Online Education and the School as a Service Opportunity

CONFIDENTIAL – Christopher Nyren, Educated Ventures

presents:

for:

July 2014

School as a Service Market Overview

27/7/2014 CONFIDENTIAL – Christopher Nyren, Educated Ventures

1970 1990 2000 2010

History of Higher Ed Outsourcing

IT Support Institutional and Operational Support Enrollment Management

Academics

InformationSystems

ManagementFinance and Accounting Dormitories Financial Aid

and Student Loans

Marketing & Recruitment

Online Platform

(LMS)

Online Program

ManagementCRM

Document and Data Storage

Human Resources

Food Services Coaching and

RetentionTuition Benefits

• XACT Telesolutions (1976)• Infosys (1981)• ACS (1988)• Collegis / SunGard (1996)

• Ed. Housing Services (1987)

• Aramark (1959)

• AVI Food (1960)

• Sallie Mae (1972)

• Nelnet (1977)

• ECMC (1994)

• Royall & Co (1989)

• ESM (1995)• QuinStreet

(1999)

• Blackboard (Angel, WebCT)

• eCollege (1996)

• D2L (1999)• Moodle (‘99)• Sakai (2005)• Instructure

(Canvas) ‘08

• Embanet (1995)

• Deltak (1996)

• Bisk (1997)• Academic

Partners (2007)

• 2U (2008)• All Campus

(2010)

• Hobsons• Leads360

• Edcor (1981)• EdAssist

(2004)

• InsideTrack (2001)

• Starfish (2007)

Back End Front End Academic Core

Source: Author, Parthenon Group


Online Programs Then

In 2008, there were only 30 not-for-profits that were fully online with at least one degree program.


By 2012, there were over 500 not-for-profits that were fully online with an average of 10 programs each, creating a universe of 5,000 potential programs.

Utilizing open source, free LMS products like Moodle, Sakai or Canvas, low cost SaaS solutions from MoodleRooms, rSmart and Instructure, or even higher cost software from Blackboard or Desire2Learn, the not-for-profits have moved online

Online Programs Today


Not-for-Profits Taking Share Online education is a $30 billion market growing 15% per year

As the number of students online continues to grow, for-profit’s

enrollments are flat to declining -- not-for-profits are gaining share

The number of not-for-profits online has grown from 30 to 500,

yet, it’s the 50 working with the leading three players that capture

the majority of enrollments today

These partnerships are still nascent and the models still evolving

But over time, turnkey tuition partnerships with leading national schools are less defensible:

– Low cost, open-source solutions are gaining share in instruction, design and scheduling

– The best branded institutions will move core education functions in-house and push for a lower tuition share or otherwise defect from their partnerships

– Defections have been low, but few contracts have reached their 7-10 year term

To that end, EV would target the following alternative models for investment:

– More targeted service and sustainable revenue share model (i.e. AllCampus)

– Package as technology-driven fee per service / SaaS model (i.e. CampusLabs, Civitas)

– Establish ownership over key assets (i.e. Orbis, Synergis)

Online Student Growth‘10-’15 CAGR 11%

‘10-’15 CAGR -1.5%

‘10-’15 CAGR 13%

Source: Eduventures, Author


School as a Service Market Drivers

There is a growing awareness of the quality and access-enhancing potential of online education among both faculty and administrative personnel

There are a number of factors driving traditional school’s growth online.

Educational Quality

Rise in costs

Technological advancements

Increasing number of graduates

Partnerships with non-profit schools

Reduction in state funding

Greater legitimacy

Focus on non-traditional students

Increased competition

New learning environments

There is a renewed emphasis by policy makers on increasing the number of U.S. college graduates, driven by a weak employment market and stagnant wages

Technological advancements have dramatically improved the richness and experience of online learning

Reductions in state funding for public institutions and shrinking endowments at some private institutions are forcing colleges to consider new sources of revenue

The dramatic rise in the cost of a post-secondary degree is driving students to demand and colleges to offer less expensive degree options without sacrificing academic quality

The Department of Education (DOE) has taken steps to ensure the non-profit sector can continue to partner with for-profit entities in order to enhance enrollment

A tech-savvy generation of traditional-age students who grew up using the internet and are comfortable learning online is increasingly demanding a technology enabled learning environment

