Joe:
Hello and welcome to Innovators and Ideas in Executive Interview series from RBC Capital Markets, where we share ideas, perspectives and advice from today's industry leaders. I'm your host, Joe Coletti. Today, we're coming to you from RBC's Global TMT Conference Technology, Internet, Media and telecom excuse me. And I'm joined by Ken Hahn, chief financial Officer at Coursera. Ken, thanks for joining us.
Ken:
Thank you, Joe.
Joe:
So let's start off, you know, for those listeners that maybe aren't as familiar with Coursera, maybe you could talk a little bit. Let's talk a little bit about the company and what you guys do. Kind of your general vision and direction.
Ken:
Sure. So what Coursera does is we take a lot of learning content and then we distribute that to learners through various channels, which is our business. We were founded by two Stanford professors who released the first book for a massive online open course into the world a little bit over a dozen years ago. And it blew up, right? It was amazing. As 100,000 students, they never expected it to happen. And they've learned all these interesting things, like it wasn't the two cohorts of Stanford students, of three brilliant Stanford kids who did the best on these programs. It was instead kids from India and all across the world. And so it gave them the idea to stop and go found Coursera.
So they they did that. They left Stanford. They found venture capital through Kleiner Perkins and NEA to fund the series A and then built around the consumer, around the learner. That's what they had done over time. It evolved the business. We created business side of it for and leaders on the corporate side and then a degrees itself, a degrees product itself, which is one of the interesting things.
Our largest market, I think going forward, we believe going forward, that's also our smallest segment today. And so at the heart of it, what we do is we take learning content and distribute to learners and through multiple channels.
Joe:
So now it's such a fascinating story and I kind of want to stay on the company a little bit more.
And you may have touched on one of them already, but you've obviously had a lot of investor meetings today. And one of the things that I think would be interesting for the audience to hear is what are some of the big drivers of your business and your growth as you see it right now going into the future?
Ken:
Sure. So we have had lots of conversations about that already today. The one thing which might not be intuitive at the highest level is what drives our business, this rate of change. So, people talk about the pandemic and they're interested in what the pandemic did, a bunch of a ton of different Internet companies and what's the lasting effect.
And for a while people thought the pandemic, the effect was essentially this edutainment People were at home, stuck at home, so bored they even did education. Right. And that kind of horrified me at the time because that's that's not really a sustainable model if you think about it if that's what's driving demand. And for us and we saw particularly in the consumer business that increase in demand continued over time.
And stepping back and thinking about why it's so durable and I can talk about some of the product offerings that became important to us, which evolved with all this is what happened with the pandemic that affected the education industry more than anything else. Was it changed the rate of change? It accelerated the rate of change. Things moved online, jobs changed very rapidly.
Some of it's gone back. Most of it hasn't gone back. It has forever increased the pace of change in society. The biggest driver of education is the pace of change in the requirements of human beings to remain relevant, whether it's out of self-interest or it's for reskilling. Job skilling piece. The real effect of education or of the pandemic on education was the acceleration of change.
And so if you think about that going forward, I'm sure, and talk about because I really want to talk about air is particularly relevant in the broader education space. US and everybody else and what it's going to mean and the change that's going to drive, which I believe is going to be the biggest change agent element that I expect I'll see in my lifetime.
Joe:
I think more people are seeing that now, but I don't think it's fully understood. So, rate of change is the biggest answer as it relates to the pandemic. What we saw there and you're right, we've been talking about AI and particularly generative AI, almost over the constantly over the last two days.
And I want to stay on this thread just for just a little bit longer. And you talked the pressure or the need to reskill, upskill, you know, ever increasing. I'd like to hear a little bit more about some of the products that you didn't get to mentioned. I think, into this, but also sort of, you know, where's the demand going from learners to like what are you seeing in terms of trends, particularly post-pandemic?
Ken:
That is a great and highly relevant question. So again, with this rate of change, one of the things we're seeing at the highest level and then I'll be specific on the products, is a bit of a breakdown or disaggregation of the unit of learning where we've done particularly well in in recent years.
These job ready consumer, these packaged offerings, we call them specializations. They're essentially a college course in a particular and they're designed to take somebody from no education on a certain topic. You don't need a college education or need a high school education, but if you can pass this course, you have an industry certified, might not be someone who does what they're doing, but a respected company out there, Google, for example, with their I.T business suite or project management is the more interesting piece of it.
