Trying to turn a profit from education

The first time I saw Education.com a few weeks ago, I immediately thought I was looking at a work of genius.

With articles titled "Getting Your Pre-Kindergartener Ready to Read" and "Scientists Say Kids Need More Video Games" the site hones right in on the fears and anxieties of the modern parent. "Look. An article on 4H programs. I think that'd be a good way to round out the extracurricular activities." "Is there any information on a home spectroscopy system for trans fats testing?"

I know this target audience. I am one of them. They are compulsive readers and spenders and rarely stop worrying about finding enough constructive activities for their kids. (Contrast that to my own childhood, where you could drink Fresca and light things on fire.) The ad potential reaches to the sky.

The site is part of an effort to revitalize the tech education market, says Mike Kwatinetz, a general partner at venture firm Azure Capital. Kwatinetz incubated the site and has been investing in other education companies. (Disclosure: I drew my conclusions about the site weeks before I met Kwatinetz or knew he had anything to do with the company. I went to his office as part of a meet-n-greet tour I'm doing with various VCs.)

The push into education is driven by two factors. First, like a lot of people in Silicon Valley, Kwatinetz has strong opinions about the decline of the U.S. school system.

"Our country is on the wrong path. We are under-investing in education," he said.

Second, there's a mismatch between customer demand and what tech companies are selling. Over the past 25 years, the reasons people buy PCs haven't changed: Most consumers buy PCs to help their kids in school. Kwatinetz was a PC analyst for various investment banks in the '80s and '90s and says that motive has rarely varied.

Entrepreneurs, however, have steadily lost interest in education. The first stroke came with the collapse of the software channel. Education titles did better when software stores existed. Now, these titles have to compete for shelf space against games at big-box retailers and superstores. Retail staffers aren't taught how to sell the products.

On the Web, there are scattered sites with educational features, but social networking and games have been bigger draws.

So far, Kwatinetz says, he's happy with the response the site has received. Interestingly, half of the hits are coming from India, China and the U.K. The next challenge will be how to introduce features like social networking and expand the advertising base without alienating parents. The site will also try to bring in more content from research universities and possibly host forums with professors on child development, etc.

"We expect within two years to be in the millions of uniques a month," he said.

Azure is also trying to revitalize Knowledge Adventure, the "edutainment" software company that got spun out of Vivendi. The company recently updated both its Jumpstart and Mathblaster titles. Expect to see two bundling deals with major PC companies for Knowledge Adventure in the fall, Kwatinetz said.

Knowledge Adventure also persuaded John Lithgow to serve as a narrator of a title called Books for You, where 8-year-olds (and up) can create books. Lithgow, Kwatinetz added, took less than his usual fee.

Coming up with a hit in this market may not be easy. Knowledge Adventure, after all, was a much bigger company years ago. If Education.com takes off, it will be sure to spawn imitators.

Nonetheless, the arguments Kwatinetz makes for education investing seem to make sense. And others are jumping in as well. One of the big surprises this year at the Think Tomorrow Today conference sponsored by investment bank ThinkEquity Partners was the unusual number of educational companies.

Educational companies appearing at the conference included Brightside Academy (child care centers), Experiencia (immersive learning programs), Flashpoint (digital media arts colleges), The Savvy Source for Parents (social network for families on things like preschool and summer camp) and SchoolNet (school performance management systems).

So something seems to be up.