MasterClass
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Duolingo boosts IPO price target in boon to edtech startups
U.S. edtech company Duolingo released a revised IPO price range this morning, boosting its potential per-share value to $100 after initially targeting a range that topped out at $95 per share.
Per the unicorn’s SEC filings, Duolingo is now targeting a $95 to $100 per share IPO price range, up from $85 to $95 per share, or a gain of around 12% at the bottom and 5% at the top.
TechCrunch previously called the Duolingo debut a bellwether of sorts for the larger U.S. edtech ecosystem; if Duolingo can price and trade well, investors in private companies may be more willing to invest, given a more proven and attractive exit market. On the other hand, if Duolingo prices weakly or trades poorly, the company could place a wet blanket atop the startup edtech world.
The fact that Duolingo is raising its IPO price range indicates that we are more likely on the path for a strong offering than a weak one.
For edtech companies that have hit unicorn status — like Masterclass, Course Hero, Quizlet and Outschool — it’s good news. For reference, those companies have raised $461.4 million, $97.4 million, $62 million and $130 million, respectively, per Crunchbase data.
What’s Duolingo worth?
The terms of the company’s IPO have not changed, aside from its proposed price. So, Duolingo is still selling 3.7 million shares in its debut, and some 1.41 million shares will be sold by existing equity holders. The company’s underwriters also reserved their right to buy 765,916 shares of the company’s stock at IPO price in the 30 days following its debut.
At the upper and lower bands of the company’s IPO price, its simple valuation excluding underwriter shares now lands between $3.41 billion and $3.59 billion. Inclusive of its greenshoe offering, those numbers rise to $3.48 billion and $3.67 billion.
Recall that when private, Duolingo’s November 2020 Series H valued the company at just over $2.4 billion. So long as Duolingo prices in its range, it will provide investors with a nice bump in the value of their investment. Duolingo was valued at just $1.6 billion in mid-2020, indicating that it has more than doubled in value since that investment.
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The second shot is kicking in
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
First and foremost, Equity was nominated for a Webby for “Best Technology Podcast”! Drop everything and go Vote for Equity! We’d appreciate it. A lot. And even if we lose, well, we’ll keep doing our thing and making each other laugh. (Note: We are in last place, which is, well, something.)
Regardless, the Equity team got together once again this week to not only go over the news of the week, but also to do a little soul searching. You see, some news broke yesterday, so we figured that we had to talk about it in our usual style. So, here’s the rundown:
- Do you want to buy TechCrunch? Apparently you can? Albeit probably along with a few billion dollars’ worth of other assets — whatever is left of Yahoo and AOL — you can now own an NFT. A non-fungible TechCrunch. What is ahead for us? We don’t know. So if you do know, tell us. Until then we’ll just yo-yo gently between panic and optimism, as per usual.
- We also dug into the latest All Raise venture capital data, and the results were abysmal.
- Next up was the news that fintech startups are setting records in 2021, raising more capital than ever before. That brought us to the latest from Brex.
- And then there was a suspicious trend when three fintech companies focused on teen banking raised in one exhale. We talk Step, Greenlight and Current.
- Natasha talked about her last Startups Weekly post, in which she unpacked The MasterClass effect’s impact on edtech.
- And to close, we discussed the latest cool-kid venture capital funds. Sure memes are cool, but did you know that they can help you raise a $10 million fund? They can!
We are back Monday morning with our weekly kick-off show. Have a great weekend!
Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 AM PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts!
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What the MasterClass effect means for edtech
MasterClass, which sells a subscription to celebrity-taught classes, sits on the cusp of entertainment and education. It offers virtual, yet aspirational learning: an online tennis class with Serena Williams, a cooking session with Gordon Ramsay. While there’s the off chance that an instructor might actually talk to you — it has happened before — the platform mostly just offers paywalled documentary-style content.
The vision has received attention. MasterClass is raising funding that would value it at $2.5 billion, as scooped by Axios and confirmed independently by a source to TechCrunch. But while MasterClass has found a sweet spot, can the success be replicated?
Investors certainly think so. Outlier, founded by MasterClass’ co-founder, closed a $30 million Series C this week, for affordable, digital college courses. The similarities between Outlier and its founder’s alma mater aren’t subtle: It’s literally trying to apply MasterClass’ high-quality videography to college classes. This comes a week after I wrote about a “MasterClass for Chess lovers” platform launched by former Chess World Champion Garry Kasparov.
Two back-to-back MasterClass copycats raising millions in venture capital makes me think about if the model can truly be verticalized and focused down into specific niches. After 2020 and the rise of Zoom University, we know edtech needs to be more engaging, but we don’t know the exact way to get there. Is it by creating micro-learning communities around shared loves? Is it about gamification? Aspirational learning has different incentives than for-credit learning. In order to be successful, Outlier needs to prove to universities it can use MasterClass magic for true outcomes that rival in-person lectures. It’s a harder, and more ambtious promise.
My riff aside, I turned to two edtech founders to understand how they see the MasterClass effect panning out, and to cross-check my gut reaction.
