GoStudent, A Leading Austrian Late-Stage Startup

GoStudent needs to decide whether to IPO, but is it a good time?

Gostudent is an Austrian success story in the venture world dominated by Silicon Valley.

In 2021 it hit the trophy status of a Unicorn – describing startups that are valued at more than 1 Billion Dollars. It’s an online tutoring platform, so no wonder that it was one of those Covid Winners like Peleton, Zoom and many others that had seen KPI tick-ups due to the avalanche of forward-pulled demand. But is it safe enough to take the next step, and join the public markets, i.e. IPO and give many investors a much-desired Exit? That’s the question.

The industry of online educational platforms has seen a boom in recent years, in China some of the most heftily valued companies were Edtech firms until the government unilaterally decreed that they couldn’t operate on the for-profit model anymore. This problem for the Edtech platforms doesn’t exist in Europe where there are 27 governments each, more or less, operating in some form of liberal democracy. Therefore, if the demand is there, and there’s a market-leading, trailblazing company, it can monetize on it. GoStudent has around 23,000 tutors on its platform serving over 11,000 million families and growing fast, last time I checked mid 30% YoY growth.

Yeah, it’s true that this growth phase can’t last as long as its management desires, especially because of the truly “special” pandemic which happens once in a blue moon or much less frequently to be more precise. At one point the growth will probably stabilize at 15% but it probably won’t drop much below that for the foreseeable future, and that’s a lot. If we assume 30% growth for the next 5 years, followed by 5-year growth of 15% per annum that gets GoStudent to around 82M users. With an average revenue per user of 50 euros, which is rather conservative, one gets to 4 Billion in revenue.

As a reminder, it has raised, the last priced round GoStudent raised was in January of 2022, right after the tech market top was reached a few months before that. There GoStudent reached its highest, 3.5B valuation, increasing it from 1.6B which it raised during Series C not long before that.

It was a smart move to raise 350M, as it turns out since the bear market for the VCs has been ongoing up until writing this, October of 2023. After that 3.5B valuation, GoStudent raised another 95M but this time in an unpriced round, to avoid being devalued which kills the growth story before the IPO and gives flexibility to the investors to jump in on favourable terms, usually at a discount of 20% to the next priced round. I’m not sure how much money GoStudent burns per quarter but since January 2022 almost 2 years have gone by, and I can imagine that with its aggressive growth strategy and 23,000 tutors on the platform, the runway is starting to dry up.

Ohswald, the CEO, must be asking whether to do another unpriced round or take a clue from recent IPOs of the ARM, Instacart, and Klaviyo which popped during their respective IPOs over the last 3 weeks. One might want to jump right into the market, especially after the exhaustion of a long and successful run of the company, wanting to become a cash billionaire, instead of being a paper (i.e. virtual) one. However, let’s not forget that these IPOs have all cooled after 2-3 days of frenzied trading. With today’s interest rate environment, higher for longer, many are still sceptical that a loss-making company is the way to go when allocating your baskets.

The best course of action would be to prepare for an IPO like it’s happening in early spring while keeping a peripheral vision on whether other ready-to-IPO companies are doing it and doing it well. If so, GoStudent should pull the trigger and quickly list, having done pre-roadshows within 2 weeks, while working with UBS, Erste Bank or even Goldman Sachs, depending on where management decides to list. A natural fit would be Nasdaq, but Euronext, or even Frankfurt Borse, would provide an often forgotten but important home-field advantage.

Lots of questions, but exciting times for the startup. These are good problems to have!

Argo Advisory | Published: December 2023