How Yellowdig CEO Shaunak Roy grew Yellowdig to $6.2M revenue and 830 customers in 2024.

hey folks my guest today is shawnik roy he's the founder and ceo of yellowdig a community driven active learning platform adopted by over 130 colleges and universities k-12 schools and corporate training clients their mission is to transform every classroom into an active and experimental learning community shania takes to the top yep all right so so who's paying for this is it the universities directly or is it the students we have both so in some cases the universities pay for it but a lot of the cases students will directly pay either through the bookstore or they will pay through a credit card how do you manage i mean those are very different sales motions schools are hard to sell students you know it's easy to sell but they churn way more that's right so we make it easy for our clients to adopt that technology so if you imagine you know our most of our clients are high education institutions um and they have long sales cycles so we make it easy for any professor who wants to use our technology they can either go to the institution and say if they want to buy a license so we in that case would sell a enterprise license directly to the school and we have many clients like that but otherwise if the professor themselves just want to try it they can go to the bookstore like a box of nobles and look for yellow day we are in we are a bonsai noble's partner so we are pretty much in all over the country so just the way you will buy a textbook you'll buy yellow um and you can add it into the learning management system and use it in the classroom um so in that case you know the bookstore would kind of directly kind of charge the students through the you know systems that are already in place so if you look at all your revenue from last year what percent was direct to consumer versus through the school director consumer is a new uh business model for us we launched it in the beginning of 2020 so that's a segment which is growing for us right now we expect that to grow rapidly in this year uh but right now i would say it's about twenty percent of our revenue okay so twenty percent is the teacher watching into barnes and noble or the student walking to barnes noble the other 80 percent is direct to the university that's right okay interesting um so let's talk about that what does the average university pay you per month or per year to use yellowdig so our pricing is uh by the course so the way the product is used is uh a faculty or a group of faculties would decide to use the other day as their teaching any subject area so the decision is at a course level so essentially the pricing is also at a course level so for one student to take use yellow again one course is 12.95 cents um and that's how for the student or for the university um it would be either the student or the university it could you know payment could come from anywhere but that's the price don't you imagine if a university is signing up it's probably for 5 000 students you're not going to charge them the full full rate are you [Music] uh we do give good discounts so we have volume discounts in place depending on as they scale with us we give them a variety of discounts so that it certifies them to kind of you know broaden the usage so like if i'm gonna i mean what is your biggest university how many seats do they pay for so you know we i mean biggest university i would say arizona state is a big client of us they were one of our first you know users of the platform um and we have an enterprise license with arizona so that's a very unique model you know for sponsoring your clients um so usage of of course grown over the years you know in the university of arizona but uh but for us for uh you know we have over 130 universities now so depending on every school has sometimes you know one school has three different licensing models sometimes like department of arts and sciences actually bought the student license so the students are directly playing but maybe for another business school they have an enterprise license where they are paying for the entire school uh to us i see got it so what i guess let's let's just talk about the 80 revenue that comes from these 830 universities what is the i guess how many paid seats across all 830 universities maybe that's the right question so right last year we had about 200 000 uh students who used our platform in a variety of ways so some of them were part of enterprise license some of them were direct student pay so that's how that's a total pool um and in terms of our uh pricing of course you know if the university has adopted us that pricing is lower than a school that is using us in a couple of courses or programs oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderprep.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview well that's why i'm asking so ignore the total pool of 200 000. you're saying 80 of that's about 160 000 is coming directly through an enterprise deal with the school philadelphia speaking okay got it so if i take 160 000 seats divided by what 830 that means the average number of seats is about 200 per university um yeah that's uh that sounds reasonable okay so if i if a university is listening right now and they reach out to you and sign up what are you gonna charge them per seat for 200 if a 200 seat deal so for us 200 seats the first question is are those 200 students in the same class so sometimes we start with an intro level class where you know they have a 200 to 500 students in the same course so in that case it would be 12.95 per student per course that's how they will get started if it's across five courses um so then you know let's say you know a student you know who's going to use yellow for the entire program and they're taking let's say five courses for that program in that case they have to pay yellow deck five times that's how you know how that's how it's designed um so yeah so if they're starting small like 200 seats uh you know that would be our out of the box essentially consumer price but then if they scale with us you know depending on how big the school is what type of a commitment they want to make you know we have contracts ranging from one year to five years so depending on the size and length of contracts we would probably give them some incentives to you know adopt us at scale don't name the customer because this is a more sensitive question but what is your largest customer pay you per year right now uh our largest customer i think you know over 300 000 a year per year okay and that is what 10 000 seats a thousand seats um i don't have the number but they are pretty big yeah okay interesting give me more of the back story here when did