The Big Question: How to Find Product-Market Fit in Edtech?

The educational technology industry has experienced exciting growth and adoption over the last few years. Many companies have upgraded to Unicorn status, and funding activity, which had slowed down in 2022-3, is expected to recover in 2024.

The future looks bright, but the fact of the matter is scaling edtech companies is hard.

One of the well-known reasons for this is the lack of or loss of product-market fit.

But why is this a challenge in edtech?

1. It takes time to demonstrate real evidence of impact. Has your offering improved learning outcomes by 10x? How consistent has this been across a large audience? It is incredibly hard to do this at scale, and still, many companies don’t have this right. One reason is that key parameters such as demographics, quality of educators, and cultural habits are not consistent across institutions.

2. There is no common pedagogical framework.

3. Curricula and desired competencies around the world are heterogeneous.

4. Educators still show resistance towards new tools and solutions.

5. Some product categories and markets have an abundance of competitors.

Product-market fit is not only a challenge faced by early-stage ventures but also more established players. For example, some incumbents overestimate the ease of penetrating new markets and think they can follow their traditional playbook at home.

So, what really is product-market fit?

Marc Andreessen, in his article The Only Thing That Matters , in broad terms, has described it as: “being in a good market with a product that can satisfy that market.”

Dan Olsen, in the Lean Product Playbook, has provided a more specific definition: “meeting the underserved needs of target customers better than the competition (or the alternative).” Here is his visual representation:

So, how does this apply in the world of edtech?

Here is my proposed checklist that educational technology companies, independent of their vertical and geography, should follow to achieve product-market equilibrium:

1. There should be a well-defined target group or ICPs who really need your offering. Pains and needs you are looking to satisfy should be clear and measurable. This should translate to a TAM that is large enough to justify investment and the existence of your business.

2. Your customers cannot live without it; not having your solution should cost them dearly (in a reputation/cost/educational perspective) or otherwise, they will be disappointed if they don’t adopt it.

3. There is strong evidence of efficacy, and users are able to land that “aha” moment with users fairly quickly. Alternatives don’t deliver the same quality of results. Ideally, the educational impact is lasting and somewhat sustainable. If this impact is so incredible, it should be evangelized to then build a large following.

4. The pedagogical approach must be sound. Making learning fun is just not enough. Creativity, personalization, and collaboration, for example, have proven to drive real outcomes.

5. For the K12 sector, your solution must be curriculum-aligned. If it doesn’t help educators or learners achieve their curriculum goals, they will never prioritize it.

6. You have at least one proven customer acquisition channel (linked with the personas above). Ideally, you can organically generate further CAC efficiencies to help shape sustainability.

7. You are able to retain learners (or educators if it’s teacher-focused) and are able to know why and how. You can start to internalize this and anticipate problems that can impact retention.

8. You have identified buyers who are willing to pay and follow a business model that is repeatable. Ideally you have a typical SaaS/subscription model. If they can even measure the ROI of their investment, it would be even better.

Signs that you are getting there…

Here is a list of some metrics that can help you find your product-market inflection point:

1. Customers are loving your product, and you have an NPS > 30.

2. Customer relationships are sticky with a 90-100% Renewal Rate.

3. The “40% rule” coined by world-renowned growth hacking expert, Sean Ellis. The ‘40% rule’ proposes that if 40% or more people answer “very disappointed” to the question “How would you feel if you could no longer use our product?” then you most likely have product-market fit. (Note: this is great to at least validate and not necessarily “find” your fit.)

4. New customers are signing up at a faster rate, and there is an uptick of referrals.

On top of all this, you should ideally have an initial cluster of customers that fit the ICP criteria so you have the foundation to scale.

Examples of Edtechs that are getting it right

Toddle: They have created a unique and differentiated LMS that offers schools an end-to-end solution, from curriculum planning and analytics for leaders, streamlined classroom management for teachers, personalized learning tools for students, and real-time communication for families. This is a product designed by teachers for teachers and is easy and intuitive for any educator, anywhere, to use.

Some of the metrics they have publicized:

• NRR > 115%
• NPS > 70
• Annual churn < 5%
• Inbound led GTM motion fuelled by positive word of mouth

Busuu : The B2C and B2B language learning giant has acquired over 120M learners and was recently acquired by Chegg Inc. Here are some scaling takeaways shared by Kirsten Campbell-Howes , its CLO.

Springboard : Shinaz Navas , its founder, here shares his story of continuous self-discovery to find a tighter product-market fit for his online boot camp product.

I have also worked for a company that had raving corporate customers who enjoyed 80-90% adoption levels. This, in part, was due to a fully customized proposition including curated content and clear ROIs in terms of cost savings and the rate of knowledge acquisition.

Final takeaways

If your company is able to be disciplined enough to stay focused on achieving the accomplishments described above, it will accelerate increase its likelihood of achieving product-market fit (a lifespan that typically lasts 2-3 years). This will then prepare you well for scalability.

Please share below your product-market fit discovery story. I would love to hear it!

Feel free to also send me a DM if you have specific questions or need advice.

That's all for now folks!

Like this newsletter? Please click “Subscribe” above to receive future editions from the world of Edtech. Comment below to let us know what you think. Please contact Tiago Mateus to also ask for a specific write-up / analysis in a GTM area that concerns you.

Tiago Mateus has 20+ years experience in SaaS, EdTech and Learning from start-ups, scale ups and enterprise. He was CEO, CRO x2, BD leader in a $100M international unit and managed over 100 people collectively across all functions. He has worked across all edtech verticals, across 50+ countries and speaks 5 languages.