Degreed Raises $75 Million to Expand Corporate Learning Platform
During a recent trip to Bangalore to visit a prospective corporate client, Chris McCarthy didn’t know how many people to expect for a talk he was to give on the future of learning. But such requests are not unusual for the CEO of Degreed, provider of a learning platform for professional credentials.
But when he walked into the room, he saw about 43,000 people gathered to hear him. For McCarthy, it was a small sign among many that international countries like India have become powerful markets for corporate training companies like Degreed. “A year ago, those places accounted for 1 to 2 percent of our revenue,” says McCarthy. Companies outside the U.S. “are now 20 percent.”
Helping Degreed continue its international growth and develop more analytical services for its corporate clients is a new injection of $75 million in a Series C2 round. Of this amount, $35 million came in the form of equity funding from existing investors Owl Ventures, Jump Capital, Signal Peak Ventures and GSV Accelerate, along with new investor, AllianceBernstein, an investment management and research services firm. The rest was raised as venture debt, also from AllianceBernstein.
This latest cash infusion comes on the heels of Degreed’s first Series C round in March 2018, which totaled $42 million. To date, the San Francisco-based company has raised about $140 million.
Founded in 2012, Degreed offers over 1,500 certificates and credentials, aimed primarily at companies looking to develop and upskill their employees. When teams sign on, they can identify the skills that they’d like to develop, ranging from customer service to data analysis, strategic planning to user experience design. The platform then surfaces courses, videos, articles and other resources to teach users.
To date, Degreed claims it has served more than 220 corporate clients, including Airbnb, Boeing, Mastercard and Unilever. The company also offers to certify individuals in certain skills for a fee of $129. An unlimited membership plan is available for $399, according to the company’s website.
Despite claiming that it doubled its revenue year over year, the company is currently not profitable, according to McCarthy. That’s because the Degreed remains in growth mode—and continues to spend to grow its operations. It tripled its sales, engineering and client experience team during that time frame, and plans to keep growing its headcount.
The company currently totals about 320 employees, about 10 percent of whom are based outside the U.S. India and Singapore are among the international markets Degreed is focused on.
The new money may also go toward acquisitions, and McCarthy teases Degreed could buy up to two other companies by the end of 2020. Degreed previously acquired learning materials playlist curator, Gibbon, in 2016, and snapped up a competitor, Pathgather, last June.
Degreed exists in a competitive industry, with former massive open online course providers that once focused on universities expanding into corporate learning. That’s what happened to the likes of Coursera, NovoEd and Udacity.
Providing educational opportunities for one’s workforce is a priority for many of today’s big corporate CEOs, who see such professional development as a way to reskill, retain and even recruit talent. A McKinsey survey conducted in 2017 found that 62 percent of executives believe over a quarter of their workforce will need retraining or replacing between now and 2023, due to automation and digitization. About 80 percent said retraining and “reskilling” is key to addressing internal skills gaps.
But relying on company training budgets could prove a risky bet during a potential economic downturn. A July 2009 presentation by the former human resources research firm Bersin & Associates, now part of Deloitte, found that most corporate learning and development budgets shrank during the last recession by about 16 percent between 2006 and 2008 (from $1,275 per learner to $1,075). Mid-sized companies—those with between 1,000 to 10,000 employees—experienced the largest percent drop with a 23 percent cut.
Some economists expect a recession in the near future, though not one as drastic as the Great Recession. A National Association for Business Economics survey this month put the odds of this happening before 2021 at 60 percent.
McCarthy says he is confident his company can withstand a recession, and that the subject comes up with every potential investor he speaks with. He claims this is because corporate customers view Degreed as an investment in technology rather than part of their HR budgets. By adding more services and more data analysis features, he hopes Degreed becomes more important to clients.
“At the end of the day, companies are wondering what skills they need to win,” he says. “We help our clients answer that.”