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December 2008
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Ron Packard
Founder and CEO
K12
grade
Adding seats to
the virtual classroom
expectations
$2.95
RON PACKARD AND K12 ADD SEATS
TO THE VIRTUAL CLASSROOM
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Washington SmartCEO December 2008 www.smartceo.com
grade
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BY ERIC TEGLER
Photo by Bryan Burris
When Ron Packard talks about his company, K12, he doesn’t go on about its quarterly performance or its return
for investors. Instead, he patiently explains the concept of “public virtual schooling.” • K12 is a leader in the
online public school sector, an educational outsourcing company whose web-based curriculum, management
services and support are in high demand from charter schools, school districts and states across the country.
• “We believe we’ve built the best curriculum ever,” Packard says, “and that we have a moral obligation, not
just a business obligation, to deliver that education to as many children as possible.” • Though that might
sound like marketing-speak, you tend to take Packard seriously. He stands well over six feet with a frame that
seems as wide as it is tall. His passion for K12 is evident in his demeanor and his leadership style, a clue to
which is given when he cites Merck Pharmaceuticals founder George W. Merck as a business role model. • Merck
was fond of saying that when his company worried mostly about medicine and helping people, profits always
seemed to follow. In the space of eight years, Packard has used a similar philosophy to grow K12 into a public
company with over 600 employees serving approximately 50,000 full-time students using its curriculum in 21
states plus the District of Columbia. • If you haven’t heard of virtual public schooling or K12, don’t fault yourself. Though the company is headquartered in Herndon, VA, it doesn’t yet operate in Virginia or Maryland. That
will likely change in the future, perhaps sooner rather than later once more people in the Washington-Baltimore
region understand the concept. •
de
xpectations
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“We promise to produce results as
good or better than the average
brick-and-mortar school and the cost
to taxpayers is significantly less.”
virtualschooling
thek12model
Charter schools are elementary or secondary schools that receive public money
but are free from some of the rules and regulations that apply to other public schools
in exchange for some type of accountability for producing certain results, set forth in
each school’s charter. Though they represent an alternative to other public schools,
charter schools are part of the public education system and are not allowed to charge
tuition.
According to the Wall Street Journal, there are now more than 1.3 million students enrolled in 4,300 public charter schools in 40 states and the District of
Columbia with over 360 new schools opening in 2007 alone. Part of an educational
reform movement begun 17 years ago, charter schools have steadily grown in popularity, evidenced by waiting lists over 350,000 students strong nationally. While they
have generated both criticism and praise, WSJ reports that new studies show charter
schools’ capacity to increase student achievement. A recent analysis of achievement
reports found that 31 of 40 studies since 2001 have reported gains in charter schools
greater than those in comparable district-run schools.
Charter schools are often founded by non-profit groups – teachers, parents or
activists – in search of alternatives to traditional public schools. Others are established by universities or states themselves. Many have no standing facilities of their
own. Rather, they are “virtual” with a charter granted by the state, a small organizational structure/staff, and a dispersed student body that receives its instruction at
home via the Internet. There are bricks-and-mortar charter schools and schools that
offer a mix of physical and virtual classroom time, but K12 dominates the virtual
public school market.
Virtual public school students learn at home like home-schooled students, but
their curriculum is more formalized and the standards they are required to meet are
the same as those bricks-and-mortar public school students are required to meet in a
given district or state. They may be dispersed, but they are in a public school. Parents
enroll their children in public virtual school in the same fashion as they would for a
normal public school. Attendance is required and each student is assigned a state- or
district-certified teacher.
“Imagine you had a classroom and you had a teacher, children in the classroom,
a computer for every child and adult volunteers at a very high ratio [usually parents
but not always],” Packard says, “You’d teach very differently. Every child could learn
at his or her own pace. When they had an issue, they could ask that responsible
adult. If they still had an issue, that master teacher could get involved. With today’s
technology, they no longer all have to be in a single room. The kids could be scattered all over the world. That’s what public virtual school is.”
K12 has four different lines of business, but for the sake of simplification we’ll
discuss the company’s offerings for the full-time, multi-district online public school
market. K12 derives most of its revenue through enrollments in online public
schools where the company charges per-student fees for its curriculum and management services, including the hiring and training of teachers.
According to K12 vice president of public relations Jeff Kwitowski, the company
does business with online charter schools in 17 states. There are three district-based
online programs and one is a program of the state of Florida. In most instances, the
schools are open to students across a state without restrictions. Each contracts with
K12 to provide curriculum, management services, training or a full turnkey solution.
The company’s reputation helps attract students, Packard says.
