How Yellowdig Grew to 130 Universities on $6M Raised With a Land-and-Expand Model (Interview with CEO Shaunak Roy)

Introduction and Overview of Yellowdig

Nathan Latka

00:00Hey, folks. My guest today is Shonak 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 experiential learning community. Shonak, ready to take us to the top?

Shaunak Roy

00:16>> Yep. Happy to

Who Pays: Universities vs. Students

Nathan Latka

00:17So be so who's paying for this? Is it the universities directly or is it the students?

Shaunak Roy

00:22>> We have both. So some cases, 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.

Nathan Latka

00:31How do you manage it? 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.

Sales Motion and Barnes and Noble Partnership

Shaunak Roy

00:38>> That's right. So we make it easy for our clients to adopt our technology. So if you imagine, you know, most of our clients are high education institutions, 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 they want to buy a license. So we, in that case, would sell a enterprise license directly to the school, and we have

01:02>> many clients like that. But otherwise, if the professor themselves just want to try it, they can go to the bookstore like a Barnes and Noble's, and look for yellowdig. We are in we are a Barnes and 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 yellowdig. And you can add it into the learning management system and use it in the classroom. So in

01:21>> that case, you know, the bookstore would kind of directly kind of charge the students through the, you know, system that are already in place.

Nathan Latka

01:27So if you look at all your revenue from last year, what percent was direct to consumer versus through the school?

Shaunak Roy

01:34>> Direct to consumer is a new business model for us. We launched it in the beginning of twenty twenty. So that's a segment which is growing for us right now. We expect that to grow rapidly in this year. But right now, I would say it's about 20% of the revenue.

Nathan Latka

01:48Okay. So 20% is the teacher watching into Barnes and Noble or the student walking into Barnes and Noble. The other 80% is direct to the university?

Shaunak Roy

01:55>> That's right.

Nathan Latka

01:56Okay. Interesting. So let's talk about What does the average university pay you per month or per year to use yellowdig?

Pricing Model: Per Course, Per Student

Shaunak Roy

02:04>> So our pricing is, by the course. So the way the product is used is, a faculty or a group of faculties would decide to use yellowdig 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 yellowdig in one course is $12.95. And that's how

Nathan Latka

02:27For the student or for the university?

Shaunak Roy

02:30>> It would be either the student or the university. It could you know, payment could come from anywhere, but that's the price for

Nathan Latka

02:35But don't you give I imagine if a university is signing up, it's probably for 5,000 students. You're not gonna charge them the full full rate, are you?

Shaunak Roy

02:42>> We do give good discounts. So we have volume discounts in place depending on as the scale with us. We give them a variety of discounts to kind of incentivize them to kind of, you know, broaden the usage.

Biggest Clients and 130+ University Customers

Nathan Latka

02:51Mhmm. So, like, if I'm gonna I mean, what is your biggest university? How many seats do they pay for?

Shaunak Roy

02:57>> So, you know, we I mean, biggest university, I would say, State is a big client of us. You know, they were one of our first, you know, users of the platform. And we have an enterprise license with Arizona. So that's a very unique model, you know, for sponsoring initial clients. So usage of, of course, grown over the years, you know, in the University of Arizona, but, but for us, for, you know, we have over a 130

03:19>> universities now. So depending on every school has sometimes, you know, one school has three different licensing model. 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, to us.

Nathan Latka

03:36I see. Got it. So what I guess, let's let's just talk about the 80% of 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.

Shaunak Roy

03:51>> So right last year, we had about 200,000, 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. And in terms of our pricing, of course, you know, if the the university has adopted us, their pricing is lower than a school that is using us in a couple of courses or programs.

Nathan Latka

04:16Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 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 Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

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06:39the interview. Well, that's why I'm asking. So ignore the total pool of 200,000. You're saying 80 percent of that. So about a 100 and what? A 160,000 is coming directly through an enterprise deal with the school?

Shaunak Roy

06:52>> Roughly speaking.

Nathan Latka

06:53Okay. Got it. So if I take a 160,000 seats divided by what? 830, that means the average number of seats is about 200 per university?

