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Six Toronto VCs discuss COVID-19 and the post-pandemic era
As North America’s fourth-largest city, Toronto is one of the world’s top startup ecosystems.
After spawning companies like Eventbrite and Crowdmark, Ontario’s capital has attracted international talent that complements its homegrown population of entrepreneurs and technical talent.
Six investors we surveyed who work and live in the area said they believe Toronto will continue to thrive after the COVID-19 storm passes. Some of them focus exclusively on the region, while others invest elsewhere as well. As they explained, the city has a lot going for it: It’s diverse, has access to locally trained engineering and business workers, and the area has already fostered many companies that are doing very well.
Investors expect Toronto to remain a fintech hub
Fintech is one of the city’s top industries, and the investors in this survey expect this to continue. Stephanie Choo, head of investments at Portag3 Ventures, said “fintech continues to see massive tailwinds from the fallout from COVID-19 as incumbents struggle to fully digitize their offerings.”
Ameet Shah of Golden Ventures listed fintech as one of Toronto’s key industries. Eva Lau of Two Small Fish Ventures agreed, adding that “blockchain has also been doing well because many blockchain-related technologies or companies were started in Toronto.”
Other investors point to fintech business leaders in Toronto like CEOs Mike Katchen of Wealthsimple, Daniel Eberhard of Koho, Andrew D’Souza and Michele Romanow of Clearbanc and Kirk Simpson of Wave Financial.
Diversity is one of Toronto’s strengths
Nearly all of the surveyed investors cited diversity as a key reason to live and work in Toronto. Probal Lala, chairman of Maple Leaf Angels, says, “Beyond having a vibrant technology ecosystem, Toronto has one of the most diverse communities in North America and is not only a great place to find the intellectual horsepower and funding to build a great global startup, but also the mosaic of social communities that makes it a great place to live and raise a family.”
Choo said the United States’ current battles over immigration could benefit Canada. “Small, nimble teams that need to move fast may still choose to co-locate in person — and many will still want access to amenities that only a large, vibrant and diverse city like Toronto can offer.”
She also pointed to Toronto’s claim of being one of the most diverse cities in the world. “[This] not only makes the city interesting but also very welcoming for those who relocate from elsewhere; a strong startup and tech scene, and, lastly, a vibrant cultural and food scene, especially through the lens of cost-of-living compared to comparable major cities.”
Shopify’s executives are key players in Toronto’s ecosystem
Several VCs listed Shopify executives as local leaders, while others acknowledged the growing unicorn’s impact. Ameet Shah of Golden Ventures says, “Toronto has traditionally been strong in fintech, B2B SaaS, crypto and AI. The explosion of Shopify should also benefit companies focused on e-commerce and supply chain solutions.”
Adam McNamara and Ameet Shah, when asked about local business leaders, both listed Satish Kanwar. Kanwar is GM and VP of Product at Shopify after the company purchased Jet Cooper, a startup co-founded by Kanwar. McNamara also points to Farhan Thawar, Shopify’s VP of Engineering, as a local leader.
Who we spoke to:
- Probal Lala, chairman, Maple Leaf Angels Capital Corporation
- Stephanie Choo, head of investments, Portag3 Ventures
- Adam McNamara, founding partner, Ramen VC
- Ameet Shah, partner, Golden Ventures
- Matt Golden, founder and managing partner, mGolden Ventures
- Eva Lau, founding partner, Two Small Fish Ventures
Probal Lala, Maple Leaf Angels Capital Corporation
How much is local investing even a focus for you now? If you are investing remotely in general now, are you filtering for local founders?
Prior to COVID-19 hitting, a requirement for the majority of my investments was a face-to-face visit with the founding team. For the most part, this meant founders spending time in Toronto. As we primarily invest in seed and pre-seed, this usually meant local founders.
When the pandemic hit, we shifted our process to primarily Zoom meetings (including due diligence) and as a result the mix of founding teams has expanded beyond our typical catchment area (two-hour drive from the city) to a broader base. Investment cycles appear to have slowed a bit due to the remote approach but our reach to founding teams has expanded to a broader base of geographically distributed founding teams (Mostly Canadian although we have recently seen a number of international opportunities).
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Labster lands new cash to bring its virtual reality science lab software to Asia
You could Zoom call into your science class, or you could conduct a lab experiment in virtual reality. During the coronavirus pandemic, the latter has never felt more full of potential.
