Andrew Grauer: Then, moving on to the other question on the engagement level, engagement is quite high. I think the difference between other online education sites like Coursera and edX is that their users are looking just to learn for learning sake. Our supplemental resources are really focused on helping students who are already enrolled in the course and there is a requirement where there’s a large incentive for them to complete and do well in the course. If they can really get an edge and make sure that they master the course, this will be a major motivation to use Course Hero.
Sramana Mitra: Are you saying that your 150,000 subscribers are all active users?
Andrew Grauer: That’s the number of subscribers that are new paid subscribers over the calendar year 2014.
Sramana Mitra: Are all people who subscribe using the product? One of my favorite example is the gym. People subscribe to gym membership and they just don’t go. That’s a common subscription behavior.
Andrew Grauer: For our subscription service, a major reason people join is because they find that we have useful resources for a particular course that they’re in. When they come in, they only subscribe because they know they can get that. When they come in, the engagement is really high as long as we have resources available to them. In schools where we have a lot of resources for most courses that people are taking, the engagement is extremely high throughout the current semester and even to future semester. There’re courses where we still have a very small penetration. The engagement is way lower.
Sramana Mitra: How many schools do you have really solid coverage on right now?
Andrew Grauer: We have solid coverage on about 250 schools right now. One analogy that I really like is how LinkedIn grew. At the beginning, you might come in and create a really good resume but then you don’t update it because there’s not so many people on there and not so many updates coming on until they got to a later stage. Then, everybody was on there and people were getting updates. Then, you get a lot of pre-engagement marketing.
We get more penetration on the 250 schools. We can do a lot more marketing about new materials and tutors for a course. We still are building the initial base of great content there and for users to engage with it.
Sramana Mitra: You started with $10,000. Talk to me about how you built the company financially?
Andrew Grauer: That was the first investment into the company. Eventually, we raised a few internal rounds of financing largely from family and friends. In July of 2010, we raised $1.5 million from a number of angels including SVAngel and Steve Chen of YouTube.
Sramana Mitra: Is that the only money that has gone into the company?
Andrew Grauer: We raised a few internal rounds from family and friends before then. Over the fifth year of the company, we’ve raised right around $2.4 million.
Sramana Mitra: That’s very good – $2.4 million and you say you’re going to do between $15 to $20 million this year. That’s excellent.
Andrew Grauer: We really try to be sustainable in our growth. Since we raised money from my family and friends, it’s very important to build a sustainable business, find a product market sales as fast as possible, manage the burn rate and not spend on things that don’t matter. Extremely focused work with capital constraints is really powerful as a motivator.