8 months ago
119 ARTICLE AD
Vienna may have a wealth of museums, public transportation, spring water and social housing, but tutoring platform GoStudent is another of its crown jewels. Its services are now used by more than 11 million families, many of whom live outside of GoStudent’s home country.
Alongside Bitpanda and Runtastic, acquired by Adidas, eight-year-old GoStudent is one of the very few Austrian startups that made a name for itself in the international tech scene. But having had to sharply adapt to a market that no longer favor growth at all costs, its €3 billion valuation and global expansion may well belong to the past, at least for now.
However, GoStudent reshaped quickly to fit the taste of the moment. When I visited its HQs a few days ago to get to know with its high-profile founders, CEO Felix Ohswald and COO Gregor Müller, they revealed that the company has reached full profitability. “And not just EBITDA profitable,” Ohswald, the son of a banker, was quick to add.
The company later confirmed in writing that “this means that we are both EBITDA positive and have positive operating cashflow across GoStudent and the GoStudent Group. It added that TechCrunch could publish the information exclusively after the founders shared the news with its team during a all-hands meeting earlier today.
There’s no point in fibbing or keeping employees out of the loop, as unicorns often do: Following Austrian standards, the private company’s yearly accounts become a matter of public record by the end of the following year. That’s also how we know that GoStudent lost €89 million in 2021 and €220 million in 2022.
The contrast with previous losses makes the turn to profitability even more significant, and it’s easy to see why Ohswald called it a “massive milestone.” It will also be a likely morale booster for the staff, which after several rounds of layoffs, is now down to 1,500 full-time employees across the GoStudent Group.
Back from the heights
GoStudent’s turnaround comes after a phase that Ohswald himself referred to as “crazy” hyperscaling. “From 2019 to 2022, we scaled our core business model to more than €100 million in revenue and it was amazing, crazy growth from zero basically within two years.” But, he added, the company also had “a cash burn of over €150 million in 2022 alone.”
As markets turned, and despite having raised hundreds millions euros in funding, the company knew it couldn’t continue on that path. In 2023, it reduced its burn rate by 70%, but it still wasn’t enough. In a LinkedIn post in January of this year, Ohswald confirmed that the company was conducting another round of layoffs — the third one since 2022.
These restructurations were “tough moments,” Müller said, but the company had to figure out how to keep on growing without spending as much. “At least we learned a lot now. We have a better idea of how and where to scale, of the key things we need to nail and be more careful about.”
GoStudent’s hypergrowth wasn’t only hubris. If the digital transformation brought along by Covid-19 lifted many boats, that was particularly true for edtech, and and even more so for GoStudent. The company went from having to convince parents of the merits of online tutoring, to becoming the go-to solution for schoolchildren in need of educational help.
GoStudent’s value add survived the pandemic, so at first, there were easy cuts to make outside of its core business. No more lavish parties. No more acquisitions for the time being. No more expanding into places where it learned that tutoring isn’t part of the culture, like Sweden, or where it had to lower its prices too much, like Latin America. But others were more painful, like exiting the U.S. after only a few months.
GoStudent no longer aims to be present in 20 countries. It is refocusing on Europe, but outside of German-speaking countries, it will “adopt a more organic growth strategy.” Quite tellingly, when its former chief growth officer and early employee Laura Warnier exited the company, she was replaced by a chief marketing officer, former Delivery Hero staffer Dan Zbijowski. Goodbye top-line growth, hello bottom-line growth.
A long way to the top
Spending less while still growing into its big dreams will be a fine balancing act for GoStudent, whose stated mission is to “build the #1 global school and unlock the potential of every student through personalized tutoring.”
GoStudent is not a school yet; its offering still very much falls under tutoring, not teaching. But acquiring StudienKreis in 2022 brings it one step closer to that goal. Not only because this traditional tutoring company founded in 1974 has 1,000 learning centers, mostly in Germany; but also because GoStudent is now using them to double down on hybrid learning.
“We believe that the future of education is hybrid,” Ohswald said. “Glocal” was another keyword he used; while education curricula are national or even regional, GoStudent can add value by leveraging technology to make sure each kid finds the right tutor, independent of location.
