Pod Insights Equity Podcast Community is the new AI About this episode Natasha and Mary Ann and Alex were all aboard this week with Grace on the dials, which meant that we had a flat lovely time recording Equity for you. Of course, Equity is TechCrunch's venture capital focused podcast where we dig into the most critical funding rounds, and natter about the key news items impacting startups.
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Here's the rundown for this week:
Chalo raises $40M to improve bus transit in India: This startup wins name (and startup) of the week. Chalo wants to tackle inefficiencies in India's bus system, so we noodle over why that makes sense and what challenges could be ahead.
Masterworks raises $110M for fractional art ownership: Call it a Series A if you must, but the megaround that Masterworks just raised helps underscore the global shift towards alternative investing, and fractional ownership. How long until we get Masterworks on the blockchain? That would be the real IRL-NFT crossover we are kinda waiting for.
CostCertified wants to save your next home reno project: CostCertified, which just participated in Y Combinator's summer cohort, raised $8.45M in seed funding. The Canadian company's end goal is to build the “Amazon for construction.” CostCertified allows contractors to send a shoppable interactive estimate to homeowners so that they can choose their selections during a project, and see the effect on price instantly.
All about community: Community has been watered down, there's no doubt about it. But, there is still arguments for why it works - and we make them (often).
Google invests in Africa: American tech giant Google is putting capital to work in Africa, but in the form of infra investment and early-stage investing. Frankly both make good sense given the advertising giant's business model.
Edtech goes B2B: Udemy is going public! We have dug through the numbers already, but thankfully with Natasha on the show we got to go a level deeper on where edtech revenues may come from next.
And that's our show! We are back bright and early on Monday!
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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Transcript 0:10 Speaker 00 Hello and welcome back to Equity, TechCrunch's venture capital focused podcast where we unpack the numbers behind the headlines. This is Alex and I have the Friday crew here, including Natasha Moskarenas. Natasha, hello.
0:20 Speaker 01 Hello, hello. It is Fleet Week in San Francisco, so apologies for the background.
0:25 Speaker 00 If you hear fighter jets, we are not under attack. We are simply under duress because Natasha can't leave our house because traffic is bad. Not suffering from similar effects is Maryann Azaveta. Maryann, do they have Fleet Week in Austin?
0:36 Speaker 02 No, we have ACL going on this weekend, but I am nowhere near it. So we're okay.
0:40 Speaker 00 What's that?
0:41 Speaker 02 Austin City Limits Music Festival.
0:42 Speaker 00 Oh, oh, oh, yes. I'm not hip to the acronym, but I have heard of the festival. Why aren't you going?
0:47 Speaker 02 Oh, we don't have enough time to get into that.
0:52 Speaker 00 All right. Speaking of not enough time, I'm going to run us through the show outline here because we have a lot to get through. We have three fascinating funding rounds from Chalo, Masterworks and Cost Certified. We're going to talk about Contrary Capital and what it means to invest in community in 2021. Then we're going to talk a little bit about Africa through the lens of Google and some of their recent investments. And then we're going to wrap with talking about how ed tech is going all business and if that's good, bad, boring or interesting. It's going to be an absolute blast. But Natasha, we're going to start with Chalo, which has the coolest name, which you'll explain why, and also one of the cooler markets out there.
1:22 Speaker 01 Hell yeah. So Chalo means let's go. In Hindi, it's actually one of the few phrases from Hindi that have entered my friend group today and none of us are native Hindi speakers, but it's such a cute word and in this case is really fitting for the startup. Chalo raised 40 million to digitize bus commutes in India and it was built by the former founder of Carwale, which was a startup that allows people to sell and buy used and new cars. That founder basically realized that he wanted to work within transportation but impact a bigger population of people. So he went for buses and I was really excited to see him tackle one of the slowest to change areas of innovation in India.
2:02 Speaker 00 Well, one thing that really blew my mind about this particular startup is that I didn't know how important buses were to India. I mean, when I think about mass transit in India, I think of trains. I mean, maybe that's stupid. Maybe I've seen too much Bollywood, but like buses are apparently 48% of public transit trips in the country. So this is an enormous market, given the geographic scale we're talking about, the number of folks and also the market share.
