Microsoft Co-founder Bill Gates has announced that his charity, the Bill & Melinda Gates Foundation, is launching a $20 million grant designed to get entrepreneurs to develop new technologies to help students obtain their college degrees.
The Gates Foundation is seeking to get entrepreneurs involved in tackling the issues surrounding America’s struggling education system. The foundation has already put billions toward education-related grants, and Bill Gates was a prominent character in Waiting for Superman, a new documentary that analyzes the failures of the American education system.
The Next Generation Learning Challenges fund will be divided into grants ranging from $250,000 to $750,000, focused on technologies that emphasize blended learning models, deepen student engagement and learning through interactive application, high-quality open courseware and learning analytics for monitoring student progress.
The deadline for the program is November 17; grants will be announced in March 2011. While the Gates Foundation will provide funds for the project, the nonprofit organization EDUCAUSE will run the program. It will award grants every six to 12 months.
According to Gates, it isn’t limiting the grants to any specific type of organization. He believes that non-profits will primarily apply for grants related to blended learning models, but that he hopes there will be a mix of private companies and startups for grants related to deepening student engagement and learning.
Kiva, the website that connects microlenders with microborrowers, is branching into new territory: Today, it announced the beginning of a pilot program to give microloans to worthy students in Bolivia, Lebanon, and Paraguay. Donors can give as little as $25 to help students in those countries pay their tuition and complete degree and certificate programs at local institutions.
In a press release, Kiva President Premal Shah said the following about the new program, which, after this year, Kiva is planning to expand to 15 countries:
We believe the Internet community is in a unique position to share the risk of student lending in the developing world and if these students repay their loans -- as we believe they will -- it could be the very impetus needed to make education accessible for everyone around the world.
Shah also spoke with Fast Company about the expansion, comparing it to Amazon's adding music to its inventory, after initially just being an online bookstore. It's a logical next step, he says:
What’s happening is there is a risk tolerance because empathy creates generosity and there’s a risk distribution on the website. Hundreds of thousands of people are sharing the risk—spreading across countries and people--there’s a higher risk appetite to try these new risky loan products in the developing world. If you can prove that the repayment rate is high over the next 1 to 2 years, it has a huge demonstration effect for more traditional providers of finance.
Shah also noted that education can lead to as high as a 300 percent increase in income level, evidence that these loans are likely a sound investment, as well as an act of kindness.
GOOD: Prior to starting Einztein, what did you do?
Marco Masoni: While studying law, I taught in a public school in Washington, D.C., and later at a private school in LA. I taught in schools that were under-resourced and schools that were over-resourced, both at a stage when the internet was just beginning to take shape. A few years ago, after working in entertainment finance, I decided to make the permanent switch to education.
G:Why education?
MM: A couple years ago I convinced my nieces to relocate to Los Angeles from other parts of the world, thinking that California had a wonderful public education system that involved going to a good community college, and after two years transferring to one of the four-year state schools. It was a pretty good bargain for the money. Subsequently, the budget crisis has implemented cutbacks, which in the abstract might not seem like such a big deal until you have someone you love looking to transfer and being turned away from four-year schools due to reduced enrollment numbers. It got me thinking that if $40,000 a year isn’t viable and the paths are closed off to cheaper alternatives, what’s a student who wants to get a higher education supposed to do? I decided to focus on new models for education.
G: What is Einztein exactly?
MM: It's intended to serve as a sort of cloud campus, which allows people with the desire to learn to access free courses and connect with one another as they carry out their academic pursuits. It's intended to serve as a platform to enable the exploration and experimentation of new models of education. And while we're not trying to create a model that will work for everyone, I predict that we will soon get to the point where there will be ways for willing students to obtain online degrees at low or no-cost.
G:When did it launch?
MM: The site launched in March and we're still developing some important elements, including our social knowledge networking tool, which is aimed at enriching the experience of studying online.
G:What's your favorite course?
MM:Making Civics Real. The years I spent teaching and my interest in civics come together in that course, which is basically a professional development workshop for teachers of civics.
G: How do courses appear on your site?
