SoftBank's retreat from its past investing exuberance continues apace. This morning, Kahoot, the Norwegian startup that provides a popular platform for people to build and use education-focused games, announced that General Atlantic is buying out SoftBank's entire 15% stake in the company. SoftBank is exiting at a loss. The firm sunk at least $215 million into the company in the last several years. However, 15% of Kahoot's current market cap (10.415 billion Norwegian Krone) works out to about $152 million (1,562,250,000 NOK).
This looks like an all-secondary round: no new investment coming in alongside the buyout. (We're confirming this with Kahoot and will update as we learn more.) "Kahoot plans to partner with General Atlantic to accelerate further growth initiatives, drive innovation, and expand its global footprint in homes, schools, and corporations," the company said in a statement.
Nevertheless, the deal comes as Kahoot, like many other tech companies, continues to feel the pinch of the general downturn in technology stocks and the wider technology market. A year ago, its shares were trading at 70.25 NOK on the Oslo Stock Exchange. They are now worth only 22.77 NOK. And that is with a bump of nearly 27% that Kahoot had this morning on the news of the investment/divestment.
SoftBank, meanwhile, has been in hot water itself, facing up to big losses in its splashy Vision Fund investment vehicles on the back of those wider tech industry doldrums. In August, Vision Fund I reported a loss of over $17 billion for just one quarter (Q1). Vision Fund 2 is reportedly down in value by some 19% on the funds that have been invested so far. Amid layoffs and big executive changes, no surprise, then, that it is now divesting stakes that are underperforming. (It's still working on a Vision Fund 3 though, so never say die in the world of tech.)
“We are very grateful to SoftBank for their partnership over the past two years. As Kahoot! continues to pursue its mission to improve lifelong learning by building a leading global learning and engagement platform, we are thrilled to add a partner of General Atlantic’s caliber," Eilert Hanoa, CEO of Kahoot, said in a statement. "The team at GA brings deep experience in scaling global education technology and software businesses and positioning market leaders for long-term success, and we look forward to our next phase of momentum in empowering the learning ecosystem around the world.”
“We believe Kahoot has significant potential for further growth as digital learning solutions continue to be adopted across its work, school, and home markets," added Chris Caulkin, managing director and head of technology for EMEA at General Atlantic. "With its much-loved brand, product-centric approach, and engaged global user base, Kahoot is well positioned to scale, and we look forward to supporting Eilert and the full Kahoot! team in the years to come as they reach and engage ever more users worldwide.” General Atlantic and SoftBank have partnered on many deals in the past, so there was clearly already a relationship between the two and that may have played a factor here as well.
To be fair, since SB Northstar (the SoftBank Group fund making the investment) made its first investment in Kahoot nearly two years ago, in October 2020, Kahoot has grown a lot. It had 1.3 billion users ("non-unique cumulative participants across the globe") at that time; now that number is 8 billion.
What started as a "YouTube for education"- style model (big emphasis on user-created content and a way of using what you have made for yourself or your own learning group, but also dipping in and using material made by others) has worked to diversify deeper into enterprise and more. It said today that Kahoot! at Work is used in 97% of Fortune 500 companies for corporate learning and engagement, and that Kahoot! at School is used by approximately 9 million teachers in the classroom. And Kahoot! at Home & Study has more than 18 million users as an "at-home gamified learning solution."
Indeed, the company went large during the COVID-19 pandemic, doubling down on being one of the platforms to help fill the gap of amusement and engagement for students who were no longer in classrooms; and ditto for remote workers as a way of team building and more.
But as with many companies that found business ballooning because of market conditions, now as more people return to the office, students are back in the classroom, and generally budgets are all being reined in in the current economic climate, it will be having an effect on Kahoot as well.
We'll update this post as we learn more.