Sector Deal Dynamics – December 2019

by: Tyton Partners | Blog |Dec 4th, 2019

The sprint between Thanksgiving and 2019 year-end is officially on, and with it, companies and investors striving to get those last 2019 deals done. We hope to have a few of our own announced shortly and look forward to sharing more in the new year as we embark on a number of new sell-side mandates. Similarly, market diligence remains an active component of our consulting practice with several new initiatives kicking off even as 2019 winds down.

We will next check in with you during the early days of the new decade with a recap of what has come before (2019) and what is yet to come (2020).

Thanks for your continued support and engagement across the Tyton Partners platform. Best wishes for a healthy and joyous holiday season.

Cheers,

Adam & Chris

Postsecondary: Boom Time for Services Companies

It’s a bad time to be a university. Demographic changes are creating existential financial pressures, students are growing ever more cynical about the basic college value proposition, and every month another school announces it is closing or merging. But that very pain makes it a good time to be a services provider to a university. Or so, at least, investors currently believe.

This month Guild Education announced a $157 million raise in a Series D round led by General Catalyst, and joined by Emerson Collective, Iconiq Capital and Lead Edge. Also participating were previous investors Workday Ventures, Salesforce Ventures, Next Play Capital, Silicon Valley Bank, Felicis Ventures, Bessemer Ventures, Redpoint Ventures and Harrison Metal. The valuation is reputed to be over $1 billion though the business is not yet profitable.

Guild is paid by colleges and universities that seek to be matched with corporations interested in sponsoring degree programs for their employees. It partners with a host of well-known companies (e.g., Disney, Discover, Lowe’s, Taco Bell, Walmart) to connect their employees with nearly a dozen online programs, including the University of Arizona, Purdue Global, Southern New Hampshire University and the University of Central Florida. Guild is also responsible in part for some innovative sponsorship arrangements – e.g., Guild helped Chipotle design a program that pays for 100% of the college costs for qualifying employees.

As with OPMs, a significant value-add seems to be finding students from sources that appear complex and exotic – at least for now. As the demographic trough persists however, colleges and universities may find that sourcing students could increasingly become a core competence and source of competitive advantage that it can no longer afford to entrust to an intermediary.

Early Childhood: A Software Renaissance

As much as K-12 education technology platforms lag those in the business world, the early childhood sector is even further behind. Highly fragmented and with little practice of capital budgeting, in software-based productivity terms, early childhood is the land that time forgot. But as is the case in the K-12 school sector, the SaaS-based, pay-as-you-go business model has begun to change that. This month Kangarootime, a Buffalo-based provider of software-based operating systems for early childhood caregivers, raised $3.5 million in Series A funding from Cultivation Capital. Kangarootime offers data analytics, tuition collection management, messaging, picture sharing, employee management and other services for childcare centers, schools and behavioral health centers. The company claims its products help to support more than 8,000 children nationwide.

K-12: Special Ed Leader Finds New Owner

n2y announced that Providence Equity Partners has made a majority investment in the company. The Riverside Company, which invested in n2y in 2016, and members of the company’s management team will also retain ownership stakes in the business. Financial terms of the transaction were not disclosed. Founded in 1997, n2y provides products for special education teachers and families that are designed to improve student outcomes, teacher efficiency, school compliance, and parent communication and collaboration. The company’s Total Solution connects the entire individualized education program (IEP) team with workflow tools that support their planning, teaching, assessment, reporting, and managing behavior in a variety of settings, including the home. n2y is currently serving approximately 60,000 service providers in all 50 states.

The number of U.S. students enrolled in special education from ages 3 to 21 grew for the seventh straight year in 2017-18, reaching an all-time high of approximately 7 million, or roughly 14% of students enrolled in public schools. The fastest growing segment within that population are students diagnosed with autism, a number that has increased 140% since 2007. Whatever the cause, the rates of growth are likely to inspire more professional investment in special education tools going forward.

HCM: Kenzie Academy’s Strong Second Act

Having burst onto the boot camp scene last month with a $7.8 Series A capital raise – led by Rethink Ed and Steve Case’s Rise of the Rest Fund –by promising to bring software coding to the middle of America, Kenzie Academy followed that up this month with the announcement of $100 million in ISA financing provided by social impact investor Community Investment Management (CIM). The strong backing for income share agreement financing makes good on the school’s promise to make tech jobs more accessible. Though based in Indianapolis, Kenzie works with remote students in 40 states.

In response to the commitment from the socially responsible CIM, Kenzie is redesigning its ISA program, lowering both its monthly repayment rate and the maximum amount students could pay, effective immediately and retroactively. Students who utilize an ISA to enroll in the program only start making payments after they graduate and get a job earning $40,000 or more annually. The school has set attracting 10,000 new students in the next three years as its goal.

Recent Deals

PreK-12

Lalilo Raises $5.5M

NeighborSchools Raises $3.5M

ISTE Acquires EdSurge

IXL Learning Acquires Education.com

Learning 2020 Acquires Penda Learning

Providence Equity Partners Acquires n2y

Rotunda Capital Partners Acquires Trinity3 Technology

SchoolMint Acquires Smart Choice

Trolley Ventures Acquires EdConnective

Higher Ed

Guild Education Raises $157M

Perlego Raises $9M

Verto Education Raises $6.3M

Campus Labs Acquires IDEA Education

Pearson Acquires Lumerit Education

Manhattan Review Acquires Get Prepped

Human Capital Optimization

Kenzie Academy Raises $100M

Immersive Labs Raises $40M

Cybrary Raises $15M

Pathrise Raises $3.2M

Aliter Capital Acquires Sponge UK

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