Prospectus summary
Prospectus summary This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially “Risk factors” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus, before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” “our company,” and “Udemy” refer to Udemy, Inc.Overview
Our mission is to create new possibilities for people and organizations everywhere by connecting them to the knowledge and skills they need to succeed in a changing world. Our marketplace platform, with thousands of up-to-date courses in dozens of languages, provides the tools that learners, instructors, and enterprises need to achieve their goals and reach their full potential.
We believe traditional education and training methods are fast becoming outdated. Technological advancements and novel industries have significantly altered the types of skills required of workers, and lifelong training and continuous skills acquisition are becoming the norm. There is a clear need to expand access to learning across traditional barriers such as geography and social demographics.
Udemy operates a two-sided marketplace where our instructors develop content to meet learner demand. Courses can be accessed through our direct-to-consumer or Udemy Business, or UB, offerings. Our platform provides over 44 million learners with access to over 183,000 courses in 75 languages and over 180 countries. Since inception, more than 73 million users have registered with Udemy.
Udemy courses address learning objectives such as reskilling or upskilling in technology and business, enhancing soft skills, and personal development. We analyze platform data to better determine our learners’ needs, helping us match individuals with relevant courses and, within UB, learning paths for a more personalized experience. Our learners also receive access to interactive learning tools such as quizzes, exercises, and instructor questions-and-answers, or Q&A.
Within our marketplace and UB catalog, we provide learners with high-quality content by prioritizing courses based on factors such as learner feedback and ratings, topic relevance, content quality, and instructor engagement.
Our business has experienced rapid growth. From 2019 to 2020, our revenue grew 55.6% to $429.9 million, which includes 103.5% growth in UB revenue, although we incurred net losses of $69.7 million and $77.6 million during 2019 and 2020, respectively. From the six months ended June 30, 2020 to the six months ended June 30, 2021, our revenue grew 24.5% to $250.6 million, which includes 78.7% growth in UB revenue, although we incurred net losses of $52.5 million and $29.4 million during the six months ended June 30, 2020 and 2021, respectively.
Industry
As technological advancements, new fields of study, and novel industries render existing skill sets obsolete, the need for a new model for learning and teaching skills is urgent. According to the World Economic Forum, companies surveyed estimate that around 40% of workers will require short-cycle reskilling (i.e., six months or less), and 94% of business leaders report that they expect employees to pick up new skills on the job.
The shift to online learning has been ongoing for years, and the COVID-19 pandemic has further accelerated this shift. According to the World Economic Forum, 84% of employers surveyed report that the COVID-19 pandemic has increased the need to digitize.
Unfortunately, many of today’s options have a number of shortcomings:
We offer a new approach, one that addresses these shortcomings and effectively connects the global ecosystem of learners to up-to-date knowledge from experts and practitioners around the world. We are creating a better learning experience.
Our market opportunity
According to a HolonIQ study, the global online and offline education market was $2.6 trillion across higher education, corporate training, and online learning in 2019. Before the COVID-19 pandemic, the majority of corporate training occurred offline, and we believe that online education is well placed to address the scalability and affordability limitations of offline education. With the increase of internet connectivity, technological advances, and interactive tools at a low cost, we expect a massive shift from offline to online.
Based on data from Arizton, we estimate our market opportunity in online learning to be $223 billion. We calculate this estimate by aggregating the global corporate opportunity of $71 billion and the global consumer opportunity of $152 billion in 2021. We believe that our market opportunity could grow to be multiples of today’s estimate as learning continues to transition online.
Further, we believe that online education can address the rising demand for lifelong learning in the rapidly evolving world economy, a development that would expand our market opportunity to include the majority of the global adult population.
Our solution: the world’s learning platform
Our platform allows individual learners and organizations all over the world to access affordable, relevant, and up-to-date content from experts and experienced practitioners in nearly every field. We combine high-quality content with data insights and technology to create a platform purpose-built for the needs of learners, instructors, and organizations.
Our platform delivers a powerful flywheel of content creation, engagement, and continuous content optimization. Our expert instructors continuously generate new courses and update existing ones, while our marketplace encourages engagement on the most in-demand topics. The volume and frequency of these interactions allow us to generate meaningful insights and provide real-time feedback and analytics for our instructors. These data insights in turn improve content quality, enhance course personalization, and optimize productivity and satisfaction for our learners.
One way that we foster access to courses for individual learners and enterprises is through broad content distribution across our various channels. We leverage machine learning, or ML, to increase learner retention and conversion using enhanced personalization. At the same time, we believe our model encourages more relevant and engaging content through well-aligned incentives for our instructors, supported by consistent improvement from the feedback and data collected from individual learners and UB customers.
Over 17,700 free courses are available on our platform. These free courses represent an important entry point for learners to experience our platform. Over 28 million consumer learners have enrolled in free courses on a wide range of topics taught by a diverse set of instructors in a variety of languages. Through this free content, we are able to build a large and cost-effective top of the funnel for both consumer and UB leads. Once learners interact with our platform, our ML algorithms recommend courses for learners to purchase based on topic, quality, instructor rating, number of enrollments, learner’s country of origin, and more. The algorithms help us maximize revenue while offering the best value to learners. Over 3.7 million free learners have converted to buyers.
