The Pearson Affordable Learning Fund (PALF) makes minority equity investments in for-profit companies to meet a growing demand for affordable education services across the developing world. Extensive market research has shaped our belief that we need both efficient public and private education actors working in tandem, if we are ever to achieve ‘Education For All.’ This ppt it an overview of the fund strategy and our investments.

1. Pearson Affordable Learning Fund
Katelyn Donnelly

2. PALF operates at the intersection of three types of
investors, integrating the best of each approach
Longer horizons and
intense social impact
metric reporting
Focus on
maximising social
impact
Focus on financial
sustainability and
financial metrics
Maximise profits and
scale
Provide services in regions
that are currently underserved
Emerging market
experience
Impact
investing
Private equity /
venture capital
in education
Pearson
Affordable
Learning
Fund
Emerging
markets
investing
We provide additional
value through our deep
education expertise and
relentless focus on
efficacy

3. We remain focused on providing high quality, low cost
K12 education while ensuring competitive returns
Short-term objective
• To generate a 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

4. The low-cost education ecosystem
3
Content
Low-cost providers
(e.g., curriculum, textbooks)
Teaching
(e.g., recruitment, training)
Low-cost
private
Government
Supplementary education
(e.g., private tuition, sports)
Other non-govt
Business operations
(e.g., pricing, marketing)
Facilities
(e.g.,
furniture,
technology)
Manage-ment
(e.g., head
teachers,
monitoring)
Pre-primary
Primary
Secondary
In scope
Out of scope
Pre-primary
Primary
Secondary
Pre-primary
Primary
Secondary

5. Since PALF was established we have:
 Mapped the global landscape for low cost private education
 Taken a leadership role in the global debate on the subject
 Made our first investment (Omega Schools, Ghana)
 Continued monitoring of Bridge International Academies in Kenya
 Reached in principle agreement on Pearson JV and opened one pilot school this
year in Manila with planes for 11 more in 2014
 Completed an investment Avanti Learning Centers
 Established the India Edupreneur incubator program to incubate 14 early stage
companies and make a seed investment in the top 2 (Sudiksha and Experifun)
 Developed a robust pipeline of investment opportunities
 Built successful relationships with key low cost education stakeholders and impact
investors

6. One of our most catalytic roles has been incubating
entrepreneurs and forming networks through Edupreneurs
Success to date:
India program 2013
Growing our impact:
3 programs in next 18 months
• Over 140 applications for 14 spots
• 120+ hours of in-person instruction and
15-20 additional hours mentorship
• 27 leaders from 14 start-ups met with 30
external experts and industry leaders
• 2 investments made, 1 in further
discussion, 4 others actively tracked
• Alumni have also engaged with various
units of Pearson India and strengthened
their models for low-income customers
• South Africa in winter 2014; India in
summer 2015; Brazil in winter 2015
• Cohorts of 12-15 start-ups each, at least
two receive funding upon completion
• Seconded expert from Pearson Catalyst
• Building off best practices of incubators
around the world, including ensuring
funding awards are cost efficient
• Developing playbook for cultivating
entrepreneurial activities and networks
that applies to broader Pearson business

7. We hope to allocate significant fund capital, upon closing
Immediate Priority investments
Dimension:
1 • Scaling the model
2 • Seed stage incubator • Proving the model
3 • LCPS chain in urban
IMMEDIATE PRIORITIES
LOW-COST ECOSYSTEM STAGE OF LIFE
Omega Schools, • LCPS chain in Africa (K-
10)
Secondary School chain JV
with Corporate in the
Philippines
Manila
• Proving the model
4 Avanti Learning Centres • After-school labs for
university entrance exam
preparation
• Proving the model
EXISTING INVESTMENTS
PALF-Vilcap: Edupreneurs
India
6
5 • Blended-learning LCPS • Scaling the model
Blended learning school in
South Africa
6 • Blended learning school in
Blended learning software
provider in India
a box solution
• Proving the model

8. Over the last year we’ve learned more about the
market and adapted accordingly…
Key insights Reaction
Few
investment
opportunities
at our ideal
growth stage
Talent
recruitment is
difficult
Government
relationships
are critical
• Expanded our investment scope to include earlier stage investments,
to increase pipeline and partner with promising entrepreneurs earlier
• Designed the Edupreneurs programme in India to incubate a new
cohort of ventures
• Backed strong talent early through the establishment of a new JV
• Leveraged our global network to find strong entrepreneurs (e.g.,
formal partnership with Ashoka)
• Launched Edupreneurs to build a broader talent pool -- opportunity
to do this in Kena
• Hired high quality interns and hope to recruit two quality business
development managers
• Developed key regulatory and government relationships
• Worked with the World Bank to help guide their comprehensive
research on low cost private schools regulations research, starting
with Ghana

9. …we have also learned about the challenges of
applying our investment approach to the market
FUND APPROACH INVESTMENT APPROACHES
Options
Invest in
existing
chain
Invest in
existing
service
providers
Edupreneurs
/ Seed
funding
Establish
new venture
Challenge
• Very few existing chains are ready to
scale and can take equity investments
at our optimal return rate
• Very early stage and highly uncertain
• Risk of spreading ourselves thin
• Difficult to navigate new regulatory
environments, trust partners and
manage costs.
• Regulatory hurdles can cause delays
but might have large, long-term payoff
Size of
investment
Value add
Investment
horizon
• Minority to
significant minority
stake with strategic
input
• Willing to seed-fund
at $0.1-5m
deals)
• LT horizon
• Often intensive
management support
• Wider operational
knowledge
• Efficacy focus
• Global brand
• 7-10 years, with
profitability
demonstrated
within 2 to 3 years
• Often companies are very early stage
• Many service companies serve both
mid- and low-income markets

10. 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

11. 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

12. 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

13. 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

14. 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