Noodle Partners is dramatically improving on its CEO’s prior business model, and it just added new fuel: a $4 million seed round investment led by Osage Venture Partners, with participation from New Markets Venture Partners, 500 Startups and others.
Noodle takes aim at the Online Program Management (“OPM”) space. OPMs help universities build and run online degree programs, handling recruiting, instructional design, technology, support, and placement. Traditional OPMs demand 50-80% of tuition revenues to do so, in contracts as long as 15 years.
“When online higher ed was a speculative, expensive venture, the traditional OPM model made great sense,” said John Katzman, founder and CEO of Noodle Partners. “In 2016, it is insane. This is no longer speculative–more than 15% of students receive their degrees through online programs–and it’s no longer very expensive to build and run online programs. With our first program under way and eight more slated for 2017 launch, we’re proving a far more efficient model is possible.”
“Like many schools, we’ve struggled with the economics offered by OPMs, but Noodle Partners brings a commitment to sustainable excellence in an innovative business model. We’re excited to be their first partner school.” David M. Smith, dean, Graziadio School of Business and Management at Pepperdine University.
Unlike traditional OPMs, Noodle Partners does not take a percentage of tuition revenue. Instead, the company charges a flat fee, saving colleges tens of millions of dollars. Its model removes a set of perverse incentives that have become more evident over the past few years:
- OPMs are incented to spend their marketing dollars recruiting students to schools that have the highest tuition and are the least selective, thereby fattening the OPMs’ own wallets, while raising the cost of higher ed. With Noodle’s flat fee structure, this incentive doesn’t exist.
- OPMs are generally under no obligation to promote a program; a school working with an OPM puts its entire existence in the hands of a company whose fiduciary duty is to maximize its own profit. Noodle performs for its schools or faces quick termination.
- OPMs’ high revenue share means higher debt: students taking a program under a traditional model will make up to $20,000 in student loan repayments to cover the OPM’s profit and marketing spend. Noodle is hired precisely to help lower the cost of higher ed while improving student engagement and outcomes.
- OPMs closely guard their data, so that a college gains little expertise during the term of the contract. At the end of that contract, the school owes millions of dollars in residual payments and has little ability to administer its own programs. Noodle offers a completely different level of transparency, putting budgets, plans, and simple, usable analytics in universities’ hands.
“Noodle Partners is changing what it means to design and run online education programs and we see great value and opportunity in those changes — both as investors and for the good of higher education,” said Nate Lentz, Managing Partner at Osage Venture Partners. “With a proven team, a huge market, and compelling economics for universities, Noodle Partners is positioned to redefine the way colleges and universities make their inevitable move online.”
Founded by Katzman in 2015, Noodle Partners is part of the Noodle Companies portfolio, which is changing the way education programs are conceptualized, designed and delivered — expanding access, improving quality and transparency and reducing costs for everyone. Katzman previously founded two publicly held education companies – The Princeton Review and 2U. Noodle Partners previously announced a partnership with Pepperdine University to design and deliver online programs and provide other technology and management services.
About Noodle Partners
Founded by a team of education and technology veterans, Noodle Partners provides a completely new approach to program management and creates online and hybrid programs while improving traditional classroom models. Noodle Partners works with universities on every aspect of building a great certificate or degree program — marketing, student recruitment, enrollment, curriculum design, student engagement, support services, graduate placement, and alumni engagement — and provides an exceptionally high level of fit and finish. The effective cost structure, innovative approach, and team of experts enables delivery of these services while maximizing tuition revenue and control to the universities. For more information, please visit: http://www.noodle-partners.com
About Osage Ventures
Osage Venture Partners (OVP) invests in early stage, business-to-business (B2B) software companies on the East Coast from its offices just outside of Philadelphia, PA. With over $150M under management, OVP seeks to invest in determined and creative entrepreneurs and provide them with the assistance required to build high-growth businesses. For more information, visit osagepartners.com.