Yogome

What did it do?

Yogome was a Mexican education technology company that developed educational mobile games for children from kindergarten to fifth grade. Offering more than 2,000 activities across nine subjects in six languages, the company operated in San Francisco as well as Mexico City.

Why did it shut down?

In March 2018 the company raised a $26.9 million Series B, taking its total investment to $36.5 million. In September 2018 an employee sharing inconsistencies between internal metrics and publicly disclosed figures with an investor set things in motion. In early October 2018 the board shut down operations, announcing that the previous management had jeopardised the company's financing through misconduct. According to press reports citing unnamed sources, download and sales figures had been inflated since late 2016. More than 150 employees lost their jobs with the closure.

The story

Yogome was born in Mexico City in 2010 when Manolo Díaz and Alberto Colín turned their web development business into educational video games. The company developed mobile games for children from kindergarten to fifth grade, with more than 2,000 activities across nine subjects in six languages, and also began operating in San Francisco. It was seen as one of the brightest names in Latin America's start-up ecosystem.

In March 2018 Yogome announced that it had raised a $26.9 million Series B and reached 6 million monthly active users in more than 50 countries. That took its total investment to $36.5 million. Investors included Exceed Capital, Seaya Ventures, Variv Capital, Endeavor Catalyst and 500 Startups.

Just seven months later the picture had changed completely. According to EdSurge, at a company meeting in September 2018 an employee shared with an investor inconsistencies between the company's internal metrics and the figures disclosed publicly. In early October 2018 the board told employees that the previous management had jeopardised the company's financing through misconduct and that operations were ending. The statement also referred to poor financial management and harmful deals.

According to reports in the Mexican press citing unnamed sources, download and sales figures had been inflated since late 2016; it was also alleged that the company's website carried false praise attributed to certain media outlets. The sources make no mention of any court ruling on these allegations. With the closure, more than 150 employees lost their jobs, 140 in Mexico and 10 in the US.

500 Startups partner Santiago Zavala warned that the closure would make raising capital in Latin America harder and increase scrutiny of governance standards.

Lessons for founders

• Keep your user and revenue metrics verifiable against independent sources such as app stores and payment providers; the figures presented to investors must never diverge from those inside the company.
• Do not concentrate reporting and financial control in one person's hands; after a large funding round, take governance steps such as an independent audit and a finance director straight away.
• Set up a channel through which employees can safely speak up when they see inconsistencies; at Yogome the problem came to light when an employee spoke to an investor.

Sources

1. Months After Raising $27M, Education Startup Yogome Shuts Down Amid Fraud Allegations (EdSurge, 2018-10-24)
2. Mexican edtech startup, Yogome, shuttered due to fraud (LatamList)

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