New Markets Venture Partners began its laser focus on education nearly ten years ago. Since then, we have made over 20 investments in education companies that serve over 19 million students, including 10 million at-risk. Our companies have recovered thousands of high school drop outs, improved millions of student math scores, provided personalized and adaptive learning, managed classroom behaviors, and kept tens of thousands of students from dropping out of college. We are extremely proud of our companies and our track record.

But, for all of the talk of education reform and the billions of dollars invested into edtech over the last decade, things have barely gotten better. There has a been a slight uptick in the high school graduation rate (from 75% to 82%) due mostly to the closing of several “drop out factories,” but achievement, income and skills gaps have changed little over the past decade. And while more employers than ever require a college degree, access and affordability at colleges and universities are both moving swiftly in the wrong direction. Every year, 4 million Americans either drop out of high school, don’t enroll in college (after graduating high school), or drop out of college. Even new graduates with a college degree are experiencing high levels of unemployment and underemployment. Another 1 million lose their jobs to automation each year. In the meantime, employers can’t find qualified candidates and 5.7 million middle- and high-skilled jobs went unfilled last year. The economic outlook for those without a college degree is dire, but only 30 graduate college out of every 100 fourteen year-olds who start high school. Numbers for low-income and minority populations are even more troubled. People are right to feel betrayed by the system. Without hyperbole, our severely broken education system runs the risk of destabilizing not only the US political system, but potentially the entire global economy.

If we want to make measurable progress helping millions more Americans get the education they need to succeed in quality jobs, we must aggressively break down silos between key areas of education and employment. Working across traditional silos is the key to improving these outcomes and are already giving rise to innovative business models that offer compelling opportunities for education investors. But entrepreneurs can’t do this alone. We also need better incentives from government along with a willingness from educational leaders to embrace the kind of change exemplified by Dr. Michael Crow, President of Arizona State University, who acknowledges that business as usual will continue to fail a majority of our students. (Over the past decide, ASU has doubled the number of low-income and minority students they serve, while significantly increasing their graduation rate and also building multiple creative partnerships with employers including their widely heralded national partnership with Starbucks).

These are the silos we invest across to foster disruption through innovation, achieve maximum impact, and deliver on our commitments to investors.

Silo 1: Learn vs. Play (Active vs. Passive Leaning/Cognitive vs. Non-Cognitive)

Every day when I ask my daughter how was school, she gives me the same answers “we sat for 7 hours straight dad, how do you think it was.”  Whether they are being talked at or sit staring at a screen, today’s students are disengaged and bored. Research shows that during a typical school day, students sit passively most of the day and that too many teachers are uninspiring. No wonder so many students are falling through the cracks. And even the most successful students are experiencing unprecedented anxiety of epidemic proportion.

Advancements in blended learning and flipped classrooms, combined with a growing focus on non-cognitive skill building, provide a real opportunity for better engagement and improved outcomes. Authentic project-based, student-led learning has been demonstrated by multiple researchers to be superior, but has yet to be widely adopted. Data from student interaction with digital content allows for fewer high-stakes assessments and real time, personalized interventions, but evolving the teacher’s role for flipped classroom and project-based learning approaches is still a challenge. Breakthroughs in learning science together with terabytes of newly available student data can now provide school districts with much more clear information about the efficacy of the products and services they are using, and a few states are finally starting to care about what works. The rest must quickly follow suit.

Both employers and society (parents) are clamoring for more soft skills from students that build EQ, grit and 21st Century Skills, but such lessons are too slow to find their way into the classroom. Research shows that these skills can be assessed and coached. Employers want this help from schools and this focus will make our students happier, contributing members of society. Their continued passive consumption of content tied neither to building job skills nor emotional intelligence, will not.

New Markets’ investments in the area of active, cognitive learning include: Pairin, Kickboard, Scholar Centric, Think Through Learning, Better Lesson, Fishtree, Presence Learning and Calvert.

Silo 2: College and Career

I can’t tell you how many times I’ve heard a college president explain that they can’t build curriculum around relevant jobs skills because those skills are evolving too quickly to teach. But when asked, employers actually complain that today’s students are lacking more fundamental skills like: writing, problem solving, public speaking, data analysis, critical thinking, communication, attention to detail, leadership, team-work, and an ownership mindset. These skills are both teachable and timeless. There is no reason that universities cannot better align their curriculum and lessons to competencies required to succeed in specific fields of interest to students.  Competency based education and direct assessment of prior learning can dramatically improve ROI for students and universities. We are working hard with our partners at ACT and Capella to find and invest in innovative models towards this end.

