Months After Raising $27M, Education Startup Yogome Shuts Down Amid...


Months After Raising $27M, Education Startup Yogome Shuts Down Amid Fraud Allegations

By Tony Wan     Oct 24, 2018

Months After Raising $27M, Education Startup Yogome Shuts Down Amid Fraud Allegations

In mid-September this year, Yogome, an educational startup founded in Mexico that also operates in San Francisco, held a multi-day bash of team meetings and parties for all its employees in Mexico City.

Then a couple weeks later came the hangover: the company board said it had uncovered evidence of financial misconduct and would abruptly shut down the company.

John McIntire, who is chairman of Yogome’s board, is currently acting CEO of the company and overseeing the liquidation of assets. He is also an advisor to Exceed Capital, the investment fund that led Yogome’s most recent funding round.

The news, shared with the company staff in the first week of October, marked a sudden turn of events for an educational game developer that had raised $36.5 million in venture capital and had been heralded as a shining example of Mexico’s tech startup scene.

After the decision was announced, the company laid off almost the entirety of its team—more than 150 people, EdSurge has learned. Those include roughly 140 employees based in Mexico, who received severance after the layoffs. Another 10 staff based in the U.S. were also let go.

Founded in 2010, Yogome began as a general web development company before pivoting to build education products a couple years later. It created a digital subscription service for its educational apps, which altogether include 2,000 activities in the form of games, videos and digital books. Aimed at children in grades K-5, the apps cover nine subjects and are available in six different languages.

The company’s shutdown, first reported by Forbes Mexico, is tied to allegations that Yogome’s co-founder and CEO, Manolo Diaz, had been committing fraud and mismanaging funds. A video obtained by Forbes shows what appears to be a team meeting in which employees were informed of the news. The speaker said (translated from Spanish):

“The conduct by the previous management has compromised finances and integrity of the company by possibly having committed fraud. The board of directors, as well as its investors and financial advisors, have met over the past few days to investigate and analyze the current state of the company as well as possible fraud… Based on an analysis of the economic situation of the company, and the effects of the crime of fraud, the decision has been made to end the operation definitively, since the company is in a situation of no return.”

The company appeared to be riding high just seven months ago, when it raised $26.9 million in a Series B investment round in March 2018. In its funding announcement Yogome claimed it had six million monthly active users across more than 50 countries.

But critics now suggest those numbers may have been a mirage. Expansión, a Spanish-language business outlet, published an account from an anonymous source who claimed that Yogome had been inflating data about its downloads and sales metrics since the end of 2016. According to this source, the beginning of the end occurred during the company-wide meeting in September, when a Yogome employee shared metrics with an investor that were not consistent with what the company was reporting. That revelation reportedly prompted further investigation.

Following the shutdown announcement, former Yogome employees, including its previous chief technology officer (who left in 2014) took to Twitter to claim that the company’s internal metrics were different from what it shared with the public. A former staff member who spoke with EdSurge described the company’s culture as one that was secretive about sharing information about its growth and user numbers, even internally.

The charges that the company was able to raise millions of dollars based on inflated metrics should serve as a warning to investors, who typically scrutinize a company’s numbers as part of its due diligence process. Yogome’s financial backers include Exceed Capital, Seaya Venture Partners, Variv Capital, Endeavor Catalyst and 500 Startups.

The company has also misled in some of its marketing. At the time of reporting, its website included positive testimonials attributed to media outlets including The New York Times and EdSurge that were never made. (Yogome removed these testimonials after contacted by EdSurge.)

The future of the company’s assets and products remain unclear. Its website is still live, although the staff page is empty and links to pricing information do not work. Yogome’s apps remain listed on iTunes and the Google Play store.

The company is in the process of paying off debts and obligations, and there are signs of financial difficulties. A freelancer who had worked with Yogome on a contract basis said via email that the company recently offered to pay just 15 cents on the dollar on an outstanding invoice.

McIntire, Yogome’s co-founders Manolo Diaz and Alberto Colín, and investors at Exceed Capital did not respond to inquiries.

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