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REV: FEBRUARY 8, 2012
WILLIAM A. SAHLMAN
LIZ KIND
Khan Academy
Sal Khan, executive director and founder of the Khan Academy, loved the fact that he could hold
staff meetings outdoors. Khan Academy’s main offices were in a second floor walk-up, above a tea
shop in downtown Mountain View, CA. The space included a deck large enough to hold the
organization’s 14 employees. August 18, 2011 was particularly sunny and warm. Khan had gathered
his staff to talk about priorities for the organization. Khan Academy was founded as a non-profit in
2009. The initial concept—free online YouTube tutorials, focused primarily on math and science—
saw tremendous early success with users, donors, and foundation grants. By the summer of 2011,
Khan Academy had more than two million unique viewers per month, and had raised approximately
$10 million from Google Inc. (Google), the Bill & Melinda Gates Foundation (Gates Foundation), and
several high profile Silicon Valley philanthropists.
The popularity of the videos drew unusual media attention, quickly making a name for Khan and
the Academy. In 2010, the Khan Academy collaborated with the Los Altos School District (LASD) to
launch a pilot program in three of their fifth grade and two of their seventh grade classrooms. The
concept for the pilot was for students to use Khan Academy’s videos and software to learn at their
own pace and master concepts before progressing. The initial pilot was deemed a success and LASD
decided to use Khan Academy district-wide for all of its fifth and sixth grade classes and some of its
seventh and eighth grade classes during the 2011-2012 school year. Many school districts around the
country had heard of the pilot and were interested in collaborating with Khan Academy.
While Khan and his staff were excited by their accomplishments in Los Altos and the vast array of
opportunities available to them, they wondered how to define their priorities while scaling quickly.
As a non-profit, Khan Academy had relied on individual donations and foundation grants. Khan
wondered if the Academy could sustain very rapid growth given the annual fundraising that would
be required to fund its vision, and questioned whether part or all of Khan Academy should consider
becoming a for-profit organization.
Background on Sal Khan and the Khan Academy
Khan was born and raised in New Orleans, Louisiana. He earned a perfect score on the math
portion of the SAT while in high school, and attended the Massachusetts Institute of Technology
(MIT), where he became president of his class. While at MIT, Khan received the Eloranta Fellowship
which he used to develop Web-based math software for children with ADHD. He was also an
MCAT instructor for the Princeton Review and a volunteer teacher for gifted fourth and seventh
grade students at a public school in Brookline, MA. Khan graduated from MIT in 1998 with three
________________________________________________________________________________________________________________
Professor William A. Sahlman and Senior Researcher Liz Kind prepared this case. The assistance of Alison Wagonfeld, Executive Director of the
HBS California Research Center, is gratefully acknowledged. HBS cases are developed solely as the basis for class discussion. Cases are not
intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2011, 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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degrees: two bachelor of science degrees in mathematics and electrical engineering/computer
science; and a master of science degree in electrical engineering. Khan worked as a technical architect
at Scient Corporation and as a senior product manager at Oracle Corporation before joining MVC
Venture Capital (MVC) as one of its initial employees. In 2001, Khan left MVC to attend the Harvard
Business School (HBS), where he also became president of the student body. After earning a masters
degree in business administration in 2003, Khan joined Wohl Capital Management, a hedge fund
based in Boston, as a senior analyst.
In late 2004, Khan began remotely tutoring his seventh-grade cousin, Nadia, who lived in New
Orleans. She had been having trouble with unit conversions, which prevented her from moving to
the more advanced math track for her grade. Khan tutored her daily for 30 minutes to an hour after
work, using the phone and Yahoo Doodle as a shared notepad. Nadia swiftly caught up with her
math class, and Khan began tutoring her brothers and family friends as well. Word spread and while
Khan enjoyed the tutoring, he was working with up to a dozen children each night after work and
quickly found himself overwhelmed.
In late 2006, a friend suggested to Khan that he make individual video tutorials that could be
posted on YouTube. At first, Khan was quick to dismiss the idea, commenting, “…No, YouTube is
for dogs on skateboards. It’s not for serious learning.” 1 However, in November 2006, he began
recording videos for YouTube using Microsoft Paint and Screen Video Recorder, a $20 software
program that allowed him to capture his screen and record it at the same time. In order to meet
YouTube’s time limit requirements, Khan’s initial videos were under 10 minutes in length. (He was
allowed to record longer videos once he became a YouTube Partner.) Quickly, Khan’s cousins started
telling him they liked him better on YouTube than they did in person. Khan joked about it with
them, but understood their rationale. He noted, “They could review the videos again and again and
follow up on just the exact thing they were having trouble with…..” 2 “They could review topics from
previous sessions without feeling embarrassed, and they could tackle new topics without the stress of
someone watching over them or judging them.”3
Within about six months, Khan began noticing that people from all over the world were watching
the videos. He was moved by their largely positive feedback, which motivated him to make even
more videos. Khan kept his job but began to wonder if making tutorial videos could become more
than a hobby. In 2007, Khan decided to set up his own domain name. He explained, “I was working
for a hedge fund called Wohl Capital, and my boss was Dan Wohl. So I said, ‘I’m Sal Khan, so I’ll call
it Khan Academy.”4 It also helped that Khan had the same name as a Bollywood movie superstar.
Khan noted, “Whenever people do an online search for Salman Khan, my name also pops up! I get to
leverage his label.”5
All of the videos were free and approximately 10 to 15 minutes in length, both to meet YouTube’s
requirements, but also to create manageable “chunks” of learning. Khan initially recorded them from
the guest room in his two-bedroom apartment in Palo Alto and later from a converted closet in his
bedroom once his family moved to a house to accommodate their new son. Most videos took
approximately two hours to produce and upload. Khan did not work from a script, and there were
usually no second takes. He typically produced two to five videos a day. The tutorials were often
described as folksy and down to earth. Khan did not appear in any of his videos, but was heard in
the background while working on the digital equivalent of a blackboard. The videos were private,
intimate, and convenient, so that a user could watch them when they wanted and replay them as
many times as they needed until they got a concept. Khan added, “I’ve turned into someone who
gets to learn pretty much everything and distill it down and teach it.” 6
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By September 2009, Khan decided to quit his day job and work on developing the site full-time,
without a salary for a year. He and his wife, then a rheumatology fellow at Stanford University’s
School of Medicine, decided to live off of their savings and his wife’s small fellow stipend. Khan
Academy occasionally received small donations from appreciative parents and students, but in 2010,
things began to change. Early that year, Ann Doerr, the wife of renowned venture capitalist, John
Doerr, learned of the Khan Academy through another parent whose child was having difficulty in
math. She elaborated, “I got on the site and was blown away by it! I spent five or six hours on Khan
Academy and ended up writing a check.” When Doerr learned that her $10,000 check was the largest
donation the Academy had ever received, she donated another $100,000 so that Khan could take a
salary. Khan described his reaction, “In dollar amount, it was a lot less than [what] Google or Gates
[eventually gave me], but in terms of my own psychic safety, it was very important. We were living
off of savings—we weren’t going to starve, but I couldn’t not work.”7
A few months later, in July 2010, Doerr sent Khan a text while she was at the Aspen Ideas Festival
to tell him that Microsoft founder and chairman, Bill Gates, was talking about the Khan Academy to
an audience of hundreds. Khan commented, “… I thought it was a joke or that maybe she’d sent the
message to the wrong person.” 8 In fact, Gates and his children had found the site and were fans of
Khan’s videos. In October 2010, the Gates Foundation awarded Khan a $1.5 million grant to further
develop the site. Stacey Childress (MBA 2000), deputy director for innovation at the Gates
Foundation, elaborated on her organization’s interest in Khan Academy:
Our Next Generation Models team focuses specifically on K-12 in the United States, and our
overarching focus is on how to create more personalized learning experiences for students.
Technology can be an incredible enabler of that, both inside and outside of classrooms. We
were really interested in the way Sal had divided his content into small, manageable, bite sized
nuggets. If I wanted to learn about algebra, I could start right where I needed the most help,
and move at my own pace, without having to plow through hours of content looking for just
the thing that I needed. We also found it really interesting that Sal had taken the approach of a
tutor, rather than trying to make a more interactive version of a textbook.
In August, 2010, Fortune magazine ran an article on Khan titled “Bill Gates’ Favorite Teacher,” and
in late September 2010, Google named Khan Academy one of five winners of its Project 10 100, a “call
for ideas to change the world by helping as many people as possible.” 9 Google provided the Khan
Academy with $2 million “to support the creation of more courses and to enable the Khan Academy
to translate their core library into the world’s most widely spoken languages.” 10
Flush from the publicity and funding, Khan turned to his longtime friend, Shantanu Sinha, that
October for help in developing the organization and hiring a team. Sinha elaborated:
I had known Sal for a really long time. We were high school math competitors back in the
day in New Orleans, Louisiana. Not many people from New Orleans go to MIT, but we both
ended up there and became freshman year roommates. We both studied math and computer
science, and used to joke about who could take more classes. We ended up getting seven
degrees between the two of us. Sal graduated faster, but I got more degrees, so I’m not sure
who won!
We came out here to Silicon Valley around the same time, in the late ’90s. After the bubble
burst we decided to get a real business education—Sal went to HBS and the hedge fund world,
and I went to McKinsey & Company (McKinsey). I was an associate principal, focused on the
high-tech space and operational transformations. Sal had been working on this part-time over
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the last four or five years. When it looked like we would get the funding to build a full-fledged
nonprofit organization, I joined as president and COO.
I was the first hire and, in the beginning, we were literally finding the office space, getting
the Internet set up, and building the IKEA furniture. We found an accountant and got a
lawyer to make sure we were actually registered properly as a nonprofit. We spent a lot of
time recruiting, and we hired some rock star engineers. Literally, the first week that I joined,
we talked to Los Altos about our vision of the classroom of the future. Much to our surprise,
they agreed with our thinking and wanted to do a pilot almost immediately. I became our
point person to coordinate with the school district.
Khan Academy began the pilot with the LASD in November 2010. Alyssa Gallagher, assistant
superintendent of curriculum, described the school district’s rationale behind working with the
Academy:
One of our board members knew someone at the Gates Foundation and set up a very
informal meeting to introduce us to Sal and Shantanu. Both my superintendent and I
recognized that the Khan Academy was doing something very interesting in education that
very much aligned with some of the work we were doing in our district. We saw it as a tool to
help individualize and differentiate learning, and as a way to provide teachers with the data
they needed to be able to enhance instruction and small group learning.
There was very little internal debate about working with Khan Academy. We had no
intention of replacing teachers with computers, and we weren’t throwing anything out with
regard to the good teaching we were already doing. When we first started, while the videos
were there, the backend software piece was not as built out. We were very interested in having
our teachers help craft and define the navigation system and problem sets. We started the
pilot with four different classrooms, and quickly added a fifth.
The staff at the Khan Academy spent the next several months refining its Web site, and in
particular, its backend “knowledge map,” “dashboard,” and practice “exercise” or problem sets for
the LASD and other users. (See Exhibit 1 for images.) The knowledge map provided users with a
trajectory of content flow and a progression path of increasingly challenging exercises. The
dashboard allowed educators to track individual student and summary classroom data on usage and
learning progress. The exercises were designed to assess proficiency in a concept. In general, users
were encouraged to complete ten exercises accurately before moving on to the next module.
However, as Childress noted, the assessment process was complicated, especially in public school
settings. She elaborated:
In the last couple of years, over 40 states have adopted the Common Core State Standards.
For the first time, rather than all 50 states having separate sets of academic standards, 80% of
the states have now agreed to a common set of academic standards. As a result, there’s an
opportunity to help accelerate student performance against this high set of internationally
benchmarked standards.
Our initial grant to Khan was to help him map the content he already had to these new standards.
Part of that is helping create more precise and accurate diagnostic assessments. Another part is
