Mike Silagadze sells his technology to college students instead of schoolsMike Silagadze was a graduate student at the University of Waterloo in Ontario when he started a company, Top Hat Monocle, in his living room three years ago. His business idea, based on his experience as an undergraduate in engineering, was to help professors better engage with students by leveraging the technology every one of them brought to class. Silagadze built an application to enable students to ask questions, respond to surveys, take pop quizzes, play with computer simulations, and interact with each other and a teaching assistant using their mobile devices.
His product development completed, Silagadze began selling the Top Hat Monocle service in September 2010. After overcoming some early obstacles, today the company has 24 employees in offices in Toronto and San Francisco. More than 60,000 student customers at 80 universities worldwide pay $20 per semester to subscribe to the service. Top Hat Monocle has generated $1.2 million in revenues during the current schoolyear and is on track to more than quadruple those results in the 2012-2013 academic year.
Silagadze shared with Yahoo! Small Business Advisor the greatest lessons he has learned so far as a startup CEO.
1. It is possible to launch a business and succeed in a recession. We got started at the worst time to start a business. But successful companies like Microsoft and Google were started in terrible recessions too. For us, raising money was really difficult. Nobody was investing, and education was the opposite of a hot market. Only recently has it heated up. Still, we were able to raise a $300,000 initial seed round from a couple of local angel investors. That got us through a year and a half to build, launch, and start generating revenue. Another angel round of funding allowed us to grow and expand the sales. In total we've raised $1.5 million. Now we're meeting with venture capitalists so that we can keep our lead and grow more quickly.
2. Get customer validation of your idea early. What a lot of people do—and this is especially true of engineers who think they have a really good idea—is invest a ton of time and energy building their product before they get any customer validation about whether their idea is right. The world is very complicated; you're never going to get it right the first time just by thinking about it. Eighty percent of your assumptions about what a solution needs to look like are going to be wrong. We shopped three or four other ideas before we settled on this one. We talked to professors at the University of Waterloo and found out that keeping students engaged is the most pressing issue in education today. The demand was enormous.
3. Hiring mistakes can be costly. Bringing on the wrong people to grow the business cost us the most time and money. I should have talked to other startup founders and mentors about hiring decisions that I made without consulting people. Firing someone was the most difficult thing I have had to do in my job. The easiest thing to do is keep the person on and keep hoping things will fix themselves. You have to be able to see this is a mistake and be able to pull the trigger. Our particular wrong hire was someone who had experience in a mature, stable company—someone used to doing three or four big enterprise sales deals a year. When you're building from scratch, you need a completely different kind of person.
4. Being flexible enough to change your model quickly is crucial. Something we did right was to pivot fairly quickly when we realized we were taking the wrong sales approach. For the first couple months, we tried to sell our product to the universities. We realized that the academic bureaucracy made that impossible. We were spending two months trying to close a $15,000 deal. It wasn't sustainable. We came up with the idea to copy what textbook companies do, since they've been around a while. We changed our model quickly to sell subscriptions to students instead of to universities. And we got into the university bookstores. If a student doesn't have a credit card they can pay for the service at the student bookstore, where they'll get a code they can enter at our website.
Any successful startup ends up doing something fairy different than what they originally planned out. Microsoft started building compilers and completely changed to build operating systems. RIM started with wireless payment systems and switched to Blackberry. Every successful company knows how to pivot. If something's not working you need to figure it out and change. To keep the lights on, you try everything you can to get revenue in the door.