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.

Edtech investors are panning for gold

The spotlight on edtech grows brighter and harsher: On one end, remote-learning startups are attracting millions in venture capital. On the other, many educators and parents are unimpressed with the technology that enables virtual learning and gaps remain in and out of the classroom.

It’s clear that edtech’s nebulous pain points — screen time, childcare and classroom management — require innovation. But as founders flurry to a sector recently rejuvenated with capital, the influx of interest has not fostered any breakout solutions. As a result, edtech investors must hone their skills at sorting the innovators from the opportunists amid the rush.

Lucky for us, investors shared notes during TechCrunch Disrupt and offline regarding how they are separating the gold from the dust, giving us a peek into their due diligence process (and inboxes).

Putting profitability over growth

The pandemic has broadly forced founders to get more conservative and prioritize profitability over the usual “growth at all costs” startup mentality. Growth still matters, but within edtech, the boom comes with a big focus on profitability, efficacy, outcomes and societal impact.

“The goal of all of education is personalized learning, when every student receives exactly the instruction in the way that they need it at the time that they need it. And that’s really, really difficult to do if you’re trying to have one person teach 180 students,” said Mercedes Bent of Lightspeed Venture Partners. “And so I’ve been excited to see more solutions that are focused on creating smaller class sizes that are also focused on allowing students to connect with people outside of their homes as well.”

During Disrupt, Reach Capital’s Jennifer Carolan brought up a recent Netflix documentary, “The Social Dilemma,” which illustrates the impact screen time can have on society. When vetting companies, Carolan said she wanted to see founders who have considered how their products may impact young users.

Why hasn’t digital learning lived up to its promise?

The fall semester is off to a rocky start. When schools were forced to close in the spring, students (and parents) struggled. As the new school year begins, affluent families are building pandemic pods and inequities abound, while surveys suggest that college students want tuition discounts for online classes.

To avoid a catastrophic loss in revenue, colleges are bringing students back to campus. At UNC-Chapel Hill, those plans were quickly reversed when 130 students tested positive for the virus just a week into the new semester. As cases skyrocket, UNC will not be the only educational institution or school district to move online again.

What is it about digital learning that has schools so keen on reopening despite the health and reputational risks? Why hasn’t digital learning lived up to its promise?

If I were asked 20 years ago, as the founding CEO of Rosetta Stone, what digital learning would look like today, I would have imagined a very different future. Online learning was exploding. Teachers and faculty were experimenting with now commonplace consumer technologies like speech recognition and virtual reality to create immersive learning experiences.

Sadly, most of these innovations never took hold in our schools and colleges, and remote learners today are left with edtech that feels like it is still trapped in the 90s.

Ironically, the business of edtech and digital learning has been booming. Billions of dollars have been invested in tools and platforms that promise to improve the learning outcomes and lives of students. But for all the investments, headlines and flashy IPOs, edtech has little to show in terms of transformative outcomes.

The United States continues to lag behind many other advanced industrialized nations in math, science and reading literacy. Schools at all levels grapple with pervasive equity gaps. And research shows that heavily investing in education technology has, so far, yielded virtually no appreciable improvement in student achievement in these core subjects.

The challenge stems from the fact that rather than making learning better, the education technology field has, for the most part, focused on reaching more students. In our rush to scale, we have largely ignored tremendous pedagogical innovation that has occurred over the last twenty years.

No matter how high-tech a digital learning solution might be, it means nothing if it doesn’t also reflect recent and emerging changes in pedagogy. In 2010, a study at the University of North Texas compared how students retain information literacy skills in a face-to-face class, an online class and a blended class. The researchers found that there was no difference in outcomes between the three kinds of classes. This is because all three used the same materials and pedagogical approach.

But in a digital environment, far more is possible. We can now create video-game quality simulations to evaluate complex skills like creativity or problem-solving. Shy students can take the form of learning avatars in online laboratories — or explore career paths first-hand, through virtual reality. We know more than ever about attention span and engagement, or the connection between socio-emotional development and academic outcomes.

