Starting an education giant in a “bad market” | ClassDojo’s story | Sam Chaudhary (Co-founder and CEO)

Brett: I thought we could start at the end. And I'm really curious for your perspective on why you think the company has been successful in a category that most people have been very negative on for a very long time, which is, you talk to most founders that have built in education and they never want to build an education again. And you talk to most investors that have looked at education companies that have invested in education companies and most of them would label it as a bad market to start a company in. And so you all have done something really special and I think it tends to be the case that most companies are exceptions to the rule. But I'm curious, when you pick apart why the company has worked in as much detail as possible, what comes to mind for you?

Sam: Well, look, I'll say first we're still very much a work in progress, so we're still in the thick of it, but honestly, we were as taken by surprise as anyone when we moved to the US. So we're both British, moved to the US to start the company, had this enormously ambitious idea that it would be really great if we could give every kid on the planet an education they love and we think that's a big engine for progress in the world. It's great for people in their individual lives, but it also helps the world move forward. And then we got here and we had this very intense learning process. It was a rude awakening because we'd meet all these ed tech entrepreneurs, we'd meet founders who'd built stuff in the space investors and we heard this continued negativity. The truth is they're right, if you look at the results in the space, it's not been a very exciting space. Most education companies basically just remain small businesses. They never reach billions of people. They never reach tens of billions in revenue. They never reach hundreds of billions in market cap. It was puzzling for us because there's a kind of weird paradox here. Every family on the planet wants a better education for their kid. No matter the income level, no matter the country you go to, just every single family you ever meet is, "I want my kid to have more and do more and be more than I was or than I had." And yet these companies don't seem to make it. So you have to ask yourself why. And we did, and one of our diagnoses was that most companies here, and this is going to sound a little facetious, but we had the beginner's mindset and we were in the US for, we had 90 days on our visit visa and we had to quickly come up with a point of view. And one of our points of view is we were like, "Hold on. Most companies here are actually serving schools. They're selling software to schools. Nothing wrong with that, but that's the supply side of the market. The people that we're trying to serve are actually kids and their families. So who's building for kids and the families, who's building for the consumer?" The analogy I think we used was if you're building Airbnb and you want to transform hospitality, you don't start by selling software to hotels. That might make hotels a little bit better, a little bit more efficient, whatever, but it doesn't massively transform the experience for the end user, for hosts and for guests. And so we just took that analogy. We're like, well, ed tech has been the business of selling software to schools. What if someone served the customer like the consumer? And so we were saying we were going to build a consumer company in a historically enterprise space. There was another company saying that, which is Duolingo. We didn't know them well at the time, but there were not many that took that approach. And so I think that single choice changed a lot about our prospects. And we didn't know how important that choice was at the time because when you look at the other side of this, the enterprise side of this, selling to schools, it's a bit like selling to in the US, like 130,000 pretty bureaucratic, very small businesses with not much budget who are trying to do a heroic job but really don't. It's not a great market and yet everyone is after the same budget trying to eke out another few dollars from the school, another few dollars from the public tax budget.

Brett: And it's a challenging end market because even though it's extraordinary amounts of spend, they're unwilling to spend on software, procurement, what structurally is going on because certainly total spend is enormous?

Sam: Yeah, I mean I think the number that's quoted usually is like 3% ish of GDP, but 70% of that is on salaries and benefits and people. And then there's a good chunk that goes into facilities and buildings. And so by the time you get to what could you spend on basically discretionary stuff, technology, other things in the classroom, it's way smaller. Then there's some artifacts of this being a public budget, it's not like you can just sign it forever. It has to come for renewal, you have to reconsider it. The procurement process is famously difficult, but I think the core issue is none of those things actually, the core issue for me is that the alignment of incentives is all wrong. So for me and it may be just the way Liam and I are wired, we want our incentives to be tied to the person that we're trying to invite, the person we're ultimately trying to serve. Now all of us in everyone in education is ultimately trying to serve kids and families. And so our view is like, well, you don't want a divorce in your incentives between you wake up one day and you're like, "Well, we have to build a roadmap that so-and-so school or so-and-so district wants," even if that's not the best thing for a kid and their family, we want our incentives to be tied to doing what's exactly right for kids and families. And so I think that was actually the more important point was you want the freedom and agency to really obsessively serve your customer and that was going to be the orientation we took.

Brett: And so you hinted at this a little bit, but when you were thinking about the opportunity, did you spend a lot of time obsessing over is this a good market? Can we build a big business? How much of that was a part of the Zero to One phase?

Sam: Yeah, we knew the school side wasn't a good market. From all we'd seen, we'd keep meeting these entrepreneurs who just had a really rough time over, I don't know, 25 years of building a company and it not really going anywhere and maybe being sold to a private equity firm or something. And so we knew that wasn't the thing. And then this actually, we had a conversation many years later, which put this into much more eloquent words for me, but we just had this belief and this conviction that families really care about their kids. And the next step is if you care about your kids, it's probably a thing you're going to spend money on. It's probably a cause you're going to spend money on. And you can look at all the market research on TAM and whatever, but there's a much more interesting view on this. I spoke with someone at Spotify, one of the C-level at Spotify, and he was talking about when Spotify started. And this actually goes into the investing side on market risk. Even if everything goes well here, how big is this market really? And most people hate that. Because they're like, "Oh god, if the market's too small then it's not a good opportunity." But I think there's actually another side to that which is it's actually the most exciting form of risk where there's one or two assumptions that if you are wrong about or if you're right about as an entrepreneur, you suddenly unlock an enormous market that no one knew was there. And so there's famous examples of this, but the Spotify one is interesting. He was like, "If you tried to proxy the market for music online when Spotify launched, you'd look at how many CDs are sold and you'd be like, it's 100 million CDs, call it 10 bucks a CD. So it's like a billion dollar market. It's way too small to build a huge company in." But then if you take the other stance where you reason a bit from first principles, you might realize that well hold on, every society on the planet has had some form of music, has evolved it or adopted it. Music is in the top five interests of basically everybody in the world at some point in their lives. And so it could be that what everyone is pointing to is a lack of a market is actually just a product and packaging problem. I think we had something like that with Dojo where no one had demonstrated that you could build a very large consumer business and education. But I think we just took this conviction that well we actually think parents care about their kids and we think they'll spend on things for their kids. Now we did early on in the company like three, six months in, we did our first monetization test. It was very small scale, it was very trivial. We can talk a bit about it. We knew at that point that parents would pay. We didn't know how much, we didn't know how big it would be, but we knew that parents would open their wallet and pay for something that would be good for their kids. So I think that was the extent of it. There was some reasoning and maybe there's some conviction based on almost this first principle's reasoning that it's an evolutionary imperative to care for your kids and therefore we think we can serve you in that need.

Brett: Let's go farther back. What was going on with you a couple of years before you started the company? And what was the entry point into, actually I think you were at McKinsey for a period of time?

Sam: That was a weird left turn for me. So I won't go into ancient history, but I grew up in a couple of weird places. I grew up in the countryside in Wales, went to a very loving, very small school, then we moved to the Middle East to Abu Dhabi in my teens went to a 3000 kid international school. This school is amazing though. They insisted on kids teaching as well as learning. So I actually taught all the way through my teens for probably about a quarter to a third of my time at school, which I had no idea how formative that would be for me. I went to college, I was an economist, a heavy dose of math in it. I thought I was going to do a PhD in one of those things. The month before I started, one of my professors asked me to go and help a friend of his with his school. And so I went to the school and helped them teach economics and maths better and turned around some of the ways they were teaching it. And then from there McKinsey came and did the recruiting spiel about how they were building an education group that was advising governments on improving public education systems, which sounded amazing. And so as I went there, I think when I got there I realized, hold on, this is all advising this isn't doing a thing. And so it was a great training ground, but there's no way I was going to stay. So I left. And there were some friends of mine in London who were starting a company. There was a small group of us in London, we all met at university and McKinsey and so on. But we'd all been reading Hacker News and this was a fringe thing at the time. This wasn't like a mainstream whatever, no one knew it [inaudible 00:11:21]

Brett: Most of tech was a fringe thing at the time.

Sam: Yeah, I mean Airbnb had launched I think in 2008 where the iPhone had come out in 2007. Facebook was still private in 2011. So anyway, so we were reading Hacker News and PG's essays were just so formative for this whole group. One of the things he said was just find the smartest group of people that you can work with. And so I found this group at a startup in London. I was working with them and while I was there, I went to a hack weekend, I met Liam, my co-founder. So it's not the way you're supposed to meet your co-founder, you're supposed to know each other when you're friends, whatever. But we together in London a week later. He's incredibly gifted. He was an amazing engineer. He was doing a PhD in computer science. He'd built one of the world's biggest kids games. We got talking about working together. My plan had been, "Look, I'm going to leave the startup and go and work on an education thing and I'm going to apply to YC as a solo founder."

Brett: But you decided you were going to start a company?

Sam: I was like, I'm going to do something in education. And I couldn't find a thing to do. I'd actually emailed Sal Khan at Khan Academy and someone there had written back and said, "Hey, this is great. You should come and join us. We're a tiny team. Just get a visa and come." And I'm like, that's a big step. So that didn't seem like a path, but I'm like, well, I care about this education thing. And it feels to me, I think there's two fundamental problems in the world that need to get solved. And I've thought this for a long time. This is stuff I was interested in when I was a kid. One is just the energy problem of we just need to provide enough energy to fund all of our activity. And that's like a survival problem. And then I think the thriving problem is once you know you're going to be around, how do you make things as good as they can be? And the answer to that I think is a very simple process, which is it's just people. Just people discover their talents and capacities and apply them in some way in the world and make something off them. And if you do that over space and time, you make the world a better place for everybody. So that problem is I think the problem that I want to spend my life on and make a dent in. So it was very clear I was going to do something in this. I don't know exactly what do I go and teach? Do I start a school? Do I... But then I think on Hacker News, someone had posted, Geoff Ralston who then became president of YC, was starting this parallel incubator called Imagine K12, which was going to have the same structure as YC, a bunch of the same speakers. It was just going to be for education companies. I was like, "Oh my God, this is amazing. I have to go to this." Liam meanwhile had been emailing with Paul Graham totally separately and they were trading riddles back and forth. Liam had some idea that he was running by Paul. Paul wrote back with, "What is the equivalent of the Altair BASIC for this idea?" And Liam was pondering. Anyway, we had this whole flirtation around Hacker News and YC. And then Liam and I got talking about working together and we agreed to work together, which is a crazy decision because we'd known each other for a few weeks, but this was when you know you know. I didn't know that he would be my best friend, the best co-founder I asked for. My roommate for the next seven or eight years.

Brett: What about things like values alignment and do you have a shared vision and all the things you end up needing to have?

Sam: That actually came a little bit later. After we got into Imagine K12 we got out in the Bay Area, I forget who it was, but someone was like, "There's only one reason that startups fail." It was a talk at this incubator thing, and I was like, "Obviously product market fit. They never find it more. I know the answer." And he was like, "No." He was like, "The only reason that startups fail is because the founders stopped trying." He's like, "If the founders are trying, you can basically figure out every problem." And I was like, "Okay, why do the founders stop trying? These are tough people." And this person's point was that it's usually because you just don't share a vision of where you want to go. And so Liam and I, I was very paranoid about this. I think a lot of founders are very paranoid, but I was very paranoid about us breaking up and yeah, there's not working out for that reason. So we actually came back home that day and both independently on a piece of paper wrote down what we wanted to do or how far we wanted to go. This guy had framed it around, one founder wants to build a very large business, the other one wants to do a lifestyle thing. We basically showed each other this little bit of paper and it said roughly the same thing, which was we've left family and friends and relationships at the time to come out to the Bay Area. We're here for 90 days. We had 90 days to prove something that would then allow us to stay for longer so that the pressure was on. He was like, "Look, I just want to build the greatest thing we can imagine building in education." And I wrote something similar. And so it felt like at a very deep level there was an alignment. And I think we got to know each other more and feel out the shape of each other. We then lived together for eight years. So you learn a lot.

Brett: And do you think the two of you fit the we're very different and compatible or we're very similar?

Sam: I think we have almost exactly the same values and we express them in quite different ways. The good thing about that is there's never been a power struggle for, "Oh, I want to do product in the company." Or, "I want to do this, that or the other." It's always been quite complimentary. So we tried, actually I was very democratic with this stuff. I remember in our Series A we had an org chart that seemed important to put in the deck. We turned up and we had co-CEO on there for me and him. And one of the investors, "What is this nonsense? I need someone to fire."

Brett: I love this.

Sam: And I was volunteered, but it was never an instinct of like, "Oh, I must have this." It was more like, "Oh, we're building this thing together." To this day we have different roles in the company, but we've kept a lot of the mechanics and logistics about, we're both on the board, we've had disagreements, but it's always been just so amicable and easy to resolve. We've been candid with each other when we don't like something, but it's never been a bitter seething kind of thing. So I think there's something around intellectual curiosity. I think there's something around humility and low ego and willingness to learn and having a high rate of learning. I think that's definitely in there. I mean, look at some level, I think there's just a willingness to work really hard. PG had that thing about relentless resourcefulness. I think both of us have both of those traits. There's definitely relentlessness and a drive, but also a resourcefulness. We'll figure it out. Like a stance that come what may we'll figure it out. I think outside of that, we probably have different temperaments and it's probably a good thing because there are times where I'm up and he's down and I'm down, he's up and we can balance each other out and all that.

Brett: So what did you apply to Imagine K12 with? What was the actual thing that was in the application?

Sam: One of Liam's best friends, I think his housemate was a teacher and we talked about one of his big problems and one of his big problems was making groups in the classroom. And so we'd made a little prototype of this group making app. And so with this group making app, but we had a whole scheme for how this group making app was going to be used by teachers. Then it was going to become a platform, not to just make groups, but then to all the teaching and learning happening in the classroom and yada, yada, yada. Now for lots of reasons, this was a bad idea, but it was like we got in with it.

Brett: You applied with that idea and then you show up. And so then what happens?

Sam: We show up and I mean you know the YC motto, Imagine K12 adopted it too. Just make something people want. And so far we'd spoken to this teacher friend of Liam's and he really wanted this and we were serving this great customer and then we got to the Bay Area-

Brett: And that was the extent of...

Sam: I mean look, also, if I'm being honest, I think it was the first cohort they're running of Imagine K12. They were like, "Yeah, these guys have some experience in education. This one's taught." Liam was doing a PhD in computer science focused on technologies that help kids learn. They're like, "These are guys great. You're a technical founder, non-technical, perfect." At the same time, Imagine K12 was putting on these dinners where we were learning about ed tech and the industry and we're getting more and more depressed about how terrible it is. And so these two things were happening in parallel. So very quickly we were like, this group thing is not a real thing. This is not going to be a big idea.

Brett: Because of what you were hearing from teachers?

