Editor’s Note: Tutorspree co-founder and CEO Aaron Harris reached out to me to point out that PandoDaily’s report of the startup having problems to raise a follow-up round are inaccurate. I inserted Aaron’s comment below.
In today’s Sunday Review I will focus on one story only. Last Sunday we learned through PandoDaily, VentureBeat and others that jumped on the story that tutoring marketplace Tutorspree, a startup we covered on EDUKWEST early on, is shutting down.
Now, startups in the education space are of course in many aspects just like other startups, the vast majority fail. Unlike other news outlets the fact in itself doesn’t make me want to write up their story for EDUKWEST. The Tutorspree case, however, teaches us some lessons about the viability of online marketplaces and the direction tutoring takes in general.
The interesting part about the story is that Tutorspree did not run out of money and was also not lacking business model (as so often in edtech); the reasons seem to be more complex and the main issue probably was scale.
In a post published on the Tutorspree blog especially one paragraph stands out and got quoted in each article about the shutdown.
Ultimately, we learned about the challenges of willing a company into existence, of building an incredible and unique team to tackle constantly shifting challenges. And finally, we learned about how to make the toughest decision of all – to shut Tutorspree down, not because it was not a business, but because we could not make it the company we wanted.
I added the emphasis to mark the two points I want to focus on. Let’s start with the challenges.
Challenge 1: Playing in Google’s Sandbox
This is a lesson another education marketplace startup had to learn the hard way about two years ago. TeachStreet, still one of my favorite edtech startups, was essentially killed by the infamous Panda update. Just before the implementation TeachStreet was pretty close to profitability, but from one day to the other it’s traffic got cut by half. Not long thereafter founder Dave Schappell sold TeachStreet to Amazon.
The problem is that a marketplace needs to be found by its potential users in the first place. And how do you find stuff on the Internet? By looking it up in search engines. As Google is more and more moving into additional verticals that rely on search traffic, like restaurant reviews and other local information for instance, I assume Tutorspree was facing a similar problem like TeachStreet did two years ago.
Google is constantly adapting its search algorithm which can have a huge effect on the amount of traffic a marketplace like Tutorspree gets. Another indicator is Aaron Harris’ blog post “How Google is Killing Organic Search” in which he analyzed how Google is dominating the search pages with its own estate compared to the space it gives for organic search results in which Tutorspree accounts would eventually be displayed. The post got picked up by the major blogs, got some critique but I think it underlines the problems of running such a startup pretty well.
If you don’t get the visitors you won’t be able to scale your marketplace, something Aaron Harris also pointed out to TechCrunch when asked for further information on the decision to shut down Tutorspree.
“We built something we were incredibly proud of, but got to the point where we realized it would not scale in a way that would meet our goals.”
Challenge 2: Student Poaching
This is one of the issues I came across very early on in my career as an online teacher. Back in the days when I was offering language classes on platforms like Myngle, student poaching was a big deal for the startup. Most marketplaces rely on the tutor paying commission for each lesson that gets arranged via the platform.
“Clever” tutors find ways to save on that commission (usually between 15% to 18%) by offering the students a better deal when they book their next lesson directly with the tutor. Most students are open to such a deal as the personal connection has already been established and they don’t really care about the middleman.
As this already was common practice in an online setting with pretty low margins, I imagine in the high-priced tutoring environment of New York City it is even more interesting for parents and tutors to cut deals aside of the platform. And there is basically nothing Tutorspree or any other platform could do to prevent this from happening. The only option is to offer such a good service that no one in the triangle wants to screw the platform over.
Challenge 3: On Demand and Right Now Mentality
Another problem is that we tend to prefer solutions that fix a certain problem the moment it occurs. Tutoring seems to move towards two directions. One the one hand, you have the on demand tutoring provided via video lectures and other asynchronous, self paced content.
The other direction goes towards services like InstaEDU that offer a connection to a live tutor the moment the student needs an answer. According to the site the average waiting time is less than 30 seconds.
No need to arrange a meeting with a tutor a week or two in advance, no delays due to traffic, no cancellations due to illness, no need to buy a big package in advance. You only pay for what you need, when you need it.
Now that we have talked about some challenges, let’s get to the point that Tutorspree shuts down though it was a legit business.
Series A Crunch?
According to CrunchBase Tutorspree raised $1.8 million in total funding. As PandoDaily’s Erin Griffith points out one of the problems the startup ran into was the team’s inability to raise a new round early this year. Only Resulute.VC agreed to invest $800k with the option to add more if Tuturspree managed to get more investors on board. Apparently that did not happen.
Comment from Aaron Harris:
I won’t comment on the majority of it, which is mostly opinion, but did want to correct something factually innacurate – we had no trouble raising money, at any point. Pando got the story wrong, probably because they didn’t actually talk to us or any of our investors.
Now, there is the question whether Tutorspree needed the money to stay afloat or if it was raising money to grow. I think it is pretty telling that none of the excisting investors followed on their previous funding in Tutorspree.
Again, this does not mean that the startup was not generating revenue and not only could have survived but slowly grow based on its revenue. But there sure was no hockey stick growth that investors like to see at this stage of a startup.
I am pretty sure the Tutorspree users, especially the tutors and parents are going to miss the service and got some real value out of it. We saw the same when TeachStreet shut down without a real alternative for tutors and learners to move to.
In the end, we probably have to see marketplaces like Tutorspree and TeachStreet as features of bigger platforms like Google, Bing or Yahoo for instance. Search engines nowadays want to own more than the brief moment a user finds a result for her inquiry, they want to extend the reach to the next step and eventually the sale.
The last thing that I noticed is that there is apparently no acqui-hire for the team and data as this is usually the way “failed” edtech startups go these days. If not even the accumulated data of tutors and learners is worth something then the decision to shut down Tutorspree was probably the right one in the end.