Games and Learning

2013 saw a 6 percent increase in investment in education technology.

For any firm considering building and taking a learning game to market the question of who might fund its development, testing and distribution looms large.

Shauntel Poulson, a principal at the NewSchools Venture Fund, has seen a lot of companies come forward with an idea for a game and seen it fail to attract funding from venture capitalists.

“A lot of times with games it is too early. A lot of times I get approached pre-product and so it is more of a ‘Here’s a vision,’ ‘Here’s where I think it can go,’” Poulson said. “With gaming a lot of times the graphics are so important, the art. And really showing engagement in that game is so critical. So not having any kind of user testing or any kind of user feedback makes it really risky at that stage.”

Listen to the full conversation:

The following is an edited version of the audio interview.

gamesandlearning.org: Looking at 2013 and even into the early part of 2014, is the investment community really seeing educational technology and, in particular, learning games as a real market to focus on, a real place to invest?

Shauntel Poulson: Yes, but we did just talk about this increase in interest in education technology and we are seeing that there is a lot of interest across different areas within the sector. It really kind of depends on the model of the company and what they are focusing on.

So overall in 2013 we saw a 6 percent increase in overall funding up to about $452 million in capital. This is broken out across a number of different categories and gaming was one of those categories. It was one of the smaller categories…

Many of the gaming investments we have seen typically follow more of a consumer model. So typically [they] are games that are direct-to-consumer rather than games that are sold to the classroom model.

gamesandlearning.org: Is that because, at least currently, investors are still a little leery of the actual ability to take a product into the formal education market? Or is it that there are not a lot of products that are aiming for the education market – the formal, sort of, school market – that are seeking funding right now?

Shauntel Poulson: So, I would say that there are companies that are seeking funding that are trying to do the formal education market. I think, in general, there is a little bit of skepticism around direct enterprise-type models, but I think that gets even heightened when you introduce games, mainly because gaming is still new even from a classroom perspective.

Just thinking about how teachers adapt games and how teachers see the implementation of games – that is still very nascent. So there is even more wariness in terms of investing in games that are implemented and sold through the classroom.

gamesandlearning.org: Is there a way that a development firm can address that wariness?

Shauntel Poulson: I think it is a mix of things. I think if you can show the traction, you can show that people are already using your product, that’s great.

Two, I also think it is a design perspective. Have you designed your tool so it can be easily integrated into the class so it is very, very easy for teachers to use and there is not a huge learning curve? That also means the alignment. Often times, with games sometimes teachers are not even sure how to fit this into the curriculum.

The games that are doing well now, they have actually mapped every single game to the Common Core and that has really, really helped in terms of teachers being willing to adopt those games.

gamesandlearning.org: There does seem to be a little bit of a chicken and egg thing, right? If there were these games that were wildly successful in the classroom, you would think the next sort of group of games to come to investors might find a warmer climate because they had seen success. But it’s hard to have success without, you know, the funds.

Does there need to be a big break-out it for there to be more interest in the gaming sector?

Shauntel Poulson: I don’t think there necessarily needs to be a big hit, and there is a sort of chicken-and-egg problem and I think it is even augmented beyond that – games take a lot of money and up-front capital to develop…

So where do companies go to get capital and one place they can look is early angels to get some early capital in so you can build a prototype that you can test from.

The other thing that we are seeing some companies do is ether turn to grants – like SBIR grants or NSF grants and then mixing that with other foundational funding.

gamesandlearning.org: Does that create any residual problems when you get a grant to… teach a certain science thing from NSF, but it seems that those grants aren’t so much built to market that game, but rather just build it. What are the challenges that come from seeking that kind of funding – the foundation funding?

Shauntel Poulson: Yeah, those funds are going to earmarked for specific work toward the game, but I think that is where you can supplement your other funding from angels or other sources. So you use that money (the foundation money) to focus on product development and use some of the other money to focus on the marketing…

gamesandlearning.org: What are the advantages for a developer in pursuing money from an accelerator (like NewSchool’s co.lab) as opposed to the traditional VC market?

Shauntel Poulson: So, you automatically get funding that way for joining the accelerator and kind of beyond the technical support, it is a great way to have an immediate connection to the classroom teachers. So I know specifically for co.lab a lot of the emphasis is in creating games that teachers can easily implement. You are going to get connections to teachers and then you can use that connection to iterate your product.

So that basically accelerates the timeline for getting that adoption. So I think they are great especially for companies that are going straight to the classroom market.

gamesandlearning.org: How important is it to really map out a strategy to (an idea) from the get-go up through distribution and have multiple, different types of funding built in?

Shauntel Poulson: I think that is important and I think it is important to have a strategy in terms of your game development. You can’t just make one game – especially if you are trying to do something in the classroom – you have to think about the suite of games that are going to cover a specific topic or a specific curriculum area. And so thinking about what are all the games that are going to necessary to provide a complete offering and then with that offering know how much money is it going to take and then, like you said, have different strategies and back-up plans.

gamesandlearning.org: You hear from a lot of … firms that are seeking support. What do you find are the biggest mistakes those firms make when making their first approach?

Shauntel Poulson: So a lot of times with games it is too early. A lot of times I get approached pre-product and so it is more of a “Here’s a vision,” “Here’s where I think it can go.”

With gaming a lot of times the graphics are so important, the art. And really showing engagement in that game is so critical. So not having any kind of user testing or any kind of user feedback makes it really risky at that stage.

The other area I could see big improvement on is differentiating themselves from the competition. There are always a million-and-one math games, so how is your math game very specifically different? And if it is significantly different, how can it be marketed so it can be elevated above the other million math games.