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Fifth International Conference on Asynchronous Learning Networks

Fifth International Conference on Asynchronous Learning Networks. The For-Profit Option. Dancing with New Partners. Strategies for Financing Distance Learning Initiatives. Institutional Revenue Sources. Tuition Debt Gifts and Grants. …in other words:. Earn it, Borrow it, Beg for it.

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Fifth International Conference on Asynchronous Learning Networks

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  1. Fifth International Conference on Asynchronous Learning Networks The For-Profit Option

  2. Dancing with New Partners

  3. Strategies for Financing Distance Learning Initiatives

  4. Institutional Revenue Sources • Tuition • Debt • Gifts and Grants

  5. …in other words: • Earn it, • Borrow it, • Beg for it.

  6. Traditional Economic Model

  7. Technology-Mediated Economic Model

  8. Capital Needs of Technology-Mediated Model • Capitalize high initial cost of courseware development. • Provide working capital for delivery system. • Capitalize continuing cost of courseware redevelopment and upgrading of delivery systems.

  9. Meeting the Need for Capital • For non-profit and public institutions, • we rent it • For the rest of the world • they create it

  10. Renting Capital • Borrow the use of someone else’s money • “debt” • Borrow the use of someone else’s facilities, equipment and personnel • “outsourcing”

  11. Build It and They Will Come For Profit Entity Builds Facility

  12. For Profit Entity Institution Builds Creates Facility or Delivery System Curriculum

  13. For Profit Entity Institution Builds Creates Facilityor Delivery System Delivers at Curriculum

  14. “Cloning the Superprof” For Profit Entity Creates Curriculum

  15. For Profit Entity Creates Curriculum Institution Adopted by

  16. For Profit Entity Creates Curriculum Adopted by Institution Delivered Via Delivery System

  17. For Profit Entity Creates Institution Curriculum Adopted by Evauates Student Performance Delivered Via Awards Academic Credit or Credential Delivery System

  18. Economic Benefits to the Institution • Earned Revenue: Income stream from credit enrollments. • Rental Revenues: Royalty stream from use of brand (i.e. institution’s name and logo) and license revenue from use of courseware.

  19. …But • no share in the appreciated value of the services entity, • and no opportunity to monetize that value.

  20. New Economic Premise • Identify the value proposition of the learning service. • Use other people’s moneyto provide capital.

  21. i.e. access the capital marketplace by selling an equity interest

  22. …but non-profit institutions cannot create capital, right? …wrong!

  23. The Need is For Organizational Strategies to Allow For Capital Creation …Consistent with remaining a university!

  24. The “Standard Model” Capitalization Entity Institution Ownership Interest Non-profit or Public Entity For-Profit Entity

  25. Fundamental Premises of Any Capitalization Structure • Academic control remains with the Institution and the faculty. • The structure does not affect accreditationand licensure. • The “capitalization entity” is essentially transparent to learners.

  26. Characteristics of the Capitalization Entity • The Institution’s intellectual property rules do not necessarily apply to the capitalization entity. • The institution’s compensation rules do not necessarily apply to the capitalization entity.

  27. Models for the Creation of Capitalization Entities

  28. Dividing the Baby Institution

  29. For-Profit Operating Subsidiary All Non- Academic Functions Institution Creates All Academic Functions

  30. For-Profit Operating Subsidiary Non-Academic Functions Institution Minority Owner Majority Owner Investor Academic Functions

  31. Creating a Clone Institution

  32. Institution Creates Special Purpose For-Profit Entity $

  33. Parenting a Child For-Profit Partner Institution

  34. For-Profit Partner Institution Ownership Interest Ownership Interest New For-Profit Venture

  35. Hiring a Nanny Institution A Institution B

  36. Institution A Institution B Shared Governance Shared Governance New Non-Profit Entity

  37. Institution A Institution B Shared Governance Shared Governance New Non-Profit Entity Ownership $ New For-Profit Entity

  38. Immediate Economic Benefits to the Institution • Income stream from credit enrollments. • Royalty stream from use of brand (i.e. institution’s name and logo). • License revenue from use of courseware. • Share of net profits of capitalization entity.

  39. …and Long-Term Benefits • Share in equity appreciation in capitalization entity, • The opportunity to monetize a portion of that value, • And the opportunity to build endowment with the remainder.

  40. Striking the Balance... • What is needed… • to achieve institutional mission • to compete • What is possible… • within institutional constraints • within economic reality • within the marketplace

  41. Dancing with New Partners

  42. Michael B. Goldstein Dow, Lohnes & Albertson 1200 New Hampshire Ave., NW Washington, DC 20036 mgoldstein@dlalaw.com 202.776.2569 Fax 202.776.4569 www.dlalaw.com/education

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