EssayJack Inc. Revenue, Valuation & Funding (2020)

hello everyone my guest today is lindy larochowski now she was a former english teacher and then english professor in canada before becoming an ed tech ceo for academic writing software platform essay jack she's won numerous awards for teaching research and publications and is now an award-winning entrepreneur she's published both peer-reviewed scholarship and popular pieces on writing and offers keynote addresses on webinars related to ed tech leadership and academic writing dr lindy you ready to take us to the top i sure am nathan let's get going all right so my first question with a tool like this essay comes is who are you selling to because you're selling to students you got to figure they don't have much money yeah so that's a really great question and there are two answers to it so one uh depends what student you're thinking about so typically if you're thinking about the north american students straight up uh you do have to have a certain kind of price sensitivity absolutely particularly at college and university level if you're thinking about other regions in the world so particularly let's look at asia where english language learning is huge parents have a different attitude towards the investment in their child's education so while there's still certainly a price sensitivity the expectation that supplementary educational tools will be part and parcel of their child's education is a little bit more standardized than we typically see in a north american context so yes you got to sell to students and watch the price depends on where you're selling in the world and then of course we also sell institutionally so what what do you sell for what's the average customer paying per month yeah so if it's just a student straight up they're paying 9.99 a month or they're paying 99.99 a year if it's a bulk license at a school obviously uh you have lower pricing on a per seat basis depending on what that institutional license looks like when you look at just last month's revenue what percent came from bulk deals where it was like a school credit card paying you right or an accounting department versus a direct consumer sale yeah so if we're looking so interestingly like covet is just weird so uh the trends so the trends that we're seeing this year are not always the same as we see uh in previous years so this year it's a little bit more of a 50 50 split between our b2c or the direct to consumer and b2b which is the institution but in previous years it's been more of like a 90 10 between institutions being the 90 percent and 10 being individuals but right now uh what we're seeing at least is that uh institutional budgets are still there's still a lot of questions in terms of the investment into software so some institutions have absolute discretionary budgets they're like yes oh my god we need help with teaching academic writing particularly online where you don't have that face-to-face modeling of what's going on with with teaching in the classroom um and then some institutions are like we don't even know what enrollment is going to be like and we're letting faculty go so our budgets in terms of software look different so we're we're really being uh flexible this year to try to be like look we just we just want to help people uh in the middle of a global pandemic i mean education opens doors for you and that's really sort of our aim and objective and then and then the money stuff will sort itself out is is what we often like to say and dr lindy when did you launch the company so we launched it as a as a beta product at the end of 2015 so into 2016. we really launched it as a full um business at the start of 2019. the obvious question there is then going to be you've got real expenses personally how are you paying your bills while you're building beta between 2015 and 2019 yeah so so we did a huge shareholder loan to get us started and then we raised 500 000 canadian from friends and family so that was about 350 000 usd at the time and that was so once we start we paid out of pocket first to get a thing out there and just be like oh my god we're academics does anybody even want this thing we've created and it was a very shaky beta product we got it out there and then the traction demand was more than we could handle and so we thought oh okay there's there's something here we need to raise money we need to actually build a stable platform we need to i don't know hire some tech people so it's not uh me answering help requests and and sort of figuring out what to do from a technical level i mean i'm an english phd what do i know about about code so when did you raise that 350 2019 so that was that was uh 2017 2018. okay got it 2018. and and talk to me about shareholder loans so i assume that was like you and your co-founders how much was that looking for yeah so right now we're looking at it's about a million usd it has gone in to get us up and off the ground so the total uh share the total equity in the company to get us from sort of hey this is an idea let's get going it's about 1.5 million usd but doctor i'm curious how you structured this because you use the word shareholder loan so it's it's being paid back correct or they actually have equity um so we have we have equity in the company as the founders as well right now it's right just structured as a straight up shareholder loan once we do an external raise we may convert that loan into equity yeah so our principal focus at the start was look we've invented an entire new category of product we don't actually know if it's gonna work but we believe in it so much that we're going to put our money where our mouth is and really see where this takes us as opposed to the more typical startup approach which is how to spend somebody else's money uh but then you're also driving uh somebody else's ship with with various other co-pilots uh and our focus was well we actually know the education business and so we need to be able to respond in real time to unexpected things along the way as we figure out this business and this product and and you know we're we're not 20. so we said you know what let's let's put some real dollars into this and see where it takes us and what interest rate did you put on that loan if any none no right now it's a it just sits there sits there as a loan on them so it's literally you and your co-founders or how many co-founders too no just there's two of us in total myself and one other coach so you two together put in one million in the business of your own capital structure as a loan so you can get it paid back out at a future date if this thing works and then you raise 350 officially in early 2018 from equity investors yeah i see okay very cool okay let's jump back into the business well very cool do