Text-to-Tutor: Bad News
Paper fires half their workforce; Prosus cuts their investment in GoStudent by 70%
We’re moving to a new format, where every other post will be a case study of an EdTech player, with learners for the broader ecosystem. And every other post will be an update on what’s happening in the market and what we’re talking about. That’s this one!
What’s happening in the market
Paper just confirmed they’re laying off 45% of their workforce. That follows their replacing CEO and founder Phil Cutler in end-of-August with Rich Yang (who led Education.com’s acquisition by IXL). This caps off a brutal year for Paper, with huge questions about the efficacy of their text-to-tutor model and cancellations by their largest customers, such as Tampa and Las Vegas. The company had raised $343M Series D funding in 2022 and made two acquisitions (Readlee and MajorClarity).
Over in Europe, another tutoring company is getting hammered. GoStudent lost their unicorn status, according to one investor. Prosus marked the Austrian-based tutoring company’s valuation down to $970M, down from the $3.3B valuation in 2022 that Prosus had invested at (Prosus invested $226M of GoStudent’s total $744M financing haul). Prosus has marked their investment down to $68M, a 70% decline.
GPT wrappers won’t save you
How are both GoStudent and Paper struggling so much when tutoring is more in-demand than ever?
Part of that is because the students who can likely afford a tutor, or are most motivated to learn from a tutor, are turning to ChatGPT. And the students who would most benefit from a tutor, can’t afford it.
GoStudent is learning the wrong lessons from its deteriorating financials. They launched Amelia, essentially a Chat GPT wrapper. After all, Amelia is cheaper at scale than the human tutors that GoStudent launched with! It also doesn’t come with pernicious issues (like GoStudent’s guardrails failing to properly vet their tutors). But as we’re seeing with GoStudent and Paper, when you race to the bottom, you…get to the bottom?
GoStudent is now going to enter into a doomloop. But betting on a GPT wrapper, they beg this question: Why would anyone pay for Amelia when they can use ChatGPT for free?
GoStudent has scaled back their expansion plans from twenty countries to focusing exclusively on Europe, closing their US office in the process. Paper, meanwhile, will be hard pressed to sign any new large districts. The failure of Ed, and Paper’s generally abysmal reputation, has soured school districts (rightfully so) on this asynchronous, faceless form of tutoring. Rich Yang is an operator, and he’s going to try to trim costs and likely position Paper for a sale (there’s got to be some valuable IP hidden somewhere in there, especially for, say, IXL?).
