The uncommon story of an edtech startup that caught elusive profitability by the tail
“We have not been flashy and all over the place. We have been quietly building. Now, we are in a good place and turned profitable months ago.”
A tiny “wow” escaped my lips when I heard Parul Gupta, co-founder of Springboard, say this as I don’t know many startups in the online learning space who could make this claim. And it was just a little over a year-and-a-half since the edtech startup on a mission to “help millennials advance their careers through self-paced, mentored courses” announced its seed funding round of US$1.7 million.
“We hit US$5 million in annualized revenues and are growing. We have had students from 70 countries now. But almost 75 to 80 percent of them are from the US and Canada,” Gupta adds.
Changing the way people learn through technology has been a long time coming and not yet arrived. That’s because it needs a shift in perspective for all stakeholders – teachers, students, parents, and others in the education space. It’s not easy, as many edtech startups that plunged into online learning discovered.
Despite US$15 million in funding and a seven-year run, for example, iProf never found a sustainable model and had to shut down. There have been others like Purple Squirrel who burned through millions in funding without ever finding the elusive keys to monetization and profitability in edtech. Carnegie Mellon University engineer Shabnam Aggarwal said after closing Kleverkid that she “came up short” when she tried to answer the question why it was “not making enough money fast enough.”
Having a price point which actually factored in what we paid our mentors and our operational and marketing costs made sure that we proved the right market.
So what worked for Springboard?
One of the most important decisions Gupta and co-founder Gautam Tambay took in the early days of their startup was to charge their users. In December 2014, they came up with their first paid learning programs. One course was priced at US$300 a month, and another at US$400.
“Having a price point which actually factored in what we paid our mentors and a reasonable fraction of our operational and marketing costs made sure that we proved the right market. You could heavily subsidize it and sell those at US$100 to begin with but later when you actually raise the price to US$400, you might find that there are no takers for it,” Gupta explains.
If they had launched the courses at a much lower price, they might have signed up more students and miscalculated the market to be much larger. Remember this was in the time of ‘irrational exuberance’ in 2014 and 2015. “We might have gone down the wrong path, building something which wasn’t viable,” Gupta says.
“Instead, we proved that there are people who are willing to buy this offering at the pricing where we can be economically viable.”
A lot of consumer-facing startups in India went on a customer acquisition spree and made the mistake of luring in users with. “While the discounts lasted, consumers flocked to them. But when they rolled back the discounts, people became less interested in buying those offerings or shifted to other platforms which were offering discounts,” Gupta says.
The triple play
Gupta says Springboard got three things right after a few iterations: the verticals it launched courses in, its one-on-one mentoring model, and the community it built – both alumni and mentor networks. She elaborates on what worked for Springboard:
1) “Identify a real pain-point. Yeah, I think that’s the main thing,” Gupta takes a minute to think about my question before saying this. “Spot the right area to launch a product. Identify where people feel a pain they would be willing to pay for.”
Springboard picked data science, business analytics, and UX design as the subjects to focus on. “Not only are these areas advancing very rapidly, a lot of companies want people with these skills. A lot of people want to learn these skills to get better jobs. But it’s not overcrowded yet because it is still early enough,” Gupta says.
2) Springboard also fine-tuned its model to give more value for the learners. If you sign up for a course or workshop, besides study materials, you also get paired with an industry expert who will mentor you one-on-one. “That resonates a lot with our audience, who are mostly early to mid-career professionals between 25 and 35 years of age. They are more flexible and also derive value from interactions with experts. Personal mentoring, having somebody who can answer the questions that they have and give appropriate feedback or advice helps them in their career trajectory,” Gupta says.
According to her, this level of human interaction and accountability increases the effectiveness of online education. “Springboard has a completion rate up to 10X more than the traditional online courses,” she says.
3) Over the last two years, Springboard has built a mentor community of close to 350 industry professionals from some of the biggest tech companies in the world – Google, Facebook, LinkedIn, eBay, and so on. “People who are learning new skills and trying to break into a new industry enroll with us, complete courses and find new jobs, and then they come back and help the community as alumni. It’s almost like building your professional network in a new field, which is very valuable to these people,” Gupta says.
Learners on Springboard spend US$500 to US$2,000 a month. And they stay for three to six months, depending on the course they signed up for. “The lifetime value (LTV) is US$1,500 to US$6,000. It’s pretty good LTV. Our gross margins are almost 70 percent after paying a third to our mentors,” Gupta says.
Springboard has a team of 30 people currently. “Even after you take out the marketing costs, we have enough left to support our operational costs.”
