More Big Bucks for Tutoring Companies: Varsity Tutors Raises $50M in...


More Big Bucks for Tutoring Companies: Varsity Tutors Raises $50M in Series C Funding

By Tony Wan and Tina Nazerian     Feb 14, 2018

More Big Bucks for Tutoring Companies: Varsity Tutors Raises $50M in Series C Funding

Tutoring is big business. Wealthy families fork out more than $1,000 an hour for top teachers. The industry has spawned celebrity millionaires in South Korea. One market analyst projects the global market for private tutoring will hit $227 billion by 2022.

In the heartland of America, one company is raising big bucks in a bid to capture this lucrative market. This week, Varsity Tutors raised $50 million in a Series C round led by Learn Capital, an education-focused venture firm. Other investors include the Chan Zuckerberg Initiative and existing backer Technology Crossover Ventures.

This latest cash infusion matches the St. Louis-based company’s $50 million Series B round, which closed in November 2015. Across its three raises, Varsity Tutors has raised $107 million.

Already boasting 40,000 tutors covering 1,000 subjects, the company is on the hunt for more teachers. Among the goals of the fundraise is to add more topics and experts available for its instant tutoring mobile app, which promises to match a learner with an expert within 15 seconds. Currently this feature is available for less than 20 percent of the subjects, but providing “instant liquidity” is a priority, shares Chuck Cohn, CEO of Varsity Tutors, in an interview.

That feature is a far evolution from the company’s humble beginnings in Washington University, where Cohn started the business as a student in 2007. At the time, Varsity Tutors offered an online directory where people could book local tutors for in-person sessions. After graduation, he continued running the company as a side project while working in investment banking as his day job. In 2011, he returned to Varsity Tutors on a full-time basis. At that time it was a small operation with a staff of 10, but nonetheless profitable, according to Cohn.

The business began shifting online in 2013, he says, as video chat functionalities on Chrome and Firefox browsers improved. The following year, the team raised its first $7 million of outside capital to scale its business across the web.

Today, 60 percent of Varsity Tutors’ business is online—up from roughly 20 percent just a couple years ago, Cohn claims. Across its on-site and online offerings, the company claims it has served more than 100,000 cumulative students since its founding.

That figure may seem like a trivial by Silicon Valley’s standards, where user numbers are generally measured by the millions. But all of these students are paying users, reminds Cohn. Students (or their parents) pay by the hour, with packages that cost in the range of $60 to $70 per hour. (The hourly rate is lower if the user purchases more hours.)

To date, Cohn says the company has facilitated about 3 million hours of tutoring, which would roughly translate to about $200 million in revenue across the company’s entire history. He declined (expectedly) to share details about the company’s current revenues, other to say that it is currently not cashflow positive.

Unlike their South Korean counterparts, it’s unlikely that Varsity Tutors’ teachers will be millionaires. The company only offers one-on-one sessions, and not classes where multiple students might pay. Cohn deflected questions on how much tutors get paid, only sharing that the rate depends on geography and the “supply and demand for the specific subject.” But tutors we spoke with suggest the range is somewhere between $15 to $25 per hour.

Lauren Heymann, who tutors online through the company, gets paid $15 per hour. Her students hail from across the country, and even as far away as Saudi Arabia and South Africa. She says the online scheduling system offers her flexibility as she does 15 to 20 hours of tutoring a week. “The range of students who you can reach is so much larger than if you’re doing local tutoring,” she tells EdSurge.

To vet its tutors (who work as independent contractors), the company conducts a video interview to check on a prospect’s communication skills, and reviews grades, transcripts and relevant test scores. There’s also a subject diagnostic test and a background check.

Today, the company has grown to just under 500 staff employees across offices in four cities. Cohn says he plans to add more people across product, engineering, sales and customer support roles.

Furthermore, Varsity Tutors aims to expand its footprint beyond the U.S., where most of its current users are based. Last spring, it acquired First Tutors, a U.K.-based tutoring marketplace that claims to have 150,000 tutors serving the Australian, Canadian, European and South African markets. For now, First Tutors facilitates offline, in-person tutoring sessions “but we think we have an opportunity to take our online model and replicate it,” says Cohn.

Varsity Tutors is not the only one chasing the tutoring market, which is saturated with traditional, brick-and-mortar competitors like Kumon and Sylvan Learning and online upstarts like Chegg and Wyzant. A number of Chinese online tutoring companies have recently raised gargantuan venture funding rounds, including VIPKID ($200 million in 2017), Zhangmen ($120 million this January) and DadaABC ($100 million last month).

For now Varsity Tutors will focus on English-speaking learners. Cohn says “eventually we would like to” branch out into other languages and markets, but that’s not on the roadmap for now.

“Our board has told us we don’t get any extra credit for doing the hardest stuff first. We might as well start with the easy stuff,” he quips.

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