Google, that's not what they do for their job. You know, Microsoft hours, like there's this host and we've done really, really well with it, but it takes someone from no education to the ability to have a job on the related topic in again, roughly a college semester, three or four months where they're paying 39, 95 or 49, depending what offering they they choose and they qualify for a job that might pay 60 to $90000 depending what the specific job is and where it's located.
And we have seen an amazing that far exceeded our expectations. And we've doubled down on it. We're doing health care now. We said on our last call that we're hoping to see 50 of those courses offered by to have announced those. And they've been a big hit with the consumer. And because they are immediately job relevant, it's what I need now to get something of value that increases my human capital.
And so that has been one of the bigger effects. Again, conceptually, the disaggregation of the learning unit, whereas it used to be the way most people experience education. It's a monolithic four-year degree. You finish high school, you go to college because that's what people do. You get out, you get a job, you're done with learning. Maybe you get a graduate degree if you'reone in 7%, let's say, but not an ongoing training.
Some professions do, but relatively few. We believe what we're seeing now is the beginning of a longer-term trend where people are taking education, big chunks of education throughout their life. And it's through these, certificate programs as one example. But we think that's a permanent change to an education is going to work. It's really fascinating.
Joe:
It's crazy to see how it the acceleration to sort of post COVID. And I don't it doesn't sound like that's going to slow down. Let's go back, I'm kind of curious how you guys are thinking about utilizing AI, what you see as sort of the runway for your your particular business?
Ken:
Sure. So first and foremost, for anybody in the education space, my personal belief is A.I. is going to change the world more than anything we've seen, any technological development we've seen in our lifetimes. So first and foremost, there's going to be tremendous demand from consumers, and it'll take some time. Companies, as they restructure lots and lots and lots of different roles.
If they want to remain competitive. And so, that will iterate and evolve over time. I think there's a tremendous opportunity to serve everybody, to help educate them and help bring I help bring them into the future with with AI. So the first level is kind of the revenue of the product offerings.
So very relevant for our industry as it relates to what we're doing operationally and how we think about it, because it's what we do. We have a number of AI initiatives internally, some just how we run the company, which might be a little bit less fun to hear about. But there's a real focus and it's fascinating as you try to make it, you know, directly applicable to make rubber hit road.
But some fun stuff there. But more importantly on our product side and what we do for our learners, we have Coursera Coach is one example, which is a bot that you can see now I think about it's still in kind of beta range. Half the if you sign up today, there's a 5050 chance you'll be on it and you'll get exposed to it if you want to use it.
But what it is, is it's trained in our sandbox, so it's only our data and you know, the data of our publishers, of our partners, our education partners, which are both industry and university, by the way. So again, big corporations as well as some of the top universities in the world. And but it's I pointed to that data, which of course, is how AI works so that the quality is my CEO Jeff mentioned called a he likes to he likes to break it to or liken it to you have a to or the a student sitting next to you while you're taking the course and so it helps you get through the course.
You get more value out of it because you have this interactive experience. And guess what? It's really, really, good. We talked about entering and I'll mention just as an aside, because it's slightly funny, he went through, and we talked about coach and he's off again with another company now and he's got an iPhone is on and he said Yahoo is looking at us to talk with the engineers this is before our board meeting.
It's a lot better than I expected it to be, which coming from Tangerang is kind of unbelievable, right? It is amazing when you focus it on a specific content said just how good is it’s what it does. So maybe it shouldn't be surprising, but it is pretty amazing. And so what that does, of course, is it makes the products everything we have more useful to the learner.
They get more out of it and so when that happens, you know it business in my opinion. You figure out how to create a lot of value for somebody, then you figure out how to split that value, who gets paid what and however it works out for that, specifically for the ugly economics of it, it's going to create tremendous value.
So it takes existing learning and content and makes it more valuable to everybody because it helps them learn better. And it's amazing. I've done some of the courses where you look at things and, you know, I did fine in school and I can do okay on most things when I'm being taught it. But it was did the ability to kind of go to the next step and have it, you know, have a deeper understanding is really, really valuable.
And most of this is are people taking this courses voluntarily because they want to know in depth about some topic. And so the for us and I'm sure other people will figure out similar things, I'm very excited about it for us because of what we do in our implementation, who we have involved in it. We also have eye for course building, we call it course builder.
