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Alphabet-backed Duolingo becomes first VC-funded $1 billion Pittsburgh tech start-up

Key Points
  • Language-learning app Duolingo is valued at $1.5 billion after a $30 million investment by Alphabet's CapitalG.
  • Bookings growth has risen from $1 million to $100 million in less than three years for the most-downloaded and top-grossing education app worldwide.
  • Pittsburgh's first venture capital-funded $1 billion start-up plans to increase staff by 50% with the new funding.
  • Another Pittsburgh-based tech company, Argo, is valued at $7.25 billion. The self-driving technology firm's funding was achieved through direct, multibillion-dollar investments made by Ford and Volkswagen.
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Language learning app Duolingo CEO on company's $1.5 billion valuation

Language-learning app Duolingo has opened up new opportunities for smartphone users. Being bilingual looks great on a resume, can open life up to new cultural opportunities, and research has shown it can even delay symptoms of dementia. Now with a new round of funding from Google parent Alphabet, the fast-growing language-learning platform is looking to expand its technology, marketing and staff.

Duolingo, which offers the most-downloaded education app in the world, just raised $30 million in a Series F funding from Alphabet's CapitalG late-stage growth venture fund, becoming the first Pittsburgh-based tech start-up valued at more than $1 billion by venture capital investors. Duolingo's new valuation is $1.5 billion. It has raised a total of $138 million, including from existing investors such as Kleiner Perkins Caufield Byers, Union Square Ventures, New Enterprise Associates, Drive Capital, Ashton Kutcher and Tim Ferriss.

Duolingo, which has made the CNBC Disruptor 50 list for two consecutive years, has seen a big jump in bookings, from $1 million less than three years ago to $100 million, the company revealed to CNBC.

Duolingo has added to the growth from its core language-learning app with new products, including podcasts for Spanish and French learners, and Duolingo Events, which connect language learners in person around the world. Chief among new additions is Duolingo Plus, a subscription-based option for the app that removes ads and provides additional features.

"Duolingo has been adding user and revenue at an impressive pace, continuing to solidify their position as the No. 1 way to learn a language globally," Laela Sturdy, general partner at CapitalG, said in a statement provided to CNBC. CapitalG was an existing investor in Duolingo. "The team has demonstrated that sticking to their mission providing free education is not only good for the world but also good for business."

Steel city turns to high tech

"Pittsburgh's tech industry has grown significantly over the past several years, and I am proud that Duolingo's roots are here," Duolingo CEO and co-founder Luis von Ahn said in an email to CNBC. "I hope this milestone is something that Pittsburgh is proud of, too, as a symbol of this city's renewal and resurgence as a great place to start a business and a great place to live in."

The venture capital industry has been more focused in recent years on funding start-ups outside of Silicon Valley. Funds like Steve Case's Rise of the Rest and Comeback Capital are investing in regions like the Midwest to bring the tech industry to parts of the country that benefited from the boom.

I hope this milestone is something that Pittsburgh is proud of, too, as a symbol of this city's renewal and resurgence as a great place to start a business and a great place to live in.
Luis von Ahn
CEO and co-founder, Duolingo

Pittsburgh is no stranger to big tech. Google, Amazon and Facebook all have offices in the city.

"Duolingo is the kind of company driving the rebirth of Pittsburgh and other Rust Belt cities as they transform into ed-med-tech economies. Additionally, Luis and his team aren't just economic leaders but community leaders as well," wrote Pittsburgh Mayor William Peduto in an email to CNBC.

Another Pittsburgh-based tech start-up, Argo, is valued at $7.25 billion. The self-driving technology firm's funding was achieved through direct, multibillion-dollar investments made by Ford and Volkswagen, rather than investments from venture capital firms.

Duolingo said it will use the new funding from Alphabet to increase its employee base by 50%, with a plan to reach 300 by the end of next year. The company has 200 employees today, double its size in July 2017 at the time of its last fundraising, and additional offices in New York, Seattle and Beijing.

Part of the $30 million will go into new initiatives like podcasts, and the Duolingo English Test, a $49 English proficiency test for international students accepted by more than 400 institutions. The company is also looking at investments in machine learning and artificial intelligence to "offer a more personalized, adaptive experience for learners," said von Ahn.

Marketing spend will increase as well. Von Ahn told CNBC that Duolingo has reached 30 million monthly active users organically by word of mouth, with some small tests in paid acquisitions. Duolingo is the top-grossing education app worldwide.

"Making a great, free product that people tell their friends about has proven to be a successful strategy for Duolingo to date and will continue to be our focus," CEO von Ahn said, but he added, "We will also start making some small, strategic investments into marketing to fuel our growth in key markets."

He said the start-up would never have gone from $1 million in bookings to $100 million without focus on the free version of the language-learning app, and that won't change. Duolingo offers 91 courses across 30 languages.

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Duolingo number 28 on CNBC Disruptor 50 list

Correction: This story has been updated to reflect that Pittsburgh-based self-driving technology start-up Argo has been valued at more than $7 billion after direct investments made by Ford and Volkswagen. Duolingo is the first start-up from Pittsburgh to be valued at over $1 billion by venture capital investors.

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How Convoy has become 'the Uber of trucking'
Key Points
  • Seattle-based startup Convoy uses a digital platform to match trucking companies with shippers.
  • Run by a former Amazon executive, Dan Lewis, the trucking start-up raised $400 million in a funding round co-led by Generation Investment Management, Al Gore's sustainable investing firm.
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