Nine-figure financings in education are rare. So a few weeks ago when AltSchool announced it had raised $75M in Series B financing from Founders Fund and Mark Zuckerberg’s foundation, along with $25M in venture debt, for a total of $100M, the entire education private sector paid attention.
As AltSchool is attempting to reengineer the K-12 school experience by building a network of technology-driven micro-schools, one concept that resonated out of of its financing was that of the “full-stack startup.” The idea of the full-stack startup – as propounded by leading venture firm Andreessen Horowitz – is merely that of the most successful public and private tech companies of our time, namely Apple and Uber. Whereas Microsoft’s approach was to provide key elements of the personal computer value proposition (i.e., Microsoft Windows and Office), Apple aimed to control every element of the value proposition to ensure a superior experience for the end user. And while Uber was preceded by several companies that attempted to sell software to taxi and limousine companies to make them more efficient, it took a “full-stack” approach like Uber’s to materially improve the end user experience and revolutionize the industry.
“Full-stack” means that technology companies needn’t be allergic to non-technology functions if those functions can be delivered more efficiently when driven by better technology. According to Chris Dixon at Andreessen Horowitz, besides producing a much better customer experience, the full-stack startup model permits challengers to bypass incumbent resistance to new technologies – which is often deadly when selling to educational institutions – as well as to capture a greater portion of the economic pie.
Inspired by Andreessen Horowitz, Mike Fishbein, a marketing expert and author of books like Startup College, posted on what a full-stack education company should look like. Fishbein’s view is that the goal for the end-user is not a quality educational experience, but rather a job: “Jobs are the top of the education stack.” According to Fishbein, “a full-stack education company might not look like a school at all. It could look like an employer, a lender, a school, and/or a recruiter all rolled into one” because the point is to provide all services required to get the student a (better) job.
The full-stack concept reminds me of something I learned in college from my roommate Chris. Whenever we were thinking about getting some beer (and that was much of the time), Chris’ thought process went like this:
- If we’re going to get a few beers, we might as well get a case.
- And if we’re going to get a case, we might as well get a pony keg.
- And if we’re going to go to the trouble of tapping a pony keg, we might as well get a keg.
We called it “keg theory,” and my roommates agree that this slippery-slope logic has proved a surprising durable lodestar in our personal and professional lives. I believe it’s applicable to the full-stack higher education company: if you’re going to go to the trouble of creating a product to improve higher education, and if you’re going to devote your life to a company to advance that product, you might as well make sure the student gets a job at the end of the day. Otherwise, the “end user experience” still may be as crummy as the passenger riding in the backseat of the dirty taxi (albeit one dispatched via better software).
In my view, the full-stack higher education company needs to do three fundamental things:
- Develop and deliver specific high-quality educational experiences that produce graduates with capabilities that specific employers desperately want
- Work with students to solve for the financing of the educational experiences
- Connect students with employers during and following the educational experience and make sure they get the job
Just as full-stack startups like Uber need to get good at much more than software – per Chris Dixon, hardware, design, consumer marketing, supply chain management, sales, partnerships, regulation, etc. – aspiring full-stack higher education companies need to be able to answer the following questions:
- Are the educational experiences we’re offering sufficiently differentiated and specific to address unmet labor market demand from specific employers?
- Are we helping students solve for financing, including pursuing a range of business models beyond the default (private-pay, out-of-pocket tuition)?
- Are employers involved in educational experiences midstream? And are we doing all we can to package, present and connect students to employers once they’ve completed?
Many of University Ventures’ portfolio companies are attempting to answer these questions, sometimes bringing them into areas that seem far afield for a higher education company. Some, like Galvanize, are making significant progress. But I know firsthand that answering these questions isn’t easy. So keep in mind that starting a higher education company isn’t easy either. And if you’re going to get a few beers, you might as well get a keg.
