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
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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 Florida Technical College EduK Group 03/25/09 acquisition Corporate Dynamics, Inc. Retail Business Development, Inc. 03/20/09 asset_acquisition The Bertram Group Smiths News, Plc 03/13/09 acquisition Morrison University Anthem Education Group 03/12/09 acquisition CDX Global Jones & Bartlett Publishers, Inc. 03/11/09 acquisition PulseMark, LLC Tyler Technologies, Inc. 03/11/09 acquisition Faculdades Nordeste S.A. DeVry Inc. 03/09/09 acquisition Edgenuity Teachscape 03/04/09 acquisition Performance Pathways SunGard Public Sector 03/04/09 acquisition Career Step DW Healthcare Partners 03/04/09 acquisition Career Step BB&T Capital Partners, LLC 03/02/09 acquisition Generation 21 Inmedius Inc. 03/02/09 acquisition Javelin Technical Training Center Excellere Partners 02/24/09 merger Campusware SchoolNet 02/18/09 acquisition Concept Media Cengage Learning 02/12/09 acquisition Quality Education Data Market Data Retrieval 02/02/09 asset_acquisition Trudy Corporation PCS Edventures, Inc. 01/26/09 acquisition Entervision, LLC Good Life China Corporation 01/23/09 acquisition Salem Press Inc. EBSCO Publishing, Inc. 01/21/09 acquisition Baran Institute of Technology Lincoln Educational Services Corporation
May 2009 9 M&A Activity – Education Sector
Deal Date Acq. Type Target Buyer
01/15/09 acquisition Gradepoint, Inc. Adayana Inc. 01/14/09 minority_investment Schoolwires, Inc. Kennet Partners 01/13/09 minority_investment Go Internet Media, Inc. Kennet Partners 01/12/09 acquisition SoftTouch, Inc. AbleNet, Inc. 01/07/09 minority_investment BrightStar Kaplan, Inc. 01/07/09 acquisition Career.edu AcademicTransfer 01/06/09 acquisition West of England Language Services Kaplan, Inc. 01/05/09 acquisition Academic Superstore Journey Education Marketing, Inc. 01/01/09 acquisition Xperts Educational Products Public Consulting Group, Inc. 12/29/08 certain_assets_of Princeton Review Inc. Core Projects & Technologies Ltd. 12/19/08 acquisition Human Performance Institute Johnson & Johnson 12/18/08 acquisition Enb Consulting Limited Moody's Corporation 12/18/08 certain_assets_of Pathology Associates Medical Laboratories Sunquest Information Systems, Inc. 12/16/08 certain_assets_of Superior School Supplies, Inc. Harris Computer Systems 12/15/08 acquisition Century Consultants, Ltd. ASM Research, Inc. 12/10/08 acquisition Fronter Pearson plc 12/10/08 acquisition Fusion Academy American Education Group 12/04/08 acquisition DailyStrength, Inc. HSW International, Inc. 12/04/08 certain_assets_of Taleo Corporation HumanConcepts 12/03/08 acquisition Camber Corporation New Mountain Capital, LLC 12/01/08 acquisition ClearStory Systems, Inc. The FeedRoom
May 2009 10 M&A Activity – Education Sector
Deal Date Acq. Type Target Buyer
11/14/08 acquisition Talisma Corporation Leeds Equity Partners 10/06/08 acquisition Infinity Science Press Jones & Bartlett Publishers, Inc. 09/30/08 acquisition Instituut Schoevers B.V. Astor Participaties N.V. 09/17/08 acquisition Educational Services & Products, LLC Innovative Solutions Group 09/08/08 acquisition Hunter Systems Software Technology, Inc. 09/02/08 acquisition Concordia Group CIBT Education Group Inc. 08/18/08 certain assets of Missouri City, Texas school Nobel Learning Communities, Inc. 08/12/08 acquisition Harris Connect, Inc. The Wicks Group of Companies, L.L.C. 08/11/08 acquisition The Institute of Medical and Dental Technology Ross Learning LLC 08/05/08 acquisition Ex Libris Ltd. Leeds Equity Partners 08/04/08 acquisition Southern Highlands Preparatory School Nobel Learning Communities, Inc. 07/23/08 acquisition Beijing Yanyuan Rapido Education Company Hartcourt Companies Inc. 07/18/08 acquisition Western State University College of Law Knowledge Investment Partners LLC 07/16/08 acquisition NewSchool of Architecture and Design Laureate Education 07/16/08 acquisition Kendall College Laureate Education 07/08/08 acquisition UNITEC Laureate Education 07/08/08 acquisition Universidad Latina Laureate Education 07/04/08 acquisition Theducation AB Skanditek 06/26/08 acquisition Sandcastle Private School Mini-Skool Early Learning Centers, Inc 06/17/08 acquisition The Field Studies Center of New York WorldStrides 06/17/08 acquisition Accent Travel Group WorldStrides 06/17/08 acquisition Royall & Company Chicago Growth Partners
May 2009 11 M&A Activity – Education Sector
Deal Date Acq. Type Target Buyer
06/16/08 acquisition Primrose Schools Roark Capital Group 06/01/08 acquisition Education Management Corp. Providence Equity Partners Inc. 06/01/08 acquisition Education Management Corp. Goldman Sachs Capital Partners 05/15/08 leveraged buyout Myers University Significant Partners, LLC 05/10/08 minority investment Estacio Participacoes S.A. Moena Participacoes SA 04/25/08 acquisition Bearfoot Lodge Audax Group 04/23/08 acquisition Didaktus AB Bure Equity AB 04/08/08 acquisition CBE Technologies The Gores Group, LLC 03/27/08 acquisition UVS Gymnasium AB Framtidsgymnasiet i Göteborg AB 03/18/08 acquisition Camelback Desert Schools Nobel Learning Communities, Inc. 03/17/08 minority investment Jardines Vitamina AXA Private Equity 03/13/08 acquisition Nackademin AB Medströms Invest AB 03/13/08 acquisition Nackademin AB Spinn Investment AB 03/07/08 acquisition Catapult Learning LLC JMI Equity Fund 03/05/08 management buyout Justin Craig Education Piper Private Equity Limited 02/27/08 acquisition Assessment Technologies Institute, LLC Providence Equity Partners Inc. 02/21/08 acquisition IvyGlen Schools Nobel Learning Communities, Inc. 02/12/08 certain assets of Foreign Trade & Business College ChinaCast Education Corporation 02/09/08 acquisition South Texas Vocational Technical Institute ATI Enterprises, Inc. 02/06/08 acquisition Bryant and Stratton College Parthenon Capital 01/11/08 acquisition Barnebygg As CapMan Capital Management Oy 01/10/08 acquisition Campus Management Corp. Leeds Equity Partners
May 2009 12 M&A Activity – Education Sector
Deal Date Acq. Type Target Buyer
12/20/07 acquisition Enchanted Care Learning Centers, Inc. Nobel Learning Communities, Inc. 12/17/07 acquisition Sprott-Shaw Community College CIBT Education Group Inc. 12/11/07 acquisition BSP - Business School Sao Paulo Laureate Education 11/26/07 acquisition InterWrite Learning eInstruction Corporation 11/06/07 acquisition Primrose Friskola Bure Equity AB 11/05/07 acquisition beRecruited.com RVS Ventures, Inc. 11/05/07 acquisition Beauty Inter-Network Company PlattForm Holdings, Inc. 10/25/07 acquisition Lawrenceville Press Inc. EMC/Paradigm Publishing 10/10/07 acquisition Porter and Chester Institute Thoma Cressey Bravo 10/04/07 acquisition Education Plaza 1105 Media, Inc. 09/26/07 acquisition Publishing Enterprises, Inc. Visant Corporation 09/25/07 acquisition INTI International Education Group Laureate Education 09/12/07 acquisition Colorado School of Professional Psychology Bridgepoint Education, Inc. 09/11/07 acquisition Fenestra Utbildning AB Bure Equity AB 09/10/07 acquisition LeadAmerica Gryphon Investors 09/06/07 acquisition Schiller International University Knowledge Investment Partners LLC 08/20/07 acquisition Inscape Publishing Inc. Sentinel Capital Partners 08/08/07 acquisition Facts On File News Service Facts On File, Inc. 08/01/07 acquisition Touro University International Summit Partners 07/27/07 acquisition Benziger Publishing CFM Religion Publishing Group, LLC 07/27/07 acquisition Resources for Christian Living CFM Religion Publishing Group, LLC
May 2009 13 M&A Activity – Education Sector
Deal Date Acq. Type Target Buyer
07/26/07 acquisition Zuma, LLC PlattForm Holdings, Inc.
07/25/07 minority investment Achieve3000 Insight Venture Partners
07/24/07 minority investment Princeton Review Inc. Bain Capital
07/24/07 minority investment Princeton Review Inc. Prides Capital Partners, LLC
07/09/07 acquisition Embanet Corporation Knowledge Universe, Inc.
07/09/07 acquisition Embanet Corporation Technology Crossover Ventures
07/02/07 acquisition eInstruction Corporation Leeds Equity Partners
06/17/07 acquisition Global Education Management Systems Abraaj Capital
06/08/07 acquisition FCC Holdings, Inc. Abrams Capital
06/08/07 acquisition FCC Holdings, Inc. Greenhill Capital Partners
06/01/07 acquisition Salisbury College Wiltshire College
05/30/07 acquisition WorldClass Strategy Halyard Education Partners
05/29/07 acquisition Monotype, LLC Calvert Street Capital Partners, Inc.
05/25/07 acquisition GoalQuest Halyard Education Partners
05/23/07 acquisition Proteam Bure Equity AB
05/22/07 acquisition Rytmus AB Bure Equity AB
05/21/07 acquisition Films Media Group Facts On File News Service
05/14/07 acquisition TSL Education Ltd. Charterhouse Development Capital Limited
May 2009 14 Private Placement Activity – Education Sector
Deal Date Acq. Type Target Buyer 05/05/2009 Private Placement Ben Air Flight Academy NV FIN.co
05/04/2009 Private Placement Everlearn International Group The CID Group; DT Capital Partners; iD TechVentures, Inc.
04/20/2009 Private Placement Edutech Navis Capital Partners
04/08/2009 Private Placement Kwench Library Solutions Private Limited IAN Consultancy Services Pvt. Ltd.
04/07/2009 Private Placement Institute for Quantum Computing Government Of Canada
03/16/2009 Private Placement Aec Education Plc (AIM:AEC) Education Development International plc (AIM:EDD); Real Time Consultancy Limited; KSP Investments Pte Ltd 02/16/2009 Private Placement Speakwell English Academy Mumbai Angels
02/11/2009 Private Placement Online Courses, LLC Five Elms Capital
01/14/2009 Private Placement Global Talent Track Private Limited Intel Capital
12/09/2008 Private Placement Global IELTS School SAIF Partners
12/09/2008 Private Placement Global Education & Technology Group SAIF Partners
12/01/2008 Private Placement Idapted, Inc. Gobi Partners Inc.; Ambient Sound Investments OÜ
11/17/2008 Private Placement Tout Petit Monde Ardens SAS
11/13/2008 Private Placement Prolific Systems and Technologies Private Altanmiya Holding Co. Limited 11/12/2008 Private Placement SGB International Holdings Inc. SGB C&C Investment Ltd.
May 2009 15 Private Placement Activity – Education Sector
Deal Date Acq. Type Target Buyer 11/17/2008 Private Placement Tout Petit Monde Ardens SAS
11/12/2008 Private Placement Orca International Language Schools Inc. SGB C&C Investment Ltd.
11/10/2008 Private Placement Caliber Bodyworks, Inc. Penfund
11/04/2008 Private Placement Caliber Bodyworks, Inc. ONCAP
- Private Placement NPI08 Inc. (OTCPK:NPIE) Infinity Capital Group, Inc. (OTCBB:ICGP)
10/21/2008 Private Placement Brightstorm, Inc. KTB Ventures
10/18/2008 Private Placement Xperience Consulting, SL Grupo Intercom de Capital, SCR, S.A.; Active Capital Partners S.L.
