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Going for-profit to ‘meet businesses on a level playing field’

Sean Segal was a longtime leader at nonprofits that helped lower-income workers retrain and connect with employers. We talked with him about why he decided to go for-profit in his next venture.

Sean Segal and Sienna Daniel were leaders at a major nonprofit bootcamp, Generation USA, for years. But when they decided to start a new venture together, they opted to go for-profit.

The goal, they say, was to meet businesses on a level playing field. Time and time again at Generation USA, Segal and Daniel would be routed to corporate social responsibility even though what they were offering was a business solution to hiring challenges. 

But the group’s nonprofit status made it hard to get that across. That was true even after Generation USA landed a major partnership with Verizon, which two years ago announced $44M in spending on free tech-focused training.

Segal and Daniel also hope that using investment capital, rather than relying on philanthropic dollars, will enable them to grow and scale more quickly than many nonprofits can. That’s critical, they say, because real change will mean retraining hundreds of thousands of workers each year.

Their new company, Escalate, offers 8-10 hours per week of free, cohort-based online training to frontline employees, particularly those who work 32 hours per week or less. After completing a year of that training, employees earn an industry-recognized certificate. They also are promoted to a second year of training, which is structured as full-time, apprenticeship-style IT job placement, with both on-the-job training and cohort-based online education.

Escalate recently was tapped by Techstars, an investment firm focused on early-stage companies, to be in the third cohort of its Workforce Development Accelerator Program. We talked with Segal in detail about the company’s plans. 

Why did you opt to make Escalate a for-profit? What’s possible with this approach that won’t work for a nonprofit group?
Sean Segal, co-founder of Escalate

A: In our most recent roles at a global non-profit, we spent a lot of time developing materials that demonstrated the ROI for employers to hire our graduates. Without fail, when we’d present these materials to a CEO, HR lead, or hiring manager, they’d nod and immediately send us to Corporate Social Responsibility. We were viewed as a charity, not a business solution.

We know that to truly drive systems change we need to meet businesses on a level playing field. They need to see us as not only a solution to one of their largest problems—one that directly impacts their bottom line—but also as a business partner with aligned economic sustainability and profit motivations. That is why we launched Escalate as a for-profit designed to help employers increase retention, one of the costliest challenges that enterprise companies face.

Finally, there is a scale aspect that we felt constrained to meet in the nonprofit space. To truly drive systems change, we need to be getting hundreds of thousands of workers retrained each year. And we need to do that in a sustainable way, not begging for philanthropic dollars each year. The startup space encourages thinking big and has been really refreshing for us.

What will be the key components of the model for participants in the first year?

A: We know that frontline workers need specific supports to be successful in work and in their transition to better careers,and we’ve incorporated those into our model. These supports include asynchronous learning—retail workers, for example, often don’t know their schedules 24 hours in advance—cohort-based support from peers that share lived experiences, live instructional support available seven days a week, and wraparound support that helps keep them in their jobs.

Why is the company focused on incumbent workers without degrees? What are the keys for serving this group?

A: There are 50 million American workers in dead-end, low-wage jobs. They turnover, on average, at 90 days. When they are asked why they chose to leave, it’s because they need upward mobility. They leave their job to find the next that pays $.25 more per hour or offers five more hours of work per week. If given an opportunity to grow at their company, they would stay. 

At the same time, companies waste millions of dollars on recruitment and training to deal with frontline turnover. And, they face a talent deficit in middle-skill roles that have starting salaries of $50,000 to $60,000. 

To us, the answer is clear. Rebuild the internal pathways that used to exist in corporations. We’re going to show this is not only possible, but it is also a business imperative for survival in the new labor market.

What sort of scale are you hoping to achieve—and how do you plan to structure your supports around this scale?

A: One of the companies that we’re in advanced discussions with has about 90,000 frontline workers. They made it clear to us that, for this to be a real solution for them, we need to be able to train 30,000 of those annually. We’re building to train hundreds of thousands of people each year, because that is what is needed. 

We believe that our model is scalable using a combination of technology and focused high-touch live support where it is most needed. As we grow, the most common support requests will be increasingly met with automated assistance, allowing our team to focus only on the most urgent matters that drive learning and retention.

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