Edtech Unicorn Outschool Exploded During the Pandemic. What Happens Next?
The pandemic set off a great deal of expanding and contracting in the education sector. Some companies and services became obsolete without the availability of face-to-face experiences. Others found their footholds and took off.
Outschool, a marketplace for small-group, live online classes for kids ages 3 to 18, certainly seems to have fallen into the camp of the latter. The company, founded in 2015, had enjoyed steady, if not quite astronomical, growth prior to the pandemic. Then schools closed. Kids were at home, bored and understimulated. Many parents were also at home, needing to occupy their children. And boom—Outschool took off.
The numbers alone tell the story.
Pre-pandemic, about 1,000 teachers worked for Outschool. The course offerings were in the ballpark of 10,000. The company employed 25 people. And it had raised $10 million in capital to date.
Now, a year-and-a-half later, 7,000 teachers are actively working with the San Francisco-based startup, which has served one million students from around the globe. Those students can choose from a cache of more than 140,000 courses. The headcount has shot up. And as of Thursday, when the company announced a $110 million Series D round, Outschool has raised $240 million total—with a $3 billion valuation.
By all measures, Outschool’s growth is outpacing many of its peers. But why? And will it last?
The key may lie in Outschool’s offerings. While it does provide traditional academic courses in core subjects, the company’s sweet spot is a bit more in the niche and eccentric.
“What’s really powerful about this product, and why people love it, is it allows people to link their interests with cool learning,” says CEO Amir Nathoo. He rattled off some examples: a class that teaches critical thinking through Dungeons and Dragons. A course taught by a veterinarian who explains the anatomy of a cat. Architectural design through Minecraft.
Courses on niche topics may not be counted for school credit, but Nathoo believes it’s doing something much more valuable than that: getting students engaged and excited about learning.
Where middle school math might have failed to inspire students who were learning remotely over the last year-and-a-half, classes on theatre arts, animal science, sports history or yoga managed to do the trick.
‘It’s Not Going to Last Forever’
That’s what Seth Guttenplan found, anyway.
Guttenplan has been teaching with Outschool since 2017, while working full-time as an education technologist at a private school in New Jersey. He mostly taught one-hour, one-time classes on stop-motion animation. The class was capped at 18 students but typically only about 10 would show up.
Last year, though, as kids were stuck at home and more families learned about Outschool, things changed quickly—and quite dramatically. Every class was a sellout.
“I raised my prices and they just kept filling up,” Guttenplan recalls.
Outschool’s business model is pretty straightforward. Teachers set their prices. Families pay those prices. And Outschool gets a 30 percent cut. The remaining 70 percent goes directly to the teachers, who are not required to have a credential.
This model naturally attracts more middle and upper class clientele. But a nonprofit arm, Outschool.org, has donated $3 million to families, schools and afterschool programs since the start of the pandemic, aimed at making its classes and clubs accessible to low-income children.
Guttenplan had been charging $20 per student for his one-time stop-motion animation class. But as demand skyrocketed, he bumped up the price. Then he doubled it.
“The highest amount I got for one class—in one hour—was $504,” he says. (That was after Outschool took its cut and before Guttenplan factored in taxes.)
Last July, when Guttenplan was on summer break from his job at a brick-and-mortar school, he raked in $13,000 on Outschool. “I was doing this every weekday, and I said, ‘This is amazing. I’m never going to make this amount of money in one month ever again. It’s amazing, but it’s not going to last forever,’” he recalls. School was closed. Camps were closed. It felt like a unique convergence of factors that worked in his favor, and he wanted to take advantage.
‘As Long As I Have Internet, I Can Teach’
Around that time, Cathryn McNamara was jumping into the fray. The family and consumer science teacher in North Carolina heard about Outschool from a coworker at her second job, at an ice skating rink, and decided to give it a try. Her two part-time gigs outside of teaching were unavailable during the height of the pandemic, and she thought tutoring sounded fun.
