How Online Education Startup Outschool Raised $45 Million During The Pandemic

The pandemic has been good to Outschool CEO Amir Nathoo, 40. Today the cofounder of the five-year-old San Francisco-based online education provider announced that he had raised $45 million in a funding round led by Lightspeed, a Silicon Valley venture fund. That brings the total invested in Outschool to $57 million.

“We’ve been dealing with overnight rocketship growth,” says Nathoo, who won’t share Outschool’s valuation. Last year revenue totaled $6.5 million, he says. In 2020 it’s on track to hit $100 million and he says Outschool is turning a profit.

The platform offers a staggering 50,000 not-for-credit classes aimed at students in grades K-12. That’s up from 15,000 just three months ago. Among the most popular right now: How to Make Awesome Animated Movies, a five-week course for students aged 10-15 that meets once a day for an hour. Priced at $210, it’s limited to 18 students.

The company stands out among online education providers because most of its courses are delivered in real time to small groups of students. It has little competition for K-12 students. Nonprofit Khan Academy’s offerings are free but they’re all pre-recorded. Juni Learning offers coding classes live to students aged 5-18. However it’s a fraction of Outschool’s size, with estimated 2020 revenue of $3 million. “Outschool occupies a unique niche in the K-12, live course marketplace,” says ed tech investor Daniel Pianko whose firm, University Ventures, does not have a stake in Outschool.

Juliet Travis, a parent in suburban Hillsboro, Oregon, says “it was a disaster” when her son Dash’s fifth grade public school suddenly switched to remote learning in mid-March. It took months before his teachers had sorted out the tech challenges and even then, he was only in virtual school for a couple of hours a day. She says Outschool was a lifeline. “All the classes seemed really creative,” she says. “There was Fortnight Math and Dungeons and Dragons creative writing.” Dash loved the classes and he talked friends into signing up too. Travis says she’s spent nearly $400 on Outschool since the pandemic hit.

The surge in demand has been a boon to many of Outschool’s instructors The company keeps 30% of class fees. Instructors pocket the rest. Jade Weatheringon, 34, who spent seven years teaching in the Minneapolis and Atlanta school systems, says she made $42,000 on Outschool in March alone. “If you saw what my calendar looked like it was scary,” she says. Her most popular course is Mastering the Five-Paragraph Essay for students aged 11-15. It costs $72, runs 40 minutes once a week for four weeks and enrollment is capped at 15. She gives her students free rein to write about topics they love. “I’ve learned a lot about Fortnite,” she says.

The bar to becoming an Outschool instructor is low. Applicants submit to background checks, submit a short video describing why they want to be an instructor and fill out an online form detailing their proposed courses. Once accepted they must complete remote training in how to use the platform. Students give courses star ratings and the most popular instructors attract the most students.

Nathoo, who grew up outside London, says he has had a lifelong interest in education. His father, whose Indian family had immigrated to the UK from Kenya, taught high school physics and his mother, who is originally from the Czech Republic, taught math. After earning a master’s in information sciences at Cambridge, Nathoo worked at IBM and later at mobile payments company Square before launching a startup that helped developers create mobile apps.

When he thought about his next venture, he says he was drawn to education but he didn’t want to “push technology into the classroom.” Instead he liked the idea of a platform that would give kids access to classes they couldn’t take in their communities.

“We wanted to offer the fun stuff,” he says. Dozens of Outschool’s classes have the words “Harry Potter” and “Pokémon” in the title.

What will happen to Outschool when (and if) the pandemic goes away? Jennifer Carolan of Reach Capital, an Outschool investor who sits on the board, notes that K-12 public schools in the U.S. serve 50 million students. “There are some who believe that Covid has been such a disruption to the educational system that there’s going to be a large portion of the population that’s going to choose hybrids or pods or different models,” she says.

Says investor Pianko, “Outschool was a successful, growing company pre-Covid, and it captured a clear lead in the K-12 class marketplace. Of course its growth will return to a more normal ark once people return to school but the vaccine is a long way away and Outschool has a long way to run.”

“I prefer in-person classes for my son,” says Juliet Travis. But in her community, there are no offerings for advanced Spanish. Since her husband is Argentinian, she wants Dash to keep studying and she’s found a great class on Outschool. “I’m going to try to keep that up.”