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The for-profit e-learning company K12 Inc. grew 40 percent last year, generating $385 million in revenue by providing virtual courses to 70,000 students across the country. Connections Academy, another such provider, generated about $120 million in revenue serving up online courses to some 20,000 students. And last month, the education technology company PLATO Learning announced that it is now offering online Advanced Placement courses, marking the first time the company will do so as part of its courseware for school districts.

Experts say for-profit providers of online courses鈥攍ong seen as an option for home-schoolers and a potential rival to public schools鈥攁re breaking into the public education mainstream as more schools mix face-to-face classes and online courses to expand their curricular offerings. With demand for that 鈥渂lended鈥� approach expected to grow, other players in the online-coursetaking marketplace, such as Apex Learning, Aventa Learning, Compass Learning, and Kaplan Virtual Education, are also seeking business in public schools.

鈥淢ost of the growth is in hybrid environments,鈥� said Michael Horn, the executive director of education at the Mountain View, Calif.-based and a co-author of Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns, referring to the combined use of online and face-to-face courses in schools. 鈥淭here are lots of definitions of what this means.鈥�

鈥楤ig Question Mark鈥�

But the growth of such companies has also attracted critics, who say schools should take a closer look at the benefits the providers tout.

鈥淚 haven鈥檛 seen anything in this industry that is special in terms of its pedagogy or its delivery,鈥� said Alex Molnar, the director of the Education Policy Studies Laboratory at Arizona State University in Tempe.

Mr. Molnar said that hooking up school districts with online courses to fill gaps in curriculum is certainly helpful, but that using for-profit companies to do so is unnecessary.

鈥淲hat benefit does a for-profit entity provide over and above what could be readily provided at a university extension?鈥� he said. 鈥淲hy wouldn鈥檛 you use a nonprofit publicly supported university that鈥檚 transparent and politically accountable?鈥�

Henry M. Levin, the director of the National Center for the Study of Privatization in Education, based at Teachers College, Columbia University, added that online coursetaking may be a good option for many schools and students, but that more independent research is needed, especially at the K-12 level, to evaluate its effectiveness.

鈥淚t鈥檚 a big question mark out there right now,鈥� Mr. Levin said. 鈥淢ore claims are being made than are justified. Both the effectiveness and the cost side of [online coursetaking] have really not been studied carefully.鈥�

Despite such concerns, many small companies are also entering the online-course market.

鈥淎 lot of e-learning CEOs are educators,鈥� said Susan D. Patrick, the chief executive officer of the Vienna, Va.-based International Association for K-12 Online Learning. 鈥淭hey鈥檙e looking for a better way.鈥�

Part of that 鈥渂etter way,鈥� she added, is bringing research and development and economies of scale along, too.

That鈥檚 the aim of K12 Inc., based in Herndon, Va. Ron Packard, who has a master鈥檚 degree in business administration and once worked at Goldman Sachs, founded the publicly traded company 10 years ago. At the time, while working as the CEO of Knowledge Schools, which provides early-childhood education services in community- and employer-based child-care centers and operates several charter school companies, he saw an opportunity to deliver education to students no matter where they lived.

Mr. Packard said his business role model is Heinrich Emanuel Merck, who founded the giant pharmaceutical company Merck, which is expected to generate more than $45 billion in revenues in 2010.

鈥淗e always said that he didn鈥檛 worry about money or profits,鈥� said Mr. Packard. 鈥淗e worried about delivering the best medicine. And we worry about delivering what鈥檚 best for each child.鈥�

Mr. Packard and others believe that for-profit schools offer a decided advantage: access to capital. That translates, they say, into the ability to scale up at a much faster鈥攁nd more cost-effective鈥攔ate than public schools can.

The biggest challenge, though, is developing course content from scratch, which cost K12 Inc. $30 million last year. Besides the cost of developing content, money is also needed for K12鈥檚 technology needs.

Some critics have said that such content-development costs have prevented for-profit online course providers from adding the kinds of multimedia features that are the hallmarks of high-quality online courses. They say that in many cases, traditional content is merely placed online.

Even e-learning proponents concede content costs are a barrier.

