Venture Capital in Education

The recession in the economy may have affected the administration of higher education, but venture capitalists have rightfully seen an opportunity in the so-called crisis scenario. They have invested millions to provide education technology in this sector and prepare it for the digital age. Technology is being increasingly used to digitise textbooks and course materials, improved student assessment tests, online learning and institutions. Venture capitalists foresee profits in education even while the spiralling cost of higher education continues to make education largely inaccessible to most high school graduates. Online education would provide cheaper and effective alternatives to traditional education.


Private equity investment in the US education market reached the $224 million mark in 2011, nearly triple of what was invested in education in 2010. There was a big leap of transaction into K-12 education than ever seen earlier. Previously, the venture capitalists were more interested to invest in the collegiate and higher education sector as it had better growth opportunities. Many states particularly in the US, suffering from budget deficits, have paved the way for privatisation of schooling starting from kindergarten. Legislations have been made in states such as Michigan, Illinois, Washington, Oregon, Virginia and Florida among others, for the operation of charter schools, cyber charters and the requirement of online coursework.


The National Venture Capital Association has stated that investments in educational-technology businesses have tripled, nationwide, to $429 million in the last decade. Going by the current trend of testing the success of education initiatives, based on the amount of venture capital flowing into education, it has been reported that in 2012, investments in education technology have reached beyond the $ 1 billion mark. In early 2013, venture capitalists such as Meritech Capital Partners, Spectrum Equity and Accel Partners have invested nearly $103 million in, an online education company, which is the forerunner in training videos in technology, business and creative skills.


The market is booming with companies providing educational technology to the educational sector that has made successful advances in computing power. The stage has been set for revolutionizing online learning like never before and includes start-ups for online learning, providing digital textbooks and a growing market for management software. Many interactive-learning companies have bagged profit-making deals to provide internet and computing power technologies to colleges. Moreover, the investors have been able to attract the right talent to education-technology business.


As the flow of investments in educational technology businesses grows, critics worry that venture capitalists have their own profits in mind over the interests of students and advocate against charter schools and high-stakes testing. There are others who feel that these investments are only creating a new bubble. But the role of technology companies in the education sector cannot be undermined and at best can be used to bring innovation and progress to the whole system.