2:22 Speaker 02 I was also shocked that there were just three buses for every 10,000 people in India. I mean, this blew my mind.
2:28 Speaker 01 It's insane. And I mean, beyond even a supply and demand problem, when you get to the bus itself, there are a ton of inefficiencies, which is, I think, a lot of where Cholo tries to make a difference. So basically it deploys GPS machines onto buses, which allow customers to track whereabouts of their commute. And it also helps buses offer tickets and monthly passes, which again, not a commonality. So Mary Ann, like you're saying, there's already such few buses, but for the few people who do get to the buses, Cholo is trying to get there and help them make their ride smoother.
3:00 Speaker 02 But they're not providing more buses, are they? They're just trying to like make it easier to ride the buses that exist?
3:06 Speaker 01 Yeah, I actually want to bring that up with you guys too, because they, at this point, they aren't owning buses. They're trying to be more of, I don't know if this is a fair comparison, but like keep truckin-esque. They like install machines onto buses instead of owning the buses themselves. Alex, I'm sure you have a take on why that is efficient from a business perspective? Question mark?
3:26 Speaker 00 Yeah, well, it's very capital efficient because if buses already exist, you don't have to spend X number of tens of thousands of dollars per bus to bring them onto the network. So if you are a startup that just raised 40 million, you can either buy 150 buses to pick a random number that sounds roughly correct, or you know, you can work with thousands of buses by installing GPS tech onto them. I'll just say that, you know, as someone who has spent time in a more developing economy that depended on buses to get around, I didn't know when they were going to come, if at all. This is great. And I think it's also kind of a testament to the fact that we are seeing or have seen rising smartphone penetration amongst Indian consumers, which makes a service like this usable because you can't really interface with a GPS data feed if you don't
4:07 Speaker 00 have a data source, which is a phone. So it's cool to see what smartphone penetration unlocks in the country. And hopefully this will lead to just, you know, less wasted time, better lives and better service. So it's kind of those holistic goods. That's also a business, which is strange.
4:21 Speaker 01 I think so. Like, I think the only question mark I still have for Cello is because it doesn't own any of the buses, it will have to work with the Indian government and they are very hard to work with. And so as we've seen from recent news, like working with in difficult government structures can completely change a startup's trajectory. And so I hope down the road, they own some or are able to avoid it.
4:43 Speaker 02 Side note about this company that I thought was cool is that they're using some of the funding to buy back stock options for the early employees and some of the investors. And I think anytime a company does that, that's just, that's really cool.
4:54 Speaker 00 Absolutely. Using capital to immediately kind of put it back into the business and the folks who built it. I do love that. Now let's talk about Masterworks. Guys, we have discussed NFTs ad nauseam on the show. I can't even say NFT without being mocked. That's a kind of testament to how we've treated them so far here on Equity. But we are going to talk about Masterworks, which put together a $110 million round. They're calling it a series A, guys, but I don't really think that's a fair description of it. Masterworks, if you don't know, is a place where you can put small amounts of money, $1,000, $2,000, to buy fractional shares of physical art. So if you can't afford a $5 million painting, but still want the upside of it somewhere in your portfolio, wow, you can buy 0.001%
5:35 Speaker 00 of it. And then if it eventually sells, you will get some return back. This is effectively like, I don't know, IRL NFTs.
5:42 Speaker 01 So obviously, NFTs have really helped us understand what it means to have fractional ownership. But Masterworks is interesting because Alex, like you said, it's physical goods and fractional ownership of that. So it makes money by selling paintings at a profit and then earning 20% of profit from a sale as well as a 1.5% a year management fee. Which altogether makes me just think about them being the middleman in and probably already existing, but not mainstream sort of transaction, which is fine art.
