Flockjay cuts at least half of its workforce as it pivots away from bootcamps into B2B SaaS

Flockjay, a bootcamp startup that helps laid off people and job seekers break into tech, cut half of its own employees amid a broader pivot to a B2B SaaS platform, TechCrunch has learned from sources close to the company.

The layoffs impacted every nontechnical team at Flockjay, including admission advisers, biz ops and development, partnerships, recruiting and marketing professionals. An estimated 30 to 45 people were laid off via an all-hands meeting, which accounts for at least half of Flockjay’s full-time staff. A hiring list of those impacted has already been highly circulated on LinkedIn.

“As a mission-driven organization, we care deeply about our graduates not only landing jobs, but also earning promotions and becoming future leaders of their companies. We learned while growing how important it is to invest early in building scalable support for our alumni, the teams they are on, and all mission-aligned sales organizations to level the playing field,” said CEO Shaan Hathiramani in a statement to TechCrunch. “That meant making the difficult but necessary decision to run our classes in a more limited capacity while we focus on building that platform. We recognize that this decision has real human consequences, especially considering how talented and tightknit our team is.”

The startup graduated from Y Combinator in 2019 with a simple goal: serve as an onramp for people to break into tech careers. Flockjay’s core offering is a 10-week sales training bootcamp that helps place graduates into sales jobs across tech companies — about 80% of the company’s students find a job within the first six months of graduation, the company said in January. The graduates of the course, otherwise known as Flockjay Tech Fellows, make an average of $75,000 upon graduation.

This core offering will continue to function but in a limited capacity for now, according to documents obtained by TechCrunch. It will come at a cost to diverse talent. In a previous interview, Flockjay confirmed that roughly 40% of students don’t have a four-year college degree; half of the students identify as female or nonbinary, and half of the company’s students identify as Black or Hispanic.

As Hathiramani’s comment alludes to, the company has spent years training students on how to be competitive hires for sales teams, so assumedly, it has key insight on what tech companies need today from an infrastructure and human perspective. A B2B SaaS tool focused on sales operations and efficiency could bring Flockjay more predictable revenue and assumedly less labor-intensive work.

Layoffs could signal changing tides for the broader edtech industry, a sector revitalized by the pandemic. While it is true that learners shifted online, there are still questions around what purpose non-accredited training programs, such as Flockjay, serve, one investor said. With so many options in the market, users have optionality on what service they frequent — and the service may indeed be the one that has a flashy university partnership that validates their program and offers a safety net.

Flockjay’s struggles also put a spotlight on the highly scrutinized income-share agreements, ISAs. The financial instrument essentially allows students to avoid paying upfront fees to attend a bootcamp, and then ultimately pay back class fees through a percentage of their future income. While ISAs play a role in making education more accessible in the beginning, satisfying those agreements post-employment can be where the controversy begins around liability. Lambda School, a well-known company in the tech bootcamp world, also uses ISAs. The startup announced that it would be doing a broader restructuring earlier this year, while also laying off 65 of its employees.

Flockjay has raised $11 million in known ventures and capital to date. Since its founding, the startup has attracted investments from Serena Williams, Gabrielle Union and Will Smith, along with institutional investors including Lightspeed, Coatue, Y Combinator, eVentures, Salesforce Ventures, the Impact America Fund and Cleo Capital.

Japan’s B2B ordering and supply platform CADDi raises $73 million Series B funding

With COVID-19 disrupting the entire manufacturing supply chain including semiconductor shortages, companies across multiple industries have been struggling to seek a procurement solution that can rebalance the gap between supply and demand.

CADDi, a Tokyo-based B2B ordering and supply platform in the manufacturing and procurement industry, helps both procurement (demand side) and manufacturing facilities (supply side) by aggregating and rebalancing supply and demand via its automated calculation system for manufacturing costs and databases of fabrication facilities across Japan.

The company announced this morning a $73 million Series B round co-led by Globis Capital Partners and World Innovation Lab (WiL), with participation from existing investors DCM and Global Brain. Six new investors also have joined the round including Arena Holdings, DST Global, Minerva Growth Partners, Tybourne Capital Management, JAFCO Group and SBI Investment.

CADDi was founded by CEO Yushiro Kato and CTO Aki Kobashi in November 2017.

The post-money valuation is estimated at $450 million, according to sources close to the deal.

The new funding brings CADDi’s total raised so far to $90.5 million. In December 2018, the company closed a $9 million Series A round led by DCM and followed by Globis Capital Partners and WiL and Global Brain.

