The Minerva Project, a San Francisco-based for-profit that aims to provide an Ivy League-caliber college degree for $10,000 a year, says it has closed on the bulk of a $70 million Series B round that will allow it to scale up its freshman class next year.
While many online education companies are grafting themselves to traditional university programs, Minerva began building a college from the ground up in September by admitting an international group of 29 students to its program. Students live in a Minerva residence hall on San Francisco’s Nob Hill, but they go to class in cyberspace via laptops they can take anywhere. The faculty members who lead the school’s small online seminars may be in distant cities, but they’re expected to help the students develop strong analytical skills through intensive discussions and exercises.
The goal of founder and CEO Ben Nelson (pictured above) is to compete with top universities on both quality and price by stripping away all the campus extras that make a high-quality college education more costly every year—the rolling lawns, the swimming pools, the administrative overhead, and the faculty research subsidized by undergraduate tuition.
Nelson says the first $50 million of Minerva’s Series B will come from a consortium of lead investors based in China: TAL Education Group, (NYSE: [[ticker:XRS]]) which runs K-12 after-school tutoring programs, and two private funds that invest in edtech companies, Zhen Fund and Yongjin Group; and Benchmark Capital, which provided $25 million in startup funding to Minerva in 2012. The company plans to close on the remaining $20 million of the $70 million Series B in early 2015. The additional investors have not yet been disclosed.
With the new money, Minerva will be able to admit its first full freshman class of 200 to 300 students next fall, Nelson says. That’s only a first step toward the scale-up Nelson envisions. “We want to be the same size as a typical Ivy League—seven thousand to ten thousand undergraduates across four years” from the freshman to the senior class, Nelson says. Minerva has accredited degrees in four majors so far: computer science, natural sciences, social sciences, and arts and humanities. It plans to add a business major by 2016.
Investors in China were drawn to Minerva because it’s a good business investment in the developing field of educational technology, Nelson says. TAL Education Group also saw opportunities to adapt some of Minerva’s methods for its own K-12 programs, he says. Beyond that, the Chinese backers may be attracted to Minerva’s mission, Nelson says. The school admits the top student candidates from anywhere in the world, regardless of their national origin, gender, ethnicity, or family wealth—which traditional universities look at in the hope that family members may later become generous donors.
In Minerva’s founding class, seven of the 29 students are from China—the largest number from any single nation, Nelson says. According to Nelson, top universities deny admission to all but a few students from China, even when those candidates have superior academic records compared to many of those who do get an acceptance letter.
Minerva’s initial group of 29 students will pay no tuition, and no room and board charges during their freshman year. It’s a benefit given them because they’ll have to take a year off after completing Minerva’s core group of initial courses, which concentrate on teaching fundamental intellectual skills such as logic and data analysis. During their gap year, Minerva’s second, much larger entering class will go through the same freshman curriculum. The Founding Class of 29 will then join them as sophomores—a year that the students will spend in Minerva residence halls in Buenos Aires and Berlin. New cities will be chosen for the junior and senior years. The idea is to expose students to a variety of cultures and socioeconomic realities.
Minerva may be the most radical of the edtech experiments that have been rising up for two reasons. The first aim of edtech companies is to reap profits from the potential of online learning. The second is to solve the problems plaguing higher education. Students and their parents confront rising tuition costs, and graduates can end up with a mountain of debt without gaining skills that land them a job.
Nelson’s target market is highly motivated, extremely talented students who can’t afford schools like Harvard and Stanford—or couldn’t get in. His solution is a classic liberal arts education that trains graduates to think, at low cost.
Meanwhile, competitor Udacity, through some of its new online “nanodegree” programs, is focusing on the knowledge needed by its partner companies–which include Google and AT&T—in students they hire, such as wizardry in specific technical and computer programming skills. Udacity is trying to bypass the entrenched university credentialing system by developing employer-backed academic credentials.
Whatever edtech models pull ahead, traditional universities would be wise to keep watching.