10/15/2008 Private Placement Guroo Limited NorthStar Equity Investors Limited
10/06/2008 Private Placement Simbionix Ltd. River Cities Capital Funds; Early Stage Partners, LP; Western Reserve Partners LLC 07/29/2008 Private Placement Vemics, Inc. (OTCBB:VMCI) -
07/23/2008 Private Placement The Greater Medical Center Group, Inc. MELCO Investments, LLC
07/17/2008 Private Placement Austin Logistics Incorporated Apex Venture Partners; North Hill Ventures, LP; Total Technology Ventures, LLC; Baird Venture Partners 07/11/2008 Private Placement Monte Cristo Multimedia Arts Alliance Ltd.; Innoven Partenaires S.A; 360º Capital Partners
07/08/2008 Private Placement Starfish Retention Solutions, Inc. Novak Biddle Venture Partners
07/01/2008 Private Placement PartsSource, Inc. Polaris Venture Partners, Inc.; Primus
07/01/2008 Private Placement SynapticMash, LLC Raycliff Capital; Vantage Partners Inc
May 2009 16 Private Placement Activity – Education Sector
Deal Date Acq. Type Target Buyer 06/12/2008 Private Placement Vocab AB Sting Capital AB
06/18/2008 Private Placement Bristow Group, Inc. (NYSE:BRS) Caledonia Investments plc (LSE:CLDN)
06/01/2008 Private Placement Health Matters Education Ltd xenos - The Wales Business Angel Network Ltd.
05/30/2008 Private Placement Grockit, Inc. Benchmark Capital; Integral Capital Partners
05/23/2008 Private Placement Enaco Nord Création S.C.R.
05/22/2008 Private Placement Bernard Julhiet Group AGF Private Equity; UFG Private Equity
05/20/2008 Private Placement Caspian Learning Limited Enterprise Ventures Limited; NorthStar Equity Investors Limited
05/20/2008 Private Placement Knewton, Inc. Accel Partners; First Round Capital
05/05/2008 Private Placement Future Now Group Inc. (OTCBB:FUTR) Newport Capital Corp
04/30/2008 Private Placement Xactly Corporation Alloy Ventures, Inc.; Bay Partners; Glynn Capital Management LLC; Rembrandt Venture Partners; Outlook Ventures 04/01/2008 Private Placement Catura Systems Inc. Draper Fisher Jurvetson
03/31/2008 Private Placement Tideway Systems Limited Accel Partners; Apax Partners Worldwide LLP; Scottish Equity Partners Ltd.; NESTA, Investment Arm 03/19/2008 Private Placement Retention Education, Inc. Ascend Venture Group, LLC; OCA Venture Partners, LLC; Ironwood Capital; MK Capital 03/18/2008 Private Placement Portico Learning Solutions Advantage Capital Partners; Enhanced Capital Partners, LLC; The Louisiana State University System Research and Technology Foundation, Investment Arm 03/16/2008 Private Placement Gamook, Inc. U.S. Venture Partners
03/04/2008 Private Placement CDSM Interactive Solutions Ltd. U.K. Steel Enterprise; Finance Wales Investments Ltd.
May 2009 17 Private Placement Activity – Education Sector
Deal Date Acq. Type Target Buyer 02/25/2008 Private Placement ePALS, Inc. National Geographic Ventures
02/18/2008 Private Placement L'atelier Des Chefs Cogepa S.A.; Phillimore Investissement s.a.s.
02/06/2008 Private Placement Woodspeen Training Plc Evolve Capital Plc
02/03/2008 Private Placement InnerWorkings, Inc. MDV-Mohr Davidow Ventures; Balderton Capital
02/01/2008 Private Placement New Career Skills Ltd. Bridges Community Ventures Ltd.
01/15/2008 Private Placement American Institutes Holdings, LLC Primus
01/17/2008 Private Placement China Education Resources Inc. (TSXV:CHN) Keywise Capital Management (HK) Limited
02/07/2008 Private Placement Sanako Corporation Nordic Venture Partners Management ApS
01/07/2008 Private Placement Epocrates, Inc. Goldman Sachs Group, Merchant Banking Division
12/18/2007 Private Placement GeoLearning, Inc. Fidelity Ventures
12/18/2007 Private Placement Grand Canyon Education, Inc. Endeavour Capital, Inc. (NasdaqGM:LOPE) 12/03/2007 Private Placement Selltis, L.L.C. Advantage Capital Partners; Enhanced Capital Partners, LLC
11/18/2007 Private Placement Blastbeat Ltd. Enterprise Ireland; Irelandia Investments
11/08/2007 Private Placement Zilliant, Inc. Austin Ventures; Trellis Partners; Cardinal Venture Capital; Panorama Capital; SMH Private Equity Group 11/02/2007 Private Placement Certiport, Inc. Spire Capital Partners, LLC
11/01/2007 Private Placement Kinderzentren Kunterbunt e.V. BonVenture Management GmbH
May 2009 18 Private Placement Activity – Education Sector
Deal Date Acq. Type Target Buyer 02/25/2008 Private Placement ePALS, Inc. National Geographic Ventures
02/18/2008 Private Placement L'atelier Des Chefs Cogepa S.A.; Phillimore Investissement s.a.s.
02/06/2008 Private Placement Woodspeen Training Plc Evolve Capital Plc
02/03/2008 Private Placement InnerWorkings, Inc. MDV-Mohr Davidow Ventures; Balderton Capital
02/01/2008 Private Placement New Career Skills Ltd. Bridges Community Ventures Ltd.
01/15/2008 Private Placement American Institutes Holdings, LLC Primus
01/17/2008 Private Placement China Education Resources Inc. (TSXV:CHN) Keywise Capital Management (HK) Limited
02/07/2008 Private Placement Sanako Corporation Nordic Venture Partners Management ApS
01/07/2008 Private Placement Epocrates, Inc. Goldman Sachs Group, Merchant Banking Division
12/18/2007 Private Placement GeoLearning, Inc. Fidelity Ventures
12/18/2007 Private Placement Grand Canyon Education, Inc. Endeavour Capital, Inc. (NasdaqGM:LOPE) 12/03/2007 Private Placement Selltis, L.L.C. Advantage Capital Partners; Enhanced Capital Partners, LLC
11/18/2007 Private Placement Blastbeat Ltd. Enterprise Ireland; Irelandia Investments
11/08/2007 Private Placement Zilliant, Inc. Austin Ventures; Trellis Partners; Cardinal Venture Capital; Panorama Capital; SMH Private Equity Group 11/02/2007 Private Placement Certiport, Inc. Spire Capital Partners, LLC
11/01/2007 Private Placement Kinderzentren Kunterbunt e.V. BonVenture Management GmbH
May 2009 19 Private Placement Activity – Education Sector
Deal Date Acq. Type Target Buyer 09/13/2007 Private Placement Azul Systems, Inc. Accel Partners; Austin Ventures; Velocity Interactive Group; CSFB Private Equity; MeriTech Capital Partners; Redpoint Ventures; WorldView Technology Partners, Inc. 09/10/2007 Private Placement Fitec CM-CIC Capital Privé
09/10/2007 Private Placement Silver State Helicopters, LLC Eos Partners, L.P.
09/05/2007 Private Placement Taecanet Ltd. Merseyside Special Investment Fund
09/01/2007 Private Placement Melorio plc (AIM:MLO) Elderstreet Investments Limited; Elderstreet VCT plc (LSE:EDV)
06/30/2008 Private Placement Futuremedia PLC (OTCBB:FMDA.Y) Yorkville Advisors LLC
08/17/2007 Private Placement Jive Software, Inc. Sequoia Capital
07/25/2007 Private Placement Achieve3000, Inc. InSight Venture Partners
07/24/2007 Private Placement CICCWORLD Ltd. YFM Venture Finance Limited
07/23/2007 Private Placement Princeton Review Inc. (NasdaqGM:REVU) Prides Capital LLC; Bain Capital Ventures
07/26/2007 Private Placement AIMS Worldwide Inc. (OTCBB:AMWW) Liberty Company Fund
07/09/2007 Private Placement Embanet Corporation Technology Crossover Ventures; Knowledge Universe
07/03/2007 Private Placement New Horizons Worldwide Inc. (OTCBB:NEWH) Al-Khaleej Training and Education Company (SASE:4290)
06/26/2007 Private Placement Adayana, Inc. Kubera Partners, LLC; Kubera Cross-Border Fund Limited, L.P. (AIM:KUBC) 08/09/2007 Private Placement JasperSoft Corporation Morgenthaler; Partech International; SAP Ventures; Doll Capital Management; Scale Venture Partners 06/21/2007 Private Placement picoChip Designs Limited Atlas Venture LLP; Highland Capital Partners; Scottish Equity Partners Ltd.; Pond Venture Partners Ltd.; Intel Capital; AT&T Investment Management Corp.; Rothschild Gestion; Samsung Ventures America
May 2009 20 Venture Capital in Education Summit Thomas E. Sawner, Ed.D. CEO, Educational Options, Inc. [email protected] & The Future of Education
Company Overview & Comments Next Generation Education • What is it • How are today‟s students different • Why must we change • What are the barriers Unfortunately, we’re not kidding Where are we now?
RHYMES WITH ORANGE Hilary Price We work in 1970’s schools With 1980’s administrators Leading 1990’s teachers Instructing 2009 students Generally, using 1906 educational methodology and standards
While passionately attempting to meet 2020 content requirements
With 25,858 fiercely independent ideas about how it should be done Requirement vs. Capability
Content Mastery Requirement
Expanding Knowledge and Information Current Base Instructional Capability
1900 1960 1990 2010 The Terrible Truth
What got us here What worked great for years (sort of) Will not get us where we need to go No matter how much harder we work No matter how many hours we spend No matter how much passion we have Yesterday’s solutions do not meet Today’s needs, much less tomorrow’s What’s the answer? Can the trend be reversed?
