Although EssayJack initially began as a beta product in 2016, the SaaS launched as a full business in 2019, the year after the founders raised $350,000 from friends and family.
A shareholder loan of $1 million also powered the launch of this Toronto-based academic writing software platform — but it wasn’t a typical loan. Educator and CEO Lindy Ledohowski and her co-founder funded the business with their own capital and structured it as a “loan on the books.”
“Once we do an external raise, we may convert that loan into equity,” she told Latka in an interview. However, the founder’s principal focus for the “new category of product” they invented was to build the platform outside of the common startup approach. By circumventing hurdles associated with investor capital, Ledohowski says they could prioritize education as they learned the business and product.
EssayJack simplifies academic writing for users, so it targets students and institutions all over the world. Students pay $9.99 per month or $99.99 per year after a free trial, and bulk licenses for schools offer lower pricing on a per-seat basis, based on their needs.
The SaaS supports more than 30,000 monthly active users — 50% are paying customers, of which 1,000 are individual student subscribers. Others are educational institutions.
“They might be on a free pilot now,” explains Ledohowski, “but they’re in a sales funnel, and our hope is we’ll move them forward and close that as an institutional sale.”
Source: GetLatka
In previous years, 90% of EssayJack’s revenue came from B2B sales. Because of the COVID-19 pandemic and the uncertainty of institutional budgets, the $20,000 MRR it earned in 2020 was split between B2B and B2C sales.
Even with a 50% annual churn rate, EssayJack’s customer growth is impressive, considering it doesn’t have a marketing budget. Word of mouth is its main marketing engine, but Ledohowski says writing workshops, and the platform’s content library of ebooks, blogs and video resources have been key to customer acquisition.
“Providing really valuable content is the way we got those first 100 individual customers, but that’s also the way we’ve been able to get into schools, colleges and universities.”
As EssayJack grows the business and its team of six employees, Ledohowski says hiring a salesperson is the next big priority. If the SaaS can raise $2 million in seed money on an $8 million USD pre-money valuation, she can hire more team members and continue to ensure no one has to stare at a blank page when they have to write.
“Education opens doors for you, and that’s really our aim and objective. The money stuff will sort itself out, is what we often like to say.”
What is EssayJack’s annual revenue?
In 2020, EssayJack generated $240,000 in ARR.
What is EssayJack’s monthly revenue?
In 2020, EssayJack generated $20,000 in MRR.
Who is the CEO of EssayJack?
Lindy Ledohowski, age 44, is the CEO and co-founder of EssayJack.
What is EssayJack’s valuation?
EssayJack is valued at $8 million.
Transcript Excerpts
A multifaceted pricing structure to support varied markets
“Typically, if you’re thinking about the North American students, straight up, you do have to have a certain price sensitivity, particularly at college and university level. If you’re thinking about other regions in the world — particularly, let’s look at Asia, where English language learning is huge — parents have a different attitude towards the investment in their child’s education. While there’s still certainly a price sensitivity, the expectation that supplementary educational tools will be part and parcel of their child’s education is a little bit more standardized than we typically see in a North American context. So yes, you’ve got to sell to students and watch the price. Depends on where you’re selling in the world.”
Customer acquisition tip: Lure prospects with valuable content
“We counted and we still count on word of mouth. We have essentially a nothing marketing budget, so it’s myself and one other person out there slogging content, [which] is essentially the key. What we realized is that really having a content strategy that says, ‘Look, we’ve got this software that adds real value if you have to write in English.’ But we’ve also got ebooks and blogs and video resources, and I’ll do webinars; things like that. We’ve got an ecosystem of people who are connected with us — whether those are students or parents or educators — where our aim is really to add value.”
Fuel more growth with dedicated sales members
“Right now, I’m doing all the sales. We’re in the middle of our very first external fundraise, and the No. 1 person I want to hire is somebody to do sales. To be honest, it’s really time-consuming, and I’m doing six people’s jobs, with sales only being one of them. … We know that to be successful in sales, you have to develop relationships with people. In order to close those deals, they really do need to feel as though you’ve heard their needs and you’re able to provide something that answers their needs.”
Weigh your pros and cons — what are your goals?
“We had the long, hard conversations about the two paths we could take. … The one path was to get investment in early and give up a larger stake in the company, or the second was to take on a huge amount of personal risk … that this fantastic idea we’re seeing making a difference in people’s lives fails. That’s always a possibility, and you have to get OK with that, and that’s tough.”
