I am very interested to see how the market will take to it.  Hopefully strong.

Link to s-1: http://www.faqs.org/sec-filings/091222/QUINSTREET-INC_S-1.A/

I think it is finding those firms who understand the current postsecondary climate and have a plan for addressing the various concerns the sector faces as a whole.

More specifically, there are some serious issues with retention and completion initiatives across all postsecondary institutions.

Regarding the for-profit sector, the DOE is going to attempt to legislate stricter regulations if student loan default rates maintain current levels. There is a move afoot by the DOE to include a ‘gainful employment’ rule, which would force for-profits to adhere to a standard tying degrees earned to a result in employment that would ensure student loan payback. There is enough of a conundrum with retention issues and the DOE’s heavy handedness of the for-profits could be disastrous.

With regard to the public sector, the problems are just as serious. With tax revenues dropping, there are faculty layoffs and furloughs, courses being dropped, and students being turned away from schools. But alas, the Obama bucks will save the day! We’ve all heard about the American Graduate Initiative, where Obama and his administration are seeking to fund $12 billion to Community Colleges to graduate 5 million students over the next 10 years.

By the way, for-profits are noticeably absent from the mix, although they do a better job at graduating students. Is it possible the government is now trying to do away with for-profits by socializing education further?

So, I think there are opportunities that private equity firms should look for in the above relative to retention and degree completion. Too many students are heading back to school that are ill equipped and under-prepared in many ways. There are some firms out there addressing these issues. The key issue is to find those who have a pulse on the problem and who are in development of real solutions.

Happy holidays!

Paul

Bruce, over the last year I have had consultations with over 35 PE firms, some with indepth knowledge of the EDU industry most with no more than a big fund & surface industry information. I would say many PE firms should spend more time and bring in more experienced people to help them really learn about the EDU market, it’s been around for over 100 years and it changes rapidly. I also believe that many firms who are flushed with funds swing too fast with the wind and the flavors of the month, and do not take the time to plan a detailed strategy for the sector rather than just buying something to be in the game. I think that clearly some get it and are building profitable long term enterprises within segments of the sector but most move a little too fast. In addition I agree with what “the Doc” had said at the BMO conference about what scares him about the EDU industry being inexperienced & inadequate management being thrusted in power as the result of the frenzy in EDU and making headline type mistakes which may sour the milk for the rest of us.

 Hello Bruce: In my role as a broker for career colleges, I deal with PE firms every day. Many want to enter the Ed space. I think it is critical that they employ, pre-purchase or shortly after, an experienced operator of career colleges. I actually find that most PE firms are trying to be well informed and want their investment to be sound and successful. They have a healthy respect for default and 90-10 challenges facing the for-profit sector.

On the other hand, most want to exit the space in 5 years of so, thus they don’t have a tremendous amount of time to develop the company over a long period of time. An experienced operator will help them avoid making a critical mistake in the name of quick profits. It is that raised profit that will be important when they take their investment to market in the future, thus allowing them to “hit a home run.”

Also, more “home runs” experienced in the sector will shine the spotlight on the industry, and the numerous detractors will use the extraordinary profits and gains as a weapon against current operators. Sad, but true. The detractors (ex. Maxine Waters, et al) won’t let the facts get in the way of their pursuit.

The facts support continued support of the for-profit sector.

Hello Bruce,

Great question, thanks for posting.

I have consulted with several private equity groups that made an investment in the for-profit higher education industry. First, private equity groups with experience in for-profit education investment tend to do a better job with the following: 1. Selecting the right investment; 2. Conducting due diligence; 3. Hiring the right management team and 4.Understanding what questions to ask before, during and after the deal has closed. A private equity group that comes up short in its appreciation for the complexity and nuance of for-profit education may end up in a “money pit” (especially if it gets any combination of 1-4 wrong). That said I agree with Bruce and think we should expect stricter regulations from the US-DOE. Specifically, the 12-safe harbors are in potential trouble from the DOE’s Negotiated Rulemaking committees.

The profit motive in higher education can work quite effectively if managed with tight internal controls. For instance, the manner in which benchmarks and goals are established, communicated and managed makes a world of difference. Get this part right and you succeed or fail on your merits. Get it wrong and you create (as I mentioned above) your own money pit, or worse. I have concluded that private equity groups investing in for-profit higher education should be prepared for a more hands-on approach to understanding the business and monitoring its management team.
One critical issue facing new investment in for-profit education is the market itself. Shifting demographics over the next decade indicate a reduction in qualified students with the ability to pay and an enormous growth in academically and financially challenged students. The ability to deliver on alternative scheduling, delivery models and even alternative pedagogical models may distinguish those with the greatest market share. Increasing societal diversity, academic remediation, job placement and alignment between educational cost and salaried result (by program) are issues that will continue to rise and present challenges for new and existing institutions and investors.
Best of luck!

Join the group: http://www.linkedin.com/groups?home=&gid=1786509&trk=anet_ug_hm&goback=%2Eanh_1786509

In a knowledge economy, nothing is more important than people being able to maximize their potential.  And yet, collectively we have not figured out how to reach every person – regardless of where they are intellectually, emotionally, financially, and geographically – to help them realize their potential.  Effective learning is important for individual learners, their families, their employers, their communities and their countries.  There is an urgent need to find ways to reach and educate every person.

Education – from toddlers through baby boomers – is also big business in the United States. Depending on how one counts it, education mirrors healthcare in terms of spending or falls just below it. The United States is the largest exporter of education in the world, and education is our country’s fifth largest export.  By some accounts we have the most robust system of higher education in this country, a rich diversity of K-12 education, innovative pre-K and educational entertainment industries, and over 50% of adult Americans learning on the job on any given day.