The global need for learning solutions beyond Zoom is precisely why Labster, a Copenhagen-based startup that helps individuals engage in STEM lab scenarios using virtual reality, is growing rapidly. Since March, the usage of Labster’s VR product has increased 15X.
On the heels of this unprecedented momentum, Labster joins a chorus of edtech startups raising right now, and announced it has brought on $9 million in equity venture funding. The round was led by GGV, with participation from existing investors Owl Ventures, Balderton and Northzone.
“COVID-19 has been a great awareness builder of Labster, opening teachers’ eyes to the good sides of online learning as opposed to Zoom-only learning, which is largely failing,” CEO and co-founder Michael Jensen told TechCrunch.
Labster sells its e-learning solution to support and enhance in-person courses. Based on the subscription an institution chooses, participants can get differing degrees of access to a virtual laboratory. Imagine a range of experiments, from understanding bacterial growth and isolation to exploring the biodiversity of an exoplanet. Along with each simulation, Labster offers 3D animations for certain concepts, re-plays of simulations, quiz questions and a virtual learning assistant.
Photo credit: Labster.
While the majority of Labster’s customers are private institutions, the company landed a deal with all of California’s community colleges during the pandemic. The partnership added 2.1 million students to Labster’s customer base, which Jensen said has been bolstered by a broader growth in annual license deals and partnerships.
With GGV on board, Labster is looking to strengthen position in Asia. Breaking into new markets often requires a strategic investor with eyes on the ground on how that market works, thinks and, most importantly, learns. Asian markets are specifically lucrative for edtech companies because consumer spend is higher compared to the North American market.
Jenny Lee, a Shanghai-based partner with GGV, will take a board seat at Labster.
Lee has expressed interest in how automation, virtual and AI-based teachers can help bridge the gap between K-12 markets and lack of good-quality teachers everywhere.
Jensen said that the capital will also be used to bolster the company’s mobile offering, since Asian markets have high mobile usage compared to North American and European markets.
The round is significantly smaller than Labster’s previous $21 million Series B, closed in April of 2019. And it contrasts sharply to the momentum that has benefited edtech companies like MasterClass, Coursera and, reportedly, Udemy into raising nine-figure rounds.
So naturally, I asked Jensen: why the conservative raise?
Jensen says that the $9 million check was a strategic growth check to bring on GGV (all existing investors in Labster also participated in the round). Since being founded in 2012, the company has been relatively conservative in raising cash. To date, inclusive of this round, Labster has raised $40 million in venture capital.
He argues the new money, thus, is offensive capital instead of defensive capital. It’s a strategic check to open a global door.
This isn’t the first time an edtech company has raised a smaller round than expected during the coronavirus pandemic. In April, edtech unicorn Duolingo raised a short $10 million to expand into Asia and bring on General Atlantic as an investor to expand into global markets.
Duolingo, however, is cash-flow positive. Jensen did not comment on if Labster has turned a profit, but adds that it was a “significant up round” that brought the company’s valuation to above $100 million.
“Our primary objectives continue to be rapid growth and global impact, not profits,” he told TechCrunch.
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What’s different about hiring data scientists in 2020?
Tianhui Michael Li is founder of The Data Incubator, an eight-week fellowship to help PhDs and postdocs transition from academia into industry. Previously, he headed monetization data science at Foursquare and has worked at Google, Andreessen Horowitz, J.P. Morgan and D.E. Shaw.
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It’s 2020 and the world has changed remarkably, including in how companies screen data science candidates. While many things have changed, there is one change that stands out above the rest. At The Data Incubator, we run a data science fellowship and are responsible for hundreds of data science hires each year. We have observed these hires go from a rare practice to being standard for over 80% of hiring companies. Many of the holdouts tend to be the largest (and traditionally most cautious) enterprises. At this point, they are at a serious competitive disadvantage in hiring.
Historically, data science hiring practices evolved from software engineering. A hallmark of software engineering interviewing is the dreaded brain teaser, puzzles like “How many golf balls would fit inside a Boeing 747?” or “Implement the quick-sort algorithm on the whiteboard.” Candidates will study for weeks or months for these and the hiring website Glassdoor has an entire section devoted to them. In data science, the traditional coding brain teaser has been supplemented with statistics ones as well — “What is the probability that the sum of two dice rolls is divisible by three?” Over the years, companies are starting to realize that these brain teasers are not terribly effective and have started cutting down their usage.
