Breaking into Bureaucracies: What Startups Should Know About Selling to Schools
“There’s a battle outside
And it is ragin’
It’ll soon shake your windows
And rattle your walls
For the times they are a-changin’.”
These lyrics from Bob Dylan’s timeless song, “The Times They Are A Changin,” outlines the feelings that many educators and experts have about PK-12 education today in our country. Things are changing—and what exactly will emerge on the other side is not entirely clear.
I hope for many things. Chief among them is coherence, especially in the way that education leaders approach the needs of school and school district leaders as they strive to educate all children at high levels and prepare them for college and work. Complex problems require comprehensive and coordinated solutions. One primary way to support this need is to create a well-coordinated, flexible and aligned school- and district- funding system.
Unfortunately we are far from this ideal—and it’s hurting innovation and the many educational entrepreneurs who may not understand how to sell their products effectively.
Many school districts receive funds in similar ways, yet the ways in which they distribute funds to schools vary wildly. State and local inequities notwithstanding, some have command-and-control models in which the central office dictates where and how monies are allocated and spent. In other models, school leaders have a tremendous amount of autonomy. As a result, the way that a startup enters depends a lot on local context.
For example, let’s imagine two different sized districts from two different states. Both are urban school systems, and both have large percentage of students who are not meeting proficiency standards.
District One has about 33,000 students and is located on the east coast. This district is fiscally dependent on the city, which means that it has no power to levy taxes. There is a “maintenance of effort law” that dictates the sum that the city must give to the school district. This district’s funding falls in the following buckets: ~$430 million from the state, $120 million from the city, and about $70 million from federal grants and reimbursements (e.g., food services).
Most interesting in this city are ways in which state funding is directed by statute. A portion of the $430 million is allocated in specific areas, including software and textbooks. These are important opportunities for educational technology startups because they provide access to dedicated revenue sources for software packages and instructional materials.
In contrast, District Two is a fairly large district located in the mid-west. It serves nearly 400,000 students and has a vibrant charter-school sector. This district is fiscally independent and can levy taxes, although the city council can set limits on its taxing authority. On average, funding falls in the following buckets for a total budget of about $5 billion: $2.3 billion from local funding (i.e., taxes levied locally), $1.6 billion in state funding and about $980 million in federal funding. Local revenues dominate funding in this city, which gives it more spending flexibility than District One. Principals also have greater discretion on spending. A bottom-up approach may be appropriate here. DataCation and Teachboost, two edtech startups, focused first on school leaders building an impressive customer base. They focused on and leveraged the autonomy and buying power of school principals.
One under-the-radar source of funds are foundations, which come in all sizes and shapes—from small to big, from community foundations to private and corporate foundations. It’s often difficult to gauge how much schools and districts receive because that funding source is seldom, if ever, represented in the district’s public-facing budget directory. Nevertheless, in a national system where we spend in excess of $500 billion on public schools, foundations support represent a fraction (around $4 billion by some account) of the total spend on public schools. As a superintendent I always welcomed foundation support because it provided a more flexible funding source that could serve as catalyst for innovation.
Even in districts where autonomy and school-level budgeting are king, it can be difficult to manage these disparate funding sources to create a cogent instructional program. The problem is magnified at the district level. As a result, I recommend several strategies to startups looking to break into these bureaucracies.
1. Understand the local context. Know the funding streams, and help school and district leaders identify the appropriate revenue source. I know vendors who not only fill out the purchase orders, but they include the budget codes as well.
2. Get listed in the approved vendors list, whether state or local. In the east coast example outlined above, the software allocation to a district or school can fund software focusing on student scheduling. Getting on the state-approved list makes it very easy for a school leader to buy the product.
3. Sometimes it is easier to grow from the bottom. School leaders are often more nimble and less bureaucratic. Moreover, they can co-mingle resources for a desired outcome.
4. Start with the charter sector. Aside from being more innovative, charter schools often are supported in greater amounts by philanthropy, allowing great spending flexibility.
Many schools and school systems are full of hardworking individuals but are failing to deliver on their promise. Their efforts and focus are not misguided; rather, partial and inconsistent implementation and alignment prevents them from meeting the needs of all students. School and school district leaders need support to implement reform efforts systemically, thoroughly and deliberately. Innovators can help close these knowledge and implementation gaps.
Jean-Claude Brizard is president of UpSpring Education Group. He previously served as CEO of Chicago Public Schools. Before coming to Chicago, he served as the superintendent of the Rochester City School District.