6:14 Speaker 00 Actually, NFTs are usually not fractional. You can kind of buy them individually, but I think that the idea of fractional ownership has been kind of brought to the fore by Robinhood and other places where you can buy kind of a slice of an equity, if you will. So Masterworks is kind of like a weird combination of Robinhood and OpenSea, and it all involves art that you can't see because you don't actually own it. All you do is own a fraction of the upside. I think this is really cool, but I mean, to me, it is kind of the definition of a consumer exotic investment. Like this is like an endowment, putting 1% into venture capital funds. This is like, you know, maybe you buy a couple of shares in an artist that you like, you can't afford one of their main works, which I think is dope. But at the same time, I'm curious what, what fraction of folks out there actually have a favorite painter.
6:54 Speaker 02 Well, they said also that the average investor puts more than $5,000 into each painting. So, I mean, that limits, I think, the pool of people who can actually do that, right? Like, how many people have $5,000 laying around just to invest in an art?
7:10 Speaker 00 Yeah. And also, if I had $5,000 in my art budget, I would buy like three awesome paintings versus one fractional share in a painting that I can't see. And that's why, to me, the NFT masterwork comparison kind of makes sense because you're, you're, you're investing in a physical good, but you don't have it.
7:25 Speaker 02 And you don't get to enjoy it.
7:26 Speaker 00 No. What you effectively have is the digital rights to partial ownership of a physical good, which is close-ish to the NFT idea of not really owning the thing, you know?
7:35 Speaker 02 Right, right.
7:36 Speaker 01 The argument that I think Lucas made either intentionally or unintentionally in his piece was that with alternative asset classes popping off in interest and in a lot of new coming investors, we see NFTs, we see Pokemon cards, we see Air Jordans being potential investments. Fine art is a more traditional segment of that class. And so his argument, I think, was like, it's a more predictable upside and downside. So maybe this is like, in the scale of NFTs, it's a less risky version of it. That was kind of like my takeaway from the story.
8:08 Speaker 00 Mary Ann, one, one reason why I'm glad you're on the pod now is that you are bringing your reporting to the show and you have a venture capital round from this week that you were incredibly excited about. So please tell us about CAU certified and why it has you, a homeowner, hype.
8:20 Speaker 02 Well, yeah. And also, I'm a nerd for construction tech, so. This company, the idea for it came up, this guy was a contractor, he had his own construction company and like trying to bill his clients, he realized was just a nightmare. So he was like, let me try to create something better than what exists, right? So he came up with something that, first of all, if you've ever had to remodel a home, you know, there's like 50 million vendors, products that you have to choose in the process. It's overwhelming, it's stressful, you have to deal with a lot of like different systems and people. So what he came up with is what they're trying to build is like a e-commerce like experience. So when you're, say you're remodeling your kitchen, you can pick out the faucet, the cabinet, the color, everything and put it all like in a cart. And at the
9:02 Speaker 02 end, you could see how much it's going to cost you and it's all there in one place. So this just kind of simplifies things, makes it less of a surprise at the end. And I don't think anything like it's exists that I know of.
9:15 Speaker 00 Yeah. And they're based in Calgary, which I thought was very, very cool. So Canadian company and cost for to find, it was 8.45 million, Mary Ann?
9:22 Speaker 02 Yes. Fuse led the round, they're Y Combinator company. They went through, I think it was a summer cohort and they're about four years old. So this is actually their first round of external funding. They were bootstrapped till now.
9:34 Speaker 00 It's really cool. And also they have 72 million in annualized GMV, which I think Mary Ann works out to about two kitchens per year, give or take?
9:42 Speaker 02 Yeah, depends on where you live, right? But yeah, they're, it's just always cool when you, I feel like it's kind of a, one of those real world problems and that that can, you know, construction is not typically considered sexy, but I feel like people underestimate. I mean, it's, it's in everybody's lives, every day impacts, impacts us all in one way or another. So I was, I thought this was a really cool company.
