SaaS Interviews with CEOs, Startups, Founders
EssayJack Raising $2m on $8m Valuation, $250k in ARR
21 Dec 2020
Chapter 1: How much funding is EssayJack raising and what is their valuation?
We're raising 2 million USD and this is our seed. We're now saying, okay, we've gone through all of the sort of depths of despair and now we'll be a more straight up sort of ed tech company with external investors. You are listening to Conversations with Nathan Latka. Now if you're hearing this, it means you're not currently on our subscriber feed. To subscribe, go to getlatka.com.
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Chapter 2: What challenges did EssayJack face before becoming an EdTech company?
We've got to grow faster. Minimum is 100% over the past several years. Or bootstrap founders like Vivek of QuestionPro. When I started the company, it was not cool to raise. Or Lookers CEO Frank Behan before Google acquired his company for $2.6 billion. We want to see a real pervasive data culture, and then the rest flows behind that. If you'd like to subscribe, go to getlatka.com.
There, you'll find a private RSS feed that you can add to your favorite podcast listening tool, along with other subscriber-only content. Now look, I never want money to be the reason you can't listen to episodes. On the checkout page, you'll see an option to request free access. I grant 100% of those requests, no questions asked. Hello, everyone. My guest today is Lindy Lidahowski.
Now, she was a former English teacher and then English professor in Canada before becoming an EdTech CEO for academic writing software platform EssayJack. She's won numerous awards for teaching, research, and publications and is now an award-winning entrepreneur.
She's published both peer-reviewed scholarship and popular pieces on writing and offers keynote addresses on webinars related to EdTech, leadership, and academic writing. Dr. Lindy, you ready to take us to the top? I sure am, Nathan. Let's get going. All right. So my first question with a tool like this, SA Jack Cummins, is who are you selling to?
Because if you're selling to students, you got to figure they don't have much money. Yeah. So that's a really great question. And there are two answers to it. So one, depends what student you're thinking about. So typically, if you're thinking about the North American students straight up, you do have to have a certain kind of price sensitivity. Absolutely.
Particularly at college and university level. If you're thinking about other regions in the world, so particularly let's look at Asia, where English language learning is huge, parents have a different attitude towards the investment in their child's education. So while there's still certainly a price sensitivity, the expectation that
supplementary educational tools will be part and parcel of their child's education is a little bit more standardized than we typically see in a North American context. So yes, you got to sell to students and watch the price. Depends on where you're selling in the world. And then, of course, we also sell institutionally. So what do you sell for? What's the average customer paying per month? Yeah.
So if it's just a student straight up, they're paying $9.99 a month or they're paying $99.99 a year. If it's a bulk license at a school, obviously you have lower pricing on a per seat basis, depending on what that institutional license looks like. When you look at just last month's revenue, what percent came from bulk deals where it was like a school credit card paying you, right?
Or an accounting department versus a direct consumer sale? Yeah. So interestingly, COVID is just weird. So the trends that we're seeing this year are not always the same as we see in previous years. So this year, it's a little bit more of a 50-50 split between our B2C or the direct-to-consumer and B2B, which is the institution. But in previous years, it's been more of like
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Chapter 3: Who is Dr. Lindy Ledohowski and what is her background?
So the total equity in the company to get us from sort of, hey, this is an idea, let's get going. It's about 1.5 million USD. But Dr. Lin, I'm curious how you structured this because you used the word shareholder loan. So it's being paid back, correct? Or do they actually have equity? So we have equity in the company as the founders as well. Right now, it's...
just structured as a straight up shareholder loan. Once we do an external raise, we may convert that loan into equity. Oh, I see. Yeah. So our principal focus at the start was, look, we've invented an entire new category of product. We don't actually know if it's going to work, but we believe in it so much that we're going to put our money where our mouth is
and really see where this takes us, as opposed to the more typical startup approach, which is, I'm going to spend somebody else's money. But then you're also driving somebody else's ship with various other co-pilots. And our focus was, well, we actually know the education business.
And so we need to be able to respond in real time to unexpected things along the way as we figure out this business and this product. And we're not 20. So we said, you know what, let's put some real dollars into this and see where it takes us. And what interest rate did you run that loan, if any? None. Right now, it just sits there as a loan on the books.
So it's literally you and your co-founders, or how many co-founders, two? No, just there's two of us in total. So myself and one other co-founder. So you two together put in $1 million into the business of your own capital, structured as a loan, so you can get it paid back out at a future date if this thing works. And then you raised $350,000 officially in early 2018 from equity investors.
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Chapter 4: Who are the primary customers of EssayJack and what are their needs?
Yeah. I see. Okay, very cool. Okay, let's jump back into the business. By very cool, do you mean very terrifying? Well, tell me about that. What was terrifying for you? Yeah, I mean, well, it really is. I mean, we had the long, hard conversations about the two paths we could take. And as I say, it was the one path was get... investment in early and give up a larger stake in the company.
Or the second is take on a huge amount of personal risk. And again, the risk is that that million dollars we've put in never gets paid back. This fantastic idea that we're seeing making a difference in people's lives fails. That's always a possibility. And you have to kind of dead okay with that. And that's tough. Yep. No, it's tough.
It's part of the slog, but you know, if it works, it works big for you guys and you still have total control. So let's talk about growth, right? So today, how many students do you have actively using the platform on a monthly basis? So over 30,000 students on a monthly basis are our active users. Okay. That's incredible. And how many of them have you converted to paid?
Probably, no, I should have looked at my data just before coming on. A range is fine, yeah. Yeah, yeah. I would say that's probably about maybe 50% of those are paying users. And then some of those are, say, in an educational institution. So they might be on a free pilot now, but they're sort of in a sales funnel. And our hope is that we'll move them forward and close that as an institutional.
