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Hey, everyone. It’s Andrew Warner, founder of Mixergy.com, home of the ambitious upstart. I’m in Buenos Aires, and when an entrepreneur from the US comes down to Buenos Aires, at least, internet entrepreneurs, I try to get together with them for steak and a [xx] and talking. One entrepreneur, the founder of Cramster came down here and we had this great conversation with him and his wife, and Olivia and I all sitting around, and naturally asked him, ‘How did you get your business funded?’
He tells me about this entrepreneur in the education space who invested a few million dollars in the business where he’s just one of these guys who loved education and jump on the idea. The more he was telling me about this guy, Shai Reshef, the more I said, ‘I got to see if I could get him on Mixergy.’ He said, ‘Sure.’ I think he’ll do it. He introduced us, and today, I’m really grateful to have the entrepreneur and the investor that we spent so much time talking about here in Buenos Aires.
Shai Reshef, he is the man who founded Kidum Group, which he sold to Kaplan, and we’ll find out a little bit about that. He also chaired KIT eLearning, and we’ll find out a little bit about that. Today, he is the founder of University of the People, a revolutionary university that’s aiming to make tuition-free learning accessible to everyone.
Am I right about that mission? How do I explain it?
Interviewee: Very well. I’m flattered about your introduction. I shouldn’t talk, you should go on talking.
Andrew: I’m flattered that you would be here, considering the story. In fact, why don’t we start off with that? Let me ask you this, how much money did you put into Cramster?
Interviewee: I raised $3 million into Cramster, which is a great company, by the way, and which doesn’t need the money because they’re doing great. They need always money, but it’s a great company, so I’m very happy to be involved. I think that Cramster not only is a great company, but for me, it was a great new way of life to learn about how people are willing to help. Cramster is basically online study community where people help each other with their homework. For me to find out that people are willing to help each other with their homework, free of charge, was something new, so it led me to the idea of the University of the People. But, with no connection to that, it was a great thing to learn about. It’s a very interesting company.
Andrew: They make their money by offering paid tutors in addition to the peer-to-peer learning that’s available. Right?
Interviewee: It’s a free model. You can get everything for free if you’re willing to help the community. However, if you want more services so you want to get more than you give, you’re able to pay and get everything. So, it’s a premium model which works great because quite a few people doing it and getting the product free of charge, other said, ‘Well, it’s a small amount of money, I’m willing to pay. I’ll get great service.’ So, yes, that’s all they get their money in which very growing company, hundreds of thousands of people using them every month.
Andrew: Yes. It’s an incredible company. I actually asked Rob to come on here and talk about it, but I don’t think he’s ready yet to talk publicly about the business, which is fine. Yes, so we lost the connection, and as you’re asking us, it does happen quite often. This is home of the ambitious upstart, not home of the comfortable sitting in MSNBC’s studio doing interviews. But sometimes I wish I was in that kind of environment.
So, the question I was going to ask you was about how you came to meet Rob and how you came to invest in Cramster? I want to spend most of the time in this interview talking about your entrepreneurial experience. But, I think there’s an interesting story of how you discovered him. He didn’t find you, why you wanted to invest in him and how that investment came about?
Interviewee: I was sold my business in 2005.
And for awhile I was having a lot of interesting time, enjoying life, but early 2008 I decided that I wanted to get back to business and start looking around. And then, I found Cramster on the Internet and it was while looking for, you know, checking education companies. That’s my background. That’s what I love to do. That’s what I believe in.
I was looking for education companies and by mistake I found Cramster and I decided to check it. So, I invited Rob to come and meet me. I was in New York. He came to New York. He forgot his belt, being late and apologizing for forgetting his belt. I told him later that it was the only reason I invested in the company because I was shocked how honest he was. I’m serious. I think it was great to find someone that he’s like really honest and not coming up with these stupid excuses for being late. So, I decided he’s the right partner.
I checked the company. I learned the company. It was fascinating because I didn’t know all these; you know, I knew about social networking, and I knew about online. I have my cell phone, you know, online university before, but the phenomenon of the social communities within the learning environment, within education and online study communities is something that I was not familiar with.
I have to admit that when he first told me about Cramster and told me about how students help each other, and how educators come on board and help the student. My first reaction was why. If you are able to help someone else, why don’t you charge him? You know, you can be a tutor. Make money. And he said, that’s the new culture. That’s the new phenomenon of the Internet, and it took me a while to believe him, to believe that it really exists.
I came to Pasadena and learned the company and not only did I learn that he was not laughing and it’s a real company and it’s a real phenomenon that they make money out of it. I said that’s a great phenomenon and if I can take it and apply to that arena, we can have a tuition-free university.
It was a win. I got it twice, both by becoming involved with Cramster and I use it for the university. So, it’s great. I love it.
