In conversation with: Sebastian Thrun, CEO, Udacity

April 10, 2014, 6:24 PM UTC

Sebastian Thrun wears many hats: Stanford professor. Google robotics tinkerer. And now, chief executive of online learning pioneer Udacity.

The venture capital-backed company in Silicon Valley had a rough start trying to work with San Jose State University, a failed experiment that looked somewhat like higher education organ rejection. It has re-tooled with a “freemium” model of offering skills-based classes for free, working with engineering-oriented companies, and charging for mentoring services.

A condensed version of this interview appears in the current issue of Fortune magazine.

Udacity started working with universities, but you’ve shifted to corporate work. How do you work with companies?

Facebook (FB) has a class internally that they used to be teaching just to internal engineers to become basic data scientists. And we digitized on this specific class so everybody in the world can become a data scientist at the level a Facebook engineer is required to be a data scientist. You might argue this is kind of giving away some of the competitive advantage, but the truth is it’s really great for the world that now everybody in the world can take this class, free of charge actually, and tool themselves up, to be able to educate themselves with our help. Obviously the class doesn’t contain any confidential Facebook information. It’s at a level which is industrywide, and Udacity as a policy only accepts these kind of classes. We don’t do proprietary classes because we are really passionate about democratizing education.

So Facebook engineers teach the course?

Yes. A Facebook or Google (GOOG) engineer are world experts in a subject matter, but they don’t necessarily know how to teach online. So we are kind of the Hollywood of education. That might be an overstatement. We are like the movie production side. We put together the video editors and the playwrights and sometimes the actors. Sometimes we even give the people that are facing the camera, and the original engineer doesn’t really show their face that much on camera.

And explain why you focus only on engineering.

We believe that the skills gap is one of the most important aspects of things that we needed help with. At this point, we have about 2 to 3 million open positions in this country that require technical skills, and the number tends to grow. If you believe McKinsey, it might be 85 million open jobs worldwide, globally by 2020. And we believe specifically that the technology skills gap is important, first because there are many open jobs. Secondly, it’s also the most fast-moving area. Technology is advancing so quickly that almost everybody today needs to really keep up with technology skills. And to be honest, I mean that’s a big enough chunk for us to bite. At some point obviously I would love to include everything, and I’d love to include humanities and every discipline, but I think for the time being, this is going to keep us busy for a few years.

Who are you typical students?

I can tell you exactly who they are. The vast majority of students we have right now are young professionals. The vast majority are actually in jobs right now. That’s the demographics. We have about a third U.S., two-thirds international, and they find themselves in situations where they need specific job skills. These are people that just understand learning is important. These are life-long learners.

How many employees does Udacity have, including the mentors you hire for paying customers?

We have in total about 70 employees at this point and about 24 mentors.

Who are the investors in Udacity?

First of all it was me personally. Second one was Charles River Ventures. And then Andreessen Horowitz.

How much money have you raised in total?

About $23 million.

Will you need to raise more money?

Yes, we will.

For what?

This will be for scaling globally. Our classes now are all in English. But we have just launched seven classes in Japanese translation in Japan, and we are expanding into the Spanish and Portuguese market. But interesting enough in the tech space, most kids — most people just want to speak English. So very simple translations like subtitling goes a long way.

If 100% is the total, which I know it can never be, how much of your time are you spending on Udacity?

My wife believes I spend 120% at Udacity. I still am involved with Google and act more like an adviser at this point. I still carry a professorship at Stanford. I still have grad students that I see regularly but only for a few hours a month. But I’m extremely passionate about putting all my energy into Udacity because I think from all the things I’ve done, to be honest, that’s the one where I can really say this is going to change the world most profoundly.

Why is higher education so expensive?

I actually believe the residential experience, the way it is set up today, costs a lot of money to make. We’ve forgotten to look at all the people that are excluded from this experience. These are people in mid-career, these are people in geographic locations that can’t make it — or people who just won’t be admitted to MIT and Stanford. There’s a vast market beyond the existing higher education market that is almost entirely neglected. I’m very proud to be a professor at Stanford. We do I believe very good work. And to make this happen on a campus with the quality of the research faculty, that’s just what it costs. And I take no issue with this. I just think that there’s a huge number of student left behind that we should reach as well, and Udacity really focuses on those people.