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Acceleration
Spring 2017
It’s a Breakout: Capital Flows In the Learning and Talent Technology Market
2017 GSV Acceleration 2
Contrary to “Conventional Wisdom”, In the Last 5 Years, In A Rising Funding Environment, A Large Group of Technology Companies Have Achieved Strong Exits and Partial Exits Though Public and Private Markets
GREAT COMPANIES ACHIEVE GREAT EXITS
Enterprise/Professional Learning & Talent Technology
PreK-12 and Post-SecondaryLearning Technology
• Acquired by MSFT Jun-16 for $26B - 8.1x LTM EV/REV • Enterprise Value up 524% from IPO • Largest enterprise/cloud sale in history
• Went public Oct-12 at $4.5B market cap - 12.8x LTM EV/REV • Opened 72% above pricing / +10x Day 1 returns to Greylock + NEA• Market cap up nearly 4x in under 5 years since IPO• Acquired by SAP Feb-12 for $3.5B - 12.1x LTM EV/REV • Enterprise Value up 438% from IPO
• Acquired by Oracle Feb-12 for $1.8B - 5.7x LTM EV/REV • Enterprise Value up 490% from IPO
• Acquired by SAP May-14 for $1.0B - 9.5x LTM EV/REV • 5X CoC / 55% IRR to Majority Investor Madison Dearborn ($150M)
• Acquired by Bertelsmann Sep-14 for $540M - 9.1x LTM EV/Rev
• Acquired by LinkedIn Feb-14 for $120M - 6.0x invested capital
• Acquired by Pluralsight Nov-14 for $75M
• Acquired by Recruit.co Sep-12 for $1.0B - 6.7x LTM EV/REV • $5M Series A from Union Square sole outside capital raised
*
• Acquired by LinkedIn Apr-15 for $1.5B - 10.0x LTM EV/REV • Bootstrapped 17 years, delivered +70% IRR to growth investors Accel/Spectrum
• Acquired by Charterhhouse Mar-14 for $2.3B• $1.2B value created for Berkshire/Bain (acquired 5/10 for $1.1B)
• Acquired by Hellman & Friedman Mar-14 for $1.1B - 5.5x LTM EV/REV• 4x LBO return to Permira which took company private in 2011
• Acquired by Insight Jun-14 for $752M
• Acquired by McGraw-Hill Jun-13 for $105M - 3.5x LTM EV/REV
• Acquired by Turnitin Oct-14 for +100.0x invested capital
• Went public May-15 at $449M market cap - 10.0x LTM EV/REV • 18x Day 1 returns to first institutional investors• Enterprise Value up 45% from IPO
• Bertelsmann invests $230M in Dec-15 *
• Acquired by PeopleAdmin May-16 for +$80M - 4.0x LTM EV/REV
• Acquired by McGraw-Hill Feb-14 for $50M
• Went public Oct-12 at $500M+ market cap - 6.4x LTM EV/REV • +10x Day 1 returns to Series A Investor Redpoint• Enterprise Value up 3x from IPO
*• Acquired by Pearson Oct-12 for $650M - 4.8x LTM EV/REV
• Acquired by Wiley Oct-12 for $220M ~ 4.0x LTM EV/REV
• Acquired by Francisco Partners Feb-17 for ~5.0x LTM EV/REV
2017 GSV Acceleration
Learning and Talent Technology is a Rapidly Emerging, $75B+ Technology Sector Disrupting the $5T+ Global Education and Human Capital Economy
3
We look at the overall market and its capital flows in two different slices when analyzing companies:
PreK-12 PostsecondaryProfessional Learning (Non-Degree, Consumer) Enterprise LearningHCM
2016$76 Billion
2020P$125 Billion11% CAGR
2016GLOBAL LEARNING AND TALENT TECHNOLOGY
MARKET BREAKDOWNPreK-122016: $10B2020P: $17B11% CAGR
Postsecondary2016: $34B2020P: $58B11% CAGRHCM
2016: $12.7B2020P: $21.4B11% CAGR
Enterprise Learning2016: $19.4B2020P: $31.2B10% CAGR
Non-Degree, Consumer and Professional Learning2016: $230M2020P: $830M29% CAGR
PreK-12PostsecondaryEnterprise and Professional Learning & Talent
Postsecondary2016: $34B2020P: $58B11% CAGR
Enterprise and Professional Learning & Talent2016: $32.4B2020P: $53.4B11% CAGR
PreK-122016P: $10B2020P: $17B11% CAGR
2016GLOBAL LEARNING AND TALENT TECHNOLOGY
MARKET BREAKDOWN
And Increasingly
2016$76 Billion
2020P$125 Billion11% CAGR
*Source: Bersin by Deloitte, GSV Capital, Ambient Insight, Internal Research
2017 GSV Acceleration 4
While Enterprise and Professional Learning & Talent Technology Generally Has Deeper Roots and Earlier Digital Successes, Prek-12 and Post-Secondary Learning Technology Has Been Catalyzed by the Formerly Unheard of Network Effects and the Adoption of Personalized/Adaptive Technologies. In Turn, the Sector is Dramatically More Mature and Deeper than Earlier Cycles and We Are Seeing Businesses Breaking Out Like Never Before.
