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The Lifecycle of an Edtech Company - Part 1
After being inside 2 and closely knowing people in all the other ones... thought of writing this.
So there was this guy who loved teaching people. It didn’t really start off as being a professor in a classroom or something. More like, helped younger cousin with Carnot cycle during his 12th grade physics exam, or opens up a paper an pen to explain things with diagrams to co-workers often.
Over time, he got a bit frustrated seeing younger cousins, nieces/nephews in the family not getting good education in school or college, so started making some fun videos on YouTube.
It was originally just a mobile phone recording him sitting and drawing things on a small whiteboard, or writing on a notebook. But those were good explanations and people started watching them.
The catch with recorded videos is that it just doesn’t have that ‘feedback loop’ of someone asking a question or doubt in the middle, and hence it is hard for himself to know how effectively he is teaching.
So, of course, he started teaching live. And YouTube is such a blessing for something like this. Soon every day 9pm he starts a lecture, and a thousands tune in to learn.
While he started teaching originally just because he loved it, it is evident that people come to a YouTube channel to learn something only for one of two reasons - they are a competitive exam to sit for this year, or they are looking to switch jobs and want to prepare for interviews.
So this guy starts following a curriculum in a way - picking topics that people prepping for exams or interviews particularly search.
By this time the channel is also having more than 100k-200k followers. And once you have normalised a camera in front of your face all the time, you don’t always just teach thermodynamics or pointers in C++ right. And with all these ‘students’ who follow him, they also start following his Instagram and Facebook and LinkedIn - they are now part of his life. They are his “family”.
To keep all of these various social media channels running 24x7, starts being a bit of chore. But among this ‘family’ of followers, a few people get a bit close. The most ardent followers. Who are always liking, sharing, replying on his posts. Who are sliding into DMs. They really wanted to ‘contribute’ back to him, because they were so grateful to have learnt so much from their teacher.
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So he got a few people and built a ‘team’. It was inevitable at this point. Initially the team really was just ‘volunteering’, but that never works out long time. Also there were now dozens of calls and messages everyweek from marketing teams who wanted him to say a line or two about their product, and offering to pay anywhere between $100 to $1000 for that. It was quite a no-brainer to start picking up some of them - if only to just justify giving a some sort of ‘stipend’ to the volunteers helping keep all of this alive.
Someone in the team said they need to ‘create thumbnails like professionals’, because it will get more views. And views were important because he was teaching so well - it must be taken to more people. At this point he felt it was his duty to make sure his ‘content’ becomes more accessible.
What followed next was the organic evolution of a ‘creator’. Thumbnails with big-eyed, shocked faces for higher CTR. Short videos were made. Motivation was also important, to make sure the students keep coming back to learn in the classes. So some motivational posts started being made. A few more ‘content writing’ interns were hired as well.
All this while there was this childhood friend of this guy who kept in touch. The childhood friend was an introvert, who never quite liked the limelight, or could even imagine living this life of making videos, or having ‘followers’. But this friend was a ‘builder’. He SEO-hacked a blog in college. Then started a B2C startup that delivered cakes. Then worked at an early stage startup that went on to be an unicorn. He understood tech, product and most importantly fundraising and scaling.
One day our teacher guy and his childhood builder friend were discussing some ideas over beer, and after a drink too many, builder buddy tells teacher buddy the famous dialog - “tu beer hai bc”.
Ofcourse what our guy was doing so far was a ‘startup’ only. He was just not looking at it like that.
Builder buddy had a point. What teacher buddy was doing was great, it was taking education to the corners of the country where neither there were any good colleges nor schools. The results were evident too. YouTube video comments were full of stories of gratitude, from some girl in Assam who got prepared using the videos and got into a good engineering college to a son of a auto driver in Bhagalpur who landed a job watching these videos.
But one person making videos day in and out was not sustainable. Also one person cannot teach everything under the sun. Why not get other teachers, train them exactly like this, and get them to teach other topics too.
Also builder buddy had a point that YouTube is not all that great to run courses. Courses need exams, assignments, teaching assistants to solve doubts, some sort of mechanism to send updates to students. YouTube has none of it. The only solution was - you guessed it - ‘build their own platform’.
They registered a company. Asked in the discord community of teacher guy if anyone could help build a website and an app. A dozen kids joined. They didn’t even want money to build it - it was all to ‘give back’ to the community.
Fast forward 1 year, there was an app, a website. There were multiple ‘courses’. By this time builder buddy had also realised that hiring teachers whom they can train to be exactly like teacher buddy (calling them B and T from now) was not free of its challenges. It takes money to hire good people. And if you get someone who can build their own audience on their own, they had to be overpaid a bit to keep them comfortable and not leave. So the ‘courses’ on the platforms were not chargeable.