Despite the size and import of learning, we have immense challenges; many hold out the hope of entrepreneurship to help solve some of these challenges. That said, until now there hasn’t been a single education business plan competition in the world and while entrepreneurship in bio tech, software, engineering and medicine is quite robust with clusters of start ups surrounding some of the world’s great universities, nothing similar exists in education.

To address this issue, the Milken Family Foundation and Penn have come together to be a joint catalyst for innovation in education, to help “create a space” for education entrepreneurs.  To begin this process, we have put together a business plan competition and we hope –if you have an idea to change the world, that you will enter the competition.

Why Penn? Since its founding by Ben Franklin, Penn has prided itself on its ability to combine theory and practice. We have the country’s first school of medicine and school of business.  At PennGSE, this spirit has manifested itself in a rich array of entrepreneurial activities all designed to foster change in education. Our faculty, staff, and students are all committed to the teleology of change and this competition is just one manifestation of a broad and aggressive agenda – framed by real world needs and sound theory and research.

Why Milken? The Milken family – who are Penn graduates – embody the Franklin spirit and through Knowledge Universe have demonstrated successful educational entrepreneurship – from pre-K services through college education for working adults. And in their philanthropic activities, the Milken family have made education – particularly innovation in education – a cornerstone of their work.

We hope that you will enter the competition, and look forward to hearing your ideas.

Visit: http://www.gse.upenn.edu/entrepreneurcomp/

Good luck!

Best,

Gregory Milken

Doug Lynch

Completion of the certification course, entitled “Core Competencies of College Teaching” (CTED 672), will earn three graduate hours of credit and award the Certified Adjunct Faculty Educator (C.A.F.E.) designation.

“We’re gratified by the confidence St. Thomas University has shown in the quality of our certification program by offering it for graduate credit. This may be an excellent time for K-12 teachers to consider registering for this course, given the widespread lay-offs of public school teachers around the country,” said Dr. Rochelle Santopoalo, President of SoCAFE.

SoCAFE is the first organization in the United States to provide a portable, national credential for adjunct faculty in American colleges and universities.

Dr. Santopoalo also stated that “while the number of opportunities for K-12 teachers is currently in decline, according to the 2008-2009 edition of U.S. Department of Labor Handbook, the number of college and university teaching jobs is expected to grow by 23 percent between 2006 and 2016 – much faster than the average for all occupations.”

Founded in 1885, the University of St. Thomas is the largest private university in Minnesota. St. Thomas offers bachelor’s degrees in over 85 major fields of study and more than 45 graduate degree programs including master’s, education specialist, juris doctor and doctorates. (University of St. Thomas website: www.stthomas.edu/education/ce).

For more information on the organization visit: http://www.socafe.org.

All trademarks and service marks are the property of The Society of Certified Adjunct Faculty Educators.

 The service, which started last year, allows students to take as many self-guided courses as they want for —as Straighterline’s Web site says — “less than the cost of your monthly cell phone bill.” 

 The $99 fee gives students access to course content from McGraw-Hill, 10 hours of one-to-one instructional support, and a course advisor. The business grew out of SmartThinking, a popular online tutoring service.

 What’s in it for students? A fast track, relatively inexpensive way to a college degree. Straighterline has partnered with at least four accredited higher education institutions that have agreed to accept credits from Straighterline students.

 The company Web site lists four partners: Charter Oak State College, Fort Hays State University, Lake City Community College, and Potomac College. Potomac is the sole proprietary institution.

 An article (http://www.washingtonmonthly.com/college_guide/feature/college_for_99_a_month.php?page=all) in the most recent issue of Washington Monthly traces the development and struggles of Straighterline and warns big and non-elite colleges that the Washington DC-based business could herald their unraveling.

 ”The day is coming—sooner than many people think—when a great deal of money is going to abruptly melt out of the higher education system, just as it has in scores of other industries that traffic in information that is now far cheaper and more easily accessible than it has ever been before, ” writes Kevin Carey, the author of the article. “Much of that money will end up in the pockets of students in the form of lower prices, a boon and a necessity in a time when higher education is the key to prosperity.” 

In another article (http://features.csmonitor.com/innovation/2009/10/15/the-future-of-college-may-be-virtual/), this one in the Oct. 15 edition of the Christian Science Monitor, Carey is quoted discussing Straighterline in the context of the growth in online education.

And in an opinion piece (http://www.insidehighered.com/views/2009/10/06/hess) in Inside Higher Education, Frederick Hess, of the American Enterprise Institute, cites Straighterline as one example of why President Obama’s initiative to get the government involved in developing free, online courses is unnecessary.

 —- Andrea L. Foster

ForProfitEDU.com

Art Institutes: with a focus on design, fashion, culinary & medical has achieved a significant brand in the market

Argosy: which focuses on Education, psychology, business, health & behavioral sciences also a strong brand with real credit to its quality & reputation.

Brown Mackie: really the career education focused division also has a strong history in accounting, business, criminal justice, tech, healthcare & legal keep them in the loop with the lower level degree programs even though they offer diploma, certs, assoc & bach

South: with it’s 100 year history & 5 locations really is an ongoing push for them as the online play has continued to move forward and gain ground.  Not yet a big boy, but clearly the management has the experience to take it to the next level.

Western State Univ. its little law school in Cali, may prove to be a future are of growth.

The EDMC group has brought together a strong management team who have done it before and hope to do it again.  They have the necessary tools & soon the resources.  It should be a nice one to watch.

click here to register: http://www.bmocm.com/conferences/2009backtoschool/default.aspx

Recently a 93-page report on online education, conducted by SRI International for the Department of Education, has delivered an interesting conclusion: “On average, students in online learning conditions performed better than those receiving face-to-face instruction.”  The New York times reported the article here: New York Times