A Business and Love Story

I have opened a business and after 3 years it failed, I’ve lost 80% of the capital invested. What happened? Business view: high churn and small market size. Alternative explanation: not enough love.

Let me elaborate first on the business side.

I opened a school to teach code and robotics for kids and teenagers, I found it a very inspirational enterprise and believed it was also a great business idea. Here in Brazil typically students spend only half a day in elementary, middle and high school, so there is an established culture of extra class activity. For instance, in my neighborhood alone there are a dozen English schools. I thought there would be plenty of demand for my school considering that computers and mobile phones are part of the day to day, and that most jobs in the future will involve coding, data analysis and robotics.

The economics of this business is such that with 100 students you reach break even, at 150 you turn a decent profit and with 200 or more you are very happy. The plan was to open 5 to 10 schools in 2 years having at least 150 students each. The first school very quickly got to the 100 enrollment mark, a few months later I opened the second one and reached the break even milestone even faster! This is the beauty of those subscription/SaaS-like business models, you acquire the customer once and keep collecting the revenue every month!!

Just if there was no churn… churn is when you lose customers. Yes, they come… but they also go! We did a pretty decent job attracting new students, however, some 5% abandoned class right after start, along the course other 5% left, and finally 10-20% didn’t renew at the end for the next period… Over time we improved retention adjusting a number of things on the operation, course design, student and parent engagement, and so on, but after two years we were still hovering around 100 students per school. Knowing more about the business at that point I evaluated that the effort and time to get to profitability was not worth it, so I sold one school and closed down the other one.

I also overestimated the size of the market. The reference of English schools was not a realistic one. This market is established for more than 40 years and English language is considered almost mandatory for professional and personal development in Brazil. Learning code and robotics is also very important, in some ways even more than language skills, eventually people will realize that but it won’t happen overnight, and I didn’t count on that. It would have been more appropriate to compare short term potential with niche markets like piano classes or mandarin courses, invest a lot on creating a new market and plan to capture results on the long run.

In spite of the financial failure, the whole experience has been very positive overall. I learned a ton about entrepreneurship in the best way, i.e. executing in real life. It was very rewarding to create jobs, in some cases offering people their first work experience, I’m proud of having empowered hundreds of kids to become technology creators preparing them for success in a digital future. The experience also opened the doors for my current job as Head of Sales on an amazing SaaS artificial intelligence startup. My day-to-day now is all about recurring revenue, growth, inbound marketing, outbound prospecting, customer success, co-working, cloud computing, venture capital, vesting, valuation, and the like, I find it amazing!

But this is all still the business side view, I’d like to offer another explanation, and this relates with love. Love is very personal and subjective, still one can grasp some hints on whether love is present or not. “I love my family”, “I love playing tennis”, “I love being a code school owner, we create jobs, develop the kids and even my own daughter is a student!”. You could hear me spontaneously saying those sentences many times, but for some reason there was always an urge to explain and justify the last one, maybe it was kind of a fabricated sentiment in that case.

Another powerful insight came to me recently during a prospective customer sales visit with a Head of Innovation. He introduced himself like this: “I’m very passionate about innovation, always dreamed to work in this area, I pursued and earned my current role thanks to that, innovation is what I read about in my free time”. Wow… this what I’m talking about! One can feel the legitimacy of the words.

Looking back, for sure I do have a personal connection with education, children development and technology, but it was not true love. I wanted to have an entrepreneur experience so I forced my way into it. Love alone would’n have turned my 2 schools in the next unicorn… but definitely I would have had the energy and motivation to keep trying alternatives, and even if this particular enterprise didn’t succeed I would have leveraged the learning to open another business on that front, partnered with another company, started to work for an education conglomerate, etc … just if it was true love. 

More on that, when you really love something you invest serious time learning about it, and I truly believe the more you know about something the more you succeed. Let’s pick that customer Head I mentioned earlier, let’s suppose he uses his free time to read only one hour a day about innovation, it is 365 hours per year, equivalent to a post grad! Imagine he does it for several years… you get my point. I’ve done a deep dive of 4 months (not even so deep actually…) before deciding to open the schools, far from enough now I know. Had I truly loved that industry I would have invested much more time, learned much more upfront, thus increasing a lot the chances of success.

Talking about love, right now I’m in a “serious relationship”. The subject is energy transition, we are not strangers once I’ve worked 10 years at GE (General Electric) and even took a postgraduate degree in the energy field. But now it is different, I read about it every night before sleeping, I dive a little bit more on weekends, I once spent a holiday on a 12-hour course on the topic, and this is going on for months now with the sentiment just growing.

I started all this engagement with no specific purpose in mind, simply because I like it and enjoy it, which is one of the best reasons to do anything. But things started to happen already, I realized big data and artificial intelligence is very relevant for the new reality of the energy industry, so I started prospecting the local utilities to present my startup’s solutions. But who knows where this affair is gonna lead me? Maybe I’ll move back to the energy industry some day, perhaps get involved in research, or just keep on learning. Fact is, each day I’m more engaged with photovoltaic solar, wind power, battery storage, smart grid, hydrogen, energy trading, project development, financing, regulation, and I’m LOVING IT! ;-)