At EdOptions, we certainly think so The good news
Today’s students are very capable Today’s students are very resilient Today’s students are very different 20th Century U.S. Generations
G.I./Greatest Generation Born 1900-1924 Silent Generation Born 1925-1945 Baby Boomers Born 1946-1964 Generation X/13th Born 1965-1980 Generation Y/ Millennials Born 1980-2002 http://en.wikipedia.org/ Baby Boomers (Born 1946-1964) Children of G.I. Generation Characteristics • Live to work • Generally optimistic • Desire to influence policy
(Finnegan, C. (2006). Engaging Millennials & Answering to Boomers: Tales from a Gen-X Technology Researcher. University System of Georgia. Baby Boomers (Born 1946-1964) Influences • Suburbia, TV, Vietnam, Watergate, protests, human rights movement, sexual revolution, drugs, and rock „n roll
Two-thirds of today‟s faculty are baby boomers
(Finnegan, C. (2006). Engaging Millennials & Answering to Boomers: Tales from a Gen-X Technology Researcher. University System of Georgia. Generation X (Born 1965-1980) Characteristics • Need a balance between work and life • Value contributing to the whole • Skeptical, but flexible and motivated • Adaptive to change and technology
(Finnegan, C. (2006). Engaging Millennials & Answering to Boomers: Tales from a Gen-X Technology Researcher. University System of Georgia. Generation X (Born 1965-1980) Influences Sesame Street, MTV, Game Boy, PC, two wage-earner family, tripled divorce rate, latch-key kids 16% of today’s educational faculty 25% of today’s students
(Finnegan, C. (2006). Engaging Millennials & Answering to Boomers: Tales from a Gen-X Technology Researcher. University System of Georgia. Millennials (Born 1980-2002) Characteristics • Live in the moment • Expect immediacy of technology • Work in teams • Globally concerned • Desire structure and purpose • Seek constant feedback
(Finnegan, C. (2006). Engaging Millennials & Answering to Boomers: Tales from a Gen-X Technology Researcher. University System of Georgia. Millennials (Born 1980-2002) Influences • Expanded technology, disasters, gangs, diversity, globalization, terrorism, conflict • Never heard of “Green Stamps” or “VCR‟s” • Have a cell phone by the 3rd grade 60% of today‟s students … and growing (Finnegan, C. (2006). Engaging Millennials & Answering to Boomers: Tales from a Gen-X Technology Researcher. University System of Georgia. Next Generation Education Context Traditional Emphasis Virtual Emphasis
Blended Web-Enhanced Classroom Synchronous Asynchronous
Asynchronous Web-Enhanced Classroom Synchronous
100% Classroom 100% Virtual
David Reed, Ph.D. Arizona State University & EdOptions Next Gen Ed Same teachers, same students, same brick and mortar school we routinely see double and triple digit gains from programs that adopt Next Generation Education My favorite quote
“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.” Machiavelli Two “Tom”-ism‟s
“No one promised it would be easy” Tom Sr. (Dad) “I was born at night, but not last night” Tom (Me) I’m sure you’ve heard of about the pig and the chicken discussing a bacon and egg breakfast While the chicken contributed, the pig was committed This having been said … I’m committed” I’ve “bet the farm” on “Next Gen Ed”
Six years and $35M+ Here’s where I’ve spent my time and money
Founded in 1997 to develop and provide educational resources Four key philosophies: – Provide rigorous curriculum – Maintain an easy-to-use interface – Preserve the student-teacher relationship – Deliver cost-effective solutions We provide Web-based courses and programs designed to increase student success Our vision To be a positive, disruptive force in how primary and secondary education is delivered To fundamentally change the paradigm for public education in the U.S. Our keys to success What we believe We believe the teacher is the most important link in the learning process We believe programs should be easy to use and that updates should be included for free We believe that training and support should be fast, easy, and available to any user We believe in cost-effective solutions that provide every student access to a quality education We partner with schools • To increase graduation rates • To reduce dropout rates • To keep students engaged We ž rovide ž roven Solutions
We stay connected We’re Nationally Recognized
2009 2008 2009 Teachers’ Choice Award 2008 AEž ž istinguished Achievement Awardž Best ELLž ESL Curriculum Software, Language Arts Bundle 2007 AEž Golden Lamp Awardž Best of the Best in Educational Technology 2007 Technology ž Learning Award of Excellence 2007 SIIA COž iE ž inalistž Best Education Solution 2007 ComputEd Learning Center’s Best Educational Software ž BESSIEž ž ž iddle School Language Arts 2008 AEP Distinguished Achievement Award: Best Math Curriculum Website 2008 ComputEd Learning Center’s Best Educational Software (BESSIE): Test Prep Website 2008 SIIA CODiE Finalist: Best Education Solution 2007 Educational Software Review Award (EDDIE): Early Elementary Test Prep Website We‟re Accredited & Certified EdOptions - accredited and certified Northwestern Association of Accredited Schools (NAAS) Commission on International and Trans-Regional Accreditation (CITA) Blue Ridge International Academy - triple accredited Southern Association of Colleges and Schools (SACS) Commission on International and Trans-Regional Accreditation (CITA) Northwestern Association of Accredited Schools (NAAS) Our curriculum has been correlated to the State learning standards for all 49 states that establish a standard Company History
1997 – Educational Options, Inc. founded by Dick Hetherington - Content delivery software and 19 courses developed 2003 – Educational Options, Inc. purchased by Tom Sawner - Academic department established and staff expanded 2004 - Sales and training departments established 2005 - TestPak developed - 21 courses available 2006 - GED Duo developed - 26 courses available 2007 - Blue Ridge International Academy established - High School Prep developed - 34 courses available 2008 - Charter School site purchased in Tempe AZ (9.2 acres) - EdOptions Foundation established - 42 courses available 2009 - EdOptions Charter School approved by AZ Charter School Board - Siboney Learning Group purchased – renamed Orchard Learning - Marketing department established - 46 courses available The Numbers Year Employees Clients Students Served 2002 6 < 200 < 12,000 2008 99 full-time > 1600 > 276,000 36 adjunct
Revenues up an average of 173% per year Increased 1037% between 2002-2008 On track to serve more than 400,000 students in 2009 The Metrics:
• We average a 99% contract renewal rate • Year on year, an average of 62% of our schools expand their usage • Last year, 61% of our new schools came from existing client referrals Last Year EdOptions… • Increased student success in – 1,600 schools & school districts – 46 states • Helped over 275,000 students stay in school, engage in education, and stay on track to graduate Our ž lagship Product The complete Webž based solution featuring rigorous curriculum and adaptive technology, designed to help middle school, high school, and adult learners reach their academic goals Rigorous Curriculum Courses you can stand behind ž owerful Technology Individualize the educational experience Rigorous Curriculum
Created by Teachers Researchž based and designed by highly ž ualified educators
State Correlated Content Regularly updated to meet changing state ž national standards ž owerful Technology
No Software to install Access anytime, anywhere!
No Servers to maintain Never any server ež uipment to buy or update! ž owerful Technology
We’re Fast! We’ve always been Webž based and optimized!
Easy to Use www. Simple as navigating a Webpage! ž owerful Technology
Autož Grading ž Reports Cut the admin work and focus more on students
Expert Support ž riendly support by phone, online, ž in person ž owerful Technology All courses can be delivered two ways…
ž ull Course ž ode 1. Similar to a standard school semester ž owerful Technology All courses can be delivered two ways…
Assessment ž ode 2. Adaptive courses individualize education Teacher ž irected
• Webž assisted courses managed locally • Teachers facilitate the learning process – Allows individualized instruction – Intervention at the point of need • Teacher controls the class – ž idterm and final exam release – Remediation process – Course sež uence and tempo ž owerful Teacher Tools
• Random exam generation • Internal ež mail between students and teachers • Obž ective ž uestions autož graded • Subž ective ž uestions are teacherž graded with a suggested answer matrix • 2ž ž 7 access -Middle & high school courses
-State test preparation
-GED preparation
-Assessment & preparation Middle & High School Courses Webž based courses forž
State test preparation • ž iagnostic test determines mastery level • ž rescriptive course individualized education • Students rapidly master key testable obž ectives • Help students catch up or prepare for high school
• Reduces dropout potential
• Great prep for freshman
• ž rovides placement data ž ualž track GEž Success
• ž esigned in consultation with national GEž experts
• Content and structure match GEž test Orchard Software provides PracticePlanet is an differentiated instruction easyž tož use online tool in math, reading, writing, designed to prepare language arts, and students for state tests in science for grades ž ž ž . grades ž ž ž for language www.orchardsoftware.com arts and math. www.practiceplanet.com ž ducators and students alike ž ducational Activities love Gamcož s combination Software provides proven of solid instruction and fun software solutions across motivation. Great software the curriculum for middle for great kids! schooler‟s through adult www.gamco.com learners. www.eaž software.com ž 6ž Prež ž to ž curriculum titles
ž anguage Arts titles contain ž ath titles contain ž ,ž 60 activities ž ,ž 0ž activities covering ž ,ž ž ž skills covering ž ,ž ž 0 skills over ž ,ž ž ž hours of instruction over ž ,ž ž ž hours of instruction Orchard Software titles are used by over 1,100 school districts 9,500 schools 6,ž 00,000 students • Accredited High School • Affordable Tuition • High School ž iploma • Credit Recovery • Certified Teachers • Proven Success An Independent ž ublic High School • Highly ž ualified Classroom • Onž Campus & Webž Based Teachers Instruction • Personaliž ed ž ducational • Individualiž ed Assistance Plans • ž lež ible ž ž hour School ž ays • Accelerated Graduation • Award Winning Curriculum Options We’re in the business of changing lives Our ž ission is to provide an individualiž ed, high ž uality educational ež perience to positively influence the lives of our students We combine classroom and webž based instruction, certified teachers and new technologies that insure high student success The ž ducational Options ž oundation ž ž 0ž cž ž was formed to promote educational innovation and to ež pand access to new technology, outstanding curriculum and best in class instruction and learning practices ž oundation activities center around two themesž • Operation of Než t Generation charter schools • Providing scholarship licenses to nonprofit educational organiž ations that ež pand student opportunity and achievement The ž ducational Options ž oundation is uniž ue in that it canž
• Accept grants for educational research • Provide scholarship grants directly to educational programs • Convert and ež pand grants and donations into direct educational services for the classroom with a matching donation by ž ducational Options Inc. and Tom and Bettina Sawner. Client school comments & studies Palm Beach Florida Schools • Now used in 17 sites • 6,000 students (past three years) • 7,500 courses – 7,084 completed successfully – 93% success rate • 400 summer school graduates • 3.3% overall increase in graduation rate Palm Beach County Schools
“Palm Beach graduated students during the summer who never would have graduated had it not been for Educational Options.” Susan Packman Credit Recovery and Summer School Coordinator Northeastern Florida Educational Consortium 2007-2008 School Year Results 30 School Systems in North Florida 105 individual schools or programs 7300.5 credits attempted 6471.5 credits earned 88.64% student success rate Pine Tree HS, Longview, TX Effectiveness Study 2007-2008 – Lifesaver program (credit recovery) • 58% increase in successful course completion rate • 48% increase in student participation • Statistically significant increases in scores for all four areas of the Texas Assessment of Knowledge and Skills (TAKS) for students using Stars Suite® software “Students that were exposed to the Stars Suite program increased their scores and benefitted dramatically from the web based curriculum.” Dr. Jason Mixon Assistant Professor, University of Texas, Educational Leadership Department Aberdeen, Maryland Alternative Education Program
2004 -2007 Graduation rate increased from 26% to 64%
“Students know they can earn the credits they need; teachers like the easy access and grading that frees time to assist students that need additional help.” Mark Buzminsky - Principal Alachua County, Florida • The Credit Recovery Opportunity Program established in 2005 • Expanded to seven high schools • In 2006, 1,273 students attempted 2,117 credits – 2,004 credits earned, 141 graduates recovered – 95% success rate • Expanded to two juvenile justice facilities – 344 students attempted 405 credits – 374 credits recovered, 92% success rate Alachua County, Florida
“Your product gives kids the second chance they need to succeed.” Charlie Wise District Coordinator Next Generation Education Come see us We’ll show you how Thank You Corporate Headquarters Western Regional Office 3440 N. Fairfax Drive 3280 S. Country Club Way Arlington, VA 22201 Suite 100 703-243-7460 Tempe, AZ 85282 480-777-7720 Midwest Regional Office Southern Regional Office 325 North Kirkwood Road 800 20th Place Suite 200 Suite 6 Saint Louis, MO 63122 Vero Beach , FL 32962 1-888-726-8100 772-299-0089 EdOptions.com Daniel Hamburger President and CEO DeVry Inc.
Venture Capital in Education Summit 2009 May 29, 2009
1 Overview of DeVry Inc.
ž ž ž ž ž ž ž ž , ž žžžžžž žžž žžžžžžžžžžžž žžžžžžžžžžžžž Tžžžžžžžžž žžž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž ž O ž ž ž ž ž ž ž ž ž ž ž ž ž ž
• DeVry University • Ross University • Becker CPA Review • Advanced Academics • Keller Graduate School − 4,400+ students • Becker CPE − 20,000+ students of Management to date − Dominica, St. Kitts, Grand • Stalla CFA Review − Associate, Bachelors, Bahama, FL & MI • 200+ U.S. school districts • Center for Corporate Masters − Largest supplier of MDs Education • Fanor − 70,000+ students; and DVMs − − 50,000+ students; 5 locations 93 locations • Chamberlain College 30 countries − 10,000 students − Best of both onsite of Nursing and online − 4 locations and online − 3,700+ students • Western Career College/ Apollo College − 10,000+ students − 17 campuses − Allied health
2 Acquisition History
Enrollment at Current Date School Acquisition Enrollment 1996 Becker CPA Review 20,000 50,000 2003 Ross University 2,500 4,400 2005 Chamberlain College of 450 3,700 Nursing 2007 Advanced Academics, Inc. 35,000* 55,000* 2008 U.S. Education 7,500 10,000 April 2009 Fanor 10,000 10,000 *Students served to date
3 3 Attractive Industry Structure
Supplier Power (Low) The postsecondary education industry is highly attractive • High barriers to entry Barriers Competitive Threat of to Entry Substitutes • Low threat Rivalry (High) (Low) of substitutes (Low) • Largest competitors are government- funded and privately- held institutions Buyer Power (Low) Positive cash cycle Pricing power