helping students know where on the Khan Academy Web site to find the most relevant videos.
Another part is helping users understand if they are actually grasping the content and not just
consuming the videos. Our goal is for parents and students to know that Khan Academy content
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corresponds to what the students are being asked to do in the classroom. (See Exhibit 2 for the Gates
Foundation milestones associated with its grant.)
In addition, the Academy focused on its back office operations. Sinha reflected, “We were trying
to drive translations, manage the pilot project, and hire a team. We had some speaking engagements
and requests for interviews, but most of the day-to-day work was building the software platform and
trying to get the organization set up.” Khan continued to focus on making instructional videos and
in March 2011, was a featured speaker at the 2011 TED Conference, and introduced by Bill Gates.
Sinha noted, “After that we started to get a ridiculous number of inbound emails and messages that
we just didn’t have the time to answer. Our strategy was to take two seconds to look at them. If they
looked exciting, we followed up. If not, we ignored them. We probably had to ignore 99% of what
came our way.”
Khan Academy in 2011
By the summer of 2011, Khan Academy had over 2,600 YouTube video tutorials on topics ranging
from math to physics, history and finance. The site drew approximately 2 million unique viewers per
month, had 57,275 subscribers, and was the 98 th most subscribed YouTube channel. 11 While the
growth in Khan Academy users had been purely viral, Sinha noted the key triggers:
After three or four events, our usage suddenly went way up. When the Fortune article came
out, we went from 50,000 to 200,000 users a month; when Google announced Project 10 100, we
went up to a million users a month; and when Sal spoke at the TED conference, we went to
two million users a month. What’s great for us is that we have been able to retain the spikes in
user volume. Normally, when an organization does a big PR push, they see a big spike in
usage, but it tends to come right back down. Fortunately, we’ve been able to keep 60% to 70%
of our new users after a major news event. (See Exhibit 3 for Khan Academy’s corresponding
donation growth chart.)
Sinha believed that most people who used the site were high school or college students, looking to
supplement their classes with outside help. However, he also believed that Khan Academy users
spanned the spectrum of age categories, from elementary school students to retirees. He added, “It’s
all changing so fast. Since the TED talk and our pilot with Los Altos, a lot of people are encouraging
their children to use our site. Now we have another demographic of younger kids—probably fourth,
fifth, and sixth graders—working mainly on the math videos and problem sets.” In addition, it was
difficult to track the age and gender of students under 13 because of online privacy regulations.
Approximately 85% to 90% of Khan Academy users were based in the U.S., followed by users in
Canada, England, Australia, and India. 12 The Academy planned to translate its videos into ten
languages within the next 18 months, and expected India to be a major opportunity for additional
growth.
Khan Academy’s mission was to “…[change] education for the better by providing a free worldclass education to anyone anywhere.”13 When asked about Khan Academy’s brand, Sinha
responded:
There are a few things that I think are unique about Khan Academy. One is that we are
focused around the individual and student-centric learning. I think we also stand for
accessibility. We’re free, we’re online, we’re a nonprofit, and anybody with an Internet
connection can access our site. But, we also stand for a specific kind of quality and approach to
learning. More than anything, what we’re trying to build is a place that people think of in K-12
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education as one of the notable names and notable brands. Today, you have Sesame Street in
preschool, and then you have MIT and Harvard and Stanford at the collegiate level, and
there’s nothing really in between. In some ways, what we are trying to build is an online
institution that fills the void in K-12, but is also for lifelong learning, at a very, very deep level.
As of August 2011, Khan Academy had 14 employees, and was planning hire six more by the end
of the year. The organization had a second office two blocks away, and was signing a third lease on
an adjacent space. Khan and Sinha were surprised by the level of talent they had been able to attract
to the organization. Khan noted, “We have an amazing development team and staff, and we just
hired John Resig. He wrote jQuery, the most used JavaScript library, and is the guy in his field. And,
he comes to us with a followership in the tens of thousands of people who want to help him on his
latest project.” In addition to the funding Khan Academy had received from the Doerrs, Google, and
the Gates Foundation, the organization also attracted leading Silicon Valley philanthropists such as
Signe Ostby and Scott Cook (founder of Intuit) and Reed Hastings (founder of Netflix). Sinha added,
“The people that we resonate most with are ex-entrepreneurs and engineers—people who have built
something and care about education.” (See Exhibit 4 for Khan Academy’s funders, Exhibit 5 for
Khan Academy’s management team and Exhibit 6 for its board of directors.)
LASD Pilot
Sinha provided more background on Khan Academy’s decision to do the LASD pilot:
We had no funding for it and it wasn’t on our immediate priority list. However, we
thought about it from the standpoint of what would help our brand and what would help
education in general. From the beginning, we’ve always wanted to focus on creating the best
experience for the user. We realized that if we were actually working with students, we would
be much more likely to build a really useful product. That’s one of the fundamental principles
of agile software development—the more feedback you get from the customer, the better the
product. So, we saw the pilot was very valuable from a pure product development standpoint.
The other thing we recognized is that the pilot would be great for what Khan Academy can
stand for—the new model of blended learning within the classroom.
Khan was also enthusiastic about the pilot and implementing Khan Academy in the classroom.
He added:
We want to see classrooms that are made more engaging by allowing every student to work
at their own pace and master concepts before progressing. In a traditional model, students
have a fixed time to learn material and the variable is how well they learn it. We want to fix
the expectation of mastery—so everyone should get an “A” level of understanding—and the
variable is when and how long a student has to learn things. This more flexible, studentfocused curricula also frees time for creative activities and deep explorations that are pushed
out by the existing model of education.
According to Gallagher, the LASD initially identified fifth grade as the starting level so that
technical skills would not be a factor and because laptop carts were already available in the
classrooms. The district also chose two seventh grade classrooms focused on pre-algebra readiness,
where the students had been historically less successful at math. Each classroom had approximately
28 to 30 students. Teacher “readiness” was also a factor in structuring the pilot. The district sought
teachers who were comfortable incorporating technology in the classroom, who would be flexible
with their teaching plans, and willing to take risks to enhance differentiated and individualized
learning. Gallagher elaborated:
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We presented Khan Academy as a great tool for teachers, where they would have access to
an incredible Web site, and where they could help define exactly how they would want the
tool to help them. That resonated with the teachers, and it was very exciting for our pilot team
to be meeting frequently with the Khan Academy developers. The teachers provided
everything from high level conceptual feedback to help with small design features such as
where the buttons should go. Even the students got involved in providing feedback to the
Khan Academy developers. It was pretty powerful for our teachers and students to be so
involved in the design loop.
The district made a conscious decision to have each student start with the very first Khan
Academy module on basic addition, and work their way up to the tutorials relevant to their grade
level. Initially, the students worked on the Khan Academy modules for a portion of their math class
each day. Gallagher estimated the process for most students to get to grade level took approximately
two weeks. Throughout, the teachers could monitor each student’s performance on the Khan
Academy dashboard and adjust their teaching plans accordingly. Gallagher described the next
phase:
A lot of people associate Khan Academy with “flipping” the classroom which implies that
all the students go home and listen to the same lecture each night and the next day all work on
the same problems in the classroom. That’s not actually how we use it. We’re trying to group
students by ability level and provide some individualization in learning. Not all students are
working on the same concepts at the same time. Some might be watching a video or working
on exercises. Some might be getting a mini-lesson in an area they are still working on, and
some might be working with the teacher in highlighting or emphasizing a standard fifth grade
lesson.
It’s not as integrated as it could be, partly because it’s not taught in the same modules.
While Khan Academy’s videos are fairly closely aligned to our grade’s standards, they are not
broken down in the same way. For example, in our fifth grade curriculum, mean, median, and
mode are taught as separate skill sets, and a teacher would dedicate time to each one. In Khan
Academy, they are combined into one ten-minute module. So, we’re not ready to assume that
just because a student finishes a module they know everything they need to about a topic.
The biggest value-add of using Khan Academy is two-fold. First, it gives the students
immediate feedback to the answers they have given on the problems, without having to wait
for someone to grade their homework. Second, it gives teachers constant data about where
their students are so that they can influence their instruction.
Gallagher estimated that Khan Academy was used during, on average, 40% of the classtime or less
in the pilot classrooms. Usage varied by student and topic. Some children raced ahead and were
highly motivated by the “badges” awarded on Khan Academy’s site for completing modules or
success on problem sets. Others worked slowly and more methodically. Gallagher also noted that
some of the children had to be taught to be active listeners, while others had to be encouraged to
spend more time on difficult concepts, rather than skipping over them.
The district assessed the success of the pilot using internal benchmark tests, attitudinal surveys of
students and teachers, and anecdotal teacher feedback. Sinha recalled, “We were a little worried
about the test! The other fifth grade class followed the standard grade level curriculum which was
closely aligned to the tests, but many of the students in the pilot had raced ahead and were doing
trigonometry and other higher level math.” The results for the fifth grade pilot were slightly, but not
significantly, better than the traditional classes. However, Gallagher noted, “It’s hard to gauge
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because we are fortunate to be in a very high performing district, where 96% of fifth grade students
are proficient in math, regardless of whether or not they were in the pilot. That said, the results
showed that using Khan Academy did not hinder what the students were learning.” However, the
results for the seventh grade pilot did show a significant increase in performance on the standardized
test, with most students jumping two levels, from “below basic” to “proficient.” (See Exhibit 7 for
LASD pilot test results.)
The attitudinal surveys showed increased ownership and engagement, and a broader
awareness of grade level concepts relative to the bigger picture of math learning. Anecdotally, the
teachers reported that using Khan Academy allowed them to see gaps in their student’s learning that
they might not have been able to identify before. Gallagher summarized, “We think Khan Academy
is a very good tool that, if incorporated with other strategies, makes an excellent teacher even better.”
For the 2011-2012 school year, the LASD district decided to use Khan Academy across all 40 of its
fifth and sixth grade classrooms, and to do an additional pilot in seventh and eighth grade
classrooms where students were at or below grade level proficiency in math.
Khan Academy’s success with the LASD led Khan and Sinha to consider partnerships with
additional public school districts. Khan elaborated, “All of a sudden we were getting calls from ten
school districts a week. We started to wonder what level of support each school district would
require and how many schools we could work with at once. We wanted to develop best practice
models for schools and test our effectiveness across a variety of districts.” As a result, Khan
Academy posted a notification on its Web site, seeking a small set of schools to partner with for pilot
programs in the fall of 2011. Over 250 applicants responded by the July 2011 deadline, and Khan and
Sinha planned to select 10 to 15 school districts for additional math pilots.
That summer, the Gates Foundation approved another $4 million grant to the Khan Academy.
Childress elaborated:
The next round has a few goals, many of which are related to the first round and continue
to improve the user experience. In addition, there are other big objectives. The Los Altos pilot
was a happy accident. I don’t think any of us would have predicted that Khan would have
moved this quickly into the public schools. And, the attention Los Altos got around the
country means that Khan Academy is getting more requests to go into schools than it can
accommodate at this point.
The Los Altos pilot was small. It was in a really high-capacity school, both in terms of the
stability of the teaching force and the existing academic success of the students. There’s a lot to
think about in going into schools where the variables are different. So, a big part of our work
over the next couple of years is to help Khan Academy experiment and devise a replicable
implementation model. What does it look like when teachers adopt Khan Academy at their
schools? How do they integrate it into their instructional plans? What can we learn about
whether or not the content works better for some learners versus others, depending on
