Private Companies’ Big Move Into K-12 Education

Rocketship Education

A Rocketship Education charter school in California. The chain uses DreamBox technology, funded by private equity, to help students learn.

There is a lot to chew on in Reuters’ reporter Stephanie Simon’s look at private equity and venture capital investments in the education market.

The story is the talker of the week among those who fear the worst when Wall Street gets involved with schools.

We’ll highlight two passages from the story.

First, investors are very, very hungry:

Think about the upcoming rollout of new national academic standards for public schools, he urged the crowd. If they’re as rigorous as advertised, a huge number of schools will suddenly look really bad, their students testing way behind in reading and math. They’ll want help, quick. And private, for-profit vendors selling lesson plans, educational software and student assessments will be right there to provide it.

“You start to see entire ecosystems of investment opportunity lining up,” said Lytle, a partner at The Parthenon Group, a Boston consulting firm. “It could get really, really big.”

And second, some of these firms see big opportunities to improve special education.

We know from our reporting that many parents are unhappy with their options at district and charter schools (More than 22,000 students participate in Florida’s McKay Scholarship, which provides scholarships for students with disabilities to use at private schools):

Mark Claypool, president of Educational Services of America, told the crowd his company has enjoyed three straight years of 15 percent to 20 percent growth as more and more school districts have hired him to run their special-needs programs.

Autism in particular, he said, is a growth market, with school districts seeking better, cheaper ways to serve the growing number of students struggling with that disorder.

ESA, which is based in Nashville, Tennessee, now serves 12,000 students with learning disabilities or behavioral problems in 250 school districts nationwide.

“The knee-jerk reaction [to private providers like ESA] is, ‘You’re just in this to make money. The profit motive is going to trump quality,’ ” Claypool said. “That’s crazy, because frankly, there are really a whole lot easier ways to make a living.” Claypool, a former social worker, said he got into the field out of frustration over what he saw as limited options for children with learning disabilities.

Thoughts?