A European Up-Skilling Unicorn In The Making

Pierre Dubuc is the co-founder and CEO of OpenClassrooms, the online platform offering top quality, education-to-employment programs and career coaching services for students worldwide. To date, OpenClassrooms has raised >$150m in VC funding including from Lumos Capital Group, General Atlantic and the Chan Zuckerberg Initiative (CZI).

Chris Caulkin is a Managing Director and Head of Technology investing for EMEA at General Atlantic, the firm that pioneered the concept of growth equity. Over General Atlantic’s more than 40-year history, the team have maintained a focus on investing in and building leading global growth companies, with $53b in assets under management. The firm has a global portfolio spanning the Consumer, Financial Services, Healthcare, Life Sciences, and Technology sectors.

Here is what founders will get out of this conversation with Pierre and Chris:

• How OpenClassrooms (OC) thinks about learner segmentation for its different products
• OC’s multiple product lines and business models, including B2C courses, digital apprenticeships, B2B and B2G offerings
• OC’s growth strategy and where it sees strategic white space to innovate and dominate in future
• Pierre’s overall insights and lessons from operating in the upskilling/reskilling market for the last nine years
• OC’s funding rounds and General Atlantic’s investment thesis in this space

Why does OpenClassrooms need to exist? Why are the alternatives not good enough?

PD: We started creating online courses back in 1999. At that time, there was not much on the internet and there was no alternative to learn online. We became the reference platform to learn coding in French, and when we created OpenClassrooms, the original idea was to create the first free online college in France. At that time, it was impossible to get a full degree programme online. We wanted to offer a better alternative for learners by delivering an innovative pedagogy based on projects and learning by doing.

Our focus is to help learners get the jobs of their dreams, and we focus on the competencies that enable this. Back then, this didn’t exist, but now we’re starting to see more career-oriented degree programmes.

How does OC segment its learners?

PD: Most of our students are adults as our focus is to get you a job from your programme. Although our average age is 35–36, we have learners as young as 16–18, as well as individuals in their 50’s and 60’s.

Our 3 main segments within our student body are:

• Working adults, typically sponsored by their employer
• Jobseekers, typically sponsored by their government
• Young people, typically self-financing

As we are a mission-driven company and a certified B Corp, we measure our success based on the number of students we place into jobs. We are especially intentional with 5 target populations:

• Job seekers
• School drop-outs
• Disabled adults
• Refugees
• Individuals living in underprivileged areas

Why are these 5 segments underserved by current alternatives?

PD: Our core mission is to make high-quality education accessible for these individuals who do not currently have access. There are several angels to accessibility.

First, our courses are financially accessible. For 70% of our students, their fees are paid by a third party. This could be the state, their employer, or an apprenticeship. The idea is that you don’t have to take a student loan or pay high tuition fees.

Our courses are pedagogically accessible. For example, if you want to switch careers, we will support you step by step until you master the necessary skills. As part of this, we offer one-on-one mentorship and support all the way.

Geography is another aspect of accessibility. We are online and we teach students in over 100 different countries. We also focus on accessibility for those who are disabled, and we ensure that you can enrol in a programme even if you are blind or have another form of disability.

Are your students looking for courses, skills, career paths or jobs? How do you capture them? What’s the positioning?

PD: Today, the main goal is to get a job. Our learners are looking for training programmes to get into high-growth careers. This often starts with individuals completing a few courses for free, and then converting to the premium model after they become interested in completing a fully fledged degree programme.

What are the key opportunities for founders looking to build a business in this space?

PD: It’s becoming very hard to differentiate yourself because there are lots of new providers such as bootcamps. I’m seeing more and more new schools focused on different verticals. For example, healthcare jobs, manual jobs, and industrial jobs etc. Every bootcamp started with coding and data, and this is starting to get very crowded. There are lots of other verticals in high demand, but there are not too many providers for those verticals, and so there’s a lot of white space there.

For General Atlantic, at what point did you buy into the OC thesis?

CC: We’ve had a thesis around education for a number of years that it needs to become more accessible, flexible, vocational and targeted on skills gaps. You can see this across our portfolio of 140+ high-growth companies.

