Contributor: Jessie Arora
(This post was originally written for the Dept of Education’s “devHandbook”- March 2014)
Overview Business Models: In no particular order, here is a quick overview of several business models that edtech startups have experimented with and insights from how that approach has panned out.
Freemium for Teachers: Offer a basic version of your product for free to teachers and encourage them to purchase the premium version with added features. MasteryConnect provides teachers with three options where they can start with a free account, upgrade their own account or have the entire school purchase a premium package. While not necessarily designed for educators, numerous teachers use and have purchased the premium version of Evernote, which also offers a discounted business version for schools.
Freemium for Students: Offer a basic version of your product for free to students and encourage them to purchase the premium version with added features. Quizlet, founded back in 2005 shares insights about their journey with EdSurge, with specifics about (re)designing their business model. While their “goal is to have most of the users on Quizlet use it for free” in 2010 they began offering a premium account to students for $15/yr where they can upload images to their flashcards.
Freemium for Schools: Offer your product for free to users (teachers or even students) and then charge schools/districts for the premium version. ImagineK12 alumni TeachBoost share their story of how they built a sustainable business applying this model and doubling-down on the customer. Many startups have found blending consumer and enterprise components successful.
Sell to other edtech companies: Offer your product for free and then charge other companies for access to your service or distribution channel. Often referred to as middleware in the edtech world Clever & LearnSprout have built their businesses on this model which has proven successful so far with both companies claiming to reach 70% of the K12 schools in the US. What they do is make sense of school data and student information systems (SIS) and sell that ease of development and integration to startups looking to connect with schools.
Enterprise: More comprehensive products that solve problems for administrators often bypass any consumer angle and go straight to selling directly to districts. Data analytics company Panorama Education targets schools directly offering them a more efficient alternative to historically complex, paper-based process of polling students. While they have raised money from tech/VC rockstars they were making significant revenue before that with this healthy business model. DreamBox Learning’s Intelligent Adaptive Learning™ platform is another example of an effective math software tool that’s built a substantial business mainly selling directly to schools and districts. They offer a free iOS app designed to attract teachers and students to their software platform.
Product driven PD Sales: As more and more schools experiment blended learning models they will not only be looking to purchase software but also more importantly will need support implementing those new tools. Ed Elements and Compass Learning are both examples of companies with rather basic software offerings they have coupled with more comprehensive professional development services
Direct to consumer (aka parents): Offering your product for free to schools/teachers can be a gateway to reaching parents as your end customer. ABCYa.com has illustrated this model with their free educational kids computer games and activities for elementary students to learn on the web that also promote their paid iOS apps.
The following articles are from seasoned edtech entrepreneurs and experts sharing their first hand experience on how they approached sales and developing their business model.
Credited Author: Anil Hemrajani (Source: EdSurge)
Veteran edtech entrepreneur Anil Hemrajani outlines direct and indirect selling methods as well as a hybrid model to help you understand various K12 sales channels. He reiterates that “much of it (your business model) relies on experimentation to see which channels are the most appropriate fit for your particular kind of tool and intended buyer.”
Credited Authors: James Byers, Adam Frey (Source: EdSurge)
The founders of Wikispaces share numerous insights from their experience tailoring their product to the education market since 2005 and they urge edtech founders to “start charging your customers on day one.”