SaaS Interviews with CEOs, Startups, Founders
955 How Skillshare Doubles YoY to $30m+ With Huge Content Library
06 Mar 2018
Chapter 1: What is the main topic discussed in this episode?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Michael Karjanapakorn.
He is the founder of a company called Skillshare, which is a learning community for the new economy. Michael, are you ready to take us to the top? Yes, for sure. Thanks for having me. Good, you bet, man. So tell us first, what is Skillshare doing? What's your business model? How do you make money? Yeah, so Skillshare is a website where you can take online classes.
So it kind of works similar to Netflix, where you can take 17,000 online classes for about $10 a month. And we really specialize in professional skills within creative business and tech. So our business model is description. So we take a percentage of that, which is how we make revenue. And so is it a pure SaaS player? Can people buy one-off courses? Pure SaaS.
So the idea for us is as we add more classes to the platform, it becomes a much better value for students. So in the early days, we're offering like 100 classes for $10, and now we have 17. I think in the future, we'll have hundreds of thousands of courses. And so what's the average customer paying you per month, would you say? So you can, it's either $15 a month or a hundred dollars a year.
So about half of our users opt into one of those two plans. So we could say it's somewhere between, well, so what, probably about 11, 12 bucks a month, something like that. Yeah. Yeah.
And what is the, have you seen a direct, before we get more into your backstory, I'm curious, have you seen a direct correlation to increased retention as you have, as you have like significantly grown your content base? Yeah. Yeah, for sure. So every year we're seeing the amount of what we track for engagement. It's like minutes watch.
So every year as we have more content, we see that number go up, which also drives up engagement and drives down revenue churn. So we definitely see a correlation for sure. So how many minutes does somebody have to watch per month where you're like, I know for a fact they're sticky and they're paying again next month? About an hour, which is roughly maybe one and a half classes. Okay, interesting.
Give us more about your backstory. When did you launch the company? Yeah, so my backstory, I was born here in the U.S., but our family moves to Korea. So that's where I went to elementary school, moved us back here to go to school here in the U.S. And, you know, did everything you're supposed to do, went to University of Virginia, which is really, you know.
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Chapter 2: What is Skillshare and how does it operate?
So I look at those two opportunities kind of like getting an MBA in startups and then started Skillshare. What year was that? I started working on it in 2010, and then we launched it in 2011. And the idea was to provide access to learning, especially learning around real-world skills that were needed in the new economy. And what is the, like, why go into it? Like you, you're younger.
How old were you in 2011? Um, I'd say maybe 27, 28. So are you, are you single or do you have kids?
not single but don't have kids okay so okay so yeah in a relationship but no yeah so you you still generally have like almost complete freedom like why decide to go into a space where your moat is not going to be a technical architecture it's going to be how much quality content you can get yeah that's a good question i think you know you know i think when i when i was thinking about what to do next i had an excel file with like over 100 different business ideas wow and
And I had a really hard time filtering those down because some of them were really good. What were your top three? Obviously, this was one of them. One of them is not tech-related. I wanted to start a Soho house. In New York, there's a private members club that launched it around the world. I realized I have no experience in real estate whatsoever, so that was not a good idea.
And I think we had another... I can't remember the other one, but... And to narrow that list down, you know, the filter I had is like, would I be able to work on this for 10 plus years? And narrowed it down to things that are very impact and mission driven. And it's even better if we can launch a for-profit for a good company. And I was also really passionate about education.
And that's what led to the formation of Skillshare. As far as the defensibility, so we do look at it in two or three different ways. One is two-sided network effects. So leveraging the internet, you have two-sided marketplace. One side pulls the other. And on the tech side, we do invest a lot to data science and machine learning.
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Chapter 3: What is the business model and pricing structure of Skillshare?
So as people use it, we invest a lot into personalization. So those two things working in unison together is how we create our mode. Also, we have a strong brand and we have great value and all those things, but we really focus on two-sided network effects and data science. Give us an update where you are today. How many folks do you have paying for the platform every month?
We have about 3.5 million registered users, 17,000 online courses, classes from about 5,000 teachers. We're pretty much half of our user base is international. Business is doing really well. We're doubling year over year. Revenue is way above $10 million. Um, so it's doing really well. I think the next, uh, stage of the company is really around growth and scaling.
So I think, you know, the early days was around the product market fit. And then we started figuring out how to lay down the foundation of scale. I'll say like we are, we are in that, you know, scaling phase right now. Are you over a hundred thousand folks paying yet? Yeah, you are. Okay, great. But can you put a cap on that? Like below 300,000 below 500,000? Yeah, below one of those two numbers.
Okay, good. Vague enough where your competitors will still be wondering. Yeah, so vague enough where I'll let everyone's mind wander a little on what they think that number is. That's good. That's good. That's good. That's good. No, yeah, congratulations on that.
