How Entrepreneurs Are Rethinking MOOCs

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Author: Mike Montgomery

I write about the many issues technology entrepreneurs confront.

Only a few years ago, plenty of people were arguing that MOOCs, or massive open online courses, were going to completely disrupt colleges. Instead of having a professor lecture to a few hundred students—how inefficient and retro!—thousands of people from around the world could register for that same course, learn the material and take tests on their own time.

There’s no question that MOOCs are increasingly popular. According to one study more than 40,000 students, on average, take each class. And people are finding creative ways to use them, like a woman who is cobbling together the equivalent of an MBA from MOOCs for less than $1,000—and launching a business to help others do the same. Companies are using MOOCs to train workers, job hunters are learning marketable skills and people in remote locales are being exposed to top-notch professors.

But as often happens, the initial wave of hype was hit with a ferocious backlash. Harvard Business School professor Clayton Christensen’s prediction that MOOCs will drive hundreds of universities into bankruptcy within a decade no longer seems prescient, as MOOC completion rates can be as low as 5 percent, indicating that many students who register don’t stay motivated to keep up with the material. Eighteen months ago, Sebastian Thrun, cofounder of Udacity, one of the original MOOC providers, declared, “We have a lousy product,” and pivoted the company toward paid courses in software development along with innovative Nanodegrees designed to teach a highly-focused set of skills leading to specific career opportunities.

Today, entrepreneurs are looking at why MOOcs fail and building new companies that take the strong idea behind MOOCs — education for all — to the next level.

Ankur Nagpal became a millionaire building Facebook apps—his first online personality quiz was the highly cerebral “How Good a Lover Are You?” He started teaching his strategies through classes he listed on Udemy but Nagpal grew frustrated that Udemy controlled information about and access to his students. He thought teachers should be able to market their work directly, so he created an e-commerce platform called Fedora, which allows teachers to sell courses through their personal websites.

The startup has raised $1 million in seed funding from a group of angel investors and another $1 million from Atlas Ventures, a Boston-based venture-capital firm.

If teachers charge students for a class, Fedora gets a cut. If they want to follow the classic MOOC model and offer their services free, Fedora doesn’t charge anything. “It’s our way of doing a little bit of good in the world,” Nagpal says.

Yet his experience with over 5,000 schools (a figure that includes individual instructors) on Fedora has convinced him that providing MOOCs free is a mistake for universities and teachers. While it might seem altruistic, the lack of a price tag can signal to students that the course isn’t worth very much.

“We’ve found that the same course, when distributed free versus when a student pays, has a drastically different completion rate,” Nagpal explains. “When you give a coupon for a free class, the completion rate can be in the low single digits. When you charge for the same course, the completion rate can be 30 or 40%. The more you charge for a course, the more people actually complete it.”

Another startup, NovoEd, helps students become entrepreneurs by having them collaborate on real-world projects. Unlike a typical MOOC provider, which asks students to absorb lecture material on their own, NovoEd emphasizes social interaction.

Cofounder Amin Saberi, a Stanford professor who studies online social networks, became interested in improving the model when a colleague asked if Saberi could help him offer a MOOC. “He was a little bit disappointed with the state of the art,” Saberi says. “They are mostly asking for multiple-choice questions, and this is not how you teach entrepreneurship. It has to be taught experientially.”

At Stanford, Saberi and cofounder Farnaz Ronaghi, then a PhD student, built a MOOC prototype that required students to form teams and give a presentation. They received feedback from peers, mentors and the instructor. At the end of the course, student ratings are compiled into a “reputation score.”

Saberi estimates that 250,000 to 350,000 students from around the world have completed the course. “It became more like a social movement,” he says.

NovoEd spun off as an independent company in 2013, and it has raised $4.8 million in two rounds of funding. Its partners include schools such as UC-Berkeley, University of Chicago, and Georgia Tech, and businesses such as Comcast.

The MOOC industry is currently dominated by a few big players, such as Coursera and EdX, but Saberi believes the open online model is ripe for disruption.

“The next generation of companies is likely to capture the understanding that education is not about passive consumption of content,” Saberi explains. “The most important contribution we can make is fostering collaboration, communication, critical thinking and creativity. We call them softer skills, when we should call them power skills.”

The fundamental insight behind MOOCs is that millions of people worldwide have untapped potential that can be put to use through education—even if they can’t attend a traditional university. That principle has great value, even if MOOCs have fallen short of their initial hype. In the coming decades, new models will evolve to give growing numbers of students equal access to the playing field.