Philip Cutler, Founder of PAPER ($1B+ Valuation) | How Customer Discovery Leads to Product Market Fit

Philip 0:00 But when you see their eyes light up and you say, okay, we’ve got something here, they’ve now seen how your solution is going to solve a problem that they have, if you’re there trying to convince them of how it’s going to do that and you’re really trying to push it, it’s not there, but when they’re like, yes, I get it, 100% this solves the problem, I need this absolutely. It wasn’t really until we dot that moment of the a-ha moment that the customer has in that pitch, they’re like, oh, yeah, this does solve my problem. Sign me up. Intro Pablo 0:37 Welcome to the Product Market Fit Show, brought to you by Mistral, a seed-stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early-stage founders like you find product market fit. Welcome to the Product Market Fit Show. Today we have Phil, the founder and CEO of Paper, which is a startup that provides free chat-based tutoring to every student by partnering with school districts. The company is based in Montreal. They’ve raised over $400 million and have over 2,500 employees. Phil, it’s a pleasure having you on the show. Philip 1:15 I really appreciate it. Thank you for having me. Pablo 1:18 The topic of today’s episode is how did you proper customer discovery. We’ve chatted about this topic previously in the podcast. I think it’s something that because of the lean startup movement everybody knows about at a high level, but honestly, and I speak to so many founders just through my day to day, very few of them do it properly and actually put in the amount of time into it partially because every founder wants to build and shit. That’s the natural course of things. The learning part and the slow moving and just learning from customers part often gets a little bit sidelined. We’ll be digging into how you did it because you have a very unique story that resulted in a lot of the success that you’ve had so far. Maybe to start and just to set some context, we can go back to the early days. You shared with me in 2015, and so this is seven years ago now, you had gone through Founder Fuel, which is an accelerator in Montreal. Maybe take us back to those days. What did the idea look like then and what were you trying to accomplish through that phase? Philip 2:26 Pablo, I think the thing that’s interesting in all of this is today the company is growing enormously and a lot’s changed. One thing that really hasn’t from pre-Founder Fuel to today is really the mission and this notion of being able to support every student and help them reach their potential. That was really the premise for what we pitched and what we spoke to Founder Fuel about before we had entered the program, we had been in touch with the folks at Real Ventures for probably about a year before then. I think we were trying to figure out exactly what it was that the product was going to look and feel like. We knew, again, this mission would help every student reach their potential, but we didn’t know what that was going to look like. We had come up with this concept of leveraging chat communication as the predominant channel for the tutoring to take place. There was photo sharing and file – there was other aspects to it but the main communication is happening through chat. At the time, no one was really approaching any sort of academics support from that perspective. Keep in mind, this is 2015. Today, very, very different, it seems very obvious, but we were really the only ones doing it. When we went into Founder Fuel, it was very much under this sort of hypothesis that chat communication could be a viable way for students to learn. No one had done it before so there wasn’t really a body of work around whether this would work and what the feedback would be. We had entered the program really under the assumption that we would in three months prove yes or no whether students like it and whether they can learn from it. That was really what we focused on the whole program. Collecting Preliminary Feedback Pablo 4:18 Did you know at the time and were you trying to sell to schools or was there an aspect of maybe just going direct to students, getting them to pay or their parents to pay? Philip 4:29 Back then, we weren’t even thinking about how we were going to commercialize everything. Ultimately, it was more about proving will students learn through chat. At the time, we were more of a consumer offering, but honestly, it wasn’t really – there wasn’t an focus on revenue. There was more let’s just get some students using this and collect feedback from them. It was super important to us in the early days that we would get that feedback, raw feedback from the students, things that they liked, they didn’t like, as unfiltered as we could possibly have it so we could learn what’s working and what’s not and then iterate from there. I think longer term, our vision from the beginning was always to go through the school district because we thought that was the most equitable way of doing it, but obviously, you sort of need to start somewhere and you can’t just build the product expecting it to be perfect from the beginning. You need to sort of collect that costumer feedback and that’s what we had done. So much of the focus was let’s get this in front of any student possible, hear what they have to say, do they like it, do they not like it, and then iterate accordingly. Pablo 5:34 That’s kind of Phase 1 of