How many consumers do our students directly pay you? So not through a school's bundled package. Yeah. So that's where right now it's quite small. So our monthly individual subscriber is think around 1,000-ish.
And that's what we've really just been launching in response to COVID, to give people that flexibility to say, hey, don't wait for your teachers or your institutions, but you can also make sure that you're prepared for college and university with software that can help you, even if there are gaps in what's happening in terms of face-to-face or what's happening in terms of
And sometimes students just find it hard to learn by Zoom if that's all they're getting. And so we're finding that they're turning to us as a trusted resource. No, I love that. Now, can I take $1,000 paying you directly times sort of that $999 price point? You're doing about $10,000 a month direct to consumer, which you said is 50% and another $10,000 a month in the bulk deal.
So $20,000 a month total. Yeah, that sounds about right. That's great. Okay. So this is not easy. I mean, getting your first 10 grand, 20 grand a month in sales is not easy. A thousand individual customers is not easy. How'd you get the first hundred? Yeah. You know, we basically beg, borrow, and steal. Ultimately, we counted and we still count on word of mouth.
So we have essentially a kind of nothing marketing budget. And so it's myself and one other person and we're out there sort of slogging content is essentially the key is what we realize is that really having a content strategy that says, like, look, so we've got this software that adds real value if you have to write in English, but we've also got ebooks and blogs and video resources and
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Chapter 5: What pricing strategies does EssayJack use for different customer segments?
I'll do webinars, things like that. We've got an ecosystem of people who are connected with us, whether those are students or parents or educators, where our aim is really to add value. I could have spent my life teaching English at university. I had a tenure track job. That's the kind of job for life. So I could have done that.
And I said, well, actually, if we take this gamble and develop software, that's far more scalable. I can take the things that I was enough to learn and master as a scholar and teacher myself, and I can digitize it.
And then it levels the playing field so that if somebody happens to not have the good fortune of, say, being in Dr. Lindy's class, they can still access the skills and the tools and the tricks of the trade that I'm able to make available for them. And so that's a roundabout answer to say content is
And providing really valuable content is the way that we got those first hundred individual customers. But that's also the way that we've been able to get into schools, colleges, and universities as well. I'd love to get a specific there so people can really feel like they know you. So the first 10 customers or the first piece of content you wrote, what was the title? Yeah.
Yeah, so in terms of the very first customers, what often I would do would be I'd go and do, this was pre-pandemic, I would do a free web or a free in-person workshop on writing. So it would be touted as a writing workshop. I'd show up at a university. Who's marketing it? The university's marketing it? Yeah, so the university would market it.
So the department, whatever department it would be, social sciences would or English department or a writing center. And I would essentially, and that would be a thing that I would offer them, which is here are the principles of good writing. Here's how you structure academic writing. This is what people are looking for.
And then from that, we'd have, at that point, we'd have sort of 65% of the people who are in that workshop sign up for an essay jack trial immediately. And what we still find, so now in this sort of more digital world, context, I'll still, I'll say partner with an organization. So I did a webinar this summer with Tro Writing Aid, which is an online sort of text editing software.
And I did a webinar with them on the principles of academic writing, particularly for graduate students.
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Chapter 6: How did COVID-19 impact EssayJack's business model and growth?
So I was like, how do you write a thesis? How do you write a master's thesis? What are the component parts? So what do you put in a lit review? What do you say in a methodology section? So those are things that for that particular audience,
you know, if you're a master's student, you've just graduated from your BA, you don't know what to do in life, you enroll in a master's program and now you have to write a thesis. Nobody's ever trained you and you kind of have to learn along the way. So if I can demystify that and do that in a webinar, And then people are like, oh, okay, let's check out the software.
That's sort of a real-time use case very recently. And Dr. Lindy, talk to me about the team that you've used to build this. How many people on the team today? Yeah. So right now it's myself and five other people. So there's six of us. So we've got a product owner. And so he kind of straddles the line between the tech and the business side.
There's one girl who helps me with the marketing client support. everything that's non-tech. And of course, we also show up to all of our tech meetings. And then we have three full-time dedicated developers. Oh, okay. You have three developers. That's great. And any quota-carrying sales reps or no? You're doing all the sales. So right now, I'm doing all the sales.
We're in the middle of our very first external fundraise. And the number one person I want to hire is somebody to do sales. Because to be honest, it's really time-consuming. And I'm doing... six people's jobs with sales only being one of that. And that's really hard because ultimately, we know that to be successful in sales, you have to develop relationships with people.
In order to close those deals, they really do need to feel as though you've heard their needs and you're able to provide something that answers their needs. And I truly believe that. But sometimes it's hard when I'm like, talking to investors and I'm talking to tech and I'm building out blogs and I'm doing webinars to also call up and be like, hey, so ready to close that deal.
You're rocking all the hats. I love that. You mentioned you're raising now. How much are you looking to raise? We're raising $2 million USD and this is our seed. We're now saying, okay, we've gone through all of the depths of despair and now we'll be a more straight up ed tech company with external investors and
We have fewer questions about what that path and that direction forward is going to look like than we had when we raised our friends and family round. And what valuation are you hoping to raise the $2 million on? Obviously, you've got to negotiate it. What's your hope? Yeah. So to be honest, it'll probably be in the ballpark of around an $8 million USD, give or take. Pre-money or post?
Probably pre-money. So eight post, if you can lock that in. And you will do then a price drawn. That won't be an $8 million cap on a safe or something. No, no. Yeah, okay. And how much of that, would you use some of that two million to pay back the owner loans of a million? Not at this point, no, no. The expectation in terms of payback of that shareholder loan is like at an exit.
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