EL&
TH
IGH
ER E
DPR
EK-1
2
TRADITIONAL JOBS / CLASSIFIED SITES
1ST WAVE OFHCM PLATFORMS
LEARNING BECOMES A CRITICAL COMPONENT OF TALENT MANAGEMENT
2ND WAVE OF SCALED COMPANIES
1990 1995
199619951994
RISE OF THE LMS (AND SUBSEQUENT CONSOLIDATION)
OPMS ENTER TO HELP DESIGN THE FUTURE OF HIGH-QUALITY ONLINE
HIGHER EDUCATION WHERE NOT-FOR-PROFITS COMPETE WITH FOR-PROFITS
EMERGENCE OF THE MOOC AS A GLOBAL KNOWLEDGE
PLATFORM (ALL 2012)
1997 2001 2004
2008 2010 2011
1996 1997 2002
1996 1999 2000
1987 1996
1997 2001
• TALEO ACQUIRES LEARN.COM (’10)• SUCCESSFACTORS ACQUIRES PLATEAU (‘11)• SABA ACQUIRES COMARTIS (‘11)• KENEXA ACQUIRES OUTSTART (‘11)• SKILLSOFT ACQUIRED SUMTOTAL (‘14)
1995 1996
2002 2005
2004
1999
EXPLOSION OF SCALED LEARNING PLATFORMS
2007 2011 2012
2005 2011 2013
2009
EXIT AND ENTRY OF FIRST NEW “TECH ENTRANTS
1984 2000 1960
1997 1998 2000
• RENAISSANCE GOES PUBLIC (’97) ACQUIRED BY PERMIRA IN 2012, HELLMAN & FRIEDMAN IN 2014
• APPLE ACQUIRES POWERSCHOOL (’01), SELLS TO PEARSON IN ’06. VISTA ACQUIRES IN 2015
• NEWSCORP ACQUIRES WIRELESS GENERATION (’10)• PEARSON ACQUIRES SCHOOLNET (’11)• ARCHIPELAGO GOES PUBLIC (’04) MERGES WITH PLATO
IN 2012
2008 Repositioning of
company
NEW WAVE OF FOR-PROFITS ESTABLISHED, GO PUBLIC AND
LATER COME ONLINE
1991 1991 1994 1995
Learning and Talent Technology: ~c.1990 - 2017
2000 (Higher Ed also)
* Year Founded
2017 GSV Acceleration 5
When You Create a Simple Timeline, You See:
✓ Enterprise/Professional Learning & Talent Technology had early digital successes with job boards disintermediating newspapers, software changing recruiting and learning management software (“LMS”) emerging and then being acquired;
✓ Postsecondary Learning Technology success was really online, for-profit colleges and LMS’s until the current period — marked by Providence Equity’s buyout of Blackboard following the company’s own wave of acquisitions;
✓ PreK-12 suffered from institutional resistance to technology, inadequate bandwidth, and other factors but is now seeing clear market receptivity of transformative technologies including adaptive/personalized/social/online/etc with inherent network effects.
2017 GSV Acceleration
Learning and Talent Has Always Represented a Large Portion of GDP, but Disproportionately Small % of Venture and Growth Capital Investment. This Dynamic Has Undergone a Dramatic Change over the Recent Period with Investment Moving Nearly In Line with the Portion of GDP
6
Other58%
Technology7%
Energy8%
Healthcare18%
Learning and Talent9%
2016 TOTAL GDP$16.8 TRILLION
Other20%
Telecom11%
Technology46%
Energy5%
Healthcare16%
Learning and Talent2%
TOTAL VENTURE AND GROWTH CAPITAL TRANSACTIONS (1999 - 2012)
56,942
TOTAL VENTURE AND GROWTH CAPITAL TRANSACTIONS (2013 - 2016)
21,929
Other11%
Telecom15%
Technology51%
Energy4%
Healthcare12%
Learning and Talent7%
2017 GSV Acceleration
The Global Learning and Talent Technology sector has been in constant evolution since the mid 1990s. Today we see the relative strength of the sector at an all time high given the following:
✓ Venture and growth capital investment levels;
✓ IPOs and IPO backlog (albeit in an overall weaker world for IPOs);
✓ Continued stress at legacy players providing opportunities for new entrants; and
✓ The substantial increase in deep-pocketed strategic and financial buyers who see the promise of the continued digitization of the learning and talent technology sector
7
2017 GSV Acceleration
0
75
150
225
300
$0
$750
$1,500
$2,250
$3,000
199920002001200220032004200520062007200820092010201120122013201420152016
Transaction ValueUS$ Millions
Transaction Volume
1999-2016 Venture and Growth Capital Investment
0
75
150
225
300
$0
$750
$1,500
$2,250
$3,000
199920002001200220032004200520062007200820092010201120122013201420152016
Transaction ValueUS$ Millions
Transaction Volume
8
8
2007-16 CAGR: 21%(Transaction Volume)
2007-16 CAGR: 30%(Transaction Volume)
Enterprise/Professional Learning & Talent Technology
PreK-12 and Post-SecondaryLearning Technology
1999-2006 2007-2016
Total Transaction Volume 195 1,301Total Transaction Value ($B) $2.6 $9.5
1999-2006 2007-2016
Total Transaction Volume 316 773Total Transaction Value ($B) $2.8 $7.0
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration
3
0
35
70
105
140
$0.0
$7.5
$15.0
$22.5
$30.0
199920002001200220032004200520062007200820092010201120122013201420152016
Transaction ValueUS$ Billion
Transaction Volume
1999-2016 Merger and Acquisition ActivitySECTOR ACTIVITY HAS MORE THAN DOUBLED SINCE 2006
0
35
70
105
140
$0.0
$7.5
$15.0
$22.5
$30.0
199920002001200220032004200520062007200820092010201120122013201420152016
Transaction ValueUS$ Billion
Transaction Volume
Enterprise/Professional Learning & Talent Technology
1999-2006 2007-2016
Total Transaction Volume 218 740Total Transaction Value ($B) $32.2 $60.7
9
9
2007-16 CAGR: 4%(Transaction Volume)
2007-16 CAGR: 15%(Transaction Volume)
