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Sep 24, 2014

Company Funding

E-Learning Startup Udacity Raises $35M to Launch ‘Nanodegrees’

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  • Lizette Chapman
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    Udacity Inc. founder Sebastian Thrun
    Udacity Inc.

    Udacity Inc. has secured $35 million, the latest e-learning startup to raise funding in a growing cluster that has raised hundreds of millions from venture investors in a bid to redefine the way people learn.

    Unlike crowdsourced learning marketplaces like Udemy Inc. and Skillshare Inc., which invite the masses to teach a variety of skills, Udacity works with corporate partners to create online courses to train future employees.

    And while companies like the Minerva Project Inc., Coursera Inc., Khan Academy and others aim to upend the traditional college experience, Udacity targets college grads and is built with the help of industry partners seeking skilled employees.

    Those partners, a list of roughly 20 that now includes Google Inc., Facebook Inc., Cloudera Inc. and Salesforce Inc., provide the content and pay Udacity to develop online classes and verify knowledge upon graduation.

    “We’re taking specific jobs and reverse-engineering them to teach what’s required and then certifying a person in that area,” Udacity founder Sebastian Thrun said.

    The Series C infusion brings total outside backing to the three-year-old startup to $58 million. The funds will bankroll expanding into other sectors besides technology as well as developing a series of new “nanodegree” programs which will be offered when a corporate partner builds and recognizes specific courses geared toward employment at their company.

    AT&T, which paid Udacity $3 million to develop a series of courses, will offer the first nanodegree program. It will include front and back-end Web development, iOS developer and data analyst courses.

    Roughly three million users have signed up for the free Udacity courses to date. The company also offers premium services, which include feedback, a help line, a personal mentor and certification of course completion. Udacity also helps with job placement.

    Mr. Thrun said the startup recently surmounted what he believed to be one of its biggest obstacles.

    “When we started out it wasn’t clear that there would be a sustainable business model, but I believe we’ve nailed it,” he said. “Since March, paying students have been increasing by 2% day over day.”

    Mr. Thrun said he began raising the round in summer once the trajectory was clear, and he selected investors who had contacts in diverse geographical regions and industries.

    Columbus, Ohio-based Drive Capital led the round, with participation from Bertelsmann Se & Co. KGaG in Germany, Recruit Co. Ltd. in Japan and Valor Capital in Brazil. Cox Enterprisesalso participated alongside existing investors Andreessen Horowitzand CRV and individuals Peter Levine and George Zachary.

    Drive Capital Founder Mark Kvamme joins the board.

    “The next step is to make it [Udacity] credible and show people in this country and others that there are alternative pathways to employment,” Mr. Thrun said. “The biggest issue is trust. With Harvard and MIT the trust is there, but [with learning startups] it’s a trust that needs to be earned.”

    Write to Lizette Chapman at lizette.chapman@wsj.com. Follow her on Twitter at @zettewil


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