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Universities and government look to boost lucrative market for education entrepreneurship

A movement is under way to make it easier for entrepreneurs to navigate the lucrative and sometimes-tricky education market and introduce new technology and products into classrooms.

An educator at the University of Pennsylvania wants to create one of the nation's only business incubators dedicated to education entrepreneurs. The U.S. Department of Education is also getting into the act with a $650 million fund to boost education innovation.

"Here's this (market) that is huge, that is really important, that needs innovation, and there's just nothing out there to sort of foster it," said Doug Lynch, vice dean of Penn's Graduate School of Education. "Let's create a Silicon Valley around education."

K-12 schools and degree-granting institutions spend more than $1 trillion on education annually, federal statistics show. That represents immense potential for entrepreneurs — if they can resist the lure of more established tech firms and trendier ventures like social networks.

There are other roadblocks.

Despite constant talk of making U.S. students more competitive, Lynch said it can be nearly impossible to introduce a new product in the fractured K-12 market because of frequent changes in superintendents, policy and curricula. Each of the nation's 15,000 school districts has its own needs and often cumbersome purchasing process.

"It's worse than trying to sell to the U.S. Army, in terms of the hoops you have to jump through," Lynch said.

The incubator he envisions at Penn — called NEST, for Networking Ed entrepreneurs for Social Transformation — would identify promising businesses and give them financial and logistical support, such as access to capital, work space and university expertise.

Linking educational researchers, who tend to be theoretical, with entrepreneurs, who are more practical and action-oriented, could help unlock the market, said Kim Smith, co-founder of the NewSchools Venture Fund, which invests in education businesses.

"If they can figure out a way to bridge those two communities, it could be a real contribution," said Smith, now CEO of Bellwether Education Partners.

Penn, an Ivy League university in Philadelphia, has already held two summits on education entrepreneurship and hosted its first business plan competition, sponsored by the school and the Milken Family Foundation.

The top prize went to Digital Proctor, which creators say can identify typists through keystroke biometrics and thereby make it easier for teachers to root out test fraud. Digital Proctor beat out competitors from 27 states and three countries to win $25,000.

In an interview, Digital Proctor CEO Shaun Sims said investors' lack of familiarity with the education industry means entrepreneurs must make a double pitch: first on the market overall, then on the actual product they've developed.

An incubator would "create an ecosystem for education" that attracts entrepreneurs who might otherwise venture into more investment-friendly efforts, he said.

"You're going to get the country's best talent working in this market instead of going to Silicon Valley working on the next social network," Sims said.

The U.S. Department of Education hopes to bolster entrepreneurship with its Investing in Innovation fund.

Jim Shelton, assistant deputy secretary for the Office of Innovation and Improvement, said it is easier than ever for schools to use new ideas and products because of increasing Internet connectivity, cheaper technology and the growing use of hard data to measure outcomes.

"The shift toward evidence as the currency for education ... will make it a much more rational market," Shelton said. "It will be much easier for entrepreneurs to prove that what they have is what people should be spending time and money on."

Arizona State University is also embracing the emerging field. It held its first education entrepreneur summit last spring and has started discussions with Penn for some kind of partnership, said Julia Rosen, associate vice president for innovation and entrepreneurship.

Arizona State's business incubator, SkySong, has all types of companies but is intensifying its focus on education businesses because of the "incredible market potential," Rosen said.

"Individual consumers are increasingly willing to pay for education, whether it's lifelong learning, private schools, tutoring (or) test prep," she said. "We think education is going to be the next health care."

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