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March 15, 2018

What Makes a Successful EdTech Company?

MHT Partners  | Education Investment Bank

Over the last decade, MHT has met with numerous education technology (“edtech”) companies that are all tackling similar pain points. As education investment bankers, we are asked repeatedly by investors and entrepreneurs what attributes make a company successful. There is no singular characteristic. In fact, the most successful companies typically have several. While we can’t cover all of them in one article, below are some of the more important ones:

  • Product or Service Meeting Market Demands. While it may seem intuitive, we see some companies selling products or services that are limited in scope or address a small number of problems or a small faction among the universe of administrators, teachers, parents and student users. The more comprehensive the solution for the various constituents, the more valuable the technology or software will be due to implied adoption of the product and its addressable market.
  • Measuring ROI or Outcomes. Depending on the customer in focus, edtech companies should be able to demonstrate a positive measurable impact on its user base. In most cases, corporate customers focus on ROI, while school administrators seek measurable improvements in student comprehension and assessment results. In either instance, an edtech company should be able to point to evidence of positive impact and improvement for its customers and users.
  • Right Team, Right Time. Occasionally, we identify companies with compelling market opportunities and technology-enabled products or services experiencing growth and scale. Among those same companies, we have found management teams lacking the requisite experience and depth to sustain long-term growth. While holes in management teams are not always a negative for certain investors, an incomplete management team may not be a fit for many institutional investors or strategic acquirers.
  • Competition vs. Pricing. As education investment bankers, we have advised clients that compete successfully in highly competitive markets as well as those that are successful in less competitive markets. Common among all of those edtech companies is a compelling value proposition for customers relative to pricing. That is to say, customers will pay a premium for a product or service that provides meaningful value and a differentiated solution compared to one that is viewed as a commodity in the current market.

With those summary attributes in mind, there are many successful and emerging edtech companies across all segments of education representing opportunities for investors. At MHT, we stay up to speed on industry trends while forging and maintaining relationships with market leaders and the universe of acquirers.

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