A $157M Fundraise for Guild Education Births Edtech’s Newest Unicorn

Nov 13, 2019

The education technology industry has given birth to its newest unicorn, one that wants to connect employees at Fortune 1000 corporations to educational programs and further their careers—all while helping higher-ed institutions stay in business.

Guild Education has raised $157 million in a Series D round led by General Catalyst, and joined by Emerson Collective, Iconiq Capital and Lead Edge. A flock of previous investors also contributed, including Workday Ventures, Salesforce Ventures, Next Play Capital, Silicon Valley Bank, Felicis Ventures, Bessemer Ventures, Redpoint Ventures and Harrison Metal.

All said, this single round is more than double the $71.5 million that Guild had previously raised. And the deal gives the company a valuation north of $1 billion, at least according to investors.

That’s plenty of cash—and bragging rights. Guild claims that it is one of the few female-led companies to achieve the hallowed “unicorn” status this year. And the company is adding a big name to its board of directors: General Catalyst’s chairman and managing director, Ken Chenault, the former CEO of American Express.

Along with the accolades come big expectations for the Denver-based startup—not the least, financial returns. The company is currently not profitable, according to co-founder and CEO Rachel Carlson, although she adds that there have been profitable months. “We decide to reinvest our revenue into research and development and expand our partnerships.”

Guild was founded in 2015 to connect higher-ed programs with employers, who would cover tuition for their employees. Often these were frontline workers at fast food or retail stores who had to put schooling on pause, or couldn’t afford it. One of the company’s first major deals was with Chipotle, which now covers 100 percent of tuition for employees who have been with the company for more than 120 days, and who clock in at least 15 hours per week. Chipotle employees across 42 states are currently pursuing more than 200 different degree programs, according to a company representative.

Today, Guild works with a handful of other brand-name companies like The Walt Disney Company, Discover Financial, Lowe’s, Taco Bell and Walmart to connect their employees to online programs offered by nearly a dozen partnering higher-ed institutions. They include the University of Arizona, Purdue Global, Southern New Hampshire University and the University of Central Florida.

There are about 1,600 online degree programs available in Guild’s catalog, says Carlson. But the company works with employers to narrow the list down to the ones that make the most sense for their employees. Courses on data analytics and digital marketing skills are popular, as are those specific to a trade, such as healthcare, plumbing and carpentry.

The company generates most of its revenues from its university partners, which pays Guild for what is essentially a student recruitment service. “They pay us out of what would have been their marketing budget to acquire these students, typically on channels like Google and Facebook,” Carlson explains.

The premise is that paying Guild is a more effective way to get students than buying ads on the internet. The company also has a team of coaches that provide advising and support services to help students plan, apply for and finish their programs.

In the meantime, the companies pay the universities directly, usually from their tuition-assistance program.

About 400,000 working adults have taken advantage of the program and started on the path back to school. But that number represents just a small fraction of all the employees who are eligible. About 3 to 5 percent of employees at Guild’s partnering companies partake in the program, says Carlson, though some report higher rates. That figure is in line with estimated industry averages.

A ‘Hot Space’

Guild often describes its work as helping companies provide “education as a benefit,” and has made that phrase mainstream. But the idea is hardly new, as employers have long provided tuition-assistance programs for their workers.

Some colleges and employers work out arrangements on their own, such as the partnership between Strayer University and Chrysler, the automobile maker. And there are established middlemen services that predate Guild, like the one offered by Bright Horizons, a publicly traded company.

Previous research suggests there are practical incentives for companies to run tuition reimbursement programs. They can encourage workers to stick around longer, thus reducing turnover. Those who stay might even advance to more senior roles that the company would otherwise hire for. And at a time when tuition costs continue to soar, such programs can be an attractive recruiting tool.

Guild claims that employees who take advantage of its education benefits are 2.5 times more likely to get a promotion than their peers who don’t, and that they are 4.5 times more likely to stay at their jobs. Those numbers come from internal data—so take it with a grain of salt. But it’s an alluring pitch, one that might help explain why companies spend an estimated $18 billion to $22 billion each year on tuition-reimbursement programs.

Other upstarts are competing with Guild for a slice of that market—and some boast deep pockets. Earlier in May, Arizona State University created and spun off a company, InStride, that also connects employers with university programs. It is backed by The Rise Fund, the social impact investment arm of private equity firm TPG, which has invested a sum in the “low tens of millions” of dollars, ASU president Michael Crow told The Chronicle of Higher Education.

The origins of InStride trace to ASU’s partnership with Starbucks, which lets workers take online, degree-granting programs from ASU at little cost. Nearly 3,000 workers have finished their online bachelor’s program, EdSurge reported in July.

“The concept of employer dollars going to educational institutions, and trying to commercialize that pathway, is something that investors are really excited about,” observes Trace Urdan, a managing director at Tyton Partners, an investment banking and advisory firm in the education market.

“Funding higher education is an increasingly difficult challenge, and finding ways to plug employers into the financial makes sense,” Urdan adds. “For folks who are in the middle of that, it’s a hot space. There’s a lot of action right now.”

Guild will also find itself competing with Pearson, which last month purchased its first company in three years to support a new venture that helps employees earn postsecondary credentials.

Now flush with cash, pursuing acquisitions is a possibility for Guild as well, says Carlson. “We are going to explore opportunities in companies that are aligned to our mission.”

She also plans to grow her team, which currently numbers roughly 400 full-time staff, to a headcount that could reach in the 500s. The new hires will support efforts to enlist more employer and university partners, and to refine the company’s technology. Among the tools Guild has developed is a proprietary database on how well different programs offered by universities serve the needs of adult learners. This system can inform how the company picks its partners, and offer programs that are tailored to what employers want.

But Carlson says she’s in no rush to spend the money. In fact, a lot of it could go to “our savings account,” she quips. It’s not typical for venture-backed startups to sit on large piles of cash. But it’s also not unusual for them to raise as much as they can to cushion against any unforeseeable downturn.

“Our top goal is to be a stable and enduring company, and that’s key because our clients are also some of the most stable and enduring companies in America,” says Carlson.


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