Upgrad in Talks to Acquire Udacity in a Potential Equity Swap
- ByStartupStory | June 30, 2023
Indian edtech firm Upgrad is currently engaged in discussions to acquire US-based company Udacity, which has been seeking a buyer for several months. The acquisition would likely involve Upgrad obtaining a majority stake in Udacity through an equity swap.
Sources reveal that Udacity’s current valuation exceeds $100 million. The company had previously quoted around $200 million to a prospective buyer, but the deal fell through.
“Talks are progressing well, and the estimated valuation being considered is in the range of $100-120 million, which corresponds to approximately 10-12 times its EBITDA,” shared the sources.
An earlier review of the sale proposal by another source highlighted that Udacity had generated approximately $100 million in revenue, but struggled with a retention rate of about 70% among its customers. Additionally, the company faced challenges with its B2C business, with 70-75% of its revenues coming from enterprise clients. “If the retention rate continues to decline, it may not justify the price in the long run, even with an equity swap,” the source added.
Both Udacity and Upgrad have refrained from providing specific comments on the matter. Ronnie Screwvala, founder and chairperson of Upgrad, denied the acquisition reports and stated, “We are a private company and do not need to clarify our plans in the media. We continue to have conversations with companies around the world for potential acquisitions, and at the right time, will share developments as we choose to.”
Udacity, founded by Sebastian Thrun in 2011, was last valued at $1 billion in 2015 after raising $105 million from investors such as Bertelsmann and Baillie Gifford. Thrun, also known as the founder of Google X, which worked on groundbreaking projects like self-driving cars and Google Glass, witnessed a significant reduction in Udacity’s operations, leading to its willingness to sell. As a result, the company’s value has experienced a substantial decline compared to its peak as a unicorn.
Andreessen Horowitz, a prominent investor in Silicon Valley, is among the backers of Udacity. Tracxn, a business intelligence platform, indicates that Udacity has raised approximately $238 million in total funding.
Udacity, based in California, offers a wide range of courses in data engineering, business analytics, artificial intelligence, data science, product management, and more. The company caters to consumer, government, and enterprise sectors.
Upgrad, headquartered in Mumbai, has been actively seeking opportunities to strengthen its position in the upskilling sector, especially considering the COVID-19 impact on the K-12 education segment in India. The company has made ten acquisitions, including Wolves India and Rekrut India, to enhance its offerings in the upskilling domain.
The potential acquisition of Udacity is expected to contribute to Upgrad’s revenue growth. This deal comes at a favorable time for buyouts, as assets in the United States are currently available at more attractive prices compared to India, according to sources.
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