MM: First, we review courses for quality purposes. And you'll find everything from as little as eight semester hours all the way up to 100 semester hours. The average is around 15 to 20 hours. It's entirely self-paced and 100 percent free. We do our best to screen out courses that have hidden costs. And we won't include a course that requires you to sign up.
G: Can you get credit?
MM: No, not yet. You can use the knowledge and skills that you gain from the course to help in a job, prepare for college, or supplement your coursework. That’s where Einztein is serving as a platform, and as it evolves, we're looking at ways that a student’s work can be recognized.
G: What do you see as the future of degrees from accredited institutions?
MM: At some point in the near future, I think, it's going to be less important whether a student got credit for a course through a university or through a reputable provider that may or may not be accredited. And while degrees from accredited post-secondary institutions are meaningful, it won’t be the only avenue available to students looking to get a leg up in the marketplace. Other avenues will open up.
G:Where do you see this whole movement headed?
MM: I think that the state of online course design is still incredibly primitive. We're just beginning to understand how to shape a course so that it is compelling and truly educational as opposed to being repurposed content that gets thrown up on the web so schools can generate money or market themselves. But we are still at a very early stage in terms of what the internet has to offer students who are coming at learning from a different place, whether that's because their first language is something other than, say, English, or because they have some other challenge to overcome. We've been pretty dumb about course design up until now. The internet has served our purposes for shopping, communication, news, and entertainment. But it hasn’t been used as effectively as it can be in terms of actually advancing knowledge.
India may have just introduced a new threat to both the One Laptop Per Child's $100 XO Laptop and Apple's iPad: a $35 touchscreen tablet PC capable of connecting to the Internet, video conferencing, and even drawing solar power. For a country where 600 million of its 1 billion people already own cellphones, this handheld device appears to be the next logical upgrade in connectivity for the world's largest democracy.
According to India's Human Resources Development Minister, Kapil Sibal, who unveiled the tablet today, the primary target for its initial launch is the education sector. Government officials told CNN that it wanted the country's universities fully connected, as part of its education goals, and that this device—the price of which could soon fall as low as $10—could be the key to hitting that target.
At $35, the Indian tablet is virtually disposable--far exceeding the $100 laptop developed by the Massachusetts Institute of Technology, and used in the non-profit One Laptop One Child program. In fact, in many ways the $35 tablet also makes the $500 iPad seem significantly over-priced. ...
Businesses that have adopted the iPad, though, might be very interested in a touchscreen, Web-enabled tablet that can enable mobile workers to access cloud-based applications and data for less than 10 percent of the cost of the iPad. In a cloud-based infrastructure, the device used to connect to and access information does not need the bells and whistles common on desktops and laptops. The tablet becomes a commodity, consuming less power, and delivering significant cost savings.
Leaving business aside, if the price does in fact fall to $10 per unit, does this device suddenly become the go-to for connectivity amongst schoolchildren in the developing world over the XO?
If you're looking for new ideas in education, says financial journalist-turned-innovation consultant Charles Leadbeater, you shouldn't focus on the top: specifically, Finland, which is often touted for having the world's best education system. Rather, Leadbeater argues, often the most dismal situations can result in the most out-of-the-box solutions. He himself has seen them in the favelas of Brazil and the slums of Kenya.
He's met a man who came up with the idea of setting up a communal computer in the entryway to an Indian slum, as well as a Brazilian fellow who has come up with more than 200 games to teach kids any subject imaginable. (One of them uses the process of making soap as, what Leadbeater calls a "technology of learning.")
During this TED London Salon talk, Leadbeater praises a couple American initiatives that we've previously cited on this blog, including the Harlem Children's Zone and Big Picture Learning. The key to these innovations, he says: Pulling people into education, rather than pushing them into it.
Figuring out how to locate the smartest concentration of people in any one place is no easy feat.
Typically, it's either been measured by the proportion of college-degree holders or the raw number of college-degree holders that accumulate in a given place. Both approaches, according to Rob Pitingolo, an economics brainiac and 2010 college graduate, have flaws:
"The theory that there is economic value to having smart people together rests on the assumption that smart people collaborate with each other. You could have a whole bunch of smart people in one place, but if they don't interact with each other, what's the value?"
