For edtech startups, it’s always been easier to go direct-to-consumer than it is to sell into school districts. The latter has stodgy and strict sales cycles, while the former has a bit more flexibility when it comes to opening up that wallet. The pandemic added validation to this dynamic by supercharging consumer companies like Quizlet and Outschool, bringing them into the unicorn club.
Despite this growth, many startups still think that going B2B, directly into schools, will have the biggest impact on students, especially those who may not be able to afford supplemental services out of school. And while it's the long game, Montreal-based Paper, an educational software provider that powers tutoring services in schools, just gave the sector a massive signal that venture-backed returns and school districts can exist in the same sentence.
Paper announced that it has raised $100 million USD in a Series C round led by IVP. Other investors include Framework Venture Partners, Bullpen Capital, Reach Capital, Birchmere Ventures, Salesforce Ventures, BDC Capital and ETW.
The startup, founded in 2014, sells tutoring software to K-12 schools in the United States and Canada. Its software allows students to request live tutor help on-demand, which can then be delivered in four languages across 200 subject areas. In the last year, Paper has grown from 100 tutors to 1000 tutors.
“School districts are not necessarily comfortable working with a company where these educators who have access to all their children are just contractors popping online and disappearing,” said Paper CEO Philip Cutler. “[Our tutors] are held to all the same professional standards that a classroom teacher would be.” The company has made its tutors part-time workers, to add a layer of incentive and formality to the working relationship and potentially limit attrition.
Cutler sees Paper as an alternate pathway for teachers looking to make a living outside of traditional school districts. However, scalability demands could inherently clash with what teachers came to the profession to do - prioritizing speed and number of finished queries instead of consistent, repeatable help.
Still, the flexibility around how Paper's advice looks and arrives is compelling. Paper claims it has 24/7 support, and that a student can request live chat help for five minutes, or for hours depending on the nature of the assignment. Since the company goes in-district, teachers can see where students are struggling most and cater class time to problem areas.
The company embodies a lot of what companies like Quizlet, Course Hero and Brainly have somewhat only recently invested in: the rise of smart, not slow, tutoring sessions. They’re all betting that that modern-day extra help may not look like a Zoom, but instead a live chat with a white board feature tacked on.
The company declined to disclose valuation, but instead pointed to other growth metrics to illustrate its positioning in the market. Paper grew its staff from 30 employees to 130 employees. It has also grown 40x in revenue over the past two years, which Cutler said is mostly fueled by strong renewals and the network effect within school districts.
“You don't want to be the last district in your community or your area to have it, so we've seen a lot of adoption from that perspective,” he said.
Cutler admitted that there hasn’t been too many breakout B2B edtech businesses for the sector, but he thinks Paper’s latest raise - its third in the past 18 months - could be a signal that the entrepreneurial energy of direct-to-consumer might finally be making its way into the hallway.
“I think school districts are more receptive than they've ever been to changing and trying new things, and the last month has really shown us that you can actually take risks and you can try different things in school.”
He added: “It’s been lost in education for a while, and I’m proud of what’s happened over the last year.”