Insights interview: lessons learned building a successful SaaS edtech company

What’s the purpose of this interview and who’s it for?

SaaS edtech is all the rage for investors—they see SaaS as a faster route to market, easier to scale, creates great stickiness, and has big potential returns. But, building a successful SaaS edtech business is another matter. I’m approached by many edtech startups wrestling with whether they should focus on building products they take to market, or SaaS capabilities they will license to B2B clients, or both. But when considering SaaS, many don’t fully pivot to a successful B2B mindset—where your client becomes the hero and you relentlessly pursue creating value for them. So, what are lessons learned building a successful SaaS edtech company?

Insights from Gavin Cooney

There are relatively few edtech companies I’ve come across in my career that have made SaaS a success—sustainably and at scale. One that I have special respect for is Learnosity. In 2011, I met Learnonsity’s CEO and co-founder, Gavin Cooney, very early on in his journey. I was especially impressed with Gavin’s focus on creating “good old-fashioned value” for his B2B clients. And, I’ve enjoyed watching the quiet yet meteoric growth he has driven. Given the tough decisions Gavin faced early on in growing his business and the success Learnosity now enjoys, I was delighted when he agreed to share insights from his journey building a successful SaaS edtech company.

The interview: lessons learned building a successful SaaS edtech company

Good morning, Gavin! Thank you so much for agreeing to this interview. As you know, I provide strategic consulting to edtech startups and mature education companies to help sharpen their mission, business strategy, and competitive positioning. With those readers in mind, I’m confident many will be hungry to learn from your experiences. I’d like to explore ten key questions with you:

1. How did you find your zig (aka product-market fit)?
2. How did you build a business without external investment?
3. Why did you land on a business model with a high acquisition cost and a high customer lifetime value?
4. How did you make your customer the hero of your business?
5. How have you built and maintained competitive distance?
6. How did you overcome customer anxieties about data?
7. How did you evolve your organization and culture to stay ahead?
8. Looking ahead, how could AI assist education content creators?
9. Which three favorite resources would you point edtech founders to and why? 
10. What three recommendations would you give to a founder building a SaaS edtech company?

Do those goals sound good?

Hey, Adam. Great to see you. Yes, those topics sound great!

1. How did you find your zig (aka product-market fit)?

At the start, we built an end-to-end courseware solution for the Department of Education in Australia and explored licensing it to other B2B customers. We were moderately successful, but deals were hard fought and hard won. 

We soon came to the reluctant realisation that we weren’t a true B2B product business—in fact, we were still a consulting business at that stage. There’s absolutely nothing wrong with building a consulting business, but our aim was to build a truly scalable B2B product business. 

After bouncing around the major edtech conferences to network, eventually I got in front of an executive at a big publisher in London. I pitched our end-to-end courseware solution, but he wasn’t interested—they already had all that. However, one thing was interesting to him: one question type within our whole end-to-end solution he saw great customer value in. It was an audio question for students to record spoken submissions for their teacher. He told us that if we could make that question type really easy to author and really perform for the end user, then that would be something they would be interested in licensing.

I was really surprised. But this was a real problem facing this company, and they had hundreds of thousands of users. We solved that problem for them, but at the time we didn’t realise how fortuitous that decision was. That executive was you, Adam!

Very quickly it became apparent that something important and fundamental had changed and it felt like the right change—things started to fit and we were building real momentum. We came to realise that through APIs, we could power assessment for the whole learning industry. We took off like a rocket from there.

It was then that we decided to pivot the entire company to deliver an API.

I remember that meeting well in 2011! It’s been amazing to watch Learnosity’s growth from that pivot.

2. How did you build a business without external investment?

Our early years as a startup were a real struggle. I had little to no salary. I was living on beans on toast and sleeping on friends’ sofas and in youth hostels as I travelled looking for business. 

Living in debt and without a steady paycheck was the harsh reality for me starting a company. On top of that, being responsible for other people’s job security gave me a whole new kind of motivation to succeed.

We didn’t have the luxury of a VC safety net so anything we did needed to have a clear ROI, and needed to be cashflow positive. Bootstrapping our business made us extremely focused.

I’d love to say that this was all deliberate. The truth is that we pitched to a bunch of VCs, but we were condescendingly told that what we had built was “just” a consulting business. The profitable consulting that kept us in business while we built the product was seen as a negative. So all the VCs said no. 

