Big changes in the near future for Kahoot, the Oslo startup that created a popular platform for users to create, share and “play” with education-focused challenges, used by billions of students and adults. The company have announced which has been fully privatized for cash at 35 NOK per share, valuing Kahoot at $1.7 billion (17.2 billion NOK) based on 492,836,049 issued and outstanding shares.
Goldman Sachs Assets Management's private equity arm is leading the acquisition, with Kahoot's existing backers General Atlantic (currently its largest shareholder), LEGO Group's KIRKBI Invest A/S ("KIRKBI") and Glitrafjord (controlled by CEO of Kahoot, Eilert Hanoa) named as the other major shareholders in the deal. Other undisclosed investors and managers will also have stakes in Kahoot.
The deal represents a premium over Kahoot's publicly traded shares as of yesterday, specifically 53,1% of the closing price on the Oslo Stock Exchange on May 22, 2023 (when it was NOK 22,86) .
However, it is a big step down from the company's highest valuation at the peak of the Covid-19 pandemic and, as such, represents yet another example of how Tech companies are struggling in the economic climate to obtain financing even as they grow.
Kahoot was one of the wave of remote learning startups that grew as people stayed away from physical classrooms and office spaces, giving the company, which has separate divisions serving K-12 students and adults/businesses, a lot of business, and the attention of investors.
Kahoot says that to date it has hosted "hundreds of millions of learning sessions with 9 billion (non-unique) participants in more than 200 countries and regions," and that it currently has more than 1 million paying users.
But in more recent times, the company, like other tech companies, has struggled in the public markets, with post-pandemic investors adjusting to a new reality: a world battling recession and inflation, and Consumers and companies are using less digital services (such as e-learning and e-commerce) on which they relied heavily just a year before. Kahoot today released a set of financial data that paints a mixed picture that speaks to this.
Today he revealed that in the second quarter he made $41 million in revenue, only 14% more than last year; $40 million in “billed revenue” up 8%; Ebitda of $11 million up 60%; and operating cash flow increased 90%, to $10 million.
But Kahoot, which over the years has collectively raised more than $500 million, also noted that it only had a cash equivalent of $96 million at the end of the second quarter.
At its peak, in 2021, Kahoot was trading at NOK 109 per share. That stock price has fluctuated greatly over the years. A year ago, in June 2022, it was trading at NOK 17,92 per share.
This acquisition will eliminate some of that fluctuation and caps years of Kahoot taking a two-tier approach to its business finances.
Launching its first products in 2018, the company has been listed for years on Oslo's Merkur Market, seen as a intermediate step between being a totally private startup and a publicly traded company. That route has helped him tap into both public and private funding avenues as he has scaled, leading him to take investments from traditional venture capitalists like big regional players Northzone and Creandum; SoftBank at its peak of investment exuberance; and strategic companies like Microsoft and Disney.
(SoftBank's 15% stake was sold entirely and at a loss to General Atlantic last year, as part of SoftBank's efforts to simplify and rationalize its portfolio.)
Although Kahoot is definitely not at its peak value, the PE (Private Equity) group that was formed to buy the shares seems to believe there is a longer-term opportunity here and are willing to bet their existing holdings on it.
“Kahoot! is unlocking learning potential for children, students and employees around the world. The company has a clear mission and value proposition, and our investment will help increase its impact and accelerate value for all stakeholders,” Michael Bruun, global co-head of Private Equity at Goldman Sachs Asset Management, said in a statement. “Through this transaction, we are pleased to partner with a fantastic leadership team and group of co-investors to expand a mission-critical learning and engagement platform and contribute to its further growth and innovation.”
“Since General Atlantic partnered with Kahoot! As of September 2022, the company has maintained significant momentum on key strategic initiatives, including expanding its enterprise offering and global subscriber base, while expanding its premium IP partnerships and delivering product innovation to leverage advances. in generative AI,” said Chris Caulkin, MD and director. of technology EMEA at General Atlantic. “Through this transaction, we are pleased to deepen our commitment to supporting the long-term growth of Kahoot! in collaboration with the broader group of co-investors. We look forward to continuing our partnership with Eilert, Kahoot! and the rest of the team in the coming years.”
And it will maintain important strategic support with this agreement. “We are excited to invest alongside Goldman Sachs Asset Management, General Atlantic and the Kahoot! management team. to accelerate the growth of Kahoot,” added Thomas Lau Schleicher, Chief Investment Officer at KIRKBI. “We are impressed with the company's journey, which has developed an interesting range of products to interact with its users in a fun and attractive way. “We support the company’s mission to empower students and educators around the world, which resonates with our core values, and we believe the investment fits very well with KIRKBI’s long-term investment strategy.”
In fact, it appears that the team leading the project remains behind the deal.
“The mission of Kahoot! is to make learning amazing. “Our portfolio of solutions powers billions of learning interactions each year, coming together through continuous product innovation and a team with the ambition to put magical learning moments within everyone’s reach,” said Hanoa. “As the need for engaging learning at home, school, and work grows, I am excited about the opportunities this partnership represents for our users, our partner ecosystem, and the talented team at Kahoot! Group, to promote the education of hundreds of millions of students around the world.”
