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Thursday, Mar 28, 2024

Web Tutoring: A Smart Deal

An education startup backed by Mark Zuckerberg has acquired Calabasas tutoring company Veritas Prep. The eight-figure-deal means Missouri-based Varsity Tutors is expanding to take advantage of the growing demand for online college admissions counseling and test prep services. Varsity has established itself as a leader in the digital learning industry, offering classes in subjects ranging from French to accounting. It has raised more than $107 million in venture capital, including a $50 million Series C round last year led by the Facebook founder’s philanthropic arm the Chan Zuckerberg Initiative. Varsity Chief Executive Chuck Cohn said acquiring Veritas will enable the company to bolster its live and pre-recorded video courses for entry exams such as the SAT. The deal also gives it access to Veritas’ team of college counselors that guide students through the admission process. Veritas will remain headquartered in Calabasas and continue to operate as a separate brand, but the companies will share resources and lesson plans. Specific financial details of the agreement were not disclosed. “The acquisition accelerates our opportunity to build and develop online classes and make sure they reach a high bar,” said Cohn, adding that, “(Veritas) is the most impressive and advanced admissions consulting business that we’ve come across.” MBA origins Veritas was founded in 2002 by a team of Yale University business school students as a nationwide tutoring network for MBA applicants. The company, which accepted no outside funding prior to the sale, moved to Malibu in 2003 and relocated to a Calabasas co-working space last year. It has 100 full-time workers and contractors and has served more than 300,000 customers. As Veritas grew, the company added undergraduate test prep and admission counseling. It also began introducing supplemental features such as online study materials and live video conferencing with instructors. As technology evolved and students expected a more “on-demand” experience, Veritas shifted its focus almost entirely to digital. “Around 2013, we started to flip,” said Brian Galvin, director of academic programs at Veritas. “We stopped trying to make online the next best thing to in-person. With all of these new tools, we realized live online could do much more.” According market research firm Ibis World, the online tutoring industry has grown at an annualized rate of 5.4 percent from 2013 to 2018, reaching $467 million in total revenue last year. Ibis analyst Heidi Diehl said that in addition to the convenience of mobile-friendly lessons and round-the-clock access to instructors, the higher premium placed on a college education is driving demand for online tutoring. “Students realize that in order to be a competitive job applicant in the future and receive a higher salary, they must succeed academically,” said Diehl. This dynamic has caused admission to the country’s highly selective schools to become even more competitive. At Cornell University in New York, for example, the acceptance rate for incoming freshmen fell from 22 percent for the class of 2012 to just 10 percent for class of 2022. Veritas aims to help students applying to such top schools gain every advantage in the admission process. “Our value-add is at the elite end where things are really competitive,” Galvin said. “Getting one extra question correct on a test can make a huge difference.” Veritas tutors also work with students to craft personal essays, prepare for admissions interviews, highlight extracurricular activities and create personalized application plans using the company’s digital platform. In addition, many Veritas instructors have worked in college admissions offices, a major selling point for Varisty Tutors in the acquisition deal. “The value you get with working with someone who has been in admissions is really huge because they know how the decisions are made,” said Galvin. Education at scale Veritas courses cost $499 for self-guided classes, $899 for live classes and $2,400 for one-on-one instruction. Admission counseling is included in all tiers. The company’s pricing model is significantly more affordable than boutique tutoring plans that can reportedly run up to $100,000. But Veritas is far from alone in offering cheaper online alternatives. Not only have established college admission companies such as Princeton Review and Kaplan Inc. created digital classes, but venture-funded education startups such as Magoosh, Knewton and Chegg Inc. have developed video tutoring platforms. New York-based Knewton has raised $157 million in funding. Chegg is a publicly traded company worth close to $4 billion. Diehl at Ibis said that while digital tutoring companies still have room to grow, particularly in international markets, they will soon feel the competition. “Online tutoring services will have to compete for skilled employees to maintain their online services,” Diehl said. “In addition, they may compete with each other for price and convenience.” Cohn at Varsity agreed with that assessment, which he said was behind the decision to acquire Veritas — a move that scales the company’s capabilities and expands its share of the tutoring market. “We need to continue evolve the platform,” he said. For Veritas, the deal gives it access to more funding to expand into additional subjects. The company will also use Varsity’s data collection and analytics tools to better understand how to help students. “We get to continue to help people achieve their dreams,” said Galvin. “But we get to be a lot more efficient and effective at doing it.”

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