kahoot picks up $215m from softbank for its user-generated, gamified e-learning platform
Following an initial funding announcement of $28 million earlier in the year, Kahoot, the user-generated, gamified e-learning platform, today revealed a significantly larger investment to capitalize on the current growth in demand for remote educational resources.
The Norwegian company – which has recorded 1.3 billion “participating players” over the past 12 months – has secured $215 million from SoftBank. This investment was made through a “private placement” involving the issuance of 43,000,000 new shares to a SoftBank Group Corp. subsidiary. The placement price was set at 46 Norwegian Krone per share, totaling NOK1,978 million (equivalent to $215 million), and these funds will be allocated to acquisitions and continued expansion efforts.
Kahoot is listed on the Merkur Market in Oslo – an intermediate stage between a private startup and a fully public company – and its stock price rose by over 15% today following the announcement. At the start of trading today, the company’s value stood at NOK22.2 billion, or approximately $2.4 billion, and this market capitalization is expected to increase further as a result of the recent investment.
“Kahoot! is currently experiencing substantial growth and increased adoption as organizations increasingly seek engaging, reliable, and easy-to-use solutions for building company culture, providing education, and facilitating interaction,” the company stated. “Simultaneously, schools and educators are looking for ways to improve the learning experience, whether in a virtual or traditional classroom setting. The company plans to utilize the net proceeds from this Private Placement to fund accelerated growth through strategic, non-organic opportunities and to further develop a distinctive platform.”
We have contacted SoftBank for a statement regarding this news – which Kahoot announced with minimal detail, as required for disclosure as a publicly traded entity – and will provide updates as more information becomes available.
Update: A spokesperson indicated that SoftBank will not be issuing any further comments at this time.
SoftBank has a well-established history of investing in both the gaming and online education sectors, with previous investments in companies like Supercell (a successful European gaming startup, now primarily owned by Tencent) and, more recently, Unacademy, an Indian e-learning platform.
The company has been a highly active investor in the startup ecosystem, through SoftBank Group, the Vision Fund, and other associated venture capital funds.
However, not all of these investments have yielded positive results. The company has faced criticism for providing substantial funding to rapidly growing startups that struggled with profitability and cash flow – examples include OYO, WeWork, and Uber – and, in some instances, appeared to lack a clear path to improvement. This led some to believe that SoftBank’s investment approach had become rushed and lacked careful management.
Despite these challenges, SoftBank has remained a significant investor, and Rajeev Misra, head of the Vision Fund, recently identified e-learning as one of three key investment areas, particularly in light of the COVID-19 pandemic.
Kahoot has developed a dual business model: one platform geared towards school children for creating, using, and accessing online learning content, and another platform for businesses to build, utilize, and share corporate training materials. The former emphasizes free access, while the latter is a subscription-based service.
In both instances, Kahoot’s approach centers on gamification – designing learning experiences as games – to enhance engagement and enjoyment. The company has likened itself to the “Netflix of Education,” though a comparison to YouTube may be more accurate due to the user-generated nature of much of its content.
Kahoot has demonstrated success with this model, reporting 1.3 billion participating players, 200 million games played, and 100 million user-created Kahoots in the last 12 months.
For context, last month, when announcing an acquisition to strengthen its corporate learning offerings – the purchase of an enterprise engagement platform called Actimo for approximately $33 million – the company stated it had accumulated 1 billion “participating players” and 4.4 billion users since its launch in 2013.
The company’s Q3 earnings, released earlier this month, showed invoiced revenue of $11.6 million, a 240% increase compared to the same quarter last year. It also reported $5.2 million in positive cash flow from operations, up from $-0.6 million in Q3 2019, and a 160% year-over-year increase in paid subscriptions, reaching 360,000.
SoftBank is not Kahoot’s first prominent investor. Other backers include Microsoft, Disney, Northzone, and Creandum. The company has now raised a total of $325 million (based on current exchange rates).
Online education has been steadily growing for years, as schools and students increasingly turn to the internet to supplement, and sometimes replace, traditional classroom instruction, benefiting from wider accessibility, potentially lower costs (particularly in higher education), and student preference.
However, 2020 saw a dramatic acceleration of this trend as many schools reduced or suspended in-person teaching to mitigate the spread of the novel coronavirus and the resulting COVID-19 pandemic.
This led to a significant surge in activity – often urgent and driven by necessity – and increased investor interest in e-learning startups. Recent funding announcements include Outschool ($45 million, now profitable), Homer ($50 million from strategic investors), Unacademy ($150 million), and Byju’s ($500 million from Silver Lake).
In addition to e-learning, gaming companies have also experienced a boost this year, providing entertainment and engagement as normal activities have been limited due to the global health crisis. Just yesterday, gaming giant Roblox, previously valued at $4 billion, announced it had confidentially filed for an initial public offering.