← Startup Stories - Mixergy
Startup Stories - Mixergy
#2267 This listener got a Mixergy guest to invest in her startup
Vlada Lotkina of ClassTag
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Transcript127 lines
- [00:00]
A
Hey there, freedom fighters. My name is Andrew Warner. I'm the founder of Mixergy where I interview entrepreneurs about how they built their businesses. Dude, living post Covid has been amazing for me. Have you had an experience like that? I know I should be introducing you, but have you had anything that's happened as a positive because your life got shaken like that?
- [00:16]
B
Absolutely. I actually moved from New York to Miami, so that was one of the post Covid decisions or during COVID Yeah.
- [00:24]
A
You know what, I don't want a war or anything, but man, shake up my life somehow every decade and I think I'll end up happier. All right. Vlada, whose voice you just heard, is an entrepreneur who'd listen to Mixergy interviews. Ended up calling one of my past interviewees and got that person as an investor in her company. She's done the whole ride from beginning to end to sale, and now she's here to talk about how she did it and to talk about how she's now helping other entrepreneurs build their businesses. Vlada Latkina, she is the founder of Class Tag. It is the way for parents and school administrators, teachers and everyone else to communicate with each other. And it's got over 5 million parents, teachers and administrators on the platform. I find this to be such a hard, such a hard world to crack. Lotta the fact that you got into this bureaucratic mess. They don't even know how to use a Google calendar at my kids school. Anyway, we'll get into all that and how you did it thanks to my sponsor, Gusto. If you're out there and you're paying contractors, employees, if you're handling benefits for them, I urge you to go do what I did, which is go to gusto.com mixergy. They're going to show you how they can make it beautiful experience for everybody and let you try it for free. But first, Vlada, how much did you sell the business for?
- [01:34]
B
It's eight figure exit. That's all I can say.
- [01:38]
A
So all you can say is more than 10 million, less than 100 million?
- [01:41]
B
That's right.
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A
Did you personally end up with more than 5 million in the bank from this?
- [01:44]
B
I did not.
- [01:45]
A
You did not. More than two. Yes, you did. Okay, so you did well from it. And it wasn't like you struggled this hard. And we're about to hear a story where in the end you got lessons learned. You lessons learned, build something and it's continuing to go on beyond you. Do you remember the day that you signed the deal or that you closed the deal? To sell the business?
- [02:04]
B
Yes. It was August 4, 2023.
- [02:08]
A
What happened when you did it and how do you feel afterwards?
- [02:10]
B
You know what's interesting, it was actually the second time that I was going through M and A process, and one of the critical learnings I had, first time is you have to continue to operate your business the same way as if it's not sold. But I think I almost gotten too far because. Because when I sold it, I felt pretty much nothing because I got conditioned to thinking, I keep operating it.
- [02:34]
A
You know what? I had that in the past. I've said, I've talked about this before. American Greetings offered to buy me out. I was so exhausted by the end of the process, I said, sure, let's take it. My brother, who's my partner in the business, looks at it and he goes, dude, this is stupid. I go, what do you mean, stupid? He goes, they're going to buy us for the money that's in the company and take the money that's in the company. What are you doing here? And I had to snap myself out of it and say, I see this is really not a good deal, and snap out of it. And then that did make me feel, for every other deal, a sense of hesitation. It's not really going to happen, and I'm. I'm going to be here. Did you ever have a moment where you finally felt it? For me, it was when I got on a plane from New York to live in Los Angeles. And I felt like, this is it. Freedom. I could do whatever I want. Nobody has to know where I am, even. What was it for you?
- [03:16]
B
Yeah, I think it's been eight years. Right. So the long journey. And as you mentioned, in the beginning, it was a. Is a top journey. Right. Really crappy. Cracking the code on. On primary education in the United States is. No, no short order. And I, Yeah, I felt relieved. I felt actually, I felt like a cork went out of champagne pie. Right. I felt like I can burst these ideas, I can burst businesses. I felt like I deprived myself all this time from creating because I wanted to be focused and get it from idea to exit.
- [03:48]
A
I see. Yeah, that's a really good point, actually, that you really do have to stifle a lot of your other ideas a lot of the rest of your life. So you do this. All right, let's go back to how you launched the business and figure out why it worked and what the rest of us can take away from this experience. You told me before we got started that you were someone who because of your background, you were looking for a business to start. What's this background that you had that led you down this path?
- [04:11]
B
I was blessed to grow up during Soviet era and collapse of that Soviet era in 1991. And so my dad, who was engineer in a turbine factory, all of a sudden became entrepreneur and started dozen of different businesses. And he's been really a role model, starting from a cinema where I was selling tickets as a small kid, to a bunch of other things where I got to witness firsthand and participate. And so I had this entrepreneurial bug to go back to that because it looked wild. It looks so fun to start things on your own.