customer discovery because there’s an aspect of customer discovery we’ll dive into which is more around the school district. There’s another aspect that’s just about the students themselves because this is kind of a B2B2C play. Do you remember some of the key insights that you learned? I’m sure some of it was simple, UI tweaks or workflow tweaks and things like that, but do you remember any of the big learnings that came out of those first few months of actually getting real students to use it and then even just having tutors on the other side and some of the problems that came out of that? Philip 6:06 Yeah, I mean, it was a very innovative way of problem solving. We wanted to be able to collect the feedback, as you mentioned, from both the students and from the tutor side because it was unique for both of them, right? This wasn’t – in the past, the way the problem had been solved was the marketplaces of online tutors with video conferencing. It was very, very, in my opinion, kind of cookie cutter. Everyone is trying to do the same thing. We were like, let’s take what they were doing, let’s use some of that as the foundation because we can build off of that, but let’s really have an open mind. One of the things that we thought was fascinating early on, this is really interesting, students were coming on – so the way it worked was students had unlimited access. That’s always been our thing. You can come for as short or as long as you need to be getting support. There was no real restriction there. It could be a five-minute interaction. It could be a three-hour interaction. It doesn’t matter, right? One of the things we thought was fascinating early on was students were coming in and they were doing 60-minute sessions, but that was because they had been conditioned that when you get a tutor, when you connect with a tutor, when you hire a tutor, it’s for an hour. We started to explain to them it’s not a 60-minute thing. In fact, the odds that you need 60 minutes of help is very, very low, right? You might need 22 minutes. You might need an hour and 15 minutes, but you probably don’t need exactly 60. What was happening was students were saying to us, “Hey, can we continue?” The hour would come up and they’d say, “Hey, can I stay on?” The tutor would say, “Yeah, absolutely. This is unlimited. You stay for two hours if you need. You stay for whatever you need.” Then over time, we actually got to the point where the students were coming back frequently. They realized this is a much shorter interaction – they were using it in a much shorter manner. They were coming for 10, 15 minutes. They were answering a question. They were coming back a few hours later when they had a different question. We realize it was really important with the speed to get the support being available on demand really quickly. The other piece that’s tied to that that we learned from them, so we did a bit of testing around how quickly the response time needed to be for the students. This is interesting. On our platform, when you click to get connected with the tutor, you’re connected right away. Most other experiences like this, you call any of the telecom providers or the airlines, you stay on hold for like 45 minutes or an hour or whatever it is you’re there. We knew that that wouldn’t fly with the students but we weren’t sure what the pressure points were. One of the things that we thought was really interesting was we wanted to test the wait times and then the overall satisfaction from students. We realized that under about 30 seconds, the students couldn’t tell the difference. It was very difficult to tell the difference between 17 seconds and 19 seconds, right? It didn’t have a huge impact overall when it came to the student’s satisfaction on the platform. There’s a huge difference when you started going over a minute, a minute, two minutes, three minutes felt like eternity. We have students who said, “I waited all day for my tutor,” and it was like two and a half minutes, right? If you think about the generation today, the expectation that they have is that you click a button that says get connected in real time, you’re going to get connected in real time right away. We worked really hard with that information to actually make sure that our connection was always under 30 seconds. You’re getting a response from a tutor in under 30 seconds. It was so important for us early on. Pablo 9:33 How did you do that? Did you fake it? Because you probably didn’t have the liquidity. Did you just pay a tutor, hey, you’re online from this time to this time. We’ll flip the bill sort of thing. Philip 9:41 We did. We didn’t have the demand, obviously, to require tutors to be available 24/7 for every subject area, every grade level, it gets really complicated. It’s difficult to staff. That’s a whole other conversation. We didn’t have that demand so we were literally paying tutors to be available literally for that one question that comes in, they would be able to respond really quickly. Part of when we raised our seed round, the hypothesis in the business model was we were at a certain number of students, that number would flip from being inefficient to being more efficient, and then all of a sudden, the union economics makes sense, which is true. At a certain point, we actually had negative margin. Every customer is actually costing us more money from a cogs perspective. Then that scale flips completely and now we’re at a point where we’re at today, we’re