Just a week after announcing the acquisition of PlaySay, Berlin-based language learning startup babbel.com has more news to share. Today we learned that they have closed a $10 million Series B round led by Reed Elsevier Ventures with participation of Nokia Growth Partners as well as the existing investors, IBB Beteiligungsgesellschaft via its VC Fonds Technologie Berlin and Kizoo Technology Ventures.
The round brings the total funding raised to date to $12.2 million and therefore close to its US based competitor Livemocha which raised around $14 million. The third of the trio, busuu comes to a total of $4.5 million with its latest Series A round last October.
While the ability to raise funding not necessarily makes a statement about the quality of the product or its business model I think that in this case it actually makes sense. As I wrote in my previous article about babbel.com last week, the founding team has proven to be able to build a viable company based on a relatively small amount of outside capital and then grow based on revenue. As babbel.com noted in the press release about the PlaySay acquisition which was also “fueled from operative cash flow”.
According to TechCrunch the three founders won’t take money off the table, therefore the investment will go directly into the expansion of babbel.com into new markets and platforms. Other European countries and the Americas are now in the focus. With two major global events around the corner and a growing middle class with dispensable income, Brazil is poised to be one of the battle grounds for language learning startups. The US which Markus Witte, CEO of babbel.com sees as “most matured” will be the other main market the startup wants to grow in with help through the PlaySay acquisition.
Which brings us to London-based busuu. The startup has a similar story and modus operandi, having raised small amounts of outside funding and growing quickly since the introduction of their mobile applications. According to the numbers both startups officially share, busuu has about 10 million users more than babbel.com, 25 million to 15 million. On the other hand, babbel.com only offers premium content which means that all users have to pay for the service whereas busuu offers freemium content which means that a significant number of its userbase does not pay for learning languages.
I am pretty sure that busuu is going to raise a $10 million or similar Series B in the coming weeks, latest in two months. It should not be difficult for the founding team as their numbers are quite impressive as well and the startup is also generating positive cash flow for years now. From what I have heard the busuu team certainly have some interesting ideas on how to innovate on their product which might go beyond ‘just’ apps. Let’s see if that vision is yet mature enough to be released in a near future.
However, busuu and to a certain degree Livemocha will need a well-filled war chest to fight off babbel.com. All three now target the same markets and thus it is going to be about marketing and teams on the ground.
Which brings us to Livemocha. Up to now Livemocha has no mobile applications I know of. It seems as if they are working on a new version of the web application (which probably also includes mobile applications) but nevertheless they are late to the game. Even compared to the yellow box selling old bull, aka Rosetta Stone, which offers a variety of mobile and tablet based applications.
It is hard to say how much money is left from the $14 million and if it is enough to launch a compelling suite of mobile applications. Maybe Livemocha has to raise a new round as well but I am not sure if the numbers are as good as those of babbel.com and busuu as the other two have basically accomplished the same user growth with far less funding.
Nevertheless I won’t count out Livemocha just yet as their focus now also seems to go into premium content and teacher lead learning. There are some English for professionals courses going on which are a mix of self-paced learning with the web application, peer learning with the community and instructor lead live lessons in a virtual classroom. Again, pretty similar to Rosetta Stone TOTALe.
So while babbel.com and busuu seem to go for the mass market with applications for the self guided learner, Livemocha is going towards a more personalized approach with expert teachers and live interactions. All in all the battle between the three promises to remain interesting.