Andrew: Why do you think that is? I would imagine that anyone who works wants to get paid for it. The people who work hard, the people who have value, real value to add aren’t just wasting time would want to get paid for it. But, as you say, as Rob helped you discover, as I’m noticing every day, there’s a culture of helping each other online for free, just to do it. Why, why is that?
Interviewee: Well, I think that people these days have a lot, have enough, and they want to feel that they help other people. They want to feel that they donate, that they contribute to society and why not. If you have free time, you have other resources to live on. Either you have a salary and you have free time or you’re retired. People feel, why not help others?
You know, when we established the University of the People, I said online that I’m based on volunteers, and we got 800 professors jumping on board, offering to help us. Why?
Andrew: Professors are the ones – I remember when I went to college – who were always complaining that they didn’t get paid enough, that they were under valued and here you are, you’re saying that you got professors who are willing to work for free at the University of the People run by a guy who is a successful entrepreneur who sold one company and invested, or at least raised a few million dollars, for a second. Why?
Interviewee: Well, because they are teachers. They want to teach, and I think that if you give – think that nobody has decided ever to become a teacher because of the money, because of the compensation.
Usually, professors can make much more money in the real life, outside of the universities. They chose it because they love it, and I think the teachers are really the people who really like to help others and to educate other people. And here they have the opportunity to go to those who need them most and give them their help. Why not? It’s great. They feel they’ve helped, and I’ll tell you something.
One thing that I discovered is that when you give to somebody, you get more than what you give. The feeling of giving, what it makes you feel; that’s like worth everything. So, that’s why people do it. They get more than what they give.
Andrew: Now, let me ask you this. As, again, a successful entrepreneurÖ
Andrew: As, again, a successful entrepreneur with a good track record who’s been in the industry for a long time, if an entrepreneur came to you and said, “Can you help me out? Can you mentor me? Can you show me how to build my business?” Answer honestly, and if the answer is no, then that’s fine, too. If it’s yes, I’d love to hear why also. But would you say, “Sure, I’ll spend some time and mentor you?”
Interviewee: I think I’ve… well, I shouldn’t be immodest. I think that I have…
Andrew: Be careful, because we do have an audience of entrepreneurs.
Interviewee: [Laughs]
Andrew: And I don’t want to put you on the spot. I really just want to learn where it ends, where the lines are around this new community.
Interviewee: Well, first of all, you know, volunteering is something that we’re learning right now and it’s a very tricky concept. So to answer your question, yes, I helped a few people. To answer your question on the other side, right now I’m unable to help even myself because I’m so busy, but if they have the time, why not?
But I think that volunteers is something that is not very easy to explain on the one hand and is not very easy to manage because people offer you their help. You’re very happy and you should realize that they do it because they like to do it and sometimes they change their mind.
You can’t rely a business or any social networking or university only on volunteers because volunteers, they are great and they do it because they want to do it, but sometimes they change their mind. Sometimes other priorities come. You know, they change their priorities. And sometimes they just don’t feel like doing what they felt like doing and they don’t have to. They don’t get paid. You have to accept this as well.
So we are now all of our courses are being developed by volunteers and we have to make sure all the time that we have backup, because some of them might one day not show up and we can’t rely on that, so, yeah, that’s part of the price.
Andrew: OK, well, the goal here at Mixergy is to talk to entrepreneurs about how they built their businesses or how they tried to build their businesses and it failed. In this case we’ve got a couple of successes. I want to dive into those.
The business that I mentioned earlier… am I pronouncing it right? I’m pronouncing it with the Israeli pronunciation, but tell me if this isn’t the accepted pronunciation. Is it Kidum Group?
Interviewee: It is Kidum Group, yeah.
Andrew: Kidum Group, OK.
Interviewee: Yeah, that was right.
Andrew: Look at me.
Interviewee: The surprisingly right pronunciation. [Laughs]
Andrew: I get a lot of emails from people who complain that I’m not pronouncing anything properly so I’m glad that I got this one right.
All right, so ’89, before you launched this business, what were you thinking you were going to launch? What was the original vision before you even got started?
Interviewee: Well, this business actually was not started by myself.
Andrew: Ah, that’s right. Right, you joined it.
Interviewee: It was started by a few people and I joined it in 1989. It was a very small business. They started a business in 1981 and they were the first to introduce test prep. At that time it was very successful. Later on other competitors came into the market so it was not a good business.
I think I joined it without knowing what I’m doing, I have to admit. I had no background in business. I knew nothing about education business or any business whatsoever, but they were friends of mine and they said it’s a great business so I had to believe them.
And I jumped in started working there. You know, I was the only employee. It ws a business without really people working there. And I think that what made us successful was at the time the concept and the fact that we entered a market which was underserved.
And the concept was great because if you take preparation course for the university at the time, it was good for five years. Students can take it when they’re in high school and know that they are in the university and they knew which faculty they can get in. If they like it, great. If not, they had more time to improve their grades.
