Language learning apps are rare in the VC-backed consumer tech space. It may have something to do with the industry’s historic struggles to make money. Rosetta Stone floundered in the stock market for a decade before selling to private equity in 2020. Open English fell into oblivion after boosting its valuation to $350 million in 2013. Duolingo, the most successful of the bunch, said Forbes it would be profitable in 2019, but filings made at the time of the IPO showed it ended up losing $14 million (last year net losses had risen to $60 million).
Cambly, a San Francisco-based startup, thinks it has what it takes to buck the trend. Unlike its predecessors, Cambly focuses solely on English, and unlike many others, it focuses on human interactions – rather than a structured program, it gives users access to one-on-one conversations with English tutors. Founded nearly a decade ago, Cambly has quietly reached the Series B funding stage with $60 million raised in total from venture capital firms Bessemer Venture Partners and Benchmark. It was valued at $250 million after the last funding round in 2020, according to CB Insights.
“If you look at the model of failed language learning companies, they overpromise their effectiveness,” says Jeremy Levine de Bessemer, who sits on Cambly’s board. “They are growing very quickly burning a lot of money on consumer acquisition. All of a sudden consumer turnover is catching up with them and no one wants to invest anymore.
Co-founder and CEO Sameer Shariff thinks Cambly can avoid this pitfall, as it has recorded positive cash flow over the past five years. The focus on profitability long before the market downturn led VCs to recommend startups be more frugal. The company now generates “tens of millions” in revenue, he adds. Users pay a subscription fee that gives them access to tutors for a set number of minutes per week. Added up over a year, the cost can range from around $500 to $4,400 depending on the amount of use.
Levine, a self-confessed skeptic of language apps (“they’re mostly hoaxes,” he says of the viability of their business), offered to lead the Series A funding round in 2018 after looking at the finances and being surprised that the company is growing without burning big bucks on marketing campaigns. “You can simulate revenue and you can simulate a growth rate through all sorts of accounting and metric manipulations, but you can’t simulate cash flow positivity,” he says.
Shariff and Kevin Law, former fellow software engineers at Google, launched Cambly in 2013 after identifying a market opportunity while traveling overseas. In Argentina, for example, Shariff recalls learning conversational Spanish much faster than he ever did in a high school classroom. They decided to focus only on English due to the demand from working professionals. “The world has kind of decided that English is the language of business and international trade,” says Shariff. “If you think you or I are learning Spanish or French, it doesn’t have the same economic unlock as English.”
Benchmark’s Sarah Tavel, formerly an investor at Bessemer where she mentored Levine, led Cambly’s Series B round in 2020 and quickly pushed the company to ramp up its workforce. Cambly had no finance staff and fewer than ten people working on engineering, product and design when she first met the founders, she says. “In order to capture all the opportunities in the market, you want the team to match the opportunity.” Today, the startup employs 150 people (not including tutors), but Shariff says he wants to share Cambly’s story now to attract better talent to the company’s San Francisco headquarters.
About 80% of Cambly’s revenue comes from individual users, and the rest from businesses that want to train their employees in English. Cambly’s main markets are Brazil, Turkey, Saudi Arabia and Japan; almost no companies come from the United States. “We basically designed a product for everyone who isn’t like us,” says Shariff. The software pairs students with English tutors — many use Cambly as a side business, though some have made it their primary source of income, Shariff says — based on professional need. For example, an airline pilot in Turkey may be matched with an English speaker versed in aviation terminology.
Cambly charges all users, so the company is taking a different approach to Duolingo’s freemium model, which brought in more than 40 million monthly active users that helped it generate $250 million in revenue last year. last year. Cambly says it also has tens of millions of “students”, but a public relations representative later clarified that it defines a student as “anyone who has created an account, including someone who takes a free trial lesson, but don’t pay for a subscription.” The company declined to share details about its actual active user base, but Levine says the figure is significantly lower: “If the users were in the millions, the company would be making billions.”
Still, the investor thinks Cambly doesn’t need that many users to be successful. Doing some towel math, Levine estimates that there are 3.5 billion people worldwide who could benefit from Cambly’s roughly $1,000-per-year subscription plan. If the company is able to capture even just 0.1% (or 3.5 million users), it would make $3.5 billion in annual revenue. “It’s an order of magnitude bigger than we are now, it’s not 100 times bigger,” he says. “Could we get there in five years? I think we can, maybe slower, but maybe even faster.