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How Duolingo became a $2.4B language unicorn

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At the heart of Duolingo is its mission: to scale free education and increase income potential through language learning. However, the same mission that has helped it grow to a business valued at $2.4 billion with over 500 million registered learners, has led to tensions that continue to define the business.

How do you survive as a startup if you don’t want to charge users? How do you design a startup that isn’t too hard to lose people, but isn’t too easy to compromise education? How do you balance monetization goals while also keeping education as a product free?

For my first EC-1, I spent months with Duolingo executives, investors, and of course, competitors, to answer some of these questions.

One of my favorite details in the story that got left on the cutting room floor was Duolingo co-founder and CEO Luis von Ahn comparing his company to the elliptical. I was pressing him on the efficacy of Duolingo, and the long-standing critique that it still can’t teach a user how to speak a language fluently.

“Now, there’s a difference between whether you know you’re doing the elliptical or yoga or running, but by far, the most important thing is that you’re doing something [other than] just walking around,” he said.

What von Ahn is getting at is that Duolingo’s biggest value proposition is that it helps people get motivated to learn a language, even if it’s just five minutes — or an elliptical workout — a day. He thinks motivation is harder than the learning itself. Do you agree?

If you enjoyed my series, make sure to check out other EC-1s and subscribe to ExtraCrunch to support me, this newsletter and the rest of the team. I’d also love it if you followed me on Twitter @nmasc_.

In the rest of this newsletter, we’ll talk about Tesla, the morality of going public and verticalized telehealth.

There’s always a Tesla angle

When I was working in Boston, the newsroom saying was “there’s always a Boston Angle.” In a remote, tech-dominated world, I’ll tweak it: There’s always a Tesla angle. While we all prepare for Elon Musk to grace the SNL stage, there’s a story you might want to check out.

Here’s what to know: Tesla tapped a small Canadian startup to build cleaner and cheaper batteries. The price tag will shock you, but the story tells a bigger narrative about patented technology, and the outsized impact that a tiny startup has on Tesla’s route to batteries.

Literally moving us along:

Tesla electric vehicle china

Image Credits: Getty Images

The clash of the CFOs

While Equity usually keeps it light and punny, we chewed into a deeper topic this week: the morality of going public. Startups are staying private longer than ever before, but one CFO argues that it’s a moral obligation to leave the nest and provide returns to the general public. We had that CFO on the show, along with another CFO at a company pursuing a SPAC. It ended up being the most interesting clash of the CFOs I’ve been a part of.

Here’s what to know: The growth of venture capital as an asset class has a role to play in this whole mess and has kept the nest warm for many startups. We talk about if the tides are turning, or we’re saying goodbye to a world in which a company like Salesforce would debut price for $11 per share.

While you’re focused on Twitter’s tip jar, here’s other money news you may have missed in the meantime: 

Image Credits: Getty Images / dane_mark

Where telehealth goes from here

As I start to cover digital health, one of the biggest questions I ask and get asked is where telehealth goes from here. Virtual caretaking had an uptick in usage because of the pandemic but is now starting to slow as the world reopens and vaccinations are on the rise. For telehealth startups, it means crafting a pitch that explains why virtual care makes sense for the conditions you serve.

Here’s what to know: I talked about how to become pandemic-proof in healthcare with Expressable, a virtual speech therapy startup that just raised millions in venture capital money. Part of the startups’ product differentiation is an edtech platform that motivates consumers to asynchronous practice speech exercises with the help of parents and friends.

And down the rabbit hole we go: 

Image Credits: Getty Images / drante

Around TechCrunch

Seen on TechCrunch

Seen on Extra Crunch

And that’s that. Thank you for reading along and supporting me. I’ll never get over it.

N

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Source: https://techcrunch.com/2021/05/08/how-duolingo-became-a-2-4b-language-unicorn/

EdTech

Edtech startups and VCs rally around a memo of their own

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Outschool founder Amir Nathoo has a message to the edtech sector, which recently found itself under a spotlight thanks to the pandemic: Add your voice, and don’t try to always appear neutral.

