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91制片厂视频 Funding

Venture Fund Fueling Push for New Schools

January 16, 2007 11 min read
Douglas S. McCurry, the superintendent of Achievement First, juggles materials for a teacher professional-development session at the charter-management organization's Crown Heights Academy in New York City. Achievement First is one of a growing number of CMOs that are expanding with support from the NewSchools Venture Fund.
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The NewSchools Venture Fund, launched nine years ago to support educational entrepreneurs, recently hit a milestone: It has raised $100 million, helped along by a big gift last summer that propelled it to the top of the heap among the Seattle-based Bill & Melinda Gates Foundation鈥檚 education grantees. So, what鈥檚 it doing with all that money?

A core activity of the San Francisco-based venture philanthropy is to create systems of high-performing charter schools, which are publicly financed but not typically operated by school districts, in big cities with chronic academic challenges.

Analysts suggest NewSchools鈥 biggest impact has been to help firmly establish charter-management organizations鈥攏onprofits that spawn and operate clusters of like-minded charter schools鈥攁s part of the education marketplace.

The fund is now supporting the work of 16 CMOs with 102 charter schools serving nearly 30,000 students, most of them from disadvantaged demographic groups. By 2010, it expects those numbers to climb to 60,000 students in 200 schools.

鈥淣ewSchools has truly put the nonprofit version of the CMO on the map,鈥 said Bryan C. Hassell, an expert on charter schools based in Chapel Hill, N.C. 鈥淚 think they were kind of a voice in the wilderness for a while on this point, but now it鈥檚 become a central strategy for a lot of people.鈥

Even some charter advocates question whether that鈥檚 a good thing. In their view, CMOs are not the best or even the most cost-effective way to create more high-quality charter schools, compared with seeding individual schools. NewSchools, for its part, thinks its results to date are proving skeptics wrong.

At-a-Glance: NewSchools Venture Fund

FOUNDED: 1998 by Brook Byers, L. John Doerr, and Kim Smith.

MISSION: To 鈥渢ransform public education through powerful ideas and passionate entrepreneurs,鈥 with a goal of giving all children, especially those not traditionally well served by public schools, 鈥渢he opportunity to succeed in the 21st century.鈥

STRATEGY: Support education entrepreneurs who are working to better serve disadvantaged children, and provide 鈥渢hought leadership鈥 to help bring about 鈥渂road, systemic change鈥 in public education.

APPROACH: Identify, fund, and support ventures led by 鈥渞esults-driven entrepreneurs鈥 looking to expand, and build a network of 鈥渢hought leaders鈥 across the business, education, nonprofit, and policy communities.

SOURCE: NewSchools Venture Fund

Early academic returns, based on a NewSchools analysis of 2004-05 test-score data, suggest that nearly all of the fund鈥檚 CMOs outscored the districts in which they operate in reading, and more than half did so in mathematics. Performance varies from CMO to CMO, and often even for schools run by the same charter operator, with at least a few schools showing disappointing results.

Ted Mitchell, who became the chief executive officer of NewSchools in fall 2005, said he鈥檚 generally pleased with the academic progress of the CMOs, especially given that many of the schools are fairly new.

But he acknowledged some trouble spots, and said NewSchools has talked with some of its CMOs about slowing expansion plans to focus more intensively on academic quality.

鈥淚 think we underestimated the difficulties of achieving consistent, super-high quality,鈥 he said. 鈥淚t鈥檚 really hard to put together and sustain a great academic program.鈥

Not Just 91制片厂视频 Schools

The majority of NewSchools鈥 venture capital has gone to support the creation and expansion of CMOs. It has primarily directed the funding to projects in six urban areas: Los Angeles, the San Francisco Bay Area, Chicago, New York City, Philadelphia, and Washington.

Next on its list, Mr. Mitchell said, is New Orleans, which has both great academic need and the opportunity for an even larger role for charters in the aftermath of Hurricane Katrina鈥檚 devastation.

