Excellent series on Education Pods and Full Stack Education. We seem to have decided as a nation to operate our K-12 educational system as a "Governmental System" rather than the front-line education of our children. Within the educational system, we have ignored innovation and continuous improvement, leaving that to the free market.
I am working on a new book now regarding the state of our educational system and these essays helped validate I was on the right track with certain aspects. Your Substack is much appreciated. Thanks!
David, Author of "Public Speaking for Kids, Tweens, and Teens: Success for Life!" (a previous book)
Hey Rob! Great question. I considered a bunch of different ways to get at a viable business model here, and tried noting these assumptions in the post.
Specifically, I'm looking at a learning pods tech business—so disaggregating the tech layer of the stack, not looking to count revenue against teachers' salaries, etc. (so I'm using "net revenue" here to isolate the revenue derived from building a tech platform in this space, perhaps most akin to Schoolhouse).
So you take 50 million US school-aged children x 26% in homeschool settings at max @ $1K per student annually (in SaaS/net revenue) and assume ~1% of homeschool students pay for a learning pods platform at the pricepoint. Of which, you win 80% of marketshare against competitors (and there are many in this ecosystem). This would get you to ~$102M in SaaS-based / net ARR that may be attractive to investors at a 10X forward multiple.
Of course, plenty of assumptions for debate and that's a good thing! My take here is it's quite difficult to rely on building a tech platform in this space, and why AltSchool and others (Prenda, et. al) have aggregated other layers of the stack (staffing, campuses, curriculum, etc.)—which is a different, also challenging market.
It seems like, of all the factors, thats actually the one with the most leverage (vs getting to 26% homeschooling or 80% market share) so seems super weird to miss that in the post. The big emphasis should have been “I’m assuming only 1% of homeschoolers do pods at all and that won’t change”
When I write it out like that, it seems like a weirder assumption than the others. 5% of homeschoolers use a pod service sounds a lot more likely than 26% of students homeschool
Interesting! My thinking is to model a realistic net revenue scenario (not a TAM calculation). And when only ~50% of US families can afford a $500 expense without worry (Bankrate/Personal Capital surveys), I find it difficult to believe that a larger share of homeschoolers would spend $10K in annual tuition for learning pods.
This reflects the increased supplementary spending thread. Of course, as noted, state funding changes the game—one that I expect Amar will cover next!
Excellent series on Education Pods and Full Stack Education. We seem to have decided as a nation to operate our K-12 educational system as a "Governmental System" rather than the front-line education of our children. Within the educational system, we have ignored innovation and continuous improvement, leaving that to the free market.
I am working on a new book now regarding the state of our educational system and these essays helped validate I was on the right track with certain aspects. Your Substack is much appreciated. Thanks!
David, Author of "Public Speaking for Kids, Tweens, and Teens: Success for Life!" (a previous book)
Pretty confused by the chart -- seems like it's off by a factor of... 100?
By my reckoning,
* 4% of ~50 million students is 2 million homeschoolers
* 100 million in revenue at a price point of $10k means 10e8/10e4 = 10e4, so 10k students
* 10k / 2 million is .005, so half a percent of homeschoolers.
So, you'd need to be off past the top left of the table to hit the 100m/yr figure... unless I'm missing factors that you're including.
Is there a hidden variable that you're including that I'm missing here?
Maybe you're only counting 10% of the revenue, which gets us part of the way there, but not all the way.
Still seems like you would only need 5% of the (current, 4%) homeschool market at $1k / customer / yr
Hey Rob! Great question. I considered a bunch of different ways to get at a viable business model here, and tried noting these assumptions in the post.
Specifically, I'm looking at a learning pods tech business—so disaggregating the tech layer of the stack, not looking to count revenue against teachers' salaries, etc. (so I'm using "net revenue" here to isolate the revenue derived from building a tech platform in this space, perhaps most akin to Schoolhouse).
So you take 50 million US school-aged children x 26% in homeschool settings at max @ $1K per student annually (in SaaS/net revenue) and assume ~1% of homeschool students pay for a learning pods platform at the pricepoint. Of which, you win 80% of marketshare against competitors (and there are many in this ecosystem). This would get you to ~$102M in SaaS-based / net ARR that may be attractive to investors at a 10X forward multiple.
Of course, plenty of assumptions for debate and that's a good thing! My take here is it's quite difficult to rely on building a tech platform in this space, and why AltSchool and others (Prenda, et. al) have aggregated other layers of the stack (staffing, campuses, curriculum, etc.)—which is a different, also challenging market.
Ah okay I missed the 1% factor you were applying
It seems like, of all the factors, thats actually the one with the most leverage (vs getting to 26% homeschooling or 80% market share) so seems super weird to miss that in the post. The big emphasis should have been “I’m assuming only 1% of homeschoolers do pods at all and that won’t change”
When I write it out like that, it seems like a weirder assumption than the others. 5% of homeschoolers use a pod service sounds a lot more likely than 26% of students homeschool
Interesting! My thinking is to model a realistic net revenue scenario (not a TAM calculation). And when only ~50% of US families can afford a $500 expense without worry (Bankrate/Personal Capital surveys), I find it difficult to believe that a larger share of homeschoolers would spend $10K in annual tuition for learning pods.
This reflects the increased supplementary spending thread. Of course, as noted, state funding changes the game—one that I expect Amar will cover next!