4 Primary Sources of Education Industry Intelligence
1. Integrated Postsecondary Education Data System (IPEDS)
2. Bureau of Labor Statistics (BLS)
3. Eduventures
4. Industry equity analysts
5. Internally-conducted consumer research
5 Thank you!
Bill Hughes ([email protected]) Venture Capital in Education Summit
May 29 2009 . Company overview
. Recent acquisitions
. Why education is an attractive industry vertical
. Resources to help your industry IQ
OU & Pearson Education Confidential
Financial Times Group The most international source of business news, data and analysis
OU & Pearson Education Confidential Penguin Group One of the world’s great consumer publishers
Adult Division: Ace Allan Lane Alpha Berkley Dutton Fig Tree Gotham NAL Penguin Classics Penguin Press Putnam Portfolio Viking
Young Readers: Dial Dutton Firebird Grosset & Dunlap Ladybird Puffin Razorbill Speak Warne Viking
Dorling Kindersley
OU & Pearson Education Confidential Pearson: the world’s leading education company
• #1 in School and Higher Education in the US and around the world • #1 in testing and technology • $1.1b in sales of digital products and services • #1 publisher in English Language Learning worldwide
OU & Pearson Education Confidential Recent Education Acquisitions (2007-2009)
. Educational Technologies and Services Leadership . NTC (National Transcription Corporation) . Edustructures . Fronter . Intellipro . eCollege . Assessment Leadership . Harcourt Assessment . ELT Leadership / China Growth . Wall Street English . LEC / Dell English . Global Leadership / Emerging Markets . Harcourt International . Longman Nigeria
OU & Pearson Education Confidential Framework for understanding innovation
New
Greenfield New Market Growth “Unexplored territory: can “Extend successful franchise” we make $ here?” Market
Disruptive Sustaining “Kill the goose “Feed the golden goose” and sell them paté”
Existing
Existing Opportunity New
OU & Pearson Education Confidential Education as an industry vertical
. A vital global industry . From the US recovery to economic empowerment in India, China and Brazil . An industry undergoing disruption . K20 is broken (too expensive, too few succeed) and needs fixing . Digital content, online assessment and tutoring, social networks . Inefficiencies create opportunity (scalable models) . Global economic crisis creates opportunities for new models . An interesting countercyclical play for investors . Private equity available for disruptive technology plays . Cross-boarder opportunities: ubiquitous broadband in emerging economies
OU & Pearson Education Confidential Sources for Improving your Industry IQ
. Conferences . Educause, FETC, EdVentures, EdNet, SIIA, Education Industry Investment Forum, Blackboard . Virtual attendance is an increasing option . Publications . FT, Economist (shameless plug) . Chronicle of Higher Ed, Education Week . Tools . Delicious . Ensembli . Companies like Pearson
OU & Pearson Education Confidential Why the US Education Vertical Matters
FOR EVERY 100 9TH GRADERS…
68 GRADUATE ON TIME…
OF THOSE, 40 ENROLL DIRECTLY IN COLLEGE…
ž ž DON’T OF THOSE, 27 ARE STILL ENROLLED ž ž ž ž ž T ! THE FOLLOWING YEAR…
OF THOSE, 18 EARN AN ASSOCIATES DEGREE WITHIN 3 YEARS OR A B.A. OU & Pearson Education Confidential WITHIN 6 YEARS…. Source: National center on education and the economy ncee.org Thank you!
Bill Hughes ([email protected]) Generation Partners
Growth Equity Investors $345 million under Management High Growth Services Sectors ̶ Business Services ̶ Education ̶ Healthcare Services & Technology ̶ Media & Marketing Services What We Do:
Identify: Result: Key Secular Trends Increased Scalability High Growth, Profitable Higher Margins Service Businesses Professionalize $10M-$50M Revenues Greater Predictability More Valuable • Often First Institutional Investor $100M+ Revenues • Limited Number of Companies/Partner • Experts at Sharing Best Practices Education: Current Investments and Areas of Interest
Investments • 2003 – Medvance Institute • 2004 – Post University
Areas of Interest • Post Secondary Schools • Outsourced Service Providers to Schools • Marketing Services • Compliance • Additional Functional Areas Why Education?
1. We are making money in it 2. Large Market 3. Strong Growth Drivers a) For Education Providers i. Strong Consumer Demand ii. Strong “Worldly Demand” b)For Outsourced Service Providers to Education i. Education Need for Optimization/ Professionalization ii. Increased Emphasis on Outcome/Results 4. But the sector is not easy… Resources
CCA
SIIA
Industry Analysts
Sloan - C Any Investor With Investment Experience in Sector Venture Capital in Education Summit 2009 May 29, 2009 Halyard Capital Overview and Industry Focus
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Business Services Media Communications
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1 Investment Strategy In Action
Company Overview: Leading interactive marketing and information services company focused on helping higher education institutions find, enroll and retain students
Investment Thesis Execution Result • • • Intersection of online Recruited experienced Education Dynamics is the marketing and online direct marketing premier provider of marketing education: two high executive to serve as support services to growth sectors Chairman and CEO of postsecondary for-profit and not- the platform company for-profit schools • Extremely high-quality ž ž žžžžžžžžžžžžž • • lead provider / premier Worked alongside this Delivers student prospecting as education websites executive to assess over well as enrollment and retention 30 acquisition targets solutions through over 60 active • Opportunity to further • websites expand content and suite Four acquisitions • of marketing services to completed to date: Provides interactive content and both the for-profit and not- eLearners.com, valuable resources to potential for-profit schools Educational Directories, students, while serving as a GoalQuest, WorldClass value-added partner to higher Strategy education institutions
2 The Market Opportunity – Continued Growth
. Elementary and secondary school enrollment has grown PK - 12 Actual and Projected Enrollment over 14% since 1992 and is projected to grow another 70,000 10 % Increase 14 % Increase 10% over the next 12 years 60,000 – Total K-12 spending estimated at $630 billion in 50,000
2008 40,000
– Technology infrastructure spending in the K-12 30,000 (in thousands) market is estimated to increase $1.0 billion from 20,000 2007 to 2011, reaching $7.3 billion 10,000
0
. Post-secondary school enrollment has grown over 22% 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 since 1992 and is projected to grow another www.halyard.com13% over Actual Projected the next 11 years Public Private
– Total post-secondary spending estimated at $405 Post - Secondary Enrollment by Age billion in 2008 16.0 13 % total increase 22 % total increase 11.5 11.7 – Competition for employment will drive increased 12.0 10.6 9.2 demand for post-secondary educational 8.2 qualifications 8.0 4.8 3.8 4.3
(in millions)(in 3.4 3.2 3.4 – Online enrollments as a percent of total 4.0 2.7 2.7 3.1 3.1
enrollments are expected to grow from ~10% in 0.0 2008 to ~ 18% by 2013 1992A 2000A 2006A 2012E 2017E
– The for-profit post-secondary market is expected to 18-24 25-34 35 and over grow from $25.4 million in 2008 to almost $40.0 million in 2013, representing a 9% CAGR
Source: US Department of Education National Center for Education Statistics, Eduventures and BMO Financial Group.
3 The Market Opportunity – Macro Trends
• The Education Industry is undergoing a substantial transformation – Students / parents / educators are seeking alternatives to traditional classroom-based education that can help improve academic achievement – Online learning initiatives (virtual schools, online testing and professional development) have become widely adopted – Moving toward a lifelong education model to support a knowledge-based economy − For-Profit providers bringing sophisticated business and performance orientation to the industry • K-12 Market – School-age population (49 million)www.halyard.com continues to grow but declining as a % of total population – K-12 spending projected to increase but highly dependent on state/local funding – NCLB pressuring districts to improve performance and driving outsourcing of some services − Charter/online/home schooling gaining popularity • Post-secondary Market – For-profit institutions have captured a substantial portion of the post-secondary market – Rising awareness of the wage premium associated with post-secondary qualifications – Growing student population (18 million) of working adults – Online enrollments continue to accelerate
4 The Market Opportunity – Areas of Focus
• ž žžžžžžžž žžžžžž žžžžžžžžžž, žžžžž žžž • Džžžžžž žžžžžžžžžž žžž žžžžžž ž žžžžžž žžž N ž ž ž ž ž ž ž žžžžžžž žžžžž ž žžžžžžžž žžžžžžžžž ž ž ž ž ž ž ž ž ž ž žžžžžžžžž • ž ž ž žžžžžžž ž ž žžž žžžžžžž • Tžžžžžžžžžžžžžžžžž žžžžžžž žžžž ž žžžžžžžžž žžž žžžžžž žžžžžžžžžžžžž žžžžžžž ž ž ž ž ž ž ž • Tžžžžžžž žžžžžžž ž
• Instructional Content / Technology / Outsourced Services – Educational institutions are increasingly seeking new and effective approaches to incorporating technology as tools for instruction and individual and classroom assessment – In the K-12 sector, spending on for-profit third-party providers (companies supplying goods and services to the sector) was ~$20 billion in 2007 with an expected annual growth rate of 5.8% ž ž žžžžžžžžžžžžž – In the post-secondary market, spending is estimated to reach similar levels and is expected to grow at an annual rate of 8.8% – Significant opportunity for companies enabling the linkage of student information systems and instructional management systems – Fragmented market presents compelling consolidation opportunity • For-Profit / Private School Market – For-profit providers account for less than 3% of the K-12 market and approximately 6% of the post-secondary market . Significant room for growth / projected to increase market share – Online delivery provides scalability and expands addressable market
5 Policy and Regulatory Insights into K-12 and Higher Education Key issues investors and executives need to know
Elizabeth Meers, Partner Maree Sneed, Partner Lorraine Sostowski, Partner May 29, 2009
© 2009 Hogan & Hartson LLP. All rights reserved. Introduction
• Transformation of U.S. educational policy and regulatory landscape
– Concurrent expansion and contraction in resources available to educational institutions at all levels, in for-profit sector as well as public and non-profit sectors
– Push by governments and policymakers to accelerate reforms at all levels
• Education is regulated industry, and compliance with regulatory requirements is mission-critical
– Legal developments in the United States in areas such as individual privacy, protection of intellectual property, and data protection measures pose additional operational burdens on all types of educational institutions
– Noncompliance may have significant adverse financial effects
• Outside the United States, governments are seeking to expand educational opportunities at all levels
• Each of these developments presents both increased opportunities and risks for educational institutions and corresponding increased opportunities for companies that provide goods and services to these institutions
© 2009 Hogan & Hartson LLP. All rights reserved. 2 Introduction, cont’d
• K-20 legal developments and business opportunities
– Economic stimulus legislation: American Recovery and Reinvestment Act of 2009 (ARRA)
– Distance education
– Privacy of student records
– Identity theft protection
• Additional K-12 legal developments and business opportunities
– Charter schools
– No Child Left Behind Act of 2001 (NCLB)
• Additional postsecondary education legal developments and business opportunities
– Student aid
– Textbooks
– Peer-to-peer file sharing
– Campus safety
• Intellectual property
• Globalization
© 2009 Hogan & Hartson LLP. All rights reserved. 3 Economic Stimulus Legislation
• ARRA provides approximately $100 billion for education
• A primary principle of ARRA is to improve student achievement through school improvement and reform, focusing on four specific areas:
– Making progress toward rigorous college- and career-ready standards and high quality assessments that are valid and reliable for all students, including English language learners and students with disabilities
– Establishing pre-K to college and career data systems that track progress and foster continuous improvement
– Making improvements in teacher effectiveness and equitable distribution of qualified teachers for all students, particularly students most in need
– Providing intensive support and effective interventions for lowest performing schools
Source: “The American Recovery and Reinvestment Act of 2009: Saving and Creating Jobs and Reforming Education,” U.S. Department of Education, March 7, 2009, http://www.ed.gov/policy/gen/leg/recovery/implementation.html
© 2009 Hogan & Hartson LLP. All rights reserved. 4 Economic Stimulus Legislation, cont’d
Program Total Appropriation (estimated) State Fiscal Stabilization $53.6B Fund (All levels)
Special Education (K-12) $12.2B Title I (K-12) $10B School Improvement $3B Grants (K-12)
Enhancing Education $650M through Technology (K-12)
Teacher Incentive Fund $200M (K-12) Impact Aid (K-12) $100M McKinney-Vento (K-12) $70M
http://www.ed.gov/about/overview/budget/statetables/09recoverybystate.pdf
© 2009 Hogan & Hartson LLP. All rights reserved. 5 Economic Stimulus Legislation, cont’d
Program Total Appropriation (estimated)
Research and $18 billion
Development –$10 billion to National Institutes of Health (Postsecondary) –$3 billion to National Science Foundation (NSF)
–$5 billion to various other agencies Federal Pell Grants $15.84 billion to increase maximum discretionary Pell Grant (Postsecondary) by $500 to $4,860 and to cover Pell Grant “shortfall” (difference between authorized and appropriated amount)
Federal Work Study $200 million Program (Postsecondary)
American Opportunity Tax Replaces Hope Tax Credit with $2,500, 40% credit; Credit (Postsecondary) textbooks can now be covered
© 2009 Hogan & Hartson LLP. All rights reserved. 6 Economic Stimulus Legislation, cont’d