Pitingolo instead calculates what he calls "educational attainment density" by measuring college degree holders per square mile:
Is there value in corralling a bunch of smart people together in one place? What if they still don't collaborate? If they did, would you be willing to relocate?
IDEO and Steelcase have just announced what might be a revolution in classroom design, a schooldesk that seamlessly adapts to whatever happens in class.
If you've spent any time in a schoolroom in the last 15 years, you're familiar with the high pitched whine of metal scraping against linoleum, as students rearrange their chairs and desks to whatever activity is going on. It seems like a minor annoyance, but it's a serious design problem: School furniture was largely designed 50 years ago for static, face-forward teaching. It isn't suited to the myriad forms of teaching that take place in the modern classroom.
Contrast that with the Node chair, which was designed by IDEO and produced by Steelcase, a Michigan-based furniture company. The details betray a remarkable thoughtfulness: The seat is a
generously sized bucket, so that students can shift around and adapt
their posture to whatever's going on; the seat also swivels, so that
students can, for example, swing around to look at other students making
class presentations; and a rolling base allows the chair to move
quickly between lecture-based seating and group activities.
In group activities, the proportions are such that the chairs and integrated desktops combine into something like a conference table:
And finally, there's storage underneath the seat--but off the ground--for backpacks, while the armrests themselves have a subtle flair that allows them to become strong, convenient hooks:
Of course, it's unlikely that the chair will be appearing in your local
public school anytime soon--the market seems to be the glizty new secondary
schools and new university classrooms popping into existance. And you wonder whether the economics will work out, since a plastic chair probably can't last as long as bomb-proof metal job like you find in public schools.
Meaning this design, for now, will be one more reason to envy a private-school education.
Chegg may very well be the fastest-growing, most successful, second-generation e-commerce startup that you hardly ever hear about,except maybe for the fact that it’s raised more than $140 million. Chegg is the “Netflix for textbooks.” It lets students across 6,400 college campuses rent from a virtual bookstore containing 4.2 million books. Based on my analysis (which I get into more detail below), the company is on track to generate $130 million in revenues in 2010, up from $25 million in 2009, and $10 million in 2008. During the January, 2010 semester, I estimate the company made close to $1 million in revenue a day, up fivefold from $200,000/day the previous January, and it should double that this coming September. My analysis suggests Chegg will do close to $50 million in revenue this September alone. It is underappreciated, to say the least.
Chegg is disintermediating the $5B+ college textbook market by providing a low-cost, short-term, nationwide rental alternative to the high-priced university bookstore. This disruptive model will likely shrink industry revenues by half in the coming years, with Chegg in a leadership position to command 80%+ market share. The key questions, of course, are: 1) Is this a winner-take-all market, 2) What can Chegg do to fend off the likes of the major bookstore owners, Barnes & Noble and Follet, as well as Amazon and Apple, and 3) Is Chegg a harbinger of a new age of startup rental services?
Old School
The Chegg story is different from those of other breakout startups, such as Groupon and Zynga, in five key ways. First, rather than creating an entirely new industry, Chegg introduced a proven service concept and relied on established customer behavior (mail-order rentals) in an old, highly dysfunctional category, whose customers felt captive and where costs were spiraling out of control. Second, founded in 2003, the company took four years to find its business, so it was not a rocketship from inception. Third, rather than targeting a broad audience, Chegg focused on solving the pain point of a specific customer set desperate for an alternative. Fourth, Chegg, like traditional e-tailers Amazon and Zappos, requires a complex infrastructure to handle warehousing, shipping, and returns for millions of physical items, as well as a customer service desk that is highly seasonal. And fifth, because Chegg is innovating in an existing industry, the company faces rampant competitive threats from both the old guard and new entrants alike.
Not Just Extra Beer Money
According to the Department of Education, the annual cost of tuition, room and board for a four-year public institution is now $13,500, while a private university will set you back $30,400.
While college tuition costs have far outstripped inflation, having grown at an average rate of 7.74% per year since 1978, guess what constitutes the second highest educational expense for college students? Textbooks.