- [04:46]
A
Wow, interesting that you would even say that that was a blessing, but now I understand that. And so you though didn't go directly into entrepreneurship. Unlike me, I graduated from school and just needed to go do it. You became so corporate that I actually I use ChatGPT to look you up and it described you as someone who had a very formal corporate background. What is that formal background that ChatGPT now identifies you as?
- [05:09]
B
Yeah, well, I would say when I was in Ukraine and I decided that I wanted to go explore the world and go to us I said, what's the best, easiest entry point? And somehow I heard about MBA program programs. I never knew anyone who went to them, but it seemed like a good entrance into the market. So I applied to top three business schools. I got into Wharton, not even knowing how hard it is to actually get in. So just ignorance is a bliss. I landed in Philadelphia and then from there went on to get my dream job at the time, which was Boston Consulting Group, because I thought, well, entrepreneurship is kind of wild. My dad, I saw he had no clue what he was doing and I wanted to learn the proper way. So the proper way led me to Boston Consulting Group and then led me to emc, then bought by Dell. And I was climbing the corporate ladder actually two levels down from Michael Dell in a strategy function.
- [06:05]
A
Did you like it and what did you learn from doing that?
- [06:09]
B
Well, I would say it was a great learning experience, especially bcg. I think I would still recommend it to a lot of young people because it's just such an amazing way to see tons of industries, right? Every three months you have a brand new industry. So I did frozen yogurt, corrugated packaging, algorithmic trading, oil drilling, something somewhere in Houston, who knows, right? So it was just such a breadth of businesses. And I think what it gave me is that confidence to know that I can walk into any business starting from three Days ago, not knowing anything and actually advise someone and do that successfully. So I think it boosted a lot of confidence and gave me just kind of the breadth of business experiences. So that I really loved. I think corporate, it's way, way easier than startups like by, I don't know, a factor of a thousand.
- [07:08]
A
You know what, I don't usually do it this part of the interview. It's only a few minutes in, but I'll tell you people, this is the time of year to pay taxes, when I'm recording it, to deal with all these tax issues. And one of the beauties of dealing with Gusto is that everything is organized for me, for my team, for anyone who's using Gusto. If you've got a team of people, contractors, employees, anyone who's helping you build your business, you want an easy way to organize how you pay them, how they get taken care of, benefits, everything in a beautiful package. I promise you, you're going to think this is the most beautiful, most easy to use, and it's fully featured and you're going to love it. If you use my URL, you'll get to use them for free. All you have to do is go to gusto.com mixergy gusto.com mixergy so I'm curious about what, what you learned about doing that. When I do remember being at business classes at NYU when we used to have to do these Harvard business case studies, and you were forced to look at a business and think through how would you improve it and have a discussion and just going through that was helpful. And it turned out we knew more than we thought. We kn. But I've also thought this is kind of like, I don't know, playing business. What aspect of, what did you learn about actually going in and changing a business based on what you've just accumulated in a few minutes of information or a few days of information about them.
- [08:25]
B
I'm a believer that the most useful skill is asking the right questions. Because when I'm interviewing someone, as you are, yeah, it's not about. You don't need to know the answers. Right. You just need to know which questions to ask. And that's a skill that is critical in customer discovery, in. Even in fundraising, even in any sort of sales conversations. And so I think that's what it taught me, is that I just have to ask the right questions. I don't have to be the expert knowing the answers. And I think that in, you know, doing that on repeat, that was really, really helpful.
- [09:07]
A
I see. So it seems A little bit like coaching or even therapy where if you can ask the right questions, the client can come up with their own conclusions. Or the conclusions could be obvious enough to anyone who's really looking for them. That's one of the things I'm picking up from you.
- [09:22]
B
Yeah, I think that's right. And I think that then the next skill of course, is the synthesis of those answers. Right. That's when you need to use logic, analytics and you know, just general sort of your brain power to. To be able to generate insights. But it all starts from asking the right questions.
- [09:42]
A
You know, Vlada, I've seen some leaders do this especially well. Someone will come to them with a problem and they will just ask enough questions that the person says, okay, I've clarified and just talking it out loud helps them.
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B
Yeah.
- [09:54]
A
And meanwhile, my tendency has always been to say, okay, I'm here to solve this for you. That is my job. And I know that that's a tendency. I have to agains. Okay, so with this in mind, you were also telling me that you had a daughter who had all these things going on in school. And then one day, what happened?
