Vienna is rich in museums, public transport, springs, and public housing, but one of its crown jewels is the tutoring platform GoStudent. Its services are currently used by more than 11 million families, many of whom live outside of GoStudent's home country.
Eight-year-old GoStudent is one of the few Austrian startups to make a name for itself on the international tech scene, along with Bitpanda and Runtastic, which was acquired by Adidas. But its €3 billion valuation and global expansion may be a thing of the past, at least for now, as it has had to adapt rapidly to a market that no longer wants growth at all costs. There is.
However, GoStudent was quickly restructured to suit the tastes of the moment. When I visited its headquarters a few days ago and spoke to its famous founders, CEO Felix Oswald and COO Gregor Müller, it became clear that the company was fully profitable. Ta. “It's not just the EBITDA that brings profits,” Oswald, the son of a banker, is quick to add.
“This means that GoStudent and the entire GoStudent Group are EBITDA positive and operating cash flow positive,” the company later said in a written statement. It added that TechCrunch can only publish the information after sharing it with the team.
There's no point in cheating or leaving employees out of the loop, as unicorns often do. According to Austrian standards, the annual accounts of private companies become public records by the end of the following year. This is also how GoStudent finds out that in 2021 he lost 89 million euros and in 2022 he lost 220 million euros.
The contrast with previous losses makes the turn to profitability even more significant, and it's easy to see why Oswald called it a “major milestone.” It will also likely be a morale booster for his staff, who have now been reduced to 1,500 full-time employees across the GoStudent group after several layoffs.
I'm back from the heights
GoStudent's turnaround came through a phase Oswald himself called “crazy” hyperscaling. “Between 2019 and 2022, we expanded our core business model to over €100 million in revenue, essentially going from zero to incredible growth within two years.” However, the company He added that there was also a “cash burn of more than 150 million euros in 2022 alone”.
The market changed and, despite raising hundreds of millions of euros, the company realized it could not continue on that path. In 2023, the burn rate decreased by 70%, but it was still not enough. In a LinkedIn post in January, Oswald confirmed that the company was implementing another round of layoffs, the third since 2022.
Mueller said these restructurings were “tough times,” but the company had to find a way to continue growing without spending too much. “At least we've learned a lot now. We have a better idea of where and how to scale and the key points we need to be more careful about.”
GoStudent's rapid growth wasn't just about arrogance. If the digital transformation brought about by COVID-19 has lifted many boats, that is especially true for edtech, and even more so for GoStudent. The company has grown from having to convince parents of the benefits of online tutoring to become the go-to solution for schoolchildren in need of educational support.
GoStudent's value-add survived the pandemic, so cutting back on non-core operations was easy at first. No more fancy parties. There are no further acquisitions for the time being. It no longer expands to places like Sweden where it has found that tutoring is not part of the culture, or places like Latin America where it has had to cut prices too low. But some were more painful, such as leaving the United States after just a few months.
GoStudent no longer aims to be present in 20 countries. It is refocusing on Europe, but plans to “adopt a more organic growth strategy” outside the German-speaking world. When Laura Warnia, former chief growth officer and early employee, left the company, she was replaced by Dan Zbijowski, a former Delivery Hero staffer and chief marketing officer. Goodbye sales growth, hello revenue growth.
It's a long road to the top
Spending less while growing toward big dreams is a fine balance for GoStudent, whose mission is to “build the number one global school and unlock the potential of every student through personalized instruction.” It will be.
GoStudent is not yet a school. The offering still amounts to tutoring rather than education. However, the acquisition of StudienKreis in 2022 will bring it one step closer to that goal. This traditional tutoring company founded in 1974 is not only because it has 1,000 learning centers, mainly in Germany. It's also because GoStudent is using them to double down on hybrid learning.
“We believe the future of education is hybrid,” Oswald said. “Glocal” was also a keyword he used. While educational curricula vary by country and region, GoStudent can add value by leveraging technology to ensure each child finds the right tutor, regardless of location.
