Following the Money in Education: Geography of Equity for Education

By Mitch Leventhal and Ina Tang

As we indicated in our first installment, we are interested in understanding the landscape of private equity investment into educational enterprises – those both delivering instruction (in some cases, schools) and those providing ancillary services in support of schools, educational institutions and related enterprises, an industry sector that we call the Eduspace.

Eduspace industries are human capital intensive – both in services provided and resources needed – and can be advantaged by clustering near concentrations of higher education institutions.

Last time, we provided an overview of the landscape.   Today, we are going to focus on the geography of the equity investors as well as the investees.  We want to understand where private equity firms are putting their money and see if there is any correlation between the headquarters of the firms and their investments, or other considerations which drive the geography of investment.

Of the 266 U.S. private equity firms that we have identified as of June 2013, close to half (46%) are located in the Northeast, far exceeding other regions.  Twenty-five percent (25%) of the firms are headquartered in New York, 23% in California, and 10% in Massachusetts.



California is the center of gravity hub for equity firms with a technology focus in general, which is not surprising given the dominance of Silicon Valley.  In contrast, New York is home to many firms with diverse industry portfolios. Some top New York firms, ranked by number of education investments, include Leeds Equity Partners, Quad Ventures, Rethink Education.  As mentioned in an earlier analysis, a handful of private equity firms – 11 identified as of today – specialize in the eduspace. Interestingly, New York also houses six (6) of these eduspace-focused firms.

But where are these equity firms investing?  In order to start painting this picture, we looked at the headquarters location for recipient companies as listed on the equity firms’ websites. Despite the concentration of equity firms in New York and the Northeast, our research establishes that California is in the lead as a destination for eduspace investment.  Taken together, private equity firms have invested in 105 such companies in California, 54 in New York, and 35 in Massachusetts.  Non-US companies are also attracting significant attention from American equity investors; about 10% of companies receiving investment are headquartered overseas.  These recipients of investment are more evenly dispersed throughout the regions compared to the private equity firms – 28% are based in the West, 26% in the Northeast, and 25% in the South.



Interestingly, investment is gravitating to the various eduspace sectors similarly among New York, California and Massachusetts. This seems to indicate that no state has yet identified a significant advantage over any other, in any one sector.  These outcomes are the result of laisser-faire market forces and are not driven by public policy.  However, it does appear that an opportunity now exists for states and localities to take control of the situation and promote differential development based on unique local advantages in the marketplace.


© 2013 Mitch Leventhal and Ina Tang