Make School

Make School was a San Francisco-based alternative higher education institution offering a two-year applied computer science program with income share agreements instead of upfront tuition.⁶ In 2020, Make School merged with Dominican University of California to offer accredited bachelor's degrees, but the merger created mission conflicts.⁶ In 2022, Make School shut down as a separate entity and was absorbed into Dominican University.⁶

Timeline

Money raised

Make School announced $15 million in Series B funding led by Venrock, bringing its total funding to $30 million.⁹ In June 2020, Make School raised $2.0 million from Initialized Capital at a valuation of $29.0 million.¹³ The Series B round in April 2019 was led by Venrock with participation from Kapor Capital and Learn Capital.¹³

Investors named in the sources: Venrock⁹¹³, Kapor Capital⁹¹³, Learn Capital⁹¹³, Initialized Capital¹³, Y Combinator⁹¹⁵, Fresco Capital⁹, Tim Draper⁹, Alexis Ohanian⁹.

What happened

Make School was a San Francisco-based alternative higher education institution offering a two-year applied computer science program with income share agreements instead of upfront tuition.⁶ It raised $13.5 million and built a model of experiential, industry-focused tech education.⁶ Make School's unique bachelor's degree program was developed in partnership with Silicon Valley employers including Lyft and LinkedIn.⁹ Nearly half of Make School's student population were underrepresented minority students.⁹ Over the last five years, Make School graduates went on to work with top tech employers including Google and Apple.⁹

Make School's pay-for-performance model required students to make tuition payments only if their income exceeded $60,000 after graduation.⁹ The degree program could be completed in as little as two years.⁹ With the new investment, Make School planned to scale to serve thousands of students in San Francisco and prepare for the launch of a New York City campus.⁹ Make School also planned to add new degree programs in computing-influenced STEM fields such as computational biology.⁹ In 2020, Make School merged with Dominican University of California to offer accredited bachelor's degrees.⁶

The merger, intended to solve the accreditation problem, instead created mission conflicts.⁶ In 2022, Make School shut down as a separate entity, absorbed into Dominican.⁶ From 2016 to 2018, Make School unlawfully operated as a for-profit college in California, according to a lawsuit filed by former students.¹⁵ In 2018, a California regulator issued an order requiring the school to refund all money paid by students to Make School during the period in which it operated illegally and to cancel the ISAs engineered by Vemo and Make School.¹⁵ The lawsuit alleges that Make School violated this order by not refunding payments to former students, and that Vemo illegally continues to collect on these students' unenforceable ISAs.¹⁵

The lawsuit further alleges that Make School and Vemo actively concealed this order from students and continued to enroll new students and push new ISAs despite being ordered to cease and desist.¹⁵ The complaint alleges a wide range of additional illegal conduct by Make School and Vemo in violation of state and federal law, including unfair and deceptive lending practices, fraudulent and deceptive marketing tactics, and illegal debt collection practices.¹⁵ The former Make School students asked the Court to relieve them and all other current and former students from these illegal ISAs and to issue them refunds.¹⁵ According to the complaint, Make School and Vemo engaged in a years-long scheme to recruit students and push them to take on high-rate ISAs.¹⁵ These firms allegedly used deceptive and fraudulent marketing tactics, misleading current and prospective students about the total cost and the economic value of a Make School program.¹⁵

Make School allegedly engaged in bait-and-switch tactics that forced returning students to take on more expensive ISAs as they progressed through the program.¹⁵ Make School allegedly engaged in a scheme specifically targeting veterans, using false statements about eligibility for financial assistance under the GI Bill to recruit these students.¹⁵ Under the terms of these ISAs, Vemo and Make School required students to agree to repay 20-25 percent of their pre-tax income each month, for three and a half years or more.¹⁵ In the cases of some former students, monthly payments were as high as $2,500 per month.¹⁵ These ISAs featured a payment cap that was 2.5-3 times the original funding amount of the loan.¹⁵

The former students alleged that Vemo and Make School pushed them to take on multiple ISAs to cover the full cost of Make School's program and associated living expenses.¹⁵ These agreements were scheduled to be repaid sequentially, binding students to repay for years longer than advertised in Make School's marketing materials.¹⁵ Many students found themselves on the hook for maximum repayment terms as long as ten years, owing maximum amounts ranging from $221,000 to $269,500 depending on when they first enrolled.¹⁵ Make School's recruitment targeted economically vulnerable students and students from historically disenfranchised communities.¹⁵ According to information about Make School published by one of its financial backers, among Make School students 40% are underrepresented minority students and 50% come from low income families.¹⁵

Make School was founded in 2014 with the backing of major Silicon Valley venture capital firms, including Y Combinator and LearnCapital.¹⁵ Make School purported to disrupt traditional higher education by systemically aligning incentives of the school with students through Income Share Agreements.¹⁵ Former students alleged that Make School partnered with Vemo, the nation's largest ISA firm, to design a financial product that the school could quickly sell for operating cash, avoiding the long-term financial risk that allegedly aligned the company's financial interests with those of its students.¹⁵ According to Make School co-founder Jeremy Rossmann, Vemo and Make School were literally the world pioneers in income share agreements.¹⁵ Make School's email to stakeholders confirmed that Make School PBC had started an insolvency proceeding known as an Assignment for Benefit of Creditors.⁵

Legal outcomes

• filedA group of 47 former students filed a lawsuit against Make School, Inc. and Vemo Education, Inc. alleging predatory lending and deceptive practices.¹⁵
• filedThe lawsuit alleges that Make School and Vemo jointly engineered a predatory and exorbitantly high-cost ISA program.¹⁵
• filedThe lawsuit alleges that Make School violated a 2018 California regulator order by not refunding payments to former students.¹⁵
• filedThe lawsuit alleges that Vemo illegally continues to collect on these students' unenforceable ISAs.¹⁵
• filedThe lawsuit alleges that Make School and Vemo actively concealed the regulator's order from students and continued to enroll new students and push new ISAs.¹⁵
• filedThe complaint alleges unfair and deceptive lending practices, fraudulent and deceptive marketing tactics, and illegal debt collection practices.¹⁵

Sources

5. Make School (W12) - Startups.RIP, startups.rip
6. Why Make School Failed: Regulation | Startup Autopsy, UnicornBurn, 2022-01-01
9. Make School Raises $15 Million to Build a Top-Ranked College That, prnewswire.com, 2019-04-09
13. Make School company information, funding & investors, app.dealroom.co
15. Income Share Agreement Provider, For-Profit School Operator Sued by Dozens of Former Students for Illegal Lending and Deceptive Practices - Protect Borrowers, Protect Borrowers, 2021-07-01

How this case file was put together

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