Tech industry-designed higher education heats up with $35M investment in Udacity

As debt-ridden, unemployed college graduates look to retool their skills, investors are betting that online vocational education has a big future. One of the household names in the online education space, Udacity, just picked up $35 million in funding from Drive Capital to expand into America’s recession-racked heartland.

Unlike other popular Massively Open Online Course (MOOC) providers, Udacity is partly funded and designed by leading tech companies. For instance, I’m taking a data science course at Udacity, and my “teacher” is a Facebook statistician. Most of the problem sets come out of issues that Facebook’s team deal with every day.

“We’re really built by industry, we’re really kind of a platform where employers and tech companies get a direct say as to what students should learn,” former Google X founder and Udacity co-founder, Sebastian Thrun, tells VentureBeat.

Udacity is betting on an alternative credentialing program called “nanodegrees,” which are certificates of competence in specific fields, such as data science and mobile computer programming.

“We are really focusing on jobs. The nanodegree program is really a focus on direct employment.”

Udacity may very well have tapped into a surge in demand, but it’s unknown whether any of the MOOC companies can eventually become profitable enough to sustain their vision. Udacity isn’t profitable yet, but Thrun says that the “money-making business has grown about 2 percent day over day.”

All Udacity courses are free. The “money-making” portion refers to a premium subscription service where students get access to live coaches. After testing out the coaching feature for a few months, I’m a fan of the service, and I think it gives Udacity a big competitive advantage in the space. However, the coaches can be frustratingly slow and vague sometimes — so the idea needs some ironing out.

Bugs aside, the live coaching and vocational demand could give Udacity a leg up in their ultimate vision of focusing the education system on directly employable skills.

Thrun concluded our conversation with a quote that I would like to get stitched on a pillow and placed on every couch in San Francisco:

“We are in that sense a typical venture-backed Silicon Valley company; we really strive to change the world in a massive way and put that objective ahead of profitability.”