"According to the National Venture Capital Association, a staggering $463 million has already been invested this year by venture capitalists into educational technology companies in the USA.

This year some of the online start-ups that have received venture capital funding are:

Udacity: $15 million this week; total: $21 million

Coursera: $16 million in April

2U (formerly 2tor): $26 million in April

Codeacademy: $10 million in June.

At the same time, the California two year college system has undergone nearly $1 billion of cuts since 2008, resulting in a waiting list of 470,000 students who cannot get into classes.

The California State University system meanwhile is outsourcing most of the services for CalState Online to Pearson.

In the forthcoming November elections in California, in order for the governor to increase some state taxes, proposition 30 attempts to get round the infamous proposition 13 in 1978 that outlawed any property tax increases for ever in California, resulting in the state going into effective bankruptcy last year."

Notice, it is the Cal State system that is pouring money into Pearson, not Silicon Valley investors. To be noted, Pearson is a 90% Limited Partner in prominent startup education seed funder Learn Capital.

What does this all mean?

Californians need to pony up, and the government needs to manage their finances more responsibly and double down on k-12 and higher education for the masses.

This is the downside of the start-up bubble, private equity investors are trying to cash in while compromising future generations. Online education tools cannot replace college education. No one can get a degree by watching TED. Its sad that education is further become an investment game.

Absolutely, Natasha; there's a great article and video here: http://pandawhale.com/convo/8370/larry-summers-and-peter-thiel-debate

Hopefully these folks will stand up and fight to save public education.

By outsourcing to Pearson did California just privatize some of its education?

Also, can Udacity, Coursera, and Codecademy become billion dollar companies?

Adam, I bet yes, and as some of them head that direction they will gain accreditation; at least from the industries that hire the "graduates". Case-in-point: around 50% of my geek friends _never_ went to college and still do better than most of my college graduate friends.

As CA universities continue to jack up their tuitions and work to back-build distance education (ahem, that's what these private companies are doing by design), private education will become more and more attractive and provide an equal or better value. Similar line to the trade schools in Germany which are highly regarded and are a legitimate pathway for students who either can't afford college or want to dive straight into a specific skill.

I agree with Ottway that CA needs to get its shit together , balance its budget, cut all of the corrupt mis-management of funds that starves education. The private sector is working to fill the gap; and that's actually a great thing for consumers to have choices.

I think Udacity will be the best; I'm betting on Sebastian Thrun to come up with the best model.

Coursera is basically like a traditional university online program in aggregate; I don't think it actually effectively democratizes education in the way we're used to it, not like Udacity or Khan when you can learn any time, anywhere, at your own pace, on an as-needed basis.

I think CodeCademy will need to prove it can actually teach people to code, first; once they do that, I believe they can be a billion dollar company effectively acting as a recruiter for tech companies and/or as a paid software development tool for existing companies, universities and high schools -- similar to CodeHS but better.

Coursera is already generating revenue; but as I've said, I think they are the most traditional -- I'm not sure I think they are actually pushing the envelope *enough* -- but perhaps with higher education, the turtle's path is the best one.

Udacity actually tries to teach people on the way scientists have studied that we learn; that's why I believe they will be the most effective to help people *learn* rather than just get accreditation.

I'd like to see folks learn, not just get degrees. For that they can go to their local degree factory and bang out their 60 gen ed credits.