20VC: Duolingo Co-Founder on Why $3M is Harder than $100M to Raise | Why You Should Always Take Tier 1 VCs Even at Worse Terms | Why Europe Can't Win Unless the US Screws Up | How AI Impacts the Future of Work and Education with Severin Hacker

Summary

The Twenty Minute VC (20VC): Duolingo Co-Founder on AI, Fundraising, and the Future of Education with Severin Hacker

Release Date: May 19, 2025

In this engaging episode of The Twenty Minute VC (20VC), host Harry Stebbings and co-host Nico Wittenborn welcome Severin Hacker, co-founder and CTO of Duolingo. The discussion delves deep into Duolingo's AI-driven strategies, fundraising challenges, the European startup ecosystem, and the broader implications of AI on education and the workforce.

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1. Introduction

[00:00] Severin Hacker emphasizes the importance of raising funds from top-tier VCs, stating, “You should always try to raise money from the best Tier 1 VCs even if the terms are slightly worse because so much signaling...” This sets the stage for a discussion on funding dynamics, especially contrasting initial struggles in Europe with success in the US.

2. Fundraising Challenges and Success

[05:27] Hacker recounts Duolingo's early fundraising hurdles in Europe, where they secured only a $3 million Series A from Union Square Ventures. He reflects, “I can guarantee you Duolingo would not have been able to raise any money in Europe.”

Notable Quote:

“It's harder to raise 3 million than it is to raise 100 million.” — Severin Hacker [00:00]

3. AI Integration in Duolingo

[05:01] Discussing Duolingo's mission, Hacker explains, “Duolingo's mission is to provide the best education and make it universally available.” This mission has driven their AI-first approach from inception.

[06:29] He likens the introduction of GPT-4 to an “iPhone moment,” revolutionizing content production. “With AI there's a potential that you can pump out a lot of these courses all at once,” he notes, highlighting a dramatic increase from 100 to 148 courses within a year.

Notable Quote:

“From day one was technology first. Back then it was software. Now we call it AI.” — Severin Hacker [05:27]

4. Personalization and Interactivity in Education

[09:04] Hacker envisions a future where education is highly personalized. “You might be interested in rugby and you could custom design a course just for you... completely different from mine,” he elaborates.

[10:01] He introduces “Video Call with Lily,” an AI-driven conversational feature that personalizes learning by remembering user preferences, enhancing interactivity and engagement.

Notable Quote:

“Personalization is the future of education in your mind.” — Harry Stebbings [09:04]

5. AI Tools and Internal Changes

[10:35] Internally, Duolingo utilizes AI for content generation, developing new courses, and enhancing productivity across departments. Hacker reveals, “We don't mandate. Duolingo is surprisingly egalitarian. And we just say use AI tool or use whatever makes you more productive.”

Notable Quote:

“We use AI in three ways at Duolingo: content generation, AI features like Video Call with Lily, and overall productivity improvements.” — Severin Hacker [10:35]

6. AI’s Role in Software Engineering

[12:10] Addressing AI’s limitations, Hacker discusses challenges in software engineering where AI excels at simple tasks but struggles with large codebases and complex feature additions.

[13:20] He speculates on the future of software roles, suggesting a blend of product engineering and design, potentially creating more versatile roles through AI integration.

Notable Quote:

“AI tools lower the entry level to get into software engineering.” — Severin Hacker [13:20]

7. Future of Work and AI Impact

[15:04] When asked about pursuing a CS degree, Hacker affirms its continued relevance, emphasizing foundational skills over specific coding languages. “Problem solving, that will still be valuable,” he asserts.

[17:14] Discussing AI’s impact on employment, Hacker expresses mixed feelings about UBI and the potential for increased productivity to address economic challenges.

Notable Quote:

“Even if you take your ARR multiple or whatever, which by the way, was infinite.” — Severin Hacker [65:36]

8. Customer Support Transformation

[19:59] Duolingo employs AI tools like Decagon for customer support, managing 70-80% of tickets autonomously. This reduction in costs allows scaling support to a broader user base without proportional expense increases.

Notable Quote:

“AI can do 70 to 80% of the tickets that we get...” — Severin Hacker [19:59]

9. Competitive Landscape and AI Developments

[23:19] Hacker addresses concerns about AI giants like OpenAI potentially entering the language learning space. “The hardest part about learning a language is motivation... Duolingo is a motivation engine,” he argues, underscoring Duolingo's unique value proposition.

Notable Quote:

“What is the hardest part about learning a language? It’s the actual motivation.” — Harry Stebbings [25:52]

10. Product Development and Quality

[26:22] The conversation shifts to product quality, with Hacker highlighting Duolingo’s attention to details as pivotal for user retention and satisfaction. “The difference between a good app and a great app is details,” he emphasizes.

[28:33] Reflecting on past decisions, Hacker discusses the strategic move to integrate new subjects like math and chess into the main app rather than launching separate ones, enhancing user experience.

Notable Quote:

“Product quality is details.” — Severin Hacker [28:33]

11. Expansion of Features and Future Plans

[30:07] Exploring new features, Hacker talks about introducing chess to help users think logically, aligning with Duolingo's educational mission. Future aspirations include enhancing social features to connect users globally.

[32:34] He expresses interest in developing the social aspect of the app, pondering ideas like “Duo date” to foster community engagement among learners.

Notable Quote:

“What I'm most passionate about is the social aspect of the app.” — Severin Hacker [32:34]

12. Company Building and Leadership

[39:09] Hacker reflects on his evolving role within Duolingo, transitioning from hands-on development to strategic thinking focused on AI and mergers & acquisitions. He underscores the importance of complementary skills within the leadership team.

[45:54] Discussing management principles, Hacker outlines his approach: “Reduce, automate, delegate,” emphasizing efficiency and strategic focus.

Notable Quote:

“My role has changed practically every year since the beginning...” — Severin Hacker [40:40]

13. Fundraising and Investor Relations

[60:37] Detailing his Series A experience, Hacker shares that Union Square Ventures was the sole investor willing to support Duolingo without demanding a relocation to Silicon Valley, highlighting the significance of supportive backers.

[63:21] He advises founders to seek top-tier VCs for their signaling power, even if it means accepting slightly unfavorable terms. “Because so much signaling... it's harder to raise 3 million than it is to raise 100 million,” he reiterates.

Notable Quote:

“Investors need to have your back.” — Severin Hacker [63:24]

14. European vs US Startup Ecosystem

[50:13] Hacker shares his conflicted feelings about Europe's startup scene, advocating for founders to move to Silicon Valley to maximize success. He acknowledges Duolingo’s success outside Europe but expresses a desire to empower European startups through initiatives like Project Europe.

[53:17] He criticizes European regulations, particularly the EU AI Act, viewing them as impediments to innovation. “If there was no alternative, then I would agree,” he states, urging for more supportive environments for startups.

Notable Quote:

“100% go to Silicon Valley. Absolutely.” — Severin Hacker [51:32]

15. Reflections on Happiness and Identity

[79:41] In a candid discussion about money and happiness, Hacker reflects on the elusive nature of happiness, separate from financial success. He emphasizes the sense of achievement derived from building Duolingo, despite its vast scale.

[84:56] Addressing personal identity tied to Duolingo, Hacker admits, “my identity is Duolingo,” expressing a desire to showcase more of his personal self beyond the company.

Notable Quote:

“The true measure of intelligence is if you get out of life, what do you want to get out of life?” — Severin Hacker [76:36]

16. Final Advice and Wrap-Up

[85:18] On partner selection, Hacker advises mutual enjoyment and support without competition. “If you enjoy talking to this person...mutual support, you know, do they support you in what you do or is there a competition,” he recommends.

[87:56] The episode concludes with heartfelt thanks, highlighting the authentic and wide-ranging nature of the conversation.

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Key Takeaways

• AI as a Growth Catalyst: Duolingo leverages AI to exponentially increase content creation and personalize user experiences, maintaining high retention through innovative features like AI-driven tutors.

• Strategic Fundraising: Securing investment from top-tier VCs like Union Square Ventures, who value mission over location, proved crucial in Duolingo’s early growth.

• Focus on Product Quality: Attention to detail and continuous experimentation are central to Duolingo’s product strategy, driving user engagement and retention.

• Navigating the European Ecosystem: While Duolingo succeeded in the US, Hacker advocates for strengthening European startup support to reduce dependency on Silicon Valley.

• Balance Between Automation and Human Touch: AI significantly enhances productivity and scalability but complements rather than replaces human roles, especially in areas requiring nuanced understanding like education and customer support.

• Personal Reflections: Hacker shares personal insights on happiness, identity linked to work, and the importance of selecting supportive life partners.

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Notable Quotes

“You should always try to raise money from the best Tier 1 VCs even if the terms are slightly worse because so much signaling...” — Severin Hacker [00:00]

“From day one was technology first. Back then it was software. Now we call it AI.” — Severin Hacker [05:27]

“Personalization is the future of education in your mind.” — Harry Stebbings [09:04]

“We use AI in three ways at Duolingo: content generation, AI features like Video Call with Lily, and overall productivity improvements.” — Severin Hacker [10:35]

“Even if you take your ARR multiple or whatever, which by the way, was infinite.” — Severin Hacker [65:36]

“Investors need to have your back.” — Severin Hacker [63:24]

“100% go to Silicon Valley. Absolutely.” — Severin Hacker [51:32]

“The true measure of intelligence is if you get out of life, what do you want to get out of life?” — Severin Hacker [76:36]

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This comprehensive discussion offers invaluable insights into building a mission-driven tech company, the strategic role of AI in scaling education, navigating fundraising hurdles, and fostering a supportive and innovative company culture. Whether you're a budding entrepreneur, a VC, or simply interested in the future of education technology, Severin Hacker's experiences and perspectives provide a wealth of knowledge.

Transcript

[Severin Hacker]

You should always try to raise money from the best Tier 1 VCs even if the terms are slightly worse because so much signaling it's harder to raise 3 million than it is to raise 100 million. But I can guarantee you Duolingo would not have been able to raise any money in Europe. You know we had $0 revenue for the first five years.

[Harry Stebies]

How much was the Series A?

[Severin Hacker]

3 million 15. Yeah, I think we only had one offer. It was unisquared or back to university.

[Nico Wittenborn]

This is 20 VC with me, Harry Stebies. Now for years I've been battling with one of my dear friends, Nico Wittenborn at adjacent that consumer subscription does not yield mega, mega outcomes.

[Harry Stebies]

Well, I've just come to the conclusion.

[Nico Wittenborn]

That I have really lost this debate.

[Harry Stebies]

And the guest today proves that I am wrong. Duolingo is a $24 billion market cap company today with 100 million monthly active users.

[Nico Wittenborn]

And joining me in hot seat is their co founder, Severin Hacker. This is such a wide ranging discussion on everything from how AI changes the future of education companies to how to.

[Harry Stebies]

Pick your life partner and the decline of Europe.

[Nico Wittenborn]

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[Harry Stebies]

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[Nico Wittenborn]

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[Harry Stebies]

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[Nico Wittenborn]

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[Severin Hacker]

You have now arrived at your destination.