鈥淐ontent is very expensive,鈥� observed Michael Moe, a co-founder at the Chicago-based venture-capital firm NeXtAdvisors LLC. But Mr. Moe and other venture capitalists think there鈥檚 a better road for e-learning companies to take in the years ahead: using open content available on the Internet.

鈥淰ery little content will be paid for,鈥� he predicted. 鈥淚t will come from subject-matter experts everywhere,鈥� and the companies will be able to package and deliver the content to schools and other customers.

Mr. Moe sees significant growth ahead for the e-learning industry.

And that growth is happening well beyond the borders of the United States. The venture-capital firm Sequoia Capital, which funded Google, PayPal, and other famous startups, has already financed companies in India鈥檚 fast-growing e-learning market.

Higher Ed. Partnerships

Though K12 Inc. offers individual courses, its core mission is starting full-time virtual schools. It already operates 37 virtual schools in 25 states.

Whether working with a state or a district, full-time virtual schools typically start with a request for proposals. Then a contract is signed鈥攆or one year, at many e-learning companies鈥攏oting service-level requirements, courses, and teachers. Virtual schools can take anywhere from months to years to get up and running.

鈥淭hey can be more challenging from a regulation standpoint,鈥� said Peter Stewart, the senior vice president of school development at K12. 鈥淎 hybrid program鈥濃�攊n which a regular school blends face-to-face and online courses鈥斺�漣s more familiar,鈥� he said.

Of course, both models come with costs. K12 estimates it costs $6,000 to $7,000 per student to run a full-time virtual school, and about $9,000 per student to operate a hybrid program.

K12 is also leveraging higher education resources to build its business. Recently, it forged a partnership with Middlebury College in Vermont to create online foreign-language programs. Called Middlebury Interactive Languages, the beginning French and Spanish courses are now available to high school students. K12 is also folding videos and simulations into the content. (鈥淰t. College, K12 Inc. Forge Language-Learning Partnership,鈥� May 19, 2010. )

The new venture taps into surging demand among high school students to take online courses to prepare for college. More than a million precollegiate students took an online course during the 2007-08 school year, a 47 percent increase over the previous year, according to the , a research and advocacy group based in Newburyport, Mass.

鈥淭here鈥檚 a huge need nationwide that鈥檚 not being met,鈥� said Michael Geisler, Middlebury鈥檚 academic-development director.

Technology and Curriculum

Connections Academy was started around the same time as K12. 鈥淲e saw what K12 was doing,鈥� said the company鈥檚 chief executive officer, Barbara Dreyer, a former venture capitalist who co-founded Connections. It now has full-time virtual schools in 14 states and also sells individual courses.

The privately held company, which has grown at a rate of about 35 percent a year, is now profitable, said Ms. Dreyer. A small number of private-equity investors, including one of the biggest global players, Apollo Management, and the smaller firm Sterling Partners, back the company. Ms. Dreyer is a veteran of many other startups, including the online-research firm Ntercept.

But she said that building a company that provides online courses is not easy.

鈥淵ou have a lot of investment in technology and curriculum,鈥� she said. 鈥淲e just now have positive profitability. It has a lot to do with scale.鈥�

Her goal, she said, is guiding the company to more than 35 percent growth a year.

鈥淲e鈥檙e moving beyond full-time virtual schools,鈥� added Ms. Dreyer, noting that the number of hybrid Connections Academy courses in high schools is growing by more than 50 percent a year.

Like K12, Connections has encountered hurdles in the virtual school market.

鈥淪ince 2002, we鈥檝e worked on getting a full-time virtual school in Georgia,鈥� said Mickey Revenaugh, a senior vice president at Connections Academy. 鈥淭here are lots of policy decisions before they can be created.鈥�

For example, Connections works closely with a lobbyist in Oregon, where there are enrollment caps on virtual schools.

鈥淲e make sure that policymakers have the most up-to-date information.鈥� Ms. Revenaugh said. Getting a virtual school鈥檚 operations under way can take anywhere from one month to more than a year, she said.

Much like what K12 is doing with Middlebury College, Connections is partnering with colleges to offer online courses for college credits to high school students.