Full Transcript Nathan: Hello everyone. My guest today is Lindy Ledohowski. Now, she was a former English teacher and an English professor in Canada before becoming an ed-tech CEO for academic writing software platform EssayJack. She’s won numerous awards for teaching, research, and publications. And is now an award-winning entrepreneur. She’s published both peer-reviewed scholarship and popular pieces on writing and offers keynote addresses on webinars related to ed-tech, leadership, and academic writing. Dr. Lindy, ready to take us to the top? Dr. Lindy Ledohowski: I sure am, Nathan. Let’s get going. Nathan: All right. So my first question with a tool like this, essayjack.com is who you’re selling to? Because you’re selling to students, you’ve got to figure they don’t have much money. Dr. Lindy Ledohowski: Yeah, so that’s a really great question. And there are two answers to it. So one, depends what student you’re thinking about. So typically if you’re thinking about the North American students straight up, you do have to have a certain price sensitivity, absolutely, particularly at college and university level. If you’re thinking about other regions in the world, so particularly let’s look at Asia where English language learning is huge. Parents have a different attitude towards the investment in their child’s education. So while there’s still certainly a price sensitivity, the expectation that supplementary educational tools will be part and parcel of their child’s education is a little bit more standardized than we typically see in a North American context. So yes, you got to sell to students and watch the price. Depends on where you’re selling in the world. And then of course, we also sell institutionally. Nathan: So what do you sell for it? What’s the average customer paying per month? Dr. Lindy Ledohowski: Yeah. So if it’s just a student straight up, they’re paying $9.99 a month, or they’re paying $99.99 a year. If it’s a bulk license at a school, obviously you have lower pricing on a per seat basis, depending on what that institutional license looks like. Nathan: When you look at just last month’s revenue, what percent came from bulk deals, where it was like a school credit card paying you, right, or an accounting department versus a direct consumer sale? Dr. Lindy Ledohowski: Yeah. So, if we’re looking… So interestingly, like COVID is just weird. So the trends that we’re seeing this year are not always the same as we see in previous years. So this year it’s a little bit more of a 50/50 split, between our B2C or the direct to consumer and B2B, which is the institution. But in previous years, it’s been more of a 90/10 between institutions being the 90%, Nathan: Oh, wow. Dr. Lindy Ledohowski: And 10% being individuals. But right now, what we’re seeing at least is that institutional budgets are still, there’s still a lot of questions in terms of the investment into software. So some institutions have absolute discretionary budgets and they’re, “Yes. Oh my God! We need help with teaching academic writing.” Particularly online where you don’t have that face to face modeling of what’s going on with teaching in the classroom. Dr. Lindy Ledohowski: And then some institutions are like, “We don’t even know what enrollment is going to be like, and we’re letting faculty go. So our budgets in terms of software look different.” So we’re really being flexible this year to try to be, “Look, we just want to help people in the middle of a global pandemic.” I mean, education opens doors for you, and that’s really our aim and objective, and then the money stuff will sort itself out is what we often like to say. Nathan: And Dr. Lindy when did you launch the company? Dr. Lindy Ledohowski: So we launched it as a beta product at the end of 2015 so into 2016, we really launched it as a full business at the start of 2019. Nathan: The obvious question there is then going to be, you’ve got real expenses personally. How are you paying your bills while you’re building beta between 2015 and 2019? Dr. Lindy Ledohowski: Yeah, so we did a huge shareholder loan to get us started. And then we raised 500,000 Canadian from friends and family. So that was about 350,000 USD at the time. And that was once we paid out of pocket first to get a thing out there and just be like, “Oh my God, we’re academics. Does anybody even want this thing we’ve created?” And it was a very shaky beta product and we got it out there and then the traction demand was more than we could handle. And so we thought, Oh, okay, there’s something here. We need to raise money. We need to actually build a stable platform. We need to, I don’t know, hire some tech people so it’s not me answering help requests and figuring out what to do from a technical level. I’m an English PhD, what do I know about, about code? So, Nathan: So, when did you raise that 350, 2019? Dr. Lindy Ledohowski: That was 2017, 2018. Nathan: Okay. Got it. 2018. And talk to me about shareholder loan. So I assume that was like you and your co-founders. How much was that loan for? Dr. Lindy Ledohowski: Yeah. So right now we’re looking at it’s about a million USD has gone in to get us up and off the ground. So the total equity in the company to get us from, hey, this is an idea let’s get going. It’s about 1.5 million USD. Nathan: Dr. Lindy I’m curious how you structured this because you used the word shareholder loan. So it’s being paid back, correct, or they actually have equity? Dr. Lindy Ledohowski: So we have equity in the company as the founders as well. Right now it’s just structured