As colleges continue to become more expensive and selective without adequately preparing students to succeed at work, we are increasingly seeing employers and students “end run the university” and create innovative alternative pathways. Bootcamps are expanding beyond coding and apprenticeships are making a comeback. Innovative certificate programs between industry and community colleges are popping up with greater frequency. Deloitte has created its own university, SAP is training HBCU students in the skills it needs through Project Propel, and Northrup Grumman has built a program at Tidewater Community College to certify shipbuilders who are in short supply.

Numerous founders and executives of e-technology leaders like Google, Facebook, Apple, Amazon, Netflix and Microsoft have made personal investments in education companies, created billion-dollar foundations focused on education and the companies themselves are beginning to make game changing acquisitions from (by LinkedIn/Microsoft), to TenMarks (by Amazon), to Learnsprout (by Apple). But if the skills gap gets painful enough, these companies could move even more aggressively into the training and education space and disrupt the entire sector with a single acquisition. Can you imagine if instead of Purdue buying Kaplan Education, it had been purchased by Amazon or Google?  This type of disruption is coming soon.

We think these portfolio companies are positioned to foster the change: Straighterline, Credly, Signal Vine, Motimatic, Practice, Graduation Alliance, Civitas Learning, and Regent Education.

Silo 3: Corporate Learning and Development, and Talent Management

Although more than $130B is spent each year in the corporate L&D space, outreach to students and other potential employees is haphazard and reactive. Few employers are thoughtfully building a farm team of potential employees, or working closely with educational institutions, but internal corporate L&D training could easily be made available to students and others looking for marketable skills. Providing assessments and other training content to those building courses, both inside and outside of universities and community colleges, would be inexpensive and provide a huge ROI for employers. Such partnerships would improve the relevancy of the content students are consuming, build exactly the skills employers are longing for, and provide real time data back to employers identifying high performing potential employees.

As more students take a lifelong learning approach, “credits” could be earned both on the job and in the classroom, and prior knowledge could be more regularly assessed and recognized. Competency based programs closely coordinated with on the job training and direct assessment of prior learning offer both students and employers the greatest chance to get more people into jobs that are the right fit. The plethora of personality assessments and data matching tools are not making a dent in the persistent skills gap problems. There is a big opportunity for entrepreneurial approaches to build a pipeline of new employees that deeply integrate the recruiting and corporate training activities inside a company and engage with universities and community colleges around project based simulations of real job skills that can be taught in the classroom, on line, or on the job for some combination of credit, credentials and salary.

We are investors in these companies that are building solutions for 21 Century lifelong learners: Credly, LifeJourney, Pairin and Graduation Alliance.

Help from the Hill/Greasing the Wheels/Policy Environment

Spending billions on infrastructure in the name of job creation misses the opportunity to really help millions of Americans who have been failed by our overly traditional academic systems. We have the technology and pedagogy to train these folks to fill the 5.7 million quality jobs that are currently vacant. These people need real career opportunities, not low-skilled jobs, to restore their faith in the American Dream.

There are pockets of public policy innovation that can serve as the basis for driving big impact. Privatizing pieces of the health and welfare economy, what economist Jeremy Rifkin refers to as the “collective commons,” could create a vibrant marketplace for large and innovative employers to offer sustainable career pathways for millions.

Paul Ryan has embraced a performance based funding philosophy that would dovetail well into this type of economic development. Private sector funding could also be mobilized through social bonds, as we have demonstrated with Graduation Alliance in Utah. These large employers could provide superior services to the poor, elderly and infirm in a more efficient way, employing thousands and saving the government millions of dollars, similar to how the defense industry directly and indirectly employs 4.6M workers.

Federal and state governments can make big progress with small moves and create a more fluid and efficient marketplace for these “alternative students.”  Small tax incentives or deductions that are easy to implement and can have a much higher ROI than expensive infrastructure projects include:

  • rewarding apprenticeships;
  • encouraging accreditors to loosen restrictions on providing credit for prior experience or on the job training;
  • allowing federal financial student loans for high ROI programs outside of the university; and
  • improving corporate training and tuition reimbursement tax credits that are largely unchanged.

Especially high ROIs come from two year programs and other micro credential pathways that skill up employees for high demand middle skilled jobs so often touted by Tony Carnavale at Georgetown’s Center for Education and the Workforce. It would not take much in the way of incentives and tax breaks to motivate employers and higher education to work together to get parents, students and tax dollars more bang for their buck.