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ED OP-ED

A double bottom line

jose-ferreiraEdtech is booming. In the past decade, VC investments in edtech have tripled from $146 million in 2002 to $429 million in 2011, according to the National Venture Capital Association. VentureBeat says that the market size for U.S. education could reach $1.2 trillion by 2015.

If this were any other information technology vertical market, the issue of incorporation status would be no issue at all. But education is held to a different standard. A higher standard, many would say — and I would agree. But “higher standard” should not be conflated with “not-for-profit tax status.” Certain entrenched interests would like you to do so. You should not.

Especially in education, “not-for-profit” has come to mean horribly bureaucratic, one-size-fits-all, and extremely expensive. Meanwhile, nearly every ed-tech start-up is in fact working to reduce the overall cost of education.

Those who fear innovation — and the change it brings — often invoke “shouldn’t profit from our kids” as an effete rhetorical device against for-profit education companies. But teachers charge for their services, do they not? So do teachers’ unions. So do schools themselves — they charge parents, students, and taxpayers — and they charge them a lot. Universities charge up to $50,000 per year. What matters is the reduction of education’s systemic costs, not the tax status of those who do so.

So let’s get past this simplistic and cynical canard that being a for-profit is morally inferior to being a not-for-profit. What matters, if you are starting an education venture today, is what the right incorporation status is for you.

Khan Academy is a great example of a not-for-profit start-up. It is, at its core, a library of wonderful content with a light technology layer to help increase engagement. It needs cash to create more videos. Its not-for-profit status has helped it get an incredible amount of press and acceptance it would not have gotten as a for-profit. But it will also impede growth. So it’s a mixed blessing even for Khan Academy, and I know of no other organization turning its not-for-profit status into anywhere near the media buzz that Khan gets.

On the other hand, some for-profit higher-ed companies have recently run publically afoul of regulators for pushing sales quotas too aggressively. To their credit, they’ve corrected the problems and are now looking to innovate their way to growth. But we must always remember that education is a special calling. It is a human right and a social good. Putting profits first might be short-term smart, but, in this industry at least, it is always long-term foolish.

I favor a middle ground. Knewton is a “mission-driven for-profit.” We intend to make a return for our investors. But the ultimate goal we measure ourselves against is a social one — our own “double bottom line”: we hope to generate sufficient cash in our core business that we can identify, power with Knewton adaptive learning, and give away the world’s best low- and no-cost education to the developing world and inner city. If we can accomplish that, I’m sure our investors and employees will do fine too.

I chose a double bottom line mission for Knewton because that’s the type of organization I wanted to devote my life to. But it turns out that it also has helped us attract unbelievably talented people who also want to devote themselves to that kind of mission. It’s been a fantastic unifying and motivating force in our organization’s culture. And it has helped us land some critically important early partners, because they believed we were in this for the right reasons.

So consider setting up your education venture as a mission-driven for-profit. It’s the best of both worlds — which is exactly what education needs.

-Jose Ferreira, Knewton Founder and CEO

EDTWEET OF THE MONTH

Michael B. Horn, Co-Founder and Executive Director of the Innosight Institute, manages to sum up the difference between last-gen and next-gen learning in just 140 characters:

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GAME ON

Knewton’s first table tennis tourney culminated in a match between Sudhama Bhatia, software engineer (left) and Nathan Lasche, product manager. Music from “Jock Jams” played as a rapt audience looked on. In the end, Nathan (and his lucky sweatband) emerged victorious.

Ping pong finals

DATA VISUALIZATION

This “code swarm” shows the entire history of each Knewton developer’s contributions to the Knewton Adaptive Learning Platform. Check it out:

 

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KNERD NEWS

HMH LogoKnewton is teaming up with Houghton Mifflin Harcourt to improve learning experiences for students in correctional facilities. This Fast Company article explains why adaptive learning is uniquely suited to serve this need — and what challenges remain.

SEASON'S GREETINGS

Screen shot 2012-12-14 at 1.17.49 PMHappy holidays from all of us at Knewton. We’ll see you next year.

KNERD ALERT

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Knewton is on a mission to personalize education for the world. We’re looking for software engineers, data scientists, and others to join our team. See open jobs or enter cheat mode.

FEATURED ED EFFORT

 

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Education’s internet moment is here, and with it have come countless opportunities for edu-focused entrepreneurs eager to make their mark. Along with a flurry of edtech startups has come a number of edtech-focused incubators aimed at supporting early-stage companies and entrepreneurs.

Imagine K12, located in Palo Alto, CA, is among the most prominent. Founded in 2011, the incubator has been hailed as “the Y Combinator for education startups” by TechCrunch and has supported 39 companies, which have raised over $16 million in venture financing, and whose products are used in over a half million classrooms by millions of children in the US and around the world.

Says Geoff Ralston, Imagine K12 Co-Founder: “The moment for edtech is now. Teachers are ready. Schools are ready. Parents are ready. And finally venture capitalists are ready too. Today’s technology has the power to transform education and help teachers improve outcomes for kids in the US and around the world. We hope to help as many companies take part in this as we can find.”

For other edtech incubators, check out this article from Getting Smart. Three notable newbies: Boston-based LearnLaunch and Exponential Boston, and NYC local Socratic Labs.

EDTECH BUZZ

How to succeed in education technology (EdSurge)

More cracks in the credit hour (Inside Higher Ed)

Ethiopian kids hacked tablets in just five months (Fast Co.Exist)

2012 HIGHLIGHTS

Here are a few of our favorite things from the education world this year.

Ecole Centrale engineering school

Good chronicled some of today’s most innovative brick and mortar learning experiences.

Reports:

How digital learning contributes to deeper learning (Getting Smart)

Enhancing teaching and learning through educational data mining and learning analytics (U.S. Department of Education)

Talk:

Daphne Koller Ted Talk

Daphne Koller, co-founder of Coursera and friend of Knewton, gave a TED talk entitled “What we’re learning from global education.”

Infographic:

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TFE Research and Michell Zappa created this infographic about the future of edtech. See the whole thing here.

MEETUPS @KNEWTON

This month, we hosted NY Tech Women’s birthday party. Next month, we’ll host NY EdTech’s I Like It When You Call Me ‘Big Data’ meetup. RSVP now.

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