Industry Analysis — Leadership Skills Sector
The Leadership industry has seen increasing growth and prominence in the investment world post-COVID-19. The industry’s growth is being driven by numerous trends and the industry has a variety of business models to serve different spectrums of need. The fastest growing business model is expert-driven, technology-enabled coaching solutions with notable examples, including BetterUp and CoachHub.
Global Leadership Sector Growth
- Per employee spend has grown from ~$1,200 in 2011 to ~$1,300, with appetite for both physical and digital
- Despite the $370bn spent on leadership training, only 20% of trainees are estimated to improve their performance. Moreover, 77% of organisations report that they have leadership deficits
- 95% of learning organisations are planning to at least maintain, if not increase, their current level of investment into leadership development
Principal Trends
- Growing class of middle managers who have increasing amounts of disposable income (average manager salary in the US is ~$90,000) and ambition want access to expertise to enhance their careers
- ‘The Great Resignation’ has forced companies to work harder to retain their staff. The switching cost of employees leaving is growing against the cost to hire, encouraging employees to be proactive about career growth. It currently costs $100,000 to hire and train a new employee as opposed to $5,000 p/a to upskill a current employee
- Increased emphasis on multi-tasking and productivity is adding further pressure on employee wellbeing and health, creating a crossover of leadership spend into the $45bn self-improvement market
Business Model
- The ubiquity of leadership content, driven primarily by online offerings, is lowering the cost to students. Differentiation is being developed by focusing on outcomes, creating communities or specialising content
- Traditional MBA brands retain most value, including in online offerings. Growth to compete is expected in employer / B2B channels
- Subscription platforms (such as BetterUp and CoachHub) offer access to expertise across middle managers, executives and boards, overtaking freelance markets for leadership skills
Leadership Funding
Funding for the Leadership industry hit record highs in 2021 with 30 deals completed, raising almost $1bn in funding with BetterUp’s Series E raise of $339m being the largest single raise. Adjacent to this surge of funding, consolidation is starting to emerge within leadership either from emerging industry giants (such as BetterUp and CoachHub) and global companies (Workday and Skillsoft) looking to add leadership into their businesses’ capabilities.
Select M&A Transactions from 2021–2022 Include:
- Skillsoft’s $22m Acquisition of Pluma
- 15Five’s $50m Acquisition of Emplify
- Giift’s $70m Acquisition of Xoxoday
- Workday’s $700m Acquisition of Peakon
- Headspace’s $3bn Merger with Ginger
Over the next 12–24 months, we expect to see further M&A consolidation in the market. Companies who raised successfully in 2021 will have plenty of capital to deploy on acquisitions. Moreover, companies in adjacent industries, such as HR Tech and Consulting, will continue to look to add leadership into their portfolios to extend their offering for clients. Due to the macroeconomic climate, fundraising for companies will be harder. However, the lack of leadership within organisations and the desire for young workers to try a range of jobs are not short-term problems and need consistent attention from employers. Therefore, companies operating in the leadership skills sector should still be able to grow strongly and raise capital.
For the full IBIS Leadership Report, please contact info@ibiscap.com
Sources: CapitalIQ, Tacxn, IBIS Capital, Statista, Forbes, Apollo Technical, EdTechX Global Report, Advantis Global, McKinsey
