Renovus Capital Partners is an education-focused private equity fund. We are interested in growth-oriented businesses that fall into one or more of the categories outlined in the sector map below:
The Schools Sector
The Schools sector consists of businesses that provide classroom instruction to full or part-time students ranging in age from pre-K to working adults. It includes both full-time instructional institutions like private colleges and K-12 schools as well as supplementary instructional businesses like after-school tutoring and test preparation. It does not include corporate training programs or other training businesses that deliver their services through a corporate partnership or outside an academic environment. Below are short summaries of key subsectors within the Schools vertical.
Career Colleges—Career Colleges are accredited, private, for-profit colleges and universities that include everything from less than one-year certificate and diploma programs at vocational schools to degree-granting four-year and doctoral institutions. These institutions compete against traditional public and private universities as well as community colleges by emphasizing career-oriented instruction that provides graduates with the practical skills they need to pursue a specific career (e.g., Nursing, Dental Hygienist, Electrician and IT Network Integrator). Career Colleges also provide more support services for students including flexible schedules, multiple enrollment dates within a year and significant job-placement assistance.
Career Colleges deliver their academic programs through two main channels: physical campuses located throughout the country and online programs that allow students to study from home over the Internet. While the sector remains dominated by on-ground schools, the online segment has been steadily gaining in market share due to the added convenience for students.
Private K-12 Schools—Private K-12 schools are the pre-college equivalent to Career Colleges in that they are a privately owned alternative to the public education system. However, these institutions tend toward serving either elite students or specific niche demographics (e.g., religious students, high achievers, mentally challenged and emotionally disturbed). As such, they tend to charge relatively high prices and compete heavily on their ability to produce strong student outcomes. These schools have been most successful in states and localities where the public K-12 system is an unattractive alternative.
Tutoring and Test Preparation—This segment is composed of third-party providers of tutoring and supplemental services for students. These range from high-end one-on-one tutoring delivered in the home to classroom instruction at a tutoring center with 20 students per teacher to afterschool tutoring done onsite at a public school. At the high end, growth in this sector has been driven by the increasingly competitive college admissions process while at the low-end, increasing state and federal funds have been allocated to remedial tutoring in poor and underperforming districts.
Childcare Centers—This market consists of national and regional childcare chains as well as locally-owned childcare centers. This subsector is highly fragmented with the largest for-profit provider having only a 2.3% market share. Non-profits and government-funded programs predominate with for-profit childcare businesses accounting for less than ten percent of the more than 116,000 state-licensed centers in the U.S.
The Corporate Training Sector
The Corporate Training sector consists of businesses that provide training and instruction to working adults that is directly relevant to their current job. Often this training is delivered via their current employer but it can also take place at training centers where customers pay for training directly. Below are short summaries of key subsectors within the Training vertical.
Corporate Training—Corporate Training companies are hired by corporations to provide training to their employees. This training can range from initial orientations for new employees, to technical training on new equipment or software programs, to periodic skills training like sales. Training can be delivered directly via instructors or online.
Continuing Education—A number of professions, including accountants, doctors lawyers and IT professionals are required to take annual classes on new developments within their area of expertise. Typically this instruction is delivered through seminars run by third-parties.
Certification—A number of fields, ranging from barbers to real estate brokers to accountants require certification before an individual can begin practicing. Preparation for, development of, and the administration and scoring of these certification exams are increasingly handled by private companies rather than the state.
Language Instruction—High immigration into the U.S. and the need for foreign language skills for many U.S. employees has created strong demand for language instruction. This sector includes both English as a second language for non-native speakers and instruction in foreign languages for English speakers. Delivery methods run the gamut from instructor-led sessions at learning centers to a wide variety of learn at home products (e.g., books, audio tapes, computer programs, etc.).
The Content Sector
Content consists of the full range of businesses that generate instructional and assessment materials for K-12 and postsecondary education. It includes textbook publishers as well as providers of supplemental materials like videos and classroom materials. It also includes online content providers and developers of tests and assessment materials. Below are short summaries of key subsectors within the Content vertical.