Program Total Appropriation (estimated)
Job Training Programs $3 billion under Workforce –$1.25 billion for dislocated workers Investment Act –$1.2 billion for youth activities (Postsecondary) –$500 million for adult employment and training activities
–$750 million for competitive grant programs for worker training and placement in high growth and emerging industry sectors such as energy and healthcare Health Information National Institute of Standards and Technology, in Technology consultation with NSF, must establish program to assist (Postsecondary) higher education institutions in establishing multidisciplinary Centers for Health Care Information Enterprise Integration U.S. Department of Health and Human Services and NSF must provide assistance to higher education institutions to establish or expand medical health informatics education programs
© 2009 Hogan & Hartson LLP. All rights reserved. 7 Economic Stimulus Legislation, cont’d
Statewide Data • Examples of potential investments: Systems (all levels) – Develop or enhance existing data systems to provide teachers access to student data in such areas as attendance, grades, course Core ARRA Reform schedules, and disability or English Language Learner status, and goal is establishing data data that show academic performance and growth and whether systems and using data students are on track to meet standards and graduate from high for improvement school; – Train school staff to use data to identify specific help students need to succeed, adjust classroom instruction to address student strengths and weaknesses, and target professional development and other resources on student and teacher needs;
– Track number and percentage of students by school who graduate from high school and complete at least one year’s worth of college credit, and use such information to strengthen high school programs;
– Link districts’ multiple data systems (including student, financial, and personnel) and use resulting information for analyses and reports that enable community, district, and school leaders to understand better educational and cost effectiveness of district programs and strategies and allocate resources accordingly;
– Launch easy-to-use online Individualized Education Program (IEP) system for students with disabilities that is aligned with state academic standards and can be used by educators to create content-rich IEPs
© 2009 Hogan & Hartson LLP. All rights reserved. 8 Establishing Data Systems and Using Data for Improvement
• The Coalition for Student Achievement report on investing ARRA funds recommends states comply with all 10 elements of the Data Quality Campaign, a national, collaborative effort that urges state policymakers to improve collection, availability, and use of high-quality education data to improve student achievement
– (1) Unique statewide student identifier that connects student data across key databases across years
– (2) Student-level enrollment, demographic and program participation information
– (3) Ability to match individual students' test records from year to year to measure academic growth
– (4) Information on untested students and reasons they were not tested
– (5) Teacher identifier system with ability to match teachers to students*
– (6) Student-level transcript information, including information on courses completed and grades earned*
– (7) Student-level college readiness test scores*
– (8) Student-level graduation and dropout data
– (9) Ability to match student records between P-12 and higher education systems*
– (10) State data audit system assessing data quality, validity, and reliability
* Elements with lowest state compliance
© 2009 Hogan & Hartson LLP. All rights reserved. 9 Establishing Data Systems and Using Data for Improvement, cont’d
• As of 2008, only 6 states had all ten essential elements
• Florida:
– First state to enact policy establishing data warehouse spanning K-12 and postsecondary – K-20 Data Warehouse
– First state to comply with Data Quality Campaign elements
– K-20 Data Warehouse is longitudinal data system
• Follows each student through postsecondary education into workforce
• Relies on unique student identifier to provide linkages between student, staff, teacher certification, and assessment databases
– Collects information in four key data subject areas called “facets,” which are all linked
• Student demographics and performance
• Educational institution information
• Employee information
• Educational curriculum
– Provides capability to track students over time and across delivery systems and to perform trend analyses
© 2009 Hogan & Hartson LLP. All rights reserved. 10 Establishing Data Systems and Using Data for Improvement, cont’d
• California
– Legislation requires:
• Assignment of individual, non-personally identifiable number to each K-12 student
• Establishment of California Longitudinal Pupil Achievement Data System (CALPADS) that includes statewide assessment data, enrollment data, teacher assignment data, and other elements required to meet federal reporting requirements under NCLB
• Establishment of California Longitudinal Teacher Integrated Data Education System (CALTIDES) to facilitate teacher assignment monitoring through automation and enable monitoring of Highly Qualified Teacher requirements under NCLB
– Implementation of data system is ongoing – only 6 of 10 Data Quality Campaign elements satisfied
• Maryland (3) and Idaho (2) – lowest number of Data Quality Campaign elements satisfied
• Other sources of funding for data system implementation:
– Institute of Education Services has awarded $150 million in grant money to 41 states and District of Columbia under Statewide Longitudinal Data Systems Grant Program
© 2009 Hogan & Hartson LLP. All rights reserved. 11 ARRA Appropriations for Title I (Elementary and Secondary Education Act)
Grant Total Timing of Use of Funds Appropriation Appropriation to (Estimated) State Title I, Part A $10 billion 50% end of March Aid to high-poverty districts and to address Targeted 2009 equity deficiencies in state funding formulae Grants and Education 50% by October Without waiver, obligate 85% by Sep. 30, 2010, Finance 2009 and remaining by Sep. 30, 2011 Incentive Grants *In addition to Regular FY 2009
School $3 billion Available Fall 2009 Grants to State Education Agencies (application Improvement required), which then sub-allocate at least 95% Grants to schools in “school improvement”
Priority to school districts that (a) serve lowest- achieving schools, (b) demonstrate great need, and (c) demonstrate strong commitment to success of low-achieving schools
© 2009 Hogan & Hartson LLP. All rights reserved. 12 ARRA Appropriations for IDEA (Individuals with Disabilities Education Act)
Grant Total Timing of Use of Funds Appropriation Appropriation to (estimate) State Part B grants $11.3 billion 50% end of March Grants for special education 2009 programs serving students age 3-21 50% by October 2009 School districts must obligate majority of funds *In addition to during 2008/09 and 2009/10 Regular FY 2009 school years and the rest by Sept. 30, 2011 Part B $400 million Same Grants for special education preschool programs at pre-schools grants serving students aged 3-5
Obligation rules same as above
Part C grants $500 million Same Grants for special education programs serving students age 0-2
© 2009 Hogan & Hartson LLP. All rights reserved. 13 Other ARRA Appropriations
Appropriation Total Description Type Appropriation (estimate)
Innovation and $200 million Funds must be used to make competitive grants to school districts (including Improvement charter school districts) or States, or a partnership of a school district or Grants State and at least one nonprofit, to develop and implement performance- based teacher and principal compensation systems. Funds available Fall 2009 (application requirements outlined in further guidance).
Education $650 million Competitive grant program to improve student achievement through use of Technology Grants technology in elementary and secondary schools. Funds available Fall 2009 (application requirements outlined in further guidance).
Impact Aid $100 million Funds for construction of shovel-ready facility projects in school districts that have within their boundaries parcels of land that are owned by Federal Government or have been removed from local tax rolls by Federal Government, including Indian lands. 40% of funds distributed by formula, 60% by competitive grants for “shovel ready” projects.
McKinney-Vento $70 million Grants to states are made in proportion to number of homeless students in Act each state identified in 2007-08 school year relative to number of homeless students nationwide. States subgrant to school districts.
© 2009 Hogan & Hartson LLP. All rights reserved. 14 State Fiscal Stabilization Fund – Overview -- $53.6 Billion
$53.6 billion State Fiscal Stabilization Fund Program Total Timing of Use of Funds Appropriation Appropriation to State (estimate) Education $39.5 billion 67% starting in April 2009 To reduce state budget shortfalls in (pending application) elementary, secondary, and postsecondary education 33% starting in July 2009 (pending application) Local Education Agencies must obligate by Sept. 30, 2011
Government $8.8 billion Same as “Education” For general government services, Services including education and school construction
Governors must obligate by Sept. 30, 2011 Competitive $5 billion Two rounds – late Fall To encourage and reward innovative Education 2009, Summer 2010 states and school districts Grants Obligation rules TBD
© 2009 Hogan & Hartson LLP. All rights reserved. 15 ARRA Competitive Awards
• ARRA creates two new award programs:
– State Incentive Grants (“Race to the Top Funds”)
– Invest in What Works and Innovation fund (“Innovation Fund”)
• General details
– $5B is set aside for award programs
• Up to $650M for Innovation Fund
• Remainder for State Incentive Grants (less administrative costs)
– Money for these award programs is appropriated through State Fiscal Stabilization Fund, but both programs will be administered by U.S. Department of Education (ED) and funds will be awarded on competitive basis.
© 2009 Hogan & Hartson LLP. All rights reserved. 16 Race to the Top Fund
Overview
– State Incentive grants will be made directly to state governments.
– ED Guidance description: Race to the Top Fund will be “national competition among states for a $4.35 billion . . . fund to improve education quality and results statewide. The Race to the Top fund will help states drive substantial gains in student achievement by supporting states making dramatic progress on the four reform goals described above and effectively using other ARRA funds. “
– Funds will be distributed in two-rounds: Fall 2009 and Spring 2010
– State must distribute at least 50% of grant to school districts based on their relative shares of Title I funding for most recent year
© 2009 Hogan & Hartson LLP. All rights reserved. 17 Race to the Top Fund, cont’d
State Application Requirements
• Governor must submit application for state to receive grant. Application must: (1) Describe status of State's progress toward meeting objectives and strategies it is using to ensure that students in all subgroups continue to make progress toward state standards, and explain progress it is making toward meeting several education “assurances” required to receive state fiscal stabilization funds:
• increase teacher effectiveness and address inequities in distribution of highly qualified teachers
• establish and use pre-K-through-college and career data systems to track progress and foster continuous improvement
• make progress toward rigorous college- and career-ready standards and high- quality assessments
• support targeted, intensive support and effective interventions to turn around schools identified for corrective action and restructuring
State Fiscal Stabilization Fund 14005(c), (d)(2)-(5)
© 2009 Hogan & Hartson LLP. All rights reserved. 18 Race to the Top Fund, cont’d
State Application Requirements, cont’d (2) Describe achievement and graduation rates of public elementary and secondary school students in state (3) Describe how state would use grant funding to improve student academic achievement, including how state will allocate funds to give priority to high- need local educational agencies (4) Include plan for evaluating state's progress in closing achievement gaps
State Fiscal Stabilization Fund 14005(c)
© 2009 Hogan & Hartson LLP. All rights reserved. 19 Innovation Fund
Overview
– ED Description: Innovation Fund awards will “be available through a competition to districts and non-profit groups with a strong track record of results.”
– Innovation Fund will be used to make awards to “eligible entities”:
• School districts
• Partnership between nonprofit organization and
– One or more school districts
– Consortium of schools
– Future ED Guidance will clarify application procedure
State Fiscal Stabilization Fund Section 14007(a)
© 2009 Hogan & Hartson LLP. All rights reserved. 20 Innovation Fund, cont’d Eligibility Criteria
• Innovation Fund awards will be made to eligible entities that:
– Have significantly closed achievement gap between various subgroups of students under Elementary and Secondary Education Act
– Have exceeded state’s annual measurable objectives for two or more consecutive years or have significantly increased academic access for all groups of students
– Have made improvement in other areas, such as graduation rates or increased recruitment and placement of high quality teachers
– Have established partnerships with private sector (including philanthropic organizations), including required showing that these partnerships likely will result in matching funds from private sector
• If eligible entity includes nonprofit organization, eligible entity meets eligibility requirements if such nonprofit organization has record of meeting them
State Fiscal Stabilization Fund 14007(b)-(c)
© 2009 Hogan & Hartson LLP. All rights reserved. 21 Innovation Fund, cont’d
Use of Funds
• Eligible Entities may use funds to:
– Expand their work and serve as models for best practices
– Work in partnership with private sector and philanthropic community
– Identify and document best practices that can be shared and taken to scale based on demonstrated success.