And those costs have grown at an average annual rate of 6.9% over the same time period, more than the growth of medical care expenses, causing real hardship to students who can already barely afford to put themselves through school. The issue of textbook affordability is so acute that in 2005 Congress asked the Department of Education to conduct a study on the matter and then released a plan in May, 2007 to make textbooks more affordable.
BMOC: Big Monopolist on Campus
According to the National Association of College Stores, students have historically been paying nearly identical prices for both new and used textbooks. Last year, the average list price for a “new textbook” was $64 compared to $57 for a “used textbook.”
When you consider that bookstores are making significantly higher margins on used vs. new books (35.7% to 22.3%) as a result of taking advantage of students by buying back (for very little money) the very books they just sold them last semester, its is clear that bookstores have little incentive to change. Students, on the other hand, are more than ready for a more economical solution that treats them like customers.
“Hi, I’m Chegg”
Chegg launched its rental service in 2007 and it quickly gained traction with students. Highly dependent on the fall and spring semesters when the majority of textbook-buying occurs, Chegg saw a nearly 2X increase in traffic to its website from Fall, 2009 to Winter, 2010. In January, it drew 1.3 million unique visitors, according to Compete. This was 10 times more than its closest startup competitor, Bookrenter. Based on its current growth pattern, I expect to see another 2X – 2.5X increase in traffic to the website this fall.
How Fast is Chegg Growing?
Sometime in 2008, Chegg began publishing on its homepage a real-time tally of the total dollars the company was saving its customers. Thanks to screenshot captures and Google image search, I was able to put together the following chart, which shows the explosive growth the company has experienced since the beginning of 2010. The company passed the $100 million savings mark on January 11, 2010 after two years of operation and needed just an additional three months to cross $200 million in May.
Financial Report Card
Jim Safka, the former Chegg CEO, said in an interview that the company generated $10 million in revenues in 2008. According to a company press release, Chegg saved students just over $16 million in 2008. That means the company is saving students 63% off the list price of books and making 37% in revenue. Using this ratio, I estimate the company did close to $1 million in revenue per day during the winter semester 2009-2010, an increase of four to five times its daily average of $200,000 a day during “off peak” business days.
Based on this ratio, I estimate Chegg generated $25 million in 2009 and will do $130 million in revenues in 2010, accounting for increased traffic and awareness, almost half of which ($50 million) will come in September alone.
Based on my analysis, Chegg is likely operating at breakeven or at a slight loss each month, making the bulk of its profits in September and January. The reason for this is the complex and expensive warehouse and customer service operations required for this business.
Chegg hires three different tiers of employees: full-time engineering and marketing, warehouse, and customer service. Chegg needs to preserve as much flexibility as possible with its customer service and warehouse teams, so that they can be ramped up or down depending on the time of the year. When things are slow, the company still needs to carry the costs of its warehouse.
With a strong affiliate program that costs the company 8% of revenues, and its textbook buyback program, Chegg’s profitability comes down to how effectively they manage three aspects of the business: 1) textbook wholesale cost, 2) warehouse efficiency, and 3) customer service operations. These are three competencies that are very difficult to learn and mimic, creating strong barriers to entry.
Chegg is clearly planning for continued future growth. In February, the company announced plans for a brand-new warehouse facility in Shepherdsville, Kentucky, which will cost the company $27 million and employ another 100 full-time and 1,200 seasonal employees. Based on my analysis, Chegg will likely have to double its monthly revenue run rate to $10 million in order to cover these additional expenses. Chegg had previously raised $55 million in debt in November, 2009 to invest in this area.
Is This A Winner-Take-All Market?
The nascent textbook rental market is looking a lot like the early days of the online DVD rental business. Online-only startup, Netflix, managed to out-innovate, out-operationalize, and outlast its deeper pocketed rivals—mainly Blockbuster—that had the added advantages of a local physical storefront and customers who already rented movies!
