College enrollment is shrinking and ChatGPT is gaining. But Andrew Grauer, the cofounder of Course Hero, and CEO of parent, Learneo, has cash in the bank and a strategy that might keep him up with the changes.
By Emmy Lucas, Forbes Staff
Andrew Grauer got the idea for his first business back in 2006, when he was a sophomore majoring in Spanish at Cornell University and tore his lateral meniscus. Navigating the hilly and icy Ithaca, N.Y., campus on crutches was difficult. From his dorm room, Grauer started building Course Hero, an online library of class notes, essays and exam answers, mostly crowdsourced from other students.
“The lucky—and most important—thing that we got right was we focused on a real pain point,’’ says Grauer, 36. “Whether it was awkwardly raising my hand in class or walking to the library and through the stacks, there’s just a lot of inefficient, awkward, stressful moments.” Easier, sometimes, to stay in your room and get answers online. Senior Cornell computer science major Gregor Carrigan signed on as a cofounder, as did Grauer’s twin brother, then at Princeton, and his older brother, a Cornell Law student. Carrigan is still CTO, while Grauer’s twin went on to become a chemist and his older brother to practice law.
Through 2013 (the year Grauer landed on the Forbes 30 under 30 list), the team got by with about $2.5 million in angel and seed financing, including a chunk from Grauer’s father, Fred, a prominent angel investor and index fund pioneer, who still sits on his son’s board. In 2014, Redwood, Cal.-based Course Hero raised $15 million, at a $120 million valuation, to keep growing its core business, which by that point included tutoring and individual questions answered.
Then Grauer made what looks to be another lucky choice: he rode the Covid-19 wave of venture capital washing over edtech. Course Hero raised $80 million in the summer of 2020, hitting unicorn status, and another $395 million in late 2021—at a hefty $3.6 billion valuation (making Grauer’s estimated 20-25% stake worth as much as $900 million, at least temporarily, on paper).
The new capital was meant largely for acquisitions, in both the student and broader online learning and productivity market. So far, Grauer has picked up seven businesses, building to more than $250 million in annual sales, 750 employees and 100 million monthly active users worldwide of products ranging from CliffsNotes to artificial intelligence enabled writing tools to a math problem search engine. The company says it still has “ample funding” left (it won’t be more specific)—that money in the bank is crucial since another funding round anytime soon seems unlikely. (VC investment in edtech fell from $20.8 billion in 2021 to $10.6 billion in 2022 and is trending even lower this year.)
In December, Grauer became CEO of a newly named holding company, Learneo, passing the top job at Course Hero to longtime executive John Peacock. Grauer says he turned to acquisitions in 2020 because he had started seeing learning and productivity startups that were a good fit for his operation and were getting to “a meaningful amount of scale, and that was different than the previous 10 years.”
But there are other solid reasons (in addition to the surge of VC money) it made sense for Grauer to broaden his business sights. For one thing, college enrollments have declined for the past three years and based on births, the U.S.’ combined high school and college age population will be shrinking.
For another, publicly traded Chegg had risen to dominate the market for online study help (or, as a lot of professors see it, cheating), with its army of experts answering questions from India. Early in the pandemic, when classes moved online, Chegg’s stock took off, peaking at $113 in February 2021. As students returned to classrooms it started falling and then collapsed further earlier this year after Chegg acknowledged that OpenAI’s free chatbot, ChatGPT, was hurting sign-ups. Chegg is rolling out its own AI tool, Cheggmate, based on OpenAI’s more advanced GPT-4, but its stock is languishing at $9, giving it a mere $1 billion market value.
Isn’t Learneo being disrupted by ChatGPT, too? Certainly, to a degree. In March, Course Hero laid off 42 people—15% of its staff—in a move that Grauer frames as making it “lean and focused on quicker decisions and innovations” as it builds “in an AI-driven world.” Learneo insists the number of paying subscribers on Course Hero’s site (which it won’t disclose) is “comparable to last year” and that it still has about 30 million monthly active users. Overall, across all of Learneo’s businesses, the company says, it had 3 million paying subscribers last year, up from 1 million in 2019—a reflection of its acquisitions as well as any internal growth.
