Make the Col­leges Pay

Forbes - - CONTENTS - By Alexan­dra Wil­son and Su­san Adams

Most edtech star­tups are ide­al­is­tic out­fits with lit­tle rev­enue and low val­u­a­tions, but Rachel Romer Carl­son’s Guild Ed­u­ca­tion is worth $1 bil­lion and is on track to book $100 mil­lion in sales. Its se­cret? Con­nect­ing work­ers who have tu­ition ben­e­fits to col­leges that will gladly pay to meet them.

Most edtech star­tups are ide­al­is­tic out­fits with lit­tle rev­enue and low val­u­a­tions, but Rachel Romer Carl­son’s Guild Ed­u­ca­tion is worth $1 bil­lion and is on track to book $100 mil­lion in sales. Her se­cret? Con­nect­ing work­ers who have tu­ition ben­e­fits to col­leges that will gladly pay to meet them.

It's 9 a.m. two days be­fore Thanks­giv­ing in Arkansas, and Wal­mart ex­ec­u­tives are drag­ging their suit­cases around a win­dow­less of­fice build­ing in search of a large con­fer­ence room. They set­tle on an in­te­rior lunch­room with dull gray car­pet, claim­ing one side of a long ta­ble in the cor­ner and ges­tur­ing for their guests to sit op­po­site them. El­lie Ber­tani, Wal­mart’s director of work­force strat­egy, says she’s strug­gling to find qual­i­fied peo­ple to staff the com­pany’s ex­pand­ing net­work of 5,000 phar­ma­cies and 3,400 vi­sion cen­ters. Her fel­low Wal­mart ex­ecs are si­lent, but Rachel Romer Carl­son, 31, co­founder and CEO of Guild Ed­u­ca­tion, sees her open­ing. With­out hes­i­ta­tion she says her team can work with Wal­mart and find a solution fast. “You guys and us,” she says, “let’s do it!”

Carl­son flew to Ben­tonville from Guild’s Den­ver head­quar­ters the day be­fore. Dressed in a sen­si­ble navy blazer and black slacks, she hasn’t both­ered with makeup. Since 7:30 that morn­ing she’s been hud­dling with teams of Wal­mart brass, go­ing over op­tions to train work­ers for those new jobs. They range from a one-year phar­macy tech­ni­cian cer­tifi­cate pro­gram of­fered by a for-profit on­line out­fit called Penn Fos­ter to an on­line bach­e­lor’s de­gree in health­care ad­min­is­tra­tion at non­profit South­ern New Hamp­shire Univer­sity.

Carl­son’s ground­break­ing idea when she launched Guild four years ago: help com­pa­nies of­fer ed­u­ca­tion ben­e­fits that em­ploy­ees will ac­tu­ally use. Many big em­ploy­ers will pay for their work­ers to go to school (it’s a tax break), but hardly any work­ers take ad­van­tage of the op­por­tu­nity. Ap­ply­ing and sign­ing up for cour­ses can be cum­ber­some, and in most in­stances em­ploy­ees have to front the tu­ition and wait to be re­im­bursed. Mean­while, many col­leges are des­per­ate for stu­dents be­cause they have small—or nonex­is­tent—en­dow­ments and are fi­nan­cially de­pen­dent on tu­ition. Many non­s­e­lec­tive on­line pro­grams spend more than $3,000 to at­tract each new stu­dent. Carl­son charges schools a finder’s fee (she won’t say how much) for the stu­dents she de­liv­ers from her cor­po­rate part­ners.

So far Guild has signed up more than 20 com­pa­nies, in­clud­ing Dis­ney and Taco Bell. Guild gets paid only if stu­dents com­plete their course­work, so a full 150 of the com­pany’s 415 staffers serve as coaches who help em­ploy­ees ap­ply to de­gree pro­grams and plan how to bal­ance their stud­ies with work and fam­ily. When a com­pany like Wal­mart re­quests a cus­tom­ized train­ing course, Guild so­lic­its pro­pos­als from as many as 100 ed­u­ca­tion providers (nearly all of them on­line) and rec­om­mends the pro­grams it deems best. It also ne­go­ti­ates tu­ition discounts and fa­cil­i­tates di­rect pay­ments be­tween em­ploy­ers and schools, a big plus for work­ers who would oth­er­wise have to wait months to be re­im­bursed.

Carl­son, an alumna of the 2017 Forbes 30 Under 30 list and a judge on the 2020 list, says she has al­ready chan­neled $100 mil­lion in tu­ition ben­e­fits to work­ers. She ex­pects 2019 rev­enue to top $50 mil­lion, and Guild in­vestor By­ron Deeter of Besse­mer Ven­ture Part­ners pre­dicts 2020 rev­enue of more than $100 mil­lion. In mid-Novem­ber Carl­son closed her fifth round of fi­nanc­ing, led by Gen­eral Cat­a­lyst, bring­ing her to­tal money raised to $228 mil­lion at a $1 bil­lion val­u­a­tion. In the sleepy, well-in­ten­tioned world of edtech, Guild is one of only a few star­tups whose val­ues have soared, says Daniel Pianko, a New York-based edtech in­vestor with no stake in the com­pany.

“I can see a path for Guild to be a $100 bil­lion com­pany,” says Paul Freed­man, CEO of San Fran­cisco ven­ture firm En­tan­gled Group, who has known Carl­son since she was in busi­ness school and was one of Guild’s ear­li­est in­vestors.