Top-tier institutions like MIT, Stanford, the University of Southern California, Georgetown, and others are increasingly embracing the technology, lending greater legitimacy to the online medium

Public and private institutions have been placing a greater emphasis on the importance of serving the educational needs of non-traditional students

Increased competition for students across all types of institutions is necessitating expansion into the online realm

Source: First Analysis, Author


School as a Service is a Rapidly Growing Market

Institute for Professional Development (origins of the Apollo Group)

Deltak founded

Orbis launches RN partnerships

Embanet founded as e-

MBAnetin Toronto

1971 1971 19931993 19961996 20012001 20032003 20122012

Acquired by Pearson for

$650mm(2012)

LearningHousefounded

20082008

2U (2tor) founded

Acquired by

Wiley for$220

(2012)

KKR / Weld North

NA(2012)

Investmentby LLR of$20mm(2012)

Over $100mm

of venture investment

Incubated University of

Phoenix

New models established

Over $50mm

of venture investment


Christopher Nyren founded Educated Ventures at the end of 2011 around several consulting clients, including one of the largest media companies in the world as well as one of the largest foundations in the world. More recently, the firm has expanded its investment banking work, completing in 2012 alone three separate capital raises totaling $30 million and two successful strategic M&A processes.

Christopher also founded Educelerate, a network fostering start-up ventures focused on education technology and innovation. We hold monthly events involving a membership base of over 600 in Chicago and Los Angeles. Podcasts and blog content can be found at www.Educelerate.com.

Christopher spent the prior four years helping to build the Corporate Development & Global Strategy team for Apollo Group, the owner of the University of Phoenix and largest for-profit educational company in the world. During this time, he was involved in the creation of Apollo Global, a $1 billion joint venture private equity fund with the Carlyle Group. Over his career at Apollo, Mr. Nyren was the primary corporate development professional on every acquisition and investment completed by the company and the fund (totaling four domestic and international deals and over $750 million of aggregate consideration).

Christopher is on the board of GetSet and Wellspring Education and in investor in AllCampus, cielo24, DecisionDesk, Flinja, GetSet, Learning.com, MentorMob and Presence Learning.

Christopher has also worked in private equity, including the education and services focused investors LLR Partners where he completed an investment in a vocational post-secondary education company. He started his career with the education and services coverage team at investment bank Credit Suisse. Mr. Nyren graduated magna cum laude, Phi Beta Kappa from Lake Forest College and received his MBA from the Wharton School of Business of the University of Pennsylvania.

About the [email protected]


We benefit from a direct channel to emerging ideas and entrepreneurs through the creation of Educelerate, a national education innovation network seeking to build an accelerator program.

This would be differentiated from other regional and non-industry focused groups through:

About Educelerate

1) Networking – investing in quality monthly event programing and leveraging social media to build an efficient, yet integrated community of potential employees, partners, mentors, and investors

2) Business Development – aligned with local leading strategic players to inform entrepreneurs of buyer needs to guide product development and secure potential customer funding

3) Mentorship – entrepreneurs are matched with advisory board and other industry experienced members, to provide regular feedback and support around key business issues

4) Colocation – we have partnered the collaborative work space Catapult, but are looking to create out own space with tenant rents subsidized by equity and strategic sub-tenants (for hoteling staff)

5) All Year – rather than a concentrated summer program, we provide a lighter touch support model throughout the year, with monthly panels, workshops, podcasts, blogs and an annual conference

AugustS M T W T F S

1 2 3 45 6 7 8 9 10 11 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 30 31

www.educelerate.com


Educelerate IX: School as a Service

When: 6:00pm February 21, 2013

Who:

Craig Pines - CEO, Deltak EDU

Steve Fireng - CEO, EmbanetCompass

Dan Briggs - CEO, Orbis Education

Joe Diamond - CEO and founder, All Campus

and moderated by Corey Greendale Research Analyst, First Analysis and author of the report, "School as a Service: the next big thing in the education industry"

Where:

On-ground - Google Chicago, 20 West Kinzie, Chicago, ILOnline – Live Google Hangouts On-Air; podcast at Educelerate

Given our industry leadership and unparalleled relationships in this market, we organized a panel discussion featuring nearly every industry leading executive

Podcast now

available

http://edreach.us/podcast/educelerate-ix-school-as-a-service/

Online Education and the School as a Service Opportunity

Education

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