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Online tutoring provider Paper Education Company Inc., a Canadian tech startup that flourished during the pandemic, has slashed jobs for the third time this year after more US schools dropped its service.

On Tuesday Paper founders Philip Cutler and Roberto Cipriani said in a blog post the Montreal company had cut 87 people – roughly 20 per cent of its corporate staff – and had set a goal to reach profitability by early 2024. “While 2024 profitability is a realistic endeavor, given the growth of the business in 2023, it does not come without sacrifice,” they wrote.

Earlier this summer the company laid off 105 people – 20 per cent of its corporate staff at the time, after cutting 81 corporate workers in April. (Paper also employs about 2,000 mostly part-time tutors.) In an interview last month, Mr. Cutler, the CEO, said revenues and bookings lagged expectations in the first half, and that buying patterns were “different than they were a year or two ago.”

Since then, two large U.S. school districts have reduced their use of the service, US education news site Chalkbeat first reported last week, Hillsborough County Public Schools in Tampa decided not to renew their contract for this year “after evaluating usage rates, return on investment and student achievement data,” spokeswoman Jennifer Holton said in an email to the Globe and Mail. Clark County School District in Las Vegas, meanwhile, has allocated some funds designated for the Montreal company to another tutoring service, it said in a statement to the Globe, confirming details first reported by Chalkbeat. Paper spokeswoman Ava Paydar said in an email Paper worked with Clark “to evolve our agreement to better meet their needs and the needs of their students for the 2023-24 school year.”

Paper faces several challenges. The U.S. government provided tens of billions of dollars to school districts during the pandemic earmarked for online tutoring services. That ignited demand for platforms and services such as Paper. But that funding is set to end next year; Florida’s Miami-Dade County and Brevard County school districts have already suspended plans to buy such services.

The end of the funding has also prompted some customers to drop Paper, which gives students 24/7, on-demand access through its online portal to live tutors, who help with subjects such as math or English or review essays via text. That includes Tustin Unified School District in California and Splendora Independent School District in the Houston area.

Another issue is perceived value for money. While many school officials have praised Paper for providing their students greater access to tutoring, low utilization and awareness are chronic issues. In February, New Mexico cancelled a US$3.3-million contract with Paper after three months. Interim secretary of education Mariana Padilla stated in a letter to the company obtained by education news site Chalkbeat that it was “not providing the results in terms of engagement, support, or delivery of service to the state’s students.”

Boston Public Schools also discontinued use of the service after signing up in 2021, determining “Paper has not been worth it,” district board spokesperson Max Baker told the Globe. Columbus City Schools also decided a year ago not to extend its contract signed in 2021 after the board asked for usage data which showed that 7 per cent of some 27,000 students at 44 of its schools used Paper at least once. Less than half of those used it a second time.

The company has acknowledged low utilization is an issue, particularly when the job of promoting the service is left to overburdened teachers and school districts.

Paper has invested in raising awareness and engagement locally, including sending a customer service manager to Hillsborough, one of the largest school districts in the US. Despite her efforts, which led to student utilization of Paper more than doubling to 82,000 “learning activities” in the 2022-23 school year, Hillsborough still went through with an earlier threat to drop the service.

School districts are tricky customers: Contracts usually require approval by elected board officials; yearly renewals are far from certain given the system’s persistent funding challenges. Meanwhile, some critics think Paper and other digital tutoring services are no replacement for the real thing, which typically involves a student working with the same tutor several times a week.

In response to concerns, Paper contracted research firm LearnPlatform to prove its efficacy in improving learning outcomes by surveying students who have used the service. Several studies shared by the company show it met the applicable “promising evidence” standard under the U.S. Every Student Succeeds Act (ESSA). But the results were mixed. LearnPlatform’s Hillsborough study determined there was no overall statistically significant relationship between Paper’s math or English tutoring sessions and student achievements. LearnPlatform did find that some of those tutored by Paper had higher math achievement and that a subset of students benefited in English, enough to meet ESSA standards.

Paper has also faced tutor discontent. Posts on Reddit reflect a general dissatisfaction with the service, with some tutors complaining about the irregularity of shifts, the lack of job security and the hurried nature of the job, which diminishes quality. On Glassdoor, which tracks employee sentiment, Mr. Cutler has a 37-per-cent approval rating, which he has blamed on reviews mostly “from tutors who haven’t had great experiences.”

Chalkbeat has reported that Paper’s tutors often feel overwhelmed having to handle as many as five students in different subjects and grades at a time – all while being timed by the company.

Mr. Cutler told the Globe last month that a lot of what tutors have shared in public forums “is valid. We’re constantly working to improve that.” He noted that last year tutors spent 10 per cent of their working hours juggling three students at a time and 1.4 per cent with four. Paper’s goal is to have no tutor work with more than three students – even though rival services have told Chalkbeat they won’t let tutors work with more than two at a time. The company has also made three acquisitions and enhanced the product, adding voice recognition technology to support reading practice by students.

Mr. Cutler started a tutoring business 13 years ago while earning an education degree at McGill University. He was struck by the inequities in education, observing that wealthier students had better access to tutoring than those who needed it most. He started Paper in 2014, a year after graduating, with Mr. Cipriani, the chief technology officer.

While sessions were one-on-one, tutors would be able to handle multiple sessions at once. It would be less expensive and more scalable than conventional tutoring, delivering benefits to students who could otherwise not afford a tutoring service.

By early 2020, Paper had 30 employees, 100 tutors and annual revenue of less than $2-million from schools in the U.S. and Canada. Then the pandemic hit. Educators and political leaders fretted about the impact of “learning loss” from studying online, particularly among students who were socioeconomically disadvantaged. The U.S. government committed vast sums of money to provide free tutoring. Paper had the right product at the right time and signed up some of America’s largest school districts.

Investors such as SoftBank piled in as Paper raised US$380-million across two financings in 2021 and 2022. It serves more than three million students in about 450 school districts, almost entirely in the U.S. The company was generating about US$70-million in annual revenue as of March.

Editor’s note: An earlier version of the story stated Clark County had dropped Paper. The story has been corrected online.

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