The Coursera IPO and Why Every University Should Publish an S-1

As a social demographer, I was trained to think about risk. If you read Coursera’s S-1, the SEC filing required for any company preparing to offer shares in a public offering, you will understand that the process is all about risk communication.

Nonprofits don’t go public. You can’t buy stock in colleges and universities. Nonprofit higher education can’t look to investors (at least directly) to fund operations and growth.

As a tribe, academics tend to be wary of market-based capitalism. (Except economists and business school professors, who benefit most from the academic market for their services.) We academics want values and mission to drive our institutions and industry more than market forces. And so it should be.

We in higher ed can learn from the for-profit world (among many areas) from the transparency that an IPO requires. A clear, unvarnished and public articulation of organizational risk factors can be both illuminating and productive. We don’t do this much at the level of our own institutions, focusing most of our thinking and writing on ecosystem-level postsecondary risks.

The worry, I think, is that publicly exposing our institutional risk factors would be too risky. Talking about how things could go wrong for our school could end up being a self-fulfilling prophecy. Articulating risk factors around demographics, funding, revenues, competition, costs, leadership or relevance might have the unintended consequence of accelerating those suboptimal institutional outcomes. Plus, any public articulation of risk factors might cause discord and strife among the various stakeholders that constitute a university.

Maybe we shouldn’t be so worried.

The IPO process in general, and Coursera’s S-1 specifically, might help us understand that articulation of risk is almost always a healthy exercise. The only way to address risk is to understand it. The only way to understand risk is to study it.

The Coursera S-1 may be particularly instructive, as some of the risk factors that the company lays out for itself are ones that many colleges and universities share.

Coursera is part of the higher education ecosystem. Many of the factors that will lead to the company’s success or failure are becoming ever more intertwined with the future resilience of individual postsecondary institutions.

So the argument is that every college and university should consider writing and publishing our own S-1.

While I highly recommend that everyone in higher ed should take some time with Coursera’s entire S-1, to save you time, I’m going to reprint the headlines (or headers) that Coursera identifies as risks in the document.

As you read these risk factors, think about how each one may translate (if imperfectly) to your school. How would you rewrite each risk factor for your institution? What new and different risk factors would you identify for your school? How do these institutional risk factors aggregate up to shared risk factors across the nonprofit postsecondary ecosystem? And what would it take -- or what would have to change -- for your school to go through an exercise of writing and publishing its own S-1?

The risk factors that Coursera identifies -- copied and pasted:

Risks Related to Our Business and Industry

• Our quarterly and annual revenue and operating results have fluctuated from period to period and may do so in the future, which could cause our stock price to fluctuate and the value of your investment to decline.
• Our recent, rapid growth may not be indicative of our future growth and we expect our revenue growth rate to decline compared to prior years. We have a limited operating history, which makes it difficult to predict our future financial and operating results.
• We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future.
• The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways.
• Market adoption of online learning solutions is relatively new and may not grow as we expect, which may harm our business and results of operation.
• We may need to change the contract terms, including our pricing model, for the course content and credentialing programs offered on our platform, which in turn would impact our operating results.
• If we fail to maintain and expand our partnerships with university and industry partners, our ability to grow our business and revenue will suffer.
• If we are required to change the contract terms with our educator partners, including with respect to pricing or contract length, it could materially and adversely affect our business, financial condition, and results of operations.
• Our financial performance depends heavily on our ability to attract and retain learners, and if we fail to do so, our business and operating results will suffer.
• If our learners do not expand beyond our freemium offerings and free trials available on our platform, our ability to grow our business and improve our results of operations may be adversely affected.
• If we pursue unsuccessful partner opportunities, we may forego more profitable opportunities and our operating results and growth would be harmed.
• We must incur significant expense in technology and content development to launch a new offering or program, and we may not generate sufficient revenue from a new offering to offset our costs.
• Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
• If we fail to quickly and efficiently scale our operations to support the needs of new and existing partners, our reputation and our revenue will suffer.
• If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our platform may become less competitive.
• If we fail to increase sales of our Enterprise offering, or if we need to change the contract terms associated therewith, including with respect to pricing or contract length, it could negatively affect our business, financial condition, and results of operations.
• If we fail to maintain sufficient high-quality content from partners, we will be unable to attract and retain customers.
• If we fail to manage the growth of our business both in terms of scale and complexity, our operating results and financial condition could be adversely affected.
• We face competition from established companies as well as other emerging companies, which could divert partners to our competitors, result in pricing pressure, impact our market share, and significantly reduce our revenue.
• If for-profit postsecondary institutions, which offer online education alternatives different from ours, perform poorly, it could nonetheless tarnish the reputation of online education as a whole, which could impair our ability to grow our business.
• We may acquire other companies or technologies which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and harm our results of operations.
• We may invest in private companies and if the value of any such equity investments were to decline, it could adversely affect our results of operations and financial condition.
• Our directors may encounter conflicts of interest involving us and other entities with which they may be affiliated, including matters that involve corporate opportunities.
• If we do not retain our senior management team and key employees, we may not be able to sustain our growth or achieve our business objectives.
• We may need additional capital in the future to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to grow our business.
• We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our results of operations in the near term.
• Our current operations are international in scope and we plan to expand our international operations, which exposes us to risks inherent in international operations.
• Our results of operations could be adversely affected by natural disasters, public health crises, political crises, or other catastrophic events.
• Our metrics and market estimates used to evaluate our performance are subject to inherent challenges in measurement, and real or perceived inaccuracies in those estimates may harm our reputation and negatively affect our business.

