This Is How Growth Hacking Got Udemy To A $6 Mil Run Rate – with Gagan Biyani

Hit play on this interview and you’ll see how a growth hacker figures out what product to create and finds customers who are willing to pay for it.

When Gagan Biyani cofounded Udemy he had no idea how to turn it into the multimillion dollar education marketplace that it is today. But in less than 3 years, he and his team did it. And he got so good at it that he’s now running the Growth Hacking Conference. So how did he do it? Like I said, hit play and you’ll learn his story.

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Gagan Biyani, Udemy

Gagan Biyani was the co-founder of Udemy, a marketplace for online learning.

 

Raw transcript

Mixergy's audio transcription is done by Speechpad

Andrew: Coming up, imagine you’re building an online education site, and you need to find the one topic that generates the most revenue. What topic would you say that is? I mean, really think about it. Put yourself in the entrepreneur’s shoes, who has to figure out what that topic is. What would you guess it is? You’ll get the answer for today’s guest in a moment. Also, if you were building a marketplace, and you had that usual chicken and egg problem; can’t get enough of this group of people unless you get enough of that group, but that group won’t come unless this group comes. You know, the standard problem. How would you solve it. Challenge yourself to think about that, to come up with your answer. And in a moment, you’re going to hear about the one partnership that solved it for today’s guest. Also, what do you think is the big no-brainer decision for a start-up entrepreneur? Today’s guest will tell you towards the end of this interview, so watch that and so much more, coming up.

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All right, let’s get started. Hey there freedom fighters, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambition upstart. How does a growth hacker figure out A) what his product is, and B) how to grow his customers? That’s what we’re going to find out in this interview. Last time he was on Mixergy, Gagan Biyani talked about how he raised a million dollars for his company. Well, soon after that, he and I had coffee privately and he admitted to me that when he did the interview, he didn’t even know what to spend his money on. He didn’t know what his product was, he didn’t know how to grow his business, he didn’t know much. Since then, he seems to have figured it out. I invited him to talk about how he did it. Gagan is the co-founder of Udemy, a marketplace for online learning that has been doing incredibly well, as you’ll see in this interview. He’s also the co-founder of Growth Hacker Conference, which if you’re interested in this interview, you’ll probably want to attend. Gagan welcome.

Gagan: Thanks Andrew, really excited to be back on the show.

Andrew: The day that you left, and you’re no longer at Udemy, no longer working there, what was the monthly revenue at the time?

Gagan: I think we were doing about $300,000 a month in sales.

Andrew: $300,000 a month in sales.

Gagan: Yeah.

Andrew: And the typical course was what?

Gagan: $50 maybe.

Andrew: Somebody paying 50 bucks to learn about how to do Word, how to do interviews like me, whatever.

Gagan: Yeah, I mean, probably the most popular courses were “How to Learn Excel,” and then a whole slew of courses after that were “How to do Development,” web development, iOS development, etc., and you know, business advice as well.

Andrew: You’ve got to tell the audience what the guy who teaches “How to learn Excel,” what kind of revenue he generates. That’ll blow their minds, because they’re going to look at the site, at Udemy and say, “oh, that course must be making a lot of money, the one about business, and startups, and software, that all must be doing…” But Excel’s doing well, how much from Excel?

Gagan: Yeah, so the guy on Excel, in one day, we discovered the strategy really early on, we’ll talk about it in the interview, I’m sure, but doing daily deals, essentially leveraging, you know, Groupon, Living Social…

Andrew: Don’t reveal too much, otherwise, I want to actually, it’s not, all joking aside, I really want to understand it step by step. I don’t want to make it sound so simple, I just want to know, like how big does one course get, so the audience sees, this isn’t a tiny company, Udemy that we’re bringing on. This is a guy who’s, I mean, you guys have done really well in a very short amount of time.

Gagan: Yeah, I know that the course has done over half a million dollars in sales.

Andrew: OK. I have since found out that he exceeded a million dollars in sales.

Gagan: Yeah, I was going to say, I’m pretty sure it’s exceeded a million dollars.

Andrew: The very first course to do a million dollars was Excel, “Learn How to do Excel, Microsoft.” Alright, let’s go back in time and really understand how you got to that, to a place where even one course can do that much, and you guys have tons of courses on the site. So you raised money, most people would think, “Gagan got it figured out, online learning, we understand the model, we understand that he’s got a million dollars, what’s the problem?” What problem were you having?

Gagan: Yeah, I mean, honestly we had pretty much nothing figured out at that point. We didn’t know who our customer was, we didn’t know what product they were willing to buy, we hadn’t even ever sold a course yet so we didn’t know whether or not they were willing to buy any product what-so- ever in the online education space. And because the market was completely new, most people thought that, that we would have to go free, and basically try to get as many users as possible. Not saying that wouldn’t have been a good decision, but you know, we ended up trying to provide as much value as possible on paid courses and being very successful that way.

Andrew: OK. So then what’s the hunch that you thought, what did you think was going to be the model?

Gagan: Yeah, you know, we thought that we would convince experts who knew, had a lot of domain expertise, and had an online brand, to build online courses, put them on Udemy, and promote them to their own audience.

Andrew: I see.

Gagan: And that they would be able to make money that way.

Andrew: Even right from the beginning you assumed whoever’s creating the class is going to be the person promoting the class for us? We’ll collect a share of the cash for facilitating the sale, but they’re going to keep the bulk of it, and they’re going to do the promotion?

Gagan: Yeah, that was always the plan from the beginning.

Andrew: OK. So what’s the first step that you took?

Gagan: The first step that we took was trying to meet with as many potential instructors as possible. So what we had was, we hired a team of interns to basically, and then eventually we used outsourced labor in the Philippines, but it’s effectively the same thing, who would basically mass- email potential instructors in categories that we felt like were a high value, you know. Honestly those categories were made on a hunch, so it’s not like there’s a lot of signs there, but and then we’d mass-email these instructors and we’d get on the phone with them via Skype usually, similar to this interview, and convince them to teach a course on Udemy.

Andrew: I’m sorry, going back, didn’t you, did you start off with this team of interns, or can we take even a step further back where you were trying to figure it out where, I actually heard from the pre-interview that you did with Jeremy that you talked to, let me see, you were going to do multimedia in the classroom, you were going to, you got a school to grant a credit for any teacher that was teaching a course that you guys were going to put together. Is that the first thing that you did?

Gagan: No, no that happened by accident really, to be honest.

Andrew: So first it was just getting interns, and calling up people who you thought were teaching classes that were valuable. How did that work out?

Gagan: Yeah, I mean so before the interns, I did it myself, for about 2 or 3 months, you know, before we had even launched the product. But it’s essentially the same process; it’s just you know, the resources that make a difference. So, yeah over the summer, before we raised the million dollars, we had a team of interns who were basically mass emailing potential instructors, and they would schedule Skype calls on my calendar, and I would spent my entire day, just Skype calling people basically, trying to convince them to join Udemy. And it kind of failed, really.

Andrew: Why?

Gagan: Honestly, we didn’t have enough to offer the experts, they didn’t find enough value and did not believe in us enough to put the time and effort associated into putting a course up, and so we could only get experts who were so desperate for the technology we’d built they couldn’t figure out themselves, and since it wasn’t very hard technology to figure out, you know, it’s just online video, I mean I think we built a bunch of great technology eventually, but at that time, the only really value we were really providing was streaming online video on a pay-wall. And that wasn’t enough to convince people to use the product.

Andrew: OK. Alright, so then what did you do?

Gagan: So we then were lucky enough to raise money. We got enough instructors you know, in retrospect, they weren’t very good instructors, but we got enough instructors off of that to raise a million dollars seed round to convince some investors to back us, and then we went and tried to figure out, “OK, how are we going to get traction, because we have no idea.” And while pitching all these people on, you know, these experts on teaching on Udemy, eventually we stumbled into something. My roommate was, at the time, this guy named Chris McCann, who was one of the two founders of Startup Digest, which is like, you know email newsletter that was basically like, blowing up at that time in Silicone Valley. I think it went, you know, now it probably has over half a million email subscribers but at the time it was like, hitting 100,000, and then 200,000, and it was pretty fun. And we were like, “hey Chris, what if we like, hosted an event, and called it Startup Digest University. What if we created a partnership with Udemy and Startup Digest?” And since he was in my living room, we all worked out of the same living room, it was a pretty easy sell.

