The Past, Present and Future of Learning & Development
Why There’s Never Been a Better Time to Build an L&D Company
My Lightbulb Moment
In the winter of 2010, as a 23 year old relatively new grad working at YouTube, I was asked to compile a list of the most popular channels by category for a year-end wrap up. Scouring YouTube’s internal database, I discovered a channel I’d never heard of that was somehow millions of views ahead of educational powerhouses like Harvard, Stanford and Yale: KhanAcademy.
Surprised and curious, I emailed the account owner, and discovering they were based nearby in Mountain View, set up a visit. I arrived at the address on Castro Street, expecting a large office with teams recording, publishing and marketing videos.
The door was nondescript; it felt like an apartment, not an office. I double checked the address.
KhanAcademy wasn’t a well-resourced operation. It was three people working out of what must have been a three bedroom apartment illegally converted into an office. Sal was recording a video when I walked by his room. He nodded in my direction as I shuffled past, not breaking the flow of his pen on the tablet. As I spoke with the COO, my eyes scanned a large whiteboard behind him — it was a storyboard for a TED talk Sal would deliver months later, a TED Talk that ended with Bill Gates coming onstage to give him a $1M check.
My dad was a teacher — my own 4th grade teacher, in fact — and he nurtured in me a lifelong interest in education. Seeing KhanAcademy’s success reaching millions of learners from a humble three bedroom on Castro Street immediately altered my career trajectory. Weeks later, I asked my boss to work on YouTube EDU, which, despite being the largest learning platform in the world, didn’t have anyone dedicated to it full-time.
I’ve spent the last decade since working on how people can learn best online. First at YouTube, launching YouTube for Schools, YouTube for Teachers, and then at Google, on Google Hangouts for Education, creating live, small group online classes nearly a decade before “Zoom School” was a household phrase. I left Google in 2013 to join Minerva, which had recently raised the largest seed round pre-product in Silicon Valley history to build a world-class university from scratch. I left Minerva in 2017 to start my own company, Strive, to build a university for working learners; to help people develop the skills needed to thrive in the economy of today and tomorrow.
In my decade in edtech since that meeting on Castro Street, I’ve seen boom and busts. Now, buoyed by a COVID-driven rush to remote learning, edtech is (once again) hot. Global edtech investing in the first half of this year was up 57% from 2019. Udemy recently raised at a $3.2b valuation, Duolingo at $2.4B, Coursera at $2.5B and Guild, ClassHero, and Quizlet all joined the Unicorn EdTech club. Buzzy startups are getting in on the action, too — Podium Education, Engageli and ClassEDU all raised $10MM+ “pre-seed” rounds, achieving out-the-gate valuations normally reserved for only the hottest DevOps, FinTech or consumer YC alums.
I started Strive because I believe our system of higher education is broken. It’s unrealistic for people to learn for four years and work for forty given how regularly people change jobs and how quickly skills must evolve. Yet, this sector — corporate training, or Learning & Development — while among the largest in edtech, is also among the least explored by funders and founders.
This piece covers what the L&D market is today, why it’s an increasingly exciting area for founders and funders, and what new opportunities are emerging.
In the next piece I’ll cover what we’re building at Strive to meet, and accelerate, these emerging opportunities.
What is Learning & Development (L&D)?
L&D is a complex category, covering a wide array of content, learning experiences and tools. The easiest way to classify the market is by thinking about the “jobs to be done” for HR teams and the content, experiences and tools they use to complete those goals.
How is L&D Changing?
Historically it has been challenging to build large, fund-returning startups in L&D:
- Minimal executive buy-in and support — L&D has been a nice to have, not a need to have, so it’s hard to generate large contracts and renewing revenue
- Deceptive TAM — while companies spend a lot of $$ on L&D, most of it is not actually addressable for education technology startups as >50% of budgets are spent on payroll of employees, not tech products
- Bad LTV:CAC ratio because of long sales cycle, employee/L&D leader misalignment, L&D leader lack of buying authority and low margin
Times, they are a changing — L&D is entering a new era: increasingly strategic, more tech-focused, and easier for startups to scale.
