I’m not supposed to be here. One of the main reasons that I was able to go from a mid-tier city in China, where I was born, to the heart of Silicon Valley was because I was lucky enough to get a great education throughout my life.

In 2000, the United Nations established eight Millennium Development Goals (MDGs) to be achieved by 2015. One of the goals was universal primary education. Having many school age children not enrolled is a major problem for a community and for the future of a country. At the time the MDGs were written, just over 100 million school age children around the world were not getting any education. Universal primary education was a moonshot idea that nearly 200 nations and over 20 international organizations committed to, now 14 years ago.

With one year to go, how are we doing on that goal? According to various reports, we are not even close. The estimates differ, but we are still anywhere from 55 to 75 million (some sources even indicate 120 million) primary age children short of the universal education goal. Many think, and I agreed, that we wouldn’t get there for many more decades.

Then, last week, I changed my mind. Three seemingly unconnected things happened to me in a span of about 48 hours. 1) I watched a video on TED, 2) I met two graduates from Utah State University and 3) I found a binder labeled “Business at the Base of the Pyramid”.

I’ll tell you about Moline and Casey first, the two young Utah State graduates. In college, they founded Effect International, an organization that focuses on education in India. They built a first school in rural Bihar to educate local students. Today, the school enrolls 120 students. When we talked, they told me about the massive demand in a country like India for high quality schools and their plans for building a network of sustainable, for-profit schools.

For-profit schools for the world’s poorest people? That’s outrageous to think that the solution for universal primary education is for-profit private schools!

But that is exactly the wrong misconception about for-profit schools.

These schools would charge each student $9 of tuition per month and be profitable within the first year. Yes, you read that right — for-profit schools in some of the poorest areas that make an income on charging just $9 of tuition per month. Casey and Moline’s survey research concluded that families in these regions are willing to spend 13% of their income on education. Moreover, each school only costs $10,000-20,000 to start and teachers are hired and trained from the local workforce. This is a scalable and sustainable way to provide primary education to the base of the pyramid. With this model, they believe that they can build 500 schools to educate 350,000 students within the next decade. It sounded too good to be true.

When it came to fundraising for this model, they faced challenges from both Indian and Western investors. Indian investors couldn’t believe the audacity of their plan while investors in Europe and America couldn’t wrap their minds around how to create private schools and a profitable company on just a $9 monthly tuition.

With that thought in mind, I started doing a bit more research. It was then that I realized something that one of my roommates told me in passing a few months ago. He had taken a class at Harvard Business School (HBS) about building businesses at the base of the pyramid — in other words, how to create for-profit and sustainable companies that serve the world’s poorest. I found his class notes and about a third of the way into his three-ring binder, I found the case study for “Bridge International Academies: A School in a Box”.

My roommate’s HBS binder.

Bridge is a network of schools in Kenya founded by three San Francisco researchers, designers and education technology entrepreneurs. Jay Kimmelman (CEO), Shannon May (CSO), and Phil Frei started Bridge in 2007, but didn’t open their first school until 2009 in the Mukuru slum in Nairobi. From this first school, they developed a scalable “Academy-in-a-Box” model that can be built widely, similar to Starbucks stores or Four Seasons hotels. Just five years later, they now have over 130 schools in operation, educating over 50,000 students.

According to data found in the HBS case study, each school turns a healthy operating profit starting in year one and pays back the entire upfront construction and land costs by the third year (see Exhibit 1 below— financial model for a single school).

The Bridge school network, including corporate headquarters, as a whole is not yet profitable but will be in the next year or so once the company achieves a sustainable scale (see Exhibit 2 below — financial model for the entire company). With this model and their track record thus far, Bridge has raised capital from some of the world’s most perceptive and powerful investors including Khosla Venture’s impact fund, New Enterprise Associates, Learn Capital, and Omidyar Network.

They are not the only ones. James Tooley, a professor at University of Newcastle upon Tyne, conducted extensive research into low-cost private schools in Africa and India and wrote a book titled “The Beautiful Tree: a personal journey into how the world’s poorest people are educating themselves” on the topic. He is also the chairman of the Omega Schools in Ghana and Empathy Learning Systems in India, two low-cost school chains serving the world’s most disadvantaged students.

Today, despite Bridge, Omega, Empathy and other private school networks’ ambitious goals, their network of schools only addresses a few percent of the problem. That’s not enough. And their critics will say that for-profit schools are still out of the reach of people and that government run public schools are both free and better run — in too many cases, they are not.

