Why I shut down my tutoring startup
My co-founder and I recently took the difficult decision to shut down Watobe, our online tutoring startup in South Africa. 2023 was a challenging year in which power cuts and a weak economy made growth exceptionally challenging, ultimately forcing us to throw in the towel. It was a frustrating situation to find ourselves in after five years of hard work, as we had a compelling product and a business model that could have been profitable but for the economic and infrastructure challenges facing the country. It's a sad loss for us founders, our investors, our amazing employees, and our customers, but ultimately we had little choice but to close up shop. Through this post I hope to shed some light on what we accomplished, the lessons we learned along the way, and where we go from here.
We founded Watobe in 2019 with the aim of providing an affordable educational supplement aimed at the aspirational middle class across Africa. These are urban households with access to a smartphone and a small amount of disposable income for after-school classes that can plug gaps created by a largely failing school system.
Africa is experiencing a demographic boom and will soon be home to one third of all school-age children. Education systems are buckling under the pressure of growing classrooms and poorly trained teachers using outdated methods. There's an urgent need for scalable, technology-enabled solutions to replace or at least supplement the old style of teaching. And while there are many noble efforts underway to reform and renew brick-and-mortar schools, we saw an opportunity in the B2C tutoring space to test out different teaching approaches and business models at a pace that would have been impossible in B2B or B2G contexts.
Watobe started out by offering micro-lessons comprised of short videos and exercises aimed at high school students struggling with maths. Despite a layer of human support in the form of chat-based tutoring and mentoring, engagement proved fickle. After lots of product tweaks, customer research, and head scratching we eventually realised that our users craved a more social learning experience than what we could ever muster using self-paced asynchronous content.
Inspired by developments in China and India, where tutoring companies were shifting from asynchronous to synchronous learning experiences, we saw an opportunity in one-to-many live lessons delivered via Zoom. Although online teaching has been much maligned by a covid-weary generation of teachers, we actually discovered that a highly skilled educator with made-for-YouTube-charisma can carry a large virtual classroom full of kids for a full hour without issue.
We handpicked a few charismatic educators from top schools around the country, gave them the creative freedom to explore ideas and share best practices with each other, then launched our live lesson offering in 2021 at the height of the pandemic. The proposition was simple: live maths classes twice a week with great teachers, coupled with regular quizzes to track progress and frequent comms over WhatsApp to keep parents in the loop.
Although live lessons require greater internet bandwidth than asynchronous content, we felt it was a worthwhile trade-off to ensure higher learner engagement and pedagogical impact. Connectivity will steadily improve as 4G and 5G continue to make inroads across Africa, making video streaming a viable long-term option for reaching millions of learners. All we needed was a great user experience, an accessible price point, and some patience, and the growing market would take care of the rest.
Customers loved the format, and we started to see decent growth throughout 2022 and into early 2023, reaching just shy of 2,000 paying subscribers and ZAR5m ($250k) in ARR in less than 2 years. Despite charging just ZAR30 ($1.50) per lesson on average, we maintained decent gross margins by packing each classroom with 100+ learners. A teaching assistant would engage and support students in the live chat to ensure everyone felt recognised, while the main teacher kept the show on the road through patient explanation punctuated by moments of playful banter to lighten things up. Facebook marketing kept the traffic flowing to our website and word of mouth was starting to picking up nicely.
It was all going quite well until the power utility Eskom started to show significant signs of cracking in late 2022, eventually plunging the country into darkness with up to 12 hours of loadshedding a day for months on end in 2023. To add insult to injury, the Reserve Bank jacked interest rates up to 8% to stave off inflation, pushing average mortgages to 12%. The pandemic recovery thus screeched to a halt and our growth stagnated along with the broader economy. Here are some hair-raising stats: over the past seven years, average take-home pay has increased by just 1%, while inflation has surged by 40%. The average South African middle class household now spends 79% of their income on debt instalments. There's barely enough left for necessities such as food and transport, let alone long-term investments like educational extras. Our hopes of riding the wave of a small but growing South African middle class were dashed by the reality of an imploding market where the common refrain from churned customers was "we love Watobe but just can't afford it right now."
In an effort to mitigate the impact of loadshedding on our business, we launched a data-light AI tutor accessible via WhatsApp called Watobe Wizard. We were one of the first companies to leverage LLMs for education in Africa, and were delighted see thousands of signups in a matter of weeks despite minimal marketing. Although the AI bot occasionally made mistakes, its Socratic tutoring approach and 24/7 availability allowed for a level of personalised support that no group instruction could ever replicate. Nevertheless, the financial realities facing our customers remained unchanged by the AI revolution and we were unable to adequately monetise the new product in time for a turnaround.
As the year dragged on and our cash reserves dwindled, we began to let go of staff even as we launched numerous experiments to achieve higher customer retention: discounts on lessons, a cheaper "recordings only" subscription tier, and weekend classes. Unfortunately none of it was enough, and together with our funders the decision was made to close up shop and divert any remaining cash towards making our website and its content free to the world. 2,000 hours of recorded maths lessons and 500 quizzes are now accessible free of charge at watobe.co.za. These resources cover every part of grade 7 to 12 Mathematics and Maths Literacy, making it one of the largest repositories of free educational content in the country. We also provide in-depth exam revision videos and practice exam questions for every grade and ability level.
A special thanks goes to CIVA, who generously agreed to support Watobe's transition towards free content. It is our hope that learners and teachers across South Africa will find these resources useful and that they'll help spread the word about our website and YouTube channel.
Our former teachers at Watobe have banded together to continue offering affordable live lessons at smaller scale over at MathsLive. Internationally, we see a number of similar startups finding traction and profitability with live lessons in more favourable market conditions.
As for my co-founder Henry and me, we're continuing to explore the potential of technology in education through other means. Henry is promoting global literacy with his Turn On The Subtitles campaign. I've launched Botsy together with my friend Herman (who happens to run this blogging platform). We're partnering with donors and NGOs around the world to bring the benefits of AI to underserved communities via WhatsApp chatbots.
I'll always be proud of the thousands of learners we impacted and the many employees whose careers we helped to launch. When we announced that we were closing down we received an outpouring of love from our customers, expressing a mix of dismay at the bad news and deep appreciation for the boost in marks and confidence we'd given their kids. The quote below from one of our parents captures that sentiment perfectly, reminding us that even though running an EdTech startup can be exceptionally hard, it's also incredibly rewarding.
