Online education startup Udacity has raised a huge new round of funding that, according to a source close to the company, values the business at around $1 billion.
Udacity, brainchild of former Google roboticist and Stanford professor Sebastian Thrun, announced $105 million in new funding on Wednesday, led by international media company and existing investor Bertelsmann. Scotland’s Baillie Gifford, Emerson Collective and Google Ventures joined as new investors, while return backers included Andreessen Horowitz, Charles River Ventures, and Drive Capital.
The deal was done at a $1 billion post-money valuation, and brings Udacity’s total funding to $163 million.
Udacity made a splashy debuted in 2012 by putting college courses online as an easier and cheaper way for students to learn than going to (and paying a premium for) college. But the college partnerships failed, and the company detoured into offering courses and certifications to workers who want to beef up their technical skills or learn new ones.
The company partnered with technology firms such as Facebook (FB), Cisco (CSCO) and Google (GOOG) to create individual courses like “Intro to Data Analysis,” and “A/B Testing” for people wanting to add a new skill.
Last year, Udacity introduced its first degree, called the “nanodegree,” a paid training course for people hoping to land technical jobs like software development. The company teamed up with AT&T and Google to create specific nanodegrees around Android development and website development. These nanodegrees also come with career services like job counseling and help with resumes and cover letters. Recently, Udacity expanded the nanodegree program abroad to India.
Thrun has acknowledged that early college classes failed to help students much. But he says he’s confident that the nanodegree will produce different results.
With the college classes, only 2% of students finished the series. With nanodegrees that come with feedback and mentoring, the completion rate is 90%, Thrun has said.
Under the latest strategy, Thrun said that Udacity’s revenue is growing nearly 30% month over month and is profitable. He declined to disclose any more detailed financial information but one source pegged the company’s revenue annual revenue run rate at around $24 million.
Udacity says it currently has 11,000 paying students. While just over 10,000 of students may seem small, the market opportunity, especially outside of the U.S., is promising. According to market research firm Global Industry Analysts, sales in the online education market will reach $107 billion this year. In a sign of the potential, LinkedIn acquired online education company Lynda for $1.5 billion earlier this year.
Thrun says the new funding will be used towards expanding and localizing Udacity’s educations programs in international markets including China, and the Middle East. “There is so much demand internationally,” Thrun said.