In 2012, education technology firms attracted $1.1 billion from venture capitalists, angel investors, corporations, and private equity—an order of magnitude more than the industry was pulling in 2002. Startups Coursera and Udacity, which offer high-quality online college courses to the masses, have each received more than $20 million from investors. Big corporations are buying their way into the industry, with Rupert Murdoch's News Corp. leading the way in 2010 by dropping $360 million to acquire ed-tech firm Wireless Generation and luring education superstar Joel Klein away from his gig as the head of New York City schools.
But will the rush of cash translate into a radically transformed education landscape? When this kind of money flowed into tech companies in other sectors of the economy, we saw radical improvements in everyday transactions, as well as some dramatic booms and busts. Think Amazon instead of the mall, iTunes instead of the record shop, Expedia instead of a travel agent. But also think Pets.com and Full Tilt Poker, where intense competition and bad politics squelched what looked like good bets. There has been a flowering of good ideas in online education, like hybrid learning, in which kids still head off to school every morning but receive the bulk of their instruction from an infinitely patient piece of software instead of a harried, overworked teacher. Yet education, particularly K–12, has remained mostly immune to the improving and empowering forces of the Internet, leaving millions of kids stuck in offline backwaters for six hours a day. Per-pupil spending on public education has more than doubled over the past three decades, while student performance has flatlined.
As the parent of a toddler, I'd love to start banking on my daughter's virtual elementary school matriculation. I want more choices than just the neighborhood public school or an exorbitantly priced private school offering pretty much the same curriculum in nicer facilities. Personalized learning and highly specific feedback appeal to me as a parent. But while Wall Street's interest in online education may bode well for entrepreneurs and students, bullish investors and parents would do well to listen to war stories from weary education policy wonks.
At the university level, MOOCs and other forms of virtual schooling are cheaper alternatives to a wildly overpriced product. But at the K–12 level, companies looking to break into that market have to make a choice: compete with the traditional educational system, which parents think of as free, or jump through the hoops required to get your product integrated into public schools—which will mean satisfying at least 50 different sets of standards, plus watering down, rejiggering, and generally accommodating your product to a system that wasn't designed for tech-driven plugins in the first place.
Every few years, Washington goes through a spasm of education reform. Some of the highlights include 1983's "A Nation at Risk," which encapsulated the Reagan-era push to eliminate federal involvement in public education. The Goals 2000 Act, signed by Clinton in 1994, looked to boost graduation rates with extra tutoring. The bipartisan No Child Left Behind Act of 2001 focused on testing and rankings and is long overdue for a makeover. Washington can't make up its mind about education, which means the industry faces a significant amount of political risk. If pols turn against online education, pushing into an area so thoroughly dominated by public institutions may become even trickier. And laws designed to shoulder online ed companies out of the public sector could easily spill into the private side of the equation, creating a hostile regulatory environment or overly specific standards for state-certified graduation.
At the state level, a mishmash of laws and regulations means that battles to make room for online schooling will have to be fought over and over. Long-standing rules requiring that students sit in desks looking at a teacher for a certain number of hours a day—so-called seat time and line of sight requirements—could kill online learning in the cradle. Requirements for specific teacher-student ratios are tough to translate in a world where a single school day might have a student chatting with a friendly avatar online, getting tech support from an in-person teacher's aide, and emailing with a subject-specific tutor, all while having her tests graded by a team of data-center workers in India.
In states where online education has made headway, often via laws that make room for charter schools, local and state teachers unions have filed lawsuits and pushed legislation to place strict caps on charter school enrollment, close virtual schools altogether, and—in a rather spectacular display of purposeful obtuseness about how the Internet works—to limit enrollment to students who live in the district in which the online school is based.
Former Florida Gov. Jeb Bush, a Republican, has been the most prominent political backer of online education. Bush founded the advocacy group Digital Learning Now with another former governor, Democrat Bob Wise of West Virginia. Despite this bipartisan partnership, in 2011 the liberal Mother Jones gazed across the landscape and spotted Machiavellian GOP politics at work:
"[T]he online-education push is also part of a larger agenda that closely aligns with the GOP's national strategy: It siphons money from public institutions into for-profit companies. … And it undercuts public employees, their unions, and the Democratic base. In the guise of a technocratic policy initiative, it delivers a political trifecta—and a big windfall for Bush's corporate backers."
That narrative isn't wrong. The GOP isn't fond of teachers unions, and undermining their power is certainly a nice bonus. And small-government types, which many Republicans profess to be, would prefer to see public institutions step back when private players can do as well or better. But both sides have ideology and cash at stake. The National Education Association spent $24 million in the 2012 political campaign cycle and another $6 million on lobbying that year. Virtually all of that money went to Democrats, who are well aware the NEA is not welcoming online education companies with open arms. (Exact wording from the NEA's website: "There also should be an absolute prohibition against the granting of charters for the purpose of home-schooling, including online charter schools that seek to provide home-schooling over the Internet.")
Online learning faces many of the same obstacles that charter schools do. It also has to overcome the same legitimate concerns about how to assess quality of a product offered by largely untested companies. Skeptics are right to note that many, perhaps most, of the online education providers out there won't survive the decade—competition is intense, the technologies are new and changing rapidly, and not everyone can be a winner. Someone will be the Pets.com of the ed-tech boom. That prospect is alarming to the traditional school bureaucracy, which tends to make contracts with vendors that span years or decades. They're not set up to contract with firms offering services for a monthly fee that can be canceled at any time. And parents are rightly concerned about the long-term value of a degree from Pets.edu.
That's why online education is already making the most headway scooping up kids who are already lost to the system—dropouts who are looking to get those last few credits, home-schoolers, kids with disabilities that make normal school attendance difficult, and students whose extraordinary abilities make normal school attendance impossibly boring. People with little to lose are the ripest market right now. Parents demonstrate their willingness to pay for a higher-quality alternative to what's being offered for free, even parents who are in the most dire circumstances. (See: Kenya, where vast numbers of poor parents pay for private school, despite a universal public schooling entitlement.)
Truly amazing new products have transformative power. And competing with free isn't impossible. But online education entrepreneurs looking to break into the K–12 market will have to do much more to come up with a product that's a little better than what's already out there. They have to come up with something truly new and mind-blowing, because to survive they're going to have to short-circuit, bypass, or rewire the entire education bureaucracy. Good luck with that.
This article originally appeared at Slate on April 9, 2013.
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