Andrew: OK. And the idea there was what?

Gagan: Yeah. So, we couldn’t convince any experts to actually teach courses on our site and yet at the same time, we had access to a lot of great experts, particularly our investors, right? So, we had eleven investors and they were all extremely successful entrepreneurs. We knew we could convince our investors to come and give a talk, right? So, we could convince them to go and speak in front of like 60-67 entrepreneurs because that’s what they do every day, a couple times a week at least, right?

Andrew: Mm-hmm.

Gagan: So, what we did is we’d start a digest. We created this thing called Start Up Digest University, which was an in-person physical course held in Palo Alto. We filmed the course. We invited the speakers to come in, sold tickets for like 30 bucks or something, and that became the first course to be successful on [??].

Andrew: Because Start Up Digest had such a big reach, that they basically sold it.

Gagan: Yeah. Exactly, pretty much. [chuckle]

Andrew: And the course was your investors giving the kind of talk that they might have given at a conference.

Gagan: Yeah. I mean we tried really, really hard to steer them away from the kind of talk that they give at a conference because I think those talks generally are pretty average.

Andrew: Yep. Yeah.

Gagan: Some of them did, of course, and there’s nothing we can do about that, but a lot of them understood what we were trying to do and tried to teach something during their talk.

Andrew: Okay. All right. Do you remember how much revenue you generated from that?

Gagan: Yeah. I think in the first e-mail we generated like $20,000 to $30,000. To date it’s probably been like…That course has probably crossed $100,000 in total sales.

Andrew: How much of that was online sales?

Gagan: It’s all online. We didn’t even…We broke even on the physical event. We probably could have made a lot of money off the physical event actually, but it wasn’t important to us. We just wanted to sell out. So, we sold enough money off the physical event to cover the costs of paying the videographer to videotape and edit the event.

Andrew: Okay. So, what do we prove with that?

Gagan: We proved two things. One, that people were willing to pay for high quality courses from experts on subjects that they…We didn’t know what subjects, but we knew one subject we had [??] correctly, which in this case was raising capital for start ups. The same subject that our [??] interview was on, ironically. Then, the second thing that we learned was we learned that we could use e-mail lists or existing distribution partners as a method for promoting courses that would allow us to scale marketing in the early days much more quickly really than anything else I can imagine right now.

Andrew: Yeah. It was huge. Now, when you saw that the Start Up Digest guys were looking for an apartment, did you intentionally say “Hey, you know what, if I have them move in with me, then I have access to their list?”

Gagan: No, definitely not. I did definitely think hey, you know my pitch to my roommates which were my two other co-founders at the time, was hey we should have Chris stay at our place because he is super well- connected and it will be like a fun little start up house and also it will probably help us with our business in some way. I don’t think I explicitly said “Hey, it’s going to help us with our business.” But, I think everybody kind of realized like, hey this is generally a good thing to have someone who is running another company that is successful living in our house.

Andrew: Got it. Okay. But, what is it about by the way, before I move on with the rest of the story. What is it about entrepreneurs that you raise the million dollars, he has hundreds of thousands of people in his list, and you still have to room up like college kids?

Gagan: I mean, honestly…First of all, you don’t pay yourself a lot when you are early on because you don’t want to waste the money that your investors gave you. But, second of all, I think it was a highly effective way for the team to to work. It was, you know, you wake up…I was actually sleeping on an air mattress until we raised money. So, I was sleeping on an air mattress in their house and I would just wake up and walk 5 feet over and start working on the couch. My co-founders would then come in whenever they woke up. I was a business guy, so I tended to wake up because I had Skype calls at like 9:00 or 9:30. Then, we’d work and they’d work later than me and I’d go to sleep, and then we’d just do it again. Honestly, I think in the early days it’s super valuable to have that kind of connection between the team. Then, more importantly, you just should save money as much as possible in the early days because you never know how long you’re going to be. However, word of advice, being too thrifty is stupid. A lot of entrepreneurs are way too thrifty. The other day I saw a blog posted, someone talking about how he had lived in Silicon Valley for $200.00 for the summer. That’s not cool. It’s not impressive and I’m not excited about that at all. Like, you should spend money to make money. So, we were not cheap when it came to hiring the videographer. We paid him $5,000.00Like, we could have found one that was a lot cheaper, but we knew that we just wanted high quality, we wanted to do well, and maybe it was like $3000. Anyways, it was thousands of dollars. I didn’t have my brother do it. So I don’t believe in being cheap, but I believe in being affordable and comfortable.

Andrew: OK. So now you’ve got an idea of what works, which is having people with brand names, like the speakers who you had. Having a big audience, what do you do next?

Gagan: Yeah, after that we started to just scale it, and so obviously the first thought was ‘OK. We’ve taught raising capital for startups. What other courses can we teach under the Startup Digest University brand?’ We did one on hiring for startups and then social marketing for startups. Those were the next two courses and they did almost as well but not as well as the raising capital course. Sort of, by the time we were on the third one we realized ‘Wow, this is a ton of work.’ Like, wrangling all these speakers together and lining up events is not what I think is the right way for us to actually grow this company.

Andrew: Let’s put a pin in there for a second and ask about a question that will come to someone’s mind if they’re going to try to do something like you, which is Chris could’ve taken your idea and said, ‘Startup Digest doesn’t have enough of a revenue model. Hey, we would can do these courses once a month, we sell our own tickets, and then we sell the videos online, and we don’t need this Gagan guy and his partners. We’ll cut him out and earn 100% of the revenue, and keep 100% of the revenue.’ Why wasn’t that an issue?

Gagan: Well, I think it’s two things. First of all, they did eventually decide that they didn’t want to do online education courses, and did essentially, not cut us off, but cut any promotion off the top of their list, because they cared more about the value of their list. They didn’t want, basically, they thought it was like spamming their list. I highly disagree. I thought the list loved Startup Digest University, and they really had a missed opportunity there. But what did end up happening is AppSumo ended up doing exactly what you’re talking about. And so …

Andrew: They were your second partner?

Gagan: Yeah. Our second big partner did. And Noah’s brilliant and he was smart enough to figure this out. He was like, ‘Wow. These online courses sell really well. We should start doing them on our own.’ And they did. It took them awhile to get to the scale that we were, so they still worked with us for awhile, but eventually it did end up being like one of those things where I think they found they wanted more Apple-style control over the content and the courses they were promoting. And so they did end up doing that.

Andrew: So, was that a mistake then, partnering up with these guys who are aggressive, who are eager for revenue, and could easily copy your model?

Gagan: No. Not at all. I mean, we benefited more perhaps from Noah’s brilliant marketing than he did from our brilliant idea. I mean, I’m sure Noah would tell you he came up with the idea himself. Like whatever, that’s his prerogative, but we were the first online course to be successful on his platform. I know the numbers. And so, the point is, like, we gave him the idea, I think, and he taught us marketing. Honestly, we looked a lot at AppSumo early on to learn how to market and essentially growth hack. I view Noah, though he did no do this intentionally, as kind of like a mentor because we would just follow everything they were doing and learn from him.

Andrew: It’s such a stressful relationship, because you were each learning from each other and trying to see who’s going to zoom out faster.

Gagan: Yeah, I mean, I was never really stressed out about it, and I don’t think he was either.

Andrew: Sure you were.

Gagan: I mean, don’t get me wrong. There was clear, like, I think you know both of us very well, so you know it’s like, you’ve seen this on both sides. Clearly there was some competitive angst between the two parties. We would often have negotiations where I felt like there was something we weren’t being told, which is really rare in conversations with startup entrepreneurs. Don’t get me wrong, there was, but at the same time our company was growing like a rocket ship, in large part because of the fact that Noah had a market, knew how to build a huge list. We were just happy to be along for the ride.

