Measuring outcomes in educationA look at emerging market education entrepreneurs

November 2, 2014

Contents

1 Background

2 Measuring outcomes in education

3 Opportunities to get involved

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4

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Students attend 2 years of after-school tutoring for 15 hours a week at Avanti’s Centres

In-class ActivitiesHindi Video Content

More than 40% of Avanti students place in the top 1% of the IIT entrance exam

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99th 90th 80th

41%

94%100%

48%

91%100%

Avanti Class of 2013Avanti Class of 2014

National Percentile (IIT JEE)

Most children in the world are enrolled in primary school, but few are learning

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% of primary age children enrolled in school

% of children who reach a basic learning level in reading, writing and arithmetic

Source: Acasus (2014)

Parents are looking for alternatives

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Source: Pearson (2014)

• Spending 10-20% of total household income on their children’s education

• Enrolling their children in low-cost private schools instead of public schools

Delhi – estimated 70% attend LCPS

Punjab – 67%

Accra – 64%

Lagos – 70%

As the sector grows, there is increasing private investment flowing into international education

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Original playersNew corporate

education entrantsNew investor entrants

• Digital Education, est. 2012, with emerging market focus

• BR Education Ventures fund, launched Mar 2014, Brazil focus

• Benesse Social Investment Facility, launched Apr 2013

• $15M to Asian companies solving social issues in ed

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PALF operates at the intersection of three types of investors, integrating the best of each approach

Focus on maximising social impact

Maximize profits and scale

Emerging market experience

Impact investing

Private equity / venture capital

in education

Emerging markets investing

Pearson Affordable Learning

Fund

We have 7 investments in our portfolio to date

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DESCRIPTIONINVESTMENT

Omega Schools, Ghana •38-school LCPS chain in Africa (K-10)

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Sudiksha, India •Chain of 22 low income preschools

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APEC (Ayala JV), Philippines

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•14 school LCPS secondary school chain in urban Manila

Avanti Learning Centres, India

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•After-school labs for university entrance exam preparation

eAdvance, South Africa

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•Blended-learning LCPS (SPARK school) creating school chain

Zaya Labs, India

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•Blended learning class-in-a-box solution

Experifun, India

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•Science kit learning solution

Contents

1 Background

2 Measuring outcomes in education

3 Opportunities to get involved

We have yet to see a true “success” in private international education for low-income learners

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Affordability

Quality Scale

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Affordability

Quality Scale

Nairobi, Kenya

Pearson a major investor $5 a month

~300 schools and over 100,000 students

Academy-in-a-box

Chain not profitable

Students sit for national KCPE exam this school year

In fact, quality is the hardest to get right

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• Need to take advantage of pedagogy, technology, and system reform to get right

• Easy to confuse demand for quality

• Takes time, effort, and money to ensure quality – all scarce and precious resources for a startup

Pearson has a word for this - efficacy

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Fundamental change:

Before -> measuring inputs

After -> measuring outcomes

“Measurable impact on

improving someone’s life

through learning”

How does this manifest in practice?

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KPIs

Data-driven decision making

Third party, independent measurement

• Avanti defines specific goals around standardized test performance – 80% of students in each center in top 10%

• Zaya collects data on all aspects of experience to inform product improvements

• Data analysis -> teacher time on reports declines -> difficulty understanding data -> revised reporting

• Omega conducts third party assessment annually to determine improvements and performance

• Math and English, Grades 3 and 6, Omega Schools + 11 private + 9 government

Contents

1 Background

2 Measuring outcomes in education

3 Opportunities to get involved

The fuel of a thriving efficacy ‘engine’ is great human capital

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• a • a

Academics Operations

Business Development / Sales

Analytics / Technical

Recruiting for startups is hard

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Recruiting for international development is hard

Recruiting for a startup in international development?

Later timing Less money Unorganized

Later timing Less money Unorganized

We’re making it easier!Go to affordable-learning.com/the-fund/job-opportunities.html

We’ll let you know about full-time jobs and internships

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Thank you!

