2013-10-23-arrested-development-2
EdSurge
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Thumb_img_0351222 Mary Jo Madda ·

Arrested Development for Teacher-Led Startups

When New York City high school teacher Jesse Olsen dreamt up the idea for JumpRope, a standards-based grading platform, he was deeply influenced by his own experiences as a teacher--the kind of background usually considered helpful for building great products. Olsen saw firsthand how teachers suffered through endless amounts of manual grading so he built a tech solution to lighten the load. “I started playing around with different tools on my own time,” Olsen says. “I built an early version of JumpRope, and other schools wanted to use it.”

Little did Olsen and his business partner Justin Meyer know, however, that they would wind up paying $4,000 in fines for violating the “conflict of interest” law, which restricts public school teachers from selling edtech products in New York City schools. Even when Olsen quit his teaching job, the restriction held for 12 months.

As education technology has boomed, plenty of entrepreneurs have plunged into the business of building tools for teachers to use. Many teachers have noted that some of the most compelling tools have been influenced by teachers. But well-intentioned conflict of interest rules in cities starting with New York and Chicago can create legal nightmares for would-be teacherpreneurs, threatening them with financial penalties and even jail time.

New York isn’t the only city with such rules. Chicago teachers are subject to similar year-long prohibitions on selling anything to the local district. Los Angeles also prohibits school employees from representing companies “in connection with any matter pending before the District that, as District employees, they participated in personally and substantially.”

According to the NYC Conflict of Interest Board website, Chapter 68 of its “Ethics Law” prohibits public employees from incurring financial gain from an operation separate from their job when it relates to selling something to their own place or district of employment. Essentially, the government considers it a “misuse of position.”

As it applies to NYC educators who venture into entrepreneurship, Department of Education employees cannot 1) sell to schools, or 2) enter any DOE-sponsored challenges, such as the Gap App Challenge while they’re working as teachers and for a full year after they leave the classroom--a significant handicap considering how quickly startups must operate.

NYC administrators feel that the law helps prevent poaching, where teachers may be lured away by companies offering financial incentives.

“The idea is that you shouldn't be able to leverage relationships that you build” or use “special information that you've acquired” as a teacher to push products, explains Steven Hodas, executive director of NYC’s iZone’s Innovate NYC Schools.

“[Selling] should be based on the merits of the product,” Hodas adds. “If you have special relationships, that in theory gives you the advantage over other vendors.”

Abusing positions of power for financial gain is a familiar story. In 2004, then-NYC Police Commissioner Bernard Kerik made $6.2 million off of agency contractors. More recently, a former board member of the NYC Health and Hospital Corporation was fined $13,500 in 2010 for multiple violations of the law, including his series of paid positions with one of the HHC’s client medical schools.

Yet the secondary result of such laws is that entrepreneurs who have not been teachers have an easier path to developing products: While non-teacher vendors can freely sell to NYC district schools and apply for vendor contracts with the DOE, teacherpreneurs have two basic options: leave the classroom or stop the operation.

That’s just what happened to JumpRope’s Olsen. After starting the company in early 2009, he began licensing his software to other schools--including some in New York City--later in the year. In November 2010, another former teacher mentioned the restrictions to Olson. “I stumbled across it when I was already violating it,” he admits.

Olsen quit teaching. His partner, Meyer, took over all of JumpRope’s New York City operations while Olsen handled sales to schools in Arizona and Virginia.

The damage had been done, however. When Olsen and and Meyer later partnered with iZone, a DOE-sponsored endeavor to bring innovation to NYC schools, iZone reps asked if there was anything JumpRope needed to disclose. When Olsen explained the potential conflict of interest breach, iZone consulted lawyers--who decided that the city had no choice but to fine JumpRope after seeing the documents. JumpRope racked up fines for “everything right down to e-mails sent to the schools,” Olsen says. The final bill came to $4,000--a hefty sum for a revenue-generating but still relatively young startup.

“Given that the law exists, I don’t feel that I was treated unfairly during the process. That said, it definitely hampered our ability to sell to schools,” Olsen explains.

Since Olsen left the classroom in November 2010, JumpRope can sell to NYC schools as of November 2011--a full year after his resignation. But other teacherpreneurs are similarly struggling with the rules.

Case in point: Brooklyn high school SPED teachers Elissa Altorfer and Melissa Corto. These co-founders have poured two years’ of off-hour work into their as-yet unfunded startup, the EdMod App, a research tool that supports SPED teachers with differentiation. But when New York ran its Gap App Challenge to spur innovation, Altorfer and Corto were told the conflict of interest rules locked them out.

“I was kind of shocked,” Corto says. “We hear from Innovate ‘the importance of teachers in edtech,’ and we couldn’t be a part of it.”

The pair also worry that they won’t be able to pilot the tool they’ve developed in the schools they know well. To Altorfer, the restrictions seem to signal that being a teacher hurts--rather than helps--her goal of building better edtech tools for teachers. “It has slowed our pace way down in terms of growing EdMod,” she says. And while both Corto and Altorfer are still currently teachers, Altorfer worries that EdMod could “trickle out and die” if the pair doesn’t leave the classroom.

Thus the larger issue--what does this mean for edtech, and beyond that, education as a whole? User-centered design is a time-tested way to create a great product, especially in the world of education. “Teachers are the ones that can make the most knowledge difference--we’re in the trenches every day,” Corto says. But if creative teachers feel that their only path forward is to leave the classroom, it seems that public education takes a blow.

A press spokesperson from the NYC Dept. of Education had no insights on this conundrum but pointed EdSurge to a general guide of situated applications of the “conflict of interest” law in education.

Here’s what edupreneurs we interviewed suggest as guidance to help other teachers avoid breaking ethics laws:

Apply for a waiver: The Conflict of Interest Board (COIB) does have a process by which educators can apply for a waiver. Teachers must receive written approval from the DOE Chancellor stating that the second job, specifically the startup in question, would not conflict with official DOE duties. Contact the DOE’s Ethics Officer to see if the Chancellor will approve your request. The approval, if granted, will be forwarded by the Ethics Officer to the COIB along with a request for a waiver. Though handled on a case by case basis, the waiver is an option and can be further explored here.

Contact the Conflict of Interest Board hotline: Wondering whether you’re in violation or not? “It turns out there is a number you can call where you are protected, and get legal advice,” Olsen says. The Board provides a hotline where anyone can acquire free legal advice on matters related to Chapter 68.

Find a non-teacher co-founder: Meyer served as the face of JumpRope while Olsen stepped back during his “gap year” after he left the classroom. Meyer explains that he could “relay messages to Jesse, and go back and forth between people” during that time,” and steer clear of violation boundaries.

Sell to charter, private, and independent schools: Because only public schools are technically within the realms of the “conflict of interest” law, charter, private, and independent schools offer opportunity for both testing and selling.

At the end of the day, the biggest concern of existing edupreneurs are the quality of those tools that are gaining the most traction in NYC--and who is creating those tools. “[The law] stifles the whole industry. Maybe we would be even more successful. Maybe there would be more tools designed by teachers,” Olsen imagines. “This all leads to more tech and business people being on the side of the edtech, which is unbalanced."


About the Author

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Mary Jo writes and heads up the INSTRUCT newsletter for EdSurge. Previously, she taught middle school math/science. Most recently, she served as an Education Entrepreneurship Fellow at the Harvard Innovation Lab. Email: maryjo@edsurge.com

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