Money Talks: Duolingo Raises $25M More (at a $700M Valuation)


Money Talks: Duolingo Raises $25M More (at a $700M Valuation)

By Tony Wan     Jul 25, 2017

Money Talks: Duolingo Raises $25M More (at a $700M Valuation)
Duolingo co-founders Severin Hacker (left) and Luis von Ahn

As the chief executive behind one of the world’s most popular language-learning tools, Luis von Ahn ironically struggles with picking up a new tongue. “I’m actually very bad at learning languages, which is pretty funny, considering what I do,” the CEO and co-founder of Duolingo said in an email to EdSurge. An English and Spanish speaker, von Ahn is “making good progress” on learning Portuguese and hopes to tackle French next.

What von Ahn may lack in foreign language skills, he makes up for with fluency in another lingo: money. Today marks the latest funding milestone for Duolingo: a $25 million Series E round, led by Drive Capital. The Pittsburgh-based company has now raised $108.3 million.

Von Ahn helped start Duolingo in 2012 as an effort to bring free language education across the world. By then, million of web surfers had already been acquainted with another of his inventions (if not his name): reCAPTCHA, which has been used in many websites that require users to prove they are human. (Anyone who’s had to type in garbled text to purchase tickets online, for instance, can thank him.)

Duolingo currently offers 72 courses covering 27 distinct languages. In addition to exercises and quizzes, there are also digital flashcards (which can be used for any subject, not just languages) and AI chatbots for conversation practice.

“Our goal is to use AI and machine learning to improve our Bots over time—to the point where they can replicate the quality of a human language tutor,” von Ahn wote. “One-on-one tutoring is one of the most effective ways to learn a foreign language, but it’s expensive and thus inaccessible for most people. Language teachers will always have a critical role in education, but for those who don’t have access to great teachers, technology—and particularly AI—can help provide access to quality education for everyone.”

Duolingo’s rapid rise in a sea of language learning apps has been the envy of technologists and investors. Its growth to 200 million users has been the subject of a piece on First Round Review, a popular blog affiliated with the investment firm. (It turns out that gamified mechanics like badges and streaks aren’t just gimmicks.) The company also helped put Pittsburgh on the map as part of the city’s “tech makeover” in a recent New York Times profile.

In addition to its consumer offerings, more than 300,000 classrooms—mostly in the U.S., Canada and Latin America—are using Duolingo for Schools. The company also offers English certification tests (for $49) that are now accepted at more than 90 U.S. universities, including Notre Dame, NYU and Yale. (International applicants to U.S. colleges make up the majority of test takers.)

Despite its popularity, Duolingo still burns more money than it makes. Yet it has been actively tinkering with monetization experiments. Ads, which show up at the end of each lesson, “has become our primary source of revenue currently,” von Ahn shared. There are also in-app purchases that allow users to buy new outfits for their avatars, fix a broken streak (the number of consecutive days a user hits Duolingo learning goals), and access bonus lessons. There’s also a “Duolingo Plus” monthly subscription that removes all ads and lets users download lessons for offline access.

The global language learning market— by one estimate a $193 billion industry for English alone—is stacked with competition across the globe. Other upstarts include Busuu, Memrise and Voxy. Older stalwarts like Rosetta Stone are reinventing their offerings for the mobile era. Then there are traditional language schools offered by the likes of Wall Street English, whose brick-and-mortar operations has persisted for decades.

Competitors aside, von Ahn watches another class of companies more closely. What sets his team apart, he said, is that “we think of Duolingo as a game; you play Duolingo and learn while playing.” Currently, “no game has captured our attention in the past year more than Clash Royale, [developed] by Supercell. We have a very competitive clan going on and our team takes a lot of inspiration from their designs in terms of social features, rewards, and the way they keep you coming back for more.”

Efforts to make learning delightful permeate through the company’s offerings—both real and imaginary. For April’s Fool last year it offered a pillow to teach people a new language in their sleep. There’s also a course on emojis. Jokes aside, Duolingo also offers (seriously) a course on High Valyrian, the tongue spoken by Daenerys Targaryen on “Game of Thrones.”

With this latest funding round, Duolingo now claims a valuation of $700 million. The infusion of cash will help the company dramatically increase its staff from 80 to 150 employees by the end of 2018.

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