Coursera CEO Jeff Maggioncalda.
Coursera CEO Jeff Maggioncalda’s excitement is palpable as he talks about the boom in online education, and future of learning. A 1996 Stanford graduate, he was the founding CEO for Financial Engines, an investment-advice company, which he took public in 2010. Coursera went public in the middle of the pandemic on March 31, 2021.
Now as the CEO of the online education firm, he finds himself in a sweet spot in the booming ed-tech industry.
The company has 87 million users, and 12.5 million in India, making it the second largest user base.
Its revenue increased an annual 38 percent to $102 million for the June 2021 quarter, with its enterprises and degrees (colleges segment) growing 69 percent and 78 percent respectively. The consumer segment is the largest revenue generator, accounting for over 50 percent, followed by enterprises and degrees.
In an interaction with Moneycontrol, Maggioncalda talks about the ed-tech boom, why the company decided to go public amid the pandemic, opportunities in the Indian market and why colleges could become its largest revenue generator.
You went for the IPO early this year during the pandemic. Was the growth of the company during the pandemic prompt you to go public?
When the pandemic broke out, we started seeing what was happening with our servers. We had like 5x or 10x the number of people coming. I just said to the board, we should raise more money because you don't know what it is going to be like and want to be prepared. We had around $100 million and I said, let's raise another $100 million because we have the need, and the world is changing. So we raised a Series F in May 2020. Then, I said, ‘Let's think about potentially talking to investment bankers, because this is going to be a very big deal.’ We did not know how much money we were going to need, plus the stock market was really going up for these online companies. So I hired my CFO on May 18, 2020. I recommended to the board that we do an IPO in November. The next week, we interviewed bankers and the week after, we had selected them. We had our S-1 drafted by December 6, which I think we did in like two weeks. We had a first version filed by the end of December and then we went public on March 31.
The growth over the last 1.5 years has been one of the fastest at the back of the pandemic, especially in India, which is now your second largest market. India too is seeing an ed-tech boom. What are your thoughts on the same?
Ed-tech did not really attract a lot of capital for decades. One of the reasons is because there were no big successful ed-tech companies and investors usually don't want to be the first ones. If the first few ed-tech companies don't go well, then the investors kind of hold back. But I think that the pandemic really changed things. By then, online learning companies such as 2U and Pluralsight were public. So I think what happened was that a lot of investors saw the pandemic and (found the next big winner) in ed-tech. They started writing checks to the likes of Byjus, Coursera. We did $100 million round Series E and 12 months later we did $130 million Series F, and less than 12 months later, we did a $500 million IPO. So (we got) almost a billion dollars in two years, because the opportunity kept getting bigger and bigger, and investors wanted to invest.
In addition to investment, what we are seeing is some kind of consolidation happening in the market…
There are different phases of investment. There are Angels, individuals who are just doing $50,000 to get something started, pre-seed, and then there is Series A, B, C, D, and then there's growth, and finally public. What you saw with Ed Tech was, as the Coursera, Udemy and Byjus of the world kept growing and raising big Series E and Series F rounds, the growth investor started giving more money to them. But then at the pre-seed and angels (and other smaller rounds), those investors were funding all the smaller ed-tech. The bigger ed-tech players have all this capital, and for them the business can go even faster if they buy that other company. So investors are funding companies that are innovating rapidly. They're also funding growth companies that could buy those innovative companies. I am not at all surprised by the dynamics. Frankly, when we thought about going public, we didn't need the cash to operate our company. But we thought the visibility of Coursera and having a publicly traded stock makes it easier to acquire companies because you know what the value of your stock is. You don't have to argue about that. We want to make sure that we have a war chest to go out and do what we want to do and grow as rapidly as we need to as well. That is what the bigger ed-tech companies are doing right now.
Does this mean you have a pipeline of companies you are looking to acquire?
We bought one company, Rhyme (Softworks), which was in hands-on learning, in 2019, which was strategic. During our strategy meeting that year, we thought that we had thousands of courses but the hands-on learning component was missing. That moved us faster towards hands-on learning. The way I think about it is that if we know where we want to be in three years, and it's a race to get there, you have to have the tool of M&A in your toolkit. Otherwise, you will be forfeiting certain opportunities to move faster, grow more quickly and to deliver more value to customers.
India is now your second largest market, though not in terms of revenues. So do you see yourself buying companies in India?
We have a team called the Corporate Strategy Team in India. So when we think about strategy, clearly, there's a big opportunity in India, there's a lot of capital going into India, and a lot of new companies being formed. So the first thing I said is, let's build out the team. So we did hire a lot of people. We grew from 21 people in three cities to about 150, by the end of this year in over 20 cities. One of the people that we have hired in India is a dedicated strategy person, who is just looking at strategic opportunities in India. That definitely includes partnerships and also possible acquisitions. But I can't say what we're going to do or not do, but I can say that there's a lot of opportunity in India. It is a part of our strategy. There's a lot of incredible company formation happening funded by capital. And, we have a team that is definitely, you know, close to the market there and growing pretty quickly.
I would also like to know your reasoning behind making India the regional hub for APAC. Was it the growth you saw in the last one year that drove this decision?
