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ST Howard Schultz Gives Capella a Jolt

ST Howard Schultz Gives Capella a Jolt

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Published by: SherriLCruz on Feb 01, 2013
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Capella Jolt

Capella gets $7.5 million cash infusion; Investment from Seattle venture capital firm Sherri Cruz; Staff Writer 808 words 24 January 2003 Star Tribune (Mpls.-St. Paul) Newspaper of the Twin Cities METRO 1D Starbucks to eBay to Capella University may not seem like a logical progression, but it is to Howard Schultz, chairman of Starbucks Coffee Co. Schultz's Seattle-based venture capital firm, Maveron, said Thursday it has invested $7.5 million in Capella, a Minneapolis- based online university. Maveron will have a minority stake in Capella, and Maveron's Jody Miller will be a "board observer," a nonvoting member participating in board meetings and contributing to the direction of the company. Capella joins Maveron's $400 million investment portfolio of companies that includes eBay, its first investment; Drugstore.com, a Bellevue, Wash.-based online drugstore; a Chicago-based sandwich shop, and a Portland, Ore.-based women's athletic clothing store. Capella's goal is to be recognized as a leading, nationally known university in five years, CEO Stephen Shank said. So for Shank, Maveron's expertise was more important to Capella than the dollar investment. Schultz said Capella has what it takes to be a national brand. Capella, founded in 1993, is the second-largest private university in Minnesota and employs 350 people in the Twin Cities and 400 faculty worldwide. It is accredited by the Higher Learning Commission - the same institution that accredits brick-and-mortar schools - and offers degreed programs to 7,000 students in the United States and in 40 countries. Maveron chose to invest in Capella in part because of the high satisfaction rate that students have had with the university, Schultz said. He also said he liked combining "profitability and benevolence," enhancing people's lives through education. "It really struck an emotional chord with me," he said. Schultz, who co-founded Maveron in 1998 with former investment banker Dan Levitan, will be a resource for Capella, leveraging his marketing and brand-building experience. "Great brands establish and maintain an emotional relationship with their customer," Schultz said. Schultz specializes in taking a commodity, such as coffee, and transforming the marketplace not just by selling coffee but by creating an experience. Schultz joined Starbucks as director of operations and marketing in 1982, when it had only four stores. He built the company by developing a precise method of brewing and making coffee drinks - from the length of time espresso sits in a shot glass to the order in which the ingredients are "called" by the cashier to the barista, the person who makes the drinks. While online learning isn't coffee, there are similarities in the uniformity and quality of delivery and an

emphasis on the consumer. Online learning is in an embryonic stage, Schultz said, but it is on the verge of taking off. Learning online is not meant to replace the socialization required by students who are 18 to 22 years old, Shank said. Capella's students typically are 25 to 55 years of age, work full time and have an aspiration, Shank said. "It's how people learn best in their mature years," he said. But online learning still has drawbacks, such as bandwidth - not everyone has a high-speed Internet connection. For the first 10 years of Capella's existence, the class presentations were geared for a 56k dial-up Internet connection, Shank said. The gradual shift from dial-up to broadband has helped improve the education experience by allowing more video, audio and graphic presentations. Although Maveron doesn't quickly turn its investments into public companies, an initial public offering is a way for investors to make money. Shank said he couldn't comment on an IPO but added that Capella is "turning the corner to profitability." Capella had $50 million in revenue last year, and its enrollment has increased by more than 85 percent annually since 1998. Part of Capella's transformation into a nationally recognized university will include building more relationships with community colleges. So far, Capella has made it easier to transfer from 100 community colleges to Capella. For example, a student transferring from a community college would know upfront what credits would be accepted by Capella. "In education, people talk about quality, so it's a big mushy thing," Shank said. But to Shank it means making the learning experience relevant to students' current jobs and making the outcome meaningful, so they can get ahead professionally. Shank knows a bit about branding himself. "Branding begins and ends with the students' experience," Shank said. So if the students get what they want, they will tell others, he said.

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