The Selling Out of Newark's Schools: Part II

Let's talk some more about Cory Booker's Christmas Eve email dump.

In Part I of this series, I detailed how Booker's secret emails reveal that Facebook CEO Mark Zuckerberg's $100 million donation to Newark's schools quickly became a vehicle for both pushing anti-teacher, anti-union "reforms," and for disenfranchising the local community from controlling their own schools. Both Team Booker and Zuckerberg's folks were very concerned with the optics of the donation, even as they hatched plans to use it to force merit pay on to Newark's teachers and expand charter schools against the will of the duly elected school board.

Let's get into a few more of the particulars, starting with this question: Who is Sheryl Sandberg?

In the days leading up to the announcement of a $100 million gift to Newark schools Facebook's COO Sheryl Sandberg and Newark officials identified three areas that could be hurdles to a smooth implementation: building community support, attracting other donors and hiring a new superintendent, according to newly released emails.

In fact, those three areas proved problematic in the months–and years–after Facebook founder Mark Zuckerberg said he would give money to New Jersey’s largest city, provided an equal amount of matching funds were raised.

[...]

A week before the September 2010 donation was public, Sandberg asked Booker in an email about spending plans for the first 100 days and details of how the mayor planned to obtain support from residents.

Booker wrote: “This is one of our biggest concerns right now as we must be ahead of the game on community organizing by next week.” A mayoral adviser outlined a rough plan to spend $315,000 on efforts such as polling, focus groups, mailing and consultants. The foundation has spent at least $2 million on such efforts since.

It was also clear early on that Zuckerberg’s donation largely would be invisible to parents, students and teachers. State officials have said they always envisioned that a bulk of the money would help pay for a new teachers contract.

“MZ’s money is not going in to classrooms,” Booker aide Sharon Macklin wrote on Sept. 19, 2010. Instead, aides discussed how to allow small donors to fund individual projects, and Macklin suggested they would “get a lot of local props” for that.

Newark residents who are critical of Booker at school board meetings often say they are wary of outsiders and would rather have a superintendent who has some connection to the city. Sandberg appears to have been concerned about how the gift would be viewed. In an email to Booker and other Newark officials, she wrote that a draft of a press release about the donation used “too much ‘national’ language.”

“I wonder if we should basically make this focused on Newark with just a touch of ‘and this will be a national model,’” she wrote. [emphasis mine]

Now I find that curious for several reasons. First: why was Sandberg so intimately involved in a donation Mark Zuckerberg - not Facebook, but Zuckerberg - was making? Obviously, she felt that the optics of the donation were going to reflect on Facebook somehow; she was particularly concerned with making sure that Zuckerberg did not look like he was coming into Newark and usurping the will of the common folk.

Any COO wants her company to look good - but Sandberg had a special motivation. Remember: the donation was in September of 2010. Less than two years later, Facebook went public in the highest-profile IPO that Wall Street had seen since Google. And there was a lot of money on the table:

 3. Facebook left nothing for the common investor. The insider pig pile of PE firms and celebrity Silicon Valley angels took it all. This is a rather new, post-Sarbanes-Oxley fact and it should make Americans very, very angry. When Microsoft when public in 1986, its market value was $780 million. Microsoft’s market value would rise more than 700 times in the next 13 years.Bill Gates made millionaires of thousands of ordinary public investors. When Google went public in 2004 at a $23 billion valuation, it left less on the table for you and me. Still, if you had invested in Google then and held your stock, you would be sitting atop a 9x return. Zuckerberg and his Facebook friends took it all. [emphasis mine]

Time for my first caveat: I know less about high finance than probably anyone on the planet. Maybe the guy above from Forbes is full of beans; I wouldn't know. However, even I can see that an IPO must have been on the minds of Sandberg and Zuckerberg in 2010. And, given the Occupy-style populism that was sweeping the country at the time, it's hardly a stretch of the imagination to think that Sandberg was more than a little interested in making sure Zuck's bucks were not perceived as yet another attempt by the 1% to disenfranchise the unwashed masses.

After all, there was quite a bit at stake, and this was the first big post-recession IPO. Bad publicity surrounding the offer itself was always a danger; how much worse would it be if the Newark gift made it look like Zuckerberg was creating a national model for the privatization of public education?

So it's clear that Sandberg was concerned about the publicity the donation might garner if Facebook moved toward its eventual IPO. But still: why education? Did Sandberg have a concurrent interest in school "reform"?

You bet she did:

What do Facebook COO Sheryl Sandberg, Skype CFO Jonathan Chadwick, Benchmark Capital general partner Bill Gurley and Netflix CEO Reed Hastings have in common, besides the filthy rich tech rockstar thing?

They’re among a dozen or so Silicon Valley personalities who’ve put money into Rocketship Education this year. Rocketship is a network of “hybrid” charter schools that put kids in front of computers for a large amount of the school day. Many in the education industry hope Rocketship’s model will prove Silicon Valley can disrupt (and make money in) the k-12 school system.

That’s a tall order, given more than a decade of poor returns in k-12 ventures. In fact, in 2009, Bill Gurley told me he wouldn’t invest in education anymore because there’s no market for it in the U.S.  That hasn’t yet changed. Regarding the Rocketship money, he clarifies that “this is a donation—not a VC investment.”