- [10:13]
B
One day, having missed variety of opportunities, lost in my back in her backpack as flyers or sign up sheets on the door or endless emails where only 1% is relevant. Right. And they have to scan through it all. Finally I said I will come and volunteer in her school. And I walked into that classroom and presented an art project and I saw the light in her eyes. I saw that proud moment that I created for my child and how really it bonded us and it bonded us in this critical educational context. And so my first instinct was, oh my God, this is such magic that every parent needs to experience this moment. And then later on I actually did a ton of research on family engagement and education and turns out that actually you showing up to school shows your child you care about education and that their outcome. So there are a lot of specific behaviors that parents can do such as coming to school that have a meaningful impact on their educational outcomes.
- [11:28]
A
You know what my kids teachers do? Send emails with information thing is so long, it's so hard to get through because they're not communicating like business people. I used to take up until recently, I used to copy the whole email from the school, from the teachers, from everyone put into chatgpt and say just some what are they talking about here? Because it's way too much information. And I could see what they're doing. They want to help, they want to bring us in. They just don't know how. We've suggested to the teachers, can you please put together a Google Calendar? They said, yeah, we'll try. They still haven't gotten it. For some reason. That just breaks their brains. And if we do it for them, based on the emails they send over, if there's a change in a date, every other parent that has to rely on that is going to be upset with us. So I totally understand that problem. By the way, little thing that I've discovered recently, if you use Superhuman for email, on any long email, if you hit the M key, it just summarize it for. Summarizes it for using AI and bullet points. It's. It's magic because so many people don't know how to communicate well. All right. You saw this. I would see this and I would go, the school system stinks. Somebody should fix it. There's no way I'm getting in. If these people don't know how to use Google Calendar, they're not going to know how to use something that. That I create. That's better. What made you say, I've got to get in there? There's a market opportunity to sell to these people?
- [12:44]
B
That's an excellent question. And I would say I heard the same. You know, about 100 investors in my early days told me this is a graveyard of companies run right. And I didn't listen, even though I did prove that was a graveyard of companies as I started going to founders who tried it and that didn't work out. But I thought that there is enough broader momentum for this problem to be solved. Right. What I certainly, even at that time when I started, we saw what our friends eat for lunch on Instagram. So how come we can have the same connectivity with our children? Right. I also, of course, I didn't predict Covid and knowing how that's gonna drive the digitalization in schools, but that certainly was kind of the accelerator for that digitalization to occur. But I just looked at broader trends and said, this is the time that this will take home.
- [13:43]
A
I see. So it's just a universal truth. You said everything is going digital. Parents are getting everything digitally anyway. They're ready for teachers are there or will eventually get there. I got to jump in. You mentioned doing customer development calls. Did you do any for this?
- [13:57]
B
Oh, a ton. Yes.
- [13:59]
A
What did you do and what'd you learn?
- [14:00]
B
I started off interviewing parents like myself because I felt the pain as a parent and I interviewed maybe 100 parents and they all said, oh, my God, yes, this is horrible. Exactly what you Said Andrew. They're too long. I can't get relevant information. So I'm paralyzed. I don't have time to waste. And then we launched a sort of a parent facing version where a parent can start that community. And that completely fell flat on its face. Nothing happened. That was my first customer development in this process.
- [14:35]
A
And that kind of makes sense because the parents are the ones who have the pain. They're the ones who need to know what's going on. And they might be instigators. And every one of them could be like another promoter of the software. You launched it based on, I'm assuming, their needs. What was it that kept them from using it and spreading it?
- [14:53]
B
One very simple thing. They didn't feel the authority to introduce it to their school because only 1% of these parents actually are sort of in that leadership position or feel empowered to suggest things like PTA leaders or class parents and things. And so we pivoted almost immediately to teachers. And so teachers became our core Persona. And that's how we scale to over 5 million parents and teachers.
- [15:22]
A
Yeah, we've got a similar situation too. If, if a parent even has the authority because they're the class parent. I don't want to use their software because maybe the teacher doesn't want to do it. Maybe it's not going to stick. And so I'll wait and see if it sticks and it's useful and then I jump in. All right, so you say, I'm going to go to the teachers. The teachers don't have budgets and they're not easy to reach. How did you find them and what did you do to get them to use it?
- [15:47]
B
Yeah, so I used those hundred parents to introduce me to their teachers instead of actually launching the platform. And so that got me my initial 100 classrooms in New York City. And then from there we leveraged a lot of word of mouth and then amplified through social media because teachers trust teachers, like in pretty much every profession. But one thing that is true. Yes. Teachers don't have money. And in fact, they spend about a thousand dollars out of their pockets on essential supplies. So these were the last people I actually wanted to charge for software. But they talk. If they're passionate about something, they will go into every teacher group and they will share about your software and how it changed them. So every ad, every copy was all about teachers talking to teachers. And in fact, half of my team became teachers. So I've hired a lot of our early users and that was really huge asset for us.