The funding proceeds will be used for accelerating digital transformation of the platform, hiring and expanding to global markets.

“We enable integrated production of complete sets of equipment consisting of custom-made parts such as sheet metal, machined parts and structural frames. Using an automatic quotation system based on a proprietary cost calculation algorithm, we select the processing company that best matches the quality, delivery date and price of the order and build an optimal supply chain,” CEO and co-founder Yushiro Kato said.

The goal of CADDi’s ordering platform is to transform the manufacturing industry from a multiple subcontractor pyramid structure to a flat, connected structure based on each manufacturers’ individual strengths, thus creating a world where those on the front lines of manufacturing can spend more time on essential and creative work, Kato said.

CADDi’s ordering platform, backed by its unique technology including automatic cost calculation system, optimal ordering and production management system, and drawing management system, offers a 10%-15% cost reduction, stable capacity and balanced order placement to its more than 600 Japanese supply partners spanning a multitude of industries.

“The demand for CADDi’s services has seen significant acceleration. Our business has been growing very fast, and our latest orders have grown more than six times compared to the previous year, leading to the company’s expanded presence into both eastern and western Japan in order to meet this increase in demand,” Kato said.

“Going forward, in addition to continuously expanding our ordering platform, we will also start to provide purchases (manufacturers) and supply partners with our technology directly to promote digital transformation of their operations, for example, the production management system and drawing management system,” Kato continued.

“As a start point, in the near future, we are thinking about selling ‘Drawing Management SaaS,’” which has been used internally for CADDi’s ordering operation, to help customers solve operational pains in handling piles of drawings. “Our ‘Drawing Management SaaS’ technology will not only help manage drawings as documents properly but also allow utilization of data of drawings in a practical way for future decision-making and action in their procurement process.”

CADDi’s next axis of growth will be other growing markets, especially in Southeast Asia, Kato pointed out. “Many of our Japanese customers have subsidiaries and branches in these countries, so it’s a natural expansion opportunity for us to strengthen our value proposition and provide more continuity and seamless service to our customers,” Kato added.

Kato also said it wants to continue investing in hiring, especially engineers, to further the development of its platform CADDi and new business. It plans to hire 1,000 employees in the next three years. CADDi had 102 employees as of March 2021.

The company aims to become a global platform with sales of USD 9.1 billion (that is 1 trillion YEN) by 2030, Kato said.

COVID-19 had a different impact on different industries in the procurement and manufacturing sector, with “the automobile and machine tool industries were negatively affected by the pandemic and experienced an up to 90% temporary drop in sales, while other industries such as the medical and semiconductor industries have experienced explosive growth in demand. The overall result of COVID-19 is that the company has captured more demand because CADDi’s system rebalances receipts across multiple industries,” according to Kato.

Masaya Kubota, partner at World Innovation Lab, told TechCrunch, “CADDi’s solution of aggregating and rebalancing supply and demand has once again proven to be indispensable to both purchasers and manufacturers, with the pandemic disrupting the entire supply chain in manufacturing. We first invested in CADDi in 2018, because we strongly believed in their mission of digitally transforming one of the most analog industries, the $1 trillion procurement market.”

Another investor principal at DCM, Kenichiro Hara, also said in an email interview with TechCrunch, “The pandemic made the manufacturing industry’s supply chain vulnerabilities quite clear early on. For example, if a country is on lockdown or a factory stalls the operations, their customers cannot procure necessary parts to produce their products. This impact amplifies, and the entire supply chain is affected. Therefore, the demand for finding new, available and accessible suppliers in a timely manner increased in importance, which is CADDi’s primary value-add.”

Enterprise AI 2.0: the acceleration of B2B innovation has begun

Two decades after businesses first started deploying AI solutions, one can argue that they’ve made little progress in achieving significant gains in efficiency and profitability relative to the hype that drove initial expectations.

On the surface, recent data supports AI skeptics. Almost 90% of data science projects never make it to production; only 20% of analytics insights through 2022 will achieve business outcomes; and even companies that have developed an enterprise-wide AI strategy are seeing failure rates of up to 50%.

But the past 25 years have only been the first phase in the evolution of enterprise AI — or what we might call Enterprise AI 1.0. That’s where many businesses remain today. However, companies on the leading edge of AI innovation have advanced to the next generation, which will define the coming decade of big data, analytics, and automation — Enterprise AI 2.0.