as a straight up shareholder loan. Once we do an external raise, we may convert that loan into equity. Nathan: Oh, I see. Dr. Lindy Ledohowski: Yeah. So our principle focus at the start was look, we’ve invented an entire new category of product. We don’t actually know if it’s going to work, but we believe in it so much that we’re going to put our money where our mouth is and really see where this takes us, as opposed to the more typical startup approach, which is, I want to spend somebody else’s money, but then you’re also driving somebody else’s ship with various other co-pilots. And our focus was, well, we actually know the education business and so we need to be able to respond in real time to unexpected things along the way as we figure out this business and this product and, we’re not 20. So we said, let’s put some real dollars into this and see where it takes us. Nathan: And what interest rate did you put on that loan, if any? Dr. Lindy Ledohowski: None. Right now, Nathan: Got it. Dr. Lindy Ledohowski: It just sits there as a loan on the books and nothing happens. Nathan: So it’s literally you and your co-founders, how many co-founders two? Dr. Lindy Ledohowski: No, just there’s two of us in total. So myself and one other co-founder. Nathan: So you two together, put in one million in the business of your own capital structure as a loan so you can get it paid back out at a future date if this thing works, and then you raise 350 officially in early 2018 from equity investors. Dr. Lindy Ledohowski: Yeah. Nathan: I see. Okay. Very cool. Okay. Let’s jump back into the business. Dr. Lindy Ledohowski: By very cool do you mean very terrifying? Nathan: Well, tell me about that. What was terrifying for you? Dr. Lindy Ledohowski: Yeah, I mean, well, it really is. I mean, we have the long, hard conversations about the two paths we could take. And as I say, it was the one path was get investment in early and give up a larger stake in the company or the second is take on a huge amount of personal risk, and again, the risk is that, that million dollars we’ve put in, never gets paid back, that this fantastic idea that we’re seeing, making a difference in people’s lives fails. That’s always a possibility and you have to get okay with that and that’s tough. Nathan: Yeah. No, it’s tough. It’s part of the slog, but if it works, it works big for you guys and you still have total control, so let’s talk about growth, right? So today, how many students do you have actively using the platform on a monthly basis? Dr. Lindy Ledohowski: So over 30,000 students on a monthly basis are active users. Nathan: That’s incredible. And how many of them have you converted to paid? Dr. Lindy Ledohowski: Probably, I should’ve looked at my data just before coming on. Nathan: A range is fine, yeah. Dr. Lindy Ledohowski: Yeah, I would say that’s probably about maybe 50% of those are our paying users. And then some of those are say in an educational institution, so they might be on a free pilot now, but they’re in a sales funnel and our hope is that we’ll move them forward and close that as an institutional sale. Nathan: How many consumers do students directly pay you? So not through a school as bundled package. Dr. Lindy Ledohowski: Yeah. So that’s where right now it’s quite small. So our monthly individual subscriber is I think, around a thousand ish. So that’s, and that’s what we’ve really just been launching in response to COVID to give people that flexibility, to say, hey, don’t wait for your teachers or your institutions, but you can also make sure that you’re prepared for college and university with software that that can help you, even if there are gaps in what’s happening in terms of face to face or what’s happening in terms of sometimes students just find it hard to learn by Zoom, if that’s all they’re getting. And so we’re finding that they’re turning to as a trusted resource. Nathan: Now I love that. Now, can I take a thousand paying you directly times that 9.99 price point, you’re doing about 10 grand a month direct to consumer, which you said is 50% and another 10 grand a month in the bulk deal so 20 grand a month total? Dr. Lindy Ledohowski: That sounds about right. Nathan: That’s great. Okay. So this is not easy. I mean, getting your first 10 grand 20 grand a month in sales is not easy. A thousand individual customers are not easy. How’d you get the first hundred? Dr. Lindy Ledohowski: Yeah. We basically beg, borrowed and steal. No, we ultimately, we counted and we still count on word of mouth. So we have essentially a nothing marketing budget. And so it’s myself and one other person, and we’re out there slogging, content is essentially the key. What we realized is that really having a content strategy that says like, look, so we’ve got this software that adds real value if you have to write in English, but we’ve also got eBooks and blogs and video resources, and I’ll do webinars, things like that, so that it’s, we’ve got an ecosystem of people who are connected with us, whether those are students or parents or educators, where our aim is really to add value. I mean, I could have spent my life teaching English at university. I had a tenure track job. Dr. Lindy Ledohowski: That’s the kind of job for life. So I could have done that. And I said, well, actually, if we take this gamble and develop software, that’s far more scalable. I can take the things that I was fortunate enough to learn and master as a scholar and teacher myself and I can digitize it. And then it levels the playing field so that if somebody