Archive for November, 2007

Part one of three reports on the SIIA’s Ed Tech Business Forum, the leading business and finance conference for the K-12 and postsecondary education technology market that wrapped up a few days ago in New York. This annual event attracts senior management from education software companies, platform technology firms, solution providers, publishers, private equity firms and venture capitalists.

The keynote speaker for this years conference was John Martinson, Managing Partner of the Edison Venture Fund. With 31 years of venture capital experience, including 8 investments for Edison from $3-10M and 12 investments from $250K-12M as an individual, Martinson has significant experience and a unique perspective on investing in the educational technology market.

In his presentation, Martinson provided a candid appraisal of what makes educational technology attractive to investors, as well as its unique challenges. He also shared his “tired or wired” list, highlighting emerging segments of the market — invaluable insight for anyone managing an educational technology portfolio or investing in new products for this market.

Among his obserations: K-12 software is a sizable niche market with 55M students, 125K schools and 12K districts. There’s tremendous public pressure to improve student performance, reduce costs and improve productivity. It’s a market of passionate entrepreneurs, a market with a high SAS (software as a service) renewal rates. Equally important, if somewhat below the radar of many departments of education and school boards who make purchasing decisions, today’s students are digital natives as are many of their parents, so the demand for educational technology will only increase.

On the downside, there’s a long tradition that schools pay for hardware and expect software and services to be free. Add to that regulations that differ by state, a long (and seasonal) sales cycle, decision making by committee, and disbursed sales (12 thousand districts, 125 thousand schools) and the challenges become clear.

In spite of these negatives, Martinson sees growing investment opportunities on several fronts, including instruction management (learning management systems), data management (assessment reporting and analytics to drive individualized instruction), portals and communication systems, special education (see individualized instruction), online schools and courses (distance learning), educational games and simulations (the “serious games” movement) and in mobile computing devices.

Martinson is particularly bullish on the post-secondary market. Despite being much smaller than K-12, the technology infrastructure is more robust, there are fewer cumbersome regulations, there are business-like initiatives to increase revenues and lower costs, and decisions are more timely compared with those made by state and local school committees.

In a nutshell, while educational technology remains unarguably a niche market with unique challenges, Martinson feels the need for applied technologies, rapid acceptance of web-delivered software as a service, recurring revenue business models, and pent-up demand from years of restrained investment in K-12 point to increased opportunity for investors, publishers and product developers.

>>> Update - The audience for John Martinson’s presentation had a few good questions which were inadvertently omitted from the original post:

Q - Frank Catalano, SVP Marketing for Pearson Education, asked “Why are traditional educational publishing copmpanies are so bad at marketing to teachers and students?”

JM - “I think that’s because its a highly disbursed market that ‘thinks locally’ making it difficult to reach with the kinds of marketing traditional ed-tech publishers are comfortable with.”

Q - “What are the best sources for early-stage funding?”

JM - “Usually ‘friends and family’ are the place to start. Also, I’d talk to entrepreneurs who have already been successful in this market.”

Q - Nelson Heller of the Heller Report asked, “What are the characteristics of a ‘home run’ investment?”

JM - “A home run to me is finding a product or service that capitalizes on current trends, that are ‘must have’ purchases, and that have a 5-10 year growth curve ahead of them.”

Q - “What about effiacy? How can you prove your product works when a proper study takes months or years, during which the market may have moved on?”

JM - “Effiacy is important but less so than delivering a product that meets current purchasing priorities. If the market ‘has to have it’ then they’ll find a way.”

I left the 2007 Dust or Magic conference a few weeks ago with nine hours of video to edit, my mind full of new insights about interactive technology for kids. Though I’m remiss in writing up my notes for the blog, the videos alone are an excellent window on this exclusive gathering with presentations by Warren Buckleitner, Krista Marks, Scott Osterweil, Marc Prensky, Robin Raskin, Mitchel Resnick, Eric Strommen, and Scott Traylor. Tune in to the Dust or Magic channel I created on Blip.tv where you can also subscribe to an iTunes feed for your iPod/iPhone.

