Codeacademy, the New York-based online interactive platform that offers coding classes in a wide variety of programming languages, is a little like background noise; it’s been operating reliably since founder Zach Sims created the company while still a Columbia University student in 2011. It’s a brand that people know and that millions have used, but because it has grown steadily, without headline-making funding rounds — or, conversely, newsworthy layoffs — the 90-person company doesn’t routinely attract a lot of press attention.
That’s fine with Sims, who we spoke with last week following the most recent bout of bad publicity for Lambda School, a younger rival that has raised $48 million from investors, compared with the $42.5 million that Codecademy has raised over time. Sims says his company is continuing to chug along nicely.
The question, increasingly, is whether that’s ‘nice’ enough for VCs. Indeed, Codecademy — like a lot of startups right now — is in the awkward position of being a smart, solid, steadily but not massively growing business — which raises questions about its next steps.
The last time we’d spoken with Sims, roughly two years ago, Codecademy — which struggled for years with how to produce meaningful revenue — had recently launched two premium products. One of these, Codecademy Pro, helps users who are willing to spend $40 per month (or $240 per year) on the service to learn the fundamentals of coding, as well as develop a deeper knowledge in up to 10 areas, including machine learning and data analysis. Sims says this has taken off, though he declined to share specifics.
A second offering, Codecademy Pro Intensive, that was designed to immerse learners from six to 10 weeks in either website development, programming or data science, has since been dropped.
Sims says the company’s international have meanwhile been growing, with 60 percent of its paying users based in the U.S. and the rest elsewhere, including in India and Brazil. (The need for coding skills “isn’t a U.S.-only phenomenon,” Sims notes.)
Who are these users? He says they tend to fall into one of two buckets: those who are learning a discrete skill set, perhaps to build a website in a pinch, and those who are gainfully employed but looking to climb the ladder or switch jobs and who see Codeacademy as a way to spend a couple of hours a week to develop the skills to get there.
Sims says the payback is typically quick and that its customers easily rationalize the cost of the courses, which are exceedingly affordable as these things go. By way of comparison, some on-premise coding schools charge upwards of $20,000 a year — a big enough expense that in order to make themselves more accessible, they invite students to pay nothing upfront and instead collect a percentage of their salary once they find a job.
Naturally, because Codecademy largely lives online, so, too, do criticisms sometimes about its perceived shortcomings. One customer — a self-described computer science major — authored a thoughtful review in December, writing that “being a programmer is more than simply being able to memorize syntax,” While Codecademy has introduced “thousands to the fundamentals of computer science,” through “addictive bite-sized pieces that are easy to accomplish,” it falls short in helping cultivate a “coders’ mindset,” he wrote.
Either way, enough people are finding value in Codecademy’s vast number of offerings that it recently reached an important milestone — it’s now cash-flow positive — having doubled it revenue last year. Sims is understandably proud of this accomplishment, noting that “there are few [coding platforms] that are growing sustainably and profitably and generating cash that can be invested back into the business.”
Codecademy is enjoying the same tailwinds it has from the start, too. While skepticism has grown around coding schools more broadly, the ability to design, shape, correct, and secure software will only grow more valuable. Receiving a related education that comes affordably and doesn’t require an income-share agreement remains an appealing proposition, too.
In fact, the company is continuing to paint that picture for consumers and, we gather, it’s talking more to enterprises that are starting to offer Codecademy type classes to employees. Though Codecademy already sells classes in volume packs, Sims suggests that a big push in 2020 will involve tie-ups with companies that want to provide what it teaches as a perk.
Whether it intends to paint a picture for investors, too, is another question, one that Sims declined to answer when we asked about fundraising more broadly.
Certainly, follow-on rounds are growing harder to land, as described in our piece last week about “portfolio bloat.” The reason: VCs have raised so much money in recent years that they’re funneling it into new startups faster than ever, too (They need to find the Next Big Thing to return all that capital.)
That’s leaving a lot of solidly run companies to fend for themselves for now.
Given Codecademy’s cash-flow positive status, at least, it can afford to wait.
The business of selling consumer goods and services online is a relatively young endeavor across Africa, but ecommerce is set to boom.
Over the last eight years, the sector has seen its first phase of big VC fundings, startup duels and attrition.