Sam: It was very lukewarm. I mean, you know when someone's into the thing and when someone's like, "Oh, that's great." And we were getting that response, we're like, "Okay, it's probably not the thing," but we didn't know what the thing was. So we've used this mental model actually a lot in the company since we called it the barbell approach where you have clarity on both ends. Clarity on one end was like, "Look, in the end, I think it's very important that everyone in the world gets to discover, develop their greatest talents and capacities. That's a thing, that's how the world should work, and I think there's a great business to be built there." On the other end, you're like, "What's the first step?" And all the steps in the middle, it's okay for those not to be completely well-defined on day one, you have to be able to learn your way into them. But we were struggling to find this end of the barbell. We're like, "What is this end?" And then we had this very, again, very formative conversation with Reid Hoffman who came as a speaker to one these things. Now we'd got to the point where we were saying, "Look, we think we're going to be a consumer company. We think kids and families are the right people for us to serve." We were like, "Look, this isn't working." Literally the tenor of the discussions we were having from the ed tech people was they're like, "Oh, it's so hard." We had someone come in and he was like, "Look, I'm going to tell you the secret to unlocking sales." And we were like, what's the secret? He was like, "You have to charter a boat and then take all this particular boat in Chesapeake Bay and take all these superintendents offshore and for a day and sign all these." I'm like, "This is not what I came here to do." So I think we had a lot of conviction that we're going to build for consumers, for kids and families, and that's going to be the audience. So then we had this conversation with Reid Hoffman. He came as a speaker and we were talking excitedly about this. "We're going to be different to all these others we're going to build for consumers." And he was like, "That's great. Consumer companies are great. Obviously I've been involved in a lot of them." He's like, "The single most important thing for you to figure out is how you're going to grow." He was like, "It's the hardest thing about consumer companies is how do you grow without spending more and more money?" And then Reed being Mr. network, he was like, the best thing, the most enduring thing at the heart of every business or great consumer business on the internet is some kind of network. And so basically, we didn't know it at the time, but that was basically the thesis of the company being formed right there. The question being put to us was what network reaches kids and families in perpetuity and at scale? And the implication was if we could build a network, then we would have a lot of time to build great businesses that people would pay for, discover what people would pay for. If we could never build a network, then nothing else we did would really matter. We really took this, I mean, I was a big nerd for basically all of Reid's writing. He'd published the LinkedIn Series A or Series B deck or something, and the whole thesis was network first, networks are valuable, build a network and then you'll build businesses on it. And we basically took that. We were like, "Okay, well we have to build a network that reaches families and kids, and that's the binary risk. That's the thing we have to do first." And we're both pretty obsessive people. So that became the only thing we did for the next six or seven years in the company. So then the question was what's the network? And that's when the penny dropped. We're like, "Well, hold on, teachers," I've been a teacher, so it's familiar. We're like, "Hold on. Teachers are in this very interesting position where every teacher first, they actually do the education. Second, they're in front of lots of kids and parents all the time." And so the thought was, well, if we could serve teachers, maybe we'd be able to serve kids and families as well. Maybe they'd take us to kids and families too. And so that then started this obsessive period of talking to teachers and really trying to understand their needs beyond Liam's first friend. That mostly came Liam did a bit of it, but mostly came to me. I was like, okay, well, I think in those first 75 to 90 days, probably 75 days, we had hundreds, hundreds and hundreds of teacher conversations to try and understand what their real problems and real needs were.

Brett: So what did the conversations sound like with all the teachers?

Sam: A lot of it was just open fact-finding. I had this question I like to ask, not the most fun question, but it really got to stuff, which was, "What's the worst part of your day? What makes you cry about your work?" And so we'd have these funny conversations where they'd be excited. I'd say we were doing everything we could to get in front of teachers because we knew nobody in America. It's hard to overstate this. We were staying in a Motel 6 for a few the first week or two because we had nowhere else to stay. Then we found this single room place in Palo Alto that, I was in one corner and Liam was in the other, and it was very humble beginnings. We knew nobody in America, we'd never lived here before. We had the Imagine K12 people had funded us. We had a little crossover with the YC folks, but that's it. And so we were just on our own in our little room. And so I just started cold calling, cold emailing, asking friends, friends of friends. We went to the local schools like Gunn High School in Palo Alto and others, and just soliciting teachers basically to talk to us. I ended up teaching summer school for a few days actually at Gunn High School in exchange for the teachers talking to us, whatever we could do. But the conversations really went to, "What is the worst pain?" That whole painkiller over vitamin thing? We're just like, okay, we took that very seriously. We're like, "What is the worst pain? What's the worst part of your day?" And we just kept getting deeper and deeper. So initially there was all kinds of good sounding stuff would come up. They'd be like, "It's marking homework, it just so annoying you marking homework." And we'd be like, "Oh, okay." But also you decide how much homework you want to set, roughly speaking, so what's really going on here? And they're like, yeah, "It's not actually the mocking homework. It's actually I get home and I'm just exhausted." And we're like, "That makes sense. Everyone, it's a long day. It's 10 hours a day, but there's other people work 10 hours a day as well. Why are you so exhausted?" And they're like, well, "It's actually, it's not that I'm exhausted. It's like I just had this one kid or one family or whatever. I'm having a real problem with them." And it basically boiled down to a human issue. They're like classroom management because some kid was causing them issues and disrupting the class. Or it was a family that was upset with them and they were having a flame war with them over email or something. And we were like, "Oh, that's an interesting thing. That's an actual human issue." That's the thing that you worry about because it's a human being on the other side of it, the rest of this is kind of workflow and whatever, transactional in a way. But these things have emotions attached to them. You could see it in their eyes, you could even feel it. And then you'd go even deeper and I could empathize with this because I'd taught, they'd say things like, "I didn't get into teaching to do this." And so there was this vision that they had of themselves that just wasn't coming to light. That's when you get that tingly sense of, "Oh, there's something here." And so that's where our first product idea came from, where we realized one of the big problems for teachers is it's called classroom management. So you've got 30 kids in a class and how do you keep it a positive and good learning environment? And that the main technology they had was basically punishment. It was like wait for things to go off the rails and then give kids detentions or raise your voice or yell. Or all these kinds of things that you just wouldn't do if you were designing a great environment. And so then we thought a bit about what a better way would be. And our first product was just a really simple way for teachers to give kids positive feedback. So it almost it felt like a game. It felt like a little toy, but as a teacher, you could sign up on a website at the time, you'd sign up, you'd put your class list in, you would add the values that you want to recognize in your class, like helping each other, kindness, curiosity, whatever it is. And then during class you could say, "Brett, that was a great example of asking a great question. Here's a plus one for a great question. You get this little sticker." Now, one of the things that was very important was we were in person for a lot of these. We did a bunch of phone calls too, but we were in person for a lot of this because a lot of this was happening in the classroom. So we'd go and see how teachers were using this early product in the classroom. And so you end up getting these little sprinklings of delight, which you totally wouldn't have done if you just stayed behind a computer screen to look at it. So one thing we did was when a little sticker would appear in a kid's profile, we had a little, "Bing," sound like a very pleasant kind of nice sound. Liam spent some time on it.

Brett: At the time you weren't concerned that this isn't a business. This is a little game?

Sam: There's a couple of things. One, we knew we wanted to get to parents, so we knew that. But the precondition to that was the YC mantra is, "Make something people want." The steps were in our minds, make something that teachers want. Step two was like question mark. Then step three is like money, but step two is get it somehow to kids and to parents. And then step three were like one day we'll build things that we think families want.

Brett: But the starting point for everything is we need to build a network? And the network needs teachers, parents and students?

Sam: That was our theory.

Brett: And then you were actively, as you were talking to teachers, as you were talking about, you were actively trying to figure out what is the unit of value in this network?

Sam: Yeah. Well, we didn't have a network to start with. We had a tool. The thing I just described as a tool, you could say there is a little bit of communication inside the classroom, teachers with kids or whatever, but it wasn't like what you think of as a network. What happened next was, so I should say this product exploded in popularity.

Brett: And you just took it to the people that you had spoken to?

Sam: Took it to the people that we've spoken to. And Mike, a third of them used it and they were blown away. We can ascribe some to a nice product, and we did a good job of that. I think the other part of it was we picked a customer that was massively underserved because no one cared about teachers because they don't have that much money, so why would you ever build products for them because they can't pay you anything. But what we realized was, well, hold on, there's a huge amount of pain here and actually they're a trusted figure and if we could serve them, then you get access to a whole lot more. And so it was looking whether people weren't looking. Maybe there's a parallel to the business model side of it as well. So it's not obvious, but we were assessing over serving teachers, that exploded. I think so one of our investors, we actually went to college together, Rahul from Superhuman, who was like, there's only one real growth channel, and that's word of mouth, and that comes from making a remarkable product. They're literally remarkable. People want to remark on it. And this was that product. Teachers would tell their friends about it and it was like became this crazy wildfire. So every batch of the YC companies, whatever, there's always at least one company that has that kind of ice hockey stick. So we were the one that started through away our idea when we turned up and everyone was like, "They're toast. They're never going to make it." And then we turned up a demo day and we had this crazy looking hockey stick chart. We'd gone from zero to, I think it was like 10,000 teachers using it out of the gate.

Brett: Before you ship the product, did you think this is really going to catch on and people are going to be obsessed? Or it's, "Oh, see what happens with this thing?"

Sam: We had a strong sense that there was a real pain here. I don't think we expected the spread. It really took us by surprise. I think we hadn't realized just how underserved teachers were. There's lots of amazing characteristics. We realized teachers don't get into it for the money or the fame. They get into it largely because they care about the mission. And when they find something that helps them on their mission, they want to tell other people about it. And so they tell other teachers about it. There's lots of other things we can talk about and the specific to teachers, but we learned a lot of that as we got into it. I talk about the resourcefulness thing. There's something to looking at a situation with different lenses. And you look at teachers and say, "Oh, it's a very bad business or revenue channel." Or you can look them and say, "Hey, it's a user with real pains that influences a lot of other people."

Brett: What was your feeling about that? Were you elated?

Sam: I mean, elated, amazed, pinching ourselves, all of which was unexpected. But I remember on demo day, the big, everyone was very riled up because Paul Graham was going to be there and the rumor was he was going to invest in the company. And Paul comes over to our booth thing after the presentations, there was some metric I'd showed about how quickly the feed points giving was growing. And he goes to Liam and is like, "Hey, Liam, can you just show me that metric over two weeks or something?" And Liam's like, "Oh God. Paul Graham's asked me to show him a metric." He dives into terminal to try and pull up the right stuff. And Liam's like, "Oh, it's going to take a minute." And I had thought it would be great to have a box donuts there because that would be a draw for people. And Paul's like, "That's fine. I'll just have a donut and wait." So the pressure is on. Anyway he ended up investing.

Brett: What did he think of the donut?

Sam: That's excellent. Really went for high quality donuts. Yeah, this is at a time. So you at a time when I had [inaudible 00:31:36]

Brett: [inaudible 00:31:36] the business that your angle on fundraising was let's have some donuts in here?

Sam: No, I was like, look, it was a goal oriented thing. I'm like, you're not sitting at the demo day hoping to fundraise. You're sitting there to get people to come to you. And I'm like, well, let's draw some more attention. If the hockey stick doesn't do it, the donuts will.

Brett: So then, okay, so you had this app and the app allowed teachers to give virtual rewards?

Sam: Stickers. There was no reward in a way. It was just stickers as feedback. So then a few months later, we were looking, we basically got enough interest in the company because if we were to go, this thing's growing, we don't really know where it goes, but we closed a seed round. We're then looking at some of the cohorts and we started to see that there was a set of users that were incredibly sticky. They'd come back every day. And we clicked a bit further into it and it wasn't obvious what they were doing in the product, but we called them and spoke to them. And basically it turns out they were taking all the rewards as a snapshot and turning into a PDF and sending it home to parents. They're communicating with parents. And this was evidently a very, we didn't know if correlation causation or whatever, but it fit a pattern of like, oh, well actually communication's a very sticky thing. You've probably been in WhatsApp groups with your friends, very hard to drop out of them. And so that then turned us onto, oh, actually what we're really building as a communication app. And a few things snapped into place. We're like, "Okay, that's a way to expand from teachers to parents and kids and really start to build a network." Two, we discovered just how high retention and high engagement that is as well. And so I think finding those golden cohorts was really important. That was almost like a second part of market fit moment for us. And so Dojo then expanded. We built parent accounts, kid accounts. The median experience of a parent is, "I don't know what's happening at school. I maybe go to a parent-teacher conference once every six months and sometimes I get a piece of paper home in a backpack, and yet this is the person I care most about in the world." And so to go from that to this seemingly, there's a very trivial thing. It was like "Brett asked a good question today," but knowing that then starts the conversation at home of, "What was that question you asked? What did you talk about?" And that's an amazing moment for the parent and the kid. But I think that then teachers were like, "Well, we're sharing these positive moments from the classroom instead of bad news and your kid got detention where you're now showing positive news." And so that was a great lift for everyone. And then it became very natural, "Well actually we want to talk about that. We want to send messages." Teachers are like, now Dojo was open in the classroom. They're like, "Now we want to take pictures of what's happening in the classroom, little snapshots of moments in the classroom." A video of this, the kid doing a poem or whatever, just real cute kind of stuff, these younger kids. And so Dojo basically from there expanded into, I think what the first product we ever built was this communication app. And it was very useful for kids and teachers and parents because it kept the whole community connected. It also served this goal of growing the Dojo network, which we can talk about.

Brett: Yeah, share a little bit more about what was the first version, I guess, of the second product built on the back of the stickers product?

Sam: Yeah, it was just a simple extension. We built parent accounts, so you now had a channel to the parent and the kid was in there as well. You can message the kid as a teacher, obviously, but the kid and parent accounts were attached and you can message back and forth. And then the next version added a camera. And we were like, "You can now take pictures in the classroom." And then we added video. And so it progressed from just sharing stickers to basically communicating about really nice moments in the classroom.

Brett: And so what were the numbers of the business at that point, roughly? What were you seeing? How fast was it growing? How many people were using it?

Sam: Oh my gosh, it's really hard to say, but I mean look, I think at the seed round, I think I know we had maybe some maybe 10,000 teachers ish using it. I think from there, this Series A, we basically just showed continued teacher growth and the beginnings of some parent growth. There's about 2.8 million teachers in the country, so I think we got to maybe one in 20 or something like that in the US. One interesting thing was we'd also started to see international growth completely organically. So we were actually at the end of 2012 I think we were in 40 or 50 countries with at least a few users.

Brett: And so did you think a lot about how do we get this thing to grow faster?

Sam: We did. Yeah, we did. Initially, like I said, it was just we're just building a great product and people love it and they tell their friends about it. I think it was, I forget now, it was one of those summers that summer, or the summer after we basically got a bit more involved in trying to learn about how this thing was growing. And a few things happened. One, we realized, I actually went on a user research visit to a middle school in the city, and I was sitting in with this science teacher, her name is Jenna, and we were like, "Wow, she's a great teacher. She's using Dojo." We were just there to learn about what's working and not working. Go back to the office. I think a week or two later I get an email from Jenna and she was like, "Hey, I'm going to take a break over the summer from teaching, obviously. Can I come and do an internship at Dojo?" And we were like, we don't really know what she would do here. And we were four or five people or something, but we're like, "Yeah, sure, come by, maybe do some support." I was doing all our support. I was probably like, "Please do all support tickets here." But a month into her internship, she comes back with this secret project she's been doing. And the secret project was her view of how we were growing through schools. And basically what she was able to show was that in all the schools that we were growing in, we had found one really passionate teacher. And it turns out we found out later on that most schools follow this kind of bell curve of distribution. Where you have really passionate, excited teachers and a bunch of module users, a bunch of laggards, but she was like, "These passionate teachers, these are people like me. These are people who really want to be on the cutting edge and do cool stuff and find the best things." And she's like, "I think these people are our champions and we should help them." And so she basically became our first community leader. She never went back to the classroom. And so she built this community where we'd get the power user from every school. And they would all meet each other and they'd be like, "Oh my God, there's people like me in the world." And that was another big inflection point.