K-12 Publishing—K-12 Publishing breaks down into two principal areas: basal content and supplemental materials. Basal content refers to standardized textbooks used across a state’s education system. Contracts for developing and publishing these textbooks are awarded through highly competitive RFP processes and result in multiyear, multimillion dollar awards. As such, the basal content industry is dominated by a handful of providers with the economies of scale needed to prevail in the RFP process. Supplemental material contracts are awarded outside the state RFP process and are instead bought at the district level, allowing smaller publishers the opportunity to participate in the market.
College Textbooks—While many of the publishers are the same, the college textbook market is quite different from K-12. Adoption decisions are made by individual professors rather than through centralized decision-making so there is much more room for competition based on quality and specialization rather than price.
Online Content—Online Content covers the growing array of educational text, video, audio and interactive software delivered via the Internet. This market resembles the K-12 publishing supplemental market in that the content is purchased on a decentralized basis. Growth in online is being driven by the conversion of hard copy instructional materials to online versions. This has the dual benefit of saving money on production while also enabling a much greater degree of interactivity for the student.
Testing—The passage of No Child Left Behind (NCLB) and the resulting proliferation of standardized state tests to measure student performance produced a boom in the test development market. Much like basal content, contracts for test development are awarded through competitive RFP processes that result in multiyear, multimillion dollar awards. Outside of the statewide test market there is also the supplemental assessment market which includes providers of generic tests to individual schools and school districts for assessment purposes and to prepare for the statewide exams. Like the supplemental market in K-12 Publishing, the supplemental assessment market is much more open with many smaller companies.
The Technology Sector
The Technology sector encompasses all vertical-specific software and hardware used in running educational institutions and delivering learning content. It includes both back office systems like Enterprise Resource Planning (ERP) as well as frontend software platforms like Learning Management Systems (LMS). Below are short summaries of key subsectors within the Technology vertical.
ERP—ERP or Enterprise Resource Planning software generally refers to the administrative software used to run a company’s back office (finance and accounting, human resources, etc.) Within education, the core of the ERP platform is the Student Information System (SIS), a unique requirement for the education vertical. The SIS handles all aspects of the student’s interaction with the educational institution from what classes he takes, to his grades, to his tuition payments and housing. Education ERP systems then layer the accounting and human resource functions on top of the SIS to offer a complete solution for customers. ERP customers range from large public universities like Penn State that can spend tens of millions of dollars on an ERP system down to individual high schools that purchase basic products for tens of thousands of dollars.
CRM—CRM or Customer Relationship Management software generally refers to software used to run a company’s sales operation (e.g., tracking customer interactions and the sales pipeline). Within education, CRM products are used to manage student recruitment and alumni relationships. The most robust systems track every interaction with a prospective student from the first contact through a campus visit and interview to graduation and donations as an alumnus. These systems also use this data to evaluate the effectiveness of marketing campaigns and the productivity of admissions officers.
LMS—LMS or Learning Management System software is used to deliver online content and classes. It is the framework used by online colleges to deliver their programs and includes both a platform for students to attend online classes as well as to handle all administrative interaction with the school.
Library Software—At its core, library software is used to manage a library’s collection by automating such functions as cataloging, circulation and purchasing. While historically this system, the ILS or Integrated Library System, managed just books, in recent years it has also come to manage online and digital resources like online journals and digitized items like photos, newspapers and maps.
The Services Sector
The Services sector encompasses all vertical-specific providers of services to educational institutions and corporations. These services range from outsourcing cafeterias to running a school’s marketing and student recruitment. Below are short summaries of key subsectors within the Services vertical.
Outsourced Services—Historically, educational institutions performed all of their functions in-house whether they were core competencies like academic instruction or ancillary services like food preparation. This approach has begun to change as the need to save money and create competitive differentiation has led schools to look to third parties to deliver ancillary services at a lower cost and/or with higher quality. These services include everything from enrollment management to campus security to cafeteria operations.
Marketing & Recruiting—As colleges increasingly compete for students, they have looked to specialty providers of marketing and recruiting services to give them a competitive edge. These providers range from simple lead generators who place Internet and TV ads to create leads, to sophisticated full-service operators who handle lead generation as well as follow-up, interviewing and enrollment.
Student Finance—The growing cost of college has created an entire sector that deals with helping students and parents pay tuition. Companies within this segment work with colleges to provide loan options, process federal financial aid applications and manage collections and delinquencies on bad student loans.