The Confluence of Education and Workforce Readiness
More and more, we see education companies creating solutions for human capital management. Similarly, talent management and HR technology companies are offering education-related content and tools to support lifelong learning. As an education investment bank, we are continually asking ourselves, what does this mean for the education industry and our clients?
While there isn’t a clear picture or path to a combined market of human capital management (“HCM”) and lifelong education, it is becoming more evident that there is a thesis for providers to participate in both markets. Further, the Trump Administration has proposed merging the Departments of Education and Labor in an effort to enhance U.S. workforce readiness. A recent 2017 report by market research firm Outsell suggests the two markets combined represent a $150 billion market opportunity that is being disrupted by technology adoption and demands by employers to continually develop and retain employees. It’s important to keep in mind that the market for experienced talent recruiting, developing and credentialing the tens of millions of adults who are already in workforce is many times larger than the traditional college-to-career pipeline that captures so much attention. Likewise, the ecosystem to support professional and lifelong learning is growing to include a host of options, ranging from employers themselves to start-up providers, as well as colleges and universities.
Investors are continuing to seek opportunities in both HCM and lifelong learning (when combined these sectors are known as “talent”), recognizing there is a skills’ gap many corporations need to address for their employees. Whether digital, communications, business or soft skills, corporations need to find solutions to continually develop their employees in an ever-changing market environment. According to a survey conducted by the Pew Research Center, 87% of Americans believe it will be necessary to develop new skills throughout their career to keep up with changes in the workplace. Further, the rise of the millennial worker brings its own set of challenges for employers looking to retain the best talent. Compensation and benefits are no longer the driving forces of employee satisfaction. Rather, more and more employees want to feel valued by their employer through advancement and continued learning.
From an investment perspective, funding, in what has traditionally been considered the corporate training technology sector, is increasingly driven by firms that focus on services and technologies related to talent development and acquisition. Some notable funding rounds include those for Coursera, Degreed, Andela, MasterClass, and Trilogy Education Services, all of which are companies that provide platforms to help meet the talent challenge, rather than, say, companies that offer software or tools.
In the future, we anticipate there will be a continuing emergence of multi-faceted platforms serving a combination of students and their employers, representing compelling investment opportunities in the HCM and lifelong learning sectors.