Dusseldorf For some employees at Gostudent, the communication tool Slack became a creepy live ticker last week: many spent their time tracking the number of members in the “all-hands” channel. Because every time the number went down, they knew: it had hit another colleague. Anyone who receives a termination from the tutoring company usually loses their access rights immediately.
It is now clear that the Viennese billion-dollar start-up Gostudent is laying off hundreds of employees. According to Handelsblatt information, there should be at least 350. The company did not confirm the number.
“Unfortunately, with a heavy heart, we will have to say goodbye to some excellent employees,” said a company spokeswoman. Consumer purchasing power is at a record low. Gostudent must therefore “re-evaluate the plans for the coming year”.
Gostudent arranges tutors for all years and subjects. The individual lessons can be booked as a subscription and take place online via video conference. The second wave of layoffs in three months follows shortly after a multi-million dollar takeover.
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Numerous start-ups are currently in crisis. The financing environment has become significantly more difficult. This is especially true for companies like Gostudent, which have high marketing spends and burn relatively large amounts of money.
Start-up investors are suddenly looking at young companies differently. Gostudent has been officially valued at three billion euros since the latest funding round in January. However, as the Handelsblatt learned from an investor’s internal papers, at least one major shareholder only valued the company at the equivalent of 1.7 billion euros at the end of June. The company declined to comment on that either.
But it is becoming increasingly unlikely that investors will participate again on the basis of the old valuation.
Between the madness of growth and the need to save
For years, investors have focused on growth. Suddenly they want to see profitability. Many founders are forced to radically change course. Your money may have to last longer than the planned twelve to 18 months.
And at Gostudent, ambitious goals had to be conceded: Since the company was founded in 2016, a total of 590 million euros have flowed into it. Investors include well-known financiers such as Tencent, DST Global, Left Lane Capital and Softbank.
The last round of financing took place in January, with Gostudent founder Felix Ohswald collecting 300 million euros. Ohswald is said to have planned growth of 250 percent. “We have now reduced that to 80 percent,” he said internally at the beginning of September.
In May, Gostudent announced that it had surpassed the 2,000-employee mark. After an internal communication channel even counted 2,100 employees in June, it is now said to be just over 1,300.
Signs point to retreat
And instead of the much-heralded expansion, there are signs of retreat. The market launch in Poland is offset by the end in the USA, Sweden, Russia and probably also Canada. In corporate circles it is also said that Gostudent is also withdrawing from Latin America. Other markets would be “observed”.
Internal presentations with preliminary figures for the months of May, June and July suggest that Gostudent has missed further targets.
- Subscriptions: More than 70 percent of customers should therefore extend their tutoring subscription. In fact, probably only 52 to 58 percent did.
- Requirements: Instead of less than five percent outstanding debts, Gostudent could not collect between 13 and almost 20 percent of its receivables.
- Satisfaction: Instead of a customer satisfaction score (NPS) of over 65, the tutoring company only achieved a value of 41, 31 and 33.
Gostudent did not answer questions about this.
Meanwhile, founder Ohswald does not give the impression of giving up his big vision. Between the two waves of layoffs, he was in a good mood at the Bits and Pretzls start-up fair in Munich. He asks his listeners to imagine school in 2040: the students would be sitting in the virtual classroom, but in reality “maybe on another planet”. The future of education will be “regardless of geographic borders”.
With its fourth acquisition, Gostudent has even entered the offline business. A few days ago, the start-up took over its competitor Studienkreis, one of the largest German tutoring providers with more than 1000 employees. According to Handelsblatt information, the price could have been around 200 million euros, some of which will probably be due in shares. But the question increasingly arises as to whether the company is torn between growth plans and the need to make savings.
Gostudent: Your nerves are on edge
The management is obviously having a hard time determining the future need for employees. That could have consequences for company morale: “Salami tactics when it comes to layoffs are terrible for the culture,” Danny Rimer, a renowned investor at international venture capital firm Index Ventures, told Handelsblatt in September.
>> Read also: Will these 36 billion German start-ups get through the crisis?
In fact, Gostudent’s nerves are on edge. Insiders report: “Gregor and Felix have never been as cold as they are now.”
Insiders report that employees should be separated quickly. Out of nowhere, those affected would have one-on-one or group meetings with their manager on their calendar. They guessed what was going on when an employee from the HR department showed up unannounced. Next, they would then have to sign a non-disclosure agreement.
There was even an internal code name for the first wave of layoffs: “Project Orange”. These cuts should be managed by someone who has experience with them: Ulrike Geissler has just coordinated the mass layoffs at the delivery start-up Gorillas. Gostudent didn’t comment.
Save on customer service
There have long been allegations within the company that Ohswald and his management team are overdoing their growth ambitions. Employees and tutors have accused the company of expanding too quickly and putting pressure on the workforce “with mental games tutors and customers”.
In the course of the expansion, there are said to have been not only technical problems and delayed wage payments, but also security gaps in the aptitude test for new tutors. Despite Gostudent promising to improve its systems, the start-up made headlines in August with allegations of abuse of a tutor.
Where future customer complaints will end up is currently unclear. The recent layoffs are said to affect many customer service employees. Apparently, Gostudent now relies on automation and outsourcing. That would save costs.
Internally, Ohswald is said to have communicated several times that the money will last until the end of the first quarter of next year. Gostudent does not comment on this. Officially, the company declares: “We are in a very solid position economically and are confident that we will master the current challenges with these difficult but necessary changes.”
More: Tutors raise massive allegations against the tutoring platform