A little while back I wrote a post describing how scale is the critical challenge for education on the web. I was reminded of that on my trip to Berlin, where I met with a couple of online education startups. Both of them have interesting (and very different) approaches and both of them are thinking hard about how to get to scale. The key questions they currently face are “whom to charge” (teachers? schools? students? parents?), “how soon to charge” (right away? later?), and “for what to charge” (content? testing?). I believe that the answers to those questions will largely determine whether or not they can achieve breakthroughs in scale. And as I wrote in my previous post, it would be best to be able to emulate a Craigslist model, by which I mean wait as long as possible with charging, then charge only for a few uses cases.
But the ability to emulate Craigslist depends heavily on the funding that’s available (unlike when Craig got started, it is unlikely that anything of scale can be bootstrapped today due to increased competition). By funding I don’t just mean the amount, but also who it comes from. There are many angel investors who will tend to push companies to charge early and “prove” their revenue model. The problem with that approach is that it will stunt growth and adoption when it is needed the most. For instance, let’s say you have great video content that teaches math but you put most of it behind a pay-wall, then your likelihood of getting students hooked diminishes dramatically (by that I mean one or even two orders of magnitude). Students will be looking for your content when they need it, e.g. to prepare for an exam or complete a homework assignment. Even if they can find a preview that looks promising, it is extremely unlikely that they will spend the time at that very moment to figure out how to register *and* get their parents to put in a credit card.
The entrepreneurs I met are well aware of this issue. I have also been surprised by how many VCs at least claim to want to pursue a scale over revenue strategy. But the missing link (at least in the education startups I have encountered to-date) are angel investors that share the same philosophy and can fund startups to the point where a traditional Series A makes sense. Changing this may require VCs to do more seed deals in online education. Some of that is happening already. For instance, Babelcentral, which uses videos to teach English, was seeded by Atlas and Google Ventures.