10:02 Speaker 01 So often when we hear e-commerce, it's about making checkout faster on websites. And it's like, this is useful. It will probably make a lot of money and investors will be happy. But I agree, Mary Ann, like it was nice to see something like this applied and the focus not just like, I don't know, helping, I'm sure they want to help customers spend more money down the road. And that's probably the return of investment they're going to prove, but just visualization on something difficult to understand feels like it's better for both parties, whether it's contractors trying to convince people to buy more things or people trying to see if they have room for more home renovations.
10:36 Speaker 02 Yeah, it's real time estimates. They want, they want to build what they're calling the Amazon for construction. So it'll be, I'll be curious to see where they are in like a year or two.
10:44 Speaker 00 Yeah, I had the fun, fun role during the pandemic of helping my spouse pick out a new kitchen faucet for us.
10:50 Speaker 01 Oh, no.
10:51 Speaker 00 I did not realize, one, how much money you can spend on that because that was crazy. And two, how do you choose?
10:58 Speaker 01 Yeah.
10:58 Speaker 00 Because there's 68,000 options and you don't know which ones are in stock, which ones are actually in Duluth. It was brutal. So I think this is long overdue. It's probably going to do very, very well. All right. Now, ladies and gentlemen, community, we have talked about this on the show repeatedly. Natasha, we had, didn't we have Lolita on the show?
11:14 Speaker 01 I think so. At some point, I'm sure she seems like someone we would have on the show. And if we haven't, congrats, you were on the show in our hearts.
11:20 Speaker 00 Yes, there you go.
11:22 Speaker 00 But in terms of there's some news out from a group called Contrary Capital that put together a new venture capital fund with a kind of a community focus with a twist. So talk us through that.
11:29 Speaker 01 Yeah. So Contrary Capital actually started a few years ago, part accelerator, part venture fund, with an explicit focus on backing student entrepreneurs within universities. So kind of thinking about like your brightest classmates, whether that's you or someone else. And Contrary wanted to back your idea. And that was around the time when it wasn't that common to do so. We've seen them now kind of launch their second fund after first closing, I believe, a 2.2 million proof of concept fund.
11:54 Speaker 00 Got it.
11:54 Speaker 01 Now they have a 20 million fund two, and it's all going towards pre-seed founders and the star talent within startups as well. So not just students anymore.
12:04 Speaker 00 And the whole thing behind this Eric Tarzinski led fund is that they're, they had this community of founders that they kind of know. And it's from that pool they source. So they're not going out there competing with, you know, Greylock and Andreessen and the mega seed funds. They're essentially kind of like almost creating their own magic with their community.
12:20 Speaker 01 Yeah, like honestly, these days when I hear community, I kind of get a little, I don't know, anxious about what that means for diversity because it's literally just another way to agree with yourself at times, right? So when Eric first told me, you know, we've never invested in a company that we didn't know through someone we already knew. I was like, okay, well, that means you're probably investing in white dudes. And then he told me that the people who gets his deal flow farm are actually like 350 entrepreneurial students. 45% of that cohort is female, 65% is non-white. So he's getting a sourcing engine that is diverse, that's probably not been a Approached or able to be recognized by a Sequoia or Index or Andreessen and is able to kind of avoid big valuations while they're at it.
13:02 Speaker 02 Well, didn't your articles say that they're actually often finding individuals before they even realize that they could be entrepreneurs themselves, which I think is is kind of neat. And another thing that I thought was really interesting is that Ramp is one of their investments. And that fintech is growing like crazy. And then what was what was your valuation earlier this year, Alex, just a couple of months ago?
13:22 Speaker 00 Eighty trillion dollars.
13:25 Speaker 02 Something like that.
13:25 Speaker 00 This is Ramp, Ramp that competes with Brex, that Eric Glanville.
13:28 Speaker 01 Ramp with a capital R.
13:29 Speaker 02 Yeah, Ramp, Ramp. So that's, that is pretty fascinating. I thought, wow, good for, good for Contrary Capital.
13:35 Speaker 00 Yeah, whomever, whomever LP'd that first 2.2 million dollar fund, congrats on your boat.
13:40 Speaker 02 Like, yeah, exactly.
