For many content creators, monetizing a blog and email list can seem like a difficult task, aside from ramping up the usual affiliate marketing and ads. But for ScholarshipOwl, a blog focused on helping students land more scholarships, launching a SaaS product seemed like the next logical step.
And the bet paid off — six years after the ScholarshipOwl team launched their bootstrapped product, the company is bringing in $4 million in ARR.
In 2015, ScholarshipOwl had stacked up less than 10,000 subscribers, and rolled out a SaaS product that could help students easily find and apply for scholarships. It launched the product with a freemium model, with premium users paying $15 a month for their subscription.
ScholarshipOwl launched the product to its email base, and then doubled down on its existing content strategy to grow the business. ScholarshipOwl advertised blog posts on other platforms and by 2016 had hit $2 million in revenue.
“We scaled quite a bit of content marketing,” David Tabachnikov, CEO of ScholarshipOwl, says in an interview with Latka. “Basically we started pushing out a lot of content related to our space and building an affiliate network.”
Source: GetLatka
ScholarshipOwl’s next step was to expand the partners it worked with — promoting some partners to its now 6 million email subscribers and sharing revenue with partners who promote ScholarshipOwl on their own platforms. The company now works with 40 partners, and continues to grow its partnership program while leveraging content marketing and paid ads.
At the moment, it costs ScholarshipOwl $60 to acquire a new user, who will stay on for seven to eight months on average. Because students join ScholarshipOwl specifically when they’re hunting for scholarships, they don’t tend to pay for a premium membership for more than a year, putting ScholarshipOwl’s monthly churn rate at 12%. With a $15 subscription cost, ScholarshipOwl is only making a few months of profit on each customer before they churn — a problem it’s looking to solve as it grows.
“We started scaling before we fully nailed our unit economics,” Tabchnikov admits. “We dedicated 2020 to fixing that, and we’re now in a much better place than we were two years ago, but we’re still not where we want to be. A large part of our roadmap this year is dedicated to further fixing it.”
There’s still work to be done — but with 15,000 paying customers and a user base of 1.5 million, ScholarshipOwl is building from a fairly solid base.
What is ScholarshipOwl’s annual revenue?
In 2020, ScholarshipOwl generated $4 million in ARR.
What is ScholarshipOwl’s monthly revenue?
In 2020, ScholarshipOwl generated $333,333 in MRR.
Who is the CEO of ScholarshipOwl?
David Tabachnikov, age 36, is the CEO of ScholarshipOwl.
Transcript Excerpts
The pros and cons of revenue-based funding
“In January this year, we took revenue-based funding in order to accelerate our growth. I love that [revenue-based funding] is non-dilutive — so basically, we don’t give out a part of the company. One downside is that VC-based funding sometimes comes with strategic partners or with connections that revenue-based funding does not. And when you take revenue-based financing, you basically start from the beginning to think about how you’re going to repay it. So you’re locked into using most of the revenue-based financing in order to generate growth on your existing model, instead of experimenting with more risky models that might cause extra growth.”
Monetization outside of subscriptions
“We have additional revenue other than the SaaS product. We have different partnerships with other scholarships and other companies in the educational space, promoting them on our platform. We work with around 40 different partners at the moment.”
The downsides of building a seasonal product
“Our monthly churn at the moment is about 12%. So yeah, it’s pretty high. A large part of that is because the business is extremely seasonal. Students don’t have time in the year to apply to scholarships, and it’s labor-intensive work for them, even with the tools that we provide them to make it easier. So the majority of our churn comes from that.”
Building based on traction
“In 2015, we didn’t have any revenue — we were bootstrapped, and we were trying to figure out what the model would be. Our product didn’t start as a SaaS product — it actually started as a blog and content related to this space. That got a bit of traction, and we built the product on top of that.”
