EdTech January 16, 2023

How To Start An EdTech Startup? Essential Steps And Challenges

Writen by EditorialTeam

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How To Start An EdTech Startup

Starting from scratch and building a new company is a bold move. It is a daunting task to do massive planning, which ultimately requires patience. Starting an edtech business is an even riskier move. There are several obstacles for ed-tech entrepreneurs. The first is “how to start an edtech startup?

The industry is highly competitive, and most of the startups fail. So you might wonder what it is about the ed-tech sector that makes it impenetrable. Firstly, let’s explore what ed-tech is. Simply, ed-tech is an industry that integrates innovative IT technologies and other solutions into educational frameworks. It aims to make teaching and learning more efficient and personalized. 

Education is one of the world’s largest industries, accounting for over 6% of GDP, making the industry very competitive. According to Holon IQ analysts, the total volume of the global education market will reach $7.3 trillion by 2025. Yet, there is an enormous potential for growth in the ed-tech business. Here’s a step-by-step guide on how to start an edtech startup.

How To Start An EdTech Startup? Essential Steps

Going forward, we will get into the detail of the essential steps of how to start an edtech startup:

Essential Steps for Starting an EdTech Startup

Understand the Ed-tech Market

Before diving into the ed-tech market, entrepreneurs should know how it works. The data about the market showcases that even before Covid-19 hit the world, the US ed-tech sector received the highest amount in the past five years in investments ($1.66 billion). Where lockdowns were ravaging industries, ed-tech flourished and raised a record-breaking amount of 16.1 billion USD.   

Understand the Ed-tech Market

Chinese Yuanfudao and Zuoyebang were among the biggest winners raising $1 billion and 1.6 billion USD, respectively. 

The pandemic is one of the contributing factors to the rise in online education. By 2030, the OECD predicts that 1 billion jobs will be transformed. It will create a massive need for upskilling and reskilling the global workforce.

Conventional forms of education are ill-equipped to cope with these challenges, and governments are now looking for cost-effective alternatives and ROI. The ed-tech sector has a vast potential for growth as it makes up 5% of global education spending.

Identify Your Niche and Narrow It Down

The biggest mistake ed-tech founders make is skipping market research. Ed-tech offers a large playing field for a single business; thus, you must identify and narrow your niche. Therefore, looking at the present ed-tech landscape is vital to comprehend and determine whether your idea is unique and whether enough people will buy your product.  It would also assist you in identifying competitive advantages, predicting market shifts, and discovering trends in your niche. 

Identify Your Niche and Narrow It Down

Evaluate the strengths and weaknesses of your competitors – businesses that address the same need and target the same audience. You can utilize sites like Crunchbase, LinkedIn, and G2 Crowd to discover competitors and buy research from companies like Nielsen, Pew, Gartner, and Forrester.

After you have identified your competitors and target audience, it’s time to dive deeper! Check recent mergers and acquisitions, unique selling points, financial records, pricing and go-to-market strategies, technologies, and features they use in their products. 

Your competition might have some defenses that will make it challenging to carve out a niche in the market. These defenses include;

Ecosystem – other companies build their products and services on top of their competitor’s platforms.

Data network effects – customers of the product take advantage of the data generated while using the product. When they switch to a competitor, all that data is lost. 

Network effects – the product has a loyal community that’s hard to leave behind.

If you use these strategies, it can help you defend your product against future competitors. Therefore, select at least one to protect your position in the market. 

While doing your research, keep all your competitors in an Excel sheet or a single database. You can draw valuable insights about your niche when you have all the data in a single place.

Validate Your Idea

Validate Your Idea

You might be tempted to start building your ed-tech product right away, but first, you need to focus on these questions;

  • Have you asked enough people to validate your assumptions?
  • Are you solving a real problem that is painful for many people?
  • How did you conclude that it is indeed an issue?

According to CBS insights, most startups fail because they do not address a real problem.