In their place, firms are focusing on project-based data assessments. These ask data science candidates to analyze real-world data provided by the company. Rather than having a single correct answer, project-based assessments are often more open-ended, encouraging exploration. Interviewees typically submit code and a write-up of their results. These have a number of advantages, both in terms of form and substance.
First, the environment for data assessments is far more realistic. Brain teasers unnecessarily put candidates on the spot or compel them to awkwardly code on a whiteboard. Because answers to brain teasers are readily Google-able, internet resources are off-limits. On the job, it is unlikely that you’ll be asked to code on a whiteboard or perform mental math with someone peering over your shoulder. It is incomprehensible that you’ll be denied internet access during work hours. Data assessments also allow the applicants to complete the assessment at a more realistic pace, using their favorite IDE or coding environment.
“Take-home challenges give you a chance to simulate how the candidate will perform on the job more realistically than with puzzle interview questions,” said Sean Gerrish, an engineering manager and author of “How Smart Machines Think.”
Second, the substance of data assessments is also more realistic. By design, brainteasers are tricky or test knowledge of well-known algorithms. In real life, one would never write these algorithms by hand (you would use one of the dozens of solutions freely available on the internet) and the problems encountered on the job are rarely tricky in the same way. By giving candidates real data they might work with and structuring the deliverable in line with how results are actually shared at the company, data projects are more closely aligned with actual job skills.
Jesse Anderson, an industry veteran and author of “Data Teams,” is a big fan of data assessments: “It’s a mutually beneficial setup. Interviewees are given a fighting chance that mimics the real-world. Managers get closer to an on-the-job look at a candidate’s work and abilities.” Project-based assessments have the added benefit of assessing written communication strength, an increasingly important skill in the work-from-home world of COVID-19.
Finally, written technical project work can help avoid bias by de-emphasizing traditional but prejudicially fraught aspects of the hiring process. Resumes with Hispanic and African American names receive fewer callbacks than the same resume with white names. In response, minority candidates deliberately “whiten” their resumes to compensate. In-person interviews often rely on similarly problematic gut feel. By emphasizing an assessment closely tied to job performance, interviewers can focus their energies on actual qualifications, rather than relying on potentially biased “instincts.” Companies looking to embrace #BLM and #MeToo beyond hashtagging may consider how tweaking their hiring processes can lead to greater equality.
The exact form of data assessments vary. At The Data Incubator, we found that over 60% of firms provide take-home data assessments. These best simulate the actual work environment, allowing the candidate to work from home (typically) over the course of a few days. Another roughly 20% require interview data projects, where candidates analyze data as a part of the interview process. While candidates face more time pressure from these, they also do not feel the pressure to ceaselessly work on the assessment. “Take-home challenges take a lot of time,” explains Field Cady, an experienced data scientist and author of “The Data Science Handbook.” “This is a big chore for candidates and can be unfair (for example) to people with family commitments who can’t afford to spend many evening hours on the challenge.”
To reduce the number of custom data projects, smart candidates are preemptively building their own portfolio projects to showcase their skills and companies are increasingly accepting these in lieu of custom work.
Companies relying on old-fashioned brainteasers are a vanishing breed. Of the recalcitrant 20% of employers still sticking with brainteasers, most are the larger, more established enterprises that are usually slower to adapt to change. They need to realize that the antiquated hiring process doesn’t just look quaint, it’s actively driving candidates away. At a recent virtual conference, one of my fellow panelists was a data science new hire who explained that he had turned down opportunities based on the firm’s poor screening process.
How strong can the team be if the hiring process is so outmoded? This sentiment is also widely shared by the Ph.D.s completing The Data Incubator’s data science fellowship. Companies that fail to embrace the new reality are losing the battle for top talent.
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No pen required: The digital future of real estate closings
Jeanne Casey is a principal on the investment team at MetaProp, where she leads new investments into compelling proptech companies and works closely with portfolio companies on strategic growth initiatives.
On a Wednesday at 4 p.m. in June 2017, I was in a small, packed office in midtown Manhattan.