Lane Merrifield opened the Dust or Magic conference by giving us a front-row seat to the creation of Club Penguin. If there was ever a testament to the Power of Nice it’s Lane’s story.

Although Club Penquin seemed to burst on the scene last summer when it was acquired by Disney, it’s been far from an overnight success as Scott Traylor documents in his blog post Just the Facts Ma’am - The History of Club Penquin.

Lane made clear in his remarks is that the decision to partner with Disney was far more than pure economics. Born in Canada and raised in Southern California, Lane visited Disneyland so many times that he was his family’s official tour guide whenever cousins visited. Later, his first paying job was operating one of the animatronic puppets that parade down Main Street.

Fast forward to after college, Lane and his wife decided to move back to Canada to raise their son in a more family friendly environment. He joined a small web design company in British Columbia and over the next several years partnered with the company’s founder and technical architect to build what’s become Club Penquin. The rest is history.

Although Lane spoke to us off the record I was able to record this video of Warren Buckleitner’s introduction to Lane before we were asked to turn off the cameras. There’s also an older interview with Lane and Disney’s Steve Wadsworth that ran last summer in paidContent.

>>> Update 11/13/07: Scott Traylor posted an in-depth interview with Lane Merrifield on his blog which he conducted right after Lane’s presentation at Dust or Magic. Much of what Lane had to say but we couldn’t videotape is captured there.

Krista Marks has a bold vision to change the way kids interact with the computer and learn about creativity, and her new site Kerpoof is a giant leap forward in that direction. A unique blend of Web 2.0 goodness, user-generated content and social media savvy combined with brilliant design and some of the best Flash programming around, Krista and her team have created a place where fun is not separate from learning but integral to it, where kids can create art, write their own stories, create their own movies, and share them. True to her educational intentions the site offers teacher resources and lesson plans as well. Krista shared her vision in this videotaped presentation at Dust or Magic. For more, visit Kerpoof’s website and see for yourself, or read what TechCrunch and Colorado Startups had to say.

Mitchel Resnick is an interactive media visionary. He directs the Lifelong Kindergarten research group at the Media Laboratory at Massachusetts Institute of Technology and develops technologies to engage people, particularly children, in creative learning experiences. In his presentation at Dust or Magic he shared his latest research and gave us an update on Scratch, the programming language he and his team developed. I made a video of his presentation and also covered Scratch in this post when it was released to the public earlier in the year.

Eric Strommen has designed and studied interactive learning products for children on almost every interactive platform available including Nintendo, SEGA, CD-I, DV-I, CD-ROM, online services and more. He founded Playful Efforts to provide research services that assist in the design, manufacture, and sale of products that encourage children to achieve their maximal creative and cognitive potential through play and other developmentally appropriate activities. In this video of Eric’s presentation at Dust or Magic he presents highlights of research conducted recently for Microsoft on user interface and input devices for kids in the living room environment.

In this video presentation I taped at the 7th annual Dust or Magic conference, Robin Raskin forecasts the trends she sees coming in children’s technology for 2008 and beyond.

Robin has been translating technology into consumer friendly terms for more than 25 years. Today, as a writer, new media consultant, and speaker she spends a great deal of her time focusing on family life in a digital world. Currently she’s featured as a columnist on Yahoo! Tech. She’s been the Editor in Chief of FamilyPC, editor of PC Magazine, and columnist for USA Today Online and the Gannett News Service, winning numerous prizes for her coverage of technology. Robin has authored 6 books about parenting in the digital age for publishers including Random House, Simon and Schuster and Hyperion. Visit Robin’s website to learn more.

