Reimagining The Future of Work

Welcome Shareholders,

Every Sunday, We'll highlight one company to do an in-depth breakdown of their business, financial situation, and whether or not it's a worthy investment opportunity - large or small. In today's edition, we'll look at an ed-tech startup looking to shake up the higher education system by promoting apprenticeships.

The cost of higher education has been soaring over the last decade, and many students are taking on record amounts of debt to fund their pursuits. Unfortunately, not all degrees provide the same return on investment, with many graduates often struggling to secure jobs that can justify the high cost of their degrees. Multiverse, a UK-based startup, is looking to change this by offering apprenticeship programs that equip young professionals with in-demand skills. By providing practical, cost-effective training, Multiverse believes apprenticeships could be a better, more practical, and affordable alternative option compared to college for many students. Let us explore the current state of the education market, the issues with modern colleges, and how apprenticeships offered by Multiverse could be the solution for the $30 billion global higher education market.

Spiralling Student Debt

One of the most pressing issues of the last decade is the soaring costs of higher education across the US and Europe. Students across disciplines are taking on record amounts of debt, all hoping to eventually land a job that can help set them up for life. However, the gains from a college degree at a top university are disproportionate based on the specialization undertaken by a student. While a Finance or Computer Science Major usually starts earning $100,000 or more after leaving college (almost guaranteeing them to pay off debts in under five years), other professionals are not so lucky. A study conducted by the Texas Public Policy Foundation found that liberal arts and alternative medicine degree holders entered the market with annual salaries of $30,000-$40,000 compared to the cost of degrees, which can be as high as $200,000.

The cost of tuition is now taking a toll on households and the US economy as a whole. Student debt has more than doubled over the last two decades as universities have continued to raise the price of degrees. As of September 2022, nearly forty-eight million US borrowers collectively owed more than $1.6 trillion in federal student loans. Additional private loans to fund higher education have taken that total to over $1.7 trillion, thus surpassing auto and credit card loans. Only Mortgage debt at $12 trillion is higher than student loans. The rising unaffordability of higher education is also a factor that's driving more students to higher balances. The average student loan balance rose by 25% between 2009 and 2021.

Half of all student-loan defaults are attributed to for-profit colleges, which, despite enrolling only 10% of students, have a high percentage of borrowers. In fact, 71% of students in for-profit colleges rely on federal loans, compared to only 49% in 4-year public schools. Additionally, the average amount students borrow in for-profit colleges is almost $2,000 more than that of their counterparts in 4-year public schools. These discrepancies in borrowing cannot be explained by differences in demographics between the student populations but are primarily a result of the significantly higher tuition fees charged by for-profit colleges, which are over $10,000 greater than those of public community colleges.

Why Modern Colleges are Broken

Despite taking on more debt and paying higher tuition, most students are now unhappy with the higher education system compared to those who came before them. Just 13% of college students agreed with the current higher education system, while a whopping 79% thought the college system was trending in the wrong direction. Taking on Hundreds of Thousands of Dollars in Student Debt in the hopes of eventually landing a high-paying six-figure job can be risky, depending on the circumstance. For instance, the college class of 2020 entered one of the most hostile labor markets in recent memory. The National Association of Colleges and Employers conducted a survey with 563,000 bachelor's graduates across 337 universities and found that only 50.2% of the respondents had secured a full-time job within six months of graduation. These statistics were obviously more favorable for college participants in 2021 due to a tight labor market prompting employment, higher salaries & benefits, but as economies across the globe head into a recession, the trend is expected to reverse yet again.

Big Tech firms and investment banks, traditionally the highest-paying firms, have collectively laid off hundreds of thousands of workers in the last six months. Even the companies that have solid balance sheets with billions of dollars in cash are looking to reduce payroll, either by conducting stealth layoffs (removing favorable policies like Work From Home) or by conducting layoffs through performance-based reviews. No industry seems to be immune to the current shock of inflation & recession, and first-time employees will find it harder to get into companies after college, only reinforcing the notion of whether a higher education degree is worth the cost and debt associated with it.

Apart from the soaring tuition costs, there are other factors for the decline in the University experience over the past decade. Most Universities have taken on staggering levels of debt to expand their facilities and justify the spiraling fees associated with new students. The selling point for the top residential colleges was not just the quality of education and credential but also the in-person experience. However, the rise of remote and hybrid models instituted during the covid-19 pandemic made a normal college experience all but impossible. Without students being present physically on campus, it is impossible for students to justify spending upwards of $70,000 on Tuition and Boarding when most of the cost associated is not delivering the education itself.

