Udacity Raises $15 Million as Money Pours into Online Education


Courtesy of Udacity

More than 753,000 students worldwide have signed up for Udacity since January.

Udacity, the digital university co-founded by artificial intelligence and robotics pioneer Sebastian Thrun, has raised $15 million, joining a crop of online education startups to attract venture capital this year.

The financing was led by Andreessen Horowitz and included existing investors Charles River Ventures and Steve Blank, the startup guru who teaches at Stanford University. Udacity, based in Palo Alto, California, has raised $21.1 million in the past year.

Thrun, who invented Google’s self-driving car and is a professor at Stanford, started Udacity last year to offer free courses in computer science, math and sciences. More than 753,000 students worldwide have signed up since January.

Peter Levine, a partner at Andreessen Horowitz in Menlo Park, California, and lecturer at Stanford’s business school, said Udacity is designed to serve the masses of people who can’t afford the tens of thousands of dollars a year required for a university education in the U.S.

“Around the world there’s a supply and demand problem,” said Levine, who’s joining Udacity’s board. “This makes Stanford-quality content and coursework available to millions of people who don’t have access to any higher level of education.”

Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.

Venture capitalists are flocking to education startups after avoiding the market for decades because of the regulatory restrictions and challenges selling to colleges and school districts.

Coursera, started by two Stanford computer science professors, said it raised $16 million in April from New Enterprise Associates and Kleiner Perkins Caufield & Byers. That month, 2U (formerly 2tor) announced a $26 million financing to bolster its services for offering degrees online. Codecademy, a site that teaches basic programming skills, said it raised $10 million in June from firms including Index Ventures and Kleiner Perkins.

Venture investing in education technology rose to $463.1 million through the first three quarters of this year from $457.2 million in all of 2011, according to the National Venture Capital Association.

With more than 2.4 billion Internet users across the globe and over 1 billion smartphones in use, investors are betting that money-making opportunities will emerge. Over the course of the next decade, the college system is going to have to adapt to these new learning opportunities, said Scott Sandell, a partner at New Enterprise Associates and Coursera board member.

“It’s an incredible productivity enhancement and that has to create economic pressures in higher education broadly defined,” he said. That doesn’t mean Stanford and other top universities will go out of business, just that they’ll have to “reinvent themselves a little bit,” he said.

Udacity plans to generate revenue from employers using the system to seek out talent and by providing certification in specialized areas. The company also offers courses sponsored by corporations looking to teach high-tech skills.

While Udacity is working on its business model, Thrun said his primary focus remains changing the way content is taught to make it more enjoyable. That includes interactive lessons that allow students to work at their own pace and engage with the thousands of other people taking the same course.

“Our aspiration is to make learning as much fun and engaging as a video game, so people get addicted to learning,” he said.

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