Last week, Microsoft unveiled an initiative to retrain 25 million people in digital skills. The tech giant provided plenty of detail on the initiative, but the real takeaway is how the unemployment wrought by COVID-19 has accelerated a decades-long trend from manual jobs to the knowledge economy. The chart below illustrates how previous recessions have accelerated this shift on each occasion.
It's abundantly clear that our current recession will be even more vicious in this regard, as businesses in the hospitality, leisure and retail sectors have been forced to shutter, many permanently. Microsoft estimates that 149m new digital jobs will be created by 2025, which will expose a yawning skills gap afflicting these segments of the workforce.
Microsoft attributes this mismatch of supply and demand of skills in the labour pool to three things:
(1) the rapid emergence of AI-powered technologies that are propelling a new era of automation;
(2) the growing need for technological acumen to compete in a changing commercial landscape; and
(3) the drop-off in employer-based training investments over the past two decades
Automation is indeed a threat to both blue-collar and white-collar jobs. Yuval Noah Harari has talked about the 'Useless Class' of people who will be not only unemployed, but unemployable. Perhaps the most cited paper on the threat of automation, Carl Benedict Fray and Michael A. Osborne's 2013 paper "The Future of Employment" predicted that many industries risk more than 90% of jobs being automated away. This is likely to be one of our greatest challenges this century.
The European Centre for the Development of Vocational Training has published reports noting the skills shortages we face - the chief shortage is of Information, Communications and Technology (ICT) professionals. The picture is varied across the continent, with the UK for example requiring more finance professionals, whereas France faces a shortage of legal professionals. It's clear that each country requires displaced workers to be retrained or upskilled to compensate for these deficits.
Finally, we have the impact of COVID-19 on higher education. Sentiments towards traditional university degrees have been changing for some time, but COVID-19 lit the matches as lectures moved online and the whole degree 'package' came under sharper light. Gen Z may well end up being even less wedded to the status quo as the combination than previous generations as they evaluate the ROI of a virtual education. Some polls have shown that the primary reason for going to university for a substantial proportion of young people is getting a job.
The widening skills gap and the unbundling of higher education combust to pose the question of whether current tools can effectively train and retrain populations. I decided to dive into the state of the 'lifelong learning' market.
The Lifelong Learning Market
To me, lifelong learning encompasses upskilling, retraining and any other means of continuously improving your supply of skills that are in demand in the market.
Many people switch careers entirely, especially to software engineering roles. Some just look to level up on their current skill set, for example by studying for an online MBA. I have left out the status quo of traditional higher education - as I noted above, the present moment is a unique opportunity to reexamine the bundle of higher education and whether it prepares us for the jobs of the future.
To start, I'd like to make it clear that this is by no means an exhaustive list. The categorisations are my best attempts at this time and some of them overlap, but I'm sure they'll change. EdTech startups feature quite heavily, most of them being venture-backed. Finally, a quick thank you to Pietro Invernizzi, who inspired the format of this post.
1. Employee Education
Training employees is a win-win for companies, as you're not only making them likelier to stick around, but the company as a whole benefits from a more productive, competent staff. Providers like Guild Education help companies offer education to their employees as a benefit, whilst listed Pluralsight helps companies upskill their workforce in the select areas they need to thrive.
- Sharpist matches employees with one of 500 coaches to help them realise their professional and personal development goals. The company raised €4.6 million in February from Vorwerk Ventures.
- Guild Education offer 'Education as a Benefit', with multiple top-tier investors on the cap table (Redpoint Ventures, General Catalyst, Salesforce Ventures).
Startup idea: A product that gamifies employee training and turns it into a competition. We can't run from our natures, so why not embrace the idea of competing against your colleagues with a leaderboard for the whole organisation?
2. Tech Bootcamps
When I first started thinking about lifelong learning, bootcamps was the first thought I had. The number and variety of tech bootcamps has increased in recent years, going beyond just coding to data science, UX, web development and more. These bootcamps tend to be available both on campus or entirely online, typically running for 9-12 weeks.
- General Assembly is one of the most comprehensive bootcamps, offering courses in software engineering, user design, data science, digital marketing and more. General Assembly was acquired by the Adecco Group for $412.5m in 2018.
Startup idea: Asynchronous courses that still lets people follow the curriculum and benefit from the peer network, support and project-based learning whilst managing their busy lives. Loom is doing this for enterprise collaboration and communication to great effect.
