Layoffs Hit the Ed-Tech Market. Is the Era of Rapid Growth Cooling?
A number of ed-tech companies have imposed significant staff cuts as what was once rapid pandemic-driven growth for some organizations slows down.
Outschool, a provider of virtual classes for children, headquartered in San Francisco, recently laid off 18 percent of its staff. The cuts were announced in June, affecting 31 people and leaving the company with a team of 164.
“We needed to staff up quickly during the pandemic to meet unprecedented demand,” said Amir Nathoo, CEO and co-founder of Outschool, in a statement.
“It is no secret that market conditions have rapidly shifted for start-ups, and we recognize the need to be more defensive going into the second half of this year.”
Other ed-tech providers have also reportedly laid off significant numbers of employees in recent months. They include Byju’s, an India-based company that has raised an enormous amount of venture capital and has an estimated valuation of $22 billion.
The company has laid off hundreds of positions at Toppr and at WhiteHat Jr., two of its acquisitions within the last two years, as reported by startup and technology news site TechCrunch.
Other ed-tech companies and online learning platforms that have recently cut staff include Unacademy, Eruditus, Vedantu, FrontRow and Udayy, among others.
Approximately 75 percent of employees joined Outschool in the last two years, said spokesperson Dabney Lawless, in an email to EdWeek Market Brief. In the summer of 2020, the organization had a staff of about 50, and the number soared to nearly 200 pre-layoffs.
The company saw a 20-fold increase in bookings for its virtual offerings across academic classes, tutoring, and extracurricular subjects from 2019 to 2021.
The expansion positioned Outschool to be named one of the fastest-growing companies by Inc. Magazine for the past two years, and it was the publication’s fastest-growing organization in the education category in 2021.
A Focus on Repeat Users
Though demand is still higher now than it was pre-pandemic, growth has slowed down from its peak, Lawless said in the email. The largest growth channel for Outschool now comes from repeat users.
“This indicates to us that the product is of value to those that know about it,” she said. “We are focused on ensuring that level of education quality and repeat usage from our loyal learner families.”
These layoffs follow a period of swift fundraising for Outschool, when the company raised Series B, C and D funding within a year, reaching a valuation of $3 billion after hitting $1 billion just four months prior.
“It’s not an easy time for start-ups for sure with so much uncertainty,” Lawless said. “No one really can predict what is going on from day to day.”
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