The Skillshare Business Model – How Does Skillshare Make Money?

Executive Summary:

Skillshare is an online learning platform that allows people to either teach or educate themselves on a variety of topics.

Skillshare makes money via monthly and yearly subscription fees as well as a referral fee from recommending other products. The company operates on a marketplace business model.

Founded in 2011, Skillshare has grown to become one of the world’s leading online learning platforms. Over 12 million people are now registered on Skillshare.

How Skillshare Works

Skillshare is a platform where anyone can take or teach online classes. It hosts thousands of video tutorials, so you can learn anything from how to make your own website and blog, designing software for mobile devices as well as 3D modeling in animation programs like Maya.

Students have the opportunity to engage with their teachers and classmates through project-based classes.

You will receive a certificate of completion once the class is completed. The certificate can then be shared with prospective employers or be uploaded on your LinkedIn page.

There are dozens of topics that students can learn about, including music, photography, UX design, business analytics, entrepreneurship, and more. Classes can range from beginner to expert level.

What often differentiates Skillshare from other creator-based learnings platforms like Udemy is the focus on well-known course instructors. Classes on the platform are often led by influencers and key figures in their domain.

Here’s how it works. First, you access Skillshare either by visiting its website or by downloading one of its mobile apps (available on Android and iOS devices).

Then, you register using your email address or social media handle. In order to access all the course material, you need to register for the monthly or annual membership.

You can watch any of Skillshare’s free classes and create projects and discussions in them with a Free membership.

Apart from individual memberships, there’s also the option to get a corporate subscription, allowing your employees or colleagues to access the course material.

Last but not least, Skillshare also hands out scholarships and discounts. For instance, students with a .edu mail address will get 50 percent off of their membership.

Skillshare Company History

Skillshare, headquartered in New York City, was founded in 2011 by Michael Karnjanaprakorn and Malcolm Ong.

Karnjanaprakorn, whose father is of Thai descent, moved back to the United States from South Korea (where his mother is from) at the age of 10 (he was actually born in the U.S.).

From an early age, his parents made sure that his grades were as good as possible to allow him to attend a leading university.

He eventually managed to enroll at the University of Virginia where he pursued a bachelor’s degree in Economics.

What he quickly discovered was that almost nothing he learned during those college days was applicable in the real world, leaving him with almost no desirable skills.

He, therefore, enrolled at VCU Brandcenter for his grad studies. At VCU, his classes were taught by actual professionals who worked the very same occupations they were now teaching about.

Where it really clicked for Karnjanaprakorn was when he volunteered at a charter school in post-Katrina New Orleans.

He saw first-hand how the local education system had failed the local children who were often from disadvantaged households and thereby couldn’t afford any private tutoring. That’s when he decided that his ultimate goal would be to eventually work on something within the education space.

But before he would branch out on his own, it was time to first learn the tricks of the trade. After graduating from VCU in 2008, he first worked at Behance, an online platform for creatives to showcase their work.

While Behance was acquired by Adobe in 2012 for $150 million, Karnjanaprakorn had already moved on. A year later, in 2009, he joined Hot Potato as a product manager. His stint, again, would only last about a year.

In 2010, Facebook acquired Hot Potato for $10 million in cash. Karnjanaprakorn stayed on for a while, but ultimately decided it was time to finally work on his own business.

Around the same time, he made the news for raising $10,000 to participate in the World Series of Poker (WSOP) main event with the goal of donating all the eventual proceedings to two charities of the donor’s choice.

While this was a nice publicity stunt, he was already working on Skillshare in the background. Karnjanaprakorn recruited Ong, whom he met during some NYC-based meetups, to join him as the startup’s CTO.

That’s where his previous startup experience would ultimately prove to be beneficial. At Behance, he saw them building a product for about nine months. But when it was ultimately released, no one actually used it.

That experience taught him the importance of the so-called lean startup approach; a method popularized by Eric Ries. Instead of building out the whole product themselves, the founders decided to create classes on Eventbrite.

Karnjanaprakorn would end up becoming Skillshare’s first teacher by hosting a set of classes about how to play poker. After testing those initial Eventbrite classes, the founders had enough conviction about the idea and product to start their fundraising process.

A guy named Zach Klein, whom he met at Hot Potato and ended up founding Vimeo, connected the team to Chris Dixon who had sold two companies to McAfee and eBay and had just started his very own seed-venture fund called Founder Collective.

In May 2011, Dixon’s Founder Collective led a $550,000 seed round into Skillshare. Others who also invested included SV Angel, Collaborative Fund, David Tisch, and Scott Heiferman.

