This story by Ann Schimke was originally published by Chalkbeat on February 14, 2025. We are sharing it in two parts. Sign up for Chalkbeat newsletters at ckbe.at/newsletters
Last July, families at a Highlands Ranch child care center received startling news: The center was temporarily closing following a visit from the county health department.
The center’s owners failed to submit required construction plans to the Douglas County health department and get construction permits from the county’s building division.
A state child care licensing inspector also found several safety violations related to the construction: Emergency exits were blocked by tools and debris, and paint and construction materials were accessible to children.
A former teacher and a former aide at the center shared additional details with Chalkbeat. They said the center’s main security doors were propped open at times, allowing workers and others open access to the building. They found concrete chunks on the playground, and a child found a box cutter there on at least one occasion, as well, they said. The former staffers spoke on the condition of anonymity for fear of career repercussions.
The renovation was the result of an ownership change: In early July, a national chain called The Nest Schools purchased the center from a small local company. The chain has six child care centers in Colorado — all of which opened after Detroit-based private equity firm Rockbridge Growth Equity invested in the company in 2022.
Some early childhood experts have recently sounded the alarm about the growing footprint of private equity in the child care space. They worry that such investment firms are primarily motivated by outsized profits, not providing quality experiences for young children. But others say private equity-backed child care is already providing many desperately needed seats and that its deep pockets can help a fragile industry during a challenging time.
Gerry Pastor, co-CEO of The Nest, said in an email that private equity investment helped sustain and grow The Nest Schools, including by making much-needed upgrades costing more than $1 million at the Highlands Ranch center.
He said that while the center tried to keep child care operations separate from construction, “a few unintended issues arose” that were corrected immediately. He said children, staff, and families did not use exterior grounds during construction there. He also said some of the allegations that Chalkbeat inquired about “never happened” but he didn’t specify which ones.
A Rockbridge spokesperson had no comment.
Colorado lawmakers are taking notice of private equity’s push into child care. In January, they introduced legislation that would put new limits on private-equity backed centers in an attempt to temper practices that critics say are harmful, including cutting staff and raising tuition. The bill would give the public more information about tuition and fees, provide advance notice of staff layoffs or enrollment changes, and curb a common private equity real-estate practice that can hurt child care centers financially.
“We just want to make sure that as more investors come to the state that they understand they’re coming to the state to invest in high quality [child] care and not simply just to turn a profit,” said state Rep. Lorena Garcia, a Democrat who is sponsoring the bill.
Experts say private equity firms often make swift changes when they invest in child care centers. At The Nest Highlands Ranch, those changes had consequences beyond physical upgrades. The director and assistant director quit within a month, according to letters The Nest sent to parents, and parents said around 10 more staff members also left.
Brooke Aldaz, whose two young children were enrolled at the center, told Chalkbeat she saw problems shortly after renovations on the decades-old building began. She said she became particularly alarmed when she, her 1-year-old son, and his visiting speech therapist were sent to meet in a classroom that had been closed for construction.
“There was broken glass and old dishes,” she said. “I remember being very uncomfortable that it was even suggested that a 1-year-old child should be in that room.”
The Highlands Ranch center reopened within a couple weeks but Aldaz said it was no longer the place she once considered “idyllic.”
Private equity has long had a stake in all kinds of industries, from health care and autism services to rental housing. In recent years, its footprint has grown in the child care sector.
Private equity firms typically use a little of their own money plus loans and funding from big investors — often pension funds, endowments, and extremely wealthy individuals — to buy companies they aim to sell at a profit later.
Experts say one of the hallmarks of private equity is that the firms borrow lots of money to buy companies — debt that can strain the companies financially and increase the risk of default or bankruptcy. But chronic child care shortages make families captive customers who take whatever’s available.
Elliot Haspel, a senior fellow at the think tank Capita who’s written extensively about private equity in child care, said the private equity playbook prioritizes speed.
“The idea is that you want to sort of wring as much profit as you can, usually over three to seven years, and then you want to ditch it off to some other private equity firm,” he said. “There’s an incentive, plausibly, to go really fast.”
Private equity firms use various strategies to turn a profit, including cutting costs and raising prices. Many child care chains backed by such firms buy centers in affluent areas where parents can more easily shoulder tuition and fee hikes. Mom-and-pop child care owners may sell to child care chains because they are retiring or leaving the field.
A Chalkbeat analysis identified about 175 Colorado centers currently owned or backed by private equity or venture capital firms — representing about 15% of the state’s licensed child care capacity for young children. Most are large, with space for more than 100 children.
The state’s child care rating system – which considers factors ranging from staff credentials to certain business practices – shows that about 40% of those centers have one of the state’s top three ratings. By comparison, about 32% of all Colorado child care programs overall hold those top ratings.
While state ratings are a starting point for determining quality, they provide only a snapshot because they are awarded once every three years. Highly rated programs can still be cited by the state for violations, put on probation, or fined.
Some early childhood leaders believe private equity-backed centers are meeting a need and that more regulation, as proposed in Colorado, could be harmful.
“I think we want to be careful about implementing anything that is going to hurt an already distressed system,” said Nicole Riehl, president and CEO of the Colorado business-focused group Executives Partnering to Invest in Children. “It’s like paying attention to the nail that’s sticking out of the fence when the fence is laying on the ground.”
Other groups, ranging from the National Women’s Law Center to the Open Markets Institute, are concerned about the growing role of private equity in child care. A 2024 National Women’s Law Center report notes that center directors in private equity-owned companies report being “pressured to prioritize raising enrollment rates above all other considerations.”
Melissa Boteach, vice president of income security and child care at the law center, said the private equity footprint could expand further as more states pump public dollars into child care and preschool.
“We want those dollars invested in children and the teachers … not going to Wall Street,” she said.
Many states have bolstered public investment in the sector in recent years, including Colorado. Its $344 million universal preschool program, now in its second year, offers tuition-free half-day preschool to all 4-year-olds. It’s too soon to tell whether that will result in more private equity in Colorado child care, or whether more regulations might temper that.
Critics of private equity-controlled child care don’t think it should be expunged from the marketplace. Rather, they say that guardrails, including high state standards for quality, are needed. States, including New Jersey and Massachusetts have recently passed laws regulating large child care chains, many of which are backed by private equity.
“It’s much harder to roll back private equity’s deep entanglement in a sector than it is to prevent it in the first place,” said Boteach.