Brett: And you did that in person or was...

Sam: We had a few in-person meetups because we did it regionally first, but then it became a Facebook group. They all had really deep relationships with Jenna. They knew the whole team. And so that, again, there's really no substitute for that. You can't really fake the care. They would text and they'd get a text back. You can't fake that. So I think that was one very important thing.

Brett: What are the other sort of things that helped inflect growth?

Sam: We started to realize in the US we had this around the world now, but we had this land and expand dynamic where we had to get to our first team basically using Dojo in a school, our first classroom. And then there was a path to expanding to the classroom. Now we have a weird stat in the business, which is hard to believe, but it's true, which is that to this day, we still haven't paid a dollar for user acquisition. So 100% of our growth has been some combination of word of mouth, virality, some community stuff, like basically zero marginal cost programs. But I'll give you an example. We would find what was working and then amplify that. So we found teachers were sitting in school doing professional development sessions. Now this is the thing teachers have to do. They have some hours they have to cover. And they were like, "I'll do a professional development session on Dojo. This is great. This is the latest thing I found this year." And we sat in on a few of these we're like, "We could just give you a really good PowerPoint presentation and we could probably put a QR code at the end of it or a link that you could flash up on the screen and everyone would join." Turns out that worked magnificently. It was such, in retrospect, we don't get that unless you go right down to the detail. The second thing we realized was that as silly as it sounds, there was no interaction effect between classrooms. So you could just use it next door to each other and not even know. So we built this concept of a school, you would join a school and now you could all see each other if you're in the same school. So you became the contact book for the school. And that was obviously a very sticky feature, which you've seen in WhatsApp and Discord and a bunch of others. So there's at least a couple of things. There's a couple of things that are working in the world and product, because we're product people. I think thinking about how you create network effect products was important to us. And so we started to see, and if you look now, Dojo is used in nine out of 10 schools in the country and maybe two or three times as many as that internationally. A lot of it's still been this land and expand dynamic.

Brett: What gave you the confidence to just grow this thing for many years without thinking about the actual business?

Sam: One, we'd done that monetization test early on, maybe a year in. We were pretty nervous about it. We didn't really have a product to sell parents. We were like, "Well, we haven't built anything." So I think we created an avatar set because kids had these little monsters we're like, oh, you can just customize your monster, give them a hat, whatever. This is very cheap to do. And we just popped in the parent account. And you don't even remember what the conversion rate was. It was abysmal. But we're like, "Oh my God, people are paying us money." This is first dollars in the company. This is incredible. So we're like, there's going to be something. We don't know what it is. It's probably not this, but there's going to be something here one day. I think it was more just a confidence building thing for ourselves. The real answer might just be we had burned our boats at that point. We turned up in the US we had this very specific thesis. We'd raise money on that thesis. We still thought we were right. The theory still made sense. We were still making progress. Every year we turned up with more teachers and more families now more kids now as well, it used to be just teachers and expand these other groups. So yeah, we were like six or seven years in, six. It was 2018, 2019 when we were like, "Oh my God, we think we've got the beginnings of a network." And then we kept seeing adjacent behavior or emergent behavior. I think that's a really important sign actually in consumer products. I think there's a lot of, probably not as important in the enterprise world, but in the consumer side of things, we are very careful not to overbuild and really tightly specify how you must use this product. We actually kept it open to see what would emerge. And so we saw a bunch of emergence. One was the international growth. Nothing we did, we didn't translate the app. Eventually we built some software, which allowed our users to translate it, but we started to see, hey, people love this. They tell that teacher they met on holiday about it and they start using it in their international school in the Netherlands. And then there are three other international school teachers, "What's that thing with the monster?" And they tell. And so we started to see these spread patterns around the world. I was like, "Oh, that's really cool." Now it's in 160 countries or whatever. But that was one. I think the second was we started to see other groupings of kids using the app. So beyond the classroom, sports clubs and afterschool clubs and daycare. And we're like, "Oh, so this isn't just classrooms. It turns out kids are many groups that could be enormous too." Once we hit a certain level of scale in the US, know something like one in four, one in five families in America use Dojo now every week. We start to get a ton of inbound from the institutions, from schools, from districts, from states, in some cases from some federal governments. And so I think there's these moments where maybe it's more of a feel thing where you feel like you've, who said this? You feel like you've got into a pool and then you get to the edge and you realize it's actually a lake, and then you get to the edge and you realize it's actually an ocean. And then we just kept feeling the sense of expanding possibilities in the communication app that we were building. And so I think that just felt like we were onto a thing. So keep going.

Brett: What's the story behind launching the first business?

Sam: We got to 2019 and basically it was more just a feel thing. We were like, "Look, we think we've got the beginnings of a network here." Think it was us and Roblox was bigger, but we were like there's, we're one of the two biggest networks on the planet for younger kids.

Brett: And this is millions of users at this point?

Sam: Yeah. Millions for sure. I think there's 25 million families in the United States with kids under 13.

Brett: And I assume the product was also highly retentive, which was super important?

Sam: Yes, super high. That was maybe one of the other things that gave us confidence was that we had incredibly high retention and incredibly high engagement. To this day it started high and it's got even higher as we've grown, but it's an incredibly sticky product. People love using it. The other thing was, it was all voluntary usage. We haven't twisted anyone's arm. It's not your school district is going to check out on you. It's just like, "I chose it." And so I think when you see those signs, they're so rare. Every time we show them to a consumer investor, the B2B investor just didn't get it. They're like, "What is this thing?" The consumer investors are like, "Oh my god, is that real? Is that weekly to monthly ratio real or is that retention curve real?" And we could just show, you see companies with consumer apps usually have 5 to 15% retention to 30 days later or something. And we were at 6 x that six months later, it was wild.

Brett: Was most of that six years just incrementally making the core product better? What was going on for those six years other than working to grow the business in all the ways you discussed?

Sam: Honestly, it's hard to convey how hard those years were. We got to seven years in and we were 30 people and we had done the Series C at 30 people with $0 in revenue. And we had the exact same thesis. I actually wrote a strategy document a year or two into the company which tried to articulate this so that we could just give it to investors. Everyone still reads that document today. It read like, "Our mission is to give every kid on earth and education they love. We think this is fundamental to progress. It's this single biggest enabler of progress on the planet. And the question is how? Step one is we're going to serve teachers. Step two is we're going to expand from teachers to this whole community of teachers and kids and families. Step three is we're going to build products and services for families that help their kids learn and grow in all the ways they want. And that's where we're going to build some great businesses." Roughly speaking, there's a lot more depth to it. But yeah, so it was incredibly hard because you have this gun pointed at your head basically, and the bank balance is going one way. And you have this really high conviction, maybe high conviction founders with a thesis that no one has ever proven before. Again, let's not align it too much. I'm just thinking about the moment in time where we were in our mid 20s, we'd moved to America. We had basically no attachments. We were living together every day and working together every day. Again, we burned the boats. We're like, "This is thing. We're going to make this work."

Brett: So how in 2019 did you decide now is the time that we're going to start a business?

Sam: I think we had just finished the Series C and we're like, man, we can't do another round with it.

Brett: We got away with it. It's been six years.

Sam: We're like, okay, it's been great. We now have, now it was the big news is we had millions of parents on Dojo and that had never happened before. We could show millions, not like a few hundred thousand, and we're like, "Wow, okay, we've got a large audience here." And so we were like, okay. We're feeling pretty encouraged about the progress on the network side. That was never the end state of the business. That was always a precondition to the next thing, which was starting to build businesses that serve kids and families in all the ways that help kids learn and grow. And so we started with honestly what felt achievable. It's a product that we still have, it's called Plus. It was at the time it was called Beyond School. We had this observation that families don't actually know how to spend money to make their kids' education better. I'm like, well, what if with confidence you could say, "This is the best $100 I can spend." We started a small team, which was working on the paid product and it was called Plus or Beyond School at the time. Then really quickly rebranded to Plus. And we basically put in a few features that parents had asked for a long time that we haven't got around to building, and that just exploded. One of them was, there's a feed of photos in the Dojo app, photos and videos. So instead of scrolling down this feed of photos and videos to see all your kids' pictures from last year or earlier in the year, we'll just make some nice digital albums for you. We call them Memories. And so you can check out these Memories and it turns out total nice to have. You don't have to buy that, but a lot of people really want that and it's a good feeling thing. And so that was one feature. Another one was the stickers that teachers were giving, you could give those at home as well, and some parents wanted that. So relatively small extensions to the core engagement loops in the product, but they were built around the core engagement loops that we'd been building for years. And so we built this and it just started to grow.

Brett: But how does that map to this is the best $100 you can spend?

Sam: It's not yet. But it's going that way. So it started with, look, the value there was let's keep you better connected to the classroom.

Brett: It started with premium features?

Sam: For some premium features, yeah, for sure. But the idea was that you want to start to add and more and more value to this over the lifetime of a customer. You want to have so much value in this that it's crazy for you not to buy this, but we have to start somewhere. Right now we can't start with deliver the whole vision. So we launched this and that just started to grow and grow and grow and grow.

Brett: And you're talking about millions in revenue very shortly?

Sam: Yeah, year one was single digit millions. It was 2020, but that just scaled very quickly. A growing percentage of our base was like, "Actually, I want this."

Brett: And it was priced $100 a year?

Sam: Yeah. I mean, monthly and annual packages varied or whatever, and the annual was a little cheaper. The monthly would equate it to about $100 year, but that was the first business. And again, it's hard to describe how in a company that's never made a dollar to then build your first business and for it to start to work, it was just a game changer. Because it gave everyone conviction that, "Oh, we can build a thing that monetizes." And with that, we started to just fund the business out of our own revenue for the most part, the team was still quite small. It meant we could extend our horizons a little bit and plan on different horizons. So when we were early days, it was just build the core products. The only thing we then got to this, we didn't know to call it this at the time, but basically a capital allocation framework. We're like, "How much money and time do we put into our core and what adjacent bets do we take?" And then what are venture bets that may or may not ever work out but are worth investing in on a very long-term horizon.

Brett: For those three years, it was basically premium features?

Sam: 2021, '22 was just premium features.

Brett: And most of it was driven by just what you were hearing from parents?

Sam: Just with families. Yeah. Now I think there's a lot of people talk about just listen to your customers and build a customer. I actually think it's incomplete advice. So for us, I got very lucky. I ran to this guy Gib Biddle, and he had this very clear framework, which we basically just totally stole in the company, which is the job is at the intersection of delighting customers in hard to copy margin and hones in ways. And hard to copy is an interesting one because that's one we thought so much about given the history of the company. There's a book called The Seven Powers, Hamilton Helmers, the author, and I got in touch with him and he was at Stanford and I was like, "Hey, could you come and talk to the company about this?" And it was preposterous. We're like 35 people or something, but he came and talked to us about it. It's really become foundational in the company. I think the intersection of those few things, how do we delight people in ways that create moats for the business and that create good businesses started to become a bit of the mantra. The second business we got into was what we call Tutor. We realized from families that a lot of families really want more attention for their kids than just what happens at school. And they substitute it by, "I'll try and help," but a lot of parents don't actually know how to help. And turns out it's not an easy thing to get great help for your kid. It's a bit trying to find a good doctor. You have to trust them. And then we looked at companies in this space and it turns out they're not very good companies, but you look at the businesses and a lot of them really struggle because they're paying a lot to acquire demand and supply. They usually have high churn because they're studying for an SAT. It's a high takes moment. Then you leave. And all that turns up at high prices or the business gets margin compressed. We realized, well, hold on. Dojo is we've got this huge community of teachers and families. We can just connect people. And because kids are younger, there's no natural churn moment. It's not like you're studying for an SAT when you're eight or something. And so we built the first version of this service. We actually found two founders. There's another weird thing about the company. We have a lot of founders in the company. I think it's like 50 or 60% of the company is former founders or founding team members, first marketer somewhere, the first engineer somewhere by design. But we found these two awesome guys, Gonzalo and Benjamin, they were YC founders. They built one the largest tutoring marketplaces in South America. And I was helping them raise their Series A. And they were like, "Look, we're going to spend all this on user acquisition." And I was like, "Well, why don't you just build this on Dojo?" And they were like, "Actually, that could make a lot of sense." So they joined Dojo, rebuilt the product on Dojo and it's just exploded. It's like millions of tutoring sessions happening on Dojo. It's way lower price than anywhere else you'll find.

Brett: And it instantly worked?

Sam: It didn't instantly work. We had to go through a few revs of it.

Brett: What were the revs?

Sam: Yeah, so the first rev was initially we built kind of the, before Benjamin and Gonzalo turned up, we tried to do it ourselves and we basically built it like a product rather than a marketplace. So the product we built was we'll find some teachers. And basically we tried to be the provider rather than setting up a marketplace where supply and demand could meet each other, which was more like what we had done before. We'd always built the product for you. And so we built that and we just knew a month or two after launching the first version of that, we were like, "This is just not going to scale. It's not going to work." Or, we're trying to be a school and you're going to get into all kinds of school issues. And so we got out of that quite quickly. But then we met Benjamin. I'd been talking to Benjamin and Gonzalo and said they joined and then it started to work.

Brett: And so what was the form factor of that product?

Sam: We actually didn't have a catalog or anything. You would just sign up initially. Initially it was just email marketing. We'd email our user base and say, "Hey, we've got this tutoring thing, you can get some tutoring for K-5 reading and math if you want more help in it." And then we would match you with one of three tutors. You could pick one of the three. And then you'd basically just have almost like a subscription to this tutor or you'd subscribe to this tutor and you'd see them every week or twice a week, whatever virtually. I think we'll do it in person eventually too, but virtually. And that just exploded in popularity. You'd have kids absolutely love it. Teachers would find out about it and then they would tell parents to do it because they're like, "I can't help Johnny as much. Can you just do this?" And it's 30 bucks a session. It's affordable for a lot more people than what tutoring had been. But the thing that really blew me away was something like two out of three families paying for that had never paid for a tutor before in their lives. So this wasn't-

Brett: Classic for the market.

Sam: This wasn't like, let's take the 1% and migrate them over. This was like there's a whole set of latent demand. Again, so one of the market risk thing, people are like, "Well, it's only immigrant parents or top 1% parents that pay for tutoring." It's like it turns out parents actually care for their kids, but there's a lot of friction in expressing that care.

Brett: Exactly. And the business model was a rake. You were just taking a percentage?

Sam: We're just taking a percent. Yeah.

Brett: You standardized the fee or you let tutors do whatever they want?

Sam: [inaudible 00:54:38] standardized to start with. We may still allow tutors to set price at some point, but it's like you just want to minimize the variables to start.

Brett: And were tutors existing teachers on the network?

Sam: Yeah. They're all [inaudible 00:54:47]

Brett: So you didn't go and recruit?

