Martin Basiri, Founder of Applyboard | How to Find Product Market Fit

Pablo (00:00):

So I just spoke with Martin, the co-founder, and CEO, ex-CEO of ApplyBoard, and now the founder and CEO at Passage. Martin is amazing. You're going to love this episode. He's one of the most successful founders in Canada. I mean, ApplyBoard is now a $4 billion unicorn. And Passage just raised, I think, Canada's largest seed round ever, $40 million. So on this episode, he goes through how to find product market fit, and the early story of ApplyBoard. When he started off, he was an international student. He had just done a couple years as an engineer and started really just helping a few of his friends come in and study in Canada, noticed there was a potential problem there. And he put out a landing page on his first day he made a sale.

Pablo (00:48):

So I think he realized pretty quickly that there was something there. And the trick really became in finding the right model, partnering with colleges and universities, partnering with agents abroad who have distribution, and automating enough of the puzzle so that he could truly scale his operations. You know, I think the learning here is it's so important to deliver incredible value. And when you do, there's so much pull behind that. So in his case, he was changing people's lives. I mean, people that were able to all of a sudden come here and study in Canada, their entire lives were transformed. And for that reason, it was one of the most top of my – problems he was solving, not just for the students moving over, but for their entire families. And for schools, on the flip side, because he made money from schools,

Pablo (01:34):

he was also providing incredible ROI, both 10 x ROI. I mean, whatever the schools paid, they made 10 times as much from the international students that came over. And then what he had to really figure out is how to scale it. And wasn't – as much as it became an incredible company, it didn't start off that easy. He had to bootstrap for a long time because he wasn't recurring revenue and clean SaaS. He had a really hard time fundraising as you'll find out. But he made it through. He was insanely focused on delivering incredible customer value. And I think that's why he found Product Market Fit. 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. Well Martin, welcome to the show.

Martin (02:21):

Thank you for having me. 

Pablo (02:25)

So look Martin, I mean now you've – just actually last week, you announced what I think is Canada's largest seed round. We could even call that a 40 million round for your new startup passage. Before that, you were the co-founder, well you still are the co-founder, you're the CEO of ApplyBoard, which is now worth $4 billion making it one of the biggest unicorns in Canada. So tons of success as a founder, but it didn't start off that way, right? I mean, nobody starts off successful. You got to get there through grind, through hard work. So let's start at the beginning, really. I mean, today we're going to talk about how to get the product market fit. But before you were there I think you were a research assistant, and then you were an engineer. Maybe take us through that context of the days before the idea for Apply board came about.

Martin (03:17):

Okay, sounds good. So I start from very early of Alp Fiber what happened before that. I was one of those nerd students in Iran. And I was inventing things, writing codes, started building circuits. I got to know that I have to come to Canada for making my ideas and inventions to companies because in Iran, at the time and maybe still, there were not those infrastructures for you to build something to a global company. So the best way was to come for study my Master's degree. And I genuinely wanted to first be an inventor and a scientist. I didn't know that much about business. Purely was more about science and inventing stuff from the engineering point of view. Came to Canada, it was such a hard process to come to Canada. 

Martin (04:19):

I wasn't speaking English properly. And then I helped my brothers to come to Canada. And as a result I started helping their friends to come to Canada. And we started learning about like the different paths of coming to Canada to study. Fast forward, I graduated. I went to working at a company in Ohio as an engineer. I worked for about two years. I was like, oh no, I'm going back to do more science and stuff. One of the ideas that I started working on was what if helping other people to come and study in Canada, which later on become all countries, become a code. What if it's automated? What if you don't have to just do it with phone, helping other people? Why they can't get some of the filtering and stuff first done on their own through a website. 

Martin (05:13):

So we built a very light version of it, and it worked. And first night we put the software up, someone one paid $500 to get the admission package to come to Canada for English language test, for English language program, sorry. And we are like, okay, we are on something. So then we started thinking about what's the business model for such a thing that we need because we knew all about the student side, and then we don't know much about the schools, universities, or colleges. And then we started basically looking at that. And that's literally how our platform was born. I've done it for myself. I needed something like that for when I was coming abroad. I knew all of my friends need it, so we built it that way. And that was the beginning of the company. 

