Portfolio Update: CodeCombat Grows Revenue, Expands Customer Base

We recommended CodeCombat almost two years ago in July 2020. The company develops video games that teach middle schoolers and high schoolers how to code. Since we recommended CodeCombat, the company has navigated the COVID-19 storm and is now growing sustainably and profitably. 

We caught up with CEO Nick Winter recently to get more details on what the company has accomplished over the last two years.

First Stage Investor: What have your revenue metrics been since we recommended you?

Nick Winter: Our revenue growth has been gradual, but we are expecting a big jump this year. Our revenue was $2 million in 2019, $2.3 million in 2020, $2.6 million in 2021, and we are projecting $4.1 million in 2022. We expect expenses to decrease this year and to turn a profit of around $300,000.

First Stage Investor: How many states require a computer science curriculum?

Nick Winter: 23 states require high schools to offer a computer science curriculum, which is up from 19 in 2020. Three states have it as a graduation requirement. We expect this number to continue growing. 

First Stage Investor: How many clients do you have in the United States?

Nick Winter: We have around 15,000 to 20,000 free schools on trial licenses and 1,000 paying schools. In 2020, we had 500 paying schools. We had some trouble closing trial licenses during COVID as our sales team was spread extremely thin, but we expect conversions to grow substantially in 2022.

First Stage Investor: How has business been going on both the business to consumer (B2C) and business to business (B2B) fronts?

Nick Winter: B2B is growing faster than B2C. We have a sales team of 10 and are hiring a director of inside sales to continue to build out both lines of business. We have also begun packaging services together for paying schools to give them multiple services at a discount. The biggest hit on this front has been running custom esports competitions at schools, and we actually built out a 1 million-plus person leaderboard in 2021. We are in the process of fully rolling out this esports service, but being able to bundle offerings will allow us to continue to grow our deal sizes. 

First Stage Investor: How has your revenue been split geographically?

Nick Winter: 75% of our revenue is in the United States and 25% is international. China accounts for about 15% of revenue. 

First Stage Investor: How has business in China been?

Nick Winter: China has seen big crackdowns on private education. However, since we are not considered an official academic subject, CodeCombat has just missed being drastically affected by the regulations of the Chinese government. While we are still profitable over there, it has been hard to stay alive, and that line of business has not been growing much. We do have plans to expand into greater Asia, and we have partners in Singapore, Taiwan, Vietnam and Hong Kong. 

First Stage Investor: How is Ozaria doing? 

Nick Winter: Ozaria has been iterated and is fully rolled out. Schools are continuing to get more and more rigorous with what they want from the service, including cybersecurity and accessibility for the hearing and visually impaired. We are currently in beta testing for the hearing and visually impaired functionality. We envision being able to eventually get the technology to a place where those who are visually impaired will be able to reach college-level programming proficiency using our services. 

First Stage Investor: Have you expanded your employee base since we recommended you?

Nick Winter: In the third quarter of 2020 we had to downsize our sales staff quite drastically. Now, we are back to just under 30 employees. We won’t be hiring more people immediately except for very specialized roles, with our next hire being a director of inside sales. 

First Stage Investor: Do you see the no-code movement as a threat to CodeCombat?

Nick Winter: No. No-code is not replacing software coding at all and is still very basic. If someone builds a platform using no-code, they then have to convert the software to normal code, which can be a painstaking undertaking. No-code allows you to create prototypes and minimum viable products, but it’s not replacing the need for software development. 

First Stage Investor: How has the competitive landscape changed since we last recommended you?

Nick Winter: While we haven’t been paying close attention to new entrants in the space, we rarely lose deals to competitors. The only real way we lose deals is when we work with smaller-school budgets that are not yet ready for or cannot afford our product. 

First Stage Investor: Do you plan on raising again?

Nick Winter: While we have no concrete fundraising plans, we might raise a Series B if the terms are right. If we did another crowdfunding (CF) raise, it would be under Regulation A. However, given the significant  cost of time and capital associated with a CF raise, we would probably prefer going the venture capital route moving forward.