To Pierre’s point, one of the challenges is how you create differentiation. One of the things we’re drawn to is that OC has its own degree-awarding powers. This is a true differentiator from a cost perspective, and also because you’re self-certifying and can build your own brand as a strong sign of quality. We like the project-driven focus where 80–90% of the learning is done through projects, and we also like the one-to-one mentoring.

We also saw a huge opportunity to grow into the B2B segment, including government funding, from what was previously a primarily B2C business. Senior leaders at companies have a lot of agenda items, including diversity, and we saw that in a crowded market OC enables people to hire and train individuals through apprenticeships. Here, you’re helping corporates with more and more apprentices each year. You are able to build long term relationships and high-quality recurring revenue streams. We saw the change from 80% student pay to now one third split each between student pay, government pay and employer pay.

Our philosophy is to back founders who can execute on a strategy that we’re aligned on. For example, we own 20% of OC, and discussed with the founders 3 years ago that there’s strong alignment on where to take this. We’ve supported the build up of these capabilities through insights, customer introductions and so on.

It’s a big cultural change to go from being a B2C business to being also a B2B business. There was quite an extensive re-engineering of the business to account this. We also invested a lot in the management team and supported in making a lot of new senior hires.

Is there a difference between a great founder and a great education founder?

CC: This category, especially in Europe, has mainly been a government-led sector that hasn’t had a very commercial or entrepreneurial mindset. This creates an exciting opportunity for folks like Pierre and Mathieu. The core of all of the entrepreneurs we back is a clear vision and mission. If you have that strength of mission, and an enormous market opportunity, those are the key ingredients.

The question is then how you can make this commercially viable. We spend a lot of time with Pierre on the nuts and bolts like where your CAC needs to be, how you price the product, where your margins should be and so on. The team has seen a lot of progress here to get to very good unit economics.

I’d add that education is a slow-moving market that has been accelerated lately by Covid. We’re generally talking about programmes that are 1–4 years in length. It takes a while to build, see outcomes and change regulation. Given the slow nature of the market, founders need to be able to commit for a longer period of time than other markets.

Let’s go into product. One of things that stands out about you is that you have a license to be able to award degrees. Why is that important?

PD: This is important for two main reasons:

1. Degree accreditation is effectively a proxy for quality. The Ministry of Education is saying to the market that those programmes are of high quality
2. This is usually a gateway for funding opportunities. For example, if you want the government to sponsor your education, this is usually tied to accreditation

Many years ago, when we launched our first degree programme, I remember that for 12 months we had a lot of students calling us and asking us if this is real. This was so new that they didn’t believe this — it felt too good to be true. You could see how important accreditation was to customers and prospects.

With corporate clients, they care slightly less, but it’s still a gateway to funding. For example, to take advantage of the apprenticeship levy in UK and the government scheme in France, this makes a real difference. Although not every company is sensitive to this, having an accreditation will never be a disadvantage.

Going a bit further on product — you use both owned and third-party content/courses, same with the technology stack. Can you talk me through your product strategy here? Which parts of product would you never outsource? What’s unique?

PD: We are highly integrated so that we develop the content, the platform, own the accreditation and have a strong network of mentors. We also have a strong network of employers. This is a lot, and it takes a long time to master every single piece. When it comes to tech, we want to own the core platform around the learning experience. When it comes to additional tools (e.g. videoconferencing), we outsource this.

The same goes for content. We create 99% of our content. We tried to outsource at one point, but realised that the quality was not as high, and we were not as agile and nimble as we wanted to be. There is also a problem of margins here. We control the full revenue and margins, and when we start outsourcing we need to share this.

We only do online delivery but do blended offerings in partnership with bootcamps and colleges. For example, Le Wagon in France and UMass in the US. Here, we have an online component operated by OC, and the in-person component operated by our partner

Let’s talk Go-to-market: one of the key things online schools have to decide early on is whether they focus on local or international students. Marketing for both is completely different, requires different brands and different products. What’s your focus and why?

PD: At first, we tried to go global like crazy, but this was a huge failure. It was really hard to differentiate in a global market. Back then, it didn’t mean much to have an OC credential in a different country. So we stated to build a stronger brand in one country, and this eventually helped us in others.