PreK-12 and Post-SecondaryLearning Technology
1999-2006 2007-2016
Total Transaction Volume 346 769Total Transaction Value ($B) $20.2 $58.5
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration
3
0
2.5
5
7.5
10
$0.0
$2.5
$5.0
$7.5
$10.0
199920002001200220032004200520062007200820092010201120122013201420152016
Transaction ValueUS$ Billion
Transaction Volume
0
2.5
5
7.5
10
$0.0
$2.5
$5.0
$7.5
$10.0
199920002001200220032004200520062007200820092010201120122013201420152016
Transaction ValueUS$ Billion
Transaction Volume
Enterprise/Professional Learning & Talent Technology
1999-2006 2007-2016
Total Transaction Volume 13 14Total Transaction Value ($B) $4.5 $13.9
10
10
PreK-12 and Post-SecondaryLearning Technology
1999-2006 2007-2016
Total Transaction Volume 12 18Total Transaction Value ($B) $4.4 $27.6
1999-2016 Initial Public Offering ActivityDESPITE AN ANEMIC OVERALL IPO ENVIRONMENT, THE SECTOR GENERATED NOTABLE ACTIVITY AND HAS SUBSTANTIAL BACKLOG
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
Enterprise/Professional Learning & Talent Technology
Acceleration
2017 GSV Acceleration 12
$0.0
$7.5
$15.0
$22.5
$30.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Capital Entry: Venture and Growth Capital - $9.8B from 1999-2016Capital Exit: M&A (Disclosed Value) and IPOs - $113.4B from 1999-2016
Transaction ValueUS$ Billion
Enterprise/Professional Learning & Talent Technology 1999-2016SINCE 2011, EXITS HAVE SUBSTANTIALLY EXCEEDED NEW INVESTMENT DOLLARS
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration 13
$0.0
$7.5
$15.0
$22.5
$30.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
M&A Activity (Disclosed) IPOs
Capital Exit CompositionTransaction Value
US$ Billion
Exits in Enterprise/Professional Learning & Talent Technology Since 2011 Have Been Dominated by M&A ($77B) But Have Included a Healthy Portion of IPOs ($25B)
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration
Company First Round of Funding Total Funding Before Exit IPO Opening
Market CapIPO
Valuation Acquisition
$2.1M Undisclosed
$45MGreylock, TPG, Canaan, Cardinal, Emergence November 2007 $650M 12.8x
EV / RevenueAcquired by SAP
$3.5B / 12.1x LTM Rev February 2012
$7.0M January 1998
Warburg Pincus
$21MWarburg Pincus February 2000 $176M 30x+
EV / Revenue
Berkshire / Bain LBO $1.1B / May 2010
Charterhouse LBO ($2.3B / March 2014)
$6.3M January 2000Undisclosed
$48MBain, General Catalyst September 2005 $305M 2.3x
EV / Revenue
Acquired by Oracle $1.8B / 5.7x LTM Revs
February 2012
$22.0M December 1999
Parthenon
$58MWafra, Parthenon April 2005 $200M 5.1x
EV / RevenueAcquired by IBM
$1.3B / 4.1x LTM Revenue September 2012
$1.6M July 1996
NEA
$20MNEA, GE Capital, Microsoft May 1999 $295M 40x+
EV / Revenue
Acquired by Tribune/Knight Ridder $250M / 16.7x LTM Revenue
July 2000
Acquired by Gannet (Majority) $1.35B / 2.0x LTM Revenue
September 2009
— $2MUndisclosed July 1997 $348M 2.3x
EV / RevenueAcquired by Ranstad
$487M / 0.7x LTM Revenue August 2016
$4.1M August 1998
Sequoia
$25MSequoia, Crosslink
April 2000 $642M 40x+ EV / Revenue
Vector Capital LBO $390M
February 2015
—Acquired for $200M
General Atlantic, QuadrangleJuly 2005
July 2007 $805M 8.0x EV / Revenue Current Mkt Cap: $254M
$10.0MOctober 1999
Marshall, Vulcan
$10MMarshall, Vulcan
Docent / Click2Learn Merged to form SumTotal
March 2004 — —
Vista LBO $160M / May 2009
Acquired by Skillsoft $150M / 3.5x LTM Revs
Aug 2014
14
In Enterprise/Professional Learning & Talent, There is a Near 20-Year History of Companies Raising Capital and Exiting with Strong Returns — Often Followed by a 2nd Successful Exit
(Recruitsoft)
(TMP Worldwide)
(Reorganized Eathweb)
1995-2007 saw A First Wave of capital inflows that supported the start-up and growth of software enterprises that provided new solutions not offered by large, legacy vendors like Oracle, SAP, Peoplesoft, IBM. These companies generally went public and were then acquired by large players.
2017 GSV Acceleration
Importantly, In This First Wave of Enterprise/Professional Learning & Talent Companies, We Saw The Increased Consolidation Of The Market In General But Also The Acquisition Of Enterprise Learning By Enterprise Talent Creating the Enterprise/Professional Learning & Talent Sector
Acquiror Target Amount Date
$130M September 2010
$290M April 2011
N/A September 2010 / January 2011
N/A July 2011
$84M February 2011
We believe we are now in a new wave of creation and consolidation in Enterprise/Professional Learning & Talent sector
1515
2017 GSV Acceleration
Company First Round of Runding Total Funding Before Exit IPO Opening
Market CapIPO
Valuation Acquisition
$10.0M May 2007Bessemer
$44.7MBessemer, Bay Partners March 2011 $606M 13.0x
EV / Revenue Current Mkt Cap: $2.4B
Undisclosed July 2008
JMI
Undisclosed JMI May 2013 $275M 7.2x
EV / RevenueAcquired by Saba
$293M (CAD) / 21.5x LTM EBITDA February 2017
$5.0M August 2005
USV, Allen & Co.