The founder of the unicorn business penned a statement, co-signed by other edtech leaders, promoting the continuance of teachers being allowed to teach critical race theory in classrooms across the country. The learning framework, which has been the subject of recent legislative debate, covers the acknowledgement of institutional, and systemic racism in the United States. Critics of critical race theory say that CTR can add more divisiveness to an already polarized world, while supporters see the framework as key to understanding the role that racism plays in society and how current systems perpetuate inequality.

“As a nation, we must take a stand that teaching the wrongs of racism is not ‘divisive’; it is imperative,” the statement reads. “Many of these new laws will require teaching ‘both sides’ of a lesson about race or current events, if permitted at all,” a nuance that would make it difficult for teachers to condemn history like lynching or Jim Crow’s legacy.

It goes on to pledge that, “as CEOs and Board Members of education technology companies, we are taking a stand to say that any new law that restricts teaching racism in a lesson is unacceptable.”

We stand with the thousands of teachers who have come together to protest these laws restricting racism lessons.
We stand with the millions of learners they will impact.
We are signing this letter today so that teachers and students can openly discuss the experiences of Black youth today in the context of the George Floyd protests of 2020.
Above all, we are signing this letter today to say racism is wrong and that hatred based on the color of someone’s skin, religious beliefs, gender, or sexual orientation is wrong, unequivocally wrong.

Signatures on the statement include a number of notable founders and investors in edtech, giving weight to the statement: 

Atin Batra, General Partner, 27V (Twenty Seven Ventures)
Michael Ke Zhang, CEO and Co-Founder of AI Camp
Joanna Smith, CEO and Founder of AllHere
Ilana Nankin, Ph.D. Founder & CEO of Breathe For Change
John Danner, Managing Partner, Dunce Capital
Erika Hairston, CEO and Co-Founder of Edlyft
Michael Haddix, Founder, Elevate
Alex Taussig, Partner at Lightspeed Venture Partners
Brian Swartz – CEO & Co-Founder Neighbor Schools
Bridget Garsh – COO & Co-Founder Neighbor Schools
Cedric McDougal – CTO & Co-Founder Neighbor Schools
Sabari Raja, CEO and Cofounder, Nepris
Sabari Raja, CEO and Co-Founder, Nepris
Amir Nathoo, CEO and Co-Founder of Outschool
Rita Rosa Ruesga, Co-Founder Pikitin Learning Projects
Garrett Smiley, CEO and Co-Founder of Sora Schools
Rethink Education III Team
Rebecca Kaden, Managing Partner, Union Square Ventures
Sara Mauskopf, CEO and Co-Founder of Winnie
Jo Boaler, The Nominelli-Olivier Professor of Education, Stanford University, Co-Founder of youcubed

Mission-oriented politics

There is a growing perspective in Silicon Valley that companies should only get involved in politics when it is related to their mission and can impact their business.

The conversation began with Coinbase’s Brian Armstrong publishing a memo that banned the debate of causes and politics internally that are unrelated to work. Coinbase has since been joined by Basecamp, and there’s a pseudonymous Twitter account, Mission Protocol, dedicated to helping other startups adopt a code of conduct that “follows in Brian Armstrong’s footsteps.”

“We started this project because existing codes of conduct and conversations around social responsibility didn’t have a voice for what is most important: staying focused on the good we actually deliver for society through our missions,” a tweet from the account reads.

In an interview, Nathoo said that critical race theory “is clearly related” to its mission, but that his company is also taking an “expansive view of how our community can be impacted.” The company says it intends to engage, and add their voice, to issues around race and inequality.

“Ideally, companies would stay out of politics but that’s not the reality that we live in,” he said. “We think it’s an abdication of corporate responsibility to try and pretend that there’s both sides to every argument. I don’t think that’s right, and we intend to take a different path on corporate responsibility than other startups might have taken.”

AllHere CEO Joanna Smith, who signed the statement, told TechCrunch that the statement is tied heavily to her mission. Her company developed a 24/7 chatbot to help families and kids that have issues with absenteeism at schools. The company focuses on supporting families, through two-way text and in-person intervention, to get better outcomes and lessen learning gaps.

