How to crystallise start-up success

Dipping my toe into the world of entrepreneurship, I’ve realised that it’s actually quite hard.  In fact start-ups fail all the time (90% if we are being precise).

You know what else fails all the time? Crystallisation.  Having spent my fair share of time in university chemistry labs, I’m well acquainted with this mysterious process. It involves making a liquid solution which should *theoretically* then start growing pretty little crystals like in this video.

 

Unfortunately this is what actually happens most of the time…

Crystallisation saga

A low success rate to say the least.

Yesterday, it became clear in my Advanced Physical Chemistry lecture that crystallisation is not in fact chemistry sorcery, but a precise balancing act.  A lot like start-ups.  Some grow into big successes (big crystals), while others never make it (no crystallisation).

One start-up that seems to have crystallised success is Education Perfect.

They are a New Zealand company who offer educational software to schools globally. They originated from co-founder Craig Smith’s need to learn Japanese and German vocabulary for school exams in 2004. Now, they are aligned with national curriculum and have expanded into 22 subjects with 300,000 students using their software.

But, they were no overnight success story. It took them years to find success in the supersaturated education market, full of big players like Khan Academy, Mathletics and Duolingo.

So how did Education Perfect grow their crystal?

1. The right reactants

Without the right ingredients in the perfect quantities, you’re never going to get crystals growing (close enough is not good enough here). Education Perfect has spent many hours developing and optimising.  They now have an easy-to-use product, that gamifies learning, secretly sneaks in repetition so you actually learn something, and cuts back on teacher’s workloads by making homework setting and marking almost automatic.

Education Perfect use a subscription-based business model, charging schools $40 per subject or $100 for all subjects per student per year.  This model is handy for predicting revenue and managing cash flow, but means repeat business is vital.  Education Perfect have top-notch customer service, treating customers as honoured guests at an exclusive restaurant. They keep schools coming back by offering customisation, training and close relationships.

Unfortunately, the right ingredients alone aren’t enough. Early on, the crystals didn’t grow and Education Perfect had no customers.

 

2. Scratching

Theoretically scratching involves scratching a glass rod against the bottom of the beaker, creating a surface for crystals to grow on, and throwing off the equilibrium of the liquid.  What it often actually means for the over-zealous among us is:

over zealous scratching

Education Perfect didn’t physically scratch anyone (obviously), but they persevered with a few clever ideas, to throw off the equilibrium of the sector.  In the early days, their sales pitches were rejected again and again, even being called a ‘load of rubbish’, yet they persevered.  They found business channels which worked for them, directly contacting schools, and working hard to build relationships and deals.  In a true mark of perseverance, they redefined the meaning of “no”, realising it often wasn’t a straight out no, but rather a “not at the moment”, or “we don’t have the budget.”

Their innovative Language Perfect World Championship has also disrupted the sector, letting competitive spirit drive learning globally (it certainly worked on me #2011BronzeAwardWinner).  Free annual publicity and a chance to get people hooked on their product has been a stroke of genius.

 

3. Seed Crystals

These are the magic.  If you chuck one tiny crystal into the liquid, all of a sudden you will have heaps more crystals just like it. Obviously getting that first seed crystal, just like a first customer, can be a little tricky, as they’re not easy to come by.  However, once Education Perfect started to get paying customers, they started to gain the credibility and momentum.  They now had a revenue stream (or rather a trickle initially) and could further expand their reach.  But had they made it yet?

 

4. Reaching the critical radius

When crystals are trying to form, there are two conflicting forces at play.  When the clusters are small, they are dominated by the dissolving force. Yet when they reach the critical radius, all of a sudden the attractive force starts to dominate, and all the little crystals start clumping together. Next thing you know, your crystal is growing exponentially.

Forces pulling crystal apart (1)

It’s the same in the start-up world.  In the early days, everything is against you, but then you reach a certain point, and boom, you start to grow!  With no sales in the first year, $20,000 of profit in their second year, and doubling in size every year since, Education Perfect is the epitome of this critical size phenomenon. This was the exponential crystal growth they had been after all along.  Luckily for Education Perfect, being software based made them highly scalable, and absolutely ready for this size explosion.

 

Unfortunately, just because you’ve finally got your crystal, does not mean you will have a crystal forever.  Have you ever taken a snow flake and crushed it between your fingers? Crystals are delicate. With an ever-changing tech industry and fierce competitors ready to crush them, ultimately Education Perfect needs to keep growing. The bigger the crystal, the harder it is to destroy.

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