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Why is Duolingo worth 1.5 billion valuation?
Duolingo is a language learning website that uses bite sized videos to make learning language easy and fun, like games. It has been raising small amount of money and trying to get cash flow positive, which is a tall order in such a highly competitive field. Duolingo has a profitable, efficient business method and model and is a “market leader in the language learning space.” This new influx of cash will help the startup continue to pursue international expansion and support its new learning app for children. The coronavirus pandemic has created a generational opportunity for virtual learning and education technology. Duolingo looks to continue capitalizing on the present opportunity. Clearly, the new disruption is the "short video" formatting and vlog boom.
Since the company’s last round of funding, Duolingo has raised an additional $10 million from General Atlantic, which will take a board observer seat at Duolingo. This new outside investment raises Duolingo’s valuation above the previous $1.5 billion. The e-learning company last raised $30 million in December at that $1.5 billion valuation. However, the company did not disclose its specific new valuation.
Duolingo seems to pay attention to early childhood language learning with enough value to build value. It is perhaps similar to Baby Einstein's model - which is great for "babysitting children".
While it’s unusual for accompany to raise a smaller amount of money so soon after a successful round of funding, the online learning startup stated that it simply wanted to bring on a new investor and didn’t need a significant amount of cash as the company is still cash-flow positive.
Another key factoid here is that along with the $10 million, there was a larger secondary transaction, which occurs when an existing stockholder sells their stock for cash or to a third party, or to the company itself while the company is still private. In this case, an existing investor in Duolingo sold a small portion of their existing stake to allow General Atlantic to have a bigger stake in the company. The company declined to share the size of the secondary market transaction. Clearly, a small PE market is already forming around this edtech "unicorn".
Tanzeen Syed, a managing director for General Atlantic, stated that Duolingo has a profitable, efficient business model while maintaining hyper-growth characteristics” and is a “market leader in the language learning space.” So, exactly how does the Model work? In the past few weeks, Duolingo launched a new app to help children read and write, passed one million paying subscribers for Duolingo Plus and disclosed that its annual bookings run rate is $140 million. The company also recently hired its first CFO and general counsel.
This new influx of cash will help the startup continue to pursue international expansion and support its new learning app for children. The coronavirus pandemic has created a generational opportunity for virtual learning and education technology. Duolingo looks to continue capitalizing on the present opportunity.