A Sector of Interest: Institutions & Schools

By Mitch Leventhal and Ina Tang

In our first article, we briefly described the industry sectors comprising the Eduspace.  We divided the industry into six (6) sectors and seventeen (17) subsectors. In this installment, we are going to focus on the sector which is most associated with the industry in popular consciousness –Institutions and Schools.  To better categorize this sector, we have further divided it into four (4) subsectors, distinguished by level of instruction:

Early Education and Childcare

This subsector consists of businesses that provide early education and childcare.  Examples include Brightside Academy, Acelero Learning and Childtime Childcare.

K-12 Schools

K-12 schools provide classroom and/or online instruction to school age students.  These compete with the public education system, and tend to serve a specific demographic group such as dropouts, high achievers, religious students and the affluent who opt out of the public system.  Examples of K-12 schools include the Avenues World School, Educational Services of America and Camelot Education.

Charter Schools and Charter Management Organizations

Charter management organizations are for-profits or non-profits that run and manage publicly funded independent schools.  Many of them have received private money from nonprofit ventures that invest philanthropic capital in education.  Some representative charter management organizations include Achievement First, KIPP Schools, and Rocketship Education.

Higher Ed Schools

Higher Ed schools are nationally or regionally accredited, private, for-profit institutions that offer education beyond high school, such as vocational schools, trade schools, and degree granting institutions. Examples include Capella University, DeVry University, University of Phoenix, Laureate Education and Education Corporation of America.

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Of the 266 U.S. private equity firms that we identified as of July 2013, 161 have made investments in Institutions and Schools.  Some of the most active firms in this sector are specialized nonprofit investment ventures such as CharterSchool Growth Fund, NewSchools and Silicon Valley Social Venture Fund.  CharterSchool Growth Fund, as indicated by its name, specializes in charter school investment. This fund has 40 companies serving more than 160,000 students in its portfolio.  For-profit funds in this sector, ranked by number of education investments, include Providence Equity Partners, Quad Ventures, Sterling Partners, Palm Ventures and Leeds Equity Partners.

Based on our examination of publicly available sources, these capital providers have together invested in approximately 200 institutions and schools. Among companies receiving funding, higher ed institutions dominate the interest of equity investors.  This should come as no surprise, given the enormity of the for-profit higher education industry and its global growth potential.  Charter schools and related management companies come in second, as more investors focus on improving public education.

Although Institutions and Schools currently constitute the most popular sector for investment in the Eduspace, we are not very optimistic about its future.  For-profit higher education continues to face regulatory challenges and structural changes, which have chilled investor interest.  As online learning becomes more prevalent, and as ‘MOOC mania” advances, students have increased options to take courses from renowned non-profit institutions rather than from for-profits.  Public K-12 does offer significant profit potential, but not from institutions and schools themselves.  Profit is more likely to derive from service providers that offer curriculum, educational software, and student assessments.  To attract potential investors, institutions and schools will need to be uniquely innovative while working on building a strong brand and lowering costs.

@ 2013 Mitch Leventhal and Ina Tang


Private Equity for Ancillary Services to the Higher Education Industry

By Mitch Leventhal and Ina Tang

In an era of tight budgets, institutional leaders in higher education (and post-secondary) are increasingly pressured to improve operational efficiency and reduce expenditures.  To this end, colleges and universities are tapping into private sector vendors to provide ancillary services which had once been delivered in-house, ranging from bookstores, administrative software solutions, distance learning technologies, marketing and student recruitment.

This post-secondary sector is enormous. The National Center for Education Statistics reports a total of 4,706 institutions in 2012, serving 21 million students in the United States. This sector – excluding the network of ancillary service companies which it supports – has over $400 billion in annual revenue. The enormity of this industry has attracted high profile investors into the for-profit college sector.

As outsourcing has become more widely accepted, investor attention has started to shift toward companies that provide ancillary services to both traditional and for-profit higher education institutions. But unlike for-profit schools, educational technology companies and MOOCs which have received intense media attention, less glamorous companies which provide back-end and support services to schools, colleges and universities have largely remained out of the limelight.

Our study of private equity companies and their eduspace investments has started to clarify the role of private equity in this ancillary services sector, which we are calling the Higher Education Services (HES) sector. Three types of HES companies are dominating the interest of equity investors at this time.

