Can AltSchool—The Edtech Startup With $174M From Billionaires Like Zuckerberg And Thiel—Save Itself From Failure?

We might not be around in five years,” says Max Ventilla, AltSchool’s 38-year-old co-founder and CEO, as the two publicists minding our interview cringe. “Don’t put that in your article,” says AltSchool’s communications director, Maggie Quale, while a young woman from Rubenstein, the giant New York-based corporate PR firm, sits in awkward silence. 

We’re two intense hours into an interview in a stuffy, glass-paned meeting room in a former 24 Hour Fitness that is now home to one of AltSchool’s two small private schools in San Francisco for grades pre-K through 8. Ventilla, who left Google to launch AltSchool in 2013, has spent $30 million annually over the last several years while trying to find steady footing for his for-profit education startup, which runs four schools; the other two are in New York City. 

AltSchool’s 240 students, including two of Ventilla’s children—Leonardo, 5, and Sabine, 7—are guinea pigs for a software platform that AltSchool is attempting to sell to hundreds of schools both private and public. So far it has 28 customers. Revenue in 2018 was $7 million. “Our whole strategy is to spend more than we make,” he says. Since software is expensive to develop and cheap to distribute, the losses, he believes, will turn into steep profits once AltSchool refines its product and lands enough customers.

But as Ventilla admits when he lets his guard down, reaching profitability will be quite a stretch. The story of how AltSchool arrived at this point—burning cash in a failed attempt to create a profitable private-school network and fighting to sell an expensive edtech product in a crowded field—shows that the best intentions, an impressive career in tech and an excess of Silicon Valley money and enthusiasm don’t easily translate into success in a tradition-bound marketplace where budgets are tight. 

Ventilla, wearing jeans, scuffed black leather slip-ons, a faded polo shirt with AltSchool’s logo and a black fleece jacket, has been able to hemorrhage cash because, as he has it, “I’m good at telling AltSchool’s story and I’m good at raising money early.” So good that he has raised $174 million in venture capital at a $440 million valuation, according to PitchBook, more than almost any other startup working on K-12 education. That sum includes a personal investment of more than $15 million from Mark Zuckerberg and his wife, Priscilla Chan. Zuckerberg initiated two hours-long one-on-one meetings with Ventilla in late 2014, when AltSchool was only 18 months old. “He’s very detail-oriented, and he likes to drill down,” Ventilla says of Zuckerberg.

It’s easy to see how Ventilla would appeal to tech billionaires and their investment vehicles, including Laurene Powell Jobs’ Emerson Collective, Pierre Omidyar’s Omidyar Network, Peter Thiel’s Founders Fund and Marc Andreessen’s Andreessen Horowitz, all of which have become AltSchool backers on the strength of his high-minded pitch. “Our mission has always been to make the best education the most available,” he says. “Students shouldn’t just be cogs in a wheel. They should be agents of their own goals.” (None of the five billionaires responded to requests for comment.)

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efore starting AltSchool, Ventilla says, he read two dozen books on education and emerged a fan of Sir Ken Robinson, a British TED Talk speaker known for lamenting the dearth of creativity in early education, and Angela Duckworth, a psychologist and the winner of a MacArthur “genius” grant who has written about the need for children to cultivate “grit.” The quality of primary and secondary education in America, stuck in an industrial-age model, has been in steady decline for the last century, says Ventilla, citing the most recent Programme for International Student Assessment (PISA) results, a worldwide test of reading, math and science ability in which U.S. 15-year-olds ranked 38th out of 71 countries. “The factory model in a non-factory world disengages kids,” he says. AltSchool’s solution: “Foster in children the development of an internal compass so that as things are changing around them more rapidly, they can always reorient.” 