Pablo (06:12):

How much was automated in the first days? What was the first iteration of the product, the landing page you put up?

Martin (06:20):

Almost nothing, so if you if you say the entire scope of helping someone for the university, the admission. If let's say that is 100%, day one might be 0.1% automated, 99.9% manual. And over years became more automation went up where the manual went down.

Pablo (06:44):

So you have demand, I'm not going to say figured out, but you are part of that demand. And I think you see signs that there's going to be a lot of demand for people that want to come and study in Canada. What's your first step on the other side, on working with partners, on working with schools, and figuring out the business model?

Martin (07:04):

Call them. We are calling them, say, “Hey, we have such a thing.” First, we are thinking about let's build that and then let's get them to subscription because everyone was saying subscription, subscription, subscription. It was 2015 and SaaS was start to becoming the very high cost to market. We are going to different hypes over time. And people loved it because it's predictable, it’s a reoccurring revenue.

Pablo (07:37):

On that, if you could go a level deeper just because at this point you have no credibility. So I'm curious, how do you even get through the door to have these conversations with universities, right, big organizations, not necessarily the most innovative?

Martin (07:52):

Later I drove there and say, “Hey where is the admission office?” They said, “That way.” I went there and I stand. I remember it was like I was standing. And they were like, “Who are you guys?” We’re like, “Hey, we have some questions.” They were looking at us weird, no appointment, nothing. You just showed up? We were like, “Oh, I didn't know you have to take appointment.” I have a thick accent. At the time, it was a bit thicker accent. So it helped because I could get away from some of the things that I don't know, and people could assume that he’s probably a foreigner, doesn’t know what is happening here. I just ignore the rules. And I went forward and – but we were calling people tens of times, “Hey, you said no to this. 

Martin (08:41):

If we change it this way, would you like it?” Then he was like this. And some people just say don't call me again. Some people were – they actually started liking our persistence. And they started telling you, yeah, perseverance. You know what? One of the best calls that actually changed the entire business model, we were with this advisor. We were talking about the SaaS and stuff, and he was like, “How are the universities pay today?” We said, “Oh, they pay per student.” I'm going to talk to universities, and universities talking about – they push back on 10,000 versus 20,000. And I say, oh, the entire school that matter in Canada for example is 300. Even if I take $10,000 and I take a hundred percent of the market, it still is only 300 times 10,000. 

Martin (09:35):

That’s $30 million. It’s such a small triad. And then we realized, no, there's unlimited. You can charge from the recruitment if you can deliver unlimited results, which is then another problem. Now that we have the business model, you want to scale it, you need to build further. And then the way that you go about it, okay, what are the steps has to happen for this to become – what are the main puzzles have to be solved for this problem to be solved, to be all automated? And then you look at risk, reward on every single one. Kind of like effort, reward then risk, reward. This one takes a year to build. The result is 40% of the process get automated. Let's go with that one. For us, the first thing to automate was search. Every student comes, they say this is my GPA, this is how much money, this is my test score, which university or college I can get accepted to? 

Martin (10:34):

So if we have all the database of all these universities or colleges that they partner with us, we could simply do the first matching. At least we could have a portion of the product that is very valuable to customers put it out for free. Not only is a lot of students use that and they go and then apply to university themselves, never university pays us or we talk to the student, but it creates a lot of good reputation for us. At least some of those students say, you know what? This is such a good tool. So maybe I also want to hire you for the application piece.

Pablo (11:15):

That makes perfect sense. One of the things that comes to my mind is when I think about ApplyBoard, and I think, okay, international students clearly want to come here. They pay a lot, so therefore universities clearly would want to accept them, especially if it's fully done for them. Part of me is like, man, that sounds obvious. That sounds easy. And nothing is. Nothing that becomes a $4 billion company was easy or truly obvious. What were some of the, I don't know, either mistakes, wrong directions that you took early on, or even just some of the insights that you figured out that made ApplyBoard what it became. 