[Harry Stebies]

Severin, I'm so excited for this dude. I had Lewis on six or seven years ago.

[Nico Wittenborn]

I've heard so many great things before.

[Harry Stebies]

This show from Miami, Bing from KP BR now, but from USV many others. So thank you so much for doing this.

[Severin Hacker]

Thank you. Thank you for having me.

[Nico Wittenborn]

I would love to start though with.

[Harry Stebies]

The news of the day. I don't like the whole context of like tell me your life story and normal podcast intros. Duolingo came out as being AI first the other day. What does that mean and what does that not mean? So people have a clear understanding.

[Severin Hacker]

Okay, so maybe taking a step back. Why did we start Duolingo? What is our mission? Duolingo's mission is to provide the best education and make it universally available. That's why Luis and I started this company in the past. The Best education was only available to the richest people, the kings. They had, you know, the private tutors for their kids. That was the way to learn. And by the way, this is still true today. If you want to become the best tennis player, you hire a one on one tennis coach.

[Nico Wittenborn]

Now you actually see this.

[Harry Stebies]

I remember there was a US Open final, I think it was, and the two female players in the final were both daughters of billionaires.

[Severin Hacker]

Yeah, exactly. So they got the one on one tutor. When we started Duolingo, we saw the potential of technology to do this. But for everyone, we can't all afford these one on one tutors. It's too expensive. But with technology, there's a way that anyone can have access to a one on one tutor with the same efficacy. And that's why we started Duolingo. From day one was technology first. Back then it was software. Now we call it AI. So in a way, not much has changed except AI has become a lot better.

[Harry Stebies]

Take me to that discussion then where you're inside the room with Lewis and the board and you decide, okay, we need to fundamentally change how we do everything and reshape the organization of this company towards being an AI driven company.

[Severin Hacker]

This has been, you know, going on for the last two and a half years. So we were one of the launch partners of OpenAI when they first launched GPT4. And we immediately saw the potential of this technology to help our mission.

[Harry Stebies]

What was it that you saw that gave you such optimism when you first.

[Severin Hacker]

Had access to it? It was impressive. It was like an iPhone moment. You just realize, this is the future, we're going to use this everywhere. And then it's like the second question is like, how do you use this at Duolingo? And the first thing we realize is this can really help us accelerate content production. In the past it would always take us a long time to produce new courses. But then with AI there's a potential that you can pump out a lot of these courses all at once. In fact, we just did that. You know, it took us 12 years to build the first course, 100 courses or so, and now within one year we built another 148 courses. It would have taken us decades to build this.

[Harry Stebies]

How are you using AI to then 12x content creation within Duolingo?

[Severin Hacker]

By the way, there's still a lot of human in the loop. So for example, the curriculum design, that's all human made. Anyway, inside Duolingo there's a lot of these short sentences, the ones you see in the lessons and those are now produced with AI. There's also this concept of viability. You, you want to introduce new words one at a time, and you can give these constraints to the AI, create a sentence that uses these words, doesn't use any of the other words, and only uses these grammar concepts. And it can do that. And that's how we've been able to generate the sentence content within these courses.

[Harry Stebies]

With respect, on the curriculum design, when you look at completion rates of students and you have the data that you have in six months, would it not be better to let AI do curriculum design, knowing all of the completion rates, success rates, satisfaction rates, NPS scores, to actually build that curriculum itself?

[Severin Hacker]

The industry is definitely moving that way. One of the most amazing things about Duolingo is we have this massive user base. We're by far the largest learning platform out there, by far orders of magnitude. We see how people learn. It's like the largest school, you know, like we see usually in education, the studies were done with, you know, 20 to 30 students. We have hundreds of millions. That allows us to look at, okay, does this curriculum design work versus this versus that? And we can use that data to improve the curriculum design itself, but not only that. So, you know, right now we still have these courses and, you know, your curriculum is the same as mine, but really, I think the future is going to be quite different. Where you say, like, you might be interested in rugby and you have a trip planned to, I know, France, I think France also is big into rugby and you could then custom design a course just for you that is exactly the vocabulary you want to use when you go to France. You know, it could be completely different from mine. Why do we even create this batch on the, on the back end? Like, why don't we create it on the fly when you need it? When you open the app, it's like this sentence is custom designed for you every single exercise.

[Harry Stebies]

So personalization is the future of education in your mind.

[Severin Hacker]

I think that's part of the reason why these one on one tutors are so good, because they know where you are. They're really good at assessment. Think of the tennis coach again. They know where you are, they know where you need to go, and they're very good at giving you the feedback. And they also know how you differ from other players.

[Harry Stebies]

I was actually watching Zuck last night on an interview and he was saying the future of content is not passive consumption of videos like we have today. It's the interactivity where you will talk to the video and suddenly the Fitness trainer will actually say, oh no, you should have 12 grams of protein, not 8 grams of protein. And it's that interactivity that will drive it. How do you think about personalization balanced with interactivity in the future of content and the future of education? To what extent is it multimodal? You know, a thing I love about Duolingo that makes me sound weird as anything is I'm walking around London and then I'm going, bruno es Americano. And it's multimodal. It's my voice playing back, it's me typing. There's many different modes.

[Severin Hacker]

Yeah, yeah, I think it's going to be multimodal. We have this feature inside the app called Video Call with Lily. So you can call Lily. Lily's one of our characters. She's the one with the purple hair. She's not a one on one tutor. She's more like a friend. But she remembers stuff. So she remembers, for example, that you know, that I like cooking, she knows where I live, et cetera, et cetera. She personalizes in that way. But it's full conversation. So you learn by conversing with an AI friend and I think that's going to be super important.

[Harry Stebies]

How has the way that you build internally in Duolingo changed with AI? What tools do you use? How's it changed cadence? How's that changed?

[Severin Hacker]

We use AI in three ways at Duolingo. Number one is content generation and that's where we've seen, you know, the biggest success. Number two is AI features that you previously couldn't build. So this is again this video called With Lily. It's a interactive conversation with an AI bot. Two years ago or three years ago you couldn't build, now you can do it. And it's actually the thing that, you know, was, was lacking in the product. If you ask our users, like what's missing in Duolingo, it's like this conversational piece like speaking. I want to get better at speaking. And now we can do this. And it's a really, really, really powerful feature. Great adoption with this Video Call with Lily feature. And I think there's more to be done there. Both making this feature better, but then also maybe there's this new AI features that we can now build. And the third is overall productivity improvements across the company. Software engineers using cursor, using AI for customer support.

[Harry Stebies]

Do you mandate cursor? Do you say, hey, we prefer you to use this or this. How do you do that?

[Severin Hacker]

We don't mandate. Duolingo is surprisingly egalitarian. And we just say use AI tool or use whatever makes you more productive and we pay for it. You can use Cursor, you can use ChatGPT, you can use Copilot. And then we see what people actually use.

[Harry Stebies]

Where is AI much better than people, and where is it not as good as people think? And actually has quite a lot of room to improve.

[Severin Hacker]

You know, early on there were a lot of these hallucinations, the AI making stuff up. I think they have gone down number one, but then also number two for us, it's not a problem if they hallucinate because we teach languages. As long as the language is grammatically correct, it is okay. You know, if it makes up a historical fact, we don't teach history. It's like hallucinations are not a problem for our use case.

[Harry Stebies]

I bet you have users though, that are like, no, it was 1914, not 1916.

[Severin Hacker]

Yeah, we don't go that far into it.

[Harry Stebies]

But when you have so many users, you're like, there's always one.

[Severin Hacker]

Yeah, no. So the hallucinations are not a problem. I think there's a lot of Silicon Valley hyperbole around software engineering getting replaced very quickly. I'm less sure about that. I try all of these tools and I think there's still a lot they can't do well.

[Harry Stebies]

What can they not do well on.

[Severin Hacker]

The software engineering side? I think what they're really good at is going from 0 to 80% for a simple app, the replit, the lovable. And then the larger code base gets the worst I get. Adding the next 10% takes as long as the first 80%. And they kind of create their own tech debt, which they also cannot really solve. And then the other thing they're really good at is just isolated transformations. So in a single file, add all the comments or change a function to use different input parameters or something like that. Really good at that. What they're not good at is large code bases and adding a feature, even a simple one, to a large code base.

[Harry Stebies]

Do you think you will have more or less software engineers in five years time at Duolingo?

[Severin Hacker]

You know, if you had asked me a year ago, I would have said 100% more. Now I'm a little bit less certain. But I think two things will change. So in a way, what these AI tools do is they lower the entry level to get into software engineering. Right. So your mom can maybe build an app with lovable or something like that.

[Harry Stebies]

She has to.

[Severin Hacker]

Right, Right. So there you go. The other thing it does, it just Lowers the cost of lines of code producing software. And then there's the Chervan's paradox, which says the cost of a good goes down, you will actually have more demand for it. I also believe some of this will be true. So I think there will be a lot more people writing apps. Whether they will actually touch the code or not, I'm not sure. And then I think the second thing is like, are we going to call them software engineers or what are we going to call them? One thing we see is inside Duolingo we have the three biggest functions within Duolingo are product engineering and design. Those compose probably about 80%, 70 to 80% of our workforce. But with AI, you can see that there's maybe like a new role, kind of a product engineer, designer, like one person who can do all of these roles to a certain degree. They can build a prototype and then maybe at some point they need to hand it off to an actual software engineer or an actual designer. That's going to be part of the future. So I think it's going to be more software, a lot more software, a lot more people creating software. Whether we're going to call them software engineers or not, I'm not sure. And then I think there's going to be this convergence of roles of product engineering and design.

[Harry Stebies]

So for everyone coming out of University State or contemplating university courses today and who are told, I'll CS in five years time, it's not going to be worth it. If I was your little brother and I'm 18 and I'm like, help me, Severin, should I do CS at university? What would you say?

[Severin Hacker]

So I did my CS degree. It's now quite a while ago. They don't actually teach you coding. People think like, oh, CS means coding. What they teach is kind of the fundamentals of not even software engineering, but like how computers work. And then computer science is kind of applied mathematics. Okay. So I do believe there's still a lot of value in thinking logically, which is something that the best CS courses teach you. They don't teach you Java or Python and they shouldn't. I think that part is going to go away. Like all the details of actual coding, but the fundamentals of problem solving, that will still be valuable.

[Harry Stebies]

And so should I do it?

[Severin Hacker]

I would say for the next five years, probably still a good investment. Yeah. You know, like there's like, okay, so if you extrapolate, okay, so once we have full AGI, okay, we no longer have jobs, Nobody has to work anymore. We have UBI etc. It's like the paradise.

[Harry Stebies]

Do you actually buy that?

[Severin Hacker]

I believe that's going to happen. The big question is when? I don't think it's going to be next five years. Maybe it's going to be next 10 years. If you really see a broad adoption of these technologies, more likely maybe 20 years or so today in the US, if you run into a stranger at the conference, the first question is usually, what do you do? But in this future world, the first question might be like, what are your hobbies? Because we don't have jobs anymore, so everything is going to be about not work.