To do this, AltSchool adopted an educational philosophy backed by the Bill & Melinda Gates Foundation and the Emerson Collective and by Zuckerberg in his much-publicized letter to his oldest daughter, Maxima, born in 2015, a year after his meeting with Ventilla. Known variously as “personalized learning,” “learner-centric learning” and “competency-based learning,” the philosophy argues against the traditional model of an all-knowing teacher dictating from the head of the class, sometimes called the “sage on the stage” approach, where students are expected to progress as a group. Instead children, together with teachers, set individual goals, explore areas that most interest them within a defined curriculum and trade lots of feedback along the way. 

The technology piece of personalized learning is the most controversial. No one wants students to sit in front of screens all day doing math drills with software driven by artificial intelligence. At AltSchool, Ventilla proposed developing a software platform that would make it efficient and easy for teachers to customize assignments, assess performance and communicate with administrators and parents. He calls AltSchool’s private schools “lab schools,” where teachers try various approaches on students while working closely with a staff of engineers, many of whom were hired away from Google, Apple and Facebook.

But he learned quickly that education is a much tougher nut to crack than search engines. Early on, he had a big plan to expand into Chicago, and he was working on an idea to franchise a network of AltSchools across the country. But in 2016, he ditched both possibilities. Altogether he started nine schools in San Francisco, Palo Alto and New York. By the end of 2018, he had closed five of them, including the one in Palo Alto, with its 62 students. (Ventilla says most students from the shuttered AltSchools in San Francisco and New York transferred to other campuses.) With tuition starting at $26,000, which is expensive but still lower than many Bay Area private schools, none of the locations were paying for themselves. 

Ventilla says schools tested different models. One San Francisco location had a single room and 32 students in grades 6 through 8, a setup that died when the school closed. He says he made it clear to parents that the schools were experimental and might remain open for only a short time. “We were doing a lot of iterating and learning,” he says. 

He also abandoned experiments like setting up four cameras per classroom to film students interacting with teachers. He had read a Gates-funded study that recommended videotaping. Teachers used the cameras for two years before Ventilla put a kibosh on the project. “It didn’t really make sense when you thought about the cost to maintain the system,” he says.

Other bigger expenses made even less sense. Because none of the properties had been designed as schools, unexpected problems surfaced, says Carolyn Wilson, AltSchool’s former director of education. “What ate our lunch more than anything was doing real estate retrofits,” she says. At one of the schools in San Francisco, the toilets kept backing up. None of the locations had playgrounds or gyms, so AltSchool took children to city parks. In one San Francisco park frequented by the homeless, human feces presented a problem. To ensure students’ safety, AltSchool hired Mike Ginty, the former head of global security at Uber. (Today, AltSchool has worked out secure arrangements with a combination of public parks and private facilities, like a YMCA in Manhattan.)

In 2016 Ventilla decided the most cost-effective way to realize his vision was to put the schools on the back burner and focus on the software platform and selling it to customers he calls “partners.” Those schools would give feedback to his engineers, who could further hone the product. He is betting that he will find massive numbers of school leaders ready to embrace personalized learning and pay AltSchool’s steep fees. But a half-dozen other companies, including Schoology, Moodle, Blackboard and Canvas, offer so-called learning management systems that also claim to facilitate personalized learning. Canvas, based in Salt Lake City, bills itself as the market leader with thousands of customers, and has both a free product and a customized version for an annual cost per student of $10 or less.

By contrast, AltSchool’s charges work out to $100 to $150 per student per year. “From what I’ve heard talking to administrators and educators, $150 per kid feels like a prohibitive price point,” says Tony Wan, managing editor of EdSurge, a media company in Burlingame, California, that covers educational technology. “Who can afford that?”

Ventilla brushes off the naysayers. “The name of the game is always scale,” he says, predicting that AltSchool’s software price will fall as low as $50 per student. AltSchool has also been building open education-curriculum software into its product, including math and English lessons that meet state standards, and its software gives automated prompts to teachers that can improve their performance. “We’re not just selling software,” he says. “We’re selling a replacement for the curriculum schools have to buy. We’re selling professional development. Those are big numbers for schools, many times what AltSchool is charging now.” 

