How I Built A $6.5 Billion App Called Duolingo | Founder Effect
Summary
TLDRThe transcript details the journey of Luis von Ahn, the founder of Duolingo, from his childhood in Guatemala to creating one of the world's most popular educational apps. It highlights his innovative spirit, from developing the CAPTCHA system to digitizing books with reCAPTCHA. The narrative underscores von Ahn's commitment to creating a happy, egalitarian workplace culture at Duolingo, his unique hiring practices, and the company's successful freemium business model that offers language learning to millions, while maintaining a strong social mission.
Takeaways
- 🏫 Carnegie Mellon University is recognized for its excellence but is also known as a stressful environment where happiness is not a priority.
- 💡 Luis von Ahn, the founder of Duolingo, is a successful tech entrepreneur who values creating a happy workplace culture, contrasting with his experience at Carnegie Mellon.
- 💼 Luis von Ahn made significant money digitizing the New York Times and through the sale of his company reCAPTCHA to Google, which helped fund his future ventures.
- 🌟 Luis von Ahn's innovative approach to problem-solving led to the creation of CAPTCHA and reCAPTCHA, which not only served a practical purpose but also contributed to digitizing books.
- 📈 Duolingo's business model is similar to that of Spotify, offering a free version with ads and a premium subscription for an ad-free experience, which has proven to be financially successful.
- 🌐 Duolingo's popularity is immense, with more users learning languages on the platform than all U.S. high school language students combined.
- 🎓 Luis von Ahn's educational background, including his time at Duke University and Carnegie Mellon, played a significant role in shaping his career and approach to innovation.
- 💼 Luis von Ahn's commitment to a positive company culture extends to unique hiring practices, such as evaluating potential employees' behavior towards drivers during interviews.
- 🚀 Duolingo's growth was initially focused on user acquisition rather than monetization, with a shift to a self-sustaining business model around 2017.
- 📈 Duolingo's valuation skyrocketed after going public in June 2021, reflecting the company's success and market confidence in its business model.
Q & A
Who is Luis von Ahn, and what is his background?
-Luis von Ahn is the co-founder of Duolingo, a successful educational technology company. He was born in Guatemala, moved to the U.S. to attend Duke University, and later pursued a Ph.D. at Carnegie Mellon University. He has been involved in creating several successful tech ventures, including CAPTCHA and reCAPTCHA.
What was Luis von Ahn's first major business success?
-Luis's first major success was a game he developed in 2003 that helped improve Google’s image search algorithm. Google purchased the game for a few million dollars.
How did Luis von Ahn come up with the idea for CAPTCHA?
-Luis got the idea for CAPTCHA after hearing a talk by Yahoo's chief scientist about the problem of spammers stealing email addresses. CAPTCHA was designed to differentiate humans from bots by asking users to type distorted characters.
What is reCAPTCHA, and how does it differ from CAPTCHA?
-reCAPTCHA is an evolution of CAPTCHA that Luis developed to both authenticate users as human and use their input to help digitize books. It was later sold to Google.
How did Duolingo come to life, and why was it focused on language learning?
-Duolingo was co-founded by Luis and his Ph.D. student, Severin Hacker, in 2009-2010. They chose language learning as the focus because both had learned English themselves, and they wanted to democratize education using technology.
What was Duolingo's approach to monetization?
-Duolingo adopted a freemium model similar to Spotify, where most users access the app for free, but a small percentage pay to remove ads and access premium features. This model has proven successful, with 6% of users providing most of the revenue.
What challenges did Duolingo face before monetizing the platform?
-Before 2017, Duolingo wasn't making any money. They spent most of their funds on salaries, focusing on growing their user base instead of monetization. Eventually, they introduced ads and premium subscriptions to create a self-sustaining business.
How did Luis von Ahn's background influence the culture at Duolingo?
-Luis grew up observing the tension between bosses and workers in his family’s candy business. He applied these lessons to create an egalitarian and happy workplace at Duolingo, prioritizing a positive company culture.
What unique method does Duolingo use to assess potential executive hires?
-Duolingo secretly collects feedback from drivers who pick up executive-level candidates from the airport. If a candidate treats the driver poorly, they are not hired, regardless of qualifications.
What is Luis von Ahn’s proudest achievement with Duolingo?
