1. Measuring outcomes in education A look at emerging market education entrepreneurs November 2, 2014

2. Contents 1 Background 2 Measuring outcomes in education 3 Opportunities to get involved

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5. 4 Students attend 2 years of after-school tutoring for 15 hours a week at Avanti’s Centres In-class Activities Hindi Video Content

6. More than 40% of Avanti students place in the top 1% of the IIT entrance exam 5

7. Most children in the world are enrolled in primary school, but few are learning 6 % of primary age children enrolled in school % of children who reach a basic learning level in reading, writing and arithmetic Source: Acasus (2014)

8. Parents are looking for alternatives 7 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%

9. As the sector grows, there is increasing private investment flowing into international education 8 Original players New corporate education entrants New 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

10. 9 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

11. We have 7 investments in our portfolio to date 10 DESCRIPTIONINVESTMENT Omega Schools, Ghana 38-school LCPS chain in Africa (K-10) 1 Sudiksha, India Chain of 22 low income preschools 2 APEC (Ayala JV), Philippines 3 14 school LCPS secondary school chain in urban Manila Avanti Learning Centres, India 4 After-school labs for university entrance exam preparation eAdvance, South Africa 5 Blended-learning LCPS (SPARK school) creating school chain Zaya Labs, India 6 Blended learning class-in-a-box solution Experifun, India 7 Science kit learning solution

12. Contents 1 Background 2 Measuring outcomes in education 3 Opportunities to get involved

13. We have yet to see a true “success” in private international education for low-income learners 12 Affordability QualityScale

14. 13 Affordability QualityScale 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

15. In fact, quality is the hardest to get right 14 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

16. Pearson has a word for this - efficacy 15 Fundamental change: Before -> measuring inputs After -> measuring outcomes “Measurable impact on improving someone’s life through learning”

17. How does this manifest in practice? 16 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

18. Contents 1 Background 2 Measuring outcomes in education 3 Opportunities to get involved

19. The fuel of a thriving efficacy ‘engine’ is great human capital 18 a a AcademicsOperations Business Development / Sales Analytics / Technical

20. Recruiting for startups is hard 19 Recruiting for international development is hard Recruiting for a startup in international development? Later timingLess moneyUnorganized Later timingLess moneyUnorganized 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

21. 20 Thank you!

22. 21 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

23. In the two years since PALF was established, we have: 22  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

24. After investing, PALF uses its role as an active investor to strengthen portfolio companies 23 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 OperationsPedagogyStrategyGovernance 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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