With $150 Million to Spend, Hero K12 Goes Shopping for Education Technology Companies

With $150 Million to Spend, Hero K12 Goes Shopping for Education Technology Companies

Unless you’re Jeff Bezos, people with money typically do not solicit the public for ideas on how to spend their dollars. Yet that’s not the case for Hero K12, which is announcing, rather bluntly, that it is going on a shopping spree to buy education technology companies.

Making this possible for the Miami Lakes, Fla.-based company is BV Investment Partners, which is giving Hero K12 $150 million to spend on making acquisitions. In addition, BV is making an undisclosed investment that will give it a minority stake in the company.

Founded in 2014, Hero K12 offers a behavior management system that allows teachers and administrators to keep a digital record of behavioral incidents—“the good with the bad,” reads the company’s website—in their efforts to build a more positive school climate. The platform aims to reduce the paper trail involved in both disciplinary actions and positive reinforcements—in essence, digitizing demerits, detention and gold stars.

The company also offers tools that scan physical ID badges to help administrators track student attendance along with visits by volunteers and visitors. Some of these monitoring features may sound a tad Orwellian, yet the data is supposed to empower educators and parents to be proactive with interventions, says Mark MacDonald, the company’s CEO. Overall Hero K12 claims users in thousands of schools across 43 states.

With the money from BV, the company aims to go beyond tracking behavioral incidents to address other challenges for school operations. Adding more assets to the platform, MacDonald tells EdSurge, is part of a grander vision of “being able to integrate and analyze data across all the administrative processes that happen in schools.”

While that sounds vague, Oliver Wreford, who joined Hero K12 in March as its Chief Product and Strategy Officer, offers clearer hints about what the company may be eyeing. “By and large we are going to stay out of the classroom—the digital content, instructional stuff,” says Wreford. Instead, services such as student registration and enrollment, transportation, lunch and health services could all be in play.

Deciding what to buy should be a familiar task for him. At his last job with PowerSchool, Wreford was closely involved in at least a half dozen acquisition deals. “We think that in any of these [aforementioned] areas there are opportunities to connect the components together, at great scale, to benefit school administrators,” he adds.

This will be the first foray into the education industry for BV Investment Partners, a Boston-based private equity firm that has invested $3 billion since its founding in 1983—predominantly in the healthcare, financial, telecommunications and IT industries. “They’re using Hero for our expertise and as the vehicle through which they create an edtech portfolio,” says Wreford.

BV is just the latest of private equity firms that have taken a financially opportunistic interest in the education market. “Private equity is taking a more meaningful role in the space as of late,” says Peter Yoon, a managing director at investment bank Berkery Noyes. “The market overall is very fragmented, and [private equity groups] see an opportunity for consolidation and an opportunity for scale. Many groups see this as the next frontier after the healthcare space.”

“There are a limited number of vendors that are delivering at scale,” Wreford states, “and a lack of products that are capable of cross-technology integrations. [Education] is a market ripe for acquisition activities.”

Hero K12 and its backers have likely found inspiration in other education companies, also owned by private equity firms, that have splurged on acquisitions. PowerSchool, whose core offering is a student information system, has bought eight companies that provide learning management systems, assessments, student enrollment and other services since June 2015. Frontline Education, which provides school administrative software, has acquired six companies within a similar time.

Other private equity groups, such as Weld North and Quad Partners, have built portfolios that consist exclusively of education companies. Often these firms will acquire others through their portfolio companies. Last year, Imagine Learning and Edgenuity, both owned by Weld North, respectively bought Think Through Learning and Compass Learning.

Some of the largest transactions in the education industry have been bankrolled by private equity firms: TPG Capital and Leonard Green Partners snapped up Ellucian for $3.5 billion in 2015; Hellman & Friedman bought Renaissance Learning for $1.1 billion the year before.

Neither MacDonald nor Wreford offered any more specific details around how many acquisitions it aims to make, or the timeframe for spending the $150 million. The only criteria, says MacDonald, is that these companies “have a proven revenue stream.”

Tony Wan (@tonywan) is Managing Editor at EdSurge. He was named to Forbes’ “30 Under 30” list in Education in 2014.

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