‘Awash in Cash’ Ed-Tech Firms Still Vie for PPP Cash

August 5, 2020 By

By Courts Monitor Publisher, Sara Schinella

courts blogCollective eyebrows have been raised across several industries as the government discloses just who received those Paycheck Protection Program (PPP) loans/grants, and education providers are no exception.

The controversy falls well short of Shake Shack returning that $10 million, but several online-education providers have drawn attention. Of course, that could change with California and other states headed to a fall back-to-school period like no other; even edtech firms may find themselves facing more pressure.

For venture-backed companies, the stakeholder-shareholder divide could become a sticking point.

Obviously, the public policy question arises: When a company has access to capital from publicly traded equity, why would they need to access government funds meant to provide a lifeline to small businesses? Yet, as one report noted, “… even an investment firm that has supported dozens of edtech startups appeared on the [PPP] list.”

To make the point more clear, note the opening words of a story in the education community news website EdSurge, where Managing Editor Tony Wan wrote: “Even the biggest names in the education technology industry, awash in private capital, are seeking public support during the pandemic… a review of the data by EdSurge for notable education technology software and service providers found more than 60 for-profit and nonprofit organizations that were approved for a PPP loan between $150,000 to $5 million. (ISTE, the parent organization of EdSurge, was also approved for such a loan.)”

(I should note that ISTE, or International Society for Technology in Education, is a nonprofit educator-membership organization and EdSurge, launched in 2011, is now an “independent news and research” initiative of ISTE. I might also note that PPP approvals offer a range of “up to” an amount and it remains unclear just how much of the approved money firms have accessed and used.)

After setting the table, Mr. Wan underscores his point: “And though the program was designed to help small businesses, some education organizations approved for loans have previously raised hundreds of million from private backers. Even an investment firm that has supported dozens of ed-tech startups appeared on the list. . . investors themselves are also split over whether internet startups should take advantage of an essential lifeline targeted toward local mom-and-pop shops that operate in-person businesses without venture capital support or connections.”

Some companies that seemed to illustrate Wan’s point were called out for special attention, like Altitude Learning, which EdSurge noted has raised the most capital among the listed firms: some $176 million. EdSurge said the San Francisco-based company, “. . .which now offers an online education platform to schools and families, was approved for a loan between $2 million to $5 million.”

In addition, Sphero, the former consumer robotics toy firm that pivoted to the education market, reportedly raised $148 million from investors — and was also approved for a loan between $2 million to $5 million.

RaiseMe, described as “a provider of an online scholarship platform for high school students” that previously raised $31.5 million from investors, was also approved for a PPP loan in April.

I noticed that tutoring outfit Noodle Pros, also made the EdSurge list of potential shame. They were approved for up to a million dollars of PPP funding while listing among the most funded of the firms, at $36.3 million. I know about the Noodle education companies mostly through Noodle Partners, an online program management company, and because Noodle founder John Katzman was also a high-profile founder of 2U, the big OPM that fuels the University of Southern California program I’m attending this fall. Mr. Katzmann left that company several years ago, and Noodle Partners is now a competitor.

So, EdSurge has previously reported that the four Noodle companies have been collectively funded for more than $40 million and that Mr. Katzman determines how that money gets allocated among several of the “Noodles.” It might be argued that, with that sort of clout, it’s another million from Uncle Sam? To its credit, EdSurge has previously disclosed that Mr. Katzman has been an investor in their company.

In June, it was reported that the Noodle raised another $16 million to address the Covid pandemic-fueled interest in remote learning that “significantly accelerated interest in its services.” That was raised through a Series B round led by ValueAct Spring Fund and joined by Lumina Foundation and existing investors.

The industry-focused among us may recall that, way back in April, the Small Business Administration issued guidance for PPP that companies applying for coronavirus relief funds must certify that the loans are necessary and that they cannot tap their sources of funding. The Noodle $16 million was raised through what’s called Series B fundraising, led by Value Act Spring Fund, the Lumina Foundation and existing investors. Clearly, access to venture capital might qualify Noodle companies as seeming to “have other access to funding.”

Actually, we should be slow to judge. Anyone in finance will tell you it remains easy to make the case for even those “awash in private capital” to take the PPP money, and multi-entity setups like Noodle illustrate new advantages for taking taxpayer money in one entity and raising capital in another. We might assume that tutoring and online education companies are enjoying windfalls right now, but could the future be more uncertain? If your job is to “extend the runway,” then an extra million here and there has to be considered.

Now, the only challenge will be if the edtech venture-funded companies must endure the social pushback of other such firms, like chain restaurants or Trump-affiliated operations. My guess is not, because except for very fine industry watchdogs like EdSurge, the public gaze is focused elsewhere.

So, perhaps the lesson is that PPP offers the well-funded an even longer runway, as they say. But that doesn’t mean the runway lacks the occasional pothole.

