GeoLearning Raises $31 Million – We Are In a Recession, Right?

13 comments

GeoLearning announced a “growth equity investment” in the form of $31 million large from Fidelity Ventures.  Here is what I don’t get…

  1. Fidelity Employer Services Co (FESCo), another Fidelity business, has a long standing relationship with Saba as one of their key partners.  Saba is a key competitor to GeoLearning.  Sure, Fidelity Ventures has a different business model than FESCo but it makes no sense to me that a company (even the size of Fidelity) chooses to invest in a competitor of one of their key partners. 
  2. The learning management (LMS) space has proven challenging to grow and make money.  Saba and SumTotal, the market share leaders in learning, have struggled for years to achieve profitability.  Most learning management vendors (with the exception of Cornerstone OnDemand and Plateau) have also struggled to sell and deliver functionality outside of learning, such as performance management.  Why such a large investment in a struggling (some would say dying) LMS market?
  3. From all indications, GeoLearning’s recent release, GeoMaestro 5 series, has some deployment issues.
  4. $31 million is a lot of money to raise for a large stage company.  With Fidelity presumably owning a large stake in the company now, should this be concerning to customers?   I think so!
  5. Contrary to the press release, GeoLearning is not a pure-play SaaS vendor.  They still deliver an ASP-hosted solution which is not as attractive a delivery model for customers or shareholders.
  6. Past experience suggests the learning management market gets hit hard in a recessionary economy.  A survey published today from top economists predict recession likely in 2008. 

Am I missing something?

  • http://talentedApps.wordpress.com Meg Bear

    could it have anything to do with this relationship?

    http://www.elearnity.com/A555F3/research/research.nsf/ByKey/DWIN6R6P2N

  • Lisa

    I suspect that there is a very solid wall between
    Fidelity Ventures and FESCo and so not a lot of hidden agenda here.

  • Jason Corsello

    Not a chance. If Fidelity thinks GeoLearning is going to exit to SuccessFactors because they have a partnership in place, they are not very smart (and I know that is not the case).

    The GeoLearning/SuccessFactors partnership is nothing more than them being the only guy left that doesn’t really have performance. SuccessFactors was partnered with SumTotal until they acquired Mindsolve (performance mgmt) and forced SuccessFactors to look elsewhere.

  • Jason Corsello

    Lis-
    I would agree but at least would hope Ventures would leverage their own internal resources for due diligence.

    Jason

  • http://www.knowledgeinfusion.com Mike Brennan

    As part of its due diligence, perhaps Fidelity Ventures was able to glean some market and operational opportunities from FESCo’s TEDS unit, which the company acquired in 2004.

    As Jason indicated, Fidelity Ventures must have leveraged its internal resources. I say this because after taking a look at TEDS website, the company positions itself as a company whose offerings are built around its learning and performance management technologies. Its integration with FESCo’s outsourcing business is less apparent. In addition, the company has not announced many new customers publicly in recent months.

    http://www.teds.com/company.asp

    http://www.allbusiness.com/company-activities-management/management/5571282-1.html

  • http://www.bersin.com Josh Bersin

    My thoughts on this. The LMS market is still growing at a decent rate (10-15%+ and more in some geographies), despite the fact that most of the players are unprofitable. (Most of the TM vendors are unprofitable too.) And the two fast growing segments of the LMS market are the mid-market and SaaS segments – both places where GeoLearning plays. I think we have to remember that LMS is one of the “bread and butter” HR applications – if you do training at all, you need some kind of LMS – and with more than 30% of corporate training hours now being done online, I think this market still has a long future ahead of it.

  • Jason Corsello

    Josh-

    Great comments. I should have said LMS is struggling as a stand-alone market. Sure there are pockets of growth but at the enterprise level, companies are looking at LMS with a consolidation lens. Regarding profitability, the recruitment-centric talent management vendors, definitely understand how to make money. Look at our two publicly traded companies today – Kenexa and Taleo. Profitability must be a priority for the vendor market.

    Lastly, I personally feel LMS needs a new, fresh approach. Today, LMS solution only get us half-way there. What about unstructured learning, OJT (on-the-job training), collaboration. Unfortunately, I don’t see many of the traditional LMS vendors truly grasping to potential of web 2.0 technology!

  • A. G. Lambert

    I am not sure this is purely a vendor problem (speaking as a vendor who has offered collaboration — including discussion forums, wikis, and communities — in our LMS for years, along with online meeting and collaboration tools). There is a broader mindset change that is needed in HR to move beyond traditional management to facilitating employee performance. Learning is too often considered only as compliance or risk mitigation effort that doesn’t focus on all the ways to make employees more effective. The same can be said for many performance initiatives, where the focus is often more on automating performance reviews and formal goals rather than facilitating and recognizing each individual’s contribution to the community.

    Until HR moves to being a business enabler rather than a regulation enforcer, the value of Web 2.0 technology will be limited. Interestingly, the greatest adoption of Saba Collaboration is in emerging economies. This is an area where traditional HR needs to catch-up.

  • http://www.trainingindustry.com Jim Hanlin

    Let’s give the folks at at Fidelity Ventures a little credit. I would wager a guess that they performed extensive due diligence before commiting $31 million to GeoLearning.

    In additon to confirming Josh Bersin’s position that the LMS market is still growing at a decent rate, Fidelity probably discovered that, unlike other pure-play LMS companies, GeoLearning provides an array of managed learning services in addition to its very competitive LMS platform. These complementary learning services provide a significant annuity revenue stream for GeoLearning that enhances its value over other technology-only based LMS companies and reduces the company’s vulnerability during slow economic times.

    Fidelity Ventures probably also found that GeoLearning has an excellent management team that understands the market and has a reputation for generating profits while maintaining the highest level of customer satisfaction. These are imporatant considerations that cannot be extended to all of the major players in the industry.

  • Jason Corsello

    Hi Jim,

    Very valid comments around the managed services offering. On caveat from my perspective though…although the managed services offering provides an annuity stream, managed services/outsourcing services firm typically trade at a fraction of pure-play SaaS technology vendors. Just compare the market caps of the respective vendors in the market!

    Cheers,
    Jason

  • http://jcsoftwaresales.blogspot.com/ JAMIE CORN

    So, here is my spin, if GEO is going to move ‘everyone’ off of their 4.6 legacy product onto their 5.o SaaS product, wouldn’t that be a major undertaking? Wouldn’t that put an immense strain on their resources? BUT, after all is said and done, they would profit handsomely if they do achive the synergies that SaaS has offered to the other LMS players…uh, like Cornerstone?

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  • http://blog.q2learning.com Valerie Bock

    To Jason’s point, Geo does have some pretty impressive support of collaborative learning through the “GeoEngage” branding of Q2Learning’s eCampus.

    Tooting our horn for a second, but we really think our approach represents the next generation learning platform, now, offering the capacity to design programs which actually deliver on the promise of speed-to-proficiency by offering the ability to create structured collaborative, coached exercises and on-the-job experiences.

    So for any org which wants to combine old-style page turner “e-learning” with the newer, collaborative learning tech, Geo is a pretty good choice, and positioned, we think, for significant growth.

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