-Luis is most proud of the culture he has created at Duolingo and the mission to democratize education, offering free, high-quality language learning to millions of users worldwide.
Outlines
🎓 Early Life and Education of Luis von Ahn
Luis von Ahn, the founder of Duolingo, discusses his background, including his upbringing in Guatemala where learning English was crucial for opportunities. He shares his journey from attending Duke University on a full scholarship to pursuing a Ph.D. in computer science at Carnegie Mellon University. Von Ahn's early experiences, such as witnessing the dynamics in his family's business and the influence of a Duke recruiter, set the stage for his future entrepreneurial endeavors.
🚀 From Captchas to Duolingo: Luis von Ahn's Entrepreneurial Journey
Von Ahn's entrepreneurial journey began with the creation of a game that improved Google's image search, which he sold for millions. He then developed CAPTCHA to combat spam, which was later acquired by Google. His innovative spirit led to the creation of reCAPTCHA, which digitized books while verifying human users. Von Ahn's ventures have not only been financially successful but also served a greater purpose, such as aiding in the digitization of The New York Times' archives.
🌐 The Birth and Growth of Duolingo
The idea for Duolingo was born out of a desire to democratize education using technology. Von Ahn and his co-founder Severin Hacker aimed to create a platform that could teach languages for free. They secured seed funding from Union Square Ventures and later raised a significant Series A. Duolingo's user base grew rapidly, and the company eventually adopted a business model similar to Spotify, offering a free version with ads and a premium subscription service. This approach has allowed Duolingo to become a self-sustaining business while maintaining its free offering.
💼 Building a Positive Work Culture at Duolingo
Luis von Ahn emphasizes the importance of company culture at Duolingo, drawing from his experiences at Carnegie Mellon and his family's business. He has implemented unique practices, such as having drivers provide feedback on how potential hires treat them, to ensure a positive and egalitarian work environment. This focus on culture has contributed to Duolingo's low employee turnover and high employee satisfaction, fostering a workplace that aligns with the company's mission of providing accessible education.
📈 Duolingo's Impact and Future
Duolingo has become a leading platform for language learning, with more users in the U.S. than all high school language students combined. The app's gamified approach and streak feature have contributed to its success. Von Ahn shares his experience with the company's IPO, the importance of not focusing on share price fluctuations, and the company's commitment to its mission. Duolingo's culture and von Ahn's leadership have made it a place where employees are proud to work towards a common goal of universal education.
Mindmap
Keywords
💡Duolingo
💡Recaptcha
💡Carnegie Mellon University
💡MacArthur Fellowship
💡Captcha
💡Democratizing Education
💡Guilt and Productivity
💡Gamification
💡Monetization Strategy
💡Egalitarian Work Culture
Highlights
Carnegie Mellon is recognized as an excellent university but is noted for being a stressful place where happiness is not a common experience.
Luis von Ahn, the founder of Duolingo, ensures his company is a happy place to work, contrasting with his early experiences.
By age 24, Luis von Ahn had already become a millionaire several times over.
Duolingo's technology is used by hundreds of millions of people daily, highlighting its widespread adoption.
Luis von Ahn's unique approach to feedback includes paying drivers to assess the interactions of potential hires.
Three key numbers in Luis von Ahn's story are: $42,000 weekly from digitizing the New York Times, $183 million in outside investment, and a $6.5 billion valuation post-Duolingo's IPO.
Duolingo was created to democratize education using technology, making it accessible to a broad audience.
Luis grew up in Guatemala, where learning English early on significantly increased his life opportunities.
Witnessing the tension between owners and workers in his family's business influenced Luis's later company culture.
A visit from a Duke University recruiter was a pivotal moment that led to Luis's academic journey in the US.
Luis's first profitable business was a game that improved Google's image search by crowdsourcing image descriptions.
The creation of CAPTCHA solved the problem of spambots stealing email addresses, and was later sold to Google.
ReCAPTCHA was an innovative way to utilize the time spent by users on CAPTCHA to help digitize books.
Luis von Ahn's companies have been successful not only financially but also in serving a greater social purpose.
Duolingo's business model is similar to Spotify's, offering a free version with ads and a premium subscription for an ad-free experience.
Duolingo's IPO was a significant milestone, with the share price starting at $102 and trading as high as $140 on the first day.
