Navigating Education Investment in Uncertain Times

Finding Opportunities in an “Untradable” Market

As we pass 100 days into the new Trump administration, we take stock of the state of the market, which has so far been defined largely by volatility and uncertainty. Broader macroeconomic tremors—spurred by tariff escalations and isolationist rhetoric—have driven some investors to call this the most “untradable” and volatile market since the height of the COVID crisis.

For education investors, these macro challenges have been compounded by disruptive signals coming directly from federal education policy, including, but certainly not limited to the Administration’s: gutting of the Education Department, proposals to eliminate Head Start, threats to K-12 funding linked to DEI policies, and freezes on postsecondary research grants alongside direct legal and financial attacks under the guise of “viewpoint diversity.”

While these signals have injected a heavy dose of caution into the sector and more disruptions are likely to follow, the courts are now having their day to assess the legality of these actions. Notwithstanding the headwinds above, investment cases across the education landscape persist—areas where we see safer, more resilient opportunities for investors amid the broader market context.

ECE: Local Momentum Amid Federal Uncertainty

Despite early federal signals suggesting cuts to Head Start programs (which, at least for now, have been walked back) and Trump’s somewhat vague campaign promises around early childhood education, the segment has continued to attract investor attention, thanks in part to its localized structure and the private-pay market’s relative insulation from federal politics. Barring a (perhaps not-to-be-ruled out) recession, ECE student participation is expected to increase at a slow but stable rate; this trend is a relieving contrast from the disenrollment taking place in public K-12 schools (driven by the school choice movement outlined below) and the enrollment cliff with which HED institutions and employers are contending.

On the private side of the ECE market, consolidation of independent centers continues to carry the day. Large operators are absorbing market share through rollups of independent centers, looking to capitalize on a fragmented market with a supply-demand imbalance comprising relatively price inelastic consumers (i.e., desperate parents like myself).

The rollup strategy is nothing new in the investor playbook, but the coherence of the growth story and quality of the execution especially matter in the context of early education. Quality of care, teacher retention, and convenience (e.g., hours, location) are key to optimizing utilization, which is the name of the game to generate ROI in centers. The market is ripe for investment, but winners and losers will emerge based on the coherence and the practicality of their strategy to scale. The ‘strategy matters’ dynamic is seen through mixed recent success of different established providers – Bright Horizons has experienced recent growth but has still not returned to pre-pandemic utilization given the delayed return to work of their core high-income customer segment. KinderCare, meanwhile, has thrived in recent months driven in part by learning center partnerships that serve a different demographic.

On the public side of the ECE market, states are stepping up to fill care gaps, especially as federal support—such as for Head Start—faces potential cuts. While recent proposals have been tabled, GOP backing for ECE funding remains unlikely, and states need targeted support to scale these programs effectively. Michigan, Illinois, and others have announced promises or proposals to expand publicly funded Pre-K. Managing the statewide implementation of these programs is complex, and business-to-government third-parties that can support the management of subsidies (e.g., Kindersystems) and/ or technology infrastructure (e.g., BridgeCare) are well positioned to capitalize as more states introduce initiatives to get children in school earlier and parents back to work.

K–12: Districts Under Pressure, Searching for Support

Superintendents have one of the loneliest jobs in the world right now, navigating a rise in frustrated and empowered parents, alongside chronic absenteeism and behavior issues from students that have spiraled since COVID. As if not enough, many are also grappling with increasing threats to safety that span from virtual to physical, all alongside the expectation of doing more with less as stimulus funds become a distant memory. The general headwinds of the job have created tailwinds for providers that can alleviate pain points for district leadership, and durable opportunities exist across several areas in the K-12 segment.

At the policy level, the school choice movement is accelerating, and districts are being increasingly forced to play defense. Just this month, the House GOP introduced a $5B nationwide tax credit that would bring school choice to every state in the country. Education Savings Accounts (ESAs) are now widespread, reaching more than 50% of K-12 students, with Texas recently joining nearly every other Republican-led state in passing a related choice program. To compete, districts are forced to increase their focus on parent engagement to keep “customers” happy, tapping into partners like K–12 Insight who can drive timely and relevant support to inbound communications. In parallel, districts are looking to offer “choice” of their own, from inside the district. Partnerships with alternative providers like Connections Academy by Pearson and Penn Foster that offer more flexibility (e.g., remote options) has been an approach to retain families In some cases larger districts such as Miami-Dade County Public Schools have introduced choice programs within their district, allowing parents to apply to schools that are outside their assigned zones.