Looking back, not neatly fitting what VCs were looking for was the best thing that ever happened to our business.

3. Why did you land on a business model with a high customer acquisition cost and high customer lifetime value?

Without millions of dollars to invest in product, marketing, and sales, we needed something that would sell and be cashflow positive quickly. We were happy to roll up our sleeves, and we were willing to work hard for a sale, but—especially in early years—a deal needed to pay for itself in a reasonable amount of time! 

In addition to the necessity of cashflow, the decision to go with an API business and to target big B2B customers, was a logical conclusion once we realised that we could have the biggest impact on learning worldwide by using APIs to power assessment for the world’s biggest edtech companies. 

What we chose to provide for our customers is undifferentiated heavy lifting: it’s generic, but it’s hard to do well. Our argument to customers was that functionality like that should be outsourced when possible, so they can focus their headspace and investments on areas where they can stand out.

Shortly after we pivoted to the API model, I found an early version of this article on the (excellent) Intercom blog. This articulated extremely well what we had already determined was our business model, and I still use the article today to explain our business. We chose to focus our business on the ‘Enterprise’ segment in the top right hand quadrant.

4. How did you make your customer the hero of your business?

Most companies recognise that they are especially good at one thing—content, marketing, technology, or running a large sales team, etc. In that vein, we see ourselves as a partnership company. We see our customers as partners, and work hard to make them successful. Our pricing model means that we’re extremely aligned—they win first with a low cost to build and take to market using our technology, and we win in the long term if we make them successful with many satisfied users.

Because we believe our customers are the hero, our capabilities are embedded in our customers’ products and we make ourselves invisible. In fact, most end users will probably never know that Learnosity is powering their experience. 

Our mission is to advance education and learning worldwide with best-in-class technology, but we can only achieve that through our customers. So, we’ve built a model where their success is our success. I think that simple North Star has helped us focus on customer success and never waiver from that.

5. How have you built and maintained competitive distance?

We have a maniacal focus on being the gold-standard in assessment. We’ve invested a lot of time, effort, and money to build a best-in-class assessment engine with more than 700,000 developer hours so far, and an ongoing annual developer spend of more than $8.5m.

That hyperfocus and commitment to innovation is what keeps us well ahead of the game. Learnosity is a space age PaaS (Platform as a Service) and cloud company, on the bleeding edge of cloud technology. All the things my mother still doesn’t understand when she asks what I do! That said, at the end of the day, we’re a company with an old-fashioned goal—to provide our customers with value. For every $1 a customer pays us, we give them $10 back of best-in-class software. Focus on delivering value to the customer is—I think—the real secret of how to keep that competitive edge.

6. How did you overcome customer anxieties about data?

Our value proposition is clear—we sell software. What we don’t sell, or have any interest in, is the data that belongs to our customers and their end users (typically schools/ teachers/ students). We’ll hold our customer’s data as a service to them, and process it when they (metaphorically) press the button to ask us to do so, but we have no other goal. The first step is to ensure our customers understand this. 

We have further reduced possible anxieties by designing our capabilities to never require any student PII (Personal Identifiable Information). So when our customer is building a product for a learner, they pass us a pseudonymized user ID, we deliver an assessment to that unknown learner, and only the customer can map the user ID back to that individual. Not storing PII is more comfortable for everyone involved! 

All that said, it’s also incredibly important for our clients to offer secure products, so we spend a lot of time making sure what we offer them is super secure. As a result we’re also ISO 27001 certified, with multi-tiered data security in place for added protection.

7. How did you evolve your organization and culture to stay ahead?

For the first couple of years, Learnosity was just me and co-founder Mark Lynch. Up until 2013, my “office” was a shed in the back garden of my parents’ house.

I’m so proud of the team that we’ve built. We’re a diverse group of passionate, talented, and driven individuals, but most importantly we are a team. Together we are building something incredible that’s having a tangible impact on the world’s education system. I’m particularly proud of the fact that we’ve built a successful company and retained our integrity. We call it “being sound” in Ireland. Too many companies lose that along the way. That’s not us! 

When Learnosity acquired Questionmark, there was a merging of cultures. Both companies were made in the images of their founders. Questionmark needed a bit more formality for their markets, and we wanted to achieve a middle ground of our company cultures. We’ve been largely successful, but we’re still working to bring everyone into alignment.

