Kahoot, an Oslo-based developer of a digital quiz tool popular with teachers, just started making money this year. But a recent investment from one of the biggest names in the entertainment business is valuing the company in the hundreds of millions.
In 2017, Kahoot joined the Disney Accelerator, a program run by the venture capital arm of the media juggernaut. As part of the participation terms, Disney initially invested an undisclosed sum, and retained the option to purchase a bigger stake at a later date. Last week, Disney took that option, and now owns 4 percent in Kahoot. TechCrunch reports that the deal gives the company a $376 million valuation. Åsmund Furuseth, Kahoot’s co-founder and CEO, confirmed that figure in an interview with EdSurge.
That may seem like a lofty figure for a company expecting to make $2 million in revenue this year. It’s a reminder that tech startup valuations are sometimes based more on potential than proof of revenue, and Kahoot is the latest test of whether a popular free education tool can successfully monetize and become financially stable.
In a recent company presentation (PDF) shared on the Norwegian stock exchange, Kahoot outlined an ambitious forecast for growth—and offered a roadmap for how it plans to meet investors’ expectations.
Launched in 2013, Kahoot offers a web-based and mobile app that allows anyone to create and partake in multiple-choice quizzes, which are accompanied by playful animations and sounds reminiscent of a game show. This tool was offered for free for the first five years, and amassed a following. In its presentation, the company claims it will reach 100 million monthly active users by the end of 2018. It also reports that 4.5 million K-12 and higher-ed educators hosted a Kahoot game over the past year, and that half of all U.S. K-12 students played Kahoot on a monthly basis.
Traction is no substitute for revenue, however, and flipping free users into paying ones is a test that not all education companies have passed. This summer, the company began offering a premium subscription for school users, which ranges from $1 to $10 per teacher per month, and a similar plan for companies that charges each user $10 to $40 per month.
By the end of this year, Kahoot expects to have over 40,000 premium accounts that altogether make up $1.8 million in revenue. (About 25,000 of them come from corporate users, and the rest come from schools.) The company is projecting another $300,000 in revenue from its premium content business, which charges publishers to distribute digital materials. That’s the math behind its $2.1 million revenue forecast this year.
The revenue projections for the next few years are ambitious: $12.4 million in 2019, and $32.2 million 2020 and $53.2 million the following year. It expects to drive most of that growth through new commercial products aimed at its corporate users (who already make up the majority of its paid accounts). These plans include a dashboard for professional learners to network and share content, and a concerted push to woo more publishers to pay to distribute their materials to Kahoot users. Companies and employees are expected to drive most of the revenue growth, as Furuseth adds that Kahoot is committed to keeping a free option available for school users.
Kahoot currently has 60 employees, and expects to nearly double its headcount to 110 staff in 2021.
It will also try a new strategy in 2019, one in which it will explore whether other educational companies can help support its growth.
Fresh from finishing the Disney accelerator, Kahoot is starting its own. Today, the company announced the launch of its Ignite program, which invites early-stage educational companies to partner with Kahoot to co-develop digital learning products and tap into its global distribution network of schools and companies. Examples of things that Kahoot could be interested in, Furuseth says, include math, language-learning and coding education tools.
Kahoot will also consider making equity investments—a sum that “could be in the range” of $1 million, says Furuseth—in these teams, and eventually acquire at least one company in 2019. He adds that the company has close to $30 million in the bank, from which it will fund these deals.
Pursuing growth through acquisition is generally a strategy reserved for well-funded (often private-equity-backed) companies. Kahoot, which has raised $63 million in funding to date, doesn’t quite have the cash to completely rely on acquisitions. Where it’s short on cash, it’s banking that its growing brand recognition across the education and corporate learning markets will attract more partners and paying users alike.
Should those plans not pan out, Furuseth says further fundraising from investors is not off the table.