The potential challenges for Chegg look a lot like those facing Netflix a few years ago (and a key one that does not):
Lack of a physical footprint on campus
Industry long dominated by a few, deep-pocketed players; in this case, Barnes & Noble and Follett, which operate more than 1,500 campus bookstores between them
Impending threat of digital replacement of physical goods
A seasonal product need that does not fully utilize operational capacity
But here is what Chegg does better than anybody else, which makes it difficult to compete against and win:
Test Quickly and Fast Rollout: The company can test concepts in discernable communities with limited risk and capital outlay. At the formation stage, the company could limit the number of books it needed. As it grows, it can roll out new services quickly after proving out the concept at say, Florida State.
Marketing: There is nothing as viral as a college campus. FTW!
Operational Excellence: Like Netflix, Chegg is excellent at pick, pack, ship, and return. This is incredibly difficult to do. And will become more so when the company begins experimenting with extending the model to other books. See #1.
Scalable: Chegg will always have better inventory than local bookstores and better pricing. There is nothing stopping Chegg from offering other kinds of books for rent.
Customer Service: 30-Day refunds, free return shipping, customer support, tree planting. As I mentioned above, managing for peak and off-peak times is difficult.
Based on my financial analysis above, operating a physical bookstore and running an online rental service require different core competencies. I believe this is a winner-take-all business and that Chegg should control 80%+ market share over time.
Strategic Plan
In order to further ensure its position as market leader, I believe Chegg should position itself as the “Amazon for College Students” and cater to their unique university needs. The company should also go deep into expanding its classroom offerings, such as class notes and digital goods. Here are some other things it could do
Partner with bookstores for physical presence and kiosks a la Red Box
Expand its assortment of books to leverage its operational expertise and capacity
Expand classroom offerings and potentially acquire companies in this space, such as lecture capture company, Echo 360
Embrace digital a la Netflix and partner with publishers
Work with Apple and e-reader company Kno (started by Chegg founder Osman Rashid)
The big question for Chegg down the line is how do they counter the cyclicality of the textbook business with more steady streams of revenue. I’d rent a novel for $5 if there was an easy way to return it. Wouldn’t you?
It turns out that the missing ingredient could be the friends a child keeps, specifically their in-school friends, the ones who sweat the same tests and homework and complain about the same teachers, rather than those they may make outside of school.
UCLA professor of psychiatry and senior study author Andrew J. Fuligni and first author Melissa R. Witkow, a former graduate student of Fuligni's, report in the online edition of the Journal of Research on Adolescence that adolescents with more in-school friends than out-of-school friends had higher grade-point averages and -- complementing this finding -- that those with higher GPAs had more in-school friends.
The authors found that these associations were similar for boys and girls and cut across all ethnic groups.
Drawing from three Los Angeles-area high schools, the researchers recruited 629 12th-grade students, split almost evenly by sex, with an average age of 18; no single ethnic group predominated. The students filled out a questionnaire, then kept a diary in which they logged such activities as time spent studying, time spent with in-school or out-of-school friends, and other activities.
Roughly speaking, the more in-school friends a child had, the higher the GPA.
"We found that within an adolescent's friendship group, those with a higher proportion of friends who attended the same school received higher grades," said Witkow, now an assistant professor of psychology at Willamette University. "This is partially because in-school friends are more likely to be achievement-oriented and share and support school-related activities, including studying, because they are all in the same environment."
This is not to dismiss or put a negative spin on a child's friends from outside school, Witkow said. "These friendships are still important in terms of fulfilling adolescents' social needs, and they are not necessarily always detrimental to achievement. For instance, friendships that form in academic settings outside of school, such as at an enrichment class, may very well promote achievement."
The next step, the authors say, is further research to better understand how out-of-school friendships are formed and how they are different from in-school friendships. The authors hope to expand their studies to draw upon younger ages and earlier grades.
Still, the findings from this work suggest that, on average, in-school friendships help support achievement because of the ways in which they engage adolescents in the school experience, Witkow said. The bottom line? Know who your child's friends are.
Enrichment classes, after-school activities, tutoring, not to mention the gentle prodding of parents -- all may count in giving a child that extra academic edge. But parents still puzzle over what the right mix is to make their children excel in school.
A new dual-screen tablet from California startup Kno aims to make electronic textbooks into a viable business.
It’ll need some luck: Tech giants like Amazon and Apple haven’t yet cracked the e-textbook market, despite multiple attempts.
