Talked with Chris Hoehn-Saric, senior managing director at Sterling Partners. Asked him about macro trends in private equity investment in K12 education and the value of data.
Sterling is a pretty decent sized investor. Currently, they have US$4 billion under management, and about four percent is education. Some of that is with Connections Academy. Chris has been in education since 1987, as an operator as well as an investor.
These are snippets from our conversation. I have edited some sentences for clarity.
The other day, we heard Albert Wenger at Union Square argue for investments that target a non-traditional audience but could impact education. He indicated it was less about taking the same old thing in education and selling it in a different way, or packaging it differently, to the same people. Thoughts?
What we have found to be most pratcial in K12, you have to be able to marry idea with funding. I think that’s the core lesson of business in general. Our first lens is usually, is there a policy and funding imperative that will support what we do?
Spending priorities always change. It’s less about waiting for the system to change, but more about understanding the system so what you are doing works with them. What are the long term macro priorties?
Then we talked about Connections Academy.
Our view was that there was a longer term trend in the marketplace. The power of the consumer, a general trend toward charters, and money would flow down that path.
It’s a question of where do you play within trends? There is a lot of conversation around issues that deal with at-risk student populations, the lack of properly skilled high school grads going to college, and a variety of things that policy folks are working on today.
People have said that education in this country is under-managed. If it could, where could private equity get into the national education picture and better manage it, and improve value and outcomes?
You have a system today that has a variety of constraints, and the system is not aligned to student outcomes. Private equity can work if there is really good clarity in the way you will be measured for success.
Where it doesn’t work as well, is where there is ambiguity in terms of the outcomes.
Systems have obligations to a work force, obligations to unions, or a constraint on where you can draw students, or what types of students. They ultimately clutter. They ultimately constrain you.
You have to have measurable outcomes and whatever way you want to meaure them is fine.
Which brings us to data. Is data where we will begin to see the greatest force for change in developing an education marketplace in K12?
Collecting a lot of data is not nearly as powerful as data that is transparently available. That’s the most compelling part of this. That can have a long term effect of making people smarter consumers — and that’s on all levels: policymaker, parents or students.
Data provides a foundation for change. Transparency allows broader pressure points to be brought to the system. Now you have relevant points of conversation. You start to ground things in a fact-based analsysis system.