Ed Tech Startup Behind L.A. Schools’ Failed $6M AI Chatbot Files for Bankruptcy

The education technology company behind Los Angeles schools’ failed $6 million foray into artificial intelligence was in a Delaware bankruptcy court Tuesday seeking relief from its creditors and to sell off its meager assets before shutting down entirely.

The latest chapter in AllHere’s dizzying collapse revealed more information about the once-lauded company’s finances and its relationship with the Los Angeles Unified School District. But the hearing failed to answer key questions about why AllHere went under after garnering $12 million in investor capital, a blizzard of positive press and a contract with the nation’s second-largest school district to create “Ed,” the buzzy, AI-powered chatbot.

During the hearing held over Zoom, one of AllHere’s only remaining executives, former chief technology officer Toby Jackson, struggled to explain why the company paid ousted CEO Joanna Smith-Griffin $243,000 in expenses from the past year and owed $630,000 to its largest creditor, education technology salesperson Debra Kerr.

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“I don’t know exactly the nature of all of [Smith-Griffin’s] expenses. She was the CEO and so that is one of the outstanding questions that we also have,” Jackson said when quizzed about the six-figure amount by the bankruptcy trustee. “She did do quite a bit of travel as the CEO of the company.”

Similarly, Jackson said he had no invoices to substantiate the $630,000 debt to Kerr, who is a longtime associate and social media booster of Los Angeles schools Superintendent Alberto Carvalho, dating back to his days leading Miami-Dade schools. Kerr’s son, Richard, is a former AllHere account executive who told The 74 this week he pitched the AllHere deal to Los Angeles school leaders.

“I’m not really sure what exactly that entails,” Jackson said of Kerr’s claim.

Moments later, Kerr chimed into the Zoom hearing, arguing the company owed her the money after she helped AllHere close the lucrative deal in L.A. Kerr said she was never paid her commission from the first payments that LAUSD made to AllHere under the contract.

The district has said it paid AllHere roughly $3 million of the $6 million for the chatbot, which was taken offline shortly after AllHere announced in June that it was in financial distress and had furloughed most of its employees.

“I never did collect any commissions and it’s in the contract based on commission percentages that would have been made on any sales accrued,” Kerr told the trustee.

Smith-Griffin, who now lives in North Carolina, was not present for the Zoom hearing and could not be reached for comment. There were indications in the hearing that her separation from AllHere was not amicable, including that the former CEO has refused to disclose the password to her $500 company-owned laptop, one of its few remaining assets.

Court records show that Jackson, now the head restructuring officer, earned $305,000 a year in his role with the company before it shuttered, nearly three times the $105,000 paid to Smith-Griffin, a Harvard University graduate who built AllHere in 2016 with financial backing from the prestigious institution.

Filed in mid-August, AllHere’s Title 7 bankruptcy petition strengthens doubts that it could find a new owner to take over its mission as an AI pioneer in K-12 schools. That scenario was put forth by a Los Angeles school district spokesperson earlier this year with the assertion that “Ed” could still be successfully launched as a personalized, interactive learning acceleration tool for all of the district’s roughly 540,000 students and their families.

Instead, court records show AllHere’s few remaining employees are preparing for “the wind down of the company” and officials acknowledged during Tuesday’s proceeding that AllHere was unable to fulfill the terms of its contract with L.A. Unified.

A lawyer representing the school district was present at the hearing. In a statement Tuesday evening, a district spokesperson said LAUSD is “evaluating its next steps to pursue and protect its rights in the bankruptcy proceedings.”

Kerr and Carvalho

Ties between Kerr and Carvalho go back to at least 2010, when she worked for the behemoth education company Pearson. Back then, she gave Carvalho and Miami students what she called “front-row access” to an original print of the U.S. Declaration of Independence. Ever since, Carvalho, who took over leadership in Los Angeles in 2022, has been a regular staple on Kerr’s social media.

A LinkedIn post promoting L.A.’s chatbot noted that the tool worked in partnership with services from seven companies including Age of Learning , the creators of digital education program ABCmouse and where Kerr previously worked as head of sales.

Kerr didn’t respond to requests for comment but her son, Richard, who began working at AllHere in 2022, said among the school district deals he worked on for the company was the chatbot project in Los Angeles.

