MartaForeros

People have asked me how I feel about Udemy’s sale to Coursera. Honestly, I’m kinda pissed about it. I want to be clear - I’m grateful for the opportunity to start and benefit from Udemy’s success. It changed my life. But there’s another side to Udemy. A story of what could have been. After our Series B, founders owned less than 30% of the company. Our investors took over and installed their own CEO to run it. We all liked this new CEO and honestly, for years it looked like a brilliant move. The company kept growing and growing. They launched B2B and built a $500M ARR business. Eventually, the company IPO’ed for $3B. Yet all along there were clear cracks under the surface. Over Udemy’s history, there have been 7 CEO’s. The board replaced the second CEO with dud after dud. I’d often try to meet with the board or the new CEO, and was completely ignored. Eren had influence as Chairman of the Board but Oktay and I were so ignored they didn’t even invite us to the IPO. LOL WTF. There are like 50+ people invited to these things and nobody thought: “oh maybe we should invite the people who fucking invented the thing we’re all celebrating.” It shows how little respect they had for founders and for product innovation as a discipline. I think they wanted a CEO they could control, a buttoned-up suit instead of a brash founder/CEO that is risk-taking, visionary, but a bit of a pain. For awhile, it looked like it didn’t even matter who was CEO - the company was run by the incredibly talented team that reported to them anyways. Well, it worked until it didn’t. The company made no major product innovations for 15 years. Instead, they took the original idea (video-based courses) and sold it in every place imaginable. It got us to $800M run-rate. That’s no joke; that takes serious execution and a great team that hustled hard to win the market. But eventually the consumer business stopped growing. The B2B business has now flattened out as well. Meanwhile, Coursera was catching up. Original Coursera was a far worse product than Udemy, but it got a ton of press. Learning ivory tower bullshit from academics doesn’t get you a real education, but it does create prestige. They raised from better investors on better terms, and had better leadership. Udemy to this day has more revenue than Coursera, but Coursera won the court of investor opinion. They got higher multiples from both private and public markets. Coursera innovated heavily. They added corporate courses to their university catalog, built fully-online degree programs, and offered a B2B competitor that kept Udemy on its toes. Still, the Udemy B2B business (and team) out-performed and so the two companies were deadlocked. Coursera was better at B2C, Udemy at B2B. A merger was inevitable. But WHY IN GODS NAME did we sell to Coursera instead of the other way around? Why are the combined companies under $3B in market cap? Three reasons: First, edtech didn’t live up to its promise. While these two companies had solid revenue and cash positions, their growth slowed, and public markets balked. This meant compressed multiples and significantly lower valuations. Second, the companies stopped innovating. They are selling a product to businesses that their customers don’t love. They were category leaders, but they lead the category into mediocrity. They captured a significant share of learning and development (L&D) spending, but L&D as a whole actually lost budget within their organizations. That’s Udemy’s fault, and it doesn’t even realize it. That brings me to my final point: I personally believe Udemy traded upside opportunity for downside risk. Us founders were unproven and young. We made lots of mistakes, including fighting amongst ourselves. A good investor would have supported us through it because they believe founders drive the highest long-term returns. Instead, they brought in outside CEOs to replace us. I sometimes wonder if they recognize this error; everyone makes mistakes and maybe they learned from it. Either way - the consequences are real. By ignoring the founders, Udemy failed to innovate, which led to slowing growth which led to mediocre public market results. Furthermore, they don’t have a good evangelist and public markets don’t like a headless horse. I sold my Udemy stock awhile ago. I think the merger was critical for both companies’ survival. Now, though, the new combined entity needs to innovate again. On B2B, Coursera needs to help L&D become the heroes of the AI era so the entire market starts growing again. On B2C, they need to build the most educational AI product on the planet. (I’d focus on the former, since the latter is a lot harder and riskier). Coursera can still achieve our original vision and likely build a $10B+ company in the meantime. Even though I’ve got no stake in its future, I’m mission-driven and I REALLY hope they figure it out. The current education system sucks and the world deserves something better.