The overcrowded conference room, with at least five more people than any fire marshal would recommend, was stacked comically high with paperwork and an eclectic collection of cheap pens. As I neared the end of the third hour and the ink of my seventh pen, I realized the mortgage closing process may be somewhat antiquated.
After closing on my first home, it was inconceivable to me that every other expense in my life has gone digital, but the most significant purchase I’ve ever made required hundreds of signatures and several handwritten checks delivered in person. By comparison, I have been able to repay my student loans, comparable in magnitude to a down payment, exclusively through online portals.
How COVID-19 is accelerating digital advancements
The COVID-19 pandemic has changed nearly every facet of our lives. One potential silver lining for the real estate world may be a forced reckoning with the mortgage closing process. Technological advances like e-closings are accelerating this arduous process into the digital age. The U.S. Census Bureau released figures in July citing the rise in homeownership across the country as the pandemic fuels the demand for single-family properties outside of urban areas. This is confirmed by the significant spike in mortgage applications seen in the second quarter of 2020.
The first signs of digitization of the mortgage origination process were seen in mid-2010 when lenders began adopting digital disclosures. Despite the availability of technology, the market has been slower to fully embrace digital closings that enable the full loan package to be electronically reviewed, recorded, signed and notarized. A true e-closing includes a digital promissory note (“eNote”), a virtual closing appointment and the electronic transfer and recording of documents by the county, all of which can be remotely coordinated and executed by the parties involved. The market started to pick up pace in recent years, and we’ve seen the number of e-mortgages increase by more than 450% from 2018 to 2019.
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US gaming industry records another excellent quarter as pandemic fuels sales
The COVID-19 pandemic has utterly decimated a number of industries over the past several months, but the U.S. gaming industry continues to benefit as people continue to be stuck at home. Yet another report from NPD highlights an excellent quarter, with spending hitting a new Q2 record in the States.
According to the figures, gamers spent $11.6 billion, marking a 30% increase over a year prior. It was also a 7% increase over Q1’s 10.9 billion, as spending continues while the pandemic continues to rage.
Games themselves comprised $10.2 billion of that figure (itself a 28% increase y-o-y), with some familiar titles occupying the top spots, including Animal Crossing: New Horizons, Call of Duty: Warzone and Call of Duty: Modern Warfare. The gaming hardware category saw a 57% increase from 2019, with Nintendo Switch, PlayStation 4 and Xbox One all seeing strong sales.
The Switch isn’t a surprise, given shortages experienced earlier in the year. Perhaps a bit more unexpected are continued sales on the PS4 and Xbox One, given that both consoles are set to be eclipsed by next-generation devices later in the year. Of course, those upcoming systems aren’t doing gamers much good during the current moment of stay at home orders.
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As the world stays home, edtech’s Q2 venture totals rose sharply
My friend and colleague Natasha Mascarenhas has been reporting on the edtech beat quite a lot in 2020. So far reading her coverage, I’ve discovered that not only is edtech less dull than I anticipated, it’s actually somewhat interesting on a regular basis.
This week, for example, India’s Byju bought WhiteHat Jr., another Indian edtech company, for $300 million. So what, you’re thinking, that’s just another startup deal? Yes, but it was an all-cash transaction, and White Hat Jr. was only 18 months old.
That’s enough to tell you that edtech is hot at the moment. Which makes sense: much of the world is sheltering at home with school and offices shuttered.
The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
The COVID-19 era has provided an enormous boon to many software startups, though some more than others. Luckily for its boosters, edtech, after being neglected by VCs due to an expectation of small exits and long sales cycles thanks to red tape, is one of the sectors enjoying renewed interest from private investors and customers alike.
According to a Silicon Valley Bank (SVB) markets-focused report, edtech venture funding reached a local-maxima in Q2 2020, jumping more than 60% from the first quarter of this year to the second. On a year-over-year basis, Q2’s VC edtech results were even more impressive.
But, there’s some nuance to the data that should temper declamations that private edtech funding is forever changed.
This morning let’s peel apart the SVB data and parse through edtech funding rounds themselves from the second quarter to see what we can learn. COVID-19 is remaking the global economy as we speak, so it’s up to us to understand its evolving form.
An edtech boom?
From the top-line numbers, you’d be forgiven for thinking that edtech’s Q2 venture capital results were across-the-board impressive.
Before we dig into the results themselves, here’s the chart you need:
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Can learning pods scale, or are they widening edtech’s digital divide?