The difference between these two generations of enterprise AI is not academic. For executives across the business spectrum — from health care and retail to media and finance — the evolution from 1.0 to 2.0 is a chance to learn and adapt from past failures, create concrete expectations for future uses, and justify the rising investment in AI that we see across industries.

Two decades from now, when business leaders look back to the 2020s, the companies who achieved Enterprise AI 2.0 first will have come to be big winners in the economy, having differentiated their services, scooped up market share, and positioned themselves for ongoing innovation.

Framing the digital transformations of the future as an evolution from Enterprise AI 1.0 to 2.0 provides a conceptual model for business leaders developing strategies to compete in the age of automation and advanced analytics.

Enterprise AI v1.0 (the status quo)

Starting in the mid-1990s, AI was a sector marked by speculative testing, experimental interest and exploration. These activities occurred almost exclusively in the domain of data scientists. As Gartner wrote in a recent report, these efforts were “alchemy…run by wizards whose talents will not scale in the organization.”

Two decades from now, when business leaders look back to the 2020s, the companies who achieved Enterprise AI 2.0 first will have come to be big winners in the economy.

But the data science bottleneck — the need for everything to funnel through a small team of experts — was not the only hurdle to scaling. AI is only as powerful as the data systems it’s plugged into. Many companies experimenting with AI at the time had data spread across silos with inadequate data infrastructure and processes to optimize the technology.

Moreover, early iterations of B2B AI involved complex horizontal “machine learning” platforms focused on model development. Operationalizing these hand-curated models required crossing a deep chasm related to customization and integration with enterprise applications and workflows. These Enterprise 1.0 solutions were cumbersome and clunky to operate yet still required large investments to deploy.

Most initiatives started from the bottom up. Data scientists developed them as exploratory projects focused on speculative use cases largely decoupled from business objectives. Many turned out to be science projects and the failure rates were extraordinarily high.

Kamereo gets $4.6M to connect farmers and F&B businesses in Vietnam

While working as the chief operating officer of a pizza chain in Vietnam, Taku Tanaka saw how difficult it is for restaurants to connect with farmers. Many small F&B businesses can’t buy in large volumes, so they rely on nearby markets or multiple suppliers who only sell one category. In turn, this means farmers are disconnected from the end customers of their products, making it hard to predict selling prices or plan their crops. Tanaka founded Kamereo, B2B platform with its own warehouse and last-mile delivery network, to focus on those problems.

Based in Ho Chi Minh City, the company announced today that it has raised $4.6 million co-led by food conglomerate CPF Group, Quest Ventures and Genesia Ventures. The capital will be used for hiring, building a new warehouse management system, user interface upgrades and expanding into Hanoi next year.

Before founding Kamereo in 2018, Tanaka was COO of Pizza 4Ps, which grew from one location in Ho Chi Minh City when he joined to 10 stores three years later (it now has more than 30 locations in Vietnam).

Kamereo works with about 15 farmers, including cooperatives, and serves more than 400 active customers, ranging in size from family-owned restaurants to chains with more than 20 locations. Despite COVID-19 related movement restrictions and temporary business closures, Kamereo says it has grown by 15% every month over the last 12 months. It currently has about 100 employees.

F&B businesses use the platform to order from multiple farmers. Kamereo handles supplier negotiations, order processing and management, and fulfillment. Tanaka told TechCrunch that the company operates its own warehouses and last-mile delivery network because it is cheaper than working with third-party providers.

One of Kamereo's warehouses for fresh farm products

One of Kamereo’s warehouses for fresh farm products

Most of Kamereo’s last-mile deliveries are done by motorbikes since Vietnam has many small roads that are inaccessible to trucks. Tanaka said one drawback is how many goods can be delivered in one trip. Since drivers need to make multiple trips each day, Kamereo plans to expand its micro-warehouse network in Ho Chi Minh City so they don’t need to travel long distances. Its tech team is also building an internal system to manage inventory, fulfillment and last-mile deliveries with the goal of minimizing variable costs.

In a statement about the investment, Quest Ventures partner Goh Yiping said, “Kamereo sites in one of the largest food production hubs of Southeast Asia, and there is much room to grow in solving many of the inefficiencies of the supply chain today, improving farmers’ livelihood outcomes and procuring the best products for businesses and homes.”