13:41 Speaker 01 I'm going to try making this point succinctly, but the interesting part about Ramp and its relationship with Contrary is that Contrary last year announced, we're going to create a talent arm where we start focusing on startup employees. So people who are really shining within the organizations who maybe are interested in entrepreneurship but aren't ready to take the jump. And then they were like, hopefully we see, you know, big companies forming out of it. But if they don't, we have a talent arm that we will help source them into our investments. So they took their community, they gave them support and resources. And when we saw by Ramp, which took a lot of those talented individuals, it all kind of went full circle. Did you guys follow that? Did that make sense?
14:18 Speaker 00 I'm like 95% sure I got that.
14:20 Speaker 01 I was excited about Ramp because if five of their first 50 employees were introduced through Contrary, it shows that community that Contrary has created is not an ignorable subset of people.
14:31 Speaker 00 Yeah.
14:31 Speaker 02 It's working. It's working.
14:32 Speaker 01 Yeah, it's working.
14:34 Speaker 00 The proof is in the pudding. In this case, the proof is in the actual numbers. So let's broaden our lens on what community means and talk a little bit about Lita Taub, who I mentioned earlier on, because she is leaving the community fund, which Natasha, I believe was a venture capital fund designed to invest in companies that had a community element.
14:50 Speaker 01 That, and I think a lot of it was she wanted to invest in a way that was very community forward. So she crowdsourced a number of scouts slash investment partners that would help her find deals. This past week, she announced that she is leaving it, but she is still staying in the investment game. She's actually moving to somewhere in Latin America with her husband, and they're going to continue to be investing and building.
15:13 Speaker 00 Okay, so not really a mark against community, more of an indication that just she maybe had outgrown that particular investment vehicle. But it does seem to be that community was the thing that was discussed kind of in the earlier, like when Discord was kind of blowing up and has now become like a de facto element in mini startup pitches and ideas and so forth. It's a bit like AI was a couple of years ago. I'm just hearing it everywhere. And I wonder if we diluted the meaning, although of course, as we've seen in this conversation, it can mean different things. But I wonder if it's like it kind of being overused, if that makes sense.
15:43 Speaker 02 Yeah, I see your point. I see your point. Like, some people are kind of using it for the sake of using it to because maybe now it's cool to use the word community, but.
15:51 Speaker 01 There's like such a fine line between actually trying to create a community or just trying to create customers that love you and will give you money. And Mary Ann, I know you talk to so many fintechs every day, all day, and a lot of them are consumer focused. Are you seeing them lean on community in a way that's impressive? Or do you feel like a lot of it's like, I want you to give me the money down the road?
16:11 Speaker 02 Yeah, I mean, actually, this week I covered a company called Copper Banking, and their target market is actually teen customers. And their model is, you ready? Community. Right, okay. It's based on community. But they do have, they have experience with another startup that they founded, that these founders called Snap Raise, it's raised over like $90 million. And that company allowed teens to fundraise through their schools with a community focus. Okay, so Copper Banking is kind of emulating that model. And they're also like, they're using youth ambassadors to promote the platform through schools, clubs, sports teams, they're talking to like, coaches, athletic coaches in high schools to help introduce the concept.
16:53 Speaker 02 So I think that's fascinating. And they say that this is also leading to dramatically lower customer acquisition costs than.
17:01 Speaker 01 Yeah. Premarketing.
17:04 Speaker 00 So who wants to talk about CAC? Because CAC is one of my favorite things. And I have, I have written more about fintech CAC. I think than anyone else in the world, which is not
17:13 Speaker 02 I bet so.
17:14 Speaker 00 Not really something that I'm proud of now that I've said it out loud. But Mary Anne, to make sure that I'm following your point, if you have a community, right? And the community is a way to engender conversation and, you know, I don't know, fraternal feelings around a certain topic, theme or business. And you want to get customers for your business. Well, then you already have a bucket of folks right there. You don't have to go out and find them. You've already essentially found them. Is that fair?
