Guild's RIF Heralds a Tough Time for EdTech
And public school enrollment is cratering amidst parent choice.
What’s Happening in the Market
Guild just went through a 25% headcount RIF; the latest once high-flying EdTech unicorn to navigate a more difficult economic environment, amidst higher inflation rates and a pullback in educational spend.
Venture funding in EdTech in Q1 2024 was down 47% from Q1 2023; from $1.1B to $580M. The private venture capital market for EdTech is in a drought, which underscores the presence of PE firms waiting in the wings.
“At any time in the last decade, there has been more venture capital to support new ideas and new innovation than there has been in the first quarter of this year,” - Patrick Brothers, HolonIQ
What We’re Talking About
Washington state’s public education is in turmoil. Five districts are running budget deficits, and fourteen are warning that they might be in trouble. Seattle is proposing closing 20 elementary schools by the 2025-2026 school year. In 2007, the Vader school district ran a deficit, and its students were incorporated into Castle Rock. That was the last time a district dissolved: Now, Washington is on the precipice of watching at least five districts dissolve.
Since 2019, nearly 53,000 students have left Florida’s public schools for private and charter, as the state championed school choice. This exodus is demolishing enrollment and leading to the shuttering of public schools. Broward County, Florida’s second-largest district, is contemplating closing 42 schools over the next several years, as they’ve grappled with nearly 50,000 “empty” seats. We spent last week’s post “Divorced Realities” talking about how school choice contributes to segregation.
One Big Idea
Guild just laid off 25% of their employees in a Reduction in Force this past week, which follows a 10% reduction a year prior. Other industries, such as Biopharma, continue to lay off employees; and Netflix & Google have also recently had reductions in force.
I worked at Guild nearly two years ago, and have the utmost respect for the company, the mission, and its people. When I joined Guild in 2020, it seemed like the perfect setup for a successful startup: They had just acquired Entangled and had raised hundreds of millions of dollars. Rachel Romer is an incredible Founder and CEO, and they had a really compelling product. A few months into COVID, the labor market for frontline talent became excruciatingly tight, and there was a larger macro-trend of companies needing to respond to the pandemic.
The Entangled acquisition proved prescient, in some ways, because it provided Guild with dozens of the most qualified MBA consultants out there, who then supercharged the sales cycle. But Guild struggled with two issues that are actually quite common:
It supercharged its OpEx growth on the basis of ephemeral product-market fit.
Guild and talent development companies all experienced incredible product market fit during the pandemic.
But past performance isn’t indicative of future growth (which is really hard to grasp at the moment, so I empathize). But this is the trap that Peloton, Zoom, Udacity, and so many others fell into / and continuously fall into. At what point do you differentiate growth as sustainable, vs. the result of a temporary exogenous factor?
I’m certainly in no position to be able to discern sustainable growth from illusionary growth, but employers ultimately pulled back from spending. A Morgan Stanley survey of HR leaders in 2023 found that 25% of them plan on cutting benefits; a more conservative survey from Care.com suggests it’s closer to half. Middle management, meanwhile, are bearing the brunt of layoffs–Bloomberg estimates that about 30% of white collar layoffs are hitting middle managers, a disproportionately higher rate.
HR is still really rudimentary at forecasting and supplying skills.
The second issue is largely an ecosystem issue, and which I’ve yet to see an L&D company effectively solve for, which is a complete inability to map supply to demand. Guild and other companies upskill employees, but there’s no way to then map that talent to open roles. How many of us complete modules at work, or take additional courses, that have no representation in any HR systems that our companies use? We’ve said this before, but how tragic is it that companies cull headcount and then go and post open roles the next day, when many of those furloughed employees could be solid candidates? This was a perennial issue for L&D. Guild was so effective at providing upskilling opportunities for companies, but outside of a few really specific talent needs, the onus was on the client companies to connect that talent to their needs and few actually do.
Guild’s RIF is a tragedy because it was a company that truly had the best intentions and some amazing employees. But the market has shifted, unfortunately. The pullback in employee benefits mirrors a broader regression of companies seeing employees as numbers, not people. You see it in the comparable pullback in DEIA, and how interchangeable frontline employees are to larger companies. It’s indicative of a changing socio-political climate, but also of fear about recessions on the horizon, and the need to belt tighten.