First, marketing and recruiting solutions.  Colleges and universities are increasingly driven to increase enrollment – both domestic and international – to meet financial goals, but global marketing and recruitment, in particular, has high costs and requires specialized expertise. All but the most elite institutions must resort to private sector providers to serve their global recruitment needs.  And some institutions, which formerly serviced their own needs in-house, are finding that specialized firms have the ability to perform the same tasks better, and at less cost, thereby freeing up resources for other strategic needs.

Earlier this year, New York-based private equity fund Leeds Equity Partner invested over $100 million for 25% of INTO University Partnerships Limited, which enters into long-term contracts with universities around the world to increase student capacity and support greater mobility for international students.  This large bellweather investment signaled the seriousness with which informed investors consider the education services industry.

Second, higher education administrative solutions.  These companies provide administrative solutions to colleges and universities and are flourishing because they enable schools to forgo or cut back on their information technology services or infrastructures, which are very costly. These costs are particularly onerous for smaller institutions which have limited bargaining leverage and who have difficulty achieving economies of scale.

One example of such an investment is Ellucian. In 2011, Hellman & Friedman, a leading private equity investor in the vertical software and information services industries, acquired SunGard Higher Education businesses from SunGard Data Systems Inc., for an aggregate cash purchase price of $1.775 billion.  The private equity firm combined SunGard Higher Education with Datatel, an existing portfolio company, into a new company, Ellucian, which offers administrative along with other technology solutions to higher education institutions. Ellucian now has over 2,400 institutional customers in 40 countries.

Finally, distance learning solutions. These companies provide institutions with the technologies, infrastructure support and resources to transform their existing courses for online delivery. Some colleges find the need to offer their courses online to reach a broader audience as online degree and certificate programs become more popular. Others – the State University of New York, in particular – are initiating strategies to use distance education to accelerate and improve completion rates for traditional students. Still other institutions are experimenting with MOOCs, or massive open online courses, to extend their reputations globally, while generating foreign exchange earnings. Institutions pursuing these strategies work with service companies such as Echo360, The Learning House, and Academic Partnerships to convert their traditional programs into an online format and market them to appropriate constituencies.  These service companies have all successfully raised capital from private equity investors.


The flow of private equity into the HES sector is an acknowledgement and affirmation of the rapidly growing trend of outsourcing higher education support services. Faced with declining budgets, colleges often find efficiencies by focusing on their core missions rather than managing business processes.  They outsource units that fail to provide the level of service needed, provide the service at too high a cost, or cannot adapt to changing market conditions, such as the globalization of higher education.  Given that colleges and universities are searching for more innovative, cost-effective and sustainable ways to deliver their services, it is imperative that entrepreneurs and investors work together to create solutions that will benefit the higher education sector.