learning style and where they are in their own learning trajectory?
Will Khan Academy be more effective for some students than others? Will it work better in
some classrooms with certain types of teachers than others? A big part of our funding is
helping get Khan Academy into 50 classrooms over the next couple of years, in grades 5
through 9, across ten to fifteen school districts. We expect that most but not all of them will be
in California, and we are purposefully looking for some diversity in terms of student
population, grade level, and teacher tenure to see what we can learn across the sample in an
effectiveness study we are funding.
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Trends in Education
In late summer 2011, approximately 50 million students were enrolled in nearly 100,000 public
elementary and secondary schools in the United States. Of these students, about 70% were in pre-K
through 8th grade, and 30% were in grades 9-12. On average, the current expenditure per student at
public schools was projected at $10,591 for the 2011-2012 school year, consistent with the previous
few years. An additional 6 million students were at 33,000 private schools.
Two of the biggest shifts from the previous decade related to rise of charter schools and the
changing ethnic composition of U.S schools. From 1999 to 2009, the number of students enrolled in
public charter schools more than tripled from 340,000 to 1.4 million students. In 2009, about 5 percent
of all public schools were charter schools. During this same time period, the percentage of public
school students who were Caucasian decreased from 68 to 55 percent, and the percentage of those
who were Hispanic doubled from 11 to 22 percent. (See Exhibit 8a for excerpts from the 2011
Condition of Education report issued by the U.S. Department of Education, and Exhibit 8b for test
results from the 2009 Program for International Student Assessment.)
Areas of Innovation
Education critics in the U.S. had noted a lack of innovation in K-12 education. Teaching models in
2011 looked remarkably similar to those from the last century. The vast majority of students
continued to attend a brick and mortar school from approximately 8:30am to 3:30pm for nine months
a year, where they sat in a classroom with a single teacher who imparted information to the students.
However, there were a few new teaching models that were beginning to gain traction in the U.S.,
most notably the concept of “blended learning.” Blended learning represented a combination of
teacher-based classroom learning and online delivery of material. Most blended models gave
students some control over time, place, path and/or pace of the online portion of their learning.14
The models varied on a number of dimensions, including time spent online, location of online
learning and modifications to classroom schedule. (See Exhibit 9 for six models of blended learning.)
There were a number of schools throughout the U.S. that were beginning to experiment with
incorporating online components. In some states such as Florida, virtual schools had become
increasingly popular due to the lack of qualified teachers in the public school system. Blended
learning advocates believed, “Online learning has the potential to be a disruptive force that will
transform the factory-like, monolithic structure that has dominated America’s schools into a new
model that is student-centric, highly personalized for each learner, and more productive, as it
delivers better results at the same or lower cost.”15 Nevertheless, critics were quick to point out
challenges such as: required policy modifications, universal access to Internet-enabled computers,
and finding the right materials to map to the educational standards.
Educational Companies
The vast majority of educational materials and programs were created by a handful of large
publishing companies such as McGraw Hill, Pearson, Scholastic, and Houghton Mifflin Harcourt.
(See Exhibit 10 for financial data on selected publicly traded education publishers.) The companies
had provided traditional materials (e.g., text books, math worksheets) for decades, and most changes
had been incremental in nature. In recent years, the publishing companies showed some interest in
newer educational models—Pearson bought online learning platform e-College in 2007, and
Houghton Mifflin Harcourt announced an Innovation Fund focused on identifying new ideas. In
September 2011, McGraw Hill announced plans to spin off its education unit, creating a new
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company (McGraw Hill Education) with revenues of $2.4 billion. According to the company, the
spin-off would provide “greater flexibility to develop and deploy new products and services to
address secular trends toward digital education platforms and to pursue higher-margin
opportunities in educational services such as online instructional and school digital services.” 16
Although the larger companies had demonstrated an interest in incorporating digital
technologies, most of the innovation in the classrooms had been lead by entrepreneurs.
Organizations such as KIPP had launched over 100 new schools across multiple geographies, and
smaller experiments have popped up throughout the country. For example, an organization called
Rocketship Education implemented a blended model to help Hispanic students in San Jose, CA by
relying heavily on online English tutorials. High Tech High in San Diego, CA used computers and
technology in every aspect of school. The digital content in such experimental programs had been
culled from a wide variety of sources, with no dominant player providing the majority of the
material.
Open and Free Educational Resources
MIT was one of the first universities to provide its course materials for free online, when it began
its Open CourseWare initiative in 2001. Several colleges, universities, and non-profit organizations
followed suit by providing some form of online educational offerings, although few had achieved
widespread usage and adoption by the general public. Two for-profit online video aggregators,
TeacherTube and Academic Earth, were launched in 2007 and 2009, respectively. TeacherTube
provided a free online community for sharing instructional videos. Members were encouraged to
upload videos, rate, and monitor the site. Academic Earth offered free access to video courses and
full-length lectures taught at top U.S. colleges and universities, such as Harvard, Yale, and MIT. In
August 2011, Stanford University made headlines when its free online course on artificial
intelligence, taught by two Silicon Valley experts, initially drew more than 58,000 students from
around the globe.17 (See Exhibit 11 for selected free online education resources.)
Growth Options
As Khan and Sinha thought about scaling Khan Academy, they recognized that the organization
had already shifted from its initial focus on creating content to a dual focus on creating content and
implementing across school districts. Childress reiterated, “The transition to a model that includes
more work on the ground in classrooms with teachers is really important, really interesting, and
really hard. It’s a very different proposition than just making the online, free, and easily accessible
application as engaging and as widespread as possible.”
Many of Khan’s advisors believed Khan Academy growth should center on expanding to
additional school districts. While the Gates Foundation was targeting 50 schools over two years, one
board member believed Khan Academy should double in size every year for the next five years.
Donor Signe Ostby added, “If Khan’s vision is to revolutionize education, then classroom integration
must be part of that vision.” Sinha explained his views:
Rather than just implementing in as many schools as fast as we can, we’d like to first build a
compelling case study for why Khan Academy works so well. We’d also like to make
implementation so easy that anyone can use Khan Academy in a classroom anywhere. Our
whole strategy has been a kind of grassroots, parent- or student-driven change to the
educational system. Right now, the conversation is, “Why should we use Khan Academy in
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this school?” In three or four years, we’d like all the students, parents, and teachers in the
school to be asking, “Why aren’t we using Khan Academy?”
We’re building out a five-person school implementation team. It will probably be a mix of
teachers and educators, former operational change consultants, and maybe people from Teach
for America. Their role will be to serve as coordinators to go into the schools, explain what
Khan Academy is, and plan and design the pilot, including figuring out which classrooms
would be best suited for it. They will also be visiting the schools to provide teacher training
and coaching, and to organize and coordinate regular feedback sessions. At the same time,
they will serve as a customer feedback arm for Khan Academy, by understanding how our
product’s being used and driving requirements back to our development staff. Eventually,
we’ll make teacher training and implementation videos, and organize events for schools from
different districts to talk to each other and foster teacher collaboration.
In addition to expanding into schools, Khan was very interested in continuing to develop new
content in subject areas beyond math and science. Already, Khan Academy’s “playlist” included
videos on the 2008 financial crisis, history, venture capital, and healthcare and medicine. On the
organization’s Web site, Khan wrote, “My goal is to cover everything. Yes, everything! My goal is to
keep making videos until the day I die (which hopefully will not be for another 50 to 60 years).
Should give me time to make several tens of thousands of videos on pretty much every subject.” 18
However, Khan also recognized the merits in expanding Khan Academy’s faculty. The
organization was considering working with outside experts, particularly for videos focused on
subjects beyond Khan’s general areas of expertise. Regardless of how they found new talent, the
Khan Academy executives recognized that the process would have to be very tightly managed. Khan
noted, “I don’t think I am the only person who is capable or the only person who should be doing the
videos. But, we’re not a crowd-sourced 100 faculty member site. Eventually, maybe we’ll have a
small group of 5 or 10 people who will create content in a way that will connect relatively seamlessly
with our users.” Sinha added, “We will need to be very careful about how we go about doing this.
Part of what makes us different is the quality and consistency of our brand, and Sal is very central to
that.”
In addition to creating broad and deep content for the site, Khan and Sinha were also interested in
enhancing the network effects of Khan Academy. Khan elaborated, “We have two million people on
the site every month, but it’s still a relatively solitary experience for a user on Khan Academy.
There’s no reason why we can’t encourage communication between people so they can help and tutor
each other. We will need the platforms to support that type of thing and integrate more with sites
like Facebook.”
Khan Academy was continuing to translate its videos into foreign languages, and saw the
potential for tremendous growth opportunities overseas, particularly in developing countries. Khan
and Sinha believed Khan Academy could be especially useful in countries with Internet access, but
limited educational systems. In addition to the translation work funded by the Google grant, Khan
Academy was also partnering with international organizations that were translating and posting the
videos on their own Web sites.
Khan Academy executives were regularly approached by celebrities, representatives from
colleges and universities, and political and civil leaders around the world. While Khan and Sinha
were exploring partnership possibilities with a high profile sports personality and an elite U.S.
university, they recognized the need to move slowly. Khan noted, “A year ago if anyone was
remotely capable of helping fund us, or if they were just someone important, we would stop what we
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Khan Academy
were doing and meet with them. Now, we’re not desperate for funding and we don’t want people to
get too excited about Khan Academy too fast. We’re not prepared to do too many things right now.”
He also added his concerns about the impact of rapid growth on the organization, “I think our
challenge at this point is not to grow too fast. Right now we have a very small number of highly
productive people. At some point in an organization—I suspect it’s around 50—productivity per
person really starts to drop off. People aren’t as aligned, and for whatever reason, they often don’t
feel like the end product is a direct result of their work.”
Business/Organization Model Alternatives
Khan Academy is an IRS-recognized 501c3 not-for-profit organization. My goal is to make it self-sustaining
in the next five years.
— Sal Khan, Khan Academy Web Site
In interviews with the press, Khan had repeatedly expressed his desire for Khan Academy to
remain a not-for-profit organization. He commented:
One of the main motivations for being a not-for-profit is the idea that we could be a new
type of institution for a new time in history. The Harvards and Yales were established soon
after the European colonization of North America. The MITs, Stanfords, and the state
university systems came out of the industrial revolution. We are in the midst of at least as big
of an inflection point right now because of information technology and the Internet. The Khan
Academy could be one of the new major institutions for this new period in history; an
institution that makes education a worldwide right rather than a privilege.
In one news article Khan noted, “The for-profit guys, as soon as they incorporate, they start
lobbying for grants and selling into school boards and become essentially dependent on navigating
this huge bureaucracy, and they completely lose sight of the end user.” When Khan was beginning to
think about leaving his hedge fund job to work on Khan Academy full time, he met with a venture
capitalist to talk about possible financing options. He reflected, “Meeting one was a lot of fun. It was
like, ‘Hey, you can make a salary to do this, and if it all works out you’ll be rich.’ But then meeting
two was like, “Let’s focus on this market because we can monetize this.’ And so…I said no. It was
too much fun to give up the fun part of it, regardless of the upside.” 19 On Khan Academy’s Web site,
Khan wrote:
When I’m 80, I want to feel that I helped give access to a world-class education to billions of
students around the world. Sounds a lot better than starting a business that educates some
subset of the developed world that can pay $19.95/month and eventually selling it to some text