[Harry Stebies]

I do just question it, though. I think we can quite often get a little bit overexcited. And it's like when you had the agricultural revolution. It's like, oh, my God, we 100 people in a field and now we have this combine harvester. We have one person driving it. We're all going to have no jobs. We have computers and calculators. What are accountants going to do? And people can do. And we always find a next thing to do. The idea that society will live in this UBI lack of utility state, I hope, is not true.

[Severin Hacker]

The other thing that is interesting about this is this is more on a philosophical note is if you just ask people, you know, do you like your job? You can ask anyone here. They all love their job. You love your job. I'm sure you love your job, right? You would do it for less money, more most.

[Harry Stebies]

Dude, I did it for free for you.

[Severin Hacker]

You would do it for free? Yeah, I would.

[Harry Stebies]

I get paid to hang out with amazing people. Like, are you kidding me? Yeah.

[Severin Hacker]

So. So for, for, for us, it's, it's, it's not just income, right? It's purpose. We derive purpose from our job, but for a lot of people, the job is just. They do it for, for the income. They don't derive purpose from it. The people that derive purpose from their job, who work the most, et cetera, you know, the tech people and the investors and all of these people close to the AI revolution, I think we are most afraid of it because we feel we might lose our purpose. That's why we are sometimes not optimistic about this future world.

[Harry Stebies]

It's funny, I had Jason Lemkin, who's a very famous SaaS investor on the show recently. He said, the hard thing is with young people, they just don't want to work. Fundamentally, they don't want to work. And AI is as good as they are at sales, at marketing, whether you're an sdr, whether you're a social media content creator, data for memes or GIFs or I don't know, whatever it is. And so in 12 months we're going to see huge, huge unemployment in this kind of lower level tech employee and it's going to happen. Do you think that's true?

[Severin Hacker]

I'm not sure. So here's another thing. The general consensus is that these AI tools are really good for senior software engineers or staff level software engineers. Right. They have been trained and now they can use AI and they become much more productive. They're now a 10x engineer. You know, the general consensus is that AI can do the job of an entry level engineer. Therefore let's stop hiring entry level engineers and only hire senior engineers. But I think that's a mistake and we're actually not doing that. At Duolingo we still hire from universities. One of the reasons is we believe that people that grow up with these tools and start using these tools early will become much better at using them. So in a way, yes, they're.

[Harry Stebies]

Why is that? Because young people have more plastic minds to new tools and new processes. What's the thinking behind that?

[Severin Hacker]

I think it's just like I bet the person who spent a thousand hours using ChatGPT is a lot better at using it than I am. And I think that's the case for the new grads. Dueling wouldn't be where it is today in terms of our social media presence if we never hired from Gen Z. It's like you need to know your target demographic. And Zaria, who was on your show before she's Gen Z and without she.

[Harry Stebies]

Just fundamentally understands it in a way that someone who's not Gen Z could never understand it.

[Severin Hacker]

In fact, when I open TikTok and look at our own Duolingo, I don't get it. It's like, why is this funny? Why do people watch this? But it's super, super popular.

[Harry Stebies]

Yeah, you're not Gen Z anymore, Severin. I'm sorry, you don't fit in that demographic. We mentioned that how it changes like engineering, product design. Another big area is customer support and we chatted about it a little bit before. How does AI change customer processes, workloads within Duolingo?

[Severin Hacker]

Yeah, so we started using an AI tool for customer support. I think it's another one of these early applications of AI where AI can really do a great job and transform an industry. We have found for a lot of the AI can do 70 to 80% of the tickets that we get and Then people always say, oh well, okay you guys, you don't need human customer support agents anymore. That's not true because you still have the other 30% or so. But then not only that, now that you know you have these kind of like an unlimited AI customer support agent, you can actually give customer support to a much broader base. So far we only give it to our subscribers, the ones that pay for Duolingo. But if we can reduce the cost of customer support by 10x or 100x, then we can actually give it to everyone. Classic, classic example of Turbine's paradox. Right? So as cost goes down, demand goes up.

[Harry Stebies]

Who do you use for customer support?

[Severin Hacker]

We use Decagon.

[Harry Stebies]

Yeah, I would love to have their CEO on the show. I think it'd be a fascinating one on the future of customer support. You know, I'd love to, I'd love to do a panel with a couple of different providers. 70 to 80% is really very significant. Can I ask you when you think about offering it to more people and then also the implementation of you mentioned like the features that you have, like implementing AI across the Duolingo product suite, it costs money. At the end of the day you have to pay OpenAI for a lot of these features. And a lot of companies are. Do you see margin degradation by offering AI across the full product suite because you're not charging more, but you are having an additional cost out to a model provider.

[Severin Hacker]

In terms of margins, as I explained before, there's these three use cases at Duolingo. Number one is the content generation. So content generation is just, it's good for margins. Right? So so you phenomenal for margins. So and it's also like it's a one off thing, generate the content then stuff. And then number two is these AI features like video called with Lily where you actually have a unit cost, you directly interact with an LLM on the back end and you have to pay for that API call. Right. So there's an actual unit cost there and then you have to make that viable. So we have three tiers. The free tier, there's super and there's max and it's mostly now max, the higher tier subscription because of that reason. Right. So we would like to give this to everyone. But the reality is today there's a unit cost to AI and therefore it's in our higher tier subscription. We believe all of these costs will come down. So the one, you know, the batch processing cost has already come down. There's a lot of competition there. And then in the kind of the real time models, multimodel, there's always going to be, we hope there's going to be a lot of competition. Costs will come down eventually. I think we'll be able to give this to a lot more people or almost everyone.

[Harry Stebies]

When you think about like model relationships, you mentioned obviously being early access with OpenAI, how do you think about the flexibility of moving between models with different generations of model with different specialties of model? Do you think you will have relationships with five model providers or do you think it's like, oh, no, we're tied to OpenAI.

[Severin Hacker]

I think there's going to be a lot of competition in more specialized use cases, the visual models or for us, Audius is very interesting multimodals. There's less competition and you can see that there could be companies that keep a lead for our voices. We also work with 11 labs and they're just amazing models. Amazing voices. I can see that might be harder to replace with one or the other model.

[Harry Stebies]

When I hear you say about elevenlabs there or decagon there, or even think about Duolingo, the thing that I am struck with is, ah, but OpenAI are going to do that. And I just love to go to the moment where I think Duolingo's stock actually took a hit. And I never talk about public market prices. I don't know why we're not going there, but I think it actually took a hit when there was the concern that that OpenAI and ChatGPT would move into language learning very significantly. Can you take me to the internal discussion around, oh, shit, are ChatGPT and OpenAI going to move into the application layer for language learning?

[Severin Hacker]

The other thing that I think you see happening in the public markets, and this is my only comment about this, is like this bifurcation of the market into, is this an AI winner or is this an AI loser? I think by mistake we were first put into the AI loser category and now it changed to like, oh, no, Duoling is going to be an AI winner. And there's lots of tailwind from AI. And I outlined some of this.

[Harry Stebies]

So there was never a concern for you internally. You never had a call with Luis where you're like, oh, shit, is Sam going to do this?

[Severin Hacker]

And I assume here you mean like OpenAI or ChatGPT building a really good language?

[Harry Stebies]

Twitter, yeah. Can they take away a lot of your very, very casual users by doing a very simplistic chat with a friend tun your language?

[Severin Hacker]

That's definitely somewhat of a concern. I think there's a bunch of things to be said about that. So first of all, what is the hardest part about learning a language?

[Harry Stebies]

I would say the discipline.

[Severin Hacker]

Yes, it's the actual motivation. And by the way, this is one of the key insights of Duolingo. We've been sharing this with the entire world for the last 10 years and still nobody seems to believe us. So the hardest part is motivation. And duolingo is because it's so gamified, it's really good at this. It's a motivation engine. I call it the motivation engine. It really gets you to come back every day and do duolingo. And if you stick to it and you do the hard material, you will actually learn a language. That is the power of duolingo in general. People underestimate how important that is. So if you want to build something that is as good as Duolingo, you have to solve this somehow. If you ask our users what would you do if Duolingo went away? They never mentioned any of our language learning competitors. They say, oh, I would spend more time on social media. And then the second thing is, if I was Sam Altman, I would go after the big trillion dollar companies. Why go into language learning when you can go into search or social media? Those are the ways.

[Harry Stebies]

Well, if you're sitting there as Sam today, you're thinking there's a couple of core areas which are winners. There's chat, which we already own. There's two, which is customer support, which I think they'll buy someone very soon. There's coding, which they've obviously just bought someone. And then I'd say language learning is the fourth, as you said. It's so perfectly, I mean, LLMs is kind of in the name. It is so perfectly aligned to the use case of what they are best at. It's not a stretch.

[Severin Hacker]

Yeah, well, we'll see.

[Nico Wittenborn]

We shall see.

[Harry Stebies]

One thing that I'd love your thoughts.

[Severin Hacker]

The other thing is Luis always says there's a difference between being a first class citizen and a second class citizen as a feature. So Duolingo works because we have these gamification mechanics. We have the streak, we have the xp, we have the leaks and all that. And you can build this all inside a different app. But if it's just kind of a second class citizen buried somewhere, again, it's hard to make that experience as sticky as if you build an app just for this.

[Harry Stebies]

Is there anything within Duolingo that's a second class citizen that you wish you could make a first class citizen?

[Severin Hacker]

There's one thing, maybe. So we have these stories inside Duolingo, so every now and then you get a story. I think they're actually becoming really good again with AI. And there's kind of an entertainment aspect with this. Maybe you could actually make them more prominent, go into more reading, including your first language, L1, or maybe something for kids learning how to read. But we haven't done that yet. It's not at the level of Harry Potter.

[Harry Stebies]

One thing that strikes me when I use Duolingo every day, it's exactly what you said there, which is the little things which make the product experience delightful. And it reminds me of Gustav Soderstrom from Spotify, who always told me, the details are not the details, they are the product. And there's so many little things which make me feel that when I use Duolingo. To what extent do you believe that and advise that to founders who call you versus who? Jesus. Don't spend too long on the way that something pops up. Just get it done. In the early days, I think ultimately.

[Severin Hacker]

Product quality is details. Luis, he's obsessed with details. He can spot something being not properly aligned within half a second. The details really, really matter. If you look at retention, which is the main metric we care about, it's like the details really matter. It really matters. It also matters in terms of. Of how likely are you to recommend it to a friend and you're not going to say, oh, you know, it's like, oh, it's super. Like, you know, details are really good. But it's like, it's a great app. That's all details. Difference between a good app and a great app is details.

[Harry Stebies]

Can I ask you, where did you spend time that with the benefit of hindsight, you're like, ah, we shouldn't have spent time there.

[Severin Hacker]

So we started with languages, but the mission was always all of education, right? So at some point it's like, okay, let's build new subjects, we want to add new subjects. And then someone says that let's add math. Math is another one of these fundamental skills that we'll probably need to learn for the next hundred years or so. And then the first idea was to build a new app. In fact, we built a new app. We built a new math app, like, completely standalone. Completely standalone. Wow. So there was Duolingo, the main app, and there was an entirely new math app built it.

