Many companies have entered the for-profit education sector, especially those looking to generate leads. Few other online segments offer such attractive economics. The online lead generation space, certainly with respect to education, has few barriers to entry, requires a rather low amount of capital intensity, and success doesn’t require becoming class leading. It only requires one to perform incrementally better than the next provider. None of these are inherently wrong. They simply explain why so many who enter the online education lead generation segment focus on becoming a lead provider to the schools. As we see in the Quinstreet IPO filing, execute well, and a company can earn well north of a hundred million dollars annually servicing the sector. And, Quinstreet is not the only one. The race for the number one spot in education lead generation revenues is much closer than most think. There are three if not four in the $100mm club for online education lead generation. If you were going to enter the online education arena, wouldn’t you just operate a similar business? Not if you are Paul Freedman and his newest venture, Altius Education.

Altius, as we found out from Founder and CEO Paul Freedman is Latin for “higher”, which makes the company name a clever, yet clear, description of their focus – the world of higher education. For another clue about Altius’s model, it helps to know something about the focus of the lead investor, Maveron who along with Spark Capital put an eye-opening $8 million into Altius’ Series A round. Maveron, as many inside the world of investing know, was co-founded by Howard Schultz, the man who has built in Starbucks one of the most recognizable brands in the world. His passion for consumer brands drives Maveron’s investment strategy. If a company doesn’t touch consumers, they don’t invest, which explains why many of Maveron’s investments are, in many places, also household names – from the super swanky Pinkberry to education leader Capella University. Such a large captial raise, though, would not have been possible were it not for Paul, the entrepreneur behind Altius. Unlike the dot com boom in the 1990′s where a sock puppet and a dream could get funding, serious money today requires a track record. Paul’s began in college during which he built a site for for people to do homework without going to the library. His was a natural language engine during a time when when the majority of reference material consisted of Microsoft Encarta at best. By the time they built up scale in traffic, the monetization had dried up, at least from an ad revenue perspective, so they retooled the technology to go from b2c to b2b, licensing it to universities. It enabled schools to have an automated knowledge base that students could tap to answer their questions. Schools needed it because in almost one admissions cycle, user behavior went from phone calls or letters to emails and web traffic.

AcademicEngine, as it was known at the time, was sold to Hobsons in 2004, and Paul stayed on to lead its development through 2008. During his tenure, he noticed a pattern in the higher education space. More year students were choosing two year programs as a pathway to a four program, while traditional four year schools were both rejecting more students while increasing their appetite for junior transfers. There was and is a demand problem, but from a supply side, the two year programs, primarily community colleges, weren’t necessarily addressing areas for high economic demand post graduation or focusing on the matriculation process. More interesting than the problem was how Paul decided to solve it. He decided that he would focus on online education but innovate on the current supplier model. And, this where the need for a large amount of working capital comes into play. Altius partners with traditional non-profit who currently do not a strong online presence, or in any in most cases no online presence. Together, the non-profits and Altius form a for-profit company under a new brand with the school providing the content and professors, leaving Altius the rest, primarily the technical back-end and making sure the school has resources and processes in place to make sure leads become students. The schools get to focus on what they do best with Altius making sure that there are digital butts in seats.

Altius’ first partnership was with Tiffin University, and together they created Ivy Bridge College of Tiffin University. Already, the new school has matriculation arrangements with 24 traditional schools where those graduating from Ivy Bridge are ensured admission. Ivy Bridge and the two newest programs being publicly announced January 2010, are all mission thematic. They build programs that are as Paul says, “not in the belly of the curve,” and he believes that the Altius approach will lead to better content, more engaged students, and ideally, better jobs. If the early indicators can tell us anything, they most likely tell us that Altius stands a good chance. In their first year of operations, they have enrolled 500 students; these are people who filled out a lead form, then an application, met the requirements for admission, scheduled their courses, and then actually began taking classes. Their lead to enrollment rate is not much higher than the industry average, more importantly, their term on term student retention is five times higher. Naturally, the test will be to see how it scales. Regarldess, it’s an impressive venture. We hope they succeed because it helps the world of education and lead generation. We thank Paul for sharing, and you can meet Paul at LeadsCon Las Vegas 2010.