Why did a profitable company decide to raise venture capital for the first time?
That’s the question surrounding Quizlet’s $12 million Series A round, led by Union Square Ventures and Costanoa Venture Capital. Altos Ventures, Owl Ventures and Imagine K-12’s co-founders, Tim Brady and Geoff Ralston, also invested in the San Francisco company. Fred Wilson and Greg Sands will join Quizlet’s board.
Founded in 2005 by Andrew Sutherland, then a 15-year-old student, Quizlet has been generating revenue since launch. (The company raised $30,000 from friends and family early on.) Any user can create study sets for free; a premium account, starting at $15 per user per year, removes ads and lets users upload images on the flashcards. There’s also a premium teacher account, at $25 per year, that allows teachers to manage track their students’ progress via a class account.
Quizlet may be one of dozens of flashcard study apps on the market, but it’s by far the most popular. The company boasts staggering numbers, with 1 billion study sessions completed, 100 million study sets created and 40 million monthly active users. By some measures, Quizlet is among the 50 most visited websites in the US.
About 70 percent of Quizlet’s users are K-12 and college students, estimates Sutherland, now the company’s Chief Technology Officer. Another 25 percent are adult learners—from ski instructors to US diplomats. Teachers make up the rest.
Quizlet has been profitable since 2009 and currently claims millions in yearly revenue. Over the years, Sutherland and Dave Margulius, Quizlet’s CEO, have turned down numerous offers from investors. Wilson has been courting the duo since 2012—until finally getting a call from Margulius earlier this year about fundraising.
Why the change of heart? “We think it’s possible for Quizlet to reach a billion students,” Sutherland tells EdSurge. “We were growing our team and revenue, but not as fast as we wanted.”
Money is only part of the reason; Sutherland picked investors with the experience and connections to help the company scale international growth. Union Square Ventures’ portfolio includes Etsy and Twitter, along with Codecademy, Duolingo and Edmodo among its education technology investments.
Beyond growing its user base, the company best known for flashcards now wants to “move beyond memorization,” says Sutherland. One of its newest tools available to premium users, “Long Term Learning,” attempts to track what users have learned over time—and when they may forget nuggets of information. The system then suggests periodic reminders. The goal, Sutherland says, is to get “students more oriented towards building cumulative knowledge over time rather than cramming for tests and forgetting things a week later.
As part of the deal, Margulius has stepped down from the chief executive position (but is still a board member). Mark Selcow, a board member and partner at Costanoa Venture Capital, will be filling the role on an interim basis.
“With the rise of inexpensive devices and broadly available Internet, it’s just now becoming possible to build an education platform that truly everyone can use,” Sutherland wrote in a blog post announcing the funding. It’s “time to be more ambitious, and that [means] aggressively expanding our team and product.” Quizlet has grown to 32 employees from 15 at the beginning of 2015. A year from now, Sutherland wants upwards of 50.
Not bad for a birthday present for a company that just turned 10. “You don’t see many Series A rounds for ten-year-old companies,” Wilson wrote. “But when you do, they are generally good ones to do.”