Yet despite its heavy involvement in CMOs, the philanthropy鈥檚 ambitions extend beyond the charter sector.

How a Sampling Stack Up

California ranks schools from 1 to 10 based on their scores, from a low of 200 to a high of 1,000, on its test-based Academic Performance Index, or API. A ranking of 10 means they were in the top 10 percent, and 1 means they were in the bottom decile. 鈥淪tatewide鈥 numbers show how schools compare with all California schools of their kind, while the 鈥渟imilar schools鈥 figure compares them with 100 schools with similar student demographics. Of the seven California-based charter-management organizations in the NewSchools Venture Fund portfolio, six had at least one school with both types of rankings in 2005, the most recent year available.

  • Aspire Public Schools: SIMILAR STATEWIDE API SCORE Benjamin Holt College Preparatory 3 7 751 East Palo Alto 91制片厂视频 School 10 7 777 Lionel Wilson College Preparatory Academy 2 2 614 Monarch Academy 4 2 651 River Oaks Charter Academy 7 6 770 Summit Charter Academy 2 5 733 University 91制片厂视频 School 10 9 880 University Public School 6 9 844 HTML; } ?>
  • Green Dot Public Schools: SIMILAR STATEWIDE API SCORE Animo Inglewood Charter High School 10 5 686 Animo 91制片厂视频 High School 7 3 638 Animo South Los Angeles 91制片厂视频 School 9 3 645 Animo Venice Charter High School 10 5 691 Oscar de la Hoya Animo Charter High School 10 6 697 HTML; } ?>
  • Inner City 91制片厂视频 Foundation: SIMILAR STATEWIDE API SCORE View Park Prep Accelerated Elementary 10 8 822 View Park Prep Accelerated Middle School 10 8 781 View Park Prep Accelerated High School 10 9 774 HTML; } ?>


SOURCE: California Department of 91制片厂视频
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鈥淐harters are only part of our strategy,鈥 said Mr. Mitchell. 鈥淥ur basic purpose in the world is to support educational entrepreneurs, where entrepreneurship can be helpful in transforming school systems.鈥

NewSchools has long invested in other types of organizations. For instance, it was one of the earliest backers of New Leaders for New Schools, a New York City-based nonprofit organization that鈥檚 working with some urban districts to help recruit and train principals.

The venture fund helped launch a Web site called Greatschools.net that provides information on schools nationwide. And it recently provided $250,000 to New Schools for New Orleans, a new nonprofit group working to support charters in that city.

The fund is also known for the NewSchools Summit, a conference for those involved in education entrepreneurship held in the San Francisco Bay Area each year since 1999. This year, the summit is moving to New Orleans.

NewSchools was started by social entrepreneur Kim Smith and venture capitalists L. John Doerr and Brook Byers, both longtime partners at Kleiner, Perkins, Caufield & Byers, a Silicon Valley venture firm. Mr. Doerr has helped direct venture dollars to prominent technology companies including Google, and has been a major contributor to the Democratic Party.

Ms. Smith stepped down as NewSchools鈥 CEO in 2004 and now is a senior adviser to the fund. Her successor, Mr. Mitchell, who was on the board since NewSchools began, brings a background in education rather than business. He was the president of Occidental College for seven years and the dean of the education school for eight at the University of California, Los Angeles.

NewSchools has raised money from individuals, philanthropies, and even the federal government. By far, the largest donor is the Gates Foundation. It committed $30 million last summer, bringing to $57 million its total giving to the fund. Other donors include the Los Angeles-based Broad Foundation, the Annie E. Casey Foundation in Baltimore, and the Bentonville, Ark.-based Walton Family Foundation.

NewSchools uses a rigorous process to ensure its ventures have 鈥渢he basic genetic code for success,鈥 Mr. Mitchell said. In 2005, it reviewed 126 business plans, did 鈥渋nitial diligence鈥 on 25 of those, and closely scrutinized 14 organizations before ultimately selecting five for investments, he said.