Ventilla himself was not educated this way. The son of Hungarian immigrants, he grew up with his sister and parents in a one-bedroom apartment on Manhattan’s Upper East Side. His father, a filmmaker in Hungary, scraped by as a sculptor and illustrator. His mother taught business courses to Columbia University undergrads and was the family breadwinner. A gifted child, he won a scholarship to Buckley, a private Manhattan boys’ school with a traditional approach where Donald Trump Jr. had been a student. He went on to Andover and Yale on scholarship and was admitted to the Yale School of Management in a program for exceptional Yale College grads, called Silver Scholars, which paid the first year of tuition.

In 2000, while an undergrad, he started a data-mining software company with some buddies from Andover and Yale, raising $1 million before selling the company 18 months later for an undisclosed sum that he says gave his investors a good return. After business school and a gig working for a classified advertising firm in Europe, he landed at Google in a unit that worked on business operations and strategy.  

But he stayed only a year before starting a social search engine company called Aardvark in 2007, funded with $10 million in venture capital. Less than three years in, he sold the company to Google for $50 million, making his stake, which Forbesestimates at more than 10%, worth upwards of $5 million. “It was totally life-changing money for me,” he says. He bought a house in San Francisco’s Twin Peaks neighborhood with his wife, Jenny Stefanotti, a UC Berkeley and Harvard grad he had met during his first stint at Google. Before starting AltSchool, he returned to Google for three years, where he worked in a small group that developed the Google Plus social network, before heading up the company’s personalization team. 

AltSchool is burning cash in a failed attempt to create a profitable private-school network and fighting to sell an expensive edtech product in a crowded field.

By the winter of 2012, he and Stefanotti already had Sabine, who was one and a half, and son Leonardo was on the way. They started searching for preschools and were appalled by what they found. “There were a handful of good preschools, and each one of them was insanely competitive to get into,” he says. “The implication was that if you didn’t get your kid into the right preschool, they were going to be penniless and alone by the time they were 30.” 

Itching to start a new venture, he threw himself into researching the kind of school where he imagined Sabine would thrive. Within months he quit Google and started raising cash. In the deck for his Series A funding round, he showed a picture of himself lying on a bed, reading to Sabine and baby Leonardo, a Gandhi quote across the top of the screen: “Be the change you want to see in the world.” 

Though Ventilla’s business plan was no more than a vague outline, he was a Silicon Valley insider, and investors bought in. “He was talking about a shift from a lecture-based model of education to a learner-centric model,” says First Round Capital partner Josh Kopelman, who sits on AltSchool’s board. “That made total sense to us.”  

Inside AltSchool’s Manhattan middle school, in an office building on the busy corner of Fifth Avenue and 14th Street, there are more books, papers, pens and pencils than computers, though students are each assigned a Chromebook, which they use off and on throughout the day. In a humanities class, a black-clad teacher with close-cropped hair, Jaqi Ruiz-Garcia, is conducting a Socratic discussion with her eight seventh and eighth graders. They have all read the same texts: Ta-Nehisi Coates’ Between the World and Me, printed on dead trees, and a photocopied James Baldwin essay. Students refer to essays they have written with pencils in old-fashioned notebooks, and Ruiz-Garcia has a stuffed yellow caterpillar that she passes around the classroom to each student who wants to speak. 

“People need to be more aware that we’re not a perfect country,” says one girl. 

“What are some ways we can build bridges in society?” asks Ruiz-Garcia. 

“There was more time in this country—250 years—when people were enslaved than when they were free,” responds a girl with tight braids. “People who make $15 an hour are still enslaved.” 

“I heard a quote on Instagram: ‘Vote like your life depends on it,’ ” says another student.

As the yellow caterpillar makes its way around the group, three kids are staring into space. 

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