17:35 Speaker 02 Yeah, yeah, I think so. I think it's, it's a, it's a combination of things, right? It's a marketing strategy and it's just also like, it's a, it's a way. I feel like it's kind of old school, right? As opposed to the channels that we're seeing a lot more of these days with like social media or, you know, different tech first marketing strategies. So I feel like this kind of goes back a little bit and, and I like that in a way.
17:57 Speaker 00 Yeah, the community to me seems to be relatively innocuous and kind of nice thing versus something that seems pernicious like growth hacking. But I will say, we saw some other examples about community and the impact it can have recently. One of which is from Robinhood. Now I know they went public, but they were very recently, one of the unicorns we paid the most attention to. And a data point that came out today was that Robinhood's COO said that Robinhood Snacks, which is their newsletter, also, I think it's a podcast as well, maybe?
18:22 Speaker 02 Yes.
18:22 Speaker 00 The newsletter has, well, let's just play a game. How many subscribers does Robinhood Snacks have? Let's guess.
18:27 Speaker 02 I actually know it because I saw the tweet.
18:28 Speaker 00 Okay, Mary Anne, how many?
18:30 Speaker 02 Oh my God. I have no clue, but I admit I am a subscriber.
18:34 Speaker 00 So this is a fun game. Mary Anne, you have to guess. You can't, the rule of equity is if the game is announced, it's like Squid Games. If you, if you don't play, you get shot.
18:42 Speaker 02 Oh my God. What kind of pressure is that? All right. 2 million, 5 million. I don't know.
18:48 Speaker 00 20, 24.
18:51 Speaker 00 24 million people.
18:53 Speaker 02 Wow.
18:53 Speaker 00 And that, that is a, an engine that I'm sure drives quite a lot of signups to Robinhood's core product, which leads to monetization. So through the lens of media, through the lens of ambassadors, through the lens of, really pick your poison. It does feel that building a, a micro movement or community, if you will, around your product does seem to be a thing. That we are never going to hear the end of. And maybe that's a good thing. All right, let's pivot. Natasha, take us into the next bit.
19:17 Speaker 01 Yes, so we're going to talk about Africa. I know we talked on a Wednesday episode about it probably a few months ago, but we are back because Google is back. Two news items to know is that Google has set up a 50 million fund to invest in African startups. And it's also confirmed that it will be pouring 1 billion in investment dollars into Africa. I believe more to support digital transformation. So one of their projects will be a subsea cable to enable faster internet speeds, also skills training, low interest loans. Google is entering Africa. How do we feel about it?
19:48 Speaker 00 I mean, it almost feels late.
19:50 Speaker 02 Yeah, I was surprised. Like, I was like, really? You know, have you not been investing in the region?
19:57 Speaker 00 I'm sure they've done some stuff, but to me, like, I can't recall Google making a concerted push to get our attention by telling us how much money they're putting into the continent. But to me, this is part and parcel of the story we've been covering all year, which is that rising venture capital interests, rising smartphone penetration, rising startup activity. Google, a bit like Facebook, grows when the internet grows. And so I guess this all kind of fits into that. Mary Ann, is this enough money, do you think?
20:21 Speaker 02 I think for now it's a good start. But one of the things that we've talked about is if you, if you look at Africa, we see a lot of parallels with Latin America. And I was covering Latin America from like 2017. I could see the potential in the region, the opportunity. I'm not shocked what's happening now, but I feel like Africa is a few years behind. But there's tremendous opportunity, tremendous potential there. So I think it's a good start on Google's part. I think it's a smart strategy. I think we're going to, I feel like we're seeing a lot more rounds, large rounds coming out of the continent. And that's just going to continue.
20:53 Speaker 01 Yeah, I mean, I was looking at one of Taja's pieces because I wanted to kind of place a 50 million from Google is going to make a difference. And it sounds like what Africa really needs right now is one of these late-stage venture capital firms to create a $1 billion fund. I mean, their growth deals are down 16% year over year, and only two deals closed above 50 million in 2020 compared to that in 2019.
21:18 Speaker 00 And that's in Africa as a whole?