“If you look at why e-textbooks have failed in the last ten years, the biggest problem is the size of the screen,” says Osman Rashid, co-founder and CEO of Kno. “Textbooks won’t fit into a 10-inch or 12-inch screen so you have to scroll up and down and right and left.”
“It makes for a poor learning experience,” he says.
Kno founders say they can fix that. The device has two 14-inch LCD touchscreens that fold in like a book. The idea is to make textbook pages fit perfectly across the screen and flow from one digital page to another. Kno made its public debut at the D8 technology conference Wednesday
The tablet will be powered by an Nvidia Tegra processor. It will include a stylus for handwriting recognition, have a full browser, support Flash and offer six to eight hours of battery life. The Kno will offer 16 GB or 32 GB of storage–enough to store 10 semesters’ worth of files, documents and books, says Rashid.
But it you are thinking a lightweight, cheap, easy-to-tote machine, Kno won’t be that.
The device, scheduled for release in December, will weigh about 5.5 lbs, or as much as a full-size notebook. And while the price hasn’t been fixed, it is expected to be “under $1,000,” says the company. Compare that to a $500 iPad that weighs 1.6 lbs, or a $260 Kindle at 0.6 lbs.
Kno is still a good deal, insists Rashid.
“If you are a parent, you know your child is carrying 20 lbs to 25 lbs of textbook in their backpack. Now you can replace the entire backpack with a 5.5-pound device,” he says.
Apple’s iPad has led to renewed interest in tablets, a category that few consumers had shown much interest in. Since Apple launched the iPad in April, it has sold more than 2 million devices. The demand for tablets has spurred other companies makers including Asus, MSI, Dell and HP to create would-be iPad killers.
But tablet-like devices from startups have been disappointing so far. Despite its 12-inch screen, the JooJoo has been widely panned for not delivering the kind of zippy, delightful experience that’s made the iPad so appealing.
Kno’s closest rival, the Entourage Edge, is also disappointing. The Edge is a dual-screen device with an E-Ink screen on the left and a 10-inch LCD display on the right. But this Frankenstein-ish monster is hobbled by a slow processor and by its weight.
Kno isn’t like these other tablets, says Rashid.
“You have to put yourself in a student’s shoes and not a technologist’s shoes,” he says. “The iPad or all these other devices aren’t created from the ground up with students in mind.”
Unlike the e-books marketed for fiction and nonfiction best sellers, electronics textbooks haven’t really taken off, because students have some unique requirements.
Textbooks are better in color, since they often have illustrations and graphics to help students understand the concepts. That’s why black-and-white displays like the E Ink are extremely limiting. Most digital textbooks are distributed as PDF files, but they are not formatted perfectly, says Rashid, who also co-founded the online textbook-rental site Chegg.
“So if a professor in a class says ‘Turn to page 74 in your book,’ you don’t know if the page 74 on your PDF corresponds to the one in the physical book,” he says.
And there’s the problem of scrolling when pages don’t fit into the screen. Kno’s tests showed that about 47 percent of textbooks fit on a 12.1-inch screen. Most freshman and sophomore books didn’t fit that screen size. On a 10-inch screen, similar to what an iPad has, only 11 percent of textbooks fit.
Kno, which was started in September last year and now has about 90 employees, says it has written its own software that will “normalize” books in the PDF format. It will also add interactive elements to the books and allow students to make notes and annotate the margins of an electronic textbooks.
Similar to Amazon’s Kindle, Kno hopes to have its own bookstore.
The company has inked deals with four major textbook publishers, including McGraw Hill, Pearson and Wiley.
Kno won’t have 3G connectivity but it will be Wi-Fi capable, so users can wirelessly download textbooks on to the device. Eventually, Rashid and his team hope to add other educational services such as the ability to buy accessories like a scientific calculator or even request tutoring from a tutor.
Rashid says students are unlikely to feel any pain from the lack of 3G access in the tablet. “Students are pretty wired on campus and at home, so Wi-Fi should work well,” he says.
Kiva, the website that connects microlenders with microborrowers, is branching into new territory: Today, it announced the beginning of 
Looking to take a free, college-level, online course? Look no farther than 
