When Course Hero raised $10 million in early February, the amount seemed curiously small for $1.1 billion “unicorn” valuation valuation it got.
As it turns out, the company wasn’t done fundraising.
Last week, Course Hero secured an additional $70 million in an extension of its Series B round, courtesy of some of the biggest names in the financial sector—TPG, Goldman Sachs Asset Management and GSV. The deal pushes the company’s Series B round to $80 million. (It kept its $1.1 billion valuation.)
Andrew Grauer, co-founder and CEO of Course Hero, says this latest fundraise was “not in the works when we did the first close” of the Series B round, which was led by NewView Capital. That deal was focused on giving his employees an opportunity to sell their shares directly to NewView through a process called a tender offer. By letting staff sell some of their stock, the goal was to boost morale and energize the team to work for the long haul, Grauer said.
The world has changed dramatically between the first and final close of the company’s Series B round. And as college campuses closed and instructors scrambled to facilitate online instruction, digital education providers like Course Hero saw a surge in usage of its services.
A combination of “market volatility” and “increased demand for help with remote learning led to a great opportunity to set ourselves up to raise more capital,” Grauer adds.
Capitalizing on increased usage seems to be the formula among edtech companies seeking new money this year. Companies like Coursera, which helps universities build and access online courses, have ridden the momentum from new registrations to secure a $130 million investment in July. According to the EdSurge database, U.S. edtech companies raised over $800 million in the first half of 2020.
Founded in 2006, Course Hero is already well known among college students, millions of whom use it to get study materials, share class notes and ask tutors questions. Since the pandemic, Grauer says the number of questions asked on its platform has tripled. Many of its services are similar to those offered by Chegg, a publicly traded education company that has also seen a meteoric growth in usage and revenue since the pandemic hit.
Course Hero now claims it has over one million subscribers, who each pay $10 to $40 per month. Its revenue surpassed $100 million last year, and is on track to exceed that in 2020.
That popularity sometimes comes at the chagrin of college professors, who have found homework, tests and other copyrighted materials from their classes on the platform. Company officials say it has policies and processes in place to remove offending material (though the onus still falls largely on faculty to report them). And while the website has strong language condemning the use of its service to cheat, in reality it cannot fully safeguard against users who have such intentions.
Still, Course Hero believes it is turning a corner to win over once-skeptical faculty. It convenes an annual conference for instructors focused on professional development. The company has also invited them to freely share their course materials with peers. So far there are 45,000 verified educators on the platform, up from 20,000 in August 2019, according to Grauer.
In July, the company launched the Educator Exchange, an online subscription marketplace where faculty can sell their resources to one another. Similar to how Apple Music and Spotify pay artists, Course Hero pools together overall revenue from faculty subscribers, and pays each of them a percentage based on how many times their materials were downloaded.
With campus reopening plans in flux, especially as some colleges backtrack on plans to hold in-person classes as COVID-19 outbreaks occur, Grauer says this is a time of anxiety for many instructors. Tens of thousands have been laid off, according to The Chronicle of Higher Education. “There are a lot of stresses and fears… and we want to help them meet the moment,” he says.
To do that, Course Hero will also be looking to acquire other products and services, now that it has an additional $70 million in new funding. The company has only purchased one company—Cardinal Scholars—to date. Among the areas of interest, according Grauer, are tools that provide students access to on-demand tutoring services, and those that help educators find and create teaching and assessment materials.