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Duolingo’s IPO pricing is great news for edtech startups

by Alex Wilhelm

While the Chinese technology market digests a new regulatory landscape impacting the country’s edtech market in a sharply negative manner, U.S. education technology companies have something to cheer about: Duolingo’s IPO priced very well.

The language-learning unicorn initially targeted an $85 to $95 per share IPO price range. That interval was later raised to $95 to $100 per share. And then, last night, Duolingo priced at $102 per share, just over its raised range.

That’s the sort of IPO pricing run that we tend to see from hot enterprise software companies (SaaS) that investors have favored heavily in recent quarters. But the stock market has also provided nigh-indulgent valuations to consumer-facing tech companies with strong brands, like Airbnb. So, the Duolingo IPO’s pricing strength should not be an utter surprise.

But it is a welcome result for U.S. edtech, regardless. When the company set its first IPO price range, TechCrunch noted that it was on track to earn a new, higher valuation. This led us to the following set of conclusions:

If Duolingo poses a strong debut, consumer edtech startups will be able to add a golden data point to their pitch decks. A strong Duolingo listing could also signal that mission-driven startups can have impressive turns.

And now Duolingo has managed to price above its raised range. Yeehaw, as they say.

In more prosaic terms, Duolingo has set a higher multiple for edtech revenue than we expected it to, implying that the exit value of edtech (Read more...)

Duolingo boosts IPO price target in boon to edtech startups

by Alex Wilhelm

U.S. edtech company Duolingo released a revised IPO price range this morning, boosting its potential per-share value to $100 after initially targeting a range that topped out at $95 per share.

Per the unicorn’s SEC filings, Duolingo is now targeting a $95 to $100 per share IPO price range, up from $85 to $95 per share, or a gain of around 12% at the bottom and 5% at the top.

TechCrunch previously called the Duolingo debut a bellwether of sorts for the larger U.S. edtech ecosystem; if Duolingo can price and trade well, investors in private companies may be more willing to invest, given a more proven and attractive exit market. On the other hand, if Duolingo prices weakly or trades poorly, the company could place a wet blanket atop the startup edtech world.

The fact that Duolingo is raising its IPO price range indicates that we are more likely on the path for a strong offering than a weak one.

For edtech companies that have hit unicorn status — like Masterclass, Course Hero, Quizlet and Outschool — it’s good news. For reference, those companies have raised $461.4 million, $97.4 million, $62 million and $130 million, respectively, per Crunchbase data.

What’s Duolingo worth?

The terms of the company’s IPO have not changed, aside from its proposed price. So, Duolingo is still selling 3.7 million shares in its debut, and some 1.41 million shares will be sold by existing equity holders. The company’s underwriters also reserved (Read more...)

Duolingo’s IPO could cast golden halo on edtech startups

by Natasha Mascarenhas

Edtech giant Duolingo set an initial price range for its impending IPO today. The unicorn expects to price in its public debut at $85 to $95 per share, selling 3,700,000 in the deal.

Another 1,406,113 shares are being sold by existing shareholders, and 765,916 shares are being offered to underwriting banks as part of the transaction. All told, the company may see 5,872,029 shares trade hands in its IPO, worth some $557,842,755. Duolingo itself can raise as much as $424,262,020 in gross proceeds at its current range, provided that its underwriting banks exercise their option.

The IPO is a material fundraising event for the company. Before its public offering, the largest single hit of capital that Duolingo raised was a $45 million Series D from 2015.

Let’s dig into what Duolingo, which we profiled in much more detail here, is worth at its IPO price and peek at its preliminary second-quarter results. Our goal will be to understand its valuation in the context of its growth. From there, we’ll be able to draw some general conclusions about the larger edtech startup market.

What’s it worth?

After its IPO, Duolingo will have 35,892,152 shares outstanding, sans its underwriter’s option. At the lower and upper bounds of its simple IPO valuation, Duolingo is worth $3.1 billion to $3.4 billion.

As with every company going public, Duolingo’s IPO valuation rises if we include shares that have vested in RSU or options form, but have yet to be exercised. In the case of (Read more...)