[Harry Stebies]

Did it have a name?

[Severin Hacker]

Well, yeah, it's the Duolingo math app.

[Nico Wittenborn]

Creative. Well done, Saffron. Wonderful.

[Severin Hacker]

And then we realized, you know, this is Looking more like the main Duolingo app. And it's like we were about to add a leaderboard and, you know, a league system and streak. And I was like, why are we doing this? Like, why are we replicating this whole functionality? That was insight number one and then inside number two is for the user. It was also not a great experience because first you had to know that Duolanga had a math app, then you had to find an app store, then you had to download it, then you had to install it, then you had to grant it permissions again to send you push notifications. It was like, wait, is this streak different from my Duolingo streak? It feels very much like Duolingo, but it's not quite Duolingo. And then we said, no more new apps. If it's education, it goes into the main app. It's kind of like a super app strategy right now. The good thing is all the content and all that, we could just transfer in. So we didn't throw it out, but merged it with the main app.

[Harry Stebies]

Can you talk to me about chess? How did the chess come about? We mentioned it outside and it was a great story. How did chess come about? And talk to me about that.

[Severin Hacker]

Chess is an interesting one because is it really education? It helps you think. I mean, we had this discussion before. Should you still study computer science? I think chess is similar in a way that it helps you think, helps you think logically. And so we believe it fits within the mission of Duolingo. That's number one. And then it was two people who were just super passionate about chess. And it's like, hey, let's try to build a chess course.

[Harry Stebies]

And we were already two people internally.

[Severin Hacker]

Internally, yeah, yeah. And we were not convinced at first, but this is.

[Harry Stebies]

Why were you not convinced?

[Severin Hacker]

We don't want to build just a game. Right. Like, there needs to be some educational aspect. That's always a trade off between, okay, are you just a game or are you an educational game or are you just a textbook boring experience? So you have to find the balance between the two. We don't want to be just a game. So with chess it's different. Chess is not a racing game or something. Chess is like, it helps you think, so that's why we're good with it. But then how does this fit into the path? How does this look inside Duolingo? Can we make it fit into the Duolingo design language and all that? So that's another concern. But then this is again, super interesting. And so the two of Them they built this prototype with AI, a PM and designer. And the pm, he has some engineering background, so he knows how to think logically. But he hadn't written much code before Duolingo or Add Duolingo. But he was able to build this first version of just using cursor and a bunch of AI tools. And the prototype is what convinced us that we should do this. If it had just been a figma design, we probably was like, ah, you know, maybe, maybe not. But the prototype was so good that it convinced everyone. It's like, yeah, let's build this.

[Harry Stebies]

What was it about the prototype that was so good? It was fun, it was progressive in terms of mindset.

[Severin Hacker]

You could play it and it just felt like this belongs inside the app. You know, it's like when you just see a screen, it's like, yeah, maybe you have to kind of imagine it versus if you have the prototype. It's like, well, this looks and feels like Duolingo. The other thing is, because of AI again, we were able to build this within nine months. Fastest we ever created a new course.

[Harry Stebies]

So nine months from start to finish?

[Severin Hacker]

Yeah.

[Harry Stebies]

Wow. And normally it would be years. What do you not have that you would love to have in terms of activity? You said that you've added languages, you've added maths, you've added music, and now we have chess. What's the next one that you'd love to have?

[Severin Hacker]

What I'm most passionate about is the social aspect of the app. You know, I think we have these leaderboard mechanic. We now have this massive user base and we have all these brand love. People love Duolingo and I feel like there's an untapped potential of connecting the people that are on Duolingo. I don't know how to do it, but I'm.

[Harry Stebies]

What would that look like? Sorry, Duo, social. Duo date. Because duo date's not a terrible idea. It's not.

[Severin Hacker]

Well, yeah, I don't know. It could be something like that. It could be, you know, learning together, but it could also be a lot of untapped potential that there's not that many apps that have.

[Harry Stebies]

Would you ever open a physical school? And I know that sounds completely counter what Duolingo is all about, but having in New York a branded amazing experience where people could go for a week, meet the owl, sit with people in their leaderboard and build that community play that is really special and different.

[Severin Hacker]

That's a good question. So not sure about that directly, but one thing that is interesting about education is, okay, so there's K12, and then there is higher ed, universities, college, etc. One thing that's interesting, when people talk about education, we always assume it's the instruction. Here's skill. I learned this skill, and now I go from A to B. That's kind of like how we think of education. But higher ed, for example, is actually more than that, that going to college. It's three things. It is the actual instruction, it's actual teaching. It's actually the learning of new skills. Okay, that's number one. But then there is also the degree, the credentials. Right? So the university says, harry, you got a degree, you successfully finished this course, and you can put this on your LinkedIn or resume. And then an employer can say, oh, I guess Harry did take this computer science class. And therefore we can hire them as a engineer. So that's credentials number two. Very important, because otherwise you would always have to prove again that you know something. Right? But that's the purpose of the degree. And number three is the social aspect. So a lot of people meet their partner at the, at the university and their friendship network. So most companies that look inside EdTech, they just focus on number one. But I think if you really want to, let's say if you really want to disrupt the Harvards of the world, you have to solve all three.

[Harry Stebies]

Do you want to solve Harvard?

[Severin Hacker]

No. So we want to achieve our mission. That's why we started this company.

[Harry Stebies]

Okay, but by achieving your mission, are you not disrupting Harvard?

[Severin Hacker]

Yeah, we would be, but one thing on the second thing. So we have not solved the social thing. Right? Okay. This is what higher ed does. But on the number two, the credentials. One thing we're also very passionate about is the duolingo score. I'm not sure if you notice it within Duolingo, but we now give you a score like how good you are at this language. And we want this to become the way people talk about language proficiency. So it's like, hey, my duolingo score is 61 in French. And then people know, okay, I guess you can have this kind of conversation, et cetera, et cetera. So we're getting into the credentials or the degree aspect of it with this score.

[Harry Stebies]

It's actually pretty helpful the amount of times you're asked like, oh, do you speak French? And you're like, a little bit. And it'd be helpful to say, oh, I'm actually a 40. And they're like, okay, not really. He's stupid, or whatever it is. Do you know what I mean? It Quantifies it a lot more easily. And this is kind of jumping around, but you mentioned the push notifications element. Does that make a difference still? We have so many push notifications. With the oversupply of push notifications, you're like, that was ruined. It was good or not.

[Severin Hacker]

Still makes a huge difference. And we know because whenever the service goes down that sends the push notifications, you can see the diploma.

[Harry Stebies]

Really?

[Severin Hacker]

Yeah. Yeah, 100%. It's huge. It's massive.

[Harry Stebies]

Wow.

[Severin Hacker]

Going back to the other ED, three things for K12 people also. Okay. My kids, they go to school to learn things. But again, it's not just the learning. In fact, a lot of K12 is childcare. So even if you solve one aspect of it, like let's say you have an AI tutor that is really, really good, you still need to solve the child care problem. It's unlikely that people will just go to a school without any humans, without any teachers, and just use apps and then go home, or that we would have some sort of optimus in the school. I think there's a lot of it needs to be done by humans still. And by the way, the other thing is, I do believe that the AI tutors will become really, really, really good. It's going to be the way most people learn most things in the future.

[Harry Stebies]

What does the future of schools look like then with that? Is it like 10 children sitting in a class with AI tutors?

[Severin Hacker]

I think that there's still going to be this human element of what do I need to learn? Kind of guidance and coaching and motivation. And also, why should I learn this? And AI will never tell you why you should learn this. They'll help you learn it, but it's not going to tell you why you should learn this. Why is this important?

[Harry Stebies]

Do you know what I wish you had? I'm sorry? You have leaderboards, which is like social status or social mechanics that drive motivation and incentives. I'm sure you've studied this. I have. Because I'm a loser. It's financial incentives and it's actually when you offer someone money, they are much less likely to do something. When you take money away from them, they are much more likely to do it. Basically, the fear of losing is much more than the gain of winning. And I wish that duolingo had this. For every day you don't do, your streak will take a committed amount off. You say, I commit to 100 pounds a day. Dude, I would do that. 100%. 100%.

[Severin Hacker]

You can just give me the money whenever.

[Harry Stebies]

Seriously, that would be the best. I gave you. Another hundred is giving me money. Turn off his push notifications, guys. No more.

[Severin Hacker]

Yeah, yeah. I mean, you know, yeah, the, the, the streak is exactly this loss aversion mechanic. Right. So it's like, it's motivating to build up your streak, but it's like, I absolutely do not want to lose my streak. I'll do a lot.

[Harry Stebies]

Have you had crazy stories of people who do crazy things?

[Severin Hacker]

Oh, yeah, yeah, yeah. It's crazy. And, and we also sometimes get emails like, you know, I was on this trip to climb Mount Everest and it couldn't extend my streak. And, and can you please, you know, restore it or something? And I had no Internet access.

[Harry Stebies]

And do you go now?

[Severin Hacker]

No, no, no. It depends. By the way, also, when there's, you know, there was a power outage in Portugal and Spain, we proactively extended their streak.

[Harry Stebies]

So I do want to talk a little bit about how you work because you're fascinating in how you work. I saw in some of your posts you said you're not good at finishing the final 20% of a project or a bit of work that seems problematic. Is it? And how do you reflect on that?

[Severin Hacker]

It would be problematic if it was just me or everybody was like me. You need to have complementary skills within the founders, but then also within the whole exec team, within the whole company. Right. So if everybody was really bad at finishing, by the way, the last 20% are basically details. You need to have someone who's obsessed with details. In Duolingo, that is Luis. From day one, he was just obsessed with details and he really cares. And I also care about details, but he is an order of magnitude better at that.

[Harry Stebies]

Has he ever been obsessed on details to the detriment of the company? Dude, we don't need to obsess over it that much. Come on.

[Nico Wittenborn]

That's a yes.

[Harry Stebies]

But I'm not sure whether I should say it.

[Severin Hacker]

You know, he mostly, mostly works with the PM Org, the Product Org, and they would probably say something like that when, you know, we still have this product review process where every change goes through review and Lucy sits in most of those. So he.

[Harry Stebies]

He still does.

[Severin Hacker]

He still does. So that's a founder mode for him. It's like he's still in most of the product reviews and I think that's rare for a company CEO of our size where. Where the CEO still sits in most of the product reviews.

[Harry Stebies]

Wow. So you decided to delegate that to the product team on whether he obsesses or not? I love that you said founder mode there. It drove so much engagement and discussion. How do you reflect on it? And when you look at your own style of management and leadership, how do you think about that?

[Severin Hacker]

My role has changed practically every year since the beginning, since when we started.

[Harry Stebies]

So yeah, Tanzine told me this. I spoke to him from General Atlantic. I stalked you, I told you. And he said, your role has changed so significantly.