Martin (11:51):

The fundraising for the first couple of years was extremely hard because a lot of the VCs go to very top schools like Harvard, Stanford, Yale, Columbia, and those schools. The fact that someone sells their home and belongings in India to send one of their children to come to a tier two a school wasn't resonating with. So they were like, why someone come to go to San Jose State University? Why don't they come to Stanford? Stanford doesn't have 500,000 seats, and also Stanford tuition fees like $70,000 per year for example. These people’s salary per month might be $500, $1,000. This is their life savings. They can't afford it. So fundraising was very hard. That really helped. So for the companies that they have hard time fundraising, the benefit of that was for us that we built the company so frugal, and we had to make it – we really had to stretch every single dollar. 

Martin (13:06):

Because of that, the advantage of that was we built a very solid, efficient business. The disadvantage of that, we couldn't have access to all the talent that we wanted, and we needed. So we had to build a lot of people. So we had to get a lot of junior people, train them to be – to act even better than seniors versus get a lot of senior people that they knew the job. However, later on in the company I realized that that is actually the business model even when you have the money to build a lot of great entrepreneurs inside your company. A lot of people were skilled to solve problems because it's great some will work at this company or that company. You do need them, some of them, to come and they bring that experience. That's not enough. 

Martin (14:09):

That drive, that know-how of the company, that knowing the company's history so that you know what did we try, what’s that result. That knowledge really also mattered for a company. But for some reason our numbers were – they started not for some reason – for some reason it worked. And our numbers, they started working so well that in the matter of every 11 months, starting 2018, so three years after building the company, every 11 months we done one fundraising. The company went from low valuation to unicorn status and continuing. We could add the talent mix that we needed.

Pablo (15:00):

Well I think – and I see this all the time. I mean, in the early days, even if you're funded, the reality is everybody needs A players. Everybody wants A players. And frankly, a lot of the known A players, the experienced A players, have so much choice that you're probably not going to get them anyways as a seed stage startup, most cases. And so you're much better off trying to find these unidentified A players that are just not proven yet. They come to your startup to really prove themselves. I mean what you get out of that is huge, I mean incredible ROI. You also get incredible mission, drive, and loyalty if you want to call it that just because of the opportunity they're given. So I think that fully resonates. Let me ask this, in the early days, I mean, you talked about fundraising being hard. Besides the fact that VCs maybe didn't fully get the problem, what were some of the key reasons VCs passed? What were some of the things you kept hearing?

Martin (15:57):

So I think number one reason was like any other company, you as a founder, you need to believe in something to see the result. And for other people, they need to see to believe it. So the gap between what you believe and what they believe is normally the reason that they pass. A lot of people pass because you as a founder did not learn how to talk, and to make it resonate with them, how to show them the vision, how to pitch, and also how much they know about that problem. Because we never have problem with immigrant VCs, which there are not that many immigrant VCs. That's why the [unclear]. Any immigrant VC, right away, they were – I didn't even have to tell them about problem right away. Oh, can I test it? 

Martin (16:56):

Oh, my cousin in India going to use this. My brother from South Africa going to use this. My sister want to do this. When we were hitting the people that understood it, they were  going like that, very fast. Till the numbers start showing the truth for the people that didn't quite get the story of immigration, they started seeing it as well. And well there’s the other reason we were in Canada is still a lot of people were believing that building top companies only going to be possible in Silicon Valley, or Boston, or New York. So we had that disadvantage as well, even though in Canada, at the result, actually we had lower cost per employee, salaries lower. Our product was a good Canadian, Canada is the best country in the world for immigration. So absolutely it makes sense to be in Canada. But for the VC parts, they were thinking talent only exists in things. And I think COVID did that very – COVID proved to everyone that no, talent is everywhere. And that fact of not giving up, every time you go to New York, to a customer, and they reject you, you have two choices to make. One way is like you say, oh this is a bad idea, this is it. Or the other way you just – here's the points that they had, think about it, see if it's real or not, adjust, pivot, whatever you have to do. But don't give up, in fact, and say, I just realized what one other way how not to pitch.