McNamara’s first attempt at teaching on Outschool, in August 2020, was less than a hit. She listed a class on “setting and achieving smart goals”—a great class, she insists—but didn’t get a lot of traction. Few students showed up.
So she listed another class: “How to Succeed in Remote Learning: Tips from a Teacher.” That class was a big success, running well into October, sometimes even selling out, McNamara says. But it eventually lost steam as people not only got the hang of remote learning but were really tired of thinking about it at all.
The classes that have stuck for both Guttenplan and McNamara are, coincidentally, on subjects they both genuinely enjoy talking and thinking about. For Guttenplan, it’s WWE and professional wrestling. For McNamara, it’s cooking and baking.
Guttenplan has been running a wrestling “social club” for 65 weeks and counting. McNamara’s “bakers academy” has been going for 30 weeks straight. Both have a few kids who have been there since week one, but most just pop in from time to time.
Between the stop-motion animation and his wrestling classes, Guttenplan says he earned about $50,000 from Outschool last year, though he still has to pay taxes on that. He’s on track to earn about $25,000 this year.
That’s no small sum of money, but it’s only a fraction of what Outschool’s highest earners are bringing in—many of whom teach for the platform full time. According to Nathoo, hundreds of teachers on Outschool make over six figures in a year. About 100 teachers make over $200,000, and the “top-performing teachers” earned an average of $232,000 in 2020. (It’s unclear how many people are counted among the “top performers.”)
Last December, McNamara ramped up her hours from three per week to 20 while her high school was on winter break. She was guiding children—mostly ages 8 to 11—through the process of baking Christmas cookies and other holiday treats, explaining the difference between a teaspoon and a tablespoon, and a cup and a pint.
She finds the experience delightful and illuminating.
“Some of these kids have kitchens I would die for,” McNamara says. Others have a small countertop oven to bake in. One student from Chile had an outdoor kitchen that fascinated her. (She also had a student from England whose measuring cups and spoons used the metric system, and an oven that was set to Celsius. That was a fun challenge.)
As McNamara looks ahead to retirement, she sees a scenario in which she sticks with Outschool. She can bring her computer with her as she travels to the coast, or to visit relatives. “As long as I have internet,” she says, “I can teach.”
Will Growth Expand, Slow or Contract?
Of course, the looming question is whether Outschool’s explosive growth is sustainable.
Guttenplan, for his part, expects enrollment in his classes to taper off as traditional in-school learning becomes increasingly reliable (though he trusts his wrestling regulars will keep coming). But Nathoo, the CEO, exudes confidence.
“We for sure don’t see [our growth] as an aberration,” Nathoo says. “Neither do investors. That’s why they continue to support us with a high valuation.”
Outschool’s latest round of funding, the Series D announced Oct. 14, was led by previous investor Tiger Global Management and BOND. Other participants in the round include Lightspeed Ventures, Union Square Ventures, Reach Capital, Coatue, FundersClub and SV Angel.
People may be wondering if Outschool will slide backward soon, but the outlook for the company, Nathoo says, is very good.
“We have more revenue booked in 2021 than we did in 2020. We expect additional growth in 2022. We don’t expect a growth rate as quickly going forward, but neither do we expect to contract.”
Adam Newman, managing partner at Tyton Partners, an advisory firm with clients in education (but which has not worked directly with Outschool), says it will be an interesting trajectory to watch.
“As we move back into conventional face-to-face environments, what does an organization like Outschool do to continue to maintain and retain the influx of subscribers and participation it got over the last 15 months?” Newman wonders. “Are folks going to want to go back to some of the more face-to-face experiences, more tactile experiences, that Outschool has been a substitute for?”
Even if many existing customers—most of whom are American—do back off, Outschools’ latest fundraise is expected to support the company as it expands into new markets globally.
“I would be surprised if they did not maintain their momentum,” Newman says of Outschool. “They may have some fits and starts … [but] I’m fairly confident they will make up for that by offering new, expanded and different resources.”