Pakistan’s growing tech ecosystem is finally taking off

Pakistan, the world’s fifth most populous country, has been slow to adapt to the internet economy. Unlike other emerging economies such as China, India and Indonesia, which have embraced digitization and technology, Pakistan has trailed the region in the adoption of technology and startup formation.

Despite this, investors have dreamed for years of the huge opportunities in unlocking Pakistan’s potential as a digital economy. As a country of 220 million people, almost two-thirds of whom are under the age of 30, Pakistan draws natural comparisons to Indonesia — which has rapidly emerged as one of the most vibrant technology ecosystems outside the U.S. and China.

In 2021, Pakistani startups are on track to raise more money than the previous five years combined.

After years of lagging behind, over the course of the past 18 months, Pakistan’s technology ecosystem has come to life in unprecedented fashion. In 2021, Pakistani startups are on track to raise more money than the previous five years combined. Even more excitingly, a large portion of this capital is coming from international investors from across Asia, the Middle East and even famed investors from Silicon Valley.

Image Credits: Mikal Khoso

The rapid emergence of Pakistan’s technology ecosystem on the international stage has been no accident — it’s the result of a confluence of changing facts on the ground and shifting dynamics in the startup and investing world as a result of the pandemic.

Unlocking Pakistan’s potential

The sudden emergence of Pakistan’s tech ecosystem on the international stage has been driven by three major factors: an improving security situation, quickly growing mobile connectivity, and critical legal changes and deregulation.

As a frontline state and coalition partner in the United States’ invasion of Afghanistan, Pakistan saw fatalities from terrorist violence soar from 295 in 2001 to a peak of over 11,000 in 2009. This climate of instability and violence scared away international business and investors from Pakistan for much of the first two decades of the 21st century.

GrowSari, a B2B platform for small stores in the Philippines, adds investors like Temasek’s Pavilion Capital and Tencent

Sari-sari stores are neighborhood stores in the Philippines that usually sell daily necessities and sometimes serve as community hubs, too. Today GrowSari, a startup that is digitizing sari-sari stores with features like pricing tools, inventory management and working capital loans, announced it has raised a Series B from several notable investors that brings its total funding to $30 million.

The company’s Series B is at a rolling close, so it has not announced a final amount. The $30 million total it has raised include its seed funding and Series A, which according to a July 2020 profile in Esquire Philippines was $14 million. Participants in its Series B included Temasek Holdings’ private equity unit Pavilion Capital, Tencent, International Finance Corporation (IFC), ICCP SBI Venture Partners and Saison Capital, and returning investors Robinsons Retail Holdings (which is part of the Gokongwei Group), JG Digital Equity Ventures and Wavemaker Partners.

GrowSari was founded in 2016, and says its B2B platform is currently used by more than 50,000 stores in over 100 municipalities on Luzon, the Philippines’ largest and most populated island. Its ultimate goal is to serve one million sari-sari stores.

According to GrowSari, there are more than 1.1 million sari-sari stores in the Philippines, and they account for 60% of fast-moving consumer goods (FMCG) sold in the country, making them a valuable distribution channel for wholesalers. In addition to its supplier marketplace, GrowSari says it is able to give sari-sari store operators better pricing for products from about a thousand FMCG brands, including Unilever, P&G and Nestle, which it claims can help stores double their earnings. Other services in the app include online telecom and utility bill payments, remittance and microfinancing for working capital loans.

GrowSari’s founding tDeam includes Reymund Rollan, Shiv Choudhury, Siddhartha Kongara and Andrzej Ogonowski, who first launched the platform as a backend system for sari-sari stores to manage their logistics and inventory.

A screenshot of product categories in GrowSari's app

A screenshot of product categories in GrowSari’s app

Since most sari-sari stores are run individually, their margins are smaller than large retailers that can negotiate deals with FMCG wholesalers. GrowSari’s supplier marketplace addresses this issue by giving sari-sari stores access the Distributor List Prices seen by large stores and wholesalers. GrowSari’s marketplace does not require a minimum order, and it allows sari-sari stores on the platform to pay with cash on delivery, GrowCoins (or cash credits that can be topped up through GrowSari’s shippers, online transfers, banks or over-the-counter at convenience stores) or E-Lista, GrowSari’s seven-day loan product.

GrowSari’s new capital will be used to expand its userbase to 300,000 new stores in the Philippines, especially in Visayas and Mindanao, increase the size of its supplier marketplace and launch more financial products for sari-sari stores. The startup is part of a new crop of B2B platforms in Asia focused on serving micro to small-enterprises, including BukuWarung and BukuKas in Indonesia and Khatabook in India.

