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Employers are consumer edtech’s next beta test

The war for talent is here, and it may need a MasterClass

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Top view of African American adult woman laying on ground and using laptop at home
Image Credits: Nadasaki (opens in a new window) / Getty Images

Remote work may have changed the way we spend our days, but there’s quite a sneaky disruptor among us: burnout. As the pandemic drags on, employees are either soul-searching for a bigger purpose or simply exhausted by the uncertainty and stale culture of their current jobs.

It’s not a small subset of the working population, either: Microsoft estimates that 41% of people are likely to consider leaving their employer within the next year, and 46% are planning to make a major pivot or career transition.

Employers are under fresh pressure to retain talent, which has made some turn to more comprehensive and creative benefits, from pre-conception and postpartum support to text-based mental health care and on-demand meditation. As the movement to support employees better gathers momentum, traditionally consumer-focused edtech startups are taking notice.

Over the past few months, direct-to-consumer companies, including Outschool and MasterClass, have quietly spun up products targeting employers. The platforms, which mix entertainment and education, have an unconventional value proposition. Outschool, an after-school enrichment platform for kids, is betting that working parents could use some extra help keeping their children engaged. And MasterClass, which offers expert-led classes on-demand, hopes that a chat with their favorite celebrity could inspire a star employee to stay at the company longer.

The belief that employers will invest in edutainment benefit platforms is a departure from the traditional pitch that edtech has used to break into this market. Companies like Udemy and Guild Education, for example, focus much more on reskilling and upskilling workforces to fill the latest in-demand roles.

As nascent efforts begin to get real investment, consumer edtech’s success will hinge on whether it can effectively, and consistently, translate its impact to employers in the long term. Put simply, entrepreneurs need to convince employers to turn to edtech for a solution even more elusive than education: motivation.

When the struggle is more obvious

Amy Yamner Jenkins joined Outschool last fall as a contractor to grow the after-school marketplace’s business. When schools didn’t reopen in August 2021, she said schools and employers began turning to Outschool to relieve the stress of another year of remote learning.

These early customer signals fundamentally changed Outschool’s priorities. A year later, Jenkins is the head of schools and distribution, in charge of a 10-person team that solely works on helping get Outschool into more schools and employer benefits packages. Today, over 100 companies, including Alto Pharmacy, Mursion and Twitter, use Outschool.

“I don’t think it was easy to be a working parent prior to the pandemic,” Jenkins said. “But it just feels like the pandemic made it even more obvious [to companies] what the struggle was.”

Outschool tells employers that it can help working parents better balance work and life duties by providing enriching classes for their children. While it’s not offering education in the most traditional, pedagogical sense of the word, Jenkins views Outschool as a better alternative than “sitting and watching YouTube,” because it helps kids discover a new interest or follow a passion.

Flipping a direct-to-consumer tool into a business-to-business-to-consumer service (B2B2C) requires intention. Outschool curated landing pages on a company-by-company basis with classes that children may be interested in. It also offers a concierge service in which parents can share their kids’ interests and availability, and an Outschool team member will book classes on their behalf with employer-paid credits.

The startup is working on better ways to communicate its value to employers. For example, it created a dashboard that human resource teams can use to understand how their employee base is engaging with classes and topics, and then draw conclusions on how the benefit impacts overall retention. Over the past year, employees have spent over $75,000 in employer-paid credits on Outschool, Jenkins said. If it works, employers that give working parents a $100-per-month Outschool stipend will increase their retention.

“I think we’ll get there,” Jenkins said, on tracking outcomes. “All of the partnerships are new, so no one is able to make those connections yet, but they have the level of data that they can do [it themselves].”

While Outschool is trying to convince employers that working parents need more support with childcare, MasterClass’ new product is selling a different vision: Your employees need help with their soft skills.

How an FBI hostage negotiator helps you reskill

MasterClass may be best known for its celebrity-fueled motivational content, which can range from a cooking class with Gordon Ramsay and unconventional creation with Issa Rae to tennis lessons with Serena Williams. Its lessons, thus, are often viewed as less about pedagogical outcomes and more about offering students a window into an expert’s thought process.

Its employer product, still in the early stages of development, strikes a different tone, however. The landing page features bundles that employers can buy to help their employees develop their soft skills: Think a class on the art of negotiation by Chris Voss, former FBI hostage negotiator, or a lesson on effective and authentic communication by Robin Roberts, a “Good Morning America” anchor. The value proposition, therefore, is more about complementary skills that could develop or upskill a workforce.

The website states that it is offering two products to employers, with differences surrounding the method of delivery, administration and use cases.

Its license product allows companies or teams to get 12 months of access to MasterClass content “leveraging a central admin panel for distribution.” Imagine this as a dashboard that employers can use to visualize who is using MasterClass and what content is getting the most engagement.

Its other product is designed to be a gift, in which an employer can offer a unique code to their employees as a perk to be turned into personal accounts. The breakdown of each product’s popularity could indicate whether employees are looking at the platform as more of a perk, or as a true productivity and soft-skill enhancement service.

While rare, consumer edtech has tried to go the B2B route in the past. Early on, language learning company Duolingo launched a partnership with Uber that would train drivers in Brazil to speak English. The monetization attempt was savvy, but it didn’t work. Years later, Duolingo is trying its B2B efforts again — and, similar to MasterClass, one of its flagship outcomes is motivation.

MasterClass declined to comment multiple times for this story. It’s unclear what triggered the new focus on employers, and we only have a few hints at its plans from a recent $225 million fundraise announcement. “New audiences will experience MasterClass through an enterprise offering that will be officially launched later this year in response to strong demand from both SMBs and large corporations,” the company said in a statement at the time.

Additionally, the startup recently hired entrepreneur Nitin Gupta — who has led operations at Uber and Postmates and has exited a startup he founded — as its VP of enterprise.

To the TAM

It’s no coincidence that MasterClass and Outschool are building new growth-focused business arms after their valuations soared from independent fundraising events. Freshly capitalized, the startups are looking for ways to grow into their valuations.

As a parent-focused consumer company, Outschool generated more than $100 million in bookings in 2020, compared to $6 million in 2019 and just $500,000 in 2017. The company declined to share its expectations for 2021 beyond its previous statement that it is “projecting to grow aggressively.”

In a previous interview with TechCrunch, CEO Amir Nathoo said Outschool turned profitable in 2020 due to massive growth in bookings. It turns out the positive cash flow was brief. “My goal is to always stay within touching distance of profit,” he said at the time. “But given the fast change in the market, it makes sense to invest aggressively into opportunities that will make sense in the long term.”

MasterClass has financial reasons to focus on non-consumer revenue, too. According to Sensor Tower data, its app hit about $3.6 million in consumer spending in Q2 2021, down 28% from Q2 2020, but up 350% from Q2 2019.

The financial appeal to focus on the enterprise is clear. Companies like Guild Education show that you can build a massive business by selling education to a single organization with hundreds of learners rather than trying to grow on a learner-by-learner basis.

Greg Siegel, chief business officer at Guild Education, doesn’t view additional entrants as immediate competition. Instead, he urged employers to focus less on adding more benefits just for the sake of it. Does adding a MasterClass or Outschool tool “actually cause an employee to want to join you or be better in their current and future job?”

“One of the questions that I think every employer is asking, when they talk to anyone from Guild to Outschool to MasterClass, [is] what does this [tool] do in terms of retention on an incremental basis, and what does this do in terms of talent attraction?” he said.

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