When asked to de­tail Guild’s in­ner work­ings, like its strat­egy for so­lic­it­ing cus­tom cour­ses, Carl­son es­chews specifics and de­liv­ers what sounds like a po­lit­i­cal stump speech: “The econ­omy's mov­ing so fast,” she says. “We can't let higher ed­u­ca­tion dic­tate the skills and com­pe­ten­cies that we need five to ten years from now.”

There’s a rea­son she talks this way. Her grand­fa­ther Roy Romer was a three-term (1987–1999) Demo­cratic gov­er­nor of Colorado be­fore spend­ing six years as su­per­in­ten­dent of Los Angeles’ public schools. Carl­son started

FI­NAL THOUGHT “THE MIND IS NOT A VES­SEL THAT NEEDS FILL­ING BUT WOOD THAT NEEDS IG­NIT­ING.” —Plutarch

rid­ing along on his cam­paign bus when she was 6 years old; oc­ca­sion­ally she would even speak at his ral­lies. When her fa­ther, Chris Romer, a for­mer Colorado state sen­a­tor, ran un­suc­cess­fully for mayor of Den­ver in 2011, she served as his fi­nance director. (“The loss was dev­as­tat­ing,” she says.)

Along with pol­i­tics, the Romers were com­mit­ted to in­creas­ing ac­cess to ed­u­ca­tion, es­pe­cially for work­ing adults. Roy Romer helped start Salt Lake City-based West­ern Gover­nors Univer­sity, a pi­o­neer in on­line adult ed­u­ca­tion. In the wake of Chris Romer’s may­oral bid, in 2011, he co­founded Amer­i­can Hon­ors, a for­profit com­pany that of­fered hon­ors cour­ses at com­mu­nity col­leges (the com­pany strug­gled, and the brand is now owned by Well­spring In­ter­na­tional, a stu­dent re­cruit­ment firm).

After grad­u­at­ing from Stan­ford un­der­grad and work­ing briefly in the Obama White House, Carl­son launched her first ven­ture, Stu­dent Blue­print, while get­ting her M.B.A. (also at Stan­ford) in 2014. Stu­dent Blue­print sought to use tech­nol­ogy to match com­mu­nity col­lege stu­dents with jobs. It was a no­ble idea, but she de­cided to fin­ish school and sold the soft­ware she had de­vel­oped to Paul Freed­man’s En­tan­gled Group in 2014 for a neg­li­gi­ble sum. In 2015, after she wrapped up her M.B.A., she pitched the idea for Guild to one of her pro­fes­sors, Michael Dear­ing, and to seed in­vestor Aileen Lee, of Cow­boy Ven­tures, rais­ing $2 mil­lion.

After re­lo­cat­ing to her home turf in Den­ver, she landed her first ma­jor cor­po­rate part­ner in the sum­mer of 2016 when she sent a LinkedIn mes­sage to a Chipo­tle ben­e­fits man­ager that played up the fast-food chain’s “strong Den­ver roots and so­cial mis­sion.” With help from Guild, Chipo­tle’s $12-an-hour bur­rito rollers are now pur­su­ing bach­e­lor’s de­grees from Belle­vue Univer­sity in Ne­braska or taking com­puter se­cu­rity cour­ses at Wilm­ing­ton Univer­sity in Delaware. In Oc­to­ber 2019, Carl­son per­suaded Chipo­tle to lift its cap on tu­ition ben­e­fits above the $5,250 the IRS al­lows com­pa­nies to write off.

Guild’s big­gest com­peti­tor is a divi­sion of Water­town, Mas­sachusetts-based pub­licly traded day­care provider Bright Hori­zons, which has of­fered tu­ition ben­e­fit ser­vices since 2009. It works with 210 com­pa­nies in­clud­ing Home De­pot and Gold­man Sachs. Under Bright Hori­zons’ sys­tem, the com­pa­nies—not the col­leges—pay. Much of the ge­nius of Guild’s busi­ness model is that it cor­rectly aligns in­cen­tives: The col­leges are the most fi­nan­cially mo­ti­vated party, so they foot the bill. An­other com­peti­tor, Los Angeles-based InStride, launched in 2019 with fund­ing from Ari­zona State Univer­sity, and like Bright Hori­zons it charges the cor­po­ra­tions.

“I see our com­pe­ti­tion as the sta­tus quo,” Carl­son says. “Clas­si­cally, em­ploy­ers have of­fered tu­ition-re­im­burse­ment pro­grams, but no one is us­ing those pro­grams.”

The non­profit In­di­anapo­lis-based Lu­mina Foun­da­tion has done five case stud­ies show­ing re­turns on in­vest­ment as high as 140% for com­pa­nies that of­fer tu­ition-re­im­burse­ment pro­grams. “We saw pow­er­ful im­pacts on re­ten­tion,” says Lu­mina’s strat­egy director, Ha­ley Glover.

“Wal­mart and Ama­zon are in a death strug­gle,” pro­claims Joseph Fuller, a pro­fes­sor at Har­vard Busi­ness School. “If a Wal­mart worker can say, ‘I got an ed­u­ca­tion that al­lowed me to get pro­moted,’ they’re go­ing to be some­one who speaks gen­er­ously about Wal­mart and they are more likely be a Wal­mart shop­per.”

Like a good politi­cian, Carl­son is work­ing to please ev­ery­one. “We found a win-win,” she says, “where we can help com­pa­nies align their ob­jec­tives with help­ing their em­ploy­ees achieve their goals.”

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