Evaluate the market need by talking to your potential customers. However, you must approach interviews with great care. 

Here are a few tips to help you with interviews;

  • Ask your customers about their lives rather than discussing your product idea. Start with a simple question like, who are you, and what do you do for a living?
  • Instead of talking about problems, talk about situations where they arise.
  • Inquire about their past experiences because people find it difficult to predict their future behaviors. 
  • Ask open-ended questions to dive deeper into the problem.
  • Do active listening rather than selling your idea.
  • Focus on facts, not hypotheticals and opinions. Dismiss everything that goes beyond the consumer’s first-hand experience.
  • Engage in a conversation where people talk about outcomes they want to achieve instead of features and solutions.
  • Explore how much customers are paying to solve these issues (both in time and money).

Record these interviews, take notes, and keep them in a single database. After finishing the interview, thank your potential customers for taking the time to participate and ask for contacts.

What is Your Unique Value Proposition?

After validating your idea, you need to define your unique value proposition (UVP) – why users should buy your product rather than your competitors. It is an appealing and to-the-point message that illustrates the following;

  • The value your product delivers.
  • The target audience.
  • And what sets you apart from the crowd?

To generate an exceptional UVP, concentrate on what’s critical to your intended customers: performance, design, integration, pricing, support, or something else. Identifying what sets you apart from the rest will aid you in positioning your product in the ed-tech market and crafting effective messaging.

Pick a Business Model That Works for You

A business model lays out the big picture for you. It demonstrates the minutest details about how you will achieve your goals and make money using your EdTech startup. It depicts the fundamental assumptions about your product and how it will add value to the lives of your target customers. 

Different ed-tech startups have experimented with different business models. Some businesses mainly focus on rapid growth to capture a significant market share. Others want to sell products to institutions and monetize them. You need to remember that you aren’t just growing a user base or going for the money but building a sustainable business around an issue you intend to solve. 

Select the Right Team for the Job

The secret ingredient for a successful ed-tech startup is a well-rounded, passionate team of professionals. 

Select the Right Team for the Job

Being a CEO of an online learning business and an education professional is an entirely different experience. So, you must fill this gap by making yourself a regular guest at conferences, listening to educators at professional events, and attending local universities and schools.  

Another secret is to have somebody build a scalable monetization model and generate a go-to-market strategy for your platform. Additionally, a startup needs a CTO – an expert to design the product and manage the development team. 

You can either hire an in-house team of engineers or outsource it. The key members of a team to develop the product are;

Product manager – an individual who devises your product strategy and finds solutions to user problems. 

Project manager – the person who is responsible for the execution of your project. A project manager oversees your budget, scope, risk, quality, and schedule. In addition, they act as a bridge between the remote team and the client in outsourcing.

Business analyst – an individual who translates your business demands into software needs and specifications. 

UI/UX designer – somebody in charge of creating the product’s overall look, building prototypes, and designing UI elements to shape the user experience and journey. 

Developers – are team members responsible for writing application code, assisting you select technologies, and making accurate estimations based on your business requirements.

Quality Assurance (QA) – a team of engineers to guarantee quality and detect bugs and defects in the application’s code. 

Depending on the requirements of your business, you may also need the services of DevOps engineers, automation specialists, and other project team members. 

Also, if you are outsourcing, you still need to have some technical knowledge. You must embrace this responsibility because you need to get a comprehensive, well-developed solution to your business needs. If you shy away from this responsibility, you open yourself to the risks of outsourcing. 

Whether you hire in-house specialists or outsource, at the end of the day, you need a strong team who can pull off this massive task.

Start with a Proof of Concept/MVP

Now that you have gathered all the necessary information, conducted thorough market research, and hired a team of professionals, it is time to validate your business ideas. 

Start with a Proof of Concept/MVP

You must test all your business assumptions in real-world settings. The cheaper this testing is, the better. 

