Deal Radar 2008: TutorVista

Located in Bangalore, India, TutorVista provides scheduled and on-demand tutoring to students all over the world. In an attempt to penetrate the $2.5 billion-a-year private tutoring market in the US, Krishnan Ganesh founded TutorVista in 2005, which has grown to include over 100,000 registered users, although the actual number of students tutored by the company is only about 20% of that number.

Unlike hiring private tutors in the US, who often charge around $50-$70 an hour, TutorVista allows students to receive tutoring for just $19.99 an hour. Students can also avail of unlimited tutoring in over 30 subjects for $99.99 a month, which is the preferred option. Tutors (who work out of their homes) are paid around $300-$350 a month. Most of the tutors, often in their 40s or even retired teachers, are either Ph.D. or Masters Degree holders with several years of experience. They undergo weeks of training and only after they pass certification exams are they allowed to begin tutoring.

In May 2006, TutorVista raised their first round of financing of $2 million, from Sequoia Capital followed by a $10.75 million second round in December 2006, from Lightspeed Venture Partners, Sequoia Capital and Silicon Valley Bank.

A report in VC Circle states that TutorVista is trying to raise another $15 million to enter their home market – India. In November 2007, TutorVista announced that it has acquired Edurite, an expert in the Indian education segment. With this acquisition, the company can jump start its operations in India. In an article in Business Standard, Krishnan Ganesh, CEO, TutorVista, states that with the acquisition of Edurite, TutorVista will be able to reach the remotest corner of India and make quality education accessible and affordable to students. However, with a price point in the range of Rs 25,000-40,000 ($600-1000) their aim seems to be the urban Indian upper middle class, not exactly remote India. Banking on the tendency of Indian parents to spend on education, the company is targeting India’s huge under-20 population of over 449 million, which is the largest in the world.

Applying the offshoring model to consumers directly, TutorVista is one of the first Indian companies to attempt a B2C model, for US consumers, without any local intermediary. As stated in The Economist , one of the biggest challenges the company faces is building trust for an unknown Indian brand. Person-to-person offshoring can be the wave of the future and Evalueserve, estimates that revenues from this sector are likely to grow to over $2 billion by 2015 from $250 million in 2006-2007.

As an investment thesis, Tutorvista’s value proposition is excellent. However, my biggest problem with the company is its focus on price, as opposed to methodology. I haven’t really seen any great methodology breakthrough from the company. The segment in which Tutorvista is gaining traction is the test preparation market, although they claim to offer tutoring in 30 different subjects, and across the K-12 grade span. It seems to me that the company’s strategy is that infamous “spray and pray” model, no segmentation, no focus, and by and large, pure labor arbitrage, not surprising, given that the founders’ background IS labor arbitrage.

Also, they are going into India without really cracking the US market, which makes me wonder whether they are retreating from the US market.

This segment is a part in the series : Deal Radar 2008