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The Private Side

The Weekly Learner, a Banc of America Securities newsletter

June 5, 2000 -- The private side focuses on private companies in the education services and e-Learning markets. We realize many investors do not have the bandwidth to scour the e-Learning landscape for the next "big idea."

This week we examine the online mentoring/tutoring business, where companies provide learners of all ages and abilities with access to subject matter experts. SmartForce purchased a company called Scholars.com around 1998, becoming the first company in the e-Learning space to make a concerted effort to provide customers with a real person to back up computer-based-training. The move has been tremendously successful, as our anecdotal evidence and management guidance suggests the mentoring business is often driving online content sales rather than the other way around. Other corporate e-Learning providers are adding mentoring or email-response help functions to their solution, a must in our view.

In the higher Ed space, we believe a tremendous opportunity exists for a company called SMARTHINKING. SMARTHINKING provides tutoring/mentoring services in the college basics (math, science, etc.) to students across the country. Their tutors are usually masters or PhD students in their subject areas and must go through intensive training in order to qualify as a SMARTHINKING tutor. The service is offered 24/7 as the company can put tutors anywhere to match students' time zones. One of the more interesting facets of their offering is that SMARTHINKING has partnered with the major textbook publishers so students can ask book/page/problem-specific questions and the mentors will have the actual problems and answers available to help them. The service is in the pilot stage right now, with some schools offering the service free to students and some letting students pay for it on their own. We believe the model makes tremendous sense, both in terms of enrollment management goals for universities as well as being a scalable, killer app for the internet that addresses a significant shortcoming of traditional college tutoring models - Tutoring is not truly anytime or anywhere.

The k-12 space has quite a few tutoring companies all employing marginally different models ranging from providing actual online instruction to acting as an objective intermediary or link between students and tutors. Companies such as tutor.com, tutornet.com, homeworkhelp.com, e-tutor.com, toptutors and others are piling into the space quicker than you can raise your hand and say "how do I do this trig question?" We believe the k-12 tutoring companies would make excellent additions to larger enterprises such as BigChalk (which recently purchased homeworkcentral.com), Classroom Connect, Family Education Network, AOL@School and others, but issues such as true addressable market size, scalability and quality control will likely prevent them from reaching a size sufficient for a public financing event.

Howard M. Block, Ph.D. (415) 913-5771 x 7

(Copyright 2000 Bank of America)