Blog + Private Equity
Blog + Private Equity
Some of us are old enough to remember when the learning management system market developed and was considered the hot, new EdTech category (back then we called it “e-learning”). It was going to finally deliver on the promise of employers bearing more responsibility for educating the labor market. That did not happen exactly as predicted, though LMS software has become ubiquitous. Knowing that, one might be forgiven for treating the latest acronym, LXP, with some world-weary skepticism.
But that would be a mistake. LXPs have begun to deliver on the 20-year-old promise of LMSes because the time is right. Consumers are comfortable learning online, a rapidly tightening labor market means reskilling and upskilling employees is a critical requirement for most companies, and there has been an explosion of high-quality, low-cost resources on the Internet. The LXP market is real, companies are buying into it, and existing and new providers are going to need capital to compete. This month saw deal activity that reinforces the scale of this opportunity.
The LXP Market Emerges
We’ve written repeatedly in this space about the consumer revolution in EdTech. From the spectacular global growth of Coursera, to the introduction of a novel edutainment industry through companies like MasterClass, to the explosion of paid peer-to-peer instruction over platforms like Thinkific, which joined the Toronto stock exchange through a successful IPO last month, the willingness of individuals to find and consume content outside of traditional higher education, occupational licensing, or forced corporate training channels is something genuinely new that has developed in earnest across the past 10 years.
This consumer mentality has crept into the workplace as well, where the need for continual reskilling and upskilling has become an accepted part of modern work life. The proliferation of free and paid content offerings and this new sense of personal responsibility for one’s continuing education has created both an opportunity and a challenge for global corporations. The complexity of tracking individuals’ current skills and what gaps they could fill to be more useful across the organization has become a challenge for which the legacy corporate learning management systems (LMS) are ill-equipped. Though these software tools have become ubiquitous at most Fortune 2000 companies over the last 20 years, they are built to support the imposition, scheduling, tracking, and delivery of required training and are not well positioned to do the far more complex job of charting training pathways to new competencies and new areas of employment and then empowering users to source appropriate content.
Into this gap has emerged a new category of learning software, the learning experience platform (LXP). Rather than focusing on employer’s mandatory training requirements, this type of software is centered around employees’ personalized needs, supporting their pursuit of skills training for advancement or reassignment by identifying training needs and options to satisfy them. LXPs use artificial intelligence tools to locate employee skills gaps and make appropriate recommendations based on employer needs and employees’ own preferences. They further curate content from both inside and outside the organization to address those gaps and connect users to one another to share content or make recommendations to entire work units. Though this software category is nascent, it operates at the center of a variety of more established areas of the corporate training market.
Source: JoshBersin.com, Capterra, Tyton Partners
The dominant market leader in this category is Degreed, which announced a large capital raise last month and a meaningful increase in valuation. Degreed raised $153 million in a Series D funding co-led by Sapphire Ventures and Riverwood Capital that values the company at $1.4 billion. Degreed is one of a handful of LXP providers – others include EdCast and Fuse Universal – that are unaffiliated with a specific content provider. (Tyton Partners represented Pathgather in its 2018 sale to Degreed.)
But the LXP functionality is sufficiently compelling to corporate buyers that some corporate training content providers have sought to embed elements of LXP functionality into their own offerings. In 2018 content provider SkillSoft introduced Percipio, its own proprietary LXP. (Tyton Partners advised Churchill Capital Corp. II in its planned acquisition of SkillSoft and Global Knowledge.) With one of the largest content libraries in the world, SkillSoft leverages its LXP functionality to assist users to create meaningful paths through its vast library and to encourage broad usage among its customers. More recently, last month LinkedIn announced the launch of a Learning Hub that will add LXP functionality to its existing training content offering. LinkedIn plans to make other competitive learning content available through the new platform and believes its proprietary taxonomy of more than 36,000 skills, its job postings, and its professional network will give it a competitive edge in the most complex area of LXP functionality: creating customized learning pathways to different or better areas of employment.
Whether corporate customers will embrace a platform that could facilitate employees leaving to find employment elsewhere, develop an appreciation for one-stop content and technology shopping, or favor platforms that are content neutral remains to be seen; but the enthusiasm for the category seems to be more than a passing fad. We expect to see more rivals emerge in the category and might also expect to see an eventual consolidation of features with LMS providers which, while less powerful and promising than LXPs, nevertheless provide functionality that has become critical at large employers.