Grauer has been spreading his bets on the future, with some purchases showing an eye for AI, as well as for other entrepreneurs who might have the smarts to help Learneo ride this wave, too. Grauer began picking up founders as well as products in 2020, with the purchase of Symbolab, a site launched in 2011 by Israeli math and computer geeks. Using machine learning algorithms, they expanded it from a search engine for math answers into a tool that also delivers step by step explanations of how to solve those problems. Grauer realized his team couldn’t easily build those functions on its own. “It was an opportunity to have some humility,’’ he says. When Course Hero bought Symbolab in October 2020, cofounder Michal Avny, an AI expert, stayed on as CEO. “That’s where it started to snowball,” Grauer says of his product-plus-founder strategy.
Michael Horn, who writes and consults on education disruption and is cofounder of the Clayton Christensen Institute, frames Grauer’s approach as a smart strategic choice. “He’s a savvy person who’s thinking about how to keep an innovative muscle,” Horn says. “If you want to have a deeper, widespread impact that’s sustainable over time, you need to catch the next disruptions. And by moving into this structure, [Grauer] allows himself to support the up-and-coming innovators.”
It also fits with Grauer’s own background as an entrepreneur from the start, points out Deborah Quazzo, a managing partner at GSV Ventures, which first invested in Course Hero in 2014. “Being a great founder himself, he loves great founders,’’ she says, adding that Grauer recently nixed an acquisition when a founder refused to stay on. CTO Carrigan, who has been with Grauer since their college days, says he has an “infectious excitement” for entrepreneurship.
In addition to looking for other smart founders, Grauer has gone bargain hunting, picking up divisions from bigger companies looking to shed them. In 2021, he snapped up CliffsNotes, the 65-year-old grandaddy of study guides, from textbook publisher Houghton Mifflin Harcourt. Months earlier, he had bought the much smaller, eight-year-old LitCharts business. Now LitCharts cofounder and CEO Justin Kestler runs Learneo’s literature vertical that includes LitCharts, CliffsNotes and Course Hero Literature. Ironically, Learneo which started online, now has a family of paper products—those familiar yellow jacketed CliffNotes study guides.
Another opportunistic buy: this past May, Grauer acquired the digital solutions division of struggling Barnes & Noble Education—the unit sells writing help, tutoring, question answering and online texts directly to students through its bartleby and Student Brand labels. In March, bartleby began offering educators a free tool that lets them check essays for the probability they were written by AI.
Grauer has also been snapping up tools used by more than just students—and by more than just English speakers. In August 2021, he added QuillBot, an AI-powered writing tool. Grauer says it “was a really huge unlocking moment for us,’’ when he learned that 30% of QuillBot’s users were professionals and non-students. In 2022, he purchased Scribbr, a decade old, Netherlands-based business that links 700 (human) editors who proofread and edit scientific papers for grammar and clarity in nine languages, while also offering such AI tools as a plagiarism checker, a citation generator and a citation checker. Finally, this past April, Learneo completed its acquisition of LanguageTool, an AI-based program that integrates with word processors to detect writing errors in English, Spanish and 30 other languages. The 20-year-old German-based company has 70,000 paying customers, most of them businesses and professionals.
Cofounders of QuillBot, Scribbr, Symbolab and LanguageTool have all joined Learneo, which is aiming to build out the AI capabilities of these products. In April, Learneo added an AI-augmented translator to the QuillBot writing platform. “A large opportunity we see in AI is multilingual grammar checking, paraphrasing, spell checking,” Grauer says. “There’s a huge number of users we serve that are bilingual and a large number of people who need writing help, from students to professionals.”
The aim, says Grauer, is to keep its core student clientele using Leaneo’s products when they graduate to the work world. “We are looking to have an incredibly long relationship with the customer,’’ he says.
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