So the concept was good. A lot of people jumped on it and what makes it so successful is that if, in 1989 when I joined the company, about 15 percent of the test, the SAT test takers took preparation courses. Two years later 85 percent of the test-takers took preparation courses, so it became like a standard. You don’t take the SAT without preparing yourself, so it was quite successful.
Andrew: I know for me, in my class, I think just about everyone took some kind of test prep and I did. It was just the next step when you’re getting ready to go to college.
Interviewee: Right. Even though it really depends on culture, and depends on regions. Some regions, you know if you look at the U.S., and the east and the west, most of the people take preparation courses in the center, in between. Much less so, but yeah, you’re right. It’s become quite a stand-out than it was before.
Andrew: How big a business was it when you joined in ’89?
Interviewee: Hundred thousand dollars yearly revenue.
Andrew: OK.
Interviewee: It was small. Nice and small. Very small. Very, very small business.
Andrew: Yeah, that’s less than a salary today.
Interviewee: [Laughs]
Andrew: [Laughs] Why did you join it? What was the promise then that you saw at that point?
Interviewee: I told you that. I think it is that that’s the main reason, because I was convinced by a friend of mine, who was the founder of the company, that it’s a great company, and has a great potential. He went into politics, and there this company said, “Go take it and run it.” And I thought, “Why not? You know it’s a great idea.” And I was not coming from the business world, so I have to admit that it’s not that, you know, the company was losing money. I haven’t realized that the company, it was very small. I haven’t realized that there are some companies that can be a hundred million, rather than a hundred thousand. You know, I was naive. I studied before that Chinese politics, so I didn’t come from any well of that background. But I thought, “Why not?” And I’m not regretting it so. [Laughs]
Andrew: All right. So what did you do then, to take it from losing money, to take it from a hundred thousand dollar business and grow it into what it became?
Interviewee: Well, I was lucky because I think that what happened then is that I joined the company, and I was convinced that there is, as my friend said, great potential. So I said if there is a potential, the right stakes sells people. And they should sell the product all over the country. I was so naive and so uneducated, to understand that if you take salespeople, you need to pay their salaries by the end of the month. So we recruited about ten people, and sent them to start selling this service. I mean two weeks we were overflowed by thousands of students. So I had the money to pay them. So it was just was pure luck, I have to admit. So some things just happen in life. You do things and they work, without really understanding that you shouldn’t have done them so.
Andrew: That’s all right. I don’t know this business as well as I often know the companies who I interview. So let me see if I understand this. This was in-person classes, kind of like Kaplan was back then, where there’s a real teacher. And you’re in a classroom, and you’re being taught by that teacher, taking homework assignments at home, coming back for more work a week later. That was essentially how it was, right?
Interviewee: Exactly, yeah, it was. Yeah.
Andrew: When you sent these salespeople across the country to sell that class,
Interviewee: Right.
Andrew: how did you then have a class for them to sell? Did you set up teachers all over the country at the same time?
Interviewee: Well, because the idea was to go to schools. So we went to high schools, and convinced the relevant person within the school that their students are more likely to get into the university if they take the proper course. And the courses would be much cheaper if we run them within the facilities of the high school. And schools have an interest for their students to go to a university, and to go to a better faculty, and to be accepted to as high as they can. And it’s their interest to save the students money. And if they give us the facility, it costs the students much less. So it was kind of a deal that we start with high school. That’s how we started. And then when we saw that we had students, we’d recruit teachers. And we’d them. It was not actually regular teachers. It was more like university students that we trained to become teachers, our instructors. So it was basically a peer education company that was the best courses.
Andrew: And so you didn’t put the rest of the infrastructure in place locally until you sold enough students on taking the class, right?
Interviewee: Exactly.
Andrew: I see. That makes a lot of sense. So you make sure you have the customers. You make sure you have the revenue. And then you train the teachers, and you organize the class.
Interviewee: Yeah, and if you’re lucky you can do it because usually you cannot. Usually you need the facility first, and you need the salespeople first. Then it takes time. And you need to build your brand name. And it takes, things just really take longer than they happened to take at that time. So we were lucky at that occasion.
Andrew: Dan Blank, in the audience, is saying, “There’s that word again, ‘luck’.” And a few entrepreneurs here on Mixergy have used that word. I want to understand why.
Andrew: I want to understand why. Why were you so lucky? Is it just that you happened to be in a growth business at the right time before these competitors who are now entrenched came in? Was there some other reason why it took off?
Interviewee: First of all, I’m not sure that I can analyze it and I’m not sure that I’m objective enough to analyze it, because usually people tend to think that they are in charge of what happened and it was them and nothing else.
But first of all, we were a group of people and I was not alone there. I had a partner which were extremely smart, know the market very well. I had great products and knew how to recruit teachers, knew how to train teachers. I think that the idea of going all over and finding the niche, the right niche of high school students.