Luis von Ahn emphasizes the importance of company culture, aiming to create a happy and egalitarian workplace at Duolingo.
Duolingo's success is attributed to its game-like experience and streak feature, which encourages daily engagement.
Transcripts
carnegie mellon is an excellent
university but
it is a stressful
place people aren't happy they're just
they kind of just
it's not good it's not a happy place one
of the things that severan and i decided
early on when we were starting a company
is like look whatever happens
you know our company should be a happy
place by the time luis van on turned 24
he was already a millionaire several
times over the 43 year old may not be a
household name but i'm willing to bet
you're one of the hundreds of millions
of people who use this technology every
day lewis isn't your average unicorn
tech founder he actually pays his
drivers to give feedback on their
interactions with potential executive
level hires on their way to and from the
airport to weed out toxic personalities
alright luis thank you so much for
taking some time out i appreciate it
yeah of course there are three numbers
to look out for in lewis's story 42 000
the amount he made each week digitizing
copies of the new york times 183 million
the total amount of outside investment
he raised and six and a half billion the
total valuation after duolingo went
public in june 2021. here's how louis
van on built duolingo one of the most
popular educational apps in the world
while managing to keep it free for
almost everyone who uses it for cnbc
make it i'm nate skid this is founder
effect
lewis grew up far from the ivy leagues
in guatemala his mother was a doctor and
made sure he learned english at a
younger age for many people that can be
the difference between a life of
struggle and one of opportunity how big
of a deal do you think it was to go to
an english program
in terms of setting on the path that you
ended up that you ended up on i think it
was a huge deal in guatemala for example
you could probably double your income
potential by just the fact that you know
english but you don't have to need it no
anything else there were two formative
moments in lewis's young life the first
was witnessing the tension in his
family's candy business between the
owners and their workers different
people in my family
would you know a lot of times they just
have this vision that it's like kind of
us versus them the second was a visit
from a recruiter from duke university
who was scouring central america for
undiscovered academic talent and she
essentially kind of
she didn't quite fill out the
application for me but she almost filled
out the application for me in 1996 lewis
moved to the united states to attend
duke university with no money to his
name yet he still managed to graduate at
the top of his class with the goal of
becoming a math professor but that dream
didn't last long i realized that all the
professors that were in math were doing
research on problems that hadn't been
solved for 500 years or whatever lewis
wanted to spend his time and energy
tackling new challenges in 2000 he was
accepted to a computer science phd
program at carnegie mellon but it didn't
take long for him to develop a knack for
creating profitable businesses in 2003
he created a simple game pairing two
players and showed them each the same
image if their descriptions matched they
moved on to the next one what they were
doing is basically just telling google
what's in these images um
and so that that really you know kind of
improved image search etc lewis says
google bought the game in 2003 for a
couple million dollars in 2006 lewis
landed on his next big idea after
listening to a talk by yahoo's chief
scientist the problem was that spammers
were writing code to steal millions of
email addresses and flood those inboxes
with junk mail lewis's answer was called
this thing called the captcha which is
these distorted characters that you have
to type um
you know
all over the internet whenever you're
buying tickets from ticketmaster or
whatever you just you know you get this
image of
messed up characters um so we came up
with that that was our idea about 200
million people take 10 seconds out of
their day to fill out a captcha and
while some would sit in amazement at
their impact on humanity lewis suffered
from pains of guilt which led to his
next big idea and so if you multiply 10
seconds by 200 million i started
thinking okay that's that turns out to
be 500 000 hours every day started
thinking okay can we
can we make good use of these 500 000
hours gave to this rise to this kind of
next project which was called recaptcha
so this is like a redoing of captcha um
where the idea was that as people were
going to they were typing these
you know over the internet
not only would they be authenticating
themselves human but they were helping
us to digitize books where did the new
tech reach the new york times which was
in the process of digitizing about 150
years worth of old newspapers lewis
charged the times 42 thousand dollars
for every year of content he digitized
we could digitize an entire year of
content in about a week
so pretty quickly we started getting
checks for 42 000 bucks like you know
about one a week lewis founded recaptcha
in 2006 and sold it to google in 2009
for an undisclosed sum but he said it
was in the tens of millions of dollars
in 2006 lewis was awarded the macarthur
fellowship also known as the genius
grant that came with five hundred
thousand dollars and no strings attached
it's not like you apply for it or
anything just one day you get a phone
call
and they just ask if
they're fortunately i picked up the
phone because you know nowadays if i get
a random phone call i do not pick up the
