For-Profit Sector Eyes Public Education Opportunities

Educational consultant Rob Lytle has identified a new money making opportunity in the education market: public schools. The nationwide adoption of the new Common Core Standards is imminent, which means that many public school districts around the country are about to become desperate for help. To avoid having a large number of their schools produce abysmally bad test results, administrators will be looking for aid, and forward-thinking for-profit companies will stand ready to provide assistance via pre-made lesson plans, educational software, and student assessment guidelines.

“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.”

Lytle isn’t the first to see the huge potential in the K-12 market. According to Reuters, total education spend comprises 9% of American GDP, with $500 billion dollars going to K-12 alone. Although bureaucratic headaches, combined with general distrust of for-profit entities, stood in the way before, the landscape is changing. At least that is the belief of the private equity sector, who have shown up to mingle in the tony halls of the University Club in New York City, and to listen to Lytle give advice on where best to realize profits on investment in the nascent for-profit education market.

n the venture capital world, transactions in the K-12 education sector soared to a record $389 million last year, up from $13 million in 2005. That includes major investments from some of the most respected venture capitalists in Silicon Valley, according to GSV Advisers, an investment firm in Chicago that specializes in education.

The goal: an education revolution in which public schools outsource to private vendors such critical tasks as teaching math, educating disabled students, even writing report cards, said Michael Moe, the founder of GSV.

There’s no doubt that the excitement is there — but so is fear. Many in the country feel that they’ve been burned by the business world since the 2008 economic upheaval, and parents especially seem leery of turning over something as important as education to private companies motivated by profit and beholden to shareholders more than students. Add to that the traditional resistance from teachers unions, who fear that they will be the losers if they fail to maintain the status quo, and the picture becomes not nearly as cheery.

One of the voices sounding the loudest about the danger of close commingling of private interests and public education is education historian and New York University Professor Diane Ravitch.

Ravitch argues that schools have, in effect, been set up by a bipartisan education reform movement that places an enormous emphasis on standardized test scores, labels poor performers as “failing” schools and relentlessly pushes local districts to transform low-ranked schools by firing the staff and turning the building over to private management.