@ 2013 Mitch Leventhal and Ina Tang

Private Equity Firms Investigated in Our Study

1 3i
2 500 Startups
3 Abry Partners
4 ABS Capital Partners
5 ABS Ventures
6 Accel Partners
7 Access Venture Partners
8 Advantage Capital
9 Advent International
10 AEA Investors
11 AEP Capital LLC
12 Albion Investors LLC
13 Alpine Investors LP
14 Alsop Louis Partners
15 Altos Ventures
16 American Capital Ltd.
17 Andreessen Horowitz
18 Anthem Capital Mgmt
19 Apprise Media
20 Arena Capital Partners
21 Argentum
22 Arlington Capital Partners
23 Atlas Ventures
24 Audax Group
25 Austin Ventures
26 Bain Capital Ventures
27 BAML Capital Partners
28 Banyan
29 BB&T Capital Partners
30 Berggruen Holdings Inc
31 Bessemer Venture Partners
32 Birchmere Ventures
33 Black Knight Partners
34 Brass Ring Capital
35 Brentwood Associates
36 Brockway Moran and Partners
37 Caltius Private Equity
38 Cambria Goup
39 Camden Partners
40 Capital Resource Partners
41 Carlyle Private Equity
42 Cartesian Capital Group
43 Catalyst Investors
44 Catamount Ventures
45 CCMP Capital Advisors
46 CCP Equity Partners
47 Centre Partners Management
48 Charles River Ventures
49 Charlesbank
50 Charter School Growth Fund
51 Charterhouse Group
52 Chicago Growth Partners
53 Chrysalis Ventures
54 CHS Capital
55 City Light Capital
56 Clearlight Partners
57 CNF
58 Collaborative Fund
59 Concentric Equity Partners
60 Crane Street Capital
61 Cyprium Investment Partners
62 DCA Capital Partners
63 DLJ Merchant Banking Partners
64 DW Healthcare Partners
65 Easton Capital Investment Group
66 Edelson Technology
67 Edison Ventures
68 Education Growth Partners
69 Endeavour Capital
70 Enhanced Capital Partners
71 Epic Partners
72 Equinox Capital
73 Excellere Partners
74 Expansion Venture Capital
75 Falcon Investment Advisors
76 Felicis Ventures
77 ff Venture Capital
78 Fifth Street Capital
79 First Analysis Corporation
80 First Round Capital
81 Firstmark Capital
82 Floodgate
83 Flybridge Capital Partners
84 Formation 8
85 Foundation Capital
86 Founders Fund
87 Friedman Fleischer and Lowe LLC
88 Frontenac Company
89 FTV Management Company, LP
90 GCP Capital Partners
91 GE Capital Equity
92 Gemini
93 General Atlantic LLC
94 Generation Partners
95 Glencoe Capital
96 Great Hill Partners LLC
97 Great Oaks
98 Greylock Partners
99 Gryphon Investor
100 Hagerty Peterson & Co.LLC
101 Halyard Capital
102 Harbert Private Equity
103 Hart Capital
104 Hellman & Friedman
105 HIG Private Equity
106 Highland Capital Partners
107 Hispania Capital Partners LLC
108 Housatonic Partners
109 HSBC Capital
110 Humphrey Enterprises, LLC
111 Huron Capital
112 ImagineK12
113 Insight Venture Partners
114 Integral Capital Partners
115 Ironwood Capital
116 J Burke Capital
117 J.W. Childs Associates L.P
118 Jacobson Partners
119 Jefferies Capital Partners
120 JMI
121 Kaplan Ventures
122 Kapor Capital
123 Kennet
124 KLH Capital
125 Kohlberg Kravis Roberts & Co. LP
126 KPCB
127 KRG Capital Partners LLC
128 La Salle Capital
129 Learn Capital
130 Leeds Equity Partners
131 Lerer Ventures
132 Levine Leichtman Capital Partners
133 Liberty Partners
134 Lightbank
135 Lightspeed Venture
136 Lincolnshire Management, Inc.
137 LLR Partners
138 Lombard Investments, Inc.
139 Macmillan New Ventures
140 Madison Capital Partners
141 Main Street Capital Corp
142 Mainsail Partners
143 Marlin Equity Partners
144 Marquette Capital Partners
145 Maveron
146 Maxim Partners LLC
147 Mayfield Fund
148 Meakem Becker
149 Merion Investment Partners LP
150 MHS Capital
151 MidOcean
152 Midwest Mezzanine Funds
153 Milestone Venture Partners
154 MK Capital
155 Monitor Clipper Partners
156 Montlake Capital
157 Morado Venture Partners
158 Murphy and Partners
159 Nautic Partners LLC
160 Navigator Partners LLC
161 NEA
162 New Atlantic Ventures
163 New Market Ventures
164 New Mountain Capital
165 New Profit Inc.
166 New Silk Route Partners LLC
167 New Vantage Group
168 New World Ventures
169 NewCastle Partners LLC
170 NewSchools
171 NLM Capital
172 North American Fund
173 North Atlantic Capital
174 North Hill Ventures
175 Norwest Equity Partners
176 Norwest Venture Partners
177 Noson Lawen Partners
178 Novak Biddle
179 O2 Investment Partners LLC
180 OATV
181 OCA Ventures
182 Olympus Partners
183 Opus8, Inc.
184 Pacific Community Ventures LLC
185 Palm Ventures
186 Pamlico Capital
187 Parthenon Capital
188 Patriot Capital
189 Penn Venture Partners LP
190 Permira
191 Pfingsten Partners LLC
192 Prairie Capital
193 Primus Capital
194 Progress Equity Partners Ltd
195 Prospect Partners
196 Providence Equity Partners
197 Quad Ventures
198 Quantum Ventures of Michigan
199 Redpoint Ventures
200 Renovus Capital
201 Rethink Education
202 Rhône Group
203 Rincon Venture Partners
204 Riverside
205 Rockbridge Growth Equity LLC
206 Rosewood Capital
207 RRE
208 Salmon River Capital
209 Seaport Capital LLC
210 Seidler Equity Partners
211 Sequoia Capital
212 Serent Capital
213 Silicon Valley Social Venture Fund
214 Silver Oak Services Partners LLC
215 Silverhawk Capital Partners
216 Silverhaze
217 Snow Phipps Group
218 Softbank
219 SoftTech VC
220 SosVentures
221 Southeastern Technology
222 Spark Capital
223 Spectrum Equity
224 Spire Capital
225 Sprout Group
226 Sterling Investment Partners
227 Sterling Partners
228 Summer Street Capital
229 Summit Partners
230 Sverica International LLC
231 TA Associates
232 TCV
233 TGF Management Corp.
234 TGV Partners
235 The Jordan Company LP
236 The Wicks Group of Companies LLC
237 Thoma Bravo
238 Transition Capital Partners Ltd.
239 Transportation Resource Partners
240 Trimaran Capital Partners
241 Triple Point Capital
242 True Ventures
243 Tugboat Ventures
244 Ulu Ventures
245 Union Square Ventures
246 University Ventures
247 Updata Partners
248 Vegas Tech Fund
249 Venrock
250 Venture Philanthropy Partners
251 Vestar Capital Partners, Inc.
252 Vicente Capital Partners
253 Vista Equity Partners
254 VSS
255 Vulcan Capital
256 Wafra Partners
257 Walker Ventures
258 Warburg Pincus
259 Webster Capital
260 Weld North
261 Wellfleet Capital Partners
262 Wellspring Capital Management LLC
263 Welsh, Carson, Anderson & Stowe LLC
264 Weston Presidio
265 Willis Stein & Partners
266 Winona Capital

