Varsity Tutors Disrupts The Tutoring Market
As college becomes more and more competitive (and expensive!) students across the US are looking for ways to get ahead of the pack. Chuck Cohn, founder and CEO of Varsity Tutors, faced that same problem when he needed a little help with his AP classes in high school. He found the options limited, expensive, and inconsistent.
The experience stuck with him and a couple of years later he took a look around at his peers in college and realized that they were exactly who he was looking for as a high school student. Chuck hired a couple of his friends and started connecting them with kids in the local community and Varsity Tutors was born.
Now, five years later, Chuck’s company has grown from a way to make some cash and do some good in college to a successful startup that employees about 60 people, operates in 14 cities, and has about 1,000 tutors on call. Chuck took some time to chat with KillerStartups about his startup philosophy and why he thinks Varsity Tutors is going to be a major player in the tutoring field.
How’d you come up with the name for your company?
I started the company while I was a student at Washington University in St. Louis. We only had WashU students and grads initially so I named it “WashU Tutor.” A few months after I started it and it was beginning to catch on, I received a call from the trademark/legal department at the University who said something along the lines of “Please change your name within a week. We would prefer to not take legal action against one of our student entrepreneurs but we will if you don’t change your name right away.” I created a list of twenty or so names that I liked and then surveyed everyone I knew to get their input on it. Varsity Tutors was the clear winner and so that’s what I went with.
What’s the very first thing you do at work everyday?
I spend the first 30 minutes of the day reading tech blogs. I find it stimulates my creativity and makes me “think big” for the day. Then I do email for 90 minutes. I try not to do calls in the morning.
How many people did you start the company with and how many people work for you now?
I started the company by myself. We now have approximately 60 employees and 1,000 tutors.
Remember the early days starting up? Maybe you can share one anecdote that describes the struggle you went through?
In 2008, we had two cities: St. Louis and Houston. Hurricane Ike hit Houston hard and all the schools completely shut down for weeks. Our sales fell to essentially zero. I thought we were going to have to let some people go (we never actually had to). It was pretty scary for a bit. Since then, we’ve pretty much grown exponentially so we’re completely financial sound now but we certainly weren’t in the first year or two. We now have the benefits of diversification among our 14 markets but we didn’t then. You just had to believe that people would eventually go back to school and refocus on education. It made for some restless nights back then.
How do you handle frustration? When/how was the last time you dealt with frustration?
I go for a run. Before I react to any big news, I like to give myself 20-30 minutes to think about it. That’s how I manage my natural tendency to overreact in either direction – just give myself a bit to let it sink it. It’s not natural for me to spend 20 minutes reflecting – I have to force myself to do it because I know it leads to better decision making.
What’s your office environment like? Is it the kind of place where everyone is bumpin’ away to house music or is it more traditional?
We have a virtual company. Everyone works from home. We believe that a lean operating model allows us to offer the best product for a moderate cost. I listen to Turntable.FM all day while I work – you can find me in the “mashups” room listening to hip hop and rock mixed together.
How do you picture your company in 5 years?
I think we have an opportunity to be the clear market leader in one-on-one tutoring in every market we’re in. We have a better system for identifying, recruiting, and managing talented tutors and a substantially leaner cost structure than our national competitors. I’m not sure how they can compete long-term.
Who or what inspires YOU? Role models? Quotes?
The people who inspire me are “super entrepreneurs” like Peter Thiel, Elon Musk, and Richard Branson; people who live by the “go big or go home” mindset.
How’d you fund this venture? Where’d you get the money, man?
We were bootstrapped – no big venture rounds for us. I started the company with a $1,000 loan from my dad. I worked as an investment banker at Wachovia and then as a venture capitalist at Ascension Health Ventures after I graduated from college.
This allowed me to (1) not take a single cent out of Varsity Tutors and plow all cash flow back into growing the company and (2) take a sizable portion of my salary and bonuses from my finance day job and invest that into Varsity Tutors to further accelerate the growth. I waited until my time – and not cash – was the limiting factor to our growth before quitting my day job to scale VT full time.
Got any great bootstrapping tips for the lean startups out there?
