Escape Velocity
When we evaluate companies, we look at business characteristics such as product quality, frictionless adoption, viral network effects, and market expansion. Size matters but product quality is just as critical. Most importantly, we focus on companies that can be the leader in their category and achieve disproportionate gains over time.
In order to be a successful company, Quality is key — the best quality services enjoy strong network effects with no marketing spent. Execution is also key as competitors are quick to follow. Navigating the rising competition while maintaining a superior service is a dynamic process, but those who consistently achieve both start to have disproportionate gains as the leader in their category.
A few notable examples from the past decade include Google winning against Yahoo because it delivered better search results, or Spotify blowing past Pandora and maintaining an edge against Apple, Amazon and Google because of the superior quality and user experience. Or Airbnb creating a unique marketplace with a compelling value add for guests and hosts. Amazon out-executing the entire commerce industry. And recall that in 2007, Apple and Research in Motion (maker of the Blackberry) had the same market cap of $70 billion. One of them created a way better product…
Soon, we will start to see a handful of Digital Learning businesses capture meaningful market share in their respective categories. The education markets are all very large, but they are less digitized compared to other industries such as commerce, media, or communication. But this is changing and the pace of digitization is accelerating. Today, Online K12 is a ~$700B market, Online Higher Ed is a ~$100B category, and Online Language Learning is ~$20B. Catalyzed by Covid, leaders such as BYJU’S, Coursera, Duolingo are gaining escape velocity and starting to capture bigger market shares in their categories, while also driving overall market expansion.
Last week, Coursera became a publicly-traded company after completing its IPO. COUR shares traded up 39% to a $7.5B market cap. We have been a partner and investor in the business since the beginning, and have been big believers in their mission to democratize access to high-quality education at a fraction of the cost. (Disclosure: GSV owns shares in Coursera).
In April 2013, Coursera co-founder and CEO Andrew Ng presented at our ASU GSV Summit and we met at one of the busy lobby halls. The conversation led to us leading their Series B and joining the Board. At the time, Coursera had crossed 3 million learners in less than a year. Today, over 77 million learners from around the World access the platform to gain knowledge, earn certificates, and get diplomas from the top Universities.
At one of our first meetings, Andrew laid out the company’s long-term vision; Coursera’s core proposition was to democratize access to the best universities and to help students progress through life. The thesis was that Coursera is student-first, its platform would benefit its University partners to achieve broader scale, and the earned Credentials would play a key role in corporate learning and in hiring.
Andrew Ng’s Long-Term Plan for Coursera, 2013
Source: GSV
Fast forward to today, and Coursera is exactly that — the core Consumer product continues to gain popularity among students and workforce learners globally, and the Enterprise offering helps corporate clients to up-skill and re-skill their employees. Meanwhile, the accredited Online Degrees are remote and at a fraction of the traditional cost.
Moreover, Coursera credentials have become a real currency in the labor force. The old ticket to ride through life was a degree, but the new ticket to ride is a personal knowledge portfolio that incorporates content, courses, and experiences, which are accumulated over time.
At the time of our first investment, our thesis was Coursera was the pioneer and leader of the emerging MOOC trend. Their offering fit square in the middle of the three mega-trends that we saw in the $4.7 Trillion education market — KaizenEDU (continuous learning), Return on Education (ROE), and Knowledge-as-a-Currency (KNAAC). We expected that in the future it was going to be about what you know, and not where you go, and that it was going to be about knowledge, and not college. ROE was all about creating stronger outcomes while lowering the cost and increasing the access.
Coursera’s growth has been driven by a rapidly expanding value proposition to the Learner, starting from single courses, to specialization (mini degree equivalents), to full degree programs from top universities. Just as platforms like Google, Facebook, and Spotify have created powerful business models based on “free” products, Coursera has developed a revenue flywheel with consumer and enterprise offerings, leveraging its massive user base and content catalog.
Today, the core thesis remains and the underlying tailwinds are even stronger.
