Udacity reaches “unicorn” status with $1bn valuation
Online education start-up, Udacity, founded by Google roboticist and Stanford Professor, Sebastian Thrun, is the latest ‘unicorn’ in the tech innovation space. Launched by Thrun at Stanford in 2012 as a free online course in artificial intelligence, Udacity raised $105m on its latest funding round giving it an estimated valuation of $1.1bn. It was announced this week that investors, including Baillie Gifford and Google Ventures, and new partners Andreessen Horowitz, Drive Capital, and Charles River Ventures have committed total funding of $165m. 
Udacity, which currently has 11,000 paying students, partners with companies such as Cisco, Google, and Facebook, rather than universities, to develop course work. Fortune reports that Udacity is growing 30% per month and believes its annual revenue is around $24m.

Business schools recognize broader digital threat

Udacity has become the latest edtech company to raise venture capital amid the exposition of online learning that threatens to rival the stoic business education scene.

Udacity pulled in $105 million from investors including Google Ventures and Andreessen Horowitz, the Silicon Valley venture capital group that backed Airbnb and Twitter, giving it a valuation of $1 billion.

Udacity has pushed further into the realms of the business school and is capitalizing on the surge in demand for more easily accessible, online management courses.

In the last year, it has enrolled more than 11,000 students into its so-called “Nanodegree” programs on topics including how to build a tech business and big data analytics.

One of the big draws for business managers is the ability to learn on the job — and at a considerably lesser cost than a degree such as an MBA from a top school.

“Today, the vast majority of our Nanodegree students are professionals who already have a college degree,” Vish Makhijani, president and COO of Udacity, told BusinessBecause, adding: “Many of our students are working in a full-time job.”

Udacity forms part of a cottage industry that is challenging top schools, which are struggling to keep pace with technological innovation. In recent months both Google and LinkedIn have edged into this space, with the latter snapping up online learning company Lynda.com for $1.5 billion.

Varsity Tutors, a live learning platform connecting students to tutors and personalized learning experiences, announced this month it had secured $57 million in funding from educational investors such as TCV Partners.

The company, founded in 2007, will use the capital to “develop its technology and expand access to high-quality, live, video-based expertise on both web and mobile”, said founder and CEO Chuck Cohn.

Business schools recognize the broader threat and have responded with online degrees, and digital solutions for companies who buy custom executive education.

“Distance learning, social learning and web platforms are now standard tools,” said Thomas Jeanjean, dean for executive education at France’s ESSEC Business School.

Edtech ventures like Udacity emerged as providers of Moocs, or massive open online courses, but have evolved into full service providers of fee-paid online learning.

The growth of business-related online programs offered by Mooc developers such as Coursera, edX or ALISON is increasingly viewed as an alternative to schools’ expensive and often longer business programs.

Kai Peters, CEO of Ashridge Business School, admitted competition is rife: “There are indeed new competitors coming from a variety of sources.” He said that “consultants, HR professional service firms, publishers and others are all vying for a foothold in the executive education space” in particular.

Edtech companies have achieved notable success in the field of corporate training — traditionally business schools’ main source of revenue.

EdX ran a pilot course on big data that enrolled 3,500 people from more than 2,000 organizations including Microsoft, which grossed around $1.7 million. Online provider Udemy launched a business service and has since grown to have more than 350 partners including technology group Oracle.

However both the chief executive of FutureLearn and business development chief at Coursera told BusinessBecause recently that traditionally degrees “can’t be replicated online”, although they both acknowledged that online learning is emerging as a new category.

“What we are finding more and more is that learners are using ALISON both as a substitute/alternative and a compliment to traditional education routes,” Mike Feerick, CEO of ALISON, said.

Dr David Butcher, director of executive development programs at Cranfield School of Management, said: “The challenge for business schools, particularly university schools like Cranfield, is to have a distinctive offer that cannot be replicated by non-business school providers.”