Education has the power to transform individuals and communities by closing achievement gaps and lifting people out of poverty. However, the current educational models around the world have limitations.

There exists, for example, a strong link between average earnings and educational attainment level. But the cost of education, especially higher education, has increased dramatically, pushing it out of reach for many, while public education in many places simply cannot keep up with the demand for seats. At the same time, as the world shifts ever more towards digitized ways of learning and working, the education sector must adopt the kind of technology and data-led practices that students, teachers, and parents want to use.

This education technology – or edtech – is harnessing predictive analytics and artificial intelligence (AI) to lower barriers to higher education, improve learning outcomes and engagement, and make educational offerings more personalized.

AI is rapidly presenting significant challenges to educational services, such as ensuring academic integrity and integrating AI into the business model. As the education landscape changes, so too must the skill sets of those delivering it. Upskilling employees to be prepared for shifts in technology and automation is happening across almost all sectors, including education. Employers involved in teaching are joining the search for digital tools to close the skills gaps of their staff.

The cost of delivery is also changing. Technology can expand access to education at a lower cost, both in terms of producing actual lessons and novel solutions to related services, like making the process of getting a student loan easier and more cost-effective.

The ultimate prize of innovation in the education sector is democratizing access. This is being led by the “massive open online course” (MOOC) space, in which large platforms allow millions of students to enroll in online courses at lower costs. There is also the option to separate degrees into smaller, less expensive certificates. This is where one of the biggest opportunities for innovation in the education sector lies: quality courses delivered in a digitally savvy way by upskilled workers, lowering costs and widening access so more students can fulfill their potential. d.

When properly channeled, private capital can drive positive outcomes. As the $6tn education market experiences a digital revolution, the sector is ripe for investment.

How private capital can help the education sector innovate

Private equity has a lot to offer the education and edtech sectors, from capital injections to the opportunities created by long-term investing strategies, expert guidance and knowledge, and advice on ways to accelerate the adoption of new tech. The global education services sector benefited from $4.60 billion in private equity and venture capital investments in 2023, according to S&P Global Market intelligence data, across 190 deals.

An injection of private equity funding can help education institutions scale up, creating routes to access learning for more people. Increased scale can help the education facilities drive revenues, allowing them to expand their operations, as well as creating profits for the private equity backers.

Governments are still the majority providers of education. But they can sometimes struggle to find support to test out new ways of delivering education. The private sector, by comparison, can be a useful test bed for innovation. Private equity funding can support research and development in education and digital transformation. This creates the opportunity for more effective and higher quality provision of learning, that, once given a trial run in the private sector, can be rolled out more widely.

Data-led decision-making is another useful facet of private capital investment in education. Private equity investors are encouraging education providers to track data and improve outcomes, in order to be certain of the measurable impact of their investments.

A recent World Economic Forum report shows how improved public-private collaboration can drive investment to build new markets and create high-quality jobs while making progress toward societal and environmental goals. Education and workforce learning rank second in terms of importance in the WEF report, where emerging digital tools and platforms, including metaverse learning, artificial intelligence, and ubiquitous computing, are driving innovation.

As traditional educational models evolve to incorporate digital and interactive elements, private equity firms are increasingly interested in edtech startups that offer innovative solutions to longstanding academic challenges. With tech innovations moving so fast, educators rely on the niche expertise of private sector enterprises. Otherwise, education professionals’ lack of edtech knowledge can be a significant barrier to necessary change.

Private capital’s can play an important role in identifying and helping promising developments in education innovation to grow. Its involvement extends beyond financial support to strategic guidance, market insights, and access to essential development networks. This support is instrumental in transforming innovative educational ideas into scalable and impactful solutions.

The impact of private capital in education

Nord Anglia

Nord Anglia is a leading premium international school organization with 79 international day and boarding schools in 32 countries. Baring Private Equity Asia, which later became part of EQT, first invested in Nord Anglia in 2008. Nine years later, it teamed up with the Canada Pension Plan Investment Board (CPPIB) to take the firm private in a $4.3bn deal. Nord Anglia’s schools deliver a high-quality education through a personalized approach to enable every student to succeed. Private equity investment is helping it pursue innovation. For example, Nord Anglia is spearheading artificial intelligence in education, with its four schools in the UAE now using AI to support and empower students. In another case in 2023, BPEA EQT and Nord Anglia sealed a $1.25bn agreement to acquire IMG Academy Parent, which offers on-campus and online sports education programs. IMG is a leading education institution supporting over 100,000 student-athletes across its suite of sports education services, set to benefit from a growing focus on health and wellbeing within academia. Nord Anglia primarily operates in markets with high foreign direct investment, large expatriate populations, and rising disposable income, factors that contribute to high demand for premium schools and strong growth in the business.

Universidad Europea

Universidad Europea operates 12 campuses across Spain and Portugal teaching 54,000 students and with 130,000 alumni. It offers an essential service to society through an academic model focused on experiential learning, a high-quality faculty, state-of-the-art facilities and cutting-edge technology. EQT agreed to acquire Universidad Europea in April 2024 and believes that the Spanish and Portuguese private higher education markets, both resilient and tightly regulated, will grow driven by demographic trends and increasing demand from international students from Europe and Latin America who view these as attractive destinations to pursue higher education. In terms of using private investment for innovation, EQT will support Universidad Europea by investing in existing and new campuses, strengthening its focus on health and sports programs, as well as applying its in-house digital team to enhance its online proposition for students seeking access to hybrid and remote learning models, building on the company’s existing online business. Universidad Europea says joining forces with EQT will allow it to continue its journey of innovation and growth, furthering its mission of changing lives through higher education.