DC to VC: Boston

March 7, 2012

There is a fast growing ecosystem of early-stage ventures focused on education. However, for those ventures working in and selling to the traditional K-12 system, access to capital remains challenging. There are venture philanthropies (like NewSchools) and an expanding network of angel investors that provide capital to many of these young companies. Yet most traditional venture capital firms continue to take a wait-and see-approach having concluded that long sales and adoption cycles, a fragmented market, and other challenges preclude, or significantly undermine, the possibility of returns that meet VCs’ threshold.

On February 16th, at the request of US Department of Education, NewSchools Venture Fund–along with Bessemer Venture Partners, Highland Capital, and Flybridge Capital–hosted a discussion in Boston on this very topic. The DoE has held similar “DC to VC” events in other cities to discuss the opportunities and obstacles to building for-profit ventures that focus on K-12 education. In addition to a terrific group of venture funders and education entrepreneurs, we were thrilled to be joined by a group of innovative leaders and policymakers, including Karen Cator, the Director of the Office of Education Technology at the US Department of Education, Joanne Weiss, the Chief of Staff to US Secretary of Education Arne Duncan, Paul Reville, the Massachusetts Secretary of Education, and Mitchell Chester, the Massachusetts Commissioner of Elementary and Secondary Education.

In the room there was agreement that the environment for for-profit ventures may indeed be changing. Participants agreed that the following could help drive change:

  1. The Common Core is creating common standards that entrepreneurs can build around. And the common assessments being created by the RTTT assessment consortia, as well as an increased focus on student outcome data, will make it easier for districts to evaluate the effectiveness of different tools.
  2. New interoperability standards could help ease districts’ anxiety over switching costs. Schools will be better buyers if they feel more confident taking on and getting rid of products, or as one participant noted: “They’ll feel more confident if they know they can kick us out”. 
  3. And efforts like the League of Innovative Schools, a group of 50 schools across the country that commit to test new technologies and use data to discover what works, could align demand and spark the creation of “consortia” that work together to purchase products and services. Limiting the need to sell individually to all districts could make life easier on entrepreneurs.

Yet big barriers still exist. In K-12 there are few examples of breakout companies that have demonstrated that the market may indeed be more hospitable than in the past. There are few examples of companies with business models that diminish a reliance on districts as “payers”, and those that do are less likely to serve students in the K-12 system that would most benefit from innovation­—namely students from the lowest-income communities. And because purchasing decisions are often made in a political context, effectiveness does not necessarily guarantee a path to growth.

While challenges remain, there was a sense of optimism in the room.  There are an increasing number of terrific entrepreneurs entering the education space. States and districts appear more open to working with for-profit ventures than in the past. And there is now a genuine ecosystem of entrepreneurs, funders, policymakers and others that are working together. Even the opportunity to gather a cross-section of leaders for an event like this provides reason for optimism.

For more, please visit Rob Go’s blog and his posting on this event here.