[Severin Hacker]

Yeah, yeah, yeah. So, so early on I was implementing the thing like I was building Duolingo and then it morphed more into code review architecture, how to build the back end system and all that system design. And then it morphed more into management hiring. I think I'm actually quite good at hiring. But then there's also other stuff that people wouldn't expect from a cto. I was the one who pushed for hiring our first product manager. It was actually interesting because Luis at the time, he's like, oh, we don't need product managers. He had seen some of them at, at Google and he had worked with someone and was like, hey, no, I don't think they provide that much value and we don't need this. You know, I can do this myself and, and we just need a bunch of designers. Like, no, no, we really should, you know, like if every single company has a product manager that size, maybe, maybe we are wrong. Let's hire one. And if it doesn't work out, then, you know, we can, we can still go with that. But obviously that was the right decision. Obviously that was the right decision.

[Harry Stebies]

So hiring, what do you think makes you good at hiring that is non obvious or not typical?

[Severin Hacker]

We have a really strong consumer brand. So literally everyone knows dueling at this point worldwide.

[Harry Stebies]

Given the strength of Duolingo's brand, do you think Duolingo is underpriced today? I think we dramatically underprice brands. And when you think about global brands, which billions of people know, underpriced in.

[Severin Hacker]

Terms of monetary value, the stock price. Yeah, I cannot talk about that. But I mean, it is just amazing.

[Harry Stebies]

Do you see what I mean by that? People often think about Manchester United global brand, for example, and I think it's drastically underpriced. Given the fact that you have children in India, Nepal, Brazil, wearing a Manu shirt and it's a $5 billion company.

[Severin Hacker]

I think at some point we were bigger on TikTok than Nike, a brand that has existed for a very long time. We all obviously know Nike. And the other thing that is, I always say is like, we run the world's most efficient marketing organization. It's like people think, oh yeah, you know, they're, they're big because they, you know, they spend a lot of money on advertising and social media influencer and stuff. By impact, we must be the most efficient marketing organization. It's a small team.

[Harry Stebies]

How big is the team?

[Severin Hacker]

40 or so. 40 people or so. The reason for it is for a very long time we had no marketing budget. We didn't advertise nothing like zero dollar marketing budget because we're also not, not profitable. We also didn't have any revenue. So it's like, no, we can't spend money that we don't have. So there was like the constraint, but then the constraint was really good at enforcing us to come up with good ideas. We always say the duolingo marketing. It's not powered by money, it's powered by ideas. You know, what do you see on our TikTok channel? So it's having the green owl, our mascot, having the costume and also kind of doing unhinged things and kind of like also making fun of ourselves in a way that is like why is so effective?

[Harry Stebies]

You mentioned about the not having PMs and actually if all the biggest companies have them, maybe there's something to it. And it makes me think of this like conventional rules are conventional for a reason sometimes. What conventional rules do you find are conventional for a reason? 1. And then what one conventional rule do you find? That's just the way it's been. But it's not right. You gotta feel sorry for my other half. I ask questions like this on date night.

[Severin Hacker]

Well, first of all, I would say you should. Not always, but every now and then, especially when there's a big technology shift like now, you should question all of these assumptions, you know, how you build companies. I think we're in the middle of this massive transformation. You can build companies with probably 10 times fewer employees. So that convention is completely overthrown that you need to hire a lot of people. That's one thing I would say. Early on there was, there was like this, this belief that you can run a completely flat organization, right? No. No managers, no hierarchies, no levels. And that's not really possible at a certain scale. You need to have managers or layers or you need to have some sort of hierarchy, career progression and stuff like that. I think that the oldest organization in the world, the Catholic Church that is still around, it's very hierarchical and I think there's probably some reason for it.

[Harry Stebies]

Does that not go against Founder Mode and Louis Sitting in the product reviews and when you think about managers on managers and layers and the diffusion of kind of knowledge and power that comes with those layers.

[Severin Hacker]

Yeah, I think how do you strike the balance right between the two?

[Harry Stebies]

What do you still do today that you don't think you should do? So like for me, I listen to every single show we do and I. Yeah, yeah. Ten years in. Why? It's because it's my product. I'm not shipping product that is not perfect.

[Severin Hacker]

You know, I'm actually quite good at delegating things and kind of like self awareness of what I'm good at, what I'm bad at, what I like, what I don't like, what is beneficial to company and what is not beneficial. So that's also why my role has always changed. And one of my principles is reduce, automate, delegate.

[Harry Stebies]

Can you walk me through that?

[Severin Hacker]

Yeah. So the main idea is maybe like once a month, once a quarter. So really think about does this need to be done at all? What happens if you don't do it? If you just don't do it? Is it the end of the world or is there an actual negative effect? So that's number one and particularly what happens if I don't do this. And then number two is what you cannot reduce, what you cannot remove. Let's say you decide, okay, this actually needs to be done. Then the second question is like, can I automate it now? Again with AI, it's a lot easier. Like can I automate this part of my job? Can I use ChatGPT to do this report or answer this question? Or does it. That's software engineering. That's very natural. It's like, okay, can we build a tool that does this for me or the company or whatever? And then what you can't automate, you delegate. Okay. So that I try to delegate to other people in Dorg. You know, I've handed off most of the day to day engineering to our head of engineering. She's really good with this. I'm now a little bit out of the weeds. I'm thinking more right now actually. I'm only focused on two things. One is like with AI, like what's going to happen? What does future look like? Like in our space? What is the implications for Duolingo? What actions do we need to take? That's number one. I probably spend 80% of my day thinking and acting on this, this AI question. And number two is, is more M and A. And it relates to the first question, M and A. Like you know what companies should we buy? Where do we invest externally? That's basically all I do right now.

[Harry Stebies]

Where have you not invested that you would like to invest? It could. It could be an M and a strategy where it's like, oh, I wish we bought an avatar company. I wish we bought an early 11 Labs competitor. I wish we integrated X.

[Severin Hacker]

We did make a bunch of acquisitions.

[Harry Stebies]

How many have you made?

[Severin Hacker]

4 or 5.

[Harry Stebies]

Any lessons from doing that? I remember having Dallas to Silver on from Lightspeed, the payments provider, and they've done that. 18. And there was a lot of lessons there.

[Severin Hacker]

Very interesting. So one insight, and in hindsight it's kind of obvious. They say, what is the best predictor of two founders working out? They're not going to get into a fight and founder comes conflict. And the number one thing to look for is have the two founders worked before they started this, this company? Like, have they worked together? For example, Luis and I, we had been working together on, you know, research for two years prior to starting Duolingo. By the way, it's not the same as friendship. You can know someone for a very long time, but they might be very different at work. So prior work experience of working together, that is number one with M and A. It's the same thing. I actually think, think it's. Do you have prior experience working with this company? Yes or no? So I would say that's the number one advice is like, have you worked with them before? It can also be an investment relationship.

[Harry Stebies]

Do you do Duolingo Ventures? Do you invest early?

[Severin Hacker]

We just made some minority investments, but it's not a lot.

[Harry Stebies]

It's always with a view to buy.

[Severin Hacker]

Essentially we have to figure this out.

[Harry Stebies]

It's a competitive space. I've seen many competitors I think came pretty close to doing around in Praktika. How do you view the competitive landscape today and the distribution of value across it? Is it like Uber and Lyft where Uber takes 90% and everyone else takes 10% and that's Duo and everyone else. Is it a much more distributed value kind of dispersion?

[Severin Hacker]

What does that look like in consumer. It's much more winner take all mechanics. So we've been now running this for 12 years. Every single year there was one or two companies that grow really fast in language learning. One or two, inevitably they go down again. What happened is they use venture money to grow through paid acquisition. So they spend it on Facebook ads, Google Ads, and they go really fast. But the only thing that matters is retention. You can spend as much money as you want if you don't have retention, it's a leaky bucket. All these people are going to leave now. We see one of those. We're not scared because we've seen this play out a million times. So the one company I'm scared of is one that has higher retention than Duolingo.

[Harry Stebies]

What's the day retention number that matters to you?

[Severin Hacker]

Of the millions and millions of people that use Duoling today, how many come back tomorrow? All of these correlate with each other. So if your current user retention is very high, you also have very high D7 retrench and you also have very high D30 retention. But you get a data point every single day.

[Harry Stebies]

Okay, that's absolutely fascinating. It reminds me of Alex Schultz, who says exactly the same thing on retention, retention, retention. I do want to ask, before we move into a quick fire, you are a European. You are also based in New York. When you look at Europe today, I sit here and I'm very aware of our fading into irrelevancy, which is why we do things like Project Europe. How do you think about Europe? Are we fading into irrelevance? And how do you see that having the perspective of being a European in the us?

[Severin Hacker]

Yes, I'm very conflicted internally. I want Europe not to fade into irrelevance, of course. However, if you ask me, a young founder, European founder, came to me like, hey, I have this brilliant idea of how to use AI or like a new model or something like that. What should I do? 100% go to Silicon Valley. 100%. Absolutely. Maximize your chances. And by the way, you know, this is why, why the environment is so much stronger. And I can say this because we built build Duolingo in Pittsburgh. We're not a Silicon Valley company. We don't have an office in Silicon Valley. We succeeded despite not being in Silicon Valley. And by the way, there's also pros of not being in Silicon Valley. But I can guarantee you Duolingo would not have been able to raise any money in Europe. You know, we had $0 revenue for the first five years. Zero. There's no European investor who would have invested. Not in Switzerland, not anywhere in Europe.

[Harry Stebies]

Do you think that's true today? I'm not being rude, dude, you're a really smart guy. You came out of great institutions. Lewis I know is a super smart guy too. Out of great institutions. There's so much money in Europe now, dude, I'd give you a term sheet today when you were. But just the two of you coming.

[Severin Hacker]

In with I Think it has changed to a degree, but it's still. You need to look at what do these most ambitious people and the founders, where do they go? It's a little bit sad because in New York, I see a lot of European founders and I often think, like, how successful would they be if they had stayed in Europe? I think for most of them, I would say best, maybe half as successful or maybe some of them 0%. And I would like to change that. I would like to change it. I mean, that's why I invest in Project Europe. We need to change that.

[Harry Stebies]

Because how do you think then about Synthesia, about 11 labs, about some incred loveable in Sweden being built from Europe?

[Severin Hacker]

They should deserve all of our support. The sad part is also I think in Silicon Valley is like being a tech founder is really, you're mostly a good person. Of course, there's also. It's aspiring. Right. So people want to be that. I think a lot of people in Europe, you're just like, why are you doing this? Or they look at it as like, oh yeah, they're just doing it for the money or. Or this suspicion you can't be too successful or you shouldn't be too ambitious. And I think that is very detrimental to the European startup ecosystem.

[Harry Stebies]

You shared an insight with me before that I'd never thought about having offices in San Francisco as a non SF HQ company. What was that insight and how did it lead to your not wanting to have an office in sf?

