I lose a little faith in the next generation every time I see a young kid, eyes glued to an iPad, fingers furiously tapping away at evil green pigs. It’s enough to make me crave the good ol’ days before the App Store was invented.

Entrepreneur Andy Russell believes most apps and games for children aren’t nurturing learning and are as addictive as candy. He refers to Angry Birds as a “digital pacifier.” So Russell’s company, LaunchPad Toys, is developing games that are grounded in “constructionist learning frameworks” — an insidery term for learning-by-creating.

LPT-ShrekPhotoShoot-015LaunchPad has traditionally focused on creating digital experiences for kids ages six to 12, but it has just launched a new app for kids as young as three. The team partnered with DreamWorks Animation to develop the new Toontastic app for iPad and iPhone [right], which features characters from the new Shrek movie.

Younger kids need more “spark and a catalyst to kick off their storytelling,” said Russell, so the new app features story-starter videos that introduce a problem or conflict. Kids get to decide what happens next.

“The goal is to make content creation accessible to kids at a very young age,” Russell explained.

Its first iPad app, Toontastic, won the approval of teachers, and hit the iTunes hall of fame. The app was designed in partnership with Stanford’s graduate school of education (Russell is an alumni) and the San Francisco’s Children’s Museum. The app teaches storytelling skills through animating cartoons. Russell says kids have already created 5 million cartoons.

886172_519812701390690_1856391850_oLaunchPad [left] aims to be “the disruptor” in the $15 billion creative toy market. To develop new apps and games, the startup pulled in funding from venture capital firm General Catalyst and Obvious Corp, among others. “We think ‘edutainment’ will be huge — especially for kids,” General Catalyst’s Niko Bonatsos told me. “The long-term vision is neat, too.”

DreamWorks Animation regularly teams up with mobile gaming giants like Rovio (creator of Angry Birds), but it is increasingly open to partnering with ed-tech startups.

“This is a great example of how DreamWorks Animation is embracing new ways of connecting with our audience,” said Chris Hewish, head of global interactive for DreamWorks Animation. Hewish said his team views LaunchPad as one of the “smaller studios that have large ideas.”

The Toontastic app makes money through an in-app purchase, but Russell said he “goes back and forth” on the revenue model. Some app developers have made money when kids buy virtual goods (and parents’ credit cards are attached). According to Russell, kids are purchasing Smurfberries in a manner akin to pumping quarters into a slot machine. “I view that as taking advantage of young children,” he said.

To avoid controversy, the revenue model for the junior app is a little different. For a one-time purchase of $2.99, kids or adults can download the app and access cool features. It’s designed for kids to play together in a small group — each player can pick a Shrek character and animate it.

The LaunchPad Toys team see an amazing opportunity to help kids learn and grow up to become independent thinkers. It’s a similar line of thinking to Salman Khan, the-educator-turned-entrepreneur behind online course provider Khan Academy. At an ed-tech conference yesterday, Khan remarked that we need a “large creative class” and that students have to learn to question authority rather than sitting passively in classrooms.

“These tablet devices are like digital arts and crafts,” said Russell. “I want to turn kids into makers, producers — and not just content consumers.”