Looking Back at 2012: The Big Winners

Looking back at 2012, there have been a number of startups that have stepped it up. This is my list of 5 big winners from 2012, many of which started off the year as obscure little companies but have since become household names.

Spotify: Music streaming service that provides access to millions of songs. Several things set Spotify apart from its competitors (like Pandora). First, the service is consistently good across a range of platforms including: computer, mobile, tablet and home entertainment system. It is even possible to download songs for when you are offline. Second, Spotify connects you with facebook friends allowing music selection and discovery to be a more social process. Third, Spotify offers different services and prices for different segments of customers allowing flexibility in the choice of a product line. Importantly, I have also found the search feature on Spotify to be far quicker and more accurate than that of its competitors.

Instagram: Since its acquisition by facebook, Instagram continues to be (in my mind) the best photo-sharing application out there. Instagram actually makes taking and sharing photos fun because it is easy to 1) take the photos 2) transform the photos into “works of art” and then 3) share the photos across a range of social platforms including facebook, twitter and tumblr. Instagram is also a case study on how to do mobile the right way.

Flipboard: Flipboard is one of my favorite news source apps because it lets me to read about things that I care about the most. The application aggregates news stories from various sources (everything from major news publications to twitter) and then provides a customized magazine-style interface from which to consume that news. I love how the app allows you to feel like you’re actually reading a physical magazine through its primary design feature—the ability to “flip” to the next page. The app also makes the internet-less subway ride to work everyday more enjoyable.

Pinterest: Pinterest is a fun way to view and share photos and videos from around the Internet in a social setting. The ability to share content via online pinboards also allows people to show their creativity and originality. I run an education-focused nonprofit on the side and while writing entries on our blog is certainly useful, I find collections of photos to be far more effective in communicating the vision behind what we’re doing.

Shazam: Shazam is a great tool for discovering new music. All you have to do is hold your phone up to the music or TV source and within seconds you’ll get more information about the song that is playing, like the name of the track and artist, streaming lyrics, videos and special offers. It’s a really great way to learn about new music, and I use the app all the time while on the go.

EdTech Part 3

“New Things in New Ways”

In order for a startup to be truly disruptive it must fundamentally change how society approaches one or more of the following areas: curriculum development, organization, architecture, teaching methods, student assessments, parental influences and administrative procedures. Much like blogging changed the publishing market, disruptive EdTech ideas must approach one or more of these areas in a way that drastically changes how users and the market as a whole (students, teachers, parents, administrators, etc.,) approach education.  There are several great examples of VC backed startups that are doing “new things in new ways.”

Edmodo is an example of a “new things in new ways” startup that has is trying to change both the organization and teaching methods of the education system. Edmodo promotes learning at anytime and anywhere via its online platform. It strives to close the gap between how students live their lives socially and how they learn in school. In doing so, Edmodo utilizes the power of social media to differentiate instruction for all types of learners. The toolkit has allowed for its user to learn in new places and ways that never existed before in the traditional classroom environment.

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Another example of a disruptive “new things in new ways” startup is Verbling. Verbling gives students and other language learners access to native speakers in a quick and easy way. Research has shown that the best way to learn a language is by talking to a native speaker. Verbling makes learning the language via online “language immersion” trips a possibility that never before existed in the confines of a school. It is disrupting the way in which people learn to speak foreign languages with extremely positive results.

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A final example of an EdTech startup doing “new things in new ways” is Udemy. This startup disrupts the world of education by enabling anyone to teach and learn online. The Udemy platform makes it fast and easy for anyone to build an online course centered on any subject or topic. This grassroots toolkit has the capability to empower potentially millions of experts around the world to teach and share what they know—either for free or for profit. In doing so, Udemy has democratized teaching and made so that anyone can be a teacher.

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Conclusion

In the span of the last 3-4 years EdTech has become an under followed, yet increasingly attractive sector for both entrepreneurs and VCs. That being said, it has become increasingly necessary for those in venture funding to hone in on investments that will make returns for their funds and for society as a whole. While the investing theory discussed here is certainly not all comprehensive, it seems as though the wisest investments in EdTech are those ideas that fundamentally change our perception of learning. Those startups that do “new things in new ways” seem to be the strongest choices for both VCs building a portfolio and society re-imagining education.

EdTech Part 2

“Old Things in New Ways”

The majority of EdTech startups receiving venture funding are channeling their energies towards using technology to enhance or simplify long-standing teaching and learning practices—i.e. doing “old things in new ways.” In these settings, technology simply enhances usability and makes learning slightly more entertaining, rather than fundamentally disrupting the way education has been done for decades (i.e. doing “new things in new ways”). At the Venture Capital Summit in Education (in June 2011), 10 up and coming startups showcased their products and services to a large audience of angels, VCs and other investors. The table below shows the startups and the type of idea they developed.

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As seen in the table above, the majority of the startups (7/10) at the summit are “old things in new ways” startups. It seems that most of their goals as entrepreneurs are to add value by enhancing the user experience of traditional methods of learning rather than bringing new methods of learning altogether.