Andrew: Alright, and I do see that. I wanted to bring it up because that is a legitimate issue that someone listening to this who’s trying to duplicate what you’ve done is gonna have, and frankly it turned out well for both of you. You did learn from each other. You did end up going in your own separate directions. The next thing that you did, was it getting AppSumo, or was it get another distribution channel, or was the next thing to find another person to teach, because you guys couldn’t keep teaching?

Gagan: No, it was another person to teach, so it was, I mean, you could do either one, frankly. I think that you’re balancing supply and demand, and in our case, we didn’t have to balance, we had no balance issues, we just had to increase supply and then correspondingly increase demand. Supply being courses and demand being people who wan to take those courses.

Andrew: I see and you couldn’t just keep being a course production company because?

Gagan: Because we knew that wouldn’t build a marketplace. Marketplaces are built by liquidity. And liquidity requires both supply and demand being happy when they come to your site essentially. If an instructor comes to your site they should be able to find students. And if a student comes to your site they should be able to find things to learn.

Andrew: What about this though? I look at my stats to see where my customers are coming from. I think the number one source for new customers from Google, is people searching for how Linda.com built her business. I did an early interview with her.

Gagan: Really?

Andrew: Yes, so they come from Google to watch that interview, They buy premiums so that they can watch and copy what she did. What she does is and what they’re trying to learn from is, how to produce your own courses. And its worked incredibly well for her. Very successful company. She produces it herself, or at least it did in the beginning. Why didn’t you guys go in that direction? Why did you have to have to have a marketplace?

Gagan: I think we’re going to eat their lunch frankly if we’re successful at what we’re doing. And the reason is because it’s really great to have an end control in the beginning of your company. But, eventually marketplaces is always, not always, there are definitely situations where this isn’t true, but, marketplaces frequently beat vertically integrated businesses because marketplaces scale much more quickly. I think in a year and a half we covered what Linda.com was able to create in 10 years. In terms of topics, in terms of having 1 course for every topic they have.

Andrew: OK

Gagan: And, in terms of quality which is the main potential sort of like counter argument to this I think that you would see most of our courses were better than Linda.com courses in terms of the instructors credibility. Because the instructor got a lot more out of a You to Me course than out of a Linda course. So Linda eventually runs into this issue of having a lot of mediocre people teach their courses and a lot of mediocre people write books for Orally [sp] for the same reasons. Because the publisher takes so much damn money that the best people don’t bother with Linda because Linda isn’t giving them money.

Andrew: OK. I don’t know that I agree with that statement that she has mediocre people. She gets…

Gagan: I think she has better than average people but I think we have amazing people and really [??] people. I think we have the top and the bottom. And she probably has this sliver right here that’s good enough for her. But I don’t think you get the absolute best or the cutting edge stuff when you give people 10% of the revenue from the course. The economics just don’t make sense.

Andrew: I don’t think she does 10% but I hear what you are saying. Your point is solid. I think it’s one of the few NDA’s that I signed that I couldn’t reveal how she pays her people.

Gagan: I know the exact, sort of, I know numbers I’ve heard from other people.

Andrew: You can say you don’t have an NDA

Gagan: Yeah I don’t.

Andrew: So say it.

Gagan: It’s between three to five thousand dollars is an often sort of an up front amount. I’m sure she goes way above that and way below that depending on the person. But, it’s basically an advanced against royalties. And then they give royalties to instructors based on the number of minutes that video is watched compared to all the total minutes on the site. It’s a very complicated formula. But that’s what I heard form other instructors who’ve done like 7, 10 courses on Linda before.

Andrew: OK, so now I see why despite the difficulty you decided we have to stick with the marketplace. I see you have your big audience. I see you have your trouble creating content. Because you’re not a content creator and it doesn’t make sense for your. Is this when you went to Zed Shaw [sp]? What happened with Zed Shaw? Who is Zed Shaw and what happened with him?

Gagan: So, Zed Shaw, is a extremely well known python programmer and sort of a now author and instructor. He wrote a book about a year before I approached him called “Learn Python the Hard Way”. It’s an e book that he put up on the internet and basically didn’t pay attention to it for 6 months. Just so happened that over that 6 months to a year its been downloaded half a million times. I know I use the words half a million a lot. This is really important to understand 500,000 people downloading your book is a [??] ton of people. That is not a small amount that book went viral like anything else. He had a ton of people that wanted this book. He put up like a little donation page and was basically not really making any money off the book. Because A he wanted to help people for free but B because honestly, I don’t think he really realized he could have. So I reached out to him knowing he had a successful book and said ‘Hey Zed would you like to teach on Udemy? And, you know, interesting competitive thing, I will tell you that the reason we reached out to Zed specifically, although many other instructors don’t come from competitor sights, it was because we did see him on another company’s sight that we thought was kind of sub-par. We thought that company was not doing a very good job of marketing that and we…

Andrew: Who?

Gagan: I’m not going to name the name. I’m already being rude enough about the company, frankly. I respect the guy who started it. He’s a really smart dude. He just didn’t know marketing the way we did. Anyway, so we went on to that sight and we found out that those… So we, for example, we did not steal from people who we had personal relationships with, for the record. So whereas at other companies that I’ve been involved with I’ve seen a very fierce competition, Udemy never had that philosophy. But at the same time, if we think of instructors getting screwed because they’re on the wrong site, we’re going to tell that instructor, ‘Hey, we can make you more money.’

Andrew: OK. So then you see a guy who’s popular, who’s already teaching online, who’s open to it on a sub-par platform in your opinion so you say, ‘We go after him.’ How open was he to it?

Gagan: Very open. I mean, we never really talked about the competitor’s site. I don’t think even to this day Zed knows that that’s how we found. In fact, nobody knows because it’s the first time I’ve admitted it publicly.

Andrew: Good.

Gagan: But, yes. I mean, we had coffee at this place in Knob Hill in San Francisco, and I pitched him on the idea. I had no idea, I had no clue if he was going to do it or not, but I told him, ‘Hey. We’ll email you out to the 200,000 people on Startup Digest’s newsletter.’ And he was in. Then I created a fake deadline. I said, ‘Hey, Zed. We’ve got a digest going out in mid-March and the rest of them are all booked for the next two or three weeks. Would you be able to get it done before then?’ And obviously I made up the whole thing. He probably knew. I mean, he’s a really smart guy. He probably saw right through me, but that fake deadline got it done quicker. Speed is of the essence when you’re an early-stage company. We got it out by mid-March, and it was by far the most successful course that Startup Digest had promoted.

Andrew: Really? How much did that bring in?

Gagan: So there’s another course in here that I don’t like to talk about because I’m a little bit embarrassed about the quality of that course in retrospect. There was another course called ‘Learn How to Build iPhone Apps in 24 Hours or Two Days, or something like that which was made. That course actually did better than Zed’s had but both did quite well. That course probably did $50,000 in one day, something ridiculous, and Zed’s probably did $25,000 or $30,000. Both of those were sent one week after another, so who knows what Zed’s would have done if it was the first course instead of the second course.

Andrew: OK. I have to ask you about one thing that’s not on the notes here. And remember, the integrity, the journalistic integrity comes first – above our friendship, above everything else. You guys at Startup Digest also ran four guides that Mixergy created where we took past interviewees, I paid a writer, April Dikeman (sp) who’s now a consistent contributor to Mixergy, to turn those into guides on how to do a lean launch. How did that play in to what you did, your model, and be just as open as you were ripping into other products when you’re talking about mine or as complimentary. Be honest is what I mean.

Gagan: OK. So first of all, you have an incredible brand, obviously. I actually told you this last time. One of the things that I do – and I’m doing this again because I’m starting a new company – is watch videos of other entrepreneurs and sort of observe them and learn from them. I used to watch Mixergy videos all the time back when I was starting Udemy, and so I obviously respected your ability to interview. The guides didn’t work, I don’t think. I don’t really remember, honestly. We did a lot of different partnerships like that, and it wasn’t one that… But it didn’t work super well. I think the reason is – and this isn’t going to be that helpful to your audience – but I think the reason is that reading and stuff just didn’t sell as well as video. And also they weren’t teaching a specific topic, they were often more about a person similar to this interview where it’s about me. Though I think people will learn a lot, it’s more about me than it is about the learning. When the person takes precedents over the learning, it’s very difficult to sell that course, I think.

