A Textbook Case Study of Capital Efficient Entrepreneurship: Bhavin Parikh, CEO of Magoosh (Part 6)

Sramana Mitra: When this happened, who else was in the company?

Bhavin Parikh: When we raised in May of 2011, we made that blogger into a full-time employee. He was doing content marketing for us full-time. He was also helping us create content for our product. Then, we hired a software engineer who had interned with us the previous summer. He rewrote the entire application. I mentioned earlier that we knew we would have to throw out the work. We ended up having to throw it out. He rewrote everything. We were able to add more features much faster.

Both of these individuals are still with us. Then we had a team of interns that first summer in 2011, out of which we found one marketing person. Basically, we had one person doing GRE content, one engineer, a marketing person, and a GMAT person. That was the team when Hansoo was diagnosed with lung cancer.

Sramana Mitra: What happens next?

Bhavin Parikh: We knew that winter was coming. We’ve been through this once before. Our revenue started dipping but we also recognized that we’re going to come out of this okay as long as we are smart about managing cash and that now is the time to invest in marketing projects that will pay off in 2013. I had mentioned that we focused a lot on content marketing. We also got a lot smarter about link building. We would build partnerships with other companies and we would write content for them. It wasn’t promotional content. It was educational content and was useful for them. They get search traffic and we would get a link back to our site that would help us rank even higher in search. That helped us grow.

One of the challenges we faced was growing and scaling support. We promised our students that if they don’t understand something in our material, they can email us and we’ll respond without charging extra because one of the things we believe is companies should stand behind their product. If a student doesn’t understand something, it means it’s our fault. We did not explain it properly.

Sramana Mitra: I agree. That’s very difficult to scale.

Bhavin Parikh: We hired someone to focus full-time on that. He did a phenomenal job, freeing up the rest of the company. We didn’t really figure out how to scale it. We were just throwing people at the problem. That was from a challenge that we were facing in 2012.

Sramana Mitra: What were the new strategic moves in 2013?

Bhavin Parikh: In 2013, I think we started focusing on mobile. We had basically decided, “We’ve been doing content marketing and that’s been great. Now, we’re overly dependent on Google.” If there’s an algorithm change or something happens, there’s going to be trouble. So we started thinking about other marketing channels. We tried to get our customers to spread the word about us. We also started creating mobile apps. In a way, creating mobile apps can be like content marketing. If you create a great app that’s free, people can use that app and then they build an affinity for your brand. If you have a few upgrade calls to action, they may ultimately purchase.

Sramana Mitra: How did the revenues ramp, come the summer of 2013?

Bhavin Parikh: We got up to around the $250,000 ballpark figure. That was the peak.

Sramana Mitra: At this point, the only money you raised is that $750,000 in two rounds?

Bhavin Parikh: Yes.

Sramana Mitra: Were you able to fix this scaling issue with how to answer people’s questions manually?

Bhavin Parikh: Yes, that happened in 2013. We hired a few more people. We hired some former tutors who could answer the student’s questions full-time. Then, we realized that we’re just going to keep hiring these people. The other thing is because the business is seasonal, what do we do when we don’t get as much questions?

We came up with an experiment. I had a friend who had tutored and he was between contract projects. I said, “Do you want to answer some tickets for us? You can just come into our system and answer the questions.” We experimented on that process. We realized that this could scale.

One of our in-house people took charge of hiring a bunch of remote tutors. These are people who had tutoring experience and we put them through an application process and gave them sample tickets. We’d hire some of them and they would be paid hourly for answering tickets. It’s similar to a Lyft or an Uber driver. They just choose when they come in. If they see tickets on the queue, they answer the ticket and they leave. That’s it. Now, we have a team of 25 or so of these people.

This segment is part 6 in the series : A Textbook Case Study of Capital Efficient Entrepreneurship: Bhavin Parikh, CEO of Magoosh
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