Slintel scores $20M Series A as buyer intelligence tool gains traction

One clear outcome of the pandemic was pushing more people to do their shopping online, and that was as true for B2B as it was for B2C. Knowing which of your B2B customers are most likely to convert puts any sales team ahead of the game. Slintel, a startup providing that kind of data, announced a $20 million Series A today.

The company has attracted some big-name investors with GGV leading the round and Accel, Sequoia and Stellaris also participating. The investment brings the total raised to over $24 million including a $4.2 million seed round from last November.

That’s a quick turnaround from seed to A, and company founder and CEO Deepak Anchala, says that while he had plenty of runway left from the seed round, the demand was such that it seemed prudent to take the A money sooner than he had planned. “So we had enough cash in the bank, but investors came to us and we got a pretty good valuation compared to the previous round, so we decided to take it and use that money to go faster,” Anchala said.

Certainly the market dynamics were working in Slintel’s favor. Without giving revenue details, Anchala said that revenue grew 5x last year in the middle of the worst of the pandemic. He says that meant buyers were spending less time with sales and marketing folks to understand products and more time online researching on their own.

“So what Slintel does as a product is we mine buyer insights. We understand where the buyers are in their journey, what their pain points are, what products they use, what they need and when they need it. So we understand all of this to create a 360 degree view of the buyer that you provide these insights to sales and marketing teams to help them sell better,” he said.

After growing at such a rapid clip last year, the company expected more modest growth this year at perhaps 3x, but with the added investment, he expects to grow faster again. “With the funding we’re actually looking at much bigger numbers. We’re looking at 5x in our revenue this year, and also trying for 4x revenue next year.”

He says that the money gives him the opportunity to improve the product and put more investment into marketing, which he believes will contribute to additional sales. Since the round closed 6 weeks ago, he says that he has increased his advertising budget and is also hopes to attract customers via SEO, free tools on the company website and events.

The company had 45 employees at the time of its seed round in November and has more than doubled that number in the interim to 100 spread out across 10 cities. He expects to double again by this time next year as the company is growing quickly. As a global company with some employees in India and some in the U.S., he intends to be remote first even after offices begin to reopen in different areas. He says that he plans to have company gatherings each quarter to let people gather in person on occasion.

Billion-dollar B2B: cloud-first enterprise tech behemoths have massive potential

More than half a decade ago, my Battery Ventures partner Neeraj Agrawal penned a widely read post offering advice for enterprise-software companies hoping to reach $100 million in annual recurring revenue.

His playbook, dubbed “T2D3” — for “triple, triple, double, double, double,” referring to the stages at which a software company’s revenue should multiply — helped many high-growth startups index their growth. It also highlighted the broader explosion in industry value creation stemming from the transition of on-premise software to the cloud.

Fast forward to today, and many of T2D3’s insights are still relevant. But now it’s time to update T2D3 to account for some of the tectonic changes shaping a broader universe of B2B tech — and pushing companies to grow at rates we’ve never seen before.

One of the biggest factors driving billion-dollar B2Bs is a simple but important shift in how organizations buy enterprise technology today.

I call this new paradigm “billion-dollar B2B.” It refers to the forces shaping a new class of cloud-first, enterprise-tech behemoths with the potential to reach $1 billion in ARR — and achieve market capitalizations in excess of $50 billion or even $100 billion.

In the past several years, we’ve seen a pioneering group of B2B standouts — Twilio, Shopify, Atlassian, Okta, Coupa*, MongoDB and Zscaler, for example — approach or exceed the $1 billion revenue mark and see their market capitalizations surge 10 times or more from their IPOs to the present day (as of March 31), according to CapIQ data.

More recently, iconic companies like data giant Snowflake and video-conferencing mainstay Zoom came out of the IPO gate at even higher valuations. Zoom, with 2020 revenue of just under $883 million, is now worth close to $100 billion, per CapIQ data.

Graphic showing market cap at IPO and market cap today of various companies.

Image Credits: Battery Ventures via FactSet. Note that market data is current as of April 3, 2021.

In the wings are other B2B super-unicorns like Databricks* and UiPath, which have each raised private financing rounds at valuations of more than $20 billion, per public reports, which is unprecedented in the software industry.