- [16:47]
A
All right, how did you get the first hundred schools? It was 100 schools in New York City. Right. How did you end up connecting with all these parents?
- [16:54]
B
Just through mommy groups and I see like hand by hand.
- [17:01]
A
Okay, all right. And I do find that parents have a lot of patience for anything related to improving their kids lives. All right, you get in. The first version was free, right? I keep talking about a budget, but as I understand it, there was like a free ad based model for a while. And there still is, I think.
- [17:19]
B
Yeah, that's correct. So we launched because we knew that we can charge parents because of equity in education. Right. It wouldn't be a good idea to not only allow parents to be informed that they pay. Right. That's just wrong in public education. And I didn't want to charge the teacher. So the first version was completely free and monetized through brand sponsorship. In fact, we had a really cool model of contributing a portion of the proceeds for school supplies. So we created kind of a classroom fund where teachers can get supplies and so.
- [17:53]
A
From the ads?
- [17:54]
B
Yeah, from brand sponsors.
- [17:56]
A
I find that so hard to believe because brand sponsorship in general I like just. I wish everyone could have seen the response you just gave me. Well, it was like, come on, what are you talking about, Andrew? Well, no, here's the thing. Brand sponsorship is really hard. Anyway, let's look at a classroom. If a classroom has say 30 students, which is a lot, let's even take it to 50 students on a CPM basis. That's nothing. CPM stands for cost per. Per m. Per thousand. Right. And so that's a tiny, tiny amount of revenue. And you have to not just fund your business from it, but also share it with the teacher who's going to buy a spiral notebook.
- [18:31]
B
It was a very successful brand support model. And the reason why is in a way it was the only platform that allows you as a brand, let's say your Walmart, the Clorox or you know, one of those. To get in front of parents and teachers in a school context, you just can't do it. You can go put your thing on a billboard somewhere or next to the school, but then you have to go school by school to do something like this. This at the point when we start getting some scale. It was a compelling model and in fact, anyway, I'm jumping ahead. But that, that is one of the businesses that I started post exit is helping others actually do the same because there is a. It's niche but it's high value demand.
- [19:19]
A
Okay, so tell me about how you got the first sponsors. Those first calls are like the Hustle stories. Bring me into that.
- [19:27]
B
Yeah, well, my first experiment was local, actually. So I realized that, let's say camps, after school programs, they really want to be in these classrooms in front of these parents because they're local. So the first thing I did was I opened Yelp and I called up hundred of these after school camps, different pediatricians, whatnot, around the schools. And so I sold out everything we had in New York in a couple of hours. And I said, wow, this is amazing. The problem is we had. Because we've grown through teachers. We had hundreds of teachers pretty much every. Everywhere around the country. I can't possibly be doing Yelp calling everywhere. And so that brought us to national. Actually the first time we sold advertising, we actually didn't even build the way to show advertising on a platform at the time. So I sold it before we actually implemented how to show.
- [20:25]
A
Okay, all right, that makes sense. That's fairly standard, but it's harder when it's software. Speaking of software, who built the first versions for you? The one that was aimed at parents and then the one that was aimed at teachers?
- [20:38]
B
Yeah, I actually have a really fun founding story. I met my co founder and CTO in the same preschool. So his son and my daughter were classmates. He is a real entrepreneur and technologist and someone who brought his first company public on nasdaq. And so I was absolutely thrilled to have such a great partner next to me. And my only condition was to build a software team in Ukraine. And so he, he managed it and for me, it was really meaningful to support folks back home.
- [21:08]
A
He was the, I guess the co founder of CD now, huh?
- [21:12]
B
That's right.
- [21:14]
A
Wow. CD now had a really popular online business selling CDs until Amazon came and decided that they would take that whole business on. Was he scarred from that?
- [21:26]
B
No, I think he. He was a kind of a startup skeptic by the time I met him, because I think that that business and say, you know, did fairly well for him. But after that, he's been involved in hundreds or tens of different businesses and he just saw the success firsthand. Right. He saw how many of them go bust. So by the time I met him, actually, he's just incredible, both professionally and personally. But one of the things that was really remarkable is I remember I said, hey, get the shares of the company. He's like, forget it. They're not worth the paper they're printed on. Right. Meaning he was such a skeptic that until it worked, I don't care about anything. And that was really refreshing relative to everyone else you talk to who want to get shares for. They don't know for what, for thin air.
