Scaling an Educational Services Business to $50 Million: Todd Zipper, CEO of Learning House (Part 2)

Todd Zipper: Around late 2005, one of the entrepreneurs bought a business that became what Kaplan Higher Education is today. This individual had an idea to start a marketing business focused on higher education using TV commercials. We called it LendingTree meets eHarmony. It had a matching algorithm. We went on to build a brand around matching people to potential education opportunities. I co-founded this business in 2006.

The next four years was an incredible journey because this was the boom period in the for-profit education space. Eventually, we got to working with non-profit schools. We had a couple of things that worked to our advantage. When the recession came, the TV market became completely open to our type of marketing messages and our price point because so many big advertisers came off. The second thing is we built one of the first call centres in education where we were advising students. We built that business over four years. We sold it in early 2010 to a competitor called Education Dynamics.

Sramana Mitra: How big did this business become?

Todd Zipper: We got to about $30 million in revenue from an investment of about $1.5 million. It was an incredibly scalable business.

Sramana Mitra: I’m very familiar with that business model. Within the education space, we’ve covered other companies that have that business model. They do scale very well. You sold it for what kind of price point?

Todd Zipper: It was a good exit—seven times of EBITDA kind of number.

Sramana Mitra: That exit happened in 2010?

Todd Zipper: Correct.

Sramana Mitra: Did you have to go to work for that company or were you free?

Todd Zipper: I went to work for that company for three months. It was unclear what my role was going to be. I also saw the writing on the wall. Even though the business was doing extremely well, the opportunity just wasn’t there for me. I happened to reconnect with the former Chairman and CEO of Kaplan, Jonathan Grayer, who left Kaplan a year or two before. He started an investment firm called Weld North. The firm was focused on doing investments in the education space. We got talking and I had several theses around different opportunities instead of starting a business from scratch.

One of the theses was around bringing best practices that we had learned in the for-profit space to the not-for-profit space. Back in 2010, there were probably four or five for-profit companies that I knew of that were helping not-for-profits build and scale online programs. It’s still very niche. I thought it was a big opportunity. Because if you look at the size of the online market in terms of secondary population and in terms of where the industry was going, the not-for-profit space was going to take back their market share at some point.

I left Education Dynamics and joined Jonathan. We spent about a year researching companies looking at a bunch of different opportunities. We eventually found this small company in Louisville, Kentucky called Learning House. They were essentially working with private institutions, primarily within driving distance of Louisville. The original business was founded around 2002. At that time, it had around $7 million in revenue. It had the kernels of what, today, we call Online Program Management (OPM).

They were essentially helping schools build courses. They would host courses for schools on the open source Moodle platform, which is the second largest LMS in the world next to Blackboard. What I saw was an opportunity to build out a full array of solutions that included not just curriculum development and LMS, but also marketing, enrolment management, market research, and retention services, and even faculty training. Now we’ve recently added career services to the mix as well. You pretty much run the gamut of everything you need to do to launch an online program.

This segment is part 2 in the series : Scaling an Educational Services Business to $50 Million: Todd Zipper, CEO of Learning House
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