And what that does is it draws across our catalog to help people produce new courses where they might structure a topic but borrow a lot of the learnings from other things that we do and our publishers, then our partners are our content partners. They didn't get paid on the amount of content that gets consumed in this other person's new course.
We were worried at first. There's a lot of IP questions around AI and how you incorporate things that that was going to be problematic. You know, you need to be very careful with your partners. They make all the difference in the world to us. They're all of our content. It matters. And these are huge brands, right? If you think about it, if you look at the names, they're like, So they care a lot.
And 90% of them have opted in to sure include my include my material and course builder, because a lot of them do want to disseminate their information. They find it useful, it's helpful to them from brand perspective, and they also get paid on it. But I don't think that's the driving force. So the Course Builder is another really cool.
It's pretty amazing when you see it's like I want to develop a course that last 2 hours based on and then you iterate on it and it develops a course for you. It's really amazing.
Joe:
It's amazing. I assume you're also seeing an increase in people's desire to learn about AI in some way, or B, is that something that you guys are starting to see?
Ken:
I think ever, particularly since chat CBT sort of has hit the headlines, there's definitely in the workplace and outside of the workplace, this desire, this need to figure out what I need to do to prepare myself are absolutely because if you're not paying attention to that, you're at risk, right? Maybe you're retiring and you're going to step away from society. But understanding societally as much as job wise and skill wise, just understanding there's a tremendous demand. And then within companies, again, how do they compete and heavily restructure. But, you know, on the basic level, again, Andrew, we talked about but Andrew, it's interesting to be where we are. He's essentially the world expert in A.I.. He headed A.I. again for Google and Baidu, right?
And why? Because the first applications of AI that were the most important was consumer behavior around clicking on ads. So the search engines were had a profound impact on monetization. But you better believe they're focused on he he was there to have the biggest use cases in the world if you think about it. So, he has a new course out which is I was not intending to do a plug, but you'll take it will take plugs this is pretty good so it's A.I. for everyone.
By the world's expert in drag. You could argue that if you want. Doesn't matter. He knows a lot A.I. for everyone. It's free. By the way, unless you want a certificate, as all of our content essentially is free. Unless you want a certificate, you're going to buy it for corporate use so people can take that for free. That's it's nice to assess, but it's essentially a college level course that teaches non-technical people how to think about it.
And I'm only halfway through, so I don't know the full extent of it. I'm on planes a lot lately, so but it, it, it's fascinating. It's really good. And so things like that, that will be another he's kind of a hit producer because he's a known he's kind of a star in the world of AI and technical.
But anyway so that's one way people are accessing it through our platform.
Joe:
That's great. I think really interesting to truly I know we could probably talk about it for another hour. I'm imagining too, but I do have to pivot us back to the world of capital markets. As maybe less exciting as it might be. The U.S. Conference. I do want to you know, we have a lot of private companies that listen and attend our confidence. You guys went public 2021. You know, as the CFO, I'm curious if there's any lessons, observations that you have about what it was like from private to public and some of the bigger lessons that I think any company would tend to learn.
But things have become more of a reality sort of after you're complete that process. So it's personal to me, never super interesting, but the personal part matters here. So this is my third IPO I've done for public companies. My CEO, Jeff Madison, called a funny founded financial engines, took them public, ran it over, I don't know 15 years.
Neither of us are spring chickens. So we've seen this before and there's no there's no real advantage to accept. You've seen it all before. And I think we made we've had relatively few new learnings, I guess, which is a good thing and why you want to have that experience, because you don't want to do that to your company as a new public company because it's traumatic.
Being a public company can whipsaw and we are eyes wide open. Went into IPO. We raised a lot of capital, which is going to be really important for the business over time. We have $700 million of cash. We believe we have all the right assets and we're in an industry that's being massively disrupted, as we've been talking about, but on multiple fronts, not just AIG.
The optionality around that cash is enormous. The use of capital to our ultimate success is really important. I'd say the things the bigger focuses on it is constantly reevaluating where you stand versus your industry competition and how it affects your strategy. And so you know, we've talked about our degree segment. We talk about very openly, which we've been sorting the strategy.
You know, we've had the joy of doing that in a public market. And so you get to talk about when it's working and when it is and it's the smallest of our segments, but it still matters because it's our biggest opportunity over time. And we don't you know, one of the things you learn over time is the best thing.
