The managers of the Rise Funds—private-equity firm TPG’s impact-investing vehicle—say their success with investments in
ucational companies such as EverFi and DreamBox Learning stems from a “rigorous” assessment of their actual value to students.
“One of the pitfalls faced by some traditional private-equity firms is that they can sometimes conflate growth with quality,” says John
partner and education sector lead at the Rise Funds, based in San Francisco. As funds with a mandate to realize positive results for society, “we’re not allowed to invest in a company unless we can see the evidence of that impact.”
This approach leads the Rise Funds to companies that drive learning outcomes, or improve student progression, in a way that ensures “that these are going to be the solutions that will endure,” says Steve
co-managing partner of the funds.
The Rise Funds I and II, with a combined US$4.3 billion in assets, have backed education and educational technology companies from the outset. Education-related investments make up about 25% of the combined portfolios.
Earlier this month,
a South Carolina-based provider of impact-oriented software, bought Washington, D.C.-based educational technology platform EverFi—the Rise Fund’s first investment—in a cash and stock transaction valued at about US$750 million, according to a news release.
Rise had led a US$190 million financing of EverFi in April 2017 with a $120 million investment, while a sister fund, TPG Growth, invested another US$30 million. Other early investors in the company, which provides educational content to financial institutions and corporations, included Amazon founder Jeff Bezos and former Google CEO
Among EverFi’s services is providing digital educational programming on basic financial services—knowledge that can help people move from lower-income brackets. Meanwhile, more financial services companies are trying to serve lower-income populations, creating demand for the kind of educational content EverFi provides, Ellis says.
Penta recently spoke with Ellis and Rogers about how the Rise Fund seeks out companies such as EverFi that provide educational services needed by society, and that are on a fast-track to growth.
Tipping Point for EdTech
One reason for the growth trajectory of educational technology is deeper penetration of broadband access and technology throughout the world, combined with a “sufficient policy focus on the needs of individuals,” Rogers says.
That’s made the difference, especially for so-called personalized learning—technology that adapts teaching methodologies to individual learning styles as a student moves through lessons.
“All of the research has always said that personalized learning drives the highest learning gains,” Rogers says. “The difficulty has been how do you drive personalized learning at scale.”
That’s changed in the last five years, leading to growth for companies such as DreamBox Learning, which has developed an “adaptive learning” technology for Kindergarten through grade 12 schools.
Rise Fund I invested US$130 million in the Bellevue, Wash.-based company in July 2018, taking a majority stake. In November, Evergreen Coast Capital Corp., a private-equity fund affiliate of the hedge fund Elliott Investment Management LP, bought a majority stake in DreamBox. Rise continues to hold a “significant” minority stake, according to a news release, and is represented on its board of directors.
In the intervening years of Rise’s investment, DreamBox went from serving fewer than 2 million students to serving more than 6 million, primarily in public Title I schools where a majority of students are eligible for free and reduced-price lunch, Rogers says. Part of that expansion was driven by the coronavirus pandemic, when DreamBox opened its platform for free and in two weeks added 1.9 million students and 2,500 schools—“many of which converted to paying customers later,” Rogers says.
The Rise Funds educational investments are driven by themes the firm believes will lead to growth. Among these is personalized learning, but also a desire to address “the massive skill gaps” in the U.S. that contribute to inequality, Ellis says.
InStride, a company created in 2019 out of a partnership between the Rise Funds and Arizona State University, works with businesses to provide free, online four-year degrees their workers can pursue during their employment to get ahead.
The idea is to make continuing education and workforce development a benefit to workers just like healthcare, Ellis says.
Other themes are addressing mental and behavioral health and solving the national problem of teacher shortages.
In December, the Rise Fund and Spectrum Equity, a growth equity firm, acquired a majority stake in PresenceLearning. The New York-based company, which provides online therapy solutions for schools, initially focused on special education services and has expanded into mental and behavioral health. PresenceLearning isn’t a software program, but “they are creating greater access and scale through using technology platforms,” Ellis says. Their services also help alleviate shortages of special education professionals, particularly in rural areas.
In September, meanwhile, Rise bought a majority stake in Teachers of Tomorrow. The
-based company provides teacher certifications often to mid-career job changers. If an individual has skills in math or engineering but doesn’t have a traditional teaching degree, Teachers of Tomorrow can accelerate the process of getting them the certifications they need,” Rogers says.
“Our impact lens is going to enable us to lean into the coaching, the follow-up, the professional development, the continuing ed, so that we can build a complete career life cycle for teachers, and be that solution to the districts who want high-quality teachers now, but they also want to retain them in the classroom,” he says.
As with most impact-investing funds, the Rise Funds track the impact their companies make throughout the term of the investment, ensuring that they are not only getting a dollar return as the companies grow but “multiple dollars of social impact” too, Rogers says.
They do this by looking at specific outcomes—such as the number of students reached—and by examining third-party research. Y Analytics, a firm formed by TPG and the Rise Funds, for instance, provides analytical assessments of impact, determining the value of results each company reports.
In other words, if a student performs better in school than they otherwise would have by using a product Rise invests in, that student is likely going to do better in the workforce. “There’s a value to that,” Rogers says.
Rise has also found that by focusing on impact, the fund gains a better understanding of what makes a business ultimately succeed. A company that is creating “demonstrable social outcomes,” for instance, is going to have more referrals and higher retention and renewal rates, meaning it is likely to grow and last, Ellis says.
“By forcing our way through a separate sort of gauntlet of impact assessment we end up getting into the businesses that are inherently lined up to succeed,” he says.