Andrew: I see. Actually, I find that too. If we were to do a course on Mixergy, essentially you and me talking and teaching growth hacking, for example, as opposed to doing an interview about how you did it, you get more attention to growth hacking as a topic. Even if we sell it, more people will watch it than will listen to your story. But the reason I’m asking is, it seems like what you were doing was just throwing stuff out there and testing to see what people were interested in. Did they like the idea of a course? I remember even Noah used to call things entrepreneurial training, used to call it courses, used to call it I forget, all kinds. It seems like that is what you guys were doing.

Gagan: Yes. I mean, that’s exactly what it is. I mean, in any given situation, it’s extremely difficult to know what is going to work and what’s not going to, particularly when you’re talking about like sending an email blast to 100,000 people or something. And so all you can do is make your best determinations, do a lot of customer development, do talking to users and understanding what they want to learn and then try a lot of shit, right? Like throw a lot of shit to the wall and see what sticks.

Andrew: OK. So in addition to all these epic steps forward there were also a lot of things that you tried that are not even memorable.

Gagan: Yes. So we actually haven’t gotten to that part of the story yet. So actually so far everything we did I didn’t miss anything in this time period so far. Everything went well. Like it was as though we could do no wrong.

Andrew: The Mixergy guys didn’t do so well for you.

Gagan: The Mixergy guys were after this, that’s what I’m saying.

Andrew: Ok, OK. I’m jumping forward.

Gagan: Right, that’s later. I’ll give you the rest of the story real quick here. And stop me of course.

Andrew: I will, any time we need to dig deeper. But go ahead.

Gagan: So after these two courses went on Startup Digest, we had now figured out how to convince instructors to teach courses on [??], which was ‘Hey, teach this course and we’ll promote you on this platform’ essentially.

And so we had solved the proverbial chicken and egg problem, right? We knew that we could get the chicken if we just dangled the egg in front of them and essentially just then put them together. And so over the next three months we brought in our first business hire and we started bringing on a team of engineers because at that point we were like ‘All right. This business is ready to go’.

So keep in mind until then this is 9 months after we raised our seed ground. As you said, I think we had spent like maybe 130 or 140 thousand dollars out of $1 million. I mean, in 9 months? That’s like unheard of. And yet at that point, we all of the sudden ramped up from 3 full time employees all the way up to 8 or 9 by the end of the summer.

And so we were not shy. When it was time to go balls to the wall, we went and hired and brought on a team and made sure that we could go execute. But when it wasn’t, we were very cautious and kind of like, you know, in our shell, sort of like solely waiting for the right moment.

Anyway, so we then went and actually we were very luck in that we happen to have a very good network of sort of entrepreneurs that we knew so we started to promote that these people were successful teaching courses and so we were able to get a lot more instructors, sort of like the entrance strategy. But this time we could say ‘[??] made $40,000. [??] made $60,000, whatever, whatever, whatever’. And so with that proof point was required to convince more instructors to come on board.

And then, on the flip side, on the demand side, we were able to reach out to every email listed employee and tell them the Startup Digest number. So we would give them explicit numbers. I don’t remember them right now, sorry Andrew, but it’s like ‘200,000 people got [??]. 200,000 people got the email. 15% conversion landing page. 5% actually bought it. And so we ended up making this much money. What do you think if we did it on your platform? Since it’s new it will probably do this much money’.

And we were not stupid to promise an exact dollar amount but we would say ‘Well, we think this is going to do really well on your platform’. And so we convinced people like Startup Weekend, we convinced people like these random email listings in various cities around the country. At one point I think I still have this websheet because I’m planning, I’ve always been planning to use it again at some point for another course. But basically we had this is huge spreadsheet, I mean, we’re talking like 40-50 email listing publications that we would reach out to have relationships with, that had anywhere between 10,000 to 250, 300,000 people on their email list. And we would track when did they respond, basically like a CRM on Excel, on people’s spreadsheets. And then we would send out emails and see what the conversion rate would be. So we would figure out what topics would be successful.

And so we were manually creating this marketplace from scratch, in the next couple of months and during that time we had a lot more successes and failures. So during that time we had a lot more situations with certain email lists sucked, they didn’t have engagement and so they didn’t work. And we had a lot of degradation, so Startup Digest started doing well and it didn’t continue as well. It did sort of less well. Same with the [??] users now. We just saw that much quicker.

And then we had massive failures like the Mixergy guys was an example of failure. I can’t remember every other one but we had plenty of them. Courses that just didn’t do very well. And then we had also massive successes. So we had a course that went on [??] sold like $65,000 to$70,000 in one day. That was the same ILS course that sold like 40 or 50 on Startup Digest. And that course, I think, whether Noah admits it or not, was the a- ha moment for him, that like ‘Holy Shit. This is like one of our best selling deals ever and this guy who I ignored for like 3 months convinced me to do it’. And it was a blockbuster basically.

Andrew: How did you get him to say yes? His whole business model was called App Sumo. It was about getting apps to people at discounts and you were giving him a course.

Gagan: Yes, it was, I mean, I think persistence. I was like pretty much I probably emailed him like every two weeks because I knew it was such a big opportunity. And then more importantly, I gave him the numbers. I think like the numbers were probably more effective than the persistence but I bet the persistence helped just like make sure he couldn’t ignore me.

And so the numbers really were that like ‘Hey, you have a list of this size. This is the percentage of conversion rate. Like, this is going to kill it for you’ and at some point I think he’s like ‘All right. It’s worth a shot’

Andrew: I see. You know what? That is the way to get to Noah. In a professional level the way to get to his heart is by showing him numbers. Everyone just wants to shmooze . Show him some facts.

Gagan: Yes, yes. And that’s like, for all the, I will tell you. I think I have more respect for Noah than almost any other quad-marketer in the business. Like, I very much respect this guy and so when I talk about competition, I think about this very friendly game. I think of it as a very friendly think. I think of it as a very mutual respect situation.

Andrew: Yes. No question. I mean, when you see it up close, you can see how good he is at this stuff. It just comes naturally, it’s almost frustrating how natural it comes to him.

Gagan: I know. It’s crazy.

Andrew: Specially when you’re like, I remember struggling to figure stuff out. And then I’d call him up and the guy’s just doing Frisbee golf while solving the problem that was epic for you.

I thought in many ways you are like that too. You’re not about to throw a golf Frisbee, I guess it’s what it’s called, while we’re talking but you are very methodical, very methodical in what you’re doing. And that’s why you make for a good interview.

And anyone, by the way, who’s not seen the interview about how to raise money that you and I did together, has got to go back and get that because as I said at the top, let me read to you the way that I even introduced that. Where is that? Oh, there it is. Here look. I’m even proud of the intro that I had. Even if you have zero interest in raising money, you’ll want to hear this interview for the same reason that Chess Masters like to watch each other play. If you listen to this interview, you’re going to hear how a methodical thinker systematically knocks obstacles out of his way and creates opportunities.

That’s what was exciting about you watching you in that first interview. You just said ‘I’m nobody. How do I become a somebody? All right. Tech crafts people respect that. I’ll go[??] a couple of articles from there. Well, there are these events. I’ll go do that’. Really great interview.

All right. But getting back to this. No more sidetrack. Are you getting Skype messages from [??]as we’re talking about? Is that where your attention just went?

Gagan: Sorry. I just had to send an email saying I’m running, I’m missing the next meeting. So I’m just going to skip it. Let’s keep doing.

Andrew: All right. Skip it. This is more important.

I want to segue way for a second to something you said earlier, which is you had to raise more money. What’s it like to go from raising $1 million as quickly as you did, to suddenly having to do a series A? What was the difference between raising money?