Researchers have, likewise, gained a deeper understanding of the ways students’ minds work. We know more than ever about how students reason, process information and solve problems. We know what kinds of scaffolding is required to develop and master these skills. Learning is best when it is built around doing, and when the context is practical, allowing students to try their hand at solving problems even as they’re still learning. It’s best when it is individualized, with progress based on a student’s personal aptitude and proficiency as they move toward mastering the material. And it’s best when it is enriched with peer-based discussion, practice and collaboration.

Astonishingly, few mass-market digital learning tools are built or adopted with these pedagogical advancements in mind. While Zoom is a fine tool for live conversations in small groups, it has few tools to facilitate the kind of engagement necessary for real learning. Coursera has raised millions for simply replicating the old-fashioned experience of a teacher lecturing at the front of a classroom. Quizlet is but a virtual collection of flashcards; it can assess the learning of certain facts, but it is hardly useful for the acquisition of skills. These types of common digital learning tools are increasingly great at making educators’ jobs easier. They are great at expanding access, allowing teachers and schools to reach more students than ever before. But scale, ease and access are not sufficient to help students learn and build skills.

The frustrations of educators and learners alike reflect the fact that education technology functions as a digital proxy for our oldest methods of teaching. Simply listening to a lecture is not effective in the real world, and yet that largely remains the default mode of education online. The impact of COVID-19 has only exacerbated these long-standing shortcomings. To create the digital learning experience students deserve — to finally fulfill the untapped promise and potential of educational technology — we must create tools that reflect not only advancements in technology, but in what we now understand about how the mind works and how students learn.

Indian decacorn Byju’s CEO talks about future acquisitions, coronavirus, and international expansion

Since India enforced a lockdown across the country in late March, shutting schools and other public places, Bangalore-headquartered startup Byju’s has emerged as one of the quintessential platforms for school-going students in the world’s second largest internet market.

It took the startup about four and a half years to amass 40 million students. Since the lockdown, its user base has ballooned to 65 million, its co-founder and chief executive Byju Raveendran said at Disrupt 2020 conference Tuesday.

Students say they were attracted to Byju’s platform because of the way it taught them subjects. Byju, who is a teacher himself, found intuitive ways like using real-life objects such as a pizza to teach complex math problems.

Today, his startup is valued at nearly $11 billion (which makes it India’s second most valuable startup), and has presence across several international markets. Late last year, Byju’s announced it has also turned profitable. It’s not everyday that we see an Indian startup with any of these three characteristics — let alone all three in one.

In a wide-ranging interview at Disrupt 2020, Raveendran shared the journey of Byju’s, which started as an offline platform that taught students at classrooms, auditoriums, and stadiums; the startup’s plans for further expansion in international markets; his views on merger and acquisition opportunities; and how the coronavirus pandemic has affected his business and the education landscape at large in India, among a number of other things.

“Unfortunately it took a pandemic for most stakeholders to try out digital learning. Parents are now accepting the online segment more than before. This sector is clearly at an inflexion point,” said Raveendran.

To make online learning more accessible to students, Byju’s made all of its offerings free during the pandemic. But the platform’s paying subscribers, now at more than 4 million, remains on a steady path of growth, he said.

The startup expects to generate more than $1 billion in revenue this year from India itself and take home profits between $150 million to $180 million, he said.

“I would still call it a relative success. What we consider as the target audience, we have less than 4% of penetration in that segment,” he said. “More than one-third of school-going students don’t have a smartphone. There’s still a lot of catch up to do.”

Another phenomenon that the pandemic has kickstarted in India is some consolidation in the edtech startup space. Byju’s itself acquired WhiteHat Jr., an 18-month-old startup that teaches coding skills to students, for $300 million.

TechCrunch has reported that the startup is engaging with several more startups including Indian firm Doubtnut, which through its app allows students to take a picture of a math problem and delivers step-by-step solution.

