Google Capital, a new growth equity fund supported by Google Inc (NASDAQ:GOOG) invested $40 million in Renaissance Learning, a technology-based educational company primarily dedicated in accelerating K-12 learning.  The educational company makes money by providing schools with learning analytics. It has a valuation of $1 billion.

Google

Best investment candidate

Google Inc (NASDAQ:GOOG) through a representative told re/code that its new investment arm reviewed approximately 500 technology-based educational companies and concluded that Renaissance Learning is the best candidate to receive funding because of its market and scale.

At present, Renaissance Learning’s enterprise-class data center hosts 38,000 schools, and tens of thousands of schools in the United States are using its advanced technology to accelerate learning. During the school year 2012-2013, students on Renaissance Place-hosted platforms completed 45 million STAR assessments, and an average of 1.9 million quizzes are passes every school day.

Renaissance Learning has 18 million paid student subscribers. Each student’s yearly subscription fee is $5 for different math and reading materials. Other educational companies have difficulty marketing their products to school principals and district leaders who are responsible in making budget decisions.

Previously a publicly-traded company

Jack Lynch, chief executive officer of Renaissance Learning said the company was previously a publicly-traded company. In 2011, private equity firm Permira invested in the company at half of the valuation it just received from Google Inc (GOOG), and took the company private.

With regard to competitiveness, Lynch said, “If you use analogy of global positioning, we have learning positioning to plot where the student is on a path. That’s the kind of insight a teacher will use to identify a missing foundational skill.”

He added that Renaissance Learning will probably no longer raise additional funding after this round. He said, “It was really not necessary to propel growth, we did for strategic reasons. We generate a lot of cash.”

Google Inc (NASDAQ:GOOG) and Renaissance learning are working together to integrate Google Apps for Education, according to Lynch.

Other investments

Aside from Renaissance Learning, Google Capital also invested in SurveyMonkey, and Learning Club. The new equity growth fund is headed by David Lawee, Scott Tierney, and Gene Frantz. According to them, the goal of the fund is to “invest in the most promising companies of tomorrow, with one important difference.”