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Have you ever experienced identity theft that forced you into a zero-cash state for an amount of time that feels like forever? Or have you ever wondered how that app knows you so well—your habits, your route to work each week, your interests? The more we shift towards personalization, the more data is collected about your every move.  And that’s borderline cyber stalking, no?

This makes cyber security ever more important. What is it, you ask? According to TechTarget:

“Cyber security is the body of technologies, processes and practices designed to protect networks, computers, programs and data from attack, damage or unauthorized access” [1].

For any app, website, or technology in this online economy that collects personal data, one may hope that the company does just as much to protect it. However, this is an area that constantly faces challenges. A survey conducted by the ISACA and RSA showed that 76.6% of respondents expected an increase in security attacks in 2014 compared to 2013 [2]. In fact, the top 5 cyber security risks for 2015 as mentioned by CNBC are as follows [3]:

  1. Ransomware: Malware that restricts access to your own data and then requires ransom payments for re-access.
  2. The Internet of Things: Vulnerability of physical devices connected to the internet.
  3. Cyber-espionage: A war between national governments fought on the keyboard.
  4. Cyber theft increases: Stolen financial information, such as credit or debit cards, on the black market
  5. Insecure Passwords: Passwords that can be cracked effortlessly

These are no small risks and they appear to be inter-related to a degree. Moreover, cyber security is a national security issue and a hot topic among presidential candidates – a cyber war against China and Russia [4]. Additionally, according to a report on CNBC, China attacked Apple’s iCloud to steal data related to iMessages, photos, and contacts [5].  Apple has the reputation of ultimate security, yet weak passwords and public access to data make it easier to crack passwords and answer security questions. On the other hand, as technology companies increase privacy and security on apps and devices, the country’s intelligence services will continue to go dark reducing their capability to prevent such attacks. Perhaps this is why cyber security continues to be a challenge, it is an ever-lasting complex battle with a lot of gray area.

Fortunately, VCs are continuing to invest in cyber security startups each year. In 2014, 240 cyber security startup deals collectively amounted to $2.5B in funding, and 2015 is on the same trajectory [6].  As startups continue to mobilize, founders should ensure that an adequate amount of resources are invested in cyber security.

Sources

  1. http://whatis.techtarget.com/definition/cybersecurity
  2.  http://www.isaca.org/cyber/Documents/State-of-Cybersecurity_Res_Eng_0415.pdf
  3. http://www.cnbc.com/2014/12/19/top-5-cyber-security-risks-for-2015.html
  4. http://www.wired.com/2015/08/lets-school-presidential-hopefuls-cybersecurity/?mbid=social_gplus
  5. http://www.cnbc.com/2014/10/21/china-targets-apples-icloud-with-hacking-attack-report.html
  6. http://www.inc.com/will-yakowicz/cybersecurity-companies-on-pace-to-raise-2.5-billion-2015.html

By: Shemeka Neville

 


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Enthusiastic edtech entrepreneurs will often pitch you the idea on how new technologies are revolutionizing the way we conceive learning. They will also mention the opportunity the $909 billion in spending on K-12 and Higher Ed in the US represents [1].  They will of course tell you about Khan Academy (despite the proven flaws to their approach to curriculum design).

What they fail to mention is that for the past few years there has only been a handful of real success stories of edtech companies that can actually reach the growth curves seen in other consumer internet sectors.

A quick scan of the leading incubators’ portfolio show little success on educational startups. Those that make it are typically focused on the very traditional market of test preparation or online courses based ventures. However, there are some exceptions, and recently three start-ups have appeared on the scene bringing interesting changes to a particular education product niche, both in terms of business model and concept.

New players in the LMS market

Learning Management Systems (LMS) have been around for about 12 years and according to Bersin and Associates [2] they will represent a $1.9 billion dollar market by 2013. The market is highly fragmented and serves the learning needs of educational institutions in K-12, higher education, and corporate training.

The first true LMS that made it to market was WebCT in 1999 and it was mainly targeted for universities. Blackboard followed, targeting corporate training and growing at a fast pace with an aggressive acquisition strategy that included WebCT itself in 2007.

The first innovator in this space was the Australian based Moodle, creating the first open-source LMS in 2000 and building around it a large network of partners that offered integration services and lately cloud deployment solutions like Moodlerooms.

