Thought Leaders in Online Education: Executive Director of Academic Innovation at University of Pennsylvania, Bobbi Kurshnan (Part 2)

Sramana Mitra: How much equity do you take against the $20,000 initial funding?

Bobbi Kurshnan: Between 6% to 8%.

Sramana Mitra: That’s expensive.

Bobbi Kurshnan: Yes, but these are early companies.

Sramana Mitra: In my program, I advise people against going for these kinds of incubators that take 6%to 8%. I think it’s a terrible model. We disagree on that and let’s move on. What are you seeing in terms of monetization trends in the kinds of businesses that you are involved with?

Bobbi Kurshnan: I’m seeing a variety of creative ones. I don’t think the traditional ones of subscription or consulting are hard for a young entrepreneur to do. I think the biggest problem with young companies is that they don’t have any way to get their product pilot-tested.

Sramana Mitra: I’m talking about business model. You’re talking about how to fund a business. The technologies that are trying to go out into the market and become companies, what are the monetization models that you’re seeing for those tech companies. I’ll tell you where I’m coming from. This question comes from the fact that the classical problem that ed tech companies are having is they’re not scaling because the adoption rates of technology in the school systems is low and people are not willing to pay.

It’s a monetization problem from a business model point of view. There are some companies that have given out ed tech products for free and got a lot of users but are still not monetizing. They’re sitting there in twilight zone waiting to be acquired by somebody, and no one’s acquiring them. There are a few who have done well in a bootstrapped mode where they have organically scaled much more slowly than what a venture pace would support, but they have managed to put together sustainable businesses around ed tech.

As you’re taking equity in companies expecting these companies to raise further equity financing from angels and VCs with the assumption that they’re going to be these hyper-growth, hyper-scalable companies, what monetization or function is this based on?

Bobbi Kurshnan: One of the monetization models we’re looking at is the network effect model. We’ve got two or three startups using this where they actually charge a fee to access their network. In that network, they’re able to monetize their product. It might be access to pilots, which they may have a hard time getting access to. The entrepreneur pays the membership fee and has access to teachers who are willing to pilot their product.

We have another one that’s using that model. It’s what’s called the social impact crowdfunding marketplace where they actually monetize their product by helping new entrepreneurs create crowdfunding for teachers to be able to afford to buy their product. It’s leveraging the network effect. That’s one of the models we’ve been looking at and we find it to be very successful.

This segment is part 2 in the series : Thought Leaders in Online Education: Executive Director of Academic Innovation at University of Pennsylvania, Bobbi Kurshnan
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