- [22:17]
A
So it looks like he did have a follow up to that. So after CD now, he ended up being a Wharton instructor, where you went to school, to business school. And then he created something called Freshman Fund, which helped parents with their 529 plan so that they could fund their kids college. And, and I'm assuming then that did well enough that he can kind of recover some of the cynicism he might have had about entrepreneurship, if he had any.
- [22:43]
B
By the time I met him, he was really in love with technology and just actually building products. Right. So I. He didn't need to work, but he wanted to build great tech, great teams. And he's so proud of the quality of his code and how he codes and what he does. And he does it so well. He can do thousand of other things. But when I met him, he said, hey, I just want to do tech. Don't involve me in fundraising, don't involve me in anything else. And I was like, I don't want you involved. I have no clue about tech and I want you to do that. So it was a great, great partnership. Each of us got what we wanted.
- [23:24]
A
You do seem to have a superpower for connecting with people. We've talked about others again offline, but what is your process? What's your. How do you connect with him and have him feel so confident about working with you that he decides he's going to go all in and partner with you?
- [23:39]
B
I. That's a great question. But I think we went back to this idea of asking questions. I think that actually is a skill. Going back to working with my dad, who was the most difficult boss I've ever had. And the only way I sold him my ideas was by asking questions, because my ideas had to be his ideas in order for them to fly. And I think that's a lesson I learned deep, deep, deep down. And I think that's in a way a superpower because I can remove the ego of it has to be my idea and make it somebody else's idea. Even if I kind of know exactly what I want, but come up with it together, right? And so that togetherness, I think, is what allows me to open some doors and build some relationships that harder to build if you just go full force.
- [24:34]
A
So you got your business model going to teachers based on advertising in the beginning, free. You start to go to teachers, you help spread the Word within the community, beyond the word of mouth. How do you get this to spread outside of New York and to other teachers?
- [24:50]
B
We took testimonials of the teachers and we put them up on Facebook and run. Ran out.
- [24:57]
A
Ran ads against their testimonials to other teachers on Facebook. Okay, that. Now we're talking about a need for money. Where did the first funding come from?
- [25:07]
B
I was bootstrapping with the paycheck, which is what I did for the first couple of years of the business.
- [25:13]
A
And then the work you did at emc, that's right down.
- [25:17]
B
Okay, yeah. And then from there, I met my first investor thanks to Mixergy Interview, and we were raising money. And at that point, I quit the job and I focused on the business full time. And so Newark Ventures was one of our first investors. And then there are many others that join in in that seed round.
- [25:41]
A
I feel like this is a good time to talk then about that first investor. You heard her on Mixergy and you did what to connect with her?
- [25:50]
B
I sent her a message on LinkedIn, I think.
- [25:53]
A
Yeah, just LinkedIn message. I heard you. And then what, do you invite yourself to lunch with the person?
- [25:59]
B
We had a drink in New York City. I reached out to her and said, hey, I really love your interview. And there was something particular that she said that really resonated with me. So I mentioned it. It was a short message, and then she responded saying, yeah, I'm open to meeting you. And so we met a few weeks after that, and I got to share with her my deck with, you know, still, it was a different name and slightly different business, but kind of the same space of parenting engagement.
- [26:31]
A
Was she investing at the time?
- [26:34]
B
She wasn't. She was just an exited founder. And. But I wanted her feedback because I thought she was great.
- [26:41]
A
You know what? I've seen people who do this. I thought that I do it a lot, but I've seen people who do it way better just reach out to people that they want to meet and start connecting with them. This one woman who I. I kind of worked with, I worked with her company anyway, in New York, Roslyn Resnick. She would just reach out to people. If she saw an author she liked, she would just send him a message and she would say, my business is very similar to what you just wrote about. She did that with Malcolm Gladwell. She ended up with lunch with Malcolm Gladwell because she said, my business is very similar to this book that you'd written. He goes, all right, let me meet people who are. Who are similar. And Starts a relationship. It takes a little bit of guts and a little bit of chutzpah, but boy, it pays off so well.
- [27:19]
B
Yeah, well, to me, there is no risk. I mean, what is the risk they're going to say no or ignore your message? I mean, but I try.
- [27:26]
A
I think to some people there's a risk of what if I end up with them and I don't know what to say or it's just I waste their time or something. I also think you're in New York and in New York there's a much smaller risk because you just have to take a cab ride to get somewhere. In most cities it's a bit of a trek to get out there.
- [27:43]
B
Yeah, I've done. I've done that a number of times. There might be some other people I think that I've connected through mixed tree as well.
