John Lock, CEO and president of the Charter School Growth Fund, knows the product of status quo public schools firsthand. In the businesses he invested in and helped manage as a successful venture capitalist, Lock hired many intelligent high school graduates who were “ripped off” by public schools that “failed to teach them how to think critically.” Seeking to improve the state of the public schools, he has helped establish a new venture philanthropy fund whose mission is to achieve a radical change in the quality of education public schools provide.
After experiencing financial success in his first career, Lock decided that he wanted to do something to help students succeed. After a stint managing a charter school in southern California, he realized he could better serve students and parents by putting into practice the lessons he learned from his business career. Lock knew there were high-performing charter schools, but these individual schools couldn’t dramatically affect the broader system unless they were expanded and replicated. Seeing an opportunity to apply his knowledge of venture philanthropy, he helped create the Charter School Growth Fund.
Lock’s personal experience in both venture capital and charter school management has helped his credibility with potential donors to the Fund. Christopher Nelson, director of policy and program at Doris and Donald Fisher’s Pisces Foundation, describes Lock as possessing “the perfect combination of business and education knowledge.” He calls Lock “a great leader who is able to bring other good leaders into charter management organizations,” and he sees the Fishers’ support of the Fund as “the best way to get as many disadvantaged students in as many high-quality charter schools as possible.”
With the Fund’s help, academically high-achieving schools are creating new seats at a remarkable rate, currently one seat for every $692 invested by the Fund. This progress has prompted the Fund to announce an ambitious goal: to obtain $100 million from private donors and foundations and create 100,000 self-sustaining, permanent seats for students in high-achieving charter schools by the year 2015.
The Fund has already received commitments from the Walton Family Foundation and the Don and Doris Fisher Foundation for $25 million and $17 million, respectively. It recently received another significant financial boost toward that goal: a $13.5 million commitment from one of the philanthropic leaders in education reform, the Lynde and Harry Bradley Foundation. In addition, such well-known donors as the Annie E. Casey Foundation and the Ewing and Marion Kauffman Foundation have recently stepped forward to support the Fund.
Over the past seven months, the Fund has awarded grant and loan packages to six charter operators in various regions of the country averaging approximately $1.7 million over four years and totaling nearly $10 million. Collectively, these groups plan to open over 40 new schools in the next five years and create new seats for over 14,000 additional students. These operators—and the schools they open—require philanthropic support to get started, but once they reach capacity, they will be sustained on public revenues.
Lock stresses the importance of small and local funders to the Fund’s success. As the Fund has demonstrated, small grants can have exceptionally large returns when the investment is managed properly. Applying the eyes of a venture capitalist to the process, the Fund is able to identify schools that ordinarily would not receive attention from large foundations and ensure that these schools are prepared for expansion. Traditional funders are often afraid to invest in experimental projects or projects that do not carry significant publicity.
Each of the Fund’s applicants is assessed using a set of objective data that is substantial in scope, including the school’s curriculum, academic performance, management profiles, teacher and parent satisfaction rates, financial data, and how these metrics compare to other schools, public and private, in its region. Schools are selected, in short, because of their proven record of student achievement—an element that’s crucial to their prospects for successful expansion. Expansion, in turn, serves the ultimate goal of the charter school movement, which is not just to provide an educational choice for a few students, but also to change public education by raising the public’s perception of how good public schools can be. To fuel this change, a critical mass of high-performing charter schools must be created.
A total of 93 groups from 20 different states recently applied to the Charter School Growth Fund. The Fund selected 15 schools serving students in 12 states and the District of Columbia from this applicant pool to be part of its Spring 2006 Business Planning Cohort. Any school can apply to become a member of a business planning cohort, a policy that helps the Fund attract a large and diverse pool of potential grantees. In a previous pilot round, the Fund selected nine candidates and put them through its intensive six-month period of strategic consultation, during which each school worked with the Fund to develop and refine its growth plan. Six of these candidates were approved for funding, while the other three were able to put into practice their respective growth plans by securing funding from other sources (further leveraging the Fund’s dollars).
Along with its rigorous process for selecting grantees, the Charter School Growth Fund is equally diligent in its granting process. Grantees receive a mix of grants and loans that encourages tight fiscal planning. The funding is spread out over three to five years and is tied to performance benchmarks. If a grantee does not attain a stipulated benchmark, or makes significant changes to its strategic plan, it can lose some or all of its funding.
This method of funding is, according to Lock, a key element in the success of a firm engaged in venture philanthropy. Lock would encourage all philanthropists to invest on a multi-year basis, recognizing that they can often be the grantee’s sole source of funding. Grantees that are forced to live year to year, constantly applying for grants, are unable to engage in long-term strategic planning. Another advantage of long-term funding is that funders can leverage their money and knowledge to attain greater levels of achievement.
The Bradley Foundation, which was instrumental in creating Milwaukee’s school voucher program, has also recognized the need to address the issues of quality and supply in school choice. The “first generation” of charter schools, many of which are thriving academically, largely grew out of grassroots efforts and are mostly independent institutions. Over the past 14 years, some 3,500 charter schools have opened their doors to over one million students across 40 states and the District of Columbia. Many of these schools have demonstrated substantial gains in student achievement, but to meet ever-growing demand for high-quality schools and to truly leverage change in the education system, the charter school movement must look to achieve scale with quality. And so the Bradley Foundation is supporting the Charter School Growth Fund’s efforts to increase the supply of high-performing schools.
Dan Schmidt, Bradley’s vice president for program, is particularly impressed with the Fund’s insistence that its grantees “explore and resolve fundamental governance, management, operational, and regulatory issues associated with sustained expansion before receiving funds.” He adds that the Fund’s “strong sense of mission,” its “clear and well-defined business plan,” and the leverage opportunities of its venture-like structure persuaded his foundation’s board to make the grant.
Nelson at the Pisces Foundation praises the Fund’s “focus on longitudinal value-added gains”—that is, the way the Fund assesses schools by measuring students when they enter a school and then tracking their performance after each successive year. He also lauds its insistence on “not just providing funding, but engaging in detailed, hands-on business and strategic consulting.”
To get the most value out of its investment, the Fund establishes a unique working relationship with each of its grantees. Chris Barbic, founder and director of YES College Preparatory Schools in Houston (one of the Fund’s grantees), remarks how the relationship is more of a partnership than most traditional grantor/grantee relationships. Barbic adds that the application process is “painless, thorough, and efficient” and that he values the Fund staff’s extraordinary knowledge of charter schools: “They really understand charter schools in ways other funders don’t.”
YES College Prep received a $1 million grant and a $500,000 loan from the Fund in its first round of disbursements, a package tied to performance benchmarks including test scores, financial metrics, and curriculum development. This funding will be crucial to supporting YES’s management office, which provides support for three campuses and is managing the planned opening of a fourth campus this fall. The management office charges a small fee to the charters it operates, but this funding is not yet sustainable. The Charter School Growth Fund is helping to fill the funding gap as YES expands to serve more than 1,300 students.
Barbic lauds the Charter School Growth Fund’s willingness to finance the aspects of charter schools that other funders are less willing to support: the additional staff positions necessary to manage an expanding enterprise, as opposed to “sexier” bricks-and-mortar expansions. He also values the Fund’s insistence on tying funding to performance benchmarks because it helps his staff gauge their own success and keeps them on track in their growth plan.
Lock encourages all philanthropists to spend more time with their grantees, getting to know their operations intimately, because “it’s more than just the money that makes the venture business successful.”
