SaaS Interviews with CEOs, Startups, Founders
1638 How He Makes Universities More Money By Keeping Students From Flunking
18 Jan 2020
Chapter 1: What is StudyTree and how does it help universities?
helps colleges make more money by making sure students keep paying ie they don't fail out using a predictive model he's built called study tree they've got over five customers now you know each paying five six grand per month on average to call it 30 grand per month today in terms of run rate up from five grand a month about a year ago they're about break even today raised 35 grand about to go out and raise 750 grand on a convertible node i call it maybe a six cap or seven cap with a 15 to 20 discount team of six spread out remote locations
Hello, everyone. My guest today is Ethan Kaiser. He's the CEO and founder of StudyTree, an app leveraging artificial intelligence to provide students with a mobile academic assistant. He received his BS from Drexel University in 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 StudyTree do and what's the revenue model?
Chapter 2: What challenges do students face that lead to high dropout rates?
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.
Chapter 3: How does the predictive model of StudyTree work?
And we can actually predict the risk of a student at a university. And we've been selling this directly to institutions where 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 enterprise license.
Yeah. 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.
Chapter 4: What is the revenue model for StudyTree and how much do universities pay?
We charge a per student fee.
Would you say for a fair average for you would be about call it 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 want to go into every cohort. If I pay 70 grand a year, about how many students do I probably have?
So in the first term, okay. So yeah, for if 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, on a ton of timeline for us. When'd you launch the company? What year?
So we launched the company in 2016. Our first product, we pivoted away from, and we started working on this. Our business model completely changed. So 2016 is when we started. 2017, we got our first customers. And then now, 2018, we're growing.
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Chapter 5: What was the journey of launching StudyTree and acquiring initial customers?
That's great. How many customers have you scaled to?
You know, we don't really share that information often. We have more than a few, so more than five universities, but it's between five and 20, 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 you at 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. Got it. 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, uh, MMR.
Okay. So maybe 5,000 months, something like that. Yeah. And how, tell me that story. How'd you get your first customer?
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Chapter 6: How has StudyTree scaled and what are the future plans for growth?
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, what 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 three Oh, 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 I was like, this is something we need. And as a bad student to identify, if I was a great student, I probably wouldn't identify the problem. Yeah. Yeah.
What sport did you play?
I was a wrestler.
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Chapter 7: What are the funding strategies and financial outlook for StudyTree?
Um, and then we got to revenue. And we haven't opened up a 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 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 or are you cashflow positive today?
Uh, we are making enough money to survive. So cashflow positive.
Yeah. So we should call it break even. Yeah. That's good. And where's all, 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 cause we're starting the fundraising process. So I wanted to get like a few months early and start building these relationships. So then I opened the round. It can move quickly.
That's great.
Any turn to date or no? Uh, we have one customer churn.
Okay.
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Chapter 8: What advice does the guest have for aspiring entrepreneurs?
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 really hard to describe what our cap is.
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 big tough point. Yeah. Yeah. So like actually the price point, by the way, is not what makes the cap hard. It's just the fact that your cohort is so small.
There's only five and you've only been in business for like a year.
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 around how much do you want to raise?
It's cutting it now, but I think you asked me how much am I looking to raise? So 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, 3 million in revenue in the next 18 months. And I thought that was pretty, that's a very honest prediction just because I've been integrated in these conferences and this kind of these circles.
Higher education is kind of like healthcare. Once you break in and you have impressive white papers and can prove product efficacy, they grow pretty quickly and universities don't really compete against each other and 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?
Yeah, I mean, I think we could do this. You know, you can do valuation or you can do like a convertible note. I was thinking doing a convertible note at a $6 million cap with a 15 to 20% discount. I think it's very fair given everything we've done so far.
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