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The University at Your Fingertips

To our Valued Investors:

Before we get started this week, and before you even read the name of the subject company we are examining, say the following out loud: “YOU da me”.

Forgive us if we’ve caused you to attract curious glances from others in the room. We just wanted you to know the proper pronunciation of “Udemy” before proceeding. After all, when Bell Atlantic, NYNEX, and GTE combined to form the newly rebranded Verizon Communications in 2000, countess individuals (including a few CNBC commentators) referred to the conglomerate as “verra-ZAHN”. That mangling of the word persisted for a while, until the proper use (rhyming with “horizon”) was more frequently spoken aloud. In any case, “Udemy” intuitively looks like “you-DEMMY”, but the emphasis should be on the first syllable. Think of it as it’s intended --- “U” for “you”, and “demy” for “academy”.

If you have the mild sense of being lectured, so be it. It’s fitting, in fact, as Udemy’s mission is to teach and to provide online lectures. Founded in May 2010, San Francisco-based Udemy, Inc. is an American massive open online course (MOOC) provider aimed at professional adults and students. For a monthly subscription fee of $19.99 (or, if you prefer, an annual tuition of $239.88), Udemy provides its subscribers with more than 130,000 courses taught by over 57,000 instructors in at least 65 languages. Try to exhaust that curriculum.

The lessons cover a wide range of topics. What do we mean by “wide range”? Let’s put it this way: your weekly Iron Edge newsletter is, on average, about 1400 words long. Feel free to verify this by counting the words in the five most recent essays to hit your inbox. If we were to list only the titles of all Udemy courses, the litany would occupy all of these emails, and the entirety of the Iron Edge Blog, for the balance of this decade. That is assuming Udemy doesn’t add to its course list during this time period, which would be highly unlikely. Instead, we will provide a very random sampling of the things one might learn on Udemy. Depending on your field of interest, you may broaden your horizons on costume design, speech writing, video game coding, Indian cooking, duck hunting, business analysis, Salsa dancing, thermochemistry, and how to speak Mandarin. A search of Udemy’s online catalogue proves to have almost no limitations to the topics which eager learners might reasonably pursue.

Instruction on painting, cooking, storytelling, and knitting are great ways to augment one’s enjoyment of hobbies. Learning about physical fitness and self-empowerment will surely have some positive impact on one’s overall well-being. A martial arts class can teach a person how to beat others up. All of these hold varying degrees of usefulness. Udemy’s plethora of professionally oriented topics, though, have the obvious potential to enrich businesses and individuals through corporate and career advancement. On Udemy, mastery of such indispensable skills as accounting, compliance, human resource development, business optimization, and many others can be attained. The company's assortment of top-rated business and technical courses gives all kinds of students, companies, governments, and nonprofits the power to develop customized expertise. They fulfill employees’ need for learning and development while giving instructors an outlet to share --- and to profit from --- their accumulated understanding of their chosen fields. Udemy’s format, programmed to allow subscribers to learn at their own pace, is designed to fit the busy schedules of full-time workers. Once purchased at prices ranging from $12.99 to about $23 on average, Udemy courses can be started, stopped, and reviewed indefinitely for the lifetime of an active subscription. To optimize the effectiveness of their offerings, instructors are allowed to build online courses with development tools such as videos, PowerPoint presentations, PDFs, audio, ZIP files and, of course, live-streamed classes. Online discussion boards promote communication between instructor and student. It’s like college for the serious learner, without the keg parties and the bad cafeteria food.

Udemy is a prominent name in the fast-growing niche of education technology, or edtech as it has become known. The field explores the potential for individualized learning and how it may be expanded and broadened. It recognizes that the way people learn and interact with instructors should be customized according to the student’s unique needs and capabilities. It allows for differences in an individual’s learning style and pacing. Edtech tools maximize students’ capabilities, permitting them to derive a higher level of understanding from classroom time. At Iron Edge VC, part of our job is to closely monitor the trends that are taking shape and that exhibit the telltale characteristics of future revenue generators. Already, it is becoming clear to us that edtech companies are going to make their mark --- in a big way --- in 2021. As a relatively new concept, edtech is largely populated by private companies like Newsela, Coursera, Schoology, Duolingo, and Remind. It is worthwhile to keep an eye on all of these as they grow and, perhaps, inch toward a public listing. Among all of the edtech opportunities, though, it is Udemy that has most decisively caught the attention of our research team.

Udemy is, frankly, one of those companies that has experienced accelerated growth rather than disruption because of the ongoing global health crisis. The need to avoid large gatherings, such as those within traditional classrooms with walls and a ceiling, has propelled online activity to a degree that the company’s founders would never have anticipated even a year ago. "This year upended everything about how we live and work,” said Udemy CEO Gregg Coccari, “and people everywhere turned to online learning to help them meet new challenges. We're perfectly positioned to meet these demands and help drive success for individuals, businesses, and governments.”

Apart from the requisite “challenging and unprecedented times” commentary, Udemy’s numbers paint a sharper growth picture. Udemy boasts more than 35 million active and paying users worldwide, executing 460,000 downloads in the past month. Of all the websites in existence, Udemy’s rank (currently standing at 689) is steadily improving. Udemy is the 10th highest grossing education application in the world. After ten funding rounds led by the likes of Lightbank, Manhattan Venture Partners, and Tencent Holdings, Udemy has raised more than $250 million, and its company valuation stands at approximately $3.3 billion. Udemy’s full-year 2020 revenue is expected to exceed $400 million. Bear in mind that Udemy has yet to celebrate its eleventh birthday. Those numbers are quite impressive for such a youthful company, and Udemy has yet to reach critical mass. Add to that the track records of the entities that have already invested in Udemy, and it’s not hard to see that an investment with great potential is taking shape. Please don’t forget, though, that it’s pronounced “YOU da me”, not “you-DEMMY”.

Right before they went public, shares of companies like Facebook, Uber, Lyft, and (most recently) AirBnB could be bought in the second market. They were, in fact, in great demand because of their “household name” status. Today, Udemy represents an investment opportunity of an entirely different sort. At $3.3 billion, it’s easy to conclude that Udemy has room to grow. We are looking at a great example of the chance to own a piece of something while the chatter is still relatively low. Indeed, Udemy is not available for purchase on your E*TRADE or Robinhood account. It is not yet listed for public trading on any stock exchange. Your friends at Iron Edge VC can get you in through the front door and give you access, nonetheless. Our inventory is priced at a very attractive valuation for now, but the rapidly spreading word about Udemy’s effectiveness could change this quickly. If you would like to learn more, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.

If you have enjoyed this article, visit the Iron Edge Blog for past updates on other pre-IPO investment opportunities.

As always, shares are available on a first come, first served basis.

All Our Best,

Paul Maguire, Managing Partner
and
The Iron Edge Team

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