If I could do it again, I would’ve made bolder decisions on day one of the acquisition. I would’ve made one big change that everyone could get used to straightaway, rather than many incremental changes.

8. Looking ahead: how could AI assist content creators?

The arrival of AI is a paradigm shift that’s always shifting and it’s sparked many concerns for our customers who are content creators. However, we see AI as a co-pilot for authors and editors—an assistant, not a replacement—and it’s something we’re working on right now.

Author Aide—Learnosity’s AI-assisted authoring tool—is capable generating alternative questions, feedback, hints, and more. It’s not about generating a huge mass of questions, but making individual questions as good as they can be.

We’re planning to supercharge content creation by making authors 10x more effective, helping them to produce better content and better feedback for learners.  

I can’t say much more right now, but we’re super excited about the possibilities. Watch this space!

9. Which three favorite resources would you point founders to and why?

Here are some resources that have helped us clarify our vision, efficiently execute that vision, and have the difficult conversations necessary to stay true to that vision:

1. We started this company because we were basically saddened by the state of educational technology, and wanted to make a really big difference. Doing an API enabled us to paint with a broader brush, and reach more students. One of the things I love about working in education is that more often than not the people we work with have a similar origin story, and they are united in that mission to improve education. So the first thing I’ll point to is Simon Sinek’s TED Talk, titled ‘How great leaders inspire action‘, on his concept of the Golden Circle.  In a mission-focussed industry like ours, we need to think in this way, and communicate as such—both internally and externally. Start with the “Why?”! 

2. As I mentioned earlier, the Intercom blog is a great resource, and an inspiration. Some superb insights for product owners. 

3. Trying to stay away from more ‘obvious’ answers like ‘The Lean Startup‘ by Eric Ries or ‘Radical Candor‘ by Kim Scott, I’d suggest any founder, in a cloud business or not, needs to know the 5 C’s of cloud finance inside and out. This presentation is a bit old, but the fundamentals remain unchanged.

10. What three recommendations would you give to a startup founder building a SaaS business?

I’ve made mistakes along the way, but there’s nothing I would do vastly differently if I started Learnosity all over again.

My main advice is: do one thing and do it very well—go an inch wide and a mile deep.

Build a business that’s not capital intensive, but that’s self-sustaining—that’s absolutely the best way to do it. 

The best thing we could’ve done was be mean about the amount of equity we gave away to investors.

Finally, cultivate an optimistic mindset. I’ve always had an almost naive optimism that we could do something great and we’d be able to succeed. With that mindset, failure just isn’t an option.

Six big lessons learned building a successful SaaS edtech company

If you’ve read any of my other blogs, you’ll know I share a lot of Gavin’s mindset. In particular, here are six key takeaways on lessons learned building a successful SaaS edtech company:

1. Focus on building a B2B or B2C company, but not both—many experienced individuals would disagree, but I’ve seen too many companies fail trying to do both. Decide which is your North Star and focus on delighting those customers (see also Five Foundational Activities for Edtech Success).
2. Successful SaaS edtech businesses make their customers the hero—a superpower of successful B2B SaaS companies is that they remove their ego from the equation and instead are relentless in making their clients look great and creating value for them.
3. Focus on one thing your customers really care about and do it better than all your competitors—as Gavin says, “Go an inch wide and mile deep.”
4. Sharpen your “Why” before you focus on the “What” and the “How”—as Gavin points to in Simon Sinek’s “Golden circle”, it’s identifying a compelling “Why” that enables inspiring leaders to take their staff and company to achieve extraordinary results.
5. Be ambitious and optimistic—ambition is what will inspire your team and your customers, optimism is what will enable you to persist in overcoming the many obstacles you will encounter along the way. Nurture both, in equal measure.
6. Venture Capital is not the only path to success—Gavin demonstrated how it’s possible to grow a successful SaaS edtech business without investment because very early on he recognized that he had to build a scalable product, and used consulting services only as a short-term means to that end.

Need help?

If you want an experienced critique of your edtech strategy, business model, product and roadmap, or mission and goals, and practical recommendations for how to improve all four to accelerate your growth, please contact us with the form below—we’d love to learn more about your business, aspirations, and challenges.