How Studytree CEO Ethan Keiser grew Studytree to $350K revenue and 5 customers in 2018.

hello everyone my guest today is ethan kaiser he's the ceo and founder of studytree an app leveraging artificial intelligence provides students with a mobile academic assistant he received his bs from drexel university and computer science before founding the company ethan are you ready to take us to the top yep all right man so tell us about the company what does study study tree do and what's the revenue model how do you make money absolutely so we solve a problem for higher education and corporations the problem is that at least in higher education 50 of college students fail out it's a big issue and the reason for why they fail out could be a number of things and what we find is that a lot of students come to college without the skill sets they need to be successful that means they procrastinate they don't self-regulate well and we built an artificial coach that can analyze how a student is performing look at their grades integrate with the university systems and then intervene when problems may arise and we can actually predict the risk of a student at a university and we've been selling this directly to institutions to help improve the retention rate so more students come back they pay tuition and that's the university revenue model we then support that by help improving their retention so we sell an enterprise license yeah what so what's the average i mean what's the average university pay you per year for this kind of thing uh it could be anywhere between 25 000 up to half a million depending on the size of the institution so it's a sliding scale based on the number of students enrolled at the university we charge a per student fee would you say a fair average for you would be about 25 30 grand a year i would say that'd be on the low side for sure i mean the average would be closer to like 70. 70-ish okay and again i want to just just cause i don't go to every cohort if i pay you 70 grand a year about how many students do i probably have so in the first uh term okay so yeah you have 70 uh maybe you probably have somewhere in the range of you know 20 000 students i see okay cool and then put this on a ton of timeline for us when did you launch the company what year so we launched the company in 2016. uh our first product we pivoted away from and we start working on this our business model completely changed um so 2016 when we started 2017 we got our first customers and then now 2018 we're growing that's great how many customers have you scaled too you know we don't really share that information often uh we have more than a few so more than five universities but it's between five and twenty i would say somewhere in the middle there okay fair enough i mean look if you have five paying that average of 70 grand a year i mean that puts out about 30 grand a month right now in revenue is that fair yeah yeah close to and is that was it zero a year ago was all that growth over the past 12 months zero 18 months okay okay god do you remember where you're at about a year ago uh i mean about a year ago we had our first few contracts so probably 10 10 uh probably less than 10 000 mmr okay so maybe 5000 months something like that yeah and how tell me that story how did you get your first customer uh i had to well i was not in academia so i didn't have any ways of getting into these universities so i just kind of cold called and sent a lot of cold emails i went to a lot of conferences and just really hustled to get this happening why couldn't you close drexel uh that's a good question actually i met with their uh vp of enrollment it never happened um he was new so i think that he had his own initiatives and it just never happened so i don't know what to do about that what gpa did you graduate with i grew up where did i graduate with yeah computer science degree no no like what was your gpa oh gpa uh i don't know it was like a 3-0 i'm trying to think i'm trying to think like okay well how good of a student were you and you probably built that into the tool so like is that reflective or not i think the idea was like i wasn't a great student and i was an athlete as well so this is something we need and as a bad student to identify if i was a great student i probably wouldn't have identified the problem yeah yeah what sport did you play i was a wrestler ah got it okay good all right so you built this tool um you coded the initial version yourself or what's your team look like today yeah so we could initial version we then competed in this like a competition called the imagine comp we imagine cup by microsoft and we won the us competition and then microsoft hired my team so i had to build a new team after that it was actually like a recruiting tool which i thought was hilarious uh we got into a bunch of accelerators uh but once my team left because like out of college uh everyone left then i had to go about and find a new team so in 2016 i found a new team my friend my co-founder is a buddy of mine from high school and then we just brought on some more people and then we've been growing since how many people today uh about six okay and have you guys bootstrapped to raise capital uh we strapped we raised about thirty five thousand dollars um and then we got to revenue and we haven't opened up a uh uh uh venture round just yet just because we have really good white papers we have a good traction i just presented at a conference in san diego san francisco two days ago and we have like 10 universities reaching out like we've had this really good sales structure in place now so i think we'll go into like a late seed or early series a in the next like three months do you have leverage are you cash flow positive today uh we are making enough money to survive so cash flow positive yeah so we should call it break even yeah freaky yeah probably about right that's good and where's where are the six teammates based um so we have some overseas and then um the rest of them are in philadelphia or new york so i originally was in philadelphia and i just moved to new york because we're starting the fundraising process so i wanted to get like a few months early and start building these relationships so when i open the round it can move quickly that's great any churn to date or no uh we had one custom return okay so and they didn't actually turn just delaying the launch for another month a year yeah so it's probably too early to like look at churn and revenue and expansion and things like that but um do you do you know what like cac is do you know what your customer acquisition cost is it's really hard to describe a cac an enterprise model um it's really i mean it's challenging because our deal sizes are very large and they take a long time so i couldn't really give you an estimate like i always get asked this question like what's our cac uh i would say it's it's it's really hard to describe what our country i mean dude you're at the stage where like you're the sole founder hustling right the next scale point is for you to build out like systems of how you close deals and teach someone else to do it like that's the next tough point yeah yeah so like actually the price point by the way is not is not what makes the cat card it's just the fact that you your cohort is so small there's only five and you've only been in business for us like a year yeah yeah but by the way still impressed i'm not i'm not digging your growth or anything still impressive growth i mean it's great you're hustling you're coding you're doing it all so it's great um okay so six people too early to talk about economics you said you're opening up a round how much do you want to raise [Music] it's cutting in now but i think you ask me how much am i looking to raise so i i actually did a predictive model where i mean a model where we raised 750 000 and it gets us to two and a half three million in revenue in the next 18 months and i thought that was pretty um that's a very honest prediction just because we've i've been in like integrated in these conferences in this kind of these circles higher education is kind of like healthcare once you break in and you have um impressive white papers and improve product efficacy uh they grow pretty quickly and universities don't really compete against each other they share best practice so if you become a best practice you can grow at a relatively fast rate just getting in is so challenging yeah so if you raise 750 grand i mean what valuation ideally would you raise that at i mean i think we could do this uh you know you can do valuation or you can do like a convertible note i was thinking doing a cover one note at a six million dollar cap with a 15 to 20 discount i think it's very fair given everything we've done so far yeah why go the convertible note route instead of using something like venture debt which would be non-dilutive uh you know i think converter will know something i'm more familiar with maybe venture debt is a better route i just um thought that that would be the easiest to move forward uh ultimately that's what we said that we'll do and that's kind of what we're just i mean we could do a safe another way of doing it but yeah it's still dilutive...