Why Education Startups Do Not Succeed. I co-founded PrepMe in 2001.
We were one of the first education companies online and the first purely online, personalized platform. We were acquired in 2011 by Providence Equity-backed Ascend Learning. In the last month, I’ve had 3 VC firms bring me in to chat with their partnership about education and 6 independent entrepreneurs reach out to me about their new education startup. This is a summary of what I tell them in person. Note: I am going to make some generalizations below. Most entrepreneurs in education build the wrong type of business, because entrepreneurs think of education as a quality problem. “Education is ripe for disruption.
First, let’s qualify what they’re saying here. The average person in a developed country does not think about education the way a well educated VC or entrepreneur thinks about education. VCs and entrepreneurs tend to be well educated. The average, middle class person thinks about education as an expenditure, not an investment. Start Your Marketplace Engines. Start Your Marketplace Engines January 23, 2012 At NextView Ventures, we have a number of companies in our portfolio which are “marketplace” businesses, where buyers and sellers meet to exchange a good or service.
And along the way we’ve met with or observed a larger number of seed-stage startups attempting to start them. All of these companies face the challenge of the marketplace cold-start problem: simultaneously attracting both sellers and buyers to generate enough liquidity so that meaningful transactions can result. Without enough buyers in the system, it’s not worth it for the sellers to show up; without enough sellers present, buyers don’t have anything to purchase. What are the best practices for going from zero to sixty with a marketplace startup? Offer supply side value for being present beyond just buyers. As a general rule, once a true market is going, I’ve observed that the supply-side often increases in step-functions, while the demand-side grows incrementally. The freemium flaw. Close your eyes, and cast your mind back to the first dotcom boom in the late 90s/early 00s.
What’s your overriding memory of that whole crazy period? Or if you’re too young to really remember, what do you immediately think of when you hear dotcom bubble or dotcom boom mentioned in relation to Silicon Valley at the turn of the millennium? I’m going to take a stab and guess that it has something to do with over-inflated valuations of ill-conceived, kooky ideas. Okay, that may be wide of the mark for some of the companies that are still plying their trade today, such as Amazon, eBay and Google. And of the many ideas that didn’t work out, not all of them were inherently bad, they were simply ahead of their time. We’ve discussed this subject before, looking at why the original dotcom boom of a decade ago isn’t the same as today, and why we won’t see the same widespread collapse of the digital industry. The case for freemium Get us addicted, then jack up the price. The Complete Guide To Freemium Business Models.
Editor’s note: This guest post was written by Uzi Shmilovici, CEO and founder of Future Simple, which creates online software for small businesses.
The post is based on a study done with Professor Eric Budish, an economics professor at the University of Chicago Booth School of Business. It also includes ideas and comments from Peter Levine, a Venture Partner at Andreessen-Horowitz and a professor at Stanford GSB The idea of offering your product or a version of it for free has been a source of much debate. Pricing is always tricky. Unfortunately, many entrepreneurs don’t give it enough thought. Free is even trickier and with so many opinions about it, we thought it would be refreshing to take a critical approach and dive deep into why some companies are very successful at employing the model while other companies fail. The Law of Marginal Cost Pricing plays a huge part in competing for customers. Guess what? An Experience Good A good example is Dropbox. The Psychology of Free. Etsy chicken-egg.
The original founders of Etsy (2/3rds are now my co-founders) started out after college doing simple freelance website building.
One of the projects was a community forum for crafters who wanted an updated design and some additional features. They built the new forums and started reading through the conversations people were having. Why Airbnb Failed To Gain Traction Twice Before Hitting It Big.