Most GoStudent’s tutors are university students, Müller said, and this younger demographic makes it easier for them to click with pupils while serving as role models, too.
According to Ohswald, that’s a reinforcement that many kids these days need, as they have to live under social media pressure that didn’t use to exist when we grew up. “Having this moment where a person sits down with you individually builds some confidence is often worth much more than improving your grades.”
In the GoStudent Future of Education Report 2024, based on answers from more than 5,000 parents, the company found that families are looking for a more personalized approach to their child’s learning. “Obviously, grade improvement is one key thing that the parents are looking for; and if they don’t see that, they are not satisfied.” But they also want their kids to get better at problem solving and other life skills.
GoStudent can come in where schools fall short, but such a far-ranging mission requires outstanding teachers. Presumably, pay that keeps up with inflation would help attracting and retaining these. Especially in light of a recent petition from some of its 23,000 tutors complaining that they “receive less than 50% of parents’ fees while undertaking almost 100% of the preparation and administrative work.” However, GoStudent’s founders see this differently.
When asked about pay increases, Ohswald went into a spiel on how purpose-driven tutors feel fulfilled from seeing students succeed. But perhaps more tangibly, GoStudent is working on leveraging AI to make efficiency improvements on “things that otherwise would take a lot of time so the teacher can focus on teaching and not on grading work,” Müller said.
A fine balancing act
GoStudent has three priorities for 2024, Ohswald told TechCrunch: Remaining cash-flow positive, staying true to its goal of putting students first, and showing how AI allows GoStudent to scale its business in a capital-efficient way.
The key here, Ohswald said, is for GoStudent to demonstrate “how we leverage AI so that we can scale operations 100 times without the need of hundreds more people. AI allows us to recruit teachers in a much more automated way, help teachers better teach their [students] and help our support and operations people on the ground hyperscale [this] without spending money on it.”
M&As are another thing GoStudent won’t spend money again on “anytime soon,” but the founders are glad they did. “I really believe having been in the position to do those acquisitions that fast in such a market environment where raising capital was easier will help us massively,” Müller said.
GoStudent is already seeing the value of becoming a group, and not just a company. Tus Medias, a network of tutor marketplaces, is proving to be a solid customer acquisition channel, but also an alternative that tutors and parents can turn to should they be unhappy with what GoStudent offers.
A recurring complaint from parents is that GoStudent pushes them to multi-year commitments, only to make cancellations difficult. GoStudent retorts that education requires consistency, not a one-time fix. But of course, contracts are also better at providing GoStudent with steady revenue. In fairness, it also makes it more likely for its tutors to get a relatively stable volume of work; and more than they would if they had to find clients on their own.
Still, unhappy parents regularly take issues with GoStudent to the press. One heavily relayed case took place in the U.K. in 2021, when a father found out that his daughter’s GoStudent tutor was barred from teaching. The company apologized and said it had already changed its hiring practices, which include background checks (Enhanced DBA, in the U.K.) and a code of conduct that forbids teachers from contacting students under 16 using Whatsapp “under any circumstances.”
Child safety is one reason why the company would invest in building its own tools, such as GoChat. Sure, it could keep on using external solutions. After all, it spent its first three years as a WhatsApp homework chat. But in-house solutions make it easier to prevent tutors from getting their students’ phone numbers and to track what’s happening during the class.
GoStudent also finally abandoned Zoom in favor of its own online classroom, GoClass, based on previous developments from Tus Medias. There may be bugs for now, but it’s also a reminder that GoStudent doesn’t only want to use ready-made tools: It wants to come up with technological innovations to teach better. For instance, one recent addition is GoVR, a virtual reality platform for language learning.
All the talk about AI, VR and hybrid learning may have been helpful in raising GoStudent’s latest funding, a $95 million mix of equity and debt that it secured in August.
But more than anything, it is profitability that opens checkbooks and give companies more options. It gives GoStudent the option to raise more debt to avoid more dilution, pick a different structure, or just not raise raise additional capital. It’s in our hands to find the right strategy,” Ohswald said. That’s true on the financing front, but also elsewhere.