you mean very terrifying well well tell me about that what was terrifying for you yeah i mean well it really is i mean we had the the long hard conversations about the two paths we could take and as i say it was the one path was get uh investment in early um and and give up a a larger stake in the company um or the second is take on a huge amount of personal risk and and again you know the risk is that that million dollars we've put in never gets paid back that that you know this fantastic idea that we're seeing making a difference in people's lives uh fails that's always a possibility um and you have to kind of get okay with that and and and that's tough yep no it's tough it's part of the slog but you know if it works it works big for you guys and you still have total control so let's talk about growth right so so today how many students do you have actively using the platform on a monthly basis so over 30 000 students on a monthly basis are our active users okay that's incredible and how many of them have you converted to paid uh probably now oh i should have looked at my data just before coming a range is fine yeah yeah yeah i would say that's probably about maybe 50 of those are paying users and then some of those are um say in an educational institution so they might be on a free pilot now but they're sort of in a sales funnel and our hope is that we'll we'll move them forward and close that as an institutional sale how many consumers do our students directly pay you so not through a school's bundled package yeah so that's where right now it's it's quite small so our monthly uh individual subscriber is i think around a thousand ish so that's and that's what we've really just been launching you know in response to covid to give people that flexibility to say hey don't don't wait for your teachers or your institutions but you know you can also make sure that you're prepared for college and university uh with software that that can help you even if there are gaps in what's happening in terms of face-to-face or what's happening in terms of um sometimes students just find it hard to learn by zoom if that's all they're getting and so we're finding that uh that they're turning to us as a trusted resource no i love that now can i take a thousand paying you directly times sort of that 999 price point you're doing about 10 grand a month direct to consumer which you said it's 50 and another 10 grand a month in the bulk deal so 20 grand yeah that sounds that sounds about right that's great okay so this is not easy i mean getting your first 10 grand 20 grand a month in sales is not easy a thousand individual customers are not easy how did you get the first hundred yeah um you know we we basically uh beg board and steal them we ultimately we count it and we still count on word of mouth so we have essentially a kind of nothing marketing budget um and so it's myself and one other person and we're out there sort of slogging content is essentially the key is what we realize is that really having a content strategy that says like look so we've got this software that adds real value if you have to write in english but we've also got ebooks and blogs and video resources um and i'll do webinars things like that so that it's uh we've got an ecosystem of people who are connected with us whether those are students or parents or educators where our aim is really to add value i mean i could have spent my life teaching english at university i had a tenure-track job that's the kind of job for life so i could have done that and i said well actually if we take this gamble and develop software that's far more scalable i can take the things that i was fortunate enough to learn and master as a scholar and teacher myself and i can digitize it and then it levels the playing field so that if somebody happens to not have the good fortune of say being in dr lindy's class they can still access the skills and the tools and the tricks of the trade that i'm able to make available for them and so that's a roundabout answer to say uh content and providing really valuable content is the way that we we got those first hundred individual customers but that's also the way that we've been able to get into schools colleges i'd love to get involved i'd love to get a specific there so people can like really feel like they they know you so like the first 10 customers were like the first piece of content you wrote what was the title yep so the so in terms of the very first customers um what often i would do would be i'd go and do a this was you know this is pre-pandemic i would do a free webin or a free in-person workshop on writing so it would be touted as a writing workshop i'd show up at a university marketing and i would just university is marketing it uh yeah so the university would market it so the department whatever department it would be social sciences uh or english department or a writing center and i would essentially and that would be a thing that i would offer them which is here are the principles of good writing here's how you structure academic writing this is what people are looking for and then from that we'd have uh at that point we'd have sort of 65 of the people who are in that workshop sign up for an essay jack trial immediately and what we still find so now in this sort of more digital uh context i'll still i'll say partner with an organization so i did a webinar this summer with pro writing aid which is an online sort of text editing software and i did a webinar with them on the principles of academic writing particularly for graduate students so i was like how do you write a thesis how do you write a master's thesis what are the component parts so what do you put in a lit review what do you say in a methodology section so those are things that for that particular audience you know if you're a master student you've just graduated from your ba you don't know what to do in life you enroll in a master's program and now you have to write a thesis nobody's ever trained you and you kind of have to learn along the way so if i can demystify that and do that in a webinar and then people are like okay let's check out the software that's sort of a real-time use case um very recently and dr lindy talked about the team that you've used to build this how many people on the team today yeah so right now it's myself and uh five other people so there's six of us uh so we've got a product owner and so he kind of straddles the line between the tech and and the business side there's one girl who helps me with the marketing client support everything that's non-tech and of course we also show up to all of our tech meetings and then we have three full-time dedicated developers oh well okay you have three three developers that's great and any quota carrying sales