The engagement doesn鈥檛 end there. The philanthropy and its CMO ventures agree to detailed milestones to be met over time, from academic-performance targets to the hiring of key personnel and other matters.

Achievement First Superintendent Douglas S. McCurry opens a discussion with math teachers about teaching decimals and fractions at the AF Endeavor Middle Academy, one of the charter schools that the organization recently opened in New York City.

Douglas S. McCurry, the superintendent of Achievement First, acknowledges that at times the process can feel overwhelming, but he says it鈥檚 worthwhile.

鈥淭hey force a discipline on the organization that鈥檚 healthy,鈥 he said.

Taking a cue from the venture-capital world, typically at least one NewSchools staff member serves on the board of its ventures.

鈥淭hey don鈥檛 just sit back to see if you succeed or fail; they鈥檙e hands-on to help ensure your success,鈥 said Judy I. Burton, the president and chief executive officer of the Alliance for College-Ready Public Schools, in Los Angeles.

鈥楥areful and Shrewd鈥

The CMO ventures that NewSchools backs have been growing steadily in numbers and influence, though Mr. Mitchell concedes that the pace of growth isn鈥檛 quite as fast as initially hoped.

The Alliance for College-Ready Public Schools runs seven Los Angeles charters with two more to open next fall. Aspire Public Schools operates 18 schools in several California cities, including the Bay Area and Los Angeles. It no longer gets money from NewSchools, but remains an active partner. Achievement First runs 10 schools in New Haven, Conn., and New York City; four new academies opened this fall.

Green Dot Public Schools, which operates 10 Los Angeles-area charters, recently got $10.5 million from the Broad Foundation to open 21 new, small high schools there over the next four years.

Bruce Fuller, an education professor at the University of California, Berkeley, said he sees a 鈥減retty strong track record鈥 for the NewSchools ventures, citing the work of CMOs such as Green Dot and Aspire.

Where the Money Goes

The NewSchools Venture Fund鈥檚 active portfolio of grantees is dominated by nonprofit organizations that run networks of charter schools, and groups that help build facilities for them.

VENTURES First Investment Total Invested* (Millions)
Charter-Management Organizations
Achievement First 2004 $1.68
Alliance for College-Ready Public Schools 2004 5.15
Aspire Public Schools 1999 6.23
91制片厂视频 for Change 2005 3.45
Friendship Public 91制片厂视频 Schools 2006 2.20
Green Dot Public Schools 2003 4.50
Inner City 91制片厂视频 Foundation 2004 3.39
91制片厂视频 Public Schools 2002 7.15
Lighthouse Academies 2004 2.60
Mastery 91制片厂视频 Schools 2003 2.69
Noble Network of 91制片厂视频 Schools 2004 5.30
Partnerships to Uplift Communities 2003 5.62
Charter Facilities/Services
Civic Builders 2003 1.70
EdBuild 2005 1.37
Pacific 91制片厂视频 School Development 2003 2.31
Other
New Leaders for New Schools 2000 2.18

* Includes funds already disbursed, as well as funds committed.
SOURCE: NewSchools Venture Fund

鈥淭he other thing they鈥檙e doing, and it makes a lot of people nervous in California, is they鈥檙e 鈥 supporting a broader challenge to urban school bureaucracies,鈥 he said. 鈥淚t鈥檚 a careful and shrewd political organization that鈥檚 putting pressure on big urban school districts.鈥

Ms. Smith said she sees the fund鈥檚 work as providing a blend of pressure and help. 鈥淸One] idea that is pretty core to us is 鈥榗o-opetition,鈥 鈥 she said, pointing out that NewSchools has worked closely with district leaders in places like New York City and Chicago. 鈥淵ou鈥檙e neither 100 percent competitor nor cooperator. 鈥 That leads to greater impact.鈥

But Alex Molnar, who heads the 91制片厂视频 Policy Studies Center at Arizona State University, in Tempe, doubts the venture fund will have a lasting impact.

