Winning the (Education Game)
The success of a Hawaii educational startup sparks interest beyond our shores
It’s 3 p.m. in the afternoon and about 20 students at Likelike Elementary School are glued to the colorful, animated images on their screens in a second-floor computer lab. The room is quiet (the students are wearing headphones), save for an intermittent conversation between a “coach” and student at this afternoon tutoring program.
This is the work of local startup educational services company It’s All About Kids LLC (IAAK). And it’s a scene that was replicated at more than 40 Oahu schools during the 2005-2006 school year, as well as a handful of community tutoring locations, such as YMCAs and Boys and Girls Clubs. Students can earn points through a Web-based rewards system, when they complete different programs and tests. Those points can be redeemed for rewards such as a pizza from Pizza Hut or a Jamba Juice. A pizza is a very cool thing to be able to earn as a student and bring home to your family, especially if you are a student who receives free or reduced-price lunches. You need to be such a student to qualify for this free after school tutoring program. What these kids probably don’t know is that the computer- gamelike programs they “play” each afternoon are designed to improve student outcomes, are individually tailored to each child’s educational needs and are aligned to the Hawaii Content and Performance Standards.
IAAK was one of 10 companies that provided Supplemental Educational Services (SES) tutoring to Hawaii students last year. These companies get paid per child serviced according to a DOE formula and the funds come from the federal government. The service is provided for free. In order to qualify for these services, students must be classified as economically disadvantaged and attend schools that are “in need of school improvement, Year 2,” under the No Child Left Behind Act (NCLB) of 2001. (See list of SES providers to right) IAAK has scaled quickly, going from 17 to 45 locations, serving students from kindergarten through the eighth grade, in less than a year, but then its founder and CEO Brett Seitman has plenty of experience with that kind of growth.
WHAT’S SWATCH GOT TO DO WITH IT?
Seitman worked as the director of stores for Jeans Warehouse, where he was responsible for 18 stores and 150 employees. He also held management positions with the El Portal Group and at one time owned multiple Swatch stores. Seitman says, “In the early stages of my career, I was responsible for opening 18 retail units in about two years. They were basically watch stores anywhere from a Swatch-branded store to Universal Time … and that was in Hawaii, Las Vegas, California and Utah.”
He knows how to scale a business, and so does IAAK director John Bower, former Hawaii Biotech COO and, currently, the managing partner of new merchant bank Sennet Capital, of which IAAK is a portfolio company (see sidebar on page 168). In a former job, Bower expanded Health Rev, a healthcare front office outsourcing company he co-founded, to 10 states in less than three years, then sold the business to a Chicago-based private equity firm.
The idea for IAAK started several years ago. Seitman’s mother, Susan, was helping to start a charter school in Las Vegas and ran across educational software developed by CompassLearning Inc., a division of the WRC Media group, which includes the Weekly Reader. Brett Seitman, who was working for Swatch as director of stores in Hawaii, put an advisory board together that included his friend Bower. Originally they thought to open a learning center in Hawaii, but quickly decided the best route was to go after the SES opportunity created by No Child Left Behind, because of the lack of providers and the tremendous need. IAAK’s application to be an SES provider was approved by the Department of Education in spring 2005. The company started hiring and training coaches that summer. At its peak of operation this past school year, IAAK employed about 300 part-time coaches on Oahu. The company also closed both A and A1 rounds of financing and raised a total of $1.125 million by March 2006.
|Supplemental Education Services (SES)
Tutoring Providers 2005-2006
|Name of Tutor||Grades||Locations/Islands|
|College Connections Hawaii||K-12||Oahu, Kauai, Hawaii, Molokai|
|Community Schools Support Services||K-12||All Islands|
|Hawaii Tutorial Academy Inc.||K-12||Oahu, Kauai, Hawaii, Molokai|
|Hui Malama Learning Center||K-12||Maui|
|It’s All About Kids||K-8*||Oahu**|
|The Learning Hale: WIN 2000 System||K-12||All Islands|
|Pacific Resources for Education and Learning (PREL)||7-10||Oahu-Honolulu District (Only)|
|Read Right Systems Inc.||3-12||All Islands|
|*IAAK plans to expand to 9-12 during the 2006-2007 year
**IAAK plans to expand to Kauai, Maui and the Big Island during the 2006-2007 year
Seitman says the company has 20-plus investors, mostly local. He owns the most shares and Bower is the second-largest shareholder. The startup costs for the company were well above $500,000. While Seitman will not release gross sales figures, he will say that the company provided services for at least 1,300 students from July 2005 to June 2006. Given the set payment of $896 per child on Oahu the DOE made to SES providers, IAAK made at least $1.16 million in its first year of operation. That is a conservative estimate, and does not include other contracts for its software and services at other afterschool tutoring locations.
The most challenging part, not just for IAAK, but for SES providers overall, is getting people educated about and signed up for this free service, which is funded under the NCLB Act. Seitman’s mother is still working for IAAK. Brett Seitman says, “Shes an educator, so she’s educating parents about the service. Making sure they understand the importance of it and what they’re getting. The hardest thing to do is to really express the perceived value of something, when it’s free.”
The figures speak for themselves. According to Butch Adams, an educational specialist with the state Department of Education, during the 2004-2005 school year, 24,788 students statewide qualified for SES tutoring, but only 2,991, or 12 percent, received services. IAAK says that Hawaii spent just $2.8 million of the $7.3 million allocated for these programs that year. For the 2005-2006 school year, there were 41,135 eligible students. At the time of this writing, the school year had not ended, so there was no total of how many students had actually received services.
“We’re getting only 10 percent of the families who are eligible, so the capacity to provide is a lot larger than families who are actually taking advantage of it,” says Adams. He thinks the number of students who are eligible for SES services will increase in the 2006-2007 school year.
