Originally Syndicated on May 4, 2024 @ 1:48 am
Mark Rohald, CEO of Cluey Learning, is a figure of considerable intrigue and controversy. With a BCom Hons in Economics from the University of the Witwatersrand, Rohald’s professional journey includes co-founding Quartet Ventures and serving as the director of the Observership Program. Since founding Cluey Learning in 2017, Rohald has been steering the company through a turbulent path marked by high growth promises and significant financial losses.This detailed review examines whether Rohald is genuinely committed to creating value for investors or if he’s engaged in misleading practices that could be akin to a scam.
Financial Performance: A Troubling Discrepancy
In 2020, Cluey Learning, under Rohald’s leadership, was burning through approximately $1 million AUD per month. At this time, global venture capital markets were wary of new risks due to the pandemic, adding to the pressure on startups. Cluey’s best monthly revenue during this period was just $250,000 AUD.
Given their gross margin of around 50% on 1-on-1 tutoring, Cluey needed to achieve $2 million in monthly sales to break even. This required an eightfold increase in sales—a monumental task that the company failed to accomplish.
According to their annual report released in August 2021, Cluey Learning reported a gross profit of $5.5 million, reflecting a gross profit margin of 55%. However, this was overshadowed by a net loss of $11.9 million for the year. The company’s loss after income tax for the period from 30 June 2020 to 30 June 2021 was $38,944,106, significantly higher than the forecasted loss of $32,936,236. This represents a discrepancy of approximately $6 million, raising questions about the accuracy of their financial forecasting and operational strategy.
Valuation vs. Reality: A Questionable Pitch
In 2020, Cluey Learning sought a valuation of $45 million AUD despite generating less than $1 million AUD in sales. This valuation was more than 45 times their revenue, which starkly contrasts with companies like Zoom, which had substantial technology advantages and were profitable at a massive scale.
For comparison, Kip McGrath, a well-established player in the edutech sector, had a valuation of $40 million AUD with $18 million in revenue and $2.5 million in profit. Mark Rohald’s attempt to secure a $45 million valuation for Cluey Learning, despite its modest sales figures, suggests a substantial overvaluation. Rohald’s approach appears more akin to selling a mirage than presenting a realistic investment opportunity.
The Perils of Pure Tutoring Marketplaces
The online 1-on-1 tutoring market has seen numerous failures. Prominent examples include Tutor.com and Tutorspree, both of which have shut down. Eurekely, a New Zealand-based company, also struggled to monetize 1-on-1 tutoring and failed to secure further financing. Varsity Tutors, another major player, continues to grapple with profitability despite significant investment.
The pure tutoring model has proven difficult to monetize effectively. Cluey Learning’s heavy reliance on this model is a red flag. The challenges of the tutoring marketplace are well-documented, and Cluey’s dependence on this failing model raises significant concerns about its long-term viability.
Misleading Market Size and Growth Potential
Mark Rohald frequently cites a vast tutoring market to justify Cluey’s high valuation. However, a closer examination of the Australian tutoring market reveals a different picture. Major players like NumberWorks, Kip McGrath, Matrix Education, and Dux College, along with private tutoring services, suggest a market size of approximately $60 million AUD annually across Australia.
Rohald’s projection of a $1 billion market is not only exaggerated but fundamentally flawed. Kip McGrath, with over 40 years in the industry, has had to expand into international markets due to growth limitations in Australia. Rohald’s inflated market size estimation by 20 times is indicative of a misleading attempt to attract investors.
Unprofitable Economics: A Red Flag
The economics of Cluey Learning’s business model are concerning. With over 600 employees, assuming that 300 are full-time with an average salary of $100,000 AUD, the company is burning through millions each month. Despite increased revenue, the unsustainable cash burn rate is a severe concern.
While Cluey can show increased revenue through heavy spending, this model is unsustainable in the long term. Rohald’s apparent knowledge of this unsustainable model raises questions about his commitment to genuine profitability versus continued investor funding.
Employee Dissatisfaction: A Management Issue
Reports of poor management and widespread employee dissatisfaction under Mark Rohald’s leadership further tarnish Cluey Learning’s reputation. Numerous complaints about his leadership style and operational decisions indicate deeper issues within the company’s culture and management practices.
Employee dissatisfaction can be a significant indicator of management problems. If Cluey Learning’s internal issues are reflective of Rohald’s leadership, this could be another layer of concern for investors and potential employees alike.
Cash Burn and Market Overestimation: A Risky Business
Cluey Learning’s financial practices reveal a troubling pattern of cash burn. With an extensive workforce and high operational costs, the company’s expenditure significantly outpaces its revenue. The unsustainable cash burn rate, coupled with the overestimation of the target market, further complicates the company’s financial outlook.
Rohald’s ability to maintain such a high cash burn rate without a clear path to profitability suggests either a lack of effective financial management or a deliberate attempt to secure further investor funding under false pretences.
Comparative Analysis: Misleading Industry Comparisons
Comparing Cluey Learning with successful educational firms like Tal Education Group, New Oriental, and Benesse shows a significant disparity. These companies rely on large class sizes and established brands, contrasting sharply with Cluey’s 1-on-1 tutoring model, which has struggled to achieve profitability.
Additionally, firms like VIPKid have spent hundreds of millions in venture capital but still face fundraising issues, highlighting the challenges of scaling a tutoring business model. Mark Rohald’s strategy of positioning Cluey Learning as a major player in a space dominated by larger, more established firms is misleading and problematic.
Conclusion: A Cautionary Tale
After analysing the various aspects of Cluey Learning’s operations and financials, it is clear that Mark Rohald’s leadership raises significant concerns. The company’s inflated valuation, unprofitable business model, and questionable financial practices suggest that investors should proceed with caution.
Rohald’s promises of immense growth potential and large market sizes are not supported by the company’s financial realities. Additionally, employee dissatisfaction and unsustainable cash burn further paint a troubling picture of Cluey Learning’s future.
Potential investors and job seekers should approach Cluey Learning with a critical eye. The disparity between Rohald’s claims and the company’s financial performance raises serious doubts about the integrity and viability of his leadership. Whether you’re considering investing in Cluey Learning or thinking of joining the team, it is crucial to weigh the risks carefully and consider the broader implications of Rohald’s management approach.
