9 Common Reasons Why EdTech Startups Fail and Tips to Avoid Them

Understand why “EdTech Startups Fail”.

Where digital transformation has transformed every industry, education is no exception. The education industry is leaping with the rise of e-learning platforms, AI learning tools, e-tutors, and management platforms. Businesses are coming forward to fill the gap created by COVID-19, reshaping how modern students learn, teachers teach, and institutions manage virtual learning. 

Thousands of ideas have been proposed and implemented to reach millions of students offline to ensure consistent and seamless learning. 

Today, startups have invested in developing smart edtech solutions using the latest technologies. In 2023, over $20 billion was invested in the EdTech industry. Despite huge demand, startups experienced a slow growth rate with 60% of startups failing. 

So what are the reasons that most Edtech startup fails?

With our best knowledge and sector understanding, we have highlighted the top 7 reasons why any Edtech startup fails with prominent solutions to overcome them. 

Real-world Edtech Startup Failures

One of the biggest examples of failed Edtech startups is.

Now, let’s understand what are those reasons that go unnoticed, and result in Edtech failure.

9 Reasons Why EdTech Startups Fail

As said by “Jonathan from Mobitrix”, it all lacks understanding of the sectors, their demand, and target audience. 

Let’s understand what several challenges faced by the EdTech industry.

1. Lack of industry research

Today, startups are in a hurry to launch their offerings without getting into much detail and understanding. They failed to understand the critical steps to succeed. The education sector is wide and has different target audiences. From students to corporate employees, all focus on upskilling which requires a platform with all available resources. 

First, you must understand what type of product, tool, or services you will create and who will be your target audience. For example, a startup might create an e-learning platform focused on video lessons, but if users prefer interactive quizzes or live tutoring, the platform won’t attract much attention. Proper research helps in developing a product that genuinely solves a problem, not just what the startup thinks is a problem.

2. High Competition

The current valuation of the Edtech market is U$ 108.246 billion and is rising with thousands of Edtech startups globally. But among global players, is there any room left for you to offer something unique? 

Well, that’s the challenge. In this fastest-growing market, staying ahead and developing unique Edtech solutions is hard. It can lead to fierce battles for funding, which may result in less money for development.

3. Lack of Product-Market Fit

Lack of product-market fit is a key reason many startups fail, including EdTech. Startups failed to understand the market demand for their product. They must know if customers are willing to pay for their product or not.

Many EdTech startups struggle to find this fit. They often do not understand what teachers, students, parents, or administrators want. Sometimes, they think the market is bigger or more appealing than it actually is. They may also face strong competition from other companies.

For example, AltSchool created microschools to offer personalized learning experiences. Despite great funding, it failed to grow and make a profit. Reasons- 

• High cost of hiring teachers, engineers, and designers
• Failed to scale the same business model to different schools
• Lacking focus on core subjects and a weak grading system
• Privacy and ethical issues, as they used students’ facial expressions, voice recordings, and behavior patterns to improve their platform. 

4. Sidetrack from learning in the name of technology

In the education sector, using unnecessary technology can create big problems for businesses. Education startups need to choose technology that truly helps them meet their goals. When companies use tools that are not needed, they waste time and money. This can reduce productivity and lead to missed chances to work on important projects.

EdTech isn’t just about technology; it’s also about education. Any EdTech product should follow good teaching methods and help users reach their learning goals. Many startups have a hard time creating effective learning experiences because they don’t have a clear teaching plan. Instead, they often focus on flashy features that don’t actually help learning. They may ignore the need for human interaction, feedback, and guidance, as well as the different needs of learners.

For example, Knewton was a startup that claimed to offer adaptive learning using artificial intelligence. It failed to deliver a strong teaching model to support its claims. Educators said it was not reliable or effective.

5. Lack of funding due to weak business model

The EdTech industry needs a lot of resources and investment to grow and operate. Many EdTech startups struggle to expand their products or services to reach more users or maintain their operations over time. This often happens because they don’t have a strong business model or they run out of funding.

These startups may also face technical problems, such as software bugs, security issues, or maintenance challenges, which can harm their performance and reputation.

Udacity is one of the early online education companies. It aimed to make education accessible to everyone and offer lifelong learning. However, Udacity faced many challenges in finding a way to make money and stay profitable. Some of the reasons for its struggles include:

• High dropout and low completion rates among students.
• Prices and revenue models that were not sustainable.
• A lack of focus and clear differences from other educational platforms.

6. Assuming your target audience is tech-savvy

A major challenge for EdTech startups is assuming that their target audience is well aware of the latest technologies. To compete in a highly competitive edtech industry, startups bring new technologies to use, such as AR/VR for immersive learning, AI for personalized learning and finding relevant courses, and Gen AI for content creation. 

