December 6, 2021
When we first led Platzi’s Series A back in 2018, we believed in the company’s mission to deliver effective online education to anyone in Latin America to help prepare them to succeed in the digital world. More than 20 years into the internet revolution, and over a decade since the introduction of the iPhone, the long-term trends toward the world becoming ever more connected are indisputable and the wisdom of investing in tech literacy is undeniable. But we never could have imagined that a couple of years after our initial investment, the world would come to a temporary stand-still due to a global pandemic, which would supercharge these trends and cram 10 years of tech adoption into a few months. Tech literacy suddenly became a matter of survival for much of the world, and I now believe Platzi holds the key to transforming Latin America’s future.
Why is Platzi’s success so critical to the future of Latin America? Because the region is experiencing a major educational crisis, exacerbated by the deeply rooted and massive income inequality in the region. Put bluntly, we are at risk of condemning over half of the region’s youth to being left behind at a time when technology is driving the largest wave of wealth creation in human history via multiple exponential technologies like machine learning, AI, fintech, crypto, computational biology, cyber security, AR/VR, IOT, among others. Platzi is one of the few avenues to get the region to jump in and play a key role in these waves, at scale.
The last couple of years have been tough for everyone, but students in Latin America were hit particularly hard. UNICEF estimates that 115 million, or 60+% of children in the region lost a year of schooling due to school closures and other effects from the pandemic. Many of these kids won’t return to school and will see their education truncated. Just in Mexico, almost 2 million kids permanently dropped out. Educational outcomes in the region were already poor even in normal times. The World Bank estimates that “learning poverty” — the percentage of 10-year-olds unable to read a simple text, “might have grown from 51% to 62.5%” in just two years. The consequences of this crisis will be severe and long-lasting: 65% of LatAm’s population is 29 or younger, so this crisis is likely to reduce a whole generations’ earning potential for life. The World Bank estimates a potential loss of $1.7 trillion in future income.
The problem is not lack of spend. The system is inefficient. Most countries in the region spend over 40+% of per-capita GDP on education, or over $4,000 USD/year per student. All that budget is just poorly spent: historic corporativism and corruption in teacher unions means much of the spend doesn’t help students at all, as a large proportion of the budget goes to salaries, there’s lack of accountability and of focus on outcomes. The crisis exacerbates all the way to higher education, with the system spending 2-3% of GDP in tertiary education, but with most students dropping out each passing year. LatAm is a region of 650+ million people, with only ~20 million college degree graduates, 22 million students enrolled in tertiary education (high-school, college, grad school), and 150+ million people in need of professional training. The system in its current form is expensive, inefficient, and it excludes the majority of potential students.
Income inequality shows up everywhere in education. Over 80% of students enrolled in tertiary education come from the top two-thirds of income tiers. Said another way, only 20% of students come from the 40% poorest sections of society.
The wage premium from education in the region is high (see Mincerian Returns chart below). This earnings premium gets an even bigger boost when combined with speaking English (I’ve previously written about how speaking English is a superpower). Given these stats, you’ll be shocked to learn that two million tech jobs in LatAm go unfilled each year (up from 1.5 million just a few years back), because companies can’t find qualified talent — LatAm produces less than 100k STEM grads each year. With the explosion in remote work, and the $10+ billion in VC capital invested in LatAm during 2021, demand for talent in the tech industry is already exploding.
Education is one of the few reliable sources of upward social mobility and of productivity improvements available to societies, so fixing the quality and access problems to increase representation of the poorest members of society is another imperative, and potentially the highest impact opportunity at hand to transform the region.
Platzi wants to break the poverty cycle in LatAm through effective, affordable, and accessible world-class online education. The company has built an incredible community, with over 2 million registered students who LOVE the platform and product. Why? Because it works! Platzi’s completion rate is more than 70%, higher than traditional tertiary enrollment, and WAY higher than MOOCs and other online courses. At less than 10% of the average annual spend per tertiary-education pupil in LatAm, Platzi is the best investment most students can make. The impact on earnings is incredible: after completing 12-18 months of Platzi coursework, most students increase their earnings by 2-10x. For those who also learn English, incomes increase by an additional 50%, for life. Just check Twitter: #PlatziSePagaSolo. Add in strong values of respect, inclusion, and strong motivation to keep bettering oneself for life, and it’s no surprise that the Platzi community is so strong and thriving.
Not surprisingly, Platzi is having a strong positive impact in the tech industry. Already, over 90% of LatAm tech startups now count Platzi alums or students within their employee base. Many other students are starting their own companies and having amazing success at it. More than 20 startups founded by alums have raised >$1m in VC capital, 20+ have over a million in annual revenue, with two of them already posting $40m+ in annual sales. Over 20 Platzi alums have gone through YC, and Platzi is consistently YC’s largest source of LatAm company referrals for each batch.
With all this progress, our friends at Prosus have recently led Platzi’s $62m Series B, and we at Foundation are doubling down on the company. They are strong partners with a great track record of investing in transformational edtech companies, including Udemy, GoodHabitz, Skillsoft and others. There are SO MANY great opportunities ahead. The company is now partnering with companies and governments across the region to help train and upskill their employee bases. They’re also partnering with companies, recruiting firms and platforms to build a recruiting pipeline for students. They’re now scaling Platzi Master, an intensive and immersive ISA program. They’re also expanding geographically, and of course, turbocharging the content library with new course offerings, formats, and school tracks. I’m personally thrilled to see the revamp of their Cryptocurrency and Web3 schools. In short, we’re investing in growth with the goal of truly transforming the region for good.
None of this would be possible without the tireless enthusiasm of Freddy, Christian, and the rest of the team. They are the embodiment of this worthy mission and have the admiration of myself and my partners. We at Foundation Capital are proud to be a small part of Platzi’s journey and invite everyone who is passionate about this mission to join the team (we are hiring, A LOT). My vision for the company: I can’t wait to see Platzi become the largest source of tech talent in Latin America within the next few years.
#NuncaParesDeAprender – Never Stop Learning.