It’s a credit to IAAK then, that, in its first year, it was able to service more than 1,300 students, or 3 percent of those eligible for SES services in the state of Hawaii.
BUT DOES IT WORK?
The proof of the efficacy of programs such as IAAK’s, at least in the Department of Education’s eyes, will be in improved test scores from the schools and students who used IAAK’s services. That data was still being collected and processed by the DOE at the time of this writing.
IAAK’s internal data show that 80 percent of children who completed the IAAK program by June showed no improvement or some increase. Up to 47 percent showed an improvement in scores of between 10 percent and 19 percent. The program has garnered its share of true believers during its short existence. One of these is Melanie Sarte, head coach for IAAK at Nanaikapono Elementary School in Nanakuli and mother of two boys who received services there. Sarte says, “I see kids enjoying it and not wanting to leave the lab and that’s the best feeling for me.”
Her 8-year-old son Darien was reading at a level 7 when he started with IAAK (20 is passing and above 24 is exceeding). After five weeks of IAAK’s program, two hours a day twice a week, Darien was up to level 18. Sarte says, “His comprehension and decoding skills went up so drastically that his teacher was amazed at the program.”
At Puohala Elementary School in Kaneohe this past year, 44 who received SES services. According to IAAK, 11 showed increased performances between pre-and post-test scores of between 10 percent and 19 percent and eight students improved from between 20 and 29 percent. Principal Alexis Kane was so impressed with the IAAK’s SES services, that she partnered with IAAK and piloted an in-school program to see how the CompassLearning software worked as part of the curriculum. Kane says, “I like it because, No. 1, our kids like it. They love going to tutoring. They can’t wait to get there. A lot of kids that we have, and it’s true of many schools, have problems with distraction. When they are on the computer, they’ve got the earphones on and a lot of those distractions are removed from their learning environment. They focus totally on the task in front of them. Plus, they’re so excited about doing it, because they get incentives.”Sarte also noticed a change in Darien’s attitude. He could only read three- or four-letter words when he started the program and, by the time it ended, he was enjoying reading sentences to her. She says, “His motivation and social skills changed, because he saw a lot of his friends in the program. Although it might seem like they’re playing games on the computer, they’re actually learning at the same time, so, because of the interaction with the computer, he was enthusiastic about coming to class.”
Kane says IAAK’s rewards program is a great way to give kids access to the kinds of foods and treats they might not normally be able to afford. She says, “The kids got their rewards on the last day of school and they were just jumping for joy. It’s the one thing they kept bugging their tutors about.”
“I think they have a really bright future ahead of them,” says Kane. “It’s very user friendly and it’s appealing to kids. It’s like playing computer games, but they’re learning at the same time and they’re getting standards-based skills and lessons.
Testimonials like hers and other educators are adding to IAAK’s traction. In the 2006-2007 school year, IAAK plans to expand SES services to Kauai, Maui and the Big Island. The company will also add SES programs for grades 9 through 12. Seitman says, “This has been a great first year. We’ve definitely positioned ourselves. We’re well respected. We deliver. We’re showing positive results in SES with our own data, also anecdotal evidence from principals, schools and teachers.”
Seitman says there will also be a focus on the nascent direct sales division of the company, which began meeting with schools over the summer. The aim of the division is to sell CompassLearning products to the schools for use outside of SES, either during or after class. The software can then be used for students who don’t qualify for the SES programs. IAAK will also be upgrading the Hawaii rewards site to include more valuable prizes, such as scholarships and computers.
There are even bigger plans for 2007-2008. He says they are exploring ways to grow their SES business on the Mainland and are in discussions with a major potential Mainland partner about creating a national Web-based rewards program, modeled on what they’ve done with IAAK. Seitman says IAAK expects a 50 percent increase in sales over each of the next couple of years. However, Hawaii remains its focus for the immediate future.
Says Seitman: “Ultimately, if we can be successful and have an impact on tens of thousands of students in Hawaii and they do come out with a better education, ultimately, everybody here in Hawaii wins. The more educated our children are here — it just leads to a better quality of life in our state.”
|Sounding The Trumpet
Sennet Capital enters Hawaii’s startup scene
The dictionary defines the word “sennet” as a signal call on a trumpet or cornet for entrance or exit on stage. However, there’s no deep meaning to how Sennet Capital, Hawaii’s newest merchant bank, acquired its name. Managing Partner John Bower says it was simply a matter of finding a word that worked in combination with “capital,” and was available as a domain name.
According to Bower, Sennet gets heavily involved with its companies and there is a relentless focus on milestones. “We tell people on the front side that we’re not for everybody,” he says. Brett Seitman, President and CEO of It’s All About Kids LLC says, “Sennet’s been great, because I’ve had the ability to tap into several resources from their board of advisors. They’ve been able to share some of their experiences in growing businesses and some of the things to look out for.”Bower is the former CFO and COO of Hawaii Biotech, who has teamed with former City Bank President and COO Richard Lim and retired Duty Free Shoppers executive Kenton Eldridge to assist Hawaii startups with advisory and investment services. Besides It’s All About Kids LLC, Sennet has among its portfolio companies: Atlantis Cyberspace Inc., Kona Bay Marine Resources Inc., Edutainment Resources Inc., America’s Mattress and PCLender.com.
No surprise there, as the Board of Advisors reads like a who’s who of Hawaii’s business universe:
Bower says he’s been having a meeting a day with prospective portfolio companies and finds the deal flow so far to be “fantastic.” Sennet announced its launch in April and is currently looking for partners with which to build an equity fund. The size of the fund will be determined in part by the partners’ research into how deep the market is for established Hawaii companies that may be experiencing a generational shift and are looking to expand or sell. Bower says, “We need more experience and more time together to see what we do well.” — KAT