Deal Radar 2008: Regent , Frederick,Marryland

Deal Radar continues to focus on education with a discussion of Regent, an on-demand, SaaS provider of financial aid management solutions that make it easier for institutions to be current and compliant with the latest federal and state regulations and updates. Regent’s goal is to offer tools to automate and manage every aspect of the financial aid life cycle, and a system that enables institutions to standardize and centralize management of financial aid, increase productivity, ensure compliance and control costs.

Regent has been providing financial aid management for over 25 years. The company was created through an acquisition, and Regent Education Inc was re-launched in 2006. Founder and CEO Mike Ratti’s vision for Regent has been to offer financial aid management innovation and expertise to enable the financial aid office to become a strategic imperative within a higher education institution. Before joining Regent, Ratti held various senior level positions and has over 20 years of experience at international corporations, from Xerox to various SaaS companies.

Regent has raised approximately $11.85 million so far: a $3.6 million Series A from Edison Venture Fund in September 2006 and an $8.25 million Series B from Chrysalis Ventures in September 2008. Regent is located in Frederick, Maryland and has more than 50 employees.

The financial aid market has seen few technological innovations, and although there are signs of change – in February 2008 the Evans Consulting Group launched its Center for Financial Aid Management – existing systems are built on outdated technology with very little updating. Regent attributes its success in part to this innovation gap: it was the first for-profit company to be 100% dedicated to financial aid management as a core business. Among its products are Diamond and Carbon editions of its core financial aid management offering, a student self-service portal and an executive dashboard.

It’s no secret that US higher education costs can be extremely high and that financial aid is a concern for millions of students and parents. It’s also a big market: financial aid typically accounts for 60-90% of an institution’s gross tuition revenue. As such, managing financial aid is becoming a strategic imperative for institutions of all types and sizes. In addition, given the complexity of the processes, the presence of state and federal regulations, and the sheer amount of money given in financial aid (over $200 billion over the past 10 years), financial aid and its management is clearly an industry in itself. There have been few vendors, however, to automate the process and extract efficiency.

The market comprises approximately 10,000 potential clients made up of community colleges, for-profit colleges, graduate schools and four-year institutions. Regent addresses needs across all four verticals and sells directly to institutions, to college systems and through channels.

Regent’s early focus was on the community college market, including state systems, which gave the company a strong footprint. With the next generation product, this focus has expanded to schools that have multiple institutions, Pell (a federal grant program) IDs or campuses.

In 2007 revenues were up more than 100% over 2006. The company declined to reveal revenue figures, but they forecast their 2008 recurring subscription revenue to be three times that of 2007.

The total value of all education market M&A transactions ballooned to over $20 billion in 2007, an increase of 304% from the $5 billion recorded for the same period in 2006.

Most Student Information System (SIS) vendors don’t currently have their own financial aid modules. Instead, they license third party solutions or components (INAS) to plug into the SIS. In addition, most SIS vendors do not have extensive financial aid knowledge in-house. Regent, with its financial aid knowledge and experience, mature software solutions and customer base, could be a good choice for an acquisition.

In general, the various workflow functions within the education business are ripe for automation through SaaS applications, and I am glad to see Regent taking one on that is a critical one.

Related Readings:

Education and Technology: Now is the Time

This segment is a part in the series : Deal Radar 2008