But Rocketship CEO John Danner is hoping he can convince investors to make bets, and not just gifts. “K-12 technology in particular has been one of the worst outcomes for venture capital,” Danner admits. “It’s really been miserable for startups to get any traction. One thing we need to do is learn how to make the distribution system a lot more frictionless. You can imagine a Netflix-like app store. I have a fair amount of hope that the distribution systems will decrease friction and make it easy.”

Danner hopes to demonstrate that the evolution of technology is transforming education into an industry where venture capitalists “can both do good and do well. Once we get there we will unleash an enormous amount of capital on the problem.”

Danner, who has roots in venture-backed tech as the founder of NetGravity, says that about half of the Silicon Valley personalities that put money into Rocketship were connections he made prior to starting the school. Netflix CEO Reed Hoffman, Benchmark managing partner Bill Gurley, and Skype CFO Jonathan Chadwick all fall into that category. Others, like Facebook COO Sheryl Sandberg, came later.

“She had a friend who had a child at a school, and it just wasn’t working out well for them. She found out about Rocketship … and was impressed.” Danner says there were openings for the grade-level and location of the child in question. Sheryl’s friend won a placement, “and from there, it was just an ask. Sheryl and her husband Dave are extremely generous people.”

“We need more models like Rocketship to demonstrate that current public funding can close the achievement gap nationwide for all students,” she said in a statement. “At the end of the day, all that matters is that all children can go to great schools — regardless of whether they are charters or district schools.”

Danner says the donations come with a lot of pressure. “It’s up to us to convert that… Otherwise, Silicon Valley will kind of say ‘yeah, well Rocketship didn’t really work out.’ They’re going to be looking at this long-term. Does it work or doesn’t it?” [emphasis mine]

This article from VentureBeat highlights a strange trend I've noticed in stories about Rocketship: even though they are a non-profit, they often refer to their donors as "investors" (see here, here, and here for examples). In this case, Danner is pretty clearly saying that he sees the current non-profit Rocketship as a potential for-profit enterprise. That, of course, doesn't mean that Sandberg sees her "investment" as anything more than a donation; she may well have no financial interest whatsoever in seeing the Rocketship model come to New Jersey. And I don't know the exact timeline of events: did the Facebook donation come before or after Sandberg's "investment" in Rocketship?

I'd like for someone to go back and ask Danner and Sandberg about all this; wouldn't you?

In any case, it's telling that Danner speaks of Rocketship as if it were an eventual profit-making scheme for investors. It's also telling the Sandberg's husband, even though he lives in California, has involved himself in local, urban school-board politics in New Jersey:

Why would California multi-millionaires be interested in a school board race in the small city of Perth Amboy, NJ?

It seems absurd, and yet it's true: four wealthy Californians and one wealthy Coloradan - heavy hitters in the tech, financial, and health care sectors - have contributed tens of thousands of dollars to a slate of candidates running for the school board in Perth Amboy, a city of 50,000 with a majority Hispanic population.

[...] 

A look at the contributors provides us with clues:

- Greg Penner, Atherton CA; $8,000 donation. Penner is the Founder of Madrone Capital Partners and a well-known conservative activist. Married to Walton fortune heiress Carrie Walton Penner, Greg Penner sits on the boards of Teach For America and The Charter School Growth Fund. CSGF invests in charter management organizations around the country, including the KIPP network and Nobel charter schools. As I've written previously, both KIPP and Nobel have reputations for managing schools that serve substantially different student populations than their neighboring public schools.

CSGF is also an investor in Rocketship Education; see below.

- Arthur Rock, San Francisco CA; $8,000 donation. Rock is a well-known venture capitalist who also serves on the board of TFA and is an active funder of KIPP. Rock has invested in the Rocketship Education, a "hybrid" school that features extensive use of computerized instruction and, consequently, has a smaller faculty than regular public schools. Larry Miller found that Rocketship had large student attrition rates and smaller percentages of special needs students than its neighboring public schools (Rocketship responds to Miller here).

- David Goldberg, Atherton, CA; $8,000 donation. Goldberg is CEO of SurveyMonkey; his wife is Sheryl Sandberg, COO of Facebook. Both are partners, along with Rock, in Rocketship Education.

So three Rocketshippers gave money in a school board race in Perth Amboy, and one was married to Sandberg, another Rocketshipper. Remember, the district had (and maybe still has - I'll look into it) a large contract up for approval with School of One, a provider of on-line instruction. Regular readers will also remember that K-12, another on-line provider, was chaired by Andrew Tisch, one of Mayor Cory Booker's biggest supporters, and is expanding into the city this year.

Is it possible that we're seeing a turf war going on between folks who want to get in on the ground floor for providing on-line instruction to New Jersey's students? Right across the Delaware, Pennsylvania has seen a proliferation of these educational, fiscal, and legal disasters posing as schools. But the money's been good: are all these corporate titans simply staking their claims in the cyber charter gold rush?

Or is this really all about the children? As NJDOE Commissioner Chris Cerf says, is it "palpable, ridiculous nonsense" to even address this subject?

You tell me.

Dave, I can't wait to get to Newark...

ADDING: A little more about how Zuckerberg came up with the big bucks to fund his excellent adventure into Newark.



ADDING MORE: Jim Horn has some special insight into Rocketship. More in a bit.