Sramana Mitra: You’ve taken seven years to build $17 million in revenue. That’s not a timeline that fits in the venture capital framework. The venture capitalists are looking to build hundred million dollar companies in seven years. This is what I’ve been really concerned about. For a long time, venture capitalists basically just decided not to invest in educational technology. Some sectors like adult education and for-profit universities got some money. But largely, educational technology was not a segment that people were willing to invest in.
Now in recent times, there has been quite a bit of investment in educational technology in the venture capital world. Some of it is with the assumption of, “Let’s build an audience and see if we can monetize it somewhere in the future.” The others conclude that if it’s a B2C business that operates like downloading apps that people are willing to pay for or subscribing to some sort of community that has certain value propositions, and if they are gaining traction, they are okay to invest in. That’s the other conclusion that we have come to. Then of course, the third conclusion is similar to what was before. For example, one category that is monetizing really well is this online technical education, especially programming. That’s doing really well. Outside of that, I’m scratching my head to see how this industry gets out of this free-rider mindset.
Katya Andresen: I think there are a few things. You have to have a product that truly solves a problem that people perceive. Number two is, you have to have that product designed for someone who has the capacity to pay. That’s my first litmus test of the business. You’ve got to solve a problem for someone. What are people willing to pay for and who’s willing to pay? Quality content is something people will pay for.
Sramana Mitra: Content is so overproduced right now.
Katya Andresen: Think about school. There are millions of dollars that go into learning materials and acquiring curriculum. I don’t agree that there are tons of contents out there for free that is of high value in the educational arena. There is a lot of free content out there. Is it high quality and well curated? I don’t think so. High quality curated content is extremely valuable. I also believe that parents and families, in particular, are willing to invest in education. In fact, if you look at the amount of money people in other societies spend on education, as a portion of their income, it’s quite extraordinary compared to the United States.
If you have really great content and learning experiences available that are high quality and curated, that is something that families and parents are willing to pay for around the world. I also think that if you’re just talking about schools, schools always will need curricula and materials to help with teaching. That’s not easily going to become commoditized. That’s why we also have a strong business providing tools and content to companies that serve those schools. I take your point that there’s a proliferation of content, but I think it’s important to look at the model behind it. If we’re talking about education specifically, the companies that I’m seeing doing particularly well and being acquired are the ones that have valuable curriculum or content.
Sramana Mitra: What examples can you offer of great-content companies that have grown really fast and have been acquired for significant dollar amounts?
Katya Andresen: I’m not a venture capitalist expert. One example that comes to mind of someone that got acquired by Amazon is TenMarks education. They had a really nice online math practice and enrichment program. They were focused on high quality content. They had a lot of on-demand hints and support. They had video lessons. That’s personalized content for math. That’s a content play.
Sramana Mitra: That’s a consumer play though?
Katya Andresen: I believe that it’s both, but I’m not that familiar with it.
Sramana Mitra: I actually believe that creating experiences that are well curated and well designed are difficult to create. I’m running a very high quality entrepreneurship education program.
Katya Andresen: You’re in the content business.
Sramana Mitra: Right, we do more than content. We do content and online mentoring. It’s an ecosystem plugging into an online ecosystem, all of which is very complicated and not easy to produce and run. I think the problem is how many people are paying for it. I’ll look at TenMarks in more detail. I think they’re selling to schools. 30,000 schools have benefited from TenMarks.
Katya Andresen: Amazon bought them.