way beyond that, but back then we knew that we were going to have to burn cash just to prove that this could work and to be able to sell the support to anybody, you had to invest. It’s like RND. The fortunate thing for us is we could model it out pretty accurately. When we went and raised our seed round, we said, listen, we’re going to need X amount of capital that we have to basically invest to provide this service even though the demand is not there and you have to trust that we’re going to build the sales capacity to get the demand to where it needs to be. Pablo 11:08 Got it. You go through this accelerator. You learn a bunch of different things around tutors and around students. I think the end conclusion is there’s something here. This medium makes sense to accomplish the goal that you’re trying to accomplish. What happens at that point? Do you then start worrying about monetization, like revenue or who you’re going to sell it to or what’s kind of your next step after that? Optimizing Academic Support Philip 11:30 We graduated the program with a lot of momentum. I think everyone more or less agreed that this was clearly a channel that could work. Whether or not we would be able to bring it to market and scale it was a different conversation but we knew that there was something there. We closed our financing shortly after graduating. We graduated in December of 2015. That was the demo day. Then we closed our seed round less than six months later. We started fundraising. We raised $1.6 I believe. It was a small seed round. Today, this was 2016 when the round closed. Today, that would be a pre-seed round. I don’t even know what they consider seed rounds anymore Back then, that was like a sizeable round. We felt pretty good about it. It was led by a fund in Pittsburgh and San Francisco called Birchmere Ventures and Ned Renzi was the partner there. I think what he was really betting on was that there was opportunity to truly disrupt the academic support space. He earnest this that myself and Roberto, my cofounder, had around solving this problem. We came up with a novel way of doing it. The focus wasn’t really so much on monetization and optimizing that immediately. It was more about delighting users and figuring out how will you delight users and really optimizing for that more than anything else, what will the experience look and feel like, how do you manage the service side with all of our tutors to schedule them. We had to build the scheduling algorithm. We still to this day, we built this back then, we iterated on it many times, but we built an automated scheduler. Our scheduling is completely done through software, which is really complicated and took us a long time. A lot of the foundational aspects of the business were built from basically 2016 to 2018 before we actually took any of this to market. How to Monetize Pablo 13:27 You go through this and you’re building things out. When do you decide, all right, it’s time to figure out – and I think you said early on that you were always going to sell through schools. At what point and how did you decide that, okay, it’s time to do that, it’s time to move on the revenue side of this business? Philip 13:46 Yeah. Um, you start to throw out money and uh, you need to prove Yeah, you start to run out of money and you need to prove certain metrics for investors. When we started having conversations around our Series A financing, it became evident to us that we needed to have some pretty material revenue we felt to at least be able to prove that there was a market for what we were building. We had some independent schools that had signed on, some private schools that had signed on early on for beta test and that was an easy way to get feedback from districts, or from the schools rather. Before we were able to actually sell it to a district, we needed to understand what does this look – how do we roster, all of these complicated things that we needed to figure out. We were able to do it with some independent schools because they were much easier to work with. It’s one single decision-maker, much smaller institutional. On cases, these are schools of 200 or 300 students. It was much easier to collect that feedback and work with them, but they didn’t represent an enormous amount of revenue for us. We had to do this stepping stone act, working with some of those schools prove out how we can integrate and onboard the students and then work our way up to bigger and bigger schools to eventually get to the point where we can sell to a public entity, like a school district which has a whole procurement process and our deals go to the school board for approval so it’s not just some person in an office says this sounds great, let’s buy it. It has to go to the board for approval and there’s a whole process to that. We really had to work our way to that point. Customer Discovery Pablo 15:26 What did that look like? What did customer discovery start to look like when it came to these districts? Philip 15:32 A lot of spray and pray in the early days. We were running kind of broad drip campaigns that were going out to basically schools everywhere. I’m just trying to see where we could get any interest at all. One of the things that’s unique for us versus a lot of other businesses was that it was very easy to get the contact information for the schools and the district because it’s all public. Not only that, you can actually do a lot of digging because it’s a public