Educational Tech Gets a Second Look

A national debate over how to remake the American education system just got one more interested party: the money guys of tech. Silicon Valley put $177 million in education technology companies last year, more than triple the amount they invested in the category in 2007, according to the National Venture Capital Assn. On Apr. 15, Technology Crossover Ventures steered $125 million into online learning company K12 (LRN), which provides software for online learning and testing. Five days later, K12's stock hit a 52-week high of $38 per share. "Education is having its Internet moment," says Rob Stavis of Bessemer Venture Partners, a prominent venture fund.

It's actually more like a second Internet moment for educational technology. In 2000, at the height of the Internet bubble, investors pumped a record $534 million into educational tech companies. Many of the startups didn't last. Companies such as UNext, which raised more than $100 million to help universities such as Columbia and Carnegie Mellon reach online pupils, folded because they couldn't sign up enough students. School board bureaucracies and tight IT budgets turned off other investors. "You saw a lot of venture capital guys swear off educational technology forever," says Michael Moe, a longtime adviser to educational technology companies.