On a sunny day in April, I visited the offices of the Sesame Workshop, across the street from Lincoln Center. At first, the space looks almost disappointingly normal, until you notice the heap of Snuffleupaguses piled on a desk, the hand-drawn Grovers in a hundred different poses pinned to a wall, and the tidy scraps of construction paper in every shade of yellow, as though waiting to be transformed into a papier-mâché Big Bird. "Sesame Street" isn’t here—the studio is in Astoria—but this is where they tell you how to get there.
In February, the Sesame Workshop launched Sesame Ventures, a fund that will work with established venture-capital firms to invest in what the company refers to as “mission-aligned” education-technology startups. (That mission is to make kids “smarter, stronger, and kinder.”) Its first such partnership is a joint fund, Collab+Sesame, created in conjunction with Collaborative Fund, an early-stage investor based in New York City. On Monday, Sesame Ventures announced a partnership with Reach Capital, a seed fund, based in Palo Alto, that focuses on educational technology.
When Sesame Ventures and the Collab+Sesame initiative were first announced, the media reacted with bemusement. “Today’s episode was brought to you by the letters I, P, and O,” Julia Greenberg quipped in an article for Wired. Some of the skepticism may have arisen from the Sesame Workshop’s well-publicized financial struggles. VHS and DVD sales of “Sesame Street” have plummeted, and licensing deals and broadcast fees haven’t bridged the gap, leaving the Workshop operating at a multimillion-dollar deficit for the past several years. In 2014, it lost eleven million dollars, which led it, last year, to strike a deal with HBO. First-run episodes of the show now run on the cable network and its streaming outlets, which are only available to paid subscribers. The deal prompted concerns that the show would no longer be available to children whose parents can’t afford premium cable. But the Sesame Workshop offered assurances that back episodes, including ones that have aired on HBO, would still be available for free on PBS.
Sesame Ventures isn’t designed to contribute revenue to the Workshop—there’s hope that the HBO deal has helped secure the TV show’s future. Rather, Sesame Ventures is its own entity, which the Sesame Workshop wants to succeed on both Silicon Valley’s terms—as an investment vehicle that funds ambitious projects—and in terms of the Workshop's traditional mission. That is, Sesame Ventures anticipates helping the Workshop to approach digital technology in the same experimental spirit with which it once approached TV, and to prepare it for future technological shifts.
In 2014, the Sesame Workshop hired Jeffrey Dunn, a former executive at Nickelodeon and HiT, the entertainment company best known for “Thomas & Friends,” as its C.E.O. Dunn, the first outsider to lead the Workshop, reminded me of a grown-up Grover, with round glasses and an eager grin. Sitting still doesn’t come naturally to Dunn. When I met with him and two other executives in charge of Sesame Ventures, Tanya Haider and Will Fowler, Dunn kept jumping up to illustrate his points on a whiteboard. “The idea was, let’s get back to our roots,” Dunn told me. “This place started as a disrupter. We started not quite in our garage, but not in these offices. How do we get back to being a workshop?”
He was alluding to Sesame’s founding, in 1968, as the nonprofit Children’s Television Workshop (C.T.W.) (It adopted its current name in 2000.) In its early years, the Workshop became famous for developing the C.T.W. Model. The initial funding proposal for “Sesame Street” established an in-house research department that would create an educational agenda for each season. C.T.W.’s founders, Joan Ganz Cooney and Lloyd Morrisett, hired one education expert to direct the research department, and another, Gerald Lesser, a professor at Harvard’s Graduate School of Education, to serve as chair of the Workshop’s advisory board. It was the first time that a children’s television show had tried to integrate serious research into its programming, and the approach was wildly successful. The TV show became an institution, and numerous studies over the years have shown that it helps kids learn.
Dunn said that Sesame Ventures is also an extension of the Workshop’s past commercial and digital initiatives—initiatives he also helped make happen. In 1998, while he was with Nickelodeon, he worked with C.T.W. to start the children’s cable channel Noggin, which eventually became Nick Jr. In 2005, Sesame partnered with PBS, Comcast, and HiT Entertainment (where Dunn had decamped) to develop Sprout, another children’s television channel. “I conceived of Sesame Ventures before I was hired as C.E.O.,” he said. The idea for Sesame Ventures came to him out of his experience with those programs. “If we’re going to act, to be cutting edge, we need to associate ourselves with startups,” he said.
