Sramana Mitra: All this is developed by Eric and your Vietnamese developer?
Mary Oemig: We now have a much bigger team. The original was developed by someone who left. We couldn’t continue to pay him and has come back. Eric and Zach were our early developers. We now have about five US-based engineers with one in Indiana, one in Wyoming, and the rest in Seattle.
Sramana Mitra: Your business model is a membership fee?
Mary Oemig: Yes. On the content side, the business model is a one-time payment where we take a service fee for the sale.
Sramana Mitra: Transaction fee.
Mary Oemig: Right. The membership model is an annual fee. We keep all the revenue from that. We share revenue with teacher-authors on the transaction product. When we were talking to teachers, they were initially resistant to that concept. We explained it this way, “The content is what you’ve already done. We are charging for replacing your photocopier, printer paper, and sending your packet home.”
That was never the revenue teachers were capturing. It was expenses schools had. We’re saving them money on that expense. When we explained that to them, they were able to understand why it was fair to pay us that. It’s very important for your customers to understand why and what value you’re providing.
Sramana Mitra: How much is the subscription?
Mary Oemig: It’s still very low cost, because we’re selling to public schools. The school membership is $40 per teacher. For individuals, we have $25 per year which has less sophisticated features. Then we also have the $40 tier. Most sellers make that back.
Sramana Mitra: If you look at your revenue, how does that split?
Mary Oemig: 50/50.
Sramana Mitra: In 2020, you hit $10 million?
Mary Oemig: Yes. Our whole family got sick at the end of February and early March. We had one kid go back to school the day before the schools closed. We knew something big was happening. We took our most expensive product and we told the teachers, “It’s free until June 30th.” We were terrified by this. It was a risky decision. We were taking our highest-earning product and making it free.
We had done the work in 2019 to establish we were a must-have. I highly recommend every entrepreneur to go through that process of establishing that you have reached the must-have set of features before you try to grow. Otherwise, you’re going to waste time and money.
When we did that, we did it graciously. The product, itself, scaled quickly. The struggle was people. We were inundated with people who wanted to take advantage of the offer. We were quickly developing technologies to streamline that. Then we started hiring.
Then schools started buying. They didn’t wait till July 1. They started buying on April 1st. Then we had to build all this technology to process all these school orders. We had to do a lot of growing all at once.