Edtech's brightest fight to survive (2023)

Welcome to Startups Weekly, a nuanced look at this week's startup news and trends from the top reporter and stock co-host.Natascha Mascarenhas.To get this delivered to your inbox, sign up here.

Earlier this week, Outschool laid off a quarter of its employees, or 43 people, according to an email from TechCrunch. The edtech company, last valued at $3 billion, confirmed the layoffs via email, citing the focus on core competencies as "growth is back down to earth."

Email to employees was even more direct. "The truth is, layoffs are rampant in our industry for a reason," Amir Nathoo, co-founder of edtech unicorn Outschool, wrote in a post.Email sent to team🇧🇷 "The funding atmosphere has been dramatically affected by expectations of a recession, higher interest rates, and a greater need to show investors [return on investment]."

To employees, Nathoo's tone is reminiscent of a conversation he had a few months earlier, in July, when the employer was leading Outschool through its first round of layoffs, which affected 18% of the workforce. The entrepreneur's comments highlight how some of edtech's boldest and best-capitalized companies are struggling. For example, Outschool's double round of layoffs comes after it launched a series B, C and D in 12 months and increased its valuation from $1 billion to $3 billion in an even shorter period of time.

As part of this week's layoff, Outschool co-founder and product leader Nick Grandy will also be leaving the company. “I knew that once students were able to return to school full time, our growth would slow; However, I did not expect our growth to slow down so drastically," Nathoo wrote in the email. "It is my fault and I sincerely apologize."

In the last quarter of 2022, edtech layoffs hit VCs including, but not limited to, BloomTech,Vedantu, Teachmint, Reforge, Coursera, Unacademy, Byju's, Udacity and Brainly. Executive shifts includeQuizlet CEO resigns, Degreed CEO is leavingthe return of the founder, and the Invact Metaversity co-founder leaves the company after irreconcilable differences with his co-founder.

Class, an edtech company approaching unicorn statusjust 10 months after the launch of ZoomAlternative School, also made layoffs this year. The company has raised a total of $146 million in known venture funds to date, including a check from SoftBank Vision Fund II. CEO and founder Michael Chasen did not respond to a request for comment.

BloomTech Coding Bootcamp, formerly known as Lambda School,cut half the team last week, in its third known round of layoffs since the start of the pandemic. Unlike Outschool and Class, BloomTech hasn't gone on a quick fundraising spree during the pandemic. Instead, the justification for the redundancies appears to be a bit more ambiguous: CEO Austen Allred explains the decision simply by saying that "we needed to cut costs to be profitable."

We now know that the startups that made the most of the pandemic-era boom are now the same startups facing tough questions about how to navigate a not-so-imminent downturn. But edtech is an industry that has reached a completely different stratosphere in 2020 and 2021 as demand for distance learning has skyrocketed. As demand increased, so did investor appetite. The same rounds of venture capital that allowed companies to broaden their vision of what a fully addressable market could look like are the same fees that may have led to overspending and overhiring that now must be corrected.

Unlike an industry like crypto, which experienced a similar bull run and is now experiencing its own winter, the edtech boom has tapped into unique human needs rather than technical ones. In the case of Outschool, it is now more focused on the final tutoring of its platform to combat learning loss caused by COVID-19.

It is safe to say that the industry is transitioning from a disruptive climate to maintenance mode.

But let's stop our digging on edtech and move on to other tech events this week. meet me atGore,subfilemiInstagram, where I publish more of my words and deeds. For the rest of this newsletter, we'll be talking about Airtable, Plaid, and all their damn AI avatars.

air table and chess

We'll stop talking about layoffs after this section, but this week there were two cuts that really surprised me:Plaid fired 20% of the teamIs good,Air table too.This comes after a long list of layoffs in the fintech space, not only but also Chime, Stripe, and Opendoor.

So this is important:These two startups were hired two weeks ago and were touted as a place to apply for laid off talent. In short, there are many lashes out there for job seekers, especially those who have been laid off, who they can "trust" for their next job.

