Capella Education Company Announces New Investors

MINNEAPOLIS, January 7, 2005 – Capella Education Company, parent corporation of Capella University, an online accredited university headquartered in Minneapolis, announced today the addition of two new investors through a series of transactions totaling more than $60 million.

Technology Crossover Ventures (TCV), a leading provider of growth capital to technology companies, made a $35 million investment in Capella Education Company. Existing Capella shareholder Maveron, a leading venture capital firm focused on the convergence of consumers and technology, also made an incremental investment of $7.5 million, led by Jody Miller, Maveron venture partner and Capella board member. TCV and Maveron purchased shares from existing Capella investor Forstmann Little & Co., which sold a portion of its funds' holdings. Forstmann Little & Co. has been an investor in Capella since 2000 and has realized substantial gains on its holdings.

In addition, Insight Venture Partners, a leading venture capital firm focused exclusively on software and Internet-based businesses, made a $15 million investment in Capella Education Company. In partnership with Insight, existing Capella investor and board member Joshua Lewis, through Watershed Capital LLC, added $5 million to his holdings. Insight and Watershed purchased the position held by existing Capella investor Pearson plc.

"We are delighted with the continued and strong support for our business and excited to count both Insight and TCV among our investor base," said Stephen Shank, founder, chairman and CEO of Capella Education Company. "TCV and Insight are long-term investors that bring ideal skill sets to help Capella as we continue to build the company's leadership in online higher education. The perspectives of both TCV and Insight, gleaned from their collective experience working with innovative growth companies, will be invaluable to us as we deliver Capella's unique proposition to learners."

Jeffrey Horing, founder and managing partner of Insight Venture Partners, said "Capella's commitment to providing education of exceptional quality, along with the company's experienced management team and attractive financial prospects, resonated with us. We look forward to working with the Capella team to fulfill the company's tremendous potential."

Jake Reynolds, general partner of TCV, stated, "We are very pleased to be affiliated with Capella, due to the university's established track record and its attractive business model. We look forward to Capella's continued progress in the business of delivering high value to all of its constituents." Reynolds has been appointed to the Capella Education Company board of directors.

Gordon Holmes, general partner with Forstmann Little & Co., which will continue to own a significant stake in Capella, commented, "We are very pleased with our investment in Capella. Through our seat on the board of directors, we will continue to actively support the company's significant potential in the higher education market."

"We are quite pleased to place our shares with exceptional new investors who are a great fit for Capella's business," added Jeffrey Taylor, president of Pearson Inc., the U.S. holding company of Pearson plc. Taylor will remain as a director on Capella's board.

Capella University is accredited by The Higher Learning Commission and a member of the North Central Association of Colleges and Schools, one of the nation's six regional accrediting associations recognized by the U.S. Department of Education.

About Technology Crossover Ventures
Technology Crossover Ventures (TCV), founded in 1995, is a leading provider of growth capital to technology companies, providing funds to expansion, late-stage private, and public companies. TCV employs a crossover investment model, which combines venture capital with public market investing and enables TCV to continue to invest in its portfolio companies at the IPO and beyond. TCV manages over $3.3 billion in assets and has invested in nearly 150 companies, achieving 37 IPOs and 27 other strategic sales or mergers. Leading investments include Actuate, Alteon Websystems, Altris, C/Net, Expedia, Netflix, RealNetworks, Solect Technology and Xylan. TCV has 8 partners and is headquartered in Palo Alto, California. For more information about TCV, visit www.tcv.com.

About Insight Venture Partners
Insight Venture Partners is a leading venture capital and private equity firm investing in software and Internet-based businesses. The firm is dedicated to helping its portfolio companies achieve their strategic, operational and financial goals, building value for their customers and investors. Based in New York, Insight has a capital base of over $1 billion and has invested in more than 90 companies over its 10-year history. For more information on Insight, visit www.insightpartners.com.

About Maveron
Headquartered in Seattle, Washington, Maveron LLC is a leading venture capital firm. Founded in 1998, Maveron's mission is to partner with entrepreneurs in the creation of extraordinary companies across the Consumer Continuum™ in order to generate outstanding financial returns. Representative Maveron investments include fast-growing classic consumer companies, such as Potbelly Sandwich Works and Cranium, businesses that use technology to deliver goods and services directly to consumers, such as eBay and Capella University, and companies like Allconnect and GameLogic, which supply technology and services to consumer-facing businesses. For more information about Maveron, visit www.maveron.com.

About Capella Education Company
Headquartered in Minneapolis, Capella Education Company is the for-profit parent company and operates through its subsidiary Capella University, an online accredited academic institution. Founded in 1993 to serve working adults and employers, Capella University offers undergraduate and graduate degree programs in business, technology, education, human services and psychology. The university currently serves more than 11,000 enrolled learners from all 50 states and more than 50 countries. Central to Capella's approach are achievement-oriented learners, expert faculty, and a university staff that is passionate about each individual's success. Today, Capella is a national leader in online education, offering high-caliber academic excellence with balanced business growth. Capella Education Company was awarded Inc. magazine's distinctive Hall of Fame award in 2004, for being named in six consecutive years to the Inc. 500, the magazine's annual listing of fastest-growing private companies in America. For more information about Capella Education Company, please visit www.capellaeducationcompany.com. For more information about its wholly-owned subsidiary Capella University, please visit www.capella.edu or call 1.888.CAPELLA (227-3552).