Amir Nathoo raised $190M+ for Outschool by staying scrappy early, solving the marketplace chicken-and-egg problem with a long runway. Clear signals like flat retention after six months and $1M revenue run-rate gave them Series A leverage. When COVID hit, they raised a large round at high valuation to build a cash buffer, betting that timing and power matter more than valuation risk.
Chapters
And I believe you've raised whatever, $190 million from some pretty awesome investors like Lightspeed Ventures and Union Square Ventures. So what has the fundraising journey been like and what are some of your key learnings from fundraising?
So in the earliest days, we decided we weren't gonna raise very much funding, only from true believers because marketplaces tend to either work or they don't. And so we believed it would generally be hard to show kind of the quality experience, the quality of metrics needed to raise large amounts of money in the early days. And secondly, that's doubly the case in edtech, which wasn't regarded as a hot investment area. So we designed the company to be very patient and scrappy in the early days. There were 4 of us for like 3 years. So very, very scrappy, almost to a kind of extreme degree. We did raise seed funding, but we were very, very careful with it and our focus was, you know, long runway. In order to figure out the initial kind of chicken and egg problem. Then, you know, we started putting our foot on the gas after it was clear that we had product market fit. And the clear signs of that were flattening retention curve, not as high as we would like, but the retention curve did flatten after about 6 months. Good CAC LTV characteristics as we found that paid growth loop in 2018 and a chart that looked like that in terms of top line GMV. And that gave us power with Series A investors. Oh, and also, you know, being around a million-dollar revenue run rate. And then of course, when COVID hits and we experienced those tailwinds, you know, we took advantage. You know, some companies held back, not wanting to kind of set expectations too high by raising too much or driving the valuation. Too high. We did the exact opposite, lent in, raised a ton of money at a very high valuation with the belief that that bank balance was incredibly important when the tailwinds subsided. And that's proven to be absolutely to be the case. So I think the idea that you have to be scrappy in the early stages of marketplace, I think is right. It's very, very tough to raise a marketplace business, particularly about the metrics. But I would also say you can't, you've got to, I think Bill Gurley has an expression, you've gotta dance when the music's playing. You know, there are big downsides to raising a lot of money. There are big downsides to driving your valuation up. You know what? A lot of the time, the downsides to not doing that when the time is right are worse. And you have to be conscious of the risks and I can go into what the risks are. But generally, you have to raise when you're in a position of power, you have to raise when when the markets are good.
