“Direct to learner” (DTL) business models and start-ups that leverage online, mobile, AI and other technologies have been an area of much focus within the ‘Edtech’ sector for over a decade.
The late Professor Clayton Christensen had made the topic one of his core areas of focus in the last decade of his life with books including Disrupting Class and The Innovator’s University.
Companies like Coursera, Udemy, Duolingo, Quizlet, Skillshare, Codecademy, Outschool and Lambda are just a few examples.
Just this sample reaches hundreds of millions of learners all around the world each month. Many learners use these products for free. A small percentage of learners pay. And yet this portfolio will generate close to a half a billion dollars of revenue in 2020.
Another interesting thing about this portfolio is that none of these companies have spent a lot of capital building their businesses. They have all been very capital efficient and most are cash flow positive at this point.
So, what?
- Direct to learner businesses are obviously very attractive for consumers and investors
- They can serve a very large number of learners very efficiently
- They can lightly monetize and yet produce massive revenues because of their scale
- They don’t require a huge amount of capital to build
As they are competing with a sector which broadly, looks exactly the same as it did 100 years ago (schools, universities, training), the current pandemic will massively accelerate significant structural changes in the way people and companies learn, train and educate.
The University segment in particular is in for a massive shock. I can’t see as much change happening in junior schooling (e.g. ages 3-7) mainly as the main job that these bodies do is child-care. I’m currently parenting a 3 and 4 year old and this is the main reason why I’m sweating on schools (safely) re-opening soon.
I’ll share further thoughts on these topics in later posts.
Andrew Essa 