To date, scaling e-commerce in Africa has straddled the line of challenge and opportunity, perhaps more than any other market in the world. Across major African economies, many of the requisites for online retail — internet access, digital payment adoption, and 3PL delivery options — have been severely lacking.
African e-commerce 2.0 will include some old and new players, play out across more countries, place more priority on internet services, and see the entry of China.
But before highlighting several things to look out for in the future of digital-retail on the continent, a look back is beneficial.
Jumia vs. Konga
The early years for development of African online shopping largely played out in Nigeria (and to some extent South Africa). Anyone who visited Nigeria from 2012 to 2016 likely saw evidence of one of the continent’s early e-commerce showdowns. Nigeria had its own Coke vs. Pepsi-like duel — a race between ventures Konga and Jumia to out-advertise and out-discount each other in a quest to scale online shopping in Africa’s largest economy and most populous nation.
Traveling in Lagos traffic, large billboards for each startup faced off across the skyline, as their delivery motorcycles buzzed between stopped cars.
Covering each company early on, it appeared a battle of VC attrition. The challenge: who could continue to raise enough capital to absorb the losses of simultaneously capturing and creating an e-commerce market in notoriously difficult conditions.
In addition to the aforementioned challenges, Nigeria also had (and continues to have) shoddy electricity.
That included their own delivery and payment services (KongaPay and JumiaPay). In addition to sales of goods from mobile-phones to diapers, both startups also began experimenting with verticals for internet based services, such as food-delivery and classifieds.
While Jumia and Konga were competing in Nigeria, there was another VC driven race for e-commerce playing out in South Africa — the continent’s second largest and most advanced economy.
E-tailers Takealot and Kalahari had been jockeying for market share since 2011 after raising capital in the hundreds of millions of dollars from investors Naspers and U.S. fund Tiger Global Management.
Jumia went on to expand online goods and services verticals into 14 Africa countries (though it recently exited a few) and in April 2019 raised over $200 million in an NYSE IPO — the first on a major exchange for a VC-backed startup operating in Africa.
Jumia’s had bumpy road since going public — losing significant share-value after a short-sell attack earlier in 2019 — but the continent’s leading e-commerce company still has heap of capital and generates $100 million in revenues (even with losses).
Venture capital investment exploded across a number of geographies in 2019 despite the constant threat of an economic downturn.
San Francisco, of course, remains the startup epicenter of the world, shutting out all other geographies when it comes to capital invested. Still, other regions continue to grow, raking in more capital this year than ever.
In Utah, a new hotbed for startups, companies like Weave, Divvy and MX Technology raised a collective $370 million from private market investors. In the Northeast, New York City experienced record-breaking deal volume with median deal sizes climbing steadily. Boston is closing out the decade with at least 10 deals larger than $100 million announced this year alone. And in the lovely Pacific Northwest, home to tech heavyweights Amazon and Microsoft, Seattle is experiencing an uptick in VC interest in what could be a sign the town is finally reaching its full potential.
Seattle startups raised a total of $3.5 billion in VC funding across roughly 375 deals this year, according to data collected by PitchBook. That’s up from $3 billion in 2018 across 346 deals and a meager $1.7 billion in 2017 across 348 deals. Much of Seattle’s recent growth can be attributed to a few fast-growing businesses.
Convoy, the digital freight network that connects truckers with shippers, closed a $400 million round last month bringing its valuation to $2.75 billion. The deal was remarkable for a number of reasons. Firstly, it was the largest venture round for a Seattle-based company in a decade, PitchBook claims. And it pushed Convoy to the top of the list of the most valuable companies in the city, surpassing OfferUp, which raised a sizable Series D in 2018 at a $1.4 billion valuation.
Convoy has managed to attract a slew of high-profile investors, including Amazon’s Jeff Bezos, Salesforce CEO Marc Benioff and even U2’s Bono and the Edge. Since it was founded in 2015, the business has raised a total of more than $668 million.
Remitly, another Seattle-headquartered business, has helped bolster Seattle’s startup ecosystem. The fintech company focused on international money transfer raised a $135 million Series E led by Generation Investment Management, and $85 million in debt from Barclays, Bridge Bank, Goldman Sachs and Silicon Valley Bank earlier this year. Owl Rock Capital, Princeville Global, Prudential Financial, Schroder & Co Bank AG and Top Tier Capital Partners, and previous investors DN Capital, Naspers’ PayU and Stripes Group also participated in the equity round, which valued Remitly at nearly $1 billion.
