Engaging the For-Profit Sector to Help Revolutionize Education for All Learners
By Peter J. Taylor, ECMC Foundation
I ran across an article recently announcing Mark Cuban's investment in ChangED, an app that claims to "superpower your spare change" to pay for student loans. The app rounds up purchases to the nearest dollar and moves that change to a savings account to help individuals pay off their loans. I thought to myself, "What a thoughtful, innovative idea!"
The article came at an opportune time—just as ECMC Foundation is preparing to announce a new funding strategy: Education Innovation Ventures (EIV). While EIV isn't as catchy as all ideas and people associated with Shark Tank, one critical common thread it has with Cuban's investment is the willingness to put money to work in cutting-edge, innovative ideas that have the potential to make transformative impact—from the for-profit sector.
Prior to EIV, ChangED is not something ECMC Foundation would have considered investing in—because our funding strategy was focused on programs and organizations in the nonprofit sector.
EIV uses program-related investments (PRIs), a financial vehicle available to both for-profit and nonprofit enterprises, to make transformative investments that improve educational and career outcomes among students from underserved communities. PRIs complement ECMC Foundation's traditional grantmaking strategy, allowing us to unlock a wider spectrum of tools, including grants, loans, deposits, equity and guarantees, among others.
Similar to Shark Tank, there's a catch: EIV requires skin-in-the-game from investees. In addition to delivering social impact in the form of educational and career outcomes, enterprises will be expected to generate financial returns. These returns will be recycled and put back into our PRI portfolio to invest in more PRIs, thus generating even more social impact. If all of the dominos fall into place, in theory, the financial returns from PRIs could be recycled in perpetuity, leading to unprecedented impact.
The decision to include PRIs in our set of funding tools was borne from the frustration that my team and I felt about the education and skills gaps, and our desire to expand our channels in providing more of a solution to the issue. Two years from now, 65 percent of America's new job openings will require at least some education beyond high school. However, only 40 percent of adults currently have some form of a postsecondary certificate or bachelor's degree, leaving a large education achievement gap.
Adding to this is the skills gap: employers are struggling to find workers with the right skills to fill jobs. Many of these jobs don't always require a bachelor's degree and can be developed by attending career and technical education programs (CTE) that lead to industry-informed credentials, up to an associate degree.
We came to the realization that while grants play an important role in addressing problems in higher education, they aren't enough. We needed a solution that had the potential to catalyze transformation in new and different ways. After a lengthy consideration of our options, the ECMC Foundation team landed on a funding strategy that pairs grants and PRIs together, giving us greater leverage to improve educational outcomes among students from underserved backgrounds.
EIV is launching with two partners–the Employment Technology Fund and Venn Foundation. With the former, ECMC Foundation joins the Joyce, W.K Kellogg, Rockefeller, and Walmart Foundations as an Executive Committee Advisory Board member and makes joint decisions on PRI investments.
We are also excited to begin our work on PRIs because this area is relatively new for philanthropy, though major foundations—named above along with others such as Gates, Lumina and Kresge—willing to venture into new and bold ideas, have been in this space for quite some time. Together, we'll be operating our version of Shark Tank as pioneer funders.
Game on, EIV.
Peter J. Taylor