$5.0M August 2005
USV, Allen & Co.— — —
Acquired by Recruit Co. $1B / 6.7x LTM Rev
September 2012
$4.7 November 2003
Sequoia
$103.0MGreylock, Sequoia, Bain, Goldman
SachsMay 2011 $4.2B 17.3x
EV / RevenueAcquired by Microsoft $26.2B / 8.1x LTM Rev
June 2016
$103M January 2013
Accel
$289.0MAccel, Spectrum, TPG — — —
Acquired by LinkedIn $1.5B / 10.0x LTM Rev
April 2015
Undisclosed 2002
Undisclosed Acquired by Vista Equity
March 2012— — —
Acquired by Bertelsmann $540M / 9.1x LTM Rev
September 2014
$15.0M 2005
Greylock
$267.0MGreylock, NEA, Janus October 2012 $4.5B 12.8x
EV / Revenue Current Mkt Cap: $17.0B
2ND WAVE OF SCALED ENTERPRISE/PROFESSIONAL LEARNING & TALENT COMPANIES
16
2017 GSV Acceleration
These New Entrants Have Themselves Become Aggressive Acquirers
17
17
EvolvSonar6
MoboltSimply Hired
BizoBright.comCardMunchCareerify
ChoiceVendorConnectifierConnected
FliptopIndexTanklynda.commSpokeNewsle
PointDrivePulse
RapportiveRefresh.ioRun Hop
Slideshare
Cape Clear SoftwareGridcraftIdentified
MediaCore PlatforaUpshotZaption
CodewarsComparablyOne MonthPortfoliumRallyteamWorkpop
Acquisitions Acquisitions Acquisitions Acquisitions
Investments
Investments
ConfluentMicroSprint
STAND Technologies
JobrMetanautix
Scoop Technologies
ThinairUnbabel
Wavefront
Investments
2017 GSV Acceleration
SINCE THE 1999 PERIOD, THE ENTERPRISE/PROFESSIONAL LEARNING & TALENT MARKET HAS BEEN A LIQUID CAPITAL MARKET WITH A DEEP BENCH OF INVESTORS AND BUYERS AT EXIT
Most Active Sector Strategics Active Global Financial Sponsors• ADP ($48B Mkt Cap): 36 transactions since 2000• Aon Hewitt ($30B Mkt Cap): 29 transactions since 2003• Career Builder: 17 transactions since 2001• CEB: 12 acquisitions prior to pending sale to Gartner• Ceridian: 11 transactions since 2001• CornerstoneOnDemand ($2.3B Mkt Cap): Acquired Evolv in 2014 to accelerate
analytics roadmap and develop big data solutions • Dice ($265M Mkt Cap): 11 acquisitions since 2004• Kenexa: 15 acquisitions prior to sale to IBM• Hired (Sierra Ventures): 3 acquisitions in 2016• John Wiley Sons: ($3.2B Mkt Cap) 5 enterprise acquisitions in 2008• LinkedIn: 20 acquisitions prior to sale to Microsoft• Mercer: 9 acquisitions since 2000• Monster: 7 acquisitions prior to sale to Randstad• Pluralsight (Insight): 8 acquisitions since 2004• Randstad: ($9.9B Mkt Cap) 33 acquisitions since 2000• Recruit: 15 acquisitions since 2000• SAP ($108B Mkt Cap): Combined acquisitions of Fieldgalss, Multiposting, and
Successfactors total ~$5B• Skillsoft: 8 acquisitions since 2000• Successfactors: 4 acquisitions prior to sale to SAP• Taleo: 8 acquisitions prior to sale to Oracle• Sumtotal 9 acquisitions prior to sale to Skillsoft• Trinet: ($1.8B Mkt Cap) 10 acquisitions since 2000• Workday ($16.4B Mkt Cap): 6 acquisitions since 2014, including online learning
platform Zaption
18
18
• Alpine • Apax• Apollo Global • Bain • Charterhouse• Clarium• CVC Capital• Francisco Partners• General Atlantic • Golden Gate Capital • Goldman Sachs• Great Hill Capital • GTCR• Grphyon Partners• Halyard Capital • Hellman & Friedman• HgCapital• H.I.G• Insight Venture Partners• Institutional Venture Partners• JMI• Leeds Equity• LLR
• Marlin Equity• MidOcean• NEA • New Harbor Capital • Providence Equity Partners • Prudential Capital• Riverside • Spectrum Equity• Summit Partners • Symphony Technology • TA Associates • Technology Crossover Ventures• Thomas H. Lee Partners • TPG Capital • Vector Capital • Veritas Capital • Vista Equity• Veronis Suhler Stevenson• Welsh Carson
2017 GSV Acceleration
Today, There is a Substantial Pipeline of Scaled, High Growth Companies in the Sector
19
19
2017 GSV Acceleration
Acquisition activity continues to be strongly supported by the large software vendors — SAP, Oracle, and Microsoft — and large scale service providers — 51 Jobs, Randstad (AMS: RAND), Recruit — with the addition of key newcomers with public and private currency including SEEK (ASX: SEK) and Workday (NYSE: WDAY). Below we list select major acquisition activity in the Enterprise/Professional Learning & Talent sector for the last 5 years.
