By Marlene Givant Star
Even as the for-profit education sector has been swooning for years under the weight of heightened government regulation, highly focused task-oriented ‘nanodegree programs’ are attracting attention from investors.
These programs aren’t really degrees but rather certificates aimed at specific job skills.
Mark Kvamme, co-founder of investment firm Drive Capital and a board member of Udacity, an online provider of nanodegree programs, just led a $35 million Series C investment in Udacity and views the California-based startup as a potential IPO candidate.
Kvamme told Mergermarket that the market for nanodegrees is potentially quite large. These programs, typically four- to six-month certification courses, are aimed at bridging the gap between what college graduates know and what companies actually need. For instance, employers might need new hires to have training in Android programs or Mongo big data software, he said, and Udacity provides these types of nanodegrees.
Rick O’Donnell, senior vice president of Fullbridge Program, a provider of workplace “boot camps,” which are similar to nanodegrees, said at a recent education conference that software coding boot camps were the first to emerge. The programs are not accredited but are short and intensive, costing $8,000-$20,000. Boot camps have evolved and are now offered in fields such as data science and healthcare informatics, he says. “There’s no degree but hopefully a job,” at the end of the course, he says.
John Katzman, co-founder of The Princeton Review and, more recently, founder of 2U and Noodle Education, estimates the boot camp market at $150 million per year. He calls the programs “highly accountable,” in terms of delivering on their promise, pointing to boot camps offered by other industry players such as General Assembly and Skillshare.
But Mary Jo Zandy, managing director of investment bank Berkery Noyes, says she’s somewhat skeptical about the staying power of these programs and “what kind of traction they’ve gotten.” She says none of the courses are of critical mass yet. Nevertheless, she says more educational technology companies will look to take advantage of investor interest by tapping the public market, following the example of 2U, which had a successful public offering in March.
Tom Kearney, principal with Wicks, a private equity firm, agrees that these programs are well-funded but says it’s too early to tell who the winners and losers will be. “It’s very difficult if you’re someone sitting in my seat,” he says.
Marlene Star is the global industrial sector head for Mergermarket. She can be reached at marlene.star@mergermarket.com.