Shaunak Roy

07:02>> Yeah. That's that sounds reasonable.

Nathan Latka

07:04Okay. 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?

Shaunak Roy

07:13>> 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. So then, you know, let's say, you know, a student, you know, is gonna use yellowdig for

07:36>> their entire program and they're taking, let's say, five courses for that program. In that case, they have to pay yellowdig five times. That's how, you know, how that's how it's designed. So yeah. So if if they're starting small, like 200 seats, 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

07:56>> 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.

Nathan Latka

08:07Don't name the customer because this is a more sensitive question, but what is your largest customer pay you per year right now?

Largest Customer and Contract Size

Shaunak Roy

08:15>> Our largest customer, I think, you know, over $300,000 per year.

Nathan Latka

08:20Per year? Okay. And that is what? 10,000 seats? A thousand seats?

Shaunak Roy

08:25>> I don't have the number, but they are pretty big. Yeah.

Nathan Latka

08:28Okay. Interesting. Give me more of the backstory here. When did you launch this?

Company History and 2019 Pivot

Shaunak Roy

08:33>> I launched yellowdig 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. 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 are scaling now.

Nathan Latka

08:53Okay. 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. If not, how did you do that?

Shaunak Roy

09:02>> So we are venture backed. So we have raised money from venture capitalists.

Nathan Latka

09:05So when was the last fundraise?

Funding History: $6M Raised in Total

Shaunak Roy

09:08>> We have raised about 6,000,000 to date. So out of that some of that was in the initial launch of the platform and some of that was when we launched

Nathan Latka

09:19So how much did you raise in the first '25 2015, 2016?

Shaunak Roy

09:23>> I think it was, like, $2,500,000 that time, and the remaining 3,500,000 was during the pivot.

Nathan Latka

09:29And and so 2019, you raised another 3.5?

Shaunak Roy

09:32>> Yeah. We have raised actually over the last couple of years. We have raised in tranches, so we didn't raise the capital in one go.

Nathan Latka

09:38I see. Got it. But generally speaking, 2.5 at start, 3,500,000 during the pivot.

Shaunak Roy

09:43>> Roughly speaking. Yeah.

Nathan Latka

09:45And why do why do you why is this software that capital intensive? Why couldn't you bootstrap?

Shaunak Roy

09:52>> 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 health care technology. There is some initial hurdles to be able to launch a product in the market. So if you think about it, like, it's a highly regulated space. The technology that is being adopted has to comply with the existing regulations like FERPA is a very well known

10:16>> regulation. The other is ADA compliance. There are few you know, there are a lot of data security and compliance, in place. Even if you want to sell, like, five pieces of license for school, you have to be compliant in all of them. Otherwise, you can't sell. So there are significant 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

10:39>> say is that there are, you know, also significant investments needed around, studying the efficacy of any edtech solution. So if you think about health care, like if you're building a drug, like if you give it to the, you know, you know, patients, you 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 that technology to the students. So we

11:03>> have done over 12 studies, with our variety of partners and third parties to prove the value of the product before we could scale the technology.

Nathan Latka

11:10I see.

Shaunak Roy

11:11>> So the early investment was quite significant for us to get into the space.

Nathan Latka

11:14Yep. Yep. And were you the sole founder at the start, a 100%?

Shaunak Roy

11:18>> That's right.

Nathan Latka

11:19Okay. Got it. 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, someone 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 seat is?

Shaunak Roy

11:36>> It's very hard to say. I haven't I don't have the number right now with me. Okay. Yeah. The the average is definitely lower than $12.95.

Nathan Latka

11:43Yeah. 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 per month per seat, it's $2,400,000 a month in revenue. I'd love for you to be there one day. I don't think you're there yet, though.

Shaunak Roy

11:57>> Yes. So that's a good point. So it's just a couple of other things to mention here is the $12.95 is for per 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. So

Nathan Latka

12:14it's just got it. So the course could be for six months.

