ClassDojo Reports First Profits - Business Model Evolution

The initial eight years of ClassDojo as an edtech company focused on consumers might appear unsuccessful at first glance: no income generation, no paying customers, and a team that hadn't expanded significantly. However, the company, designed to facilitate communication between parents and teachers regarding students, has secured substantial venture capital funding—totaling tens of millions of dollars—from prominent Silicon Valley investors such as Y Combinator, GSV, SignalFire, and General Catalyst throughout its history.

When asked how the startup managed to endure for so long without generating revenue, co-founder Sam Chaudhary explains it simply: “A strong conviction in the long-term potential of an idea allows for sustained dedication. We consistently believed that connecting people and fostering their engagement, particularly during times of physical separation like last year, would be profoundly valuable.”

Essentially, ClassDojo has been strategically focused on long-term growth within the edtech sector since 2011, steadily building a global base of free users who have become enthusiastic supporters. Selling to public schools can be challenging due to budgetary constraints, but ClassDojo has successfully navigated this landscape. Each engineer on the team effectively supports a user population equivalent to the size of San Francisco. The company has consistently operated with financial prudence, offering its primary service—a platform for communication between parents and teachers regarding classroom updates and involvement—as a free download.

“From the beginning, we believed that school districts aren’t the true customers in education; that perspective is counterproductive,” Chaudhary stated. “It’s comparable to Airbnb aiming to revolutionize travel by focusing on hotels.” This approach has enabled ClassDojo to achieve significant adoption, reaching 51 million users in 180 countries.

ClassDojo tested the loyalty of its user base two years ago, launching its first paid offering, Beyond School, in 2019. This service provides supplementary at-home learning resources to complement classroom instruction. Within four months of its release, ClassDojo achieved profitability. The circumstances surrounding the COVID-19 pandemic in 2020 further accelerated ClassDojo’s growth, tripling its revenue and expanding its subscriber base to hundreds of thousands of paying users.

This demonstrates how a venture-backed startup can thrive for years without immediate monetization plans, cultivate a dedicated user base, and ultimately convert those users into paying customers when a suitable opportunity arises.

The acceleration of ClassDojo’s business attracted the attention of Josh Buckley, the current CEO of Product Hunt and a solo capitalist.

“For a considerable period, they have been quietly establishing the most highly regarded brand in the industry; the children, teachers, and families they serve genuinely appreciate it. Their business strategy aligns with this vision, prioritizing the needs of individual users rather than the ‘system’” Buckley commented.

Buckley spearheaded a new $30 million funding round for ClassDojo, as he shared with TechCrunch. This round also includes participation from Superhuman CEO Rahul Vohra, Coda CEO and former Youtube head of product and engineering Shishir Mehrotra, former Airbnb growth product lead Lenny Rachitsky, and other investors.

This financing arrives almost two years after ClassDojo secured a $35 million Series C round led by GSV. While a funding round smaller than the previous one often indicates a down round, Chaudhary asserts that ClassDojo experienced a “significant increase in valuation” with this extension. This trend of opportunistic extension rounds has become increasingly common among edtech startups, particularly as the pandemic highlights the importance of innovation in remote learning.

ClassDojo’s Future Development

Supported by recent funding and its extensive user base, ClassDojo is now focused on transforming from a communication tool into a comprehensive platform designed to enhance students’ learning experiences outside of traditional schooling.

Chaudhary states that the company intends to expand its current team of 55 employees by doubling its size, dedicate resources to product development, and broaden its reach into new geographic areas.

“My vision has always been that ClassDojo could contribute to a more equitable future, one where a child’s opportunities aren’t limited by their location,” Chaudhary explained. “That’s the future we are actively working towards.” He drew a parallel between ClassDojo’s ambitions and those of Netflix, aiming to provide a diverse range of content to a wide audience, extending beyond specific subject areas.

ClassDojo is currently developing content addressing topics often overlooked in formal education, such as coping with failure and cultivating empathy, as part of its Big Idea series. The Beyond School program assists students in establishing goals, monitoring their progress, and discovering engaging activities like conversation prompts for family meals or guided meditations for bedtime.

Access to this premium content is available through a subscription service priced at $7.99 per month or $59.99 per year. The platform is exploring subtle methods to personalize and enrich its content, including customizable avatars, but continued innovation will be crucial for the success of this new direction.

While ClassDojo benefits from a substantial user base for potential monetization, succeeding in the content market presents challenges. Educational content is, to some degree, readily available. The existence of free resources on platforms like YouTube or Khan Academy raises the question of why users would pay for a subscription to an edtech platform offering similar material. The increasing accessibility of education is beneficial for learners and often explains why startups employ a freemium model to attract customers. Converting free users into paying subscribers requires edtech companies to deliver unique and specifically tailored content.

The United States remains ClassDojo’s primary market, with a growing presence in the United Kingdom, Ireland, United Arab Emirates, and other countries. Despite some concerns within the edtech sector regarding comparatively lower consumer spending on education in the United States, Chaudhary believes this assessment is inaccurate.

“To suggest that is to assume that families do not prioritize their children’s well-being, which I strongly disagree with,” he stated. “The ways in which American families demonstrate their commitment to their children are diverse, ranging from extracurricular activities and sports camps to choosing where to live.”

With this perspective, ClassDojo aspires to become the leading brand that families consider when focusing on a child’s education.

“I believe there is currently a gap in the market,” Chaudhary said. “There’s an opportunity to fill a void of apprehension, uncertainty, and doubt.”