Understanding the Most Common Reasons for Edtech Startup Failure

Anusha Anusha
Sep 27, 2021 4 min read
Understanding the Most Common Reasons for Edtech Startup Failure

With increased competition in education technology, it’s becoming more difficult for startups to overcome the challenges of entrepreneurship. Of course, this is a common challenge that affects many industries, not just the educational sector. While the startup community continues to embrace innovative technology and business models, many tech entrepreneurs still struggle to turn their ideas into reality.

The challenge boils down to one simple question. Why are Edtech startups failing? Are entrepreneurs simply not smart enough to survive? Or are there systemic causes for these failures? For example, is there something about a startup’s early days that prevents it from scaling beyond its initial vision? Let’s see what this guide states.

The Reality of Education Technology Startups

Edtech startups are fraught with challenges that slightly differ from the traditional business. Don’t get it wrong; it is a robust industry, which according to HolonIQ is expected to hit $404 billion in 2025 β€” a 12.2% increase from last year’s $227 billion. That doesn’t imply that it’s all bed of roses for all business persons in this ecosystem.

Several variables influence the global viability of successful ed-tech firms. One of the biggest challenges of educational technology is the complexity of the sector itself. To explain this better, let’s take a classic example from China’s education boom last year (2020), which surged to over $10 billion. It was a fiesta for ed-business individuals.

Fast-forward to this year; the situation appears gloomy as the values of deals sit below $2 billion. A major driver of this plummeting is the Chinese government’s crackdown on ed-tech startups, with Tencent, Alibaba, and other active corporations taking a hit. Many experts have expressed their opinions on its implications, including Bloomberg analysts. However, these situations are influenced β€œby powers that be.” Other times, Edtech startup founders get it completely wrong.

Breaking it Down to Numbers

Here is a breakdown of factors that wipe out startups from the market:

  • Achievability for non-technical users (5%)
  • Non-sustainable monetization model (5%)
  • Slow-moving in accepting innovation (11%)
  • Oversaturated market (16%)
  • Limited budgets (26%)
  • Long sales cycles (32%)
  • Others, such as finding tutors (5%)

These statistics may give a rough idea of where Edtech startup challenges stand. However, things are not as dismal as they seem, and there is hope on the horizon. Over my eight-year experience in Edtech, I’ve learned to adapt and overcome a tough environment and market. There are also successful Edtech businesses that have weathered the highlighted factors.

I have been privy to exclusive reviews from such firms. Here is a review of WriteMyEssayOnline, an essay writing service provider:

β€œI'm so happy I learned about Write My Essay. Running 2 businesses and doubling up on classes, has proven to be an unrealistic task. Since using them, I have been less stressed. The work has been of superior quality.”

Perhaps, the review can be replicated for other Edtech startups. It’s up to the founders to make the right decisions at the right time and then let the business take its course. A startup is a hard game to win, but it is not impossible.

Reasons Edtech Businesses Fail

Startups in the educational technology industry fail during their early stages for various reasons, including the following:

The Inability to Solve a Problem

Although there may be a need in the educational market, if the startup doesn’t have a solution for it, it would be like running a marathon without shoes. The founders must be committed to finding a solution that will add value to the lives of teachers, students and parents. However, a business is not an end in itself. So, entrepreneurs need to ensure that their products are highly valued to ensure customers and users are constantly in need of them.

Lack of Clarity of Vision and Goals

Businesses thrive on vision and clear goals. Without a vision, a startup founder would never know where to start. The entrepreneur may not realize what the end goal is and would thus expend extra efforts on irrelevant educational projects. Additionally, the business model should be crystal clear for all the Edutech team members. If there is no plan to make money out of the venture, while providing quality educational services, the business would probably be doomed from the onset.

Failure to Understand the Market

Educational products and services must satisfy the target market’s needs and ensure that no aspect is left unaddressed. While the Edutech product is in development, the entrepreneur must consider its impact on the target audience and the environment at large, in other words, how the market will react to it. There should be room to test the waters and make necessary adjustments when required.

Not Knowing their Strength and Weakness

Startups in the educational technology sector are particularly vulnerable, especially when they are in the early stages of development. As such, business owners must assess their strengths and weaknesses before embarking on this business. For example, if they want to sell online, they must have a good understanding of how to do it.

They must also understand how to appropriately adapt the technology to educate students. Technical implementation, team members, and market conditions can all be sources of vulnerability. Edutech entrepreneurs must address such weaknesses immediately before taking the project to its final stages.

Conclusion

Having identified the challenges encountered in the Edutech industry, there is a need for a comprehensive strategic planning system that could help an entrepreneur create a roadmap for the development of their business. Such a system would be invaluable in making their Edutech firms sustainable, valuable, and highly efficient towards meeting market demands. It would also help to avoid failures that are sure to come with any typical Edutech business venture.

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