Selling to Schools Is B(to)S
What Edtech Founders Should Think About When Selling to Districts
What Edtech Startups Should Think About When Selling to Districts
As an advisor to early stage edtech startups, I’m asked to provide guidance in the area of product market fit and growth strategies. The K-12 education market is one that is very complex and different from startups within the edtech industry that are looking to sell directly to students. The B2C model is a little more straightforward (although not easy, since you are launching a new product) and when startups approach me asking for advice to sell to schools or how to develop a strong B2B model, I honestly point to advice the great Afro-Canadian poet Aubrey Drake Graham once gave me.
However, this advice has rarely deterred the committed founders who are passionate about disrupting K-12 education through technology. So then I focus on helping them develop a sales strategy. First and foremost I attempt to reframe their perspective by letting them know that they are not creating a typical B2B model. Selling to schools and school districts is a whole different animal because the buyer is not the end user like most enterprise sales. Yes, this is a different kind of B2B — what I like to call the B2S (Business to Schools) model since sometimes the sales cycle can be some bull s%^*!
The following are the 3 concepts I believe all edtech startups should consider when selling their products to schools or school districts. All advice is derived from my experience of working with startups in the industry, reading research and speaking with salespeople on the front lines.
Know Your Worth
Schools — and to a greater extent districts — have budget allocations for technology that determine how much they can spend on different types of tech tools. Of course, tools that are essential to core school or administrative operations are can command a higher cost per student price tag. Depending on the type of edtech product your startup produces, you can charge a range of $1-$50 per student. Core products (associated with assessment) can charge $30-$50 per student while adaptive learning tools range from $7-$10 student. Lastly gaming and extracurricular tech tools usually cost $1-$5 per student. These interactive tools, like a music education gaming software, doesn’t fall under compliance or testing, so if an educator decides to spend money on this product the purchase would come out of the instructional materials or technology budgets. This means the music education edtech startup is competing with a bunch of other companies that are not direct competitors. So if your team has built a non-core product, I would recommend keeping the price to a few dollars per student per year, especially if you are selling in large quantities at the district level. However, if you are taking a ground up approach selling school to school remember that anything over the $3,000–5,000 mark per school needs district/school board approval.
Have A Path to Revenue
The K-12 Edtech market features a sales/procurement cycle that usually lasts approximately 18 months. Some startups have tried to get around this by building a large massive user base (students outside of school or teachers within schools) by giving away a lot of free products or services. But I like to remind edtech startups that schools, investors, and strategic partners do not care about every metric that could display growth in your user base. Every metric is not created equally. I have found that the key metric that convey a strong user base are not how many signups you have but how many daily or monthly active users are engaged with your product or platform.
Even after you have accomplished an impressive number of monthly active users, it is important to always stress to your consumers, partners, and investors that you will be looking to capture this value in the future. I recommend that all startups have a clear path to a licensing or subscription based revenue model — even if they start with giving away free products. So many edtech firms have made the mistake of focusing on user base and gaining traction only through the free subscription growth strategy. Because pricing was an afterthought, when edtech companies attempt to switch gears with announcements such as “the enterprise version of the product is coming soon,” these startups are unable to get current users to pay for the new product because they are accustomed to the fact that this has only been a free educational tool. Remember to even let your pilot participating schools or districts know that you will be developing a premium version of your product from the beginning of your relationship. Schools do place more value on products that they pay for more than free products.
Structure Creative Pilot Programs that Lead to Future Revenue
Lastly, if your company has developed a minimum viable product and are looking to test it with a few districts, I think having a pilot of free use could be great to gain insights on your customer preferences. I would advise that you include some conditional, opt-in terms in your pilot contracts that lead to pilot participants purchasing the product if your startup meets certain agreed upon milestones. Terms could resemble something as simple as “if Edtech Startup 1 has X thousand monthly active users by the end of the pilot then School District A will pay for an expansion to Z number of schools.” I would just remind the startup to carefully think about what success criteria it could meet and that would show impact and traction with the students.
The process of building your edtech startup’s perfect B2S model may not include aspects from each of the concepts I presented, but I’ve seen the first hand the importance of discussing these issues and more before selling to schools. The moral of the story is: It’s sometimes a BS process but if you create a customized B2S model to your market it’s definitely doable.
Earnest Sweat is a Startup Adviser and Business Ops professional for various accelerators. Sweat specializes in sourcing, managing and mentoring startups within the fin tech, ed tech, and real estate tech sectors. If you have any questions, comments or requests please connect with Earnest through LinkedIn, Twitter, or AngelList.
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