Giving away money is more complicated than it looks. Just ask Marchela Iahdjian, education program manager at the Taco Bell Foundation, in Irvine, Calif. Now in its fifth year, the foundation has given “Live Más Scholarship” to about 1,000 U.S. residents between 16 and 24. This year alone, it plans to disburse $6 million to about 200 new recipients and about 300 existing ones.
Before choosing recipients, Iahdjian and her team will watch two-minute videos submitted by more than 11,000 applicants. They will also need to manage which schools receive what scholarship amount, not to mention staying in touch with recipients who may need more resources outside of finances, like mentoring, to navigate college.
To manage these tasks, the foundation contracted with a company called Kaleidoscope, a Minneapolis-based provider of a platform that connects companies, foundations and high-net-worth individuals offering scholarships and grants to students seeking financial aid.
In a fitting piece of news for a company that connects students with financial aid, Kaleidoscope has received a Series A round of funding from Rally Ventures. This brings the company’s total amount raised to $6 million since its founding in 2016.
Khan Academy explains different types of scholarships
How Kaleidoscope works: Private scholarship and grant sponsors pay a license fee to host their scholarship application on the platform, says Greg Dehn, founder and CEO.
To apply for a scholarship, students make accounts and upload their essays and other information requested by sponsors. Students do not pay to use the platform and can use their profiles to apply to multiple scholarships. He hopes that Kaleidoscope can be a force against the $1 trillion-plus student debt crisis that looms over most who attend post-secondary institutions. “Loans are an outdated ineffective solution,” says Dehn, 44. “This is an alternative.”
Each year, students receive more than 1.7 million scholarships and fellowships funded by foundations, companies and philanthropists for a total value of more than $7.4 billion, according to Saving for College, an online resource for savings plans.
Scholarship providers receive access to tools to manage online fundraising and donor relationships, which sponsors increasingly use to keep in touch with students to make sure they don’t hit other obstacles on the way to a degree, Dehn says.
For example, Kaleidoscope can allow scholarship sponsors to send texts to students to check in and develop portals for past scholarship recipients to interact with new ones.
Organizations that offer scholarships on the platform include the PA Foundation—a nonprofit focused on physicians assistants—and the Corvias Foundation, which has a $5,000 scholarship for spouses of active-duty service members.
Kaleidoscope joins a handful of other startups that have also recently raised venture capital to help students access scholarships. Among them is Raise.me, a San Francisco startup that raised $15 million in 2018 to help students qualify for scholarships offered by colleges and universities, based on meeting academic and extracurricular achievements.
In the last three years, the number of renewable scholarships on Kaleidoscope has grown about four times, according to Dehn says his platform also supports 529-type financial plans (401(k)s for college payments instead of retirement). He believes those plans will grow in popularity and is preparing his platform to accept more in the future.
Dehn says he’s noticed some trends since launching the platform. The average amount per scholarship has increased, and he sees more scholarships for specific races, genders, fields of interest and locations. He sees more small businesses and locally-focused foundations creating scholarships to help students in their communities. And more providers are interested in renewable scholarships and providing additional services to keep recipients on track to graduate, much like the Taco Bell Foundation.
In fact, Kaleidoscope and the Taco Bell Foundation will launch a web portal later this year for past and current scholarship recipients to communicate and network, says Iahdjian. “We’ll be able to use that as a channel to distribute scholarships, share news, get scholars connected to each other,” she says. “It will be a channel to connect in the real world.”