It was driven by a few things, and growth that we were seeing was one of them. We had a good team there, the 21 people that we had, they are very talented. When you expand as a company, just being a CEO, you really want to make sure that your culture, strategy and your team are really well aligned. If you have a team already in one area, and they're performing well, understand the business, your customers, and the values of the business, it is great to just grow with that leadership. Raghav Gupta, who has been with us for long, is the leader of our India team. And we just thought, ‘Let's bet on Raghav’. Plus, we have seen the growth emerging in India and looked at where things were going. There is a large population, rising middle class and a big emphasis on education. We have seen that growth, we have a great team, and this is a great place to bet. So it was really a combination of the growth we've seen, the team we had and the growth that we expected, that made us really double down on India.
So could India become the second largest market after the US?
I suspect that it will. We have a pretty big sales and client Services team in London. They serve in Europe, Middle East and North Africa. There is a lot going on in the Middle East as well. I would say that they may be roughly the same size right now. But it also depends on how fast different regions grow. Sometimes you see a certain region really take off. You put a lot of your investments and resources to supporting that growth. We are kind of making bets on where the opportunity might emerge. And the more that opportunity emerges, we will put in more resources. It is a little bit like what we do with Coursera for Campus. We had put off a lot of our resources on Coursera for Business, but we spent some to get this product launched. And then once the pandemic happened, we started putting a lot more resources on this product. We said this is a big opportunity, bigger than we thought before. I think the same is true for any region of the world, including APAC. If we see the kind of growth that we're expecting, that team will grow more rapidly than others and will ultimately become the largest team.
What does the future of work and future of learning look like after the pandemic?
Technology and globalization mostly are the key drivers of change. Because the world is changing, people need to learn new things. So the future of work and the future of learning are converging, driven by a world that is accelerating. Close to 30 years ago, it was not time for ed-tech. The world was changing so quickly, we didn't have all the capacity. We did not have Cloud. So I think the big reason why we do what we are doing is because the world is changing unless you think technology is going to slow down, or globalization is going to slow down. I believe you will be seeing a lot of demand for education, which will never be the same way that it was.
With online learning, campuses will reopen, but they'll never be the same. In work, offices will reopen, but they'll never be the same. We will be having zoom meetings in ways that we never did before the pandemic and we will have hundreds of employees who don't go to offices at Coursera. Some do, some don't, and some do every now and again. But there's this blended world of work that will never go back. Part of it is because we want the best talent in the world. If the competition for talent is very intense and if you have to work next to an office, we are losing out on 99 percent of the global population of talent. I would say if a school only has teaching on campus, they're losing out on 99 percent of the students that could be learning from that school. So there's going to be hybrid learning.
What do you think is going to be the next big game changer in ed-tech?
I think it is going to be hybrid credentials. So first of all, credentials will be important. The reason the credentials are important is because for employers, it's hard to see who knows what. So seeing credentials is a quick way of saying, ‘Oh, this person must know something about that.’ Because they got into the school, got this degree and learnt these things. I think they are going to be hybrid credentials. I don't think it's already happening. For instance, NMIMS University is still giving their Bachelors of technology, they call it the B tech degree. But they're integrating Coursera into their curriculum. And now you can graduate B.Tech with Honors in data science. So the B.Tech is your college degree and honors in data science, you get on Coursera. This is a hybrid of micro credentials, and a university credential. I think that hybrid credential is going to evolve very rapidly. So when people say colleges are going to be going out of business, this is assuming that colleges are not going to change and evolve. But they are changing and evolving. And they're working with Coursera for campus, and they're integrating content from Google, MIT, Stanford and other universities to really revitalize their college degrees. So I feel like the next big thing in higher education is not just hybrid teaching is hybrid credentials.
If I understand, Coursera has stepped up its efforts on the Degree segment…
Yeah and that is really because so many people need access to learning but they are working and they can't go back to campus. We see this happening in India in a major way with the first 38 universities who have been given permission to do fully online degrees. They can do 40 percent of the credits that can come from an external provider like Coursera as a partner and 60 percent has to come from the university. But 100 percent can be delivered online. So I think online degrees create a level of flexibility and affordability. And also sort of relevant, because they can change very rapidly it's harder for on-campus programs to match. The other thing is a lot of universities are hiring new faculty to teach the online degrees. And these new faculty sometimes are a bit more innovative.
So do you at some point, see your business and degrees overtaking the consumer business, which is right now your largest revenue generator?
Well, I expect that it will. One of the reasons is that credentials in the consumer business are valuable. But anybody can earn them, if only they spend enough time. I think that a lot of people will still look for the rigor and premium credential of a college degree. Right now, that market, like I said, is $1.9 trillion. That is a very big market. It makes me think that that will probably be the largest segment of our business at some point in the future.
Which one do you think has a bigger potential, enterprises or degrees?
I suspect that degrees will. But companies kind of run almost mini-education programmes inside their companies. That might be the biggest market but you know, that's a $365 billion market compared to 1.9 trillion. So I'm still betting on colleges and universities.
The growth we are seeing today in ed-tech, including Coursera, is it sustainable, even as colleges reopen and businesses return to work?
But when you look at the size of higher education, the amount of tuition that students are paying for higher education, it is about $1.9 trillion. And if you look at the size of the corporate training market, it's about $365 billion. I believe that the corporate training market is getting bigger as more companies realize that they need their employees to be learning new skills. You saw Amazon announce that they will pay for college education for its employees. Walmart's doing that, and Target is doing that. So companies are saying we will buy your college education for you. That's how badly we need skills. So when I look at a market that's over $2 trillion, and we are doing less than a half billion dollars, that's 2000 times smaller. If we execute we should be able to grow very rapidly for a long time.