Sunday, 21 October 2012

Privatization, venture capital and public education

In days past, most of the private sector direct engagement and investment in public education was probably in the area of publishing textbooks.  However, this has changed as technology has increasingly become a factor in education.

The array of technology expands almost daily--marks programs, student information systems, bar-code uses, etextbooks, online programs and schools, learning resources, and on and on.

The business of education technology seems to have three key actors--startup companies trying to find a niche for ideas and products, venture capital to finance the development, and large, mature companies that buy out the successful startup. 

"Who are some of the prominent investors in education technology?"

An answer to that question is provided in Audrey Watters'  hackededucation blog.   She lists dozens of venture capital businesses that are making investments.  Although the Gates Foundation is not itself a venture capital business, it provides funding for a number of them.

What is the importance of this? 

Venture capital is interested in making money fast, even if there is high risk.  Its primary purpose definitely is not to create products that best fit the needs of the education system as determined by educators.

If, as Ursula Franklin reminds us, "every tool shapes the task," then it is important to develop tools that fit with the social and philosophical aims of education.  Leaving decisions about our tools in education to "the market" may well produce results that are not the best for education or society.

How do the education technology entrepreneurs make their money?  If they can establish a market for their products, they can go to an IPO, the offering of stocks for sale in the public markets.  This is the way that Google and Facebook went "public."  The Facebook example shows the limitations of this approach.  When even the biggest guys can end up with stocks that quickly drop in value, how can one expect a little-known company in a niche market to find success with this approach?

Even Blackboard, didn't stay public.  Watters reports that "Blackboard, for example, went public in 2004, but went private again in 2011 when the company was purchased by an equity firm."  This even after it had swallowed up WebCT and Elluminate, among others.

Some venture capital comes from subsidiaries of big Pearson.  Their position "gives enormous power and influence to Pearson-backed Learn Capital and to charter-school focused NewSchools Venture Fund in particular in establishing who gets out of the gate with strong, initial seed funding," according to Watters.

The other option is acquisition--selling to one of the big, established companies in the education market.  The acquired company and its product often disappear, as WebCT did when Blackboard stopped supporting it and moved users to its platform and the software for BCeSIS did when Pearson acquired AAL.

Pearson consolidates its leading position by two means--providing venture capital for products it thinks will succeed and buying up the ones that it hasn't financed itself.

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