Bootstrapping or Hypergrowth? Finding a Third Way of Growth at Goalbook.
Many early stage edtech founders believe that there are only two paths for creating a sustainable and impactful company:
Bootstrapping – Spend on a shoestring, wear every hat, and scrape together money to survive until break-even and then become profitable enough to invest in growth.
Hypergrowth – Pitch venture capital firms and institutions who are seeking to build a portfolio of rapidly growing startups. Successfully raise a seed round, find product market fit and raise a Series A within 1-3 years.
We want you to know there’s another way! Goalbook is an edtech company that Justin and I founded in 2011 and our growth path wasn’t pure bootstrapping nor VC-funded hypergrowth. We stumbled upon a “third way” of growing an edtech company:
Raise a modest amount of capital from patient and impact focused investors
Find product-market and product-sales fit with a lean team
Reach sustainable profitability through sales instead of Series A
Below is a bit more of what this journey looked like for us. I hope by sharing some of Goalbook’s formative moments that you’ll have at least one real story of what this “third way” can look like.
Founding the Company (2011)
I participated in not one, but two, edtech incubators in 2011. I started my first incubator without a product and without any idea of what “being a founder” meant. By the time the second incubator concluded, I had a co-founder, a C Corp, an MVP, a few paid customers, and felt connected to a wider community of edtech founders and investors. It was a transformative educational experience. While not huge in absolute terms, the financial support was critical. It allowed me to be 100% focused on Goalbook for nearly a year without having to draw on the modest personal savings I had at that time.
Raising a Seed Round (2011-12)
My incubator experience concluded at “demo day” where I pitched to some of the most revered angels and venture firms in Silicon Valley to invest in Goalbook’s seed round. I remember preparing intensely for my presentation, but I don’t remember thinking intensely about questions like, “How much should we raise?”, “Who should we raise from?” and perhaps most importantly, “What kind of company do we want to build?” Raising a $1-2MM seed round just seemed like what every startup was supposed to do to be successful.
What followed was a stumbling, grinding, twelve-month-long effort to finally close a $950k seed round. The experience forced Justin and I to reckon with those deeper questions and we decided then to never raise money again. This decision committed us to figuring out how to break even and grow profitably before our seed money ran out.
Pivoting to Find Product Market Fit (2012-13)
Revenue was proving to be a problem. We were struggling to get small paid pilots ($1 - $5k per account). Teacher usage was scattered and uneven. It seemed unlikely that our pilots would become larger implementations. We eventually accepted the cold hard truth that the product that founded the company wasn't going to be the product that would grow it.
Our seed round enabled Justin and myself to pay ourselves a minimal salary as well as hire our first two employees, both software engineers (Dhiren Bhatia, Hain-Lee Hsueh). We had one of them shift focus on building a prototype for a new product idea. When selling the new product, we felt the tone of our conversations shift from nice-to-have to must-have. We soon landed our first large district contract with DC Public Schools with a half-baked prototype. This gave us confidence that our new product had already achieved a level of product market fit that surpassed our original product.
Scaling the Organization (2013 - 2022)
We hired our first salesperson mid-2013 (J. Mark Arnold) and got to break-even by the end of the calendar year. This salesperson convinced us that there were more leads than he could handle and that the sales work was repeatable enough to train others. We added more salespeople (Jonathan D’Angelo) and saw them quickly become ROI positive. When customer support began to take the majority of Justin’s time, we hired for that (Wendy Drake). From this point onward, our team has worked collectively to grow Goalbook organically without any additional fundraising.
Goalbook Today (2022)
It’s hard to believe that it’s been 11 years! Here are some high-level data points that capture where we are as an organization today:
We serve over 50,000 special educators, specialists, and leaders across 700 US public school districts in 47 states.
We have over 70 full time employees with an aggregate annual employee retention rate of over 94%.
We've reached double-digit millions in annual revenue with an 85%+ gross revenue retention rate.
We’ve had a 20%+ annual revenue growth rate for every year of Goalbook's history.
Third party research has found that teachers who use our products with fidelity had 3.4 times more growth for their students in reading and 5.6 times more growth for their students in math.
Our $950k seed round has been the only outside funding we've raised to date.
Long Term Impact’s Approach
Justin, Jason, and I believe that there are many other impactful edtech companies out there that can be successful taking a similar approach. We started Long Term Impact to support founders who are considering this third way of growing a company that’s neither bootstrapping or hypergrowth.
Our approach is somewhat different from a typical venture investor. We invest $150-200K. We then work with the founders to help them reach sustainable profitability early and not have to depend on future rounds of investment. For this reason, we believe our investment is best suited for small teams of 1-3 people, that have a product in market and a few sales under their belt.
If you’re a founder who is looking for a third way of building your company, we’d love to meet you! Please connect with Jason at jason@longtermimpact.fund
Learn more about Long Term Impact at https://www.longtermimpact.fund/
– Daniel