Without proper training, teachers and students will not understand your business model and cannot leverage the benefits. All your efforts in delivering a high-end learning platform will go to waste if your end users fail to operate it. 

7. Overlooking Regulatory issues

The Edtech industry knows no boundary. Learning is the same for all. But reaching global platforms and targeting global users, comes with serious regulatory risks. Many startups failed to consider it, for example, Byju’s failed due to lawsuits. 

To ensure data privacy and security, startups must follow these regulations, such as FERPA, GDPR), etc. Not paying attention to regulations can delay product launches and make it harder to compete. Rules can also vary by region, making it tricky to enter new markets. If companies ignore these regulations, users may have a bad experience because the platform might not have important safety or accessibility features. 

8. Failed to provide quality content

As said, “Consistency is the key to success”. Failing to provide consistent quality learning resources will drastically impact your business. You will lack the trust of your users. In this highly evolving industry, providing the latest and up-to-date data is challenging. 

9. Failed to market your Edtech product

Creating a strong market visibility is crucial with many competitors out there. Without proper marketing, schools, teachers, and students may not learn about the product or how it can help them. This can result in low sales and limited growth. Among high competition will be overlooked by potential customers.

Also, if a startup fails to explain the product’s unique features, potential users might misunderstand it. This can make them hesitant to try it out. To succeed, EdTech startups need to focus on marketing strategies that show how their product helps improve learning and engage their target audience.

There are some other hidden challenges that you must also consider-

• Edtech is a slow industry, monetization takes time and drains much of your funding.
• Failing to understand the difference between customer and consumer.
• Not understanding the role of teachers in this evolving industry
• Resistance to changing education industry.

Tacking these challenges is necessary to make a strong market presence. 

Key Learning from these Edtech Failures

Learning from mistakes is always appreciated. These key failures offer valuable lessons for scaling startups. Here are some key learning-

• Know your market and customers. Many EdTech startups fail to understand their users’ needs. They rush into creating products that might not solve real problems or fail to explain why their product is helpful. Startups should research their market, test ideas, and improve based on user feedback. 
• Build a strong team and culture. A successful startup needs a team that works well together and shares the same goals. Without a strong team and positive work environment, a startup can struggle. 
• Balance innovation and execution. While new ideas are important, startups also need to deliver their products effectively. They should focus on the most important features and avoid making things too complicated. 

These learnings will help you create a sustainable business model for your Edtech startup that will help you excel and grow. But, how do you overcome these challenges? Let’s understand potential solutions and approaches directly from experts.

Experts’ Tips to Overcome Potential Edtech Failures to Stay Ahead

With 15+ years of experience in delivering future-proof solutions, we have expertise in overcoming Edtech challenges. Here are some approaches that we recommend to every Edtech startup.

Approach 1- Focus on solving a real problem

It starts with analyzing the market and potential competitors. Understand what is the emerging demand of customers and how your competitors trying to solve it. It helps you analyze where they lack and what engaging features you can add to make your startup work. For example, Duolingo is focusing on interactive learning that keeps users engaged while offering immersive AI-driven learning for all users. 

With the perfect AI-powered panel management tool you can connect with your potential customers directly and understand their preferences.

Case study- Explore how we build GradReady– an all-in-one e-learning solution specifically for Medical students for exam preparation.

Our aim for GradReady

We wanted to offer a personalized learning experience for medical students preparing for medical exams. This platform helped 

• Students can access thousands of materials with the ability to take tests frequently. 
• Offers interactive learning tools like practice exercises, video tutorials, mock exams, and online exams.
• Allows users to book private tutors.
• Provides immediate feedback through a support and ticket system to keep users engaged.
• Offers multiple payment options for flexibility.
• Lets students choose from predefined courses or create custom courses with selected features.
• Allows students to enroll in specific modules they want to practice.

Our approach

• Introduced ACER Exam Format allowing global students to appear for exams in their timezone.
• Middleware integrations to avoid spam attacks
• Implemented a subscription model allowing students to access courses every month
• Automated notifications for new courses are added based on unique searches.

Results 

It has helped our client to get an online presence in Australia, covering a vast user base within a few years- generating 10x revenue growth, 70% content improvement, and 30% user engagement. 

Approach 2- Come up with a unique value proposition

To stay ahead in the fastest-growing Edtech market, you must know the unique demands of every customer segment. From students to corporate employees, all rely on learning platforms to access the information they need. So creating a single solution will not work here. 

