Education Innovation Fund

SUMMARY OF PROPOSED INVESTMENT

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein that has been prepared by the project sponsor, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
The SII is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors.

Project number 32429
Company nameLearn Capital LC
CountryWorld Region
SectorT-AB - Colleges, Universities, and Professional Schools
Environmental categoryFI2
Date SPI disclosedApril 8, 2014
Projected board dateMay 15, 2014
RegionWORLD
DepartmentGbl Ind, Manufact, Agribus & Services
Date revised SPI disclosedApril 8, 2014
StatusPending Disbursement
Previous EventsSigned: July 2, 2014
Approved: May 9, 2014
Overview

Project description
The Project is to establish an Education Innovation Fund (the “Fund”), a US$100-150 million venture capital fund, to invest in early to mid stage innovative education companies that will expand access to and quality of education in the emerging markets. As an anchor LP, IFC will provide up to US$20 million in the form of a straight equity investment. Target companies for the Fund would typically include companies that are located in emerging markets, or that have or will have substantial userbases in emerging markets, including companies that have already developed, tested and, in some cases, initiated the commercialization of at least one innovative product and/or service in their home markets. Through the investments carried out by this Fund, target companies would typically aim to improve their market viability in any of the emerging markets, support their commercialization and marketing efforts, and/or finance any other capital or operational expenditure needed for their successful commercialization. The Fund will have an emphasis on global companies with a large potential impact on developing regions, especially Latin America.

Through a Request for Proposal (“RFP”) process where more than 50 potential fund managers participated, IFC selected Learn Capital (“Learn” or the “Fund Manager”), a venture capital fund focusing on investments in the education innovation and technology space, as the fund manager of the proposed Fund.

Sponsor/Cost/Location

Project sponsor and major shareholders of project company
Learn Capital was founded in 2008 with offices in San Mateo, California and elsewhere. Learn is a US-based early stage venture capital firm focused exclusively on the education technology sector. It currently has over US$78 million assets under management and manages four funds. Its limited partners include large capitalization global education companies like Pearson Plc and Benesse Holdings Inc and family trust investors with a history of significant education sector support and involvement. Learn targets both above-market venture returns and high social impact in education by investing and supporting rapidly scaling global companies, many of which are located in the US, but the firm also has relevant investment experience in emerging markets.
Total project cost and amount and nature of IFC's investment
The proposed Fund size is US$100-150 million. Final fund size may vary and will depend on the appetite from other institutional investors.

As an anchor LP, IFC would provide a straight equity investment of up to US$20 million.
IFC investment as approved by Board
20 million (USD)
Product LineIFC Investment (million USD)
Risk Management 
Guarantee 
Loan 
Equity20

* These investment figures are indicative
Location of project and description of site
The Fund will invest in (i) education innovation companies with global userbases aiming to have a significant number of users from developing countries, (ii) innovative local education companies based in emerging markets and (iii) licensing or JVs with existing companies, potentially including North-South and South-South partnerships for accelerated technology diffusion. Regardless of investee origin, the Fund’s emphasis will center on investments that impact global developing regions with a particular focus on LAC.

Development Impact

Expected Development Impact
- Accelerate the introduction and expansion of latest education technologies in selected markets, contributing to improved access, quality, efficiency and relevance of local education systems.

- Promote innovation in early stage technology companies through the access to growth capital for expansion in emerging markets.

- Provide a demonstration effect of the potential for the private sector to bring innovative solutions to long standing problems in education systems in emerging markets, mainly through the use of technology.

IFC's Expected Role and Additionality
- Provide debt and equity financing that might otherwise not be available to the Education Innovation Fund's investee companies.

- Mobilize capital from other investors into what is still a relatively new and innovative sector.

- Leverage experience and network in emerging markets with the Fund's investee companies to facilitate their expansion in new markets.

- Promote best practices in monitoring the Fund's performance in terms of students access, learning outcomes, employability, and other relevant dimensions as necessary.



E&S Risks / Impacts and Mitigation

Environmental & Social Categorization Rationale
The project is categorized as FI:2 (medium risk) according to IFC's Environmental and Social (E&S) review procedure. A review of the Fund's investment themes indicate that the fund will target investments in the education sector, focusing on investments in education technology, including software and platform development and online delivery of educational content, which may have minimal or no adverse environmental or social impacts. The fund may also invest opportunistically in projects which may include construction and operation of schools and may entail limited adverse E&S risk and impacts that are few in number, generally site-specific, largely reversible and can be readily addressed through mitigation measures. The Fund Manager will be required to conduct an E&S due diligence and monitor the target investments against the IFC Exclusion List, applicable host country E&S laws and regulations, and Performance Standards (PS).

Main Environment & Social Risks and Impacts of the Project
Key issues associated with this investment relate primarily to the E&S risks of the potential investments, and the capacity and systems in place to manage these risks. This is a first time IFC Fund and as yet does not have an ESMS outlining the procedures, responsibilities and tools for undertaking E&S risk management of its investment activities.

Key Mitigation Measures:

In order to mitigate the key E&S risks, and formalize the approach to E&S management the Fund will implement a number of actions: (i) Develop an ESMS and capacity to review all sub-projects per the E&S laws and regulations of the sub-project's country and the Performance Standards, to be in place by commitment; (ii) conduct an E&S due diligence (ESDD), with the help of qualified professionals, as appropriate, to identify the applicable E&S risks of each sub-project and require corrective actions as needed to ensure that these risks are managed according to the Performance Standards and applicable laws; (iii) implement a monitoring framework to supervise the E&S risks of all sub-projects and report to IFC. In addition, IFC will review the first three ESDDs and that of all Category A sub-projects (if any) prior to the Fund’s investment to support the implementation of the ESMS.
Key Mitigation Measures
Task DescriptionAnticipated Completion Date
Nominate E&S Officers/DepartmentOn or prior to commitment
Establish an ESMS including guidelines for its
implementation
On or prior to commitment
Implement Staff TrainingPrior to First Disbursement



Contacts

For inquiries about the project, contact:
Paul Strange
mailto:paul@learncapital.com
Telephone: +1-650-275-3030
Learn Capital
20 E. 3rd Ave San Mateo, CA 94401

For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster
Local access of project documentation

Supporting Documentation