27 June 2018

Degreed’s Pathgather Acquisition – Stacia's Take

Stacia Garr
Co-founder & Principal Analyst


Stacia’s take on the Degreed acquisition of Pathgather.

I guess it’s true: having $42 million dollars really does burn a hole in one’s pocket.

Or at least this was the case with Degreed, who, fresh off its March Series C funding round, purchased “frenemy” Pathgather last week. These two companies (plus EdCast, which has now been relegated to third-wheel status), have furiously competed for years, while at the same time building up the new product category that we now call the Learning Experience Platform (LXP). And now, they’ve dropped the enemy part of their relationship and become “more than just friends.”

If you’re just getting caught up on this acquisition, you can read the basics in the company’s press release and thoughts on what it means for the overall category by folks such as Josh BersinDavid James Clark IVAve Rio, and Bersin by Deloitte. I don’t want to duplicate others’ work, so instead focus here on how this acquisition could create opportunities for Degreed in the talent management space.

As many of you know, Degreed shifted in the last year to a much bigger mission: enabling people and organizations to more effectively build, measure, and communicate the skills people need. This shift, plus the Pathgather acquisition, could open up opportunities for Degreed in the following areas:

  • Performance management: Performance management is hot right now, and Degreed’s updated mission fits right in with the modern coaching and development-focused approach. With the acquisition of Pathgather, Degreed has a head start on many of the technology vendors looking to jump into this market. Think about it: Pathgather has a way to set goals within its system and Degreed already has a tool that allows manager and self-assessment of skills (with some exciting skills verification offerings coming down the pike). Blend the capabilities from both companies together, add in a feature that enables continuous conversations and a rating (not everyone’s going to abolish them) and… BAM you have a performance management offering. Ok, we all know it is harder than that, but you get my point – many of the pieces are there. And speaking of being there, so, too, are competitors Cornerstone and Bridge, which each have a performance management offering. So, adding this capability would allow Degreed to better compete against them.
  • Coaching / Mentoring: Another, adjacent, opportunity would be for Degreed to expand its reach into coaching. There is a host of new coaching technologies (BetterUpPlumaSounding Board, etc.) that are trying to use technology to more effectively connect individuals to coaches – Degreed could enter into some sort of partnership with them. Perhaps an even better opportunity, given the new data that the Pathgather acquisition will provide, would be for Degreed to move into the mentoring space. Degreed is getting more and more insight into who knows what and to what extent, and creating more formalized opportunities for mentoring and coaching would also align with Degreed’s mission. Companies like ChronusRiver, and Everwise already offer this, but Degreed could help employees tie their coaching / mentoring discussions together with timely and relevant content (based on insights from Degreed’s now-extended data set).
  • Career Management: And speaking of data, I could see this acquisition accelerating Degreed’s foray into career management. Degreed wants to understand the skills people need and when they need them. The Pathgather acquisition will provide more data on people’s skills and learning habits, making their existing data set more robust. Thinking forward, though, I wonder if an acquisition of a career management technology might be a wise move. More granular information similar to that provided in offerings such as Visier’s recently released Career JourneysFuel50RallyTeam (oops, Workday just bought them) Cornerstone’s succession tool, or the one that PageUp People has had in place for years, would make the data from the current acquisition even more powerful.

So, these are some really exciting potential talent management-related opportunities that result from this acquisition.

There are, of course, some concerns to flag, too. First, as we all know, acquisitions take up a lot of time. In this instance, we have two teams with very strong perspectives coming together and I bet (and hope) that there will be many meaningful discussions and passionate debates on topics ranging from product direction to user experience to overall strategy. The end product will hopefully be better, but no matter what, these discussions take time. And remember, the failure rate of acquisitions is somewhere between 70% and 90%.

Second, Degreed will need both to integrate Pathgather and continue to compete in its super hot LXP market. In terms of competition, there is EdCast, which I can only imagine will remind its current and prospective customers that it is the only dominant LXP not busy with an integration (take that, third-wheel status!), and will therefore be able to give “undivided” attention to customers. Then, there are the learning providers (Cornerstone, Skillsoft’s PercipioFuseValamis, etc.) who are already competing in this space, but also offer other capabilities. Further, it’s possible that the large HCM players (SAPOracle and Workday) will get into this space, since a market growing at 200% year-over-year won’t go unnoticed (some thanks for having slogged all these years to create a new market, eh?).

Third – and related to the second point – I really like that Degreed had turned its focus toward skills verification, but that is already a hot market, too. Vendors such as LinkedInHiQ LabsProFindaTeamFit, and EdCast are competing here. Degreed will have to figure out how to execute its skills verification technology and compete with incumbent players, while also managing the integration.

So, to wrap this up, I see a huge amount of potential in Degreed and Pathgather tying the knot. This opens up lots of new opportunities for Degreed, as long as they can manage the concerns. The teams on both side of this acquisition have proven themselves to be extremely smart and tenacious, so it should be a good show. I, for one, will be tuning in regularly to see what happens.

Disclosure: I/we have no positions in any companies mentioned and no plans to initiate any positions. We have no information beyond what is publicly available on Degreed’s intentions and are not receiving compensation for this post.

Written by

Stacia Garr
Co-Founder & Principal Analyst

Stacia is a Co-founder and Principal Analyst for RedThread Research and focuses on employee engagement/experience, leadership, DE&I, people analytics, and HR technology. A frequent speaker and writer, her work has been featured in Fortune, Forbes, The New York Times, and The Wall Street Journal as well as in numerous HR trade publications. She has been listed as a Top 100 influencer in HR Technology and in D&I. Stacia has an MBA from the University of California, Berkeley, and a master’s degree from the London School of Economics.

Share This