Not only AI: Where Preply will invest $70 million from Horizon

A Ukrainian startup Preply was founded in 2012 by Kyrylo Bygai, Sergiy Lukyanov, and Dmytro Voloshyn. Their product is an educational platform where you can find tutors for remote learning. A year after its launch, the team moved to Boston and attempted to 'quickly conquer the USA'. The experiment turned out to be unsuccessful. "We slightly overestimated our capabilities and underestimated the amount of money needed for an effective entry into the American market. At that time, we lacked competence in marketing and product development," recalls Dmytro Voloshyn.

So, the founders had to return to Kyiv. Over the next few years, they spent time in Ukraine, building the product and testing it in the local market. When the platform and marketing competencies were ready for a second attempt, the founders began their international expansion with a focus on the USA. "The story came full circle, we once again have a team in the States, but this time with much better skills," shares the co-founder.

Nowadays, the team consists of 500 employees in 30 countries worldwide. Recently, Preply raised $70 million from Horizon Capital, Reach Capital, Hoxton Ventures, and investors who participated in previous funding rounds. Following this significant news, the company's valuation, according to some estimates, may reach $500–600 million. But what is the actual value? How did Preply manage to grow tenfold during a crisis and war? And why does the company have zero revenue in Ukraine? Dmytro Voloshyn shared this and much more in a blitz interview with Mind.

– Preply's revenues have grown tenfold over the past three years. How did you manage that? What are your business metrics?

– We do not disclose our business metrics. We have certain information that we cannot share as it may be useful to our competitors. We work with over 35,000 tutors from all around the world.

The main reasons for our growth are as follows: we improved the quality of our product and launched new product lines such as group lessons and Preply Business. We became more effective in international markets by investing more time and resources in the development of our office in Barcelona. Additionally, we have assembled a strong leadership team. These are individuals who have built billion-dollar companies in their careers, and their presence helps us develop in a qualitatively better way.

– How did the war impact your business?

– First and foremost, it affected our team. We have a large office in Kyiv. In the early days of the war, we had a plan in place to ensure the safety of our employees, and we managed to maintain effective work with our Kyiv team for the past year and a half.

Overall, we are actively hiring in Ukraine, particularly for engineering roles. We currently have several open positions, although hiring has slowed down slightly since the beginning of the year. After the last funding round, we may increase hiring efforts.

We also launched some projects to support Ukrainians during the war, including donations and initiatives for people who became refugees in Europe. We also waived the commission for Ukrainian tutors.

– So, currently, you have no revenue from Ukraine?

– Correct. In Ukraine, even before the war, the revenue share was small, about 1-2% of our total income. We operate as a marketplace, where money flows from students to tutors, and our revenue comes from a percentage of those transactions. We waived the commission for Ukrainian tutors when the war started, and currently, it is 0%. As a result, we don't generate any revenue from Ukraine. Our main revenue comes from Western markets, particularly Western Europe and the USA.

– After waiving the commission, are you attracting many new tutors?

– We already have a sufficient number of tutors. We are increasingly working with our top tutors to improve their classification. We are trying to move away from the model where anyone can come and post an ad as a tutor.

Sometimes, we face a shortage of specialists in Dutch or Norwegian languages. In these niches, we actively recruit new tutors. There is a surplus of English teachers, so we recruit only a small number of them. As far as I remember, the number of tutors has increased by only 3400 over the past year, and tutors do not leave the platform. They work with us for 8–9 years.

We aim to make Preply the main source of income for our tutors. In some countries, good tutors can earn more on our platform than the average salary in their country. Of course, it's more challenging to achieve this in countries like Switzerland or the USA, where the average salary is higher. However, in countries like Mexico, Ukraine, Brazil, the Philippines, and Thailand, tutors earn significantly more than the average salary in those countries. We have tutors in Ukraine earning thousands of dollars per month.

– Last year, you signed over 200 new deals in the B2B direction. How do you attract such clients? Which market is the largest?

– B2B clients either come to us on their own, or our sales department engages in cold outreach. The largest market in the B2B direction is Europe. Many prominent companies, such as Plarium, Datadog, GroupM, and Bain, work with us.

We like this approach because it works in synergy with B2C. Roughly speaking, every third or fourth user works for a company that could potentially become our client. We see a dynamic where our B2C clients become ambassadors within their companies and help us sign contracts with those companies.

– Regarding the latest investment round, how did you find the investor?

– We had been in communication with them for the past five years, closely observing each other. This year, the stars aligned, and we decided to go ahead with this investment round, which was publicly announced, and Horizon Capital raised a new round. They were ready to invest in companies with Ukrainian roots, including Preply. We see Horizon Capital as a strong partner who will assist us with many aspects of our future growth chapters.

– What do you mean by "future growth chapters"?

– The main plan is to continue growing in the markets and developing our B2C and B2B products. Another area where we will invest a significant portion of the funds is artificial intelligence. We don't believe that AI will completely replace humans in the medium term. Humans provide empathy and motivation, but many aspects of the tutoring process are routine, such as preparing homework, creating personalised plans for students, and assisting them with learning foreign words. Many of these processes can be automated. This is where part of the investment round will go.

In the future, we will be launching even more features. For example, we may analyse students' emotions to understand when they are losing motivation during a lesson. At some point, we may ask for permission to record lessons and then analyse what happens during the learning process. With the help of AI tools, we can understand what constitutes an ideal lesson and what components it should have. Data is the 'new petroleum’. We currently have a team of five people working on this, and we plan to expand it to 10–15 people later on.

– You mentioned that a significant portion of the investment will go towards the AI direction, and what about the rest?

– The rest of the investment will be directed towards continued growth in other markets and other product lines. Part of the round will be allocated to improving our growth strategy, such as investing more in marketing, brand development, and expanding into new markets.

– According to some estimates, the value of Preply currently stands at $500–600 million. Are those estimates close to the truth?

– I can't comment on this in any way. You can write that I refused to comment and add "smiles" in brackets.