happens to not have the good fortune of say, being in Dr Lindy’s class, they can still access the skills and the tools and the tricks of the trade that I’m able to make available for them. And so that’s a roundabout answer to say content and providing really valuable content is the way that we got those first hundred individual customers. But that’s also the way that we’ve been able to get into schools, colleges and universities, Nathan: I’d love to get a specific there. So people can like really feel like they know you. So like the first 10 customers were like the first piece of content you wrote, what was the title? Dr. Lindy Ledohowski: Yeah. So in terms of the very first customers, what often I would do would be I’d go and do, this was pre pandemic. I would do a free webinar or a free in-person workshop on writing. So it would be touted as a writing workshop, I’d show up at a university, and I would just, Nathan: Who’s marketing it? The university is marketing it? Dr. Lindy Ledohowski: Yeah, so the university would market it. So the department, whatever department it would be Social Sciences or English department or a writing center. And I would essentially, and that would be a thing that I would offer them, which is here are the principles of good writing. Here’s how you structure academic writing. This is what people are looking for. And then from that, at that point, we’d have 65% of people who are in that workshop sign up for an EssayJack trial immediately, and what we still find so now in this more digital context, I’ll still say partner with an organization. Dr. Lindy Ledohowski: So I did a webinar this summer with ProWritingAid, which is an online text editing software. And I did a webinar with them on the principles of academic writing, particularly for graduate students. So it was like, how do you write a thesis? How do you write a master’s thesis? What are the component parts? So what do you put in a lit review? What do you say in a methodology section? So those are the things that, for that particular audience, if you’re a master student, you’ve just graduated from your BA, you don’t know what to do in life, you enroll in a master’s program and now you have to write a thesis nobody’s ever trained you and you have to learn along the way. So if I can demystify that and do that in a webinar, and then people are like, “Oh, okay, let’s check out this software.” That’s a real time use case very recently. Nathan: And Dr. Lindsay talk to me about the team you’ve used to build this, how many people on the team today? Dr. Lindy Ledohowski: Yeah, so right now it’s myself and five other people. So there’s six of us. So we’ve got a product owner and so he straddles the line between the tech and the business side. There’s one girl who helps me with the marketing client support everything that’s non-tech and of course, we also show up to all of our tech meetings and then we have three full time dedicated developers. Nathan: Oh, okay. Three developers. That’s great. And any quota carrying sales reps or no, you’re doing all the sales? Dr. Lindy Ledohowski: So right now I’m doing all the sales we’re in the middle of our very first external fundraise and the number one person I want to hire is somebody to do sales, because to be honest, it’s really time consuming. And I’m doing six people’s jobs with sales, only being one of that and that’s really hard because ultimately we know that to be successful in sales, you have to develop relationships with people in order to close those deals, they really do need to feel as though you’ve heard their needs and you’re able to provide something that answers their needs. And I truly believe that, but sometimes it’s hard when I’m like talking to investors and I’m talking to tech and I’m building out blogs and I’m doing webinars to also call up and be like, “Hey, so close that ready to close that deal?” Nathan: You have all the hats on. You’re rocking all the hats. I love that you mentioned you’re raising now, how much are you looking to raise? Dr. Lindy Ledohowski: We’re raising two million USD and this is our seed. This is we’re now saying, okay, we’ve gone through all of the depths of despair and now we’ll be a more straight up ed-tech company with external investors and we have fewer questions about what that path and that direction forward is going to look like than we had when we raised our friends and family round. Nathan: What valuation are you hoping to raise the two million on? Obviously you got to negotiate it. What’s your hope? Dr. Lindy Ledohowski: Yeah. So it’ll, to be honest, it’ll probably be in the ballpark of around an eight million USD, give or take. Nathan: Pre money or post? Dr. Lindy Ledohowski: Probably pre money. Nathan: Pre. Dr. Lindy Ledohowski: Yeah. Nathan: So eight posts, if you can lock that in, that’s great. And you will do then a price draw and that won’t be an eight million cap on a safe or something. Dr. Lindy Ledohowski: Nope. Nathan: Yeah. Okay. And how much of that, would you use some of that two million to pay back the owner loans of a million? Dr. Lindy Ledohowski: Not at this point? No, the expectation in terms of payback of that shareholder loan is like at an exit. So the intention is to fuel growth, not, I mean, as much as I’d like to line my pockets, I’m able to be patient and line those pockets later to see like my vision is that nobody should have to stare at a blank page when they have something to write. Now we’re starting in the education space to help students who have academic writing and that blank page that stares