Online education startups: a field guide

Innovation in a thought bubble written on a chalkboard
Online education is on a tear. Every few weeks or so, it seems like yet another startup offering online classes announces a multimillion dollar funding round. This week, San Francisco-based UniversityNow, which provides affordable higher education degrees online, said it raised $17.3 million. In the past three months, at least seven online course startups have launched or announced funding.
“I think we’re hitting a tipping point where online education is accepted,” said Gene Wade, CEO and co-founder of UniversityNow. “There’s enormous demand for education around the world.”
In the past decade, he said, more than a billion people have joined the middle class, creating new demand for educational opportunities. Globally, 150 million people will seek higher education in the next eight years and, domestically, 2 million will pursue higher ed over the next ten years.
When people join the middle class, education becomes one of their biggest priorities. But, increasingly, he said, traditional educational institutions can’t accommodate all of the interest.
Because everyone is now connected on the Web and technology has matured to a place where it can be used to create learning programs that adapt to students’ needs, Wade said, online platforms can provide a compelling educational alternative.
And the momentum behind online education isn’t expected to let up. According to Harvard Business School professor and disruptive innovation expert Clayton Christensen, half of North American higher education will move online in the next ten years, followed by half of K-12 education by 2019. Several startups (and institutions, including Harvard and MIT through their EdX initiative) are starting to realize that future. Here’s a guide to seven that have made headlines in the past few months.
“We don’t need to reinvent Harvard,” UniversityNow’s Wade said. “We need to build a school that works for everyday people.” To do that, he said the company is creating a network of low-cost, accredited universities that let students complete courses at their own pace. The program, which costs $199 a month for as many courses as a student can handle (including textbooks), targets working adults who want an associates, bachelors or masters degree. While they’re enrolled with UniversityNow, students can defer loans from other schools and potentially get a tax credit. This week, the company announced it had raised $17.3 million from University Ventures, Bertelsmann AG, Kapor Capital, Novak Biddle Venture Partners and Greylock Partners, in addition to receiving a $300,000 research grant from the Bill & Melinda Gates Foundation and the William & Flora Hewlett Foundation.
Barely a year after launching, Codecademy is quickly emerging as a favorite among education-oriented startups. The New York-based company, which offers gamified online classes that teach people how to code, this week announced that it raised $10 million from Index Ventures and Kleiner Perkins. The online classes are available to anyone – students and professionals alike. But Zach Sims, Codecademy’s co-founder, said it is starting to make its way into high schools and middle school classes as teachers organically adopt the platform to teach students computer science. At the F.ounders conference in New York last week, he said, “We’re seeing more [innovation] from outside the system… It’s easier to start from the outside and then have the [schools] adopt what you’re doing after they see traction.”
Founded by Stanford computer science professors, Coursera wants to bring classes from top-tier universities to the Web for free.  On the platform, students can sign up for classes on everything from business and technology to sociology and literature. Students can’t earn degrees through the site, but a student could use it as a credential that opens up new opportunities. The startup has said that it plans to  match employers with people who have performed well in classes on its platform. Its partners include big-name schools, such as Princeton, Stanford and the University of Michigan. In April, the company said it raised $16 million from Kleiner Perkins and New Enterprise Associates.
With nearly $100 million venture funding, 2tor partners with top universities to deliver masters degree programs in a range of fields, including law, nursing and social work. For each degree program, the startup partners with just one institution, which commits to giving online students all of the same privileges and rights as its offline students. In addition to live online classes (in which all of the students can simultaneously see each other and the teacher via video), 2tor coordinates field placements for students when relevant (for example, in-clinic experiences for nursing students). In April, the startup announced its latest round of funding, $26 million from an affiliate of the Hillman Company, New investors, SVB Capital and other investors.
Minerva Project
Calling itself the first elite American University to be launched in a century, The Minerva Project wants to bring a Harvard-grade education to the Internet. It sounds awfully ambitious, but it has both influential people and an impressive chunk of funding on its side. Former Harvard president and U.S. Secretary of the Treasury Larry Summers chairs its advisory board and in April, it announced that it raised $25 million from Benchmark Capital, which said is the largest seed financing in the fund’s history.
Launched earlier this year by former Stanford AI professor and Googler Sebastion Thrun, Udacity‘s goal is to bring high-quality university classes to as many students as possible. Students can take classes and participate in the platform’s social network for free. Udacity will also send students’ resumes to one of its 20 partner companies for free. But it charges a fee to those who want to certify their skills online or at one of the site’s testing centers. The startup has raised a reported $5 million from Charles River Ventures.
With a goal of democratizing education, the San Francisco-based startup provides a learning platform that lets anyone create and take classes. Since its launch in 2010, Udemy has raised $4 million and attracted thousands of instructors who teach classes for free or between $20 and $250 a course. As of now, the best-performing classs center around web development and technology, but instructors have also created classes on the humanities and sciences. Last month, the company said that some instructors were earning six-figure salaries through the platform.