Risks Related to Regulatory Matters and Litigation

• If our partners fail to comply with international, federal and state education laws and regulations, including any applicable state authorizations for their programs, it could harm our business and reputation.
• Our future growth could be impaired if we or our partners fail to obtain timely approval from applicable regulatory agencies to offer new programs, make substantive changes to existing programs or expand their programs into or within certain states.
• If our partners fail to maintain institutional accreditation for their programs, our revenue could be materially adversely affected.
• Our activities are subject to international, federal and state education accessibility, and consumer protection laws and regulations and other requirements.
• Activities of the U.S. Congress, such as changes in spending policies or budget priorities for government funding of colleges, universities, schools and other education providers, could result in adverse legislation or regulatory action.
• Our business model has been validated by a DOE “dear colleague letter”, but such validation is not codified by statute or regulation and may be subject to change.
• If we violate the misrepresentation rule, or similar federal and state regulatory requirements, we could face fines, sanctions and other liabilities.
• We are required to comply with The Family Educational Rights and Privacy Act (“FERPA”), and failure to do so could harm our reputation and negatively affect our business.
• We could face liability, or our reputation might be harmed, as a result of the activities of our customers and educators for content on or accessible through our platform.
• We are subject to governmental export and import controls and anti-corruption laws and regulations that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
• We may become involved in claims, lawsuits, government investigations, and other proceedings that could adversely affect our business, financial condition, and results of operations.

Risks Related to Privacy, Cybersecurity and Infrastructure

• If sensitive information about our partners, their employees, or our learners is disclosed, or if we or our third-party providers are subject to cyberattacks, use of our platform could be curtailed, we may be exposed to liability and our reputation would suffer.
• If the personally identifiable information we collect from our partners, customers, and learners is unlawfully acquired, accessed, or obtained, we could be required to pay substantial fines and bear the cost of investigating the data breach and providing notice to individuals whose personally identifiable information was unlawfully accessed.
• Disruption to or failures of our platform could result in our partners and learners becoming unsatisfied with our platform and could harm our reputation.
• If we do not maintain the compatibility of our learning management platform with third-party applications that our customers use, our revenue will decline.
• Our payments system depends on third-party providers and is subject to evolving laws and regulations.
• Our business depends to a significant degree on continued access to the Internet and mobile networks.
• If the mobile solutions available to our learners and partners are not effective, the use of our platform could decline.
• Our use and processing of personal information and other data is subject to laws and obligations relating to privacy and data protection, and our failure to comply with such laws and obligations could harm our business.
• Use of social media, emails, push notifications, and text messages in ways that do not comply with applicable laws and regulations, lead to the loss or infringement of intellectual property, or result in unintended disclosure may harm our reputation or subject us to fines or other penalties.

Risks Related to Intellectual Property

• Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary technology and our brand and could materially harm our business.
• We may be subject to intellectual property claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies in the future.
• Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and proprietary information.
• Our use of “open source” software could negatively affect our ability to offer our solutions and subject us to possible litigation.
• Individuals that appear in content hosted on our platform may claim violation of their rights.

Risks Relating to Our Existence as a Public Benefit Corporation

• Although we operate as a Delaware public benefit corporation, we cannot provide any assurance that we will achieve our public benefit purpose.
• If our publicly reported B Corp score declines, our reputation could be harmed and our business could suffer.
• As a PBC, our focus on a specific public benefit purpose and producing a positive effect for society may negatively impact our financial performance.
• Our directors have a fiduciary duty to consider not only our shareholders’ interests, but also our specific public benefit and the interests of other stakeholders affected by our actions. If a conflict between such interests arises, there is no guarantee such a conflict would be resolved in favor of our shareholders.
• Our focus on the long-term best interests of our company as a PBC and our consideration of all of our stakeholders, including our shareholders, learners, partners, employees, the communities in which we operate, and other stakeholders that we may identify from time to time, may conflict with short- or medium-term financial interests and business performance, which may negatively impact the value of our common stock.
• As a Delaware PBC, we may be subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interest, the occurrence of which may have an adverse impact on our financial condition and results of operations.
• If we cannot maintain our company culture and public benefit commitment, our business could be harmed.

Risks Related to Tax, Accounting and Operations as a Public Company

• Our business may be subject to sales and other taxes.
• Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or regulations could have an adverse effect on our business and operating results.
• Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
• Our reported results of operations may be adversely affected by changes in generally accepted accounting principles.
• If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
• We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
• We have not operated as a public company, which will require us to incur substantial costs and will require substantial management attention, and we may not be able to manage our transition into a public company effectively or efficiently.

Risks Related to This Offering and Our Common Stock

• An active trading market for our common stock may not develop or be sustained and you may not be able to sell your shares at or above the initial public offering price, or at all.
• The price of our common stock could be volatile and you may not be able to resell your shares at or above our initial public offering price. Declines in the price of common stock could subject us to litigation.
• If you purchase our common stock in this offering, you will incur immediate and substantial dilution.
• Future sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that such sales could occur, could cause the price of our common stock to decline.
• Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution to our stockholders and could cause the price of our common stock to decline.
• Our actual operating results may not meet our guidance or analyst or investor expectations, which would likely cause our stock price to decline.
• If securities analysts or industry analysts downgrade our common stock, publish negative research or reports, or fail to publish reports about our business, our stock price and trading volume could decline.
• We will have broad discretion in the use of the net proceeds to us from this offering and may not apply the proceeds in ways that increase our market value or improve our operating results.
• We do not intend to pay dividends on our common stock, so any returns on your investment will be limited to changes in the value of our common stock.
• Our directors, executive officers and principal stockholders beneficially own a substantial percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
• Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our common stock.
• Our amended and restated charter and bylaws that will be in effect upon the closing of this offering will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and provides that federal district courts will be the sole and exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us or our directors, officers, or other employees.