Transformation - Cape Digital FoundationWho is GetSmarter?

GetSmarter is an online education company based in Cape Town and London that collaborates with leading universities to offer premium online short courses to working professionals. Its portfolio includes about 70 short courses offered with its university partners. It operates under a revenue-share model with its university clients. Nasdaq-listed technology education company 2U has announced it is acquiring Cape Town-based start-up GetSmarter for US$103m (about R1,4bn).

To stay in the game universities need to work with tech companies
GetSmarter’s journey from bootstrapped start-up to a billion-rand enterprise is a case study worthy of attention. By Martin Hall.

The world of higher and professional education is changing rapidly. Digitally-enabled learning, in all its forms, is here to stay. In the past five years, massive open online courses have allowed universities to share their expertise with millions across the world. This shows how rapidly developing digital technologies can make learning accessible.

These new technologies are shaking up traditional classrooms, too. And as the nature of work changes professionals are turning to high level, online courses to keep pace with new demands. But much of this new technology is the preserve of private sector companies. This means that universities must work with them. Yet partnerships with for-profit companies still don’t feel right for many in the higher education sphere. Knowledge has long been seen as a public good, and education as a basic right. Many of today’s universities were shaped by the principles of public funding. This world was changing well before the disruptive impact of digital technologies, with tuition fees rising above the rate of inflation and the emergence of private universities as part of the higher education landscape. But there’s still unease about technology and its role. The reality, though, is that higher education institutions will have to get over their queasiness if they’re to survive in this brave new world.

Universities may not have the know-how or the money to match the innovations coming onto the market through private tech companies. The decision by Nasdaq-listed technology education (edtech) company 2U to acquire Cape Town-based start-up GetSmarter for R1,4bn (US$103m) is the largest price tag yet for a South African company working in digital education. This is an indication of what it would cost a university to set up a full online division. Few institutions will have this money, or the ability to raise it. The alternative is to reconsider the advantages of public-private partnerships, taking care to retain authority over quality. For many universities, this could be the only way of keeping pace with the changing world of education.

The story of a start-up

The story of how GetSmarter got off the ground is a textbook case of how a simple idea, combined with guts and luck, can reap huge rewards.

GetSmarter was launched in 2008 with a tiny budget and offered just one online course, in wine evaluation. By 2016, its annual revenues had grown to about R227m. The foundation for this expansion has been a wide range of courses developed and offered in partnership with the University of Cape Town and, more recently, the University of the Witwatersrand and Stellenbosch University.

GetSmarter’s key breakthrough into the international realm came with professional programmes in association with the Massachusetts Institute of Technology (MIT) and Cambridge University. GetSmarter’s first course with HarvardX will soon be presented.

After its acquisition was announced, I talked to the company’s CEO, Sam Paddock, co-founded with brother Rob. We discussed the lessons for other small digital companies — and for universities that are mulling the value of digital learning.

The Paddock brothers leveraged the cash flow from their father’s niche law firm to launch their first online course. They then used upfront payments for that course and the courses that followed to keep financing their next offerings. In the nine years that followed, edtech has become a crowded and complex field.

GetSmarter’s purchase price has garnered a lot of media attention: it’s high, in US dollar terms, and is a vote of confidence in the company. The price represents a valuation of a company’s assets, intellectual property and know-how, and strategic positioning for the future.

But what does it say about the kinds of investments and partnerships that conventional universities will have to make as they adapt to the full disruption from new digital technologies? The key aspect of GetSmarter’s success is how its partnership with universities has played out. As Paddock points out: “We are starting to realise the potential of public-private partnerships, where the credibility and resources of great universities can be combined with the skills of nimble private operators.”

This acquisition is also good news for South Africa’s digital economy. Paddock says GetSmarter will employ more South African graduates and give them international experience and expertise. And, he says, ecosystems often develop from one significant investment in an individual company. “This was how Silicon Valley started, as well as London’s “silicon roundabout”. Cape Town, GetSmarter’s home city, has been trumpeted as South Africa’s own Silicon Valley: “Silicon Cape”. The opportunity to lead in digital innovation and application has been widely recognised, for example through the work of Accelerate Cape Town. The Cape Innovation and Technology Initiative (CiTi) has a range of initiatives underway, including a three-year partnership with Telkom intended to build the digital workforce. Last year, Vodacom announced an investment of R600m to assist in developing South Africa’s digital skills.

GetSmarter’s big win is good news and proof — if universities needed it — that such initiatives can bolster higher education’s offering in a rapidly changing world. Universities in Africa know that they need to keep up with the relentless march of digitally enabled learning. GetSmarter’s journey from bootstrapped start-up to a billion-rand enterprise is a case study worthy of attention.

  • Martin Hall is emeritus professor, MTN Solution Space, Graduate School of Business, University of Cape Town
  • This article was originally published in The Conversation
2U TO ACQUIRE CAPE TOWN-BASED START-UP GETSMARTER FOR US$103M – APPROX R1,4BN

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