Duolingo’s S-1 depicts heady growth, monetization, new focus on English certification

by Natasha Mascarenhas

Duolingo filed to go public yesterday, giving the world a deep look inside its business results and how the pandemic impacted the edtech unicorn’s performance. TechCrunch’s initial read of the company’s filing was generally positive, noting that its growth was impressive and its losses modest; Duolingo recently began making money on an adjusted basis.

While the company’s top-level numbers are impressive, we want to go one level deeper to grow our understanding of the company beyond our EC-1.

Duolingo is likely entering a period in which it will have to invest heavily in features like pronunciation, efficacy and new apps — which could come at a steep upfront cost.

First, we’ll explore the growth of Duolingo’s total user base, how much money it makes per active user, and how effectively the company has managed to convert free users to paid products over time. The numbers will set us up to understand what else can be learned about Duolingo’s business beyond our original deep dive into the company’s finances — specifically underscoring the pressure cooker it finds itself in when looking for new revenue sources.

Starting with Duolingo’s growth in total active users, guess how fast they rose from 2019 to 2020. Hold that number in your head.

The actual numbers are as follows: In 2019, Duolingo closed the year with 27.3 million monthly active users (MAUs); it wrapped 2020 with 36.7 million MAUs. That’s a gain of 34%. If we narrow our gaze to Q1 2021 numbers (Read more...)

Edtech stocks are getting hammered but VCs keep writing checks

by Natasha Mascarenhas

After years in the backwaters of venture capital, edtech had a booming 2020. Not only did its products become must-haves after schools around the globe went remote, but investors also poured capital into leading projects. There was even some exit activity, with well-known edtech players like Coursera going public earlier this year.

But despite a rush of private capital — which has continued into this year, as we’ll demonstrate — edtech stocks have taken a hammering in recent weeks. So while venture capitalists and other startup investors are pumping more capital into the space in hopes of future outsize returns, the stock market is signaling that things might be heading in the other direction.

Who’s right? One investor that The Exchange spoke to noted that market turbulence is just that, and that he’s tuning into activity but not yet changing his investment strategy. At the same time, the recent volatility is worth tracking in case it’s a preview of edtech’s slowdown.

The Exchange explores startups, markets and money. 

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Let’s look at the changing value of edtech stocks in recent months, parse some preliminary data via PitchBook that provides a good feel for the directional momentum of edtech venture capital, and try to see if there’s irrational exuberance among private investors.

You could argue that it’s public investors who are suffering from irrational pessimism and that private-market investors have the right to it. But since public (Read more...)

Coursera set to roughly double its private valuation in impending IPO

by Natasha Mascarenhas

In a new S-1/A filing, Coursera set an initial IPO price range between $30 and $33 a share, signaling the market views its edtech business warmly ahead of its impending public offering.

Coursera will have 130,271,466 shares outstanding after its IPO, or 132,630,966 including its underwriters’ option. At $30 per share, the low end of the company’s IPO range and a share count inclusive of 2,359,500 shares reserved for its underwriting banks, the firm would be worth $3.98 billion. That number rises to $4.38 billion at $33 per share.

Coursera is being valued as a software company, likely a breathe-easy moment for still-private edtech companies, since the debut could be an industry bellwether.

This is a solid increase from Coursera’s last private-market valuation, which was around $2.4 billion when it raised a Series F round in October 2020.

For the bulls in the room, there’s a bigger valuation if you tinker with the numbers. In a fully diluted accounting, including in our calculation, shares that are issuable upon vested options and RSUs, Coursera’s share count rises to 166,006,474, or 168,365,974 if we count its underwriters’ option. At its most generous share count and highest projected price, Coursera’s valuation could reach $5.56 billion.

However, IPO-watching group Renaissance Capital comes to a smaller $5.1 billion figure for a midpoint-range, fully diluted valuation. That result excludes shares reserved for underwriters and equity currently present in vested RSUs.

Using the more modest $5.1 billion midpoint figure, Coursera would be worth around 17.5 times (Read more...)