Outschool, a marketplace for kid-friendly, virtual extracurriculars, has laid off 31 people, or 18% of its workforce, CEO Amir Nathoo confirmed to Root Devices in a text message. The layoffs, made earlier this month, come after a period of rapid fundraising for Outschool. The company raised its Series B, C and D series over the 12-month period, most recently increasing its valuation to $3 billion after reaching a $1 billion valuation just four months earlier.
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 to its platform. Nathoo then explained the need for rapid recruitment to meet the unprecedented demand; the number of employees increased from 25 to 164. Now the co-founder said that “it’s no secret that market conditions have changed rapidly.”
“We knew we had to be more defensive in the second half of the year,” Nathoo said. “It was one of the hardest decisions I’ve had to make in my career, but we were trying to do right by some really talented and amazing people.”
A spokesperson said by email that the layoffs affected all teams, including those at the vice president level, “to ensure operations continue to be optimized across the company.” They also confirmed that 75% of employees have joined in the last two years.
Outschool did not provide full details of the severance package, but said it was “a very generous package.” The company claims it has more than three years of runway, with no need to ramp up any time soon.
Still, the layoffs shine a brighter light on the startup’s challenges in the marketplace 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 a venture firm and its core clients, he said “we’ve been venture capital since the beginning, and I hope our actions and the way we do our work reflect our values… the fact , that venture funding has not affected the fact that we are a mission-driven and values-driven company, and that will not change.”
Outschool has recently shifted from individual clients to business deals through schools or employer benefits. The company hopes that over the next five years, more than half of enrollments on the platform will come from employers and schools.