Media conglomerate Bertelsmann’s investment in Udacity, a US-based provider of online programming courses, last week appears to herald a shift in strategy, in which its recently formed Education Group unit will become a more proactive investor.
Bertelsmann led Udacity’s $105m series D round, closed at a $1bn valuation, which also featured participation from corporate venturing unit Google Ventures, Baillie Gifford, Emerson Collective, Andreessen Horowitz, Charles River Ventures and Drive Capital, while Bertelsmann Education Group CEO Kay Krafft joined Udacity’s board.
The funding increased Udacity’s overall funding to more than $155m, with Bertelsmann having previously taken part in a $35m series C round in September 2014 also backed by Drive Capital, Andreessen Horowitz, CRV, human resources provider Recruit, media company Cox Enterprises and Valor Capital.
Udacity offers ‘nanodegrees’ in coding to applicants across the world, and has enrolled 11,000 students from a total of 168 nations in the past year. It also claims to have reached profitability earlier in 2015.
Shernaz Daver, Udacity’s executive advisor for global business and marketing, told Fast Company the money would be used to open additional offices to fuel international growth, and to expand the company’s nanodegrees raange to between 45 and 50 in the next year.
As stated above, Udacity is not a new investment for Bertelsmann; it was one of two portfolio companies taken forward when it launched Bertelsmann Education Group in September this year – the other being education services provider Synergis Education – together with university network Arist Education Systems, e-learning subsidiary Relias Learning, and its stake in two funds raised by investment firm University Ventures.
At the time of the unit’s launch, Bertelsmann CEO Thomas Rabe described education as one of the corporate’s key growth platforms, and one that it aimed to eventually build into one of three “mainstays” of the business, along with media and services.
Although Bertelsmann did not state that its Education Group would be an active corporate venturing investor, the firm’s reinvestment in Udacity was made just days after it invested $230m to become the largest minority backer of Hotchalk, the developer of a turnkey service enabling non-profit universities and colleges to provide courses online.
Alternative education systems have become somewhat of a preoccupation in Silicon Valley over the past two or three years, and Bertelsmann is clearly betting big on the sector. It is not difficult to see where an online course provider fits in with a company that produces technology capable of boosting online education provision, not to mention a burgeoning university network.
The question is where Bertelsmann Education Group plans to invest next, and whether it will seek to make early-stage investments with a view to building a more substantial corporate venturing portfolio.
The sector could be its route into China, where several alternative education providers, including Hujiang.com and Phoenix E-Learning, have raised notable sums in 2015, not to mention other emerging economies.
Bertelsmann has also already made two education-based investments in Brazil, and the combination of widening internet access and relatively underdeveloped established education systems could make other emerging economies, and education-focused startups within those economies, big target areas for the company.