My opinion, the best thing to do with the street and with investors is to tell things how you see them. You're not positioning the company to look best because you're working with people that you're you spend time with as you release results over time. It's a play in replay model. You're going to have continual experiences. And so we're always pretty open and honest on where we see things, where we're not doing well, where we're doing well, where we haven't figured out things, and what we and you shockingly, you actually get really good feedback sometime from investors, like people very focused on you.
Making money tend to be helpful and thinking about how you make money and how you run your model. So to me, one that we've avoided some of the pitfalls and remain fairly open. But the biggest thing is it requires an ongoing evaluation and communication of your strategy and your progress toward that and change and then changes in the environment and having to be super thoughtful about that because you need to adapt.
Joe:
So it's a requirement for a heightened sense of awareness around something that you should have been doing private anyway that you're forced to do every day. But don't make a mistake. It's not the first time I've heard that part, you know, similar but slightly different. M&A, if it takes it, how do you guys sort of think about M&A as part of your own sort of growth plans growth story moving forward?
Ken:
So we've done little M&A as a company today. We did a very small acquisition around some great technology that we've really enjoyed when we were pre-IPO public called Rhimes. It allows a virtual use of a software program so that you can learn something in a hands-on event without having to download and pay for the software, which is it's super cool if you see how it works, but a fairly small acquisition, nice product tuck in came with a great leader who's still part of Coursera today and runs product for us now.
So it's been it's been a good experience. We are open and looking at acquisitions all the time. What I described earlier which is we are at the early stages for in a huge market. Education's a huge market that we believe is about to undergo a lot of change. Optionality makes all the difference. As I described before. That's why the cash is important to us.
It will enable us to have strategic flexibility in dorky financial theory terms. If you think about an option, which is what that cash is, when is an option most valuable in the time of greatest change in volatility? So given what we believe that that cash is important as it relates to thinking about acquisitions in the future where we'll be break even, we committed to on the last call, in fact, we committed to three quarters ago in this existing quarter from an PNL perspective, we'll be profitable next year.
Again, we announced that three quarters ago, reiterated it on the last call. So we don't need the money to run the business. It will be earmarked for acquisitions as and as we have those opportunities. And we think there will be a lot of opportunities. We think we're in a a quickly changing landscape and because of the assets we have, we will have a better ability to use other assets than most people out there, which makes us a natural acquirer over time.
Joe:
I want to thank you so much for that. I think one thing I, I meant to ask you earlier, but I'm going to bring it up now. You guys are a B Corp. Yes. I'm wondering if you can take a second to what that is and why you guys decided to do that or what it means to to the company, which I think is I'm sure speaks to your purpose.
Ken:
It's a great question and it's very meaningful at Coursera. It's very meaningful. We chose to in B Corp, by the way, is the certification essentially of a set of actions which revolves in a legal structure around a public benefit corp. So that's the official legal structure that you're held you're accountable for essentially in making governance decisions. And even in my role, maybe particularly my role, sometimes that is part of the decision-making process.
If you were to hear conversations internally over let's I want to be careful here a university in in a country that's that is in particular financial hardship, do you turn off their service because they're not paying their bill well and in my for-profit companies before the answer would be very swift. It's turn them off and get them to pay or they're done.
Not the case in this one instance, which is not what we do day to day. But the conversation was, well, let's think about it. Think what the university is doing. I think Heather and as well as our bill, our appetite for taking risk in other countries that might not be as stable but have a population that desperately needs to be educated.
We have and then we have we have places where we distribute free licenses and we've partnered with a number of companies, some of the nonprofits. We've, you know, they get discounted rates and we work with them to roll things out across the world. So it is a pretty fundamental part of the business model. We were one of the first companies to go public as a B Corp, as a PDC, and there were maybe five in total.
I think we were the fifth. That could be wrong or slightly wrong, but really important in the So making the decision to do that right before you go public is a big deal. Tweaking your governance structure, an untested legal theory about who can sue you for what is it really, truly big deal when you have a bunch of shareholders who stood behind you as a private company and are about to be launched in the public world, and if you get this wrong, you might affect the value of their returns.
Those are the people you work for, by the way. And so they were all fully supported. The most important part for me, as we analyze that, and I think in my opinion and there may be other reasons to do it, in my opinion, this is the best reason for a PDC or B Corp to exist. Is it naturally helped the business.
