Codecademy Raises $40 Million to Expand Enterprise Offerings

Codecademy Secures $40 Million in Series D Funding

Following a four-year period without external investment, the coding education platform, Codecademy, has successfully completed a new funding round. A $40 million Series D investment was led by Owl Ventures, with additional participation from Prosus and Union Square Ventures.

Joining a Trend in Edtech Investment

Codecademy is now part of a growing number of edtech companies attracting capital after a prolonged period of self-funding. Companies like ClassDojo, CourseHero, Quizlet, and Udacity have also recently secured new investment. However, founder Zach Sims, who initiated the company in 2011 while a student at Columbia University, emphasizes that Codecademy’s expansion and subsequent need for funding aren’t directly linked to the pandemic.

Sims clarified that much of the recent surge in edtech funding has been concentrated in K-12 and higher education solutions, as well as leisure learning platforms such as MasterClass. He believes Codecademy’s trajectory differs significantly from these trends.

Financial Performance and Growth Trajectory

Currently, the platform generates $50 million in annual recurring revenue. This figure aligns with Codecademy’s consistent growth pattern, which has seen consistent doubling since 2018. Notable growth has been observed in user acquisition; it took four years to reach the first 100,000 users, but an additional 50,000 paying users were added within the following year.

This funding round demonstrates investor interest in not only rapid expansion but also in established, sustainable growth. Codecademy has maintained cash-flow positivity for several years and still holds $20 million of its $30 million Series C funding, which was secured in 2016.

Strategic Use of New Capital

Despite a healthy cash reserve and strong demand, Codecademy chose to raise additional capital. Sims explains that the new funds will be allocated to strategic acquisitions, international expansion – particularly in India and other emerging markets – and talent acquisition.

A significant portion of the investment will also be directed towards Codecademy For Business, a paid product launched during the pandemic. This represents a strategic shift towards offering coding courses to enterprises, moving beyond its traditional direct-to-consumer model.

Expansion into the Enterprise Market

Launched in beta last year, Codecademy For Business has already attracted 600 paying clients. A substantial portion of these clients – approximately half – are organizations outside the technology sector, including banks, consulting firms, and small businesses seeking to enhance employee skills in data literacy and specialized programming.

Sims attributes the product’s development to direct customer requests and reflects a broader industry recognition of the necessity for employee training and reskilling initiatives.

Mirroring the Success of Udemy

This growth mirrors the recent success experienced by Udemy, another reskilling platform. Udemy also offers both enterprise and consumer products, with the enterprise segment currently driving greater revenue. Reports indicate that Udemy for Business has secured 7,000 customers and generates approximately $200 million in annual recurring revenue.

Sims acknowledges that developing an enterprise-focused product, which competes with platforms like Udemy and Coursera, requires significant upfront investment in research and development. He believes that leveraging Codecademy’s extensive user base will be both a key opportunity and a considerable challenge.

Long-Term Goals and Differentiation

Codecademy’s ultimate objective is to achieve a 50/50 split between its consumer and enterprise revenue streams. A key differentiator for the platform, according to Sims, is its emphasis on interactivity.

“Users are growing weary of video-based learning, and our core belief from the outset has been that learning is most effective through hands-on practice,” Sims stated.

Future Outlook and Potential IPO

While the company has not disclosed its current valuation, Codecademy’s growth appears robust and suggests a potential unicorn status. The company is diversifying its revenue streams, bolstering its financial reserves, and has recently appointed a CFO from Chegg, signaling a possible path towards an Initial Public Offering (IPO).