Filed Under: COVID-19 2020 Tagged With: , , , , , ,

Magazine Explains Why All Those Educations Cases Happen

April 27, 2016 By
See you in court. (Monica Almeida, Pool/AP Photo)

See you in court. (Monica Almeida, Pool/AP Photo)

U.S. News and World Report has a new opinion piece from Andrew Rotherham, a cofounder and partner at the non-profit Bellwether Education Partners, about why so much of education reform ends up in the courtroom. After outlining several high-profile cases, he explains that “… on the courthouse steps you can say pretty much whatever you want. Inside the courtroom, there are rules and process. Clever and fiery sound bites from a press conference will get you in trouble in front of a judge. If the evidence is on your side, the courtroom is often more fertile ground than the political arena.”

He also notes that “… it’s remarkable how many issues that are generally settled in terms of the research evidence remain incredibly live political debates. Courtrooms mitigate the problem.”

It’s a really solid good “think piece” and you can find it here.

Filed Under: Community, National Tagged With: , , , ,

Lawsuits, Legislation On Tap As California Charter Schools Keep Attracting Students

March 14, 2016 By
About one-fifth of students in the San Diego Unified School District have turned to charters such as College Preparatory Middle School, above. The district expects that figure to climb. (Misael Virgen / San Diego Union-Tribune)

About one-fifth of students in the San Diego Unified School District have turned to charters such as College Preparatory Middle School, above. The district expects that figure to climb. (Misael Virgen / San Diego Union-Tribune)

The Los Angeles Times has a detailed report from the front lines of the Golden State’s public charter schools battles, noting that “… twenty-five years after the California Charter School Act allowed public money to fund charter schools, which can be privately run and are often not unionized, advocates across the county and the state are waging legal and legislative fights. These disputes have led to tense relationships in districts that are scrambling to recoup the thousands of students who have sought alternatives.

Some numbers in the report: In the 2008-09 academic year, 38,680 students attended 73 charter schools in San Diego County. This year, 69,685 students are enrolled in 124 charters. But with growth comes questions.

San Diego County has emerged as a sort of Ground Zero for the California schools debate, although Los Angeles has its share of lawsuits as well.

Read the well-researched report here: Inside the fight against California’s charter schools

Filed Under: Community, Events Tagged With: , ,

New SoCal ‘Stealth Charter Schools’ Bring Confusion, Prompt Litigation

December 16, 2015 By
They are calling them “stealth charters” and the San Diego Union-Tribune newspaper reports that “… San Diego County has seen a rise in ‘out-of-district’ charters in recent years — mostly independent-study programs authorized by small districts in the eastern reaches of the region. The arrangements can be appealing because the authorizing districts don’t stand to lose students, and they receive a percentage of the charter’s revenue in exchange for varying degrees of oversight and often administrative support services… regardless of what’s driving this trend, it has sparked bitter turf wars that have pitted districts against one another and stirred costly litigation.”
 
The challenge is that charters that are authorized in one district can set up shop in another. It’s a whole new front in the Golden State’s school wars.
 
Filed Under: Cases, Community Tagged With: , , , , ,

L.A. School Group Offers List Of ‘Best Practices’ Facilities

December 14, 2015 By
The LA Times 12/17/15 article reports, "Sarah Angel, a regional director for the California Charter Schools Assn., praises charters at a recent forum on the future of Los Angeles public education. A new group is trying to launch more of these schools. (Al Seib / Los Angeles Times)"

The LA Times 12/17/15 article reports, “Sarah Angel, a regional director for the California Charter Schools Assn., praises charters at a recent forum on the future of Los Angeles public education. A new group is trying to launch more of these schools. (Al Seib / Los Angeles Times)”

The educational reform group “Great Public Schools Now” has issued a list of possible model schools for Los Angeles County, and the L.A. Times reports that the full list includes 23 magnet programs, 19 charter schools and seven traditional neighborhood schools. The Times says that “… each has a low-income enrollment of at least 75% and more than 60% of students met state targets in English.”
 
Charter schools, especially those crated by teh “parent trigger” that allows parents to take over private schools, have been a civil litigation magnet in recent years. The Times report includes defining terms: “Charters are independently managed and exempt from some rules that govern traditional schools. Most are nonunion. Magnets are district operated and typically offer a special academic program. They were set up initially to encourage voluntary integration.”
 
And the paper repeats that “… questions still surround Great Public Schools Now, including the names of the financial backers and how much money they hope to raise. A confidential draft proposal, obtained by The Times, called for raising $490 million. Critics have questioned whether the underlying goal of the original draft plan — which called for more than doubling the number of charter schools — has changed. That draft was apparently intended for supporters and potential donors.”
 
Filed Under: Community, Courts Budget Tagged With: , ,