What’s Going On At BetterUp? Now Valued At $1.7 Billion.
BetterUp, a company known for its coaching network and AI assessment and development tools, just raised an additional $125 Million and is now valued at $1.73 Billion. This makes the company roughly two-thirds the valuation of CornerstoneOnDemand, a business with nearly a billion dollars in recurring revenue.
What’s up here?
Well BetterUp is a very successful and disruptive company, likely to change the corporate training industry forever. So let me try to explain.
Over the last 25 years I’ve studied the corporate training and HR industry in detail. And every few years there are red hot companies. In the early 2000s it was Skillsoft and SumTotal. In the mid 2000s it was Lynda.com (sold to LinkedIn for $1.5 billion), Khan’s Academy, and Pluralsight (sold to PE firm for $3.5 billion last year). Now it’s vendors like Udemy, Coursera, Degreed, and STRIVR. In fact, the corporate EdTech market is so hot right now that every vendor has visions of a billion-dollar exit hopefully being sold to Microsoft, Google, Salesforce, or another big player.
And I understand why this happens. Corporate training and education (which is now colliding with Wellbeing, as I explain below) is more than a $250 billion market, and it is robust, recession-proof, and growing. The problem is that it’s incredibly fragmented and complex.
Coaching, for example, has been a massive industry for years. I interviewed companies about their coaching programs in the 2000s and I remember BAE Aerospace telling me they used coaching (external and internal) for all their leadership development. And just about every other company does the same thing: there are executive coaches, coaches for new managers, and now wellbeing and fitness coaches as well.
But coaching was always a cottage industry. Until recently it was dominated by thousands of individual experts, often people who retired from corporate jobs or came to corporate training from their work as psychologists. And as many of you know, business is one of the most stressful experiences in life, so psychologists who learn about business can make a good living serving corporate needs.
Many vendors tried to build coaching networks, coaching selection tools, and outsourced coaching services, but most never became very big. And dozens of consultancies like Korn Ferry offer coaching because the price per hour is high and the margins can be attractive.
The problem, however, is that buyers can’t really buy “at scale” because the market is so complex… so the consumption of coaching has been limited and HR leaders use it for “remediation purposes.” In other words, when someone starts to fail or has problems at work, HR will often say “let’s get him or her a coach.” So it has felt more like a bandaid than a vitamin, so most of us never got a coach.
Well BetterUp has solved this problem, and taken it several steps further.
Let me tell you a story. I was at a UK HR conference in Birmingham five years ago and it was a dark and cold night. I woke up early to get ready for a speech and a cheery entrepreneur named Alexi Robichaux approached me to have breakfast. We sat down and talked and he explained to me that he was building this high-powered AI-enabled coaching network and he was in the UK training coaches and speaking at the conference.
Alexi and I hit it off and I became interested in the company. I was skeptical at first (I’d talked with a bunch of companies like this before) but he offered me a free session so I decided to check it out. My coaching session turned out to be invaluable. I found a coach who was a senior psychologist to help me with my transition out of Deloitte. We only talked a few times but she did an terrific job of getting me on track as I considered what it was like to sell my company, watch Deloitte run it, and consider my next steps. The BetterUp system worked: it diagnosed my issue, matched me to a perfect coach, and helped me understand what was keeping me up at night.
Fast forward to 2021. Over the last dozen years, the corporate training industry has exploded with growth. Not only is the demand for skills development, leadership training, and wellbeing at an all-time high, but the modalities of learning are expanding at light speed. Ideas like Learning in the Flow of Work are going mainstream; tools like VR are becoming common; and new modalities like conversational microlearning, micro-story telling, and all types of cohort-based learning are everywhere. The days of an instructor standing up on stage have not gone away, but this modality is really only a small fraction of the market at this point.
And as most of you know, the demand for “critical interventions” is huge. Workers and leaders are under more stress than I have ever seen (overload, lack of reset, uncertainty), so companies are lavishing tools on their employees to try to help. The Wellbeing market, which we write about often, is so filled with fancy new tools that HR departments buy everything they can find, then realize that some work and some don’t. There are few end-to-end vendors that integrate the problems of work-related stress, leadership development, inclusion and belonging, and personal wellbeing, yet we know they’re all connected.