Full Transcript Nathan Latka: Hello everyone, my guest today is David Tabachnikov. He is building a great company that changes the way Americans pay for college by leveraging data, to make scholarships more accessible and transparent. He’s doing this at scholarshipowl.com. David are you ready to take us to the top? David Tabachnikov: Yeah. So ScholarshipOwl is leveraging technology to increase the chances of earning private and [inaudible 00:00:22] scholarship for American students. Nathan Latka: And who’s paying for this, the students or somebody else? David Tabachnikov: To use the premium features of the platform, the students are paying a subscription fee, which is $15 a month, and for that, basically will save a huge amount of time for them preventing them from applying to scams or finding the scholarship that match them the best way possible. Nathan Latka: And how many customers do you have today? David Tabachnikov: We have today, 15,000 paying customers and about 1.5 million users in general. Nathan Latka: So can we take $15 times 15,000, you’re doing about $220,000 a month in revenue? David Tabachnikov: With some partnerships and other things, with some B2B partnerships as well, we do a bit more than that. Nathan Latka: Okay, got it. And let me ask you, why do students keep paying you after you helped them get the scholarship dollars? Wouldn’t you have a massive churn problem? David Tabachnikov: So the thing is that the common misconceptions that students need scholarships only when they just applied to college. But the reality is that students actually need scholarships one that first year of college, and the second year, then in high school. Because many of the financial aid that they get is only for the first year. And they can use private scholarships to pay for board, for books and other things then in college as well. And there’s no limit to how many scholarships you can earn, throughout your whole education. So it’s still the majority of all youth, they are high school seniors. But basically, many of our users are between the ages of 16 and 26. Nathan Latka: And when did you launch the company David? What year? David Tabachnikov: So the company was launched in 2015. And- Nathan Latka: And what did you grow revenue to back in 2015, your first year? David Tabachnikov: 2015, it wasn’t, we didn’t have any revenue, we’ve been bootstrapped. But we were trying to figure out what would be the model. 2016, we already scaled to around almost to two million in revenue. Nathan Latka: And what did you finish 2020 with? David Tabachnikov: 2020, we finished with four million. Nathan Latka: Four million, okay. That’s great. And so, what, have you bootstrapped the company to date, you’re still bootstrapped? David Tabachnikov: So until now, we never took any external funding. Only in January this year, we took revenue-based funding in order to accelerate our growth. Nathan Latka: And how much did you raise? David Tabachnikov: We took, we got approved to 1.3 million out of which we at this point we took only 300,000. Nathan Latka: Okay. And what do you like or dislike about revenue-based financing? David Tabachnikov: I love that it’s a non-dilutive. So basically, we don’t give out a part of the company, in general. The thing is that Visa-based funding gives, comes sometimes with the strategic partners or with connections that revenue-based funding does not. So that’s one downside. And when you take revenue-based financing, you basically start from the beginning to think how you’re going to repay that. So basically you’re locked into using most of the revenue-based financing in order to generate growth on your existing model, instead of experimenting with more risky models, that might cause extra growth. Nathan Latka: Talk to me about how you got your first 1000 customers. You have 15,000 say that’s a lot of customers. How are you getting them? David Tabachnikov: The majority of our customers are online onboarding. So you see affiliate network that we started building with and we scaled quite a bit of content marketing. So basically we started pushing out a lot of content related to our space. Nathan Latka: But how did you get your first, how did you get the first 1000 customers sale? David Tabachnikov: So if you’re looking for some story of us going door to door, we didn’t do that. So it’s mostly online, the standard ways. Nathan Latka: Well, David, I’m looking for your story. So when you say standard, tell me what you mean. Did you just start with ads on day one? David Tabachnikov: So we started with a blog related to the space and started advertising that blog and turned into a- Nathan Latka: Where did you advertise the blog? David Tabachnikov: Mostly on other platforms and smaller ones on connection. More like personal connections. Nathan Latka: I don’t understand what that means. David Tabachnikov: Okay. So the story is that our product didn’t start as a SaaS product. It started actually as a blog and content related to this culture space itself. So, that kind of got a bit of traction. And on top of that the products started being built. So that’s why the story is a little bit confusing in that sense, but it’s not like we built a SaaS product and then started looking for customers for that. Nathan Latka: Yeah. David, it’s not confusing. This is a great way to build a SaaS company. It just is what it is. It started off as content and a blog. You built an email list and then you launched a paid membership product, it sounds like. How large did you grow your email list before you launched the SaaS product? David Tabachnikov: A few thousands. Not that big. Nathan Latka: Okay. Under 10,000? David Tabachnikov: Yeah. Nathan Latka: Okay. And what’s the email list size today? David Tabachnikov: 6 million. Nathan Latka: Sorry. David Tabachnikov: 6 million. Nathan Latka: 6 million people. Amazing. And what kinds of things are you doing with that list to drive additional growth? David Tabachnikov: So, when I mentioned before that we have additional revenue other than the SaaS side is different partnerships of other scholarships, promoting them to our platform, other companies in the educational space. We work with around 40 different partners at the moment. Nathan Latka: And what is the pitch sound like to them? Can you name a partner and explain to me how you convince them to market your product? David Tabachnikov: There’s many different ways. It’s a bit hard to highlight. Nathan Latka: Pick one. It’s easy if you pick a story, a real story. David Tabachnikov: So, I mean, a simple example is Nielsen, for example have, does market research to scholarships. And we work with them to basically work with the students to reach out to students, to Nielsen. Nathan Latka: And why does Nielsen help promote your product? Do you pay them a commission? David Tabachnikov: We put basically a revenue share. Nathan Latka: Revenue share. And is that typical revenue share? You just split it 50 50? David Tabachnikov: It’s not specific with Nielsen. We do it with other organizations. For example, once