Today the cost of college is astronomical, and as a result the average U.S. college graduate carries more than $30,000 in debt. Pick up any newspaper – especially as politicians hit the campaign trails – and you’ll read about ideas or initiatives aimed at lowering the cost of higher education. The tricky constraint, however, is that universities are expensive to run! Think about your undergraduate experience: an idyllic campus, state-of-the-art classrooms, football games, student clubs, tenured faculty, and the list goes on.
So how do you provide a high-quality education at a low-cost? Well, you can either take the current institutional model and seek some efficiencies (or subsidies), or you could completely redesign a university from the ground up. The latter is precisely what Minerva has done.
Founded in 2012 by Ben Nelson, former CEO of Snapfish, Minerva is a (for-profit) organization that has raised $95M and aspires to become the best university in the world. Minerva provides a four-year accredited undergraduate program to top students across the world via an immersive global experience, rigorous curriculum, and technology-enabled learning model at a price-tag of only $10,000 per year. How Minerva has managed to flip the traditional operating model of an elite university on its head is fascinating, and theoretically Minerva’s cheaper and more scalable model has the potential to be highly disruptive in an industry facing intense cost pressure. However, in a sector where brand and prestige are of paramount importance and the competitive set maintains hundreds of years of legacy, will Minerva’s business and operating models be good enough to win?
An Overview of Minerva’s Unique Offering:
- Top Students – Minerva’s mission is to educate students who will be global innovators and leaders of the future, and as a result they recruit top students from around the world (think Ivy Leaguers).
- Global Immersion – There is no centralized campus for Minerva. Students at Minerva live in centrally-located residence halls in seven different cities across the globe during their four years of study (Year 1 – San Francisco, Year 2 – Berlin and Buenos Aires, Year 3 – Seoul and Bangalore, Year 4 – Istanbul and London).
- Unique Approach to Academics – Students learn through small interactive seminars enabled by technology (classrooms don’t exist) and the curriculum is rigorous. While the program delivers a liberal arts education, there is a deeper focus – as compared to traditional programs – on intellectual growth and preparing students for operating in a global context.
- Low Price Point – Students pay only $10,000 per year in tuition, just a fraction of what many private universities charge.
Stripping the Model Down to the Essentials:
Minerva has taken the traditional operating model for higher education and stripped it down, removing expensive components that are not core to the student learning experience. The following are examples of how Minerva’s operating model differs from that of a traditional institution:
- Physical assets: Minerva does not own any real estate and maintains few facilities beyond the dorm, which is rented space for students to live. Classrooms don’t exist at Minerva, and neither do most of the other fancy and expense campus facilities.
- Labor: There is no such thing as professor tenure at Minerva, helping to again keep costs low. Professors are on three year contracts, and because professors don’t need to be co-located with students, they can live anywhere with an internet connection. Attracting top faculty talent is a key to their strategy of becoming an elite university, and Minerva believes geographic flexibility is a competitive advantage.
- Technology: Minerva has built its own proprietary technology platform (the Minerva Active Learning Forum) to support small-class interactive seminars. The technology is built on robust learning science principles and therefore enables a high-quality learning experience. Employing technology serves to lower the cost of each course and will allow Minerva to scale quickly if it can attract enough qualified students to the university.
- Student Life: Minerva has also foregone other expensive components of the student experience, such as intercollegiate sports (sorry, no tailgates!). However, it does encourage and support co-curricular activities in the cities in which the students are currently learning.
Currently in its second class of 110 students, Minerva is far from self-sustaining. The company projects that it will achieve financial sustainability when it reaches 5,000 students. We can then assume that the average cost to educate each student will be roughly $10,000 (the price of tuition), which is less than half the cost to educate a student at a comparable institution (see chart below).
Although Minerva has designed an alternative higher education model that allows it to deliver a unique high-quality and low-cost experience for its students, its ability to scale will depend on convincing potential Ivy Leaguers around the world to forgo hundreds of years of prestige and the student life we’ve come to know on residential campuses. Higher education is a mature industry with entrenched consumer preferences. In a sector where brand and prestige is 80% of the offering, it will be interesting to see how far Minerva’s tightly aligned operating and business model will take it.
 The cost of room and board is additional, but this portion is not paid to Minerva