Upgrad has already made ten acquisitions, including Wolves India and Rekrut India, within the span of two years (2020-2022). The company raised $36.4 million through a rights issue in March 2023 from investors like Temasek and Screwvala. In June 2022, Upgrad secured $225 million in a new funding round, valuing the company at $2.25 billion.
Udacity’s initial asking price was around $200 million, it may now be valued at over $100 million. Talks are progressing smoothly, with a valuation of approximately $100-120 million, which equates to about 10-12 times its EBITDA.
Image-: Upgrad
In a surprising turn of events, it has been reported that Upgrad, an edtech company focusing on higher education and upskilling, is currently in discussions to acquire Udacity, a US-based learning platform. Sources reveal that Udacity has been exploring options for selling a majority stake in the company, and Upgrad is considering an equity swap for this acquisition. While Udacity’s initial asking price was around $200 million, it may now be valued at over $100 million. Talks are progressing smoothly, with a valuation of approximately $100-120 million, which equates to about 10-12 times its EBITDA.
A source familiar with the sale proposal mentions that Udacity has generated revenue of around $100 million but has been struggling with a retention rate of about 70%. Moreover, its business-to-consumer segment has been facing difficulties, as around 70-75% of its revenues come from enterprise clients. This declining retention rate raises concerns about the long-term justification of the price, even if it involves an equity swap.
Udacity, founded by Sebastian Thrun in 2011, reached a valuation of $1 billion in 2015 after raising $105 million from notable investors. However, the company has experienced significant shrinkage in operations, leading to its willingness to sell at a substantial decline in value compared to its peak valuation. Among Udacity’s investors is Andreessen Horowitz, a prominent name in Silicon Valley. So far, Udacity has raised approximately $238 million in funding.
With its focus on upskilling, Upgrad, based in Mumbai, has been actively seeking acquisitions to strengthen its presence in the market. The demand for edtech companies specializing in higher education and upskilling has been on the rise, especially due to the impact of the COVID-19 pandemic on the K-12 segment in India. The acquisition of Udacity would not only contribute to Upgrad’s revenues but also present an opportune time for buyouts, as assets in the US are currently available at more favorable prices compared to India.
Upgrad has already made ten acquisitions, including Wolves India and Rekrut India, within the span of two years (2020-2022). The company raised $36.4 million through a rights issue in March 2023 from investors like Temasek and Screwvala. In June 2022, Upgrad secured $225 million in a new funding round, valuing the company at $2.25 billion. The additional capital was intended for acquisitions, according to the company’s executives. Notably, Upgrad has raised $600 million since its establishment in 2015 and has received investment from Bodhi Tree, a joint venture of James Murdoch and former Star India chairman Uday Shankar.
Mayank Kumar, the co-founder and managing director of Upgrad, projected an 80% growth rate for the company in the fiscal year 2022-2023. In the previous fiscal year, Upgrad witnessed a significant increase of 108% in operating revenues, reaching around Rs 679 crore, while incurring a loss of Rs 626.6 crore. Kumar emphasized the need for edtech firms offering upskilling courses to prove their product proposition, especially as professionals regain their busy schedules after post-office re-openings. This would enable employees to prioritize their desired courses effectively.
Upgrad has a global presence with offices in the US, UK, Singapore, Vietnam, and the Middle East. The company offers a wide range of courses, including skilling programs, short certification courses, bootcamps, job-linked initiatives, and foreign degrees. With approximately 300 university partners worldwide, Upgrad claims to have educated over 7 million candidates in more than 100 countries.
The potential acquisition of Udacity by Upgrad comes at a time when the prominent edtech player, Byju’s, is grappling with challenges related to corporate governance and financials. Other major players in the Indian edtech sector, such as Unacademy and Vedantu, are also facing difficulties in their K-12 business and are increasingly relying on offline centers to generate revenue. Although Byju’s had previously explored potential acquisitions in the US, such as 2U, the company had to prioritize pressing issues within the Indian market.