In particular, Sesame is concerned about keeping pace with technological developments. According to a 2015 study, published in the journal Pediatrics, ninety-seven per cent of children have used a mobile device by the time they turn one. About two-thirds of kids discover “Sesame Street” through on-demand services. Matthew Wong, a research analyst at CB Insights, told me that investors have responded to these trends, and began putting in serious money “five, six, seven years ago.” A report by CB Insights showed that, in 2015, annual funds poured into education technology from venture-capital firms increased sixty-four per cent over the year before, and the number of deals being made rose ten per cent.
The Sesame Workshop’s initial stake in Sesame Ventures came, in large part, from the sale, in 2012, of its shares in Sprout. Thus far, it has been partnering with experienced firms to navigate the venture-capital world. Its first such arrangement was with Collaborative Fund, which manages about a hundred million dollars of investor capital and gave early-stage funding to a variety of tech companies, including Kickstarter, Lyft, and Reddit. The Collab+Sesame fund is small—about ten million dollars, with five million from Sesame Ventures and the other half from Collaborative—but it has already received more than five hundred inquiries from companies seeking investments. “Every day, we’ll see someone who wants to sell something like yoga for kids,” Haider said. But some more-promising pitches have come through, and the fund has so far made two investments. Haider couldn’t provide many details but later wrote to me that one “offers parent-child experiences and classes outside the traditional school hours,” while the second is aimed at educating high-school students.
Typically, when businesses decide that they want to get involved in the startup world, they either develop an internal investment arm or they become passive investors, lending financial resources but staying out of the picture. Sesame Ventures acts not just as an investor but as an incubator of sorts. Each company that receives funding will be assigned a Sesame Workshop executive, who will help the company collaborate with Sesame’s research department and other like-minded enterprises in the worldwide Sesame network.
That doesn’t mean brand extension, necessarily; Sesame isn’t trying to fund Angry Big Birds or Cookie Monster Crush. Rather, the Workshop will offer its expertise to companies that might, down the road, help it reach kids on new platforms. For example, if Sesame Ventures invested in a company that was building an app to help kids learn a letter a day—something the show has done since the beginning—it might offer the Workshop’s research on the subject. Joe Blatt, a professor at Harvard’s Graduate School of Education who teaches courses on “Sesame Street,” told me that this would, in turn, allow the Workshop to develop “great ideas that Sesame wants to have happen but aren’t what they do.”
Sesame Ventures’ newest partner, Reach, is a fifty-three-million-dollar fund that invests in education technology for K-12 students. Sesame is a limited partner in the fund, and will provide what Haider dubbed the “preschool perspective.” Jennifer Carolan, Reach’s co-founder, offered me an example of the kind of problem they’re working on: communication between parents and teachers is often a problem in preschools—most schools still send kids home with a piece of paper stuffed in a backpack—and several startups are trying to develop apps for this.
Haider and Fowler said that Sesame Ventures would “expect and need” a financial return from these investments. “We would be thrilled if one of our companies is able to scale significantly, because it would mean that some entrepreneur has built a great service for kids around an innovative business model,” they wrote in an e-mail. But Wong, the CB Insights analyst, told me that Sesame Ventures was more likely to succeed as a strategic investment vehicle—that is, as a way for Sesame to experiment—than as a way to make a lot of money. “Given that it’s such a small fund size, they’re not going to be deploying a lot of capital on each deal,” he said. “It signifies that making money is not necessarily their primary goal.”
And failure might be, in its way, a success. Josh Lerner, a professor of finance at Harvard Business School, told me that venture-capital firms often act as de-facto research-and-development arms. For Sesame, he said, the point might be more “understanding that what seemed like a threatening technology isn’t really that threatening.” Investing a few million dollars in a startup that flops, he suggested, would be a lot cheaper than overhauling the Workshop to target particular platforms, only to see the technology fizzle.
John Weidman, a Tony-nominated librettist who wrote for “Sesame Street” for twenty-five years, told me that while he’s nostalgic for the days when the show had the airwaves largely to itself, he didn’t see Sesame Ventures as corporatization. “When an organization becomes as large and lumbering as Sesame Workshop has become,” he said, “the kind of nimbleness which drives creative thinking at the entrepreneurial fringes becomes harder to get. To want to have access to that is really smart.”
* This post was updated to correct details about Sesame Ventures’ partnership with Reach Capital.