Sam: They're all still existing teachers, which is pretty amazing. There's a few joining off network now and that tutors are bringing demand from off-network as well, but that started to be our second growth engine in the company. Lots of exciting adjacencies around the subjects and grade levels and geographies and formats and lots of stuff you can get into, but the core of that is just looking like an amazing business too.

Brett: And then have you worked on the next business that you're going to launch?

Sam: Yeah. I mean different levels of maturity. So these are going from most to least mature. The next one was a crazy one, but this is a real, I think it's the kind of thing startups should be doing. So in 2021 we were talking with a bunch of parents. One of the big concerns we were hearing was, "Hey, screen time, my kids are spending all this time." It wasn't even just the quantity, it was like, "What are they doing? My kids are online. It seems bad. I don't know what they're up to." There's lots of fear, uncertainty and doubt. And the truth is you're right as a parent to be worried if your kids are under 13 and on the internet because there aren't great places for them to be on the internet. It was never really built for younger kids. So you usually get either quite boring single player apps and then to make them more exciting, you have to have all these engagement mechanics, which aren't great for kids, or you get multiplayer apps, but they're full of strangers. That's what happens on a few of the bigger gaming platforms or whatever. And now your kids amongst a bunch of strangers and we know all the downsides and weird effects of that. So what we realized was we were like, "Well, hold on." And this was actually my co-founder, Liam. He'd helped build one of the world's biggest games for kids back in the day called RuneScape. What we realized was, well, we've built this large community, but the community also has real relationships baked into it. You have kids and their parents and the teachers and their friends. We're like, because we know who you are, we could make a place where kids can be with only their friends, no random strangers, no weirdos, and that everyone would feel way better about that. Parents would feel better because it's a closed community with just my kids' friends, it's like a playground basically, where I know everyone in it, kids would feel better because now you can actually have fun rather than having a bunch of creepy strangers around. And so we start to build this place called Dojo Islands, which I could show you, but it's a virtual world where every class gets an island, they get to build this island together, so it's very Mindcrafty, you build this virtual world together. And then you start to discover games and activities spread across this island made by the kids. And so it was such a crazy, when we talked about it with the board, they're like, "You're a games company now?" And to me as well, I was like, "Oh my god, Liam is excited about this idea. I don't really know that much about it." But the more we picked it out, the more we realized, hold on, this just makes so much sense. If you could make a place basically the best place on the internet for kids where you knew your kids were going to be safe, you knew they were going to be doing wholesome stuff that was helping them learn and grow, you'd want that place. And so that's what we started to build and we launched it quietly in 2023 and it's just exploded. It's also now millions of kids.

Brett: And the primary experience is you're doing these things with your classmates?

Sam: With people you already know.

Brett: So it's not necessarily just your close friends in the school?

Sam: Yeah. Now you can peel off into smaller groups or whatever, but the superset is just people you already know.

Brett: And what's the fifth business?

Sam: Our CTO Dom turns out he homeschools his kids and we were talking about AI and the impact of it or whatever, and he taught them to read, there's a couple of great books you can work through to get through the science of reading like phonics. And he was like, "I think there could be a really killer product here." And he just went off on his own for a few weeks and he was like, "I think we could build an AI reading tutor here." And we were talking about it and we were like, look, I think everybody in the world wants the AI tutor for their kids, but you look at the way people are building it or the way it's going, it's not clear which one's going to work out. And we realized, well, we've got all of this information on how kids learn. That can be really helpful here.

Brett: What data did you have on the way that kids learn?

Sam: To start with it was like what's happening in the classroom, what your kids are doing. So it's a bit more contextual information, what kids are up to rather than specific information about your learning. People add their work and things to Dojo so there's a few things, but more than that we have deep engagement. Dojo is open on the phone or in homes and classrooms many days, many weeks. So there's lots of opportunities for engagement. And so I saw Dom and he was like, "Look, I think we should have a crack at building this." And he started to build it and so we launched it quietly last quarter. It's called Sparks. So it's an AI in the end it's going to be the AI tutor for your kid. It's starting in reading because that's basically a huge use case. We speak with families and hear from them all the time. That's one of the biggest needs they have. And it's got two parts. It's got a tutor, a little guy called Sparky who has this conversation with your kid and learns more about their preferences and where they're struggling and all the rest of it. And then a series of games and activities that lead kids through the science reading. We can take a kid from not knowing how to read to early literacy in three or four months in about 15 minutes a day with no humans involved. That's never been possible before. It's super cool.

Brett: Is there anything else that comes to mind in terms of things that you figured out in how to launch multiple products or multiple businesses?

Sam: One of the instincts was just the talent in the company. I had this mandate that we want at least half the company to be founders or former founders or former founding team members. And you can look at these businesses and all of them have a founder type at the core. You look at my exec team, it's all got former founders or close to founder. Our head of product was the first product person at Khan Academy or one of the early ones. Dom, the CTO is multi-time founders, X and a couple of businesses, a bunch of others. Our CFO was like the first finance person at Plaid. So you've got these people that are used to that muscle is intuitive to them. So who knows, we're still a relatively small company. It's 230 ish people.

Brett: So that's one of the biggest parts is to have sort of founder DNA that we're directly point on getting the new business off the ground?

Sam: Yeah, I think you want to find DNA for it. And then I think also almost like the orientation. For Dojo, like it's a really ambitious company. We want to give every kid an education they love. We're not saying we want to teach every kid to read, which is one part of an education or one part of a childhood. So it's quite a broad mandate. And then you have to be smart about which verticals you get into, which categories you unlock and so on. But I think everyone has the understanding that, oh, we're not like a one product company. It's a multi-product, multi-revenue line company. We have to be thoughtful, we have to get good at allocating capital and resources and time and energy. But those are also skills that we built in those first six or seven years because we couldn't do superfluous stuff. We had to be really just laser focused on what's the critical path to making this network work. And so I think some of that DNA transfers into these other things as well. You get into Zero to One, what's the critical path? There's not so much posturing. Actually maybe this is actually an important thing. There's this great book, it's called Leadership and Self Deception. One of the unexpected benefits of the gun to the head time of not having your revenue and going to network was that you had to be incredibly candid with yourself and with one another because it was just like time was running out so you couldn't fluff around and be like, "Well, it's I guess not that bad or whatever." If something wasn't going to work, you had to say it early and say it loudly and we had to talk about it and find a way forward. And so I think it built a culture. We have a value in the company we call candor over harmony. It's not that we don't like harmony. It's like if we have to pick as a trade-off, we'll pick candor. And so I think creating a culture of candor has really helped because with early stage ideas, it's very easy to not say anything to be like, "Well, I'll just keep eking out 2% wins over here." But someone's like, "Look, we're missing the boat on this, that or the other. We need to get into that." Another great example actually is one of our product leaders, his name's Brendan. He did this total side project, which I didn't even know about. He was like, "Look, clearly every teacher in the world is going to have a teacher's assistant. And we're in classrooms with teachers. We have a lot of trust with teachers. We should get into that and help." And so he just went to teachers did the same process I described. He was like, "What's the worst problem?" Everyone knows that story by the way. He would ask similar questions, "What's the worst problem? What's going on?" Then he arrived at, there's a whole set of more than half of the teacher's work week is taken up in admin work. I think it's like 55 hours is the average work week that teachers work and 48% of it or something is teaching. And he was like, "We should just abstract away all this stuff." But that just emerged in the company. I think building a culture where people are like, they know that we do Zero to One stuff, they know that there should be candid when they think we're missing an opportunity and then they have the muscle to do it, I think maybe some of the ingredients.

Brett: When you think back to the path into originally getting the company into product market fit and these kinds of different chapters or businesses, what are some of the meta things that you've figured out that are useful for other founders to consider and maybe some of the things that are less obvious or less discussed and the types of things that generalize? I'm sure there's tens of thousands of things that you figured out, but really it's useful in the context of this business, but the more generalizable things?

Sam: At every one of these businesses we've talked about, we had a thesis like an end, "This is what we think this could be." And we weren't always sure of all the middle steps, but we had a thesis for what this could be, this is why we could win, et cetera, et cetera. And in some of those we had to change our minds on some of the assumptions, but it was never like, let's just throw some spaghetti against the wall and see what happens. I think we had this lens of delight people hard to copy margin halting ways. Let's have a little bit of structure around picking the direction in a way. And so I think people maybe just don't talk about that. It's just make something people want. But you were asking me earlier about how much did you assess the market, that was maybe our version of it. It was like have a point of view and then update that point of view over time as you learn more. I remember even on our first funding deck, we had a series of hypotheses that need to be true for this business to work out. Things like parents will pay for a product and stuff like that. So I don't know if that's not obvious, but I feel like just that makes some people walk alone maybe misses that and I think it's necessary, even not sufficient. Dojo has this breadth of products, but I think at every point in the company there's always a choice, do you go deep or do you go broad? And it's basically almost always been right for us to go deep. And that's all we did for the first six or seven years until we found some kernel of delight.

Brett: Why do you think that is correct?

Sam: Again, it's just my one person's experience, but I hate to think what would've happened if we tried to build 50 million features in the first six or seven years. Dojo was a communication app, it stayed of communication app and it got better and smoother and more delightful and more useful and all the rest of it. But I think the third thing it is the thing about being around other founders. I spent a lot of time internally focused in the company and I think in retrospect some of the best step change kind of thing thinking I got was just from being around founders who are a step or two ahead of me.

Brett: Maybe there's a couple other things that you can share. The founder density at the company and where that came from?

Sam: Culturally, I think we're extremely atypical in a lot of different ways. I can talk about that including the founder density thing. But so I think early days everyone's like, "You've got to write values. You've a mission and strategy and values." And so I turned to one of our engineering leaders who's still in the company today. I was like, "Hey, we've got to figure out values. Can you help me write them?" And he was like, "Let me take this. I'm going to talk to the engineers." The company was mostly engineers. He said, "I'm going to talk to the engineers and I'll come back with something." And they came back with, honestly this amazing, everyone that reads them is just captivated by them. They wrote values with these three characteristics. One was they wrote them all as trade-offs, so there's no integrity or whatever. It's like candor over harmony, continuous improvement over continuous production, failure recovery over failure avoidance, this kind of stuff. And so these are actual decision-making heuristics.

Brett: Which is a good test of a value.

Sam: A really good test, especially when both sides are good things. Break things isn't actually, if you choose two [inaudible 01:06:59]

Brett: If integrity is one and lying is the other, I mean that's not interesting.

Sam: Totally. If you pick two good things and then you have to force a trade-off, which way do you generally choose is an interesting thing.

Brett: Because ultimately I think you're using it to figure out who comes to the company, who leads the company and how to behave as a group.

Sam: 100%. So I think that was one very important thing. They also wrote these as descriptive rather than prescriptive. So it was like, what are we actually doing today rather than aspirationally what would we like to do? The idea was once we write these down, if we don't like them, we don't like who we are, once it's on a piece of paper, we should change what we're doing and then write the new thing. And then the third thing was these were actually built to re-evaluate over time rather than just be etched on the wall in stone. So it's like, let's update these. We've dropped some of them, we've cut some of them, that kind of stuff. I thought that was a very cool thing. The way it turned into reality in the company was we took these values and we basically built all of our human systems on these values. Now look, there's a pre-product market fit and a post-product market fit. This is I think is post-product market fit, but it's enabled us to continue to innovate rather than just heroically do it once. And so I think it's somewhat important, but there's this great book by Patrick Lencioni called The Advantage, and he talks about the four jobs. He's like create high performing leadership team, create clarity over-communicate clarity, and then reflect that clarity in your human systems basically. Something like that I'm butchering in, but the human systems, how you hire, how you fire, how you compensate, and how you reward and recognize people. We basically built all those systems around these values. So what does a high candor hiring process look like or a continuous improvement feedback process look like, et cetera, et cetera. And that's led to this very clear, I think, cultural resonance through the company. And so people self-select very quickly. You can turn up, read our values though. I'm like, "This is actually how we are and you can opt in or opt out." The downstream effect of that though is that we spend very little time having very fundamental philosophical battles. There's just a base level. There's lots of diversity of thinking and experiences and things around that core, but there's a shared core for sure. I think we've just been uncompromising on that, which seems good. One of the things that emerged from that was what kinds of things you encourage and tolerate in the company. And I think one of the pernicious things that companies get into is they start to tolerate errors of inaction. They're like, "Well, I didn't do anything, so I can't be wrong." And they start to punish errors of initiative and boldness. So you really want to change that, I think. And that led us, I think to the founder thing where I think we've always feared just getting a bunch of people that are phoning it in and just doing a job. Nothing wrong with that, but it's not how I want the company to run, and I want this to be just a real team that's charging together. And so we basically just had the mandate. We're like, "Look, more than half the company is going to be founders." I think it was more than two-thirds at some point, but it's like more than half is going to be founders or founding team members. This isn't like, oh, I've only ever done a startup. These are people that have done a startup. Maybe they've scaled a thing, they've led a big thing, but they know that that curve. And I think it's just a totally different level of empathy too. If you've only presided over a kingdom, building the kingdom is a different thing, and I think that's important.

Brett: And you haven't had it lead to just chaos with these people that want to be the founder or want to be in charge? I guess maybe that's that you want people that have had more than a experience?

Sam: Yeah, I think there's a level of maturity also that comes. We've definitely had some chaos for sure, but there's a level of maturity you start to look for. You're like, okay, I know what it means to be a founder. I know what it means to be part of a team and drive together.

Brett: Who has had the biggest influence on you that is not a family member? What is the thing they imparted on you?

Sam: Well, I mean the tee up there is can I be my co-founder? Yeah. I mean, honestly, I think Liam's had an enormous impact on me. You can't work and live with someone for eight years and they don't rub off on you, but it's maybe not in the way you think. It actually goes back to something you told me earlier. We finished the incubator and we were like, "It's great. We've got this hockey stick." I talked to Tim, our now board member. I was like, "Tim, what do you think the hardest part about building this company is going to be? It seems like we've cracked the product market fit thing," whatever. And he was like, he told us a story about how Bill Gates wrote an article about Yahoo saying how cool it was, and he was just like, he woke up, blood drained from his face. He was like, "Oh my God, we're going to get taken out by Microsoft basically." He was like, "You're going to have crazy highs and crazy lows. And finding equanimity, managing yourself through those ups and downs is going to be one of the hardest things. And you don't know it yet because you've not had them, but it is one of the hardest parts of it." He was so spot on. And Liam has been just an incredible example for me because I think he's been such a, he is a model for me of equanimity and a model of optimism. I think I'm a pretty optimistic guy, but Liam is both calm and optimistic. And so when I'm having the worst of times, we'll go for a walk, we'll talk about it and I'll be like, "Oh man, actually there's a way through this." And so I count my blessings because it'd be very hard to do this alone.

Brett: How did you learn that behavior? You can't just tell yourself be calm.

Sam: Well, I mean lots of work. This whole team keeps us trained on the tracks, but there's like exact coaches and therapy and all the rest of it. But I really do think some of this is just role modeling. Being around someone like that where we could have a crazy terrible day and Liam doesn't go to pieces. He's like, "Okay, let's talk about it, think about it, feel all the feelings about it, and then let's move through it and get on with it." And I think that's been a great example for me.

Brett: Good place, then.

Sam: Yeah, man.

Brett: Thanks so much for doing it.

