Udacity, the US-based online course provider, has taken on $75 million of debt from Hercules Capital after becoming “cash flow positive… for the foreseeable future”.

The decision by Udacity – most recently valued at $1 billion five years ago when it was last capitalised – underscores the ability of fast-growing digital education firms to raise capital amid the pandemic without giving away equity.

Covid-19 triggered a dash for cash among ed techs worldwide. But because many – despite recording record revenue gains – were not profitable, debt facilities remained largely out of reach.

According to TechCrunch, Udacity opted for debt over an equity raise after receiving an “unsolicited” debt term sheet from Hercules Capital, which “turned out it was the better option”.

Udacity, founded nearly a decade ago, develops training courses for corporate clients and also sells so-called nanodegrees, micro-credentials and courses direct to learners.

Over time, its business model has pivoted away from massive online open courses (MOOCs), which have proven tricky to monetise, towards vocational skills training targeting adults – specifically those who do not have the time nor funds to undertake full-time courses.

Gabe Dalporto, Udacity’s chief executive who joined the firm last year, said that enterprise and government customers will account for 80% of revenues in due course.

Previous investors in Udacity include Andreessen Horowitz, Ballie Gifford, CRV and Emerson Collective.

Date published: 4 November 2020

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