Having a coach or a mentor at work is a proven way for individuals to accelerate professional development and for companies to improve organisational effectiveness (study 1, study 2). Moreover, appreciation of coaching has become widespread with 79% of UK professionals saying that coaching is useful and should be part of their development plan (study 3). Coaching works because it is both personalised (responsive to actual situations/needs) and iterative, allowing coachees to develop over time. That said, traditional models of in-person coaching are expensive (executive coach fees average $500/hour), limiting both the number and duration of coaching relationships that companies can offer their employees.
Recent changes in the technology available in the workplace--namely ubiquitous cheap video conferencing, improvements in AI/Machine learning and the growth of inter-workplace chat tools-- have made it possible to dramatically lower costs, widen access to coaching, and improve overall outcomes, spurring a boom in startups with coaching/mentoring solutions for everything from teaching, to manufacturing, to sales, to management.
While talking to numerous companies in this space, we crafted a market map to help us refine our thinking about how the sector is shaping up and to differentiate between the various approaches.
This map includes 80+ companies of disparate geographies, sizes, value propositions (online vs. offline sessions; professional coaches vs. peer coaching; etc.) and target markets (large companies vs. tech startups vs. SMEs; etc.). It is by no means an exhaustive list - please feel free to suggest companies that we’ve missed.
We created a simple matrix with two axes:
The y-axis reflects the degree of automation: products in the top half facilitate human to human coaching, while those on the bottom automate feedback. Note: We differentiated solutions that offer peer-to-peer coaching from those that offer professional coaching networks in quadrant I and II to facilitate the reading.
The x-axis reflects the different type of skills (soft vs. hard) that startups are offering
Based on our market map, slightly more than $640M (in 2019) has been invested into this space by Venture Capital and Private Equity funds over the last 8 years. Notable recent fundings include BetterUp ($145M raised), who is paving the way, followed by Chorus ($55M raised) Guru ($40M raised), Aviso ($40M raised) and Everwise ($26M raised). While most of the capital to date has been invested in solutions that impart soft skills and leverage human interaction to deliver their services (quadrant I; ~$287M in funding), some top tier US funds like Emergence Capital are focusing on AI/ML driven solutions (Emergence’s coaching networks thesis is worth reading: here).
📊 GENERAL TRENDS
There are three main value propositions being offered by companies to serve the on-demand coaching/mentoring market:
1. Peer-to-peer coaching/mentoring both within enterprises (e.g. MentorCliQ, Piper) and across enterprises (e.g. Enrich, Plato, Guider). For a flat monthly fee (or no fee as startups build market share) participating companies can give all relevant employees access to a broad array of expertise in general management (Guider) or specific domains like engineering (Plato).
2. Professional coaching platforms - Platforms such as BetterUp, CoachHub, AceUp, Sharpist, Moovone). While the technology here is not new, applying video conferencing dramatically increase the volume of coaches that are accessible and lowers the cost of connecting for both coach and coachee. We believe, as these platforms grow, they also lower the cost of customer acquisition for coaches which translates into costs that can be up 40-70% cheaper for customers.
3. Digital coaches - AI coaches like Guru, Chorus, Wave, Sparkplan, Rocky.ai, Edward.ai, Mendo, many of which leverage artificial intelligence to provide feedback and guidance which is narrow in scope but often much more iterative (e.g. how successful was each sales call (Chorus)).
💎 AVENUES OF DIFFERENTIATION
While all areas are seeing numerous entrants, we see three avenues that are less crowded:
Leveraging humans to develop hard skills - Many consumer-facing education startups incorporate human coaches to help students develop the hard skills that the market is looking for, but the majority of B2B human coaching solutions tend to assume that employees already have the requisite hard skills and focus on soft skills development as we can see in quadrant I. As the pace of innovation increases, the need for on-the-job hard-skill development also grows. Solutions in quadrant II that leverage humans to help build hard skills such as lingo live (language learning), codementor (software development), Growth Tribe (growth marketing) have the chance to apply some of the lessons learned on the consumer side in the less crowded B2B field. One caveat, many fast-growing consumer facing learning companies that incorporate coaching (like OpenClassrooms, Ironhack and Lambda School) see this opportunity as well and are branching out into B2B although we have left them off the map since their core business is still consumer.