Lucia, a six-year old, hides from Zoom calls and has rejected every edtech tool from Seesaw to Khan Academy. She will spend all of first grade in quarantine.
Her mother, Claire Díaz-Ortiz, says her daughter fits squarely into the “distance learning death zone.” The idea is that younger children are too young to do distance learning solo, even with tools meant to make it easier. Here’s one kindergartner’s remote fall class schedule:
Just got this schedule for my kindergartner’s “distance learning” in the fall and would just like to say LOL FOREVER TIMES A THOUSAND pic.twitter.com/CXXzdbwUWa
— Aubrey Hirsch (@aubreyhirsch) July 31, 2020
“And unfortunately for my daughter, I’m a VC, not a Zoom mom,” Díaz-Ortiz said.
The impact of the distance learning death zone, as Díaz-Ortiz calls it, is one of the reasons why many wealthy families with young children are considering a new solution: learning pods.
Learning pods are small clusters of children within the same age range who are paired with a private instructor. Depending on a parent’s preferences, learning pods could be an in-home or virtual experience and be either a full-time school replacement or supplemental learning.
In recent weeks, the concept has taken off all across the country, from suburbs to cities. There’s a Facebook group for Boulder, Colorado school districts; organizers launched Pandemic Pod San Diego to “connect families looking for in-home, teacher-led learning groups.” Some households are offering teachers a retainer. Among working mom groupchats, pods are taking off as a sanity lifesaver, especially as childcare responsibilities fall disproportionately on women.
Looking for the best 4-6th grade teacher in Bay Area who wants a 1-year contract, that will beat whatever they are getting paid, to teach 2-7 students in my back yard#microschool
If you know this teacher, refer them & we hire them, I will give you a $2k UberEats gift card
— jason@calacanis.com (@Jason) August 2, 2020
Startups are pivoting to keep up with the demand for private teachers. But because of high costs, only affluent families are able to form or join learning pods, which may limit the model’s ability to reach scale while extending the existing digital divide.
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Amid pandemic, returning to offices remains an open question for tech leaders
As COVID-19 infections surge in parts of the U.S., many workplaces remain empty or are operating with skeleton crews.
Most agree that the decision to return to the office should involve a combination of business, government and medical officials and scientists who have a deep understanding of COVID-19 and infectious disease in general. The exact timing will depend on many factors, including the government’s willingness to open up, the experts’ view of current conditions, business leadership’s tolerance for risk (or how reasonable it is to run the business remotely), where your business happens to be and the current conditions there.
That doesn’t mean every business that can open will, but if and when they get a green light, they can at least begin bringing some percentage of employees back. But what that could look like is clouded in great uncertainty around commutes, office population density and distancing, the use of elevators, how much you can reasonably deep clean, what it could mean to have a mask on for eight hours a day, and many other factors.
To get a sense of how tech companies are looking at this, we spoke to a number of executives to get their perspective. Most couldn’t see returning to the office beyond a small percentage of employees this year. But to get a more complete picture, we also spoke to a physician specializing in infectious diseases and a government official to get their perspectives on the matter.
Taking it slowly
While there are some guidelines out there to help companies, most of the executives we spoke to found that while they missed in-person interactions, they were happy to take things slow and were more worried about putting staff at risk than being in a hurry to return to normal operations.
Iman Abuzeid, CEO and co-founder at Incredible Health, a startup that helps hospitals find and hire nurses, said her company was half-remote even before COVID-19 hit, but since then, the team is now completely remote. Whenever San Francisco’s mayor gives the go-ahead, she says she will reopen the office, but the company’s 30 employees will have the option to keep working remotely.
She points out that for some employees, working at home has proven very challenging. “I do want to highlight two groups that are pretty important that need to be highlighted in this narrative. First, we have employees with very young kids, and the schools are closed so working at home forever or even for the rest of this year is not really an option, and then the second group is employees who are in smaller apartments, and they’ve got roommates and it’s not comfortable to work at home,” Abuzeid explained.
Those folks will need to go to the office whenever that’s allowed, she said. For Lindsay Grenawalt, chief people officer at Cockroach Labs, an 80-person database startup in NYC, said there has to be a highly compelling reason to bring people back to the office at this point.
