For-profit, online education and private equity

The synergy between for-profit education, online education and private equity has worked well in the US education market where they all have served as a catalyst for each other. A recent article in the USA Today states that "Online education is a growing industry in the United States with estimated revenues of $12 billion at a dozen or so for-profit companies that provide primarily online learning." This sector had been witnessing double digit growth (nearly 20%) and achieved 13% growth last year. For-profit institutions are aggressive marketing machines with nimbleness of adapting to the demands of the economy by innovating and offering new courses. For example, the recent ad campaign of Kaplan University clearly questions the value of conventional educational model.





Undoubtedly, growth of for-profit institutions in the US indicates that there is a segment that needs flexibility, technology and career-oriented education. But, there is also some of criticism about the sector including inferior academic preparation of the graduates and reports of unscrupulous and unprofessional activities. A blog on Wall Street Journal also highlighted the perils of a private equity backed education. It states that the performance of three private equity led education companies which went for IPO within last one year are now showing lackluster performance.

Trends in the US for-profit higher education has lessons for the Indian private higher education sector too. Online higher education driven by private investment can solve immense problems of:
- access to higher education as it leverages power of technology for scalability and reach
- skill gap as it may offer courses which are aligned with the market needs
- availability of capital as government can not provide for all the funding

However, the biggest challenge for India remains the policy framework which does not recognizes "for-profit" education. This is limiting the prospects for innovative forms of online learning delivery and funding from private equity which would like to fund scalable and efficient ventures.

There is an increasing sense of optimism in Indian among emerging models of formal and informal educational enterprises which are gaining attention of investors. Manipal Universal Learning (administrative arm of Manipal Education) is one interesting and effective model which is exploring IPO.

There are also implications for designing and delivering an offering which optimizes affordability, prestige and flexibility. For example, U21Global is the only venture with some visibility in the for-profit online higher education space in India (Manipal owns 50% of U21). However, U21Global is under pressure to prove its value after eight years of launch.


More than ten years back, The New York Times covered a story about the emergence of for-profit online learning model in the US. Since then it has seen some high profile failures like Columbia's Fathom and other mega successes like Kaplan Higher Education. This clearly indicates that it is primal to get the business model for for-profit education correct. Prof. Fried in his recent article on the future of for-profit higher education concludes that "Higher education is a large, mature industry that is being reshaped by innovation. While some of the innovation is in technology, the primary innovation is in business models. For-profits are at the fore-front in developing and implementing these innovative models."

Likewise in India, apart from the supportive regulatory and investment enviornment, ability to create a sustainable and competitive business model, would distinguish between success and failure of the synergy between private equity, online learning and for-profit education.