So, yeah, I mean, look, at a minimum, if you've got 100,000 people at $12 a month, obviously people can do the math and kind of back a little bit into why it's easy for you to say you're well above $10 million in ARR at this point. Tell me more about the data side of this.
So when you have video and audio content in your platform, are you doing things like transcribing it and then actually using your search and recommendation algorithms tied to the actual text data? Or do you have something that ties directly into the voice data? We do some of that.
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Chapter 4: How does Skillshare measure customer retention and engagement?
What we really look for is quality content, right? So we look at engagement within classes. So let's say you upload a class and, you know, 10 people watch it, but they all watch the whole thing. So we can signal that that's pretty good.
And based on, you know, another user's past viewing history, let's say you're really into, I've seen your background, you have like psychology, let's say you're really into that. we can pull that class out and recommend it to you because we feel pretty confident it's really good. And if you like it, then that class funnels all the way to the top. So that's one example on the class layer.
But our vision is to create what we call this ecosystem for the new economy. So we want to add a career layer where we can start recommending jobs, other pieces of content for you, other people you should interact with. So the idea is that we can create this personalized school for you around everything you want to learn. and who you want to interact with. So that's kind of the vision.
And that's where a lot of the data machine learning comes into play. And these kinds of companies, content companies specifically, it's always a struggle. I mean, you've got a massive, obviously, content base, but churn is always a struggle. I mean, it's hard, especially at this kind of price point.
I imagine you're mainly probably selling to consumers or people just out of school wanting to educate, maybe not a ton of income they can just throw away. What is your annual retention right now? And what are some things you're doing over the next year or two years to drive that up? Yeah, so our annual retention is pretty high.
I think when we look at the retention curves, they all start flatlining at a certain point. Every year, the retention point is pretty good, I would say. For B2C, so I think when people think about subscription churn, a lot of what's written out there is about SaaS churn. So those are B2B, especially enterprise. So you're looking at 1% to 2% annually, which is really good.
Consumer is much different. So I think a terrible churn for consumer subscription business would probably be 15+. You're talking 15% low, like people churning or the revenue that make up those people? either. We track the subscriptions because we don't have different price points. We just have one. We look at subscription churn. 15% per month is really high. 10% is okay.
I think 5% is world-class. 5% monthly churn for consumer business is great. You can really build a humongous business doing that. I think David Pakman, who's a VC at Venrock, wrote a great article on consumer subscription churn.
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Chapter 5: What is the backstory of Skillshare's founder?
So I would say we're definitely, you know, in the single digits for monthly churn and improves year over year. But yeah, it really comes down to engagement, right? So people don't use your product, they're going to cancel. Are you sub 5% monthly yet? Are you world class or almost there? I would say we're within spitting distance of getting there. What do you do?
Like, that's what I'm interested in. You've already gotten churn kind of down below 10%, not as low as 5%, below 10% monthly. What are like the other levers you pull to go from 8% churn down to, you know, five? I mean, a lot of it's just engagement, right? So, I mean, it's just about getting your, you know, people use the product and finding value.
Obviously there are a lot of growth hacky things you could do there as well. Like you could, you know,
Um, you know, there, there are little things you can do to drive churn down, like, you know, swipe people, you know, if their card bounces, swipe in on the first or 15th, you know, when they're getting paid, um, there's little things you could do that, that might get you, you know, uh, some, um, like incremental improvements in churn, but the big stuff, function changes in churn or, or just core product experience.
Yeah. Have you bootstrapped this or if you raised capital? And if so, how much have you raised? We originally bootstrapped it. So we launched Skillshare with less than $25K. Your own money? Our own capital. Honestly, we only spent probably $5K of it. And then to date, we've raised about $25 million to date. And who's we? What's the founding team look like?
So I started this company with a co-founder named Malcolm, who was more of a technical background. I did more of the product design business and I guess today we're about 50 to 60 people based here in New York and with a distributed team all around the world. Sorry, how many of the 50 to 60 are in New York? All of them and the rest are distributed or?
Um, I would probably say like 89% of companies based in York and 10 to 20% are distributed. Okay. Got it. Talk to me more about, uh, about how you're winning these consumers over, you know, a tree house on the coding side or Udemy on the, you know, business side or creative live on the creative side. Like how are you winning these sectors? I think one way to think about it is just our audience.
So we focus on what we call the independent class. So these are, you know, either, you know, independents, entrepreneurs, small business owners, freelancers. And, you know, there's two concentric circles. The other are millennials. So we feel like we built the best product and the best ecosystem for that audience.
And the second one is just kind of like when, you know, you asked me earlier about moats, you know, Because what we do is digital content, right? At the end of the day, it's just an MP4 file that we're delivering. You know, if you really strip out what, you know, that it's a class.
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