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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 2, 2013 at 8:40 AM

Seattle’s Livemocha sold to Rosetta Stone for $8.5 million

Language-learning giant Rosetta Stone is coming to Seattle for a mocha.

Arlington, Va.-based Rosetta Stone today announced that it’s buying online language learning startup Livemocha for $8.5 million cash. It  plans to continue operating the company as a subsidiary in Pioneer Square, using the team to help move other Rosetta products onto the Livemocha platform.

“Livemocha will enable us to quickly migrate our legacy products to a future-proof technology stack with a modern, cloud-based architecture  and contemporary means of distribution,” Rosetta Stone Chief  Product Officer West Stringfellow said in a release. “But even more exciting, it gives our  customers more choice. Livemocha presents us with a low-cost or even free alternative product to offer learners around the world. It becomes a ‘ladder of learning and value’ for our customers.”

Livemocha was started in 2007 by a Microsoft veteran Shirish Nadkarni and raised $14 million through 2009 from investors, including Seattle’s Maveron Partners. The company has 35 employees, plus 16 million users from 195 countries who teach and interact online through the platform, which competed directly with Rosetta and significantly undercut its prices.

“By combining our strengths, our technologies, and our dedicated focus to serve you well, we will transform the world of learning,” Livemocha Chief Executive Michael Schutzler said in an announcement to customers and the public.

In an interview, Schutzler said Rosetta will be hiring more engineers and product managers in the Seattle office.

“We really truly are going to double down on staffing here,” he said. “The team that’s operating here will run really well as part of the Rosetta Stone organization.”

Seattle may come out ahead, but investors aren’t as lucky with the deal.

Schutzler said that’s partly because Livemocha started out as social networking play in the heady, early days of social ventures. But the company later realized that the best prospects for its business were more enterprise oriented, selling its technology to schools and other institutions, such as a Washington state program that’s using Livemocha to develop an ESL program for immigrants.

Investors are less enthused about the education space, he said, despite the success of more recent ed startups raising venture funds.

“All of those are still around the notion that there’s some community, viral, social media something or other going on. Nobody’s actually demonstrated that there’s any veracity to the claim,” he said. “When we matured to the point where we had a real business model ….. it put us squarely in the teaching space.”

About a year and a half ago, Livemocha turned its focus to “blended learning” opportunities in schools and universities.

Schutzler still expects a social component to language learning, though. He sees the business model becoming more like the business network LinkedIn.

“You’ve got a lot of stuff going on in Livemocha that is about language exchange and sharing a learning experience,” he explained. “But the actual solution is teaching.”

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