Here’s what Byju’s had to say about that: “The long-term potential of the sector is at an all-time high. […] We are looking for companies that can add strong product components to either our existing userbase or potential new customers in new markets, or companies that can give us some kind of distribution so that we get a headstart to launch in a new market — especially English speaking markets.”

“You will hear of a few more acquisitions from us. We are exploring some of them very seriously,” he added. The future acquisitions will again be all-cash deals, Byju said, as he “values equity more than others.”

On IPO, fundraise, and international expansion

Byju’s isn’t looking to go public for at least two years, the chief executive said. “We have strong business fundamentals; we have been able to find the right balance between high-growth and sustainable growth and created a very profitable model in such a short period of time. But we have not seriously thought about the public listing,” he added.

And it appears that investors in Byju’s are also not in a hurry. “We don’t need to do public listing to give exit to some of the early investors because the business itself will generate enough cash. A good number of them have already taken the money they invested out in the last few rounds,” he said.

Byju’s has raised more than $700 million this year. We asked Byju why is the startup raising capital. “We have been very capital efficient in terms of how we have used the primary capital we have raised. In the first five years, we have utilized less than $350 million of the primary capital — which shows how we have efficiently scaled the model,” he said.

“Most of the recent fundraising is to finance inorganic growth like full-cash acquisitions. We are utilizing it to add some strong business models. We never raised money because we needed it. It was always to add the right partner. In recent times, we have added long-term, patient investors,” he said. Byju’s is likely not done with its fundraising spree yet as the startup is currently engaging with at least two more investment firms.

For expansion in international markets, Byju said it plans to launch a digital learning app aimed at kids in several English-speaking markets. He said WhiteHat Jr., will introduce math subject to its offering to serve customers in several markets including Australia, New Zealand.

We also talked about what he thinks of other giant startups in India that are not profitable today, the kind of message that sends to international investors, and whether there is room for any new player in the education market in India, and much more. You can watch the full-interview below.

VCs pour funding into edtech startups as COVID-19 shakes up the market

A few weeks back, The Exchange looked into the pace of edtech exits, noting that over time, the sector has delivered rising exit volume. All startup verticals want to demonstrate a history of liquidity, so you might imagine that even before the COVID-19 pandemic, edtech fundraising was rising due to its improving exit profile.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


And dollars invested into edtech startups did increase, with 2018 and 2019 recording historically-elevated results concerning edtech venture capital deals and venture capital dollars invested.

However, with COVID-19 pushing more students to learn from home and forcing schools to invest in new tooling and other digital capabilities that support remote-learning, a strengthening exit market and a market shift towards edtech services has led to an explosion in venture capital investment in the sector.

According to CBInsight’s data concerning the state of edtech venture capital activity, startups in the sector have already surpassed their 2019 venture capital dollar tally and are on-track to set a new record in 2020, besting even 2018’s elevated result. Whether more total edtech deals will be closed in 2020 is less clear, but if current pace holds, 2020 should come somewhat close to 2018’s edtech deal count.

What’s driving the huge boom in edtech’s venture capital results? Let’s dig into just that.

An edtech boom

The data is pretty clear, as the following chart details. 2018 and 2019 were amazing, and 2020 is looking super hot as well:

Chart via CBInsights, shared with permission. 2020 data through August 31, 2020. Global edtech funding.

Driving 2020’s huge VC totals in terms of dollars invested are a grip of mega-rounds — venture deals of $100 million or more. According to CBInsights data, 13 deals of $100 million or more have been raised by edtech startups thus far in 2020, worth billions of dollars as a group. Indeed, the huge rounds from Yuandudao and Zuoyebang were worth $1.75 billion as a pair.

The high concentration of big rounds is also part of the reason why edtech startups are prepping to set a venture capital dollar record, if not a venture capital deal volume record, in 2020.

