GoStudent — the online tutoring marketplace last valued at $3.2 billion — has carved out a position for itself as one of the biggest and more popular startups to come out of Vienna, Austria, with 11 million families and 23,000 tutors on the platform. Now it’s adding another distinction to the list: It is profitable. The company’s CEO Felix Ohswald told TechCrunch that the company is now in the black across its global footprint.
“And not just EBITDA profitable,” said Ohswald, who co-founded the company with COO Gregor Müller in 2016. The company is now both EBITDA positive and has positive operating cashflow across GoStudent and the GoStudent Group.
Alongside online trading platform Bitpanda and the fitness tracker Runtastic, acquired by Adidas, eight-year-old GoStudent is one of the very few Austrian startups that has made a name for itself in the international tech scene.
Its arrival at profitability has not been without bumps, however.
Amid a boom for online learning (and other technology favoring remote and virtual experiences) — the market crashed for it and many other technology companies. Not only did cash burn become a major issue after years of companies going hell for leather on scaling, but for many customer demand started to sharply drop off, creating a critical situation. At GoStudent, the company lost €89 million in 2021, with that figure ballooning to €220 million in 2022. That led to several rounds of layoffs, and major cost cuts.
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 of 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 only a few months ago, in January of this year, Ohswald confirmed that the company was conducting another round of layoffs — the third since 2022.
These restructurings 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 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.
But even if that sentiment has continued to carry business through for the company, it was still burning cash and needed to break the circuit. The first cuts that the company made outside of its core business were easy. No more lavish parties. A pause on acquisitions. No attempts to expand to markets where online tutoring wasn’t already established, such as Sweden, or where it had to lower its prices too much to compete, like Latin America.
Others were more painful, like exiting the U.S. after only a few months and high-profile entry to take on that very big and mure, but also very competitive, market.
GoStudent no longer aims to be present in 20 countries. It is instead refocusing on Europe. And 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, which still has a stated mission to “build the #1 global school and unlock the potential of every student through personalized tutoring.” Scaling at lower costs inevitably will butt up against the kind of personalized approach that its customers might demand.
GoStudent is not a school right now: Its offering still very much falls under tutoring, not teaching. But its acquisition of Studienkreis in 2022 does speak to how it will be evolving that. Founded in 1974, Studienkreis has 1,000 physical learning centers, mostly in Germany, and GoStudent is now using them to double down on hybrid learning.
GoStudent uses its warchest to acquire large network of traditional tutoring centres in Europe
“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 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&A is another thing GoStudent won’t spend money 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.
GoStudent adds another $95M to its war chest to go after VR and AI-enhanced tutoring
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 additional capital. It’s in our hands to find the right strategy,” Ohswald said. That’s true on the financing front, but also elsewhere.
Comment