Money has flowed into the edtech sector over the last twelve months. Bumper funding rounds and freshly minted unicorns are grabbing headlines, but there are questions about how long current investment appetite will last.
Unlike other edtech startups seemingly on the fast track to big checks, Codecademy has been in the business for over a decade. And its announcement of a $40 million Series D round, led by Owl Ventures, is recognition of years of growth at the forefront of programming education. Founded in 2011, the New York-based company has built a hugely popular training platform that has helped millions of students learn to code over the last decade.
COVID-19 certainly drove a surge in the number of people accessing its platform, attracting five million new users, 150,000 new paying subscribers and a growing number of business partners. But the New York-based company had already served 45 million students in more than 190 countries before the pandemic hit.
“We have worked on building a really capital efficient business over time,” said Zach Sims, Codecademy’s co-founder and CEO. “We’ve been cashflow positive for more than 18 months at this point … I think that's a rarity in the world of technology startups and in the world of fast-growth, education-technology startups.”
Over the past ten years, Codecademy has amassed millions of users while spacing out its investment rounds. The company last raised $30 million in a Series C round led by Naspers in 2016, and a $10 million Series B back in 2012. Investors from these previous rounds include Flybridge Capital Partners, Index Ventures, Alexis Ohanian and Sir Richard Branson’s Virgin Group.
“We focused on building a business to help our learners over the long haul, and not just grow explosively and then flame out,” Sims said. “We’ve been very careful about choosing partners and also when to raise capital. We looked at building a business that can be sustainable all the time but also primed for rapid growth and an eventual large outcome.”
The deal with Owl Ventures, one of the largest edtech-focused venture funds, appears to tick all of these boxes.
“Codecademy has been on our radar for a long time, as one of the early, long-standing leaders in online learning,” said Amit Patel, Owl Ventures’ managing director. “We could not be more excited to help the team continue its impressive growth trajectory and deliver its mission to empower the world with technical skills.” Owl is joined by Prosus and Union Square Ventures in this Series D round.
The edtech space is certainly having a moment with several blockbuster investment deals and buyouts over recent months. But Sims is cautious about the long-term implications and potential for rising asset prices to fall.
“I know that there’s talk about a bubble in certain areas, and I think that’s probably true,” he said. “I definitely worry about a bubble in the space where you’ve seen some companies grow 6, 7X over the course of the last year, building their businesses on top of Zoom, for instance, and assuming that [approach] will remain the same when it might not.”
A sample project in Codecademy.
Codecademy provides online training in more than a dozen popular coding languages and has a growing list of targeted programs for specific subjects including data science, machine learning and game development. In addition to a free basic plan, the company offers a $20-a-month Pro membership that provides exclusive course content, step-by-step roadmaps and real world practice projects designed by experts.
Last year, the company launched an enterprise version of its offering, called Codecademy for Business. To date it has worked with over 600 companies including IBM, The Guardian, The Motley Fool, Mixpanel, Paradox, and University of Washington's Institute of Health Metrics and Evaluation. Through regular exercises, assessments and certificates, the Business platform allows students to learn new skills and update employers with their coding progress.
Since Codecademy launched in 2011, the learn-to-code industry has spawned dozens, if not hundreds of coding bootcamps, apps and other competitors. So how is it keeping pace?
About half of Codecademy for Business customers work in non-technical roles like sales and marketing, according to the company. The program encourages them to apply what they learn to practice to deliver results in the workplace, and develop their individual skills and career plans simultaneously.
“A lot of our corporate clients are saying that’s a huge differentiator for them as they looked at us versus other learning providers that tend to be kind of more ‘lean back’ and video oriented. It's that interactivity that seems to really be making the difference for folks,” Sims said.
The number of employees at corporate clients using the platform jumped 350 percent during 2020, outstripping growth among Codecademy’s higher education users, another growing demographic which doubled last year.
“Learning at work is just an absolutely massive trend that we intend to tap into over the next couple of years,” Sims said. “I think when we look at the future of the business, it definitely lies more in the B2B [business-to-business] side of things than it does on the higher-ed side.”
Codecademy hired its first chief financial officer last November: former Chegg executive and general manager Adam Goldman. Chegg went public in 2013. Goldman’s appointment could foreshadow the path that Codecademy is pursuing, Sims shared. “I think that experience from Chegg signals the direction that we hope to go in the future, which is becoming a business of that size and scale, if not larger.”
The Series D funding will help Codecademy expand internationally, with India a focus for market expansion. Existing study materials will be expanded and new curriculums added to the platform as the company pursues more enterprise customers.
Codecademy began life in 2011 with a mission to provide the easiest way for people to learn to code. That goal remains the same ten years on, Sims said, but it is part of a bigger plan now.
"Our ambition now is significantly broader … How can we connect hundreds of millions of people around the world to economic opportunity? Today we are pursuing that by teaching consumers the skills they need in order to find jobs, and also by teaching companies the skills they need in order to stay relevant.”