Sam: Cheers.

Brett: I really appreciate it.Brett: I thought we could start at the end. And I'm really curious for your perspective on why you think the company has been successful in a category that most people have been very negative on for a very long time, which is, you talk to most founders that have built in education and they never want to build an education again. And you talk to most investors that have looked at education companies that have invested in education companies and most of them would label it as a bad market to start a company in. And so you all have done something really special and I think it tends to be the case that most companies are exceptions to the rule. But I'm curious, when you pick apart why the company has worked in as much detail as possible, what comes to mind for you?

Sam: Well, look, I'll say first we're still very much a work in progress, so we're still in the thick of it, but honestly, we were as taken by surprise as anyone when we moved to the US. So we're both British, moved to the US to start the company, had this enormously ambitious idea that it would be really great if we could give every kid on the planet an education they love and we think that's a big engine for progress in the world. It's great for people in their individual lives, but it also helps the world move forward. And then we got here and we had this very intense learning process. It was a rude awakening because we'd meet all these ed tech entrepreneurs, we'd meet founders who'd built stuff in the space investors and we heard this continued negativity. The truth is they're right, if you look at the results in the space, it's not been a very exciting space. Most education companies basically just remain small businesses. They never reach billions of people. They never reach tens of billions in revenue. They never reach hundreds of billions in market cap. It was puzzling for us because there's a kind of weird paradox here. Every family on the planet wants a better education for their kid. No matter the income level, no matter the country you go to, just every single family you ever meet is, "I want my kid to have more and do more and be more than I was or than I had." And yet these companies don't seem to make it. So you have to ask yourself why. And we did, and one of our diagnoses was that most companies here, and this is going to sound a little facetious, but we had the beginner's mindset and we were in the US for, we had 90 days on our visit visa and we had to quickly come up with a point of view. And one of our points of view is we were like, "Hold on. Most companies here are actually serving schools. They're selling software to schools. Nothing wrong with that, but that's the supply side of the market. The people that we're trying to serve are actually kids and their families. So who's building for kids and the families, who's building for the consumer?" The analogy I think we used was if you're building Airbnb and you want to transform hospitality, you don't start by selling software to hotels. That might make hotels a little bit better, a little bit more efficient, whatever, but it doesn't massively transform the experience for the end user, for hosts and for guests. And so we just took that analogy. We're like, well, ed tech has been the business of selling software to schools. What if someone served the customer like the consumer? And so we were saying we were going to build a consumer company in a historically enterprise space. There was another company saying that, which is Duolingo. We didn't know them well at the time, but there were not many that took that approach. And so I think that single choice changed a lot about our prospects. And we didn't know how important that choice was at the time because when you look at the other side of this, the enterprise side of this, selling to schools, it's a bit like selling to in the US, like 130,000 pretty bureaucratic, very small businesses with not much budget who are trying to do a heroic job but really don't. It's not a great market and yet everyone is after the same budget trying to eke out another few dollars from the school, another few dollars from the public tax budget.

Brett: And it's a challenging end market because even though it's extraordinary amounts of spend, they're unwilling to spend on software, procurement, what structurally is going on because certainly total spend is enormous?

Sam: Yeah, I mean I think the number that's quoted usually is like 3% ish of GDP, but 70% of that is on salaries and benefits and people. And then there's a good chunk that goes into facilities and buildings. And so by the time you get to what could you spend on basically discretionary stuff, technology, other things in the classroom, it's way smaller. Then there's some artifacts of this being a public budget, it's not like you can just sign it forever. It has to come for renewal, you have to reconsider it. The procurement process is famously difficult, but I think the core issue is none of those things actually, the core issue for me is that the alignment of incentives is all wrong. So for me and it may be just the way Liam and I are wired, we want our incentives to be tied to the person that we're trying to invite, the person we're ultimately trying to serve. Now all of us in everyone in education is ultimately trying to serve kids and families. And so our view is like, well, you don't want a divorce in your incentives between you wake up one day and you're like, "Well, we have to build a roadmap that so-and-so school or so-and-so district wants," even if that's not the best thing for a kid and their family, we want our incentives to be tied to doing what's exactly right for kids and families. And so I think that was actually the more important point was you want the freedom and agency to really obsessively serve your customer and that was going to be the orientation we took.

Brett: And so you hinted at this a little bit, but when you were thinking about the opportunity, did you spend a lot of time obsessing over is this a good market? Can we build a big business? How much of that was a part of the Zero to One phase?

Sam: Yeah, we knew the school side wasn't a good market. From all we'd seen, we'd keep meeting these entrepreneurs who just had a really rough time over, I don't know, 25 years of building a company and it not really going anywhere and maybe being sold to a private equity firm or something. And so we knew that wasn't the thing. And then this actually, we had a conversation many years later, which put this into much more eloquent words for me, but we just had this belief and this conviction that families really care about their kids. And the next step is if you care about your kids, it's probably a thing you're going to spend money on. It's probably a cause you're going to spend money on. And you can look at all the market research on TAM and whatever, but there's a much more interesting view on this. I spoke with someone at Spotify, one of the C-level at Spotify, and he was talking about when Spotify started. And this actually goes into the investing side on market risk. Even if everything goes well here, how big is this market really? And most people hate that. Because they're like, "Oh god, if the market's too small then it's not a good opportunity." But I think there's actually another side to that which is it's actually the most exciting form of risk where there's one or two assumptions that if you are wrong about or if you're right about as an entrepreneur, you suddenly unlock an enormous market that no one knew was there. And so there's famous examples of this, but the Spotify one is interesting. He was like, "If you tried to proxy the market for music online when Spotify launched, you'd look at how many CDs are sold and you'd be like, it's 100 million CDs, call it 10 bucks a CD. So it's like a billion dollar market. It's way too small to build a huge company in." But then if you take the other stance where you reason a bit from first principles, you might realize that well hold on, every society on the planet has had some form of music, has evolved it or adopted it. Music is in the top five interests of basically everybody in the world at some point in their lives. And so it could be that what everyone is pointing to is a lack of a market is actually just a product and packaging problem. I think we had something like that with Dojo where no one had demonstrated that you could build a very large consumer business and education. But I think we just took this conviction that well we actually think parents care about their kids and we think they'll spend on things for their kids. Now we did early on in the company like three, six months in, we did our first monetization test. It was very small scale, it was very trivial. We can talk a bit about it. We knew at that point that parents would pay. We didn't know how much, we didn't know how big it would be, but we knew that parents would open their wallet and pay for something that would be good for their kids. So I think that was the extent of it. There was some reasoning and maybe there's some conviction based on almost this first principle's reasoning that it's an evolutionary imperative to care for your kids and therefore we think we can serve you in that need.

Brett: Let's go farther back. What was going on with you a couple of years before you started the company? And what was the entry point into, actually I think you were at McKinsey for a period of time?

Sam: That was a weird left turn for me. So I won't go into ancient history, but I grew up in a couple of weird places. I grew up in the countryside in Wales, went to a very loving, very small school, then we moved to the Middle East to Abu Dhabi in my teens went to a 3000 kid international school. This school is amazing though. They insisted on kids teaching as well as learning. So I actually taught all the way through my teens for probably about a quarter to a third of my time at school, which I had no idea how formative that would be for me. I went to college, I was an economist, a heavy dose of math in it. I thought I was going to do a PhD in one of those things. The month before I started, one of my professors asked me to go and help a friend of his with his school. And so I went to the school and helped them teach economics and maths better and turned around some of the ways they were teaching it. And then from there McKinsey came and did the recruiting spiel about how they were building an education group that was advising governments on improving public education systems, which sounded amazing. And so as I went there, I think when I got there I realized, hold on, this is all advising this isn't doing a thing. And so it was a great training ground, but there's no way I was going to stay. So I left. And there were some friends of mine in London who were starting a company. There was a small group of us in London, we all met at university and McKinsey and so on. But we'd all been reading Hacker News and this was a fringe thing at the time. This wasn't like a mainstream whatever, no one knew it [inaudible 00:11:21]

Brett: Most of tech was a fringe thing at the time.

Sam: Yeah, I mean Airbnb had launched I think in 2008 where the iPhone had come out in 2007. Facebook was still private in 2011. So anyway, so we were reading Hacker News and PG's essays were just so formative for this whole group. One of the things he said was just find the smartest group of people that you can work with. And so I found this group at a startup in London. I was working with them and while I was there, I went to a hack weekend, I met Liam, my co-founder. So it's not the way you're supposed to meet your co-founder, you're supposed to know each other when you're friends, whatever. But we together in London a week later. He's incredibly gifted. He was an amazing engineer. He was doing a PhD in computer science. He'd built one of the world's biggest kids games. We got talking about working together. My plan had been, "Look, I'm going to leave the startup and go and work on an education thing and I'm going to apply to YC as a solo founder."

Brett: But you decided you were going to start a company?

Sam: I was like, I'm going to do something in education. And I couldn't find a thing to do. I'd actually emailed Sal Khan at Khan Academy and someone there had written back and said, "Hey, this is great. You should come and join us. We're a tiny team. Just get a visa and come." And I'm like, that's a big step. So that didn't seem like a path, but I'm like, well, I care about this education thing. And it feels to me, I think there's two fundamental problems in the world that need to get solved. And I've thought this for a long time. This is stuff I was interested in when I was a kid. One is just the energy problem of we just need to provide enough energy to fund all of our activity. And that's like a survival problem. And then I think the thriving problem is once you know you're going to be around, how do you make things as good as they can be? And the answer to that I think is a very simple process, which is it's just people. Just people discover their talents and capacities and apply them in some way in the world and make something off them. And if you do that over space and time, you make the world a better place for everybody. So that problem is I think the problem that I want to spend my life on and make a dent in. So it was very clear I was going to do something in this. I don't know exactly what do I go and teach? Do I start a school? Do I... But then I think on Hacker News, someone had posted, Geoff Ralston who then became president of YC, was starting this parallel incubator called Imagine K12, which was going to have the same structure as YC, a bunch of the same speakers. It was just going to be for education companies. I was like, "Oh my God, this is amazing. I have to go to this." Liam meanwhile had been emailing with Paul Graham totally separately and they were trading riddles back and forth. Liam had some idea that he was running by Paul. Paul wrote back with, "What is the equivalent of the Altair BASIC for this idea?" And Liam was pondering. Anyway, we had this whole flirtation around Hacker News and YC. And then Liam and I got talking about working together and we agreed to work together, which is a crazy decision because we'd known each other for a few weeks, but this was when you know you know. I didn't know that he would be my best friend, the best co-founder I asked for. My roommate for the next seven or eight years.

Brett: What about things like values alignment and do you have a shared vision and all the things you end up needing to have?

Sam: That actually came a little bit later. After we got into Imagine K12 we got out in the Bay Area, I forget who it was, but someone was like, "There's only one reason that startups fail." It was a talk at this incubator thing, and I was like, "Obviously product market fit. They never find it more. I know the answer." And he was like, "No." He was like, "The only reason that startups fail is because the founders stopped trying." He's like, "If the founders are trying, you can basically figure out every problem." And I was like, "Okay, why do the founders stop trying? These are tough people." And this person's point was that it's usually because you just don't share a vision of where you want to go. And so Liam and I, I was very paranoid about this. I think a lot of founders are very paranoid, but I was very paranoid about us breaking up and yeah, there's not working out for that reason. So we actually came back home that day and both independently on a piece of paper wrote down what we wanted to do or how far we wanted to go. This guy had framed it around, one founder wants to build a very large business, the other one wants to do a lifestyle thing. We basically showed each other this little bit of paper and it said roughly the same thing, which was we've left family and friends and relationships at the time to come out to the Bay Area. We're here for 90 days. We had 90 days to prove something that would then allow us to stay for longer so that the pressure was on. He was like, "Look, I just want to build the greatest thing we can imagine building in education." And I wrote something similar. And so it felt like at a very deep level there was an alignment. And I think we got to know each other more and feel out the shape of each other. We then lived together for eight years. So you learn a lot.

Brett: And do you think the two of you fit the we're very different and compatible or we're very similar?

Sam: I think we have almost exactly the same values and we express them in quite different ways. The good thing about that is there's never been a power struggle for, "Oh, I want to do product in the company." Or, "I want to do this, that or the other." It's always been quite complimentary. So we tried, actually I was very democratic with this stuff. I remember in our Series A we had an org chart that seemed important to put in the deck. We turned up and we had co-CEO on there for me and him. And one of the investors, "What is this nonsense? I need someone to fire."

Brett: I love this.

Sam: And I was volunteered, but it was never an instinct of like, "Oh, I must have this." It was more like, "Oh, we're building this thing together." To this day we have different roles in the company, but we've kept a lot of the mechanics and logistics about, we're both on the board, we've had disagreements, but it's always been just so amicable and easy to resolve. We've been candid with each other when we don't like something, but it's never been a bitter seething kind of thing. So I think there's something around intellectual curiosity. I think there's something around humility and low ego and willingness to learn and having a high rate of learning. I think that's definitely in there. I mean, look at some level, I think there's just a willingness to work really hard. PG had that thing about relentless resourcefulness. I think both of us have both of those traits. There's definitely relentlessness and a drive, but also a resourcefulness. We'll figure it out. Like a stance that come what may we'll figure it out. I think outside of that, we probably have different temperaments and it's probably a good thing because there are times where I'm up and he's down and I'm down, he's up and we can balance each other out and all that.

Brett: So what did you apply to Imagine K12 with? What was the actual thing that was in the application?

Sam: One of Liam's best friends, I think his housemate was a teacher and we talked about one of his big problems and one of his big problems was making groups in the classroom. And so we'd made a little prototype of this group making app. And so with this group making app, but we had a whole scheme for how this group making app was going to be used by teachers. Then it was going to become a platform, not to just make groups, but then to all the teaching and learning happening in the classroom and yada, yada, yada. Now for lots of reasons, this was a bad idea, but it was like we got in with it.

Brett: You applied with that idea and then you show up. And so then what happens?

Sam: We show up and I mean you know the YC motto, Imagine K12 adopted it too. Just make something people want. And so far we'd spoken to this teacher friend of Liam's and he really wanted this and we were serving this great customer and then we got to the Bay Area-

Brett: And that was the extent of...

Sam: I mean look, also, if I'm being honest, I think it was the first cohort they're running of Imagine K12. They were like, "Yeah, these guys have some experience in education. This one's taught." Liam was doing a PhD in computer science focused on technologies that help kids learn. They're like, "These are guys great. You're a technical founder, non-technical, perfect." At the same time, Imagine K12 was putting on these dinners where we were learning about ed tech and the industry and we're getting more and more depressed about how terrible it is. And so these two things were happening in parallel. So very quickly we were like, this group thing is not a real thing. This is not going to be a big idea.

Brett: Because of what you were hearing from teachers?

