‘They Can’t Price Risk’
The hallways at ASU+GSV are a who’s who of higher-education influencers, leaders, and luminaries. Well-known megauniversity leaders like Michael Crow, Scott Pulsipher, and Paul LeBlanc could be seen around, along with the leaders and key figures from major think tanks and foundations, like the Lumina Foundation or Jobs for the Future. I ran into Ryan Craig of Achieve Partners, who seemed confident coming off his debate with Bridget Burns of the University Innovation Alliance, in their head-to-head discussion on one of the side stages to answer the question, “Is College Worth It?” for The Disagreement podcast. Ed-tech pioneers Sal Khan and Andrew Ng both held main-stage talks, too. Miguel Cardona, the former secretary of education, was hard to miss hanging out in the lobby bar, perhaps looking for work. (Attendees said he is starting to do consulting.)
Linda McMahon, the new secretary of education and star speaker of the event, hardly said anything in her time onstage. But she still made the news. During her talk, McMahon repeatedly referred to “AI” as “A1.” How someone — most of all the leader of the nation’s education agency — could make a flub like this is hard to fathom. It at least led to levity, with people saying that McMahon is out of touch with her “steakholders.” (A small protest marched around the conference hotel as she spoke.)
The Trump administration’s actions of the past few months were a common topic of hallway conversations, with a number of the investors saying that the unpredictability of the impacts on the sector made it very difficult to do business.
Mark DeFusco, who brokers deals for companies looking to buy colleges or between institutions seeking to merge, said that he had lost some major deals when an acquiring organization got spooked by the administration’s actions. “They can’t price risk,” DeFusco said.
Mark Grovic, a co-founder of New Markets Venture Partners, which invests in companies serving both college and K-12, says that the ed-tech sector has been on a roller coaster with higher education over the past several years. The Covid-19 years represented a bubble, with trillions of dollars flowing out of the government to colleges.
After the pandemic, the money “fell off a cliff,” says Grovic. “In higher ed, all those grants stopped.” Years of budget tightening followed, leading up to the election. “There weren’t a lot of deals getting done, particularly in ed-tech.”
Then the federal government cut support for the National Institutes of Health, the National Science Foundation, and other agencies tied to academic research, and threatened the funding for universities. “I live in Silver Spring, Maryland, and I have had very close friends, top scientists, in my kitchen in tears,” he says. That kind of instability at the personal level is “part of the uncertainty or like the weirdness around what’s going on.”
Taking a chainsaw to the problem is unlikely to fix what’s wrong. “I’m trying to be optimistic and say that there’s opportunity that will come from people being more open to different things,” Grovic says. For him, the nontraditional student journey — programs focused on apprenticeships, returning adult students, employee training — might get more emphasis in the years to come. Grovic believes that only 10 to 15 percent of students earn a job requiring a degree at the end of college, so more emphasis in the education system might start to focus on work-force training, stackable credentials, competency-based education, and skills-based hiring — all in support of the nondegree approaches favored by the ed-tech crowd. “It is an interesting time to step forward and admit to ourselves what the demographic play is in higher ed, and it’s the adult worker, it’s part-time, it is job skills,” says Grovic. “It’s a lot of that stuff that interests us that I think the numbers are starting to support.”
In hallway conversations, some investors complained that many of the new companies and products on the scene were using AI as little more than an attention-grabber. Grovic has started to categorize some companies as “AI first” — meaning that AI is an intentional and integral part of a company’s product, not an add-on.
“A lot of companies that have struggled, even some consulting companies or just old-school content companies, are emerging as AI companies. And I haven’t seen that be an exponential sort of improvement in their value proposition or efficacy or ability to serve students. It’s very marginal.”
Cycles of Investment and Disruption
Many of the sessions were filled to capacity, with people waiting outside to get in — a pattern that had been different from past years, regular attendees noted, and maybe an indication that people were hungry for advice and direction this year.
During a lunch session on “investors’ appetite for ed tech,” a group of four prominent investors pondered the question from moderator Jessie Woolley-Wilson, “Is ed-tech investing, as we understood it, dead?” (“If it were, there would be nobody in the audience, and it looks like a pretty full house,” said Richard Sarnoff, who is the chairman of media, entertainment, and education at KKR, a private equity firm.)
Woolley-Wilson noted that at a recent ASU+GSV gathering a couple of years ago, Bill Gates had said that “the first stage of AI investment was going to be philanthropic, even if investors didn’t realize that” — meaning that investors would be supporting ideas and tech that might set the stage for successful products but might not be successful themselves.
Jason Brein, of the investment firm Francisco Partners, said that Gates is right. Certainly, building AI infrastructure is very expensive and risky, but experimenting with AI at the application level is very cheap. Many of those companies and products will fail, too. “But the good news is that [AI is] cheap enough that even if it works just a little, and if you can iterate quickly and iterate often,” he said, “then it does have the potential to be both a contribution to the overall AI ecosystem but also have an opportunity to make the kind of impact that you want to make.”
Investors need to allow developers to fail — but then they need to spin up new iterations of products and approaches quickly. But it could be challenging for the ed-tech sector to keep up with disruption cycles coming closer together, as AI accelerates the development of new technologies and new iterations of products.
“You also have a rapidity of disruption in everything that you do — including those new things that you just did,” said Sarnoff.
Many on the panel pointed to the increasing need for clear, competent leadership that understands the cycles of disruption, how to develop a product, and bring it to market. In the AI environment, investor and company leadership has to especially encourage collaboration on a team, which means that leaders need to have human skills, too.
“Leadership is becoming extremely, extremely important because there’s so much change taking place across the board, internally and externally,” said Bethlam Forsa, president and chief executive of the Savvas Learning Company. “If a leader’s only strength is in one specific area, the voids are gonna come back to plague us.”
Finally, a Word From Goldie
Since Goldie Blumenstyk, The Edge’s original columnist, retired last fall, the summit brought her back this time for a Q&A session to unpack her years in higher-ed journalism at The Chronicle.
Goldie took the opportunity to call out many of the people she has hung out with at this conference since 2013. She pointed to the attacks on libraries, science agencies, the humanities, and many individual institutions, which she has found alarming.
“I’ve been sitting here wondering, frankly, thinking about all the companies that have been coming to GSV since even before I started coming here in 2013, how many billions of dollars these industries have made off the backs of higher education and off the backs of students. Where are you? Where are these companies right now?” she asked, to scattered enthusiastic applause.
“Maybe I missed it — and if I did miss it, I apologize — but I have not seen the higher-education industry, the business sector, respond at all,” Goldie continued. “These are your customers, these are your clients, these are all the institutions that provide you the intellectual capital for your own companies. Where are they? I don’t know where they are. I feel awful. After coming to this meeting for so many years, I feel awful to know that the silence is so great.”
I recorded her full comments in a LinkedIn post, which got tens of thousands of views, hundreds of likes, and several dozen repostings, some boosting her message. It even inspired a hashtag, so appropriately coming from the inquisitive Dame of Higher-Ed Journalism: #askthequestion. May it be part of her legacy.
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Got a tip you’d like to share or a question you’d like me to answer? Let me know at scott.carlson@chronicle.com. If you have been forwarded this newsletter and would like to see past issues, find them here. To receive your own copy, register here. Follow me on LinkedIn. Buy my book, Hacking College: Why the Major Doesn’t Matter — and What Really Does, which discusses how students get lost in college, and how they could create a more meaningful and marketable degree by looking at the college experience differently.