Up-and-coming startups, including co-working space provider The Riveter, real estate business Modus and same-day delivery service Dolly, have recently attracted investment too.
A number of other factors have contributed to Seattle’s long-awaited rise in venture activity. Top-performing companies like Stripe, Airbnb and Dropbox have established engineering offices in Seattle, as has Uber, Twitter, Facebook, Disney and many others. This, of course, has attracted copious engineers, a key ingredient to building a successful tech hub. Plus, the pipeline of engineers provided by the nearby University of Washington (shout-out to my alma mater) means there’s no shortage of brainiacs.
There’s long been plenty of smart people in Seattle, mostly working at Microsoft and Amazon, however. The issue has been a shortage of entrepreneurs, or those willing to exit a well-paying gig in favor of a risky venture. Fortunately for Seattle venture capitalists, new efforts have been made to entice corporate workers to the startup universe. Pioneer Square Labs, which I profiled earlier this year, is a prime example of this movement. On a mission to champion Seattle’s unique entrepreneurial DNA, Pioneer Square Labs cropped up in 2015 to create, launch and fund technology companies headquartered in the Pacific Northwest.
Boundless CEO Xiao Wang at TechCrunch Disrupt 2017
Operating under the startup studio model, PSL’s team of former founders and venture capitalists, including Rover and Mighty AI founder Greg Gottesman, collaborate to craft and incubate startup ideas, then recruit a founding CEO from their network of entrepreneurs to lead the business. Seattle is home to two of the most valuable businesses in the world, but it has not created as many founders as anticipated. PSL hopes that by removing some of the risk, it can encourage prospective founders, like Boundless CEO Xiao Wang, a former senior product manager at Amazon, to build.
“The studio model lends itself really well to people who are 99% there, thinking ‘damn, I want to start a company,’ ” PSL co-founder Ben Gilbert said in March. “These are people that are incredible entrepreneurs but if not for the studio as a catalyst, they may not have [left].”
Boundless is one of several successful PSL spin-outs. The business, which helps families navigate the convoluted green card process, raised a $7.8 million Series A led by Foundry Group earlier this year, with participation from existing investors Trilogy Equity Partners, PSL, Two Sigma Ventures and Founders’ Co-Op.
Years-old institutional funds like Seattle’s Madrona Venture Group have done their part to bolster the Seattle startup community too. Madrona raised a $100 million Acceleration Fund earlier this year, and although it plans to look beyond its backyard for its newest deals, the firm continues to be one of the largest supporters of Pacific Northwest upstarts. Founded in 1995, Madrona’s portfolio includes Amazon, Mighty AI, UiPath, Branch and more.
Voyager Capital, another Seattle-based VC, also raised another $100 million this year to invest in the PNW. Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, closed on another $180 million to invest in early-stage consumer startups in May. And new efforts like Flying Fish Partners have been busy deploying capital to promising local companies.
There’s a lot more to say about all this. Like the growing role of deep-pocketed angel investors in Seattle have in expanding the startup ecosystem, or the non-local investors, like Silicon Valley’s best, who’ve funneled cash into Seattle’s talent. In short, Seattle deal activity is finally climbing thanks to top talent, new accelerator models and several refueled venture funds. Now we wait to see how the Seattle startup community leverages this growth period and what startups emerge on top.
2019 brought more global attention to Africa’s tech scene than perhaps any previous year.
A high profile IPO, visits by both Jacks (Ma and Dorsey), and big Chinese startup investment energized that.
The last 12 months served as a grande finale to 10 years that saw triple digit increases in startup formation and VC on the continent.
Here’s an overview of the 2019 market events that captured attention and capped off a decade of rapid growth in African tech.
The story of the year is the April IPO on the NYSE of Pan-African e-commerce company Jumia. This was the first listing of a VC backed tech company operating in Africa on a major global exchange — which brought its own unpredictability.
Founded in 2012, Jumia pioneered much of its infrastructure to sell goods to consumers online in Africa.
