As we explore the demand conditions, within industries, we're going to take a look at what they mean in the context of industry conditions. And we're going to examine the influence of demand conditions on your success as an entrepreneur. Specifically, when we explore industry conditions, the first element that we discussed is knowledge conditions, the second is demand. And it's within that, by understanding both of these conditions, that you can improve your success, within industries that you are entering. This, in demand conditions will round out our discussion. And the opportunity analysis canvas, of the industry condition element. So when we talk about demand conditions, we're talking about a few different elements of looking at markets. We're talking about the size, of the market. The rate of growth of that market. As well as the consistency of that market. We want to recognize that to create a successful venture we need to satisfy customer needs in a better way and we need to do it in a profitable way. And we want to recognize that a problem well stated, is a problem half solved. And specifically, we want to seek ways to understand problems, and to solve those known problems. We will want to understand not only the current needs and wants in the market, but we also want to be able to forecast and expect where the market's moving. And how we're going to be competitive not only now. But later, a big piece of that is an element of customer discovery, of actually getting out and talking to prospective customers. So as we do this, it will help us, as well think ahead to when the time comes to begin talking to prospective customers. What are the various segments? And what are the various sizes? And what are the audiences, that we need to be sure to consider? E-learning is a great example to think about demand conditions. And the various elements that come into play. It starts in item one. With recognizing that the global education expenditure, is $4.4 trillion. That there are 1.4 billion students, 62 million educators. Also a significant number of parents, that are influential in purchasing decisions here as well. Now e-learning, as a subset of the education market, is sizeable as well, at $91 billion. It also has a, growth rate in the near term of 23% per year. So that average growth rate, through 2017 is 91 billion, increasing at 23% per year. There are a number of other factors that play into the market opportunity and the demand conditions as well. Per element three 700 million individuals. That lack basic literacy skills worldwide. Item four. A rising cost of education. Up 84%, since 2000. High student loan debt. $1 trillion. Item five. Internet users, so if we're going to look at e-learning we're going to both look at the learning peaks in education and we're going to look at the e-piece of electronic and online. So with item five, we look at internet users. Massive, over 2.4 billion users globally. Item six. What is the population of the space? How many companies am I competing with? Well if I'm in Europe, there are 3,000 alone. Just in Europe. I look at item seven. Of, what about the hardware side. What about the ease and availability of tablets? Well here I see that the U.S. student tablet ownership grew, over 250%. And it is, rapidly growing beyond that as well. I also want to think. As I'm considering demand, about expectation and about the industry. Into item eight, I see there's a lot of hype. There's a lot of expectation. There's a lot of perhaps belief that e-Learning and online learning's going to be a panacea for all education. And it's going to solve all of our, problems and gaps. And I want to be aware of that, I want to be aware of what these trends, and desires, and expectations, both hyped and fact as well. I see in item nine there's new regulation that's emerging. And I see in item ten, that there are a number of what are considered to be hot topics of learning record stores, of MOOCs, of open education and free content. So I see when I look at e-learning and think about the demand that there are a variety of conditions to consider. Regarding, again, the magnitude of the market. The rate of growth. The homogeneity of it. As well as the other factors that are influencing demand. In this case, elements of affordability. And web access. And tablet ownership. And industry standards and expectations. When I look at expenses, this is an important element to consider as well. I want to recognize, what is the expenses that are incurred on education? And I see here, it's over 6 billion a year, in the coming years. And I see that e-learning, is growing at an even faster rate. That's the 23% that we referenced. I want to know, who's my customer? Who's buying these elements? Well there are four primary factors, that are analyzed here in this IBIS report. There's a K through 12 market. There's the post secondary, typically your college market. There's corporate and government spending for employee training. And there's other, there as well. In fact there's a variety of other factors. But I can recognize here, via the pie graph that 50% of the spending is done in the K through 12 market. Not surprising based on that being the bulk of the population. There are many more schools and many more students, in the kindergarten through 12th grade programs, than there are in colleges. So in that way, I'm not necessarily surprised by this. But I'm interested in knowing the statistics, and what expenses are being made, such that if I'm to enter and compete in that market. What are the revenues that are up for grabs? I also want to recognize how the industry is structured. And how is it segmented. Working my way from the left side, content is an area that's influenced by regulatory and curriculum matters. That's influenced by requirements and the types of businesses that would fall into content are the publishers. The content generators, the open source content. My next item, management systems, are looking at scale and complexity and efficiency. These are the software platforms, the tools, the smart technologies, the learning management systems, the analytics, et cetera, that is factored into e learning. The third element, distribution, arguably the most popular of late. Is looking at online access. Free or paid, one to one, one to many. Types of business include immersive learning of how can we make perhaps face to face learning or hybrid learning? More immersive and more experiential and more customized. It's MOOCs. Its other learning portals. And all three of these elements, content, management systems, and distribution, will play a role as we're working to serve our customer. And we are looking at the cost of education. The level of qualification, the flexibility, the customer experience. The quality that's being delivered across the intersection of these three areas of content management systems and distribution. I'm also interested in fundraising and specifically as I look at these many competitors in the market. Are people raising money? Are people getting funding from venture capitalists and other types of investors? And I see here that they are. Albeit it's on a bit of a decline. We see it rose end of 2010. But with the US and economic slowdown and the global economic slowdown, it began to dip off a bit. Not surprising. Recognizing that many of the K through 12 and many of the college audiences. Nominally 85% from the prior chart that we saw of our customers. Are public funded. Meaning they're reliant on tax revenues. Meaning they're reliant on federal spending. So if federal spending is down. Or if tax revenues are down. Then that's going to have an impact on industries that are tied and connected to them. We can, however, see that there's still significant funding in this space. 