Udemy has $790M ARR versus Coursera's $750M ARR... So why did Udemy sell to Coursera instead of the other way around and why is their combined market cap under $3B? (Part 2 of 2)

Three reasons:

1) Edtech 1.0 didn't live up to its promise. While these two companies have solid revenue and cash positions, their growth slowed, and public markets balked. This meant compressed multiples and significantly lower valuations.

2) The companies stopped innovating. They are selling a product that their customers don't love. They were category leaders, but they lead the category into mediocrity. They captured a significant share of learning and development (L&D) spending, but L&D as a whole actually lost budget within their organizations. That's Udemy's fault, and it doesn't even realize it.

3) Finally, I personally believe that Udemy traded upside opportunity for downside risk. We made lots of mistakes, including fighting amongst ourselves. A good investor would have supported us through it because they believe founders drive the highest long-term returns. Instead, they decided to hire CEOs that represented the opposite.

Either way - the consequences are real. By ignoring the founders, Udemy failed to innovate, which led to slowing growth which led to mediocre public market results. Furthermore, they don't have a good evangelist and public markets don't like a headless horse.

During this time, Coursera's team was excellent, and they innovated heavily. They added corporate courses to their university catalog, they built fully-online degree programs, and they offered a B2B competitor that kept Udemy on its toes. Their innovations led to a slightly higher growth rate than Udemy. Still, the Udemy B2B business (and team) out-performed and so the two companies were deadlocked. Coursera was better at B2C, Udemy at B2B.

A merger was inevitable, and I'm glad Coursera bought Udemy. Now, though, the new combined entity needs to innovate again. It's existential.

On B2B, Coursera needs to help L&D become the heroes of the AI era so the entire market starts growing again. On B2C, they need to build the most educational AI product on the planet (this is harder and riskier).

If they do either of those things, they can achieve the vision we originally set out to achieve and likely build a $10B+ company in the meantime. I genuinely hope they figure it out.

The current education system sucks and the world deserves better.