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As remote work booms, Everphone grabs ~$40M for its ‘device as a service’ offer
The latest startup to see an uplift in inbound interest flowing from the remote work boom triggered by the coronavirus pandemic is Berlin-based Everphone, which sells a “mobile as a service” device rental package that caters to businesses needing to kit staff out with mobile hardware plus associated support.
Everphone is announcing a €34 million Series B funding round today, led by new investor signals Venture Capital. Other new investors joining the round include German carrier Deutsche Telekom — investing via its strategic investment fund, Telekom Innovation Pool — U.S.-based early-stage VC AlleyCorp and Dutch bank NIBC.
The Series B financing will go on expanding to meet rising demand, with the startup telling TechCrunch it’s expecting to see a 70-100% increase in sales volume versus the pre-crisis period, thanks to a doubling of inbound leads during the pandemic.
“The global pandemic has been a catalyst for growth in the field of digitization,” said CEO and co-founder, Jan Dzulko, in a statement. “We are currently experiencing a significant increase in demand at home and abroad, which is why we are aiming for European expansion with the funding.”
Everphone describes its offer as a one-stop shop, with the service covering not just the rental of (new or refurbished) smartphones and tablets but an administration and management wrapper that covers support needs, including handling repairs/replacements — with the promise of replacements within 24 hours if needed and less client risk from not having to wrangle traditional rental insurance fine print.
Other touted pluses of its “device as a service” approach include flexibility (users get to choose from a range of iOS and Android devices); lower cost (pricing depends on customer size, device choice and rental term but starts at €7,99 a month for a refurbished budget device, rising up to €49,99 a month for high-end kit with a 12-month upgrade); and rental bundles, which can include standard mobile device management software (such as Cortado and AirWatch) so customers can plug the rental hardware into their existing IT policies and processes.
Everphone reckons this service wrapper — which can also extend to include paid apps (such as Babbel for language learning) as an employee on-device perk/benefit in the bundle — differentiates its offer versus incumbent leasing providers, such as CHG-Meridian or De Lage Landen, and from wholesale distributors.
It also touts its global rollout capability as a customer draw, checking the scalability box.
Its investors (including German carrier, DT) are being fired up by the conviction that the COVID-19-induced shift away from the office to home working will create a boom in demand for well-managed and secured work phones to mitigate the risk of personal devices and personal data mingling improperly with work stuff. (On that front, Everphone’s website is replete with references to Europe’s data protection framework, GDPR, repurposed as scare marketing.)
“Everphone envisions that every employee will one day work via their smartphone,” added Marcus Polke, partner at signals Venture Capital, in a supporting statement. “With this employee-centric approach and integrated platform, everphone goes far beyond the mere outsourcing of a smartphone IT infrastructure.”
The 2016-founded startup has more than 400 customers signed up at this point, both SMEs and multinationals such as Ernst & Young. It caters to both ends of the market with an off-the-shelf package and self-service device management portal that’s intended for SMEs of between 100 and 1,500 employees — plus custom integrations for larger entities of up to 30,000 employees.
It says it’s able to offer “highly competitive” prices for renting new devices because it gives returned kit a second life, refurbishing and reselling devices on the consumer market. “Thanks to this profitable secondary lifespan, we are able to offer highly competitive prices and extensive service levels on our rental devices,” Everphone writes on its website.
The second-hand smartphone market has also been seeing regional growth. Swappie, a European e-commerce startup that sells refurbished iPhones, aligning with EU lawmakers’ push for a “‘right to repair” for electronics, raised its own ~$40 million Series B only last month, for example. Its second-hand marketplace is one potential outlet for Everphone’s rented and returned iPhones.
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Tandem snags $5.7M for its language buddy app amid COVID-19’s e-learning boom
The Berlin-based startup behind Tandem, an app for practicing a second language, has closed a £4.5 million (~$5.7 million) Series A round of financing to capitalize on growth opportunities it’s seeing as the coronavirus crisis continues to accelerate the switch to digital and online learning.
With many higher education institutions going remote as a result of concerns over virus exposure risks of students mixing on physical campuses, there’s a growing need for technology that helps language students find people to practice with, as Tandem tells it. And while language learning apps make for a very crowded space, with giants like Duolingo and Babbel, Tandem focuses on a different niche: native speaker practice.
As the name suggests, its app does pair matching — connecting users with others who’re trying to learn their own language for mutual practice, by (their choice of) text, phone chat or video call.
