Mark Zuckerberg Joins AltSchool’s Backers

Is AltSchool disrupting public school or private school? Can the answer be both?

That’s the tension evident in today’s announcement that the company has banked an additional $100 million, on top of the $33 million it raised last year, in order to fuel a transformation of K12 education.

“We started AltSchool because we wanted to change kids’ lives,” says founder and CEO Max Ventilla, a parent and former Google executive. His ambitious vision is all-encompassing, with plans to both run private schools and offer AltSchool’s proprietary “operating system” to many dozens more. Real estate, teacher hiring, homework management—nearly every school function is being incorporated into the company’s technology platform and deployed at a rapid pace in AltSchool’s four existing school sites. By September 2017, Ventilla aims to open up that platform to partner schools—public or private—for a fee.

It’s a testament to Ventilla’s track record and progress to date that investors have lined up to give him their vote of confidence. Nearly $2 billion in venture capital poured into education last year, but it was companies focused on professional training and continuing education that raked in the largest, nine-digit rounds. AltSchool represents Silicon Valley’s first bet of that magnitude in the fragmented and localized K12 market.

But the structure of the $100 million Series B also highlights the challenges that AltSchool will face as it attempts to live up to its mission. The round was jointly led by two venture capital firms, Founders Fund and Andreessen Horowitz, and Facebook CEO Mark Zuckerberg, who contributed via the donor-advised fund he previously established at Silicon Valley Community Foundation. That combination of venture and philanthropic funding is commonplace in health care, but unusual in education.

“I had some conversations with Mark Zuckerberg at the end of last year and again early this year, and he expressed interest in being a part of our next round,” Ventilla says. “I think [philanthropic funding] is going to increasingly be a trend as startups go after really big opportunities to impact people.”

For the time being, however, that impact is focused on the children of the San Francisco elites enrolled in AltSchool’s initial school sites. Although AltSchool aspires to socioeconomic diversity, via financial aid, its annual tuition of $20,875-plus will deter many parents.

Moreover, venture investors acknowledge that AltSchool could generate a significant return even if it focuses only on the U.S. private school market, worth $55 billion, according to IBIS World.

“The elite prep school model has breathed its last gasp,” says Robert Hutter, managing partner at Learn Capital, which participated in both of AltSchool’s major funding rounds. “Eton, in England—that’s their model. But many parents want their school to be a Silicon Valley garage.”

If disrupting private school were the only thing AltSchool ever did, Hutter says, then “it would be one of the more important companies to emerge in Silicon Valley in this time frame.”

Ventilla is confident that AltSchool will be able to reach beyond private school, and into education more broadly. “There are orders of magnitude more children that we could impact by partnering with other schools and enabling existing schools to personalize education for their students,” he says. “We see enough promise to what we’re doing that we can justify taking on five times the amount of cash that we’ve spent so far.”

The presence of philanthropic donors will arguably ensure that AltSchool prioritizes working with public schools, including charters. And in theory, AltSchool’s complementary business lines could fuel a virtuous cycle of pedagogical innovation, via data and cross-classroom collaboration. But it’s just as easy to imagine that the voices of paying parents could drown out the company’s founding imperative to serve all students, or that the red tape endemic to the public system could prove anathema to a company birthed from Silicon Valley’s DNA.

Zuckerberg knows the perils of the latter all too well. His first major education donation, a $100 million grant to Newark Public Schools, became a punching bag for local New Jersey critics, as the dollars disappeared and entrenched politicos resisted reform. The lesson seemed clear: To “move fast and break things,” steer clear of politics and bureaucracy. Zuckerberg’s gift to AltSchool (he declined to release the exact amount) suggests that he sees in Ventilla’s model a way to avoid those pitfalls, and yet still serve low-income students, at scale. Whether he’ll get that kind of return on his investment remains to be seen.