With Nigeria as its base market, the Rocket Internet backed company created accompanying delivery and payments services and went on to expand online verticals into 14 Africa countries (though it recently exited a few). Jumia now sells everything from mobile-phones to diapers and offers online services such as food-delivery and classifieds.
The online retailer gained investor confidence out of the gate, more than doubling its $14.95 opening share price post IPO.
That lasted until May, when Jumia’s stock came under attack from short-seller Andrew Left, whose firm Citron Research issued a report accusing the company of fraud. The American activist investor’s case was bolstered, in part, by a debate that played out across Africa’s tech ecosystem on Jumia’s legitimacy as an African startup, given its (primarily) European senior management.
The entire affair was further complicated during Jumia’s second quarter earnings call when the company disclosed a fraud perpetrated by some of its employees and sales agents. Jumia’s CEO Sacha Poignonnec emphasized the matter was closed, financially marginal and not the same as Andrew Left’s short-sell claims.
Whatever the balance, Jumia’s 2019 ups and downs cast a cloud over its stock with investors. Since the company’s third-quarter earnings-call, Jumia’s NYSE share-price has lingered at around $6 — less than half of its original $14.95 opening, and roughly 80% lower than its high.
Even with Jumia’s post-IPO rocky road, the continent’s leading e-commerce company still has heap of capital and is on pace to generate over $100 million in revenues in 2019 (albeit with big losses).
The company plans reduce costs by generating more revenue from higher-margin internet services, such as payments and classifieds.
There’s a fairly simple equation for Jumia to rebuild shareholder confidence in 2020: avoid scandals, increase revenues over losses. And now that the company’s publicly traded — with financial reporting requirements — there’ll be four earnings calls a year to evaluate Jumia’s progress.
Jumia may not be the continent’s standout IPO for much longer. Events in 2019 point to Interswitch becoming the second African digital company to list on a global exchange in 2020. The Nigerian fintech firm confirmed to TechCrunch in November it had reached a billion-dollar unicorn valuation, after a (reported) $200 million investment by Visa.
Founded in 2002 by Mitchell Elegbe, Interswitch created much of the initial infrastructure to digitize Nigeria’s (then) predominantly cash-based economy. Interswitch has been teasing a public listing since 2016, but delayed it for various reasons. With the company’s billion-dollar valuation in 2019, that pause is likely to end.
“An [Interswitch] IPO is still very much in the cards; likely sometime in the first half of 2020,” a source with knowledge of the situation told TechCrunch.
China-Africa goes digital
2019 was the year when Chinese actors pivoted to African tech. China is known for its strategic relationship with Africa based (largely) on trade and infrastructure. Over the last 10 years, the country has been less engaged in the continent’s digital-scene.
That was until a torrent of investment and partnerships this past year.
July saw Chinese-owned Opera raise $50 million in venture spending to support its growing West African digital commercial network, which includes browser, payments and ride-hail services.
In August, San Francisco and Lagos-based fintech startup Flutterwave partnered with Chinese e-commerce company Alibaba’s Alipay to offer digital payments between Africa and China.
In September, China’s Transsion — the largest smartphone seller in Africa — listed in an IPO on Shanghai’s new STAR Market. The company raised ≈ $394 million, some of which it is directing toward venture funding and operational expansion in Africa.
The last quarter of 2019 brought a November surprise from China in African tech. Over 15 Chinese investors placed over $240 million in three rounds. Transsion backed consumer payments startup PalmPay raised a $40 million seed, stating its goal to become “Africa’s largest financial services platform.”
In the new year, TechCrunch will continue to cover the business arc of this surge in Chinese tech investment in Africa. There’ll surely be a number of fresh macro news-points to develop, given the debate (and critique) of China’s role in Africa.
Nigeria and fintech
On debate, the case could be made that 2019 was the year when Nigeria become Africa’s unofficial capital for fintech investment and digital finance startups.
Kenya has held this title hereto, with the local success and global acclaim of its M-Pesa mobile-money product. But more founders and VCs are opting for Nigeria as the epicenter for digital finance growth on the continent.
A rough tally of 2019 TechCrunch coverage — including previously mentioned rounds — pegs fintech related investment in the West African country at around $400 million over the last 12 months. That’s equivalent to roughly one-third of all startup VC raised for the entire continent in 2018, according to Partech stats.
