The K-12 Institutional Tutoring Gold Rush of 21-22

As the K-12 institutional supplemental academic services market explodes in the wake of the pandemic and available federal stimulus funding, it recalls a similar period in the early 2000s tied to the No Child Left Behind (“NCLB”) Act. That window of opportunity didn’t quite materialize and persist as many had hoped. It is important to understand what is different this time around.

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The passage of No Child Left Behind in early 2002 ushered in a new era of K-12 accountability that remains to this day. One notable element in the legislation was an increased emphasis on choice for parents of children in persistently low-performing schools. For Title 1 schools that failed to make adequate yearly progress (i.e., “AYP”), as defined by NCLB, for two consecutive years, parents had the option to transfer their children to another public school.

After three years of a school’s failure to meet AYP, students became eligible for supplemental education services (“SES”) that parents could select from an approved list of providers. Often referred to as the “SES provision of NCLB”, it required services be free to parents and students (i.e., paid for by federal program funding), delivered outside the normal school day, and could include tutoring, after-school services, and summer school. Each state had to establish a list of approved providers, many of whom were leading private sector tutoring and academic enrichment organizations.

For many SES providers, it felt like a gold rush. A new, quasi-institutional market had emerged for their services, often emphasizing tutoring. Numerous companies and organizations rushed to get approved, spun up new business divisions and teams to tap the opportunity, and strove to figure out customer acquisition in this new business-to-institution-to consumer land grab. Some players struck it rich, many more struggled, and several were exposed for trying to take advantage of both parents and the program in the mad dash to capture share in this SES “Wild West”. By the mid-2000s, much of the SES speculation was over.

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Fast forward to the K-12 supplemental academic services (“SAS”) gold rush of 2021-22. Dozens of companies and hundreds of millions of investment dollars are chasing a similar dream with comparable catalysts – under-performing and/ or challenged schools and considerable pools of available federal dollars. This time, however, the outcomes will be different. The speculators, schools, and students should all benefit, and here’s why.

Location, location, location

Today’s SAS models are happening at schools, not outside of them. This dynamic allows schools and providers to focus on how to integrate these academic support models with core instructional activities, reinforcing schools’ primary objectives. Rather than set up as a punitive measure for failing to hit AYP targets, SAS models are being pursued as credible solutions – and partners – to the myriad challenges facing schools and districts in the wake of the pandemic.

Tools available for every scenario

SES providers in the early 2000s generally had one “tool” available to mine the opportunity – site-based, face-to-face program models. Twenty years later, on the far side of the “edtech revolution”, the diversity of SAS provider models has expanded considerably. From on-demand homework help aligned with schools’ core curriculum to hybrid high-dosage tutoring to AI-powered intelligent tutors, the greatest challenge for many schools is understanding what SAS “tool” to use when, given the terrain. The proliferation of SAS tools will continue; providers would do well to ensure their continual innovation does not supersede ensuring schools and teachers know how to use the tools with which they are being furnished.

Critical shortage of “natural resources”

Teachers are the essential natural resource in K-12 schools, and it has never been a more challenging time to find and retain them given the experiences for many across the past two years. A January 2022 survey of National Education Association (“NEA”) members indicate 67% reporting burnout is a “very serious” issue, and 55% are more likely to retire or leave the professional earlier than planned as a result of the pandemic, nearly double the percentage indicating the same in July 2020.

Whereas the SES providers were often viewed as competing with teachers and schools, today’s SAS providers are striving to collaborate with them. Moreover, the current and (anticipated) future teacher shortages facing schools and districts will require new resources and resourcing models. SAS providers’ value and impact to schools can persist well beyond the expiration of the one-time ESSER funds. Today’s SAS speculators must be earnest stewards of the current landscape; gaining the trust of teachers and schools at this critical time will ensure them a long-term concession.

Investors are funding the rush

In the NCLB-sparked gold rush, SES providers generally were staking themselves, investing off their own balance sheets to create new teams and models to serve eligible parents. This created pressure to find a motherlode quickly, or risk siphoning resources (and profit) from the rest of their business. While a number of companies were established – and funded by private investors – to tap the opportunity, this was the exception.

Today, investors and acquirors have poured hundreds of millions of dollars into tutoring and supplemental academic services since mid-2020 alone. Much of the early enthusiasm has focused on online direct-to-consumer models – think Nerdy/ Varsity Tutors, Revolution Prep, Wyzant, and GoStudent. However, most of these players are beginning to introduce or explore K-12 institutional models and find themselves chasing the early 21-22ers – companies such as Paper, BookNook, FEV Tutor, and Saga Education – who are securing the early motherlodes.

Buoyed by investor enthusiasm, today’s speculators have considerable backing to capture the near-term opportunity while building models that can work in partnership with schools for the long term. Moreover, curriculum providers – among other K-12 stakeholders – are taking note as well and trying to determine how SAS providers’ “tools” fit into their traditional teaching and learning landscape.

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The supplemental academic services gold rush is on. Stay tuned for the emerging rivalries and claims, sparked by tens of billions in ESSER funding and schools’ needs to find new paths forward at this uniquely challenging time. And unlike the early rush in the mid-2000s, this one will leave a permanent mark on the K-12 landscape.