Specialized Eduspace Investors: “The Twelve”

By Mitch Leventhal and Ina Tang

Education is an industry undergoing exciting and dramatic transformation. Some recent trends and developments in the space include: Common Core Standards, MOOCs (massive open online course), game-based learning, blended learning, marketing, recruitment, and a host of ancillary specialized services.  These industry changes, along with advances in technology, have stimulated the growth of educational companies and have spurred the interest of private equity investors.

Over the last six months, we have reviewed hundreds of education companies, consulted publicly available databases, and studied numerous websites of private equity firms, in order to better understand the role of private equity and venture capital in the Eduspace – an industry sector which includes both organizations delivering instruction (in some cases, schools) and those providing services in support of schools, educational institutions and related enterprises. The outcome of this work is a landscape survey of, so far, 266 U.S. private equity firms which have made significant investments in over 500 education-related companies of all types.

For the purposes of our research, we define private equity firms as those that provide capital to private companies in exchange for equity ownership. In most cases, these firms are providing early- and middle-stage capital, and are not seeking to control the companies in which they invest. Most private equity firms identified in the eduspace have invested in several industries, e.g. education, health and technology.  Only twelve (12) firms have been identified as specializing exclusively in education. This article focuses on The Twelve: who are they, and what are they doing?

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Among these specialist firms, which we have affectionately come to call “The Twelve”, eight (8) take a broad approach to investment.  For example, Education Growth Partners, Epic Partners and Leeds Equity are interested in a wide range of business models, from the more traditional enterprises such as education institutions to the fast growing technology-based solutions and services.

Three (3) exclusively invest in the educational technology sector– ImagineK12, Macmillan New Ventures, and Rethink Education.  ImagineK12, an incubator for educational technology startups, has recently launched the Imagine K12 Start Fund to provide additional support to their investees. One firm, University Ventures, has chosen a niche investment approach focused exclusively on the higher education sector.  Some of Univeristy Venture’s current investments include UniversityNow, which provides access to online collegecourses at accredited institutions, and Synergis Education, which partners with universities in the area of marketing and recruitment.

The Twelve are almost exclusively located in the Northeast, with a heavy concentration in New York City (7), along with Connecticut (2) and Pennsylvania (1). Only two are located in California.  This pattern is probably a reflection of the coincident concentration of both higher education institutions and capital in the Northeast, particularly New York.

