Uncovering the Dynamics Behind For-Profit and Nonprofit Education Companies’ Decision-Making

As we continue to support our grantee partners, we always look for ways to improve our understanding of the K-12 education landscape by establishing benchmarks of key measures such as reach, impact, cost, and financial sustainability. This data provides essential context—helping leaders set realistic goals, identify high-performing outliers, and assess effectiveness against sector norms.

Often, the dynamics faced by the nonprofits we support are different from those of their for-profit counterparts. To better understand nonprofit performance and perceptions in comparison with for-profits, we teamed up with EdWeek Market Brief to analyze the results of its 2024 State of the K-12 Industry survey of 230 employees at for-profit and nonprofit organizations serving the K-12 sector. The survey gathered views on issues including the expiration of the Elementary and Secondary School Emergency Relief Fund (ESSER), and adoption of artificial intelligence (AI), and we used the results to develop a new whitepaper that explores key distinctions between the business dynamics of education nonprofits and for-profits.

READ THE WHITEPAPER

Among the findings, several key ideas are worth a deeper look, with implications for education leaders and the philanthropic sector.

1) Nonprofits feel less impacted by the expiration of ESSER

Only 23 percent of nonprofit respondents reported the ESSER funding cliff as a challenge they are facing right now, compared to 40 percent of for-profits. That also meant that for-profits are adopting strategies to cope with the end of ESSER at twice the rate as nonprofits. This was a surprising finding; from where we sit, the end of ESSER is already reshaping the education market in ways that demand a strategic response from nonprofit organizations.

One hypothesis for the divergence is that the nonprofit respondents’ business models do not require them to compete in the national K-12 market in the same way as for-profits, instead relying on steady local or regional philanthropic support as a primary revenue source. However, overreliance on any one funder or funding source is risky, especially in the wake of market disturbance.

The influx of ESSER dollars temporarily expanded district demand and purchasing power, giving many nonprofits an opportunity to deepen district relationships and broaden their reach. But now, as federal funding dries up, districts are making hard choices about where to make cuts. Without a deliberate strategy, even proven, high-impact programs are at risk.

If nonprofits hope to maintain and expand their role in improving educational outcomes at scale, they must treat the end of ESSER not as a temporary dip, but as a structural shift. This means not only adapting and diversifying their revenue models, but also ensuring they can clearly communicate to purchasers why their product or service is impactful and cost-effective.

We’re encouraged by the proactive steps many of our grantee partners are already taking. To further support our grantees, Overdeck Family Foundation has strategically paired grantmaking dollars with targeted capacity-building support designed to strengthen organizations across key areas, including market landscape analysis, identifying alternative funding sources, scenario planning, evidence generation, and restructuring. By understanding what’s at stake and which options are available, nonprofits will be prepared to sustain impact through a turbulent time.

2) Nonprofits are pursuing AI less aggressively in their products and internal operations than for-profits

While it’s not surprising that for-profits are moving faster, the size of the gap is striking—and concerning. Forty-seven percent of for-profits, compared to 31 percent of nonprofits, are integrating AI for internal functions. Forty-one percent of for-profits, compared to 15 percent of nonprofits, are expanding into products.

As AI tools rapidly reshape how organizations operate and deliver services, nonprofits risk falling behind if they are slow to engage. In a tightening education marketplace where district leaders face mounting budget pressures, organizations that leverage AI to add value, enhance usability, and drive down costs will have a clear advantage. Nonprofits cannot afford to treat AI adoption as optional.

Our foundation’s AI strategy is grounded in a desire to understand what works to improve teaching and learning in U.S. schools. Through this lens, we’re already seeing promising signs of early AI adoption for both internal purposes and product integration. Nonprofits are using AI to automate repetitive processes, generate insights from complex data, and assist with content creation, freeing up valuable staff time for more strategic, mission-driven work. Some are going even further, embedding AI directly into their programs and products. From increasing literacy proficiency to enhancing traditional professional learning approaches, these innovations demonstrate how AI technology can help nonprofits deepen their impact, cost-effectiveness, and scalability. We encourage other education nonprofits to look for ways to integrate AI into their work, not only to improve internal processes, but to enhance the impact and scalability of their products.

In addition to grantmaking, Overdeck Family Foundation is prioritizing capacity-building supports to help grantees thoughtfully adopt and integrate AI. For example, through a partnership with Charles and Lynn Schusterman Family Philanthropies and led by Playlab AI and Leading Educators, we supported the creation of AI Accelerator, a program that aims to help nonprofits explore, develop, and implement AI-powered solutions to accelerate outcomes. Additionally, the foundation has brought in experts to host workshops for grantees focused on hiring technical talent, developing legal guidance for internal AI usage, leveraging AI for data analysis, and empowering innovation with AI.

3) Nonprofits are less likely than for-profits to say their clients have requested evidence aligned with ESSA

Fewer than 15 percent of nonprofits and 30 percent of for-profits reported that district partners required ESSA-aligned evidence. This is particularly concerning at a time when student outcomes are stagnating and district budgets are tightening. Now more than ever, purchasers should focus on investing in proven solutions that can drive real, measurable improvement in student outcomes.

We remain committed to increasing the role that evidence plays in purchasing and decision-making and believe that, in an increasingly competitive and resource-constrained market, it will become critical for organizations’ long-term sustainability and growth. As a Foundation, we prioritize supporting our grantees to build stronger evidence and, through our communications strategy, do our part to distribute and share the research we fund to equip state and district stakeholders with the data they need to promote better decision-making. We believe that, if the field is serious about improving academic achievement, generating and disseminating rigorous evidence must be a priority shared by all.

Read the full Education Week whitepaper, Different Dynamics, to learn more.

Images courtesy of Education Week