That was, it might be you can say that I was lucky to think about it. You might say that I was smart enough to read the market correctly. It was the combination of all of them.
I definitely think that the idea of sending sales people all over the country to sell a product which first of all I knew for about two weeks. Second, I didn’t have the resources to pay their salary… was irresponsible on my side. I didn’t know it at the time. I didn’t know. I was not aware enough. I was not educated enough how to run a business at the time. So that’s where the luck comes in.
I think it’s a combination of all these elements. So then, you know, we had a lot of marketing initiatives that happened and they were successful. But I think that at the same time, we were in the right market because students realize you came to a classroom of 40 students and say, you know, I have a product that will improve your chance to go into university. Not only that, if you do it now when you are in school and everything is fresh in your mind, it will be easier for you to do it and the grade still is relevant for the next five years.
Well, you know, you don’t need to sell it. People buy it right away because it’s a great product. It’s the right product at the right time. So it’s a combination of all of that.
Andrew: Was there a part of you that knew that you needed to pay the teachers but just said, “Things will work themselves out. I’ll figure it out.” Not the teachers, excuse me, the salespeople… because it’s kind of natural. You hire people, you know you need to pay them. You know at some point that that time is going to come up. Was there a part of you that said, “We’ll figure it out. We’re going to make this work somehow?”
Interviewee: I think that from the very first minute it was clear to me that the second they will go out they will bring students. So now in retrospect I can say why did I assume that? There were so many things that you think that will happen and they don’t happen or happen opposite the way you think they would. This time I was convinced and it did work, so that’s as much as I can say there. I had no doubt that it would work and it did work.
Andrew: One thing I know about myself and other entrepreneurs is that there’s a certain blindness to the risks. There’s a certain self-confidence that to some other people might come across as arrogance, but that is just critical to building a company. Is that what was going on, that you just knew if we told this to enough people, a large enough group of them would want to sign up that the whole business would grow?
Interviewee: I think that you’re right. I think that first of all if you don’t believe in the business it won’t fly. You need to believe and especially you need to believe in those times, in any business it happens that everyone feels that things are collapsing and no way, that’s the end of it. That’s it. It’s done. It’s gone. You need to believe, and really believe, not only… obviously you need to show everyone that you believe because you need the people behind you, but you really need to believe. Otherwise it won’t happen.
But I would say another thing. When you are successful, I think that my secret for success is be afraid of what will go wrong because you need always to prepare for the worst thing that might happen. If you are prepared, it’s very likely that it won’t happen because you prepared yourself. And if it does happen, you’re prepared for that as well.
But I think that you need to believe in the product as much as possible. On the one hand, really believe, not convince yourself, but really believe, and on the other hand, prepare for the worst. So that’s the combination of being successful in my eyes.
Andrew: Do you have an example of a time when you prepared yourself for the worst and either it happened or it didn’t happen? Either it happened and you were able to take it on
Andrew: Ö either it happened and you were able to take it on because you were already prepared for it or it didn’t happen and it made you a smarter thinker because you thought through a complicated problem.
Interviewee: I have a hard time thinking about an example because I think it’s, it’s my daily life. I really think that on a daily basis I’m afraid of, how things would go out, how things might get bad, and will go wrong. I think that it happened, well, first of all financially, you know, you want to make sure that you have enough finance to run the business, and, yes sometimes and it happened to us in the past that we raised money even though we didn’t need to. Because we wanted to make sure that if things go wrong, we will have the resources. It never happened. We raised the money, things didn’t go wrong. I think that, yeah, I think that we had, you know, I don’t believe that any businessman ever, had only success. You fail. Sometimes you must fail. Not only because, that is the nature of life, but also because that’s the best way, to [inaudible].
Andrew: Let’s get an example of that. At [Kadum], at the [Kadum] Group, what was the big failure, we now know, you had an idea, you sent those sales people out into the field, they brought back orders and that helped get the business going, do you have an example of the opposite?
Interviewee: I’ll give you an example of fame. 1995,96, we decided to launch, a online test prep. I’m talking about 96. It was slightly [inaudible] for online test prep, and we spent quite a lot of money building the product, and, preparing ourselves, and had a business plan. We invested there, we built up, a new product. Then I went to [award show] to raise money because obviously should have cost money. We went to quite a few, investment bankers at the time, in [inaudible] and foundations. And people, when we start talking about our online, test prep, and its going to be on the internet and people asked us, ‘what is the internet?’ and it was at a time when we were in New York, and I still remember, that there were billboards saying www.gap, because Gap was so innovative, they had the website and they advertised the fact that they had website. But people didn’t get what we were talking, it was like ‘what the hell are you talking about?’ And we couldn’t raise money, and we didn’t. And we just, that’s it, we didn’t have the business. It might sound, it was premature, for that product. So this is an example of, losing, you know, not succeeding. I don’t know if we, I think that, it might have been even worse failure if we raised the money because [laughing].