Districts’ battle with persistent student disengagement continues post-COVID. Chronic absenteeism, behavioral challenges, and mental health needs remain top concerns, with many leaders recognizing that academic recovery is not possible without first meeting students’ basic wellness needs. Providers that can re-engage students who have (nearly) dropped out (e.g., Acceleration Academies) drive benefits to the district through recouped funding and improved outcome metrics. Mental health support that can right size the astounding 385:1 student-to-counselor ratio will continue to be valuable, and can take the form of teletherapy (e.g., Hazel Health, Cartwheel), hybrid providers like Daybreak Health, or emerging AI wellbeing tools like Sonar that have established safeguards and keep humans in the loop.

Finally, safety and security remain non-negotiable priorities. The fear of cyber attacks, online bullying, and physical safety threats are among the top things that keeps superintendents ‘up at night’. With the acceleration of AI, AI-powered phishing attacks have proliferated, and districts have needed specialized solutions to repel these efforts. Related, web filtering and monitoring students’ online behavior with specialized solutions (e.g., GoGuardian, Securly, Lightspeed Solutions) has never been more important, with cyberbullying and the arrival of AI companion tools (e.g., Replika) that lack sufficient guardrails to monitor student behavior. Physical safety, including visitor and crisis management solutions like those offered by Navigate360, Centegix, and Raptor Technologies, remain essential products to avoid preventable tragedies from taking place. Investor interest within and across these forms of safety solutions remains strong; moreover, with numerous providers reportedly coming to market in 2025, we expect to see a flurry of M&A activity with strong considerations given to consolidation opportunities across the segment.

HED and its Link to Workforce: Seeking Relevance from Under Fire

Postsecondary institutions may be experiencing the most intense policy and financial headwinds in education today. The administration’s early moves—freezing research grants and withholding funding from universities in a “campaign to expunge ‘woke’ ideology”—have paralyzed many elite institutions in efforts related to planning, hiring, and enrolling for the future.

Enrollment management has become an even higher-stakes challenge than before. Between the long-anticipated enrollment cliff and changes to international student policy that is forcing (or driving) current and prospective students away, institutions are struggling to maintain stable pipelines. Tools like Slate and Element451 that can help institutions personalize their outreach and compete for a shrinking—and more skeptical—applicant pool are only going to increase in relevance.

Contributing to the shrinking pipeline described above, students are demanding more flexible and ROI-driven pathways than the traditional ‘finish in four’ value prop offers. With skepticism toward traditional degrees on the rise, programs like Ed2Go that offer shorter, career-aligned learning options are increasingly attractive. In addition, an increasing number of offerings in the career-aligned experiential learning space are gaining traction including Podium Education, Forage (acquired by EAB) and Stukent. These alternatives provide clearer links to job outcomes and offer a quicker return on investment—an appealing proposition in a value-conscious higher ed market.

Because of this, institutions are being called on to prove their relevance to workforce needs, which will deepen assuming Trump’s Executive Order linking accreditation more directly to student outcomes like graduation rates and earnings takes hold. Students and families increasingly expect a direct connection between academic programs and employment opportunities. This dynamic makes platforms like Handshake essential infrastructure for colleges seeking to demonstrate (and improve) career outcomes for students. Notably, this desire for connection and relevance between academics and employment is also growing in the K-12 segment, with established college and career navigation support providers (e.g., Naviance, Xello) and emerging AI-centric providers (e.g., Kollegio) poised for growth behind this same tailwind.

Let’s Talk

The relatively slow start to the year as measured by volume and size of investment transactions is expected to give way to increasing pressure to put capital to work, and (perhaps optimistically) a better understanding of the direction this administration plans to go. While we expect to see an uptick of activity in the second half of 2025, durable opportunities will persist regardless for those who stay close to the realities of learners, educators, and institutional leaders.

If you’re considering diligence support, partnership strategy, or just want to better understand investment themes across the education ecosystem, we’d welcome a conversation.