State Fiscal Stabilization Fund Section 14007(a)(3)
© 2009 Hogan & Hartson LLP. All rights reserved. 22 Broadband
• School districts, colleges, universities and other educational institutions are eligible for ARRA broadband funding
• U.S. Department of Commerce, National Telecommunications and Information Administration (NTIA), Broadband Technology Opportunities Program (BTOP)
– $4.7 billion in competitive grants to promote broadband deployment and adoption
– Funds can be used to acquire networking equipment, hardware, software, and infrastructure for broadband services and to ensure access to broadband by low-income, unemployed, aged or otherwise vulnerable populations in order to provide educational opportunities
– At least $250 million to be used for expanding “public computer center” capacity, including at community colleges
– At least $200 million to be used to promote increased broadband adoption
– At least one grant awarded in each state or territory
– NTIA may consult with affected states and territories
© 2009 Hogan & Hartson LLP. All rights reserved. 23 Broadband, cont’d
• U.S. Department of Agriculture, Rural Utilities Service (RUS), Distance Learning, Telemedicine and Broadband Program
– $2.5 billion in grants, loans and loan guarantees for broadband infrastructure in rural areas without adequate access to broadband in order to promote economic development
– Preference given to previous RUS funding recipients
– No project receiving BTOP funding can be funded under RUS program, but applications pertaining to same project can be submitted to both agencies
© 2009 Hogan & Hartson LLP. All rights reserved. 24 Broadband, cont’d
• Opportunity for vendors and school districts and other educational institutions to partner in developing funding proposals
• Funding guidelines for both programs are expected in late June 2009
• First round of funding applications expected in August/September 2009
• Three funding cycles expected
• All awards must be made by September 2010
• State and local support important for success of funding application
• Projects must be substantially completed within two years of receiving funding, and applicants must show that the project would not have been implemented within the grant period without BTOP grant assistance
© 2009 Hogan & Hartson LLP. All rights reserved. 25 Distance education
• Distance education is expanding at all education levels, although some public universities have scaled back because of economic downturn
– Content providers
– Delivery platforms
© 2009 Hogan & Hartson LLP. All rights reserved. 26 Distance education, cont’d
• Technology, Education, and Copyright Harmonization Act of 2002 (TEACH Act)
– Copyright exemption for distance education to permit digital transmission of copyrighted works by government or accredited nonprofit education institutions
– Allows for non-infringing use of copyrighted works as part of a course, where certain statutory requirements are met. If these requirements are not met, use of the material will have to qualify as "fair use" or permission from the copyright holder must be obtained
– Accredited institutions required to:
• Institute copyright policies
• Provide accurate information about copyright
• Promote copyright compliance
• Provide notice to students that course materials may be copyrighted
– Downstream controls must be instituted including, e.g., technological measures that reasonably prevent:
• Retention in accessible form for longer than a class session
• Unauthorized further dissemination in accessible form
• No interference with copyright holder's technological measures that prevent such retention and dissemination
© 2009 Hogan & Hartson LLP. All rights reserved. 27 Distance Education, cont’d
• Continuing concern regarding integrity
– Higher Education Opportunity Act (HEOA) requires through accreditors that postsecondary education institutions have processes to establish that student who registers for distance education program is same student who participates in and receives credit for program (Effective August 14, 2008)
– Through “negotiated rulemaking” ED has developed draft regulation
• Requires use of such methods as secure login and passcode, proctored examinations, or “new or other technologies and practices that are effective in verifying student identification”
• Requires use of processes that protect student privacy and notice to students of any additional student charges associated with identity verification at time of registration or enrollment
• Opportunities/solutions
– Username and password and examinations with proctor are common, but may become inadequate as new technologies evolve
– New application for other forms of identity recognition technology?
© 2009 Hogan & Hartson LLP. All rights reserved. 28 Distance Education, cont’d
• Approximately 1,030,000 K-12 students engaged in online courses in 2007-2008, a 47% increase since 2005-2006.¹
• As of Fall 2008, some form of significant full or part-time online learning opportunities for students exists in 44 states (either through state/district programs or charter schools) .²
• 17 states offer both supplemental and full time online options for students (e.g., many states in the western US– California, Oregon, Washington, Nevada, Idaho).
• 23 states have supplemental programs but no full-time options.
• 4 states have full-time opportunities but no supplemental programs.
• 6 states have neither – predominately in the northeast – New York, New Jersey, Vermont, Maine, Rhode Island.
• Many are state-led programs (approximately 34).
– State-led programs which offer full courses, teachers and student support include Florida, Illinois, Michigan,
– State-led initiatives, which provide online resources or serve as a clearinghouse for online courses, include Washington, Texas, and Oregon
• 21 states have full time online schools; most, but not all are charter programs.
¹ Sloan Consortium Survey ² Evergreen Consulting, Keeping Pace with K-12 Online Learning
© 2009 Hogan & Hartson LLP. All rights reserved. 29 Distance Education, cont’d
• Beginning in 2009-2010, school districts in Florida will be required to offer a full- time virtual instruction program to students in grades K-8.
• Alabama’s Board of Education has passed a resolution requiring students to take and pass an on-line/technology enhanced course.
• Wisconsin changed its charter school laws in 2008 to allow virtual charter schools to operate with public funding in response to a Dec. 2007 state appellate court ruling.
• In response to state task force reports to their respective state legislatures, Wyoming and Hawaii passed legislation in 2008 to permit full-time online schools to operate within those states.¹
• Indiana, which has no state-led program and explicitly denies funding to predominately-online charter schools, has established an interim study committee on virtual learning to review and make recommendations to the state legislature regarding virtual schools.
¹ Glass, Gene V. The Realities of K-12 Virtual Education
© 2009 Hogan & Hartson LLP. All rights reserved. 30 Distance Education, cont’d
• Overview:
– Online learning regulated at the state level, with different rules governing whether online education is authorized, whether it can be full time, whether virtual charter schools may be established and funded, geographic limitations on enrollment, manner and extent of funding
• Virtual Charter Schools – Most states that permit charter schools permit online education through charter schools in some form, although Indiana, for example, currently prohibits funding for virtual charter schools, severely affecting their viability in the state. Geographic limitations built into existing charter school statutes also hampers their viability in certain states.
– For example, Maryland charter law requires students to be “physically present on school premises”; therefore, currently there are no online charter schools in that state.
© 2009 Hogan & Hartson LLP. All rights reserved. 31 Distance Education, cont’d
• Geographic limitations/Open-enrollment.
– Many state online education programs are limited to students who live in the a school’s geographic district.
– California charter school laws limit their operation to contiguous counties
– Florida’s virtual program limits enrollment to students who reside within the district of a school that has an established virtual program.
– Others have no such limitations – Charter schools in South Carolina, among other states, can service students throughout the state.
© 2009 Hogan & Hartson LLP. All rights reserved. 32 Distance Education, cont’d
• K-8
– Availability of K-8 instruction is more limited than secondary education, but growing.
– Until 2008, Nevada prohibited two state-wide charter schools from serving K-3.
– Florida and Missouri are implementing K-8 online education.
– A number of states have pilot programs on K-8 online instruction; for example, Mississippi.
© 2009 Hogan & Hartson LLP. All rights reserved. 33 Distance Education, cont’d
• Funding:
– The manner of funding online education varies greatly from state to state
– South Carolina funds virtual charter schools by the same formula it funds all charter schools; Colorado, Nevada, Wisconsin, and Idaho, among others, do not.
• Standards and Accountability
– Certification issues.
– Enhanced training for online teachers. Various states require online teachers to have additional training.
• Wisconsin law requires 30 hours of professional development designed to prepare a teacher for online teaching.
• Texas requires teachers to complete an approved professional development course.
¹ Glass, Gene V. The Realities of K-12 Virtual Education
© 2009 Hogan & Hartson LLP. All rights reserved. 34 Privacy of student records
• FERPA prohibits educational institutions from disclosing personally identifiable information from education records without consent of parent (K-12) or student (higher education)
– Exception for disclosure to “school officials” with “legitimate educational interest”
• Parents and students complained that school officials may have unrestricted access to records of all students
• New ED regulations require institutions to use “reasonable methods to ensure that school officials have access to only those education records in which they have legitimate educational interests”
• Regulations suggest preference for “physical or technological access controls” over administrative policy
– Effective January 8, 2009
– ED needs assessment
• Vast majority of mid- and large-size school districts and postsecondary education institutions currently use commercial software for student information systems, which generally include role-based security features and transactional logging features
• 6,687 small K-12 districts and 3,906 small postsecondary education institutions may not have software with access security control features; 1,619 (15 percent) may not have role-based security features; cost of acquisition of student information software estimated at $56,665,000
© 2009 Hogan & Hartson LLP. All rights reserved. 35 Privacy of student records, cont’d
– Parents and students complained that unauthorized parties obtain access to student’s education records because educational institutions use widely available information (name, date of birth, Social Security Number (SSN), or student identification number) when providing access to electronic records or disclosing information by phone
– New FERPA regulations also require institutions to “use reasonable methods to identify and authenticate the identity of parents, students, school officials, and any other parties” to whom institutions disclose personally identifiable information from education records (effective January 8, 2009)
• Use of widely available information is not reasonable method to authenticate identity
• Single-factor authentication (such as standard form user name and password or PIN) may not be reasonable for all types of records in all circumstances. High-risk records (credit card information, SSN, immunization or other health records, certain records on disabled students, transcripts and grades) should receive greater protection.
• Reasonableness depends on usual and customary good business practices and requires ongoing review and modification of procedures as standards and technologies change
© 2009 Hogan & Hartson LLP. All rights reserved. 36 Privacy of student records, cont’d
• Opportunities/solutions
– Software applications to match school officials with education records in which they have legitimate educational interest
– New application for identity recognition technology?
© 2009 Hogan & Hartson LLP. All rights reserved. 37 Red Flags Rule
• Federal Trade Commission issued “Red Flags Rule” pursuant to Fair and Accurate Credit Transactions Act to reduce risk of identify theft
– K-20 institutions may be subject to Red Flags Rule to extent they lend to students, faculty, or staff or engage in other activities involving pattern of delayed payment for services rendered
– If covered, institution must develop identity theft prevention program, including
• Identification and detection of relevant “red flags”
• Appropriate response to detected red flags
• Periodic updating
• Staff training
• Oversight of service providers
– Effective November 1, 2008, but enforcement deferred to August 1, 2009
• Opportunities/solutions
– Software applications to notify of discrepancies in information and other red flags
© 2009 Hogan & Hartson LLP. All rights reserved. 38 Additional K-12 legal developments and business opportunities
• Charter schools
• NCLB
© 2009 Hogan & Hartson LLP. All rights reserved. 39 Charter Schools
• President Barack Obama supports charter schools
– White House education reform agenda focuses on improving public education through innovative measures, including charter schools
– States are encouraged to expand use of charter schools and to hold charter schools accountable
– President Obama named May 3, 2009 through May 9, 2009 National Charter Schools Week
– Secretary of Education Arne Duncan has experience with implementing charters in Chicago and supports charter schools
© 2009 Hogan & Hartson LLP. All rights reserved. 40 Charter Schools, cont’d
• The Race to the Top funds ($4.35 billion) may be used to support charter schools. Whether charters receive an award depends on:
– Whether state receives a grant
• Grants to be awarded to reform-minded states. Charters should work with state to prepare Race to the Top application and generate innovative ideas
– If state receives grant, at least 50% will be allocated to school districts through Title I, Part A formulae.
• Does charter qualify as Title I, Part A school?