Andrew: I was gonna say, if you jumped in there before there was a market back then, well who knows, whose to say because students were online before the rest of the population was so maybe you would have discovered a way to service them. On the other hand, how do you get their payment?
Interviewee: I don’t knowÖ
Andrew: There was no Paypal, so you might have been better off.
Andrew: How about this then. Somebody in the audience asked this question. ‘How do you, when your, when you’ve got those setbacksÖ’ and this doesn’t even, between you and me, this doesn’t seem like a big setback. I’ve got people in my audience who I’m sure have suffered more this morning than that. But when you have one of those big setbacks, how do you keep yourself going? What do you do?
Interviewee: I think that you just, turn around and start running to a different direction. That’s the only thing I can say, I mean you know, you realize that it’s never personal. I mean if you fail, you might made a mistake, you might made many mistakes, but you know, it’s the circumstances that, a lot of things happen, and that’s okay, I mean it doesn’t mean anything about you. I believe that if you succeed it also doesn’t mean anything about you. You were lucky, so sometimes you’re lucky, sometimes you’re not. You know, just go on, just never give up. It will happen eventually.
Andrew: So then it is just luck. Are we just talking about business being a numbers game? That sometimes it will work out some times it won’t, as long as you get up more often than other people do, something good will happen. Is that what you’re saying?
Interviewee: No, I think, no, no, noÖ
End of transcription.
Interviewee: No, no, no, no, no. I think that you need to know what you’re doing. I think that you need to find the right market. I think that you need to find the right people to work with you. I think that you need to know how to manage them. I think that you need to have great product. You know, there are all these things that make business successful. I don’t think that you wake up in the morning, and today I’m lucky, so I’ll win the lottery. I don’t believe that it works this way. But I think that the fact that you are talented, and the fact that you did everything right, doesn’t guarantee that you, that you will succeed. Exactly like if you do all the mistakes in the world, it doesn’t mean that you will fail. Obviously, the chance is that when you do the right thing, you will succeed. And you should try to do the best you can. Hire the best people. Think about what you’re doing. Worry, you know, not to make mistakes. And hopefully, you will succeed. But I don’t that it’s purely talent. I think that it’s much more than that.
Andrew: OK. I scribbled down a few notes as you were talking earlier. One of them was you said you have to have the right people. Now here you are. You’ve got a training program that’s going up all across the country. You need to hire teachers quickly. How did you find those teachers? And then, how did they work out?
Interviewee: Well, at that time it was quite easy because if you’re looking for a teacher for the SAT, it’s very easy. Just take the people who are in the three top percentile. Train them to be teachers. And that’s it. The material they probably know better than me because if they’re up there, they know the material. You don’t need to teach them the content. Make sure they have some experience teaching or working with kids, and know how to stand in front of a crowd. That’s it. So in that case, it was quite easy.
Andrew: What kind of training did you give them?
Interviewee: By the way, all the best…
Andrew: I’m sorry. What were you going to say? By the way, all the…
Interviewee: Basically, all the test prep companies in the world are doing the same. They just take the top people and give them some training. And the training is more, you know, you give them manuals, and you give them, you know, the class where they need to teach, how to teach it, what’s the order of teaching, how to teach. And you know, all the methods of how to become a good teacher, but mostly they do it by themselves. And it’s self-screening. Those that are good stay. Those that are less good, leave quite fast. Yeah.
Andrew: OK, we talked about the market. How did you find the right markets? How did you know which pockets of the country parents were willing to pay for these classes and students were willing to sit in those classes?
Interviewee: [pause] We have this question right now at the University of the People, and we don’t know, not always. You need the money in order to know. You do market research, if you ask the right, well if you know what to ask, you can find the right answers. Sometimes you cannot. In our case, we brought underprivileged kids from all over the world, or young adults, we just don’t know. And we try, and sometimes that’s the best way as well. Give it a try. Start selling and see the reaction, and if you can afford it, I think that that’s the best way, to improve the product, to see what the customers want. But I think that, the secret is not to find the market, but to be attuned to your customers, see what they really want, what they’re willing to pay for, what they’re not willing to pay, what they’re complaining about. So, really being in touch with your customer is the most important thing.
Andrew: How did you do that before the internet, before you could send out a survey, a monkey survey, and get response from people within hours?
Interviewee: [pause] Well, it’s servers. We, I’ll give our example but I don’t think that we are unique. First of all, every, we ask the students questions. And we ask the questions, students questions, twice every course. And we got the feedback, and we learned from it. Then we realized if we ask the students by the end of the course, the feedback is not necessarily objective, because it can be dramatically effected by our instructors, by the teachers, because think about you taking an SAT, and the day before the SAT, your teacher coming in, saying to you, ‘I’m sure that you’re not going to make a single mistake. You’re a genius.” And you come and say, “But I haven’t performed that well during the course”. So the teacher might tell you, “Don’t worry. I deliberately gave you hard questions. You’re the genius.” And you are so good, you feel so good.
