Duolingo Raises $35M at $2.4B Valuation

Recent reports confirmed that the widely-used language learning application, Duolingo, boasting 500 million app downloads, has secured $35 million in new funding, achieving a valuation of at least $2.4 billion. This development represents the latest progression in the ongoing story of substantial growth and investment within the e-learning sector and other educational technology companies, largely influenced by the increased reliance on digital platforms during the Covid-19 pandemic.

(Notably, these details emerged alongside news of another edtech company, Udemy, seeking to raise $100 million.)

Duolingo has now officially announced the $35 million investment, received from Durable Capital (established last year by former T. Rowe Price professional Henry Ellenbogen) and General Atlantic. This funding elevates Duolingo’s valuation to $2.4 billion.

This represents a considerable increase compared to the $1.65 billion valuation Duolingo attained earlier in the year when General Atlantic initially invested $10 million in the company.

The current market conditions are a contributing factor to this growth.

The edtech industry has experienced a significant rise in demand, driven by educational institutions seeking more effective remote teaching methods, businesses aiming to train and connect remote employees, individuals pursuing productive activities beyond traditional entertainment, and educators exploring innovative teaching approaches for geographically dispersed students.

Duolingo has directly benefited from these trends. The app, which operates on a freemium model – offering free access with optional paid upgrades for enhanced, gamified features and displaying advertisements – reports a 30% increase in its user base over the past year, with projected bookings set to rise by 100%.

Importantly, the app was already demonstrating these positive trends prior to the pandemic, having consistently achieved 100% revenue growth for the last three years. According to Sensor Tower, Duolingo has been the top-performing education app in terms of revenue since 2019.

Headquartered in Pittsburgh, the United States accounts for 20% of Duolingo’s user base, its largest single market. However, the company is also experiencing growing adoption in numerous other regions (including, for example, users like the husband of the author in London learning Italian). Asia now constitutes 15% of the company’s users, and the Duolingo English Test has seen a fifteen-fold increase in usage as part of the higher education admissions process.

Looking ahead, it will be interesting to observe Duolingo’s future strategies. The company was co-founded and is currently led by Luis von Ahn, the creator of reCAPTCHA, and its initial business model involved language learners and app users translating text for paying companies. Currently, the company generates revenue through advertising and in-app premium features.

Duolingo has also expanded its offerings to cater to younger learners, launching an app earlier this year designed to help children develop reading and writing skills.

This diversification of revenue streams could prove valuable as the company considers a potential public offering.

“I’m proud of the impact we have achieved while also significantly growing our business,” stated CEO von Ahn.

“Duolingo embodies the qualities we seek in our investments: a strong mission, a positive culture, and a talented team with the potential for substantial long-term growth,” commented Henry Ellenbogen, founder and chief investment officer of Durable Capital Partners LP. “Luis is an exceptional entrepreneur, and we are excited to support Duolingo in its next phase of development.”

“We are pleased to strengthen our partnership with Luis and Duolingo following our initial investment in April 2020,” added Tanzeen Syed, MD at General Atlantic. “Duolingo has successfully developed a robust learning technology platform, an engaging and effective product, and a dedicated user community. We believe the company is well-positioned to further solidify its market leadership and expand its product offerings, team, and customer base, capitalizing on the accelerating global trend towards digital learning.”

Other recent funding activities in the edtech space include Udacity securing a $75 million debt round and achieving profitability earlier this month. In October, Kahoot announced a $215 million investment from SoftBank. Furthermore, in September, Outschool raised $45 million (and is now profitable), Homer secured $50 million (from a notable group of strategic investors), Unacademy raised $150 million, and Byju’s, a major player in the industry, obtained $500 million from Silver Lake.

Numerous smaller funding rounds, new edtech startup launches, and other indicators suggest growing acceptance of online education as a permanent fixture in the educational landscape.

Updated to clarify the proportion of users located in the U.S. compared to the rest of the world.