Gagan: Yes. I mean, honestly it was completely different. I did not even come close to anticipating and honestly I think it was one of my biggest personal failures between you and me, the way that I handled the Series A fundraising. And it’s because they needed a lot more than what Angel Masters wanted.

Angel Masters look at potential and in terms of everything. The way that you present yourself, like, I do not change my personality unless [??] but I feet like I needed to be much more professional than I was in Angel meetings. Angels are attracted to hustlers and business attracted to professionals. Angels are attracted to business that could work and businesses are attracted to businesses that do work. Angels don’t need a lot of data or numbers. They just want to see one glimmer of hope that like this business could become really big and business want to make sure that every piece of data is [??]

Andrew: For example, what surprised you? What kind of data did they need?

Gagan: I mean, the biggest mistake that we made was we didn’t do any engagement data analysis whatsoever. So we were just straight up [??] like focused entirely on our acquisition and on sort of like getting users. [??] regret that from the standpoint of raising money. You know, raising money is at the end of the day kind of an annoying obstacle in the way of building a really good company. You know, getting good investors is not annoying. I think great investors provide tremendous value. But actually, the act of actually getting them to give you their money is the part that’s annoying. That said, I wish going back we had focused more on engagement on all parts of the product because I think that would have built for a more defensible and sustainable long-term business. And I think we’ve now just realized that and are switching significantly over to that and are doing a really good job.

Andrew: What do you mean by engagement?

Gagan: Getting people to finish courses. So, people would buy courses and oftentimes it’s kind of like buying a book. Of the number of books that you buy, how many do you actually read and how many sit on your shelf?

Andrew: And investors wanted to know that?

Gagan: Yes.

Andrew: They didn’t just want to know how are you getting your customers, how are you closing your deals?

Gagan: Yes, that’s exactly right and that’s exactly what we missed. And so, in retrospect, during the Series A fundraising, the big thing I missed as an entrepreneur was hey, these questions that VCs [??] are asking about engagement are not stupid, which is what I thought at the time, of course. And don’t get me wrong, I thought engagement was important, so I had other engagement metrics that I thought were important, but they weren’t around the core question of do people love this product. And honestly, people did love our product and they still do. I’m sure you’ve at least heard from people that they take courses on Udemy and love it, anecdotally, while talking to people at conferences or something. Or they’ve taken courses from you and loved them.

Andrew: So how do you know that people, well, did you say that honestly people did not love it at the time?

Gagan: No, I think people did love the courses.

Andrew: So how do you know if they love it, not just watch it all the way through, but love it?

Gagan: So a lot of them that love it don’t watch it all the way through, right? I love Mixergy, but I don’t watch every interview. Is that a fair expectation?

Andrew: So what is a good way to measure happiness and engagement? We’re always thinking about that, too.

Gagan: You have to do a combination of a whole bunch of things because the reality is that just looking at the data is usually not sufficient. So, I would look at the data and obviously there’s a ton of data things like monthly actives versus daily actives, how much time are they spending on your site, et cetera, et cetera. All of those basic engagement metrics are really important, but then on top of that, you have to talk to your users and talk to people who buy your courses on why they buy them and whether they’re satisfied. And surprisingly, similar to books, people were satisfied to buy courses and not watch them all the way through. It doesn’t actually matter to them. Sometimes they just wanted twenty minutes’ worth of advice on something and to them it was worth paying fifty bucks so that they would have access to the rest of the advice when it’s time.

Of course, that’s not great, but one thing our investors missed when they looked at our business is every other business that claimed to have engagement actually didn’t have any better engagement than we did. People who were raising money at the time like Skillshare and Codeacademy, it’s kind of a joke that those guys acted like they had more engagement than we did because the reality is the full course completion was roughly the same rates for almost every company. You look at Udacity and Coursera who have now come up since then, and they have similar problems. The number of people who actually get through those courses are always less than ten percent, always always always. It’s very rare, sometimes you can find it fifteen percent, but it’s never higher than that. Does that mean people don’t like online education? Does that mean online courses are bunk? Obviously not, right? It just means that people like having access to this knowledge and they don’t need to go through the whole thing to be satisfied with it. I read the first fifty pages of a business book and the rest is just reference for me, usually

Andrew: OK. Now, fair point, it’s kind of a frustrating point also.

Gagan: Yeah.

Andrew: At least in a restaurant, the guy can walk around and say, are people eating all the food? All right, if they are and they’re coming back, then I know that I’ve got happy customers. You’re right, if Barnes & Noble were able to look at every single book that I read, they might think Andrew hates business books because he never completes them, or rarely does, but in reality, I complete the ones I want to and don’t the ones I don’t. All right, let’s continue here, then. Now what we’ve got is a business that figured out what it’s about. I think you were, at this point, doing a hundred thousand in revenue, I’m looking at my notes here. Then you started to do paid acquisition. Why did you shift to paid acquisition and what did you do?

Gagan: I’m going to close the loop a little bit here on timeline. We were doing a hundred thousand about June or July or something, in 2011, probably. We raised around immediately after that during our fundraising process, we actually just kept growing. So I think we grew to about a hundred and fifty, maybe a hundred and seventy. And then at some point we realized that these email lists were not going to drive any more additional revenue, and by the way at the same time Obstama [SP] was kind of not favoring us as much as they were in the beginning. In the beginning, honestly, we ran Obtama [SP] like every five days. It is ridiculous. And they were driving an inordinate percentage of our revenue at the time and we realized…and they probably realized that we were driving an inordinate percentage of their sales. And so we realized, like hey…all these e-mail lists generally are seeing degradation on their list, they’re not doing as well as they were in the beginning. And so even though we’re out executing and so we’re basically like drastically increasing the number of total reaps, so we’re getting a group on living social. We’re starting to get a much bigger list, it was clear the writing was kind of on the wall that this list strategy was going to end, eventually. And so we had to find another strategy and one of the obvious things was like, okay, can we advertise and profitably? And so we started to explore that really deeply. My co-founders had a lot of experience and paid acquisition and so it was really easy for us to get up and running and start. And we kind of like leveraged their expertise to build a lot of that infrastructure early on in the next couple of months.

Andrew: What’s the first paid acquisition test that you guys ran?

Gagan: I couldn’t even tell you, I mean it’s probably a phase we got for raising capital for start-ups or for learning how to build IOF applications.

Andrew: Okay.

Gagan: [SP]We always promoted a specific course on Facebook or Google and then they would come to our page and we’d ask them for their e-mail and then we’d e-mail them about any course. And so, like that was sort of the funnel that we had, and we still kind of have that to this day. Although we’re just way less relying upon then we were before.

Andrew: So the user seized the ad on Facebook, clicks over and comes to your site. You say, can’t do anything until you give me your e-mail address. They give you the e-mail and then what they see is an ad for a course.

Gagan: Yeah, effectively. I mean we call it, the course profile page, it is kind of an ad, but it also provides real value and real information, it’s not built just to be an advertisement.

Andrew: Okay. Is that the point in the story where things start to shift away from you, to your co-founders and the rest of the team because you don’t have experience in paid ads?

Gagan: No, I mean, I still was responsible for all our outside marketing, so I required all of our instructors still, and then the responsibilities of the team just grew significantly at that point so it didn’t make sense…. Nobody needed to have…none of the founders any longer needed to have deep expertise. And like a lot of things we just had to have deep expertise on one or two things because we had a team of people who could build expertise in other parts. And so, yeah, to some extent, my role diminished when we did paid acquisition because it was on the demand side we didn’t need me for marketing. But at the same time, I still ran the marketing team and also focused entire…and so like, I don’t think so really.

Andrew: Okay. How effective was paid ads for you guys?

Gagan: It was mediocre, to be honest. I think like in retrospect it took us six months to do it, to figure out that it was working, but not well enough to scale to like really large numbers. So it scaled us from, I don’t know, you said Erin said I could say all the numbers, right?