Sam: It was very lukewarm. I mean, you know when someone's into the thing and when someone's like, "Oh, that's great." And we were getting that response, we're like, "Okay, it's probably not the thing," but we didn't know what the thing was. So we've used this mental model actually a lot in the company since we called it the barbell approach where you have clarity on both ends. Clarity on one end was like, "Look, in the end, I think it's very important that everyone in the world gets to discover, develop their greatest talents and capacities. That's a thing, that's how the world should work, and I think there's a great business to be built there." On the other end, you're like, "What's the first step?" And all the steps in the middle, it's okay for those not to be completely well-defined on day one, you have to be able to learn your way into them. But we were struggling to find this end of the barbell. We're like, "What is this end?" And then we had this very, again, very formative conversation with Reid Hoffman who came as a speaker to one these things. Now we'd got to the point where we were saying, "Look, we think we're going to be a consumer company. We think kids and families are the right people for us to serve." We were like, "Look, this isn't working." Literally the tenor of the discussions we were having from the ed tech people was they're like, "Oh, it's so hard." We had someone come in and he was like, "Look, I'm going to tell you the secret to unlocking sales." And we were like, what's the secret? He was like, "You have to charter a boat and then take all this particular boat in Chesapeake Bay and take all these superintendents offshore and for a day and sign all these." I'm like, "This is not what I came here to do." So I think we had a lot of conviction that we're going to build for consumers, for kids and families, and that's going to be the audience. So then we had this conversation with Reid Hoffman. He came as a speaker and we were talking excitedly about this. "We're going to be different to all these others we're going to build for consumers." And he was like, "That's great. Consumer companies are great. Obviously I've been involved in a lot of them." He's like, "The single most important thing for you to figure out is how you're going to grow." He was like, "It's the hardest thing about consumer companies is how do you grow without spending more and more money?" And then Reed being Mr. network, he was like, the best thing, the most enduring thing at the heart of every business or great consumer business on the internet is some kind of network. And so basically, we didn't know it at the time, but that was basically the thesis of the company being formed right there. The question being put to us was what network reaches kids and families in perpetuity and at scale? And the implication was if we could build a network, then we would have a lot of time to build great businesses that people would pay for, discover what people would pay for. If we could never build a network, then nothing else we did would really matter. We really took this, I mean, I was a big nerd for basically all of Reid's writing. He'd published the LinkedIn Series A or Series B deck or something, and the whole thesis was network first, networks are valuable, build a network and then you'll build businesses on it. And we basically took that. We were like, "Okay, well we have to build a network that reaches families and kids, and that's the binary risk. That's the thing we have to do first." And we're both pretty obsessive people. So that became the only thing we did for the next six or seven years in the company. So then the question was what's the network? And that's when the penny dropped. We're like, "Well, hold on, teachers," I've been a teacher, so it's familiar. We're like, "Hold on. Teachers are in this very interesting position where every teacher first, they actually do the education. Second, they're in front of lots of kids and parents all the time." And so the thought was, well, if we could serve teachers, maybe we'd be able to serve kids and families as well. Maybe they'd take us to kids and families too. And so that then started this obsessive period of talking to teachers and really trying to understand their needs beyond Liam's first friend. That mostly came Liam did a bit of it, but mostly came to me. I was like, okay, well, I think in those first 75 to 90 days, probably 75 days, we had hundreds, hundreds and hundreds of teacher conversations to try and understand what their real problems and real needs were.

Brett: So what did the conversations sound like with all the teachers?

Sam: A lot of it was just open fact-finding. I had this question I like to ask, not the most fun question, but it really got to stuff, which was, "What's the worst part of your day? What makes you cry about your work?" And so we'd have these funny conversations where they'd be excited. I'd say we were doing everything we could to get in front of teachers because we knew nobody in America. It's hard to overstate this. We were staying in a Motel 6 for a few the first week or two because we had nowhere else to stay. Then we found this single room place in Palo Alto that, I was in one corner and Liam was in the other, and it was very humble beginnings. We knew nobody in America, we'd never lived here before. We had the Imagine K12 people had funded us. We had a little crossover with the YC folks, but that's it. And so we were just on our own in our little room. And so I just started cold calling, cold emailing, asking friends, friends of friends. We went to the local schools like Gunn High School in Palo Alto and others, and just soliciting teachers basically to talk to us. I ended up teaching summer school for a few days actually at Gunn High School in exchange for the teachers talking to us, whatever we could do. But the conversations really went to, "What is the worst pain?" That whole painkiller over vitamin thing? We're just like, okay, we took that very seriously. We're like, "What is the worst pain? What's the worst part of your day?" And we just kept getting deeper and deeper. So initially there was all kinds of good sounding stuff would come up. They'd be like, "It's marking homework, it just so annoying you marking homework." And we'd be like, "Oh, okay." But also you decide how much homework you want to set, roughly speaking, so what's really going on here? And they're like, yeah, "It's not actually the mocking homework. It's actually I get home and I'm just exhausted." And we're like, "That makes sense. Everyone, it's a long day. It's 10 hours a day, but there's other people work 10 hours a day as well. Why are you so exhausted?" And they're like, well, "It's actually, it's not that I'm exhausted. It's like I just had this one kid or one family or whatever. I'm having a real problem with them." And it basically boiled down to a human issue. They're like classroom management because some kid was causing them issues and disrupting the class. Or it was a family that was upset with them and they were having a flame war with them over email or something. And we were like, "Oh, that's an interesting thing. That's an actual human issue." That's the thing that you worry about because it's a human being on the other side of it, the rest of this is kind of workflow and whatever, transactional in a way. But these things have emotions attached to them. You could see it in their eyes, you could even feel it. And then you'd go even deeper and I could empathize with this because I'd taught, they'd say things like, "I didn't get into teaching to do this." And so there was this vision that they had of themselves that just wasn't coming to light. That's when you get that tingly sense of, "Oh, there's something here." And so that's where our first product idea came from, where we realized one of the big problems for teachers is it's called classroom management. So you've got 30 kids in a class and how do you keep it a positive and good learning environment? And that the main technology they had was basically punishment. It was like wait for things to go off the rails and then give kids detentions or raise your voice or yell. Or all these kinds of things that you just wouldn't do if you were designing a great environment. And so then we thought a bit about what a better way would be. And our first product was just a really simple way for teachers to give kids positive feedback. So it almost it felt like a game. It felt like a little toy, but as a teacher, you could sign up on a website at the time, you'd sign up, you'd put your class list in, you would add the values that you want to recognize in your class, like helping each other, kindness, curiosity, whatever it is. And then during class you could say, "Brett, that was a great example of asking a great question. Here's a plus one for a great question. You get this little sticker." Now, one of the things that was very important was we were in person for a lot of these. We did a bunch of phone calls too, but we were in person for a lot of this because a lot of this was happening in the classroom. So we'd go and see how teachers were using this early product in the classroom. And so you end up getting these little sprinklings of delight, which you totally wouldn't have done if you just stayed behind a computer screen to look at it. So one thing we did was when a little sticker would appear in a kid's profile, we had a little, "Bing," sound like a very pleasant kind of nice sound. Liam spent some time on it.

Brett: At the time you weren't concerned that this isn't a business. This is a little game?

Sam: There's a couple of things. One, we knew we wanted to get to parents, so we knew that. But the precondition to that was the YC mantra is, "Make something people want." The steps were in our minds, make something that teachers want. Step two was like question mark. Then step three is like money, but step two is get it somehow to kids and to parents. And then step three were like one day we'll build things that we think families want.

Brett: But the starting point for everything is we need to build a network? And the network needs teachers, parents and students?

Sam: That was our theory.

Brett: And then you were actively, as you were talking to teachers, as you were talking about, you were actively trying to figure out what is the unit of value in this network?

Sam: Yeah. Well, we didn't have a network to start with. We had a tool. The thing I just described as a tool, you could say there is a little bit of communication inside the classroom, teachers with kids or whatever, but it wasn't like what you think of as a network. What happened next was, so I should say this product exploded in popularity.

Brett: And you just took it to the people that you had spoken to?

Sam: Took it to the people that we've spoken to. And Mike, a third of them used it and they were blown away. We can ascribe some to a nice product, and we did a good job of that. I think the other part of it was we picked a customer that was massively underserved because no one cared about teachers because they don't have that much money, so why would you ever build products for them because they can't pay you anything. But what we realized was, well, hold on, there's a huge amount of pain here and actually they're a trusted figure and if we could serve them, then you get access to a whole lot more. And so it was looking whether people weren't looking. Maybe there's a parallel to the business model side of it as well. So it's not obvious, but we were assessing over serving teachers, that exploded. I think so one of our investors, we actually went to college together, Rahul from Superhuman, who was like, there's only one real growth channel, and that's word of mouth, and that comes from making a remarkable product. They're literally remarkable. People want to remark on it. And this was that product. Teachers would tell their friends about it and it was like became this crazy wildfire. So every batch of the YC companies, whatever, there's always at least one company that has that kind of ice hockey stick. So we were the one that started through away our idea when we turned up and everyone was like, "They're toast. They're never going to make it." And then we turned up a demo day and we had this crazy looking hockey stick chart. We'd gone from zero to, I think it was like 10,000 teachers using it out of the gate.

Brett: Before you ship the product, did you think this is really going to catch on and people are going to be obsessed? Or it's, "Oh, see what happens with this thing?"

Sam: We had a strong sense that there was a real pain here. I don't think we expected the spread. It really took us by surprise. I think we hadn't realized just how underserved teachers were. There's lots of amazing characteristics. We realized teachers don't get into it for the money or the fame. They get into it largely because they care about the mission. And when they find something that helps them on their mission, they want to tell other people about it. And so they tell other teachers about it. There's lots of other things we can talk about and the specific to teachers, but we learned a lot of that as we got into it. I talk about the resourcefulness thing. There's something to looking at a situation with different lenses. And you look at teachers and say, "Oh, it's a very bad business or revenue channel." Or you can look them and say, "Hey, it's a user with real pains that influences a lot of other people."

Brett: What was your feeling about that? Were you elated?

Sam: I mean, elated, amazed, pinching ourselves, all of which was unexpected. But I remember on demo day, the big, everyone was very riled up because Paul Graham was going to be there and the rumor was he was going to invest in the company. And Paul comes over to our booth thing after the presentations, there was some metric I'd showed about how quickly the feed points giving was growing. And he goes to Liam and is like, "Hey, Liam, can you just show me that metric over two weeks or something?" And Liam's like, "Oh God. Paul Graham's asked me to show him a metric." He dives into terminal to try and pull up the right stuff. And Liam's like, "Oh, it's going to take a minute." And I had thought it would be great to have a box donuts there because that would be a draw for people. And Paul's like, "That's fine. I'll just have a donut and wait." So the pressure is on. Anyway he ended up investing.

Brett: What did he think of the donut?

Sam: That's excellent. Really went for high quality donuts. Yeah, this is at a time. So you at a time when I had [inaudible 00:31:36]

Brett: [inaudible 00:31:36] the business that your angle on fundraising was let's have some donuts in here?

Sam: No, I was like, look, it was a goal oriented thing. I'm like, you're not sitting at the demo day hoping to fundraise. You're sitting there to get people to come to you. And I'm like, well, let's draw some more attention. If the hockey stick doesn't do it, the donuts will.

Brett: So then, okay, so you had this app and the app allowed teachers to give virtual rewards?

Sam: Stickers. There was no reward in a way. It was just stickers as feedback. So then a few months later, we were looking, we basically got enough interest in the company because if we were to go, this thing's growing, we don't really know where it goes, but we closed a seed round. We're then looking at some of the cohorts and we started to see that there was a set of users that were incredibly sticky. They'd come back every day. And we clicked a bit further into it and it wasn't obvious what they were doing in the product, but we called them and spoke to them. And basically it turns out they were taking all the rewards as a snapshot and turning into a PDF and sending it home to parents. They're communicating with parents. And this was evidently a very, we didn't know if correlation causation or whatever, but it fit a pattern of like, oh, well actually communication's a very sticky thing. You've probably been in WhatsApp groups with your friends, very hard to drop out of them. And so that then turned us onto, oh, actually what we're really building as a communication app. And a few things snapped into place. We're like, "Okay, that's a way to expand from teachers to parents and kids and really start to build a network." Two, we discovered just how high retention and high engagement that is as well. And so I think finding those golden cohorts was really important. That was almost like a second part of market fit moment for us. And so Dojo then expanded. We built parent accounts, kid accounts. The median experience of a parent is, "I don't know what's happening at school. I maybe go to a parent-teacher conference once every six months and sometimes I get a piece of paper home in a backpack, and yet this is the person I care most about in the world." And so to go from that to this seemingly, there's a very trivial thing. It was like "Brett asked a good question today," but knowing that then starts the conversation at home of, "What was that question you asked? What did you talk about?" And that's an amazing moment for the parent and the kid. But I think that then teachers were like, "Well, we're sharing these positive moments from the classroom instead of bad news and your kid got detention where you're now showing positive news." And so that was a great lift for everyone. And then it became very natural, "Well actually we want to talk about that. We want to send messages." Teachers are like, now Dojo was open in the classroom. They're like, "Now we want to take pictures of what's happening in the classroom, little snapshots of moments in the classroom." A video of this, the kid doing a poem or whatever, just real cute kind of stuff, these younger kids. And so Dojo basically from there expanded into, I think what the first product we ever built was this communication app. And it was very useful for kids and teachers and parents because it kept the whole community connected. It also served this goal of growing the Dojo network, which we can talk about.

Brett: Yeah, share a little bit more about what was the first version, I guess, of the second product built on the back of the stickers product?

Sam: Yeah, it was just a simple extension. We built parent accounts, so you now had a channel to the parent and the kid was in there as well. You can message the kid as a teacher, obviously, but the kid and parent accounts were attached and you can message back and forth. And then the next version added a camera. And we were like, "You can now take pictures in the classroom." And then we added video. And so it progressed from just sharing stickers to basically communicating about really nice moments in the classroom.

Brett: And so what were the numbers of the business at that point, roughly? What were you seeing? How fast was it growing? How many people were using it?

Sam: Oh my gosh, it's really hard to say, but I mean look, I think at the seed round, I think I know we had maybe some maybe 10,000 teachers ish using it. I think from there, this Series A, we basically just showed continued teacher growth and the beginnings of some parent growth. There's about 2.8 million teachers in the country, so I think we got to maybe one in 20 or something like that in the US. One interesting thing was we'd also started to see international growth completely organically. So we were actually at the end of 2012 I think we were in 40 or 50 countries with at least a few users.

Brett: And so did you think a lot about how do we get this thing to grow faster?

Sam: We did. Yeah, we did. Initially, like I said, it was just we're just building a great product and people love it and they tell their friends about it. I think it was, I forget now, it was one of those summers that summer, or the summer after we basically got a bit more involved in trying to learn about how this thing was growing. And a few things happened. One, we realized, I actually went on a user research visit to a middle school in the city, and I was sitting in with this science teacher, her name is Jenna, and we were like, "Wow, she's a great teacher. She's using Dojo." We were just there to learn about what's working and not working. Go back to the office. I think a week or two later I get an email from Jenna and she was like, "Hey, I'm going to take a break over the summer from teaching, obviously. Can I come and do an internship at Dojo?" And we were like, we don't really know what she would do here. And we were four or five people or something, but we're like, "Yeah, sure, come by, maybe do some support." I was doing all our support. I was probably like, "Please do all support tickets here." But a month into her internship, she comes back with this secret project she's been doing. And the secret project was her view of how we were growing through schools. And basically what she was able to show was that in all the schools that we were growing in, we had found one really passionate teacher. And it turns out we found out later on that most schools follow this kind of bell curve of distribution. Where you have really passionate, excited teachers and a bunch of module users, a bunch of laggards, but she was like, "These passionate teachers, these are people like me. These are people who really want to be on the cutting edge and do cool stuff and find the best things." And she's like, "I think these people are our champions and we should help them." And so she basically became our first community leader. She never went back to the classroom. And so she built this community where we'd get the power user from every school. And they would all meet each other and they'd be like, "Oh my God, there's people like me in the world." And that was another big inflection point.

