Online tech training co Masterschool raises $100m

2022 hasn't been good, so far, for online education. In the past few weeks alone, several leaders in the field, including Israel's Jolt, US company On-Deck, and India's Unacademy, have been forced to make painful cuts, and lay off large numbers of employees. Tech companies that have until recently hired employees at a dizzying pace, have slightly lowered their demand for new recruits, while other giants such as Meta, Uber and Netflix have begun to put positions on hold.

Despite this, demand for tech workers is likely to continue and the shortage of skilled tech workers will not go away in the long run. Masterschool, an Israeli company that had been operating for three years under the radar, has benefitted greatly from the recruitment stampede of the past two years - so much so that it turned a profit. That is, until recently, when it decided to raise a $100 million seed round to fund simultaneous, across-the-board marketing, sales and expansion activities.

"We're building a digital campus"

Masterschool has found itself an interesting niche with a unique business model by offering students free courses in in-demand tech subjects, such as data analysis, software development, and websites, and charges a fee only after a successful placement. In Israel, for example, Masterschool graduates pay their tuition only after being hired for a job with a monthly salary of more than NIS 10,000, and spread over several months or years. Graduates commit to paying 10% of their salary each month until the entire tuition is covered. The instructors - mainly experts working independently on the platform - receive an average 20% commission for each placement, so that they, too, become partners in its success.

The idea behind Masterschool is reminiscent of the original idea that also gave rise to Jolt, (an Israeli training startup that ran into trouble last month). Jolt had influencers from companies like Fiverr, Taboola, or Palo Alto Networks, providing online courses in their areas of expertise to train the next generation of programmers.

But that's where the similarity between the two companies ends. While Jolt wanted to bring students back into the classroom, Masterschool has developed an online teaching platform that allows those experts to register, select, teach, test, and ultimately place their students in jobs at Masterschool partner companies. Masterschool co-founder and co-CEO Otni Levi compares his company to a kind of Amazon or Airbnb for schools and influencers, telling Globes, "The only way to succeed is to break down all the components related to education - selection, lesson dissemination, fee collection, placement - and reassemble them. In the end, we're building a digital campus."

Masterschool does not guarantee placement at the end of training, and therefore does not charge for courses. However, as placement is integral to its business model, Masterschool works to bring companies into its network. Among the companies that have hired employees from Masterschool are Intel, Tesla, Google, Wix, AppsFlyer and eBay. The company emphasizes that they do not charge partner companies a fee, and that their only customers are the students.

But collaboration with corporations and tech companies often expands beyond placement. Most of the partnerships have not yet been made public. One exception is Israeli fintech company Pagaya, which joined Masterschool as a provider of advanced-level tech training. Through Masterschool, the company selected candidates for training in data analysis, instructed them in a months-long online course, and then hired all 30 participants who completed the course. If it had not recruited every one, says Levi, the rest would surely have been hired by another partner company. "We don’t steer students towards one company or another because we are committed, first and foremost, to our students. We safeguard our students the same way that Airbnb provides a safety net if your host cancels a reservation or an appliance breaks down".

"We recruited investors only after we became profitable"

Masterschool was founded by: Eran Glicksman (VP technology), Roi Tzikorel (Chief of Impact), and Michael Shurp and Otni Levi (co-CEOs). Tzikorel, who formerly worked at educational fund The Trump Foundation, previously founded a number of educational projects together with Shurp. Glicksman, a graduate of the elite IDF Talpiot training program and classified intelligence Unit 81, and Levi, a graduate of the IDF General Staff Reconnaissance Unit (Sayeret Matkal) and also of Unit 81, met during their military service. The four came together while working on projects in education and social justice, and founded the company in early 2019. "It was the most 'bootstrap' it could be," Levi admits. "I mean, we started from scratch. From an office in south Tel Aviv, with almost no budget, and no money from investors. We let ourselves recruit investors only after we became profitable."

And investors have indeed arrived. The company reported that its initial seed funding round of $100 million was actually raised last year but was not announced publicly at the time. The round was led by Dovi Frances' Group 11 fund, with the participation of pan-European investment firm Target Global, Pitango Ventures, Dynamic Loop Capital, Apax Partners founder Sir Ronald Cohen, and other strategic investors.

"Are things today the same as in 2008? Probably not."

The huge $100 million financing round actually began last summer, during a period of abundance and massive growth for the entire market, and ended with another expansion in January this year. The company declines to reveal its value, but it can be assumed that the valuation given it last summer enabled it, even then, to cross the $1 billion mark.

Masterschool has about 30 schools and instructors on its platform, and is expected have about 100 schools and instructors enrolled by the end of the year. The company ended 2021 with 1,000 graduates. This year, it expects thousands of graduates in 20 countries around the world. The workforce currently numbers about 100 employees, with most of the company's management and research and development teams - 80 people - in Israel, working alongside business development and support teams in Europe and the US.

Is your growth due to the wave of folks making a career switch to high-tech?

Levi says, "The company has been around for three years. Our story is about the basic human desire to build a better future for oneself. We live in a world where to build a better future for yourself, you have to be on the tech side. There will be a global shortage of 85 million unfilled jobs for technology workers, which is beyond our capacity, but we want to be the main player on a field that has room for lots of other players. We want to build as many schools as possible and grow with them, to enable people to build their careers. We're on a journey to build the world's largest school that will train people, regardless of their background or life circumstances."

You conducted the funding round last summer. You announced it today, when we see the world entering an economic slowdown and a cooling in demand for tech workers.

"We see what’s happening now and what has happened in past crises. 2008, for example, was a turning point for many people who decided to make a career change in their lives. It was a year where people acquired new skills, and we saw after that, the sector taking a very big leap forward. Are things today the same as in 2008? Probably not, but the story is always about workers wanting to be relevant and looking for ways to make them that."

Published by Globes, Israel business news - en.globes.co.il - on May 22, 2022.