New players are also breaking into the e-learning industry.

Kaplan Virtual Education, based in Hollywood, Fla., was launched in 2007 by its 78-year-old parent company Kaplan Inc., which is owned by The Washington Post Co. Now the e-learning company has full-time virtual schools in seven states and provides hybrid courses in six states. The course catalog numbers over 200.

鈥淲e saw this as a natural extension,鈥� said Charles Thornburgh, the president of Kaplan Virtual Education. 鈥淜aplan was already working with school districts for state exams.鈥�

Mr. Thornburgh is a seasoned entrepreneur, having started such education technology companies as ClickSafety.com, which offers online safety training.

鈥淥ur mission [at Kaplan] is to serve underserved populations,鈥� Mr. Thornburgh said. 鈥淭hey need another alternative.鈥�

One of Kaplan Virtual Education鈥檚 top services, he said, is data tracking. Teachers are constantly updated on student performance by tracking assignment completion and how student time is spent online. 鈥淭eachers can see what categories students are failing in,鈥� he said, 鈥渁nd then there鈥檚 an intervention.鈥�

Banking on Hybrids

Some for-profit online-course providers are banking primarily on the success of hybrid models.

Take Apex Learning. Currently funded by various venture capitalists, Apex was started in 1997 by Microsoft co-founder Paul G. Allen, through his private investment firm Vulcan Inc.

CEO Cheryl Vedoe was recruited by Apex investors in 2002. She was formerly a software engineer who moved into marketing and then educational technology. Ms. Vedoe declined to disclose specific revenues or profitability for the private company, but said that revenues have grown 50 percent over the past few years.

She added that Apex鈥檚 primary growth comes from students who are academically at risk and are taking online credit-recovery classes to stay on track to graduate.

Apex has developed more than 100 courses sold to 600 school districts last year. The company鈥檚 success is partly driven by the venture capitalists who sit on Apex鈥檚 board, including lead investor MK Capital, a venture-capital firm with offices in Chicago and Los Angeles.

鈥淭hey look at how aggressive we are,鈥� Ms. Vedoe said of those investors. 鈥淒o we understand the risks in reaching our plan?鈥� Venture capitalists also help brainstorm and look at the bigger picture at Apex, and they offer business perspectives from a wide range of companies and industries.

Given the lessons learned from other companies, Ms. Vedoe rejects the idea that for-profit schools taint e-learning because of their motivation to make money.

鈥淭hey鈥檙e more objective and bottom-line-focused,鈥� she argued. 鈥淭here鈥檚 a sense that education is all about not-for-profit schools. But schools buy furniture, contract for school buses, and buy school lunches.鈥�

Still, some educators question the argument that for-profit providers are more clear sighted and efficient than nonprofit ones.

鈥淵ou have examples out there of companies that have great tools, but do they have the teachers or instructional support [that students need]?鈥� said Bryan Setser, the chief executive officer of the , a state-sponsored online-course provider.

Apex has a direct sales force of 25 to 30 people that contacts superintendents and other school administrators about its e-learning course offerings. Apex Learning鈥檚 list price for access to all its courses is $200 per student per year. The company also offers volume discounts, and contracts generally last one year.

Districts that sign a contract with Apex can be online quickly鈥攚ithin a few days鈥攕ince the technology piece is outsourced rather than customized in-house.

Aventa Learning, a division of KC Distance Learning that focuses on hybrid e-learning, says it is also seeing strong growth.

鈥淏lended learning is where it鈥檚 going,鈥� said Caprice Young, the chief executive officer of KC Distance Learning, a subsidiary of Knowledge Learning Corp., that is based in Portland, Ore. 鈥淲e鈥檙e seeing schools take whole courses online as a group.鈥�

Ms. Young was once a vice president at Knowledge Universe, a holding company co-founded by the financier Michael Milken that has stakes in more than 50 education companies, including KC Distance Learning. But she cut her teeth as the CEO of the .

鈥淚 believe that every kid deserves an equitable education,鈥� Ms. Young said. 鈥淭hat鈥檚 why a lot of us are here. We were misfits in traditional schools.鈥