21:20 Speaker 01 That's in Africa as a whole. And so that, there's like, obviously, great, yay, seed funding is awesome. But Will those startups have places to get funding locally once they burn through that cash? And like, will it be able to hit critical speed is a question that I'm not sure if we should be asking Google to answer, but is one that I have for it.
21:39 Speaker 00 We can ask Google to answer it. They're rich, fuck them. We don't have to be nice to them. I mean, Google has, how many different venture capital arms does Google have? At least three, right?
21:47 Speaker 01 GV, formerly Google Ventures?
21:49 Speaker 00 Yeah, well, you know, the artist formerly known as. They also have Capital G. They have their, don't they have a biotech thing as well?
21:56 Speaker 01 Probably.
21:56 Speaker 00 And they also have an internal Skonkhoros program called Google X that spends lots of money. And they also have other bets and blah, blah, blah. The point is, Google's doing fine. They should add a zero to $50 million. And if you guys don't want to put your name on that, they can call me and tell me that I'm wrong. I will say, we are seeing some other money going in. SoftBank just put $200 million into Andela, a company that we've talked about at TC a couple of times, helps other companies hire developers in Africa. And then I think takes a cut to the transactions. So kind of like evidence of there being a strong developer base in the continent that is probably being underutilized by global companies. And Goldman Sachs is also working with a spinoff called Juven that's going to back high growth African companies with larger checks. So we're seeing like, pre-seed money and late-stage money. I just hope there isn't kind of a series A gap there that ends up harming people's growth. But, you know, given how much capital there is in the world
22:41 Speaker 00 right now, surely some of it will go over to where there's a demand for it, right? Like you would think.
22:46 Speaker 02 Yeah, I think we're going to see that happening. I mean, I don't know exactly when, but I think as we start to see more successes come out of the region and, you know, it's kind of a, what's, what's the word? Like that, the people just, it starts following like domino effect, I guess. I don't know. But like, once we start seeing more successes, right? More firms are going to be like, I want a piece of that. And then they're going to come in and start writing checks.
23:07 Speaker 01 So totally, I think so.
23:09 Speaker 00 That's the first time, Marianne, I've ever heard you imitate someone else. And that was amazing. I want more of that on the podcast. Okay, now, listen, guys, we're going to talk about one more major theme, which is, which is ed tech, which is Natasha's favorite thing, because it's been her beat for, for some time now. But the good news is, is that we're seeing more exits, which means that we're seeing more numbers, Natasha, which means that all the stuff we've talked about is now becoming a bit more concrete.
23:30 Speaker 01 Definitely. I actually woke up to Alex's piece about Udemy filing to go public. So it was like the perfect morning coffee situation. I was just like, what is going to happen to EdTech right now? I was really happy to see their numbers. Alex, how did you feel?
23:45 Speaker 00 So they filed and my overall impression was that they were more B2B focused than I expected. When I thought about Udemy, I didn't even know they had a business element. I thought it was all kind of B2C, kind of consumer focused.
23:57 Speaker 01 Same, same.
23:57 Speaker 00 So a couple of numbers here, just for everyone's sake. In 2019, they had $276 million in revenue. So pre-COVID, during the COVID year, when EdTech saw a big boom of demand, they ended up with about $430 million in revenue. So a pretty solid growth rate there. More recently, growth has slowed down, especially because the consumer bump to revenues they saw last year has kind of leveled off. And the good news for the business is that their business incomes are rising. Natasha, this seems to be a theme, that you know, there's a lot of money to be made in EdTech in ex-China markets and ex-India markets, but perhaps not sold to regular folks, more sold to their employers.
24:30 Speaker 01 Definitely. Udemy had a really not easy route to the public markets. It took a while to find its sweet spot. I see why both of you thought that they were a consumer business before they filed, because it's only a recent, probably over the last two or three years, that they had moved into like Udemy for Business, which is their enterprise offering where they help create reskilling programs for, I think they had about 7,000 customers when I last talked to them. But you know, the reason they got a new president, remember when I talked to him a while ago, he said that they had well surpassed 200 million in ARR. That's compared to a year ago, when it took them five years to hit 100 million ARR. So like, I feel like when Udemy found its rhythm, it got there.
