We recently had an opportunity to present at The Association of Learning Providers (“ISA”) Annual Conference. The ISA members are CEOs and founders of leading technology and services companies that provide their clients with training, assessments, and talent development solutions. We discussed our take on the investors’ view on this part of the Human Capital Management (“HCM”) market summarized in the three sections below:
A spike in investment
Over $4 billion of venture funding went into Learning, Development, and Assessments (“LD&A”) in 2021. Astoundingly, this amount of capital is nearly 5X the past 5 years…combined! LD&A went from around 5% of total Human Capital Venture investments to over 23% in 2021.
Notably, several very large transactions boosted this total (e.g. Articulate raised $1.5 billion Series A, as this developer of e-learning software seeks to accelerate growth and scale internationally).
The power of this capital is changing industry boundaries and creating tremendous opportunities – with very high expectations, particularly given that most VC investors expect 3-4X in returns!
Valuations also reflect the attractiveness of the LD&A market. Four of the top 10 highest valuations in the HCM universe were in LD&A investments in 2021.
In Q1 2022 alone, there have been over 30 transactions and more than $1.3B targeted at learning and development solutions.1
Attractive trends in HCM
The disruption in the talent markets has led to a greater emphasis of LD&A as a force within HCM to help enterprises adapt to new work realities and cope with the “Great Quit”.
Upskilling is one example. As one CEO noted, “If you upskill your existing talent base, it is easier to fill positions internally and not look to outside sources for talent”.
Focusing on skills is another. “Companies in agile organizations look for skills, not job titles. The problem is that skills are not identified or taxonomized in organizations yet. Companies need to know capabilities and what role their people should be in”, noted another conference attendee.
Overall, following the investment money going into LD&A suggests there will be more innovation coming in these key areas:
Platforms for E-Learning, Coaching and Mentoring
Tools for talent mobility and skills
Training focused on technical skills, executive skills and DEI
The chart below depicts some of the more notable transactions and the themes behind the deals.
Future expectations
The size of the investments combined with the valuations and focus on key themes suggests high and rising expectations for the LD&A companies.
The more established incumbent players will be challenged to adapt to the force of change these innovators bring.
Consider how the incumbents across LD&A represent trusted brands with strong research backing and proven processes and outcomes.
We expect to see tremendous upheaval as new entrants with more flexible technology, subscription-based models face off against (or in some cases, with) the more established, data-hardened veteran companies who are already adapting their models to the new normal of today’s more “zoom-based” client expectations and delivery channels.
The chart below depicts the leading new entrants, the total capital raised and the key trends of disruption they are enabling.
Sources:
1 Harbor View’s Q1 2022 Human Capital Management Report
DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.