Altman brothers lead B2B payment startup Routable’s $30M Series B

We all know the COVID-19 pandemic has accelerated digital adoption in a number of areas, particularly in the financial services space. Within financial services, there are few spaces hotter than B2B payments.

With a $120 trillion market size, it’s no surprise that an increasing number of fintechs focused on digitizing payments have been attracting investor interest. The latest is Routable, which has nabbed $30 million in a Series B raise that included participation from a slew of high-profile angel investors.

Unlike most raises, Routable didn’t raise the capital from a bunch of VC firms. Sam Altman, CEO of OpenAI and former president of Y Combinator, and Jack Altman, CEO of Lattice, led the round. (The pair are brothers, in case you didn’t know.)

SoftBank-backed unicorn Flexport also participated, along with a number of angel investors, including Instacart co-founder Max Mullen, Airbnb co-founder Joe Gebbia, Box co-founder and CEO Aaron Levie, Salesforce founder and CEO Marc Benioff (who also started TIME Ventures),  DoorDash’s Gokul Rajaram, early Stripe employee turned angel Lachy Groom and Behance founder Scott Belsky.

The Series B comes just over eight months after Routable came out of stealth with a $12 million Series A.

CEO Omri Mor and CTO Tom Harel founded Routable in 2017 after previously working at marketplaces and recognizing the need for better internal tools for scaling business payments. They went through a Y Combinator batch and embarked on a process of interviewing hundreds of CFOs and finance leaders.

The pair found that the majority of the business payment tools that were out there were built for large companies with a low volume of business payments. 

After running enough customer development we identified a huge scramble to solve high-volume business payments, and that’s what we double down on,” Mor told TechCrunch. 

Routable’s mission is simple: to automate bill payment and invoicing processes (also known as accounts payables and accounts receivables), so that businesses can focus on scaling their core product offerings without worrying about payments.

“A business payment is more like moving a bill through Congress, where a consumer payment is more like a tweet,” Mor said. “We automate every step from purchase order to reconciliation and by extending an API, companies don’t have to build their own inner integration. We handle it, while helping them move their money faster.”

Since its August 2020 raise, Routable has seen its revenue grow by 380%, according to Mor. And last month alone, the company tripled its amount of new customers compared to the month prior. Customers include Snackpass, Ticketmaster and Re-Max, among others.

“We’ve been beating every quarter expectation for the past 18 months,” he told TechCrunch.

The company started out focused on the startup and SMB customer, but based on demand and feedback, is expanding into the enterprise space as well.

It has established integrations with QuickBooks, NetSuite and Xero and is looking to invest moving forward in integrating with Oracle, Microsoft Dynamics Workday and SAP. 

“A lot of our investment moving forward is to be able to bring that same level of automation and ease of use that we do for SMB and mid-market customers to the enterprise world,” Mor told TechCrunch.

Lead investor Sam Altman is in favor of that approach, noting that the recent booms in the gig and creator economies are leading to a big spike in the volume of both payments and payees.

“With the addition of enterprise capabilities, we think this can lead to an enormous business,” he said. 

The round brings Routable’s total raised to $46 million. The company has headquarters in San Francisco and Seattle with primarily a remote team. 

Sam Altman also told me that he was drawn to Routable after having experienced the pain of high-volume business payments himself and working with many startup founders who had experienced the same problem.

He was also impressed with the company’s engineering-forward approach.

“They can offer the best service by being embedded in a company’s flow of funds instead of the usual approach of just being an interface for moving money,” Altman said. 

With regard to the other investors, Mor said the decision to partner with founders of a number of prominent tech companies was intentional so that Routable could benefit from their “deep enterprise and high-growth experience.”

As mentioned above, the B2B payments space is white-hot. Earlier this year, Melio, which provides a platform for SMBs to pay other companies electronically using bank transfers, debit cards or credit — along with the option of cutting paper checks for recipients if that is what the recipients request — closed on $110 million in funding at a $1.3 billion valuation.

ClassDojo’s second act comes with first profits

ClassDojo’s first eight years as an edtech consumer startup could look like failure: zero revenue; no paid users; and a team that hasn’t aggressively grown in years. But the company, which helps parents and teachers communicate about students, has raised tens of millions in venture capital from elite Silicon Valley investors including Y Combinator, GSV, SignalFire and General Catalyst over its life.

If you ask co-founder Sam Chaudhary to explain how the startup survived so long without bringing in money, he responds simply: “When you have something that you think will be for the long term you can put [in] a lot of energy. So, we always kind of maintained the belief that like bringing people together and helping them be connected, especially last year when they needed to be apart, physically apart, was going to be really important.”

