U.S. online-education company Udacity raises $35 million for 'nanodegrees'

Reuters News
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Posted: Sep 24, 2014 7:33 AM

SAN FRANCISCO (Reuters) - U.S. online-education company Udacity said Wednesday it had raised $35 million and was offering its first "nanodegree" course, which aims to teach a skill but at a fraction of the cost of a college degree.

The credential aims to provide a way for students to prove they have mastered some sort of skill, such as data analysis or programming, without the time commitment or expense of getting a traditional college degree.

Built with AT&T Inc, the degree in web development will start at around $1,200, said Udacity, based in Mountain View, California. Udacity's biggest market is the United States, followed by India, the United Kingdom and Germany.

The company was founded in 2012 with the goal of democratizing education and is led by Sebastian Thrun, a former Google Inc executive who pioneered Google’s self-driving car.

Nanodegrees will be extremely tailored, unlike a broad liberal arts education.

But at $200 a month, with the AT&T nanodegree taking an average of six to 12 months to complete, they will not carry the same price tag, either.

The average yearly undergraduate tuition at private schools is $21,949, according to the Department of Education, or $6,669 at public schools.

Students who need to borrow money to pay for a bachelor’s degree owe an average of $29,400, nearly a 20 percent increase over the past four years.

The funding round brings the total backing for Udacity to $58 million, according to a spokeswoman.

The latest round was led by Drive Capital, with participation from Germany’s Bertelsmann; Japan’s Recruit Holdings; and Brazil’s Valor Capital. Existing backers Andreessen Horowitz and Charles River Ventures also participated in the new funding round.

Online education has become one of the hottest fields for startups, with businesses such as Coursera and 2U also raising millions in venture capital funding. Harvard, MIT and other leading universities offer their own courses online gratis in an initiative called EdX.

Some aspects of the new programs have come under fire. Last year, a program run by San Jose State University and Udacity was suspended after officials found that failure rates for online students were much higher than for traditional learners.

Spokswomen from San Jose State and Udacity said Tuesday they were not currently working together.

(Reporting by Sarah McBride; Editing by Lisa Shumaker)