Taylor Nieman, the founder of language learning startup Toucan:
Although I do love how these models try to lean into this theme of “invisible learning” like we leverage with Toucan, it faces the same issues as so many other consumer products that try to steal time out of people’s very busy days. Constantly competing for time leads to terrible engagement metrics and very high churn. That leads me to question what true learning outcomes could occur from little to no usage of the product itself.
Amanda DoAmaral, the founder of Fiveable, a learning platform for high school students:
Masterclass is important for showing us why educational content should be treated more like entertainment. All of our bars for content quality is much higher now than it ever was before and I’m excited to see how that affects learning across the board.
For students, it’s about creating environments that support them holistically and giving them space to collaborate openly. It feels so obvious that these spaces should exist for young people, but we’ve lost sight of what students actually need. At my school, we built policies that assumed the worst in students. I want to flip that. Assume the best, be proactive to keep them safe, and create ways to react when we need to.
Anyways, that’s just some nuance to chew on during this fine day. In the rest of this newsletter, we will focus a lot on tactical advice for founders, from the money they raise to the peacock dance they might want to do one day. Make sure to follow me on Twitter @nmasc_ so we can talk during the week, too!
The peacock dance
You know when male peacocks fan their feathers to court a lover? That, but for startups trying to get acquired. As one of our many rabbit holes on Equity this week, we talk about Discord walking away from a Microsoft deal, and if that deal ever existed in the first place or if it was just a way to drum up investor excitement in the audio gaming platform.
Here’s what to know: Discord is reportedly pursuing an IPO after walking away from talks with multiple companies that were looking to acquire the audio gaming giant.
Discord aside, the consolidation environment continues to be hot for some sectors.
- To sell or not to sell: Lessons from a bootstrapped CEO
- Once VMware is free from Dell, who might fancy buying it?
Image Credits: VectorInspiration / Getty Images
Even venture capital knows that the future isn’t simply venture capital
Clearbanc, a Toronto-based fintech startup that gives non-dilutive financing to businesses, has rebranded alongside a $100 million financing that valued it at $2 billion. Now rebranded as Clearco, the startup wants to be more than just a capital provider, but a services provider, too.
Here’s what to know: The startup has been on a tear of product development for the past year, launching services such as valuation calculators or runway tools. It’s a step away from what Clearbanc originally flexed: the 20-minute term sheet and rapid-fire investment. I talk about some of the levers at play in my piece:
Many of Clearco’s newest products are still in their infancy, but the potential success of the startup could nearly be tied to the general growth of startups looking for alternatives to venture capital when financing their startups. Similar to how AngelList’s growth is neatly tied to the growth of emerging fund managers, Clearco’s growth is cleanly related to the growth of founders who see financing as beyond a seed check from Y Combinator.
- How are VCs handling diligence in a world where deals open and close in days, not months
- Clearbanc rebrands into a unicorn
- After going public, once-hot startups are riding a valuation roller coaster
Abstract human brain made out of dollar bills isolated on white background. Image Credits: Iaremenko / Getty Images
Don’t market your opportunity away
Keeping on the theme of tactical advice for founders, let’s move onto talking about marketing. Tim Parkin, president of Parkin Consulting, explained how startup founders can use marketing as a tool to stand out in the noisy environment. Differentiation has never been harder, but also more imperative.
Here’s what to know: Parkin outlines four ways that martech will shift in 2021, strapped with anecdotes and a nod to the importance of investing in influencers.
- Customer care as a service: Outsourcing can help your startup wow clients 24/7
- 5 creator economy VCs see startup opportunities in monetization, discovery and much more
- Time-strapped IT teams can use low-code software to drive quick growth
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Around TechCrunch
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Thanks for reading along today and everyday. Sending love to my readers in India and everyone around the world that is facing yet another deadly surge of this horrible disease. I’m rooting for you.
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Garry Kasparov launches a community-first chess platform
Four years ago, MasterClass, a platform that sells celebrity-taught classes, invited chess legend Garry Kasparov to teach a class. He said yes, but soon realized that creating a message that could satisfy a majority of players was a “struggle throughout the process.”
While the class did pretty well, Kasparov found it “a little bit annoying” that he had to downplay concepts and stick to a specific structure. So, now, Kasparov is launching a platform he says has been several years in the making: Kasparovchess.
Kasparovchess will be a platform in which legendary chess players will have free reign to share tips and tricks with players from various levels. Financed by private investors, and media conglomerate Vivendi, the company declined to disclose its total capital raised to date.
The platform, produced by Vivendi, includes documentaries, podcasts, articles and interviews between experts and known players in the chess community. Moe than 1,000 videos have been recorded to date, Kasparov said. Beyond content, Kasparovchess will have an exclusive Discord server attached to it and playing zones.
In many ways, it’s a vertical-specific version of the chess MasterClass he did years ago, with a big focus on community and variety. MasterClass, which is reportedly raising funding that would value it at $2.5 billion, has been a leader in the “edutainment” space, which monetizes off of documentary-style entertainment. One of the unicorn’s biggest characteristics, as Kasparov alluded to earlier, is that it has to appeal to a wide audience so subscribers can hop from one class to another. Within the same month, a user could go from a Kasparovchess class to general pontifications from RuPaul on self expression. The more classes that MasterClass can get you to take, the longer you’ll keep your subscription.