– Stimulus legislation does not specify how state must use other 50% of grant
• Work with state in application process so that reforms and funding for those reforms can apply to charter
© 2009 Hogan & Hartson LLP. All rights reserved. 41 Charter Schools, cont’d
• Charters can access directly Innovation Fund awards
– “Eligible entities” include partnerships between nonprofit organizations (such as nonprofit charter schools) and school districts
• Charter schools may also be able to obtain Title I School Improvement grants
– School Improvement grants are made to support low-performing schools
– $3 billion for school improvement grants in ARRA
– Funds will not be awarded directly to charter schools, but there is an interesting opportunity for charter schools to use expertise to work with school districts and drive reform
© 2009 Hogan & Hartson LLP. All rights reserved. 42 Charter Schools, Cont’d
• 10 states have not authorized charter schools
– Alabama – Kentucky – Maine – Montana – Nebraska – North Dakota – South Dakota – Vermont – Washington – West Virginia
© 2009 Hogan & Hartson LLP. All rights reserved. 43 Charter Schools, cont’d
• State laws governing charter schools vary significantly
– 26 states (as well as D.C. and Puerto Rico) restrict number of charter schools that may be authorized
• Some states limit number of charter schools authorized
– Illinois 60
– Massachusetts 120
• Certain states restrict location of charter schools
– In Missouri start-up charter schools may open only in Kansas City and St. Louis school districts
© 2009 Hogan & Hartson LLP. All rights reserved. 44 Charter schools, cont’d
• 14 states do not have restrictions on number of charter schools that are authorized
– Arizona – Colorado – Florida – Georgia – Kansas – Maryland – Minnesota – Nevada – New Jersey – Oregon – Pennsylvania – South Carolina – Virginia – Wyoming
© 2009 Hogan & Hartson LLP. All rights reserved. 45 Charter schools, cont’d
• Funding amounts per-pupil may be equivalent to or less than amount allotted to schools in district
– Indiana pays charter schools 100% of per-pupil funding that district schools receive
– In some states, such as Arizona and Rhode Island, portion of funds allotted to charter schools is paid to local school board for oversight services
– In other states, including Illinois and Oregon, funding is negotiated between charter school and the local school district that authorized charter school
© 2009 Hogan & Hartson LLP. All rights reserved. 46 No Child Left Behind Act of 2001
• There will continue to business opportunities related to NCLB, such as:
– Supplementary Education Services – before and after school tutoring
– Assessments
• NCLB will be reauthorized in the near future
– Secretary Duncan is on a listening tour regarding changes to NCLB
© 2009 Hogan & Hartson LLP. All rights reserved. 47 Additional postsecondary legal developments and opportunities
• “Program integrity triad”
– State education licensure by state education agencies
– Accreditation by institutional and programmatic accreditors
– Federal student financial aid
• Authorized by Higher Education Act, recently amended by Higher Education Opportunity Act (HEOA)
• Administered primarily by ED
• Participation requires state education licensure and institutional accreditation
• Federal student financial aid requirements and opportunities
– Student aid refunds
– Textbooks
– Peer-to-peer file sharing
– Campus safety
© 2009 Hogan & Hartson LLP. All rights reserved. 48 Federal Student Aid
• Federal student financial aid is complex system undergoing significant change
– Credit crisis resulted in significant contraction in number of lenders in Federal Family Education Loan (FFEL) program and private education loans and emergence of federal government as secondary market for student loans
– President Obama has proposed to abolish FFEL program in favor of Federal Direct Loan Program and to use resulting savings to increase Federal Pell Grant funding for low-income students
• Lenders such as Sallie Mae are positioning themselves to service ED student loan portfolio
• Guarantee agencies may continue to provide financial literacy and default management services to postsecondary education institutions
– Post-9/11 GI Bill significantly increases aid available for veterans
– Congress and public are pressuring postsecondary education institutions to control costs and price of postsecondary education
© 2009 Hogan & Hartson LLP. All rights reserved. 49 Federal Student Aid, cont’d
• Higher Education Act requires adoption of federal student aid regulations through “negotiated rulemaking”
• ED has recently completed negotiated rulemaking under HEOA
– Student loans (lender and school issues)
– Accreditation
– Various other issues
– ED will issue proposed rules for public comment and is expected to issue final rules by November 1 to become effective July 1, 2010
• ED has announced second round of negotiated rulemaking
– Foreign schools
– Incentive compensation and other issues
– ED is conducting public meetings and is expected to establish negotiated rulemaking teams by September
© 2009 Hogan & Hartson LLP. All rights reserved. 50 Student Aid Refunds, cont’d
• Federal student aid regulations create opportunities for niche businesses to streamline business processes and improve student services
– For example, ED regulations require institutions to make “refund” to student of difference between federal student aid award and institutional charges in prescribed manner and timeframe
– Failure to do so may result in monetary liability or other sanctions
• Opportunities/solutions
– Higher One, Inc., contracts with institutions to manage refund process
– Students receive “Higher One” stored value/debit card
– Institutions deposit refund on Higher One card rather than issue check
– Students can use Higher One card on campus and with merchants
– Since its founding in 2000, Higher One has disbursed over $6 billion dollars in refunds for public and private higher education institutions throughout the country
© 2009 Hogan & Hartson LLP. All rights reserved. 51 Textbooks
• HEOA seeks to decrease cost of textbooks by enhancing disclosure
– HEOA requires colleges and universities to provide textbook information on Internet course schedules
• International Standard Book Number
• Retail price
• Current and next academic period
– Effective July 1, 2010
– ED is prohibited from issuing implementing regulations
• Opportunities/solutions
– In coming year colleges and universities will be seeking means of compliance with disclosure requirements
– Opportunity for outsourcing?
© 2009 Hogan & Hartson LLP. All rights reserved. 52 Textbooks, cont’d
• HEOA promotes other cost-saving measures
– HEOA encourages institutions to disseminate information regarding cost-saving measures such as
• Textbook rentals
• Used textbook purchases
• Textbook buy-back programs
• Alternative content delivery programs
– HEOA requires publishers to sell textbooks and course materials separately
– Effective July 1, 2010; ED is prohibited from issuing implementing regulations
• New bill in House (H.R. 1464, 3/12/09 (learning opportunities with creation of low cost text books Act of 2009 (LOWCOST)) would require certain federal agencies to develop freely available open source educational materials for college level math and science subjects
• Opportunities/solutions
– Market for textbook rentals, used textbook purchases, and textbook buy-back programs
– Alternative content delivery programs
• Amazon’s Kindle
• Google’s Book Search Program
© 2009 Hogan & Hartson LLP. All rights reserved. 53 Textbooks, cont’d
• Amazon Kindle Litigation
– On March 17, 2009, Discovery Communications filed suit against Amazon in US District Court in Delaware claiming Kindle willfully infringes on patent granted Discovery on November 20, 2007
– Discovery is seeking treble damages, payment of legal fees, and ongoing royalty in lieu of injunction blocking Kindle sales
– Underlying patent explicitly pertains to both electronic books and infrastructure necessary to buy and download content from device
© 2009 Hogan & Hartson LLP. All rights reserved. 54 Textbooks, cont’d
• Google Book Search Litigation
– Stemming from Google's scanning of entire libraries of books for full- text searches on Internet
– The Authors Guild, publishing industry, and Google entered into settlement agreement on October 28, 2008, with Google agreeing to pay total of $125 million to rights holders of books it had scanned, to cover plaintiffs’ court costs, and to create Book Rights Registry.
– As part of settlement, Google created Google Book Settlement web site that went active on February 11, 2009. This site allows authors and other rights holders of out of print (but copyrighted) books to submit claims by January 5, 2010. Claimants will receive $60 per full book or $5 to $15 for partial works. In return, Google will be able to index books and display clips in search results, as well as up to 20% of each book in preview mode. Google will also be able to show ads on these pages and make available for sale digital versions of each book. Authors and copyright holders will receive 63 percent of all advertising and e-commerce revenues associated with their works.
– Settlement approval hearing scheduled for June 2009
© 2009 Hogan & Hartson LLP. All rights reserved. 55 Peer-to-peer file sharing
• Movie and music industries have complained of pervasive unauthorized sharing of digital copyrighted material through university-controlled networks
• In December 2008 Recording Industry Association of America announced end to strategy of litigation against individuals to pursue other strategies such as cooperation with Internet service providers: http://online.wsj.com/article/SB122966038836021137.html
• Alternative legislative strategy resulted in HEOA provisions on peer-to-peer (P2P) file sharing
© 2009 Hogan & Hartson LLP. All rights reserved. 56 Peer-to-peer file sharing, cont’d
• HEOA requires colleges and universities, as a condition of participating in federal student financial aid programs, to take certain steps pertinent to copyright enforcement
– Certify to ED that institution has developed plan to combat effectively unauthorized use of copyrighted material
– Consider technology-based deterrents, among other approaches
– Offer, to extent practicable, alternatives to illegal file-sharing
– Provide students annually with description of school policies regarding unauthorized file sharing and disclosure that illegal file sharing may lead to civil and criminal liability.
– Effective August 14, 2008
© 2009 Hogan & Hartson LLP. All rights reserved. 57 Peer-to-peer file-sharing, cont’d
• HEOA Congressional Conference Report identifies “effective technology-based deterrents” as including
– Bandwidth shaping
– Traffic monitoring to identify largest bandwidth users
– Vigorous program of Digital Millennium Copyright Act (DMCA) notices
– Variety of commercial products designed to reduce or block illegal file-sharing
• ED is expected to issue implementing regulations by November 1, 2009, to become effective July 1, 2010
• Some states are adopting similar measures
– New Tennessee law (S.B. 3974 signed 11/12/08) requires public and private universities to develop and enforce policies to combat student copyright infringement on campus networks
© 2009 Hogan & Hartson LLP. All rights reserved. 58 Peer-to-peer file sharing, cont’d
• Opportunities/solutions
– According to The Campus Computing Project, as of summer 2008 institutions increasingly were installing technology solutions intended to stem inappropriate P2P activity (from low of 34.6 of community colleges to high of 83.3 percent of public bachelor’s colleges) http://www.campuscomputing.net/content-item/new- campus-costs-p2p-compliance
– Bandwidth shaping and traffic monitoring
• HEOA Conference Report identifies Packeteer
– Commercial products designed to reduce or block illegal file- sharing
• HEOA Conference Report identifies Audible Magic’s CopySense Appliance for Universities and Red Lambda’s Integrity
– Development of alternatives to illegal file-sharing
• Institutional digital content licenses
© 2009 Hogan & Hartson LLP. All rights reserved. 59 Campus Safety
• In response to tragic shooting at Virginia Tech, HEOA requires institutions to disclose emergency-response policies
– Immediate notice to campus community upon confirmation of significant on-campus emergency or dangerous situation involving immediate threat to health or safety of students or staff, unless notice would compromise efforts to contain emergency
– Use of electronic or cellular communications systems
– Effective August 14, 2008
• ED is expected to issue implementing regulations by November 1, 2009, to be effective July 1, 2010
© 2009 Hogan & Hartson LLP. All rights reserved. 60 Campus Safety, cont’d
• Opportunity/solution
– Electronic or cellular communications systems for emergency response
– According to The Campus Computing Project’s report “Campuses Invest in Emergency Notification” (Oct. 2008), institutions increasingly use e-mail (86.6 percent), voicemail (65.5 percent to campus phones, 41 percent to off-campus wired phones, and 28.5 percent to mobile phones), and text messaging (75.6 percent) for emergency notifications. http://www.campuscomputing.net
© 2009 Hogan & Hartson LLP. All rights reserved. 61 Intellectual Property
• Copyright Act
• DMCA Rulemaking
• Orphan Works Developments
• Opportunities
© 2009 Hogan & Hartson LLP. All rights reserved. 62 Copyright Act
• Fair Use
– Rapid growth in digital content delivery leads to greater challenges in protecting copyrighted material and interpreting “fair use”
– If alleged infringer broadly distributes copyrighted work, particularly if for commercial purposes, copyright holder has stronger argument that infringing activity does not constitute “fair use”
– Where TEACH Act exemption is inapplicable, “fair use” defense may still be asserted, which would involve subjective consideration of:
• purpose and character of use, including whether use is of commercial nature or is for nonprofit educational purposes
• nature of copyrighted work
• amount used in relation to copyrighted work as whole
• effect of use on potential market for or value of copyrighted work
© 2009 Hogan & Hartson LLP. All rights reserved. 63 DMCA Rulemaking
• DMCA provides that "no person shall circumvent a technological measure that effectively controls access to a work protected under this title."
• Copyright Office is currently conducting its regular triennial rulemaking proceeding mandated by DMCA, through which Librarian of Congress may exempt certain classes of works from DMCA’s anti-circumvention prohibition.
• Purpose is to update on a periodic basis the particular classes of works that are exempt from anti-circumvention measures.
© 2009 Hogan & Hartson LLP. All rights reserved. 64 DMCA Rulemaking, cont’d
• Classes of works being considered for exemption include: – Commercially produced and distributed DVDs used in face-to-face classroom teaching by college and university faculty, regardless of discipline or subject taught, including teachers in K-12 classrooms – Audiovisual works used by instructors at accredited colleges or universities to create compilations of short portions of motion pictures for use in course of face–to–face teaching activities. – Audiovisual works that illustrate and/or relate to contemporary social issues used for purpose of teaching process of accessing, analyzing, evaluating, and communicating messages in different forms of media – Audiovisual works that illustrate and/or relate to contemporary social issues used for purpose of studying process of accessing, analyzing, evaluating and communicating messages in different forms of media and that are of particular relevance to specific educational assignment, when such uses are made with prior approval of instructor – Audiovisual works contained in college or university library when circumvention is accomplished for purpose of making compilations of portions of works for educational use in classroom by media studies or film professors – Audiovisual works contained in college or university library when circumvention is accomplished for purpose of making compilations of portions of works for coursework by media studies or film students – Audiovisual works included in library of college or university when circumvention is accomplished for purpose of making compilations of portions of those works for educational use in classroom by professors – All audiovisual works and sound recordings “used in face–to–face classroom teaching by college and university faculty, regardless of discipline or subject taught” and regardless of source of legally acquired item
© 2009 Hogan & Hartson LLP. All rights reserved. 65 Orphan Works Developments
• “Orphan works” refer to works for which copyright owner cannot be identified or found, and applies to all works from images to text and includes posters, photographs, and letters
– Multiple versions of Orphan Works legislation have failed to pass through Congress, but legislation may be re-introduced later this year
– Proposed legislation would allow educators, libraries, and others to safely use copyrighted works if they cannot find copyright owner to acquire license
– Opponents argue that such legislation would lead to pervasive infringement on copyright holders’ rights
– Settlement agreement between Google and The Authors Guild relating to Google Book Search makes it possible for Google to include orphan works in its Book Search service
© 2009 Hogan & Hartson LLP. All rights reserved. 66 Opportunities
• Opportunities/solution
– Continued development of web-based technologies to connect educators and learners, in ways that will help engage students in expanded learning process, such as content hosted and shared in de-centralized “cloud computing” environment
– Use of blogs, wikis and other forms of social media used as learning tools to share and develop educational content, while managing effective policies to mitigate opportunities for misuse and personal embarrassment
– User generated content communities can be developed in manner respecting proprietary rights
– Opportunities to create orphan work registries to help identify copyright holders and categorize copyrighted material
© 2009 Hogan & Hartson LLP. All rights reserved. 67 Globalization
• Globalization
Governments around the world and multilateral organizations are engaged in efforts to expand educational opportunities at all levels for their populations and to increase the utility derived from education. Multilateral organizations are also offering assistance.