By 2009, according to the eLearning Guild Report [3], Moddle lead in market share with 20%, followed by Blackboard with 13% and TotalLMS (SumTotal) with 10%.

Surprisingly, recent market data shows the first significant change in the market structure for a decade [4], with newcomers Edmodo and Interactyx growing at a very fast rate. In terms of number of users, Moddle continues leading the market with 60 million, SumTotal with 32 million and Blackboard with 20 million. Nothing new there, except for the 10 million users that Edmodo has reached in barely 3 years, placing it in fourth place in the blink of an eye (view infographic).

Along with Edmodo, two other companies (Lore and Schoology), following the same approach, have secured $54 million dollars in total on VC funding [5] [6] [7] and are growing steadily (Schoology reached a million users a few months ago and Lore is in the same path).

The sudden change in the marketplace and the number of users adopting the new offerings is not to be underestimated, especially not in a market where this is an oddity. So what is creating this shift?

These start-ups have introduced the concept of what some have called Social Learning Platforms. Born on the cloud, and designed combining best practices on social networks, LMS and CMS together. In addition, by offering a free product, they have been able to flip the customer acquisition model to a bottom up approach, generating an incredible response by teachers, students and chief learning officers as first adopters alike. This has allowed them to bypass the cumbersome selling process to school districts and government usually avoided by VCs.

The disruption for the traditional LMS players has been clear. As a response, Blackboard has moved onto open source in an unexpected acquisition of Moddlerooms and NetSpot, and has now in its portfolio a strange combination of proprietary and open source software. It also launched Coursesites, a SaaS freemium offering that departs from their traditional business model.

Pearson, another one of the big industry players, has also reacted and created a cloud based free Social Learning Platform called OpenClass. In this case, it is not even clear how this decision is going to affect their Pearson Learning Studio, an LMS acquired from eCollege back in 2007.

The next question one would ask is how to monetize these free services? In the case of big players like Blackboard and Pearson, one can assume they will go for cross-sell and up-sell strategies targeting customers that where previously on Moddle and other systems and will potentially migrate to their platforms. Pearson has a stronger case as it can sell its content via this new channel.

On the other hand, Edmodo has recently announced their new API, which allows third-party developers to build apps around the platform, most probably paying Edmodo a portion of their revenue in return.

With the long tradition of acquisitions in this market, it would not be strange to see exit strategies facilitating M&As in the short run, especially if the race for Moddle users is being won by the newcomers.

 

So it is starting to sound like the real consumer internet story, but don’t forget is about education as well

For us aspiring edtech entrepreneurs, what is happening with these start-ups gives some hope for the possibility of embarking in for-profit, VC backed ventures that actually look and feel like the ones in other sectors; as opposed to the hundreds of small, unsustainable, donor backed ventures prevalent in the educational start-up ecosystem.

However, it is not that simple, education is not like any other sector. An educational product should prove the effectiveness of its technology on learning. That is the whole purpose of using technology to begin with. Nonetheless, I am afraid that this might not happen, and in the mean time certainty about the efficiency of Social Learning Platforms on learning will be yet to be demonstrated.

You might end up with a successful company and a high perceived value from customers. But if learning is not improving, in the end, you are simply contributing to the inevitably failure of the education system and with it, fueling the damaging spiral of low education, low productivity, low economic output.

 

References:

 

[1] U.S. Department of Education.  (2005, June). 10 Facts About K-12 Education Funding. Retrieved from http://www2.ed.gov/about/overview/fed/10facts/index.html

[2] Bersin & Associates. (2012, October). LMS 2013: The $1.9 Billion Market for Learning Management Systems. Retrieved from http://www.bersin.com/blog/post.aspx?id=5c1f98de-e439-4e56-879d-b7741bde216c

[3] Davis, B., Carmean, C., & Wagner, E.D. (2009).  The evolution of the LMS: from management to learning deep analysis of trends shaping the future of e-Learning. The eLearning Guild Research

[4] Capterra. (2012, October). The Top 20 Most Popular LMS Software Solutions.  Retrieved from http://www.capterra.com/top-20-lms-software-solutions#.UKSB9uOe_mA

[5] Techcrunch Company Profile. Retrieved from  http://www.crunchbase.com/company/coursekit

[6] Techcrunch Company Profile. Retrieved from   http://www.crunchbase.com/company/schoology

[7] Techcrunch Company Profile. Retrieved from   http://www.crunchbase.com/company/edmodo

 


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