Date Target Acquiror Investors Prior to Exit Value ($m) LTM EV/Rev LTM EV/EBITDA
Jan-17 CEB Inc. Gartner, Inc. Public $3,448.0 3.5x 17.1x
Aug-16 Monster.com Randstad Public $486.1 0.7x -
Apr-16 Evanta CEB Inc. Undisclosed $275.0 - -
Feb-16 Connectifier LinkedIn True Ventures, Goldcrest $141.8 - -
Jan-16 TalentWise SterlingBackCheck Undisclosed $375.0 5.0x -
Apr-15 lynda.com LinkedIn Accel, Spectrum, TPG $1,500.0 10.0x -
Feb-15 Saba Software Vector Capital Public $338.0 2.8x -
Nov-14 Smarterer Pluralsight True Ventures, GV, Deborah Quazzo $75.0 - -
Oct-14 Evolv Cornerstone OnDemand Vantage Point, Khosla $45.0 7.3x -
Sep-14 Relias Learning Bertelsmann Vista Equity $540.0 9.1x -
Sep-14 Concur Technologies SAP Public Investors $8,300 10.8x -
Aug-14 SumTotal Systems Skillsoft Vista $150.0 3.5x -
Apr-14 CrossKnowledge John Wiley & Sons Undisclosed $175.0 4.7x 19.7x
Mar-14 Field Glass SAP Madison Dearborn $1,000.0 9.5x 40.0x
Mar-14 SkillSoft Charterhouse Berkshire, Advent, Bain $2,300.0 5.6x 16.3x
Feb-14 Bright LinkedIn Passport Capital, TOBA Capital $120.0 6.0x -
Jan-14 People Answers INFOR Undisclosed $200.0 - -
Sep-12 Indeed Recruit.co Union Square, Allen & Co. $1,000.0 6.7x 40.0x
Jul-12 SHL Group CEB HgCapital, Veronis Suhler Stevenson $660.0 3.1x -
20
20
PreK-12 and Post-Secondary Learning Technology
Acceleration
2017 GSV Acceleration
Capital Flows to PreK-12 and Post-Secondary Learning Technology 1999-2016
As we have noted in prior whitepaper research (see Fall of the Wall: Capital Flows to Education Innovation, July 2012), we believe there has been a confluence of catalysts that has fundamentally altered the landscape of PreK-12 and Post-Secondary Learning Technology resulting in a far more mature/developed market with solid, sophisticated capital inflows and an increasing stream of high value exits
22
$0
$750
$1,500
$2,250
$3,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
PreK-12 Post-Secondary Multi-Sector (K-20)Transaction Value
US$ Millions
Learning Venture and Growth Financings
0
75
150
225
300
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Transaction Volume
2007-16 CAGR: 21%(Transaction Volume)
PreK-12 and Post-Secondary Learning Technology is an emerging market as typified by the tepid financing volume post 1999 until 2007 and the peaks and valleys of M&A activity prior to 2007. However, since 2007, we have seen the build of a stable and growing base across the sector.
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration
23
23
$0
$3,750
$7,500
$11,250
$15,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
PreK-12 Post-Secondary Multi-Sector (K-20)Transaction Value
US$ Millions
PreK-12 and Post-Secondary Learning Technology M&A
0
25
50
75
100
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Transaction Volume
2007-16 CAGR: 4%(Transaction Volume)
M&A data excludes wave of publishing house leveraged buyouts (Harcourt, Simon & Schuster, Harcourt, McGraw-Hill Education, etc) which total $21B from 1999-2016
PreK-12 and Post-Secondary Learning Technology M&A Activity 1999-2016 POST-2007 REPRESENTS A NEW AND MORE MATURE MARKET
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration
Confluence of Catalysts
Disintermediation of the Traditional Sales Model
Digital Tracks Laid
Cloud Computing
Big Data
Investment Capital
Efficiency
Heightened Sense of Urgency
Mobile
Platforms
Device Proliferation
Digital Natives
Talent Has Poured Into
Sector
Successful Exits
Skills Gaps
Signs of Network Effects
Why Now: CONFLUENCE OF CATALYSTS
24
24
Foundations and Charters as
“Change Agents”
2017 GSV Acceleration 25
$0.0
$5.0
$10.0
$15.0
$20.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Capital Entry: Venture and Growth Capital - $12.3B from 1999-2016Capital Exit: M&A (Disclosed Value) and IPOs - $90.1B from 1999-2016Transaction Value
US$ Billion
Capital exit data excludes wave of publishing house leveraged buyouts (Harcourt, Simon & Schuster, Harcourt, McGraw-Hill Education, etc) which total $21B from 1999-2016
PreK-12 and Post-Secondary Learning Technology: 1999-2016AS IN ENTERPRISE/PROFESSIONAL LEARNING & TALENT, EXITS HAVE STEADILY EXCEEDED CAPITAL ENTRY. WE EXPECT STRONG EXITS IN 2017
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration 26
$0.0
$7.5
$15.0
$22.5
$30.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
M&A Activity (Disclosed) IPOs Publisher LBOs
Capital Exit CompositionTransaction Value
US$ Billion
PreK-12 and Post-Secondary Learning Technology: 1999-2016M&A HAS DOMINATED AND WE WOULD EXPECT THAT TO CONTINUE
Note: Deal volume and value figures based on internal GSV data. While indicative of overall trends, certain undisclosed transactions may be excluded.