I wonder why these late-stage companies have waited so long for the layoffs, or if they really thought they could weather this crisis at great cost. What changed for them to finally disconnect? Note that Airtable's firing seems particularly momentous; seethat the Director of Product, the Director of Personnel and the Director of Revenue also separatewith the company, focusing more on the corporate side of its business.

• Have you been fired? I'm writing a story on how technical talent evolves from here and I'd love to talk to you (off the record is fine!).DM-me no Twitteror call (925) 271.0912.
• African fintech unicorn Chipper Cash is laying off around 12.5% ​​of its workforce
• FTX cut Chipper Cash's valuation from $2 billion to $1.25 billion

All your AI avatars

My new trick is that I don't have an AI avatar, so I'm a bit insecure! Jokes aside, if you've been on tech Twitter in the last few weeks, chances are you've seen some very stylish, imaginative, algorithmically-generated portraits of your friends (and enemies).

The company behind these magical avatars isAI-Objective,which, unsurprisingly, went up to the App Store. It's really great. yes I'm tempted but so it doesn't rain on all your new twitter pics they already existUsage questionsand its effect on artists.

See why this is importantabout my colleagueTaylor Hatter:

While the tech world is celebrating advances in AI text and image generators this year, and artists are watching the process with suspicion, the average Instagram user probably didn't strike up a philosophical conversation with ChatGPT or send meaningless prompts to DALL-AND. It also means that most people have not grappled with the ethical implications of free and readily available AI tools like Stable Diffusion and how they are poised to transform entire industries, if we let them.

I invite you to readAsk the hatter to understand some of Lensa's red flags,especially if you're concerned about artists being properly recognized and paid for their work and, well, the future of creation.

• Meet Unstable Diffusion, the group trying to monetize AI-powered porn generators
• UPDATED: Making Lensa AI create NSFW images is very easy
• Prisma Labs, makers of Lensa AI, say they are working to prevent accidental file generation
• OpenAI's ChatGPT shows why implementation is so important in generative AI

[insert good news here]

It's officially that time of year and part of the news cycle that I'm desperate for good news to highlight. Without further ado, this is what made me smile this week:

• This Equity Crew attemptFlashback para 2022It was a hot mess by any measure.
• wait guys.The big brunch was so good.You have to pay attention, if not for the heartwarming kitchen stories, then for the satisfaction of seeing everyone in the room constantly bow to Sohla El-Waylly.
• TCDominic Madori Davis, aka one of my favourites,tells us that women are rising through the ranks of venture capital firms.
• One of my favorite restaurants on campus isReopening after the pandemicapagalo
• All the Best: The Short Film (Behind the Scenes)
• Babies are cute!

some notes

• Thanks to everyone who came with us to TC Sessions: Space. If you missed your flight, join again!
• Speaking of events,We'd like to meet your startup at CESthis year! The team is already collecting the startups they want to cover, so please fill outthis formso that we can see your innovation at an early stage.
• General greetings to my colleagues,Maria Ana Azevedo, for putting all his heart and energy into his work every day.
• VC:Take this survey to let us know your strongest predictions for 2023.
• Please no parking spaces.
• Many thanks to the Equity audiencetoday and every day.

Seen not TechCrunch

Amazon gives $5 to its overworked delivery driver when you ask Alexa to say thank you

Instant food app Getir takes on its competitor Gorillas

Theranos manager Sunny Balwani was sentenced to 13 years in prison for defrauding patients and investors

Slack's new CEO, Lidiane Jones, brings two decades of product experience to the job

Seen on TechCrunch+

As Butterfield exits stage left, you can imagine what's going on in Salesforce.

Amazon's era of constant innovation may be over

Getaround challenges legal public markets with SPAC combination

How to respond when a VC asks to rate your startup

Don't worry: rounding down is still rare by historical standards

If you made it this far, congratulations and thank you. I would say forward it to a friend, let me know what you think.sin twitterthe followmy personal blog for more emotional content- but I'm also glad you're here and still worried so close to the holidays.

take care and stay warm

norte