Image Credits: Kasparovchess
MasterClass might consider its broad view as a differentiator, but it’s clear that Kasparov views it as an opportunity.
Kasparovchess has a monthly or yearly subscription of $13.99 or $119.99, respectively. The majority of lessons from experts and retrospective analysis on games you’ve played sit behind the paywall. The premium product also grants users access to a database of 50,000 manually created puzzles that allows players to train certain skills. The product will be available to the public by the end of month.
A popular competitor already exists: Chess.com. It’s a chess server, forum and networking site that launched in 2005, with premium subscription that ranges between $5 a month or $29 a year. Kasparovchess is significantly more expensive.
Kasparov says his biggest differentiator will be a focus on community. The long-term goal of Kasparovchess is to connect global chess communities with each other, unearth prodigies that might not have access otherwise and give others access to his experiences. He thinks that remote education during the pandemic has shown the need to have more interactive solutions, beyond buzzy promises.
“It’s time to actually switch from what we’re teaching to how students can apply it,” he said. “And that helps us indirectly because chess has been recognized for centuries as a nexus for intelligence and creativity.”
Kasparov became the youngest world chess champion in 1985. He retired from public chess in 2005, and has since launched a foundation to help children have access to chess worldwide. Most recently, he helped advise for “Queen’s Gambit,” a show about a chess prodigy that became Netflix’s most-watched scripted limited series to date on the platform. The show was so ubiquitously popular that sales for chess boards soon skyrocketed.
“I was so happy because it was the first time where we could see chess as a positive factor,” he said. “We had so many years with chess being seen as potential destruction and something that could push kids to the dark area of psychological instability.”
The freshness of this message mixed with an uptick in remote education has given Kasparov confidence that his years-long project is finally ready to launch.
“It’s not just about teaching the game, or playing the game, or debating the game,” he said. Instead, he hopes people who come to the platform focus on the culture of chess, its survival and its seemingly timeless power.
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BeGreatTV to offer MasterClass-like courses taught by Black and brown innovators
BeGreatTV, an online education platform featuring Black and brown instructors, recently closed a $450K pre-seed round from Stand Together Ventures Lab, Arlan Hamilton, Tiffany Haddish and others.
The goal with BeGreatTV is to enable anyone to learn from talented Black and brown innovators and leaders, founder and CEO Cortney Woodruff told TechCrunch.
“When you think of being a Black or brown person or individual who wants to learn from a Black or brown person, there’s nothing that really exists that gives you a glossary of every business vertical and where you see representation at every level in a well put together way,” Woodruff said. “That alone makes our market a lot larger because there are just so many verticals where no one has really invested in or shown before.”
The courses are designed to teach folks how to execute and succeed in a particular industry, and enable people to better understand the business aspect of industries while also teaching “you how to deal with the socioeconomic and racial injustices that come with being the only one in the room. Whether you are a Black man or woman who wants to get into the makeup industry, there will always be a lot of biases in the world.”
When BeGreatTV launches in a couple of months (the plan is to launch in April), the platform will feature at least 10 courses — each with around 15 episodes — focused on arts, entertainment, beauty and more. At launch, courses will be available from Sir John, a celebrity makeup artist for L’Oréal and Beyoncé’s personal makeup artist, BeGreatTV co-founder Cortez Bryant, who was also Lil Wayne and Drake’s manager, as well as Law Roach, Zendaya’s stylist.
Hamilton and Haddish will also teach their own respective courses on business and entertainment, Woodruff said. So far, BeGreatTV has produced more than 40 episodes that range anywhere from three to 15 minutes each.
Image Credits: BeGreatTV
Each course will cost $64.99, and the plan is to eventually offer an all-access subscription model once BeGreatTV beefs up its offerings a bit more. For instructors, BeGreatTV shares royalties with them.
“Ultimately, the platform can include a more diverse casting of instructors that aren’t just Black and brown,” Woodruff said. But for now, he said, the idea is to “reverse the course of ‘Now this is our first Black instructor’ but ‘now this is the first white instructor’ ” on the platform.
BeGreatTV’s team consists of just 15 people, but includes heavy hitters like Cortez Bryant and actor Jesse Williams. Currently, BeGreatTV is working on closing its seed round and anticipates a six-figure user base by the end the year.
MasterClass is perhaps BeGreatTV’s biggest competitor. With classes taught by the likes of Gordon Ramsay, Shonda Rhimes and David Sedaris, it’s no wonder why MasterClass has become worth more than $800 million. The company’s $180 annual subscription fee accounts for all of its revenue.
“If you benchmark [BeGreatTV] to MasterClass, we are finding individuals that are not only the best at what they do in the world, but often times these individuals have broken barriers because often times they were the first to do it,” Woodruff said. “And do it without having people who look like them.”
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