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We remain focused on providing high quality, low cost education while ensuring competitive returns

Short-term objective

• To generate a 10-25% IRR on invested capital over 5-10 years by helping provide 1 million children from low income families with a quality education that is substantially better than alternative schools

• Use this success as a basis for dialogue with developing-country governments and donor agencies about including LCPS as part of their strategy to improve educational outcomes for the poor

Long-term vision

• To help provide millions of the poorest children in the world with a quality education, in a profitable and scalable manner

• To demonstrate to governments and donors that low-cost private education can help educate the poor in a cost-effective way

In the two years since PALF was established, we have:

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Mapped the global landscape for low cost private education

Deployed over $9M into 7 portfolio companies approaching low cost private education in innovative, mission-driven companies with strong financial outlooks

- Omega Schools (Ghana), APEC (Philippines), Avanti (India), eAdvance (South Africa), Zaya (India), Experifun (India), Sudiksha (India)

Embedded a focus on efficacy in our portfolio companies

Developed a robust pipeline of investment opportunities

Catalysed the market to crowd in capital from investors (e.g. Omidyar Network)

Established a world-class Edupreneur incubator program for early stage companies first in India and later this year in South Africa

Learned lessons relevant to Pearson’s strategy and operations in emerging markets

Taken a leadership role in the global debate on the subject, building successful relationships with key stakeholders and impact investors

The momentum we’ve built can be used to drive even more impact across the affordable learning landscape

After investing, PALF uses its role as an active investor to strengthen portfolio companies

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Zaya

APEC

Omega Schools

Avanti Learning

eAdvance

FUND VALUE-ADD

EXAMPLES IN ACTION

Dimension:

Description: • Helping company with day-to-day operations as well as key human capital needs

Operations Pedagogy Strategy Governance

• Providing educational expertise on efficacy of product / curriculum design

• Co-creating vision for scaling effectively while ensuring strong efficacy

• Establishing strong governance, especially amidst corporate crises

• Interviewed CAO, COO hires. Actively supporting delivery

• Advised on the teacher training program

• Co-created Omega 3 year strategic plan

• Established norms when finances were proven incorrect

• Refined curriculum and established teacher training

• Created business plan jointly

• Provide oversight and relationships with government

• Help review content and LMS

• Co-created strategy for understanding path to scaling model

• Establish board meeting schedule and cadence

• Redesigned organisational structure

• Connected team to use PowerSchool

• Worked to create sustainable scaling model

• Formed new board of directors, with 3 Pearson seats

• Interviewing to help hire COO and Business Development

• Worked through Efficacy Review on Zaya software

• Creating strategy to use CSR funds to expand reach

A

B

C

D

E • Fathima represents Pearson on the board

• Refined curriculum and established teacher training

• Former PALF managers is COO

Portfolio: APEC

• Located in Manila, Philippines

• Chain of low cost, employability-focused secondary schools

• Now at 12 schools and over 1,000 students

• Partnership between Ayala and Pearson

• $35 a month

• Curriculum is focused on real world skills and English literacy

Portfolio: Avanti Learning Centres

• Located in Mumbai, India

• High quality science education company with 600 students in 9 learning centres and 4 schools across India

• 15,000 applicants for 450 seats in 2014; ¼ the cost of competition

• 3x revenue growth year on year. $5Bn industry in India

• >40% of Avanti’s student place in the top 1% in college entrance exams

Portfolio: Omega Schools

• Located in Accra, Ghana

• Started with 10 schools summer of 2011 now at 38 schools and over 20,000 students

• Cashless, daily fee system – accountability from parents

• Workbooks, not textbooks

• iPad data and student information systems

• All costs localised

Portfolio: eAdvance

• Located in Johannesburg, South Africa

• Blended learning model pioneered by Rocketship Education

• Currently 2 Spark Schools with over 350 students

• Plan to reach 64 schools and over 60,000 students

• First private African primary school network to implement blended learning model

Portfolio: Zaya Labs

• Located in Mumbai, India

• Holistic blended learning solution provider for primary schools

• In over 30 schools and reaching 1,500 students this year

• Provide schools with “LabKit” and “ClassCloud” to ensure online and offline learning in low-income settings

• $5/student/month

Pearson Portfolio company: Bridge International

• Located in Nairobi, Kenya

• Now at 300 schools and over 100,000 students

• Cashless, mobile money payment

• $5 a month

• Teaching curriculum is all on tablets

• Academy-in-a-box