Interviewee: You feel so good and you feel great about the course, about the company, about the teacher and when you have a feedback survey you give great, great feedback. Then you get into the exam and you find out that you’re not doing that well and then you are really upset.
So what we did, we introduced another feedback, another survey a week after they get the real grades. So we got their feedback from different points of time and from that we learned how well we perform, how happy they are with us.
And by the way, one of the things that we used to do and we keep doing it and we’re doing it even now, for me, in education at least, there is only one question that is relevant. I never care about what they think about the teachers, what they think about the content, what they think about the technology and the facilities et cetera, but only one thing: would you recommend this course or this service to your peers?
And if the answer is yes, everything is yes. If the answer is no, everything is no because I don’t… sometimes students can go into education course and say, well, it was great but I could have done it myself. You don’t want these students. You want the students that even if they do bad they would come and say I would not have been able to do as good, even though it’s relatively not that good, without this service.
So that’s what you want and that’s what you train your teachers to teach them and bring them to this point to realize what they got. Eventually they should recommend you and that’s what you want, recommendation. In education it’s word of mouth, eventually.
Andrew: How’d you come down to that one question? Did you try other questions then you ended up on that question?
Interviewee: We asked a million questions. We try all the time different questions. We keep trying a lot of questions. Now people are telling me that there are other questions, general satisfaction questions that brings the same results and we don’t need to ask the same question different ways.
So yeah, I think that there are. You learn by asking questions. You ask your students and you find out. And you hire professionals to see how good your survey is, how representative it is. All the statistical deviations et cetera. You learn and eventually you build it right.
Andrew: And the one question that you have right now is what? Can you repeat that?
Interviewee: Would you recommend the University of the People to your peers as a good place to attend?
Andrew: OK.
Interviewee: By the way, just for the record, 91 percent of our students say definitely yes.
Andrew: 91 percent? That’s very high.
Interviewee: Well, we’re… yeah, it’s very high and I think that first of all, we’re doing a great job, but I think that also the students are very, they realize that they get a great… they get an opportunity they couldn’t have get otherwise and they are very grateful and they give us credit for that.
So 91 percent said that either they would recommend or definitely recommend to the university. Yeah, we’re very happy. I mean it’s much more than I expected it to be, I have to admit.
Andrew: Dan Blank in the audience is saying 91 percent sounds high. Maybe that’s not the right question, then. Maybe it’s something else to help you guys improve. Dan, you’ve got to suggest something if you’re going to say that.
Interviewee: Exactly.
Andrew: Maybe it’s a vanity metric. Wow, Dan’s being a little hard today. And Ian Thomas in the audience actually pointed out something that was dead-on right. He’s saying, “Survey Monkey Surveys? Surely it would be a Woofoo survey?” And you’re absolutely right. Woofoo is my sponsor. I’ve never even used a Survey Monkey survey. I should have used them in the example and I’m actually going to do that under this interview. I’m going to say, “Would you recommend this interview to your peers?” And I want to see what people think of my work. Maybe I’ll start asking that question more and more often.
Dan, if I get 91 percent and you don’t let me be happy about that, I’m coming for you. [laughter] I’m personally coming for you. I’m going to leave Buenas Aires and find you.
We talked a little bit about.. actually, before we move to University of the People, let’s find out why you sold to Kaplan. Why move on?
Interviewee: No, it’s slightly different because in 2000 or 2001 I moved to The Netherlands to start the first online university outside of the U.S. It’s called at the time Karite [ph] and it was in partnership with the University of Liverpool. So 2001 to 2004 I lived in The Netherlands running, chairing this university.
Interviewee: … this university, which was a great experience. We sold this university to Lauriette. At that time it was still called Sylvan Learning. They changed the name about two months after they both ??, and it was sold. KIT was sold because we felt that there was a ?wall?. It grew very fast, and we had about 2,000 students in 2004, but we felt that in order to become really big the company needs a strong ?background?. And we felt that Lauriette, being a very big company that owned a lot of universities, was the right parent for this product. So we sold KIT to Lauriette, and then I moved to the U.S. When I moved to the U.S., in order to bring ?? because I felt that the ?textbook? industry in the U.S. is still under-served and there’s huge potential there. The idea was to start a ?textbook? company in the U.S. That’s why I moved in 2007 to the U.S. And since I thought that I ?had enough time with? the company that I started from scratch. This time I’m going to buy a small company and use that as a platform to grow. So, I went to an investment banker, who I knew for years, and said that I’m looking for a company to buy. And, you know, we talked and I told him about my ideas and he said, “Well, that’s a great idea, but why don’t you sell your company? Instead of buying, why don’t you sell it to ?? ?” My reaction was that I had never thought about it. I was there for fifteen years, and it never came to me to ever sell it. He said, “Think about it,” and I thought about it. So, after a day or two, I gave him a call and said, “The idea still sounds a little bit funny, but I’m willing to give it a try. If the price is right, I’ll sell it.” Well, two weeks later we closed the deal with Kaplan and sold the company. So, that’s how it happened.