2017 GSV Acceleration
POOL OF ACQUIRERS IN PREK-12 AND HIGHER ED IS LARGER THAN EVER AND INCLUDES THE FOLLOWING
Active Global Strategics Active Global Financial Sponsors
• 2U ($1.7B Mkt Cap)• 3P Learning ($135M Mkt Cap)• Achieve3000 (Insight)• Alibaba ($249B Mkt Cap)• Amazon ($400B Mkt Cap)• Amplify (Emerson)• Axel Springer ($5.3B Mkt Cap)• Baidu ($60B Mkt Cap)• Benesse ($3.0B Mkt Cap)• Blackboard (Providence)• Blackbaud ($3.2B Mkt Cap)• Bertelsmann• Cambium ($240M Mkt Cap)• Capella ($980M Mkt Cap)• Cengage (Searchlight)• Chegg ($660M Mkt Cap)• Edgenuity (Weld North)• Desire2Learn (NEA, OMERS)• Follett• Frontline (Insight)• GEMS Education• Hobsons (DMGI)• Houghton Mifflin ($1.3B Mkt Cap)
• Imagine Learning (Weld North)• Ingram / Vitalsource• Instructure ($620M Mkt Cap)• Intel ($180M Mkt Cap)• IXL• K12 ($800M Mkt Cap)• Macmillan (Holtzbrink)• McGraw-Hill Education (Apollo)• Microsoft ($511B Mkt Cap)• New Oriental ($7.7B Mkt Cap)• PeopleAdmin (Vista)• Performance Matters (Weld North)• Powerschool (Vista)• Promethean (Net Dragon)• Renaissance Learning (Hellman &
Friedman)• TAL Education ($8B Mkt Cap)• Tencent ($245B Mkt Cap)• TES Global (TPG)• Turnitin (Insight)• TutorGroup• USA Funds • Wiley ($3.1B Mkt Cap)
• Accel KKR• Apollo Global • Brentwood Associates• Cambridge Information Group • Chan Zuckerberg Initiative • Charterhouse• Emerson Collective • Francisco Partners• General Atlantic • Golden Gate Capital • Graham Holdings • Hellman & Friedman• Insight Venture Partners• JMI Equity• L Squared Capital • Leeds Equity Partners• LLR Partners• Marlin Equity• NEA • New Harbor Capital • Permira Funds • Providence Equity Partners
• Renovous Capital • Riverside • Skyview Capital • Spectrum Equity• Sterling Partners• Stone Goff Partners• Summit Partners • TA Associates • Technology Crossover Ventures• Thomas H. Lee Partners • TPG Capital • Vista Equity• Vistria Group • Veronis Suhler Stevenson• Weld North • Wicks Group
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2017 GSV Acceleration
WEAPONS OF MASS INSTRUCTION ARE BEING BUILT UNLIKE EVER BEFOREScaled Learning Platforms with Revenues In Excess/Approaching $100M or Users in Excess of 10 Million
• 1,000,000+ SubscribersFounded: 2007
• 80,000,000+ LearnersFounded: 2009
• Self-Funded Founded: 1999
• 50,000,000+ Users• 175 CountriesFounded: 2011
• 26,000,000+ Students• 60,000+ SchoolsFounded: 2012
• 25,000,000+ Students• 145 University PartnersFounded: 2012
• 10,000,000+ StudentsFounded: 2006
• Self-FundedFounded: —
• 100M+ Language LearnersFounded: 2011
• Powers #1 provider of M.Ed in U.S.Founded: 2004
Founded: 1998
• 33,000,000+ MAUsFounded: 2013
• +20,000,000 MAUsFounded: 2005
• 23,000,000+ MAUsFounded: 2011
Founded: 2013
• 50,000+ LearnersFounded: 2013
• Self-Funded
• Self-Funded
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2017 GSV Acceleration
Notable Large Transactions in PreK-12 and Post-Secondary Learning Technology
Date Target Acquiror Investors Prior to Exit Value ($m) LTM EV/Rev LTM EV/EBITDA
Feb 2017 MyOn Francisco Partners Self-funded (Capstone) -- 5.0x -
Aug 2016 Compass Learning Edgenuity (Weld North) Marlin Equity $175 3.0x -
May 2016 Teachermatch PeopleAdmin (Vista Equity) Chicago Growth Partners $80.0 4.0x -
Aug 2015 Ellucian TPG Capital Hellman & Friedman $3,500 4.9x 12.5x
June 2015 Powerschool Vista Equity Partners Pearson $350 3.5x -
Feb 2015 Schoolwires Blackboard Kennet Partners $97 4.3x 5.0x
Dec 2014 Royall & Co. Advisory Board Self-funded $850 7.8x -
July 2014 Touchnet Heartland Self-funded $375 5.0x 11.5x
June 2014 Turnitin Insight Venture Partners Warburg Pincus $752 - -
April 2014 Imagine Learning Weld North Sorenson $90 2.5x -
Mar 2014 Renaissance Learning Hellman & Friedman Perimra, Google Capital $1,100 5.5x -
Feb 2014 Engrade McGraw-Hill Education Rethink $47 34.1x -
July 2013 TES Global TPG Capital Charterhouse $595 5.4x 10.8x
Oct 2012 Embanet Pearson TCV $650 5.0x 4.7x
Oct 2012 Deltak John Wiley & Sons, Inc. Frontenac, Salt Creek $220 4.1x 9.5x
July 2011 Blackboard Providence Equity Partners Public Investors $1,623 3.4x 5.6x
Apr 2011 SchoolNet Pearson Carlyle, Hamilton Lane, Seavest $230 4.0x 6.0x
Nov 2010 Wireless Generation News Corp Seavest $430 7.2x -
July 2010 Wimba / Elluminate Blackboard Ascend, ABS, Brookfield $116.2 4.3x -
Nov 2009 Datatel Hellman & Friedman HarbourVest, Thoma Bravo $570.0 4.1x - 29
29
2017 GSV Acceleration
SERIAL ACQUIRERS IN PREK-12 AND HIGHER ED Critical to this market maturation has been the recognition by a broader set of global strategics and financial buyers that the digitization of learning has finally arrived full force, supporting the build of products and platforms at scale