[Severin Hacker]

Yeah, so Duolingo does not have an office in Silicon Valley or anywhere in California. The reason is when we thought about opening one and of course all of our investors, they said, you got to open a SF office. And we in fact did go to SF and we looked at office space. We were this close to opening an office in sf, but before we pulled the trigger, we asked a bunch of founders who had companies that were headquartered outside of Silicon Valley and then opened an office in Silicon Valley. And we asked him, what are you thinking? Think it was good decision, bad decision. And all of them said, worst single decision ever. And I said, why? And they said, well, you know, what happens is it creates this internal funnel of your best employees moving from your HQ to Silicon Valley, which by itself is not a problem. The problem is then they get recruited away by the. Whatever the hot Silicon Valley company is at the time. You know, like it could be Airbnb or Uber at the time. Maybe now it's OpenAI or anthropic and. And you basically create a hiring funnel for Silicon Valley and you lose your talent. That was also new to me. And then I was like, no, no, let's not do that.

[Harry Stebies]

I love that. I hadn't thought about that at all. And so you will not do an office in sf?

[Severin Hacker]

Nope.

[Harry Stebies]

Do you think I would be more successful if I was in sf? I know that's an unfair question to ask, but it's something that I've always been told, Severin, for years and years. You have to, you have to. Why are you in London?

[Severin Hacker]

As a founder, I would say 100%.

[Harry Stebies]

Let me tell you my rationale and you can see if you think I'm right and you can call bullshit on me. Like in sf I'm competing against Peter Fenton, Mark Andreessen, Finn Khosla, Eli Gill, the Collisons, Daniel and Nat Friedman. I rate myself, I buy my product, but that is a fucking hard market. And Marc Andreessen getting you around to his house for breakfast on a Saturday morning. And rolling in Europe, it's probably two good VCs.

[Severin Hacker]

By the way, I started angel investing with a very similar thesis in Pittsburgh because like there's no one other than me and Luis. But then, you know, a lot of those companies eventually moved to Silicon Valley, so. But yeah, that was, that was exactly my investment thesis in Pittsburgh. But I think as an investor, it's not clear. As an investor and you know, doing the show, I think it's not clear because you, this is much less crowded. You can really become the top, you know, investor that founders want to work with in Europe. I agree, but I was explaining this. As a founder, if you want to start a business, an AI business, you have this crazy idea, would you stay or not? I would move, but that's exactly the problem. How can we change that? You know, part of the problem, this is a little non obvious is part of the problem is it's so easy to move Silicon Valley a good degree and you can raise money, et cetera. The US is actually really good at getting these brains to come to Silicon Valley. In a way, the best thing that could happen to Europe is if the US made it really hard to, to immigrate. For founders, you know, if they, if they made it really hard, if they restricted immigration such that you people like me couldn't move there anymore, then I would build it here and what I would do first, it was like, let's first change the environment here to make it easier for startups to succeed. Right now there's also no pressure from the industry to change the regulation to you know, make it easier to start companies because I can just go, I guess I can vote with my friends feet.

[Harry Stebies]

What would you change about Europe? Is it the regulation? Is it the level of capital? Is it the mindset that we tell.

[Severin Hacker]

Young people regulation is definitely hurting?

[Harry Stebies]

No great entrepreneur was stopped by regulation, though, which is like Travis wasn't stopped by regulation with uber, Elon with SpaceX. Wasn't stopped by regulation. Does not inhibit the greatest entrepreneurs.

[Severin Hacker]

Again, I think it depends if there is an alternative or not. Again, as a founder, I can, like, okay, I can work with the EU regulation on AI AI, which is some of the dumbest regulation ever. You know, the Ottoman Empire, they had when they invented the printing press. It's like, oh, this is not good. It's not good for our community. Let's not do the printing press. I feel like the EU AI act is that, let's not do AI because there could be negative repercussions or negative side effects or something. It's that dumb. If there was no alternative, then I would agree, by the way, for example, in. In Uber's case and Airbnb, there's a lot of local regulations. There's actually lots of alternatives. So even if, like, say one city doesn't work, like New York, this is the regulation. You have 200 other cities in the.

[Harry Stebies]

US if you could go back to the early days of Duolingo and do something differently, what would you do? Most significantly, we're pretty open up this.

[Severin Hacker]

I think that the two mistakes we've made at Duolingo, they were not fatal.

[Harry Stebies]

But obviously 20 billion.

[Severin Hacker]

I would say the two big ones were one, we waited too long with monetization, so we just didn't take it seriously enough early on. And we were operating under this business model of let's raise more money, like our business. People ask, what's your business model? Oh, it's like venture capital. And eventually we did take it seriously, and we're very good at this. Now we have this internal concept of the green machine. It's like run a lot of experiments, see what works, and then double down. And that's what we did with monetization. It's super good now, but we just waited for too long.

[Harry Stebies]

Was that because of naivety? Was that because of a push for user growth and engagement?

[Severin Hacker]

Yeah, combination. So it was also like the investors that didn't push us to monetize early, which is. It was always counterintuitive to me. It's like, why don't they ask for monetization?

[Harry Stebies]

But I Never would because I'd want engagement and I want user behavior and I want habit forming. Don't fucking put a paywall in front of them.

[Severin Hacker]

Yeah. And our investors, they also invested in Twitter and some of these and. And for those platforms, it was always the right decision. Just grow users first. Grow users first. So that's what we did. So number one is we knew we could always grow users first. Number two is we knew we could always raise more money. And I think the other one was our mission, right? So our mission is to provide the best education and make it universally available. For a long time we didn't know how to build a business model that is compatible with this mission. Right? So for a long time it's like everything has to be free. But then we realized, no, no, no. What really matters is that we don't exclude people. You should be able to learn everything that is on Duolingo without a bank account. And it's still true today. You know, most of our users do not pay Duolingo. They use the free tier. That's actually another thing I'm very proud of. It's like it's not just great business, but it's a great business with a great purpose. That's also like why we probably waited for a little bit too long, you know, we should have started two years earlier. Number two is we also waited it for too long hiring more senior managers. Up until 30 employees or so, it was completely flat. A lot of people from new grad. It was pretty chaotic.

[Harry Stebies]

That goes against everything everyone says to me on the show. Everyone always eschews, don't hire the senior manager if they've been there, done it before. The playbook's not transferable. You want youngsters you bring up through the ranks. They want to be involved more in the weeds and hands on. Beware of the manager.

[Severin Hacker]

You cannot run a thousand person company with all new grads. You need a little bit of both. By the way, today it's still. Duolingo is a very young organization. We still hire a lot of people directly from university.

[Harry Stebies]

You mentioned you always knew that you could raise more money. I love that. What's the business model? Venture capital. Harry's like, thank God I still have a job. But when you think about the fundraisings that you did, what was the hardest?

[Severin Hacker]

A series A.

[Harry Stebies]

Talk to me about that.

[Severin Hacker]

We started as a research project at Carnegie Mellon University. The belief was, oh, it's these two academics. Luis was a professor and I was his PhD student. It's these two academics and they Gonna build something that's not gonna make any money and they're gonna sell to Google. Okay. And then that was kind of the belief. And by the way, that belief lasted until we actually made money for like five years. The first five years. Oh yeah, they're, you know, these like these two researchers and they're going to build this thing and they're eventually going to sell. They're not going to become a public company or anything. That was one reason. And then this was 2011. We raced on a prototype and there was a website for Series A. Yeah, yeah. My co founder, he had two prior exits. So he had a track record. That was actually. The other belief was like, ok, these two researchers are going to sell to Google. Google. And number two is like, even if this one doesn't work out, it allows us to invest in Luis's next next company. So they were basically buying a ticket for the next next company, including the first one. They didn't believe that this was gonna become this big.

[Harry Stebies]

How much was the series A?

[Severin Hacker]

3 million at 15.

[Harry Stebies]

Yeah, that was a Series A. Yeah, yeah. It's called a pre. Pre seed today. That's like your friends and family.

[Severin Hacker]

Yeah.

[Nico Wittenborn]

Who do a PayPal rank round.

[Severin Hacker]

We never raised a seat or pre seed. This was because we had these NSF grants. So we built this project inside the university. So Series A was our first round.

[Harry Stebies]

Who did that round? And can you take me to the moment when you sign the term sheet?

[Severin Hacker]

Union Square Ventures. It was hard. I think we.

[Harry Stebies]

How many no's did you.

[Severin Hacker]

We may have to cut this afterwards. But I think we only had one offer. It was Union Square or back to university.

[Harry Stebies]

But isn't that amazing though that Union Square, one of the best firms in the world, recognized and statistically proven with data. And the one offer. This is what I see so often though I don't think there's anything controversial about that. That just shows quality in picking.

[Severin Hacker]

Yeah, absolutely, absolutely. And they were amazing investors.

[Harry Stebies]

What do you think they saw that others didn't?

[Severin Hacker]

Okay, so one thing that was true back then is we did the Silicon Valley roadshow. We actually did get a lot of interest from Silicon Valley VCs at a time. But they all made it a requirement to move to Silicon Valley. That was always the question. We're super interested, we want to make a deal here and when are you moving to SF or Bay Area? And we're like, we're not moving. And then they immediately lost interest. By the way, some of them later invested in later rounds, but they didn't want to be the first one in a non Silicon Valley company. And so Unisquare, they didn't care. In fact, they said we're the only investor that doesn't care that you're in paper work. That's true.

[Harry Stebies]

Do you think the best founders need investor value?

[Severin Hacker]

No, I would say the best founders do not need investor value. However, I would say investors need to have your back. Absolutely. That is important. You should always try to hire, raise money from the best Tier 1 VCs, even if the terms are slightly worse. I mean, there's.

[Harry Stebies]

Again, what makes you say that?

[Severin Hacker]

Because so much signaling. Series A was the hardest, but because Uniswap, it's like every other investor, like, okay, what does unitsquare do? Because they had this amazing track record and amazing performance. And if Unit Square invests in your company, they will look at it really, really, really powerful. Every other round, it was a lot easier. That's the weird thing is it's like it's harder to raise 3 million than it is to raise 100 million.

[Harry Stebies]

I totally see that. What was the easiest round to raise?

[Severin Hacker]

The latest ones? Yeah, it was just everybody wanted to invest.

[Harry Stebies]

Was there a question with you and Luis where you were like, do we think 5 billion? And this is obviously at the time, do we think that's not a bit high? How do you reflect on price and overpricing when you have such demand?

[Severin Hacker]

We were thinking like, we don't want to have a down round. No down rounds. Okay. By the way, we also never had a layoff, you know, growing fast. But we were never, we never went on a hiring spree or. And we never wanted to have a down round. And the problem also with raising a lot of capital at super high valuation is like, the expectations become very, very. Because obviously you're not worth that much at a time. But they all want you to grow into that valuation. Right. So that's why they invest. Oh, yeah. You know, today, you know, if you, if you take your ARR multiple or whatever, which by the way, was infinite.

[Harry Stebies]

The joys of raising with no revenue, it's great.

[Severin Hacker]

So you're obviously not worth that much, but we believe that you're going to be worth that much a couple of years down the road. So that's one thing we wanted to avoid. We wanted to avoid a down round and we wanted to avoid having an investor that just has extreme expectations that we cannot live up to. That was kind of our philosophy. The other thing I learned on the fundraising is, you know, I thought every Deal is custom. Every deal is custom. Like, you know, your Series A is different from my Series A and your Series B is completely different from my Series B. And what I realized, there's only three, three possible deals. One is no deal. Nobody, nobody.