Brett: And you did that in person or was...

Sam: We had a few in-person meetups because we did it regionally first, but then it became a Facebook group. They all had really deep relationships with Jenna. They knew the whole team. And so that, again, there's really no substitute for that. You can't really fake the care. They would text and they'd get a text back. You can't fake that. So I think that was one very important thing.

Brett: What are the other sort of things that helped inflect growth?

Sam: We started to realize in the US we had this around the world now, but we had this land and expand dynamic where we had to get to our first team basically using Dojo in a school, our first classroom. And then there was a path to expanding to the classroom. Now we have a weird stat in the business, which is hard to believe, but it's true, which is that to this day, we still haven't paid a dollar for user acquisition. So 100% of our growth has been some combination of word of mouth, virality, some community stuff, like basically zero marginal cost programs. But I'll give you an example. We would find what was working and then amplify that. So we found teachers were sitting in school doing professional development sessions. Now this is the thing teachers have to do. They have some hours they have to cover. And they were like, "I'll do a professional development session on Dojo. This is great. This is the latest thing I found this year." And we sat in on a few of these we're like, "We could just give you a really good PowerPoint presentation and we could probably put a QR code at the end of it or a link that you could flash up on the screen and everyone would join." Turns out that worked magnificently. It was such, in retrospect, we don't get that unless you go right down to the detail. The second thing we realized was that as silly as it sounds, there was no interaction effect between classrooms. So you could just use it next door to each other and not even know. So we built this concept of a school, you would join a school and now you could all see each other if you're in the same school. So you became the contact book for the school. And that was obviously a very sticky feature, which you've seen in WhatsApp and Discord and a bunch of others. So there's at least a couple of things. There's a couple of things that are working in the world and product, because we're product people. I think thinking about how you create network effect products was important to us. And so we started to see, and if you look now, Dojo is used in nine out of 10 schools in the country and maybe two or three times as many as that internationally. A lot of it's still been this land and expand dynamic.

Brett: What gave you the confidence to just grow this thing for many years without thinking about the actual business?

Sam: One, we'd done that monetization test early on, maybe a year in. We were pretty nervous about it. We didn't really have a product to sell parents. We were like, "Well, we haven't built anything." So I think we created an avatar set because kids had these little monsters we're like, oh, you can just customize your monster, give them a hat, whatever. This is very cheap to do. And we just popped in the parent account. And you don't even remember what the conversion rate was. It was abysmal. But we're like, "Oh my God, people are paying us money." This is first dollars in the company. This is incredible. So we're like, there's going to be something. We don't know what it is. It's probably not this, but there's going to be something here one day. I think it was more just a confidence building thing for ourselves. The real answer might just be we had burned our boats at that point. We turned up in the US we had this very specific thesis. We'd raise money on that thesis. We still thought we were right. The theory still made sense. We were still making progress. Every year we turned up with more teachers and more families now more kids now as well, it used to be just teachers and expand these other groups. So yeah, we were like six or seven years in, six. It was 2018, 2019 when we were like, "Oh my God, we think we've got the beginnings of a network." And then we kept seeing adjacent behavior or emergent behavior. I think that's a really important sign actually in consumer products. I think there's a lot of, probably not as important in the enterprise world, but in the consumer side of things, we are very careful not to overbuild and really tightly specify how you must use this product. We actually kept it open to see what would emerge. And so we saw a bunch of emergence. One was the international growth. Nothing we did, we didn't translate the app. Eventually we built some software, which allowed our users to translate it, but we started to see, hey, people love this. They tell that teacher they met on holiday about it and they start using it in their international school in the Netherlands. And then there are three other international school teachers, "What's that thing with the monster?" And they tell. And so we started to see these spread patterns around the world. I was like, "Oh, that's really cool." Now it's in 160 countries or whatever. But that was one. I think the second was we started to see other groupings of kids using the app. So beyond the classroom, sports clubs and afterschool clubs and daycare. And we're like, "Oh, so this isn't just classrooms. It turns out kids are many groups that could be enormous too." Once we hit a certain level of scale in the US, know something like one in four, one in five families in America use Dojo now every week. We start to get a ton of inbound from the institutions, from schools, from districts, from states, in some cases from some federal governments. And so I think there's these moments where maybe it's more of a feel thing where you feel like you've, who said this? You feel like you've got into a pool and then you get to the edge and you realize it's actually a lake, and then you get to the edge and you realize it's actually an ocean. And then we just kept feeling the sense of expanding possibilities in the communication app that we were building. And so I think that just felt like we were onto a thing. So keep going.

Brett: What's the story behind launching the first business?

Sam: We got to 2019 and basically it was more just a feel thing. We were like, "Look, we think we've got the beginnings of a network here." Think it was us and Roblox was bigger, but we were like there's, we're one of the two biggest networks on the planet for younger kids.

Brett: And this is millions of users at this point?

Sam: Yeah. Millions for sure. I think there's 25 million families in the United States with kids under 13.

Brett: And I assume the product was also highly retentive, which was super important?

Sam: Yes, super high. That was maybe one of the other things that gave us confidence was that we had incredibly high retention and incredibly high engagement. To this day it started high and it's got even higher as we've grown, but it's an incredibly sticky product. People love using it. The other thing was, it was all voluntary usage. We haven't twisted anyone's arm. It's not your school district is going to check out on you. It's just like, "I chose it." And so I think when you see those signs, they're so rare. Every time we show them to a consumer investor, the B2B investor just didn't get it. They're like, "What is this thing?" The consumer investors are like, "Oh my god, is that real? Is that weekly to monthly ratio real or is that retention curve real?" And we could just show, you see companies with consumer apps usually have 5 to 15% retention to 30 days later or something. And we were at 6 x that six months later, it was wild.

Brett: Was most of that six years just incrementally making the core product better? What was going on for those six years other than working to grow the business in all the ways you discussed?

Sam: Honestly, it's hard to convey how hard those years were. We got to seven years in and we were 30 people and we had done the Series C at 30 people with $0 in revenue. And we had the exact same thesis. I actually wrote a strategy document a year or two into the company which tried to articulate this so that we could just give it to investors. Everyone still reads that document today. It read like, "Our mission is to give every kid on earth and education they love. We think this is fundamental to progress. It's this single biggest enabler of progress on the planet. And the question is how? Step one is we're going to serve teachers. Step two is we're going to expand from teachers to this whole community of teachers and kids and families. Step three is we're going to build products and services for families that help their kids learn and grow in all the ways they want. And that's where we're going to build some great businesses." Roughly speaking, there's a lot more depth to it. But yeah, so it was incredibly hard because you have this gun pointed at your head basically, and the bank balance is going one way. And you have this really high conviction, maybe high conviction founders with a thesis that no one has ever proven before. Again, let's not align it too much. I'm just thinking about the moment in time where we were in our mid 20s, we'd moved to America. We had basically no attachments. We were living together every day and working together every day. Again, we burned the boats. We're like, "This is thing. We're going to make this work."

Brett: So how in 2019 did you decide now is the time that we're going to start a business?

Sam: I think we had just finished the Series C and we're like, man, we can't do another round with it.

Brett: We got away with it. It's been six years.

Sam: We're like, okay, it's been great. We now have, now it was the big news is we had millions of parents on Dojo and that had never happened before. We could show millions, not like a few hundred thousand, and we're like, "Wow, okay, we've got a large audience here." And so we were like, okay. We're feeling pretty encouraged about the progress on the network side. That was never the end state of the business. That was always a precondition to the next thing, which was starting to build businesses that serve kids and families in all the ways that help kids learn and grow. And so we started with honestly what felt achievable. It's a product that we still have, it's called Plus. It was at the time it was called Beyond School. We had this observation that families don't actually know how to spend money to make their kids' education better. I'm like, well, what if with confidence you could say, "This is the best $100 I can spend." We started a small team, which was working on the paid product and it was called Plus or Beyond School at the time. Then really quickly rebranded to Plus. And we basically put in a few features that parents had asked for a long time that we haven't got around to building, and that just exploded. One of them was, there's a feed of photos in the Dojo app, photos and videos. So instead of scrolling down this feed of photos and videos to see all your kids' pictures from last year or earlier in the year, we'll just make some nice digital albums for you. We call them Memories. And so you can check out these Memories and it turns out total nice to have. You don't have to buy that, but a lot of people really want that and it's a good feeling thing. And so that was one feature. Another one was the stickers that teachers were giving, you could give those at home as well, and some parents wanted that. So relatively small extensions to the core engagement loops in the product, but they were built around the core engagement loops that we'd been building for years. And so we built this and it just started to grow.

Brett: But how does that map to this is the best $100 you can spend?

Sam: It's not yet. But it's going that way. So it started with, look, the value there was let's keep you better connected to the classroom.

Brett: It started with premium features?

Sam: For some premium features, yeah, for sure. But the idea was that you want to start to add and more and more value to this over the lifetime of a customer. You want to have so much value in this that it's crazy for you not to buy this, but we have to start somewhere. Right now we can't start with deliver the whole vision. So we launched this and that just started to grow and grow and grow and grow.

Brett: And you're talking about millions in revenue very shortly?

Sam: Yeah, year one was single digit millions. It was 2020, but that just scaled very quickly. A growing percentage of our base was like, "Actually, I want this."

Brett: And it was priced $100 a year?

Sam: Yeah. I mean, monthly and annual packages varied or whatever, and the annual was a little cheaper. The monthly would equate it to about $100 year, but that was the first business. And again, it's hard to describe how in a company that's never made a dollar to then build your first business and for it to start to work, it was just a game changer. Because it gave everyone conviction that, "Oh, we can build a thing that monetizes." And with that, we started to just fund the business out of our own revenue for the most part, the team was still quite small. It meant we could extend our horizons a little bit and plan on different horizons. So when we were early days, it was just build the core products. The only thing we then got to this, we didn't know to call it this at the time, but basically a capital allocation framework. We're like, "How much money and time do we put into our core and what adjacent bets do we take?" And then what are venture bets that may or may not ever work out but are worth investing in on a very long-term horizon.

Brett: For those three years, it was basically premium features?

Sam: 2021, '22 was just premium features.

Brett: And most of it was driven by just what you were hearing from parents?

Sam: Just with families. Yeah. Now I think there's a lot of people talk about just listen to your customers and build a customer. I actually think it's incomplete advice. So for us, I got very lucky. I ran to this guy Gib Biddle, and he had this very clear framework, which we basically just totally stole in the company, which is the job is at the intersection of delighting customers in hard to copy margin and hones in ways. And hard to copy is an interesting one because that's one we thought so much about given the history of the company. There's a book called The Seven Powers, Hamilton Helmers, the author, and I got in touch with him and he was at Stanford and I was like, "Hey, could you come and talk to the company about this?" And it was preposterous. We're like 35 people or something, but he came and talked to us about it. It's really become foundational in the company. I think the intersection of those few things, how do we delight people in ways that create moats for the business and that create good businesses started to become a bit of the mantra. The second business we got into was what we call Tutor. We realized from families that a lot of families really want more attention for their kids than just what happens at school. And they substitute it by, "I'll try and help," but a lot of parents don't actually know how to help. And turns out it's not an easy thing to get great help for your kid. It's a bit trying to find a good doctor. You have to trust them. And then we looked at companies in this space and it turns out they're not very good companies, but you look at the businesses and a lot of them really struggle because they're paying a lot to acquire demand and supply. They usually have high churn because they're studying for an SAT. It's a high takes moment. Then you leave. And all that turns up at high prices or the business gets margin compressed. We realized, well, hold on. Dojo is we've got this huge community of teachers and families. We can just connect people. And because kids are younger, there's no natural churn moment. It's not like you're studying for an SAT when you're eight or something. And so we built the first version of this service. We actually found two founders. There's another weird thing about the company. We have a lot of founders in the company. I think it's like 50 or 60% of the company is former founders or founding team members, first marketer somewhere, the first engineer somewhere by design. But we found these two awesome guys, Gonzalo and Benjamin, they were YC founders. They built one the largest tutoring marketplaces in South America. And I was helping them raise their Series A. And they were like, "Look, we're going to spend all this on user acquisition." And I was like, "Well, why don't you just build this on Dojo?" And they were like, "Actually, that could make a lot of sense." So they joined Dojo, rebuilt the product on Dojo and it's just exploded. It's like millions of tutoring sessions happening on Dojo. It's way lower price than anywhere else you'll find.

Brett: And it instantly worked?

Sam: It didn't instantly work. We had to go through a few revs of it.

Brett: What were the revs?

Sam: Yeah, so the first rev was initially we built kind of the, before Benjamin and Gonzalo turned up, we tried to do it ourselves and we basically built it like a product rather than a marketplace. So the product we built was we'll find some teachers. And basically we tried to be the provider rather than setting up a marketplace where supply and demand could meet each other, which was more like what we had done before. We'd always built the product for you. And so we built that and we just knew a month or two after launching the first version of that, we were like, "This is just not going to scale. It's not going to work." Or, we're trying to be a school and you're going to get into all kinds of school issues. And so we got out of that quite quickly. But then we met Benjamin. I'd been talking to Benjamin and Gonzalo and said they joined and then it started to work.

Brett: And so what was the form factor of that product?

Sam: We actually didn't have a catalog or anything. You would just sign up initially. Initially it was just email marketing. We'd email our user base and say, "Hey, we've got this tutoring thing, you can get some tutoring for K-5 reading and math if you want more help in it." And then we would match you with one of three tutors. You could pick one of the three. And then you'd basically just have almost like a subscription to this tutor or you'd subscribe to this tutor and you'd see them every week or twice a week, whatever virtually. I think we'll do it in person eventually too, but virtually. And that just exploded in popularity. You'd have kids absolutely love it. Teachers would find out about it and then they would tell parents to do it because they're like, "I can't help Johnny as much. Can you just do this?" And it's 30 bucks a session. It's affordable for a lot more people than what tutoring had been. But the thing that really blew me away was something like two out of three families paying for that had never paid for a tutor before in their lives. So this wasn't-

Brett: Classic for the market.

Sam: This wasn't like, let's take the 1% and migrate them over. This was like there's a whole set of latent demand. Again, so one of the market risk thing, people are like, "Well, it's only immigrant parents or top 1% parents that pay for tutoring." It's like it turns out parents actually care for their kids, but there's a lot of friction in expressing that care.

Brett: Exactly. And the business model was a rake. You were just taking a percentage?

Sam: We're just taking a percent. Yeah.

Brett: You standardized the fee or you let tutors do whatever they want?

Sam: [inaudible 00:54:38] standardized to start with. We may still allow tutors to set price at some point, but it's like you just want to minimize the variables to start.

Brett: And were tutors existing teachers on the network?

Sam: Yeah. They're all [inaudible 00:54:47]

Brett: So you didn't go and recruit?