Although The Twelve are all U.S based, many do make investments abroad. Hart Capital has a very international focus, with investments in the China, India and other countries characterized by rapidly growing private education sectors; Kaplan Ventures has investments in both developed and emerging markets; Learn Capital has invested in the United Kingdom, and Kenya; Quad Partners in Canada; Epic Partners in the Caribbean and Netherlands; University Ventures worldwide; and Leeds Equity in the United Kingdom and Israel, with prior investments in the Caribbean.  The remaining five (5) firms have a strong preference for U.S. investment, with some tending to prefer investments closer to their headquarters.  Learn Capital, based in California, seems to be particularly focused on close-to-home investment, with nineteen (19) out of its thirty (30) investments in the Golden State.

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What are the investment criteria The Twelve? Unfortunately, only a handful shares such information in the public domain. Education Growth Partners focuses on companies earning a minimum of $5 million annually, with investments of from $5 million to $30 million. Epic Partners looks for companies with an EBITDA greater than $2 million.  Hart Capital invests from $5 million to $15 million per transaction. Kaplan Ventures will consider early stage companies, with investments from $200k to $5 million. Finally, Renovus Capital seeks companies with EBITDAs greater than $10 million, and commits $5 to $15 million per investment.

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While The Twelve have very different characteristics and investment parameters, they all serve as a critical source of capital for eduspace companies, and these firms have made significant contributions to the development of this sector in recent years.  For example, Macmillan New Ventures, part of the global media powerhouse Macmillan, has invested over $100 million in educational technology startups.  Imagine K12 has funded products that are used by more than 10 million students and more than 1 million teachers.  Leeds Equity Partners has recently invested $100 million in INTO University Partnerships, a company which specializes in international pathway recruitment in partnership with public universities.

Private equity now sees education as a significant opportunity, one that transcends simplistic characterizations or geography. Understanding emerging patterns of equity investment is important not only for eduspace entrepreneurs, but also for not-for-profit institutions which are dependent on well-capitalized private sector partners for the provision of essential services. In the coming weeks, we will be delving more deeply into many eduspace equity firms, as well as particular industry subsectors, to uncover other patterns of interest.

@ 2013 Mitch Leventhal and Ina Tang

Private Equity for Educational Technology

By Mitch Leventhal and Ina Tang

In our first article, we briefly described the industry sectors comprising the Eduspace.  We divided the industry into six (6) sectors and seventeen (17) subsectors. In this installment, we are going to focus on one of the hottest sectors – Educational Technology.

The educational technology sector is booming. According to the National Venture Capital Association, investments in this sector ballooned to $429 million in 2011 from $146 million in 2002. 

In our analysis, we have divided Educational Technology into six (6) subsector:

Learning Management Systems (LMS)

LMSs are software applications for student administration, documentation, tracking, reporting and delivery of education courses.  These platforms have become very popular in recent years as education institutions expand their online offerings.  Some representative LMSs are Blackboard, Moodlerooms and Schoology.

Assessment Management Systems (SMS)

AMSs are integrated technology solutions that collect and analyze student data.  These systems allow educators to track student performance and use data to make informed decisions.  Some examples are Escholar, Questar Assessment and Edusoft.

Instructional Technologies

Instructional technologies include assistive and adaptive technologies, classroom management tools, and hardware such as computers, interactive whiteboards and student response systems.  Effective use of these technologies enhance teaching and learning in classrooms. Iclicker and Turning Technologies are two companies in this subsector.

Social Learning Networks (SLN)

SLNs are online community for different stakeholders- administrators, teachers, parents, and students- to collaborate, discuss and share resources.  For example, Claco is designed for teachers to collaborate with each other and Chegg is an online community for students to share information on textbook, scholarships and help each other on homework.


E-Learning is broadly defined as any learning or training that occurs online or delivered via tablets and mobile devices, including learning games, online classes and tutoring. Examples of e-learning companies include General Assembly, Codecademy and Duck Duck Moose.

Education & Career Planning

Education & career planning includes online portal or platforms that help students plan for education and career success.  For example, Alltuition provides online planners to help students and families manage the college financial aid process and myEdu offers tools to help students manage college and get a job.

Of the 266 U.S. private equity firms that we have identified as of July 2013, 177 have made investments in Ed Tech.  Three firms – ImagineK12, Macmillan New Ventures, and Rethink Education – exclusively specialize in this sector.  Forty six (46) firms are interested in information technology in general and have included Ed Tech companies in their portfolios.  The others are mostly firms with a broad investment focus, with education just being one sector of interest. Some of the most active firms in Ed Tech, ranked by number of education investments, include ImagineK12, Learn Capital, NewSchools Venture Fund, 500 Startups, and New Market Ventures.

