Sramana Mitra: You were able to build a minimum viable product, start monetizing it right away, and then, scale it from there.
Katya Andresen: Not right away. Most of the overnight successes have a five to seven years lag.
Sramana Mitra: That’s my point. How do you finance five to seven years of development?
Katya Andresen: We did it slowly with MVPs and self funding through our own growth. It was really hard work and that’s why we didn’t scale faster.
Sramana Mitra: This is the technology industry. At this point, the whole educational technology is competing with the talent of the technology industry. There are many other sectors of the industry that are high growth and there’s a lot of wealth creation opportunity. Whereas if you have to spend 10 to 15 years to slowly bootstrap a company and then perhaps you will be able to scale it and get to the next level, this is something that is not drawing a lot of talent.
Katya Andresen: That may be true in Silicon Valley. I think there’re more patient places and more patient businesses. However, I think you’re right. Most great companies didn’t have an overnight success.
Sramana Mitra: It’s not a question of overnight success. Let’s say you’re an entrepreneur and you had to build, for 15 years, a company that is incredibly slow in growth and you don’t make much money. It is hard to expect an industry to thrive under those conditions. I have studied plenty of industries. There are lots of industries that suffer under this lack of capitalization because of these dynamics.
Katya Andresen: You were saying no one wants to pay for anything. I don’t entirely agree with that. I believe if you’re solving a real problem, people will pay. Did that particular model become an overnight success and was it easy? No. Did we hit a home run out of the gates? No. We’re growing nicely. In my experience, you can grow a successful business if you are focused on the user.
Sramana Mitra: I think that is the conclusion that a lot of investors are coming to. This is a segment of the industry that works fine as slow-growth bootstrap businesses, which doesn’t work in the venture capital funded model. The example you gave is a company that bootstrapped for about 10 years and then raised funding. I know a bunch of entrepreneurs in the Edtech industry who are doing $10 million in revenue now in a bootstrap mode, and are maybe starting to get to a point where this is now fundable. But a lot of years have gone into building those businesses.
What you’re saying is absolutely correct. I don’t dispute the fact that you can build businesses in education. There’s absolutely no contention on that point. The point however is, can you build businesses that investors are willing to capitalize heavily so that they can become fast growing, large businesses. Where is the Google of educational technology? We don’t see it because of some of these inherent structural problems of the industry that not as many people are willing to pay and these tend to be slow-growth businesses.
Katya Andresen: I think that education is somewhat unique in that it’s not a technology product. It’s education technology. What matters is not the functionality of the product but its effectiveness in providing meaningful experience like what you’ve built in your organization. It’s not because of the platform you have. It’s because of what you’ve put on the platform, the experience you’ve built around it, and the content that you have.
Sramana Mitra: The problem is no matter how good it is, not enough people are willing to pay for it. In education, there is this assumption that a lot of it should be free. That’s at the heart of the bottleneck that the industry is facing.
Katya Andresen: I think schools spend a lot of money on educational products. If you’re talking about teachers or students and their ability to pay, that does look different.