Tutor.com has raised $13.5 million to expand its marketing activities for Tutor.com Direct.  $9.5 million comes in the form of equity from a group led by Intel Capital, $4 million is secured debt.  By the standards of the emerging school improvement industry, it's a lot of money. Compared against the national market where Tutor.com operates - be that selling k-12 tutoring to government or to consumers, it's not all that much. The real question is how much founder and CEO George Cigale intends to grow the company, how fast, and - above all - how.

Like other tutoring firms formed since 2000, much of Tutor.com’s funding comes from government. Consistent with the old adage about dropping your line “where the fish are and the fisherman aren’t” the live "on-demand" online tutoring firm has pursued students through libraries and their homework help programs.  And unlike the Supplemental Education Service providers with similar offerings, Tutor.com's revenues are split among multiple government  funding streams, including local library budgets,  the federal Library Services and Technology Act  (see the LSTA ) the HomeworkKansas program funded by that state's legislature,  and – one prime example of the political risk of drawing on political assistance - the work of San Diego Congressman Randy “Duke” Cunningham (just to suugest that this is not an isolated risk, online EMO K12's reliance on Bill Bennet also comes to mind).

The strategy is pretty damn smart. It has allowed Tutor.com to build its cacacity viz other government-funded tutoring firms in a protected, non-competitive environment. It has marketed to institutions reather than individual parents. The firm has dealt with government education agencies as customers rather than adversaeries, and arguably improved libraries' relevance to local communities and competitiveness in their own battles for a share of the tax revenue pie. Moreover, Tutor.com has incurred none of the administrative costs SES providers' bear to demonstrate attendance, nor has it been held responsible for improving student test score. Cigale deserves support from investors just for his strategic aptitude.

But it also points to what the firm needs to do next.  At some point, Tutor.com will need to demonstrate efficacy. It will need to show that students who use its services perform better on state tests, or improve more, than similary situayed student who do not make use of the services. Why?

First, the federal LSTA falls within the jurisdiction of the House and Senate education committees. SES providers are either going to try to move into Tutor.com's territory or point out the inconsistency between their requirements under NCLB SES and Tuttor.coms under LSTA when both programs are ulimately aimed at the same objective. The drive for educational programs based on "what works" will not end at the boundary between schools and libraries.

Second, Intel Capital and company are investing with an exit in mind. One option is almost certainly a public offering, although post Sarbannes-Oxley, not necessarily on the NYSE or NASDC. The value of that offering depends on Tutor.com's projected future. If the library market has plenty of room for expansion, it is only a matter of time before several other effective online tutoring firms enter the market with competitive programs, so Tutor.com's future value depends in no small part on its percevied ability to grow beyond its niche.

That leaves the consumer market and public education. Both are filled with established and new competitors each with a slightly different value proposition and base.

On the consumer side, results confirmed by scientific evaluation count less than brand identification. If they are aware of the deal, Sylvan, Kumon and Huntington are probably not quaking in their boots right now. (Tutor.com's position in community libraries might help here (but "why buy the cow if you can get the milk for free" (unless you plan to exit the library market?))) And given how venture capital tends towards pack-like behavior, the Intel investment could well be taken as an alpha-male signal and so spur copy-cat deals in tutoring firms like SmartThinking and a half-dozen India based firms with a foothold in the U.S. k-12 market now, to say nothing of the tech plays offered by firms like Apangea and Quantum. (It happened with the EMOs in the 1990s and the SES providers in the early 2000's, why not here?)

But on the government side, if the funding is federal, tutoring providers face an ever higher standard of proof. And, it is worth considering that when primarily government-funded tutoring firms are able to establish scientifically validated claims of improvements in academic performance, they might use that competitive advantage  to enter the consumer market.

For some reason, school improvement providers of all types believe that demonstrating efficacy by the current standards of k-12 program evaluation is enormously complex and terribly expensive. But providers don't have to defend a doctoral dissertation in psychometrics; they need to meet an emerging government standard. Week after week, the fairly simple studies that pass muster at the U.S. Department of Education's What Works Clearinghouse are summarized in New Education Economy® (see this week's). After reading a few, George, his management team - and above all his investors should see that creating a viable option to enter the NCLB funding stream is a relatively inexpensive matter, and the investment would also be relevant to consumer marketing. This is a place on the ticket to Tutor.com's future that needs to be punched, and its really pretty easy to get started on it.