Venture Capital in Education Summit 2009 Agenda Thursday, May 28th 6:00 – 8:00 pm Welcome Cocktail Reception Friday, May 29th 7:30 – 8:30 a.m. Registration & Breakfast 8:30 – 8:50 a.m. Welcome and Event Introduction • Chris Curran, Managing Director, Berkery, Noyes & Co. 8:50 – 9:30 a.m. The Future of Education K-20 trends and market dynamics influencing the education community • Dr. Thomas Sawner, President & CEO, Educational Options 9:30 - 10:30 a.m. Finding an Exit Strategy — Perspectives from Private Equity and Strategic Investors Investment strategy in a market with limited VC funding Key criteria for evaluating education industry M&A opportunities Why education is an attractive industry vertical • Daniel Hamburger, President & CEO, DeVry, Inc. • Bill Hughes, Director of Business Development & Innovation, Pearson • Peter Campbell, Partner, Generation Partners • Jonathan Barnes, Principal, Halyard Capital From www.berkerynoyes.com/pages/vc_investment_summit_conf/agenda.aspx 24 July 2009 10:15 – 10:45 a.m. Coffee Break & Showcase Tables Table-top materials regarding participating companies available to attendees 10:45 – 11:30 a.m. Policy & Regulatory Insights into K-12 and Higher Education Key issues investors and executives need to know • Elizabeth Meers, Partner, Hogan & Hartson • Maree Sneed, Partner, Hogan & Hartson • Lorraine Sostowski, Partner, Hogan & Hartson 11:30 - 12:15 p.m. Keynote • Christopher Liedel, EVP & CFO, The National Geographic Society 12:15 – 1:30 p.m. Lunch & Discussion Insights from professionals covering the markets and issues • Zoran Basich, Editor, VentureWire • Scott Jaschik, Editor, Insider Higher Ed • Dr. Jennifer House, Founder and Principal, RedRock Reports 1:30 – 2:30 p.m. Funding Early-Stage Education Businesses Identifying the ingredients for building an early-stage education enterprise Assessing the critical factors for achieving a set of ROIs Lessons learned • Frank Bonsal III, Partner, New Markets Venture Partners • Brad Palmer, Managing Partner, Palm Ventures • Jason Stoffer, Senior Associate, Maveron 2:30 – 3:30 p.m. Beating the Odds — Perspectives from Education Executives Students vs. Customers — Opportunities and challenges specific to serving new student generations Technology-based models that are transforming K-12 and postsecondary education Lessons learned in sourcing capital for an education business • Kevin Greaney, President & CEO, Children’s Progress • Shirish Nadkarni, CEO, Livemocha • Craig Powell, President & CEO, ConnectEDU • Nicholas Smith, President, Aplia From www.berkerynoyes.com/pages/vc_investment_summit_conf/agenda.aspx 24 July 2009 3:30 – 3:45 p.m. Coffee Break & Showcase Tables Table-top materials regarding participating companies available to attendees 3:45 – 4:45 p.m. Stanford Faculty Panel Digital innovation and empowerment for all Privatization, globalization, and reorganization of higher education Educational multimedia ventures • Bruce Boyd, Director of Technology, Hasso Plattner Institute of Design, Stanford University • Dr. Paul Kim, Chief Technology Office, Stanford University School of Education • Dr. Mitchell Stevens, Associate Professor, Stanford University School of Education 4:45 - 5:30 p.m Keynote • Milton Chen, Executive Director, The George Lucas Educational Foundation 5:30 – 7:00 p.m. Closing Remarks & Reception From www.berkerynoyes.com/pages/vc_investment_summit_conf/agenda.aspx 24 July 2009 Christopher Curran Managing Director Berkery, Noyes & Co., LLC. [email protected] Private & Confidential | Project Garcia | FebruaryMay 27, 20082009 Why Invest in Education? . High Rates of Return: Across sectors EBIT margin ranges from 15%-40% with IRR’s sometimes in excess of 30%. Favorable Pricing: Driven by the supply-demand imbalance, price growth is strong in more attractive sectors; particularly on-line and virtual education platforms, digital curriculum, data systems with BI features , and services across K-20; . High barriers to entry: government regulations, accreditation process, standards alignment, high start up costs, required brand strength, channel . Scalability: Insufficient supply and overwhelming demand for content, technology, assessments and services that truly improve learning outcomes, offer dramatic opportunities for operational scale growth and top-line growth . Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality . Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred over time; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue content models and cloud computing applications . Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens . For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY May 2009 2 Venture Capital Performance . At the end of last year most venture investment categories experienced quarter over quarter and year over year declines . However, longer term venture investments continue to outperform the overall public markets . Venture capital investment receded 61% in Q1 2009 to $3 billion, the lowest level since 1997, with only $168 MM allocated to first round venture monies . 2009 will be a challenging year as the IPO and M&A markets produce lower valuations May 2009 3 Venture Capital Investing by Sector . In 2008 over $28 billion dollars was invested by venture capital firms across 17 key industry segments The segment receiving the largest funding was software, at $4.9 billion followed by energy and then biotechnology . While Healthcare, a $4.5 trillion industry, attracts significant venture investment, the Education Industry, which is estimated at $2+ trillion worldwide, doesn’t receive enough venture investment to register as a category Source: National Venture Capital Association May 2009 4 Private Equity Activity – Education Sector Education Transactions by Type . Contrary to the venture capital community, private equity investors have embraced education . Over the past three years there have been 165 private equity backed transactions within the education sector . The aggregate deal value of these investments based on data compiled by Berkery Noyes is in excess of $35 billion . Interest from private equity has been driven by the increased role technology is playing in the classroom and administrative and support services Source: Berkery Noyes, LLC May 2009 5 Berkery Noyes Is Recognized as the Leading Mid-market M&A Brand across Many of the Market Segments It Serves . Strong brand recognition in the education, information and technology market segments . Over 450 completed transactions since inception . Successfully closed 29 transactions in the last 21 months . Staff of 40 professionals specializing exclusively on the information industry . Depth of knowledge and expertise in every segment of the information industry . Skilled in advising privately-held information providers, creating maximum value . Skilled at divestitures of non-core assets & sales from private equity portfolios . Deal sizes in the past 18 months range from $10MM to $500MM . Strong track record of closing deals . Skilled at negotiation by possessing financial, legal and regulatory knowledge May 2009 6 Recent Education Transactions Deals span K-20 and corporate, and include publishing, technology, services, and schools has acquired has acquired has acquired has acquired has acquired a portfolio company of has acquired May 2009 7 M&A Activity – Education Sector Deal Date Acq. Type Target Buyer 05/20/09 asset_acquisition Connecticut School of Broadcasting, Inc. Dick Robinson 05/20/09 acquisition Americas Best Distance Education Corporation 360training.com 05/20/09 acquisition Crayon Campus Mini-Skool Early Learning Centres, Inc. 05/19/09 asset_acquisition National Dental Network 360training.com 05/18/09 merger Freshman Fund, Inc. Wee Web 05/14/09 acquisition Sleep Ed, LLC Jones & Bartlett Publishers, Inc. 05/08/09 acquisition Dementia Care Specialists, Inc. Crisis Prevention Institute, Inc 05/06/09 acquisition ANGEL Learning Blackboard Inc. 05/04/09 merger Techniques.org Regis Learning Solutions 04/30/09 certain_assets_of Towers Perrin CherryRoad Technologies 04/28/09 acquisition Optionetics, Inc. optionsXpress Holdings, Inc. 04/27/09 acquisition Clemens College Lincoln Educational Services Corporation 04/24/09 acquisition SumTotal Systems, Inc. Accel-KKR 04/23/09 acquisition Daniel Webster College ITT Educational Services, Inc. 04/21/09 asset_acquisition Syrus Global SAI Global Inc. 04/16/09 acquisition Virtual Heroes, Inc. Applied Research Associates, Inc. 04/15/09 acquisition Wall Street English Pearson plc 04/15/09 asset_acquisition Muze, Inc. Macrovision Solutions Corporation 04/08/09 asset_acquisition Professional Development Software, Inc. Elsevier B.V. 04/07/09 acquisition Highpointe Children's Academy Nobel Learning Communities, Inc. May 2009 8 M&A Activity – Education Sector Deal Date Acq. Type Target Buyer 04/03/09 reverse_merger Piccolo International University Maple Mountain Pumpkins & Agriculture, Inc. 04/01/09 acquisition