25:11 Speaker 00 Yeah.
25:12 Speaker 01 It just is like, it took a little bit. It took a pandemic, honestly.
25:15 Speaker 00 Yeah, well, EdTech was a boon. And now the question is, what do these companies do afterwards? And we're going to watch them price their IPO in the next couple of weeks and go public. We'll have more data points to come. But what really stood out was that consumer revenue share fell from 82% in 2019 of the company's aggregate revenue. And then it's now 69%. So a, I can do math, 13% decline, which is one-sixth of the total, which is a little bit higher than that in percentage comparative terms. But it's a, it's a pretty impressive growth story. And I think the question is, how do investors value this? It's got a strong margin, flattish consumer business, and a strong margin, growthy business-to-business business. And I- How you value the combination of the two is going to be fascinating to see.
25:56 Speaker 00 And Natasha, I think maybe indicative of where ed tech valuations might go next year.
26:01 Speaker 01 Yeah, I mean, I think we saw like Duolingo that there was a lot of positivity. But Mary Ann, I'm curious, you know, as someone who covers one of probably the more booming sectors, like, does this feel exciting to you? Does it feel like eh, neutral? How were your first thoughts?
26:13 Speaker 02 I'm intrigued because I feel like it all goes back to this remote work trend. And the fact that companies are having to be more creative and look towards different types of benefits and perks for employees, like five, 10 years ago, it was the fancy ping pong tables, lots of snacks and massages. And now that so many people are working remotely, you know, we need other things to entice them with. And so I feel like you to me for a business will probably continue to just grow in other things like it.
26:44 Speaker 00 You know what? I just, I just thought about the, I think Apollo, our new corporate parents, if you will, a corporate parent, should buy us fancy ping pong tables for our homes.
26:53 Speaker 01 I agree.
26:53 Speaker 00 Yeah.
26:54 Speaker 01 Why don't we have that yet?
26:55 Speaker 00 Yeah. Where's my fancy espresso machine for the house? I feel, I'm saving the world by not commuting, reducing my carbon footprint, improving the long-term Apollo return profile by allowing the planet to not explode in 10 years. I should get a coffee table. Sorry, I'm gonna stop trying to get fired. Natasha, before we, before you wrap up, we are seeing other ed tech companies pursue a business-to-business focus, Outschool and MasterClass, I think are two examples.
27:20 Speaker 01 Yeah. So kind of as Mary Ann was detailing, like the benefits really used to be these offline things that were nice perks. I think you and me sat in a different category because it was helping with skills acceleration, so helping someone get promoted, for example. But now we're seeing maybe more supplemental entertainment, education-focused platforms there to boost motivation, morale. We saw MasterClass recently launched Enterprise Arm, an offering, which I thought was just like funny. It's like, oh my God, is my company going to pay for Serena Williams to virtually teach me tennis? And there's also Outschool, which does after-school classes for students. And it's all about enrichment. Like, how do we take what you learn in Spanish class and reinforce it through Taylor Swift lyrics? I feel like it's really creative. And I don't know about you guys,
28:03 Speaker 01 but I feel like employers deserve a little pressure to be giving us more benefits so we all stay at our companies.
28:10 Speaker 02 Well, especially like for us working parents who had to deal, for example, with 18 months of having your children at home while you're trying to work. Like having that as a benefit, like where they're paying for your kid to take some cool ass class. I like that.
28:24 Speaker 00 Also, we gotta get Natasha a job as a pitch person because she just sold me on Spanish Taylor Swift lyrics and Serena Williams classes, and I'm totally down for both of those.
28:32 Speaker 01 I was gonna say, like, out school does not need to be for kids only. It could totally be for us three and we would totally engage.
28:39 Speaker 00 Sadly, we're out of time, guys. We are back Monday morning with the York Weekly Kickoff Show. And Natasha and Mary Ann, thank you as always for hanging out with us. And we'll be back very soon. Bye.
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