“I think every startup has to be aware of the environment within which they operate,” she said. “I think specifically in education technologies, it would be very difficult to scale a company that’s directly interfacing and interacting with families and kids, if the company itself is not aware of, or reflective of the needs and priorities of those who they are attempting to serve.

“We don’t have the luxury of putting on blinders to the realities that families and kids live in, which, for AllHere, includes transportation, health care, absenteeism, mental health and, of course, how families see the world,” she added.

The debate is more complex than pro-Coinbase and anti-Coinbase. For example, both companies present an alternative to how startups should address politics: Tie it to the mission, and view the mission as wide-ranging and inclusive.

Nathoo said that a small number of edtech leaders were invited to sign the edtech statement to start. Of those who didn’t sign, the main reasons were disagreement with messaging, or worry about getting involved in politics.

Edtech startups are in a unique spot to address racism because of the content and mission that many have. Quizlet has a number of free, downloadable lessons for educators to address topics like mass incarceration and policing, the fight for women’s suffrage, and the coronavirus in Black America, for example. Outschool has a number of classes offered about anti-racism, including an $11 one-time class for kids ages 4-6. There’s still a lot of work to be done.

Nathoo expects that Outschool’s business, which was recently valued at over $1 billion, will benefit from this choice because of “greater trust and connection” with the community and staff. Medium, for example, recently lost more employees after CEO Ev Williams published a culture memo, in the wake of a failed unionization attempt.

Even with this perspective, Nathoo admits that the company “is not where it wants to be” on diversity, and thinks that there is work left to be done. It’s up to future employees on if today’s effort, rallying against the diminishment of critical race theory and for more conversations of racism, will either be an attractive, or dissuasive, reason to join the team.

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Source: https://techcrunch.com/2021/06/23/edtech-culture-memo/

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EdTech

UK edtech startup Perlego expands to Europe: Germany, Switzerland, Austria and France 

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Perlego, one of the world’s largest online subscription services for educational books, has announced its launch in Germany, Switzerland, Austria and France, further cementing its position as one of the UK’s fastest growing edtech startups.

Founded in 2017, the platform is now available to users based in DACH and France, offering access to more than 600,000 e-books from a global network of over 3,000 publishers through an-easy-to use web and mobile app.

Perlego works with many of the world’s leading publishers – including Bloomsbury, Elsevier and Wiley – to offer titles across genres such as architecture, business, history, computing, law, literature, maths, medicine, science, the arts and more.

With over 26 million students in Europe, the recent pandemic has highlighted the increasing need for digitalisation of higher education within these regions. Recent protests in France amongst university students have demonstrated the impact of the pandemic on this “lost generation” with extended curfews and closed universities having a detrimental impact on their education and future prospects. With similar reports coming from the DACH region, Perlego recognised the need for a simple, easy to use platform that opened up access to information at a time of national lockdowns.

Following a global shift to online learning in response to COVID-19, Perlego saw a 1500% increase in subscribers. Since March, edtech and online content has emerged as an effective solution in enabling student education to continue as normal. Perlego grew its own online library by 245,000 titles, and partnered with 260 new publishers. It also worked with Universities such as Cambridge and Portsmouth ahead of the new academic year to offer students access to the online library.

UK-based entrepreneurs Gauthier Van Malderen and Matt Davis founded the company after meeting at school where they experienced the rising expense of textbooks and difficulties accessing academic content. Since launching in 2017, the company has experienced rapid growth as demand for better access to education material grows.

“Learning should be accessible to everyone, but the unfortunate truth is that the current economics of the publishing industry makes this difficult.” Perlego CEO co-founder Gauther Van Malderen said of the expansion. “With lockdown restrictions varying across Europe, students are rightfully worried about how they will continue to access the material they need to complete their degree. We want to help support them by expanding our coverage in Europe and are looking forward to working with our new partners in Germany and France to not only widen access to educational materials but accelerate profits for the publishing industry.”

