There is a growing cluster of companies in the Northwest looking to capitalize on educational needs. Learning.com makes computer software programs that help elementary school students learn science, math, languages and social studies.
"We help teachers by integrating our program with the school's curricula," said William Kelly, founder and chief executive of the company, based in Portland.
Vernier Software and Technology, based in Beaverton, Oregon, makes a device that allows instant data analysis and graph-making.
"So students can concentrate on the experiment and not spend all period making a graph," said David Vernier, a one-time physics teacher who founded the company with his wife, Christine, also a teacher, in 1981.
Saltire Software makes a program that expresses geometric diagrams and mathematical equations interactively so that students can work efficiently on scientific calculators in solving problems. Saltire is also in Beaverton.
Those three companies along with 27 others are members of the Northwest Education Cluster, a four-year-old organization in the Portland area that holds quarterly meetings at which these entrepreneurial companies can share ideas on directing sales efforts to school districts and teachers' conventions, or on the intricacies of staffing, finances and other routines of managing a company.
Most cluster members are relatively small. Vernier Software has US$30 million in revenue and 75 employees; Learning.com has under US$20 million in revenue and 50 employees; and Saltire has US$1 million in revenue and nine employees.
Saltire, which often works on grants from the National Science Foundation, wants to expand use of its geometry program in high schools across the nation.
"That's where the big market for scientific calculators is today," said Philip Todd, Saltire's founder.
The cluster originated as an idea of Fred Phillips, a professor at the Oregon Graduate Institute, a research university, and was promoted by Kelvin Ng, an investment banker in Portland. Their vision was that a cluster would expand the capabilities and horizons of small companies. The idea evidently encouraged Portland cluster members, whose ambitions to improve American education belie their small corporate size.
"A revolution is needed in education -- students exist in a world where technology is pervasive but classroom teaching hasn't basically changed in 50 years," said Mona Westhaver, a founder of Inspiration Software, a Portland area firm that developed a visual learning system for kindergarten through 12th grade.
Westhaver, a founder of the Northwest Cluster, said that new approaches sought by Portland entrepreneurs include lifelong learning, online network teaching and "an end to the long summer break that was introduced for an agricultural society."
The small companies are encouraged by the fact that large corporations are expanding.
Pearson of London, for example, has nearly US$6 billion in annual revenue from ventures in education. It recently paid nearly US$500 million to acquire eCollege, a US company that supplies distance learning programs to commercial colleges.
Knowledge Universe, an education holding company that has 14,000 employees and almost US$2 billion in annual revenue, is raising US$1 billion in private equity financing for expansion. One of its holdings is the Portland-based Knowledge Learning, which owns Kinder Care child centers and KC Distance Learning, which provides online curricula for high schools.
"There is growing confidence that reform is coming," Kelly said.
His and other companies are profitable and have been growing over the last four years, he said, because of the No Child Left Behind Act. That law, enacted in 2001, increased accountability of state and school districts for the performance of primary and secondary school, which "puts accountability on school principals," he said, "and they want help from technology."
Nonetheless, the education technology industry around Portland faces challenges both fundamental and financial. Most serious is skepticism about the value of education technology.
The US Department of Education reported to Congress in March the results of a major study, Effectiveness of Reading and Mathematics Software Products. The conclusion was that "on average, after one year, products did not increase or decrease test score by amounts that were statistically different from zero."
Kelly countered that the study examined a model of computer teaching that amounted to little more than "entertainment products, computerized Sesame Street that only distracted children from the lesson plan the teacher was trying to follow." By contrast, he said, his software "is a blended model that helps the teacher implement the lesson plan and teaches children how to use online tools effectively."
Learning.com is in a joint venture with Pearson to implement its products in Texas schools.
Computer teaching aids allow individual students to learn at their own pace, said James Snyder, who coordinates the Cluster.
"Teachers can adjust curriculum to the abilities of each child, and not have to devote more time to slow learners or faster learners," he said. The other challenge is that for all the entrepreneurial passion among the companies of the Northwest Cluster, there are few venture capitalists buzzing around their meetings eager to invest.
"Cluster meetings don't even talk about attracting financing," complains Deme Clainos, founder and chief executive of StudyDog.com, which has a program that teaches pre-kindergarten to second-grade children to read.
Clainos is seeking new financing for the company, which has US$1 million in annual revenue. Venture investors have been reluctant to back education companies, Portland entrepreneurs contend, because marketing to thousands of publicly financed school districts is cumbersome and uncertain.
But reluctance is fading as investment comes into education, from federal government programs and private capital. This month, for example, an investor group that includes a division of Citicorp agreed to acquire Laureate Education, owner of Sylvan Learning Centers, for US$3.8 billion.
Programs from kindergarten through 12th grade "represent a US$60 billion market, so investor interest is growing," said Corey Greendale, a vice president specializing in the education businesses for First Analysis, a Chicago-based private equity and venture firm.
First Analysis has a two-year investment in Learning.com, which has raised US$10 million in capital over seven years.
Providing a return for those investors will require Learning.com to sell to a larger firm or investment group at some point in the future. But for the present, his investors are satisfied to ride a rising trend in education, Kelly said.
"The only instruction our investors give us is stick to our mission, which is to help teachers improve learning," he said.
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