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Based on our examination of publicly available sources, these capital providers have together invested in 156 Ed Tech companies. Among the Ed Tech companies receiving funding, 45% are E-Learning platforms, 15% are SLNs and 14% are LMSs.  A few of these Ed Tech companies have received investment from more than one private equity firm.  For example, ClassDojo, a real time behavior monitoring platform, has raised capital from at least six private equity firms.  Knewton, a technology company that uses data to personalize online learning content for individual students, has also received investment from at least six firms.

Several major trends are strongly encouraging investment in educational technology. The dramatic ongoing culture shift toward ubiquitous computing on mobile devices is keeping educational technology in the spotlight. The emphasis on outcomes-based learning and assessment at both schools and colleges demands creative solutions. At the same time, regulatory challenges faced by for-profit higher education enterprises has chilled investment in that sector, and has caused investors to seek alternate opportunities. For these reasons, we believe in the potential of Ed Tech, and we think that this sector will soon replace for-profit schools/institutions as the most popular sector for investment.

In future articles, we will discuss patterns of equity investment in the other Eduspace industry sectors.

@ 2013 Mitch Leventhal and Ina Tang

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

Following the Money in Education: Private Equity and the New Educational Economy

By Mitch Leventhal and Ina Tang

Education is an industry undergoing exciting and dramatic transformation. Some recent trends and developments in the space include: Common Core Standards, MOOCs (massive open online course), game-based learning, blended learning, and international recruiting, just to name a few.  These industry changes, along with advances in technology, have stimulated the growth of educational companies and have spurred the interest of private equity investors.

Over the last six months, we have reviewed hundreds of education companies, consulted publicly available databases, and studied numerous websites of private equity firms to better understand the role of private equity and venture capital in the new education economy. The outcome of this work is a landscape survey of over 200 U.S. private equity firms which have made significant investments in education-related companies of all types.

For the purposes of our research, we define private equity firms as those that provide capital to private companies in exchange for equity ownership. In most cases, these firms are providing early- and middle-stage capital, and are not seeking to control the companies in which they invest. In our study, we found a total of 266 U.S. private equity firms that have publicly described their investments in education.  These firms are located across the United States. Over 32% have offices in New York City, 28% have presence in the Bay Area, and 11% are located in Chicago. Some have overseas offices, as well. Many have more than one office location.

In terms of investment focus, most firms are highly diversified, investing in a range of industries, with education being just one sector of interest. Some firms which are heavily concentrated in information technology have naturally gravitated toward educational technology, and have included such companies in their portfolios.  Eleven private equity firms identified invest exclusively in education. Some major players in this category are Learn Capital, Quad Ventures, and University Ventures.  In addition to for-profit equity firms, there are a number of nonprofit ventures that invest philanthropic capital in education.  For example, NewSchools Venture Fund supports both for-profit and nonprofit education entrepreneurs who are working to improve public education.

As of now, these capital providers have together invested in over 500 education-related companies.  The most active firms ranked by the approximate number of current and prior education investments include Newschools Venture Fund (100+), Charter School Growth Fund (34), Learn Capital (30), New Market Ventures (20), Venture Philanthropy Partners (14) and Leeds Equity Partners (14).  Taken together, investment into education can be broadly classified into one or more of the sectors and subsectors described below:


Among the companies receiving funding, institutions/schools is the most popular sector, followed by educational technology and services.  Of the 500+ education companies that received investment, 36% are institutions/schools, 24% are focused on educational technology and 19% provide various services.  Within the subsectors, 18% are Higher-Education Institutions, 11% provide Content & Consumer Products and 11% are E-learning organizations. Trending in popularity with investors are online courses and institutions, online content distribution hubs and publishers, as well as e-learning platforms.

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The list of private equity firms we compiled is by no means exhaustive but it is clear from our landscape survey that private equity involvement in education is significant, yet is barely understood by most administrators and practitioners in higher education.  An increasing number of firms is capitalizing on the investment opportunities afforded by the education industry, and this trend is growing. Given that more private equity capital will be available to industry in the coming months and years, it is imperative that higher education administrators better understand these trends, and how they will affect prospects and opportunities going forward. Higher education can signal where investment should go, but it must be conscious of what its needs are in order to do so.

© 2013 Mitch Leventhal and Ina Tang