book company or something. I already have a beautiful wife, a hilarious son, two Hondas, and
a decent house. What else does a man need? 20
However, Khan continued, adding, “With that said, if you are a social venture capitalist and are
looking to deploy capital with the highest possible social return per dollar invested, we should talk. I
think you’ll find that there is no more measurable, scalable, and high impact way to educate the
world.”21 Khan recognized the challenges associated with trying to do something “game changing”
while having to rely on donors each year in order to execute. He elaborated:
I think as long as we continue to execute and grow our user base, we should be able to
attract foundation funding. If we can get into several thousands of classrooms and reach tens
of millions of students outside of classrooms with a budget that is leaner than those at most
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high schools, I think it’s a pretty compelling ROI [return on investment]. Assuming we can
reach a certain number of students and create content that goes on forever even if the
organization were to go away, I’m hoping we’d have no trouble asking the foundations for
more money. Ideally, they’d respond, “Of course. This is a no-brainer. “
But, there is the broader question of getting to real sustainability and accomplishing things
on a really grand scale. I think there are several ways we could go about doing that. One of
my motivations for being a not-for-profit is that I don’t want Khan Academy to be the next
McGraw-Hill. I want it to be the next Stanford or MIT. Along those lines, we are considering
raising an endowment. Instead of having endowed chairs for professors, we’d have an
endowed chair for video lecturers, for designers, or for engineers. For example, our lead
developer could be the “So-and-so Chair of Engineering” at the Khan Academy. If someone
made a donation at the multi-million dollar lever, that role could be filled in perpetuity. We’re
starting to think about finding a development officer who has been pretty successful in the
university fundraising world to see if they would want to come on board.
The other thing that we haven’t completely tapped into is the goodwill of our user base. At
some point last year, people started asking why they couldn’t donate online to Khan Academy.
I spent a day setting up a PayPal account and then donations for $20, $30, and even $500 just
started coming in. We have a lot more information on our users than NPR or Wikipedia does.
We know what videos people have been watching and all the rest. At the rate that we’re
growing, if we could get an average of $0.50 to $1.00 per user a year, we should easily be able
to cover our run rate.
However, Khan was aware that historically, the Gates Foundation had not put funds into
endowments. Khan was also open to developing other revenue generating ideas, or creating a hybrid
model where the Khan Academy core would remain a non-profit, but an affiliated division would be
a for-profit organization. In addition to long-term financial sustainability, Khan was concerned about
the Academy’s ability to attract top engineering and developer talent without being about to provide
market rate salaries and stock options. According to a recent New York Times article, “Computer whiz
kids have long been prize hires in Silicon Valley. But these days, tech companies are dreaming up
new perks and incentives as the industry wages its fiercest war for talent in more than a decade.” 22
Recruiting and retention were major concerns among Khan Academy board members as well.
Childress noted, “How long and at what scale is it going to be possible to attract rock star developers
at non-profit salaries for something more than a year or two service job? If we’re really serious about
bringing the power of technology and the Internet into K-12, can we really keep paying non-profit
wages?”
One revenue generating option was selling to corporations. Khan explained, “Every time I make a
speech, CEOs come up to me and tell me that they need to be doing this sort of thing for their
corporate training. They want their managers to create videos the way we make videos, with
modules and badges for achievement, whether they’re for accounting or supply chain management.”
Khan would not be making the videos for companies, but instead Khan Academy would be sharing
best practices and its platform for firms to make their own knowledge management and corporate
training materials. He noted, “This would be easy for us because we already have the platform and
in no way does it conflict with our mission of creating a world-class education anywhere. The
corporate training videos would be proprietary content that someone else would develop for their
own use.”
Another opportunity the Khan Academy executives were reviewing was the possibility of
licensing the Khan Academy name. Sinha explained, “We’re also looking at the Sesame Street model,
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Khan Academy
which relies partly on individual donations, but also on licensing its brand in a very smart way.
Maybe we’d have a Khan Academy approved textbook, or a series of iPad applications, or group of
educational games or books for children.”
Sinha also believed the organization could charge for value added services, particularly around
school implementations. He elaborated:
Right now, we’re not charging schools for our teacher training and consulting services, in
part because we’re focused on the product and use case, and there’s not a lot of value in
putting in an extra barrier to getting the right school pilots today. There are a lot of schools out
there, and in just a few months we had 250 applications. If we can show success in our fall 10
to 15 pilots, we expect there will be a lot of schools that will want to partner with us.
We would not charge to use our core product, but there is no way we could continue to
provide labor-intensive professional services without some revenue model. If we did go this
route of being hands-on in the school transformation process, we believe it would have to be
through a separate organization. Currently, we are about the platform and the content
creation. Getting a ground force of multiple trainers to cover the nation and drive school
transformation is something that would overwhelm us and change the culture of our
organization. We would have to spin off a separate entity, or partner with another
organization to do it. Many of the potential partner organizations in that world are for-profit.
However, we’d have to question how much business we’d want to give a for-profit without
getting substantial benefits back, when we’ve created a lot of the value they are monetizing.
Also, our brand is closely tied to the nature and success of these school implementations, so
there is a risk in delegating that responsibility to others.
Regardless of the opportunities Khan Academy decided to pursue, organizational structure
remained an issue. Khan noted, “The idea of having a separate for-profit entity is just an idea and a
way to fund Khan Academy. Khan Academy, the not-for-profit itself, could be a significant
stakeholder in that entity. The employees could be part-time employees or contractors for that entity.
We don’t know. But, it would solve one of our biggest problems of providing growth capital and
competitive compensation packages so that our people don’t walk into Facebook and get enough
options that with an IPO they can be millionaires.”
Ted Mitchell, president and chief executive officer of NewSchools Venture Fund and a Khan
Academy board member, described what pursuing some sort of for-profit hybrid model might look
like for Khan Academy:
The capital markets in education are crazy, and they don’t function very efficiently or well,
either in the startup world or in the mature company world. That has to do with a sales cycle
that is attenuated and fragmented, with a really uneducated purchasing cadre in schools and
districts, and with the abundance of very, very large, oligopolistic operators, who have
dominated the sales scene—the big publishers.
It’s a very difficult market for people to work in, whether it’s not-for-profit, or for-profit.
We have, I think, only recently seen a loosening of that. Khan Academy is in the fortunate
position of riding the front edge of that wave, and so it has available to it not only an
abundance of philanthropic capital that has fueled its growth so far, but the potential to raise
significant amounts of traditional venture and investment money.
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I think that the fact that Khan Academy has that choice is both a testament to the power of
the enterprise itself and to Sal’s vision. I also think it suggests that there may be a systemic
change afoot in the education capital markets.
That said, I think that the reasons that Khan Academy should go ahead and gain access to
the for-profit capital markets are threefold. One is that the odds are that it creates access to
greater amounts of capital faster than the philanthropic capital markets typically provide, and
so it would be a better fuel supply for the kind of extraordinary growth that Khan is
experiencing.
Second, it provides a pool of capital that would help provide incentives to the next
generation of Khan Academy employees, particularly the top-flight engineers that the
organization has relied on and will continue to rely on as it builds out further. A flush pool of
capital would give those people not only a salary commensurate with their capabilities, but
equity potential as well.
The third reason to raise traditional venture and investment money is that it would
establish Khan Academy in a capital market in which the rewards are more consistent with
achieving metrics of success. One of the things that’s most complicated about the
philanthropic capital markets, is that they do not necessarily reward success. Philanthropic
capital markets tend to be trendy, and they tend to over-invest at the start of exciting
enterprises and under-invest when it’s time to scale.
However, recent findings suggested the jury was still out on hybrid models for non-profits. In the
last few years, several dual-mission organizations ended up dividing or dissolving. 23 One reporter
observed, “On occasion, the need to generate returns for investors overwhelms the social mission. In
other cases, the business falters altogether and cannot support the non-profit.”24 (See Exhibit 12 for
excerpts from a news article on the subject.)
Newer models, such as LC3 companies, which could raise funds from capital markets but put
social good ahead of profitability, and B Corporations, for-profit companies certified for providing
social and environmental good, were evolving. 25 (See Exhibit 13 for data on selected social enterprise
business models.) As Khan thought about the future organization and model for Khan Academy, he
focused on four different options. First, Khan Academy could remain as is, continuing to exist purely
as a not-for-profit organization. In this scenario, the Academy could add an endowment or more
aggressively solicit donations from its user base. Second, the Academy could remain a non-profit, but
add revenue generating products and/or services. Third, Khan Academy could adopt a hybrid nonprofit and for-profit model. Finally, Khan wondered if he should re-think his predisposition against
becoming a for-profit, and follow the leads of companies such as TOMS or Newman’s Own, with a
social enterprise mission.
As he headed outside to the office’s deck, Khan struggled with which model would make the
most sense to ensure Khan Academy’s survival through economic cycles and over the long-term.
However, the more immediate questions for his staff that day centered on how to prioritize the many
opportunities available to the organization, and how quickly it should grow. Khan recognized that
the decisions Khan Academy made about its growth strategies would influence its choice of business
models. On a different front, Khan felt a constant sense of urgency with regard to developing more
content in order to preempt any potential competitors. He couldn’t wait to get back to his office to
start making more videos.
15
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Exhibit 1
16
Khan Academy
Images of Khan Academy Knowledge Map, Dashboard, and Exercises
Khan Academy
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Exhibit 1 (continued)
Source: Company.
17
APPENDIX A – Khan Academy (OPP1025663)
Gates Foundation Milestones from 1st Round Grant
staff
Build first implementation of many-tomany mapping from the Khan Academy
materials to the Common Core
Milestone 2-b
Establish an advocacy and resource
mobilization working group
Milestone 2-a
Academy content to the Common Core and
have Common Core-focused navigation
GRANT OUTCOME 2 Map Khan
(Anticipated) External Factors
or Challenges
Salman produces 1000 new videos over 2
years (for a total of ~2800 at the end of 2
years) without sacrificing quality.
Milestone 1-b
Grantee hires competent expert
members to build out platform
Milestone 1-a
Build a core team for the Khan Academy to
build out the platform and allow Salman
Khan to focus more on content production
GRANT OUTCOME 1
First version of
mapping complete;
working on navigation
No mapping
No Common Core
navigation
> 2500 videos
complete
Team of 15
Actual Progress or
Completion
September 2011
Volunteer working
group supporting
mapping
~1800 current
videos
Salman Khan only
person working on
Khan Academy
Original Status/
Baseline
First revision
completed
First revision
completed
~2300 total
videos
Khan Academy
has staff of 5
core members
beyond Salman
Khan
Anticipated
Progress or
Completion
Year 1
Refined
implementation
Refined
implementation
~2800 videos
5 person team
continuing to
build out
platform
Anticipated
Progress or
Completion
Year 2
Please complete the chart by providing an update for each milestone in the highlighted column. If applicable, add comments about any external factors or
challenges. You can discuss these further in your narrative.
Exhibit 2
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-18-
Mapping of Khan Academy content to
Milestone 5-b
Sal produces videos taking Compass and
Accuplacer practice test
Milestone 5-a
Create test-prep materials for high stakes
assessments such as Compass and Accuplacer
GRANT OUTCOME 5
(Anticipated) External Factors
or Challenges
2 million unique users per month
Milestone 4-c
Open ID /Facebook authentication
Milestone 4-b
First major redesign
Milestone 4-a
Improve discovery and distribution by
enhancing user interface, better integrating into
platforms such as Facebook and developing
additional partners
GRANT OUTCOME 4
(Anticipated) External Factors
or Challenges
Working summative assessment
functionality for k-12 mathematics topics
Milestone 3-a
Build review and summative assessment
functionality into learning application
GRANT OUTCOME 3
(Anticipated) External Factors
or Challenges

