Degreed remains acquisitive as it anticipates frothy workforce learning tech M&A environment in coming year, CEO says

Degreed, a VC-backed workforce upskilling and talent management platform, is “right on plan” amid COVID-19 and targets acquisitive growth “as the year goes on,” said CEO Chris McCarthy.

Pleasonton, California-based Degreed has seen “no changes to the roadmap,” McCarthy said. The company's workforce education and digital learning platform is becoming “more valuable today than even just a few months ago," as the coronavirus pandemic has forced employees to work remotely and learn new digitally-focused skills.

The next year and a half will be a “rich and active M&A environment," McCarthy said, noting additional consolidation in the learning experience, human capital management and learning management systems is "inevitable." A fragmented market full of point solutions looking to be part of a more complete platform will yield pickup in M&A, the CEO said.

Most recently, Degreed acquired UK-based skills inventory and internal career mobility platform Adepto for undisclosed terms in December.

Acquiring Adepto was a "big strategic move” that Degreed pursued in a bid to better serve client needs around skill measurement and internal mobility, McCarthy said. Degreed, which generates around USD 100m in revenue currently, could see revenues grow 70% to 100% this year as it integrates the acquisition, the CEO said. The company has 450 employees. 

Degreed is not yet profitable, preferring to invest in growth, McCarthy said.

Looking ahead, Degreed has a “few targets in mind” and its internal corporate development team will continue sourcing potential targets over the coming months, McCarthy said. Ideal targets include training, mentoring and individual coaching platforms that can help bring Degreed to the “next piece of the human capital tech stack,” the CEO added.

Degreed has centered its platform on an “end-to-end system for employees” with “content and platform-agnostic learning,” career-mapping, skill tracking and internal job mobility functions, McCarthy said.

"We won’t be [pursuing acquisitions] to buy revenue,” but rather to shore up talent and go-to market capabilities, the McCarthy said. Degreed doesn’t have an ideal target size range, he added.

From a capital standpoint, Degreed is in the "strongest financial position it's been in," McCarthy said. The company has raised USD 140m to-date, most recently taking in USD 75m in equity and debt last June. Degreed remains focused on putting existing capital to work on M&A, hiring, and product and technology development, the CEO said. The company could consider raising additional funds to finance acquisitions and further invest in development, he added.

Ultimately, Degreed is a likely candidate for an initial public offering, McCarthy said, noting the next year and a half will inform more concrete decisions. Degreed has been “building with the intent that it could be a public company,” the CEO added.

Investors include Owl Ventures, Jump Capital, Signal Peak Ventures, GSV Accelerate and AllianceBernstein.

Degreed expects to see ballooning international growth, a focus area for McCarthy since he took the helm as CEO in 2018. The company derived about 2% to 3% of revenue from outside the US when he took over, but is now at “more than a third,” the CEO said.

“Europe is exploding for us,” McCarthy said, adding that Latin America, India, Singapore and Canada are also “key focus areas."

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