鈥淭here鈥檚 absolutely nothing new here,鈥 he said. 鈥淚t鈥檚 the same tired rhetoric about competition, the same identification of high-performing schools that are going to serve as models, the same idea that somehow, magically, the presence of these schools is going to make schools that are underperforming into performers.鈥

He added, 鈥淚t鈥檚 all very glib, it鈥檚 all very slick, and it鈥檚 all ultimately very empty.鈥

The venture firm collects lots of data on its CMOs, from details on academic performance and financial operations to the backgrounds of teachers hired.

About two-thirds of the students are from low-income families. Eighty-five percent are either Hispanic or African-American.

NewSchools provided 91制片厂视频 Week with enrollment and performance data, though it declined to reveal the names of the CMOs in charts comparing their performance. The 2004-05 data show that a majority of the CMOs are outperforming their host districts on state exams, especially in reading.

Taken as a whole, elementary and middle school students from the CMOs during the 2004-05 academic year achieved 43 percent higher proficiency rates in reading on state exams than their host districts, and 28 percent higher proficiency rates in mathematics, the NewSchools analysis found.

In high school, the CMO students on average showed 46 percent higher proficiency rates in reading than their host districts overall. The math results were more mixed, with the CMO students showing a proficiency rate 7 percent higher. Of nine CMOs examined that had high schools, five outperformed the district average, two were just shy of it, and two more were far below it.

Mixed Results in California

91制片厂视频 Week also examined recent data from the Academic Performance Index in NewSchools鈥 home state of California, where seven of the CMOs are based. The index allows for comparisons for schools with similar student demographics across the state.

Students pass through the halls of Amistad Academy, a charter school in New Haven, Conn., whose founders have started more schools with backing from the nonprofit NewSchools Venture Fund.

Of 21 charter schools in the NewSchools portfolio with such comparative data available for 2005, nine were ranked in the top 10 percent of similar schools, and another seven were in the top half.

But results for some California schools are less than stellar.

91制片厂视频 Public Schools has been struggling with two of its five campuses in the Bay Area, said Mark E. Kushner, who heads the San Francisco-based CMO. The organization recently hired a new principal for its high school in East Palo Alto, and it plans to do the same for the Richmond, Calif., campus next year, he said. The group also has scaled back growth plans.

鈥淲e were planning to open up two or three a year,鈥 Mr. Kushner said, 鈥渂ut decided not to open any this next fall, and stay at this level until we ensure outstanding schools at all of our [campuses].鈥

Mr. Mitchell, the NewSchools CEO, said that overall, he sees the fund鈥檚 portfolio as showing strong academic achievement to date, noting that the schools are 鈥渇or the most part on a positive trajectory.鈥

鈥淭hese are really young enterprises, and three, four, five years into this work, it鈥檚 no surprise that there鈥檚 variation,鈥 he said.

Looking ahead, beyond expanding its CMO work, NewSchools aims to take a second stab at building a large pool of money to help ensure high levels of student achievement both in CMOs and in districts where the philanthropy concentrates its efforts.

NewSchools faltered a few years ago when it tried to build a Performance Accelerator Fund to enhance the capacity of school systems to be performance-driven. It set a goal of raising $20 million to $30 million, but only received about $3 million.

Matt Taylor, director of the Amistad Academy, talks with students in a stairwell between class periods.

鈥淭hat was very frustrating to me,鈥 said Ms. Smith, the former CEO.

NewSchools isn鈥檛 giving up on the idea. It aims to raise money to invest in entrepreneurs who will devise interim performance assessments of students, offer staff development to enhance instruction, and attract more high-quality teachers to public schools.

Also, it鈥檚 looking into ventures to turn around low-performing schools.

鈥淭he demand is so clear,鈥 Mr. Mitchell said. 鈥淲e鈥檙e deep in the analysis side right now.鈥

Coverage of new schooling arrangements and classroom improvement efforts is supported by a grant from the Annenberg Foundation.
A version of this article appeared in the January 17, 2007 edition of 91制片厂视频 Week as Venture Fund Fueling Push for New Schools

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