L&D is Increasingly Strategic
L&D Helps Companies Retain Millennials and Gen Zers
The rise of the information economy, increased millennial job hopping, and a historically tight labor market have led to a war for talent. Millennials now make up 50% of the workforce (75% by 2030) and they list learning as their most desired benefit. 94% of millennials and gen z say they would stay longer at a company if the company invested more in their development (LI Learning Report).
While promotions and raises are zero-sum and finite, investing in L&D is positive-sum and available for all. Given this, 90% of executives cite L&D as a necessary benefit, and only 27% of L&D leaders cite budget concerns as an issue, down 50% in the last five years (LI Learning Report).
L&D Helps Companies Resolve Existential Skills Mismatch
One of the existential challenges of the modern talent landscape is the rising skills gap — the difference between the skills employers need and candidates have. As the economy constantly evolves, Universities struggle to update curriculum or departments to generate candidates with skills to match modern jobs.
The rise of AI will exacerbate the existing skills gap and create a new one. AI won’t eliminate most white collar work, but it will augment and automate ~60% of existing jobs. Jobs will be re-defined, emphasizing soft skills that are hard to automate (Chief Learning Officer magazine is re-branding soft skills as durable skills for exactly this reason).
Between the current skills mismatch and the rise of AI, the World Economic Forum estimates that 35% of workers will need to complete immersive upskilling programs — more than one week but less than six months — by 2025 to stay professionally relevant. Companies can’t solve this problem simply by changing their hiring practices — in many instances, people with the needed skills simply don’t exist, and finding them is expensive: hiring new candidates is 6 times more expensive than upskilling existing ones.
Given the increasing need for L&D as a retention tool and L&D to overcome skills mismatch, L&D is increasingly strategic, overcoming the first major roadblock to building a breakout L&D / corporate training startup. A PwC survey of 600 HR & IT executives listed “developing people to reach their full potential” as the second biggest problem they face, after “finding, attracting and retaining top talent” (which also has an L&D-related component) and 77% of CEOs of companies with >$100MM in revenue list upskilling as a strategic priority.
L&D is Increasingly Done Online and Integrated with Work, Increasing the Addressable Market for Startups
The L&D market has traditionally been dominated by training service providers, who would roll out personalized in-person programs for companies. Pre-COVID this market was already being displaced by learning products and platforms that are trackable and scalable, providing clearer engagement data and ROI for increasingly data-driven L&D teams. COVID accelerated this trend — 60% of L&D leaders say they spend more on online learning than last year.
The most effective way to learn is by doing, not just by listening, reading or watching. Application-centric learning products — “learning in the flow of work” — are increasingly possible:
- Platform proliferation with friendly APIs — every successful enterprise tool — Salesforce, Slack, Zoom — wants to be a platform, so they include APIs and hooks that allow learning providers to build learning into the experience.
- Rise of remote work — Remote work has pushed more work asynchronous and all meetings onto Zoom, which means that how we work together is truly trackable for the first time. This gives learning companies entirely new datasets to work with to build intelligent contextual learning.
These “learning in the flow of work” products move even more learning online, and thus towards startups and away from people and services, overcoming the second major roadblock to building a big L&D tech company or platform. These tech-first learning in the flow of work tools will be higher margin businesses.
It’s Easier to Market, Sell and Scale L&D Products
Bottom Up / Product-led Growth
Bottom up / product-led growth has emerged as the dominant successful GTM approach for recent hypergrowth tech cos. This approach was previously impossible for L&D — you can’t sell workshops or LXPs to individual users and then bubble up. Tech-centric learning tools that provide learning in the flow of work can be deployed to individual users signing up with a credit card and then spread organically, and virally, throughout the organization.
