Masterschool: $100MM to Build the Future of Global Education
Group 11 has led a massive $100MM Seed round in Masterschool, the digital education and financial technology company disrupting the massive $670BN U.S. “college-industrial complex” (WSJ). The company is building a network of online schools, for which students pay no tuition until they are gainfully employed. Target Global, Pitango Ventures, Dynamic Loop Capital, and private investors including Sir Ronald Cohen also participated in the round. It is believed to be the largest Seed round for a software company out of Israel.
Higher Education is Inefficient and Outdated
The underlying dogma of traditional higher education is no longer believable. It has been universally accepted for far too long. In its current state, the higher education system in the US simply does not serve its participants effectively.
There are two key parties to be considered in this equation — students and employers. In a perfect world, education acts as the bridge between these two parties: students pay schools a tuition in order to gain valuable, employable skills, with hopes of entering the job market and earning a wage in return for contributing to the economy. Employers hire these qualified students and provide them wages, enabling the students to pay back the educators who invested them with the skills.
Unfortunately, the system falls short. Today’s higher education programs do not fulfill their role. They demand continually increasing prices of students (without necessarily increased quality of education), do not always teach relevant, employable skills, and ultimately are not efficiently converting students into prepared employees that meet the ever-changing demands of our job markets.
College is far too expensive. Students are forced to commit more money than ever to gain an education; college tuition and fees have historically outpaced inflation indices significantly (Visual Capitalist), and aggregate U.S. student loan debt has surpassed $1.75TN (Forbes). The trade-off is simply unfeasible; students are paying too much for traditional, four-year, on-campus programs that do not guarantee strong job prospects, thus leaving them in massive debt without the reasonable means to repay it.
Moreover, colleges are not aligned with students to help them secure jobs upon graduation. They overwhelmingly provide general, theory-based curriculums that leave students ill-prepared for real-world jobs. It is then incumbent upon the inexperienced students to secure job placements with little to no practical skills and/or guidance or support from their educational institutions. The modern student needs applicable skills, in growing industries, obtained in a shorter time frame, and at a much lower cost than a traditional education.
As for the job markets, data shows the expansion of industries in the U.S. are in technical, high-paying engineering and software jobs. Companies are hiring for roles in computer science and data analytics in large quantities. Employment in Computer and Information Technology roles in the U.S. is projected to see a 13% overall increase from 2020 to 2030, much faster than the average for all occupations (U.S. Bureau of Labor Statistics). Demand for these roles is growing, and thus companies are willing to pay higher wages to satisfy these growing talent needs. These roles have a median wage of $97,430, more than double the $45,760 median wage across all other industries in the US.
In Computer Science (CS), one of the highest-demand job sectors in the global market today, there is a significant shortage of qualified candidates. In the US. there are projected (using historical growth rates) to be 2,938,983 Computer Science roles in 2023 (U.S. Bureau of Labor Statistics), while only 128,193 undergraduate CS degrees (NCES), 74,837 graduate CS degrees (NCES), and 97,226 online coding bootcamp certificates (Career Karma) are projected to be awarded. These programs produce a total of 300,256 potential new applicants for these roles, leaving a 2,638,727 deficit. This shortage of talent in the US illustrates the inability of current education systems to satisfy demand in high-growth, high-paying sectors.
In short, to better serve all stakeholders, this inefficient legacy system of physical, on-campus learning is in dire need of digitization and alignment of incentives in order to become more flexible, scalable, and affordable.
Masterschool recognizes the above deficiencies and issues in higher education, and is working to rewrite the equation entirely. The company partners with leading professionals to train individuals so they can secure high-paying jobs upon graduation. Students attend six to nine month online schools for specific careers paths (i.e. Data Science) and skill sets, which cost $0 until they are hired. Masterschool actively works to place graduates in high-growth industries such as technology. Only once the graduates are gainfully employed do they pay back their tuition by returning a fixed percentage of their monthly income. This directly aligns the school’s incentives with the student’s — the way all educational systems should operate.
The founders of Masterschool strive to eliminate the financial obstacles that prevent individuals from integrating into the workforce. They hope to optimize the balance between the length, cost, and value of education programs. For example, a traditional two to four year college program costs too much, takes too long, and still may not produce strong job prospects. Shorter, unguided coding bootcamps may be a more affordable option, however many are too short and unstructured to be considered a legitimate career-changing program. This is why Masterschool is targeting the under-served middle ground — offering guided, intensive programs taught by industry experts, at lower costs and reasonable lengths, with tangible career placement.
From Zero to Hero
Let’s look at a real example. Take Jade (name changed for privacy purposes), a student in the final year of her Economics program. Jade was struggling to find internships or full-time job prospects during school. Her program’s curriculum focused on theoretical topics, not technical skills, and thus left her unqualified for many roles she was interested in. She wanted to explore ways to become a more qualified candidate in the job market, without taking on more debt to enroll in another long, expensive program. That’s when Jade learned about Masterschool.
By attending Masterschool’s Data Analysis program, Jade learned essential technical skills in Python and SQL, and utilized Masterschool’s career development resources to secure interviews at top technology companies. She was able to earn a high-paying job at Google and will begin paying back her tuition to Masterschool each month. Jade is the textbook example of a candidate with no prior programming experience, who was able to secure a highly-coveted, technical role at a major technology company through Masterschool — all in less than a year.
Jade’s success highlights a crucial element of Masterschool’s offering: the placement process. Unlike the average college career center, which is ill-equipped and not incentivized enough to work with every single student, Masterschool is committed to helping every graduate achieve successful employment. They go above and beyond to provide students with all they need — CV/LinkedIn workshops, live coaching sessions, networking and interview preparation — to best showcase themselves and the new skills they’ve learned.
Why We’re Excited About Masterschool
We believe Masterschool has built a proven and scalable business model to disrupt this massive market. Moreover, by incorporating innovative financing solutions, they empower students to bypass the financial and operational inefficiencies of legacy education. As is the case with other Group 11 portfolio companies, Masterschool is digitizing outdated, manual processes. They are improving the user experience on a large scale as well as rectifying market imbalances, including the ROI of current higher education and the talent shortage in high-growth sectors. As the company continues to grow, they will further develop their network of schools, Masters, students, alumni, and hiring companies, to establish themselves as a trusted household name in education.
Group 11 is proud to back the impressive founders of Masterschool — Michael Shurp, Otni Levi, Roi Tzikorel, and Eran Glicksman — who have proven expertise in the education technology industry. Congratulations to the entire Masterschool team as they strive to eliminate the outdated financial barriers that prevent students from obtaining successful careers and financial freedom. We look forward to the company’s continued progress.