[Harry Stebies]

Bad outcome.

[Severin Hacker]

Number one is that's the default. Right. It's like nobody wants to invest. Number two is you get a standard deal. And the standard deal is what most companies get at your stage is the standard Series A deal. I don't know what it is today.

[Harry Stebies]

About 15 to 20% dilution, whatever the price and input is.

[Severin Hacker]

That was basically our deal at the time. Right. So you got a standard deal and then there's like the extreme outlier deal. That's like one or two companies of a generation get that one. Facebook got that one. Or Uber, Airbnb, they probably got some of those.

[Harry Stebies]

You see it more and more today, which is actually, I think, brilliant rounds for companies where they raise say 100 million on a $2 billion price. And you're like, wow, 100 million is a lot of money to bring into a company financing wise. But only diluting 5% is a small amount for quite a large and significant amount to bring in. I think they're good rounds to do for companies.

[Severin Hacker]

Yeah.

[Harry Stebies]

And so those are the three types.

[Severin Hacker]

Those are the three types.

[Harry Stebies]

Did you do the third type?

[Severin Hacker]

We never did the third type. We always go got pretty much a standard deal. I think the last couple were more competitive and you know, by the way, we could have raised a lot more at higher valuations, but we didn't do it.

[Harry Stebies]

Who was the most helpful investor?

[Severin Hacker]

Unisco was great. Bing is actually great. You know, Bing is a rare type of investor because he is very product minded. He uses the product and he gives us a lot of feedback on the product. He's obsessed with product. Most investors are, they're more like business types and like, okay, investment and return and EBITDA and all that. And Bing is a very different type of investor.

[Harry Stebies]

I'm going into a territory you might go, Harry, wave the white flag. Do you like Bing public? I have a new theory that why would anyone go public today when if you have a consumer brand, you never need to? And what I mean by that is if you're the Collisons, if you're Ali at databricks, if you're Elon at SpaceX, you don't, you don't need to go public today. The extension of private markets is so significant that there's just no need. If Duo were private today, would you go public.

[Severin Hacker]

Yes. So I'm in the camp of, yes, you should go public. It's actually the better thing for the ecosystem. In fact, I believe there should be more European companies going public, because in.

[Harry Stebies]

The us, so it doesn't matter.

[Severin Hacker]

Doesn't matter as long as it kind of flows back to the European, European ecosystem. But for Duolingo, it's been a great journey, actually going public, ringing the Nasdaq, the bell, career highlight by far. It's incredible. You know, I felt like I grew up in this small town in Switzerland, made it to the US, got a PhD, started this company. It's my first job, I've never worked anywhere else. And then this became this huge hit, massive audience, millions and millions of people loving the product, great purpose, Unicorn, Decacorn public company. You feel like it gives you this achievement. It feels like you won a big tournament. You're not done right. It's not done.

[Harry Stebies]

It's a milestone.

[Severin Hacker]

And I think that that's also really important that you don't think it's done right. I'm still with the company. Most founders that are not CEOs, they leave after four or five years, once they're fully vested, or at least when they, when they get acquired or I. I'm still with the company. The one thing I think is, yes, these private markets are now much, much, much bigger. And there's lots of pros of staying private. Right. For us, before we went public, our finance team, for example, was two people. Now it's I think, 25 or so. So there's a lot of overhead. And the financial markets, they really care about predictability. So in fact, I feel like they care even more about that than they care about the actual profit margins or growth or whatever, whatever. They really care that you can predict. And I think that the way they see this is like, if you can't predict the future of your business, you're not a good operator, you probably don't understand what drives your business, or they kind of like lose trust in the management team. So something like that.

[Harry Stebies]

Do you not think that's the biggest weakness now more than ever before? Because this is a time where there's no predictability, where models can change, where deep seat can come out and completely change how we think about China's approach to AI or open source or whatever that is. And actually, respectfully, I don't think we can predict very well. To you now doing MAS investing, thinking about the future of AI, God, that's a negative to place a premium on predictability.

[Severin Hacker]

Yeah, there's so much uncertainty in the market right now. I think right now if you're a private company, there's a stronger argument for staying private. But for the very much more mature businesses like Stripe, I think you want to to go public because you create this liquidity for your employees. And yes, there's other ways to do it and you can do secondaries and all that. One thing I am also proud of is that we hired all these people, we made lots of millionaires. That money flows back into the ecosystem now it flows back into the Pittsburgh ecosystem and maybe some of it the New York ecosystem. But if you had more European companies, Spotify, go public and adapt, making lots of employees, make some money and then maybe start own companies, that is like what we need. That's what we need in Europe.

[Harry Stebies]

I agree. I just don't know if that mechanism is IPOs. I think you need a consumer brand to have that extension in private markets. If you're a boring B2B company, that does, I don't know, whatever no one cares about. You kind of have to go public because there's not the appetite. I don't think on the later stage demand in the private markets, but Duo could stay private, stay longer. And there's so many different ways of getting share buyback. There's so many people who want to have that late stage secondary access. I think you can do it. I think that's a big question for the next few years. I think the other big question is Deliveroo. Deliveroo sold for 2.9 billion. It was priced at 1.5 billion on the UK Stock Exchange. It's a $1.4 billion delta in how they value a company mega. Listen, dude, I want to do a quick fire. I could talk to you all day. What's the biggest near death experience with jio? Is that like a day where you're like, like, oh my God, that was the hardest day.

[Severin Hacker]

It's not a single day, but it's the first five years we had. We were very constant.

[Harry Stebies]

When you said five, I was like, five days, five years we're gone.

[Severin Hacker]

We just didn't know how to find a business model that aligns with our mission. It was hard.

[Harry Stebies]

What's the best angel investment you've made? And why do you think I'm not.

[Severin Hacker]

A good angel investor?

[Harry Stebies]

Why?

[Severin Hacker]

There's no rub between being a good founder and a good investor. Ultimately, they're different things. First of all, the investment cycle is 10 years, right? So versus as a founder, at least early stage, you get Data points every day. You can learn the feedback loops are so much faster. I think I'm better with the fast feedback loops than the ten year investment horizons. I've had a few successes like a 10x or something.

[Harry Stebies]

But you've had a few 10xs? Yeah, yeah, that's pretty rare, you know.

[Severin Hacker]

But I would not come consider myself.

[Harry Stebies]

In an investor's life. They don't have that many 10X's. We chat a big game. What do you hear a lot from investors that you're like, really?

[Severin Hacker]

So one thing, they ask this question like what is the secret sauce? Why is stooling so successful? And they look for an answer that is like a one word explanation and you can tell when you give them the actual answer. They're disappointed. They wish the answer was it's a string week. That's, that's the secret sauce. You know, it's this one mechanic. That's why we're so successful and we, we invented it or whatever, we maximize it or whatever. Or it's, it's the leaderboards or it's like, oh, we're so good at, you know, like this particular market. It's like, it's, it's like Brazil. That's, that's a secret sauce. We figured out how to crack Brazil and you know, like whatever, like they want an answer like that. Then Luis keeps telling them the true ass answer which is it's running thousands and thousands of a B experiments. The streak mechanic for example, you know, we added it, that was one experiment. But then we've probably run 300 experiments fine tuning the streak mechanic and that's where you get the gains in retention and that's what ultimately drives the growth of Duolingo which you know, still is super fast. We're still growing so fast. The green machine is like, it's like what I mentioned before, it's like we run a lot of experiments. This is also true for marketing. It's not a B experiments, but it's more like let's try this on TikTok, let's try this on Instagram and then double down on the stuff that works. And that's it. That's the secret sauce. It's the process. It's not a single feature.

[Harry Stebies]

The thing I find hard with that process though is the compressed timeline on outcomes. And what I mean by that is content's a really good example. It takes time to know if content works. And so you have to do things with no obvious gain in the short term for compounding long term advantage. Does that make sense. It's almost a bit like the gym. You don't gain muscle. Day one, day two, week one, you'd be like, harry, quit this. This a B test is failing. But three months in, it shows.

[Severin Hacker]

I would agree with that. I think there's like the trap you can run into is you only run tiny experiments like on your purchase page or you run these tiny experiments on copy or something. And I think it's very important that you have your portfolio of genes. So you have lots of low risk, small changes. But you also have some big changes. And big change could be adding chess or adding math. And that's how you stay innovative and relevant. Otherwise you end up in a local maxima where you can't get out because you optimize yourself into that.

[Harry Stebies]

What have you changed your mind on most in the last 12 months?

[Severin Hacker]

AI and the impact of it? I've gone back and forth on basically any of the fundamental questions. Is it going to change the world? Are we going to have more engineers, fewer engineers? One thing I think that gets lost in the conversation is that, okay, let's assume AI really drives productivity gains. We all become more productive. You become more productive, I become more productive. Everybody we work with becomes more productive. Let's say 20, 30%. Is that good or bad?

[Harry Stebies]

Good.

[Severin Hacker]

That's great. One of the big problems we have is demographics. We all need to become more productive. Productive. We don't have enough kids. And then how are we going to finance our welfare systems? How are we going to finance our governments? We need every single productivity gain we can get. In the US there's this huge deficit, there's all the debt. But if you can grow the economy 10% year on year instead of 1% or I guess right now we're in a recession. But if you can grow it 10% or more, all of these problems will go away. It will really be an age of abundance.

[Harry Stebies]

Will we have AI friends in the future? More than normal friends?

[Severin Hacker]

No, I don't believe. No. I think the human to human interaction, the value of that will go up significantly.

[Harry Stebies]

Why?

[Severin Hacker]

There's going to be value on verified human, even if it's not as good. So for example, in the art world, I believe that art that was made before 2022 2. It's going to increase in value because it's verified human. Picasso. We know it was Picasso.

[Harry Stebies]

It wasn't Sam Altman masquerading his factory. Who's the most underrated founder in AI right now?

[Severin Hacker]

We talked about Decagon. I think that it's an amazing company.

[Harry Stebies]

Whose life do you secretly admire and why?

[Severin Hacker]

This is Naval Ravikant. Quote, the true measure of intelligence is if you get out of life, what do you want to get out of life? By that definition, I'm maybe 80% successful or intelligent.

[Harry Stebies]

What do you not have that you.

[Severin Hacker]

But I have an investor friend. I'm not going to share who it is, but. But I feel that guy has kind of figured it out for himself.

[Harry Stebies]

What do you not have? You said 80%. What's the 20%?

[Severin Hacker]

You know, one. One thing I would say is one of the reasons why I said yes to this podcast or why I wanted to be on this podcast is, is I feel like I'm reduced to just duolingo. My identity is Duolingo. Said, I'm founder of Duolingo. Every introduction, right, starts with oh, Severin, founder and CTO of Duolingo. And I feel there's much more to me, to my personality, my identity, than just duolingo. That's the other 20% that I have not, you know, really explored or haven't been able to, you know, share.

