Based in Santa Clara, California, Chegg, currently, a USD 12 billion company is getting rich off students through Covid-19. Chegg operation is in India, employing more than 70,000 experts with advanced math, science, technology and engineering degrees.
Subscriptions to Chegg have spiked since nearly every college in the world went virtual. In the third quarter, they grew 69 percent over the previous year, to 3.7 million. Nine-month revenue surged 54 percent to USD 440 million through September 2020 and projected to hit USD 630 million for the year. (As of press time, Chegg hadn’t reported final 2020 numbers.) Its shares are up 345 percent since March 18, when the US began to lock down. It is now valued at more than USD 12 billion.
The experts, work freelance, and are online 24/7, supplying step-by-step answers to questions posted by subscribers (sometimes answered in less than 15 minutes). Chegg offers other services students find useful, including tools to create bibliographies, solve math problems and improve writing. But the main revenue driver, and the reason students subscribe, is Chegg Study.
Chegg CEO Dan Rosensweig has profited handsomely. His holdings in Chegg plus after-tax proceeds from stock sales add up to USD 300 million. In a 2019 interview, he said higher education needs to adjust to the on-demand economy, the way Uber or Amazon have.
In late 2010 Chegg acquired Cramster for an undisclosed sum. It proved to be the struggling company’s golden goose. Chegg had launched just two years before Cramster, in 2000, as CheggPost, an online campus flea market founded by University of Iowa sophomore Josh Carlson, who combined “chicken” and “egg” to make the name. After teaming up with an ambitious Iowa State M.B.A. student from India, Aayush Phumbhra, he bowed out in 2005. Phumbhra and new partner Osman Rashid shortened the name to Chegg and switched their strategy to textbook rentals.
Students were happy to pay USD 30 to rent a USD 250 textbook for a semester. But book purchases, warehousing and shipping bled cash. Venture capitalists invested USD 280 million anyway, and by 2010, lead investor Ted Schlein, a partner at Silicon Valley powerhouse Kleiner Perkins, recruited Dan Rosensweig to turn Chegg around.
First Rosensweig had to raise more capital. In November 2013, with a balance sheet in the red and competition from Amazon, which had started renting textbooks in 2012, he took the company public. The stock sank from an initial USD 12.50 to a low of USD 4 in early 2016. That was a tough period for Rosensweig. However, in 2017 shares had climbed to USD 11.