- [27:50]
A
Right on. I've seen people do that a lot over the years and I love it. I think actually that's the best. That's the best response that I think a guest could get. They don't need fame. They want the right encounter as a result of this. All right, so you told me before you talked with her, you had a good conversation. She told you about the problems that you were going to face. You understood it, had a good relationship. Then you came back a little later and you said, here's how far we got. And how far you got was what, what was the sales at that point?
- [28:19]
B
So we had a really hard time raising in the beginning because primary education in us, everyone knows there's lots of problems and very little money and that just not a good combination. And so we had hard time raising until we became profitable. So we actually became profitable from this brand model in the early days. So we're doing 20K MRR and we had just a tiny team, so we were break even, slightly profitable. And so that was my message to her a year and a half later saying, hey Alison, how are you doing? We just crossed 20k mrr and we are profitable and looking to get funding to accelerate from here. And she said, well, I am an investor now, so I'm excited to see what you guys are up to.
- [29:08]
A
I just can't believe that you got that far from brand advertising. I mean, when you say it's the only way for brands to get connected with teachers and students and parents, I guess parents and teachers in the context of a school, I kind of get that. All right, so now you've got investors, you're starting to buy ads to ramp things up and you're starting to grow. At what point did you add the SaaS component, that monthly fee that you have now?
- [29:35]
B
Yeah. So that was during COVID Effectively. What started happening is about a week into Covid, my cell phone started blowing up from teachers finding my cell phone out in the Internet and calling me up saying, our district, our school is telling us we can no longer use your software. We love your software. We rely on it daily. Do something, go to them and tell them we need it. I was like, no, you go and tell them you need it, because I don't have. It's not the easy thing to do to go and figure out who to talk in the district. And so we understood that it's changing. Right. At that point it was really a transition from bottom up to districts realizing unless they build an engaged community and built a holistic communication system, they just will really sink in. This noise of what's happening with COVID and all the things coordinating parents, teachers, etc. And so we effectively launched a beta version. So we announced that we have a paid platform, a couple of schools even paid for it, but we effectively was an enterprise version. Right. So when you can have the whole district on the platform, no sponsorship at that point, because they were paying. And then there were increasingly more and more enterprise features, analytics and integrations with student information systems and things like that. So we effectively launched it during COVID in. In a way, forced. Right. Because I wanted to stay away from selling to districts for as long as I could. I really didn't like.
- [31:15]
A
Because it's so hard to get to the right person. Because your approach doesn't work as well.
- [31:21]
B
Yeah, so. And why? Because. So you think brand economics are not great. Think about selling to district economics. Right. So let's say an average, a good salesperson in advertising can sell a million to $2 million of ads in a year. A good salesperson in selling to districts can sell 350k.
- [31:47]
A
Wow. Wow.
- [31:49]
B
And not, not because they're necessarily different people, but because this. The cycles are long because the unit price, like they pay a couple of bucks a student in our category. Right. Maybe if you do like math curriculum, like something that's more core to the actual success side that the economic changes a bit. But if you are in this extraneous category of enablement software in a school system, it just tough. You need really big scale.
- [32:22]
A
Okay. And so before COVID how were you all doing financially? And after Covid, how much of the. How did the business grow?
- [32:30]
B
So before COVID we had our Consumer monetization. Effectively. We had single model where we got teachers in, a teacher activated, got 30 parents in. Right. So in a way it was a really smart sort of mousetrap. Even though I don't want to talk about my software as mousetrap. But if you think about a unit price, we got one teacher and that teacher brought in 30 parents. So if you multi, if you calculate the price to acquire a parent, it was really, really cheap. In fact, it was probably the cheapest way to get parents is through that platform. Right. If you like do the math. And then we just kept scaling it. We added commerce, which was where parents can buy back to school supplies and they can also donate to the classroom wish list. And so teacher can, instead of spending a thousand bucks out of pocket, we integrated reminders to parents through the communication software so they don't have to fundraise and parents can contribute. So we raised millions of dollars for teachers through that.
- [33:31]
A
I see, so now you're actually saving teachers money because they could list what they want instead of buying it. You know, I've seen that in one of the schools my kids went to, it was an email or something or a spreadsheet that they had used that said we need some supplies and of course you're gonna buy it. And you know, even if you go out of your way and you buy them a printer, how much is a printer? A hundred bucks. And you really help out the school for a long time and maybe the teacher thinks of your kid as someone who is especially helpful and looks out for the kid a little more. Right. Revenue wise, where did you hit? How did you end up?
