Outschool, a marketplace for kid-friendly, virtual after-school programs, has laid off 31 people or 18% of its workforce, CEO Amir Nathoo confirmed to TechCrunch over text message. The layoff, conducted earlier this month, comes after a period of rapid fundraising for Outschool. The firm raised its Series B, C and D in a 12-month period, most recently growing its valuation to $3 billion after hitting a $1 billion valuation just four months earlier.
The capital was used to help Outschool grow from an early-stage startup into a growth stage company. In October 2021, the company announced it had attracted over $100 million in bookings on its platform. Nathoo then explained the need to staff up quickly to meet unprecedented demand; growing from 25 employees to 164. Now, the co-founder said “it’s no secret that market conditions have rapidly shifted.”
“We recognized the need to be more defensive going into the second half of the year,” Nathoo said. “This was one of the most difficult decisions I have had to make in my career but we have tried to do right by some truly talented and amazing people.”
A spokesperson over email said that layoffs impacted all teams, including those at VP level, “to ensure that operations continue to be optimized company wide.” They also confirmed that 75% of the employees joined in the past two years.
Outschool did not provide full details of severance, but said that it was a “very generous package.” The company asserts that it has over three years of runway, with no need to raise anytime soon.
Still, the layoffs put a brighter spotlight on the challenges of marketplace startups, and the difficulty of being a growth-stage company that wants to serve children. Months ago, when I asked Nathoo about the clash of incentives between venture and its core clientele, he said that “we’ve been venture funded from the very start, and I hope our actions, and how we go about our work reflects our values….the fact that venture funding hasn’t affected the fact that we’re a mission-driven company and values-driven company, and that’s not going to change.”
Outschool more recently has shifted focus from single customers to enterprise deals through schools or employer benefits. In the next five years, the company hopes that more than half of the enrollments on the platform are coming from employers and schools.