Failure to Reimagine Business Models in EdTech

October 26, 2022  •   David Pring-Mill

By David Pring-Mill

The following text has been excerpted from Section 7.5 of the Policy2050 report Global EdTech Market: Thematic Analysis — Perspectives from Industry Leaders & VC,” which was originally published in April 2022, in order to serve as a product sample and fulfill Policy2050’s mission “to keep the most socially-relevant insights outside of any paywall.”

One early and prominent failure in the EdTech space, Educomp, was mired in allegations of “creative accounting,” “preferential transactions,” and “mismanaged growth,” following a series of investments (totaling over $100 million) in other education players that tripled the company’s debts. Educomp also aggressively sold its services to educational institutions without adequately factoring in their ability to pay. Analysts cited these mounting receivables and the scope creep or deviation in Educomp’s business model as primary reasons behind their eventual insolvency. The founder has both conceded that the model was wrong and noted that their early entry into the EdTech market meant a shortage of available private equity.

Today, investors are taking a stronger interest in pandemic-driven EdTech market growth, while also scrutinizing business models and potential regulatory roadblocks. Some investors think that there’s room for much greater imagination. They argue that the core yet sometimes implicit motivations for higher education, such as signaling or networking, help to explain why there hasn’t been enough pressure to meaningfully innovate around actual learning and meaningful outcomes. Venture capitalist Marc Andreessen argues that “the university format was standardized before the printing press,” and trying to transplant some of these outdated, monastic approaches into a digital business model has raised fundamental questions.

A mindset shift that prioritizes the right outcomes could clarify business models. Sequoia India’s GV Ravishankar, who serves on the boards of EdTech portfolio companies such as BYJU’s, believes that small companies can have outsized impacts because founders focus on “what if this works” whereas managers fret over “what if it doesn’t?”

And yet, we’re moving in a direction where the relevant hypotheticals are being more thoroughly explored and dominant brands are emerging. Some digital learning habits will have stickiness post-COVID. EdTech innovators are responding to similar marketplace signals. As EdTech becomes less of a “blue ocean” or uncontested market space, there will be more and more overlap between EdTech offerings.

With Sequoia’s own portfolio companies increasingly competing with one another in different education segments, Ravishankar says that the firm “can always help them kind of diverge or at least not over-compete in an unhealthy manner.” They maintain that the market is large enough to support multiple winners; competition among them is inevitable, as is consolidation; and different teams lead to Chinese walls or information barriers. He added, “It’s important to make sure that we don’t lose the aspect of education in all this noise of technology.”

Andreessen Horowitz’s Connie Chan points to mobile-first as a pathway to innovation, yet she concedes that a lot of this potential hasn’t yet been realized, possibly due to the limitations of established business models more so than the devices. Tuitions in traditional formats remain expensive, while mostly ad-based alternatives, such as YouTube, potentially underfund content creators and skew their incentives toward clickbait strategies that maximize viewership. Typically, impactful content and depth of expertise are qualitatively different than clickbait. Therefore, dedicated EdTech platforms that generate subscriber revenue might create stronger incentives for qualified creators to package their expertise into various courses and formats.

In some scenarios, the ad-based revenue model means that educational content creators add value but lose money. Andreessen Horowitz’s Frank Chen elaborated: “It takes a lot of work to create this content. And if you’re monetizing with advertising, that means only the top 1% are going to even break even, or barely break even, on all of that effort because you need to attract tens of millions of people.”

“Focusing on just building up pageviews and hoping they’ll monetize with ads, to me, is a scary strategy in general, for any consumer app,” said Connie Chan.

The emphasis on production value, such as the design of a compelling YouTube thumbnail, further excludes many types of experts who lack that video production knowledge and would be underpaid for their own knowledge, suggested Connie Chan. Breaking away from the ad-based model and strengthening the incentives for content creators might accelerate the shift towards lifelong learning and self-improvement, since it would presumably lead to higher-quality content.

What might reimagined business models look like, and which new players might be drawn into the EdTech industry?

Andreessen Horowitz’s Frank Chen referenced Taobao, a C2C platform or Chinese equivalent of eBay. Sellers on the platform had experimented with the system, figured out what was working in terms of analytics, strategies, and consumer behaviors, and shared the info. Instead of leaving these activities on the periphery, Taobao went along with the momentum by setting up “Taobao University” and enabling top sellers to earn money from their content, not just their markets. The example shows that EdTech products and services can be built around virtually any area of interest, such as startups, side hustles, hobbies, and personal development. Given that these areas have unique dynamics, there’s potential for specialized platforms or broad content libraries.

Connie Chan noted that there are already great workout apps with different fitness instructors and nutritionists, and sees the potential for increased adoption of Shopify-style approaches that give creators options to turn on modules, offer content in different media formats, and create their own knowledge stores. This might even be an extension of an existing social media platform with network effects as opposed to an entirely new startup. Twitter, she noted, has lots of long-tail experts, meaning that there’s potential for high ROI models around specific content. Chan argued that these social media giants would have an advantage, given the detailed information about their user bases that already aids in their conversions.

But they’re not the only companies that might be overlooking the potential to engineer EdTech into their business models, or at least conduct experiments. Chan proposed, as an example, that a DIY repair course might be able to partner with Home Depot to sell tools or construction products, or offer a discount on the specific bundle required for the course. They could even partner with a local handyman in case the learner fails or gives up. “And those ideas are very possible and not being implemented today,” she said. “Kind of thinking: if this person learns this course, what else can I sell them, beyond just another course? What physical things can I sell them? What other services can I sell?”

Andreessen Horowitz’s D’Arcy Coolican suggested that the gamification of education not only increases engagement but it potentially enables the type of creative monetization seen elsewhere in gaming. For example, Fortnite became one of the most popular and profitable video games through microtransactions or in-game purchases of digital assets, such as “costumes” and “skins.” Parents have supported these interests and presumably would be even more inclined to pay for digital goods if there were a direct connection with learning.

These monetization options could be particularly advantageous if an EdTech platform can’t retain users, convert them to additional pay-per-use classes through algorithmic recommendations, or interest them upfront in an all-inclusive, pricier subscription.

The full report “Global EdTech Market: Thematic Analysis — Perspectives from Industry Leaders & VC” is now available for purchase on

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