entity, you can see what their conversations are. Once we started to target a few of the more innovative districts that we felt were the ones that we had our best chance in partnering with initially, we would go deep in terms of what was happening in their communities. What are the resources that the students have? How do we support those? What are some of the initiatives that the students are taking or the community is really focused on? Then you can really integrate that into your outreach and say, look, we understand what you’re going through. We actually think Paper can be a really strong resources for X, Y, and Z reason because you know the community. Because so much of it is all public, it’s very different than selling to like an SMB where you really don’t know what’s happening behind the scenes. Here it’s all very much in front of everybody and it’s reported in the local newspapers. You could really get deep into what their problems were and then present your solution or how your solution fits in for that problem. We were lucky from that perspective, I think, because it made part of our lives a little bit easier. The challenge is there are 13,500 school districts. Who are the ones that are actually going to listen to us? You can’t really spray and pray to all of those so you have to be pretty strategic about your outreach. Pablo 17:13 Was that working in the early days, this targeted outreach, was that leading to conversions or was there a missing piece? Philip 17:21 You get a lot of conversations, but the conversations didn’t necessarily materialize into deals or into contracts. That part was frustrating. Again, I was a teacher before I started the business so this was very new to me. I had to kind of understand the dynamic of what needed to happen in order for a deal to get done. I just didn’t know. I didn’t have that knowledge. In the early days, we were getting a lot of conversations, there was a lot of interest, but people sort of wait and see and schools operate very much in a herd mentality where if a few districts start doing something and it’s been proven, then everybody else will follow suit, but no one wants to be the first one to take that leap of faith. You really have to start doing your research to find out, okay, who are the districts that are comfortable taking that leap of faith, being the first movers. That’s where we identified Laguna Beach Unified school district in California. Laguna Beach, California is by no means representative of your average community in the United States. They are some of the highest paid teachers in the country, very affluent community. The average home is like $3 million plus, beautiful neighborhood. Everyone can imagine, if you know Laguna Beach, you can imagine what it’s like. It’s not really representative of what the rest of the country looked like, but they had a lot of appetite to try things and to do things for the first time and be the first movers. It took us a while to actually build that relationship and to build the trust, but we knew that they were comfortable piloting things that no one else had because they had a decent amount of money to run these experimental initiatives with. In our case, we presented to them as, hey, you have the chance to really be the first district to go district wide and test this with all your students. That really appealed to them. They like that status. Landing the First Customer Pablo 19:20 Then was that your first sale? Did you ultimately get to convert them into customer in those early days? Philip 19:28 We did. It took a long time. I would say the process was really six months of us working with them, a lot of going back and forth around how we would roll this out, how we would introduce it to the various students. In their case, they only had three school sites so it wasn’t a huge lift from that perspective, but it took a while. We started speaking with them pretty much towards the end of 2017. We only went live, really live because we had gone through a few false starts, as you can imagine. We went live the beginning of the school year in 2018. Pablo 20:11 Okay, so it took a while. You mentioned to me earlier that you actually moved there. Was that before you went live or when did you decide to make that decision? Philip 20:20 Around then, so the story was Laguna Beach was our first customer. They were the first ones who said, hey, we’ll take the leap of faith here. It was approved at board, I can’t remember when, but probably March or April of 2018. The board meetings are public and there happened to be a journalist from the LA Times that was there that was covering Orange County and wrote a story about it and said, hey, this sounds really interesting. We’re going to do a story on this partnership. The story gets out a couple days later. We get a phone call from the folks at Irvine Unified school district, which is the neighboring community to Laguna Beach but far more representative of the country, a better more balanced community in terms of wealth and just demographics. They call us up and they say, hey, wait a second, we’re the one who actually have this problem that you guys are solving. You need to work with us. We can make that happen pretty quickly. Let’s sit down and chat. Their leadership at Irvine was just phenomenal. I mean, these people were like very much wanted to do the best thing for their students and they said this sounds like an idea that could really benefit our kids. We want