2,000,000
Completed Facebook
authentication
Implemented
Doesn’t exist
Doesn’t exist
Have not been able to
obtain materials
Have not been able to
obtain materials
Lack of traction growth with users
300,000-500,00
Only Google now
Very initial work has
begun
Built first
implementation
assessment
Lack of “certification” from Common Core
Ambiguity of Common Core standards
No summative
assessment


Both done
1,000,000
Implemented
Implemented
First
implementation
of assessment
Implemented
Potentially
more videos
if we can get
materials
2,000,000
Implemented
Refined
Refined
implementation
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-19-
Source: Company.
(Anticipated) External Factors
or Challenges
Aggregate reporting for teachers
Milestone 6-b
Basic individual reporting for students and
parents
Milestone 6-a
Enhance data and analytics in order to optimize
the interface of the site, the content itself and
reporting and analytics for various stakeholder
groups (students, parents, teachers)
GRANT OUTCOME 6
(Anticipated) External Factors
or Challenges
Accuplacer and Compass skills

None
Very basic today
Implemented
Fairly refined
Implemented
Fairly refined
Refined
Very refined
Obtaining learning materials and practice problems from the test makers
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Khan Academy
Exhibit 3
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Khan Academy Donations Growth Chart
Source: Company.
Exhibit 4
Approximate Funding for Khan Academy as of the Summer of 2011
Total
$5.5 million
$3.0 million
$2.0 million
$1.0 million
Bill and Melinda
Foundation
Gates
Silicon Valley Community
Foundation
(Reed
Hastings)
Google, Inc.
Valhalla
Charitable
Foundation (Signe Otsby
and Scott Cook)
Source: Company.
21
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Exhibit 5
Khan Academy
Khan Academy Management Team Biographies as of August 2011
Sal
Shantanu
Founder & Executive
Director
President & COO
Being founder and faculty
means Sal's busy setting
the vision for the Khan
Academy and expanding
our library of educational
videos.
Before quitting his job as
manager of a hedge fund
to run the Khan Academy
full time, Sal also found
time to get three degrees
from MIT and an MBA from
Harvard.
Before teaming up with Sal
(his college classmate and
high school math competitor),
Shantanu was an Associate
Principal in McKinsey &
Company's Silicon Valley
office, and received four
degrees from MIT.
Bilal
Ben
Dean of Translations
Lead Developer
Bilal coordinates the
translation of Khan
Academy content into
other languages.
Ben started by volunteering
for Khan Academy after
watching one of Sal's talks
and feeling left with no choice
but to help.
Prior to joining Khan
Academy, he was VP
Development for Global
Education Management
Systems (GEMS), an
international network of
private schools. He
completed his MBA and
MA in Education from
Stanford and a BS in
Actuarial Science from
Urbana-Champaign.
Ben was previously VP of
Engineering at Fog Creek
Software, where he spent five
and half years learning how
to push bits around with
small, fast teams.
Jason
Marcia
Lead Designer
Software Engineer
As Lead Designer for the
Khan Academy, Jason's
responsible for how things
on the site look and how
users interact with those
things.
Marcia designs and builds
any and every piece of the
Khan Academy software with
a constant focus on the
experience of our learners.
Prior to joining the Khan
Academy, Jason headed
up the design team at Fog
Creek Software (and
worked with Ben).
22
As President and COO,
Shantanu focuses on overall
organizational strategy,
partnerships, and operations.
Marcia was a Program
Manager for Microsoft before
joining the team. She
received her BS and MS in
Computer Science from
Stanford, with a specialization
in human computer
interaction.
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Exhibit 5 (continued)
Jessica
John
Chief of Staff
Dean of Open Source
As Chief of Staff, Jessica
focuses on operations and
partnerships. She is
behind the scenes
coordinating and
smoothing the path for the
rest of the team to do
amazing things.
John works to get more
people contributing to Khan
Academy and builds the frontend of the platform.
Life before Khan Academy
included stints at McKinsey
and Company (where she
worked with Shantanu)
and Yahoo! She is an
alumna of Stanford and
UC San Diego.
John is the creator of the
jQuery JavaScript library,
amongst a number of other
Open Source projects, and
the author of two books on
JavaScript development.
Desmond
Charlotte
Software Engineer
Office Manager
Desmond was always
fascinated by the concept
of teaching at scale, so
once he discovered Khan
Academy he couldn't resist
getting involved.
As Office Manager, Charlotte
focuses on operations.
Desmond used to work on
ranking and metrics at
Bing. Before that, he
studied mechatronics
engineering at Swinburne
University, Australia.
Prior to joining Khan
Academy, Charlotte was the
Business Manager and
Director of Admissions of The
School for Ethics and Global
Leadership (SEGL) in
Washington, DC. Charlotte
was the first hire at SEGL and
helped open the school. She
received her BA from
Haverford College.
Source: http://www.khanacademy.org/about/the-team, accessed October 20, 2011.
23
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Khan Academy
Exhibit 6
Khan Academy Board of Directors
Sal Khan
Shantanu Sinha
Ann Doerr
Ted Mitchell
Jonathan Goldman
Ryanne Saddler
Founder and Executive Director, Khan Academy
Chief Executive Officer, Khan Academy
Silicon Valley Philanthropist
CEO, NewSchools Venture Fund
Director Analytics & Applications, Aster Data
Former Teacher, Castilleja School, Palo Alto, CA
Source: Company.
Exhibit 7
LASD Pilot Test Results for 7th Grade Pilot Classes
Source: http://www.khanacademy.org/about/blog, accessed October 20, 2011.
Exhibit 8a
Excerpts from U.S. Department of Education, The Condition of Education
Selected Education Statistics - 2011
Section 1: Participation in Education
24

