ETS Launches New ‘Strategic Capital’ Investment Vehicle for Education

Managing Editor

ETS announced today its launch of a first-ever investment arm devoted to supporting growth-stage companies in education, in a major turn for the longtime assessment and research organization.

A nonprofit based in Princeton, N.J., ETS said that the new investment vehicle, ETS Strategic Capital, will make private-equity investments and participate in mergers and acquisitions in K-12, higher education, and workforce education.

The investment fund has already established a portfolio of five companies, which are focused on areas that include applying artificial intelligence to education and matching students with the right university.

“Clearly, there’s been a huge amount of innovation in technology, and in education technology, and in new business models” in the market today, said Ralph Taylor-Smith, the managing director of ETS Strategic Capital, in an interview.

“ETS is really looking to benefit from that, grow from that, and use that as a foundation for new business areas.”

While he declined to describe the total amount ETS might invest over time, Taylor-Smith said the new program’s equity investments will likely range between $1 million and $20 million, and its M&A activity could focus on deals of $20 million to $200 million in size.

The launch of a new investment arm “enables ETS to grow its business, and advance its mission,” he said.

Founded in 1947, ETS is one of the best-known providers of testing in the United States and abroad, sponsoring exams covering an array of subjects, skills, ages, and grade levels. The tests include statewide summative exams, graduate-school entry tests, and tests of English-language proficiency.

Taylor-Smith did not have prediction of how the mix of strategic investments would vary across K-12, higher ed, and the workforce, though it will extend well beyond assessment.

ETS is not looking to make seed-stage investments, but rather to put money behind growth-stage companies that have an established customer base and a product-market fit, he said.

The five companies that ETS Strategic Capital has already invested in are:

  • ApplyBoard, a Canada-based company that touts itself as the world’s largest platform for international student recruitment.
  • Capti, a Buffalo, N.Y.-based company, created by Charmtech Labs LLC. It seeks to provide personalized literacy and learning support to K–12 students.
  • EdAgree, a company spun out of ETS that seeks to match international students with universities and support those students throughout the course of their education.
  • Gradschoolmatch, a software platform that matches prospective graduate students with potential graduate academic programs. It uses a “match-algorithm, search-engine and business-approach,” in which students can post biographies, research interests, and career plans and send private messages to graduate school recruiters.
  • Pipplet, a Paris startup specializing in language assessment for businesses. The company aims to help companies gauge job candidates’ language fluency based on their practical, real-world ability to communicate in a professional context.

ETS officials believe the organization’s funding and expertise in education make it an attractive partner for emerging education companies that are focused on promoting high-quality education and equity—which are core to ETS’ mission, said Taylor-Smith.

Taylor-Smith was brought to ETS to manage the investment program. He noted that he has worked on similar investment funds—albeit focused on different areas of investment—at other organizations, most notably GE and Battelle. He currently serves as vice president for corporate development at ETS, but he is transitioning to serve as managing director of the new investment unit.

ETS Strategic Capital’s investments will focus mostly on Series B, C, or later rounds, though some early-stage investments may be possible. The growth partnerships sought by ETS may include joint ventures, distribution or channel-partner agreements, intellectual property licensing, and technology transfer relationships, along with similar strategic value-add business partnerships.

ETS Strategic Capital will be involved in deals in both the United States and international markets, including Asia Pacific, Southeast Asia, the Middle East, and Latin America, the organization said.

COVID-19 has been a major setback for many education companies, as clients like school districts wrestle with new approaches to instruction and struggle to cut costs to adjust to pared-down budgets.

Across the K-12 market, companies have imposed layoffs and salary cuts and implemented alternate pricing strategies in an effort to weather the pandemic’s wrath.

But the upheaval creates opportunities for investors like ETS, who are well-positioned to spot and support innovative, durable education companies, said Taylor-Smith.

“It’s when you have market dislocation, that’s when you can get the best deals,” he said. As long as there’s sufficient capital flowing, a rocky period in the market is a “tremendous time to launch such an endeavor.”

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