Future Returns: Impact Investing in Education

Managers at Rise Funds, TPG’s private equity firm, say their success in investing in educational companies such as EverFi and DreamBox Learning stems from a “rigorous” assessment of their actual value to students.

“One of the pitfalls faced by some traditional private equity firms is that they can sometimes combine growth with quality,” says John Rogers, partner and head of education at Rise Funds, based in San Francisco. As funds that have a mandate to deliver positive outcomes to society, “we are not allowed to invest in a company unless we see evidence of that impact”.

This approach will lead Rise Funds to companies that deliver learning outcomes or improve student learning in a way that ensures that “these decisions are strong,” says Steve Ellis, co-managing partner funds.

Rise I and II funds with total assets of $ 4.3 billion have supported educational and educational technology companies from the beginning. Education-related investments account for about 25% of pooled portfolios.

Earlier this month,


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The South Carolina-based software provider, South Carolina-based software, has bought the EverFi educational technology platform in Washington, D.C. – Rise Fund’s first investment – in cash and stock deals worth about $ 750 million, the press release said.

In April 2017, Rise funded EverFi $ 190 million with an investment of $ 120 million, and subsidiary fund TPG Growth invested another $ 30 million. Other first investors in the company, which provides educational content to financial institutions and corporations, included Amazon founder Jeff Bezos and former Google CEO Eric Schmidt.

Among EverFi’s services is the provision of digital education programs on basic financial services – knowledge that can help people get out of low-income categories. Meanwhile, more and more financial services companies are trying to cater to low-income people, creating demand for the educational content that EverFi offers, Ellis says.

Penta recently spoke with Ellis and Rogers about how the Rise Fund is looking for companies like EverFi that provide educational services needed by society and that are growing rapidly.

A turning point for EdTech

One reason for the growth trajectory of educational technology is the deeper penetration of broadband access and technology around the world combined with “sufficient policy emphasis on people’s needs,” Rogers says.

This has made a difference, especially for so-called personalized learning, a technology that adapts learning methodologies to individual learning styles as a student progresses through lessons.

“All research has always argued that personalized learning provides the greatest success in learning,” says Rogers. “The challenge was how you organize personalized learning on a scale.”

This has changed over the last five years, leading to the growth of companies such as DreamBox Learning, which have developed “adaptive learning” technology for kindergartens up to 12th grade schools.

Rise Fund I invested $ 130 million in Bellevue, Washington.company founded in July 2018, taking a controlling stake. In November, Evergreen Coast Capital Corp., a subsidiary of the private equity fund hedge fund Elliott Investment Management LP, bought a majority stake in DreamBox. According to a press release, Rise continues to own a “significant” minority stake and is represented on the board of directors.

In recent years, Rise DreamBox’s investment has shifted from serving less than 2 million students to more than 6 million, primarily in Title I public schools, where most students are eligible for a free lunch at discounted prices, Rogers says. This expansion was partly caused by the coronavirus pandemic, when DreamBox opened its platform for free and added 1.9 million students and 2,500 schools in two weeks – “many of whom later became paying customers,” says Rogers.

Thematic investments

Investing in Rise Funds education is driven by topics that the firm believes will lead to growth. Among them are personalized learning, as well as a desire to close “large skills gaps” in the U.S. that contribute to inequality, Ellis says.

InStride, a company founded in 2019 as a result of a partnership between Rise Funds and the University of Arizona, is working with businesses to provide free four-year online diplomas that their employees can earn while working to succeed.

The idea is to make continuing education and workforce development a benefit for workers as well as health care, Ellis says.

Other topics are mental and behavioral health and addressing the national shortage of teachers.

In December, Rise Fund and Spectrum Equity, a growing joint-stock company, acquired a majority stake in PresenceLearning. The New York-based company, which provides online therapeutic solutions for schools, initially focused on special education services and then expanded into mental and behavioral health. PresenceLearning is not a software program, but “they create more access and scalability through technology platforms,” Ellis says. Their services also help alleviate the shortage of special education professionals, especially in rural areas.

Meanwhile, in September, Rise bought a majority stake in Teachers of Tomorrow. The Houston-based company often issues teacher certificates to those who change jobs in the middle of their careers. If a person has skills in mathematics or technology, but does not have a traditional degree, tomorrow’s teachers can speed up the process of obtaining the certificates they need, ”says Rogers.

“Our spectacular lens will allow us to lean towards coaching, follow-up, professional development, continuous editing so we can build a full life cycle for teachers and be the solution for areas that want high quality teachers now, but they also want to keep them in the classroom, ”he says.

Impact measurement

As with most mutual funds, Rise Funds track the impact of their companies throughout the term of the investment, ensuring that they not only earn dollar profits as companies grow, but also “a few dollars of social impact,” Rogers says. .

They do this by looking at specific results – such as the number of students covered – and by studying third-party research. Y Analytics, a company created by TPG and Rise Funds, for example, provides analytical impact assessments, determining the value of the results reported by each company.

In other words, if a student does better in school than otherwise by using a product that Rise invests in, that student is likely to work better in the workforce. “There’s value in that,” Rogers says.

Rise also found that by focusing on exposure, the fund gains a better understanding of what makes a business ultimately a success. For example, a company that creates “demonstrative social outcomes” will have more referrals and higher retention and update rates, which means it is likely to grow and continue, Ellis says.

“Breaking through a separate glove of impact assessment, we end up in businesses that are essentially lined up to succeed,” he says.

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