By Jason Stoffer

I graduated from Wharton in 2005, and rather than joining my fellow graduates flocking to Wall Street, McKinsey and Google, I joined Career Education Corporation (Nasdaq: CECO). This little known company delivered operating results most VCs would salivate over. CECO’s Online Education division, which  offered online post-secondary degrees, scaled from startup to $600 million in sales and 30%+ operating margins in less than five years. My decision to join CECO reflected my optimism in the opportunity for new for-profit players across the $1.2 trillion U.S. education market. Since I first interned at Career Education in 2004 the for-profit education market environment has only gotten stronger – market leader University of Phoenix has increased revenues from $1.8 billion in 2004 to $3.7 billion annually today. For-profit companies have grown faster than the overall market as they have proven to be more nimble, more responsive to consumer needs and less attached to legacy business models than incumbent players.

To give a sense as to the size and scope of for-profit education, I compare it to some other industries popular amongst investors in the chart below – note that for-profit education is 3.0x times bigger than Internet advertising.

Trends Driving the Education Markets

For over a hundred years, education changed very little in the U.S. Students received a new set of textbooks each year and class consisted of the proverbial “sage on stage” – a teacher standing on stage and lecturing to students. The advent of the Internet has changed the learning paradigm – and we believe the impact to date will be dwarfed by technology’s impact on educational delivery and pedagogy in the decade ahead. While most of the big wins to date have been in for-profit post-secondary education, we believe there will be multiple types of businesses in domestic and international and formal and informal education that offer potential for venture returns. The impact of changes in education can be distilled into four megatrends, as shown on the chart below. Over the coming months on this blog, we will shine a spotlight on each of these trends and highlight some of the promising young startups we are seeing emerge.