SECTOR STRATEGICS REMAINING ACTIVE NEW WAVE OF CONSOLIDATORS
Student-first, Connected Learning Platform10 acquisitions since 2010: Campus Special, CourseRank, Cramster, Flux Software, Imagine Easy, InstaEdu, Internships.com, Notehall, Student of Fortune, Zinch(NYSE: CHGG)
(Insight Venture Partners)
(Vista Equity)
Assembling Comprehensive Human Capital SaaS Portfolio for K-12 School Districts7 acquisitions since 2014: Aspex, Centris, CRS, eSped, Excent, My Learning Plan, Teachscape,
(Vista Equity)
(NYSE: TAL)
Talent Management Platform and Analytical Solution for Identifying, Hiring and Developing Effective Teachers3 acquisitions since 2015 : Netchemia, Searchsoft, TeacherMatch
Technology Platform Powering school Operations, Improving Student Growth, and Unifying the Classroom Experience7 acquisitions since 2015: Chalkable,Haiku Learning, Infospan, Interactive Achievement, SRB Education, Sungard K-12, TIENET
Leading K-12 Learning Platform in China2 acquisitions since 2015: Firstleap, Shunshun
Ex-Kaplan CEO Building Platform of Digital and SaaS Solutions for K-12/Higher Ed10 acquisitions since 2011: Compass Learning, e2020, Editure PD, Imagine Learning, Intellify Learning, JBHM Education Group, Learning House, Performance Matters, Think Through Math, TrueNorthLogic,
(KKR)
(NYSE: HMH)
(Providence)
(Apollo)
Comprehensive Student Success Solution20 acquisitions since 2009: Angel Learning, Blue Canary, Card Smith, CerBibo, EdLine, Elluminate, Fronteer, HigherOne, Moodlerooms, myEdu, NetSpot, Nivel Siete, Parent Link, Perceptis, Presidiujm, Saf-t-Net, Schoolwires, Sequoia Retail, Wimba, X-Ray Analytics
Global Leader in Digital K-12 Content and Services 7 acquisitions since 2013: Channel One, Choice Solutions, Curiosityville, MeeGenius, SchoolChapters, Scholastic EdTech Business, Tribal Nova,
Expanding Digital Personalized Learning and Virtual Professional Development Capabilities8 acquisitions since 2010: ALEKS, Area9, Bookette, Engrade, Key Curriculum Press, RedBird Advanced Learning, Tata, Tegrity
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Expanding Technology Solutions for Universities 3 higher ed acquisitions since 2010: Deltak, Harlan Davidson, Ranku (5 in enterprise)
(NYSE: JW.A)
2017 GSV Acceleration
The Pipeline of Learning Technology Companies with the Scale to IPO if They Choose to in the Next 24 months is Substantial
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2017 GSV Acceleration
While we are seeing unprecedented flows of venture and growth capital across the learning and talent technology sector, today’s market is dramatically more mature and deeper as indicated by the substantial pipeline of high growth / profitable companies and the emergence of a new class of global public/private consolidators supporting a deep bench of investors and buyers at exit.
Given these change catalysts, we have far more optimism that these dynamics will continue to support the liquid entry and exit into learning and talent technology and investment returns for the current wave of scaled companies will far exceed earlier cycles.
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VAppendix
Acceleration
2017 GSV Acceleration
M&A Transaction Comparables: PREK-12 LEARNING TECHNOLOGY
3
Date Target Acquiror Business Model Value ($m) LTM EV/Rev Multiple
LTM EV/ EBITDA MultipleFeb-17 MyOn Francisco Partners Institutional -- 5.0x
Aug-16 Compass Learning Edgenuity (Weld North) Institutional $175.0 2.9x 7.5x
May-16 TeacherMatch PeopleAdmin (Vista Equity) Institutional $80.0 4.0x -
Feb-16 Interactive Achievement Powerschool (Vista Equity) Institutional $50.0 5.5x -
Jun-15 PowerSchool Vista Equity Partners Institutional $350.0 3.5x 12.0x
Feb-15 SchoolWires Blackboard (Providence) Institutional $97.0 4.3x -
Jun-14 iParadigms Warburg Pincus Institutional $752.0 - -
Apr-14 Scholastic Ed Tech HMH Institutional $575.0 2.5x 10.7x
Apr-14 Imagine Learning Weld North Institutional $90.0 2.5x -
Mar-14 Renaissance Learning Hellman & Friedman Institutional $1,100.0 5.5x -
Oct-13 TenMarks Education Amazon Institutional $29.0 9.7x -
Jul-13 TES Global TPG Capital Institutional $595.0 5.4x 16.5x
Jun-13 ALEKS McGraw Hill Education (Apollo) Institutional $104.9 3.5x -
Jun-12 FinalSite Spectrum Equity Institutional $55.0 5.0x -
Mar-12 Archipelago Learning PLATO Learning (Thoma Bravo) Institutional $301.3 4.1x 9.8x
Aug-11 Carnegie Learning Apollo Mgmt. Institutional $96.5 4.8x 19.3x
Apr-11 Schoolnet Pearson Institutional $230.0 4.0x 11.5x