Shaunak Roy

12:17>> It could be for six months. Most courses are for three months, four months. 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 or they

12:35>> pay for the entire course to adopt the technology. The other thing to keep in mind is that, you know, it's also, you know, when students are when we 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 variety here. So essentially, it's not that they are using

12:56>> in every month. So depending on where they're taking courses, they're using our technology and they're paying for it. Mhmm. So that's another thing to point out.

First $1M in Revenue (2020)

Nathan Latka

13:04Got 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?

Shaunak Roy

13:13>> So we launched the product in 2019. We I think we'd have hit a million revenue in 2020.

Nathan Latka

13:21And what do you think you guys will do this year?

Shaunak Roy

13:24>> 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 are going to do pretty well this year because the market is pretty hot right now for EdTech. Schools are looking for these kind of products in the market.

Nathan Latka

13:38How do you model this though? Right? If, I mean, by nature, this is a product where there's churn because you start a course, you end a course. And SaaS to get a great valuation, obviously you want very low churn. In fact, you want an entire retention above 130, 40%. How do you tell that story? And you know, your Series A deck, your Series B deck, you're on the venture path?

Shaunak Roy

13:57>> It's a great question. So for us, the way we look at the business is, adoption in a particular course. So let's say a 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 is 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,

Land and Expand Enterprise Model

Shaunak Roy

14:20>> school starts without you know, using our technology, let's say, 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 a 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.

14:41>> You know, we launch into schools and we have seen that and proven that model is, you know, it takes about some time for them to try the product that they buy. And, you know, universities, as you know, very conservative, right? They're not buying technology and adopting it overnight because they really want to make sure they're using the right tools for their students. So this land and expand model helps us to actually get in quickly without a

15:01>> long sales cycle, prove the product, show the data, show the efficacy, and then kind of sign up a good deal with them.

Nathan Latka

15:07And the last tranche of the three point, because you mentioned it was rolling of the 3,500,000 you raised. When did you close the last tranche of that?

Shaunak Roy

15:15>> Six months back.

Plans for a $10M-$20M Round

Nathan Latka

15:16So are you looking now at doing a formal series b?

Shaunak Roy

15:20>> Yeah. We are gonna do a a bigger round this year.

Nathan Latka

15:23I see. Got it. How much are you targeting to raise? Obviously, it'll change depending on the terms, but what what are you targeting?

Shaunak Roy

15:29>> Yeah. I think maybe in the, you know, 10 plus million, 10 to 20 in that range. Mhmm.

Nathan Latka

15:34And, I mean, don't if you're gonna go raise, like, 10,000,000 and sell the, you know, the average 20% of your business, you gotta be able to validate a $100,000,000 valuation. What do you think you have to grow revenue to in order to get and be able to tell a story of $100,000,000 valuation?

Shaunak Roy

15:49>> Well, if you get $100,000,000 valuation, would be great.

Product vs Distribution in EdTech

Shaunak Roy

15:53>> I would say that the real story here is this, which is you know, in education, the the hardest thing to do in education, just like in health care. Right? If you if you look at a health care product, like, the key thing is the product. But do you have the product that you can sell and that does it work? So we have

Nathan Latka

16:09a I mean, I would disagree with that for healthcare and ed tech. I would say distribution's way more important. There's a lot of subpar products that have better distribution that are winning.

Shaunak Roy

16:17>> In education?

Nathan Latka

16:19In 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.

Shaunak Roy

16:26>> Yeah. So 100%. So I mean, you know, sales cycles are also very, very important. But, you know, in AdTech, there are so many companies, are 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. We we drive higher

16:48>> retention, 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 gonna go. So, you know, EdTech is quite different from,

17:07>> let's say, ecommerce site where you can, you know, set up a site and, you know, sell things online, which is it's more friction to kind of get into business, but EdTech has a slightly different, way of kind of, you know, scaling things. Of course.

Team Size: 30 People, 12 Engineers, 5 Sales Reps

Nathan Latka

17:18Yeah. What's your what's your team size today?

Shaunak Roy

17:22>> We have about 30 people in

Nathan Latka

17:24the Any team quota carrying sales reps or no?

Shaunak Roy

17:28>> Yeah. We have a sales team of about five people now.

