Pittsburgh unicorn Duolingo just filed to go public

Pittsburgh’s first unicorn is going public.

Duolingo, the language learning companay that saw user numbers soar during the pandemic, filed an S-1 form late Monday with the U.S. Securities and Exchange Commission. It marks the company’s official registration statement for an initial public offering (IPO). Per the filing, Duolingo plans to list on the Nasdaq under the ticker symbol “DUOL.” A date for the IPO was not included with the filing.

The news of the East Liberty-based company’s forthcoming IPO isn’t surprising. A November 2020 Series H funding round of $35 million from Durable Capital and General Atlantic bumped the company’s valuation up to $2.4 billion—a $750 million increase from its previous valuation of $1.65 billion after a quiet $10 million funding round from General Atlantic in April 2020. So far, the decade-old company has raised over $183 million in venture capital. Along with this significant influx of capital to the company, CEO Luis von Ahn, who is also the creator of CAPTCHA and reCAPTCHA technology, often hinted at plans for Duolingo to pursue an IPO sometime in 2021.

The company’s S-1 form shows exactly how successful Duolingo was throughout the earlier days of the pandemic, as people across the globe turned to its app and web-based services to level up skills and fill newfound time at home during lockdown. As of March 31, 2021, Duolingo reported having 40 million monthly active users and 1.8 million paying subscribers—up from 27 million monthly users and 900,000 paying subscribers on December 31, 2019. The company also saw its revenue more than double in year-over-year growth, going from $70.8 million in 2019 to $161.7 million in 2020.

By the end of this year’s first quarter, Duolingo’s revenue was $55.4 million, almost double the $28.1 million revenue in the first quarter of 2020. In those first three months of 2021, the S-1 form shares that 72% of the company’s revenue came from subscriptions to Duolingo Plus—the ad-free premium services offered by the company starting at $6.99 per month—showing the success of its freemium model despite early promises to keep all services completely free. About 17% of the company’s revenue in the first quarter this year came from advertising, with the remaining 11% coming from the Duolingo English Test and other revenue.

In 2020, only four employees, less than 2% of the total workforce, left the company—down from the 2019 attrition rate of 6%. That's good news for Pittsburgh.

Despite these huge jumps in users and revenue, Duolingo also reported higher losses during the pandemic that have continued into 2021. At the end of the first quarter in 2020, the company reported a net loss of $2.2 million while the end of the first quarter in 2021 showed a net loss of $13.5 million. In the S-1 form, the company attributes these increased losses to continued investment in new technology and services as Duolingo continues to grow.

Some of those anticipated innovations, as outlined by the growth opportunities in the S-1 filing, include better integrating the Duolingo English Test with the language learning app, as well as introducing a Duolingo Proficiency Score —which it aims to turn into a “widely accepted indicator of language proficiency level”— later on. The company also shared plans to expand services on its platform beyond language learning, perhaps to a wider range of subjects and audiences, mentioning its 2020 launch of child literacy product Duolingo ABC as one potential example.

Duolingo’s rapid growth and continued product diversification could prove attractive to investors on Wall Street, but the company also acknowledges some risks to its success in the filing. While currently a leader in online language learning and edtech, Duolingo cites impending competition from larger companies like Apple and the low switching costs of online education tools. Still, Duolingo remains in a healthy position for its impending IPO, and has plans to diversify its product line in ways that should alleviate some of these competition concerns, the S-1 states.

According to this first filing, Duolingo plans to file for $100 million as its proposed maximum aggregate offering price (in other words, the most it expects to raise), though this number is commonly filed as a placeholder in S-1 forms and will likely be different from the final raised amount. The number of available shares for the company’s Class A and Class B common stock also remains uncertain for now. Both of these details will become more clear as Duolingo embarks on its eventual IPO roadshow to pitch investors.

Duolingo’s employee numbers have also surged since December 2019, going from 200 then to 400 now (170 of which are engineers), which makes sense given the increased revenue and service usage. Notably, the company has not only grown its employees at a steady pace, but done well at keeping them, too. In 2020, only four employees, less than 2% of the total workforce, left the company—down from the 2019 attrition rate of 6%. That’s good news for the Pittsburgh tech community, as Duolingo plans to keep the city as its headquarters for the foreseeable future.