Dec-10 GlobalScholar Scantron (M&F Worldwide) Institutional $160.0 5.0x -
Nov-10 Wireless Generation News Corp Institutional $430.0 7.2x -
Jul-10 SynapticMash Promethean World Institutional $13.0 18.6x -
Jul-08 Nord Anglia Education Baring Private Equity Asia Consumer $358.4 2.4x 15.1x
Aug-05 Delta Education School Specialty Inc. Institutional $334.5 3.5x 15.4x
Dec-04 Voyager Expanded Learning Voyager Learning Institutional $370.1 4.0x 11.6x
May-02 NetSchools Corp. PLATO Learning Institutional $113.3 9.5x -
Aug-01 Classroom Connect Harcourt / Reed Elsevier Institutional $87.0 5.1x -
May-01 PowerSchool Apple Institutional $66.9 10.3x -
Jul-00 National Computer Systems Pearson Institutional $2,490.0 3.5x 21.3x
Mean: $312.5 5.6x 15.3x Median: $136.7 4.6x 15.1x 1st Quartile: $70.2 3.5x 11.5x 3rd Quartile: $356.3 5.9x 16.8x
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2017 GSV Acceleration
3
Date Target Acquiror Business Model Value ($m) LTM EV/Rev Multiple
LTM EV/ EBITDA MultipleOct-15 CampusLabs Leeds Equity Partners Institutional $91.0 5.5x -
Aug-15 Ellucian TPG Capital Institutional $3,500.0 4.9x 12.5x
Dec-14 Royall & Company Advisory Board Co. Institutional $850.0 7.8x -
Aug-14 Noel-Levitz RuffaloCody Institutional $220.0 2.9x -
Jun-14 iParadigms Warburg Pincus Institutional $752.0 - -
Jun-14 InstaEdu Chegg Consumer $30.0 6.0x -
Oct-12 Deltak John Wiley & Sons Institutional $220.0 4.1x -
Oct-12 EmbanetCompass Pearson Institutional $650.0 4.8x -
Aug-12 CampusLabs HigherOne Institutional $39.0 4.7x 31.5x
Feb-12 Zinch Chegg Institutional $40.0 6.0x -
Jul-11 Blackboard Providence Equity Institutional $1,623.0 3.4x 20.5x
Aug-10 Touchnet Heartland Payment Institutional $375.0 5.0x 11.5x
Nov-09 Datatel Hellman & Friedman Institutional $570.0 4.1x -
May-09 ANGEL Learning Blackboard Institutional $95.0 4.3x -
May-07 eCollege.com, Inc. Pearson Institutional $495.7 9.0x 27.0x
Jan-07 Laureate Education Inc. KKR Consumer $3,797.8 3.2x 17.6x
Oct-05 WebCT Blackboard Institutional $154.0 3.3x 31.4x
Sep-03 Datamark, Inc. eCollege.com Institutional $77.1 2.4x 14.2x
Jun-03 American Education Centers Inc. Education Management Corp. Consumer $109.4 4.8x 25.2x
Mar-03 Whitman Education Group Inc. Career Education Corp Consumer $257.5 2.4x 18.5x
Mar-03 Ross University Management DeVry Inc. Consumer $355.6 5.7x 15.5x
Sep-02 Campus Pipeline SCT Corp. Institutional $77.2 4.9x -
Mean: $653.6 5.1x 21.4x Median: $238.8 4.8x 19.5x 1st Quartile: $92.0 3.6x 15.2x 3rd Quartile: $630.0 5.7x 28.1x
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M&A Transaction Comparables: POST-SECONDARY LEARNING TECHNOLOGY
2017 GSV Acceleration
3
Date Target Acquiror Business Model Value ($m) LTM EV/Rev LTM EV/EBITDA
Jan-17 CEB Inc. Gartner, Inc. Institutional $3,448.0 3.5x 17.1x
Jul-16 LinkedIn Microsoft Institutional / Consumer $26,200.0 8.1x 98.4x
Jan-16 TalentWise SterlingBackCheck (Goldman) Institutional - 5.0x -
Feb-15 Saba Software Vector Capital Institutional $338.0 2.8x -
Oct-14 Evolv Cornerstone OnDemand Institutional $45.0 7.3x -
Aug-14 SumTotal Systems Skillsoft (Charterhouse) Institutional $150.0 3.5x -
Apr-14 E-Learning (CrossKnowledge) Wiley Institutional $175.0 4.7x 19.7x
Mar-14 Field Glass. SAPAG Institutional $1,000.0 9.5x 40.0x
Mar-14 SkillSoft Charterhouse Institutional $2,300.0 5.6x 16.3x
Aug-12 Kenexa IBM Institutional $1,307.0 4.1x 49.0x
Jul-12 SHL Group CEB Inc. Institutional $660.0 3.1x 11.6x
Feb-12 SuccessFactors SAP Institutional $3,516.0 12.0x -
Feb-12 OutStart Kenexa Institutional $83.9 3.5x -
Feb-12 Taleo Oracle Institutional $1,805.0 5.7x 60.9x
Apr-11 Plateau Systems SuccessFactors Institutional $290.0 4.8x -
Sep-10 Learn.com Taleo Institutional $130.0 5.2x -
Dec-11 2Catalyze (Rypple) Salesforce.com Institutional $60.0 30.0x -
Dec-11 Workplace Systems International IDC Institutional $63.4 3.9x 84.9x
Dec-11 Jobs2Web SuccessFactors Institutional $110.0 5.5x -
Dec-09 Vizual Business Tools PLC ADP Network Services Institutional $25.4 2.2x 17.5x
May-08 Vurv Technology Taleo Institutional $195.6 3.8x -
Mar-07 JobFlash Taleo Institutional $12.2 8.1x -
Oct-06 Thomson NETg, Inc SkillSoft Corp. Institutional $269.7 1.8x -
Dec -04 Peoplesoft Oracle Institutional $10,300 3.2x 23.0x
Jun-02 SkillSoft Corp. SmartForce PLC Institutional $209.9 4.2x -
Mean: $1,782.0 6.0x 41.7x Median: $239.8 4.7x 19.7x 1st Quartile: $103.5 3.5x 17.1x 3rd Quartile: $1,076.8 5.7x 60.9x
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M&A Transaction Comparables: ENTERPRISE AND PROFESSIONAL LEARNING & TALENT TECHNOLOGY
GSV Acceleration
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