Andrew: How much did you sell it for?
Interviewee: I’m not allowed to (laughing) reveal… Seriously.
Andrew: Can you give us a sense of the size of the business, the size of the values? We don’t need the exact numbers. But if you just give us a sense of how big it was.
Interviewee: Well, the business was a $25 million dollar business. Make the figures from that.
Andrew: You took it from about $100,000 a year to $25 million in sales a year, right?
Interview: Right.
Andrew: What portion of the business did you own?
Interviewee: By the time we sold it? 100%.
Andrew: Oh, a hundred? How did you end up owning 100%? What happened to those friends that brought you into the business?
Interviewee: Originally, they gave me percentage for managing the company. It was a relatively easy thing to do. The shape of the company and along the years, I bought the shares. So, they sold me their shares and I ended up buying 100% of those shares.
Andrew: So, using your salary and bonus, you ended up buying them out?
Interviewee: (pause) Yeah. Kind of. (laughing)
Andrew: Can you say if you borrowed money or anything else? If you can’t, it’s not the end of the world. I’m not looking to pry.
Interviewee: I’d rather not, you know. You have enough. (laughing)
Andrew: Okay. One more question about numbers. Then, we’re gonna move on to University of the People. What were the multiples for education companies like yours at the time? So, I don’t need to know your multiples, but if you give me… (cut off)
Interviewee: (laughing)
Andrew: That’s public knowledge. All you’re doing is saving me some work.
Interviewee: As I told you… You know… (more rambling) Did I tell you that I studied Chinese politics?
Andrew: Yes, I saw that in your bio, and I couldn’t believe it.
Interviewee: So, what do I know about multiples… You know, I’m not…
Andrew: (laughing)
Interviewee: You know much more than I do.
Andrew: You know what, Shai? We started this interview and you said, “I didn’t know about business, I didn’t know what I was doing, I took a Chinese class going to school, and I just ended up here. It’s all about luck…” The more I’m finding out, the more questions I’m asking. The more I discover: Hm, so he owns 100% of this business. He went from just being a guy who came in to help out a company that was losing money to ending up owning the whole company. He’s pretty ?canny?. It’s a good thing I keep asking these questions.
Interviewee: Didn’t I tell you that I was lucky? So, I was.
Andrew: From now on I’m going to send the ?? to you and anyone else I’m going to interview before the interview… (continues)
Andrew: …to you and anyone else who I interviewed before the interview. I think that’s the way to really get down into the details of it.
Interviewee: [Laughs] So, yeah.
Andrew: OK. All right. Well, I think we’ve got a sense of it. You owned 100% of a business that was doing 25 million dollars a year. You took some time off. You invested in Cramster, when you looked to get back in. And then you had an epiphany that became University of the People. And the epiphany was based on what Cramster was doing. What was the original idea for University of the People?
Interviewee: Well, I think I should go a little bit back to the time of the KT Learning, the Dutch University. It was for-profit, by the way. And it was a great product because we had students from over 100 countries. And we succeeded in going places that was amazing. And we put students from all over the world in one class. And you know, we had 15 students in a classroom, from 15 different countries. And it was a great feeling. And it’s a great product, as well. Online education is a very powerful tool. So we had this tool, great education. We took people from all over the world. We enabled people to work and study, people who couldn’t work in order to study, could study in the evening and get a great education. However, when we saw the company the feeling was, “Yeah, it’s a great product. It’s something that a lot of people need. But most of the people cannot afford it.” At the time, we taught for M.A. level. We taught for M.S.E. in Computer Science and in IT, and an M.B.A. Most of it, and it was about twenty thousand dollars for the degree. And most of the people, you know, it was like wishful thinking for them to get this amount. So it was kind of, “Wow, we have a great thing, but most of the people can’t afford it. So, too bad.” I think that what I told you earlier about Cramster, that’s the time when it hits me to say, “Wow, so here’s the way to make this product accessible to everyone”. Now, when you think about what happened in between these years, so obviously, the cost of higher education keeps increasing. A lot of people all over the world, there are hundreds of millions of people who cannot afford a higher education. People graduate high school and get stuck because they don’t have the money. Or in some other countries, and that’s not necessarily the US, there aren’t enough universities. You take entrance exam, either you are in or out. It doesn’t mean if you’re out you cannot study in the university, it means there is no room
for you. So, there are all these people, but there is the internet, and the internet is the tool to bring knowledge everywhere. At the same time, there is the phenomena of open source technology. So, there is, or free technology out there for you to grasp. The reason the phenomena of open access to knowledge, and if you’ve heard about open course, or other open access content. So, the content is there, courses are there. People, and that’s what we were talking earlier, people are willing to help each other basically just came to me. Let’s package all of it together and get tuition-free university. So, that’s how it all came about.