[Harry Stebies]

I think the hardest thing is, like, identity is tied to company. And when your identity is tied to a company, the performance of your company denotes the happiness of yourself. I have this. I've only ever had one job, which is 20 VC. When we're not doing well, either fund or media company, I'm depressed. That's hard.

[Severin Hacker]

So true. And I have talked to many founders who left their company and there's like, I would say half of them fall into a depression because their identity is the company. And you know, another thing, I don't know if you notice this, but could you ever leave?

[Harry Stebies]

Don't laugh. But when it is so tied to you, like yours is to you and mine is to me, 11 years. Yours is even longer.

[Severin Hacker]

The thing is, like, I just, I still enjoy it so much and sometimes I wish, like, I, you know, hated my job and it would make it easy to leave and do something else. But I still really enjoyed another point. It was like, when early on. And it's still somewhat true. When an employee leaves, quits, it's like a punch in the gut.

[Harry Stebies]

Which trans rich employee.

[Severin Hacker]

Sure, sure, sure, sure, sure. But like, it's like, why did I leave? What did I do wrong? Do they not believe in this company anymore? You know, I was like, I think about this for weeks.

[Harry Stebies]

Neil Mehta asks a brilliant question from Greenoaks. He likes to go into a company and asks, the employees are your best Days ahead or behind you when I ask you that for Duo, why would you say they're ahead of you?

[Severin Hacker]

Well, thanks for assuming that they're still ahead of us. As I said, going back to the very beginning of the conversation, it's like the mission is this to provide the best education, making universities successful. But now I think we can really do it. You know, we can really build an AI tutor that is as good as the best human AI tutors and we can do it for everyone, not just the rich, and that will change the world. I really think this is the moment. You know, we had to wait for 10 years to get to this stage, but I think this AI wave is going to really enable us to do.

[Harry Stebies]

This final one on public market caps and stuff. I believe you're probably, I don't know, ownership structures, which I probably should do. I believe you'd probably be a billionaire technically, so well done. My question to you is, do you think about money and how does money and happiness correlate or not correlate for you?

[Severin Hacker]

Yeah. And I've also spent a lot of time thinking about this question. The weird thing is I wish I hadn't. I feel like it's not a productive. Am I happier now than I was when I was a grad student? And is it because of, because of the money or is it because of the success or is it because I know myself better? And it's very hard to disentangle all the different factors that go into happiness. I would say though, that there's different levels of wealth and they actually did this study, I think with post exit founders. They asked him, how much is enough? How much is enough? When do people switch their opinions? Okay, now this is enough. The answer they got was, you know what the answer was?

[Harry Stebies]

$20 million?

[Severin Hacker]

No. 100 million.

[Harry Stebies]

100 million. Jesus. Inflation is real.

[Severin Hacker]

Whoa. So, so, so that's a.

[Harry Stebies]

That's a lot.

[Severin Hacker]

That was the, the answer of those people. It's kind of like when you stop, I guess, worrying about it because it's so much. I mean, it's so much. And I want.

[Harry Stebies]

Did you have a number when you started?

[Severin Hacker]

No, I. I want. This is a missionary company and I tweeted this recently. It's like, I think that the counter intuitively, the founders that start with a purpose and a mission and are not focused too much on money end up usually doing better. Maybe people don't give them credit, but I do because I'm in the same situation. I think Bill Gates or Mark Zuckerberg. Bill Gates wanted To put a computer on every desk. And then he realized, okay, well how do I do this? And one way of doing it or maybe the only way of doing it is starting a company company. They're not like I'm going to start a company to become rich. That's like kind of the reversing. It's like you have to think like okay, what change do you want to see in the world? What do people want? How can I help other people? That's ultimately in an ideal capitalist environment that should drive value. And I do believe that that's why these companies got started. And Mark Zuckerberg maybe connecting people.

[Harry Stebies]

What do you think was the biggest needle mover for your happiness then? Because for me there's like pay rent, easy. I can live life like I kind of want to, but I'm not loaded. I still kind of need to work, but I'm not loaded. Probably a couple of million. There's the 10 to 20 which is like I'm pretty good. Adding another 80 is not going to change much actually. I still have a super nice house and I'm good. And then there's the hundred. I can take jets when I want to.

[Severin Hacker]

I do believe I'm happier now than not by a lot. I was pretty happy in my twenties too but, but a little bit. I think there's this sense of achievement and will never go away. Even if, you know, if duolingo collapses tomorrow is still, still a good thing. It's like, you know, I tried, you know and it worked out for a while and maybe, maybe and then, then maybe it goes away but I, I would still have this, this sense of achievement. And another thing is like, you know when, when people just share their duolingo stories or when I, you know, I was in, in Venice is a year ago or two years ago and they have. The bus is a boat, right? So I took the bus on the canal and next to me was this woman like literally like sitting next to me was this woman doing duolingo. And I was just looking at and I was like, you know, if she knew, you know, I was sitting next. I didn't.

[Harry Stebies]

Did you say anything?

[Severin Hacker]

Nothing. I was just for 10 minute ride she was doing her duolingo and I saw like how she used to it and I was just like this is amazing.

[Harry Stebies]

Does money change marriage?

[Severin Hacker]

Wow. I thought it was going to be the quick run. I think the answer depends on your answer of the question is does money change people? Because if it changes people it'll probably change marriage. So I assume the answer is yes, but it depends on the people.

[Harry Stebies]

Did it change in your case?

[Severin Hacker]

A little bit. So we met before. You know, I was successful. In fact, my now wife at the time, girlfriend, she for the first couple years, she made more than me, so we kind of reversed that. She knows me from when I wasn't very successful, when I was just a dude with some crazy ideas. I think it's different than if I had to date someone now because again, everybody, like, everything starts with this. Oh, co founder of Duolingo and then super successful. Everybody. Well, everybody knows the link, but my CEO, like my. My co founder is obviously way more famous, but it's hard to remove that. So, in fact, do you resent that? I wish you could go into, like, you could switch, you know, like you could go into incognito mode, like in the browser. It's like, you know what? I'm just gonna put on glasses and I don't want to. In fact, you know, people sometimes. Yeah. Always ask you, what do you do? And when I'm in a. In a. In a room where I know they don't know who I am, I sometimes give a wrong answer. I say, you know, I used to say, like. Like a Uber driver. Of course, nobody. Nobody really believes that. Or I say, like, I'm a software engineer at a tech company. Or I say, I'm a patron of the arts, which is not entirely untrue because I know how the conversations go when I tell the truth. There's like, next question is, how many languages do you speak? Next question is, how did you start dual.

[Harry Stebies]

Why has it been so successful?

[Severin Hacker]

And the next question, if they're a user, it's like, oh, I love your. My streak is this long. And that's actually. What if they're actual users? It's much more interesting to me.

[Harry Stebies]

A final, final one, I promise, but an important one. Everyone has said, including Warren Buffett, the most important thing in life is partner selection, who you choose to spend your life with. I spoke to everyone on your cap table, really, and they all said about the special relationship you and Luis have.

[Nico Wittenborn]

Have.

[Harry Stebies]

I'm intrigued. We mentioned marriage there. Whether it's Luis or marriage, I don't mind, really. What would be your biggest advice on partner selection?

[Severin Hacker]

So for founders, I think it's a little easier. One thing is like, have you worked previously with this person? The keys worked. Not hung out at the bar. It's like, have you worked with this person prior to starting this company? And Luis and I, we had worked together for two years prior. So we kind of already knew how we worked work and what we're good at, what are we bad at Priorities. And we actually had this very early on. We had this because I went from he was my superior, he was my PhD advisor, and I was his student into an equal relationship where we're equal co founders. And I was like, can I trust this guy? What if he just fires me after a year? So I wrote down a little contract between the two of us. I still have a copy at home where we outline exactly like, you know, this is how we're going to make decisions is. It's like this short. This is how we're going to make decisions. This is, you know, Luis's responsibility. This is Severin's responsibility. And we both signed it. And I think that avoided a lot of conflict. And the other thing that's interesting, I think a lot of the conflicts happened in the first two years.

[Harry Stebies]

What was the biggest conflict?

[Severin Hacker]

Probably what to build the product itself. There were conflicts there and then also on. On hiring, not hiring, firing, et cetera. There were a bunch of conflicts as well. And then I think we had it all worked out. And it's amazing. I only meet with Luis every other week and sometimes the meeting lasts 10 minutes. We go into a meeting like the exec team meeting, and I have a pretty good language model of what he's going to say or how he's going to react to a certain idea. Because we had been working together for the first six, seven, eight years in the same, same room every day for 50, 60 hours a week. I know him better than probably any other person other than my wife, and vice versa.

[Harry Stebies]

Your wife. Biggest advice on partner selection, Romantically, I would say.

[Severin Hacker]

Do you enjoy talking to this person?

[Harry Stebies]

You enjoy talking to many people?

[Severin Hacker]

Yeah, but I think it's like I.

[Harry Stebies]

Call it the Tuesday night test, which is like in five years time, will you be excited for just you and them to sit down and just talk? And there's very few people where five years time, Tuesday night, it's a cold February evening in Pittsburgh or London or wherever you are. If it's like, hell yeah.

[Severin Hacker]

Yep. I think that's one thing. And I think then also, like mutual support, you know, do they support you in what you do or is there a competition? I think competition. You don't want to have competition in any of these relationships.

[Harry Stebies]

This has been one of the most wonderful, wide ranging discussions I've had. I'm so pleased we got a chance to do it. Thank you for being so open. You have been amazing.

[Severin Hacker]

All right.

[Harry Stebies]

I mean it shows like that where I remember why I love what I do so much. I love the natural and authentic conversation at the end there.

[Nico Wittenborn]

If you want to watch the episode, you can find it on YouTube by searching for 20VC. That's 20VC. But before we leave you today, I love seeing the team come together to make this show happen. What I don't love is trying to keep track of all the information, the data and the projects that we're working on across dozens of platforms, products and tools. That's why we use Coda, the all in one collaborative workspace that's helped 50,000 teams all over the world get on the same page. Offering the flexibility of docs with the structure of spreadsheets, Coda facilitates deeper teamwork and quicker creativity. And their turnkey AI solutions. The intelligence of Coda Brain is a game changer. Powered by Grammarly, Coda is entering a new phase of innovation and expansion, aiming to redefine productivity for the AI era. Whether you're a startup looking to organize the chaos while staying nimble, or an enterprise organization looking for better alignment, Coda matches your working style. Its seamless workspace connects to hundreds of your favorite tools including Salesforce, Jira, Asana and Figma, helping your teams transform their rituals and do more faster. Head over to Coda iO20VC right now and get six months off the team plan for startups for free. That's Coda. Coda.io20VC and get six months off the.

[Harry Stebies]

Team plan for free.

[Nico Wittenborn]

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[Harry Stebies]

We so appreciate all your support and come back on Thursday for the favorite show of the week with me, Jason Lamkin and Rory o' Driscoll. It's going to be a lot of fun this week. We have a lot to talk about.