Approach 3- Demonstrate measurable results

When it comes to technology, there is resistance from traditional systems. It is hard to explain why teachers, students, or organizations need advanced learning management systems. Make sure to have results, explaining how it can help them for better learning opportunities. 

Approach 4- Leverage the right technology

Integrating several technologies and offering high-tech features will not help you succeed. But that does not mean you should not use the latest technologies. First, understand your goal, and find the right technology that will help you fulfill that goal. For example, you want to create a learning platform that will offer personalized courses based on the user’s last searches. It will only work if you have the right AI model, ML, and NLP in place. So choosing the right technology is crucial. 

Approach 5- Creating sustainable business models

Generating revenue streams in the learning industry is very slow. You need your customer’s trust and a robust business model that will help you stay in competition. For that, you can use different monetization strategies that will help you generate revenue.

• Freemium: The app is free to use, but users can pay to unlock extra features or get a better experience.
• Pay as You Go: Users only pay for the time or services they use within the app.
• Subscription: Users pay a fee to access the app’s services, either weekly, monthly, or yearly. Many big EdTech companies like Coursera use this model.
• Enterprise Sales: This model is used when the app requires more training, integration, or customer support, and businesses pay for the service.

To explore your Edtech startup needs, OnGraph can help you build a sustainable business model with advanced IT consulting. 

Approach 6- Go global with regulations in place

Since laws like GDPR and California’s CCPA were introduced, EdTech companies can face big fines for breaking privacy rules. Losing trust is even worse, especially if they handle kids’ data.

Security can be costly, but it’s also a great way to stand out from others with weak protection.

The EdTech Privacy Report shows that being transparent builds trust. Here are some simple steps to improve security:

• Make a clear privacy policy for your app.
• Only collect the data you need.
• Use HTTPS on all pages.
• Don’t sell personal data.
• Get parents’ permission for users under 13.
• Keep kids’ data private.
• Limit social features to trusted users.
• Notify users if there’s a data breach.

These approaches will always work for any startup who are entering into a dynamic market like EdTech. But this is not all, staying ahead requires you to consider the latest trends.

8 EdTech Trends to Explore in 2024

Here are some trending trends.

• AI Study Assistants: ChatGPT is now widely used by students, with many turning to it for homework help. This AI’s ability to explain concepts and create content is reshaping the EdTech industry.
• Integrating AI in EdTech: Companies like Chegg are incorporating AI into their platforms, rather than competing with it. For example, Chegg partnered with OpenAI, and Duolingo added an AI-powered premium tier.
• Udemy’s AI Expansion: Udemy is building an AI-powered ecosystem to offer personalized content, skill assessments, and better collaboration tools for learners.
• AI’s Role in Content Creation: Gen AI is helping educators create learning content more easily, from tests to full courses. Platforms like Docebo and GoSkills use AI tools to automate content and create personalized materials.
• Microlearning for Corporate Training: Microlearning LMS platforms, like EduMe and MobieTrain, offer brief, mobile-friendly lessons for quick, effective training. Companies use these to upskill workers without taking them off the job.
• Data Science Boosts Engagement: EdTech companies use data analytics to increase user engagement. Duolingo, for example, monitors user behavior to improve retention and increase daily active users.
• AI in Immersive Learning: VR and AR with AI enhance corporate and educational training. AI tracks learner engagement, while VR simulations teach essential skills, like customer service or handling emergencies.
• Funding for Education Solutions: New FinTech-EdTech companies, like ClassWallet and EduFi, provide innovative solutions for educational loans and reimbursements, helping students afford learning.

Implementing tech innovations is challenging, you need experts to make integrations successful. 

Also Read- 11 Trends Reshaping Education Industry- Savior for Edtech Startups

How Can OnGraph Help Your Startup Excel in the EdTech Industry?

Make sure to enter the edtech business for the right reasons. If your only goal is to make money, you will likely fail. Focus on putting students first, improving education, and helping the economy by offering valuable products or services. Doing this will set you up for success.

Education is not the same for everyone. Many edtech startups will not succeed. However, those that begin with a solid business plan, prove their ideas and understand their customers can be successful.

At OnGraph, we pioneer in understanding what modern learners want and what education app development solutions will help them. From customized solutions to readymade solutions, we can help you kickstart your Edtech startup in 2024 and beyond. 

Drop us your business requirement today, we will help you from conducting market research to deploying the perfect Edtech solution. 

FAQs

Q. What is Education Technology?

Education Technology, or EdTech, refers to the use of digital tools, software, and resources to enhance learning, teaching, and educational management. It encompasses a wide range of applications, from online learning platforms and interactive digital content to classroom management software and data analytics, aiming to make education more accessible, engaging, and efficient.

Q. What are the latest trends in the education industry?