Examples include:
– Bologna Process:
• Voluntary agreement among 46 government signatories creating a European Higher Education Area effective 2010.
• Establishes “3 cycles” of higher education qualification: bachelor’s (3 years), master’s (2 years) and doctorate (3 years); convergence of U.S. and European higher education models.
• Will result in “equivalency” of qualifications among signatory nations, ease of cross border transfer of credits among institutions and increase cross border employment mobility.
– China
• Following China’s accession to the WTO, the Chinese government began to open the education sector to foreign investment. Higher-learning, vocational, adult and secondary technical education institutions, in particular, are permitted (upon approval from China’s Ministry of Education) to work with overseas partners to run corresponding schools in China.
© 2009 Hogan & Hartson LLP. All rights reserved. 68 Globalization, cont’d
– China, cont’d
• Later this year, the Chinese government is expected to release details on its 12- year plan for education, which may herald new policy directives with respect to foreign investment in China’s education system through the year 2020.
• Chinese government allows private investment in education:
– In April 2009, Pearson, the international education and information company, acquired Wall Street English, one of China’s leading English language training (ELT) companies, for US$145 million. Pearson first entered the Chinese education market in 2008, through the acquisitions of Learning Education Center and Dellenglish, which provide ELT to school and college- aged students, as well as adults.
– In November 2008 global private equity firm The Carlyle Group invested US$50 million in Hao Yue Education Group, a private school based in Beijing that focuses on career training and development. Carlyle first entered the Chinese education market in 2007, with a US$20 million investment in NeWorld Education Group, a language institute specializing in Japanese training in China.
– In April 2007Kaplan, Inc., a global education company, formed a joint venture with ACE Education, a leading educational services provider in China. The new venture, Kaplan ACE, provides preparation courses for matriculation in universities, along with degree and professional training programs at campuses throughout China.
© 2009 Hogan & Hartson LLP. All rights reserved. 69 Globalization, cont’d
– Middle East:
• Significant government sponsorship of Western institutions of higher education, including Education City in Qatar (branch campuses of Cornell Weill Medical School and Virginia Commonwealth, Texas A&M, Carnegie Mellon University, Georgetown and Northwestern Universities) and NYU branch campus in Abu Dhabi
• Creation of major graduate research institutions such as Masdar Institute of Science and Technology in Abu Dhabi and King Abdullah University of Science and Technology in Saudi Arabia.
– Africa
• International Finance Corporation is investing $2.5 million in Ghana’s Ashesi University College, a liberal arts college offering courses in computer science, management information systems, and business administration.
© 2009 Hogan & Hartson LLP. All rights reserved. 70 Elizabeth Meers Abu Dhabi Baltimore 202-637-8676 Beijing Berlin [email protected] Boulder Brussels Caracas Maree Sneed Colorado Springs Denver 202-637-6416 Geneva Hong Kong [email protected] Houston London Los Angeles Miami Lorraine Sostowski Moscow Munich 202-637-6681 New York Northern Virginia [email protected] Paris Philadelphia San Francisco Shanghai Silicon Valley Tokyo Warsaw Washington, DC
© 2009 Hogan & Hartson LLP. All rights reserved. 71 Maveron LLC
Venture Capital in Education Summit 2009 Maveron Equity Partners III, L.P. Jason Stoffer October 16, 2008
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Overview: Children’s Progress
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• ž ž ž ž ž ž ž ž ž – Seed round – A, B & C rounds • ž ž ž ž ž ž ž ž ž – Founder & CEO of a private bank – Founder & CEO of a large hedge fund – CEO of a major investment bank Lessons Learned
• žž žž žžž žžž ž žžžžžžž žžžžžžžžžž ž žžžžžžžž ž žžžžž žžžžžž ž ž – National Institutes of Health (NIH) – National Science Foundation (NSF) – U.S. Department of Education (ED) • ž žžž žžž ž žžžž žžžžžžžžžžž • ž žžžžžžžžž žžžžžžžžžžžž – Columbia University Science & Technology Ventures (STV) COMPANY CONFIDENTIAL Global User Community
Livemocha is a rich mix of languages and cultures
North Other, America, 3.8% Brazil, 9.1% 25.5%
Latin America, 16.1%
Europe, China, Asia, 13.0% 14.6% 17.9% Immersive Learning Approach Fund Raising
• Raised $6.0 million from Maveron and angel investors in Dec 2007 • Education represents a huge global opportunity. Online initiatives can play a significant disruptive role • Education Index down 12% vs S&P which was down 38% (as of end of March 2009) • Out of the 46 IPOs in the last 16 months, 5 were education related companies
COMPANY CONFIDENTIAL Aplia
The Death Spiral Aplia – Investment History
2001 – Skandia invests $11.2M
2005 – Additional investment by core Aplians and family Aplia – Data Points
493,713,000 360,000 30% 100% 20 hours Aplia – Keys to Success
Business Model ESP Service-based revenue model Product development model Identify real problems and solve them in simple, elegant ways User-Centric, iterative design Things we believe in Hire really smart, really nice people Set reasonable expectations and over-deliver Stay focused - Do fewer things really well Venture Capital in Education 1 Summit May 29 2009 Venture Capital in Education 2 Summit May 29 2009 Venture Capital in Education 3 Summit May 29 2009 Venture Capital in Education 4 Summit May 29 2009 Venture Capital in Education 5 Summit May 29 2009 Venture Capital in Education 6 Summit May 29 2009 Venture Capital in Education 7 Summit May 29 2009 Venture Capital in Education Summit May 29 2009 Venture Capital in Education 9 Summit May 29 2009 Venture Capital in Education 10 Summit May 29 2009 Venture Capital in Education 11 Summit May 29 2009 Venture Capital in Education 12 Summit May 29 2009 Venture Capital in Education 13 Summit May 29 2009 UNDERSTAND OBSERVE DEFINE IDEATE PROTOTYPE TEST
Venture Capital in Education 14 Summit May 29 2009 Venture Capital in Education 15 Summit May 29 2009 Venture Capital in Education 16 Summit May 29 2009 Venture Capital in Education 17 Summit May 29 2009 Venture Capital in Education 18 Summit May 29 2009 Digital Innovation & Empowerment for All
Paul Kim, Ph.D. Chief Technology Officer [email protected] Mobile Minutes
Water Africa
40,000 new mobile subscribers a week in Rwanda Rwanda Newtimes report, January 2009
Africa is the continent with the fastest growth, where penetration has soared from just one in 50 people at the turn of the century to 28%. International Telecommunications Union (ITU), March 2009 India
In 2008, 7M new mobile subscribers a month*
In January, 2009, the number sky rocketed to 15.4M (Growth was driven by people in the poorest region)**
*Nokia Research Lab **CHECK http://news.yahoo.com/s/afp/20090308/bs_afp/indiaeconomytelecom Global Mobile Adoption
• 60,000 new mobile subscriptions every hour*
• 4.1B out of 6.7B people at the end of 2008.**
• Mobile Technology is making much broader impact than we can possibly understand the implications.
* NOKIA Research Lab ** International Telecommunications Union (ITU) Profound Impact • Economy • Education • Health • Culture…. POMI 2020 Programmable Open Mobile Internet
The Stanford Clean Slate Program http://cleanslate.stanford.edu Stanford Faculty Team
Education Paul Kim Applications Roy Pea HCI Scott Klemmer Security Dan Boneh Languages John Mitchell Monica Lam Distributed Systems David Mazieres OS Phil Levis Mendel Rosenblum Architecture Christos Kozyrakis Economics Ramesh Johari Guru Parulkar Nick McKeown Networking Fouad Tobagi Andrea Goldsmith Radio Arogyaswami Paulraj
8 The Big Research Agenda
Applications PocketSchool, Virtual Worlds, Augmented Reality
Handheld Data Substrate UI PRPL Virtual Data System Economics Secure mobile browser
Energy efficient Computation Substrate Secure OS Network of VMs, Mobile VMs
HW Platform Network Substrate OpenFlow
Radio technology Multi-Gb/s, 99% coverage 9 POCKETSCHOOL A local NGO staff presenting mobile learning devices to internally displaced children in Uganda UN refugee camp (AMURU).
* PICO cell-based content distribution station for a village * Peer-relayed communication •Scalability •Sustainability • Human creativity is the ultimate economic resource (Florida, 2002). • There is more user-generated content on the Internet than professionally-produced and corporate content (Cunningham, 2008). • The origination, adoption and retention of “novel ideas” or “creative contents” has just become the chief cause of economic growth and development (Potts et al., 2009). • Social networks are the predominant factor determining the value of creative commodities. (Potts et al. 2009). • As a result, creative story or media making and distribution in the digitally networked world creates a unique opportunity for the marginalized persons around the world. • With initial help, all those with life stories or creative contents yet no prior access to media technologies become capable of engaging in a process of capitalizing those creative commodities (Cunningham, 2008). Children in Rwanda playing with mobile learning devices loaded with literacy and math education games.
Figure 4. Mobile Creative Content Economy Ecology Mobile Empowerment Developers Network http://pocketschool.stanford.edu Programmable Open Mobile Internet Simulation Lab
• Affordable • Hands-on, inquiry-based learning • Engaging
Cloud Computing + Semantic Web = Web 3.0
Data Repositories
PRPL Personal Cloud Butler Service Providers URIs
PRPL PCB Service Provider
RDF
PRPL PCB Service Provider
PRPL PCB Service Provider RDF •Interoperability •Hybrid Model •Cloud Computing RDF •Mass-Scale Implementation •Semantic Web POMI PRPL-Based ePortfolio
PRPLPRPL PCB PCB Service Service Provider Provider Owner
Multi-Purpose E-Portfolio Views
•College Admission • Assessment Report •Course Completion • Project Documentation •Degree Completion • Human Resource Planning •Employment Resume • Knowledge Transfer & Management •Professional Development Evidence • Institutional Business Intelligence žžžžžžžžžž žžžžž ž žž žžžž žžžž ž žžž žžžžž ž žž want to help…
Nž žžžžžžžžž Nž žžž žžžžžž Nž žžžžžžž ž Tags are used to indicate subject, textbook, page, and problem number, problem title, etc. Mobile Health & Medical Education Synchronous Mobinars ž Nž TOO INETOO Notes on Privatization and Reorganization of U.S. Higher Education
Mitchell L. Stevens, PhD Associate Professor School of Education, Stanford University [email protected] An Entrepreneurial Sector
U.S. higher education always has been a plural and competitive sector
The U.S. federal government created the student/consumer in the mid-20th century
The student-as-consumer idea is a truly global phenomenon The Great Capacity Crisis
From 1945 – 1975: U.S. created the largest and most productive higher education sector in world history; this also created great expectations
1980 – present: Relative stasis in capacity coupled with steadily increasing demand
Result: Cohort crowding; lots of unhappy students; new business opportunities But Don’t Kid Yourself: Higher education is not ONLY a business
It always has been embedded in projects of self-improvement, social service, and regional boosterism
It always has had a big identity component
That’s why Americans love it so much! Some suggestions:
1) Don’t scrimp on the ceremony – People want higher education to be special 2) Find ways to include service in your institutional mission 3) Find ways to honor and include alumni 4) Ferociously defend the authority of instructors – your long-term success requires it Thank you.
Mitchell L. Stevens [email protected]