New Markets Venture Partners Launches $160 Million Education Fund

According to at least one source, global investment in education technology and education companies is down nearly 50% year over year – 2021 to 2022.

That’s a massive drop in any market and when markets drop that much that fast, some people panic. They sprint for exits. Others, like me, see a necessary recalibration. Still others – the veteran and institutional players – see these retreats as value opportunities.

It’s in this environment of investment decline in education that Maryland based New Markets Venture Partners, is launching a new education investment fund – their fifth overall. The newest one is a $160 million enterprise aimed at boosting economic mobility by investing in “student and workforce outcomes,” according to the press announcement. The company says this new fund is already oversubscribed.

New Markets describes itself as, “the nation’s longest-running edtech and workforce technology VC.” And if you follow the education business marketplace, you’ll recognize some of the names New Markets has invested in over the last handful of years including Credly, Presence, LearnPlatform, Signal Vine, Kickboard, StraighterLine and Graduation Alliance. The company says that their recent education investments, “totaled more than $1 billion in market value and returned over $100 million to limited partners” in the last three years alone.

Since their founding just 20 years ago, the company has placed investments with 41 companies and realized $3.3 billion in value for shareholders.

This new fund, the company announced, will focus on Series A and B investments and recapitalizations with companies generating between $2 and $50 million in revenue with potential to grow to $50 to $200 million within three years.

So, yeah, their new fund is worthy of attention. If not for who’s floating it, then for its size, which is pretty big – for education at least.

NMEP III, the newly announced fund, “is twice as big as NMEP II, which will allow us to write bigger checks, take bigger positions and spend less time syndicating than we have in the past,” Mark Grovic, Co-founder and General Partner of New Markets, said in an interview.

About the timing of the new fund, right in the midst of a significant pull back in education investing, Grovic said, “The frothy market over the last few years was particularly prevalent in the edtech sector, as significant stimulus money went to supporting the education and workforce sectors, and there was a tremendous need for technology to address the education and employment problems caused by the pandemic.” As things have started to cool, Grovic said, “the edtech sector is rationalizing as is the rest of the economy, and investors are taking a pause.”

Grovic does not appear bothered by the cooling or rationalizing or pausing.

“At New Markets, we have lived through three cycles and appreciate when it is time to buy and when it is time to sell. We had 10 successful exits over the last few years, recognizing things were topping out. We expect that prices in our market will continue to rationalize and we are fortunate to be sitting on a fresh pool of capital at a point in the cycle that should produce some very attractive buying opportunities,” he said.

Again, attractive buying opportunities is how people who know describe downturns. Though personally, I like the word rationalization for what’s going on. It fits.

As for what some of those attractive opportunities are, Grovic elaborated, saying, “Over the last few years, schools and universities were all forced to provide every student with broadband access, one to one computing, and high-quality digital content. Students are now creating a tremendous amount of data that can drive interventions and personalized learning leading to much better outcomes.”

That’s absolutely true. Schools were forced to do that and all that data is, or at least can be, highly insightful.

He continued, “Non-degree pathways are exploding, and many companies are creating high ROI, credentialed experiences for students that are less expensive, shorter and lead to better job outcomes than traditional education pathways. Employers are increasing recognizing this and are dropping degree requirements, quickly moving to skills based hiring requiring new technologies in recruiting, assessment, on-boarding and training.”

As additional insight for investment-seekers, he said, “Machine learning, AI, and ChatGPT are wonderful features marginally improving the efficacy of solutions we invest in, but are not a stand-alone investment thesis for us.”

I feel like that’s very helpful to know.

In addition to knowing the market and demonstrating success and having the money, timing may be whatever is left in getting things right. And whether they planned it that way or not, adding capital at exactly the moment when there’s less of it going around seems strategically wise – the big new education investment fund on the block is opening up while the investment market is down. And it’s absolutely worth watching closely.

Read full story here