I’m Goldie Blumenstyk, a senior writer at The Chronicle covering innovation in and around academe. Here’s what I’m thinking about this week.

Let’s talk about all that ed-tech money.

It’s quite the contrast: Colleges are laying off personnel, cutting entire academic departments, and otherwise struggling with budgets battered by lower revenues and higher costs. Meanwhile, investors are pouring billions into companies that sell education technology and related services to colleges and schools — and into investment funds themselves.

That imbalance could spell trouble.

Ed-tech companies raised a record $2.2 billion in venture and private-equity capital across 130 deals in 2020, according to EdSurge, which tracks those figures in its funding database. Last year’s total was up nearly 30 percent over the $1.7 billion invested in 2019, across 105 deals. And that doesn’t count the additional hundreds of millions invested already in 2021, or the potential gusher of new capital being raised by education-focused private-equity funds or by the now-trendy Wall Street vehicles known as SPACs, or special purpose acquisition companies, that have no actual operations (yet).

We’ve heard this story before. Heck, I’ve written this story before — initially two decades ago, when the bubble first burst on "education dot-coms." Ed tech, of course, is a more mature industry now than it was after the boom-and-bust in 1999-2000 (and subsequent booms, in 2008 and 2015). Many colleges, too, have become savvier consumers, better able to hold their own as a growing number of companies look to get in on the action.

But with Covid-19 pressuring institutions in ways never before seen, and analysts noting that the money flowing into the sector is creating overvalued companies with unrealistic expectations for post-pandemic profit and growth, I wonder how long it will be before the bubble bursts again — and where that will leave institutions and students.

Conversations I've had in the last two weeks with several investors, analysts, and academics inform my sense of the pros and cons. So here goes:

To be fair (and less cynical than I tend to be on this topic), investment capital flowing into ed tech brings obvious benefits. For one, it fuels entrepreneurship. And that means “greater odds of our problems being solved,” said Matthew Rascoff, associate vice provost for digital education and innovation at Duke University. It behooves academics to work closely with companies, he said, and watch what they’re doing: “We should be willing to buy the good solutions.”

Some of the new (and newish) companies that are attracting capital right now do respond to the challenges colleges are facing, like how to encourage interaction among students remotely (see especially $16 million for ClassEDU and its Class for Zoom platform, and $14.5 million for Engageli and its alternative to Zoom). Improving communication is another theme (for example, $16 million raised by Mainstay, formerly known as Admit Hub, to expand its chatbot capabilities).

Another positive: More companies create a more competitive landscape, which can result in better pricing for colleges. It can also give colleges greater leverage to, say, ask a company to run a pilot program with a new product before committing to a contract, noted Fiona Hollands, a senior researcher in the department of education policy and social analysis at Columbia University's Teachers College. “If the buyer is smart, they’ll get what they want,” she said. “If they’re not, they’ll get what everybody throws at them.”

Of course, that assumes college leaders and IT staffs have the time and energy to figure out what requests they’d even want to make. After a year of managing pandemic operations, many are still barely keeping up — and they’re exhausted.

Just staying current can be a challenge, said Robert Pianta, dean of the School of Education and Human Development at the University of Virginia. “As a higher-ed administrator, I’m getting bombarded” with pitches from companies, he told me. “Some I recognize, most I don’t.”

Oops, is my cynicism showing? Even the “positives” are a mixed blessing.

While a lot of the $2.2 billion tracked by EdSurge went to companies focused primarily on postsecondary students and institutions (Coursera, $130 million; Course Hero, $80 million; Handshake, $80 million), the tally also included many deals in other education markets. Think companies that help parents educate their children and help adults educate themselves. (What’s more pandemic-y than Master Class raising $100 million?) But increasingly, products cross from elementary and secondary instruction to college education to work-force training. Actually, there’s another positive: to show the limits of siloed thinking about education.

More salient to me, however, are the risks of an overheated, overvalued ed-tech industry. The entry into education of those "hot" Wall Street creations known as SPACs seems a clear sign of that overhype.

Quick detour here for a little primer on these things: A SPAC is a “blank check” company created to raise money from investors in public markets even before it’s specified what businesses the company will own and operate. In the last year, financiers have raised close to $1 billion creating at least four ed-tech SPACs. The acquisition capacity of each one is several times the amount it has raised because it can attract capital through a private investment in public equity, or PIPE, deal. Within two years, the SPAC has to buy something or return investors’ money.

Does that sound like a lot of capital looking for a deal? Yeah, to me, too. As one education-industry banker told me: “The knock on SPACs is that they’re going to have a hard time finding good assets to buy.”

In that case especially, investors may pay too much. Sure, right now, ed-tech companies look like a solid bet. Colleges have eased their usual procurement rules and allocated emergency funds to solve remote-learning challenges. Because of Covid-19, a lot of these companies “have grown extraordinarily fast,” Troy Williams, head of ed-tech strategy for the University Ventures investment firm, told me.

But what happens if the pandemic effect fades and companies can’t meet their investors’ (perhaps inflated) expectations? No tears for the investors here. But that could get really disruptive for the colleges and students the companies are working with. Attention may shift to sales rather than customer service, the strategy and offerings may change, or the company might look for a buyer or merger partner.

To be sure, such moves are generally less disruptive to campuses today than they were in the early days of ed tech. The industry now has more common standards so that its products and tools can move more easily into different systems. Cloud-based technologies have minimized the need for extensive reprogramming at the campus level. Still, as the market analyst and consultant Phil Hill said, “When things go bad, they go really bad.” That can leave college leaders feeling the heat as well.

It’s too early to determine the impact of this ed-tech investment bonanza. But it’s not too late to pay attention to something perennially missing from these booms: whether the tools are working. As Pianta told me, with all the money now flowing, “there hasn’t been a parallel investment in the kind of infrastructure and resources to study the impacts.”

Pianta’s not disinterested on this subject. He’s chair of a nonprofit, the UVa-affiliated EdTech Evidence Exchange, entirely devoted to this work. That doesn’t negate his concern. The fact that the exchange is still scrambling to raise the funds it needs to build a platform to help college educators share information about ed-tech efficacy might even prove his point.

Most companies and investors won’t fund that kind of research unless customers insist on seeing such information before they buy. And most colleges don’t make those demands. It’s a "circle of gridlock" I’ve described before. The pandemic has changed a lot about higher ed. Maybe now the Covid-driven ed-tech surge will crack open that circle, too.

Got a tip you’d like to share or a question you’d like me to answer? Let me know, at goldie@chronicle.com. If you have been forwarded this newsletter and would like to see past issues, find them here. To receive your own copy, free, register here. If you want to follow me on Twitter, @GoldieStandard is my handle.