Enrollment: From 1999–2000 to 2008–09, the number of students enrolled in public charter schools more
than tripled from 340,000 to 1.4 million students. In 2008–09, some 5 percent of all public schools were
charter schools From 2008–09 through 2020–21, public elementary and secondary school enrollment is
projected to increase from 49.3 to 52.7 million students.
Some 10 percent of all elementary and
secondary school students were in private schools in 2009–10 (indicator 4).

Ethnicity: Between 1989 and 2009, the percentage of public school students who were White decreased
from 68 to 55 percent, and the percentage of those who were Hispanic doubled from 11 to 22 percent. In
2009, some 21 percent of children ages 5–17 (or 11.2 million) spoke a language other than English at
home, and 5 percent (or 2.7 million) spoke English with difficulty. Seventy-three percent of those who
spoke English with difficulty spoke Spanish
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
Special Education: The number of children and youth ages 3–21 receiving special education services was
6.5 million in 2008–09, corresponding to about 13 percent of all public school enrollment

Advanced degrees:
Between 2000 and 2009, undergraduate enrollment in degree-granting
postsecondary institutions increased by 34 percent, from 13.2 to 17.6 million students. Projections
indicate that it will continue to increase, reaching 19.6 million students in 2020. Postbaccalaureate
enrollment has increased every year since 1983, reaching 2.9 million students in 2009. In each year since
1988, women have made up more than half of postbaccalaureate enrollment. In 2009, postbaccalaureate
enrollment was 59 percent female
Section 2: Learner Outcomes

Reading: Between 2007 and 2009, there was no measurable change in the average grade 4 reading score
on the National Assessment of Educational Progress (NAEP); the average grade 8 reading score,
however, increased 1 point. At grade 12, the average reading score increased by 2 points between 2005
and 2009. In 2009, White students at grade 12 scored 27 points higher in NAEP reading than Black
students and 22 points higher than Hispanic students. Neither score gap was significantly different from
the respective score gaps in previous assessment years. In 2009, the average U.S. combined reading
literacy score for 15-year-old students was not measurably different from the average score of the 34
Organization for Economic Co-operation and Development (OECD)-member countries. The average U.S.
score was lower than that of 6 OECD countries and higher than that of 13 OECD countries

Math: From 1990 to 2009, average grade 4 NAEP mathematics scores increased by 27 points and average
grade 8 scores increased by 20 points. At grade 12, average scores increased by 3 points between 2005
and 2009 In 2009, White students at grade 12 scored 30 points higher in NAEP mathematics than Black
students and 23 points higher than Hispanic students. Neither score gap was measurably different from
the corresponding score gaps in 2005

Science: Thirty-four percent of students at grade 4, some 30 percent of students at grade 8, and 21
percent of students at grade 12 performed at or above the Proficient level in the NAEP science assessment
in 2009
25
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Khan Academy
Section 3: Student Effort and Educational Progress

High School Graduation: In 2007–08, about 75% of public high school students graduated on time with a
regular diploma. In general, the status dropout rates for Whites, Blacks, and Hispanics each declined
between 1980 and 2009. However, in each year during that period, the status dropout rate was lower for
Whites and Blacks than for Hispanics

College: The immediate college enrollment rate after high school increased from 1975 to 1997 (51 to 67
percent), declined from 1997 to 2001 (to 62 percent), then increased from 2001 to 2009 (70 percent). Gaps
in immediate enrollment rates by family income, race/ethnicity, and sex have persisted over time About
54 percent of male and 60 percent of female first-time students who sought a bachelor's degree and
enrolled at a 4-year institution full time in fall 2002 completed a bachelor's degree at that institution
within 6 years. In 2010, some 32 percent of 25- to 29-year-olds had completed at least a bachelor's
degree. Between 1975 and 2010, the gap in bachelor's degree attainment between Whites and Hispanics
widened from 15 to 25 percentage points, and the gap between Whites and Blacks widened from 13 to 19
percentage points Greater percentages of the population ages 25 to 64 had earned a bachelor's degree or
higher in all reporting OECD countries in 2008 than in 2001 (21 vs. 15 percent). The percentage of the
U.S. population with a bachelor's degree or higher was 32 percent in 2008, compared with 28 percent in
2001. Between 1998–99 and 2008–09, the number of degrees earned increased by 41 percent for
associate's degrees, by 33 percent for bachelor's degrees, and by 49 percent for master's degrees. In 2008–
09, females earned the majority of all associate's, bachelor's, master's, and doctoral degrees awarded