Andrew: Yes, so let me say this to you…I was worried that because we are friends that maybe as an interviewer I would drop my guard and I would let you say everything, like, I did everything, I’m the greatest, I ran this company, meaning while you’re not at the company anymore. So in our interview meeting where we talked about guest Alecks who books the guests and Jeremy who pre-interviewed you, and I were you sitting around, let’s talk to his co-founder and check it out. So I frantically e-mailed Erin and I got on the phone with him and went through it all, I said, did Gagun really raise the money, did Gagan really help you guys figure out where the model was and he said, yes, yes, he did. He confirmed it; he’s the one that told me about the Excel spreadsheet course. He told me a bunch of stuff, and he did say that he wanted to be open with everything, he actually said that he was going get me some numbers, but I talked to him yesterday so he still hasn’t e-mailed me back. So my senses say everything except…within reason, and I think he’s comfortable revealing revenue, he told me I could have the exclusive and talk about revenue because you guys haven’t in a while. Maybe because he didn’t e-mail it to me what we’ll do is wait on the actual revenue number till the interview is posted and he can say it in the comments. So I’ll ask the audience if you guys want to hear that, if it’s important put it in the comments. So now with that in mind, what were you going to say?

Gagan: Yeah, I can talk about this, these are old numbers anyways. You could intimate these from many different [??] mentions. So I think at that point we went from like $150,000 to maybe $300,000 off of paid acquisitions we thought, so at the time we thought it was paid acquisition that was doing a lot of these sales, and we couldn’t track it. So, you know, with paid acquisition you can track every user you acquire through paid acquisition, how much revenue they’re doing. And the total revenue from paid acquisition was not adding up, and so Aaron and I were scratching our heads to figure out, what was this difference? Like, where was this difference coming from? I think that at the time, the theory was that the difference came from people seeing the ads but buying separately, basically a missed attribution problem. I think that was somewhat true, but actually the big part of our growth to date now is our instructors and users telling their friends. So instructors telling their audiences and then users telling their friends. And honestly, we just like really missed the ball there, like we ignored that channel, and did not cultivate it and focus enough on just getting our users to continue to love our product. And we were lucky in that people did love our product, so they share it anyways, but in classic sort-of Growth Hacker in-the-weeds mentality, we missed that. And paid acquisition was in a lot of ways, I think, just a distraction that was somewhat healthy. I mean, we learned a ton and we did still grow, but I think we now have our heads on straight a lot better at the company, where we focus a lot more on making sure people just love our courses and instructors from our courses.

Andrew: What did you learn from paid that you didn’t know otherwise?

Gagan: I mean, the level of detail that we got to on the metric side was incredibly valuable for me.

Andrew: And so what did that help you guys do?

Gagan: Well, I don’t know that it helped you to me as mu h as it did me personally.

Andrew: What do you mean?

Gagan: Well, I mean, like Aaron was already really good at this, so he didn’t need to learn it. I mean, seeing it again when he is entirely responsible for the budget is probably a little bit different, you know, he’s CEO, etc. But at the same time, like, he kind of already knew this stuff. I had never spent money on marketing in my life before, right? And so, for me, seeing the details of how we went about calculating lifetime value and our customer acquisition cost, and then seeing how different campaigns performed, was extremely valuable in cultivating me as a performance marketer as opposed to simply a, sort of like, a guy who knew how to do very small-time affiliate business development deals.

Andrew: One of your advisers is John Bishke [SP], who I used to live next to in Santa Monica-

Gagan: Oh, cool.

Andrew: He did Edufire [SP]. And he told me that he had a vision for the teachers being teacher-preneurs. Teacher-preneurs meaning entrepreneurs who taught and sold what they taught. And he was going to give them tools to sell it. It seems like that’s what worked best for you, as you said. What do you do to make your instructors teacher-preneurs and help them really recruit their friends and their followers to come and buy?

Gagan: Yeah, so ironically we teach them how to market on their courses.

Andrew: What do you teach them?

Gagan: All sorts of things. You know, we teach them how to write great blog posts. We teach them how to get featured in newspapers, not newspapers sorry, I just didn’t want to be repetitive there. But you know like tech blogs like TechCrunch. We teach them how to cultivate their email lists, and how to create great courses. I mean, one of the biggest things we focus on now is we have a whole team that’s entirely dedicated to making sure course quality is high. And so those are all the things that we started to teach them. And how do we teach them? We email them like crazy, we put blog posts, we have a Facebook group that’s super active, and we just engage with them on a constant level. And those instructors have started to become very, very successful. I mean, we’re talking about, we have minted a millionaire, I think we’ve easily minted people who are making a hundred to two-hundred fifty thousand dollars a year. I’m sure there are like, dozens of them.

Andrew: Who became a millionaire?

Gagan: Well, so the Excel course is, and the reason why we don’t get the same kind of credit for it that I wish we did, is that was kind of a company that started that course. And so the instructor got a share of it, but that company was a lot like Linda. And so, given my sort of like somewhat animosity towards Linda that you heard about earlier, because I think they kind of screw their teachers a lot, and while I love the business they built, I think that it’s really not as good for the teacher as people say. And so this was kind of that situation and I feel kind of bad about it still. Like, I wish we had found a specific instructor to teach Excel, and actually at the time I had pitched many people on it, but these guys already had the content created and we promoted it on YoutoMe [SP] and it killed it, really. And so we minted a millionaire business essentially. Like that business made a million dollars off of that course. I don’t think they made a million dollars, I think they did a million dollars of sales, but you know, still made a lot of money.

Andrew: I also see one of the things you guys did was go after people who already knew how to sell, they just didn’t know how to sell individual products. Like I asked Tim Sykes [SP], I said, you’re selling a tremendous amount of content on your own. Why do you need to partner with Udemy? They’re not really sending you any new customers. Maybe you guys were because you had a mailing list.

Gagan: [??]

Andrew: And he said, “I don’t have the technology to sell individual courses and I don’t want to create it. These guys do it.” Before you, I think he was selling DVDs in the mail.

Gagan: Yeah.

Andrew: Higher perceived value, there’s a system for selling it. There was no system for selling the online stuff.

Gagan: Yeah, remember in the beginning of this conversation I said that early on, instructors who already had their own promotional vehicles didn’t find it valuable to use us? Eventually we built a set of technology that actually was valuable enough for those people. More importantly, we had a marketplace that had credibility. Before, people didn’t really even know that they could sell an online course. Tim Sykes is a great of example of someone who was like, “People will buy this digitally? I don’t have to have my parents put together these DVD boxes and mail them individually to all of our clients?” And I was like, “Yeah, we’re doing it. We’ve made millions of dollars. We’ve sold millions of dollars. People are doing it all the time.” That was a big thing. It wasn’t just the Udemy technology, it was actually just, “This actually works and this is proof.” Kickstarter is a great example of that. Now everybody believes it works but can you imagine being pitched on Kickstarter as a way to start your hardware company five years ago? You would have told them they were crazy.

Andrew: Since I’ve been revealing how I do my research here, people have already known that I have a pre-interviewer, that we have someone here who does research. I also talked to your competitor. Smaller competitor, I said, “What should I be asking?” He said, “Ha!” He was surprised that I would even e-mail him. He said, “Ha, well they only take a small percentage of the sale. Long-term that doesn’t seem like enough to grow the business. What other revenue models has he tried or what other revenue models has he seen that work?”

Gagan: Yeah, I’m curious what competitor that is. I’m sure you intentionally left it out.

Andrew: I promised him that I wouldn’t say, but it’s a small guy that you may not even know of.

Gagan: Yeah.

Andrew: I want to know what a new person starting out would be curious about.

Gagan: Makes sense. I just believe it’s a huge opportunity, we don’t need to take more money to be profitable. I never really got people who asked us about additional revenue streams. If you look at the most successful businesses…My goal is not to become a business that does 60 or 70 million dollars in sales. It’s to become a business that’s doing hundreds of millions of dollars. It’s to become [??] via Kickstarter and any business that I start. When my co-founders and I were talking about share and revenue streams, we never thought there would be another revenue stream. We’re going to take 30% of the revenue and we’re going to provide as much value to instructors, and we’re going to mint a bunch of millionaires, and on the way we’re going to mint ourselves as well.

Andrew: And 30% is not small.

Gagan: Yeah, I don’t think it’s that small either.