But don’t think that it is all over for early-stage edtech rounds. Per the same dataset, a historically-normal 50% of edtech deals recorded through August of 2020 were seed or angel investments. These transactions are worth a far-smaller fraction of dollars-raised by definition, but the number of very early bets into the edtech space implies that there is still lots of room to build. We’ve covered a number of early-stage financings such as Edsight’s $1.6 million round and Learn In’s $3.5 million round. Gaps around inclusivity, efficacy, outcomes and back-end support still remain and are ripe territory for new startups to innovate within. Plus, data shows that there’s a good pipeline of future deals for the later-stage investors that have already demonstrated an interest in writing big edtech checks.

A geographic focus

The CBInsights data also shows that 8 of the 10 top-funded edtech startups are in China, and a chunk of those are focused on English-learning education. China’s edtech scene has historically been bigger than other regions because of a high population, consumer spending patterns and a cultural focus on education. It was growing much before the pandemic; when venture investing dropped in China Q1 2019, edtech grew year over year and brought in $1.86 billion.

In the past couple of months, edtech startups have closed strategic capital to expand into the gold mine that is China. Labster, for example, recently brought on $9 million in capital and GGV’s Jenny Lee, who is based in Shanghai, to break into China. Duolingo similarly took a $10 million check to welcome on an investor with knowledge of Asian markets, General Atlantic.

Byju’s, coming out of India, is one of the other top-funded edtech startups. The personalized learning startup, already the most valued edtech startup in the world, got a $500 million check from Silver Lake earlier this week. It has doubled its revenue during the pandemic as it added more than 20 million new students to its platform. The company also acquired 18-month old White Hat Jr for $300 million. And the venture capital firm that invested in both Byju’s and White Hat Jr? Owl Ventures, which has raised a $565 million pair of funds to invest in edtech. 

The unicorn’s growth during the pandemic is hard to get your head around (although we tried to) but sums up how boggling growth can be.

That growth is part of why edtech’s venture capital results are as strong as they are. Now the challenge for the sector will be keeping its growth alive in 2021, showing investors that their 2020 bets were not merely wagers made during a single, overheated year, but bets placed in a startup niche that will keep getting hotter for years to come.

To reach scale, Juni Learning is building a full-stack edtech experience

 Juni Learning connects kids with math and science tutors, but co-founder Vivian Shen would prefer not to be lumped in with other edtech startups, despite the sector’s pandemic-born boom.

“We’re not just in the middle to take a few percentage points off of each side and pretend like we’re delivering value,” said Shen. “That’s not scalable.”

Semantics aside, Shen’s words underscore a truth about live tutoring businesses: Anyone can start one. All it takes is smart friends, eager students and a platform to bring them together.

The low barrier of entry has given rise to a slew of new startups. Some view edtech as a marketplace play, others go the gig economy route, and some are trying to make tutoring as simple as calling an Uber — on-demand and only when you need it.

Juni Learning, co-founded by Shen and Ruby Lee, is entering a fragmented and fatigued market full of better-funded and well-known startups. The startup views itself as a consumer play instead of an edtech startup and raised a $10.5 million Series A back in February to prove it can take a slice of the market.

With only 4,000 active subscribers, Juni Learning is bringing in $10 million in annual run revenue (ARR), compared to $2 million of ARR in March, according to my calculations.

So how is it faring?

A word of warning

In 2005, Andrew Geant was thinking about two-sided gig economy marketplaces. He applied the model to tutoring, thinking he could grow a business from connecting students and tutors online to meet offline. So, Geant and Mike Weishuhn, both recent Princeton graduates, founded Wyzant.

Hear from experienced edtech investors on the market’s overnight boom at Disrupt 2020

Edtech’s reputation has been revitalized due to the coronavirus pandemic, which forced millions of students to adopt remote education overnight. But behind the scramble is a crop of investors who have long invested in the space — before it became cool.

To better understand what’s ahead, what’s hot, and what’s not, I’m talking to a trio of top investors in edtech at TechCrunch Disrupt: Ian Chiu of Owl Ventures, Mercedes Bent from Lightspeed, and Jennifer Carolan from Reach Capital. Between the three of them, they have stakes in category-defining upstarts like Byju, Masterclass, Quizlet, Newsela, Labster, Winnie, and Outschool.