Well BetterUp has figured this out and built a set of offerings that they call “precision development at scale.”
The BetterUp platform (which has four solutions: leadership development, diversity and inclusion, sales leadership training, and employee wellbeing), addresses these problems in a scalable and personal way. It can assess the problems you have as an individual or team, it can assign a precisely chosen coach (more than 2,000 coaches are available), invite you to a coaching circle (group event to discuss issues), and give you a set of self-study assessment and development tools. It all runs on mobile and it shows you activity, impact, and results.
And people love it.
(70% of customers say it’s “amazing” or “life-changing.”)
As an experiment, we offered BetterUp coaching to Josh Bersin Academy members who go through our Coaching at Scale program, and I get emails from HR professionals thanking me deeply for the solution. There’s nothing like having someone to personally listen and help you with your issues, and BetterUp does this at scale.
The interesting thing about BetterUp is that while product features are extensive (AI-based assessment, coaching, coaching circles, nudges, training) it’s all based on psychology. Alexi and Eddie (the founders) assembled a world-class science team of psychologists and technologists and built a “Whole Person Model” early in the company’s history. When I first saw it I wasn’t sure it was that different, but over the years they deepened it and the model helps BetterUp go into new markets with a “whole person” approach.
Consider, for example, the problem of sales leadership. I know, having led sales teams for years, that sales managers are under a lot of stress. Many are thrust into management because of their sales prowess, so they are not prepared for the pressures and issues in leadership. So not only are sales leaders highly charged individuals with many selling skills, they have to learn the leadership principles of employee selection, coaching, development, and rewards. BetterUp found that by focusing their product on sales leaders they could increase sales productivity by double digit percentage in a short period of time. And sales training is a large and important market.
In the area of Wellbeing, BetterUp introduced an offering called BetterUp Care, designed to replace and enhance the EAP program. EAP programs, which go back decades, involve call centers of psychologists to help employees with personal and family problems. My experience with an EAP was not positive at all: I had issues at home and the EAP couldn’t even help me find a local psychologist. I’m sure there are success stories out there, but generally speaking, they are not “precision solutions” for most people.
BetterUp Care tries to address this. By using the BetterUp assessment to help an employee describe their issue (maybe it’s not getting enough sleep, for example), the system can diagnose the problem and immediately assign a coach, a coaching circle, or series of interventions to help. The company found that a combination of coaching, counseling, and mental health support improves psychological and emotional health, leading to a 77% reduction in stress and a 35% decrease in burnout, enhances sleep habits and feelings of rest by 2.4x.
And this gets to the point of my article: BetterUp is not an AI-based coaching company, it’s a disruptive player that provides “precision development at scale.” And this means the company’s offerings (which are growing at 80% per year) can be sold to CHROs, heads of L&D, heads of Diversity and Inclusion, as well as heads of employee benefits, and VPs of sales. No other L&D provider really does this.
Yes, you can go out and buy LinkedIn Learning, Skillsoft, or Udemy for Business and you then have a big library of content. But they are not “precision” solutions and the overall adoption may not be high. BetterUp can compliment (and replace) some of these vendor solutions, and also give the HR leader a detailed diagnostic on results. (Other potential players in this market are Bravely and Torch, which are coaching networks.)
In fact, the analytics are pretty impressive. Clients of BetterUp receive a dashboard that shows what topics are trending, how much “stress” there is in the company, and can compare readiness, leadership, and stress levels against industry peers. So a BetterUp buyer can understand that “we are consuming 500 hours of coaching each quarter and our level of stress and anxiety has dropped by 23% among woman leaders,” for example.
Here’s a specific example. The CHRO of Chevron told me that when the oil prices went negative last year, she could immediately see stress and emotional needs skyrocketing among the employees. BetterUp helped her understand the impact of this business disruption, which encouraged the company to have a series of open-door meetings. Companies like Hilton, NASA, Salesforce, Google, Visa, and Genentech now all use it.
There’s a good reason BetterUp is valued at $1.7 billion. This is a company that pioneered a new solution and they’ve done it in an elegant and practical way. I want to congratulate Alexi, Eddie, and the team at BetterUp for their energy and focus on these issues, and I hope the company’s success helps every HR team think a little deeper about the psychological, leadership, and educational needs of employees in this tumultuous era of change.