the time was outside, like we have the two-sided, some companies promote us and some companies we promote, as well. So Nielsen is an example that we promote. But Festival for example, is somebody who promotes us. They have featured scholarships and things like that, that we post our scholarships to. Nathan Latka: Let’s go to your team, how many people on the team? David Tabachnikov: Today, were almost 50 people. Nathan Latka: Five zero? And how many engineers? David Tabachnikov: Around 20. Nathan Latka: 20 engineers. And so what are they building? What is the most technical thing about this product? David Tabachnikov: I mean, first we have two products with, so probably talked only about the students. We also have a scholarship with app, which is the sell them for brands and organizations offer scholarships. And our product actually is very pack intensive, I myself and before scholarship, Paul was a senior engineer at Google. So I come from engineering and the hopelessness of matching and finding the scholarships, leveraging they will leverage also machine learning and AI to find the ones that you have, the highest chance of winning and does many different ways to apply to different scholarships, to leverage all this huge amount of data that we already have in order to, basically it’s of the students that are blind to hundreds of different scholarships. We wanted to apply to three scholarships a week, but he, that he has the highest chance of actually earning. Nathan Latka: Got it. So 20 engineers. David Tabachnikov: Nathan Latka: How many sales employees do you have if any? David Tabachnikov: We have marketing, in sales we don’t have any, we don’t do enterprise sales or anything like that today. Nathan Latka: Okay. So no sales or ups. How many folks on the marketing team? David Tabachnikov: Eight people. Nathan Latka: Eight? David Tabachnikov: Yeah. Nathan Latka: Eight people. Okay. And does that include like the content writers, the people managing the email lists, these sorts of things? David Tabachnikov: Email list, yes. Content items, we work mostly with external content items, like a freelance list that we work with for a long while, but social media, email content blend one as some planning, all those kinds of like product side of the marketing as well. Nathan Latka: And talk to me about churn. I imagine with consumers like these, churn can sometimes maybe get high. What is your churn annually? David Tabachnikov: So our monthly churn at the moment is about 12%. So yeah, it’s pretty high. A large part of that, is because of the business is extremely seasonal as well. Like not the students do not have all the time in the year to apply to scholarships and all that. And it’s based labor intensive work for them, even with the tools that we provide them to make it easier. So the majority of our churn is, comes from that. Nathan Latka: And David, you mentioned your land you’re spending on PPC ads. What does it cost you to get a new $15 a month customer? David Tabachnikov: It costs me today $60. Nathan Latka: Got it. So that’s a what? A four or four or five month payback period. David Tabachnikov: Yeah. Nathan Latka: How do you make that work? Because your customers are only staying for six or seven months. There’s only two or three months of margin there for you to make money. David Tabachnikov: They stay seven to eight months in most cases and- Nathan Latka: Okay. Same, same question though. There’s only three or four months there for you to make margin on. David Tabachnikov: We’re doing it at scale. Nathan Latka: Got it. Is there any, I mean, are you okay with those margins and you’re just going to keep driving new volume or are you- David Tabachnikov: The thing is that one of the biggest things we’ve done in the history of the company is basically we started scaling before we fully nailed our unit economics. And in a way we kind of woke up too late for that dedicated 2020 into fixing that. And we’re now in a much better place than we were two years ago, but still not where we want to be. And the large part of our [inaudible 00:12:09] is actually dedicated to politics. Nathan Latka: Right? Well, David, on that note, let’s wrap up with a famous five. Number one. What’s your favorite business book? David Tabachnikov: What’s my favorite business book. Zero To Launch, I guess. Nathan Latka: What to launch? David Tabachnikov: Zero to Launch. Nathan Latka: Zero to Launch. Number two. Is there a CEO you’re following or studying? David Tabachnikov: Nathan Latka: At Google? Number three. What’s your favorite online tool for building a business? David Tabachnikov: Let’s say Mixpanel. If that’s, if that could be considered. Nathan Latka: Of course, number three. How many are for, how many hours of sleep do you get every night? David Tabachnikov: How many? Nathan Latka: Hours of sleep? David Tabachnikov: Hours of sleep, let’s say an average five. Nathan Latka: Okay. And what’s your situation? Married? Single? Kids? David Tabachnikov: Living with a girlfriend? No kids. Nathan Latka: Okay. And how old are you? David Tabachnikov: 36. Nathan Latka: 36, last question, David. What’s something you wish you knew when you were 20? David Tabachnikov: I wish I knew how to monetize my side projects. When I was 20, I was so involved in engineering and I never knew how to sell what I was building. Nathan Latka: Guys, scholarship al.com, doing 4 million in revenue this year from 15,000 students paying 15 bucks a month to identify scholarship opportunities at scale. This is very much a tech play. They’d like 20 people on the team of 50. They’ve done this all bootstrapped, which is great. Scaling nicely. Obviously there’s churn here cause it’s students, but they’re okay with that because the unit economics work nicely as they look to continue to scale using content PPC and their 6 million person email list. David, thanks for taking us to the top. David Tabachnikov: Thank you very much. Nathan Latka: One more thing before you go, we have a brand new show every Thursday at 1:00 PM. central it’s called shark tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyer 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. Nathan Latka: 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, make sure you click 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 SaaS world, whether it’s an acquisition, a big fundraise, a big sale, a big profitability statement or something else. I don’t want you to miss it. Nathan Latka: Additionally, if you want to take this conversation deeper and further, we have by far the largest private slack community for B2B SaaS 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 go in there and quickly search and see what people are saying. Nathan Latka: Sign up for that at nathanlacquer.com forward slash 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. And 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, put the thumbs up below to counter them and know that I appreciate your [inaudible 00:15:4] support. All right, I’ll be in the comments. See ya.
