Innovators Worth Watching: Thriving on an upmarket trajectory, part 2

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Sep 18, 2019

Welcome to our “Innovators Worth Watching” series, spotlighting interesting and potentially disruptive players across a spectrum of industries.

In our Innovators Worth Watching series in higher education, we have profiled nine innovative companies to date, to investigate the extent to which they are disruptive to traditional college and university offerings. One, MissionU, is no longer in business. We revisited four companies in a previous post, and cover the remaining four here, to see how these companies are faring in their efforts to bring about an increasingly equitable and affordable age of higher education.

Minerva: An elite institution aims to become disruptive, too

Minerva, a university with ambitions to outshine even the most prestigious institutions, has long explained that its model is not disruptive. Much, but not all, of its progress since we last checked in is a continuation of that non-disruptive trajectory—in May, Minerva held its first graduation ceremony. Graduates defended their two-year capstone projects and were treated to a multi-week graduation celebration. 

With its first batch of graduates comes a transition phase in which Minerva Schools begins spinning out of Keck Graduate Institute over two to three years, which consists of applying for separate accreditation and proving financial sustainability for the following five years. This requires a substantial fundraising effort, especially as Minerva also continues to admit more students than anticipated, despite raising the admissions bar. That said, Minerva is roughly 60% of the way to meeting its $50 million fundraising goal.

However, in a surprising move, Minerva announced in April that it is licensing out Forum, its homegrown active learning online platform—a potentially very disruptive product—into the higher education market.  “Being aspirational is an important aspect of helping universities change,” explained Minerva founder Ben Nelson. “But enabling disruptive players matters, too.” Forum empowers other institutions to implement active learning in their own programs and to teach classes of 150-300 students at once. “With Forum, you can bring annual tuition down to $5,000—an order of magnitude difference from traditional universities” noted Nelson. The first two institutions to implement Forum are the Hong Kong University of Science and Technology and India’s SRM University, AP.

ReUp Education: Not forgetting the forgotten students

When we first profiled ReUp, which partners with colleges to re-enroll and support stopout students through to graduation, we noted considerable disruptive potential. An important factor was that market incumbents were largely ignoring the students ReUp serves. 

ReUp has taken advantage and seen continued growth, even in the face of leadership and strategy changes. Since Sarah Horn became CEO last year, ReUp has expanded from working with four colleges to partnering with entire systems of public and state institutions, re-enrolling roughly 8,400 students to date across 43 schools. “We didn’t expect public schools to be the lion’s share of our work,” noted Horn, “but we are proud that this is what came to fruition.”

ReUp has kept the same business model, incurring all upfront costs in the partnership, then taking a share of tuition revenue for the students that re-enroll. The company has generated over $25 million in tuition revenue for partner institutions, enough evidence of the model’s effectiveness to raise $6 million in a recent fundraising round. ReUp will use the funds to continue expanding and to further build out its proprietary technology, which helps ReUp coaches leverage student data to better support students.

Horn has noticed an increased acknowledgment of the stopout student population in recent years from other companies, but little increase in efforts to reach them. ReUp is thus keeping its focus on this nonconsumer demographic, instead of expanding into higher profit services. “Our goal is to better serve those with some college but no degree, who are often at the bottom of the priority list,” explained Horn. “Helping them earn a credential that increases their earning potential is hard, rewarding, and sorely needed work. If ReUp isn’t focused on them, who is?”

StraighterLine: Slow and steady and sustaining

StraighterLine, which provides low-cost, for-credit general education courses online, is firmly on a sustaining innovation trajectory at this stage of its lifecycle. “We’re still running the same business: students come to us to lower costs and risk, and schools increase yield and retention by referring students to us,” noted founder Burck Smith. “It’s a story of continued growth, really.”

For StraighterLine, that growth has meant increasing the number of partner colleges that guarantee full credit transfer to almost 150, and working with more non-partner colleges who also accept StraighterLine credits. 

While the company is piloting a program where international students can take a year’s worth of StraighterLine courses as an on-ramp to a US institution, StraighterLine has no intention of straying from its position of strength in the domestic market. “This is a market that is maturing,” said Smith, “and we’ve been around long enough to establish best practices, scale, dependable outcomes, and a deserved reputation for quality.”

Lambda School: Expanding its disruptive ambitions

Since our initial profile on Lambda School, an online coding bootcamp, the company has grown rapidly in both size and scope and continues on a disruptive trajectory. In 2018, Lambda added three new courses and met its goal of enrolling over 1,000 students. This year, the bootcamp expects to enroll 4,000 students. Since this past January, Lambda has expanded into Europe, raised $30 million in funding, increased the full-time course length to nine months, and started a living stipend pilot program.

The living stipend is designed to address costs beyond tuition for students in need. The bootcamp pays select students $2,000 per month to cover living expenses during the full-time program. For these students, the standard ISA is replaced by one that charges a lower percentage of income over a longer period of time, and with a higher payment cap. This aims to help students better afford monthly payments while compensating Lambda for the higher initial outlay ($18,000 plus instruction costs). Students still only make ISA payments when their income exceeds $50,000 per year.

Going forward, Lambda hopes to expand into more countries, conditional on more widespread acceptance of ISAs. It is also trying to enable widespread disruption in higher education by broadening and deepening its offerings—Lambda is looking to offer courses in cybersecurity and nursing while expanding its partnerships with employers. “The recruiting landscape is changing. Employers today can’t rely on recruiting and hiring methods of the past,” explained founder Austen Allred. “Long term, I view Lambda School as an economic engine, where we find people and help them develop exactly the skills that employers need in any number of crucial roles, evolving our curriculum as those in-demand fields change.”

These four innovators have seen consistent progress in their innovative endeavors, whether leading traditional elite institutions by example while pursuing a disruptive play, partnering with universities to retain students, offering radically affordable general education courses, or becoming a new pathway to in-demand jobs. We will continue watching as they increase access and affordability, reframing and reshaping the higher education landscape as they go.

As a research fellow on the Christensen Institute's higher education team, Richard helps investigate novel business models in postsecondary education, professional development, and lifelong learning.