Blog + Private Equity
Blog + Private Equity
This month Tyton Banking had the privilege of advising Fullstack Academy in its sale to Bridgepoint Education for $17.5 million in cash and 2.5 million shares of common stock. Fullstack offers remote and in-person career training programs to consumers focused on software engineering, and recently partnered with Cal Poly San Luis Obispo to launch coding bootcamps for the University’s continuing education school. It is this university-branded offering that is of particular interest to Bridgepoint, which recently entered the online program management market. We expect to see similar mergers going forward, as OPM providers seek to add high-quality, non-degree program capabilities to the range of services they bring to their university partners.
K-12: TCV Investment Heavily in Supplemental EdTech
TCV announced a $50 million Series C investment in Newsela, bringing the edtech start-up’s total funding to $85 million. Newsela offers a supplemental leveled-reading instructional tool to K-12 schools. The product supplies teachers curated collections of popular news sources that provide students with challenging instructional material based on their Lexile-measured reading level. In addition to saving valuable teacher-hours, independent research conducted by WestEd suggested that using the tool regularly contributed materially to improved reaching scores. While not quite at unicorn-scale, the TCV check denotes confidence that Newsela can leverage a popular product into a more robust ELA platform in the vein of Curriculum Associate’s iReady and speaks to the growing belief that next-generation supplemental instructional offerings are slowing eroding the stranglehold of the big publishers on the school curriculum market.
Growth among K-12 supplemental instructional products can be attributed to a number of factors, not the least of which is the technology and business model innovations represented by the SaaS phenomenon, which allows schools to purchase innovative content and software as part of their regular annual budgeting process. Another is likely the cultural shift that has made students, parents, and importantly teachers more accepting of and even insistent upon digital content, as well as the sense that big basal publishers, fairly or not, are part of a top-down solution for schools that has largely failed public education. (Read more about the shift from basal and print solutions to supplemental digital ones here.)
Postsecondary: Transact Transacts
Blackboard announced a definitive agreement for the sale of its Transact business unit to Reverence Capital for an estimated $720 million; the deal is expected to close in the second quarter. Transact includes a suite of campus ID, payments, attendance and event management services used by higher education institutions. And while the business should be relatively easy to decouple from Blackboard’s core SaaS offerings, the cashless transaction business has ample opportunity to grow globally in an organization where it does not have to compete for investment dollars.
Private equity owners have been quite successful in consolidating payments businesses in a number of other sectors, such as religious institutions and youth sports; we believe education offers the same opportunity. A number of smaller companies across both the postsecondary and K-12 sectors are providing cashless payment services for tuition, meal services, and even field trips. Whether Reverence means to consolidate horizontally, invest in Transact’s ability to expand its product offerings horizontally, or pursue more aggressive geographic growth options – or some combination of all of the above – remains to be seen. However, with such a breadth of opportunity, the future of an independent Transact seems bright.
HCM: Cluster Raises Seed Round
Cluster, a California-based start-up that offers a specialized recruiting platform focused on filling advanced manufacturing technology roles in the aerospace, automotive and defense industries, announced a $1.9 million seed round led by Mark Cuban and ECMC Group. Other investors include education technology executives such as Penn Foster CEO Frank Britt and Chegg CEO Dan Rosensweig, along with Zynga founder Mark Pincus and Flatiron Health CEO Nat Turner.
Founder Kim Taylor, whose previous company Ranku focused on student recruiting for higher education (before its sale to Wiley), has identified a new, poorly-served niche where her knowledge of online marketing practices can introduce much needed efficiencies. Over time, Cluster hopes to offer access to specialized training that will allow more people to enter manufacturing tech fields. Identifying places where the Internet can create efficiencies in connecting hard-to-reach buyers with specialized sellers is an increasing trend in the HCM sector, and we believe this new space Cluster is pursuing is one worth watching.
Human Capital Optimization