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Source: https://www.eu-startups.com/2021/06/uk-edtech-startup-perlego-expands-to-europe-germany-switzerland-austria-and-france/

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EdTech

KKR buys into booming edtech business Education Perfect using $1.3bn impact fund

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Buyout giant KKR has agreed to pick up a majority stake in Australian and New Zealand edtech company Education Perfect.

EP provides a digital teaching and learning toolkit for K-12 schools, including data insights and tools for automated marking, feedback and secure assessment.

It also offers tens of thousands of pre-built lessons. The system is currently being used by more than 3,000 schools, 50,000 teachers and one million students in more than 50 countries.

KKR has agreed the deal from its $1.3bn Global Impact Fund in February last year to target the climate change fight and sustainable development as sources of potential profit.

Five V Capital, which invested in the company in 2017, will remain a shareholder alongside EP’s management team and co-founders Craig and Shane Smith.

Srdjan Dangubic, founding Partner of Five V Capital, said, “Since our investment, EP’s leading team has more than doubled to over 200 employees delivering revenue growth of over by 400% and earnings growth of 600%.

“We believe that the future remains very bright.”

KKR director George Aitken said, “Digital transformation in K-12 education is at an early stage compared to other industries, and EP is well-positioned to drive this on a larger, global scale.

“We are excited to work with Education Perfect’s talented team to strengthen its market-leading position in Australia and New Zealand, accelerate its growth, and expand its international presence.”

Copyright © 2021 AltAssets

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Source: https://www.altassets.net/private-equity-news/by-news-type/deal-news/kkr-buys-into-booming-edtech-business-education-perfect-using-1-3bn-impact-fund.html

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EdTech

German startup Masterplan.com raises €13 million to expand its B2B edtech software

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Today learning platform Masterplan.com has announced raising 13 million total funding, with existing investors only participating in the round. With the additional capital, Masterplan intends to further expand the development and distribution of its proprietary software. Most recently, Masterplan launched a no-coding tool (Masterplan Creator) that allows companies to build their own learning courses, and released a new Android and iOS app.

Founded in 2017, Masterplan is a learning platform for companies that makes workplace employee training easier and more engaging than ever before. The startup is looking back on a very successful 2020; like other edtech startups, the company came out on top of the pandemic and tripled its revenue year-on-year. Now three years after its launch, more than 250 companies, including Otto Group, VW or EON, use Masterplan to digitize their internal training.

‘We entered the market in 2017 as the Netflix of professional training with high-quality produced video content. Meanwhile, Masterplan is the all-round solution for all learning activities in companies. With our software, our customers can digitize their sales, product, leadership, soft skills, onboarding or mandatory trainings in no time,’ said Stefan Peukert, founder and CEO of Masterplan; ‘We are very successful with this concept. In 2020 alone, we tripled our revenue. Now it’s a matter of setting the course for the future: with the new funding, we will expand our target market to be the best offer for small and medium-sized companies. For that we focus on the development of our software, to become the most intuitive and most flexible solution for all our customers’ needs.’

The fresh funds marks their second mid-seven-figure convertible loan within one year. Both convertibles were raised with existing investors only and sum 13 million in total. As well as expanding its software, Masterplan plans to use the funding to continue to build its management team. Talip Yenal recently joined Masterplan as Chief Financial Officer, having previously helped steer the online retailer Amorelie as Managing Director. Iva Agova, formerly of Trivago, joined as Head of People and is expanding the HR division. And at the beginning of 2019, Dr. Jörn Heyenrath joined Masterplan as Sales Director from Stepstone. The respective sales team now numbers over 30 employees. Co-founder Dr. Daniel Schütt is also moving to the advisory board and will support the company from now on as an advisor and shareholder.

“The past three years have been an incredibly exciting and successful journey for Masterplan. For me, the right time has come to make my family the focus of my life,” said Dr. Daniel Schütt; “For this reason, I have decided to change from my role as co-managing director to an advisory role. This means I will continue to work with some of our most important customers and to support Masterplan strategically.”

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Source: https://www.eu-startups.com/2021/06/german-startup-masterplan-com-raises-e13-million-to-expand-its-b2b-edtech-software/

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