Pluralsight Gets Smarterer in $75M Deal

Mergers and Acquisitions

Pluralsight Gets Smarterer in $75M Deal

By Tony Wan     Nov 19, 2014

Pluralsight Gets Smarterer in $75M Deal
Smarterer CEO, Dave Balter (left) with Pluralsight CEO, Aaron Skonnard

Sometimes the best way to learn what you need to know is to figure out what you don’t know.

That’s the idea behind Pluralsight’s decision to spend $75 million to acquire Smarterer, a Boston-based startup founded in October 2010 that can quickly assess competencies for technology tools and skills through crowdsourced quizzes. Smarterer’s team of 16 will continue its operations in Boston.

It’s a healthy return for Smarterer’s investors--True Ventures, Google Ventures, Rethink Education and Boston Seed Capital--that have given $4.6 million to the company.

This deal marks Pluralsight’s fifth deal in the past 15 months, on top of a hearty $135 million Series B round closed in August 2014. The company, which bills itself as a provider of “hardcore developer and IT training,” boasts over 3,500 courses and nearly 10,000 hours of videos, many of which are now available thanks to acquisitions that Pluralsight CEO, Aaron Skonnard, says have “helped us accelerate our growth from a content perspective that would have taken us years if we were to do them organically.” Here's who Pluralsight has snapped up:

  • April 2014: Digital Tutors (for $45 million)
  • October 2013: Tekpub
  • August 2013: TrainSignal (for $23.6 million)
  • July 2013: PeepCode

The Smarterer deal is different, according to Skonnard, in that it represents “a shift in our acquisition strategy from content to expanding the capabilities of our platform.” His company’s 6,500 enterprise customers, including Fortune 500 companies, “have been asking for a credible way to measure where people are with their skillsets.”

After all, Pluralsight’s users need to know where their skills gaps are in order to make the best use of the extensive collection of training videos. That’s where Smarterer’s crowdsourced tests and assessment engine come in, says CEO Dave Balter. “When you first show up on any learning platform, the first question you typically ask is, ‘What should I be learning?’”

Smarterer’s community of experts have contributed more than 100,000 questions for over 900 skill tests on a wide range of topics, from specific tools like Photoshop and Excel to skills like creative writing, customer service, and even child safety--which at the time of writing is the second most popular test on Smarterer. (This writer performed rather poorly.)

Balter attributes the quality and rigor of the tests to an active, smart community of users who can create, flag and edit questions so that the best ones rise to the top. He also credits the company’s machine learning algorithm that combines elements of Item Response Theory and statistical techniques like Bayesian inference to generate a score (based on an 800-point scale) that accurately reflects a test taker’s skill level.

“When someone creates a question, it’s hard to determine its quality,” explains Balter. “So we’re taking information about how you answer each question, and applying that to other questions in the test to assess its overall difficulty and complexity.” Over time, as more questions are updated and more people take the tests, the system gets “smarter” about how test takers stack up to one another.

There’s also the question of the validity of a Smarterer assessment and score. “The credibility of a badge comes down whether it allows someone to get the job that they want,” explains Balter, who adds that Smarterer tests are also used on service marketplaces like Elance and so freelancers can show off their competencies.

Like Pluralsight, Smarterer also serves Fortune 500 Companies. Nearly 100 organizations use Flock, an enterprise-specific assessment platform launched by Smarterer in February 2014 to support hiring, internal evaluations, training and compliance tasks. Companies can create their own private, custom tests and borrow from questions already publicly available.

Skonnard’s vision is to tie the assessments to Pluralsight’s video content to address the skills and knowledge gaps. “Ideally we can generate personalized learning paths as a result of these assessments,” says Skonnard.

While Skonnard plans to integrate Smarterer tightly to its learning content, he’s open to the idea of making it freely accessible to other platforms and services that would benefit from the assessment tool, “assuming they’re willing to share the assessment and data.”

“The key is for the businesses who have the jobs and are hiring to trust the badge and the score,” says Skonnard. “Working with our enterprise customers and other learning partners to help establish this crowdsourced assessment engine that can become trustworthy is a big step in that direction.”

Founded in 2004, Pluralsight has been profitable since 2005 and Skonnard says company revenues have recently been growing at over 100 percent. Pluralsight made $6 million in revenue in 2011, a number that grew to $16 million in 2012 and $32 million in 2013. While it currently focuses on software development, hardware management and creative skills, Skonnard says the company plans to “broaden its scope over time.” There are certainly plenty of opportunities, with global corporate training recently estimated as a $130 billion market.

At a time when specific skill demands are changing day-to-day, “there’s no one entity or standards body that can provide assessments that are going to be current and credible,” says Skonnard. “Our thesis is that it has to be crowdsourced from industry experts.”

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