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Should Education Entrepreneurs Fear a 'Tech Bubble'?

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By Sean Cavanagh

Do educational technology companies and entrepreneurs face the risk of a "tech bubble," similar to the massive boom-and-bust that rocked the market the late 1990s? A recently released paper says it's a real possibility.

The paper, "Obstacles and Opportunities for Entrepreneurs in Education," was released in December by the MIT Enterprise Forum of the Northwest. That organization is a chapter of the MIT Enterprise Forum, a global nonprofit organization that seeks to support technology entrepreneurs.

The paper was based partly on research and interviews with educators, entrepreneurs, business leaders, and others during 2012, and was released in conjunction with a conference held in November by the enterprise forum. The authors note that it is "not intended as a comprehensive or authoritative treatise on the subject," but rather an examination of the opportunities, and the "threats and obstacles" that education technology entrepreneurs face, write the co-authors,

In the 1990s, the tech bubble was presaged by a number of factors, including "overheated attention and expectations" related to technology, rising investment, and good investments followed by bad ones. There was also rapid startup activity, much of which was not focused on problems solving technological and other problems, argue the authors, Frank Catalano, the principal of Intrinsic Strategy, a consulting and analysis firm, and Shirley Lunde of Bader Martin, an accounting an business advising company.

Similiar forces could be at work today, the authors say.

"Digital learning may be getting too popular among some entrepreneurs and investors—because this popularity may be increasing for the wrong reasons and have little to do with actually improving education," the paper states. "There are early warning signs that the hype could be outpacing the reality."

The enterprise forum's paper covers a lot of ground, from how educational technology could be affected by the Common Core State Standards, to how entrepreneurs might respond to multi-state digital initiatives that are under way. Yet its message about a potential bubble delivers a particularly stern and cautionary message.

There are differences between the 1990s era and today, Catalano and Lunde say. There is currently strong demand for educational technology in schools, and most entrpreneurs now seem to be more "mission-driven than gold-rush-driven," the paper says. Yet at the same time, K-12 schools are being "chased by a mob of investment capitalists," the authors argue. By one estimate, venture-capital investments in education this year are on pace to be five times higher than a decade ago. But there's a concern there that more emphasis needs to be put on creating smart and useful products, rather than simply pouring money into the next fad or concept with the most money attached to it, according to the enterpise forum's analysis. Otherwise, too much money will be flowing into ideas "that should have been left to die."

Other factors could be contributing to a potential bubble, including the overall attention paid to ed tech in the media, through the proliferation of blogs, websites, and publications, the paper says.

In addition, improving ed tech has become a popular political message, the paper notes. Many prominent political figures—the paper cites former Florida Gov. Jeb Bush and his Foundation for Excellence in Education—are touting the benefits of educational technology.

"[E]d tech frequently is mentioned in the same breath as education reform, as though one can't occur without the other," the authors argue. "True or not, adding politics to the mix can mask, or make divisive, technology's application and effectiveness in classrooms."

Taken individually, none of these developments are bad things, the analysis explains. The concern is that even though there are many potential benefits in applying sound educational technology to K-12 education, if technology is continually overhyped, even products with limited potential to help students, the market for it will suffer, dragging potentially sharp ideas and products down with all of the lousy ones, the authors say.

That's the warning issued by the enterprise forum. Do you share its unease?

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