Although the 7th annual Dust or Magic conference on children’s media has sold out, I’ll be there to tape, blog and web-cast many of the keynote presentations (except those that disclose proprietary information). I’m excited and you can join me by adding my RSS feed to your reader. Allowing for a few days delay to get everything posted next week (the confrence runs November 4–6), you’ll be able to hear what some really smart people have to show-and-tell about the past year and forecast for years to come in children’s technology:

• Chris Byrne, The Toy Guy
• Claire Green, President, Parents’ Choice Foundation
• Jim Gray, Ed.D., Leapfrog Enteprises
• Peter Grunwald, Researcher and President, Grunwald Associates
• Lisa Guernsey, Education Journalist/Author of Into the Minds of Babes
• Lyle Hall, Vice President of Product Development, THQ and General Manager of Heavy Iron Studios
• Lane Merrifield, Executive Vice President and General Manager of the Club Penguin division at the Disney Internet Group
• Scot Osterweil, MIT Education Arcade
• Robin Raskin, Author, Blogger at Yahoo Tech
• Mitchel Resnick, Ph.D., Director of the Lifelong Kindergarten Research Group at the MIT
• Marc Prensky, Author and CEO, Games2Train
• Scott Traylor, President, 360KID

Not familiar with Dust or Magic? Now in it’s seventh year, it’s

…an annual show-and-tell review of the past year in children’s technology. The demonstration-intensive three day institute is designed for individuals who need to understand the latest children’s interactive media products, in the context of known theories of child development and play patterns. Because participants stay at the same Inn and come from a variety of perspectives, the event has a retreat feel to it. Time is put into the agenda so that there are opportunities to try out the latest products in both formal and informal settings. The agenda is planned around the products, and videos of child testers using key products help ground the discussion. Throughout the session, there are presentations by developers, reviewers and researchers on current topics.

The conference is organized each year by Warren Buckleitner and his incredible staff from Children’s Technology Review, which Warren has published since 1985. With more than 8,000 reviews under their belt (and online for subscribers) and more each month along with their regular feature articles, it’s a must-read if you need to stay on top of the children’s interactive media space. To find out more go here to download a sample copy or subscribe.

The week after Thanksgiving this year I’ll be blogging from the SIIA’s 7th Annual Ed Tech Business Forum - the leading business and finance conference for the K-12 and postsecondary education technology market - at the University Club in New York. The speakers an attendees at this conference read like a who’s who in educational technology and publishing, so there’s sure to be news and announcements you won’t want to miss. Don’t change that URL!

This week’s release of the new Open Social web API supported by Google, Ning, LinkedIn, Friendser and others may be a milestone of sorts in the development of the web-as-application - what some are saying defines Web 3.0. Web luminary Marc Andreessen, who thought Facebook was a dramatic step, calls Open Social

“…the next big leap forward. Open Social takes the Facebook platform concept and provides an open standard approach that can be used by the entire web. Open Social is an open way for everyone to do what Facebook has done…including Facebook itself, potentially (Marc’s post continues here).

The San Jose Mercury reports reports that Open Social will let developers write one program that can be used on Ning (Marc Andreessen’s startup), Orkut, Friendster, Linked In, Plaxo or any other service that participates. Of course all this comes as Google, Microsoft and Facebook are squaring off in a battle for the social-networking advertising market. And, they report, not everyone is so sanguine about Open Social and have concerns about the privacy issues.

Regardless of labels (Web 2.0 or 3.0, take your pick) and the legitimate privacy concerns some have focused on, Open Social looks to me like a big step towards the the next generation of web services where users expect to be able to customize their experience, where social connections as well as data connections are the norm. Marc Andreesson has posted a series of screenshots and videos on his blog that show Open Social in action and you can Google Open Source API for more info.

>>> Update 11/4/07: Why Google Turned into a Social Butterfly in the NYTimes discusses Open Social in depth, compares it to Facebook’s ‘island’ approach, and observes,

“If Facebook chooses to remain a holdout, it will not be as the head of a counter-coalition but as a cranky recluse. [...] So far, every time the Web has matched up against a proprietary alternative, the Web has prevailed.”