Turning to Apprenticeship

Mandating college degrees and making admission officers gatekeepers for great careers has often left hundreds and thousands of talented and motivated individuals from truly reaching their potential. Soaring tuition costs, rising student debt balances, and the lack of employable skills at work have prompted many startups to look for alternative solutions to the $30 billion global higher education market. A rapidly growing popular solution that could be the norm in the future is apprenticeship. Multiverse (formerly known as WhiteHat) is a UK-based startup that offers an apprenticeship program for young people seeking to gain practical experience and develop in-demand skills.

Multiverse wants to bridge the growing gap between in-skill demand like tech and finance and other fields by providing accelerated training programs that equip young professionals with relevant skills needed by businesses today. The company believes that apprenticeships could be better for most people than college because they offer a practical and cost-effective way to learn and develop in-demand skills. Unlike traditional college programs that rely heavily on outdated textbook knowledge, Multiverse's apprenticeships offer on-the-job training, real-world experience, and up-to-date industry insights. As a result, companies can hire professionals with the skills they need rather than relying on graduates who may not have the relevant experience.

The company, which was co-founded and led by Euan Blair (the son of ex-Prime Minister Tony Blair and high-profile barrister Cherie Booth Blair), last raised $220 million through a Series D in 2022, valuing it at $1.7 billion, making it the first ed-tech startup in the UK to reach Unicorn status. The funding was led by StepStone Group, Lightspeed Venture Partners, and General Catalyst, with participation from Founders Circle Capital, Audacious Ventures, BOND, D1 Capital Partners, GV, and Index Ventures. The company's new valuation is double that compared to its Series C when the firm raised $130 million from the Series C raised in 2021. So what's the reason for the hype behind the startup? Let us take a closer look.

Business Model

Multiverse's approach is straightforward yet effective. The startup employs human coaches paired with apprentices and then embedded within organizations that have taken them on. The list of organizations partnering with Multiverse now exceeds 500 leading enterprises, including government organizations, Cisco, Verizon, Box, and several financial services companies, to name a few. The range of jobs covered in the Multiverse universe is vast, spanning from software engineers to data analysts, professional services, and related roles. The number of apprentices in the Multiverse Community across the United Kingdom and the United States now exceeds 8,800 professionals.

Multiverse operates on a simple revenue model where it charges employers a nominal recruitment fee for sourcing apprentices for them, followed by a cost for training that accounts for the majority of its revenue. Employers then pay the apprentices a salary, while the program is completely free for the apprentice. The platform offered by Multiverse enables employers to access a diverse pool of non-graduate talent, reskill those in need, and offer formal credentials in their chosen field of specialization. The training is delivered by expert coaches who are employed by Multiverse, and supported by their technology, offering a community experience for all participants.

Multiverse is also capitalizing on the evolving governmental approach toward creating more pathways for individuals to enter the job market. In the United Kingdom, training costs are mostly borne by employers through the Apprenticeship Levy, which involves a small tax on companies that they can use to fund apprenticeships. In the United States, apprenticeships are tax-deductible for employers, and a few state-level incentives are also available. By utilizing these schemes, Multiverse wants to help organizations invest in the development of the workforce and provide a more accessible route to employment for people from diverse backgrounds.

Achieving Equal Access

Multiverse also helps those in other fields to pivot, grow their skills and increase their salaries exponentially (since most of the programs offered are tech/data science related). A survey conducted by ZipRecruiter found nearly half (44%) of all job-seeking degree holders regretted their college majors. The top three most regretted majors, according to the survey, were journalism (87%), sociology (72%), and liberal arts and general studies (72%). By comparison, Computer Science (28%), Engineering (29%), and Finance (35%) ranked as three of the least regretted majors in the same survey. The survey also revealed that 14% of the respondents chose a major because their family or friend recommended/pressured them to do it (indicating that college students may not be clear about the education market).

By providing training and support, Multiverse enables young professionals to transition into new careers and improve their job prospects. This benefits not only the individual but also the businesses they work for by bringing in fresh talent with diverse experiences and perspectives. Multiverse's apprenticeship program encourages higher labor force participation with the diversity involved, including those at home and people of color. A recent survey conducted by McKinsey found that a majority (58%) of participants wanted or preferred their next role to include options for working from home, showing the stickiness and ease of access from when it was instituted during the pandemic. Another long-standing issue of traditional employment that Multiverse aims to solve is racial inequality.

Historically in the US, Black Americans have trailed White, Asian, and Hispanic population by as much as 6% (Employment rate of 61.2% for Hispanics vs. 55% for Black Americans). By comparison, most (56%) of Multiverse's graduates are people of color, with more than half being women. Economically too, College access is unevenly distributed, creating challenges for the economically challenged. At universities, just 12% of students are likely to come from the most deprived areas. With Multiverse's apprenticeship program, access to education, training, and eventually employment is open to all regardless of race, economic status, or employment preference, making it a blessing for a large fraction of society.

