Political Climates Can Impact Education Spending

In the past, election outcomes—including majority party shifts and new referendums—meant a change in value for markets, industries, and businesses. Education spending is also affected by election results, and we pay close attention to the platforms and policies that could bring changes to the education markets. If the results of the upcoming elections follow the midterms, then we can expect increased funding for education but shifts in how funding is allocated, which will result in changes in Education Technology ventures.

The sweeping gains by the GOP in the midterm elections meant further challenges to the adoption of Common Core and other federal education standards, and the importance of assessments in measuring both student and teacher success were reduced in favor of alternative measurement methods. Referendums passed in New York and Illinois generated extra revenue for education spending through bonds or specific income taxes. This fall, similar referendums in other states could pass and add to overall education spending. As in the past, almost all candidates’ policy statements include positions on K-12 spending and whether (or how) to increase educational technology funding. In addition to a K-12 focus, several of the gubernatorial candidates during the last election were higher-ed administrators and ran on a platform of increased focus on higher education attainment. Education spending continues to be a priority issue regardless of party, albeit there are differences in how funding will be allocated and that is where we are focusing our efforts.

At New Markets Venture Partners, we have built an exciting portfolio that has proven efficacy around student outcomes and solid business models that follow clear sources of funding. Our portfolio is also well positioned in terms of business models and geography to replicate some of the industry’s biggest wins and the shifting trends we see in Education Technology spending.

According to Edreach, the Edtech Unicorns (those investments that have achieved at least a $.5B or higher exit value) break down across the following business models and geography:

State funding flows are increasingly focused on those areas most critical to improving educational outcomes. Twenty-six states currently focus on the following performance based funding criteria: • Graduation (based on either number of degrees or graduation rate) • Retention • Transfer • Research and development funding • Dual-credit completion • Focus on low-income, adults, and STEM • Weighting of certain metrics for at-risk students

The real question in education technology ventures is not what will the results of the next election cycle be or what will the impacts on funding be, but how can education spending best align with the biggest winners in the ed-tech universe? What we’ve seen as proven principles are companies that:

• Improve student outcomes • Follow funding flows • Achieve successful exits

We have achieved one successful exit and are the path for more in the near term. We are looking hard for another “unicorn” and we may have already found it!

New Markets Venture Partners is an early and growth stage venture capital firm that invests in and helps build disruptive education, information technology and business services companies. We are one of the leading education technology-focused venture firms in the U.S.

Mark Grovic co-founded New Markets Venture Partners in 2003 and is a General Partner. Mark serves or has served on the Board of Directors for several education technology “unicorns” including Fishtree, Graduation Alliance, Think Through Learning, Moodlerooms, and Workspace. Mark also co-founded LifeJourney, an online educational company that allows students to test drive real life careers in specific corporations.