to make sure that we’re at least exploring it. We worked with them and I credit a lot of our success to that partnership because they really held our hand in terms of how you walk through the board approval process, how you walk through implementation, onboarding. At Laguna, they’re a district with 2,500, maybe 2,800 students. Irvine was over 30,000. It’s more than ten times bigger. We knew that obviously that that was a huge indication for us that some of these bigger districts were interested in our solution but they worked really closely with us to walk us through how you do all this. What does a board approval mean? How do you even navigate that? What documents do you need? What is the data privacy agreement that school districts in California all have? There are a lot of things that they really supported us through. We ended up going live with both those districts. They’re our first two districts. They came live back to school the beginning of the school year 2018-2019, so August 2018. We had built this hypothesis that we wanted to be close to our customers. We want to be near them to understand. We wanted to be on site if we could. We wanted to be in the conversation when things were happening. Myself and three others actually decided to move out there in October, so about a month a half into the school year. We lived in a small house, a really small house in Santa Monica, actually. Our whole thing was there were 20 million folks that live basically within a two-hour drive north or south of Santa Monica. You go up to Santa Barbara, you go down to San Diego, you’ve got about 20 million people. As we said, this is a pretty big nucleus of potential customers here. We’ve got two. Let’s see if we can land some more for end market. What was supposed to be a month ended up turning into several months and then permanent office. It was funny because it took a little bit of time. When we got settled in, we were driving down to Irvine every day. We were meeting with them. We were trying to understand what was happening in the community. Before the month was up, we actually had a couple other deals that had closed because we were there in market and we’d driven there and sat down with the district leadership and said, look, this is working at Laguna. It’s working at Irvine. We see the potential for it to work with you guys as well. They agreed. That really catalyzed the business enormously. Working 15h days Pablo 24:33 How much of your time while you were there was split on making new sales versus just customer discovery and learnings from Irvine and Laguna? Philip 24:43 It was all one in the same to a certain degree. Basically, the way we thought of it was every day should be filled. Your calendar should be – I mean, we were working 16 to 18-hour days every single – when Friday night would come around, we were in Santa Monica, we were like, oh, it’s a buzz. The city’s got a pulse. We should go out. Then by like 9 p.m. we’re asleep. Everyone was so exhausted. A lot of the time was spent on site at the districts, for sure, but a lot of it was also spent getting to know – we would go to any of their local conferences. They had the different events and then meet ups in the community. We were at all of those things. It’d just be omnipresent in that market and talking to everybody, understanding what their needs were. I personally spent a lot of time on site districts because I wanted to see how students were using the product. What do they like? What do they not like? Then they get the feedback from the teachers and from the administration, right? It’s one thing for us to just hypothesize what’s going to be popular or what’s going to work. We actually need to get that validated and know there’s actually revenue on the other side of making this happen. Pablo 25:58 How did you set that up? I just imagine you walking around a school asking kids if they’re using your app. It doesn’t sound great. I mean, how did you actually make this happen in terms of learning from students and teachers and so on? Philip 26:08 That was kind of what was happening. I mean, we had just such a great relationship with district and they knew that we were there. Obviously, you work with them ahead of time just to coordinate schedules to a certain degree, but no, we were going on site. We would sit in the back of the class in a lot of situations and just observe what was happening in the class, how students would use it, if they wanted to use it, if they didn’t – Pablo 26:35 Is the idea that people text during the actual class lesson? Philip 26:40 About half of our usage is during the school day. Yeah, so kids are using it in class, and half is outside of school, too. What we would do as well, so we would see which students had accessed it so then we would try to reach out to either the principal or to the teachers and say, hey, do you think we could have a chat with so and so. We saw they did an hour and 20-minute session last night. They’d always say, yeah, of course, because it’s beneficial to everybody. Then the kids would come in with their candid feedback and they’d give you the highs and the lows of their experience, but you listen to that, you hear it, and then we’d go right back to the district and say, listen to what we learned. This is how we’re going to improve our product. This is what we’re going to do to make this experience better for students. They played a really critical role in helping us work through a lot of those