We announced our investment in Udemy today: https://techcrunch.com/2011/10/12/crowdsourced-academy-udemy-raises-3-million/
Here's why we invested...
Several years ago in our tenure at the Peacock Equity Fund, Bill Pescatello and I ran across a company that fascinated us in many ways. The company, Megastudy, was a tutoring company based in South Korea that sold digital tutoring sessions for between $20-40. You can read about the company here: https://www.businessweek.com/magazine/content/06_50/b4013056.htm and here: https://abovethecrowd.com/2009/06/02/a-really-interesting-online-education-company-in-korea-megastudy/
The basic model was that tutors created their own digital lesson, put it on the Megastudy platform and then marketed themselves to the audience to sell the digital lesson (and kept 30% of the transactional revenue). The remarkable thing about Megastudy was that the top tutor earned $2MM (at the time we studied them. That number has since gone up to $4MM) while the company did over $200MM in revenue.
What we liked about the model most was that the tutors were monetarily rewarded for being entrepreneurial, entertaining, engaging, and educational. The reviews from the community drove placement on the site and the best tutors got the most traffic which led to the most income –> virtuous cycle.
Fast forward several years…
Bill and I found Udemy and we saw many of the dynamics we witnessed at MegaStudy. Eren and Gagan have built a platform that incentivizes users to create quality content and rewards them when consumers purchase and use that content. The top creator of content has earned hundreds of thousands of dollars to date this year (all for creating a simple powerpoint presentation). Also, the community is geared to push up the most well reviewed content and make sure it gets the most exposure. Finally, the focus on digital content, rather than physical classes is a huge differentiator relative to the some of the competitors like SkillShare (also a fascinating business) because of the inherent scalability. We believe that through Udemy, creators of content can make $1MM+ annually and fundamentally alter the way education and entrepreneurialism intersect.
From a broader technology perspective, the rise of twitter, facebook, tumblr, etc has given these creators of content the tools to reach their audience in a way that wasn’t possible just a few years ago. We’ve invested in companies such as Beachmint and BabbaCo that rely on those social tools to push curation and we believe many of those elements are present with Udemy as well.
We’re looking forward to seeing the continued growth in Udemy (they’ve been experiencing 100%+ growth month over month) and are incredibly excited and honored to be part of the effort.