Sam: They're all still existing teachers, which is pretty amazing. There's a few joining off network now and that tutors are bringing demand from off-network as well, but that started to be our second growth engine in the company. Lots of exciting adjacencies around the subjects and grade levels and geographies and formats and lots of stuff you can get into, but the core of that is just looking like an amazing business too.

Brett: And then have you worked on the next business that you're going to launch?

Sam: Yeah. I mean different levels of maturity. So these are going from most to least mature. The next one was a crazy one, but this is a real, I think it's the kind of thing startups should be doing. So in 2021 we were talking with a bunch of parents. One of the big concerns we were hearing was, "Hey, screen time, my kids are spending all this time." It wasn't even just the quantity, it was like, "What are they doing? My kids are online. It seems bad. I don't know what they're up to." There's lots of fear, uncertainty and doubt. And the truth is you're right as a parent to be worried if your kids are under 13 and on the internet because there aren't great places for them to be on the internet. It was never really built for younger kids. So you usually get either quite boring single player apps and then to make them more exciting, you have to have all these engagement mechanics, which aren't great for kids, or you get multiplayer apps, but they're full of strangers. That's what happens on a few of the bigger gaming platforms or whatever. And now your kids amongst a bunch of strangers and we know all the downsides and weird effects of that. So what we realized was we were like, "Well, hold on." And this was actually my co-founder, Liam. He'd helped build one of the world's biggest games for kids back in the day called RuneScape. What we realized was, well, we've built this large community, but the community also has real relationships baked into it. You have kids and their parents and the teachers and their friends. We're like, because we know who you are, we could make a place where kids can be with only their friends, no random strangers, no weirdos, and that everyone would feel way better about that. Parents would feel better because it's a closed community with just my kids' friends, it's like a playground basically, where I know everyone in it, kids would feel better because now you can actually have fun rather than having a bunch of creepy strangers around. And so we start to build this place called Dojo Islands, which I could show you, but it's a virtual world where every class gets an island, they get to build this island together, so it's very Mindcrafty, you build this virtual world together. And then you start to discover games and activities spread across this island made by the kids. And so it was such a crazy, when we talked about it with the board, they're like, "You're a games company now?" And to me as well, I was like, "Oh my god, Liam is excited about this idea. I don't really know that much about it." But the more we picked it out, the more we realized, hold on, this just makes so much sense. If you could make a place basically the best place on the internet for kids where you knew your kids were going to be safe, you knew they were going to be doing wholesome stuff that was helping them learn and grow, you'd want that place. And so that's what we started to build and we launched it quietly in 2023 and it's just exploded. It's also now millions of kids.

Brett: And the primary experience is you're doing these things with your classmates?

Sam: With people you already know.

Brett: So it's not necessarily just your close friends in the school?

Sam: Yeah. Now you can peel off into smaller groups or whatever, but the superset is just people you already know.

Brett: And what's the fifth business?

Sam: Our CTO Dom turns out he homeschools his kids and we were talking about AI and the impact of it or whatever, and he taught them to read, there's a couple of great books you can work through to get through the science of reading like phonics. And he was like, "I think there could be a really killer product here." And he just went off on his own for a few weeks and he was like, "I think we could build an AI reading tutor here." And we were talking about it and we were like, look, I think everybody in the world wants the AI tutor for their kids, but you look at the way people are building it or the way it's going, it's not clear which one's going to work out. And we realized, well, we've got all of this information on how kids learn. That can be really helpful here.

Brett: What data did you have on the way that kids learn?

Sam: To start with it was like what's happening in the classroom, what your kids are doing. So it's a bit more contextual information, what kids are up to rather than specific information about your learning. People add their work and things to Dojo so there's a few things, but more than that we have deep engagement. Dojo is open on the phone or in homes and classrooms many days, many weeks. So there's lots of opportunities for engagement. And so I saw Dom and he was like, "Look, I think we should have a crack at building this." And he started to build it and so we launched it quietly last quarter. It's called Sparks. So it's an AI in the end it's going to be the AI tutor for your kid. It's starting in reading because that's basically a huge use case. We speak with families and hear from them all the time. That's one of the biggest needs they have. And it's got two parts. It's got a tutor, a little guy called Sparky who has this conversation with your kid and learns more about their preferences and where they're struggling and all the rest of it. And then a series of games and activities that lead kids through the science reading. We can take a kid from not knowing how to read to early literacy in three or four months in about 15 minutes a day with no humans involved. That's never been possible before. It's super cool.

Brett: Is there anything else that comes to mind in terms of things that you figured out in how to launch multiple products or multiple businesses?

Sam: One of the instincts was just the talent in the company. I had this mandate that we want at least half the company to be founders or former founders or former founding team members. And you can look at these businesses and all of them have a founder type at the core. You look at my exec team, it's all got former founders or close to founder. Our head of product was the first product person at Khan Academy or one of the early ones. Dom, the CTO is multi-time founders, X and a couple of businesses, a bunch of others. Our CFO was like the first finance person at Plaid. So you've got these people that are used to that muscle is intuitive to them. So who knows, we're still a relatively small company. It's 230 ish people.

Brett: So that's one of the biggest parts is to have sort of founder DNA that we're directly point on getting the new business off the ground?

Sam: Yeah, I think you want to find DNA for it. And then I think also almost like the orientation. For Dojo, like it's a really ambitious company. We want to give every kid an education they love. We're not saying we want to teach every kid to read, which is one part of an education or one part of a childhood. So it's quite a broad mandate. And then you have to be smart about which verticals you get into, which categories you unlock and so on. But I think everyone has the understanding that, oh, we're not like a one product company. It's a multi-product, multi-revenue line company. We have to be thoughtful, we have to get good at allocating capital and resources and time and energy. But those are also skills that we built in those first six or seven years because we couldn't do superfluous stuff. We had to be really just laser focused on what's the critical path to making this network work. And so I think some of that DNA transfers into these other things as well. You get into Zero to One, what's the critical path? There's not so much posturing. Actually maybe this is actually an important thing. There's this great book, it's called Leadership and Self Deception. One of the unexpected benefits of the gun to the head time of not having your revenue and going to network was that you had to be incredibly candid with yourself and with one another because it was just like time was running out so you couldn't fluff around and be like, "Well, it's I guess not that bad or whatever." If something wasn't going to work, you had to say it early and say it loudly and we had to talk about it and find a way forward. And so I think it built a culture. We have a value in the company we call candor over harmony. It's not that we don't like harmony. It's like if we have to pick as a trade-off, we'll pick candor. And so I think creating a culture of candor has really helped because with early stage ideas, it's very easy to not say anything to be like, "Well, I'll just keep eking out 2% wins over here." But someone's like, "Look, we're missing the boat on this, that or the other. We need to get into that." Another great example actually is one of our product leaders, his name's Brendan. He did this total side project, which I didn't even know about. He was like, "Look, clearly every teacher in the world is going to have a teacher's assistant. And we're in classrooms with teachers. We have a lot of trust with teachers. We should get into that and help." And so he just went to teachers did the same process I described. He was like, "What's the worst problem?" Everyone knows that story by the way. He would ask similar questions, "What's the worst problem? What's going on?" Then he arrived at, there's a whole set of more than half of the teacher's work week is taken up in admin work. I think it's like 55 hours is the average work week that teachers work and 48% of it or something is teaching. And he was like, "We should just abstract away all this stuff." But that just emerged in the company. I think building a culture where people are like, they know that we do Zero to One stuff, they know that there should be candid when they think we're missing an opportunity and then they have the muscle to do it, I think maybe some of the ingredients.

Brett: When you think back to the path into originally getting the company into product market fit and these kinds of different chapters or businesses, what are some of the meta things that you've figured out that are useful for other founders to consider and maybe some of the things that are less obvious or less discussed and the types of things that generalize? I'm sure there's tens of thousands of things that you figured out, but really it's useful in the context of this business, but the more generalizable things?

Sam: At every one of these businesses we've talked about, we had a thesis like an end, "This is what we think this could be." And we weren't always sure of all the middle steps, but we had a thesis for what this could be, this is why we could win, et cetera, et cetera. And in some of those we had to change our minds on some of the assumptions, but it was never like, let's just throw some spaghetti against the wall and see what happens. I think we had this lens of delight people hard to copy margin halting ways. Let's have a little bit of structure around picking the direction in a way. And so I think people maybe just don't talk about that. It's just make something people want. But you were asking me earlier about how much did you assess the market, that was maybe our version of it. It was like have a point of view and then update that point of view over time as you learn more. I remember even on our first funding deck, we had a series of hypotheses that need to be true for this business to work out. Things like parents will pay for a product and stuff like that. So I don't know if that's not obvious, but I feel like just that makes some people walk alone maybe misses that and I think it's necessary, even not sufficient. Dojo has this breadth of products, but I think at every point in the company there's always a choice, do you go deep or do you go broad? And it's basically almost always been right for us to go deep. And that's all we did for the first six or seven years until we found some kernel of delight.

Brett: Why do you think that is correct?

Sam: Again, it's just my one person's experience, but I hate to think what would've happened if we tried to build 50 million features in the first six or seven years. Dojo was a communication app, it stayed of communication app and it got better and smoother and more delightful and more useful and all the rest of it. But I think the third thing it is the thing about being around other founders. I spent a lot of time internally focused in the company and I think in retrospect some of the best step change kind of thing thinking I got was just from being around founders who are a step or two ahead of me.

Brett: Maybe there's a couple other things that you can share. The founder density at the company and where that came from?

Sam: Culturally, I think we're extremely atypical in a lot of different ways. I can talk about that including the founder density thing. But so I think early days everyone's like, "You've got to write values. You've a mission and strategy and values." And so I turned to one of our engineering leaders who's still in the company today. I was like, "Hey, we've got to figure out values. Can you help me write them?" And he was like, "Let me take this. I'm going to talk to the engineers." The company was mostly engineers. He said, "I'm going to talk to the engineers and I'll come back with something." And they came back with, honestly this amazing, everyone that reads them is just captivated by them. They wrote values with these three characteristics. One was they wrote them all as trade-offs, so there's no integrity or whatever. It's like candor over harmony, continuous improvement over continuous production, failure recovery over failure avoidance, this kind of stuff. And so these are actual decision-making heuristics.

Brett: Which is a good test of a value.

Sam: A really good test, especially when both sides are good things. Break things isn't actually, if you choose two [inaudible 01:06:59]

Brett: If integrity is one and lying is the other, I mean that's not interesting.

Sam: Totally. If you pick two good things and then you have to force a trade-off, which way do you generally choose is an interesting thing.

Brett: Because ultimately I think you're using it to figure out who comes to the company, who leads the company and how to behave as a group.

Sam: 100%. So I think that was one very important thing. They also wrote these as descriptive rather than prescriptive. So it was like, what are we actually doing today rather than aspirationally what would we like to do? The idea was once we write these down, if we don't like them, we don't like who we are, once it's on a piece of paper, we should change what we're doing and then write the new thing. And then the third thing was these were actually built to re-evaluate over time rather than just be etched on the wall in stone. So it's like, let's update these. We've dropped some of them, we've cut some of them, that kind of stuff. I thought that was a very cool thing. The way it turned into reality in the company was we took these values and we basically built all of our human systems on these values. Now look, there's a pre-product market fit and a post-product market fit. This is I think is post-product market fit, but it's enabled us to continue to innovate rather than just heroically do it once. And so I think it's somewhat important, but there's this great book by Patrick Lencioni called The Advantage, and he talks about the four jobs. He's like create high performing leadership team, create clarity over-communicate clarity, and then reflect that clarity in your human systems basically. Something like that I'm butchering in, but the human systems, how you hire, how you fire, how you compensate, and how you reward and recognize people. We basically built all those systems around these values. So what does a high candor hiring process look like or a continuous improvement feedback process look like, et cetera, et cetera. And that's led to this very clear, I think, cultural resonance through the company. And so people self-select very quickly. You can turn up, read our values though. I'm like, "This is actually how we are and you can opt in or opt out." The downstream effect of that though is that we spend very little time having very fundamental philosophical battles. There's just a base level. There's lots of diversity of thinking and experiences and things around that core, but there's a shared core for sure. I think we've just been uncompromising on that, which seems good. One of the things that emerged from that was what kinds of things you encourage and tolerate in the company. And I think one of the pernicious things that companies get into is they start to tolerate errors of inaction. They're like, "Well, I didn't do anything, so I can't be wrong." And they start to punish errors of initiative and boldness. So you really want to change that, I think. And that led us, I think to the founder thing where I think we've always feared just getting a bunch of people that are phoning it in and just doing a job. Nothing wrong with that, but it's not how I want the company to run, and I want this to be just a real team that's charging together. And so we basically just had the mandate. We're like, "Look, more than half the company is going to be founders." I think it was more than two-thirds at some point, but it's like more than half is going to be founders or founding team members. This isn't like, oh, I've only ever done a startup. These are people that have done a startup. Maybe they've scaled a thing, they've led a big thing, but they know that that curve. And I think it's just a totally different level of empathy too. If you've only presided over a kingdom, building the kingdom is a different thing, and I think that's important.

Brett: And you haven't had it lead to just chaos with these people that want to be the founder or want to be in charge? I guess maybe that's that you want people that have had more than a experience?

Sam: Yeah, I think there's a level of maturity also that comes. We've definitely had some chaos for sure, but there's a level of maturity you start to look for. You're like, okay, I know what it means to be a founder. I know what it means to be part of a team and drive together.

Brett: Who has had the biggest influence on you that is not a family member? What is the thing they imparted on you?

Sam: Well, I mean the tee up there is can I be my co-founder? Yeah. I mean, honestly, I think Liam's had an enormous impact on me. You can't work and live with someone for eight years and they don't rub off on you, but it's maybe not in the way you think. It actually goes back to something you told me earlier. We finished the incubator and we were like, "It's great. We've got this hockey stick." I talked to Tim, our now board member. I was like, "Tim, what do you think the hardest part about building this company is going to be? It seems like we've cracked the product market fit thing," whatever. And he was like, he told us a story about how Bill Gates wrote an article about Yahoo saying how cool it was, and he was just like, he woke up, blood drained from his face. He was like, "Oh my God, we're going to get taken out by Microsoft basically." He was like, "You're going to have crazy highs and crazy lows. And finding equanimity, managing yourself through those ups and downs is going to be one of the hardest things. And you don't know it yet because you've not had them, but it is one of the hardest parts of it." He was so spot on. And Liam has been just an incredible example for me because I think he's been such a, he is a model for me of equanimity and a model of optimism. I think I'm a pretty optimistic guy, but Liam is both calm and optimistic. And so when I'm having the worst of times, we'll go for a walk, we'll talk about it and I'll be like, "Oh man, actually there's a way through this." And so I count my blessings because it'd be very hard to do this alone.

Brett: How did you learn that behavior? You can't just tell yourself be calm.

Sam: Well, I mean lots of work. This whole team keeps us trained on the tracks, but there's like exact coaches and therapy and all the rest of it. But I really do think some of this is just role modeling. Being around someone like that where we could have a crazy terrible day and Liam doesn't go to pieces. He's like, "Okay, let's talk about it, think about it, feel all the feelings about it, and then let's move through it and get on with it." And I think that's been a great example for me.

Brett: Good place, then.

Sam: Yeah, man.

Brett: Thanks so much for doing it.

Sam: Cheers.

Brett: I really appreciate it.