“We had a big deal in L.A. and the investors, I guess, didn’t have patience to wait to get paid from it,” he said.

Kerr said he met with education officials in Los Angeles and “did a lot of work” helping the company secure the ageement. When asked about his mother’s role in closing AllHere’s contract in Los Angeles, Kerr said “she had a lot to do with it,” but didn’t elaborate further.

A statement from the L.A. district spokesperson said that “Los Angeles Unified launched a competitive” request for proposals that received “multiple responses,” which eventually led to AllHere’s selection. This spring, Carvalho went on the road with Smith-Griffin to promote “Ed,” billing the chatbot personified by a yellow sun as being “unprecedented in American public education.”

Before he was furloughed, Richard Kerr said AllHere was a great place to work — in part because of Smith-Griffin’s leadership.

“It’s very unfortunate what happened to Joanna. I thought she was on a great path and she was doing an amazing thing,” he said, adding that she made a mistake when she “brought in the wrong investors that were pretty vindictive” and decided to cut short the company without giving it a proper chance.

AllHere’s former senior director of software engineering, who became a company whistleblower, told The 74 earlier this year that AllHere struggled to meet the terms of its contract in Los Angeles and took shortcuts that violated bedrock student privacy principles and district rules. Both the district’s independent inspector general and top administrators have launched separate investigations into what went wrong with AllHere.

Even though his mother, Debra Kerr, was on the Delaware court’s Zoom call Tuesday, Richard Kerr said he was unaware his former employer had filed for bankruptcy.

What’s left

The company’s few remaining employees and board members, including former Chicago Public Schools Chief Executive Janice Jackson, have not made themselves available for comment.

AllHere investor Andrew Parker, who was on vacation Tuesday and didn’t attend the court hearing, now serves as the company’s secretary. In addition to Janice Jackson, other players who signed AllHere’s bankruptcy petition are Andre Bennin, a managing partner with the investment firm Rethink Education , and education consultant Jeff Livingston.

Even though Smith-Griffin is no longer with the company, court records show she still has a significant stake, holding 81% equity in its common stock. Rethink Education was by far the company’s biggest outside investor.

Other top creditors, according to court records, are the law firm of Gunderson Dettmer at nearly $275,000, the information technology company Svitla Systems at $190,000 and $123,000 to well-known education consulting firm Whiteboard Advisors

Earlier in the summer, The 74 spoke with Gunderson Dettmer partner Jay Hachigian, who said he had only worked with AllHere early in its formation. He didn’t respond to requests for comment this week about his firm’s large outstanding balance with the company. Whiteboard Advisors spokesperson Thomas Rodgers said in an email that his firm previously worked with AllHere but its role is covered by a nondisclosure agreement.

Court records show the company earned $2.4 million in gross revenue last year but had generated much less since January, about $587,000.

At the time of bankruptcy, court records show the company had active contracts with just 10 school districts, including those in Cincinnati, Miami and Weehawken, New Jersey. Only Weehawken sought to use the chatbot platform created for LAUSD, while the rest relied on an earlier text messaging tool designed to combat chronic absenteeism.

Despite landing millions of dollars in backing from a group of social impact investment firms, several of which cited their enthusiasm for investing in AllHere specifically because it was led by a Black woman, court records reveal the company’s coffers are nearly empty. AllHere claimed nearly $2.9 million in property and just shy of that — $1.75 million — in liabilities. The company’s actual assets, Toby Jackson acknowledged in court, are much lower.

It claimed an “unknown” value on pending patents, which Jackson conceded Tuesday had been denied, and $2.88 million for licenses, franchises and royalties for its LAUSD contract. Other assets, including its website and chatbot source code, were also listed at a value of “unknown.”

Jackson said the Los Angeles contract was valued at $2.88 million for the remaining outstanding balance the district owes to fulfill the agreement — money he admitted AllHere would be unable to collect because it has not “held up our part of the bargain in the contract” and is closing shop.

Financial statements to the court show AllHere had $18,000 in savings and just $500 in physical assets: the value of Smith-Griffin’s work laptop, whose contents remain outside the tech company’s reach.

“We have not been able to obtain the credentials for Mrs. Smith’s laptop. We did not receive any cooperation with that,” Jackson testified Tuesday. “She has been cooperative with some other matters, but not with this one.”