Finally, the cost of living crisis is driving more people towards apprenticeships. The rising cost of traditional degrees and their mounting debt are making it increasingly difficult for many individuals to invest in their futures. As a result, more and more people are turning to alternative paths, such as apprenticeships, to gain the skills and experience necessary to enter the job market. Multiverse's apprenticeship program could particularly appeal to those facing the cost of living crisis. The company pays the salaries of their apprentices, which means that participants can focus on learning without having to worry about financial pressures. Additionally, there are no costs associated with education, making it an even more attractive option for those looking to gain skills without taking on debt.

Disrupting The Education System

Multiverse's apprenticeship program is a game-changer in today's demanding job market. Unlike traditional academic degrees, Multiverse degrees represent what students are capable of accomplishing rather than what they have learned. What sets Multiverse's program apart is that the degree is completely free, paid for by employers, freeing students from the burden of crippling debt often accompanying academic programs. In addition, students are paid a salary throughout the program, making it a full-time job, providing financial security, and removing uncertainty about future employment prospects. But the benefits are not just for the students. Companies also benefit from the program, gaining access to a diverse pool of non-graduate talent, which can be trained and reskilled in-house, resulting in a more productive and efficient workforce.

The stats speak for themselves. Typically the retention rate for apprenticeships run by Multiverse is 85%, compared to the dismal 9% completion rate for professional training courses typically run as MOOCs. And it doesn't end there - 90% of those who complete Multiverse's apprenticeships also stay in their jobs at the companies where they trained, benefiting both the company and the apprentice. This is a win-win situation for everyone involved, highlighting the success of Multiverse's unique approach to education and job training. With the current market conditions and the company's current growth trajectory, Multiverse has the potential to become one of the most valuable ed-tech companies in the world if all of the current trends play out in the future.

Looking Ahead

Multiverse has a significant opportunity to disrupt the higher education market, currently valued at $30 billion. The company wants to use its funding to expand aggressively in the US (Multiverse was operational across nine cities in the US at the time of the announcement of its funding in mid-2022) and invest in developing its technology. Expanding in the US is sensible since the market is a low-hanging fruit. Two-thirds of US adults do not have a college degree, and the job market requires a degree or higher-learning qualifications for 65% of jobs. This presents a massive opportunity for Multiverse to tap into the untapped potential of non-college-educated adults. The apprenticeship market, which has traditionally been reserved for blue collared jobs, has recently expanded to other fields and is estimated to be worth around $3 billion in the UK alone. In addition, other companies such as Amazon, LinkedIn, and PwC are aggressively pushing toward the apprenticeship model.

Multiverse has already awarded 8,800 degrees through its apprenticeship program and has the potential to grow exponentially. In the UK alone, annually, there were over three-quarters of a million people participate in an apprenticeship, while there are close to 600,000 students pursuing an apprenticeship program in the US. Multiverse got a big boost last year, becoming the first apprenticeship provider granted a license to award degrees on the job. Through its apprenticeship programs, Multiverse will be able to provide degree-level education (up to a bachelor's) in fields such as data science and technology, with a unique emphasis on on-the-job learning. The first cohort of 170 enrolled in September 2022, training alongside full-time jobs at partner companies. This is expected to add credibility to the program, opening up the potential to partner with more companies and thereby increasing applications into the program.

General public perception and policy towards apprenticeship also seem to be trending positively in recent years, boosting its appeal. There is growing bipartisan support for apprenticeship programs in the US. During the Trump Administration, there was a push to make it easier for employers like Wells Fargo to establish training programs. Meanwhile, under the Biden Administration, there are plans to expand apprenticeships at least fourfold under the American Jobs Plan, which includes a $113 million commitment. Looking ahead, it is clear that Multiverse will drive the connection between enterprises looking to create a long-term sustainable workforce and a frustrated cohort of students opting out of expensive degrees which have little application. Time will tell if apprenticeship can replace the existing higher education system, but all of the factors point that a disruption of the system may be on the way.

Bottom Line

The issue of spiraling student debt and the declining value of higher education has become a growing concern for students and society as a whole. The traditional college model, with its high tuition costs, low job prospects, and the mismatch between educational programs and industry demands, has left many disillusioned and unsure about the value of pursuing a degree. Companies like Multiverse are providing an alternative path to success for young people by offering practical, relevant training programs that equip them with the in-demand skills needed by businesses today. Through apprenticeships, individuals can gain real-world experience and industry insights without incurring the massive debt associated with a college education. This approach is gaining popularity as the way forward, and it offers a practical and cost-effective way to learn, develop skills, and advance in a person's career. Multiverse can potentially disrupt the bloated education market with all of the signs pointing to a once-in-a-generation shift, but the results will largely depend on enterprise involvement and worker participation.