In the education technology industry, we see an abundance of press covering venture-backed startups and their funding rounds, acquisitions and other noteworthy milestones.
On the other hand, there is a paucity of coverage about edtech companies that grow their businesses with little or no venture capital or outside investment.
In a way, it makes sense. Bootstrapped companies rarely have “unicorn” potential and most aren’t nearly as sexy as their venture-backed counterparts. Bootstrappers also often don’t grow as fast. They are almost never designed for quick exits and financial returns. And they can rarely afford expensive PR teams that land features in major news outlets.
But to me, bootstrapped companies provide a window into a bygone era in company building, and their gritty stories of survival can offer important lessons for nearly any entrepreneur.
Below is our story. At first, I was hesitant to write it down. It exposes so many personal failures that it feels like ripping the bandage off a deep wound.
However, my hope is that it inspires startup founders to get through the tough times and to make better decisions. Above all, my goal is to help bootstrapped entrepreneurs get to the most important milestone of all: sustainable profitability.
After 10 years in business, our tutoring company, SurePrep Learning goes under after the elimination of a federal tutoring program. We are forced to lay off 22 beloved team members. My mom passes away. Our dog dies in a tragic accident. We have marital issues at home. I am hanging on by a thread.
My wife and I patch things up. I write a business plan for CodaKid, a coding school that would teach kids using professional programming languages and tools. With our savings and overly optimistic break-even projections, we decide to bootstrap it. As a former video game designer for Sony Playstation, I’m pretty sure this is going to be easy. Our plan is to start as a brick-and-mortar coding academy, and then move into an online subscription model.
We launch free coding classes at our academy, in an old, beat up space in Scottsdale, Arizona that we remodel with our savings. We have a total crash-and-burn failure out of the gate. No kids want to come back, citing that the “class is too boring.”
I read Eric’s Reis’s “Lean Startup” and go back to the woodshed. This time, we validate ideas with our end users before developing the software. We build new curriculum and advertise sessions. After the first class, students are so excited they literally jump on our chairs.
We bootstrap software development and curriculum production by selling camps and weekend coding sessions at our brick-and-mortar academy. My wife and I work 90 hours a week and gain experience.
I read Mark Cuban’s “How to Win at the Sport of Business.” Taking his advice, we pitch directly to editors, TV anchors, and influencers via email and Twitter. We land front-page stories in major newspapers. The big lesson learned is that you don’t need an expensive PR firm to get quality national coverage. We sell out our camps and are able to donate classes to underprivileged youth.
We endure a frivolous lawsuit by a now defunct competitor (who ironically raised lots of capital). After spending precious time and money defending, they go away (and later out via a fire sale).
We launch a new division and teach after-school coding clubs at local schools. We test, hone and iterate our curriculum, and see major improvements. We begin recording our first online course, a Java programming course with Minecraft. Our idea is to become the Lynda of kids coding, but with timely chat and screen-share support for students who need help.
We launch our first online course, and our first customer buys from Sao Paulo, Brazil. Within weeks, we have customers in 10 countries. I take an online marketing course from Neil Patel, start a company blog, and our organic traffic grows exponentially. I’m amazed that we have become a small, but global company overnight.
A CodaKid Minecraft Modding class meets at our Old Town Scottsdale academy in 2016. (Photo credit: CodaKid)
We try to bootstrap our online course development through summer camps but this time we are inefficient and lose money. Online sales grow slowly but steadily. We are still able to donate camps to underserved youth, which provides a boost in morale. Our team is holding up, but they can tell that we are on the ropes.
My wife and I liquidate all of our investments and savings. I spend late nights in bed staring at the ceiling. I wonder if I should drive for Uber.
We keep grinding and launch two more online courses. We switch to an all-access subscription model. Sales grow, but it is still not enough to cover overhead. We try crowdfunding through Kickstarter but are unable to meet our funding goals.
We apply for a federal SBA (Small Business Association) 7(a) loan. The wait begins.
We win a 2017 Parents’ Choice Gold Award which leads to national press coverage in Parents Magazine and other publications.
Still no loan approval. Desperation sets in. We take out a second mortgage on our home to make payroll. I start meeting with angel investors who smell blood in the water. They offer bad terms that I seriously consider. We get down to the last few thousand from our loan proceeds. I spend more late nights staring at the ceiling and feel like an idiot for putting my wife and daughter through this.
Our SBA loan is approved. We hire more full-time developers, and start ramping up online course production.
I read Verne Harnish’s “Scaling Up,” and we improve operational efficiency. We generate more profit through classes and summer camps. For a third year, we are able to donate a significant number of camps to underprivileged youth.
With a healthy reserve of SBA cash on hand, we begin behaving like a venture-backed startup and engage in a series of expensive marketing experiments. We fail badly. By early 2018, we need to use SBA principal to cover SBA loan payments.
We launch our 20th online course. We receive CODiE Finalist recognition for Best Coding and Computational Thinking Solution.
Our largest online reseller announces that it is going out of business. (It was responsible for 40 percent of our online sales the previous holiday season). Panic. We experience a painful lesson in what can happen when you put too many eggs in one basket.
We set up a store on Amazon. We spend late nights learning its advertising algorithm and end up selling thousands of units. The new revenue stream gets us through the winter. Crisis averted.
We launch our 35th online course. While online subscriptions are growing, we discover a major churn issue. CodaKid’s online division is still not able to pay its overhead.
I discover Gary Veederchuk’s book, “Crushing it!” We step it up with blogging, YouTube and social marketing. Over the following months, our web traffic doubles and our YouTube channel accelerates to nearly 2 million views.
We experience a devastating drop in summer camp sales. We spend the last penny of our SBA loan. The bank refuses more lending. Our company is forced to reorganize and lay off 3 team members. Heartbreak.
We begin licensing our online platform to brick-and-mortar coding academies and schools. Online sales double. We reduce our customer churn rate and finally become profitable. In August, we are featured on CNN.
In addition to licensing our tools to other businesses and schools, we decide to further diversify our bootstrap strategy in case hard times hit again. We launch year-round drop-in classes at our brick-and-mortar academy. This becomes a big hit which allows us to validate our ideas and test our content with hundreds of students before releasing it online.
We launch our 50th online course and now have students in over 90 countries. We prepare translation of our courses to other languages. Holiday sales are on pace to double what we did year prior. We begin donating coding programs and professional development seminars to schools in Nigeria, and are in talks with new schools in rural Tanzania.
As I look back, there were moments when we were weeks away from losing everything. But after every crisis, we seemed to bounce back. Bootstrapping forces you to fail quickly and to rebound even faster. It helped us develop scrappy instincts and focus on making money, rather than spending it.
Ironically, the cash infusion we received from the SBA brought us closer to going under than at any other time in our history. We got away from our habit of frugality, and began focusing on how to spend money rather than how to operate profitably.
While running too many divisions can cause problems for startups, diversifying our revenue streams is what finally allowed us to become profitable. It allowed us to focus-test our courses with live students prior to releasing them online, and strengthened our core offering.
Bootstrapping is stressful, and you must have a high tolerance for risk to make it work. When things go wrong, the results can be devastating. The positives are that you don’t answer to anyone, you don’t waste time fundraising, and you can become a better entrepreneur as a result of the problems you be forced to overcome.