A Textbook Case Study of Capital Efficient Entrepreneurship: Bhavin Parikh, CEO of Magoosh (Part 4)

Sramana Mitra: At that time, the competitive landscape was limited to that other company that was not as far along as you or were there other people who you were competing with?

Bhavin Parikh: There were several other companies that we were competing with. There were the big institutions like Kaplan and Princeton Review. In the online space, there were two very well-funded competitors. One was called Newton which is still around and has pivoted a more technology-centric space. They were providing GMAT prep at a much higher price. There was Grockit. Both of those companies have raised over $25 million. Grockit was more about test prep with gamification and a social element. They ended up pivoting into something else and sold off the Grockit side of the business to Kaplan.

Our hypothesis is they raised too much money for the space. They had over $25 million each. It takes time to build a test prep business because the students aren’t just investing their money but they’re investing maybe three to six months of their time into something that could change the trajectory of their career or even their life. You need an element of social proof. You need to be an established brand so that people can trust you. Unfortunately, money can’t buy trust. We opted to raise $750,000 in our seed round. We were going to build out slowly but build that trust along the way.

Sramana Mitra: It’s a better way build businesses when you do foundational work first and set it up right. Then you can scale. Money can scale things once you have the foundations set up right.

Bhavin Parikh: I agree 100%.

Sramana Mitra: You raised $750,000. I imagine the next major step is to figure out customer acquisition.

Bhavin Parikh: Yes. The next step was figuring out customer acquisition. Honestly, we didn’t know what we were doing. We try experiments. You need to give yourself time to iterate on those experiments to make them work. You don’t want to cut an experiment short. We were doing this forum approach which wasn’t really scaling well. We’ve been doing this for a while so we felt like we’ve been iterating on it and it wasn’t going to work well.

We had moved into the GRE space by this point. We’re both in the GMAT and GRE space and we started focusing more on the GRE. We hired a tutor who tutored the SAT, GRE, and GMAT and we asked him to write blog articles for us as well as post on forums. He was approaching the two strategies. He is a fast and good writer with a lot of good knowledge. After a month or two, we started to see that some of the articles are generating traffic.

Sramana Mitra: Once again, content marketing.

Bhavin Parikh: Yes, this is pure content marketing. We’re writing articles about how hard the GRE is and how to study the GRE. We were really targeting the long tail of search. Although at that time, we didn’t know that there was a thing called the long tail of search. We just wrote articles. We started looking at which of the articles are generating traffic. What’s the pattern?

What we found is that there are some that are generating traffic. We could see every single keyword that was leading to every single article. I think the turning point for us was very specific. Since the GRE format was changing in six months, we wrote an article about how difficult is the new GRE. That was generating a decent amount of traffic. What we found is everyone who’s coming to that article was searching for something like “How hard is the new GRE?” We were ranked seventh. I told our tutor, “Can you write a really robust article about how hard is the new GRE? Go a lot deeper than you did with the other one.” Then we started ranking second. That article started generating more traffic than the other 30 combined.

We turned that into a system where he would write a bunch of articles, figure out what keywords people were searching for, and create new articles based on those keywords. We went from 1,000 visitors a month in May of 2011 to about 25,000 visitors a month in September of 2011. It was purely based on article writing.

This segment is part 4 in the series : A Textbook Case Study of Capital Efficient Entrepreneurship: Bhavin Parikh, CEO of Magoosh
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