A typical K12 charter/public school scenario would work as follows: Parents
enroll their child in the online public or public charter school as they would in any
other public school. Just prior the beginning of the school year, the family would
receive a 90-pound package from K12 containing all the relevant curricula, materials
for the parents, and a computer that comes with an Internet connection paid for by
the state or district. Packard says the most common response families give K12 is
that receiving the supplies is “like Christmas in September.”
Shortly thereafter, a K12 teacher in the area affiliated with charter school would
give the family a call, establish contact with the student and often schedule a face-toface meeting. Subsequently, the student takes a placement test. Packard reports that
45 percent of students are at a different math grade level than language arts level. So
they’re placed at their ability level – if that’s behind grade level, they may take two
lessons a day in a particular subject and catch up over a year or two.
Following placement, the student begins the school year and goes online, logging
into school every day and following a schedule for math, language, history and other
subjects. After each lesson, there’s an assessment (not for a grade but to demonstrate
understanding) which, if passed, sends the student to the next subject. During the
course of the day, the teacher can see via the Internet hour to hour or even minute to
minute how the student is progressing. Interactive coursework is delivered via K12’s
Web platform, and if a student does not successfully complete the day’s work, it is
pushed to the next day with the subsequent schedule automatically adjusted. Likewise, children who accomplish more than scheduled during a day can elect to keep
on going and their schedules will adjust. Throughout, families can see what day their
child will finish the school year. State law typically requires a minimum of 720-900
hours of attendance per year.
On the other side, each teacher instructing through K12 is given a class list at the
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Washington SmartCEO December 2008 www.smartceo.com
Photos courtesy of K12
beginning of the year. The teacher-student ratio varies depending upon grade but
typically averages 50 students per teacher. Working from home, teachers communicate with families at the start of the school year, ensuring their readiness. High school
instructors do daily or several-times-weekly Web sessions on topics in each course
(high school teachers specialize in one subject). All teachers offer help on-demand.
For instance, if a child is struggling with fourth-grade fractions, he or she can consult
directly with the teacher on the phone, on the Web through “white board” sessions,
or in a face-to-face meeting.
All teachers in the K12 system run monthly field trips for grades K through 8 so
students can socialize and meet one another. The company works with approximately 1,500 teachers nationwide, and in Pennsylvania for example, there are about 200
public online schoolteachers working with K12.
Essentially K12’s services are paid for by the state though the funding comes
indirectly through the public charter schools in this example. It’s a pretty sophisticated model and there are other lines of revenue but none of it would exist had Ron
Packard not decided to help his daughter with her homework.
other
’ parentsmightwantit
Packard thought his destiny was on Wall Street. As an undergraduate at the University of California, Berkley, he worked at Goldman Sachs while earning a B.A. in
economics and mechanical engineering. As a Hughes scholar, he spent his undergraduate summers writing an image-processing language. Later, he would add an
MBA from the University of Chicago. Packard did go to the Street, working in New
York for Goldman and management consultant McKinsey & Company.
After four years at McKinsey he was hired by a client to run a business it was
establishing in Chile. Packard says he enjoyed the move to South America and was
still taking in Chile’s delights when infamous junk-bond investor, Michael Milken,
called his office. His reputation notwithstanding, Milken had established the Milken
Family Foundation in 1982 to support education and medical research. In the late
1990s, Milken was launching an education investment fund, and Packard’s savvy
investment skills had caught is attention. He offered Packard a position as director
and strategist for his Knowledge Universe Learning Group, guiding its educational
investments.
Back in the United States and nine months into his new job, Packard took on
the post of CEO of a private pre-school chain (Knowledge Schools), which Knowledge Universe had just acquired. The responsibility was added as he continued his
role as an investment strategist for KULG. A high-ranking executive with an advancing career, he was also an involved parent. Going over his daughter’s math homework with her one night, he was also a frustrated parent.
“I was working with my daughter on her homework from a public school,” he
remembers. “I wasn’t really happy with the math work she was doing. As an engineer, I thought I’d just teach it to her myself. I went online to see what the best
public and private schools did in math courses. There was nothing like that, however. What there was were thousands of little supplemental math sites. Nowhere was
there a site that explained, ‘This is first-grade math,’ or ‘This is second-grade math,
and if your child passes this test, they’re on par with the best kids in the world.’ I
thought that if I built something like that, other parents might want it.”
Packard recalled his own exposure to self-paced and remote learning.
“Even as early as the 1980s when I went to Berkley, I took astronomy selfpaced,” he says. “You’d read a book then go into a center and take a test once a week.
It was OK, but it wasn’t interactive.”