- Better buyers — Given exec interest in L&D, L&D leaders now have more power and larger budgets for L&D generally and online learning specifically, meaning that deals happen faster and renewals and expansions are more likely.
- New Buyers — Learning isn’t exclusively purchased by L&D professionals now. Line of business buyers are investing in learning for their teams, whether it’s short term training for a product launch, or broader “Skill Academies” for upskilling. Skill Academies, internal bootcamps to upskill employees into their next role, need to be run by the line of business to really work — the CTO oversees the Cybersecurity Skill Academy or the Data Science Skill Academy, the CRO oversees the Sales Enablement Skill Academy, etc. Because of this, these Skill Academies will tap into even larger budgets (and with faster sales processes) than existing corporate training.
Clearer Renewal & Expansion Stories
Because L&D is increasingly happening online, it’s easier to collect data on usage and efficacy. This allows L&D and HR leaders to understand learning ROI, which in turn enables them to argue for renewals and expansions with their C-level approvers.
New GTM approaches, buyers and easier renewal & expansion overcomes the third major roadblock to building a home run L&D business — L&D no longer suffers from bad LTV:CAC.
The Emerging L&D Opportunities
Companies Upskill en Masse with Modern Skill Academies
As discussed above, companies need their employees to develop new skills to thrive in the jobs of today and tomorrow.
Their existing options won’t suffice:
- Universities are out-of-date — Curriculum from executive education departments is behind the modern working world, and universities are unprepared to teach working learners.
- Internal L&D teams are neither innovative nor sufficiently resourced — Successful Skill Academies requires a unique combination of curriculum developers, instructional designers, program managers, instructors and learning engineers. Most companies don’t invest enough in L&D to bring these to fruition. Despite 77% of corporate execs saying upskilling is a top 10 strategic priority, only 18% of execs report making significant progress.
- Content libraries struggle to teach learners extended lessons — While people can learn specific photoshop skills from 3m clips, they won’t learn to be a product designer, let alone a Design Manager, from short videos alone. Completion rates on content libraries like Udemy, Coursera and LinkedIn Learning are low.
Learning substantial new skills is hard; it requires sustained effort, opportunities for application and reflection, and assessment to validate and motivate development. Companies will need to invest in Skill Academies to upskill their employees en masse (or, as Josh Bersin calls them, Capability Academies).
These new immersive learning experiences will use technology to motivate workers to continue training, even (especially) when they’re struggling. This technology will be akin to what Noom has built for weight-loss or Omada Health, Virta Health and Livongo have created for diabetes prevention and treatment — a combination of coaching, content, peer support and analytics to help people absorb new lessons and sustainably change behavior.
Learning in the Flow of Work
Pre-pandemic the average employee had 24 minutes per week for learning. This number will likely drop given digital fatigue and rising employee burnout. While content libraries will still help companies looking to invest in learning as an employee perk, the next wave of small-dose performance improvement training — aka “microlearning” — will need to be “in the flow of work” rather than standalone on content libraries.
The best companies in this category will use AI to understand the right learning content or work advice to share with the right user at the right time.
Expect more L&D-focused companies that look closer to Gong.io, Chorus.AI or Guru. Emergence Capital’s “Coaching Networks” thesis is spot-on (albeit a bit confusingly titled).
These two trends are not an either/or proposition — the best Skill Academies will use learning-in-the-flow-of-work as spaced repetition to both ensure people retain existing skills and develop new ones on top of their existing foundation.
In 2010 leaving the Khan Academy “office”, I was flooded with optimism, energy and enthusiasm for the seemingly limitless possibility of technology to help anyone, anywhere learn anything.
A decade into this journey, I’ve seen many promises of breakthrough edtech solutions come and go. That said, I believe we’re at a unique moment for educational innovation, with clear learner needs, an understanding of how people learn best online, and motivated buyers, and I’m excited for what we can build this next decade.