Udemy has beaten Coursera to emerge as the most spectacular continuous growth e-learning/teaching platform franchise in Silicon Valley and its projected IPO in early 2021 on NASDAQ will be a milestone event, given its global brand resonance among the millennial/Gen-Z denizens of the Digital Age. After all, Udemy now boasts 55 million students in 190 countries, 150,000+ courses, 57,000 instructors teaching in 75 languages. In essence, Udemy’s open platform leverages and monetizes the ultimate unused assets – each human being’s brain power, specialized skills, professional training, academic, musical and artistic training and cultural heritage.
Udemy meets the Valley’s classic definition of a platform company, which invariably commands the highest valuation on Wall Street. One, Udemy has created a global, scalable managed market place between learners and teachers in every conceivable subject from learning to play the Piano or to code in Python software, from Tarot card reading to Cisco’s latest terabit router products specs. Two, Udemy has user generated content in 75 languages, thus creating an invaluable, exponential growth, global database at virtually no cost. It is no surprise that Udemy commands the same phenomenal digital network effects as a Google, a Facebook, or an Airbnb once did on the internet.
Udemy’s strategic and financial destiny is controlled by some of the most legendary venture capital firms in Silicon Valley. These include Norwest Ventures, Insight Partners, Naspers Ventures (the South African money alchemist who turned a $30 million stake in China’s Tencent and India’s Flipkart into a staggering $60 billion value), Learn Capital (the most respected edutech VC in Silicon Valley) and Japanese media conglomerate Benesse who invested $50 million in Udemy. It is significant that none of the VC’s have diluted their stakes in the recent financing round, an indication that they expect a highly successful IPO in 2021. The recruitment of veteran CFO David Oppenheimer, who has taken three companies public on NASDAQ is also a signal that the Udemy IPO meets the imprimatur of Wall Street’s buy side institutional investors.
I have been stunned by the sheer scale of Udemy’s international footprint, user generated content and client engagement, the reason I decided to lead an investor syndicate in its pre-IPO shares at a valuation just above $3 billion. Udemy has raised guidance in 2Q and 3Q 2020 as the pandemic was a steroid shot for its revenue growth and I can easily envisage 2020 revenues above the $460 million revenue guidance. Therefore, it is entirely rational for Wall Street bulge bracket investment banks to value Udemy at 10 to 12 times its 2021 revenue guidance of $600 million. This means an IPO offer price of $6 to $6.5 billion and a market cap of $8 to $10 billion after listing on NASDAQ since Udemy’s brand name has a global mass market resonance for the Robinhood generation. So hopefully we expect to earn a 3X return in the next twelve months on Udemy’s private market valuation now.
There are no guarantees in life or the capital markets but, as someone who lives life in the second derivative, I can extrapolate myriad trends that enable me to be uber bullish about Udemy’s continued viral growth. These include telecommuting, Zoom, the accelerated digitalization of education and corporate training programs, EM youth demographics, smartphone penetration rates and government initiatives to retrain hundreds of millions of jobless youth.
Udemy has also developed a world class scalable corporate franchise, led by enterprise icons like Cisco Systems, Adidas, Booking.com, Volkswagen and Lyft. Udemy’s 7,600 corporate clients now contribute almost 40% of global revenues and will be a profit ballast in the next decade. I see no reason why Udemy cannot equal and surpass Byju’s private market valuation of $11.2 billion sometime in late 2021.
In the long run investors will value Udemy for its colossal intellectual capital, its user generated library of real time data created and uploaded by its instructors. I can easily envisage a world where a Udemy platform hosts 400 million students and a million instructors worldwide. This would mean an exponential growth in revenues, cash flow, profits and ultimately market cap.
I had gone gaga on the Amazon, Google, Alibaba and Facebook IPOs in my media columns in various GCC publications because I was convinced that the biggest risk in the financial markets was not investing in scalable global platform franchises. History has amply vindicated my conviction in the past two decades. While I do not view Udemy with Panglosian optimism, I am convinced that this will be the first Decocorn in its $200 billion e-learning and corporate training addressable market. That much, at least, is certain.
