Education and health startups may be ‘cloaked in nobility,’ but how good are they, really?

Earth in hand

When you cover education technology and digital health, it’s easy to get caught up in the public goodness of it all. The companies in these sectors aren’t just trying to chase the next billion-dollar idea, they ostensibly want to bring change and improvement to two areas of society that need it. But it’s important to remember — especially as investors pour upwards of a billion dollars into each of these sectors — that simply carrying the banner of education or health isn’t “good” in itself.

At the EdGrowth Summit this week in New York, Andrew Kassoy, co-founder of B Lab (an organization that certifies socially responsible business) put it well when he said:

“This industry, in particular, is one — and there are some others like healthcare and clean tech — which is cloaked in nobility. We’re providing a public good at some level or another and so what we do must be good. And I think it’s a pretty good idea to ask whether that’s always true. I’m not in the education field, but I know plenty of folks who are education investors or who are entrepreneurs running education businesses who, I wouldn’t say they don’t care, but that’s not why they’re there — they see a market opportunity. And I think it’s useful to be honest about where that’s the case and where there are other entrepreneurs or other investors who really are truly driven by the mission and profit is not that important. And then where people are on the spectrum, because usually people aren’t one or the other, they’re somewhere in between. That kind of clarity, and the transparency around measuring impact and communicating who you are, can drive who your investors are and what you’re able to achieve.”

Kassoy was speaking on a panel about how entrepreneurs, executives and investors build companies that are simultaneously market- and mission-driven and, to me, his comment was one of the more refreshing ones offered by the speakers.

Will Ethridge, COO of Pearson North American Education, also took part in the panel but emphasized “false dichotomies.” “I don’t think there is a trade-off between being mission-driven and being profit-driven,” he said.

Thankfully, Kassoy called him on the comment, arguing that if you’re a public company, your obligation is to maximize shareholder value. So if you decide, for example, to bring your products to poorer people without the resources to pay for those products, that affects your bottom line. And, he added, if you’re a startup with “hot money” interested in a fast exit, you won’t have the chance to control your mission for very long.

I don’t think mission and market motives are incompatible. But I agree that it’s important to look at companies in the context of what’s really driving them and consider the compromises they may make in the pursuit of their goals, as well as who benefits most from the value they create and to what degree. There are always trade-offs — if companies want to be trusted, they need to give windows into how they’ll draw their lines and be honest about where they stand.

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