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Private Equity and Venture Capital Going Back to School

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Over the last few years, both private equity and venture capital firms are taking an increasing interest in the education sector, as seen below in this chart from Pitchbook.

Private Equity and Venture Capital Investments in Education

In general, some of the differences between the investments made by VC firms vs PE firms include:

  • VC firms are investing less money, at earlier stages of a company’s life. However, in the last 12 months, there has been a definite trend of VC firms choosing to invest in later stage deals (Series B or later), which often puts them in competition with growth private equity investors.

This competition for deals has been good for the companies looking for investment because it has driven up pre-money valuations, resulting in the founders giving up less of their equity for the needed investment.

  • The type of companies that VC firms choose to invest in skews strongly towards online education providers and ed-tech companies. However, certain brick and mortar education institutions are getting a second look as VC firms, like Jason Stoffer at Maveron, recognize “the academic world is decoupled from the employer world…I think what we’re going to see is this work backwards, where what’s going to win are colleges or alternative investments…where the education or training leads to a tangible job outcome.”

For private equity firms, the top segment of investment or buy-outs is institutions/schools, followed by Ed-tech, as seen in this chart developed by Equity For Education.

Private Equity Investments in Education Sector

  • Finally, in the private equity world, there are many more later stage investments that take the form of buy-outs, rather than growth stage minority investments.

If your education/training firm is in need of investment for acquisitions or organic growth, or you’d like to understand your exit options, please contact me directly.