Money Talks: Babbel Raises $22M to Help Online Language Learners

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Adults who put effort into learning a language usually want to be able to carry conversations, says Thomas Holl, co-founder and President of Babbel. So his company doesn’t believe in teaching “useless sentences like ‘the boy is under the table,’ which are grammatically correct,” he tells EdSurge. “But no one will actually use these sentences in real life.”

Parents of mischievous children may disagree. And given his company’s name, it may seem ironic that Holl’s not too fond of babbling. But investors like his approach. The online language learning company has raised $22 million in a Series C round led by Scottish Equity Partners, with existing investors Reed Elsevier Ventures, Nokia Growth Partners and VC Fonds Technology Berlin also participating. Babbel has now raised $33 million.

The idea for Babbel grew out of a vocabulary program built by Lorenz Heine, co-founder and Chief Innovation Officer, when he tried to learn Spanish. The company was founded in Berlin in 2007 and has since expanded to an office in New York, which together house more than 350 employees.

Babbel offers courses for 14 languages for a subscription ranging from $6.95 to $12.95 per month, a business model that has helped the company stay profitable since 2011. Holl claims the majority of paying users “tend to stay for more than a year.”

The premium business model is a contrast to the free services offered by Duolingo, which raised $45 million in a Series D round last month. The Pittsburgh, PA-based language learning company initially supported itself by selling crowdsourced translations of online articles to companies like CNN, but has since pivoted to focus on serving schools. Today it also offers “Test Center” certifications for $20 a pop.

Holl says Babbel targets a different demographic: adult learners over the age of 25 who are “motivated by self enrichment.” In Europe, where the company first grew its business, English is the most commonly studied language on Babbel, “a big part of which is because people want to use it in their jobs,” he observes.

In the US, Spanish accounts for the majority of the company’s courses taken, with the rest distributed among evenly German, French and Italian. “We don’t have many people [here] who actually need to learn a language for school or job.”

While other online language companies help learners connect and chat with native speakers, the idea has been scrapped by Babbel. “It sounds great in theory,” says Holl, “but if you have to depend on another person being there and not losing interest over time, it’s pretty hard to make that work as a business.” He adds that many beginning learners are often not ready—and sometimes too embarrassed—to attempt speaking with strangers.

The company prefers to experiment with other ambitious efforts. Babbel rode the Apple Watch wave, becoming the first language learning app available on the gadget. The functions are currently limited; users can learn up to 360 words from each of the languages.

“We’re focusing on how to get the product into the daily lives of the user,” says Holl. “We’d rather have you use Babbel use five times for 10 minutes a day, than start a binge learning lesson for two hours.”

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