October 3, 2022

Out of school CEO Amir Nathu confirmed to TechCrunch via text message that a market for child-friendly virtual after-school software has laid off 31 people, or 18% of its workforce. The layoff, which took place earlier this month, comes after a period of rapid fundraising for Outschool. The company raised its range of B, C and D classes in a 12-month period, and recently increased its valuation to $3 billion from $1 billion just four months ago.

The capital was used to help Outschool grow from an early stage startup to a growth stage company. In October 2021, the company announced that it had attracted more than $100 million in bookings on its platform. Then NATO explained the need for rapid recruitment to meet the unprecedented demand. From 25 employees to 164. Now, the co-founder said, “It is no secret that market conditions have changed rapidly.”

“We recognized the need to be more defensive in the second half of the year,” NATO said. “This was one of the hardest decisions I’ve had to make in my career, but we tried to get it right by some really talented and amazing people.”

A company spokesperson said via email that the layoffs affected all teams, including those at the vice president level, “to ensure that operations continue to improve company-wide.” They also confirmed that 75% of employees have enrolled in the last two years.

Outschool did not provide full details of the termination, but said it was a “very generous package.” The company asserts it has more than three years of runway, with no increase needed anytime soon.

However, the layoffs shine a brighter light on the challenges facing emerging companies in the market, and the difficulty of being a growing company that wants to serve children. Months ago, when I asked Nathoo about the conflict of incentives between the project and its core clients, he said, “We’ve been funded from the start, and I hope our actions and how we do our work will reflect our values…the fact that venture funding hasn’t affected the fact that we are both a mission-driven and values-driven company, This will not change.”

Outschool has recently shifted the focus from individual clients to enterprise deals through schools or employer benefits. In the next five years, the company hopes that more than half of those registered on the platform will come from employers and schools.

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