Skillshare Series D Raise: What We Learned

Today we announced that Skillshare has raised a $66 million Series D funding round, led by OMERS Growth Equity. The last few months have been pivotal for the company, and like everything else in 2020, the path to funding was full of surprises. I wanted to share a few lessons learned from the process.

The value of focus

This isn’t necessarily a new lesson, but it was a valuable one to reinforce nonetheless. When I joined three years ago, Skillshare had pivoted away from its in-person teaching model several years earlier. We were using our open platform to teach as many different skills online to as many different people as possible. Creative classes and content had naturally evolved to be our core, but we aspired to be the go-to source for business, tech, and professional learning as well. But in mid-2019 we came to the conclusion that while we could compete in business and technology, we could be the clear market leader in creative learning.

We started the work behind the scenes, making subtle shifts in our product, content, and messaging to refocus our business where we were strongest. In January 2020, we officially refocused our content, product, community, and brand to help people explore and discover their creativity, both personally and professionally. And with that focus, the community flourished. Today Skillshare is made up of 12+ million members from around the globe who are passionate about leading an authentic, creative life. The corporate world has taken notice, too: our brand pivot has led us to partner with hundreds of businesses to help employees tap into creativity and feel more fulfilled at work. Prior to the COVID outbreak in the US and Europe, we were already reaching high points of user acquisition, member engagement, and growth.

COVID boosted our numbers but clouded the outlook

We had hit our stride well before COVID fully broke out in the US. Once a pandemic was announced in Q2, people around the world who were quarantined at home were craving activities and connection to others more than ever before — our new user signups more than tripled and existing members were watching 3x-4x the number of lessons. COVID accelerated the success we’d been carving out for ourselves, and the team and foundations we’ve built over the last several years were ready when the world beat a path to our door.

But as we got into the initial fundraising conversations, it was clear that many investors were still grappling with how to read the COVID impact. There were 3 general thoughts from investors:

1. COVID has accelerated trends that were going to happen anyway (like remote work and online learning) and we’ve reached a new, higher baseline that we’ll continue to build on
2. COVID is accelerating next year’s acquisition into this year, and all of the businesses benefitting from the pandemic will end up plateauing next year or when things return to “normal”
3. Nobody has a clue what will happen, so it’s best to sit on the sidelines

I’m obviously a big believer in #1, but admittedly biased. It was interesting to hear such a wide range of opinions on how the pandemic will impact growth in the tech and startup world. We saw several early conversations fizzle with firms that were impressed by our business but uncertain how to read the current environment.

Casting a wider (virtual) net

Our entire fundraising process was virtual. We had just wrapped up our banker selection (Citi represented us on this raise) when we went into full quarantine, so we did not have a single face-to-face meeting with an investor. To this day, I have still not met the OMERS team face to face. One or both of us may just be an avatar.

What the Zoom roadshow enabled, however, was for us to cast a much wider net. We were able to meet with 65 different firms in the first round. While 65 one-and-a-half-hour Zoom pitches was a physical grind, there’s no way that we could have managed the logistics of physical meetings in the same time frame. I think it is also highly unlikely that we would have seen the interest from the investor side. A video meeting carries a lot less overhead for everyone involved, so we had a high hit rate for first meetings and were able to introduce our business to a broader audience. I know that many of you who have led fundraising before may think this sounds like too broad of an audience or overly time consuming, but I think of these introductions as planting valuable seeds for the future. There were investors who were unlikely to invest in this round that could be great partners for us down the road. There’s a high probability that we would not have met with OMERS (based in Toronto) had we been following a traditional in-person process.

Zoom made it more personal, not less

Everyone’s been rocking the “business on top, elastic waistband on the bottom” look for months now, and the pitch meetings were no different. Taking all meetings remotely allowed everyone to skip a lot of formalities that are more draining than productive. I may be the first person to raise a $66 million round while barefoot.

One thing that was immediately obvious was how much more personal the meetings were. It turns out you can learn a lot about someone based on what’s behind them in a video call in their home versus the sanitized environment of a big VC boardroom. Behind my desk, I have a wooden surfboard mounted on my wall which I built and shaped by hand (looks awesome, rides terrible) and it turned out to be a great icebreaker. Like me, every investor had a stamp of personality — photos, bikes, art, kids — in their home offices that helped us to build rapport right away.

It made the experience that much more human and deepened our connections in ways that wouldn’t have been possible pre-COVID. We really got to know our investors on a personal level, giving us a fuller idea of who we’d be adding to our board. We wanted someone who already fit the mold of the rest of our board: strategic, generous, and proactive. After weeks of due diligence, Saar Pikar and the OMERS team were the front runners. We immediately clicked, and it was clear from the beginning that their values and culture align closely with our own.

Where we are going from here

This was an interesting raise for Skillshare because it was opportunistic. Skillshare has been cash-flow positive year-to-date, so we were approaching the raise as an opportunity to accelerate our already-healthy growth rather than it being a necessity for survival. Everywhere we look in our business, we are seeing blinking green lights and want to move faster. So we will use the capital to do more of what has been working, and invest more in our enterprise growth, international expansion, and teacher tools.

We expect to always be a consumer-led business. That said, our success in consumer markets has led to a growing interest from enterprise clients. Our corporate offering, Skillshare for Teams, has seen strong growth over the last few years and a recent acceleration with the COVID outbreak. Companies increasingly realize that a culture of creativity results in more engaged employees. In fact, engagement on our platform is twice the industry average for traditional learning solutions. Further, our platform uniquely delivers this learning and development experience while satisfying the needs of companies looking for perks and benefits for their employees that are positive, affirming, and deployable for distributed teams. Our partnerships have also grown significantly as we refined our focus on the creative community. More and more companies are coming to us as partners as they look to build their own brand within creatives.

What does “international expansion” actually mean for Skillshare? It’s all about investing more aggressively in our product development and content creation to support, retain, and grow our base — no matter where they are. Two-thirds of new user trials are already coming from outside the US, so we know the interest is there. But we’re mostly an English-language platform at the moment, so part of our next phase will be optimizing more localized experiences for international audiences.

Our teachers are the heart and soul of our creative community. We are going to be investing in new features and functionality to help them create more amazing content, connect more directly with their Skillshare students, and promote their amazing work both within and outside our platform. We will also be launching new revenue streams so that teachers can provide a broader set of services and products to their followers.

Like most people, I can’t wait for 2020 to be over. Skillshare raised a big round from a great investor during one of the strangest and most uncertain years in our lifetimes, but maybe that’s exactly what makes this funding round so important. We have a real opportunity to empower people around the world (truly), help them discover themselves through creativity, and come together in a supportive, collaborative community — something we could all use in 2020 and beyond.