To illustrate, Brainscape is a modern flashcard toolkit. It takes the “old” idea of using flashcards to study, adds a user-friendly interface and complex flash card algorithm to enhance the traditional flash card experience. Undoubtedly, this is a nifty application and something that may enhance the user experience significantly. It may even make a solid return for any VC firm backing the startup. Nevertheless, the startup is not a disruptive player that has the potential to fundamentally change how society learns.

 

EdTech Part 1

In the last several years there has been growing interest from entrepreneurs, angels and venture capitalists in the K-12 EdTech space. Yet this interest has been primarily speculative in nature with little actual venture funding to back the “buzz” and few successful exits to date. In the public sphere, there is certainly much focus on school reform by the government—at the local, state and federal levels. Nonetheless large, bureaucratic education agencies, much like large private corporations, are ill equipped to pivot quickly enough to address the systemic challenges education faces today. Against this backdrop funding disruptive EdTech startups focused on changing education would seem lucrative, but venture firms have been slow to back EdTech entrepreneurs. On the flip side, entrepreneurs have not witnessed many successful exits in education to motivate further innovation in the K-12 sector.

Nonetheless, opportunities do indeed exist. Nancy Hanover, of the International Committee of the Fourth International, estimates that the education technology market is a $47 billion market. As large as this number seems—it number refers primarily to those directly as the forefront of education: namely students and teachers. This number does not include the broader impact of education players that are more on the fringe of the industry: parents, administrators, publishers, suppliers, test-prep companies, tutors, etc., An entrepreneur with an innovative product that focuses on just a small segment of one of these markets could in fact do very well.

Framing the Debate

With all this interest in education technology it has become less apparent who is getting the highly coveted venture funding and what ideas are the most valuable—both to venture firms (seeking a return on their investments) and society as a whole. Leading education technology researchers like Peter Knapp and Kathleen King have long discussed bringing technology into the classroom as a replacement for older methods of instruction or to learn traditional material in new, technologically enhanced ways. Others such as Zane Berg and Mauri Collins have focused on societal shifts and learning pattern changes as a result of computer mediated communication.

Despite the advances made in these research fields, most of these efforts have been focused on taking traditional practices that have been used for centuries, placing a new layer of technology on them and re-introducing them into the classroom—old ideas that are simply done in new ways. The smart board, for example, is a tool that allows students to do a number of useful tricks and makes it engaging to interact with. Yet, at the end of the day, one can’t help but notice that the smartboard is simply a modern blackboard with some bells and whistles. Very few agents in the EdTech community have proposed a fundamental shift in the way society views the intersection of education and technology.

This changed in 2006 when Marc Prensky published a bold article in Edutopia entitled “Shaping Tech for the Classroom.” In the article Prensky argued that in order for education technology to improve education in a high impact, long-lasting way, there needs to be a completely new architecture for learning and framework for the classroom. Education needs to be re-imagined in a way where technology is used to implement new ideas in new ways. I would argue that EdTech startups that are high-impact, disruptive players in the space think about education and the learning process in completely new ways. Likewise, venture capital firms looking to invest in EdTech should invest in companies doing “new things in new ways” rather than “old things in new ways.”

Tumblr: Innovation in Advertising

I have had something of a difficult time getting into the groove with Tumblr. I have nothing really against the product. Tumblr has a unique microblogging / social networking platform that clearly adds value value to its largely teen and college user segments. In 2011Tumblr boasted an 85% retention rate (compared to, for example, 40% at Twitter). It’s just that my current social media toolkit provides me with a range of options for all my needs. I have…

  • Twitter – for my status updates or thought of the day
  • Pinterest – for my photos / video “blogging”
  • WordPress – for my longer, more thoughtful posts
  • Facebook – for my day to day social interaction
  • Quora – for the questions I have that my current network can’t answer

With all these tools, I’m not really sure where Tumblr will fit into my current computer-mediated-communication (CmC) tool-box. However, there is one thing about Tumblr that I thing is truly innovative and something to look out for: their advertising structure.

The founder of Tumblr, David Karp, has long been a critic of traditional banner or adsense advertising. It can be invasive / annoying for users and costly / ineffective for advertisers. Recently, Tumblr has been toying with some new advertising models that seem to be headed in the right direction.

For example there is the Highlighted Post option. Users or advertisers can pay $1-$5 and have their post get a special sticker to make it standout from the rest in the dashboard. To draw a parallel to one of my favorite sites 4-5 years ago (Digg), it’s like you are paying for “diggs” so that your post ranks higher and therefore gets more views. Sticker options include words such as “On sale now” or “Today only.” These paid blog posts stay at the top of Tumblr home pages of users who are already following those blogs. Users can also click “dismiss” to remove the adds. Furthermore, advertisers are only allowed to link to pages that appear on their own Tumblr blogs.The combined effect of these features is a less invasive experience for users and a more effective, targetted add for advertisers.  It is therefore no surprise that advertisers are lining up to access the 60 million blogs on Tumblr.