Case Study: A tutoring marketplace sounded like a dream, but one that Tutorspree couldn't sustain

I am pretty sure at some point all of us had a tutor in high school, in varsity, or at work. Although we call them mentors at work, they sometimes fulfill the function of a tutor.

Tutorspree had the vision to connect those with the need to those with the skill. A tutor marketplace and the “airbnb for tutors”. With more than 7000 tutors on the platform, it sounds like a no-brainer and they even secured a total of $1.8m after two rounds of funding.

But having launched in 2010 they closed down in 2013 after only three years with a heartfelt letter to their customers stating that they:

“learned about the challenges of willing a company into existence.”

But what does that even mean?

While it is often difficult to pinpoint the downfall of a startup as it is usually a multitude of factors that play a role, two factors stood out from this case study. Let’s take a look below.

#1 Not understanding the industry they were in

The three founders had a great vision to build an impactful solution for the education space and make it easier for students to access tutors. In fact, the startup graduated from the Y Combinator, a startup accelerator in California well-known for producing some of the world’s biggest startups such as Airbnb, Stripe Payment, DoorDash, Dropbox, Matterport, Flutterwave, and Reddit to name a few.

So it seemed they were off to a good start - especially since the acceptance rate to the Y Combinator is rather low (about 1.2% - 2% only) - and had the necessary backing.

But the founders did not come from the Edtech industry, and while it was admirable that they had the vision to positivley impact this space, their lack of understanding meant that they were learning lessons as their business was growing. Something that all of us do but if you understand the industry you are in, you save yourself a couple of unnecessary lessons along the way.

Because sometimes these lessons can cost you a bit too much. For instance, the founders focused on establishing a personal connection between tutors and students by meeting up in person, but the practical implication was not as straightforward as they were not always in the same locations.

This leads me to the second point.

#2 Not accounting for Marketplace Leakage

The three founders had a noble idea but did not establish the necessary measures to prevent marketplace leakage. What is marketplace leakage? It is the number one challenge that multisided platforms face in their operations.

Users connect on the platform and then take the conversation and subsequent transactions offline.

Every multi-sided platform faces this challenge and in reality, marketplace leakage is never 100% avoidable. Take Airbnb as an example. If you really like where you stayed, it is easy to exchange numbers and arrange private accommodation in the future to avoid the transaction fees of the platform.

The same with Uber (when it was still reliable in South Africa that is) where you could easily exchange numbers with a driver to pick you up and drop you off via private agreements.

The point here is that you cannot avoid it, but you should focus on the risks you can mitigate if people do use your platform versus taking things offline. Or the peace of mind you provide over the uncertainty of private transactions.

Airbnb manages the payment and scores of hosts as well as legal protection so travelers have peace of mind when they use the platform that the hosts are vetted. And by looking at reviews from other guests they get an understanding of what to expect. The hosts in return are assured of their income and also have access to review travelers so both sides have an opportunity to get out of the transaction if they feel uncomfortable. The risk is taken out of their hands. Not entirely though but that is the case with every business. There are always risks and you just have to ensure you take the necessary actions to mitigate these as much as possible.

You can probably figure out the risk mitigation for Uber on your own.

My takeaway

So finally the company closed its doors, and gave the remaining money back to investors. Their platform and database were acquired by Wyzant, a similar platform still active today.

My takeaway is twofold:

• While you cannot prevent marketplace leakage, you can get creative in mitigating the risks for your users to such an extent that it is just not worth it for them to take the risk with offline interactions.
• My second takeaway is the importance of understanding the space you operate in. Of course, it helps if you have personal experience but if you don’t, research is crucial. By law, you are not allowed to drive a car without having a learner’s license which is nothing but theoretical knowledge. But that lays the foundation for learning how to drive. The same goes for startups. Laying the foundation with expertise or research is crucial to increase your chances of success.

It was a simple case study today but the lessons are always powerful. Forcing a business into existence is a term that I haven’t heard much before but it is a concept that I have seen before - now I just have a better explanation for it!

But perhaps my final takeaway is that it is not always necessary to shut down just because you are ‘forcing a business’, that is the beauty of pivoting. If there is too much resistance in one direction, then you try another. There is almost always another option on the table, you just have to find it and make sure you keep understanding the risks and finding ways to mitigate these.

And yes. Always easier said than done.

On that note, have a good week!

If you want to chat some more, reach out to me at [email protected]