Lingoda Announces $68 Million Investment

“Growth equity sounds fancy… but is it just a disguise?”

“Summit Partners dropped $68 million into Lingoda. That’s not pocket change — it’s a bet. 

Let's look into this massive investment in more detail.  

How Lingoda Tricks You into Loving their Brand

Lingoda’s Success Story

Left to right: Felix Wunderlich, Co-Founder and Managing Director, Michael Shangkuan, CEO, and Fabian Wunderlich, Co-Founder and Managing Director.

Source: Business Insider

Lingoda is the brainchild of two brothers — Fabian and Felix Wunderlich. Both went to study and work abroad for a couple of years, before returning back to Berlin in 2013. At that time, the city was rising up as the new startup capital of Europe — and this attracted a lot of new transplants.

The duo noticed that many expats, hired by local companies, struggled to combine work and language learning. Their demanding work schedules deterred them from joining in-person classes, offered by local schools. So, Fabian and Felix decided to test an alternative — on-demand 1:1 German learning sessions via Skype (led by certified teachers).

The Wunderlichs soon realized that online language learning is a huge and profitable niche. After raising a seed funding round of $1.5 million, they officially branded their venture as Lingoda and got down to work. The team launched a convenient website for marketing to students, recruited more tutors, and developed extra training materials.

Unlike other language learning startups, Lingoda chose not to build its online language learning platform. Instead, they kept using Zoom for hosting classes to save on operational costs — while these saved costs went into improving the quality of tutoring.

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By 2016, Lingoda scaled to offering classes in 4 languages — German, English, French, and Spanish — and intends to keep it this way. But why don’t they add more languages?

Because the Lingoda team has a “quality over quantity” philosophy. The Wunderlichs envisioned Lingoda as a service offering the same high academic teaching standards as traditional language learning schools but more flexibility in terms of scheduling.

The brand’s main target audience is busy working professionals, looking for an effective, yet accessible, language learning experience. To meet their needs Lingoda recruited over 1,500 certified native-speaking teachers, who can lead language classes 24/7. They also spent a great deal of time on improving the training materials and teaching tools.

As Fabian Wunderlich shared in an interview:

“CEFR-based learning materials are designed by linguistic experts and include over 2,000 fully digital lessons, focused on speaking practice and filled with action-oriented topics and easy-to-learn examples from real-life situations”.

Superior teaching standards and unmatched flexibility made Lingoda a threat to both traditional language learning schools and online language apps.

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To keep the growth momentum going, Lingoda welcomed Michael Shangkuan at the end of 2017. A Harvard Business school graduate and EdTech entrepreneur, Shangkuan has a diverse background. He dabbled in investment banking at Goldman Sachs, led brand management activities at Procter & Gamble, and successfully scaled another educational company, Terra Education.

Shangkuan originally joined Lingoda as a Managing Director, in charge of Marketing and Finance. But his on-point advice and strategic thinking eventually landed him in the CEO position. In this role, Shangkuan is determined to turn Lingoda’s original brand vision into long-term, cross-market growth.

In Shangkuan words, some of the first things he did to scale Lingoda were:

• Hire the right talents for key roles and build extra teams

• Refocus on operational priorities, while leaving room for ideas and innovation

• Create better processes, without killing the entrepreneurial / innovation spirit

Through a series of methodical structural changes, process optimizations, and proactive customer listening, Shangkuan managed to increase Lingoda’s sales by 10 times without burning virtually any cash by 2020.

Then the pandemic hit — but Lingoda was well-positioned to profit from the new wave of online education fans. Lingoda’s internal survey suggests that 60% of users started learning a language during the pandemic. So they doubled down on marketing to people who previously dismissed online courses in favor of in-personal training and won over this market segment.

Another smart (and generous) move they made during those challenging times? They extended support to offline language schools. Instead of tanking their direct competition, Lingoda extended a helping hand via the #StayHomeKeepLearning initiative.

Any language learning school could page Lingoda to get:

• Free access to all its language learning materials

• Assistance with setting up online classes (including setup done by Lingoda)

• Guides and training on remote teaching

That was a great gesture from Lingoda that didn’t go unnoticed by both students’ and teachers’ communities — and likely led to more positive brand associations.

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Lingoda, now heavy with some extra cash, is bullish about growing its global brand awareness and getting more users to try its product. The strong growth numbers from 2021 have set a high bar for this year.

How are they planning to keep growing their brand value and user bases? We’ve got some ideas.

3 Lingoda Brand Lessons to Borrow

From the onset, Lingoda was careful with picking its battles. They avoided positioning their brand as a direct competition to language learning apps. Instead, their unique sales proposition (USP) was perfectly tailored to one receptive and profitable target audience — the busy working professionals, serious about mastering a new language fast.

Their main brand differentiators reflect that. Lingoda is the only language school offering 450,000 live classes per year at any time of the day (or night).

Also, by choosing to segment their brand marketing, the team avoided costly competition for other demographics such as college students or hobby learners — already bombarded with pitches from other language learning apps.

By choosing to focus on one major customer segment, Lingoda managed to ensure steady growth numbers, thanks to a solid performance at the lower stages of the brand funnel — brand consideration and brand preference.

At the same time, they are very lean in their process and creative with their marketing. So there are several lessons other brands could borrow from them.

1. Use Gamification for Customer Retention

Usage of language learning apps increased during the pandemic. According to Duolingo, some 30 million people attempted to learn a new language on their app in 2020.

But how many people maintained their learning streak for 6+ months and turned into paying customers? As one informal survey of Duolingo users found, the overall completion rate for Spanish courses was less than 0.01%.

New customer acquisition can leave a big dent in your marketing budget. A lot of language students get disengaged midway and drop their studies. That’s why Lingoda goes at length to retain as many people as they can — and they worked out a very cool, gamified strategy for that. It includes:

• Marathon courses — special 3, 6, or 12-month learning courses with a cashback reward of €50 to €1000 if the student attends 90% of classes.

• Language Sprint — a quarterly promotion event, based on the “challenge” concept. If you take a 3-month Language Sprint learning challenge, you can get up to 100% of the course cost refunded to you.

Lingoda heavily promotes both reward schemes via influencers marketing — one of their pillar activities — mainly via expat and travel bloggers/vloggers.

The Takeaway: For many language learning products, user retention is a problem as people lose motivation halfway through. You may try to win people back with repeating email nudges or small time-sensitive discounts — but that’s what every product does.

Lingoda, however, decided to try a more daring strategy. Their rewards system bolsters our natural competitiveness and then slaps an attractive cash reward on top — and this approach works for them.

2. Build Your Marketing Based on Customer Knowledge

Lingoda was founded with a clear brand mission:

“We aim to empower even the busiest people to master a language anywhere, anytime.”

By “the busiest people” Lingoda assumes two types of targets:

• Adult professionals (over college students or leisure learners), who want to achieve specific professional goals.

• Expats who want to feel more integrated within a host country, move abroad, or gain more self-confidence at work.

It follows that most of their brand marketing is centered on increasing brand awareness among these targets and communicating the main brand advantages to them.

Influencer marketing is their go-to strategy for that. If you follow any expat YouTubers, you’ve probably seen a Lingoda ad insert more than once. 

 Continue reading: Youtube - Love Lingoda? 

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