The platform also incorporates a more formal learning component by providing access to tutors. But the main thrust is to help learners get better by practicing chatting to a native speaker via the app.
Because of the pandemic push to socially distant learners, that’s a growing digital need, according to Tandem co-founder and CEO Arnd Aschentrup. He says the coronavirus crisis spurred a 200% increase in new users — highlighting a “clear appetite” among consumers for digital language learning.
The team has taken another tranche of funding now so it can scale to meeting this growing global opportunity.
The Series A is led by European VC firm Brighteye Ventures, with Trind Ventures, Rubylight Limited and GPS Ventures also participating. It brings the startup’s total raised to date to £6.8 million.
“Given the accelerated user-uptake and clear market opportunity, we felt that 2020 was the right time to partner with the team at Brighteye to bring Tandem into the mainstream,” says Aschentrup, adding: “We anticipate significant growth opportunities for online learning and social learning in the wake of coronavirus.”
He says two “key trends” have emerged over the past few months: “Firstly, schools and universities providing language courses have either temporarily shut down, or moved almost entirely to remote lessons. Students are therefore relying on additional platforms to learn and practice languages, which is precisely what Tandem offers.
“Secondly, we know that lockdown has enormously limited people’s ability to socialise. Friendships have been harder to maintain, and new connections more difficult to spark. We’re excited about Tandem’s ability to connect people all across the globe despite lockdown. Since coronavirus began, engagement on Tandem’s video chat feature has increased three-fold, and new user signups have increased 200%.”
Tandem had been growing usage prior to COVID-19 — increasing membership from around a million back in 2017 (when we last spoke), to more than 10 million members now, spread across 180 countries.
Aschentrup couches the underlying growth as “strong organic demand,” noting the platform has been profitable since 2019 (hence not taking in more outside funding ’til now). But, with the pandemic curve ball accelerating the switch to remote learning, it’s expecting usage of its platform to keep stepping up.
“We’ve successfully increased our community numbers ten-fold in recent years, profitably and organically,” he tells TechCrunch. “More people than ever value digital learning solutions combined with human connection, and so the time is ripe to introduce Tandem to language learners more widely around the globe. With the team at Brighteye on our side we’re excited to further develop Tandem’s reach and voice over the coming period.”
“We expect increased interest in online learning to sustain well after lockdown lifts. In China — where lockdown sanctions were implemented and lifted earlier — user engagement has remained buoyant.”
“Once people experience the value of learning as part of a like-minded global community, it often becomes a lasting part of their lifestyle,” he adds.
Tandem’s best markets for language learners are China (10%), the U.S. (9%) and Japan (9%) — which combined make up close to a third (27%) of its user base.
While the most popular language pairs (in ranked order of popularity) are:
- English – Spanish
- Spanish – Portuguese
- English – Chinese
- English – French
- Chinese – Japanese
While the vast majority (94%) of Tandem’s user base is making use of the freemium offering, it monetizes via a subscription product, called Tandem Pro, which it introduced in 2018 to cater to members who “preferred taking a community approach to language learning,” as Aschentrup puts it.
“For $9.99 per month, members can access key features such as: translating unlimited messages, finding Tandem partners nearby or in specific locations — for example ahead of international travels or studying abroad — and having enhanced visibility in the community as a featured Pro member,” he explains.
Aschentrup describes the “community aspect” of Tandem as a key differentiator versus other language learning apps — saying it helps users “develop and maintain cross-cultural friendships.”
“Members are often on opposite sides of the world to each other, yet able to enjoy a window into another culture entirely. Now more than ever, we’re pleased to be facilitating members’ healthy curiosity about other languages, countries and styles of living.”
The new funding will go on developing additional features for the app, and expanding the team across marketing and engineering, per Aschentrup. Currently Tandem has 24 full-time employees — it’s planning to double that to a 50-member team globally, post-Series A.
Commenting in a statement, Alex Spiro, managing partner at Brighteye Ventures, lauded the team’s “innovative and effective strategy” in building a community platform that tackles the language gap by connecting learners with fluent speakers.
“The product has not only proven resilient in this global crisis but has seen impressive growth during the period, and the team is now very well equipped to come out of it stronger and to continue to support loyal language learners that now number in the millions and will number many more in the coming years,” he added.
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