Remedial Work: In 2007–08, about 36 percent of undergraduate students considered to be in their first
year reported having ever taken a remedial course, while 20 percent had actually taken one in that same
year. At public 2-year institutions, about 42 percent of students had ever taken a remedial course
Section 4: Contexts of Elementary and Secondary Education

Spending: Total expenditures per student in public elementary and secondary schools rose 39 percent in
constant dollars from 1989–90 through 2007–08, with interest on school debt increasing faster than
current expenditures or capital outlay. Total variation in instruction expenditures per student has
increased among public school districts since 1997–98, primarily due to an increase in the variation
between states. In 2007, the United States spent $10,768 per student on elementary and secondary
education, which was 45 percent higher than the OECD average of $7,401. At the postsecondary level,
U.S. expenditures per student were $27,010, more than twice as high as the OECD average of $12,471

Poverty: In 2008–09, greater percentages of Black, Hispanic, and American Indian/Alaska Native
students attended high-poverty elementary and secondary public schools than did White or
Asian/Pacific Islander students. In 2009, some 19 percent of 5- to 17-year-olds were in families living in
poverty, compared with 15 percent in 2000 and 17 percent in 1990

Teachers: A larger percentage of full-time teachers held a postbaccalaureate degree in 2007–08 than in
1999–2000. Forty-nine percent of elementary school teachers and 54 percent of secondary school teachers
held a postbaccalaureate degree in 2007–08, compared with 43 percent and 50 percent, respectively, in
1999–2000. In 2008–09, some 8 percent of public school teachers left the teaching profession compared
with 16 percent of private school teachers. Another 7 percent of all teachers moved from their 2007–08
school to a different school
Source: http://nces.ed.gov/programs/coe/overview.asp.
26
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Exhibit 8b
812-074
International Education Test Results
Source: Sam Dillon, “Top Test Scores from Shaghai Stun Educations,” The New York Times, December 7, 2010.
http://www.nytimes.com/2010/12/07/education/07education.html?pagewanted=all, accessed October 18, 2011.
27
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Exhibit 9
Khan Academy
Selected Examples of Blended Learning
Source: Michael B. Horn and Heather Staker, “The Rise of K-12 Blended Learning,” Innosight Institute, January 2011, p.5,
http://www.innosightinstitute.org/innosight/wp-content/uploads/2011/01/The-Rise-of-K-12-BlendedLearning.pdf (accessed October 20, 2011).
28
Khan Academy
Exhibit 10
812-074
Financial Data on Selected Educational Publishers
(In MMs, except per share amounts)
Revenue
Gross Profit
EBIT
Net Income
Latest 12 Months Ended 6/30/11
McGraw Hill
Pearsona
$
6,367
$
9,204
$
3,672
$
5,057
$
1,817
$
1,113
$
828
$
2,029
Cash & Equivalents
Long-term Debt
Stockholders' Equity
Total Assets
$
$
$
$
1,325
1,198
2,255
6,944
Shares Outstanding -MMs
Stock Price 6/30/11
Market Capitalization
301.3
$
41.91
$ 12,627.5
$
$
$
$
Fiscal Year
Ended
5/31/2011
Scholastic
$ 1,906
$
963
$
98
$
39
881
3,051
8,382
15,600
$
$
$
$
105
160
740
1,487
799.9b
$1,886.66
$15,091.2
$
$
34.6
26.60
920.3
Source: Adapted by case writer based on company 10-Ks, 10-Q's and Thomson Reuters.
a In U.S. dollars, assuming exchange rate as of June 30, 2011 of 1.60430 USD per GBP.
b Weighted average shares outstanding.
Exhibit 11
Selected Examples of Free Online Educational Resources
MIT Open CourseWare Introduced in 2007, MIT’s Open CourseWare includes notes
assignments, exams, and multimedia resources on almost all MIT courses from anthropology,
architecture, biological engineering and cognitive sciences to political sciences, economics and
management.
The Gutenberg Project Started in 1997, it hosts more than 33,000 e-books for free download.
About 100,000 e-publications are available through its affiliates and partners including wikibooks.
Popular titles include: The Adventures of Huckleberry Finn by Mark Twain, the Complete Works of
William Shakespeare, and Metamorphosis by Franz Kafka.
WikiEducator Supported by the non-profit, Open Education Resource Foundation with
financial backing from the Commonwealth of Learning, the foundation was proposing to start OER
University, a virtual institution.
Connexions Started at Rice University in 1999, the site was created “to view and share
educational materials made of small knowledge chunks called modules that can be organized as
courses, books, reports, etc.” It has 17,738 modules on arts, business, humanities, math and statistics,
science and technology, and social sciences in a variety of languages and over one thousand
publications. The site boasted more than 2 million visitors a month.
29
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Khan Academy
Exhibit 11 (continued)
TeacherTube Launched in March 2007, the site was created to provide free instructional videos
for teachers, schools, and home learners. The TeacherTube community was encouraged to upload
educationally relevant videos, rate them, and preserve the integrity of the site.
Academic Earth The site was launched in March 2009, “with the goal of giving everyone on
earth access to a world-class education.” The organization provided free video courses and fulllength lectures from leading scholars at top U.S. universities such as Harvard, Yale, and MIT. The
videos covered a variety of subjects, from physics to philosophy, and from economics to English
literature.
Source: Adapted by casewriter from organization Web sites and “Best Free Online Education Resources,” Hindustan Times,
March 16, 2011, available from Factiva, http://www.factiva.com (accessed July 7, 2011).
Exhibit 12
Excerpts from New York Times Article
Hybrid Model for Nonprofits Hits Snags
Since its founding in 2003, the GlobalGiving Foundation has used its Web site to channel more
than $30 million to charitable projects like buying seeds for farmers in Zimbabwe and feeding
orphaned chimpanzees.
ManyFutures provided the technology platform on which the GlobalGiving Web site operated,
and which it hoped to sell to others. But the company never broke even, even though it paid nothing
for the platform, which had been donated to ManyFutures. In late 2008, GlobalGiving converted its
loans into ownership of the company, paying Ms. Kuraishi and Mr. Whittle just $12,000 for their
stakes.
They had invested $1.4 million. “I lost a large majority of my net worth doing this,” Mr. Whittle
said. “It’s been personally very painful.”
GlobalGiving is one of the most prominent examples of the hybrid model of social enterprise that
married a profit-making business to a nonprofit organization. Such dual-mission companies have
sprouted over the last decade as a means of addressing the financing difficulties faced by many
nonprofit groups, particularly as they need capital to expand. “It is virtually impossible to grow a
social enterprise in any significant way relying wholly on donated money, earned revenue and debt
financing, which are the only sources of financing available to nonprofits,” said Allen Bromberger, a
lawyer with extensive experience in nonprofit financing. “These hybrid structures allow social
enterprises to tap conventional investors interested in making profits while continuing to pursue
their social missions.”
…Within the last two years, several ventures have split up or been dissolved. For example, World
of Good’s commercial unit was bought by eBay, and its nonprofit arm is now struggling to stand on
its own. Another prominent hybrid, Pura Vida Coffee, almost collapsed. And some, like
GlobalGiving, demonstrate how hard it is to “cash out” of a venture that is not purely commercial. It
wound up using foundation grants to prop up its losing profit-making partner.
Mr. Whittle said two things drove their decision to create a hybrid. “We looked at the
philanthropy and didn’t think we could raise the capital required to support the technology, and we
wanted to impose a brutal bottom-line discipline on what we were doing,” he said.
30
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812-074
Exhibit 12 (continued)
Investors have increasingly voiced concerns about hybrid groups. “This conjoined structure really
has problems,” said Kevin Doyle Jones, a partner at Good Capital, one such investment firm.
“Embedded in it is an inherent risk that individuals are profiting from donations that were made for
public benefit.”
…Concerns about the hybrid model surfaced in a very public way earlier this year when a tiny
nonprofit in Seattle, Unitus, abruptly announced that it was letting go almost all of its employees and
no longer accepting donations.
The award-winning nonprofit had helped commercialize the microfinance industry through its
profit-making venture capital arm, which had made investments in several microfinance banks that
were poised to go public, generating huge returns for investors, some of whom were Unitus board
members.
…For many hybrids, however, neither partner is achieving its mission and, as Unitus found,
pulling them apart is tricky. “These tiered capital structures where you have some mission-oriented
capital combined with commercial capital can be challenging,” said Laura Callanan, a consultant in
McKinsey & Company’s social sector office. “When everything is going well, everyone is getting
along and interests are aligned. But when financial challenges hit, the fact that there are different
objectives creates questions about how the pain is shared.”
When World of Good Inc. was sold to eBay and the GreaterGood Network this year, its nonprofit
half was effectively orphaned, stripped even of its name.
World of Good Inc. had been established in 2004 to help connect small artisans around the world