In layman’s terms: ClassDojo has been playing the long-game in edtech since 2011, quietly aggregating free users-turned-fans across the world’s public schools, which are notoriously hard to sell due to tight budgets. Every engineer on the team serves a population that is the size of the city of San Francisco. The company has been intentionally frugal throughout the process. Its core service, which is an interface that allows parents and teachers to communicate updates and stay involved in the classroom, is free for anyone to download.

“Our view from the start was actually that the idea of districts isn’t the customer of education, [that’s] kind of backwards,” he said. “It’s like Airbnb saying we’re going to transform travel by selling to hotels.” The route has helped ClassDojo gain traction with 51 million users across 180 countries.

Two years ago, ClassDojo tested this customer love. It launched its first monetization attempt in 2019: Beyond School, a service that complements in-school learning with at-home tutorials. Within four months of launching the paid service, ClassDojo hit profitability. In 2020, the added dimension of COVID-19 helped ClassDojo triple its revenue and grow to have hundreds of thousands of paying subscribers.

It’s a lesson in how a venture-backed startup can successfully live for years without any plans to monetize, grow a super-fan user base, and eventually turn those users into paying customers if the fit is right.

The acceleration of ClassDojo’s business got noticed by Josh Buckley, the new CEO of Product Hunt and a solo capitalist.

“For years, they’ve quietly been building the most adored brand in the industry; kids, teachers and families they serve love it. Their business model follows that vision; they’re focused on serving the consumers, not the ‘system’” Buckley said.

Buckley led a new $30 million financing round for ClassDojo, he tells TechCrunch. The round also includes Superhuman CEO Rahul Vohra, Coda CEO and former Youtube head of product and engineering Shishir Mehrotra, former product lead of growth for Airbnb Lenny Rachitsky, and others.

The financing comes nearly two years after ClassDojo raised a $35 million Series C round led by GSV. When new capital is less than the preceding round it usually signals a downround, but Chaudhary says that ClassDojo had a “significant markup on valuation” with the extension round. The trend of opportunistic extension rounds has grown for edtech startups recently as the pandemic underscores the need for remote learning innovation.

ClassDojo’s next act

With new financing and massive scale, ClassDojo is now trying to evolve from a communication app into a platform that can help students get better learning experiences beyond the one they get from schools.

Chaudhary says that they plan to double ClassDojo’s 55-person team, invest in product, and enter new markets.

“For me, I’d always thought ClassDojo could enable a better future, specifically one where kids’ outcomes aren’t entirely determined by what their ZIP code can offer them,” Chaudhary said. “That’s the kind of future we’ve been building toward.” He likened ClassDojo’s goal as similar to Netflix: provide a broad scope of material for a broad scope of people, not just on-demand political dramas.

ClassDojo is already creating content around topics not discussed in school such as how to fail and how to become an empathetic person, as part of its Big Idea series. The Beyond School offering helps students set goals and track activities, as well as find activities such as dinner table discussion starters or bedtime meditations.

Image Credits: ClassDojo

ClassDojo charges $7.99 a month, or $59.99 annually, for its premium content. The platform is finding small ways to add personalization and spice to its content, such as customized avatars, but further innovation will be key in making its next phase work.

While ClassDojo certainly has a strong user engine to monetize off of, the content game is difficult to win at. Content, to an extent, is commoditized. If you can find a free tutorial on YouTube or Khan Academy, why buy a subscription to an edtech platform that offers the same solution? The commodification of education is good for end-users and is often why startups have a freemium model as a customer acquisition strategy. To convert free users into paying subscribers, edtech startups need to offer differentiated and targeted content.

The United States continues to be a dominant market for ClassDojo, which also has users in the United Kingdom, Ireland, United Arab Emirates and more. While some in edtech express concern that United States consistently lags in consumer spending in education, Chaudhary thinks it’s an unfair assessment.

“To believe that, you have to believe that families don’t care all that much about their kids. And I just don’t think that’s true,” he said. “All the ways that American people express their care for children, there’s such a range, from extracurricular to sports camp to moving to the right zip code.”

And with that mindset, ClassDojo thinks that it can become the brand that families turn to when they think about a child’s education.

“I think there’s just like a missing brand in the world right now,” Chaudhary said. “There’s a blank, a lot of fear, uncertainty, and doubt.”