For most companies, I encourage them to bootstrap their company until their time – and not cash – becomes the constraint. Most new entrepreneurs think that raising lots of venture money is the goal. It’s not – that just gets your ownership stake diluted. Venture is a means to an end and if you don’t truly need the cash you shouldn’t take it. Having worked in VC for 2.5 years, I’ve seen firsthand how control changes once you take money and what happens if you don’t grow as fast as you expect to.
Interacting with investors and reporting results also takes an incredible amount of time. Many entrepreneurs seem to think they’ve earned some sort of notch in their belt with a big capital raise. When I see that I always wonder what they’ll think when they realize just how costly that notch was. You’re effectively borrowing at credit card-level interest rates. My advice is to only take what you absolutely need and what you know you can get a great return on.
Too many venture-backed companies start burning cash on stupid projects because they’re searching for ways to “put money to work”. Once you have to start searching for ways to spend money, your ROI is going to start dropping on incremental investments. There is an incredible cost to taking institutional money – only do so to the extent you need to.
Most industries aren’t changing fast enough that the “land grab” mentality makes sense. In most cases, building a sustainable, cash flow positive company should be the focus. Make sure your product is great but don’t spend money on things you don’t need or don’t facilitate that end goal.
What would you be doing if you had one year off and $500,000 to spend?
People always ask me what my hobbies are – my hobby is entrepreneurship. I love hanging out with my wife, friends, and family; I love travelling; I love microbrews; I love college football. Other than that, it’s all innovation and growth. It’s what I like to read about, talk about and think about.
I love entrepreneurship for the same reasons other people like sports or reading books. It stimulates me more than anything else. For that reason, if I wasn’t allowed to focus on scaling Varsity Tutors for a year, I’d be focused on another venture for that year because the challenge is so much fun.
Do you consider yourself a successful entrepreneur right now? If not, what’s it gonna take to make you feel successful?
One of my best friends asked me last week if I felt like I had “made it”. The answer is definitely ‘no’ and here is why: we’ve only made a small impact on the industry so far. Tutoring is a $7 billion industry, so the potential is massive. The education system in this country is largely broken. The largest companies in the tutoring industry only have 3-4% market share. Lots of students aren’t getting the supplemental assistance they need.
I think that the industry will consolidate and move from a cottage industry to a handful of larger best-in-class companies each servicing a different niche. The current “big guys” will be largely displaced due to their ridiculously high cost structures. To compete, they’ll need to make deep cut to their national footprint.
I think we have an opportunity to own the market for moderate to premium tutoring services. The directory sites will own the bargain hunters who aren’t concerned about quality. The large national brands will struggle to compete in the new hyper-competitive environment given their substantial fixed costs and overhead. And I think we’ll gain significant market share through operational excellence and a laser-like focus on delivering a high quality product at a moderate cost.
Website you couldn’t live without and why?
Mobile App you’re in love with and why?
Twitter. I follow my favorite technology experts, venture capitalists and entrepreneurs and like to see what they’re reading and thinking.
Dogs or cats?
I grew up with both but prefer dogs. They actually have a personality.
iOS or Android?
I just made the switch to an iPhone from my old Android G2 that was on its last legs. I loved that G2. Android has better Google Apps integrations (which we use) but I like the Facetime feature. Overall, I’m liking iOS more all-in but only it’s only marginally better. It will be interesting to see how the Apple-Samsung patent suit impacts Android longer-term.
Number 1 country you’ve always wanted to visit but haven’t yet?
What’s the greatest thing about your company/website/idea?
There is no better value for your money in tutoring. We deliver outstanding tutors at a modest cost. We have expert-level Directors who supervise the entire process and ensure our clients are ecstatic about their experience. It’s easy to find other tutoring companies charging 2x-3x as much for a lower quality product.
When you come to our site, you know you’ll be getting more for your money then you could anywhere else. Our tutors are outstanding and our costs are moderate. That’s our differentiation. We take more care and put more time into selecting our tutors than any other company we know of.
We have better, more scalable backend systems that make our team more efficient and effective than their counterparts at other companies. We’re trying to use scalable systems and repeatable processes to ensure our tutors stay outstanding as we grow substantially. There are some good boutique tutoring firms out there but the vast majority let quality slip as they grew. We’re very concerned with making sure that doesn’t happen to us. Tutor quality has been and needs to continue to be our core competency.