We also offer unlimited access to a curated catalog of courses through our Consumer, Enterprise, and Team plan subscriptions. The courses selected for the subscription plans are among the highest quality, most relevant, and most popular on our platform. Learners can access the Consumer subscription plan for a monthly fee, whereas Enterprise plans have annual licenses that are priced based on volume. Our Team plan offers customers access to over 6,000 top-rated courses for 5-20 seats at an annual rate starting at $360 per seat. The Enterprise plan begins with the same offering as the Team plan and supplements it with administrative tools, insights, learning playbooks, and additional courses through our language packages.
In addition to these subscriptions, we offer immersive learning experiences such as labs, skills assessments, and coding exercises in a range of verticals.
What we offer our learners
We provide over 44 million learners with relevant, affordable, and high-quality content, and we do this on a platform that enables the constant improvement of our courses by leveraging the social validation of over 594 million course enrollments, as well as thousands of ratings and reviews. With Udemy, learners can fulfill objectives involving:
Learners on Udemy receive a comprehensive and immersive experience through interactive exercises and the ability to communicate directly with instructors through Q&A functionality.
What we offer our Udemy Business customers
We have over 8,600 global UB customers, including 42 of the Fortune 100. Our UB customers typically express high satisfaction with their UB experience, resulting in our average net promoter score of 49.
Our curated UB offering begins with over 6,000 of the most engaging and relevant courses available on our platform. We also offer an extensive non-English language collection, which includes courses in Spanish, Portuguese, German, Japanese, and French. Arabic, Indonesian, Italian, Mandarin, and Turkish language packages were launched in 2021, and we plan to launch Korean, Polish, and Russian language packages later in the year.
We use a rigorous selection process across a wide set of criteria to determine the courses that will be offered as part of UB, including:
As of June 30, 2021, the UB course catalog included over 74,000 hours of technical content and over 28,000 hours of business, personal, and professional skills content. On average, in 2021, over 460 new courses are added each month. Our overall UB course catalog has increased from fewer than 2,500 courses in 2017 to over 11,000 today.
We offer UB customers learning paths, which allow organizations to assemble customized learning series made up of Udemy courses, the organization’s own material, and links to external resources. Learning paths are only visible within the organization that creates them and offer a unique benefit to administrators and employees. As of June 30, 2021, our enterprise customers have generated over 360,000 learning paths.
We also offer UB customers a comprehensive analytics dashboard and other powerful tools where our customers can gain high visibility into the progress, areas of focus, and feedback of their employees. This strong set of tools, which includes our learning playbooks, helps our UB customers better understand and optimize learning experiences for their employees and ensure they are delivering a strong and measurable return on their investment in learning skills.
What we offer our instructors
We offer instructors from around the world access to a global audience of over 44 million learners. Our model allows instructors who elect to charge for courses to share directly in the economic upside of the course content they contribute and the growth of our platform. In 2020, our paid instructors earned $161.4 million from Udemy for their courses, with average paid instructor earnings of $2,950 and over 9,000 global instructors receiving more than $1,000 in earnings. In the six months ended June 30, 2021, our paid instructors earned $86.8 million from Udemy for their courses, with average paid instructor earnings of $1,574 and over 6,000 global instructors receiving more than $1,000 in earnings. The breadth of instructors and courses contributes to the wide variety of content topics available on our platform, as well as meaningful depth within most content categories. We believe that this combination of breadth and depth helps foster competition and choice on our platform and attracts learners and UB customers.
We enable our instructors to drive innovation and ongoing engagement on our platform. Instructors can use platform insights, review feedback from learners, and harness analytics dashboards to manage their course content, brand, and course marketing. Our performance marketing engine identifies and selects the best courses to be featured to each learner around the world. In addition, we offer instructors insight on the revenue opportunity and existing content for any given topic, and we provide auto-generated translated captions from English to Spanish, Portuguese, French, German, Italian, and Polish.
When an instructor’s course is added to the UB catalog, instructors are subject to an exclusivity clause for the use of their content on our platform, pursuant to which instructors agree, subject to limited exceptions, not to offer any on-demand content, such as pre-recorded courses, on any competing platform in a way that directly competes with or impairs the sales of such content on our platform. This exclusivity clause is effective for so long as an instructor’s content is included in the UB catalog, and we may continue to include content in the UB catalog for up to 12 months after an instructor elects to opt out of the UB catalog. We believe these exclusivity arrangements increase the value of our offerings by increasing the amount of unique content on Udemy and helping maintain our robust roster of expert instructors.
We believe that, on average, the value we offer instructors ultimately delivers a far higher return on investment relative to other content creation and online learning competitors.