Nathan Latka

17:31They all carry a quota?

Shaunak Roy

17:33>> Yep.

Nathan Latka

17:34How did you come up with that? A lot of people struggle to scale a sales team.

Shaunak Roy

17:39>> You mean, like scaling the team with the

Nathan Latka

17:41How did you come up with the quota? Yeah. The initial the initial targets for new new sales hires.

Shaunak Roy

17:46>> 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, you know, for last year's goal was to get a build up 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 the top. We see what we see some of the salespeople. I mean, if

18:04>> 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 implement year two. That's kind of the bar we set for the rest of the team.

Nathan Latka

18:12Of the 30 people, how many are engineers?

Shaunak Roy

18:17>> About, like, 12 people are engineers, but brought in the engineering team.

Nathan Latka

18:21Okay. Interesting. Okay. Very cool. So so looking at raising past, call it a million dollar run rate in 2020, you know, to be able to go out and do it go from a 3.5 series a to 10,000,000, you know, you gotta be at I mean, I I would say at least tripling at this stage. So, I mean, do you guys think you can get above $6,000,000 to $7,000,000 in ARR this contracted ARR this year?

Shaunak Roy

18:41>> We'll see. You know, it's hard hard to say right now, but, yeah, of course, we are talking to a lot of people right now. So we'll see how quickly we can grow.

Growth Rate Since 2020

Nathan Latka

18:50It was it fair to say since is it fair to say since 2020 though, you've grown at least a 100% year over year?

Shaunak Roy

18:56>> Since 2020 last year?

Nathan Latka

18:59Twenty four months ago. No. 2020. That would be two years ago.

Shaunak Roy

19:02>> That's right. If we look at yeah. It was close to 100%. I wonder if I don't know whether it's 100% exactly right here close to that number.

Nathan Latka

19:11Around. Got it. So go you go from a million to 2,000,000 to around 4,000,000 today, hoping to continue to scale past there.

Shaunak Roy

19:18>> Yeah. I mean, that's kind of what we're expecting. Interest you know?

Nathan Latka

19:21Interesting. Well, that's a heck of a story. I'm rooting for you guys, though. The meantime, let's wrap up here with the famous five. Number one, favorite business book?

Famous Five Rapid Fire Questions

Shaunak Roy

19:31>> Good to Great.

Nathan Latka

19:32Number two, is there a CEO you're following or studying?

Shaunak Roy

19:37>> I love Elon Musk.

Nathan Latka

19:38Number three, what's your favorite online tool for building the business?

Shaunak Roy

19:43>> Slack.

Nathan Latka

19:44And number four, how many hours of sleep do you get every night?

Shaunak Roy

19:48>> Like, plenty of sleep. Eight hours.

Nathan Latka

19:49Eight hours, Shonak. Okay. Very good. And what's your situation? Married, single, kids?

Shaunak Roy

19:54>> Kids.

Nathan Latka

19:55Not married?

Shaunak Roy

19:56>> Yeah. Married.

Nathan Latka

19:57Okay. Married with kids. How many kiddos?

Shaunak Roy

20:00>> Two.

Nathan Latka

20:01Two. Okay. And how old are you?

Shaunak Roy

20:04>> 42.

Nathan Latka

20:0542. Take us home here. Last question. Something you wish you knew when you were 20.

Shaunak Roy

20:13>> Well, I mean, take life, easy, I would say. I mean, I was, probably stressing myself too much at that age.

Nathan Latka

20:19Guys, there we have it, yellowdig. Eight thirty 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 dollar run rate back in 2020 just after their pivot. Raised a 2,500,000 seed when they launched in 2015, and the 3,500,000 sort of series A they closed out last year. Now looking at doing a series B sometime this year, call it, raise it between 10

20:41and $20,000,000. We'll see if they can get it done. EdTech is hot. They have a team of 30 of which 12 are engineers and a five person sales team. They're looking at scaling. Shinak, thanks for taking us to the top.

Shaunak Roy

20:51>> Thank you so much.

Nathan Latka

20:54One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 one

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