Washington Monthly - September/October 2012 - 36

that is Silicon Valley, higher education is a particularly fat target right now. This hype has happened before, of course. Back in the 1990s, when Andreessen made his first millions, many people confidently predicted that the Internet would render brick-and-mortar universities obsolete. It hasn’t happened yet, in part because colleges are a lot more complicated than retail bookstores. Higher education is a publicly subsidized, heavily regulated, culturally entrenched sector that has stubbornly resisted digital rationalization. But the defenders of the ivy-covered walls have never been more nervous about the Internet threat. In June, a panicked board of directors at the University of Virginia fired (and, after widespread outcry, rehired) their president, in part because they worried she was too slow to move Thomas Jefferson’s university into the digital world. The ongoing carnage in the newspaper industry provides an object lesson of what can happen when a longestablished, information-focused industry’s business

For the huge generator of innovation, technology, and wealth that is Silicon Valley, higher education is a particularly fat target right now.
model is challenged by low-price competitors online. The disruptive power of information technology may be our best hope for curing the chronic college cost disease that is driving a growing number of students into ruinous debt or out of higher education altogether. It may also be an existential threat to institutions that have long played a crucial role in American life. I’m here at this party and in the Bay Area for the next few days to observe the habits, folkways, and codes of the barbarians at the gate—to see how close they’ve come toward finding business models and technologies that could wreak such havoc on higher education. My guide, and my host at this party—he organized the event for my benefit—is a man named Michael Staton. With sandyblond hair, blue eyes, and a sunburned complexion, Michael is thirty-one—old by start-up standards—and recently married. He’s the president and “chief evangelist” of Inigral, a company he created five years ago to build college-branded social networks for incoming undergraduates. But just as importantly for my purposes, he’s also one of those people who has a knack for connecting with
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others, a high-link node in a growing network of education technology entrepreneurs who have set their sights on the mammoth higher education industry. One of the bedrooms in the house where we’re mingling and drinking was Inigral’s headquarters for the first eight months of its existence, back when the founders were “bootstrapping” the company, which is valleyspeak for growing the business on their own using credit cards, waitering tips, plasma donation proceeds, and other sources that don’t involve the investment dollars that can shoot a start-up toward fame and fortune at the price of diluting the founder’s ownership and control. The longer someone can manage to feed themselves with ramen noodles and keep things going via bootstrapping, the more of their company they’ll ultimately get to keep—unless someone else comes up with the same idea, takes the venture capital (VC) money earlier, and uses it to blow them to smithereens. The start-up culture is full of such tough decisions about money, timing, and power, which are, in their own way, just as complicated and risky as the task of building new businesses that will delight the world and disrupt a trillion-dollar market. After the guests leave, Michael and I retire to the living room with one of his colleagues, Nick. The conversation comes around to how the money works. Nick explains that, nowadays, there is a basic philosophical divide among venture capitalists. One way of thinking goes like this: technology is a winner-takes-all world. For every Facebook, there are dozens of Friendsters lying in a pile of dead companies with silly made-up names. The difference between winning and losing everything often comes down to timing and execution. Everyone knew social networks would be huge. Mark Zuckerberg just did it better, so he won. Talent, meanwhile, is always scarce. So the VC guys try to identify the smartest people with the best teams in their quest to back the winner who takes all. The second way of thinking—the one that Nick finds more plausible—is that the world is too complicated and chaotic to accurately predict which company will have the exact combination of talent, luck, and timing to be victorious. There’s no way to know who will come out of the scrum with the ball. Therefore, the smart strategy is to invest in the entire scrum—to bet on categories, not people. The recent surge of money into higher education startups reflects growing interest in the category. My goal is to find out what it’s like in the middle of the scrum. t’s 10:30 a.m. on my first full day in the valley. I’m in San Mateo, twenty miles south of San Francisco, at the offices of Learn Capital, an education-focused venture capital firm. Having driven down from the city in Michael’s Honda CRV, he and I take the elevator to the second floor, where one of the firm’s partners, Nathaniel Whittemore, brings us into a glass-walled conference room. We walk by five people sitting around a table, some

Washington Monthly - September/October 2012

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