From OPay to PalmPay to Visa — startups, big finance companies and investors are making Nigeria home-base for their digital finance operations and outward expansion in Africa.
The founder of early-stage payment startup ChipperCash, Ham Serunjogi, explained the imperative to operate in the West African country. “Nigeria is the largest economy and most populous country in Africa. Its fintech industry is one of the most advanced in Africa, up there with Kenya and South Africa,” he told TechCrunch in May.
When all the 2019 VC numbers are counted, it will be worth matching up Nigeria to Kenya to see how the countries compared for fintech specific investment over the last year.
Tech acquisitions continue to be somewhat rare in Africa, but there were several to note in 2019. Two of the continent’s powerhouse tech incubators joined forces in September, when Nigerian innovation center and seed-fund CcHub acquired Nairobi based iHub, for an undisclosed amount.
The acquisition brought together Africa’s most powerful tech hubs by membership networks, volume of programs, startups incubated and global visibility. It also elevated CcHub’s Bosun Tijani standing across Africa’s tech ecosystem, as the CEO of the new joint-entity, which also has a VC arm.
In other acquisition activity, French television company Canal+ acquired the ROK film studio from Nigerian VOD company IROKOtv, for an undisclosed amount. The deal put ROK founder and producer Mary Njoku in charge of a new organization with larger scope and resources.
Many outside Africa aren’t aware that Nigeria’s Nollywood is the Hollywood of the continent and one of the largest film industries (by production volume) in the world. Canal+ told TechCrunch it looks to bring Mary and the Nollywood production ethos to produce content in French speaking African countries.
The on-demand motorcycle market in Africa has attracted foreign investment and moved toward EV development. In May, MAX.ng raised a $7 million Series A round with participation from Yamaha and is using a portion to pilot renewable energy powered e-motorcycles in Africa.
In August, the government of Rwanda announced a national policy to phase out gas-motorcycle taxis altogether in favor of e-motos, in partnership with early-stage EV startup Ampersand.
Africinvest teamed up with Cathay Innovation to announce the Cathay Africinvest Innovation Fund, a $100+ million capital pool aimed at Series A to C-stage startup investments in fintech, logistics, AI, agtech and edutech.
Like any tech ecosystem, not every startup in Africa killed it or even continued to tread water in 2019. Two e-commerce companies — DealDey in Nigeria and Afrimarket in Ivory Coast — closed up digital shop.
And South Africa based, Pan-African focused cryptocurrency payment startup Wala ceased operations in June. Founder Tricia Martinez named the continent’s poor infrastructure as one of the culprits to shutting down. A possible signal to the startup’s demise could have been its 2017 ICO, where Wala netted only 4% of its $30 million token-offering.
Africa’s startups go global
2019 saw more startups expand products and business models developed in Africa to new markets abroad. In March, Flexclub — a South African venture that matches investors and drivers to cars for ride-hailing services — announced its expansion to Mexico in a partnership with Uber.
In May, ExtraCrunch profiled three African founded fintech startups — Flutterwave, Migo and ChipperCash — developing their business models strategically in Africa toward plans to offer their products in other regions.
As we look to what could come in the new year and decade for African tech, it’s telling to look back. Ten years ago, there were a lot of “if” questions on whether the continent’s ecosystem could produce certain events: billion dollar startup valuations, IPOs on major exchanges, global expansion, investment from the world’s top VCs.
All those questionable events of the past have become reality in African tech, even if some of them are still in low abundance.
There’s no crystal ball for any innovation ecosystem — not the least Africa’s — but there are several things I’ll be on the lookout for in 2020 and beyond.
Two In the near term, start with what Twitter/Square CEO Jack Dorsey may do around Bitcoin and cryptocurrency on his return to Africa (lookout for an upcoming TechCrunch feature on this).
I’ll also follow the next-phase of e-commerce in Africa, which could pit Jumia more competitively against DHL’s Africa eShop, Opera and China’s Alibaba (which hasn’t yet entered Africa in full).
On a longer-term basis, a development to follow is how the continent’s first wave of millionaire and billionaire tech-founders could disrupt dynamics around politics, power, and philanthropy in Africa — hopefully for the better.
More notable 2019 Africa-related coverage @TechCrunch