While we’ll most definitely get into the billions at stake between the three, I’m most excited about how these three individuals have welcome and contrasting synergies at play. As we all play catch up, their intentional focus on the sector before it was hot will bring a fantastic level of depth that’s impossible to manufacture.

Mercedes Bent, for example, has worked in almost every startup role that exits out here: operations, customer service, talent and recruiting, product management, design, sales, marketing, strategy, and general management, according to Lightspeed. She spent the last eight years working in or around the career mobility space, including nearly five years at General Assembly. Bent tells me her love for education is the personal role it played in her life, from her grandparents to parents teaching the importance of invention and learning starting at an early age.

“Given the coronavirus’ effect on education, I’m spending more time here than normal. Prior to March, I spent about a third of my time in edtech, and now I am spending almost all my time here,” she tells TechCrunch.

Ian Chiu is the child of immigrant parents who came to the United States and pursued education degrees, a move he says has made the sector a focus early on for him.

His record shows the early commitment. Chiu was the lead author on a book about scholarships and rising college costs, published nearly two decades ago. Before joining Owl, Chiu worked at Bain & Company, Silver Lake Partners, and Warburg and Pincus.

“We find ourselves in a watershed moment for the $6 trillion education market as the rising digital penetration in the sector that had already been taking place has surged in these unprecedented times,” he said.

Finally, Jennifer Carolan will bring an on the ground perspective to the Extra Crunch stage. Carolan worked in Chicago’s public school for 7 years before going to Stanford and eventually breaking into venture.

“There is no doubt that schools will look different post-virus. This pandemic has made parents/guardians acutely aware of just how challenging and technical the role of the teacher is. It has also highlighted the custodial function of our schools — 92% of our nation’s 50 million school children attend our public schools,” she said.

Carolan’s notes shed light on a common balance within edtech: how to get venture-scale returns with companies that are creating solutions for all families, not just rich and privileged ones.

For the first time, TechCrunch’s big yearly event, Disrupt, is going fully virtual in 2020, allowing more people to attend and interact with speakers, investors and founders. And Disrupt will stretch over five days — September 14-18 — in order to make it easier for everyone to take in all the amazing programming. Prices increase soon, so get your pass now and then submit your pitch deck for invaluable feedback from our panel of VCs.

Edtech exits are increasing, but by how much?

Before the coronavirus made edtech more relevant, companies in the sector were historically likely to see slow, low exits. Despite successful IPOs by 2U, Chegg and Instructure in the United States, public markets are not crowded with edtech companies.

Some of the largest exits in the space include LinkedIn’s scoop of Lynda for a $1.5 billion in cash and stock and TPG’s purchase of Ellucian for $3.5 billion.

But both of those deals happened in 2015. Five years later, edtech is cooler and surging — but is it seeing exits? Are Lynda and Ellucian one-off success stories?

2U’s co-founder and CEO, Chip Paucek, said he is optimistic.

“We are a rare edtech IPO,” he told TechCrunch last week. “For a long time in edtech it was either ‘sell to Pearson or not.’”

Despite the sector’s slow past, Paucek said now is a good time to start an edtech company because the sector “is finally starting to hit its stride” with more back-end infrastructure and demand for online education.

This morning, let’s use some data to paint a picture of the landscape of edtech exits and bring some balance to this stodgy stereotype.

Boot the growth

There have been approximately 225 acquisitions in edtech between 2003 and 2018, according to Crunchbase data. RS Components sent me a graph in March to contextualize this timeframe a bit more:

Edtech deals over time. Graph credit: RS Components.

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:

The rules of VC are being broken

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

As ever I was joined by TechCrunch managing editor Danny Crichton and our early-stage venture capital reporter Natasha Mascarenhas. We had Chris on the dials and a pile of news to get through, so we were pretty hype heading into the show.

But before we could truly get started we had to discuss Cincinnati, and TikTok. Pleasantries and extortion out of the way, we got busy:

It was another fun week! As always we appreciate you sticking with and supporting the show!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.