Howard Schultz by Nitin Sharma

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  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Market Large Growing Global More resistant to economic cycles New trends transforming the industry over next 5-10 years Demographics Global Many Investors have made money PE VC NEA fit Models we are familiar with Long gestation cycle Global network Proximity to the DOE can potentially help us High Rates of Return: Across sectors EBIT margin ranges from15%-40% with IRR’s sometimes in excess of 30%.  Favorable Pricing: Driven by the supply-demand imbalance,price growth is strong in more attractive sectors; particularly online and virtual education platforms, digital curriculum, data systems with BI features, and services across K-20;  High barriers to entry: government regulations, accreditation process,standards alignment, high startup costs,required brand strength,channel  Scalability: Insufficient supply and overwhelming demand for content,technology,assessments and services that truly improve learning outcomes,offer dramatic opportunities for operational scale growth and top-line growth  Revenue predictability: Multi-year enrollment and knowledge of attrition rates in post-secondary allow firms to better predict their revenue streams; K-12 has a “narrow elasticity” in aggregate funding over long historical periods relative to economic cyclicality  Negative working capital: Post-secondary Student fees are collected annually or semi-annually prior to actual enrollment while costs are incurred overtime; many K-12 models for content and technology receive cash first; and are transitioning to SaaS and subscription based, recurring revenue, content models and cloud computing applications  Counter-cyclicality: Enrollment in sectors such as post-secondary education improve as the economy worsens  For the U.S. to remain competitive globally, significant investment in education will be required to develop the human capital infrastructure needed for growth. EDUCATION IS POWER AND KNOWLEDGE IS CURRENCY GLOBALLY Climate for disruption – contradictory pressures (demand, supply, price) Price continues to rise The United States is the single largest education market in the world with a for-profit sector roughly $100B in size The U.S. spends ~40% more per K-12 student on average than other industrialized nations; the gap is even larger for post secondary spending Big Market. 􀂉 In chaos (some say), increasing financial pressures, an entrenched management, slow to change. 􀂉 Change will be driven from outside –for-profit colleges, charter schools foreign countries, the business community, the internet, etc. 􀂉 At the early stages of technology adoption, new business practices. 􀂉 Growing government recognition of system shortcomings and impact on our economic future. 􀂉 Severe lack of management talent. 􀂉 Widespread private investor interest. 􀂉 For-profit colleges are stable business models. 􀂉 No Child Left Behind and declining competitive position internationally are challenging the K-12 sector. 􀂉 Regulatory environment, both a hurdle and a protection. 􀂉 Increasing outsourcing. SIGNAL HILL Education is a rapidly growing industry that has greatly benefitted from the U.S. economy’s transition to a knowledge based economy 􀂄 Virtually all segments of the education industry are expected to benefit and grow because of rising student populations 􀂄 Many sectors within the education market are heavily regulated by the government; however, the government provides steady streams of funds for proprietary K-12, post-secondary, and other providers 􀂄 Legislation and parents have put increasing pressure on K-12 schools and districts to increase the quality of public education and student success – Increasing number of high school dropouts – Federal funds dedicated to 3rd party providers in order to provide higher quality solutions (SES, charter schools, virtual public high schools, etc.) 􀂄 More Americans than ever are enrolling in some form of post-secondary education – Many careers now expect or require post-secondary credentials – Working adults gaining awareness of the “wage gap” – the incremental average salary based on full or partial attainment of higher education is material 􀂄 Student / consumer acceptance of online / technology solutions to aid education – online schools & tutoring, software and other computer products, social networking, etc. are flourishing 􀂄 Increasing enrollments, greater dependence on the internet, and demand of real-time data has created an opportunity for learning management systems, enterprise software, and other technological solutions for education institutions, teachers, and parents The U.S. will need to produce 63 million degrees to match top countries by 2025. Current production rate is 41 million. After immigration shortfall is 15.5 million. International market opportunity is huge but here we are only focusing on U.S. investing Potential large tickets Our - investing thesis
  • Howard Schultz by Nitin Sharma

    1. 1. Howard Schultz: A Total LeaderTotal Leadership: Spring 2013Nitin Sharma
    2. 2. Framing the PurposeWhat business are we in?
    3. 3. Framing the Purpose“Very early on, I realized that …We are NOT in the Coffee Business servingPeople,We are in the People Business servingCoffee”
    4. 4. Background• Born 1959. German Jewish family.• New York City projects. Poverty.• First in family to go to college• Professional: Xerox >> Hammarplast >> Director of Marketingat Starbucks• The famous buying trip to Milan. Coffee culture sparks the idea• Trying to convince managers to scale the concept, met withresistance• Leaves to start own coffee shop, later buys Starbucks in 1984• The rest is history: Biggest success story in retail• 2000: Stepped back. Starbucks loses its way….• 2008: Back as CEO to lead a revival
    5. 5. Episode 1: Living Personal Stories at WorkWhy be the First American Company toProvide Health Insurance to Full-Time ANDPart-Time Workers (total of 200,000+employees)??• “My inspiration comes from seeing my father broken from the thirtyterrible blue-collar jobs he had over his life, where an uneducatedperson just did not have a shot”• “On the day in 1987 that Schultz bought a local business in Seattlecalled Starbucks, he held an all-employee meeting. He had threetalking points: “1. Speak from my heart.2. Put myself in their shoes.3. Share the Big Dream with them.”• “A company can grow big without losing the passion andpersonality that built it, but only if it’s driven not by profits but bypeople . . . The key is heart. I pour my heart into every cup of coffeeand so do my partners.”
    6. 6. Episode 2: Deriving Strength from Family andSelf Domains• Maintaining a Very Healthy Lifestyle:• Diet, Kinetix, Biking, Sunday basketball• From Self >> Employees >> Customers• Stepping back in 2000• Self: Other endeavors• Family: Spending more time with family• Marriage, Kids and Privacy• Very happy marriage with Sheri Schultz, 2 kids• Dedicated time, philanthropic activities together• Separation of domains
    7. 7. Episode 3: Community at the Heart ofStarbucks’ Turnaround• “I decided--against the advice of many people at the time, because it had ahigh cost attached to it--to take 10,000 store managers to New Orleans. Iknew that if I could remind people of our character and values, we couldmake a difference.”• “Our efforts represent the single largest block of community support in thehistory of New Orleans, contributing more than 54,000 volunteer hours andinvesting more than $1 million in local projects like painting, landscaping,and building playgrounds. …• “If we hadnt had New Orleans, we wouldnt have turned things around. Itwas real, it was truthful, and it was about leadership.”
    8. 8. Episode 4: Voicing Values• “It is not an economic decision," he said. "The lens in which we aremaking that decision is through the lens of our people. We employ over200,000 people in this company, and we want to embrace diversity."• “If you feel, respectfully, that you can get a higher return than the 38percent you got last year, it’s a free country. You can sell your shares ofStarbucks and buy shares in another company. Thank you very much.”

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