hurdles from the early days. Then now if you look at our presence, we are everywhere in SoCal. You’d be hard pressed to find a student in Southern California that doesn’t have access to Paper. Pablo 27:37 That’s awesome. Do you remember back then, whether it’s from the student, the teachers, any stories that were particularly insightful in terms of things that you learn by doing – by spending so much time there being present that informed the future of your product that really made some big changes in the approach or anything like that? Philip 28:04 One of the things that became really apparent to us pretty quickly was that the quality of the integration and the interoperability between the technology that’s already being used in the district and paper was so important because the last thing that anybody wanted was some standalone software that required a new password, a new sign-in. It was just sort of sitting on its own island. Everybody, whether this was students, teachers, administrators, everybody didn’t like that. At the time, we hadn’t built a lot of these integrations. Today, we integrate with pretty much everything and interoperability is very simple and straightforward, but back then we didn’t have any of that. It became really clear to us that we needed to prioritize it. That was things like the rostering. The way it works is we actually pull the rostering data from the school district. When a students logs into Paper, they actually see the classes that they are registered in with their teacher’s name as they would see it on their schedule. That was really valuable because it made it feel a lot more personalized to the student and that we weren’t this strange foreign organization that doesn’t know anything about them. We actually are in their community and know how to support them because we’re integrated into everything else. That was really big learning for us that really I think gave us a leg up on the conversations we had with future districts because we would go into those conversations saying we do X, Y, and Z and we make the integration and interoperability really simple and straightforward so we can turn you on really quickly. You just need to basically give us access to this and access to that and we’ll be ready to go. That was really beneficial. That was one of the biggest learnings that I had never thought of but in retrospect, I don’t think we would ever have been able to grow without it. Pleasing the Stakeholders Pablo 30:03 Here’s another question and something that I find very common in these, whether it’s B2B, C, or even enterprise sales where you have a buyer and then you have a user and two different personas with two different expectations. The value doesn’t always accrue equally and so you have maybe the buyer is super excited and users don’t use it or the users use it, the buyer doesn’t want to pay, like these kinds of conflicts. In your case, just thinking out loud, I mean, you have tutors, you have students, you have teachers, and then you have principals and school districts. You have to please everyone. How did that work out, especially in those early days? I mean, today, I’m sure you’ve got sales pitches to each of them and you thought through the value propositions for all of them, all those different party stakeholders. What about back then? Was there any kind of conflict with one of them or any situations you recall that was like, wow, students love it, principals love it, but teachers hate it, or just any kind of combination like that that was hard to figure out? Philip 30:57 Yeah, I wouldn’t even say that we’ve sorted this out perfectly to this point. The thing that’s challenging is that we do have so many stakeholders and their priorities and the problems that we’re solving for them is actually quite different based on who they are. The student is the most obvious, the easiest one, right? They’re stuck on a homework problem. They need support. We’re there for them. That’s the easiest. A lot of the messaging is, hey, you’re stuck, we can get you unstuck. That’s what academic support has really always been. If you think about it through the lens of a school district administrator, they’re not really thinking about the experience a student has. They’re not worried about the student who’s stuck and needs to get unstuck. Of course, they want them to learn. It’s not that they don’t care. It’s that their problems as an individual are quite different than that. What became clear to us was that the school districts were very focused on their communities and how the community would be supported by a resource like Paper. A lot of what we started to say to them was, look, this is a solution that’s going to level the playing field for your whole community. Now your individual student doesn’t care about leveling the playing field for everybody. They care about do I get the support that I need with my math homework. I’m stuck. I need to get unstuck, right? The districts have a very different perspective. They want to know is this something that’s going to actually make my community better. Those two messages weren’t in conflict with each other but very hard to be able to put both of those on your home page, for example. What we needed to do was figure out how do you make sure that the right message is hitting the right audience. You need to kind of separate those into the different channels. If you go to our home page today, it’s very much geared to a school administrator. What