Udacity Evolves into ‘Nanodegrees,’ Online Tech Training for Businesses

Udacity tells Reuters that it will be offering its first "nanodegree" course, which will teach a skill at a much lower price than the cost of a college degree. The US online education company raised $35 million to make this offering and aims to provide a way for students to learn a skills like data analysis or programming without the time or financial commitment that a traditional college degree requires.

The degree in web development will cost about $1,200 and was built in partnership with AT&T, Inc. Udacity, headquartered in Mountain View, California, has its biggest market in the US, followed by India, the UK, and Germany.

The online company was founded by Sebastian Thrun in 2012. A former Google, Inc. executive, Thrun pioneered the Google self-driving car.

The average tuition for undergraduate work at a private college or university comes to about $21,949, says the Department of Education, and $6,669 for public schools. If a student has to get loans he will eventually owe $29,400, nearly 20% more than four years ago.

Online education is raising millions in venture capital funding, with even Harvard getting on the bandwagon with an free initiative called EdX. Yet there have also been critics. San Jose University, for example, suspended a program the school had begun with Udacity. The complaint was that failure rates for online students were much greater than for traditional learners.

The nanodegree is the first entry into the Udacity Open Education Alliance, which is a pool of businesses which are on board to recognize an industry-focused skills credential, says Jonathan Shieber writing for TechCrunch. Some investors who will help the program expand are partners in Brazil, Japan, Germany, and the US heartland.

"The way we're doing this, our education is really built by industry," says Thrun. "They give us their best staff, they give us money to build the content, and they really take a first-hand design of the curriculum. [For instance] Google built with us Android classes that define what an Android programmer should know, according to Google."

Udacity has been chafed by some in the education field who are worried that its emphasis on vocational training might replace the liberal arts degree. This is especially possible as the fear of huge student loan debt could lead students to choose cheaper and faster paths to a career. Thrun says that Udacity is not meant to replace four-year degrees, but to supplement them.

Udacity is focused on students age 24- to 34-years, and with 20 partners lined up to roll out courses for which a typical student will receive certification within six months to a year. The tuition is $200 per month, but being involved with Udacity also offers a network of companies that are committed to considering nanodegree students for positions.

Udacity's education connection was not quite on target, and 2013 was especially rocky.

"We were working with academia and our work was not as well received as I'd hoped," says Thrun. "But we wanted to reinvent education and we believe bringing education back to companies is a good move for society."

George Anders, in an article for Forbes, writes that although Thrun provides free versions of all his courses, the nanodegree's official certificate and small tuition will give the course a little more stature and will allow graduates to include the course on applications and resumes.

"I'm in this for the long run," Thrun said. He said he hopes that as Udacity's courses grow, it can help knowledge and opportunities spread globally in ways that contribute to a more harmonious world. Besides," he noted, "Udacity last year hired a chief operating officer, Vish Makhijani," who rounds out the management team in ways that lessen the pressures on Thrun to try to do everything.

The lead investor in the new round of Udacity funding is Drive Capital, an Ohio-based company founded by Mark Kvamme, a former Sequoia Capital partner. Sequoia is one of Silicon Valley's most renowned venture firms, says Silicon Valley Business Journal reporter Cromwell Schubarth.

Gregory Ferenstein, writing for VentureBeat, ended a conversation he was having with Thrun with a quote that he says he is going to have stitched on a pillow and placed on every couch in San Francisco:

"We are in that sense a typical venture-backed Silicon Valley company; we really strive to change the world in a massive way and put that objective ahead of profitability."

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