864 million. In 2012 alone is the forecast here. That was the year to date. It was likely a little bit above that in the end as well. And when we look on the right hand side to the volume of deals, we're still seeing somewhere between 87 and 130 deals done per year. So that would typically mean approximately 100 companies that had been funded via these means. We also would look at M&A activity, the merger and acquisition activity in the space, and what was going on there as well. We're seeing that there's a lot of consolidation and a lot of acquisition. We can look here and see deal values approaching 10 billion. And we can also see that many of those deals in the educations phase were in fact e-learning companies. So 75% of the education companies. That merged or were acquired were in the e-learning space. What we can also look at as we do this type of research is who's raising money? From whom? And what target sector and at what transaction value? What we can see here is a little bit of a survey, a little bit of a snapshot, of the target. So these are the companies. That raise money. We can see the investors. And we can see some pretty notable investors here and they're, vary from some notable VCs, like Andreessen Horowitz, as well as to some foundation, like the Bill and Melinda Gates foundations, that are putting money into this space. We can see the target sectors, largely distribution. And we can see transaction values. So a few million here. Ten or 15 million there. We can also do this type of research in other areas. Everything you've seen is from an IBIS report. And this is one of the research databases that you have access to as a University of Maryland student. There are others out there. We'll look at those stats. We'll look at Eurostats if we're over in the EU. We'll look at SBDC. We'll look at Census Bureau. So when we look at demand conditions, there are a variety of databases that we have access to. Some free, some paid. Some paid, but included within your tuition, that you have access to. So we'll highlight some of these online for you as well. To capitalize on these demand conditions, we want to focus on three aspects. Again the magnitude of the demand is important, but when you're looking at an early stage industry, when you're looking at something that is just beginning to climb its way into success, the magnitude may not necessarily be there, it may not be that high. So we're also as interested. And perhaps more interested. In the rate of growth of that demand. If it's a small market, that's okay. But if it's growing at 20 or 30 or 40% a year, we want to be on that curve as entrepreneurs. We want to ride that growth. And the idea is that a rising tide will raise many of the companies that are in that space. We are also interested in the consistency of demand across the customer segments so when I look at that demand and I see that half of the market spent is K through 12 that's a fairly homogeneous market. There probably is a similar set of needs and wants across that broad sector. Now that doesn't mean that I necessarily want to try to build a product that's going to serve everyone, the needs of a kindergarten class and the needs of a high school class are very different. The sophistication of the students very different. What a six year old and an 18 year old can do or expect is very different. So it's not necessarily to say that it's all the same, and so one size fits all. But at least it brings me into a common genre of what some of the needs and wants are. There's likely some kind of a grading system that's employed. There's likely some measure of assignments and homeworks and deliverables that's employed. There's some kind of a teacher student relationship. There's some kind of a parent or guardian relationship. There are the administrators at the K through 12 area that will play a role, and there may be various other regulations regarding student privacy. Of grade privacy. That we want to consider as well. Now it's a different set of factors and concerns if we're looking at corporate training. Or we're looking at the training of employees within the government. By the government. So that's what we mean by consistency of demand. Or their pockets of demand. Where there's a large grouping of k through 12, a large grouping of the post secondary or large grouping of corporate and government, where if we were to develop a solution we could tackle one of those large areas with our solution and not have to build an entirely new solution, if we wanted to compete within that area. Now this all brings to question of, once you've recognized an industry and began to dissect the demand, what do you from there? For me I like to think about, well where is there an unrealized opportunity? If everyone that I'm seeing, particularly those that are raising venture capital. And are raising a lot of venture capital from good companies, are in the distribution column. I, as a startup, may not want to compete there. I might not want to chase what everyone else is chasing. I might want to look to something different. I might want to look to the management system side. My rationale could be that on distribution, there are a lot of players, and a lot of funding going into that. On the content side, perhaps I can be a content generator, but my expectancy is that the colleges and the schools may already have the content. Or may have the expertise to develop that content or even the responsibility philosophically to develop their content. So I might want to rest in the center. I might want to rest as the startup and management systems and look at tools that can be of value. And maybe I don't want to only look at tools, at all tools. Maybe I want to look at mobile tools. And I might not just want to look at mobile tools. I might want to look at doing analytics. Within mobile. Within management systems. So that's the kind of research that you can do to drive where you might want to compete. And think about where the opportunity is. And where is there a sufficient magnitude and rate of growth. And homogeneity that you can build a sustainable startup. So I'm seeking sizeable markets that are growing that have some similar needs and wants that I can deliver something of value and focus my resources and do that effectively. And I can do it in an area that perhaps there's a niche that for me is attractive. If it's a $1 million or $5 million offer opportunity for me, that would be very attractive. For Microsoft, for Google, not answering the phone for a million dollar opportunity. Not having a meeting to discuss a million dollar opportunity. Just too small. For companies of that scale. So you may find that there are opportunities to engage and participate. And market opportunities. That might be too small for some of the large players to compete in. But may be very much worth it as a start up. Segmentation is a central piece to consider as well when you're thinking about demand. With segmentation it's an opportunity to specialize. And to build reputation and a brand. For doing one thing well. That you can leverage that into new things later. But it gives you discipline. And it lets you go in and think about how do I fill a need. In summary, when we think about demand conditions, we want to recognize this is a piece of the industry. That we need to understand. And we want to recognize the element and the influence that magnetism, rate of growth, and homogeneity plays as we look to bring new products to market.