- [34:07]
B
We were in single digits, but our model changed quite a bit post Covid because the part that we started growing aggressively was the SaaS portion. Right. So this Covid, effectively this whole consumer monetization was built on the premise that is bottom up, right. Sort of teachers adopting the platform. But then as fewer and fewer teachers had the freedom to decide how they communicate and more and more kind of top down decision making happened, we had to pivot again to leverage these teachers, leverage the schools as a way to get this kind of product led growth going. And so effectively we started from 100% AD commerce to about 60% by the time we sold.
- [34:57]
A
And why did you decide to sell the business?
- [35:00]
B
Well, first of all, I would say eight years is a fairly long time. I think I was sort of mentally prepared that somewhere in that time range that's when I would want to have that. I would say very openly from personal perspective My family got affected by war in Ukraine and I just had a lot of responsibility on my shoulders and I needed liquidity. So that was also a component of that. But also I would say that was a decision tree. Do I raise more money to go and build a full blown district, go to market, which is what was needed to really fully embrace this new model of selling to districts. Or I can have a good outcome when given the momentum I'm having. And by the way, by the time we sold, not only we were growing fairly fast, but were profitable as well.
- [35:54]
A
And you continued to grow after Covid?
- [35:57]
B
Oh yeah, we grew rapidly, but the SaaS portion was what we were double. Now.
- [36:04]
A
How did you find the acquirer?
- [36:06]
B
They found me. They approached me, I would say three.
- [36:10]
A
Times before that because they were looking for. This is school status is the name of the company because they were looking for acquisitions in this space.
- [36:18]
B
Yeah, they're private equity backed and that's kind of what they do. But it was a perfect fit because they had a number of assets surrounding sort of the student success. And so class 10 is the core interface to get parents as the active participant and stakeholder in that student success. And so it really was the missing piece.
- [36:43]
A
And they already had an like, if we call it enterprise. They had a way of going out to district leaders, to superintendents, school leaders. So they were already talking to the people who you now found. Were you new customers?
- [36:56]
B
Exactly.
- [36:58]
A
Did you bring an investment banker or someone in? How'd you, how'd you help navigate the deal?
- [37:02]
B
Yeah, I did bring investment banker in. In fact, I talked to about a dozen, believe it or not, there are about a dozen investment bankers specialized in education. Blew my mind. But I did talk to them and I ended up with kind of two options and I let my board vote on which one they like better. And so we went with small investment banker, kind of one man show. But he's super connected, great experience. And so I was happy with the outcome.
- [37:33]
A
This is a little in the weeds on that, but what's the advantage of going with an investment banker instead of hiring a lawyer to make this deal happen?
- [37:39]
B
I thought it would be given the how large my cap table was. I think one of the advantages for a founder is to have someone who is that impartial party sort of doing the work. Right. As opposed to saying, hey, I decided this, this is the deal, etc. Right. So I think it takes some of that sort of weight off you onto someone else, which I think is, is helpful just strategically from a founder standpoint. I also think that a lot of people I knew a lot of people having spent eight years in education and asking the questions and reaching out and whatnot, but certainly he knew more. And so he got the meetings and interactions that I just realistically couldn't have gotten myself.
- [38:24]
A
I see. So he's able to bring more potential buyers to the table and. Got it. And to navigate those. You are done. You take some time off afterwards. You did. What'd you end up doing?
- [38:37]
B
No, I actually haven't. I think the feeling I had right is that I had all these things. And frankly, so far the two things I'm focused on, they kind of came to me. I wasn't even seeking them. Right. But they just landed. And so, for example, the brand partnership business that we've built so successfully, the new acquiring company wasn't interested in that. And so that's something I had a whole team that was let go as a result of that, and I just couldn't pass on that. And I said, hey, let's go build this business so you can help others do the same playbook.
- [39:18]
A
This is Class Media.
- [39:20]
B
That's right.
- [39:21]
A
Oh, so that's what Class Media is. It's you taking the team that was representing your company to brands and saying, there are other businesses that are in the education space. We are going to be the agency between these education companies and these brands. Wow. Got it.
- [39:38]
B
I see.
- [39:38]
A
And so, yeah, you didn't take any time off. I could see a 24 business started class tag did from 2018 to 2024. 2024. The same month I think you were running Class Meet the Class Media.
- [39:53]
B
Right.
- [39:54]
A
And then the same month also I see on your LinkedIn profile something called Elevator Lab. What's Elevator Lab?
