On June 2, Stack Overflow announced it was being sold to Prosus N.V., one of the world’s largest technology investment firms, for $1.8 billion. This marks a continuing move into the ed-tech/ skills arena - and may point to developments that will impact hiring and recruiting.
Prosus, the investment wing of South African technology provider Napsters Ltd., recently freed up capital by selling part of its majority-stake share in TikTok owner Tencent, selling 2% of its stake, giving it $14.6 billion to play with. Naspers acquired the Tencent shares in 2001 for $34 million. Those shares are now worth over $200 billion.
Stack Overflow is a learning-oriented community for software developers, with a deep focus on skills and skill-building. It began as a simple question & answer board, founded in 2008 by Jeff Atwood and Joel Spolsky, and quickly became a standard in the industry due to the efforts the company took to maintain a high degree of focus on community. Users are verified, can up or down vote questions as well as answers, and earn badges and recognition based on the quality of their inputs. Users maintain active presences in the community and tend to keep it open in a tab - according to Alexa, SO is the 45th most trafficked site on the web.. Over time, the company has developed three revenue streams: talent; advertising; software products. The latter focuses on teams-based, project-management software called Stack Overflow Teams. Teams is currently used by thousands of companies, including startup Zapier and corporations Bloomberg and Microsoft, and has doubled its revenue each year since its launch (the company says annual recurring revenue for the product exceeded $27 million in 2020). The Covid-19 pandemic’s shift to remote work has only bolstered Stack Overflow’s spot in engineering circles. From April to June, an average of 200,000 new users signed up each month, the best quarter in the 12-year-old New York City-based startup’s history.
The company is still closely-held, taking on $135 million in capital since its founding. Spolsky is still with Stack Overflow but stepped back from his CEO position in 20219, while Atwood left in 2012 to spend more time with his family. Since then Atwood has created the popular gamer-focused social-community, Discourse.
Here's where Stack Overflow lived the lesson so many job "marketplaces/ boards/ skill-matchers" keep missing. Build the community. The job board will come along on its own. On Stack, smart recruiters know that they're paying for access, how to behave, and that they'll get kicked out for bad behavior - the community policies recruiters and companies actively. The chance to connect with developers, to get to know them, is a huge win.
As one engineering leader told RNN: "We all know we're going to need a new job now and again. And we hate doing that work - mostly because of bad recruiting experiences. Unless the recruiter knows what they're doing. You stay in touch with the good ones, and it's usually a short list. And you probably got to know them somewhere like Stack Overflow first."
This may be about more than private equity acquiring a technology company with a loyal user-base and a profitable job board. This may be about category dominance.
There are two types of PE companies: ones that invests patiently into select group of a categories and often, over time, creates roll-up organizations in an attempt to gain some dominance in that category; and the second type, which buys up troubled organizations, breaks them down into components and attempts to make rapid profit off of those sales. Prosus looks to be the former. They make pains to point this out: “Our engagement with partners is driven by our commitment to their long-term success. Because we invest off of our balance sheet, we are not constrained by a short-term fund that requires returns within a set amount of time. We work with our partners to help them build long-term, sustainable, global businesses.”
That said: Prosus seems to have a type.
As you look into their portfolio, you see a number of investments in L&D, training, and skills-testing organizations - many of them recent. What’s interesting is that they’ve already created one roll-up in the sector, when they moved Global Knowledge into Skillsoft in a somewhat complex maneuver involving Churchill II, a special purposes acquisition company.
“Prosus has built a strong portfolio of edtech investments over the last five years,” said Patrick Kolek, Chief Operating Officer of Prosus. “We believe there is a huge growth opportunity to fulfill enterprise and consumer demand for education globally. Our investment in Skillsoft is another exciting opportunity in this fast-growing sector and we look forward to working with Churchill II to execute on the full potential of the business.”
Timing is everything, of course. Without the pressures to shift every activity possible online last year, and the discovery by may companies that remote work can no longer be an afterthought - it may well become a strategy - opportunity arises. Smart, aggressive companies will take advantage of newly opened labor markets, as well as the ability to rapidly upskill employees to take advantage of new technologies, human resource updates, deliver needed diversity trainings, etc. And they'll look for ways to leverage gig and contract work to handle opportunities and/ or to address critical needs in a timely fashion.
When you consider the addition of a renowned technology community/ training/ recruitment hub like Stack Oveflow, with the rest of the assets Prosus manages that are related, potential emerges. From invests in k-12 training technology (Brainly will be familiar to many US parents after the past year), to ongoing training providers such as the aforementioned SkillSoft, Udemy, Code Academy, etc, the company can make some interesting moves.
For example, when you bake in Prosus’s investments into another sector - payments - you see the potential to, for example, offer trained, ranked, vetted talent on demand, with time tracking and payments baked into your project management software. Or, the ability to rapidly deploy training on a new version of a software critical to your organization, with assessments, project management, billing, etc, again, baked in. You establish a level dominance via software and services in any area that is now critical to the success of every enterprise organization.
They won’t be the only ones pushing in this direction, either. Over the course of the past 30 days, Japanese investment company SoftBank invested $220 million into recruitment AI tech Eightfold, as well as pumping an additional $175 million into South Korean ed tech venture Riid to accelerate global entry of its artificial intelligence-based personalized learning experience and assessment program. Google has been quietly running an online training program to develop a feeder pool of talent for itself. LinkedIn/Microsoft/Github have their Global Skills Initiative.
On demand talent, and talent pools, have become borderline laughable buzzwords amongst recruiters over the past few years, as the potential to create them never met investors who saw the potential ROI. That may be about to change - at least in the tech sector. We’ll see if the Chipolte’s of the world step up with some solutions to handle their corner of the employment world.
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