Lifelong learning is essential for vocations, especially critical ones like healthcare. Lots of VC funding has gone into this area, as the benefits are similar to those we see for employees in corporations (productivity, competence, morale, retention etc.).
- BetterLesson is a platform for the professional development of teachers, equipping them with skills and knowledge to teach better. Raised $23m to date.
Startup idea: Workers in many sectors don't keep up with changes in their fields as much as they should - finance is one to start with. How many theories, schools of thought and concepts seem utterly moot today?
4. Career Accelerator
This is probably one of the more debatable categorisations. The companies in this segment help their customers land their dream jobs through one or more of: mentorship, educational content and appreticeships/internships. The mentorship, coaching and internships make this different to typical bootcamps.
- Pathrise is a YC-backed company that pairs customers a mentor from the tech sector who works 1-to-1 with them to help them land their desired role.
Startup idea: A product which initially begins by offering mentorship, job-hunting support and training, but turns the relationship into a lifelong one by forming a strong community and continuing to provide value through content/networks.
5. Online MBAs
Online MBAs have become more common as more and more people question the the value of the extremely expensive residential MBA programs. The FT compiles an annual list of the top online MBAs.
Startup idea: Tools that radically transform the distance learning experience. Hopin is making virtual events more like actual events, with a live stage, back stage, breakout rooms and more. Similarly, could the campus experience and its constituent elements be replicated online?
6. Income Share Agreements
The Income Share Agreemente (ISAs) is a new form of financing education, which is like the student loan market in the UK where you only pay a % of your income after you start earning above a certain threshold. Unlike courses that require tuition fees upfront, this model gives access to people from less advantageous backgrounds. The companies listed here all provide a coding education to help their customers boost their earnings by securing coveted software engineering roles at tech companies.
- Lambda School is one of the most well-known ISA providers that offers a full computer science education and has placed many people in high-paying software engineering roles. A YC-alum, Lambda School most recently raised $30m in January 2019.
7. Talent Investors and Company Builders
Broad-brush strokes again but here I've included companies that are nurturing the entrepreneurial talents of exceptional people who have the latent abilities to succeed as founders.
- Entrepreneur First is one of Europe's best exports; it's a talent investor that takes in individuals pre-idea, betting on their ability to build successful companies. LPs include Reid Hoffman's Greylock Partners, Peter Thiel's Founders Fund, DeepMind's Demis Hassabis and more.
- On Deck are fairly new. They're combining the triumvirate of community, knowledge and talent to give its fellows the perfect environment in which to start a company. Village Capital's Erik Torenberg (who I admire a lot!) is behind this.
Startup idea: Assessing candidates through supervised simulations to judge an applicant's aptitude and propensity to succeed as a founder. Unlike the biases that creep in when we evaluate people by what they've done in the past, why don't more talent investors judge candidates through rigorous assessments that simulate some of the challenges they'll face as founders and whether they could cut it.
Not many here, but this category is for companies that are helping people learn creative skills like design, craft, art, music and more. I believe that such jobs will sustain their importance even if AI begins to encroach on their territory.
- Creahara is a venture-backed company helping creative professionals in Latin America access online courses. Such courses have generally been in English.
Startup idea: A learning platform with a community layered on top, including peer-to-peer learning, forums, job boards and more.
Massive Open Online Courses are libraries of university-level content spanning a variety of subjects, offering certifications to customers who complete them on their own time. In terms of pure content, these are as good as any thing you would learn on campus.
- Kadenze is a bit different to the other names here as it focuses on the arts and creative technologies instead of hardcore STEM.
Being multi-lingual has always differentiated candidates in the job market, but this is more relevant than ever in the last few decades as the world becomes more globalised and the locus of power moves from the West to the East. D2C just edges it as the prevailing model but lots of companies have corporate customers as well.
- Busuu CEO Bernhard Niesner recently claimed that the business will generate $40m of revenue in 2020, having reached break-even in 2019.
Startup idea: No one is using AI for conversational avatars and chatbots. Lots of learners look for someone to practice with, but struggle to find speakers in their areas.
11. VC Fellowships
This couldn't be an edition of Socratic VC if I didn't throw VC fellowships in there. In all seriousness, a plethora of fellowships have arisen recently which are meant to give outsiders a chance to experience the world of investing, hopefully giving them the foundational knowledge to land a full-time role. Fellowships typically see participants shadow investors, source deals, present to Investment Committees, receive masterclasses and more.
- Dorm Room Fund recruits partners from campuses across the US to source companies and make investments. Powered by First Round Capital, the group has become one of the strongest pipelines of VC talent out there.