The experimentation phase
Springboard began as SlideRule, an aggregator for online courses, way back in July 2013. Gupta and Gautam Tambay – a Wharton School alumnus who worked with adtech company InMobi – were fascinated by the MOOC (Massive Open Online Courses) movement in the US, wanted to be part of the transformation, and built SlideRule.
If you are getting 20X more interest, there’s clearly something here. We were a little slower than we should have been in pursuing that hypothesis.
SlideRule would collect data about all online courses and present it coherently for learners to compare and choose from. A few breaks – for example, a Wharton professor emailed his entire online class of around 40,000 students about SlideRule the day it launched – helped it nab users, mentors, and angel investors.
“We’re in it for the long term,” I remember Gupta telling me just after SlideRule got some angel investors in early 2014. SlideRule had just started curating sequences of online courses to help learners pick up tech skills like data analysis and web development back then.
The team was already looking at introducing mentors to learners and connecting with employers when it got picked by Microsoft Accelerator. By the end of 2014, they launched mentoring as a key part of their curated learning programs.
“We kept talking to our users about how each version was working and what their pain-points were. We were evolving and adapting our model based on their feedback, till we came to our current model, which is mentor-guided online learning,” Gupta explains.
Lean, mean startup machine
For the first ten months, Gupta and Tambay bootstrapped with just interns, freelancers, and designers. “We didn’t have specialized skills. Mostly, we were working with just our common sense. We were not paying ourselves. Our spouses were supporting us. We were paying very small salaries to interns. So the quality of work was poorer. Our product was quite shabby. But we kept at it, kept working harder, and working from first principles,” Gupta recalls.
Among the investors who backed it were co-founder of LinkedIn Allen Blue and founder of The Princeton Review John Katzman.
The team got emotionally attached to the first couple of versions of the product – the aggregator and the recommendation engine for online courses. “We continued to invest our engineering resources in building and maintaining it long after we had enough evidence that this is not the big opportunity that will make our business. There was a period of almost lack of focus and not utilizing our resources in the best manner. We should have moved on from it faster. I count it as my personal mistake,” Gupta tells me.
The company saw a surge in the number of users when it made its first pivot from just an online courses aggregator to offering curated learning paths.
In the first six months, with the aggregator model, they saw about 50 users a day, which grew to a few hundred, and then peaked at around a few thousand users a month. “But when we launched our curated learning paths, we hit top of the charts on Hacker News and so on. In a single day, we got 20,000 users and our servers crashed.”
“If you are getting 20x more interest, there’s clearly something here. We were a little slower than we should have been in pursuing that hypothesis. We should have completely pulled out all of our resources from the aggregator, gotten rid of it, and devoted our attention in the new direction.”
After a loose network of successful entrepreneurs angel-invested in SlideRule, Gupta and Tambay hired a CTO and an operations head in San Francisco. The angel money allowed them to launch their paid pilot. “If you are charging somebody US$300 or US$400 a month, you better give them quality and service that will make them want to pay for the product. So we couldn’t be very scrappy and shabby anymore,” Gupta says.
Springboard shifted its headquarters from Bangalore to San Francisco shortly after it raised seed funding. Among the investors who backed it were co-founder of LinkedIn Allen Blue and founder of The Princeton Review John Katzman.
Apart from Allen Blue and John Katzman, its backers include founder and CEO of InMobi Naveen Tewari, Wharton School professor Kartik Hosanagar, 500 Startups, and Blue Fog Capital. SlideRule rebranded as Springboard in December 2015, after pivoting to the current mentor-guided model of education online.
All of Springboard’s user-facing functions, including marketing and operations, are based in the US. Its engineering office is still in Bangalore.
Globally, funding for edtech companies fell sharply in 2016 after rising steadily for three years. But it has picked up again this year, according to data from CB Insights. For example, online learning platform EverFi raised US$190 million in its series D round of funding from investors including Jeff Bezos and Eric Schmidt this April.
This year saw four edtech IPOs, including three Chinese companies.
- Retech Technology
- SchoolPal Online
Springboard is now mulling the next phase of its growth, which might come through strategic partnerships with companies and universities to offer co-developed programs. Or it might come by expanding its programs to corporates. So it could move from its business-to-consumer (B2C) model to a business-to-business (B2B) model.
“What got you here will not always get you to the next level,” Gupta says. “It could take a different kind of problem-solving to build for that next wave of growth.” This belief is core to the company – continuously iterating, testing hypotheses, executing, and then moving on to the next problem to solve.
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