But in 1999, he realized the Internet could change that. “What it could do was
allow interaction on a real-time basis,” he says. “Previously, there were correspondence and CD-ROM-type courses through which you couldn’t interact instantly – a
teacher couldn’t grade a child’s work the same day.”
The idea he had while working with his daughter quickly morphed into building
the entire school, the entire curriculum. Packard was ambitious enough and wellconnected enough to take a shot at making it reality. In 2000, he wrote a business
plan and ran it past former Secretary of Education and Drug Czar Bill Bennett, who
was convinced by the concept. At the time, Packard had noted the 10 percent per
year increase in the number of home-schoolers, but he wanted to go a different way.
“The idea was,” Packard explains, “could we create public education online? It’s
very different than home schooling.”
In providing curriculum and management services to charters and others looking
to establish virtual public schools, Packard’s proposed company would have to operate within a framework (state-approved curriculum, certified instructors, standardized, proctored state tests) that allowed for comparison of results, both educational
and financial. That was attractive to investors.
His idea was compelling enough to attract $10 million in initial capital from his
boss, Milken, and from Oracle CEO Larry Ellison. Packard elected to open the
company in Virginia because of its tech-friendly business climate, its low start-up
costs compared to California, and the educational connections it promised.
After hiring a few initial employees, Packard made good on that promise by
hiring John Holdren, head of the Charlottesville, VA-based educational non-profit
curriculum provider and adviser Core Knowledge Foundation. Holdren’s connections with the University of Virginia and in the educational community in general
helped attract a respected core of educators who began to build the fledgling company’s curriculum.
Strong though his connections were, Packard’s timing couldn’t have been worse.
“The most challenging time the company had was the spring and summer of
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Photos courtesy of K12
2001,” he says. “Two things were going on. One, it was an enormous effort to build
every lesson, every grade curriculum in grades K through 2 and all those systems. If
you had come to our offices, you’d have seen 110 people, which is everyone we had,
working seven days a week, day and night. We had people sleeping in the office. It
was ‘start-up’ in its purest, most grueling, most beautiful form.”
The fact that K12 had employees at all was impressive. As the tech bubble burst
in mid-2000, people lost their jobs and what was once a hot labor market became
ice cold. While jobs were scarce, the last thing most people wanted to join was
another Internet start-up. But K12 was an idea in which people believed, Packard
says, and they gave it their full energy. “It amazes me, even to this day,” he says.
While attracting quality employees might have been tough, attracting capital
should have been harder. By 2001, the venture capital market was at a standstill.
Packard needed to raise $40 million for a pre-revenue Internet company. Amazingly,
he got it from a group of wealthy individuals across the country. “By any logical view
of the environment at that time, there’s no way that round of financing should have
been raised,” Packard says.
But it was. As hard as Packard’s employees worked to build a curriculum for
kindergarten though the second grade and to simultaneously build the company’s
Web platform, he worked to get buy-in from crucial partners: the states. He began as
with investors – by pitching a dream. It went something like this:
“When you create a public virtual school, you give every family in a state an educational choice,” Packard says. “If for some reason the local school isn’t working for
your child, you now have a choice. Unless they have economic means, most families
in this country don’t have that choice. When a state makes this public policy, they
create the most democratic form of education. They’re offering a choice that every
child in the state can potentially take. Secondly, we promise to produce results as
good or better than the average brick-and-mortar school and the cost to taxpayers as
a whole is significantly less. We might be getting 70 percent of the funding a traditional school gets.”
Packard’s connections allowed him to put that message to U.S. Undersecretary of
Education Eugene Hickcock and to Gov. Tom Ridge of Pennsylvania. Both men
liked the idea, and Pennsylvania became the first state to host a K12-serviced charter
school in September 2001. The confidence of one state led to the acceptance of
another when Gov. Bill Owens of Colorado contacted Packard and signed his state
on the same year.
“The political ability to get states to do this was a big part of our success,”
Packard says. “In the early days, I had nothing to show them, so the first two [states]
were absolutely critical. Once Pennsylvania and Colorado were running, other states
felt easier about the idea because they could see it, touch and watch it work.”
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Washington SmartCEO December 2008 www.smartceo.com
“itworks”
K12 commenced its first school year with 1,000 students and grades K through
2. The second year it added grades 3 through 5 and signed on schools in Ohio, California and Idaho. Gradually the company built its entire K through 12 curriculum
and expanded into the 21 states it currently services. Schools using K12 are currently skewed to the south and western parts of the country. Packard wants to better
penetrate the northeast and especially Virginia where the company is headquartered.
“For whatever reason, school change has occurred faster out west,” he says.