Pablo (18:36):

That makes sense. I mean, I think perspective’s everything. And frankly, being able to handle rejection is – just has to be in the DNA of any successful founder. Again, from outside, and this is one of the points that I'm trying to get at is from outside a lot of these successes just look like rocket ships. Wow, they just hit it on the headfirst try, and the thing just went up into the right. You dig in, and most overnight successes took a long time. So maybe on that note, when we go back to those pre – you're raising that $3 million round before that, and you – seems like you have good demand. Students are coming in. You're starting to figure it out with schools. Any stories that that come to mind, just some of the things, I mean, interesting the story of you walking into the universities and just talking to people. Anything else you had to do to fake it till you make it?

Martin (19:35):

Hiring those people that you – now you really need. They have a skill set that you need, and they have hundred choices as you said. Well no, those ones were the ones that I was sometimes personally flying to their cities to convince them. And back in the days we wanted them to be in person as well. So I had another disadvantage of them, “Hey, not only I have to convince you to join us, I also want you to come to our city and change your life.” Hiring it was hard. I hustled a lot. I had another disadvantage of asking them, “Hey, not only I have to convince you to join us. I also want you to come to our city and change your life.” It was hard. I hustled a lot. I hustled way more for hiring than fundraising, convincing people, and for some reason, that was like – maybe it's more personal. You are talking to a person, not to a firm, that actually the rejection for me was a little even harder to – emotionally harder than the rejection from the cities because this person can make that decision versus, eh, I can't confirm because my firm doesn't want to do that, like a little bit more personal.

Pablo (20:43):

What was one of those early transformational hires that you made? Maybe walk me through the story of what it took to get him on board.

Martin (20:50):

I tell you, for the first person I hired, first software developer, person was working, had a good salary, curious person. I was like, “Come work for us to write the codes,” and he was like, “Listen, this is my rent. This is my living cost. This is my car,” blah blah. “I don't have savings. I love you. I think you can make it.” This is now five months of convincing him to the idea of quitting and doing the job, right? It’s not the first day that he just – now he’s convinced and said, “How are you going to pay me this much money to come?” I knew I got to make it, and at the time, I had an Audi TT convertible. It was an old car, but it looked so sick. From outside, it looked like it's an expensive car. In reality, it wasn’t expensive car. I got a good deal on it. It looked cool. I said, “Listen, you can join. We will make money. Don't worry about it. Have a confidence. You’re genius. I'm as smart. We'll figure it out, but if I ever don’t have the salary, I sell that car immediately.

Pablo (22:15):

Just on the product side, I mean, one of the things you talked about is the beginning. Almost none of it was automated. Were you telling students that this thing was automated, and then you just had people back handling all this stuff? What was that that period like?

Martin (22:33):

No, we didn't have to take it in front of the customers. Actually, also, customers expected a full manual service, so the pieces that was automated throughout, ending with the search, that was very impressive for them, but all the customers see from ApplyBoard is only 10% of the entire job. The other 90% is after you match now to get your acceptance to work with universities, to make sure the documents has no error, all this processing of all those things. That 90% is behind the scene, so the customer really never knew what is automated, what is not automated. What the customer care is I get my thing done. For example, when you order this from Amazon, you don't care what happened in the warehouse. All you care, tomorrow 12 o'clock, this is at my door because I need this. That's very similar case that we have.
 
 

Pablo (23:40):

Makes sense. What did it feel like when you – because it's kind of a long road. I mean, you got to get students in. You got to help them. You got to get – I don’t if you worked the visas and all this stuff, and then you got to get them approved. What was that feeling like when ApplyBoard – I don't know if you remember it, when ApplyBoard closed that first student all the way through and they got that acceptance letter?

Martin (23:59):

Oh my God, it mean the whole world, probably like the prayer of these people, the positive feedback they give you, the thanks that they sent you. The moment they come to Canada and they send you a picture from the airport, or their parents send you a message of thank you, that is worth more than any money, or recognition, or valuation, or publicity, or anything, the fact that you know you made the customer happy, their life has changed. A lot of them, they continued working with us, and some of them actually joined ApplyBoard later on as an employee, and that's even another level of success when you see the product of yourself. You brought someone from high school. They came here. They studied. They will intern with you, and then later on they become the employee. It's just like full cycle, like happiness. Every time you see them, you’re proud. [Unclear].