phone so what did you do with the five
hundred thousand dollars put in the bank
account uh uh honestly i probably spent
it mostly on
a little seed funding for this recapture
so um
where did the aha moment for
a
language service
come about where did this happen
yeah that was so i was that was around
2009 2010 um i had sold recapture to
google i had a phd student named severin
hacker who is my co-founder at duolingo
at the time we hadn't started anything
one of the insights was you know
computers are getting much smarter and
we could make it so that computers
really could teach everybody as opposed
to teachers having teach everybody that
was kind of the idea now that they knew
they wanted to teach they just needed to
agree on a subject eventually we settled
on teaching languages
and the reason for that was because both
of us have you know both of us
learned english so we thought okay let's
do something to teach english the other
thing that we really wanted to do was we
really sought technology as a way
to
to be able to really democratize
education beautiful thing with
technology is that it doesn't cost you
that much more to teach more people than
just to teach one person um so we
thought okay well we teach everybody and
and we can teach them for free and just
like that duolingo was born well sort of
so um how do you come up with the name
duolingo we looked at a lot of names one
of the ones um was
f-l-o-o-n-t which should sound kind of
like fluent but it more sounded like
fluent
and then you know my friend said oh that
sounds like i flunked it all over the
floor like it's like not good
um so we had we had a bunch of names
eventually we came up with not duolingo
but monolingual
and and that sounded like a
like an illness like you have
monolingual and at some point just
duolingo made a lot of sense now that
they had a name and a mascot it was time
to turn their idea into a business
instead of applying for a grant through
carnegie mellon in 2012 lewis reached
out to union square investors and
secured three million dollars in seed
funding they had just invested in like
twitter and tumblr and they were like
the biggest thing out there and
foursquare was also the biggest thing
out there and so unesco advantages was
like oh my god like amazing okay so um
can you tell me the amount that series a
from union square was yeah i mean one
thing that is important to mention is
series a back then this is the year 2012
we're very different than csa's today
which today is just massive so in 2012 a
very nice series a that you were happy
with was three million dollars
three million today that's not even
called a series eight today's like seed
funding around that time lewis gave a
ted talk
and at the end he made mention of this
really cool new application focusing on
language that he was working on
well that talk went viral and soon
duolingo which at the time was just a
landing page with a place to put an
email address had a waiting list with
over 300 000 names on it at the time the
other thing that was going on at the
time was uh there wasn't really a good
way to learn a language on the computer
i mean the thing that there was was
rosetta stone and it was like super
expensive it was like a thousand bucks
and so there was this thing that just
you can learn a language here it's
entirely for free and so a lot of people
were like yeah sure i'll give you my um
my email um and so you know that worked
out pretty well the instantaneous
interest in duolingo and his proven
track record helped lewis raise even
more capital 183 million in all
he used almost all of that early
investment money to build out a team and
for the next three years he focused
solely on growing his user base he
didn't even think about monetization
up until
2017-ish duolingo was making no money
this was uh not it was our finances were
very simple simply we spent money on
mainly people's salaries
and that was at that point though we
decided it's probably time to make
duolingo be a self-sustaining business
and we started actually monetizing and
it has worked out very well by now lewis
says duolingo had about 10 million
active users and was the number one
education app in the world
now they just had to figure out how to
make money while keeping the app free we
didn't just want to say you know turn
around and say oh just kidding um now
you gotta pay
so what we ended up doing is we ended up
coming up with a business model that
ends up being pretty similar to say what
spotify does or what the dating apps do
which is um you can use duolingo as much
as you want for free
but uh um
if you don't pay us you have to see some
ads at the end of a lesson
and then if you want to turn off the ads
you can pay us to subscribe and then we
turn off the ass and we may give you
other kind of premium features so that
that combo of ads and subscription
worked out really well um and so we
ended up making a you know
every year since then we've made more
and more money a full 94 of duolingo's
active monthly users opt for the free
version which includes some ads but the
company makes most of its revenue from
the other six percent of its users who
were paying subscribers from six percent
of our users give us the majority of our
money by now there are more people in
the u.s learning languages on duolingo
than there are students learning
languages in all u.s high schools
combined and one of the reasons for
duolingo success is that it feels like a
game in fact the app keeps track of how
many consecutive days a user logs in
skip a day and it goes to zero we have
over by by now i mean we haven't quite
released the the figure but we have
released this one which is we have over
a million daily active users who have a
streak longer than 365.
