EdTech Tips to Secure & Continue Contracts as ESSER Funding Ends
- As districts and schools make their final decisions, EdTech companies have an opportunity, and a challenge
- EdTech companies need to be more strategic about proving ROI intentionally and quickly
- Founders should have an eye on changing pricing and payment models to ensure a longer term commitment
The pandemic was exceptionally challenging for school districts, but one silver lining that came out of it was access to Elementary and Secondary School Emergency Relief (ESSER) funds, which have undoubtedly given students across the country more opportunities through access to new tools and programs than before. Billions of dollars were unlocked overnight, eliminating one of the main barriers districts had to accessing EdTech tools they were interested in using, as many became a necessity for continuing daily learning.
Now, as these funds come to an end, with ESSER II expiring in September 2023, and ESSER III in September 2024, districts are making their final decisions on how to obligate funds.
Though this focus on finding the best EdTech programs to spend final money on is a benefit for EdTech companies, especially those with products or services for in and out of classroom use, it also carries with it some necessary planning and re-strategizing to secure new and continuing contracts with districts. Here’s what EdTech leaders should be thinking about ahead of districts’ upcoming spending decisions.
Consider where they’ve been to determine where they’re going
To determine how districts might prioritize their next set of funds, it’s important to look back on what they’ve already purchased. In a U.S. Department of Education report from late 2022, we are able to get a comprehensive picture of 2021 fiscal year spending of ESSER funds. The most funds were dedicated to: academic/social/emotional needs, safe reopenings for in person learning, and physical health and safety.
But spending has been uneven across the country, Future-Ed.org reports, with states disproportionately spending, an essential trend to watch for EdTech founders marketing to these areas. In 19 states, schools have spent half their total allotment, they report, while in four states, they’ve spent less than a third. For example, as of Feb. 28, 2023, Iowa districts had spent almost two thirds their allotment, while Washington D.C. schools had only spent around one fifth. This helps EdTech founders identify which school districts will have more leeway and ability to invest now, and which have already spent quite a bit.
Trial periods with solutions and products need to be more efficient
There’s more of an appetite now to experiment with products and services that might serve the district long term, from investing in educational equity to further building out what a hybrid classroom looks like in the years to come. Some tools continue to focus on asynchronous learning benefits, for example, expanding on pandemic lessons for future use.
But now, EdTech founders have to prove efficacy much more quickly, given the looming ESSER deadlines. So while there are more funds available to try solutions, companies need to show their product is "worth it" for the long haul, and in a shorter amount of time.
In addition, districts are feeling rushed, layering on top of the burnout they were already feeling as so many EdTech solutions have been presented to them over the past few years for consideration. EdTech founders now shoulder the burden of proving their product or service stands out against others, and will uniquely and creatively fill district needs.
Get specific and intentional about your ROI
It’s time to prove your worth to districts, and numbers don’t lie. Use your expedited experimentation periods and short term contracts to convince and convert district leaders into long term fans who must have this product over their many other choices for years going forward. To do this, be intentional about gathering data that proves your ROI, and present that clearly and frequently to district leaders. There should be no doubt how your product or service is benefitting the district, and how it’s a must-have now and in the future.
This means having a dual focus on both the short and long term, rather than just focusing on the long term. In the short term, they need to see quick results now to prove ROI. But also, they have to move your service from a "nice to have" to a “need to have” perspective. This is especially true with the majority of educational software that facilitates classwork for students and teachers. This budget was heavily invested in during the pandemic to assist with remote learning, but is under scrutiny now that in-person classes have resumed. It is essential for EdTech companies to hone in on proving ROI to receive a portion of a school’s remaining ESSER funding.
Offer multi-year contracts paid up front, when possible
Districts historically prefer to pay annually as their new budget is allocated, but this isn’t always the case. Where possible, it’s worth offering multi-year contracts, paid in full and up front as districts finalize use of their ESSER funds. You can offer multiple payment arrangements, including this option for a three-year contract and eliminating the need to find additional funding sources when ESSER runs out.
Some districts might hesitate as to whether this strategy is allowed, and each should do their own research, but the U.S. Department of Education’s ESSER guidelines from December 2022 states that while it’s not typically "good stewardship" to use government funds to prepare for services extending in the future, “under limited circumstances where a grantee or subgrantee timely obligates ESSER or GEER funds, ESSER- or GEER-funded activities may continue for a reasonable time beyond the liquidation period (including an approved late liquidation period).”
They elaborate that the SEA or Governor determines if these activities are acceptable and allowable, but go on to give the example that it would be reasonable and necessary to enter a multi-year software licensing contract with a vendor with ESSER funds, and to "pay for the entirety of the software license within the liquidation period," but also continue to provide the services for “some time” after the funds have been liquidated.
To make this a more attractive option, ensure you are also relieving the implementation burden as much as possible and exhibiting stellar customer service early on. If there are any initial challenges, it should be handled quickly and effectively. An exceptionally successful experience in the earliest stages increases the likelihood they will commit to a multi-year contract to keep seeing those benefits.
It might be a good time for EdTech to consider M&A opportunities
Mergers and acquisitions have slowed in the EdTech market since the boom produced by the pandemic, but there is a common adage in M&A that you should time your business, not the market. Premium businesses command premium outcomes, regardless of market conditions.
That is very much true for EdTech. Since there are so few compelling assets on the market now, the amount of competition to win those assets are at maximum. Combined with the closing of ESSER funding, these conditions are driving exciting outcomes for founders. So take the necessary steps to drive tangible ROI now and in the long term for educators and you will be rewarded. If you are seeing good adoption and growth especially within this current EdTech market environment, that will get the attention of investors/buyers, who are being selective but also aggressive with those succeeding.
For more information, check out our tips on EdTech businesses selling during a growth phase.