Mixing tech and human to maximise learning impact - Most companies are focused either on automation or on human connection. We couldn’t find mature examples of coaching companies leveraging both aspects to deliver more value to end users. One could imagine for example a human language coach that has access to an AI based analysis of their student’s actual workplace conversations throughout the week designing a much more valuable in person lesson (Redpoint VC partner Tomasz Tunguz identified AI driven service businesses as an increasingly prominent business model more broadly for SAAS companies in the “AI Agency”).
Offering real time feedback - Effective learning takes constant reinforcement, is much more likely to be retained if it is useful, and will begin to fade quickly if not used. (study: here & here). One way to enhance retention is to provide feedback at the time that such feedback is useful. There are a few companies, including TeachFX, Oto Systems, Chorus, Aviso that are on their way to unlocking this value proposition. They collect data to understand users’ behaviours and, based on the context and inputs, they deliver real-time advice to help users improve on the fly. For instance, TeachFX helps teachers measure students’ engagement by recording class sessions and analysing the pattern of dialogue, and then provides feedback highlighting successful interactions and suggesting areas for improvement based on the teacher’s own goals. Another interesting example is Oto Systems, which analyses customer service calls’ audio and provide agents with real-time advice (e.g. tone, choice of words, etc.) on how to handle the customers.
👀 OUR VIEW
Continued growth
Technology enabled coaching & mentoring represents a big opportunity. While 4% of payroll ($1,200/employee/year) in the US goes to employee learning, 60% is still spent on offline instruction and 90%+ of is spent on internal resources rather than outside professionals or software per BMO Capital despite the fact that online learning is cheaper and just as or more effective. There is a lot of room for improvement in connecting employees with online resources, both human and software, better suited to unlocking performance, and we see the growth of coaching as a secular trend responding to that opportunity.
ROI > Employee satisfaction
We are in year 10 of a growth business cycle. Labour markets are tight and coaching can be justified solely because workers like it and it can help attract and retain talent. The cycle will turn (is turning?), however and mentoring/coaching programs will need to show a clear correlation between coaching and company’s bottom line. Coaching products in all categories that are able to track and measure ROI will do better in the long run.
Drive motivation
Because learning requires commitment, coaching products that motivate users to commit time are more effective. Moreover, finding time to learn remains a hurdle for people, employees spend on average just 1% of the work week (<5min/day) on professional development. One way to create motivation is to build coaching into existing workflows, LitiGate, for example, bundles AI driven litigation analysis with a product that uses the same AI to reduce work burdens in other areas so that coaching happens within the context of an enhanced workflow. Another way is to tap into existing incentives for professional development (e.g. X hours of coaching provides Y qualification). At a more basic level, a product that incorporates regular check-ins with humans can create incentive just by virtue of those check ins (generally people find it harder to cancel meetings with people than computers).
Professional coach vs. industry expert
There is some tension between the rise of generalist executive coaching platforms like BetterUp and SoundingBoard, which provide access to coaches trained to help people and specialist platforms like Plato (peer to peer engineering mentorship) or Drishti (AI driven manufacturing coach) which provide deep insight but don’t build in the structure of traditional coaching. We see potential in both approaches, but look hard at what each is capable of delivering when evaluating investments.
🙏 THANK YOU!
We want to congratulate and encourage all the passionate entrepreneurs who are building amazing coaching and mentoring companies, allowing people to acquire new skills in a more efficient and fun way. We would love to receive your feedback on this market map. We are always happy to talk to early-stage learning technology companies that help people learn & grow so please reach out to us if you feel Brighteye could be the right partner for your journey: dg@brighteyevc.com
Finally, a massive thank you to the following people for their time and valuable feedback and insights. 🙌
Nimrod Aharon (LitiGate) 🇮🇱
Jamie Poskin (TeachFX) 🇺🇸
Tom Tunguz (Redpoint) 🇺🇸
Esteban Sosnik (Reach Capital) 🇺🇸
Jake Saper (Emergence) 🇺🇸
Matti Niebelschütz (CoachHub) 🇩🇪
Anna Ott (Calibr8 & Unifier) 🇩🇪
Will Foussier (AceUp) 🇺🇸
Amit Pande (Aviso) 🇺🇸
Peter van Sabben (Growth Tribe) 🇳🇱
Morgan Baivier de Fortis (monmentor.fr) 🇫🇷
Harry Novic (Rocky.ai) 🇩🇪
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