to major retailers. World of Good Development, its nonprofit partner, was charged with developing a
free online tool to help calculate a fair wage and improve negotiating power with buyers.
“Those activities needed to be done in the public interest, and so we put that tool into open-source
space,” said Priya Haji, chairwoman of the nonprofit board and a founder of the company.
Traditional venture capital supported World of Good Inc. The nonprofit held a 5 percent stake in
it and was to receive 5 percent of its profits. “The nonprofit’s work never benefited the business,” Ms.
Haji said.
Nor did the business’s operations ever benefit the nonprofit. “They were never profitable, so we
did fund-raisers to support the organization,” said Holly Boyer, a board member of World of Good
Development and its former executive director. “The business would host a fund-raiser and sell
products where we were part of the event and would speak and talk about our work and get half of
the proceeds from the sales.”
When World of Good Inc. was sold in February, the nonprofit got a $100,000 grant from eBay and
its shares were retired. Ms. Boyer said the grant was intended to help the nonprofit rename itself,
since eBay purchased the World of Good brand. Whether the nonprofit got a fair deal for its stake in
World of Good Inc. is unknown.
…Pura Vida Partners, the nonprofit partner of Pura Vida Coffee, also is changing its name, the
result of a similar divorce imposed by Jeff Hussey, a no-nonsense investor who took control of the
company in 2009, having sunk more than $3 million into it to keep it afloat.
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Khan Academy
Exhibit 12 (continued)
“The business model was flawed,” Mr. Hussey said. “Whenever you have an organization of
human beings with a blurry mission you get blurry results.”
Pura Vida was created in 1998 by John Sage and Chris Dearnley, former classmates at the Harvard
Business School.
They set up a foundation, Pura Vida Partners, and gave it ownership of the company. But when
the company needed money to grow, it could not get access to traditional lines of capital because of
its ownership structure, a problem that led it to embark on a series of complex financial transactions
involving wealthy private investors, including Mr. Hussey. “There was a lot of pretzel logic and
gymnastics to create financing vehicles and structures that would let us continue to grow and
continue our social mission,” Mr. Sage said.
Those transactions diluted the nonprofit’s stake in the company to 9 percent by 2009, when Mr.
Hussey took over. “We could either agree to the dilution or lose the business — and all the funding
streams for the nonprofit that had been established through the business,” Mr. Sage said.
Mr. Hussey purchased the nonprofit’s final shares for $200,000. “I overpaid,” he said. “I had to
because of the laws governing nonprofits.”
Today, the Create Good Foundation, as the nonprofit will be known, is a stand-alone charity that
supports clean water and economic development projects in the areas where the profit-making
company, Pura Vida Create Good, buys its raw materials.
“Our goal now is to sell coffee, wine, tea, chocolate and other things and do it profitably,” Mr.
Hussey said. “There’s nothing blurry about what we do and why we do it.”
Source: Stephanie Strom, “Hybrid Model for Nonprofits Hits Snags,” The New York Times, October 25, 2010,
http://www.nytimes.com/2010/10/26/business/26hybrid.html (accessed October 13, 2011).
Exhibit 13
Model
Description
32
Selected Examples of Social Venture Models
B Corporation
New type of
organization that
uses business for
social good. To
become B
Corps, businesses
must prove that
they care as much
about society and
the environment as
they do about
profits
Non-profit
Fueled by taxdeductible
donations—
cash from
individuals,
public grant
funding, or
money from
foundations. As
of 2010, nearly
1.3 million
501(c)(3)
organizations
were registered
with the IRS in
Non-profit
with Earned
Income
A 501(c)(3)
that generates
revenues.
Works well
when user has
some ability to
pay and when
non-profit can
offer valuable
goods or
services.
Hybrid
(linked nonprofit
and
for-profit)
Nonprofit and
a for-profit
are linked
either with
one as a
subsidiary or
two entities
are bound by
long-term
contracts.
Impact
Investors
Funding by
patient
investors
seeking social
and
environmental
results.
For-profits
with a Social
Mission
Organization
that makes a
social impact
through
products or
through
donations.
Khan Academy
812-074
U.S.
Examples
Method (ecofriendly cleaning
products)
American
Heart
Association
National Public
Radio
Girl Scouts of
America
Teach for
America
Mozilla
Foundation
formed a forprofit
subsidiary to
oversee
the Firefox
Web browser.
Acumen Fund
DBL Investors
(invested in
Tesla)
Seventh
Generation
(cleaning
products)
Newman’s
Own
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Khan Academy
Exhibit 13 (continued)
Model
Advantages
B Corporation
Draws in certain
types of “impact
investors”; enables
co to get
discounted
products/services
Non-profit
Major
foundations
direct nearly all
their funding
toward
501(c)(3)s.
Don’t have to
pay taxes.
Disadvantages
Hard to qualify;
Must take
extensive rating
exam
Need to keep
raising funds
from donors.
Funds are
often restricted.
Non-profit
with Earned
Income
Generating
income frees
an
organization
from total
dependence
on
philanthropic
dollars.
Often need
two staffs: one
to work on
philanthropic
goals; the
other to
handle
business side.
Potential
conflict of
interest. All
501(c)(3) must
give priority to
the nonprofit's
stated
mission.
Hybrid
(linked nonprofit and
for-profit)
The nonprofit
remains tax
exempt and
eligible for
foundation
grants. The
for-profit can
raise
unrestricted
funds from
angels and
VCs and
make taxdeductible
donations to
its nonprofit
partner. Can
also pay
more for
talent.
Can be
complicated.
Require
separate
boards and
management
staffs,
significant
crossover in
leadership
might signal a
conflict of
interest to the
IRS.
Impact
Investors
J.P. Morgan's
Global
Research
division
estimates that
there is a $1
trillion
investment
opportunity
over the next
10 years in
businesses
that serve
people earning
less than
$3,000 a year
with potential
profits of $667
billion.
Deals tend to
be small and
it’s hard to
quantify social
return.
For-profits
with a Social
Mission
Social
mission can
be a potent
marketing and
recruiting tool
and an
effective
differentiator
from the
competition.
Must quantify
financial
results and
social impact,
which is no
easy task. No
guarantee
that the social
mission will
be preserved
as the
company
grows.
Source: Adapted from Inc. Magazine, “How a Business Can Change the World: A special report on the innovative business
models social entrepreneurs are inventing,” Inc. Staff, May 2011, http://ht.ly/4M7WK, accessed October 13,
2011.
34
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Endnotes
1 “The Future of Streaming Online Video; New Approaches to Education Over the Internet,” PBS: The Charlie
Rose Show, May 4, 2011, available from Factiva, http://www.factiva.com (accessed July 7, 2011).
Sian Griffiths, “The Maths Guru; Salman Khan’s Online Tutorials Have Gone Global Since Bill Gates’
Children Tuned In,” The Sunday Times, June 12, 2011, available from Factiva, http://www.factiva.com (accessed
July 7, 2011)..
2
3 Salman Khan, “Review—Turning the Classroom Upside Down—Why not have lectures at home and
‘homework’ at school—and let students learn at their own pace?,” The Wall Street Journal, April 9, 2011, available
from Factiva, http://www.factiva.com (accessed July 7, 2011)..
4
“The Future of Streaming Online Video…”
Ashish Kumar Sen, “Bookmark: The Prof Who Keeps His Shirt On,” Outlook, June 28, 2010, available from
Factiva, http://www.factiva.com (accessed July 7, 2011)..
5
6
“The Future of Streaming Online Video….”
7 Alex Wagner, “Can Sal khan Reform Education in America?,” www.huffingtonpost.com, April 4, 2011,
<http://huffingtonpost.com/2011/04/04/the-khan-academy-and-educ_n_844390.html (accessed September 8,
2011).
8 Sian Griffiths, “The Maths Guru; Salman Khan’s Online Tutorials Have Gone Global Since Bill Gates’
Children Tuned In.”
Google Company Web site, <http://www.project10tothe100.com/faq.html> (accessed September 19,
99
2011).
10 Google Blog, <http://googleblog.blogspot.com/2010/09/10-million-for project-10100-winers.html>,
(accessed September 19, 2011).
11
Ashish Kumar Sen, “Bookmark: The Prof Who Keeps His Shirt On.”
David A. Kaplan, “Bill Gates’ Favorite Teacher,” CNNMoney.com, August 24, 2010
http://Money.cnn.com/2010/08/23/technology/sal_khan_academy.fortune/ondex.htm (accessed September
19, 2011).
12
13
Khan Academy Web site.
Definition based on article by Innosight Institute. Michael B. Horn and Heather Staker, “The Rise of K-12
Blended Learning,” January 2011, p.3.
14
15
Ibid. p.2.
16
http://www.publishersweekly.com/pw/by-topic/industry-news/financial-reporting/article/48642mcgraw-hill-education-to-become-standalone-business.html
17 John Markoff, “Virtual and Artificial, but 58,000 Want Course,” The New York Times, August 15, 2011,
http://nytimes.com/2011/08/16/science/16stanford.html (accessed October 12, 2011).
18
Khan Academy Web site.
19
“The Future of Streaming Online Video….”
20
Khan Academy Web site.
21
Ibid.
22
Claire Cain Miller and Jenna Wortham, “Silicon Valley Hiring Perks: meads, iPads and a Cubicle for
The
New
York
Times,
March
25,
2011,
Spot,”
35
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Khan Academy
http://www.nytimes.com/2011/03/26/technology/26recruit.html?pagewanted=print (accessed October 13,
2011).
Stephanie Strom, “Hybrid Model for Nonprofits Hits Snags,” The New York Times, October 25, 2010,
http://www.nytimes.com/2010/10/26/business/26hybrid.html (accessed October 13, 2011).
23
36
24
Ibid.
25
Ibid.