Education Perfect CEO Alex Burke at his global company's Dunedin office. "Border restrictions have created a level playing field. We can use our stability to create a competitive advantage," he says. Photo / Peter McIntosh, ODT
Education Perfect CEO Alex Burke at his global company's Dunedin office. "Border restrictions have created a level playing field. We can use our stability to create a competitive advantage," he says. Photo / Peter McIntosh, ODT
US private equity giant KKR is taking a majority stake in Dunedin-based Education Perfect in a deal that values the online learning firm at $435 million - or up to $455m if the company hits earn-out goals over the next couple of years.
The deal is still subject to OverseasInvestment Office approval.
Education Perfect chief executive Alex Burke declined to give the size of KKR's holding. But he said a number of the online learning company's existing shareholders, including its founders, Dunedin brothers Craig and Shane Smith, were not selling all their stock and would retain minority stakes.
This year has seen a string of New Zealand-based technology companies sold offshore, with many of the deals in the hundreds of millions (see links above and below). Industry boosters see it as a chance for expansion, and to recycle funds back into the local start-up system.
"It's fantastic to see Kiwi tech competing on the world stage," he told the Herald.
"Border restrictions have created a level playing field. We can use our stability to create a competitive advantage."
Burke said around 150 of Education Perfect's 200 staff work out of its Dunedin office. The KKR money would allow the firm to continue its recent hiring drive and push into new markets. Staff numbers in New Zealand would be boosted, Burke said, but Education Perfect would also add to its workforce in Australia, Singapore, the Middle East and new markets. The CEO - a Brit transplanted to Australia then NZ - said he would stay, and keep running things from Dunedin.
And while private equity has a reputation for being hard-nosed, Burke notes that KKR's investment in Education Perfect is coming from the multinational's US$1.3 billion Global Impact Fund, which makes ESG (Environmental, Social and Governance) investments in companies "with core business models that advance solutions to global, environmental, educational and workforce development, responsible consumption and production, worker safety, and societal challenges as identified by the UN Sustainable Development Goals".
A leg-up with his vocab homework
Education Perfect had its genesis when Craig Smith was still at high school in 2007 (both Smiths are St Kents old boys), and saw a niche for creating an online tool that would help himself, and other students, play catch-up with French and Japanese vocab.
As a student at Otago University, he created the online "Language Perfect" platform, roping in his brother Shane - who was working as a junior doctor after graduating with a medical degree - to help with development.
Craig, working out of a room at the Knox College hall of residency, conducted endless user testing, asking fellow students to road-test prototypes as he tweaked the positioning of various buttons and other elements in a bid to create a user-friendly system. "It kept me out of nightclubs," Craig told the Otago Daily Times during the firm's early days.
Education Perfect co-founder Craig Smith in 2018, when he was a finalist for EY Entrepreneur of the Year. Photo / Supplied.
The company hit the market in 2012 with $200 in its kitty, Craig as CEO, Shane as CTO, and their varsity friend Scott Cardwell as marketing manager.
It proved a runaway hit, and soon expanded its online tutorials from languages to a range of subjects, and rebranded as Education Perfect.
In 2017, Australian venture capital firm Five V Capital and Malaysian group Mulpha Credit (which is selling out under the KKR deal) bought a minority stake in what the Herald understands was a deal valuing Education Perfect at $50m.
The Smith brothers stepped back from operational control, with Craig going travelling to catch up on the social life he never had as a student. But trusts associated with the Smith family retained a 20 per cent stake, and the brothers remained on the board (it has yet to be finalised if they will remain as directors if the KKR deal goes ahead).
Today, Burke said Education Perfect's platform is used by around 85 per cent of New Zealand secondary schools, although its largest market is now Australia.
The firm also sells to international schools, catering to British, American and other ex-pat students, in Southeast Asia including Singapore, Northeast Asia and the Middle East.
The maths
All up, Education Perfect's platform is now used by more than one million students in more than 3000 schools in more than 50 countries.
KKR invested at some robust multiples.
Education Perfect had revenue of $31.1m in the year to December 31, 2020, and made a net profit of $3.3m.
Burke says revenue will surge to $44m this year.
Like other online education companies (including fellow Kiwi contenders LearnCoach and Kami), Education Perfect has seen business boom with lockdowns, with the abrupt shift to remote working and the acceleration of many schools' plans to go digital.
The chief executive sees the shift to online learning persisting after the pandemic passing. He says these days, teachers are just as likely to use Education Perfect in the classroom during the day - in part to free up time, and in part because the platform's data features allow them to keep real-time tabs on areas where a student is over or under-achieving.
"We're going to continue to hire and grow globally," Burke says.
He says Education Perfect is also continually releasing new modules. The latest is its te ao Māori programme of courses, which are aimed at both classrooms and corporate staff who want to move beyond beginner te reo.
The courses have Māori culture and history modules as well as language units.
"We're balancing for-profit with being a purposeful and kind business,' Burke says.