There were many justifications for making it paid. Initially T didn’t quite like the idea - he had only made free courses till now. But he figured, the videos will be free on YouTube only. It is the ‘platform’ for which they are charging. The platform gives so much more. If people only want content it is there. He could live with that.
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One of the weird things about having a revenue, having a P&L sheet, having a ‘salary package’ for everyone who works for you is that you are not insulated from the transactional relationship that ‘customers’ and ‘employees’ have with you anymore. ‘Family’ has turned into ‘customers’. ‘Team’ has turned into ‘employees’. And you are a “company” now - which has a particular ‘industry’ in which it operates, and the industry has both, some standard practices as to how its players operates, and a bunch of existing players, who are now your competitors.
These people started having some similar problems.
The ‘teachers’ were not immune to being poached by other edtech companies. The customers were also not immune to being told that there was better or cheaper education available elsewhere.
Meanwhile there was a certain amount of money being spent every month on tech, content writing, video production and many other things. The funny thing about those costs were that they kept rising. Tech, because as the platform catered to more users, it needed more experienced engineers to run it. Content writers had been hired by the dozen. And video production quality had to keep increasing, because you do not want to shoot hand-held phone videos in low light now that millions of followers see it.
The only way forward was to start making more money. And that was not hard. They just had to sell to more customers. The product afterall was infinitely scalable and elastic. Once a course is made, 10k students take it or 50k students - it is all the same. Teaching assistants can always be hired dime-a-dozen to solve doubts on a per-hour payout.
Our friend B here was the type who used to hang out in startup circles, talk with other founders, and mingle with VCs. Many wanted to put some money into their venture too. It made all the sense - a purely digital business, a small team, thousands of customers and recurring revenue and so far purely profitable.
The VC’s had a great pitch. Take $2M from us. Spend it on marketing, and next year you’ll have 10x students buying your courses and you’ll make $5M in revenue itself. The math was fitting. It all looked too easy - this was definitely what things were meant to be.
At a spiritual level, and a highly intellectual level in your brain, something changes when you see 6-7 digit numbers with a currency symbol in front of them. It becomes a number. It becomes math. It ceases to be money.
The concept of money holds good only to a degree where you can viscerally experience the concept of spending it, with your own hands, and getting in return a very tangible product or experience.
The first time someone looks at a sum of money that is larger than they can comprehend in their mental model of ‘money’ it is easier to visualise it as an input variable of a machine.
No one knows what is there inside the magic box if you adjust the input variables in various ways you get different qualities and quantities of **OUTCOME**
So anyway, cut to a few months done the lane, our friends B and T here had raised a few million dollars. And they went to work on their Magic Box.
The funny thing is, they didn’t quite have an ‘Outcome’ in mind when they raised the money. At first most people told them, and the team internally agreed, that simply more people knowing about them mattered.
The first step to make that happen was to hire a head of marketing from consumer internet company. And that person in turn hired a crack team of marketeers mostly from media and ecommerce companies which had recently achieved big marketing goals.
Banners started appearing on shopping malls, all the big YouTube creators started doing sponsored segments about their company, and the marketing team started parading T through a bunch of podcasts, many of them paid. Quite ironically the the person whose original claim to fame was running a free youtube channel and getting millions of followers was now paying other YouTubers to appear for 5 minutes on their channel with less followers than what he once had. Ads in the next year’s IPL followed. Followed by TV commercials with movie stars and cricket stars.
But all of the ‘publicity’, while was translating to ‘awareness’ was not translating to revenue. And more importantly, ever since raising VC funding the P&L sheet had permanently been in red. Marketing costs were increasing. Most of the marketing increased a lot of load on the ‘freemium’ parts of the platform, which increased tech costs too. Paid courses unfortunately didn’t 10x in number commensurately though. The VCs, the other founders B and T had made friends with, and ‘mentors’ they had now, suggested the key thing every largescale B2C business has to come to terms with - build a sales team.
This is not something that came innately to either B or T though. Because while B was someone who loved tech, product and even marketing, he had always been queasy about ‘selling’. He neither was interested in sales nor was ever very good at it. On the other hand T had never needed to ‘sell’. He was charismatic person, who when would start to talk, hundreds would just gather around organically to listen.
Nevertheless they hired a sales head - who had done sales of large ticket price items before. They in turn hired a bunch of sales leaders to ‘scale up’ the sales team.
…. to be continued in part 2