reps or no you're doing all the sales so right now i'm doing all the sales we're in the middle of our very first external fundraise and the number one person i want to hire is somebody to do sales because to be honest it's really time consuming and i'm doing six people's jobs with sales only being one of that and that's really hard because ultimately we know that to be successful in sales you have to develop relationships with people in order to close those deals they really do need to feel as though you've heard their needs and you're able to provide something that answers their needs and i truly believe that but sometimes it's hard when i'm like talking to investors and i'm talking to tech and i'm building out blogs and i'm doing webinars to also call me like hey so uh you have all the houses you're rocking all the hats i love that you mentioned you're raising now how much are you looking to raise we're raising 2 million usd and this is our seed this is we're now saying okay we've gone through all of the sort of depths of despair and now we'll we'll be a more straight up sort of ed tech company with external investors uh and we have fewer questions about what that path and that direction forward is going to look like uh than we had when we raised our friends and family around and what valuation are you hoping to raise the 2 million on obviously you've got to negotiate it what's your hope yeah so it'll to be honest it'll probably be in the ballpark of of around an 8 million usd you know give or take pre-money or post uh probably pre-money okay so eight posts if you can lock that in that's right so and you will do that a price drone that won't be an 8 million cap on a safe or something no no yeah okay and how much of that would you use some of that 2 million to pay back the owner loans of a million uh not at this point no no the the expectation in terms of payback of that shareholder loan is like at an at an exit so the intention is to fuel growth not i mean as much as i'd like to line my pockets i'm able to be patient and line those pockets later to see like my vision is that nobody should have to stare at a blank page when they have something to write now we're starting in the education space to help students who have um academic writing and that blank page that stares at them but realistically in you know at the end of the day nobody should have to stare at that blank page so whether that's business writing or corporate writing or government writing or academic writing which is the field that i know and i'm willing to uh keep my pockets emptier than i would like them to be in order to see that real vision fulfilled that's something that i would like to have as a as my contribution to the world at large when my life is over are students sticking what's churn rate look like yeah so it's still kind of early days in terms of the individual subscribers as opposed to the bulk licenses where they might buy it for a grade and the expectation is that it's available for that particular program or that particular grade and then you roll new students in in the subsequent year so with respect to the individual subscribers typically we're seeing sort of a year or two ends up being the kind of duration of of how long they stick uh with essay jack and again that's dependent upon what program they're in and and what they what they need it for what they what they want it for and how we can help them yep yep so that if you're one to two years you're talking then somewhere between like 50 and if a hundred percent annual churn rate on those student subscribers then yeah it's it's about 50 right now but as i say it's like we've really started rolling out yeah it's it's early days did you spend any money on ads last month uh no okay cool so no no paid ads i mean so if i asked you what your cac is you wouldn't have an answer because it's really sweat equity yeah so i mean i can give you a customer acquisition cost that takes into account my time and the time of of another person but it's not going to be it's not going to be a sort of accurate um you know ad spend direct if i spend this dollar yeah this this so it in some ways it's it's it's an academic conversation yeah you're figuring you're figuring it all out this is what you got to go through very cool hey listen this has been wonderful let's wrap up dr lindy with the famous five number one favorite business book uh you know what my favorite business book is actually a tech book and it's don't make me think and it's it's a really great sort of ui ux book so i'm cheating a bit it's not technically business but i love it number two is there a ceo you're following are studying um you know i so this is a canadian context um a business leader i really like is arlene dickinson she runs a fund and she's sort of a successful entrepreneur and is on canada's dragon's den but i think as a as a woman leader she's really inspiring so i i keep tabs on what she does through social media number three besides your own what's your favorite online tool uh you know i'm a big fan of slack i gotta say and i was pretty excited to see the recent acquisition but yeah so slack 22 billion bucks we'll see what happens there number four how many how many hours of sleep breaking every night uh probably about four okay and what's your situation dr lindy married single kiddos i am married i have no kids but i am a crazy cat lady beautiful i have a beautiful little two-year-old uh kitty cat that we brought back from asia with us i love that can i ask how old you are i am 44. last question take us back 24 years what's something you wish you knew when you were 20. uh oh my goodness i think when i was 20 i wish i knew it would all be okay guys there you have it dr lindy essay jack her contribution to the world helping right now academic folks write better academic paper so they never have to start writing looking at a blank page currently is doing about twenty thousand dollars in monthly recurring revenue but it's been a long slog lunch in 2015 her and her partner put in a million dollars into the business as a loan they raised 350 000 externally they've grown the business officially launched in 2019 now growing nicely even during covid looking to raise 2 million on an 8 million pre we're rooting for you dr lindy thanks for taking us to the top thanks so much bye one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathanlacka.com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode if you enjoyed it click the thumbs up we get a lot of haters that are mad at how aggressive i am on these shows but i do it so that we can all learn we have to counter those people we got to push them away click the thumbs up below to counter them and know that i appreciate your guys's support all right i'll be in the comments see ya