“We’re not really sure why. We’re hoping we’ll be in the northeast in a much bigger
way. It could be a cultural difference out west, but I won’t rest until we’re in all 50
states.”
Getting there will hinge on getting the K12 message out. Initially, Packard and
his staff adopted a “Field of Dreams” build-it-and-they-will-come approach. In the
company’s early years it relied on direct mail and, because of the concept’s novelty,
free newspaper coverage. They figured that the choice offered by the company would
attract families who were unhappy with, or whose children weren’t succeeding in,
local bricks-and-mortar schools. They were largely right. Despite the home-schooling vogue, four out of five students come to a K12 online public charter school from
traditional bricks-and-mortar schools. Trouble was, they needed more.
Key to that was explaining the concept of online public virtual education and
how K12 could advance it. This, Packard decided, could be done by holding openhouses. K12 ran ads in target-market newspapers and held seminar-like meetings in
local hotels.
“One of our challenges was that it’s very hard to appreciate how good this is until
you can see it in action,” he says. “These face-to-face open houses were very critical
because our Web marketing wasn’t nearly what it is today and you could win people’s
trust.”
Part of establishing trust was convincing potential online charter school families
that K12’s system, and the idea itself, wasn’t too good to be true.
“We heard that a lot,” Packard says. “People would say, ‘We’re going to get all
this curriculum material, be part of the public school system and be able to do this
in the environment we choose? That’s too good to be true.’”
But families that heard the message generally embraced it. “I had moms come up
and hug me, thanking me for doing this,” Packard says. Often those most grateful
are parents of children who have fallen behind or who have special needs, he adds.
That online virtual public education works is confirmed by the fact that K12 has
direct competitors like Apollo Group (whose businesses include the online University of Phoenix), DeVry and Blackboard, and peripheral competitors like Apple Edu-
SPS Consulting is a full service staffing and recruitment firm
specializing in accounting, finance and administrative placements.
“There’s nothing
more satisfying
than having created
an enterprise from
just an idea.”
cation. Packard thinks his company has a big leg up, however, stressing that none of
his competitors has a curriculum as well-designed and interactive as K12’s.
K12 went public in December of 2007. Recent financial developments might
slow the growth of the business, but with over a million students attending charter
schools and two million more home schooled, market watchers estimate the virtualschool industry could produce annual revenue of $5.5 billion to $11 billion.
K12 reportedly generated $140.6 million in 2007 from its online and other revenue streams. These include the provision of curricula and materials to bricks-andmortar schools. The company also provides custom-tailored online programs for
school districts that want to offer accelerated learning or blended learning wherein
students attend a teacher-led classroom 50 percent of the time and learn at home via
the Internet the other 50 percent of the time.
Individual courses, AP language and a variety of electives are offered, as well. K12
can provide school districts with curriculum for license, be it for a single course or a
grade level. Relieving states of the burden of developing curricula themselves is
increasingly attractive to budget-challenged education departments. And there are
also direct-to-consumer sales. Finally, the company offers home-school curricula and
its own private “virtual academy,” which compares favorably (at lower cost) with private schools around the country.
Jeff Kwitowski stresses his firm’s commitment to its clients, referencing the fact
that company employees refer to the charter and district schools they work with as
“our schools.”
“Technically they’re not, but we’re so different from a publishing company that
drops books off every five years and says, ‘Good luck.’ We take personal responsibility for the education of these children,” he says.
Packard echoes the sentiment, affirming that his sole purpose is “to give children
and families a better education.” His role as CEO and entrepreneur goes hand-inhand with that mission.
“It kind of is what I expected. It’s not easy,” he says. “I’ve been on bridge loans a
couple times. I’ve lent money personally to make the payroll a couple times. I’ve
done the whole thing but there’s nothing more satisfying than having created an
enterprise from just an idea. In some small way the world is a little bit different
because you created this. The fact that we’ve created a workplace where 600 people
have chosen to work is very rewarding. That’s what entrepreneurship is all about.”
In 2008, K12 added South Carolina to the list of states in which it serves online
public charter schools and it is actively examining opportunities in Canada and
Mexico as well as overseas markets where Packard feels his model will work as effectively as it does in the United States. In 2007, Packard received the James P. Boyle
Entrepreneurial Leadership Award from Education Industry Association, but far as
K12 has come, he says he feels it has much further to go.
“Eight years on, I feel like we’re just starting the company,” he says.
CEO
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administrative personnel. With over 10 year’s experience, we pride ourselves on
exceptional service that we extend to each and every one of our customers.
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Office: 301-652-9112 Fax: 301-652-9114
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