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Education start-ups are exploding

Tuesday, 8 Oct 2013 | 4:33 PM ET
Blend Images | Vetta | Getty Images

At the Education Nation summit over the past few days a recurring theme has been how new tech tools can improve education and tackle soaring costs. A relatively new category of "EdTech" start-up looks to use technology to make education more effective and accessible to hundreds of millions of people.

"Anyone in the world should be able to take high-quality courses, whether at the college or high school level," said Anant Agarwal, the president of nonprofit EdX, which makes college courses available online. "They should be able to take it freely, maybe pay a small amount to get a credential."

Huge demand for education improvement and massive upside potential is driving a surge of investment. The amount of venture capital funding going into Ed Tech has quadrupled, from $154 million in 2003 to $630 million in 2012. The number of companies funded has also quadrupled, to 95 last year—a sign of the explosion of interest from entrepreneurs.

"We're now in this age where anybody can learn anything, anywhere," said Tom Vander Ark, founder of Learn Capital, the first VC fund focused on such start-ups. It has invested $60 million into 40 Ed Tech businesses. "With the explosion of mobile devices and open content, [it has] really made it possible for anybody on the planet to access the best professors in the world," he added.

We're on the precipice of major change thanks to technology—giving students a more social and connected experience, while "gamification" keeps them engaged, according to Vander Ark.

"In the second half of this decade, with inexpensive tablets, with open content, we'll be able to create blended high schools that give hundreds of millions of kids a shot at college and the idea economy," he said.

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Ed Tech investment expanding
The biggest venture capital investor in education technology, Learn Capital has put $60 million into 40 start-ups.

One of the areas in Ed Tech drawing the most attention—and a surge in usage from students—are focused on higher education—offering free access to online courses from top universities.

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Coursera has had over 5 million students take 461 courses from 91 partners. Students can take everything from Duke University's "21st Century American Foreign Policy" to Peking University's "Introduction to Computing." All classes are available for free, but the company recently started charging students who had completed a course for a certificate of completion, generating more than $1 million in revenue.

Udacity also offers free online courses but has a different model. Last month it announced the "Open Education Alliance" of educators and nine employers, including Google and AT&T. Together they'll help create and provide training for companies, and will offer online classes and curriculums to help students prepare for tech jobs.

Udacity also helps schools like Georgia Tech offer an online master's program for less than $7,000. That type of program gives students everywhere access to high-quality, name-brand education at a low price.

Nonprofit EdEx also recently announced a partnership with Google in which they'll launch what they're calling a YouTube for free online courses. The idea is to make it as easy to access a college class as it is to watch a funny cat video.

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Anant said all this competition is a good thing, pushing everyone to make it as easy as possible to learn, study and achieve.

—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin.

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.