are the problems that you and your community are dealing with and how can we help you solve those? Your average kid is not going to Paper’s website just out of the blue to find out more about it. They’re going to Paper because they want to log in. The experience when a student logs in is very much tailored – the messaging is all about get the help that you need right now. We need to split those things out very distinctly. If you try to have a little bit of – and by the way, this is a mistake I see companies make all the time. A lot of these businesses try to sell B2B and B2C, which I just think in the early days is literally impossible. I think even at scale is really very few companies have done it well. They have this messaging that’s conflated buy this as an individual but also buy this as a company and the needs are very different. The problems are very different. It’s so uncommon that you’re going to have the exact same problem as a human, me, Phil, or Phil as CEO of Paper and what I’m trying to do in my role there. Just thinking about eating and food. For me, when I’m hungry, I need to get food to nourish my body to be able to operate. The message that a Kit-Kat or a Snickers is eat this thing and you’re going to be good right away, well, that message is not going to resonate to a business that’s providing food catering to their entire team, right? They want something that’s very simple, that can be done quickly, that they don’t have headaches for, that still has the nutrients but they don’t have to worry about this complicated – it’s very, very different messaging. I think it’s a mistake that companies make all the time when they don’t know what to do so they try to be everything to everyone and we sell B2B, we also have this B2C angle. It’s almost impossible to do. You need to have established business units to be able to do it, and even at that, very few companies do it well. Pablo 34:49 How did you – there’s kind of at the top this school district sounds to me that you made the messaging and the positioning for them and the experience focused on the students. The teachers, to me, feel like – and I used to have a company called Gym Track where we sold to gyms. There was personal trainer and then their users. Personal trainers are in the middle. I kind of feel like there’s an analogy there where the teachers could be huge champions, huge accelerators to the extent that they’re pushing Paper – not pushing it but recommending it, let’s say, to the students, or huge subtractors to the extent that they see it as a threat or see it as something annoying that’s on the side that’s taking away from their class time. How do you – was that an issue at all? Just in general how did you get teachers on your side and for Paper? Philip 35:32 Yeah, Pablo, you’re spot on. I mean, they are the conduit. They can hurt you. They can help you. One of the things that we had decided on very early in the business is that we were not going to rely on parents. The reason why weren’t not going to rely on parents was that a lot of our students didn’t have engaged parents. They may not have known what their kid, their child needed academically for whatever reason, but they all had teachers. Every one of our students had a teacher. We needed to make sure that whatever resource we were providing wasn’t going to be in conflict with what a teacher was doing in their class. That shaped a lot of the way that we approached the actual teaching that happened on our platform. One of the concerns that every teacher had was, well, I don’t need my kids getting told some different way of solving their math problems or different way of writing their bibliography or their critical essay or their science assignment or whatever. They just didn’t want that noise. We followed the Socratic teaching principles which are basically this notion that you’re guiding a student, not really the primary source of instruction. We’ve always said that to our teachers that no kid comes on Paper and says “teach me math” and we say “okay, here’s Module 1. This is what you need to know and here’s how to learn it.” We would always say it’s inquiry based. We’re really there to support whatever you’re doing in the classroom. We’re not going to step on your toes at all. You’re going to do and teach the way that you teach and the curriculum that you teach. That’s totally up to you and your district. We don’t play in that sandbox at all. What we do is we’re there to answer the questions that students have by guiding them. We’re going to rely really heavily on the resources you provide for those students and the experience you give them in the classroom because we’re going to say stuff like, have you seen a similar problem to this before? How has your teacher asked you to solve these problems? Do you have examples of other problems like this that your teacher has helped you solve? Things like that, and so we need to disarm the teacher really quickly because we knew that they could really hurt the rollout. Now, the reality was that once we got that messaging right, teachers were huge advocates because they said, well, this is amazing. I’m not getting asked questions at 10:30 at night. It’s not going to impact my next day because kids aren’t going to come in confused but they’re going to come in and they’re going to be really well prepared. This is a huge value. You think about an English teacher or an English language arts teacher who is giving homework about write