Ufi Ventures Bulletin December 2020

By Joe Ludlow, Impact Investment Director, Ufi Ventures

Hello and welcome to the latest update on VocTech investing from Ufi Ventures.

As 2020 draws to a close, we reflect on where the VocTech investment ecosystem stands after an extraordinary twelve months and provide some brief updates on Ufi Ventures, including one new company joining the portfolio and a new team member.

VocTech market intelligence

Evidence of the impact of the pandemic on workers, industries, and working life overall is now clearer, as is evidence of how the VocTech sector is responding.

The UK unemployment rate is rising fast (albeit from a low level relative to the long term, currently 4.9%), redundancies are at a record high (314,000 in the UK July - September), the youth unemployment rate is now 14.6%, and there’s been a 13% year on year decrease in the number apprenticeships starting (although we believe the average statistics mask significant sector differences, e.g. with possible growth in more digital industries).

There’s more evidence of the acceleration of the big future of work trends. Investment in artificial intelligence and ICT are at nearly twice the levels of last year indicating the acceleration of automation; there’s been an 18% growth in zero-hour contracts since 2019 and growing demand for online freelance labour with rates 5% higher than usual.

We're also reading evidence of how COVID19 exacerbates long-standing inequalities: for example, people without good access to digital technology and internet, people without required digital skills; worse education and employment outcomes correlated with where you live or who your parents are/were.

We were particularly affected by this Learning and Work Institute research that shows people out of employment were less likely to participate in learning and skills development during the lock down. The negative impacts of working from home are becoming higher in our consciousness and no doubt further research evidence on this will also follow.

We’ve looked in overview at the range of Governmental responses to the crisis through a skills and work lens:

• In the UK, a range of initiatives have been announced (Lifetime Skills Guarantee, “funding for skills valued by employers”, a “skills toolkit”, incentives for small businesses to take on apprentices, and more flexible further and higher education loans), but with mostly unclear timelines for delivery.
• In France, a €100bn stimulus plan included €36bn for “solidarity and skills” covering training young people, boosting employment in healthcare, investing in lifelong training and voctech for the training system, increasing training in strategic sectors such as clean energy
• In Germany, longstanding policies such as the much hailed “Kurzarbeit” scheme has kicked in and a €130bn stimulus package has been announced without explicitly investing in training programmes.
• The EU has issued €88bn in “SURE” social bonds to support national short-time work schemes and similar policies across member states.
• In the US, the continuing jobless claims as a proportion of US workforce reached 11.1% in July. The United States government has launched massive stimulus programs to provide temporary relief for those made unemployed and the White House released an ad campaign encouraging Americans to utilise existing (but not expanded) publicly and privately funded reskilling programs. The philosophy is one of shared responsibility between public and private actors in the face of economic and workforce devastation.

No doubt these measures illustrate that Governments have the capacity to act at scale as is needed in such a crisis, whilst also showing the challenges Governments face in executing such plans with urgency and agility.

In contrast, VocTech market activity post crisis has been buoyant and nimble but smaller scale. Large and smaller enterprises with a VocTech focus have launched new initiatives or raised growth capital e.g. Google's Career Certificates and google.org job training grants, Microsoft offering free access to training via linkedin, City&Guilds partnered with Futurelearn on Skills Bridges to launch retraining programmes and fundraises by Coursera, Skillshare, and Springboard illustrating investors seeing further growth potential in the VocTech sector.

There have been several new private funding and investment initiatives launched relating to VocTech too e.g. a new Xprize focused on retrain workers who lost employment to automation, a Career Impact Bond where investors returns are a function of student employment outcomes, and the launch of Resolution Ventures focusing on workertech (Ufi is a partner to Resolution in this).

This is a highly selective snapshot of private initiatives but we feel it illustrates the agility and fast-to-deliver qualities of the VocTech sector. It also points some issues of concern: efforts which are micro-scale versus the scale of the economic and employment challenge, fragmented initiatives that may be difficult to navigate or deploy strategically in concert; and perhaps some vested interests behind apparently altruistic offers (locking trainees into a particular software or platform?)

Updates from the Ufi Ventures portfolio

We made a further new investment in September – Bodyswaps. Bodyswaps aims to provide soft skills training similar in performance to expert coaching and role-playing, but close to the cost and scalability of eLearning, and is developing a learning platform and content library uses VR and AI to achieve this. The platform empowers learners to safely practice their skills and measure their progress through a library of VR role-play simulations. We've been keen to invest in a soft skills training venture for some time - as sectors are transformed with automation such as retail or transport, companies increasingly depend on employees’ soft skills to add operational value. Rapidly developing the soft skills of the large workforces is critical, and we think Bodyswaps’ technology and learning model will massively deliver this.

Kinderly has made good progress in the midst of challenging few quarters for the childcare market. It generated significant interest in its online training offers (including webinars, activity lists etc.) with up to 2000 people joining some webinars and this high-quality engagement is now translating into increased registrations, conversions and subscriptions to its core offerings. In parallel, it has made significant headway in establishing a base in the Gulf region on the back of some large contracts. The company will build on this activity (including the development of curriculum for 0-4 year olds in UAE) to grow adoption of the Kinderly software and content in the region. Kinderly was recently selected as a Finalist for the ‘Ed-tech Firm of the Year Grand Prix Award by 'Education Investor'

Learnerbly has won two prestigious industry awards recently: The Learning Technologies Silver Award for Most Innovative New Learning Technologies Product, followed by L&D Supplier of the Year from Personnel Today. These awards come on top of some terrific commercial progress, and some brilliant new initiatives, including their Wellbeing and Benefits Survey which is taking submissions now and will report in early 2021.

SonicJobs continues to grow fast on the back of some very impressive quarters of performance. The company is attracting increasing number of employers and candidate applications in response to open roles on the SonicJobs platform. Monthly revenues are up by 400% in the last 12 months and the team is seeing strong interest from large direct clients, attracted by the company's performance-based pricing model. Typical recruitment advertising converts only 4.1% of advertising clicks into completed applications, but the support SonicJobs gives to candidates via chatbot Julie raises this to 23%. In a tough labour market, this is really valuable to candidates and employers. SonicJobs plans to raise further funds early next year to maintain its growth and add additional features and functionality to its platform.

Learning Labs offers Flashacademy® Digital English learning tools into schools and workplaces. They’ve seen substantially increased demand from schools since they reopened as schools have adopted edtech both in the classroom and to support new remote learning requirements. Supported by a Government pandemic response grant, they’ve also released a new digital assessments tool to help schools (and, coming soon, workplaces) to understand the English language competencies of learners and better target support for them. 

Fluence has recently opened an office in Switzerland as it grows its client base in the pharmaceutical sector, applying the technology to understand IP portfolios. They’ve also been selected for the Financial Conduct Authorities Digital Sandbox programme to explore use of the technology to interpret and analyse financial applications and claims handling processes in order to automatically interpret new applications and claims.

What’s going on in the team?

Alex Bishop joined the Ufi Ventures team in October and has got his feet firmly under the desk (in the home office!), as you can read in this update.

We’re working on some exciting new investments and hoping we can share more in the next bulletin. Until then, have a peaceful and restful festive season, and please do be in touch if you'd like to discuss VocTech Investing.