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December 2, 2015

The Silicon Valley Education

How a $500 Degree is Disrupting a $475 Billion Education Industry

There’s a long-overdue commotion going on in higher education where the academic and employer worlds collide. In partnership with some big name companies like Google, AT&T, Facebook, Cloudera, IT students and professionals can up-level their careers by getting a Nanodegree.

Coined as a “new kind of credential” for landing a job, Udacity, Inc. offers Nanodegree’s in front-end, iOS, and/or web development; web analyst; programing, and other tech areas. Engineered by ideal companies one would want to work for. Courses can last 10-15 hours per week at roughly $200 a month. And select students have finished an entire program for $500 in roughly five months.

Called by some the “Silicon Valley Education.” It’s a novel concept. Shaking up the way people think about traditional education; And, bringing in the idea that potential employers should have a hand in developing their future talent pool.

“College hasn’t changed since the time of Aristotle, but over the next decade our idea of college is going to go away…” Jason Stoffer, partner at Maveron.

And why shouldn’t they?

The ability to learn programs that are utilized in real-world job functions seems invaluable. And the estimated $475 billion higher education industry has been stagnate in recent times, with the population needing jobs training – as opposed to classic education – less served.

But these education programs may eventually require some standardization or regulation, if for-profit Massive Open Online Course (MOOCs) programs—like Udacity—seek federal funds for scholarships.

Right now Colorado State University’s Global Campus offers transfer credit for Udacity’s Computer Science 101 course and it is working with Georgia State to offer courses towards a Masters degree.

As a for-profit educational organization—currently working with public universities—Udacity might not be far off from being lumped into the ongoing for-profit college regulatory battle.

The Department of Education recently established an interagency task force to oversee for-profit colleges. The Federal Trade Commission, SEC, Consumer Financial Protection Bureau, Departments of Justice, Treasury and Federal Affairs play a role along with state attorneys generals.

Udacity presently falls into a grey category given it’s not calling itself a college but it does offer courses transferrable for college credit. And with new investigations being launched into online education offerings almost on a weekly basis, it may not be immune to regulatory pressures.

Some for-profit colleges have been cited for misleading marketing and advertising practices around graduation and job-placement rates, lending practices and other issues. In early October, the Department of Defense suspended the University of Phoenix’s federal tuition assistance program for veterans based on allegations about preferential, paid recruiting access to veterans and service members. And Corinthian Colleges across the nation were recently shut down by the Education Department for harmful student lending practices.

If regulators decide to lump MOOCs, like Udacity, into online college education category, the company should be thinking about how to proceed. And have answers to questions like: Are its advertising claims 100% accurate? How/or will its scholarship program seek to draw federal funds? And are there state-based requirements that Udacity must adhere to depending on where the student lives?

While Washington ponders how to proceed with MOOCs and organizations like Udacity, these and other kinds of ed-tech services already have investor’s full attention. The space is ablaze with startup funding soaring some 96 percent in Q2 2015 – a new bar for ed-tech deals and financing with $765 million in funding across 80 deals according to New York-based CB Insights.

Online education is also enjoying some positive political attention. Both Hillary Clinton and Senator Marco Rubio have pointed to online education as low-cost options for college affordability.

Thus Washington’s watchful eye could come into focus on the Nanodegree program and others.

If that happens, Udacity would need to think about whether its model would be better served through federal education standards or going-it-alone. So far it is proving that private-industry can lead education and training. But it should capitalize on that freedom now just in case Washington decides to disrupt this disruptor.

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