Screwvala, who owns 22.4% in Upgrad, is likely to invest his personal capital in the new investment round as well, sources said, adding that the company has pitched to external investors for about $50-60 million. The rest would be from existing investors like Temasek.
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The acquisition talks had begun last year, which ET had reported.
While the contours of the new funding round are still being finalised, the valuation for Upgrad is unlikely to see a jump from its last assessment of $2.5 billion.
India’s edtech sector saw one of its worst phases in 2023, underscored by troubles at Byju’s that dented investor interest.
Upgrad is likely to acquire Udacity now for about $80 million, slightly lower the $100 million value that was discussed earlier.
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Sources said Upgrad is aiming to close the acquisition in the current financial year.A spokesperson for UpGrad declined to comment.
ETtech“The due diligence at Udacity is at a very advanced level now and law firms have been appointed who are in the middle of the process,” a person aware of the details said. “The new financing being planned is linked to the Udacity deal.”
The company doesn’t immediately need external capital for operating the existing business, the person added.
Upgrad has been on the lookout for international assets to boost revenue and enhance its offering in the reskilling space.
“Upgrad has been involved in the deal for months now but the deal has taken longer to fructify amid the reset in the technology ecosystem worldwide,” the same person said.
Another industry source pointed out that the valuation at which Upgrad finally manages to raise new capital would be crucial given edtech valuations have been reassigned globally.
“A flat valuation deal is quite ideal at this point. Companies with good revenue growth with clear paths to profit have been getting a minor premium to their last valuation,” said the same person, who is also aware of other edtech deal discussions, including primary and secondary investments.
Upgrad has raised $600 million since its inception in 2015. The last $36.4 million came through a rights issue in March last year. It counts Bodhi Tree, a joint venture of James Murdoch and former Star India chairman Uday Shankar, among its investors. It reported a 96% rise in revenue at Rs 1,194 crore in the financial year ended March 2023, while losses increased by 67% to Rs 1,142 crore during the period under review.
ETtechCalifornia-based Udacity offers courses across data engineering, business analytics, artificial intelligence, data science, product management and others. Essentially, it has three key verticals: individuals, government and enterprise. The enterprise business is the largest revenue driver for the US-based firm but retention has been a challenge.
Sebastian Thrun-founded Udacity was last valued at $1 billion in 2015 after it raised $105 million from investors like Germany’s Bertelsmann and Scotland’s Baillie Gifford. Silicon Valley’s Andreessen Horowitz, also known as a16z, is also one of its investors.
Thrun is also the founder of Google X, where he worked on ideas like self-driving cars and Google Glass.
Mayank Kumar, cofounder and managing director at UpGrad, had said in a statement while issuing the FY23 financials that the company continues to explore organic and inorganic expansion as it was on track to hit operating profitability during the second half of the current quarter.