Andrew: What was the revenue that you guys did last year? That, I know, you can say. 2012.

Gagan: I look at numbers very differently, so I think it’s 3 to 5 million, probably, last year. I don’t know actually the exact number.

Andrew: And the company launched in 2009, so we’re talking about within three years, over 3 million in revenue.

Gagan: Yeah, but…

Andrew: It’s not really…

Gagan: It’s not really…We really did not start until December of 2010.

Andrew: Not only that. I was kind of embarrassed at myself for pointing that out because not only is it not really three years of building this [??] figuring it out, but frankly, once you raise money and you’re starting to do some paid ads, I don’t necessarily know that there’s…I don’t know how to explain my lack of confidence in the way that I explained it. I don’t think that’s the right way to look at where you guys are.

Gagan: Yeah, exactly. I would say that we’re a success, but not a Blockbuster success yet. I think we still have to keep growing. The thing that I think is particularly impressive about the company compared to any of the other companies out there in online education is that we have consistently grown, pretty much every month. We have even months every once in a while but we’ve grown pretty much every month since January of 2011. That’s one month after December 2010, really it’s when we started. Since we’ve been doing paid courses on Udemy, we have grown every single month, almost. When it’s at six months, it’s interesting. When it’s twelve months, it’s cool. When it’s 24 months, it’s like, “What the hell is going on? This company knows what they’re doing.” That’s why I think we are, in a lot of ways, considered to be some of the best marketers in online education.

Andrew: Why are there trophies over your shoulder?

Gagan: Haha oh, shoot, I didn’t even realize that. Those are from high school. I’m in my home, my parents’ home in Freemont, and you know…

Andrew: In your old bedroom, why are you living in your parent’s house?

Gagan: I’m not. I live in San Francisco. I’m here because, I still, so I come home very frequently. I’m really close to my family, but more importantly, I was here today because I had a dentist appointment, and most of my like, doctors and dentists are still at home because it’s only 50 minutes away from San Francisco.

Andrew: OK. I thought maybe I’d discovered something.

Gagan: No, I don’t live at my parents house.

Andrew: Why didn’t you go for a membership model, instead of selling individual courses, sell a monthly recurring revenue, have a monthly recurring revenue business, the way that Ryan Carson, the way that Mixergy, and so many others have done?

Gagan: Yeah, I just really don’t like the scale-ability of that opportunity, I think, like when you’re dealing with monthly subscriptions, there’s a couple of, so first of all, I think if I’m you, I would definitely do a monthly subscription. I think the big difference between Udemy and you, is that we have thousands of mouths to feed, right. Like we have thousands of instructors who are teaching on our platform, and so instead of, so we can’t afford really to be in a situation where we have to deal with splitting up that revenue amongst the instructors on a subscription model. I think that the purest way to go about this business was to allow instructors to be their own entrepreneurs, and as long as those teachers could be their own entrepreneurs, like they had to have a limitless upside to their individual revenue. So we viewed Kickstarter and Airbnb as a much closer proxy for what we were going to do business model- wise, than like Lynda.com.

Andrew: Lift, I mentioned, your advisor. I’m looking at my notes here. There’s no sense asking you why you left the company, even privately neither you, nor Erin, or anyone else has revealed why you left the company. I don’t know what the big secret is, but…

Gagan: We just agree not to talk about. Like, it’s one of those things that protects both sides. We agree not to talk about it and that’s the best way to. If anybody ever deals with a situation where someone has to leave a company who is fairly prominent member of that company, like that’s the most professional way to deal with it.

Andrew: Do you steal pens from the company and take them home?

Gagan: I probably did, yes. That wasn’t the reason I got, I got, I had to leave, but that definitely did happen.

Andrew: You know, and I realize I did it right here as well. Let me do this, and then ask you about growth hacking. I always have to do a plug at this point in the interview because it is by far, the most important part of this whole interview for me, to plug Mixergy Premium, by saying, guys go to MixergyPremium.com, and if you do first of all, I hope you’re a member, if you’re not, just sign up, you’ll get access to hundreds of interviews, hundreds of courses taught by real entrepreneurs. You can see Gagan used to listen when he started, now he’s back, now he’s starting a new business, now he’s listening, and I appreciate that Gagan. And if you are a premium member, I’m going to suggest that you check out the Lynda.com interview. It was fantastic, because most people see where she is today. They don’t remember the Lynda who was just a writer, who started out with one course online, and then built, and built, and built, and built, and if you see her growth, I think it’ll be inspiring, and as you’ve noticed, a lot of other people ahve signed up for it, because it’s also educational. You can see how she did it, and how you, if you’re interested in building an online business, can do it. I’d also recommend checking out Gagan’s first interview because the guy had guts to say, “I’m an outsider, I don’t really have an idea, but I’m going to partner up with these guys who have this great idea. I’m going to help them, I’m going to grow this business, and I’m going to get funding before I’ve even proven anything.” And that’s a great interview to go check out. What else? I guess check that out, and we have tons of other courses for you to go an explore on your own. MixergyPremium.com. I guarantee you’ll love it, and if you don’t love it, I’ll give you your money back, and the reason that you can trust me is because Gagan would be embarrassed to be friends with me, and he would kick my butt, and call me out on it. And other people who are listening would kick my butt, and call me out on it, if I don’t do right by you, the customer, the person who is funding this who business, who is allowing me to have researcher, and pre-interview process, and everything else that we have here. So go to MixergyPremium.com. I guarantee that you’ll love it, and I guarantee that if you don’t love it, that you’ll get 100% of your money back.

Gagan: Yeah, look, it’s a no-brainer guys, honestly. If you’re starting a company, you want to learn from the best entrepreneurs in the world. And one of the challenges from the other options out there is that they don’t ask questions like Andrew does. And the reality is, he got more out of me in this interview than probably any reporter has in, in a long time. And the reason is, because he knows what to ask and how to get it out of people. That’s the most valuable thing.

Andrew: Thank you. And thank you for trusting me by the way, we haven’t finished, but one of the reasons I don’t reveal things you guys don’t want revealed is so that you trust me and get out the things that I think are important to talk about, important to reveal. Here’s the thing, growth hacking. I kind of, to be honest with the audience, and with you, I called you a growth hacker at top, and I used the phrase “growth hacker” throughout this interview because you’ve got a conference about growth hacking.

Gagan: Yeah.

Andrew: Before we talk about the conference, let’s be explicit, what part of what you did at Udemy is growth hacking?

Gagan: Yeah I mean, people have very different terminology, and you know, the term “growth hacker,” a lot of people who are actually good at marketing don’t like it, and a lot of people who are good at marketing love it. It’s really controversial right now. But ultimately what it is, is it’s coming up with creative ways to scale a high growth company, particularly as it relates to product development, and analytical thinking, as well as, sort of internet marketing. So I think it combines those three things in a way, internet and mobile marketing I think, I always want to mention mobile now-a-days, because it’s so important. But that’s what growth hacking is, and so I would say that the way that we scaled our business in the early days, is growth hackings. It’s kind of like, you know, when we got all of the people to teach courses through using interns, and then also when we had a massive team of like, people who were going out and getting email lists, and getting them to promote our course, that’s a form of growth hacking. And then obviously paid acquisition is, the way we did paid acquisition and LTV analysis was.

Andrew: A plain vanilla internet marketer would do what compared to a growth hacker? We now know you built Udemy, what would a plain vanilla internet marketer have done, that’s different?

Gagan: I think a plain vanilla internet marketer would have done a lot of the things we did in the early days, and except for the intern strategy, that’s something that’s more clearly a start-up thing, because you need a little bit of budget to do it usually. And so the intern thing, scaling on the supplies side is something, I think that most internet marketers wouldn’t know how to do, really. And they would use their own personal networks, actually for that kind of thing.

Andrew: I see. And what you did, was you had a team of interns call everybody who they can who can teach, and recruit them to come on and teach?