Andrew: Was this a, it’s not a non-profit, is it?
Interviewee: It is non-profit.
Andrew: It is non-profit.
Interviewee: It is non…
Andrew: I saw, it’s a .org domain name, but I didn’t realize you were doing it non-profit. So you’re not going to make money with this business, this is going to be a business the way Cramster is?
Interviewee: No, not at all. First of all, I, it is a business model. We run it, it’s a non-profit, it will never be profitable. I mean, it will be, it will never be a full profit company. However, it is run as a business, it is a tuition, let me describe the business model. It’s a tuition-free university. However, students do pay for two things. When they apply for the university, they pay for an application processing fee, between 10 to 15 dollars, depending on the country they come from. And every time they take a course, they pay for assessment processing fee that range between 10 to 100 dollars, again depending on the country that they’re coming from. So, the student from a very poor country will pay 10 dollars per course or about 400 dollars for the entire degree over the four years, if he doesn’t get any help or any subsidy…
minute 50 to minute 55
Interviewee: ÖSo, a student from a very poor country will pay $10 per course or about $400 for the entire degree over the four years, if he doesn’t get any help or any subsidy or any other kind of help to reduce this amount, he will pay $400. So, that’s the amount that students pay. This amount, because we use open-source technology, the courses are all being written by volunteers. We don’t have textbooks and we don’t buy courses and because the majority of our staff, our volunteers, will enable us from this very small amount to be sustainable when we have 15, 000 students. So, when we have 15,000 students, we’re sustainable. In order to get there, we need $6 million.
I put a $1 million of my own money into this venture, and we now starting to raise the other $5 million. I encourage you as well as your audience to take a look at us. We’re at www.UOPeople.org. If they want to help us, we would love to help. We’re going to start pretty soon a micro-philanthropic campaign asking people to donate online for as little as they want. We think that it’s extremely important to get as many people supporting us. So, that’s basically the financial model.
Now, when we get to sustainability, then we stop having surplus. We’ll use the surplus in order to reduce this small amount that we mentioned, but to go back to your first question, it’s a fully non-profit company. I put money, I don’t get out money.
Andrew: Did I read this right? Have a million people already taken, at least, one class? No. Not based on what you’ve said now, I got that they’re wrong.
Interviewee: I wish we have a million people. No, no, no.
Andrew: No, because you said that with far fewer people would get you, guys, to break even.
Interviewee: 15,000. No, no, no. We just started, we it announced it a year ago. We started teaching last September and we have, by now, about 380 students or 400 students from 81 different countries. By the way, the largest country is Indonesia, 81 countries from all over the world. Our business plan is that in four years, we’ll get to 15,000 students.
Andrew: How are you reaching out to the students? How are you finding them?
Interviewee: That’s good one, because when we announced the program, we got quite nice positive welcome from the media, and we got nice coverage, these coverage started a word of mouth. So, students heard about us either they read about us in the newspaper or on blogs, etc., or from their friends. Not a lot of them, the majority of our potential market haven’t heard about us. We have a problem because we don’t have a marketing budget to reach them. So we’re now trying to figure out how to reach them, because the majority of our potential students don’t know that we exist.
Andrew: I want to be fair with your time, and we’re already at the top of the hour. I want to ask you about the legacy question, but let’s save that for last, I’ve one more practical question. A few years, you were outside the country while Kiddum was growing. How did the company survived? How did they keep on going with the guy behind it being out of the country?
Interviewee: (laughs) I won’t say again that they were lucky, but they would say thatÖI’m an entrepreneur, and they think that one of the good things that they did for the company is growing and every year, trying to start a new business and branch through different new initiatives, etc. When I moved into the Netherland, I put a CEO. We were a group of companies at the time and she was the CEO of one of the subsidiary, and she did an amazing job. She was much better than myself. She was a manager, I wasn’t a manager. I was an entrepreneur and she was a manager, but that’s a different discussion, I guess.
Andrew: So then, let’s end with the legacy question. You’re building a business that’s going to leave a legacy, what’s the legacy that you hope to leave?
Interviewee: I hope that my legacy would be that when you get enough, start giving, and I think that that’s what I’m doing. I got enough and now it’s my turn to give, and I hope that every successful entrepreneur would do the same.
Andrew: A great place to leave it. Thank you, thank you for doing this interview with me, great to meet you. Guys in the audience, thanks for watching and looking forward to your feedback. I’ll see you all in the comments.
Discuss this interview on the Mixergy community site
– What role does luck play in success?
– Do you think I should stop asking entrepreneurs how much they sold their business for?
This program was sponsored by
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[This interview happened after a great dinner with Rob, the founder of Cramster.com.]