An excellent way to show the feasibility of your project on a shoestring budget is to construct a proof of concept (POC). Such an application usually includes the product’s riskiest or essential features. However, you don’t need a fancy design, as the aim is not to impress users. 

You need to convince investors that your idea can work in real life.

Many businesses build a POC under a fixed-price contract to minimize the risks associated with testing out your development partner. A small scope of your work will guarantee you are not wasting your money and time on incompetent contractors.

While POC is about providing proof that your idea can work in real life, MVP refers to validation that it can delight your potential users. 

However, you must remember that MVP is never a final product. It includes only enough features to address the core pain points of your target audience. The aim is to gather enough feedback to comprehend whether you are moving in the right direction.

Get the Funding

Get the Funding

There are five main ways you can raise money for your ed-tech startup.

VC funding & angel investors

Both can offer you money in exchange for a stake in your business. 

While VCs invest money on behalf of other companies or people, angels utilize their own funds. As a result, they take fewer risks and are wary of investing in a company they believe will not provide a return on their investment. 

Getting funds early on depends on your dream. Investors are looking for a story about their future; the better you tell that story, the more likely you will be funded. 

Investors will be interested if you provide evidence of product-market fit or if your business idea will get an accurate scale.


Self-funding poses many risks but gives you complete control over your business direction. In all likelihood, it is possible to bootstrap your ed-tech business.


You can get loans from most banks or use state initiatives or governments for funding. 

One of the advantages of taking loans is that paying back is simple, and banks cannot exercise control over your startup. However, you will still have to repay the loan even if your business fails.


Crowdfunding Equity eclipsed venture capital funding in 2016. It paved the way for lots of niche products and ideas while raising small amounts of money from many individuals. 

The only tradeoff is that you must offer some tangible reward to individuals for funding and attain nothing if the crowd doesn’t provide enough funds.

Sponsorships & Grants

Different companies and governments are often interested in providing educational startup funding. To be eligible for a grant, your product must fit specific criteria. The good news is that you won’t have to pay the money back.

Grow Your Business

Once you’ve released MVP, focus on improving your product and growing your ed-tech business. Before that, you still need to gather feedback from customers. For example, ask them how they would feel if they stopped using your product. 

Grow Your Business

The consumers who’d feel upset are your top fans. So, improve the aspects of your product to impress your super fans, who can attract more customers like them. You will have a product-market fit once you gain 10 or 100 loyal customers. If you have that, you’ll be able to scale your business with excellent retention and growth.

After analyzing the feedback, your next step should be to work for the next iteration. But before adding more features to your roadmap, ask yourself;

  • How well does it fit in with your vision?
  • Do the benefits outweigh the perceived costs, including time and effort?
  • How does it complement or improve existing workflows?
  • Do you think it will grow your business (improve growth, retention, or monetization)?
  • Is it going to take away from other features of your product?
  • Are you capable of realizing it well and providing adequate support?

Shipping your feature is only half the part, if users are not using it, your features might not exist. 

Introduce new features and market them to your existing customers. For example, highlight the latest features during a quick tutorial or introduce them gradually as people use your product. The most effective way to make customers try out new features is by giving them contextual hints. 

You continue to develop your product, including building new features, assessing feedback, and learning from the market. Often you need to change the direction of your business. Also, at times you might have to abandon it for more promising opportunities. 

But, usually, it encompasses building new features and rolling out improvements as long as it serves the customers and adds value to an already existing product to assist you in creating a sustainable business.

Final Thoughts!

Each business has different requirements and different paths to success. But, it is always good to follow best practices to avoid common mistakes and risks. 

Begin with the need that is driving your potential users crazy. Then research the market to understand the challenges and opportunities in the niche. Next, gather a team of employees who are dedicated to your cause. Network with educators and listen to what they have to say. Your product is a hypothesis that you must validate in real-world settings. 

To achieve success, you need patience and attention to detail. The path can be long and twisting, but you must take the first step to fulfill your dreams.

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