Now a managing partner, Johnson likes to work with clients producing technology to assess student learning or help deliver curriculum, sometimes for kids who are struggling with material and other kids who could learn faster and need to be challenged. He also works with clients that sell and install equipment used in schools.

FastBridge Learning could be considered a typical client, although its brief life as an independent company seems anything but typical. Created in 2015 as a bootstrapped start-up out of the University of Minnesota’s tech venture center, this student assessment tools provider got acquired in 2019 with Johnson’s help after reaching 60 employees and about $11 million in revenue.

I hadn’t heard of FastBridge Learning or its buyer, Illuminate Education.

“There’s tons of merger and acquisition activity [in the market],” said Terri Soutor, the former CEO of FastBridge, who stayed through an 18-month integration. “There’s tons of capital being deployed and a lot of startups, particularly any that are providing curriculum that can be delivered online.”

Cherry Tree has clients across the country, but “Minnesota does have a cluster of education companies, coming out of the [National Computer Systems], Plato Learning, Capella, all these companies that have grown up here and did really well,” Johnson said. “So there’s now like 40 or 50 education companies just in our region, and we would certainly love to work with our homegrown, backyard companies.”

Managing Director Mike Buttry is Johnson’s counterpart at Cherry Tree in the adult education sector. Buttry is a former executive with Capella Education Co., the for-profit higher-ed company acquired by publicly-traded Strayer Education in 2018.

For-profit colleges, Buttry said, attracted a slug of capital and went through a 2000s-era boom, but that explosive growth led to the industry’s problems. He mentioned a few companies, including the University of Phoenix, which peaked out at hundreds of thousands of students. Eventually Phoenix all but collapsed, after appearing on a list of higher-ed operators where the students defaulted on loans at a higher rate than graduated.

In time the market corrected, Buttry said, some of the poorest-quality companies disappeared. That painful process was aided by Obama administration regulations including something called the “gainful employment rule,” which meant that grads had to be able to earn enough in the jobs they trained for to pay back their student loans.

Public and private colleges and universities have market problems of their own, of course.

“This is not data, this is anecdote,” Buttry said. “But you kind of fall into one of two camps if you are a traditional, nonprofit, degree-granting institution. You’re either struggling to keep your current model afloat or you are looking at new ways to innovate and deliver, and meet students where they are.”

The firms to watch these days, Buttry said, include the language teaching platform company Duolingo, the education management system provider Instructure Holdings and 2U, which is spending $800 million to buy the assets of a business affiliated with MIT and Harvard that offers open, online courses.

Beyond that handful of names, about $3.2 billion was invested in U. S. educational technology companies in the first six months of this year, according to venture investment firm Reach Capital. That’s compared to $2.2 billion for all of last year.

Some of these startups may be trying to meet needs that didn’t exist two years ago, as educators had to think through how they could teach students safely during an infectious disease pandemic. Now they have to decide which of the improvisations and innovations they need to keep doing, and what tools or services can make that easier.

With all this going on, Cherry Tree finds itself in a “really great niche,” Buttry said.

“‘Niche’ makes it sound small,” he said, correcting himself. “It is a really great space that we found to occupy.”