Startup idea: A YC for investors, connecting experienced investors with young, up and coming VCs. Fred Wilson, Bill Gurley, Michael Moritz and other legendary investors have gained a lot from being in the thick of the action right through 2001 and 2008, seeing markets form and die. Can we accelerate the education of the next generation of VCs by giving them access to the wealth of experience and knowledge in the heads of the giants who went before them?
12. Alternative MBA
A few options have cropped up that claim to give you all of the upside of an MBA curriculum for a fraction of the cost. Naturally, these won't replicate the alumni network and brand recognition, but as far as value for money goes, the content is up there with the better MBA programs.
- Jolt recently raised a $14m Series A led by Balderton to expand their alternative business school model to the US, having seen success in London and Tel Aviv.
Startup idea: An alternative business school that replicates the societies of traditional business schools. This is a key benefit of the MBA experience, as students are able to explore their own unique interests with these societies. If this could be recreated, the model could become more viable to a wider range of people who are more interested in expanding their network.
13. Alternative Bachelor's
The undergraduate degree is being reconfigured to suit practical problems and needs. After all, as we noted above, many students are primarily motivated to find a job.
- Make School is a computer science degree that focuses on project-based learning. YC-alum.
- London Interdisciplinary School offers a bachelor's degree that claims to equip students with the skills needed to tackle the world's most complex problems.
Higher Education has been ripe for disruption for a long time. Many elements are becoming less and less defensible, but its strongest moat remains the brand and the concomitant signalling effect to employers. Until employers change their view of alternative education models, people will continue to seek out brand-name degrees to improve their candidacy, even if they personally suspect the merits of these programs.
What are your thoughts? I'd love to hear your feedback and comments, both good and bad!
Bethany McLean (Smartest Guys In The Room), one of my favourite journalists and writers, wrote a brilliant analysis on the private equity industry's rising fortunes.
Staying on private equity, the industry has recently entered the impact investing market with force. This Institutional Investor analysis gives you a deep dive on what's actually happening.
Which VC firms are backing black founders? Check out this list.
Gaming is very hot right now - check out this piece to learn lessons from gaming on how to drive product-led growth for SaaS businesses.
Millennials and Gen Z are not doing a good job of building a credit history - Chime has come out with a credit card to fix this.
The current rate of inflation in Zimbabwe is 786% - read to find out how the stock exchange is faring.
Deals of the week
London-based startup Symmetrical.ai raised €5.6 million seed funding, led by Global Founders Capital and Partech. The company offers a set of solutions that help improve the financial wellbeing of employees. Through the medium of a financial coach, employees can access their salary-on-demand (free access to earned salaries between paydays), zero-interest employee loans, and an automated financial advisor. The deleterious effects of financial security on workforce productivity, morale, absenteeism and retention are quite material, which is why we're seeing companies (Neyber, Origin) focusing specifically on this element of employee wellbeing. The B2B2C model outperforms against B2C financial wellbeing plays, of which there are so many that it's hard to discern the differences sometimes.
Staying on the topic of financial wellbeing, Los Angeles-based Willa raised $3 million in a seed round led by EQT Ventures. The solutions helps freelancers access their income when they want, helping them meet unexpected expenses and avoid the tyranny of month-end pay cycles. We've already seen some very successful examples for salaried workers (Wagestream, Earnin), yet nothing like this currently exists for freelancers (that I know of). There's not much to inspect on the website in terms of the business model, which is curious.
Finally, saving the best for last, New York-based Capital raised $9m, with participation from Steve Jurvetson's Future Ventures, Greycroft, Wavemaker Partners and Partech. The company claims to be "equal parts high finance and Silicon Valley technology", offering capital-as-a-service. Applicants fill out a survey which provides Fortune 500 quality analytics on the quality of the business. Approved companies get access to 'The Capital Machine', which is $5-$50m of non-dilutive growth capital. Where does the money come from? They say it comes from institutional pools of evergreen capital. The capital-as-a-service concept really got traction when Social Captial started using models to assess data points and make investment decisions, with some impressive results (especially in terms of diversity). There's very little information about Capital at the moment, but I'm slightly cynical about what looks like a much nicer user experience for a loan, then again they're very upfront about that - "We believe that with the right tools, accessing institutional capital can become as predictable and efficient as buying a product on Amazon."
"Study hard what interests you the most in the most undisciplined, irreverent and original manner possible." - Richard Feynman