your rough draft for a paper and now the teacher has to review every single one of those rough drafts the next week. That’s like sentencing yourself to a night of reading rough drafts and drinking wine or whatever. That’s exhausting. Now what the teachers say is they say put your rough draft through Paper. I’ll be able to see the comments that the tutors leave, but now I don’t have to do the reviewing myself. That’s a huge win. Pablo 38:36 Was that something you discovered – I think you probably had the philosophy or the idea that teachers – you had to get teachers on site early on, but did you get that right in the first kind of phases or was there some kind of push and pull in those first pilots? Philip 38:50 Initially, we had one product. We had one thing and it was just this live help feature that was there. Everything was funneled into that same experience. It was actually through a lot of the conversations we had with students and teachers where we recognized that the experience students would have with writing feedback in the current model didn’t make a whole lot of sense. They were uploading an essay, for example, and trying to get feedback on it. Then the tutor would spend 15 minutes reading the essay while the student is just sitting there in the chat waiting for a response. It’s kind of weird. We worked with a group of students that actually put together what ends up becoming what we called essay review is now known as review center where you upload your work. It’s more asynchronous. You upload your work. It goes into a queue. That queue then a tutor picks it up, reviews the essay, annotates it, adds feedback. They don’t write anything. They annotate it. Then that feedback afterwards is sent both to the student and to the teacher. Both of them see what comments were made. They may say, oh, I like this, I don’t like this, whatever. Writing is very subjective, but it was another set of eyes that was on the paper. We built that whole experience working with the students and the teachers to do that. It was really cool to see. We eventually spun it out as its own product and now it’s a standalone. It’s called review center. It’s a standalone product. It’s all integrated in the platform. We would never have been able to do that if it wasn’t for the teacher sitting down with us and saying this is the experience that we want as a teacher and the student sitting down and saying this is the experience that we want as a student and then us actually listening with an open mind critically and saying, okay, we hear you. Give us a little bit of time. We’re going to build something. Product Market Fit Pablo 40:37 We’ll stop it there. I want the last question, which is one we like to always end on, which is when did you feel that you had true product market fit? Philip 40:52 The moment you recognize that your pitch that you’re sitting down and giving to a customer is very, very clearly being received as a solution to a problem that they have, it’s a very different feeling in that meeting. I think that’s when we started to realize that we had product market fit. To a certain degree, you’re always trying to find product market fit in a business. I don’t think there’s a 100% you have this. It’s always evolving because your market is evolving. In our case, 14-year-olds, a 14-year-old today is very different than a 14-year-old was in 2015. We have to constantly evolve and you know you need to be moving – but when you see like their eyes light up and you say, okay, we’ve got something here because they’ve now seen how your solution is going to solve a problem that they have. If you’re there trying to convince them of how it’s going to do that and you’re really trying to push it, it’s not there, but when they’re like, yes, I get it, 100% this solves the problem, I need this, absolutely, that was the moment for us. We started having districts calling their friends and saying, hey, we’re working with Paper, you guys have got to get – and we get an inbound inquiry saying, hey, we heard from so and so at this other district that they’re working with you, can you set up a demo for us? Then it starts to snowball and you start building this reputation. It wasn’t really until we got that moment, that a-ha moment that the customer has in that pitch, like oh, yeah, this does solve my problem. Sign me up. Recap Pablo 42:39 Perfect, so we’ll stop it there. I think just as a recap, you started I think in 2014, 2015. You’re going through this accelerator. I think something that might’ve been missed here is you spent about three years from 2015 to 2018 getting this adopted by school districts and in the meantime doing a bunch of different things but it wasn’t until three years later that you had that real adoption. I think that’s an important piece because these things take time. From the outside looking in, it just looks like a straight line up and to the right. It is very rarely so. Even for the ones that make it to unicorn status like yourself, there’s a lot of ups and downs in between. Things tend to take a lot longer than you might expect. Either way, I think one of the big things that you did super right was just getting really close to that customer, in your case, actually moving and being their neighbor and being in their presence daily, talking to all the different stakeholders. There’s just probably a million tiny little data points that you took out of that that made it into your product and got you closer and closer.