Scale and Monetization | Justin Wohlstadter

Fundraising is hard no matter who you are. And I can get it. I actually didn't set up fundraising stuff here, but I'm happy to talk about fundraising because I think it's interesting and a pain in the ass. So we raised— when I left Enterpreoid, we raised about $500,000 from friends and family. That was October of 2012. We then raised it on a valuation that was— $1 million. Very attractive to them. I wanted to be fair to them, even though we could have raised any valuation we wanted. Then 2 summers ago, we raised $6 million— sorry, $6 million, Jesus. I'm thinking in today's terms. We raised $2 million, led by First Round Capital. And that was basically to build this. Build the app. Yeah, exactly. And then we had— last year we raised some additional capital led by Bloomberg Beta. They wanted a larger stake in us, so we took some more capital from them. And we just actually raised— we just closed something last week that's much larger. And if I wasn't being recorded, I would go into details about all of this stuff. But suffice to say, we have cash for a long time now. And I'm happy to talk about what that means. But yeah, we'll get into that in a bit. So you can imagine our team's frustrated. We've built multiple designs, 2 iterations, 2 different products. Nothing's happening. And we're sitting here, and we really are trying to build something game-changing, but it just doesn't feel right. And we couldn't get the implementation right. One little piece of what we had built is— so we had this whole thing around Pathways, exploring pathways people had taken, right? So the idea was you'd land on a page and you could see like a page about Bitcoin and you could see the path that Larry Summers took or Ben Bernanke took to explore that topic. We realized one little feature of this thing that we had built was an ability for you to create a pathway, right? So we built all this crazy NLP web crawling technology to like crawl the web at Google scale To detect inherent pathways through the web that we could then show people. Crazy stuff. Again, I regret building it. But one little simple feature of what we had built was an ability for someone to connect a pathway themselves and to basically say, I'm an expert in this topic. I'm going to connect 10 pages. I'm going to add notes. And I'm going to guide someone through. And I can share it as an easy link. That was a little feature that we built accidentally in the product. And this is kind of what the first version looked like. So someone could take a bunch of pages, they could stitch them together, add notes, and as you click through, you would actually move through the pages. It was pretty cool. We like, we proxied the pages. I can get into the tech side of it, but it was neat. And it actually started to take off. So we never really did press or marketing or any of that kind of stuff. We had a few people who created, we called them routes, created routes. And within a few days, these routes were getting a quarter million page views because they would be shared out on a controversial topic, like on a debate that was going on. One was a Brazilian pathway or route on Bolsa Família, which is a Brazilian welfare program, I believe. And it was shared out on Facebook, and it just went viral. And we started to get users. And it was very exciting. And it was really healthy for the team to actually see, wow, there's something here. So we kept building and we kept building. And long story short, and again, I can get into this digression if people are interested, but we realized as we got more and more down this pathway, pun intended, we were moving farther away from our vision. Our vision of creating access to knowledge and education and making that explorable. Instead, we had basically built a content marketing tool. Right? Brands were using it. GE and Sprint were using it to put together campaigns on their products they were launching or to position themselves as thought leaders. And while that was great, and it's a great business, and there are other companies that are doing it too, and God bless them for doing it, it's not something that I want to spend the next decade of my life doing. And so I decided we're scrapping it. We're starting over. This is not where we want to go. We're gonna try again. And this, as you can imagine, was scary for a lot of people on our team. We had just gotten something that was getting somewhere. How could we just scrap it and start over? Thankfully, the team trusted me. Most of the team trusted me. Those who are still around. And we built a bunch of experiments. And came out with Wonder. And in the beginning, we released Wonder, it was super simple. It took us like a day to build. It was a simple box. It looked nothing like this. It was free. So for the first 3 months, Wonder was free. We had thousands of students and teachers and librarians using it. We went aggressively after schools. Again, like, in line with the vision, I wanted to— I wanted this to be for education. So you were able to get schools to use it? We got featured in Library Journal. I presented at like South by Southwest EDU, and we just had amazing. We had you know we would see like six students sign up at the same time, all asking the same questions because clearly their teacher was using it as a teaching tool, right? And basically what we were doing is we were providing you know we were bringing a librarian to every student because a lot of schools don't have can't afford. You know, a library, let alone a librarian, right? And so offering that was really neat. And it's something that I still am very passionate about, and we are still dedicating resources to thinking about. But basically, after 3 months of doing this, we realized that it was too successful in that we had, you know, the growth was crazy. We were paying our researchers. We had a lot of volunteer researchers who were librarians, but we were paying them $4 a request, right? And to give you a sense, you know, the first week we launched Wonder, again, we told no one about it. I think we had about 100 requests in like maybe the first week or a few weeks. We had 1,000 requests in the second month. We had 1,000 requests in one day on the third month, right? It just kept growing like that. And you can imagine when you're paying $4 a request, Like that starts to get a little nerve-wracking, right? And we have an amazing advisor, a guy named George Segale, who was the founder and CEO of Tutor.com. And he basically sat me down and he said, "You can't have your cake and eat it too. You have to choose one of two paths. Either you build a better Quora, right? And Quora at this point, you know, has raised I don't know $100 million of venture capital." They have brilliant minds, they've been doing this for many years, right, and they have yet to make a single dollar in revenue, which I hope for their sake will change soon, but that is their situation. So they've solved scale by being free and crowdsourced, but they haven't solved monetization. And on the other side, you have like virtual assistant services, right, like Fancy Hands or Zirtual at the time, that have solved monetization but have not solved scale. And he was like, look, you have to choose one of two paths. Either you keep it free and you try and build a better Quora, even though all those brilliant people have not been able to. And by the way, there's a ton of companies in the past like ChaCha and Mahalo who have never been able to make this successful. Or you charge right now and you build a pro— you know, like a revenue-generating real business from day one. Crazy. Long— crazy, right? And long story short, I chose that second path. It just made so much sense. Very glad I did. You know, if you think about it, comparing us to like the virtual assistant services, the nice thing is that unlike a Fancy Hands where people are asking things like, can you schedule my dog daycare appointment tomorrow afternoon in Palo Alto, the questions people ask Wonder are reusable, right? Not entirely maybe, but like the question that you asked earlier has insights that will be derived from it that can be reused for another question. Right? So the model is inherently more scalable than that stuff. So why not charge from the beginning, monetize, maybe even break even— crazy— and grow a profitable business, and then solve scale? And that's what we decided to do. I was scared shitless. Sorry. I thought that the moment we started charging, that people would just abandon ship. And by the way, our growth did go from like this to down here. And, but then we recovered and people started paying for it. It was crazy. We were charging $8.99 a question. I didn't think anyone in the world would pay $8.99 for a question. Turns out they will. Then we realized the moment we started to charge that the questions got harder, right? Instead of having students just ask questions like, how far is Saturn from the moon? Or, you know, something like that. We would have people ask a question like, how large is the pharmaceutical market and who are the major players? Right? And that's not a question you can have like a librarian answer for free or someone for $4, right? So we had to increase prices. Okay, well, if we have to increase prices and pay our researchers more and hire more skilled researchers, we have to raise the amount we charge. And again, I was scared to death that we increase the price and everyone goes away. Instead, we increased the price to $19.99 and still we keep growing. And the growth has actually been quite crazy. And if you just think about the numbers here for a second, if we're charging $19 a question and people are asking 2+ questions a week, which our active users are, 40,000 customers, 40,000, 50,000 customers makes this a $100 million revenue business, right? Billion-dollar valuation with a 10x multiple. So that's kind of— So you're saying that the growth