Howard Tullman provides business lesson in running for-profit schools
Howard Tullman making money while providing educational opportunitiesBy Ann Meyer
Special to the Tribune
January 14, 2008
Serial entrepreneur Howard Tullman believes education can be run like a business: profitably.
Tullman opted for for-profit business models at both the new Flashpoint Academy of the Media Arts and Sciences vocational school and Experiencia science and business education center for grade school students. Both ventures stress hands-on learning and are dedicated to reaching underserved students while also making money.
Operating as a for-profit is critical to building the businesses the right way, said Tullman, who opened the 75,000-square-foot Flashpoint in September at 28 N. Clark St. in Chicago, complete with stages, editing suites and mixing rooms, plus state-of-the-art camera and computer equipment.
"The non-profit mentality is sort of 'good enough is good enough,'" Tullman said. "It's not an attractive strategy for investors and for really growing these businesses."
Whether to structure a business as a for-profit or non-profit is becoming a common dilemma among so-called social entrepreneurs, or those launching ventures with missions of doing good for society, experts said.
"The line between for-profits and not-for-profits gets more and more fuzzy every year," said Thomas Morsch, clinical professor of law at Northwestern University.
"My advice is to start your for-profit business up, make a lot of money and then be socially responsible" by giving back to the community, said Morsch, who is also director of the Small Business Opportunity Center at Northwestern.
Although schools traditionally have operated as non-profits, the growth of for-profit companies such as the University of Phoenix and Laureate Education Inc. is spurring more interest in profitable educational ventures.
"There's no reason, in principle, why you can't set up a for-profit school," said Eric Posner, professor of law at the University of Chicago. "This is a mix of legal and business judgments."
The decision also depends on whether the venture intends to get start-up funds from individuals interested in donating to charities or business investors looking for a return on their dollars.
While for-profits can't offer tax breaks to donors and must pay real estate taxes, they can offer teacher bonuses and merit pay, often not permitted at a non-profit, Posner said. Funds from businesses can take the form of sponsorships.
"There are good marketing and advertising reasons for business to give money to universities," he said.
Tullman raised $16 million from Chicago investors in 60 days last spring to begin construction on Flashpoint in time for its opening in the fall with 105 students.
"Part of this grew out of people who wanted to give back and support education but were completely frustrated" with funding non-profits that offered no accountability, Tullman said.
Still, Flashpoint and Experiencia have sister foundations, allowing for charitable donations to be used for scholarship funds, Tullman said. So far, Flashpoint has given $1 million in scholarships.
Partnering with businesses
The 50,000-square-foot Experiencia, at 770 N. Halsted St. in Chicago, includes Exchange City, a simulated city where middle-school students work as bankers, merchants and entrepreneurs, and EarthWorks, where early elementary pupils learn about science careers.
Tullman, chairman and chief executive of Experiencia, has solicited such corporations as LaSalle Bank and Eli's Cheesecake as sponsors since taking over the non-profit in 2005. Previously, he said, "it lived from grant to grant and day to day. We developed the city here as a partnership with business and turned it into a business."
Tullman attracted about $5 million in investment dollars, including about $2 million to revamp the Chicago facility into a flagship school. Experiencia also operates facilities at 10 other locations throughout the U.S.
"Businesses and foundations enjoy the opportunity to help sponsor schools," said Elaine Mondschein, president of Experiencia. At Experiencia, "they can see the children learning and are proud to be able to allocate their resources to something this powerful," she said.
It's not the first time Tullman has ventured into education. The former litigator who ran CCC Information, RollingStone.com, Tunes.com, Worldwide Xceed Group and Imagination Pilots, among others, became president of then-ailing Kendall College in 2002 and refocused it as a culinary school, shedding its sports teams and some academic programs, he said.
He sold its Evanston campus and moved the college to the former Sara Lee research and development lab at Goose Island, raising $60 million for the renovation and move. Complete with state-of-the-art culinary equipment, the new facility and new focus helped to boost enrollment, student retention and revenue.
After arranging for the pending sale of the school to for-profit Laureate Education, which had already made an investment, Tullman was ready to move on.
Despite turning around the school, Tullman said he was personally frustrated by the low salaries greeting graduates in the culinary and hospitality fields.
Meanwhile, he saw a growing need in the marketplace for people trained in game development, film, computer animation and recording arts. He became president and chief executive of Flashpoint in March.
Still, the digital-arts industry isn't without bumps. When Flashpoint opened this fall, Electronic Arts Inc., a $3 billion company based in Redwood City, Calif., operated a Chicago studio employing 145 workers, up from 49 two years earlier. But the company announced in November that it would be closing the facility.
"That studio wasn't forecasting a profit until 2010, and we felt that the resources were better committed to another project," spokesman Jeff Brown said in an e-mail.
2-year vs. 4-year degree
Although Electronic Arts' closing is a setback, Tullman believes Flashpoint grads will fare well in the job market, even without a four-year degree.
Not everyone agrees that a two-year certificate is as beneficial.
"I have some issue with kids going right in and thinking they're going to make a killing as a gamer programmer, editor or animator. Basically, most are going to be cubicle assembly-line workers," said John Yaworsky, who teaches digital cinema at DePaul University and is a producer at Two + One in Wilmette.
Yaworsky sees value in a well-rounded four-year degree and questions whether Flashpoint can work in enough academics while teaching hands-on vocational skills.
"Is [Tullman] being philanthropic or totally profit motivated?" he asked.
Tullman said Flashpoint is aiming at high school graduates who aren't ready for a four-year university or have tried college unsuccessfully and are back at their parents' homes playing video games in the basement.
Although Flashpoint's admission policy isn't stringent, Tullman said it won't take just anyone. For starters, the application fee is $250, compared with $50 for many universities. Tuition is $25,000 a year.
Tullman said he is training his students for jobs involving higher-level thinking and collaboration. Demand for people with cross-training in multiple digital-arts skills is great, he said.
"Every corporation has a Web site as its front door and needs video and music," he said.
But Tullman also is in talks with area universities to allow Flashpoint students to complete the last two years of a four-year degree in business or a related field. The main goal is an educated workforce.
"We treat education as the most important business there is, because it's our future," Tullman said.
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One busy guy
Here is a look at the variety of positions keeping Howard Tullman on the go:
*President and chief executive, Flashpoint Academy
*Chairman and chief executive, Experiencia
*President emeritus, Kendall College
*General managing partner, Chicago High Tech Investors
*Board of directors, Cobalt Group and Passage Events
*Adjunct professor, Northwestern's Kellogg School of Management
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