- [40:01]
B
Elevator Lab again, started because I had founders after I announced the exit. A lot of founders starting from education, but also some folks, international immigrant founders reaching out to me, saying, hey, I'm trying to figure out my business model. I'm trying to scale. Can you help me out? And so they just started writing to me on LinkedIn and I was like, okay, well, you know, there is some business. And it turns out I really, really enjoyed it. So I started Elevator Lab to help coach founders and help them get to their first ten customers and hundred customers depending kind of where they are. But it's very practical. I think one of the challenges of accelerator programs, that they're kind of broad and I am very much about making things happen. Right. I believe that the idea done is better than a brilliant idea. Just sitting there on A shelf. I've seen too much of that in consulting so I don't want that. And so I am there with them building.
- [41:02]
A
So if somebody has for example a B2B software company, they are struggling to find businesses, they will get coached by you. They pay you on a what on a monthly basis to get coached by you.
- [41:16]
B
So it's a, it's a 12 point week program. I find that that's a good time frame when you can actually make meaningful impact. So with early stage founders now I'm actually about to launch a program how to get the first 10 paying B2B customers. I'm seeing a lot of who struggle, they run free pilots, they don't go anywhere and so they kind of get holed up in that mass. And so it's a combination of content but also step by step coaching. So it's a weekly one on one meeting where that's both accountability as well as know how, how to move from A to B.
- [41:54]
A
Why do you want to do this? This is like another tough customer set to go after. These are people who haven't had any sales so it's hard for them to justify spending money. And it's coaching. Coaching is, it's a tough business because a lot of coaches have nothing going for them. And so you're kind of painted with that same brush.
- [42:13]
B
I, you know, I don't know how, for how long I will be doing this. I found that it is very rewarding for me because the number of breakthroughs I see when I work with these founders is just incredible. And I also know how many painful mistakes I learned through the process. I was interestingly enough when I came from mba, bcg, all of those things, right. I said oh my God, I know so much about business. Well, turn out I knew nothing about starting a startup. I had a lot of skills that became important later on, right? Annual planning and okrs and all of org charts and all of that fancy stuff. But when you are three people show, you know those things don't matter, you just need to build and do.
- [43:06]
A
So then what? What did you do? Did you just. Actually I'm trying to think if I were in your shoes or in any of your clients shoes now and I was trying to say get a business to buy a brand deal on my software. That's just getting going. I don't know who I would even call at Walmart to get them to consider buying a brand deal from me. What did you do? How did you get the right person? How'd you close those early Sales.
- [43:32]
B
I did cold email. I developed a system with cold email that worked really well and I, I actually sold about a million of my first brand just by myself, without selling ads.
- [43:46]
A
What's your cold email strategy?
- [43:48]
B
I used Apollo and I used highly Apollo I.O. and I also used a highly sort of personalization at scale. So something that's very contextual, that's relevant and that's how I got my first customers.
- [44:07]
A
It looks like Apollo creates a set of those cold emails that go out. It seems to get information from LinkedIn and then it will say something like, looks like you're growing account management team quite a bit right now. Let's find some time to talk. It's that kind of a thing that's written on your behalf. You're smiling. That's the thing you did that.
- [44:28]
B
That's right. And so I didn't necessarily leverage the context of LinkedIn. They just have the contact information in there. I think that now there are plenty of other competitors that do. And in fact there is AI software now that helps you personalize the first line from LinkedIn, which is really cool. But it wasn't anything that fancy. It was just understanding the time of the year we're in and sort of making it contextually relevant, understanding the industry they're in and who their target customers. And in just kind of writing that. So I had this pretty complex matrix of all the different industries. And so as I started to scale the team, I was like, okay, which season are we in? Which vertical are we talking to? Well, this is what.
- [45:15]
A
So the email that I got to have you on here was. I'm assuming that was Apollo or something like it, right?
- [45:22]
B
No, it was actually personally.
- [45:24]
A
Oh, okay. I do get a lot of emails that I get so many that are automated that I've just now been blind to a lot. And if it's not for that organization that you and I are part of, Post Exit founder and the Slap the Signal group actually is what we're using. I would have completely lost this and not end up having this, this interview. So. Well, I'm glad that we connected there. All right, this is, this has been a really interesting eye opening experience. I love hearing things like this. And for anyone who wants to connect with you, it seems like the best way is to get you on LinkedIn and message there because you're probably still sending a bunch of messages. Maybe actually the better way than that is to go to elevator, lab.com and elevators. E L E V the number eight or lab.com I'm assuming that's like elevator pitch. Is that what that's from? Or elevator meaning like going up elevator.
- [46:20]
B
You know, ditch the hike and take the elevator. Yeah.
- [46:24]
A
All right, Makes sense. Thanks so much for doing this. Congratulations.
- [46:29]
B
It was full circle for me, so thank you for having me here, Andrew.
- [46:35]
A
Thanks. Feels great, and I am grateful to Gusto. If you're out there and you have a team, go to Gusto. Com Mixergy.