This brings us to the TED video I watched. Pauline Dixon, a senior lecturer at Newcastle University, gave a talk in 2012 at TEDxGlasgow. She has worked extensively in Asia and Africa analyzing private and government schools catering to low-income families. She found out that a majority of schools in some of the worst slum areas in India, Ghana, Nigeria were private schools. Furthermore, she conducted surveys with parents and looked at achievement levels of students in government public and private schools. What did she find?

  1. Parents believed that private schools were of higher quality. There is greater accountability because parents could demand quality for the tuition that they were paying. Moreover, while government schools are tuition-free, they end up charging students for ancillary items like uniforms and textbooks.
  2. Low cost private schools have smaller classes and teachers are more likely to show up and actually teach. In government schools, teachers are sometimes absent or even drunk. And the facilities are much better — with higher likelihood of having drinking water, blackboards, and a clean and safe learning environment.
  3. Private school students outperformed students at government schools in every assessment. This even takes into account the fact that private school teachers actually get paid a lower rate.
  4. On the main issue of cost, Pauline has separately found ways to subsidize costs for parents. School vouchers programs from NGOs and other nations can help parents send their kids to private schools. This addresses one of the main opposition to private schools.

So what’s in store for the future?

As much as wearable computing and self driving cars are technology moonshots, a school model to build nearly infinitely scalable and sustainable primary education is a massive opportunity for our generation to create a better planet.

In their recent annual letter, Bill and Melinda Gates wrote that they believe few countries will still be in extreme poverty by 2035. As the Gates stated, children raise up economies. If we are to achieve a world without poverty, schools will play one of the biggest roles in that vision — along with access to water, resources and basic healthcare.

Proving out a profitable and sustainable school model will be our “Roger Bannister moment” in universal primary education. Roger showed the world that it was possible to run a sub-four-minute mile after some said it was impossible. Once he had shattered that mark, dozens of people run sub-four-minute miles in the following few years. Once we prove the private school model to work in a few cases, it will unleash a wave of emboldened entrepreneurs to try as well.

Napoleon once said that a “revolution is an idea that has found its bayonet”, to which I’d counter with:

“A revolution is an idea that has found a sustainable and repeatable business model.”

The work of Effect and Bridge along with bold plans like the X Prize for education will open the gateway for other innovators to deliver education at a price point that almost anyone on the planet can afford. This is a watershed moment for entrepreneurs to build a million or more innovative and affordable schools around the world (yes, millions of new and better schools). We’ve seen it with the work of many contemporary foundations (Gates) and social entrepreneurs (Bridge); the idea of creating more equitable opportunities for people around the world to pursue a life worth living is the central goal for this generation.

With the hard work of current entrepreneurs and new ones, perhaps someone currently reading this essay, I know we can achieve universal primary (and secondary) education in our near future.

If you want to discuss the topic or want more information, please drop me a tweet @li_x_jiang.

Exhibit 1 — Bridge International: One School

This is the single school model for Bridge from the HBS case study. I’ll highlight a few things about it.

Taking out the initial startup cost of land purchase and construction, the school generates a profit in the first year. As the school grows, operating costs decline as it gains scale and each school has a high profit margin (line 30).

Factoring in the capital expenditures of building construction and land purchase and the entire school turns cumulative cash flow positive by the end of the third year (line 40).

(Please zoom in — I had to scale size down to fit the entire exhibit)

Source: Harvard Business School, 2010/2012. There may be slight rounding differences between my version and the HBR version.

Exhibit 2 — Bridge International: Overall Company

On a company wide basis, the school doesn’t turn a profit until 2015 (line 49).

The main costs in the early stages are the corporate level G&A (general and administrative). As the company scales, these costs become less than 5% of the company’s revenues (line 36). Operations and franchising is another large cost for the first few years and become less than 10% of the company’s revenues when it gets to scale (line 30).

By 2018, the company’s EBITDA (earnings before interest, tax, depreciation and amortization) margin hits about 30%, which is a high number for any franchise model (line 49).

(Please zoom in — I had to scale size down to fit the entire exhibit)

Source: Harvard Business School, 2010/2012. There may be slight rounding differences between my version and the HBR version.

Global Silicon Valley

A passionate global community who embrace big ideas, challenge conventional wisdom, inspire disruptive change and architect the future.

    Li Jiang

    Written by

    Li Jiang

    Business Development @ Harmony.one

    Global Silicon Valley

    A passionate global community who embrace big ideas, challenge conventional wisdom, inspire disruptive change and architect the future.

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