During those early days, Skillshare classes were taught face-to-face and solely in New York. The team had recruited various teachers who would then give group classes in spaces that the company had just rented out.

The reasoning behind the firm’s limited access was to make sure that the product experience was flawless before deciding to expand it into other cities. That expansion occurred a few months later.

In August 2011, Skillshare announced that it had raised another $3.1 million from the likes of Union Square Ventures and Spark Capital. With the capital injection secured, Skillshare quickly expanded into other cities, including San Francisco, Philadelphia, and more.

Early on, Skillshare put a particular focus on only having high-quality very skilled teachers led their classes. For instance, the previously mentioned Chris Dixon and Eric Ries taught classes on entrepreneurship, which were then attended by thousands of people.

Eventually, though, they figured that scaling the business would require for it to move online. In August 2012, they first introduced so-called hybrid classes, which were programs in which both offline and online students could participate. All the necessary course material would then be shared on the platform.

Throughout 2013 and 2014, Skillshare continued to add students and teachers to its marketplace as well as more funding to its balance sheet. It raised two more rounds of funding, one $1 million round from Zappos founder Tony Hsieh and another $6.1 million from Union Square Ventures and Spark Capital in January 2013 and February 2014, respectively.

Unfortunately, in 2013, co-founder Malcolm Ong stepped down from his role as CTO to focus on other endeavors.

That same year, Skillshare finally moved away from its hybrid approach towards a purely online-based learning experience. By that time, some of its most prominent teachers were already raking in over $100,000 a year from teaching on the platform.

By 2016, while announcing another $12 million Series B raise in May, the company had already surpassed over three million course enrollments. Growth continued well into 2017 – unfortunately without co-founder and CEO Karnjanaprakorn.

In November 2017, he announced that he would move into the role of Executive Chairman while handing the keys to Matt Cooper who had joined the company the year prior as COO. Cooper himself had plenty of marketplace experience, having worked in various managerial roles at freelance platform Upwork for more than five years.

Karnjanaprakorn himself stayed on at Skillshare for a few more months, but eventually founded another business called Otis, an alternative investment platform for arts and memorabilia.

The departure did not negatively affect Skillshare, though. The company continued to successfully raise money and grow in accordance with those cash injections. 2020, in particular, was an extremely successful year.

As people were forced to quarantine at home, they found themselves using their spare time to invest in online education. Skillshare, just like other online learning platforms such as Coursera or Masterclass, experienced a surge in user activity. The company was able to grow almost twofold over that very same time span.

Today, more than 500 people are employed by Skillshare. Additionally, over 12 million people are now registered on the platform.

How Does Skillshare Make Money?

Skillshare makes money via monthly and yearly subscription fees as well as a referral fee from recommending other products.

Skillshare operates on a marketplace business model in which it works together with independent teachers to serve the knowledge demands of its students.

Let’s take a closer look at each of these in the section below.

Subscriptions

The bulk of the revenue that Skillshare generates comes from the monthly and annual subscriptions that students can opt into.

Users either pay $19 for the monthly or $99 for the annual membership. Just like any modern-day subscription, the platform can be tested for 14 days free of charge.

Furthermore, (corporate) teams can sign up as well. The more people sign up, the greater the discount that is applied.

The membership grants students unlimited access to thousands of courses in almost any category imaginable. Students will furthermore be able to participate in class projects.

30 percent of the subscription revenue will then go to a so-called royalty pool for teachers. From there, the money is distributed based on the number of hours their courses have been consumed.

Skillshare claims that first-time teachers can earn about $200 in their first month while more experienced ones earn upwards of $3,000.

Referrals

Apart from the subscription income, Skillshare also generates revenue from referral fees for promoting other products.

By subscribing to an annual membership, users will receive various perks and discounts. Examples include 20 percent off of a Canva membership or 15 percent off of Adobe Creative Cloud.

While this has not been confirmed, it can be assumed that Skillshare does not promote those products out of sheer goodwill for its users.

With software products, which are often high-margin, companies can afford to hand out a commission in exchange for users that sign up for a year (and likely beyond).

Skillshare Funding, Revenue & Valuation

According to Crunchbase, Skillshare has raised a total of $116.8 million across 9 rounds of debt and equity funding.

Notable investors include Adobe, Union Square Ventures, Burda Principal Investments, Spero Ventures, Spark Capital, and many more.

As a private enterprise, Skillshare is not obligated to disclose revenue and valuation figures to the public. It may opt to do so in future rounds of funding or in a liquidation event (IPO or sale).

Hi folks, my name is Viktor! By day, I lead a tech team of 10 for an e-commerce startup. At night, I work on expressing my weird thoughts through this blog. And if there's time, I cuddle my cat..