Most of GoStudent's instructors are college students, Mueller said, and this young demographic makes it easier for them to get along with students while also serving as role models.
Oswald said this is reinforcement that many children today need. Because they have to live under the pressure of social media that didn't exist when we were growing up. “Having this moment where someone sits down with you individually and builds your confidence is often far more valuable than getting a good grade.”
In its GoStudent Future of Education Report 2024, based on responses from more than 5,000 parents, the company found that families are seeking a more personalized approach to their children's learning. “Obviously, improving academic performance is one of the important things that parents are looking for. And if they don't get that, they're not happy.” But they also teach children problem-solving and other things. want to improve their life skills.
GoStudent can join schools where they are inadequate, but such a far-reaching mission requires great teachers. Perhaps wages in line with inflation would help attract and retain these people. Especially considering a recent petition from some of the 23,000 tutors who “undertake almost 100% of the preparation and administrative work, while receiving less than 50% of the tuition fees from parents.” ” are the complaints. But the founders of GoStudent see it differently.
When asked about the raise, Oswald began talking about how fulfilling tutors with a purpose find in seeing their students succeed. But perhaps more specifically, GoStudent is leveraging his AI to improve the efficiency of “tasks that would otherwise take a lot of time, so that teachers can focus on teaching rather than grading.” said Mueller.
a delicate balancing act
GoStudent has three priorities for 2024, Oswald told TechCrunch. It's about staying cash flow positive, staying true to his goal of putting students first, and showing how AI can help his GoStudent grow its business in a capital-efficient way.
The key here, Oswald said, is that GoStudent is “demonstrating how we can leverage AI to scale our operations 100x without requiring hundreds of people.” AI allows us to employ teachers in a more automated way, allowing them to teach better. [students] Empowering hyperscale support and operations personnel on the ground [this] without spending money. ”
M&A isn't something GoStudent plans to invest in again “any time soon,” but the founders are happy to have done so. “I truly believe that being in a position to make an acquisition so quickly in a market environment like this where it's easy to raise capital will be a huge help to us,” Mueller said.
GoStudent already recognizes the value of being a group rather than just a company. Tus Medias, a network of tutor marketplaces, has proven to be a solid customer acquisition channel, but also an alternative to turn to if tutors or parents are dissatisfied with her GoStudent offering. there is.
A recurring complaint from parents is that GoStudent simply forces parents into multi-year contracts, making it difficult to cancel. GoStudent counters that education requires consistency, not one-off fixes. But of course, contracts are better for providing GoStudent with stable income. To be fair, tutors are also more likely to get a relatively steady amount of work. And more than if we had to find customers ourselves.
Still, disgruntled parents regularly bring up issues with GoStudent in the press. One highly publicized incident occurred in the UK in 2021 when her father learned that his daughter's GoStudent tutor had been banned from teaching. The company has apologized and said it has already made changes to its recruitment practices, including background checks (the UK's Enhanced DBA) and a code of conduct that prohibits teachers from using Whatsapp to contact students under 16 “under no circumstances”. Stated.
One of the reasons the company invests in building its own tools like GoChat is child safety. Of course, you can continue using external solutions. After all, the first three years of his life were used as homework chats on WhatsApp. However, using an in-house solution prevents tutors from obtaining students' phone numbers and makes it easier to track what's happening during class.
GoStudent also ultimately abandoned Zoom in favor of GoClass, its own online classroom based on an earlier development by Tus Medias. There may be bugs at the moment, but it's also a reminder that GoStudent doesn't just want to use off-the-shelf tools, it wants to come up with innovations to make teaching better. For example, one of our recent additions is GoVR, a virtual reality platform for language learning.
All the talk about AI, VR, and hybrid learning may have helped GoStudent raise its latest round of funding, the $95 million in equity and debt it secured in August.
But above all, it is profitability that opens the checkbook and gives companies more options. This gives GoStudent the option of raising further debt to avoid further dilution, choosing a different structure, or simply not raising additional capital. It's up to us to find the right strategy,” Oswald said. That's true in terms of funding, but it's true in other ways as well.