so we have more than
they haven't missed a single day in the
last year
what day did you ipo what was it like
for you personally were you nervous do
you remember the moment it was extremely
exciting and it's a big milestone for
the company and for everybody who has
been working on this i mean
duolingo has really good employee
retention as in like people really
rarely leave duolingo so most of the
original team is still here and so
there's been all these people that have
been at this for you know the last i
don't know eight nine years um so it was
pretty transformative what happened to
the share price our share price was 102
um it went it went really high i mean uh
uh the first trade was 140
i don't know maybe 141 or something like
that some i don't know the exact number
is around 140 and then it just kept
going up et cetera you don't know like
that would be like plastered on my wall
is like a big memory
you know share price is uh
i'm i i i was told by a lot of ceos of
public traded companies
not to pay too much attention to share
price and i've been doing that and it's
actually really good feedback here's
basically what your share price moves
randomly
with like basically no connection to
what's going on with the company what
was the biggest money mistake you've
made along the way with duolingo i don't
feel bad about anything we've done by
the time we went public we still had a
hundred and some million dollars in the
bank account meaning we had only really
spent 80 million of course we had been
making some revenue the last few years
etc but basically we could have raised a
lot less money
and by raising a lot less money you know
i think um boss employees me and the
rest of the employees would have owned a
larger fraction of the company
when i was talking to the management
team about uh interviewing you uh one of
the other senior producers said that she
had gotten very far um in the in the
interview process at duolingo you guys
flew her out to pittsburgh you put her
up and she said that even though she
didn't get the position the culture and
the vibe at duolingo
stayed with her and she was like nate
you have to ask about that culture and
so it dawned on me when you were telling
me about this candy factory that you
watched and then hearing about the
culture that you created and i'm
wondering if you can kind of sew that up
for me like what you learned there and
what you apply now most tech companies
there's a lot of
employee churn meaning like people leave
the company etc very few people leave
dual language because it's a good
workplace and i think that there's two
reasons for that i think the
you know what i what i saw with with my
family and this is not it's not that
my family was doing anything bad or
anything it just
in in a in a country like guatemala uh
there really is a kind of a boss versus
employee like us versus them kind of
thing
and and i saw that that really didn't
work i mean it's much better when when
everybody is much more egalitarian
culture so duolingo has a you know in as
much as possible a very egalitarian
culture that's one thing the other thing
is you know when when we were at
carnegie mellon carnegie mellon is an
excellent university i have nothing bad
to say about it it is really an
excellent university um excellent for
artificial intelligence
for all kinds of things but
it is a stressful place
and people when you enter the buildings
there you people aren't happy they're
just they're kind of just
it's not good it's not a happy place
um and uh you know one of the things
that severan and i decided early on when
we were starting a company is like look
whatever happens uh you know our company
should be a happy place lewis has a
unique way of weeding out potentially
toxic employees i'll tell you some of
the things we've done by the way even
for executives um
whenever we fly an executive for an
interview
or or not just accept it for a lot of
people whenever we fly them uh um we
have a driver go pick them up in the
airport and we have a set of drivers
that are the same everywhere
we actually that's part of your
interview and people don't know it um
it is how you treat them and so we we
get feedback from the drivers about how
well they were treated and so now
normally that most people are just
perfectly fine like just like that but
we have we have not made offers to very
very um
qualified competent people because they
were nasty to our driver and well uh we
don't like that because that just means
you're gonna um
you know you're gonna be nasty to the
little people and we don't want that and
so so yeah i think that that type of
stuff has really helped
lewis businesses have been incredibly
successful and yet they all seem to
serve a greater purpose the picture
matching game had the added benefit of
generating seo terms captcha helped
yahoo and many many other digital
businesses decipher between humans and
robots and recaptcha is helping to
digitize the world's books
these ideas have made lewis incredibly
wealthy but he's most proud of the
culture he created at duolingo a lot of
the people that come work at duolingo do
so because they love this mission of you
know developing the best education in
the world and making it uh you know
universally available
you
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