Another key thought to keep in mind is that the cost of acquisition can be very different from one market to another. For example, it can cost $10k to recruit a student for a degree in the US. In Europe this figure is in the region of $1–3k. This then drives the cost of the programme.

What helped us a lot to build the brand is accreditation, and also partnerships with top notch academic brands and tech providers. For example, we’ve launched programmes that are co-branded with top tier names such as Stanford University, Microsoft and Salesforce. This has really helped us with international expansion. We then expanded our network of employers — the more employers we had hiring from us, the stronger our brand became for B2C clients.

Is there a killer feature that matters the most?

PD: To get the accreditation, you need to master quite a few pieces. At first, we started with technology and content, but this started to be a commodity. You can find tens of thousands of learning content pieces now on the internet.

We then built certificates and degrees, and then mentorship and then the apprenticeship product. This is a stackable model where we went from first stage to second stage, and you need each stage before the next.

Our killer product now is the degree apprenticeship. Here, the learner has training and work from day 1. They get to learn and work for 3 years and get a degree at the end. It’s perfect alignment for learners and employers, and this is highly unique and differentiated.

In which channels do you see the greatest opportunities for growth for OC?

CC: all three segments are growing fast — B2B, B2G, and B2C. Pierre has done a great job building up case studies across multiple sectors. These case studies and their great outcomes should put the company in very good stead as they roll out across other markets

B2B is great because it’s recurring, and so if you can land and expand with employers, this is an exciting area. The key opportunities here lie in helping employers with digital transformation and reskilling the workforce at scale.

Both: When it comes to GTM, what are big mistakes you have made or have seen other full stack online schools make in the past

For B2C, building a brand is a long and costly process. In particular, doing this globally is highly challenging, and we initially failed because we focused on too many markets and too many segments early on. At the start, we didn’t spend a lot on marketing. Over time we invested more on building partnerships, media presence and PR. These campaigns have helped a lot with B2C acquisition.

For B2B, we chose a complex path by going after enterprise sales with clients that have tens or even hundreds of thousands of employees. They have very high expectations and there is a lot of competition to work with them. Initially, we underestimated their requirements, especially around IT security, GDPR, data management and so on. Compliance is key, and to sign a yearly contract of £1m, you have a lot of compliance processes that you have to go through.

The sales cycles are also pretty long. We realised over time that you need to have a nailed down set of policies and certain features like SSO. These are key requirements for large enterprise sales and it took us a bit of time to build out. It wasn’t just about building the team, but having the right materials took a few iterations. For example, we decided to establish a dedicated team for Sales Operations. This team builds materials, brochures, case studies, and sets up processes on Salesforce. This investment really changed our sales engine 6–12 months later. Essentially, you need to have everything in place to help your sales reps sell as much as possible.

What is the big vision? What does this business look like in 10 years?

PD: Our target is to become the global leader in education for employment. Our north star is the number of students we place in the workforce. By 2025, we want to place 1m learners in the workforce every year. Today, we are have reached 5-digits when it comes to this metric.

Imagine a future in which this vision is not achieved and you are doing a post-mortem. What are the key things you would be most likely to identify as reasons for that?

PD: The key reason would be that things get delayed. The scenario that is most probable is that we don’t reach 1m in 2025 but reach it in 2026. In the grand scheme of things, this wouldn’t dramatically change our project.

This may happen because of external factors that we can’t control. Generally speaking, when it’s an internal reason, this would be failing to scale as fast as the demand requires us to. The gap in the market is there — 1 billion people to be reskilled by 2030. 1 million out of this is nothing.

The scariest bit used to be scaling mentors — but right now, we contract 50–100 new mentors each week. Going forward, the main challenge would be accreditation in new markets — the regulatory environment will also change and this may impact us.

How do you establish your curriculum as a competitive advantage?

We only maintain 25% of our curriculum each year. This is at the top end of the market benchmark. A provider on average will refresh 10–15% of their content. You tend to be good at this when you start, but when you start to widen your fields of study and the number of programmes, the burden of maintenance starts to appear. I haven’t seen many providers focus on this as a highly differentiating competitive advantage, except for very early-stage companies

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