Shortly after becoming chief executive of Hackbright Academy last November, Sharon Wienbar started getting calls from companies wanting to buy it.
Most wanted Hackbright, a school in San Francisco that teaches women about software programming and engineering, to expand to include men. “Quite a few said, ‘Hey, you’ll double your business,’ ” Wienbar said. “They didn’t get it.”
The executives at Capella Education Co. did. The firm’s online Capella University for years has attracted more women than men, and more minorities than traditional, in-person universities do. “When we had the first call with Capella, it was completely different,” Wienbar said. “They said, ‘That’s what makes you unique.’ ”
Last month, Capella spent $18 million to buy Hackbright, one of three deals this year that have pushed the Minneapolis-based for-profit education firm into a new business. Capella in the early 1990s was one of the first companies to offer accredited college degrees via online courses and has grown into one of the biggest, with about 38,000 active students and $430 million in annual revenue. Now, it is teaching job-ready skills that will get people into today’s most in-demand professions.
“Employers can’t find the right skilled workers and academia isn’t keeping up,” said Kevin Gilligan, Capella’s chief executive. “We recognize a big opportunity to be an institution that can upskill and reskill 21st century workers.”
In addition to Hackbright, Capella bought DevMountain, a Provo, Utah, firm that teaches even more specific tech skills, such as creating apps, in classrooms in the Salt Lake and Dallas metro areas.
And early this year, Capella formed a joint venture with the employment website firm CareerBuilder. The two companies are identifying job-training opportunities from data that CareerBuilder gets from employers. Capella has built courses in two areas so far — mobile web development and retail management — as a result of the venture, called RightSkill.
The two firms have spotted supply-demand imbalances in about 40 other fields. Gilligan said Capella aims to create courses quickly, within two months, once it decides to attack one of the in-demand jobs. “We have to create a very agile, rapid capability in product development,” he said.
That’s very different from the years Capella spent in the early 1990s building the degree programs it offers through its online university. Those courses needed to pass muster with accreditation agencies as well as the U.S. Department of Education, which qualifies programs for federal financial aid.
Capella and firms like Apollo Education Group, known for its online University of Phoenix, and Kaplan Inc. drove the rise of for-profit education. Their online courses appealed to people who were already in the workforce, preferred to work on their own or needed more flexibility than could be found at traditional colleges and universities.
Capella took a leading role among online education providers in several fields where knowledge is always evolving, including nursing and education. Capella University now offers undergraduate degrees in six fields and graduate degrees in 10.
For years, the company’s business ran against economic cycles, with more enrollments during downturns and recessions and fewer during economic good times. But that pattern broke around five years ago, Gilligan said, amid a broader shift in attitudes about higher education. There was a demographic-related dip in the number of people heading for regular college in recent years and there’s been a broader national discussion about affordability of higher education.
“The world is shifting,” Gilligan said. “New models [of teaching] that can be more affordable and deliver a better outcome for learners are becoming more valuable.”
Traditional colleges and universities have taken note of the market created by the online for-profit firms. One of Capella’s newer competitors in education coursework is the University of Southern California’s Rossier School of Education, which now offers graduate courses online for teachers and other educators.
“They’ve seen an enormous growth in the number of competitors,” Trace Urdan, analyst at Credit Suisse, said of Capella and its online rivals. “That’s caused them to be much more nimble.”
But the traditional colleges are unlikely to tackle the employer-directed, job-skills courses that the online, for-profit universities are moving into, territory that has typically been relegated to trade schools and community colleges. “A lot of traditional universities don’t like to see themselves as pre-professional,” Urdan said.
At the moment, the hottest niche in job-ready skills is software. In the past few years, dozens of for-profit “coding” schools, sometimes referred to by techies as “boot camps,” have emerged around the country to fill demand that far outpaces the training in regular universities and community colleges.
Hackbright, the women-only software academy Capella bought, got started in 2012 and has already built a nationwide reputation with both students and employers. It offers 12-week courses in classrooms rather than online at a single site in San Francisco, though new sites are planned for Oakland and San Jose. It gets so many applicants, typically women who have an undergraduate degree and have been working for a few years, that its acceptance rate rivals that of elite colleges.
The success rate is high: 90 percent of its graduates find jobs in tech, and their average salary upon leaving is $89,000. Capella will run the company as a separate unit. Wienbar said Hackbright expects to eventually expand to have classroom sites in about a dozen large cities across the country — and maintain its focus on women.
“We already know there is demand for Hackbright in other places,” Wienbar said. “We have corporate partners outside the Bay Area who recruit graduates to come work for them.”
Capella’s rivals Apollo, Kaplan and Strayer have also invested in or acquired coding schools in recent months.
“The market is enormous to teach the careerist, the hobbyist or the person who doesn’t want to go to school but wants to develop a skill,” said Scott Wieler, chief executive of Signal Hill, a Baltimore investment firm that helped Capella raise capital in the 1990s. “The first one they’ve all gone after is coding.”
For Gilligan, the expansion into job-training courses is a natural fit with what Capella’s leaders have long seen as the social mission of the company to reach people who, for whatever reason, aren’t well served by traditional educational paths.
“Education is unbundling and rebundling in different ways,” Gilligan said. “We want to be a destination for professionals to improve their job-readiness as they advance through their careers.”