Online education firm Udacity looks beyond tech sector

By Harro Ten Wolde

BERLIN (Reuters) – Online education company Udacity plans to branch out of its core technology market to meet growing demand for digitally-skilled workers in areas such as banking and the car industry, its co-founder told Reuters as the company launched in Germany.

The Silicon Valley start-up, now worth more than $1 billion, is betting its focus on vocational courses for professionals, as well as its work for global companies such as Google, will help it to stand out in the fast-growing online education industry.

The market is expected to more than double to $97.8 billion in 2020 from $43.3 billion in 2015, according to research firm Research and Markets.

Publishers such as Pearson , finding their traditional education textbook business under threat, are also investing heavily online. Udacity’s main financial backer is German publisher Bertelsmann .

“We have spoken to many CEOs in sectors like automotive, telecommunications and others – banking – and interest is very high,” said Sebastian Thrun, co-founder of the Google X research lab who led development of Google’s self-driving car before co-founding Udacity in 2011 with David Stavens and Mike Sokolsky.

He pointed to the difficulty German carmakers were having in hiring software engineers to meet a surge in demand for hi-tech features as a sign of a gap in the market.

BMW recently outlined a vision for a complete overhaul in which half its research and development staff would be computer programmers.

Udacity’s current clients are mainly big technology firms including Facebook as well as Google. Its courses include so-called nanodegrees in subjects such as data analytics, software development and artificial intelligence.

“At the moment we are active in a niche market, but we plan to expand,” Thrun said at Udacity’s newly-opened Berlin office.

Udacity currently operates in China, India and Egypt as well as the United States.

Last year, it raised $105 million in a financing round that included Bertelsmann and valued the business at more than $1 billion. Other shareholders include investment firms Andreessen Horowitz, Charles River and Drive Capital.

In total, the company has raised $165 million.

Asked whether current funding was enough to roll out its strategy, Thrun said: “By far”, adding it should last for the next three years.

He declined to say whether he would prefer the company to stay private when more money is needed.

“In the end we want to list our shares. That is our goal, but for us it is not so important. At the moment it is important to build our name,” he said.

Thrun dismissed concerns about a recent drop in funding for education technology. Data from research firm CB Insight show funding deals in the sector are on course to fall 57 percent in 2016 to $1.3 billion, from a record of $3.1 billion last year.

“(This) is not a small niche market … it impacts almost everybody who works. What we are offering will happen, no matter what,” he said.

(Editing by Mark Potter)