Pablo (25:02):

That's amazing. I mean, talk about that. I had something else I want to say, but talk about that. What were some of the crazy things you had to do on the customer success front? That's one thing I've noticed talking to some founders. Just give you an example, when I was talking to Mike Katchen Wealthsimple, he mentioned, in the early days, he would call up every user 30 seconds after they signed up, right? We're talking free users who probably hadn't deposited any money yet, downloaded their app, sign up, and they get a call from Mike Katchen. I mean, hearing you sparked it because you're talking about talking to mom in the middle of the night just to make sure that her child is okay. What were some of those things that you had to do just to make sure the bar of customer service was up here?

Martin (25:42):

Everything. I remember one, yes. The student’s application, the acceptance, I had to get it. They had a visa appointment. They were able to connect, and it was a time that I didn’t have a car. I had to pay my friend to come drive me to another city, get the acceptance of this person on a spot, print it, came back, scanned it, and they went for their visa. Then, at the same time, DSL it to the hall. I said, “This is the electronic version; wait,” and they got it within a day or something. 

Martin (26:29):

It ties into one of the things I'm really noticing here, two things but they're related. One of the things we talk about a lot on the show is that one of the traits of successful founders is they're insanely focused. They're insanely focused on something, and different ones have different things. I think, for you, customer value was clearly an insane focus. Tied to that, to the extent that people are wondering, what drove the excess – the success of ApplyBoard? One of the key ingredients was the amount of customer value that you were providing. I mean, for these students, getting accepted, as you've said, is life-changing. It's stressful, all these other things, but to the extent that they get in, it's truly life-changing so that amount of value. Of course, you're talking about international students that have the means. I think now you're changing with Passage, but in ApplyBoard days, they had the means. They had a huge amount of value to get, and they had the means to pay for that value. Plus, the schools on the flip side also get tremendous value because the kind of ROI on international student is 10X what they pay you. That's the key nugget. I mean, it's hard to find areas where you can provide such dramatic value. 

Martin (27:42):

When you do, that provides the pull that you need to – that and plenty of hard work, but you need that pull. I think it's a critical ingredient, so I hope that's not lost on anyone or on you as the founders listening. 

Martin (27:53):

The moment we realized that we can charge universities some marketing fee, we direct 100% of our cost to our students. We made it free for our students. We can not only not charge our students, but also, because we send a lot of the students to their school, sometimes universities actually give us some sort of a discount. The students get, actually, a cheaper price, tuition fee, if they go through us than they go to university because we were negotiating as some sort of a discount or a scholarship for them. I want this problem globally to be solved. Everyone should have access to good quality education. When they come here, as you said, it's like they find good jobs. They make good money, all like make 70, 80, 100, $200,000, but that first $30,000 become a barrier for them. 

Martin (28:50):

I said, “Why don't you lend them the money?” Same system that domestically governments create for citizens, like you have – for example, Ontario, you can borrow. In US, you have different student loan that you can borrow, go to schools. I'm not saying those programs run perfectly. Normally, when governments do something, there's always – they have different angles and sometimes not running it the most efficiently, but those student loan almost made most of the people able to go to higher education. Such a thing doesn't exist for international students or if it exists is extremely expensive, or unachievable, or very – for a small limited number of people. We said, for all those 90, 95% of the students that they don't get a scholarship from university and they have to self-fund it, we provide a little bit of loan. At least more people can come here. They change their lives. They can go to the society and do what matters. As a result of, we want to make sure they're successful, and they’re going to be able to pay back a loan. We can make the money recycle, so we can use the money to give it to the next level of students and the next year of students. The money must be able to come back.

Pablo (30:13):

Love it. I love that mission. Let me ask one more question about ApplyBoard because we didn't touch on this which is, as far as I understand, one of the key pieces of ApplyBoard that really helped you scale is your partnership with agents, agents in other countries that are the ones that kind of deal closely with students. How did that start? Did you start with that, or did you start going direct to students and then move to this agent model?

