Softbank invests $215m in Kahoot!, more spending to come

Softbank has a acquired a 9.69% stake in Norway’s Kahoot! at a cost of US$215 million, and is reportedly looking for external funding for a new acquisition vehicle.

Kahoot!, an education software company, said it issued 43 million new shares at a cost of 46 kroner (US$5) each, raising NOK1.98 billion in total.

In approving the private placement, Kahoot!’s board noted that “Softbank will strengthen the company’s shareholder base as an investor with deep expertise and experience owning and developing software companies.”

Founded in 2012, Kahoot! has developed a game-based learning platform, that was initially aimed at educational establishments, but has recently broadened its scope to target business training sessions, and sporting and cultural events. The Covid-19 pandemic and the related need for home learning has raised the company’s profile over the past 12 months; in March it announced it would make the premium version of its platform free to schools across the world to help them deal with the challenges of distance learning during lockdown. Earlier this month it noted that it has more than 21 million active accounts and hosted 224 million games in the year to the end of Q3.

The revenue has yet to catch up with the hype, but the company is posting strong growth albeit from a low base. Kahoot!’s turnover reached $11.6 million in the third quarter, up from $3.4 million in the same period of 2019. Its paid subscriptions number 360,000.

Kahoot! raised $28 million in new equity in June via a funding round that attracted both domestic and international investors. It counts Northzone, Creandum, M12 (formerly Microsoft Ventures), Datum Group, and Accelerator Investments (owned by Walt Disney Company) amongst its investors. And now Softbank.

Kahoot! said it “intends to use the net proceeds from the private placement to finance accelerated growth through value-creating non-organic opportunities and continue to build a unique platform company.”

Translation: it will spend some money on what it already has, but there could well be an acquisition or two on the cards too. It has not shied away from M&A in the past, having picked up Danish employee engagement platform Actimo for $26 million-$33 million – that deal is due to be finalised later this month – and paid NOK56.2 million (around US$6.5 million) for gamified learning to read app Poio last summer.

It’s not the only one with more M&A in its sights.

It is not clear which bit of Softbank has invested in Kahoot! – the firm simply disclosed that the cash had come from “a subsidiary of Softbank Group Corp” – but one way or another it appears that the Softbank Vision Fund, which holds many of the group’s financial interests in start-ups, has its eye on some more acquisitions.

The outfit will reveal details of a new blank-cheque acquisition vehicle in the next two weeks, an unnamed source told Reuters this week, backing up similar earlier reports. The newswire’s source said Softbank is looking for external funding for the vehicle and may also invest its own capital too.

Earlier this year Softbank warned of a $17 billion loss at the Vision Fund, in no small part due to the impact of Covid-19. Clearly it is now looking for new investment avenues as the world seeks to get to grips with the virus.