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Duolingo CEO explains language app’s surge in bookings
Language learning apps, like many educational technology platforms, soared when millions of students went home in response to safety concerns from the coronavirus pandemic. It makes sense: Everyone became an online learner in some capacity, and for non-frontline workers, each day became an opportunity to squeeze in a new skill (beyond sourdough).
So why not learn a new language in a low-lift way?
Language learning platforms, including Babbel, Drops and Duolingo, all have benefitted from quarantine boredom as shown by surges in their usage. However, success also depends on whether these same companies can turn that primetime interest into dollars and profit.
To figure out if the language learning boom comes with paying customers, I caught up with Luis von Ahn, the CEO of Duolingo, a popular language learning company valued at $1.5 billion.
Von Ahn tells TechCrunch that Duolingo has hit 42 million monthly active users, up from 30 million in December 2019. The surge comes as new users are spending more time on the app in aggregate, for some of the reasons explained above. Duolingo has been steadily increasing in bookings over the past few years:
This year, Duolingo will hit $180 million in bookings, von Ahn estimates. The company discloses bookings as a proxy for revenue, because when someone purchases a subscription the app it is considered a “booking” until the completion of the subscription, when it becomes revenue.
“We’re more than breaking even,” von Ahn told TechCrunch.
While this growth is impressive, the most staggering metric that von Ahn revealed is that $180 million in bookings is only coming from 3% of its current users.
“Only 3% of our users pay us, yet we make more money than the apps where 100% of their users pay them,” he said.
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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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Edtech startups flirt with unicorn-style growth
When Quizlet became a unicorn earlier this year, CEO Matthew Glotzbach said he’d prefer to distance the company from the common nomenclature for a startup valued at or above $1 billion.
“The way Quizlet has gotten to this point is by building and growing a very responsible business,” he said. “It’s the result of the hard work of the team for a decade. We’re much more like a camel.”
It’s clear, though, that the tides might be changing. In edtech, the rich are getting richer. Last week, Mountain View-based Coursera announced it had raised a $130 million Series F round a day after The Information broke a story about Udemy reportedly raising new financing at a $3 billion valuation.
For anyone who has been following my edtech coverage in recent few months, this momentum is hardly surprising. Earlier in the pandemic, MasterClass raised $100 million, Quizlet became a unicorn and Byju’s became India’s second-most-valuable startup.
While edtech’s boom is predictable, the industry is known — to the chagrin of founders and to the benefit of long-time investors — for being conservative. Today we’ll look to understand how a boost in late-stage funding may impact the market on a broader scale.
High-flying camels
Ian Chiu, an investor at Owl Ventures, tells TechCrunch that the rise of big rounds brings a “watershed moment” to the $6 trillion education market. Owl Ventures was founded in 2014 and is one of the biggest edtech-focused firms out there, but Chiu says the recent strong capital flow shows that the sector is finally emerging as a sector other investors are noticing.
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Understanding Duolingo’s quiet $10M raise
Earlier this month, edtech unicorn Duolingo raised $10 million in new venture capital from General Atlantic, per an SEC filing. With the raise, the online language learning platform accepted its first outside investor in almost three years. General Atlantic will take a board observer seat at the company, per Duolingo.
The company, which was last valued at $1.5 billion, says the round has increased its valuation, but it declined to share by how much.
General Atlantic has invested in a number of edtech companies around the world, like OpenClassrooms, Ruangguru and Unacademy. Duolingo said that General Atlantic’s global platform and experience with online education in Asia would help guide its own growth, specifically pointing to its plans to scale up the Duolingo English test.
The e-learning company last raised $30 million in December at that $1.5 billion valuation. To raise a smaller sum a few months later is uncommon. Historically, that type of raise could happen for a number of reasons: a company is accepting a later investment as part of the same funding round, it needs more cash and this is an easy way to raise it or the company tried to raise a new large round and failed to secure past $10 million.
So where does the language learning unicorn fit?
In Duolingo’s case, it said the $10 million was raised because it wanted to bring a new investor on, but didn’t need a massive amount of primary capital. Duolingo says it is cash-flow positive.
In the past few weeks, Duolingo launched a new app to help children read and write, passed one million paying subscribers for Duolingo Plus and disclosed that its annual bookings run rate is $140 million. The company also recently hired its first CFO and general counsel.
“Because our business has been growing very fast and we have more than enough capital, there was limited need for us to raise more primary capital. However, over the last year, we developed a relationship with General Atlantic,” the company said in a statement to TechCrunch.
Tanzeen Syed, a managing director for General Atlantic, said that Duolingo is a “market leader in the language learning space. Syed also said Duolingo has a “profitable, efficient business model while maintaining hyper-growth characteristics.”
Another key factoid here is that along with the $10 million, there was a larger secondary transaction, which occurs when an existing stockholder sells their stock for cash or to a third party, or to the company itself while the company is still private.
In this case, an existing investor in Duolingo sold a small portion of their existing stake to allow General Atlantic to have a bigger stake in the company.
The company declined to share the size of the secondary market transaction.
In light of this new information, Duolingo’s expansion to Asia, which has a robust market of English learners, welcomed one investor and lessened the stake of another.
Based on what we know, the transaction signals that a preexisting investor in Duolingo was looking for liquidity at a time where the public markets are tightening and private markets are pausing. And at a time when companies are staying private longer than ever before, secondary transactions are hardly rare.
Sometimes, however, secondary transactions signal a lack of faith from a preexisting investor in the company’s current trajectory.
Duolingo is full steam ahead on its goal to expand across the world — and now has new cash in the bank, and a new observer seat on the board, to prove it.
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Labster’s latest partnership, and what it tells us about the future of remote learning
Labster, a virtual science lab edtech company, today announced that it is partnering with California’s community college network to bring its software to 2.1 million students.