Gagan: Yeah, we created a highly leveraged sales funnel, I mean, this works for B-to-B or B-to-C companies. We basically figured out how to massively email people, who were interested in our product, convince them to talk to us, and then sell them. Whereas, right now, the way that most traditional marketing works, is they try to cultivate leads via inbound marketing, like blog posts and stuff, which also a form of growth hacking, but it’s not, it’s a different form, and hope that they can network their way into companies to sell to them. We didn’t need to do that because we were getting so much volume off of our process, that we didn’t need to deal with the deep level of effort for each individual sale.

Andrew: When’s the conference?

Gagan: May 3rd, in San Francisco.

Andrew: May 3rd, in San Francisco. And what do we learn if we go to the conference?

Gagan: I mean honestly, last year we put on the conference as our first time. Over 200 people bought tickets in the first 3 weeks, and so we sold out, and we had 200 people on the wait list, by the time the conference had started. We planned the whole thing in five weeks, very similar to this one. And people loved it. They learned a lot of different things. You’ll learn specific growth tactics from top entrepreneurs, people who led companies like Square, Facebook, Twitter, LinkedIn. You’ll get to meet some of the best growth hackers in the business, I mean literally, I was looking at the attendee list the other day, because I was trying to convince some sponsors to come, and I was like, I was shocked at who was coming to our conference. I was like, “why do all these people want to come?” But we’re lucky enough to have that…

Andrew: Who, who were some of the growth hackers I can meet when I’m there?

Gagan: I mean, I need to pull it up. Let me just pull up the website. I mean, so here are our speakers right, it’s Keith Rabois, probably arguably one of the best angel investors of all time, and primarily focused on companies who have had massive growth. Josh Elman, founder of the Twitter growth team, Elliot Schmuckler, who if you’ve been following LinkedIn recently, he’s the man behind all of like, the genius LinkedIn growth hacking that’s been going on. Akash Garg, who is the Director of Engineering at the Twitter growth team, and…

Andrew: What’s LinkedIn doing? That you’re [??] [SS]

Gagan: Oh man, I mean, almost, like every couple of weeks I see a new thing on LinkedIn that I’m just like, “wow, what genius is this?” It’s like…

Andrew: Do you have an example of that?

Gagan: Sorry?

Andrew: Do you have an example?

Gagan: Yeah, they sent out an email at the beginning of this year, thanking everyone who, for like, for basically, for a great 2012. And what they did in this email, and it changed depending on who it was that got it, but they like told you, gave you a timeline of the things that happened in 2012 with your colleagues, and that drove a ton of engagement. A couple of weeks later, they sent out an email to the people in the top 1% and 10% and said, “hey, you’re in the top 1% of LinkedIn profiles viewed, thank you for being a part of LinkedIn,” so they cultivated their top groups.

Andrew: And then they said tweet out the fact that you are in our top 1% or 10%.

Gagan: Exactly.

Andrew: And when you’ve got such a big audience 1 and 10% is a sizable number of people who are all tweeting.

Gagan: Exactly, you’re talking about basically LinkedIn getting in the forefront of the business conversation in social media in a way that very few companies ever can.

Andrew: How about something smaller because I can see people in the audience going, all right that’s really impressive for LinkedIn, I don’t have that big of an audience. One percent of my audience isn’t big. Do you have anything that would translate well to a smaller company?

Gagan: So usually not, right, because when you have the size of LinkedIn you’re going to be doing tactics that are related to your size. But the thing that you want to learn from someone that runs LinkedIn, and by the way we intentionally bring people more like me into the conference. When I’m talking to people about why I should be a mentor it’s always because I’m much closer to the ground. I understand what the entrepreneurs are doing. So I totally agree with you Andrew. Elliott’s not going to be the guy to teach you that stuff unless you’re talking to him one-on-one. What you will learn is what a best-in-class organization looks like from a growth perspective and you can start to take elements of it. So how Elliott goes about A-B testing is something that is valuable for you. The actual tests that he can run, probably not as valuable for you so you’ve got to figure out different tests.

Andrew: I see what you’re saying. And of course it’s always great to meet the people at the conferences, you and I re-connected and did this interview as a result of meeting at Jason Calacanis’ conference. Alright, great conference, of course if you’re there go over and say hi to Gagan, tell him that you saw him on Mixergy and tell him that you heard him say that he sometimes pitches people on being their mentors. And maybe he’ll end up being your mentor and tell him I say hi. Maybe even I’ll see you there, Gagan, and everyone else.

Gagan: Yeah, we’d love to have you Andrew if you can make it.

Andrew: Now that I’m living in San Francisco it’s a lot easier.

Gagan: Totally.

Andrew: Cool. Thank you all for being a part of it. Bye guys.

Gagan: Awesome. Thank you. Take care.

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  • http://tradlands.com/ Jeremy

    26:24 Which coffee shop on Nob Hill? I live up there. There’s only a few :)

  • http://mixergy.com Andrew Warner

    Funny. I wondered that myself. I’m not sure why.

  • http://www.facebook.com/shayrgo.barazi Shayrgo Barazi

    I’m a long time Mixergy fan but this is my first time leaving a comment in over 200+ interviews I’ve watched. Andrew: You were by far more comfortable in this interview than I have ever seen you. But I suppose that’s due to your friendship with Gagan and the fact that this is your second interview with him.

    Gagan: I have two questions for you. My first is in regards to the long-term sustainability of online education, especially considering the growth and popularity of Coursera, MIT Open Courseware and others. Is there a strong case for paid courses in light of the ubiquity of free online education? Why?

    My second question is in regards to email lists. How did you successfully convince so many businesses to let you use their list? I’m in the dental industry and I would have to pay anywhere from 5-16K to blast subscribers on any particular list. What can someone in my position do to leverage a list without having to incur such costs?

    Thanks!

    Shayrgo

  • Arie, Community Manager

    Great questions. I’ve passed this on to Andrew.

  • Joe

    What exactly is run rate?

  • wizzra

    Why the video and sound doesn’t match?… there is a delay!

  • Arie, Community Manager

    Could you try reloading the video? That should fix it.

  • http://mixergy.com Andrew Warner

    Usually it means the company took it’s previous month’s revenue and multiplied it by 12.

    Here’s how investopedia defines it “How the financial performance of a company would look if you were to extrapolate current results out over a certain period of time.”

  • http://www.facebook.com/kyle.mccrary.12 Kyle McCrary

    Hey Andrew, will you put up links to videos you refer to in your interviews?
    I’m interested in Gagan’s and your previous video and I feel I am more likely to watch it, if I see the physical link on here.
    (On the same concept, have you thought of placing “Similar Videos” links after viewers watch interviews.)

    Also, I’m curious why you didn’t use the Vuact video interface for this interview. I keep wanting to click “Interesting” and “Funny.”

    Shayrgo is spot on about you being more comfortable. It’s always an appealing trait.
    Gagan, you made some sensational business points I hope to keep with me.
    Thanks!

  • Arie, Community Manager

    Glad to hear your feedback on Vauct—we want to make it more useful so it’s getting tweaked right now.

  • http://www.facebook.com/aaron.miller.7712 Aaron Miller

    Yeah I’d be interested in these answers too

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  • http://mixergy.com Andrew Warner

    Kyle, I’d love to add links to the interviews and courses I mentioned, but I’m not sure how to signal to the team that there’s a link there.

    Maybe I could add phrase like, “Arie, could you hook it up” so she could find it in the transcript.

    @disqus_iwr90NY83w:disqus what do you think? Kyle’s idea of including links is a good one.

  • Arie, Community Manager

    Sounds good to me!

  • http://untether.tv Rob Woodbridge

    “What are those trophies behind you and why do you live at home” – classic :)

  • http://mixergy.com Andrew Warner

    I met a friend of Gagan’s on BART last night who told me that he liked that section too.

  • http://twitter.com/JamesTaylor_me James Taylor

    Phenomenal interview. Amazing that Gagan was so open with their numbers, strategies and tactics.

  • http://brownknowsmedia.com/ Jeff Brown

    Maybe some joint ventures Shayrgo? You might be able to convince some they could actually earn more money by taking home part of the profits your venture generates than by accepting a flat fee for their list. This would also incentivize them to effectively promote what you’re doing.

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