at them. But realistically, at the end of the day, nobody should have to stare at that blank page. So whether that’s business writing or corporate writing or government writing or academic writing, which is the field that I know, and I’m willing to keep my pockets emptier than I would like them to be in order to see that real vision fulfilled. That’s something that I would like to have as my contribution to the world at large, when my life is over. Nathan: Are students sticking? What’s churn rate look like? Dr. Lindy Ledohowski: Yeah. So it’s still early days in terms of the individual subscribers, as opposed to the bulk licenses where they might buy it for a grade and the expectation is that it’s available for that particular program or that particular grade and then you roll new students in, in the subsequent year. So with respect to the individual subscribers, typically we’re seeing a year or two ends up being the duration of how long they stick with EssayJack. And again, that’s dependent upon what program they’re in and what they need it for, what they want it for and how we can help them. Nathan: Yep. So that one in two years, you’re talking then somewhere between like 50 and it’s a hundred percent annual churn rate on those students subscribers then. Dr. Lindy Ledohowski: Yeah. It’s about 50% right now but as I say, it’s like, we really started rolling out. Yeah. It’s early days. Nathan: Did you spend any money on ads last month? Dr. Lindy Ledohowski: No. Nathan: Okay, cool. So no paid ads. I mean, so if I asked you what your CAC is, you wouldn’t have an answer because it’s really sweat equity. Dr. Lindy Ledohowski: Yeah. So, I mean, I can give you a customer acquisition costs that takes into account my time and the time of another person, but it’s not going to be accurate ad spend direct, if I spend this dollar, so in some ways it’s an academic conversation. Nathan: Yeah. You’re figuring it all out. This is what you got to go through. Very cool. Well, hey, listen, this has been wonderful. Let’s wrap up Dr. Lindy with the famous five, number one favorite business book. Dr. Lindy Ledohowski: You know what, my favorite business book is actually a tech book and it’s, don’t make me think and it’s a really great UI UX book. So I’m cheating a bit. It’s not technically business, but I love it. Nathan: Number two, is there a CEO you’re following or studying? Dr. Lindy Ledohowski: So this is a Canadian context, a business leader I really like is Arlene Dickinson. She runs a fund and she’s a successful entrepreneur and is on Canada’s Dragons’ Den. But I think as a woman leader, she’s really inspiring. So I keep tabs on what she does through social media. Nathan: Number three, besides your own, what’s your favorite online tool? Dr. Lindy Ledohowski: I’m a big fan of Slack. I got to say, and I was pretty excited to see the recent acquisition, but yeah. So Slack. Nathan: 22 billion bucks. We’ll see what happens there. Number four, how many hours of sleep are you getting every night? Dr. Lindy Ledohowski: Probably about four. Nathan: Okay. And what’s your situation Dr. Lindsay married, single, kiddos? Dr. Lindy Ledohowski: I am married. I have no kids, but I am a crazy cat lady. I have a beautiful little two year old kitty cat that we brought back from Asia with us. Nathan: I love that. And can I ask how old you are? Dr. Lindy Ledohowski: I am 44. Nathan: Last question. Take us back 24 years. What’s something you wish you knew when you were 20? Dr. Lindy Ledohowski: Oh my goodness. I think when I was 20, I wish I knew it would all be okay. Nathan: Guys, there you have it. Dr. Lindy, EssayJack, her contribution to the world, helping right now academic folks write better academic papers so they never have to start writing looking at a blank page. Currently is doing about $20,000 in monthly recurring revenue, but it’s been a long slog launch in 2015, her and her partner put in a million dollars into the business as a loan. They raised $350,000 externally. They’ve grown the business officially launched in 2019. Now growing nicely, even during COVID looking to raise two million on an eight million pre. We’re rooting for you, Dr. Lindy, thanks for taking us to the top. Dr. Lindy Ledohowski: Thanks so much. Bye. Nathan: One more thing before you go, we have a brand new show every Thursday at 1:00pm central it’s called shark tank for SAS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live. And the founder shares backend dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it. They share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1:00 PM central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2:00 PM central, to make sure you don’t miss any of that makes you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn’t want you to miss breaking news in the SAS world, whether it’s an acquisition, a big fundraise, a big sale, a big profitability statement or something else. Nathan: I don’t want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SAS founders, you want to get in there. We’ve probably talked about your tool if you’re running a company or your firm, if you’re investing. You can in there and quickly search and see what people are saying. Sign up for [email protected]/slack. In the meantime, I’m hanging out with you here on YouTube. I’ll be in the comments for the next 30 minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We got to push them away, click the thumbs up below to counter them and know that I appreciate your guys’ support. All right, I’ll be in the comments. See ya.