So it's this virtuous circle which people like to draw these cheesy, virtuous circles and investor decks. We don't have one in our investor decks, by the way. You don't really I'll take your word for it. Don't really use investor decks, in fact, so much anymore because a lot of people understand the business pretty well. So we're talking about the business.
But but where us doing good in the world? And we have these conversations internally to be clear, around the time of some of the social unrest in the United States, where an all hands meeting, where a number of the employees are very raw. We talked about what we're going to do. People wanted us to donate the company's money to these various causes.
We then had have conversations around this is not our money to give away. You know, we're a steward of this capital. But our solution a couple of times was the executives agreed to amounts to donate to the same charities, which was kind of funny and not necessarily sustainable after the second time. It's not a good way to fund a business, at least in my opinion.
But I'm biased. And but joking aside, during one of those processes, one of the very thoughtful comment from one of the employees, they said, look, we're talking about being a global company as we're getting ready because they knew we're getting ready to go public. And as I look at this, it feels like we were very domestically focused. We're talking about giving all these various charities in the United States.
But what about hunger in Africa? This was literally the example. And I sat there listening to and thought, boy, here we go. What how are we going to do this if we're giving away all our money? This is not going to work out. And of course, the answer is we should probably leave that to the Gates Foundation.
Other people who are truly expert on eliminating malaria and things like that, that's not what we're good at. But the answer is instead, what we should be doing is doing what we're really good at, which is education. By the way, there's lots of opportunity with education. Education cures so many ills in the world that we face, and it reduces poverty, ignorance, discrimination across the board, spreading.
So our ultimate success and this is discussions we had further as we thought about messaging within the company, because a lot of it is bringing people along. So you have, you know, a mutual understanding of what's important is if we succeed and we succeed as a growth company, we succeed as a financial entity. By the way, little known I think is and I talk with Andrew NG about this in a sidebar, They had originally considered launching Coursera as a nonprofit, and they were Stanford professors, him and Daphne and they thought, you know, they're doing this for something good for the world.
But they thought about and thought we could never expand as quickly as we wanted to if we didn't do it in a for profit fashion so fast for ten years later, as we're going public and you have this big for this P, B, C, and the answer at the end of the day is us. We're growth company. Our investors are going to get paid the best if we grow.
And we do that while we're becoming its growth plus leverage are becoming increasingly profitable. I mentioned before I'll be profitable this coming year and I need better cash flow standpoint and but we need to do that because the more we do that, go back to the previous conversation, we can buy other companies we incorporate into our conference. We can become a massive or a good size already, but we can become a massive company.
What we do at its basic level is good for the world. So the more we do, the more we succeed as an economic beast, which is like it's brutal with competition and how the world works with economics. But if we can do that, we serve the world better. By the way, serving the world better makes the business work better, right?
These governments we're doing business with. So we have and it's somewhat do we're in a good place to do that. So that's great. We're an industry where that makes a lot of sense. There's another example. I won't name them by name just in case I get any of it wrong with an insurance company who's going public around the same time we're going to insurance company.
That's less of a natural thing as they think about it. And their view at the time, which I thought was a fascinating way to think about the same topic, was they all are consumers. No, we give away 10% to charity. They're less likely to commit fraud on their insurance claims. And we have the data. I don't know where it's gone since I've been very busy since we've been public, but it's like, that's brilliant.
So it makes sense. And my belief on the PDC because where they really work is when the goodness you provide also has economic benefit and you get this virtuous circle. And if that's how other people think about it, I haven't ever shared that before, but that's my personal point of view. But it's been a fascinating ride for us and it's proven true and it's pretty exciting.
It's lots of other benefits. A lot of employees, especially it's become better known, want to work at a B Corp and and so you attract a different, very mission driven person to the company when you're a B Corp which has lots of other benefits. Certainly was a bold move when you're going public, but it also sounds like it was very meaningful and it's really tied your company's purpose together with what you're doing.
It really does to the Fitzwilliams, to the executive teams, the employee base, to the board of directors. It you know, honestly, it pervades the company and it's why most of the people are you know, most people are here and most of the people are with us because that they have a strong sense of and even for those who maybe weren't as strong on it, on the front end, it grows on you.
Joe:
You're doing good in the world. Well, look, I think I got to leave it there because I don't know if we could end on a better high note. I just want to thank you for joining us today. Really appreciate it. Really enjoyed this conversation. And I hope you'll come back.
Ken:
Thank you, Joe