Martin (30:42):

Yeah. When we made the search – remember I was talking about the first alteration we made was the search? We noticed that there are some IPs that they use it too often. It is more than one, like a national student. We were curious. What is happening, why some people use it this much? It doesn't make sense someone search two hours a day on your search. Why, and for every single day? Yeah, when the students come, they search for hours. Then they go away, and then they come back two weeks later. Why is this IP – so many searches is happening? Then we start receiving emails. It’s like, hey, I'm an agent in Bangladesh. I'm an agent in this country, that country. I just used your search, such an awesome thing. Can I just also apply to you? 

Martin (31:32):

I know you work only with direct students, but I have 10 students a week. Can I also bring it? We are debating about what to do with these people from one side on the online version, and this is actually a good lesson here. From one side, we were like – the first pitch was like the online version of agents. Basically, everyone saying, okay, so it's a huge market. If you can remove the traditional agents and you make it online, it works, right? Now these traditional agents are using our online advantage, and we were thinking what to do. We didn't really have a good answer. It was 50/50. It was like, team, we were talking about it. It was 50/50, yeah, both as pros and cons. Pros was we get higher exposure. Cons is we don't talk to students every time ourself. 

Martin (32:29):

We don't control the funnel. Pros is they do some of the manual work. We don't have to have the stuff for it. Cons is we don't really know who are these people? Are they authentic? Are they not? We have to do a lot of vetting to make sure we work with the right agent. The end of the story is what helps me to make that decision because I was tired of vetting people. I was trying to find out, and it was, like myself, 50/50 was to go back to mission. What is our mission? The other one was the economically. Economically, when we were helping the students, we were making all the money. When we wanted agents, we have to share something with them, so it's way more profitable for us to not work with agents, right? 

Martin (33:14):

That was another very big piece. Why should we even work with them to share with that? That was one of the things that I went back to the mission and said what is our mission? Our mission is to help the students. Our mission was not never to make the maximum amount of profit. Yeah, we need profit to make sure we can help the students at the first place, but what is our mission? Our mission is to help the students, so let's go; let's partner with them. Let's be careful. Let's be cautious. We don't know these people.

Pablo (33:47):

That's what I really like about the answer is it really showcases why mission done properly isn't just words that you put on a slide deck. It is something that aligns your entire team and build a culture around it and, frankly, makes decisions a lot easier. A lot of these micro decisions, you can just go up a level or two ‘til you get to the mission, and it grounds you. If everybody's doing that in your organization, then that's extremely scalable because you don't have to be part of every single little thing, right? I think that's great. Let's stop it there. I'm going to end with the two quick-fire questions that we always end with. The first one, Martin, is when was the first time that you felt like you had true product market fit?

Martin (34:36):

Almost never. Always I wanted more. From Day 1, I knew it’s going to work. Even without writing a single code, I knew it’s going to work. From the other side, I always knew I can do better. One day, the first day, the first students that they paid online, that was eye-opening for me. It was like, wow. It did happen. Also, one day we wake up. We had 40 students applied overnight. Remember, most of the students applying in Southeast Asia, so when we are sleeping here, it’s our peak usage of our website, which is during the day in Southeast Asia. The maximum peak in our usage is when we are sleeping, so every day I was waking up. For eight years, this was my first thing I wake up. Wake up and look at the numbers, see how they were. Those days were like what? What just happened?

Pablo (35:44):

Last question is, thinking again, you're talking now to an early-stage founder. You've gone through eight years or so at ApplyBoard, now going through at again. What's one lesson you wish someone had shared with you in the early days?

Martin (35:58):

Over emphasis on the people who have drive and purpose in life and earn their emphasis on the knowledge and experience that that person has at that.

Pablo

That's awesome.

Martin

If I wanted two people, one driven, passionate, show the signs that they can learn anything but they don't have experience versus another person experienced but they're not really – are in the mood of hustling or something, go always for the first person. That person, within six months, one year, they can learn what the person No. 2 can do, but the person No. 2 never be able to get to the drive and passion that the first one has unless something changed. It's way easier to teach that person the experience than teach the second person the drive.

Pablo (36:53):

It's much easier to change – to add skills than to change a person. I totally agree with that.