California Community Colleges claims to be the largest system of higher education in the country. The Labster partnership will provide 115 schools with 130 virtual laboratory simulations in biology, chemistry, physics and general sciences.
As COVID-19 has forced schools to shutter, edtech companies have largely responded by offering their software for free or through extended free trials. What’s new and notable about Labster’s partnership today is that it shows the first few signs of how that momentum can lead to a business deal.
Based in Copenhagen, Labster sells virtual STEM labs to institutions. The startup has raised $34.7 million in known venture capital to date, according to Crunchbase data. Labster customers include California State University, Harvard, Gwinnett Technical College, MIT, Trinity College and Stanford.
Lab equipment is expensive, and budget constraints mean that schools struggle to afford the latest technology. So Labster’s value proposition is that it is a cheaper alternative (plus, if students spill a testing vial in a virtual lab, there’s less clean up).
That pitch has slightly changed since COVID-19 forced schools across the world to shut down to limit the spread of the pandemic. Now, it’s pitching itself as the only currently viable alternative to science labs.
For many edtech companies, the surge of remote learning has been a large experiment. Often, edtech companies are giving away their product and technology for free to help as schools scramble to move operations completely digital.
For example, last week self-serve learning platforms Codecademy, Duolingo, Quizlet, Skillshare and Brainly launched a Learn From Home Club for students and teachers. Before that, Wize made its exam content and homework services available for free. And Zoom offered its video-conferencing software for free to K through 12 schools, which had mixed results.
Labster itself gave $5 million in free Labster credits to schools across the country. The list continues.
Labster’s new deal shows edtech companies can secure new customers right now — without breaking the bank.
Labster CEO and co-founder Michael Bodekaer declined to give specifics on what the deal is worth. He did share that Labster works with schools one by one to understand how much they can, or want to, invest in teacher training and webinar support. He also confirmed that Labster does profit from the deal.
“We want to make sure that we set ourselves up for supporting our partners but still also make sure that Labster as a financial institution can pay our salaries,” Bodekaer said. “But again, heavy discounts that help us cover our costs.”
The long game for Labster, like many edtech companies, is that schools like the platform so much that these short-term stints have a better chance to lead to long-term relationships.
“We’ll be keeping these discounts as long as we possibly can sustain as a company,” he said. “It looks like initially the discount was until August and now we’re extending it until the end of the year. If that continues, we may extend it even further.”
Pricing aside, the real struggle toward implementation for Labster, and honestly any other edtech company focused on remote learning, is the digital divide. Some students do not have access to a computer for video conferencing or even internet connection for assignments.
The COVID-19 pandemic has highlighted how many households across America lack access to the technology needed for remote learning. In California, Google donated free Chromebooks and 100,000 mobile hotspots to students in need.
Bodekaer said that Labster is currently working on providing its software on mobile, and has worked with Google to make sure its product works on low-end computers like Chromebooks.
“We really want to be hardware agnostic and support any system or any platform that the students already have,” he said. “So that hardware does not become a barrier.”
While today’s partnership brings 2.1 million students access to Labster’s technology, it does not directly account for the percentage of that same group that might not have access to a computer in the first place. The true test, and perhaps success, of edtech will rely on a true hybrid of hardware and software, not one or the other.
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Edtech startups prepare to become ‘not just a teaching tool but a necessity’
As Stanford, Princeton, Columbia and others shutter classrooms to limit the coronavirus outbreak, college educators around the country are clambering to move their classes online.
At the same time, tech companies that enable remote learning are finding a surge in usage and signups. Zoom Video Communications, a videoconferencing company, has been crushing it in the stock market, and Duolingo, a language teaching app, has had 100% user growth in the past month in China, citing school closures as one factor.
But Kristin Lynn Sainani, an associate professor of epidemiology and population health at Stanford, has a fair warning to those making the shift: scrappiness has its setbacks.
“[The transition to online] is not going to be well planned when you’re doing it to get your class done tomorrow,” said Sainani, who has been teaching online classes since 2013. “At this point, professors are going to scramble to do the best they can.”
As the outbreak spreads and universities respond, can edtech startups help legacy institutions rapidly adopt online teaching services? And perhaps more tellingly, can they do so in a seamless way?
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YC-backed Py is a Duolingo style learn-to-code app
Teaching people to code in bite-sized, gamified chunks delivered via mobile app is Py’s mission. The fledgling startup is the brainchild of two friends and college computer science majors who found themselves repeatedly asked for advice on how to learn to Germany’s Duolingo competitor Babbel sets its sights on the US
Language learning service Babbel is one of Berlin’s quiet startup success stories. While it was once on the brink of shutting down, today it’s a thriving company with hundreds of employees who work in a sprawling office in the middle of Berlin — and it’s the market leader in large parts of Europe. Unlike competitors like Duolingo, though, Babbel is a paid service. Read More
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Crunch Report | Quora Valued At Around $1.8B
Today’s Stories Q&A app Quora valued around $1.8 billion in $85 million fundraise Elon Musk’s Neuralink wants to turn cloud-based AI into an extension of our brains Duolingo launches paid subscriptions as it experiments with new ways to monetize its service Snap acquires the crucial geofilter patent from Mobli for a record $7.7M Credits Written and Hosted by: Anthony Ha… Read More
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Duolingo’s new chatbots help you brush up on your foreign language conversation skills
A lot of startups are talking about the possibilities of chatbots, but Duolingo recently launched one of the most interesting uses so far — practicing a new language. The Duolingo chatbots allow users to hold text message conversations in French, Spanish or German, with the chatbots taking on different personas to discuss different topics. You probably won’t mistake them for… Read More
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