Chegg built a billion-dollar business by helping college students cheat on their homework — sorry, "study more efficiently." Then ChatGPT launched and did the same thing for free, and Chegg's stock dropped 50% in a single day. The company that proved AI could disrupt education, just not in the way they planned.
Founded
2005
HQ
Santa Clara, California
Total Raised
$265 Million (pre-IPO)
Founder
Aayush Phumbhra, Josh Carlson, and Osman Rashid
Status
Public (NYSE: CHGG) — Stock down 90%+ from peak
Website
www.chegg.comTHE ORIGIN STORY
The company originally started as a Craigslist-style textbook marketplace — the name "Chegg" is a portmanteau of "chicken" and "egg" (which came first, the textbook or the course?). They pivoted from textbook rentals to digital study services around 2014, which proved to be the right call as physical textbook demand declined.
The Chegg Study product — essentially an answers database — was a goldmine. Students would post their exact homework questions and get step-by-step solutions.
Professors hated it. Students loved it.
Revenue soared.
WHAT THEY ACTUALLY DO
Chegg started as a textbook rental service and evolved into a homework help subscription ($15-20/month). The core product: students post homework questions and get step-by-step solutions from Chegg's database or human experts.
They also offer Chegg Writing (plagiarism checker), Chegg Math, and Chegg Study Pack. Revenue is primarily from Chegg Services (subscriptions) with a declining textbook segment.
At peak, they had 8+ million subscribers.
THE PRODUCTS
Chegg Study (homework help), CheggMate (AI tutor), Chegg Writing, Chegg Math, Textbook rentals, Chegg Study Pack (bundle)
HOW THEY GREW
Pivot to AI-powered study tools — if you cannot beat ChatGPT, integrate it. Chegg launched CheggMate (AI tutor powered by GPT-4) to combine their content library with conversational AI.
Focus on differentiated content that AI cannot easily replicate — expert-verified solutions, exam-specific prep. Cut costs to match the new reality of lower subscriber growth.
THE HARD PART
ChatGPT. On May 1, 2023, Chegg's CEO mentioned on an earnings call that they were seeing a significant impact from ChatGPT on new customer growth.
The stock immediately dropped 48% — wiping out $1 billion in market value in a single day. It was the most vivid example of AI disrupting a specific company overnight.
Why pay $15/month for Chegg when ChatGPT gives you the same homework answers for free?
MONEY TRAIL
Series B
2008 · Led by
$12M raised
Series D
2011 · Led by
$75M raised
IPO
2013 · Led by
$187M raised
WHO BACKED THEM
Ace Limited, Insight Partners, IVP, public market investors post-IPO
Related Profiles
Head-to-Head
Compare Chegg vs another company.