I’ve watched the debut of Coursera on the NY Stock Exchange with interest, and a raised eyebrow, having floated at US $33 per share some 8 days ago, the price rocketed to a high of US $62.53 overnight. This has got me curious, as to how a company, which peddled a tech platform for unprofitable (and some might argue, resource zapping) MOOCs in 2012, has managed to raise US $519 million from the market, giving it a $7.56 billion market capitalisation as at 8 April 2021.
Well, it is a fascinating story, as it turns out, of the capitalisation of the democratisation of access to education.
Coursera today has about 77 million students across the globe, 150 university partners and 50 industry partners. In 2020, approximately 50% of their new degree students were already engaged in learning on their platform (what is your alumni rate of return?) and their enterprise division, launched in only 2016, is upskilling the workforce at 25% of Fortune 500 companies.
Coursera’s most profitable line is their consumer segment (individuals wanting to upskill), netting US $106 million, followed by their enterprise segment (business customers) at US $49 million and degree offerings at US $30 million. They have a marketing budget to make any University Chief Marketing Officer weep at US $107 million (37% of revenue in 2020) and they ploughed US $76 million back into Research and Development which is primarily content development (26% of revenue in 2020). Imagine if Australian universities and TAFES invested 26% of budget into course development…
Despite strong revenue growth during COVID (US $184 million in 2019 to US $293 million in 2020) – Coursera isn’t actually turning a profit, with losses reported in 2019 (US $44 million) and 2020 (US $66 million). This is largely attributed to the cost of revenue (think course content, licence fees and partner costs). With only 776 staff, no physical campuses (with backlog maintenance) or the need to cross-subsidise research, I can’t help thinking they just need a good COO from an Australian University, adept at finding fat in operating budget (like magic, even when it doesn’t exist).
Coursera was founded by two Stanford university academics in 2011 – one is now the Chair of the Board. The CEO, a Silicon Valley pro, is remunerated in cash and stock (US $15 million).
Despite the (surprising) litany of risks to their market position mentioned in their IPO documents, Coursera has pulled big name underwriters (Morgan Stanley and Goldman Sachs, among others) and the market has rallied. It seems there are many fans among their 77 million students who believe in the product.
The apparent ingredients to success:
- The platform – single content catalogue, and a unified technology and data platform (how many CRMs and Content Management Systems are your staff operating, unsatisfactorily at your university?)
- Big name partners –Johns Hopkins, Stanford, Princeton, Imperial College, LSE, Shanghai Jiao Tong
- Targeted business development – 12,000 new degree students enrolled in 2019 and 2020, with a cost of acquisition per student at US $2,000
- R & D – US $76 million or 26% of (2020) revenue. This includes investment in the platform and course development. That’s 25 degrees, 40 certificates, 500 specialisations and 4,600 branded, stackable, customisable and credentialed courses.
Want more? Check out Coursera’s IPO filing with the SEC.