you launch this i launched yellow light back in 2015 but we went through a pivot in 2019 so the first generation of the product was in the market for about three years uh i thought we did quite well but there were some challenges we were running into so we decided to kind of rebuild the platform slightly in a different direction and launched it in 2019 and that's the product we're skating now okay got it how did you i mean obviously i mean unless you're like rich and you just keep investing your own money you probably had a raise to get through a pivot or if not how did you do that uh so we are venture-backed so we have raised money from venture capitalists so when was the last fundraise we have raised about six million uh till it um so out of that some of that was in the initial launch of the platform and some of that was um when we uh launched so how much did you raise in the first 25 2015 2016. i think it was like two to a half million that time and the remaining three and a half million was during the pivot and and so 2019 you raised another 3.5 yeah we have raised actually over the last couple of years we have raised in tranches so we didn't raise the internet capital in one group i see god but generally speaking 2.5 at start 3.5 million during the pivot speaking and why do why do you why is this software that capital intensive why couldn't you bootstrap um it's a great question so i think you know one thing about so we are in this space called education technology you know think about education technology it's more like healthcare technology there is some initial hurdles to be able to launch a product in the market so if you think about it like uh it's a highly regulated space uh the technology that is being adopted has to comply with the existing regulations like ferpa is a very well-known regulation the other is ada compliance um there are a few you know there are a lot of data security and compliance uh in place even if you want to sell like five pieces of license per school you have to be compliant in all of them otherwise you can't sell so there are um investments that are needed to be able to comply with those regulations in terms of product processes and how we support our clients the other piece i would say is that there are you know also significant investments needed around studying the efficacy of any electric solution so if you think about healthcare like if you're building a drug and if you're giving it to the you know you know patients you need to know that what's the impact of the drug so especially in edtech if it's in classroom learning it is important to know the impact of the technology to the students so we have done over 12 studies uh with our variety of partners and third parties to prove the value of the product before we could scale the technology i see so the investment was quite significant for us to get into this space yep yep and were you the sole founder at the start 100 uh this way okay got it um when you look at so obviously someone signing up for one seat is going to pay the full 12.50 a seat for one class but someone's signing up for a thousand seats you're giving a discount too if you look at the average across all your paid seats what would you say the average paid senior seat is it's very hard to say uh i haven't i don't have the number right up with me okay yeah the average is definitely lower than 125. yeah yeah i mean because the reason i'm asking right so i'm trying to back into your revenue right if you have 200 000 paid seats at 12 bucks per month per seat it's 2.4 million bucks a month in revenue i'd love for you to be there one day i don't think you're there yet though yes uh so that's a good point um so it's just a couple of other things to mention here is the 1295 is for perk course a course can run between three and four months so we that's one price you pay for the entire usage in that particular course so it's not by month oh it's just got it so the course could be for six months it could be for six months most courses are for three months four months um so that's how we price it because you know if a student buys it for a course and if we charge them per month so this month they have access next month for whatever reason they can't pay for it it's not fair to them not to have access to that platform yeah for that particular course so we pay for the entire course so they pay for the entire course to adopt the technology the other thing to keep in mind is that um you know it's also um you know when students are when i say 200 000 users i mean these students they will take one course in the fall maybe one course in the you know spring or they might take one or two courses in the year so there's a lot of right here so essentially it's not that they are using in every month so depending on whether they're taking courses they're using a technology and they're paying for it so that's another thing to point out got it well do you remember i guess there's a lot of complications there it's hard to scrub back into it but do you remember the first year you hit maybe it was recently when you hit a million bucks in revenue so we launched the product in 2019 we i think we'd have hit a million revenue in 2020. and what do you think you guys will do this year this year we would do actually you know what i'm not going to share the numbers right now for a few reasons but we're going to do pretty well this year because the market is pretty hard right now for edtech schools are looking for these kind of products uh in the market how do you model this though right if i mean by nature this is a product where there's churn because you start of course you end the course and sas to get a great valuation obviously you want very low turn in fact you want nintendo retention above 100 you know 30 40 percent how do you tell that story and you know your series a deck your series b deck since you're on the venture path it's a great question so for us the way we look at the businesses uh adoption in a particular course so let's say our university wants to just try us and they launch us into a set of courses and we get paid for that i mean that is something what we call this courseware revenue we track that separately from arr which is our contracted revenue one to five year contracts so typically what we find is that when uh school starts without you know using our technology let's say in a few courses it takes them about one to two years to be able to get enough data to buy an enterprise license so our enterprise license is always the goal we want to sign a five-year deals with you know all our clients but we take them through the journey of in terms of land and expand to that enterprise level so that's the business model for us you know we launch into schools and we have seen that improving that model is you know it takes about some time for them to try the product that we buy and you know universities as you know are very conservative right they are not buying technology and adopting it overnight because they really want to make sure they are using the right tools for their students so this land and expand model helps us to actually get in quickly without a long-lasting sales cycle prove the product show the data show the efficacy and then kind of sign a bigger deal with them and and the last tranche of the three-point because you mentioned it was rolling of the 3.5 million you raised when did you close the last tranche of that six months back so are you looking now at doing a formal series b yeah we are going to do a bigger round this year i see got it how much are you targeting to raise obviously it'll change depending on the terms but what are you targeting [Music] yeah i think maybe in the you know 10 plus million 10 to 20 in that range and i mean don't if you're gonna go raise like 10 million and sell the you know the average 10 20 to your business you got to be able to validate 100 million dollar valuation i mean what do you think you have to go revenue to in order to get and be able to tell a story of a 100 million valuation well if you get 100 evaluation that'd be great but uh you know it's i i would say that the real story here is this which is um you know in education uh the hardest thing to do in education just like in healthcare right if you if you look at a healthcare product like the key thing is the product or do you have the product that you can sell and but that doesn't work so we have i mean i would disagree with that for health care and ed tech i would say distribution is way more important there's a lot of subpar products that have better distribution that are winning in education in education and healthcare because the sales cycles are so long it's so difficult to convince these buyers to buy big big deals like you have yeah so 100 so i mean you know sales cycles are also very very important but you know in edtech there are so many companies there's so many technologies available showing the product that really works is also very important and and that is where a lot of investments go initially so we have a product that works really well i mean we have done studies now with you know as i said over 12 universities uh we we drive higher attention higher engagement you know in a pretty high level and that has a huge impact on the school so you know i think our biggest advantage right now is that we have the technology that works now of course in terms of sales and you know building up a sales force to be able to scale it to every colleges and universities i mean that's where the investment is going to go so you know edtech is quite different from let's say e-commerce site where you can you know set up a site and you know sell things online which is it's no friction to kind of get into business but edtech has a slightly different uh way of kind of you know scaling of course yeah what's your what's your team size today we have about 30 people in the team now any quota carrying sales reps or no yeah we have a sales team about five people now they all carry a quota yeah how did you come up with that a lot of people struggle to scale a sales team um you mean like scaling the team how did you come up with the quota yeah the initial the initial targets for new sales hires um we you know i mean just to be we have to be realistic so you know when we started the process we started scaling the team last year so the last year's goal was to get a build of the pipeline and build a relationship so you know flexible year one we are very flexible year two onwards we start to put a quote on the top what we see some of the sales people i mean if you hire five people if somebody is kind of going and hitting a certain number we know that that's possible that's kind of when we play for year two that's kind of the bar we set for the rest of the team of the 30 people how many are engineers uh about like 12 people are engineers a broadband engineering team okay interesting okay very cool so looking at raising pass caught a million dollar run rate in 2020 um you know to be able to go out and do it go from a 3.5 series a to 10 million you know you got to be i mean i would say at least tripling at this stage so i mean do you guys think you can get above six seven million bucks in aor this contracted ar this year uh we'll see you know it's uh hard to say right now but yeah of course we are talking to a lot of people right now uh so we'll see how quickly we can go was it fair to say is it fair to say since 2020 though you've grown at least 100 year over year since 2020 last year 24 months ago no 2020 that would be two years ago that's right um if we look at yeah it was close to 100 percent i won't know i don't know whether it's 100 exactly right here close to that number around got it so go you go from a million to 2 million to around 4 million today hoping to continue to scale past there yeah i mean that's kind of what we're expecting uh interest interesting well that's a heck of a story i'm rooting for you guys though in the meantime let's wrap up here with the famous five number one favorite business book um good to great number two is there a ceo you're following or studying [Music] uh i love elon musk number three what's your favorite online tool for building the business slack and number four how many hours of sleep to get every night like a plenty of sleep eight dollars eight hours knock okay very good and what's your situation married single kids kids not married yeah okay married with kids how many kiddos two two okay and how are you uh 42 42 take us home here last question something you wish you knew when you were 20. uh well i mean take life uh easy i would say i mean i was probably stressing myself too much at that age guys there you have it yellow dig 830 universities use the platform to help students manage both courses a number of seats they had over 200 000 paid seats in 2021 broke a million running back in 2020 just after their pivot they raised a 2.5 million seed when they launched in 2015 with the 3.5 million sort of series a they closed out last year now looking at doing a series b sometime this year called raise it between 10 and 20 million bucks we'll see if they can get it done edtech is hot they have a team of 30 of which 12 our engineers and a five person sales team they're looking at scaling shanock thanks for taking us to the top thank you so much 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 1pm 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 support all right i'll be in the comments see ya