The company is already in Dizraptor’s portfolio since Dec 1. New offerings are possible in the future
About the Company
Udacity is an online learning platform offering courses in artificial intelligence, machine learning, and robotics sector, as well as data science, autonomous systems, and cloud computing. By the end of 2020, the platform had 14 million students from all over the world.
Udacity works closely with leading IT companies such as Microsoft, IBM, Alteryx, NVIDIA, GitHub, Amazon, Accenture to create its training programs. Its recent module on the platform, a new “AI for Business Leaders” executive program, was developed in close cooperation with the BMW Group.
Udacity is actively developing its business segment. Its corporate clients include IBM, Shell, Vodafone, Qualcomm, AT&T, BNP Paribas, leading aerospace and defense companies, automakers and professional services firms. Udacity was ranked 29th on the 2021 CNBC Disruptor 50 list. The company works with government agencies from the US, India, Chile, Great Britain, Germany, Egypt and the Arab Emirates.
Market Opportunities
The global e-learning market size and share revenue is expected to grow from $144B in 2019 to $374.3B by 2026, at 14.6% annual CAGR growth in the forecast period. The boom in growth is largely due to the impact of the pandemic, which has forced educational institutions to switch to online. Many of them will continue to use technology for educational purposes, integrating online educational platforms into the learning process.
Also, demand for online education has increased from companies. According to Udacity, 83% of large companies are understaffed, especially when it comes to tech positions. Collaboration with online learning platforms helps them fill this gap. Due to the trend towards lifelong learning, employees feel more confident in the labor market and those companies that offer educational opportunities are perceived as more attractive employers.
In the third quarter of 2020, Udacity’s revenue in the B2B market increased by 120% year-over-year. The company’s management says that this segment accounts for about 80% of the company’s total revenue. By comparison, Coursera’s revenue from business clients accounts for only 20%.
The company's focus on breakthrough technology programs allows it to stand out amongst competitors targeting a broader audience. Collaboration with leading technology companies on exclusive training modules makes Udacity's offering the best in its niche.
Financials and Valuation
Udacity boasts a high net retention rate, which reached 140% in the first half of 2020. The number of sales employees doubled in 2020.
According to Udacity’s press release in 2020, its revenue increased by 260%. In 2018 the company reported that revenue totaled $90M, a 25% increase over the previous year, while in 2019 it exceeded $100M. Udacity also reported that it is profitable. We estimate the company’s revenue in 2021 to be $250-300M.
Udacity raised $240M in four investment rounds. In 2015, its last Series D round valued the company at $1B. Investors include Andreessen Horowitz (invested in Reddit, Pinterest and Oculus), Asas Capital (invested in SoFi, Palantir Technologies and Uber), CRV (invested in Zerto, HubSpot and Twitter), and others.
Public companies Coursera and Udemy have market capitalization of $4.1B and $3.62B, and trade at P/S 10.75x and 7.5x respectively, as of the end of November 2021. Unlike Udacity, they have not broken even yet and have negative operating profitability. Udacity’s valuation to be $3.7-4.5B at IPO.
Risks
The main risk for Udacity is competition from Coursera, edX, Udemy and many other learning platforms that seek to gain a market share in the growing online education market. Competition has put pressure on the margins of these companies, preventing them from raising the price of their services.
There is also a risk that the ease of restrictions will lead students to return to classroom learning, and the demand for online education will drop. These fears are reflected in the drop in Coursera’s and Udemy’s public stocks by the end of 2021.
Sources
Udacity 2020: The Year in Review, Udacity website, Jan 2021
(Online) E-learning Market Size & Share 2021 Rise at 14.6%, Facts & Factors, Aug 2021
Udacity's 2018: Year in Review — Class Central, Class Central, Dec 2018