This week, a young education company seeks advice on how much financial risk to take on as it pushes forward. — Dan Beyers
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The entrepreneur
Former English as a Second Language (ESL) teacher Ben L. Grimley spent the last 15 years in children’s software, developing language and literacy mobile apps for PBS Kids and Houghton Mifflin Harcourt. He saw a persistent issue that ESL teachers were still facing and no one seemed to be solving: There weren’t good teaching tools available to address the daily needs of the elementary ESL classroom. Grimley teamed up with other former ESL teachers and technologists to do something about it.
“About 85 percent of elementary students who are English language learners were born here in the United States and most can speak English colloquially just fine. The problem is, many are behind in academic English,” Grimley said.
“More than 9 out of 10 English language learners aren’t hitting basic reading proficiency standards by fourth grade. That’s why we went into the business of supporting English language learners in 10 different subject areas at the elementary level – to catch them up before the problem mushrooms. We want them to learn not only the isolated vocabulary terms, but also to apply them in the context of sentences, stories and math word problems.”
The pitch
Ben Grimley, chief executive of Speak Agent
“Speak Agent is a Rockville, Md.-based education company dedicated to closing the academic achievement gap for at-risk and special populations. Our initial market is English language learners. We offer an online solution for teaching academic English vocabulary through games and activities. It’s the only academic vocabulary solution that aligns with the specific daily needs of individual K-12 school districts, giving customers full control over the content.
“Our customers are K-12 school districts and the teacher is a very important sales influencer. We need to get their buy-in first, so our sales strategy is both bottom-up and top-down. We offer a free version for teachers to try the product, but our basic business model is a $20 per student per year license fee for the school districts.
“We just started marketing our solution at the Teachers of English to Speakers of Other Languages Annual Conference in Seattle after piloting the software for the past year. We are currently serving elementary schools from Montgomery County, Md. to New York City.
“Our biggest challenge is determining how much financial risk we should take on to accelerate our growth. When you are a young enterprise like we are, we struggle with balancing the desire to push the business forward versus the fiscal responsibility of maintaining a sustainable company. We’re fortunate to have some grant funding coming in the door, but to be at complete break-even at our stage would be very difficult. We struggle with whether to take on debt or investors to push forward with sales and marketing, hiring new employers or contractors, knowing that at some point we could run out of cash. Beyond proving a product-market fit, how do we reduce the risks of the business without making huge investments?”
The advice
Elana Fine, executive director of the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business
“We categorize risk in three categories: Product risk – does the product work?; customer risk – can you find your customers easily where you can create a replicable sales process?; and market risk – can you scale this business before you run out of money? You have the first two risks figured out. And since you don’t seem to be in land-grab kind of company, where competitors are racing with marketing dollars to snatch up the market first, you could put on the brakes a bit. When you aren’t going head-to-head with a close competitor, you can take it slower and invest in the business in the most strategic way.
“Figure out your sales process and how many sales people you will need to get out to school districts, knowing that at some point, the districts themselves will be part of your sales channel as influencers. It will take time to get those first three-to-five school districts fully on board with you through pilots then adding students. Once you prove that out, this business should grow.
“Doing too much now – such as overspending on trade shows, sales and marketing – would be a mistake. Right now, invest in a very good sales/business development team that can nurture your initial relationships and make sure the pilots go well and lead to full district rollouts while putting a good sales pipeline together. You know where to find your customers, but as school districts, they are going to move slowly. So your business may scale slowly, but you can still build a great business. Consider ways to fund it without raising money from investors, who likely will expect a much faster rate of growth than you can provide right now because of the long sales cycle with school systems.
“Explore other ways to accelerate your growth. Figure out how many pilots you can run at once so you exponentially grow the number of school districts you have on board within the next three years. Think about ways you can increase the lifetime value of your customers, perhaps by introducing add-on products or additional software options. Also look for other sales channels.