Our competitive strengths
We believe our business model benefits from several competitive advantages:
Global distribution and reach with strong brand value: In 2020 and during the six months ended June 30, 2021, 61% and 61%, respectively, of our revenue was generated outside North America. Because our online platform is available globally, curious learners and organizations can easily test our content. As these new learners and organizations begin to engage with us, we then have the opportunity to quickly and efficiently expand into these new markets by focusing our marketing, advertising, pricing, and language customization resources and expanding our payment options, which in turn allows us to grow our base of individual learners and organizations on an ongoing basis and attract new instructors who create native language courses.
Robust content generation engine:
Self-reinforcing flywheel with powerful network effects: We believe the growing number of individual learners and organizations on our platform attracts instructors who recognize that our platform and global audience can create new income streams and help support their families and local communities. In turn, the increasing number of relevant, high-quality, and up-to-date courses offered by world-class experts and practitioners attracts more individual learners and organizations.
Our direct-to-consumer offering is synergistic with UB. As individual learners experience the quality and benefits of Udemy’s platform, they recommend Udemy to their organizations. We have been very successful at driving high-converting leads to UB, with over 60% of leads coming from our direct-to-consumer platform in 2020.
Powerful data insights and analytics: With over 500 million unique visitors from 2018 through 2020, more than 594 million cumulative course enrollments, and in 2020 alone, almost 11 billion minutes of learning, we believe that the volume of the data our platform collects provides meaningful insights into the behaviors and needs of our learners and instructors. We leverage that data to provide personalization for learners as well as to promote high-quality and relevant content from instructors.
We capture user behavioral data on the learning objectives and interests of our learners to better address their needs and recommend the right courses. We also analyze enrollment data, market insights, and feedback from learners to identify new topics of focus within our content catalog. We share this information with our instructors in real time so they can improve their course offerings.
Flexible technology platform: Our technology platform is modern, agile, accessible from a variety of online and mobile channels, and built to scale with our global growth. We use advanced technology applications, such as personalized promotions, lifecycle marketing, and content personalization, to help tailor our platform for our learners.
Our platform’s ability to provide a personalized experience is further enhanced by the ML methodologies used to develop the algorithms included in our technology, which allow us to continuously and automatically personalize each learner’s experience. We regularly run tests to determine which product features, course recommendations, prices, and messaging will drive the best outcomes for our learners and Udemy as a whole. In addition, we have built our technology to be flexible to enable us to continuously test and add new features, such as interactive exercises and immersive learning experiences.
Our growth strategies
We are still in the early stages of our long-term growth strategy. We expect to continue expanding our consumer and UB customer base, instructor network, and content catalog while increasing our market opportunities through the following strategies:
Accelerate the growth of our enterprise business through:
Increase learner retention through:
Our personalization efforts are only beginning. We believe that these investments will yield high returns around customer engagement, retention, and lifetime value in the quarters and years to come.
Expand our geographic footprint through:
Risk factors summary
Our business is subject to a number of risks and uncertainties of which you should be aware before deciding to invest in our common stock. These risks are more fully described in “Risk factors” immediately following this prospectus summary. These risks include, among others, the following:
Corporate information
We were incorporated in January 2010 as a Delaware corporation. Our principal executive offices are located at 600 Harrison Street, 3rd Floor, San Francisco, California 94107, and our telephone number is (415) 813-1710. Our website address is www.udemy.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only. Investors should not rely on any such information in deciding whether to purchase our common stock.
“Udemy,” our logo, and our other registered or common law trademarks, service marks, or trade names appearing in this prospectus are the property of Udemy, Inc. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.
Implications of being an emerging growth company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering. As a result of this status, we have taken advantage of reduced reporting requirements in this prospectus and may elect to take advantage of other reduced reporting requirements in our future filings with the Securities and Exchange Commission. In particular, in this prospectus, we have provided only two years of audited consolidated financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
The offering
Instructors in good standing with our Trust & Safety team who have at least one active, published course on our platform and at least 10 enrolled learners as of October 1, 2021 are potentially eligible for the program. Instructors must also have an active tax form on file with us and reside in the U.S. or selected international jurisdictions to be potentially eligible for the program. If demand for the program exceeds capacity in a particular jurisdiction, we may invite instructors to participate based on lifetime earnings through our platform. The number of shares of common stock available for sale to the general public will be reduced to the extent that these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. Morgan Stanley & Co. LLC will administer our directed share program. See “Underwriters—Directed share program.”The number of shares of our common stock to be outstanding after this offering is based on 122,927,466 shares of our common stock outstanding as of June 30, 2021, and excludes:
Our 2021 Plan and our 2021 ESPP each will provide for annual automatic increases in the number of shares reserved thereunder, and our 2021 Plan will also provide for increases to the number of shares that may be granted thereunder based on awards under our 2010 Plan that expire, are forfeited, or otherwise repurchased by us, as more fully described in “Executive compensation—Employee benefit and stock plans.”
Unless otherwise indicated, this prospectus assumes or gives effect to the following: