Scaling Teachable: Part 3 — Our First $2M Month
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On September 1st, I sent our 63rd monthly investor update. It was one of the better ones.
A little over five years after Teachable was incorporated, we were excited to sneak past the $2,000,000 in monthly revenue mark.
While we are proud of this–as we should be–this post is about the entirety of our journey over the last year and not just our highlight reel. (For that, there’s always my IG).
While I maintain that running this company is the most rewarding part of my life, I’d be lying if I said it hasn’t been a goddamn @!%*@% at times.
And then back to being incredibly rewarding–often hours later.
My goal in this article is to take you behind the scenes as to how the last 12 months have transpired.
I’ll share revenue numbers, specific fundraising details, my biggest operating mistake, and a whole lotta feelings.
Let’s dive in.
1 — Okay, doubling every year just got super hard
My post last year was about our journey to a $15M run rate.
At that point, we had roughly doubled in the last 12 months.
At the end of this month, we anticipate being at a $25M+ run rate.
That’s an addition of $10M in run rate in a year, or a 67% year-on-year growth rate.
My initial feelings about our growth mirrored my father’s reaction to our April 2018 investor update:
Even though a growth rate of close to 70% is “fast-growing” at our scale, it’s the first time we are growing at a rate materially under 2x annually.
Upon further inspection though, we’re pretty happy with where we are today.
Despite the slowing percentage of growth, the absolute numbers are growing rapidly.
The first $12m in run rate took us 4 years, while the next $12m has taken us under 18 months.
Beyond that, we’ve been able to do so while building a fundamentally good business™ and skirting the line around profitability.
Last year, we had an EBITDA loss of under $700,000, and this year we’ve had the occasional accidentally profitable month.
In the age of Ubers and WeWorks, this is something we’re more than happy to trade a few percentage points of growth for.
2 — Responsible Venture Capital (is that a thing?)
As a result of building a fundamentally good business™, we’ve always raised a lot less money than we potentially could have.
Consider this:
- Our last funding round–eighteen months ago, what would probably be considered our “Series A”–was a $4 million round on a $130 million valuation, or approximately 3% dilution to the business.
- We’ve raised a little over $13 million in total in venture capital for selling slightly more than 30% of the business across multiple funding rounds.
- We control 2 out of 3 board seats.
- We still have over $9 million in the bank.
At close to a $25M annual run rate, this makes us highly atypical relative to a traditional venture-backed business.
Will we forever retain this level of control? Almost certainly not. And it’s nothing we have ever over optimized for.
Yet, when:
- you run a business in a non capital-intensive way;
- your survival is not predicated on the next round of funding;
- you are truly building for the long-term
You get a LOT more leverage while fundraising.
This fundraising strategy does not make us a better business in any way and neither does it materially decrease our chances of failure.
It just means that even if we do not end up achieving the level of success we aspire to, it would be because of our own failures and shortcomings and not any necessitated by outside stakeholders.
That — and being able to run the business on our own terms — is pretty fucking great.
3 — Having more than one revenue stream is 🔥🔥🔥
The most impressive part of our growth in the last year has been the growth of our Payments business.
A year ago our Payments operation was responsible for approximately a quarter of our business.Today, it’s a third and growing:
This mirrors what Shopify has been able to do very, very successfully at a mere 50 times our volume.
When Shopify went public, their Merchant Solutions revenue was 36% of their overall revenue.In the most recent quarter completed, it had jumped all the way to 57%.
Over the coming years I expect us to get over 50%+ as well.
We have been able to move this considerably by doubling down on providing value in the otherwise complicated and painful world of payments.
We decided to absorb a lot of pain that would otherwise be the creators’ responsibility — fun topics like global taxes, fighting chargebacks and automating payouts — in return for processing payments on behalf of our creator.
This was a painstaking and largely unsexy process. It has taken years of investment in terms of time, headcount, and product roadmap. It continues to occupy a significant portion of all those resources and likely always will.
But… this was an opportunity to solve a real problem for our creators, all while staying true to our mission.
And in return, we got a powerful second revenue stream that will become increasingly significant as we march towards the coveted $1B in annual sales on the platform (GMV).
4 — Experience Matters. A Lot.
The biggest operating mistake I have made over the last five years is waiting too long before hiring experienced leaders.
There was a myriad of excuses along the way:recruiting taking too much time or being too expensive, deluding ourselves that we didn’t need executives who have been there before, and even misguided attempts at running departments myself.
And this hurt us repeatedly.
It led to losing employees that we may have otherwise retained. It led to some of the more stressful months and quarters of my life. It slowed down the development of the people that we had on our team.
And even when we did eventually find the right executive, it was a bigger hole for them to dig us out of.
This is something I have spent a long time fixing this year and I’m proud relieved to say for the first time in the history of the company, we have a complete executive team.
Aside from our VP Engineering, CTO, CFO and Head of People who were here a year ago, this year we brought on experienced leaders in the roles of VP Customer Success and Sales, VP Marketing, VP Compliance, and VP Product.
Aside from each function benefiting from having an experienced leader, I’ve been amazed at how much I have been able to learn simply from observing competent executives doing their job.
This is heightened in my personal case since not only have I never been an executive before, this is also my first full-time job 😬… but that’s a story for another time.
You hear this all the time, but it’s still going to amaze you watching how much a great leader raises everyone else’s game.
5 — The human stuff is the best and hardest part of it all.
Growth is hard. Building good software is hard. Recruiting amazing people is hard.
Yet, nothing is ever as hard as the tough things that happen on the human side.
This last year in particular was harder than usual.
We had a tough Q1 2019 where a number of team members that had been around for 2–4 years all moved on from Teachable for a variety of largely unrelated reasons in a compressed period of time.
In some cases, it was necessary and the right thing for both the individual and the business. It still hurt.
In other cases, it wasn’t. That hurt even more.
As a founder, you can’t help but take personal responsibility every time that happens and go down a rabbit hole of self-examination.
You wonder if you had done something differently, would the outcome have been any different?
You look around the room and realize it looks nothing like it was a few years ago.
And then you realize, it will probably always be that way.
People start companies for a lot of reasons.
I wanted to create something used by lots of people. I thought it was “better” than finding a job. I wanted my side-project to get more users and make more money. I wanted to leave a footprint on the world.
What I did not expect however, was how all the reasons I initially wanted to start a company, would ultimately pale in comparison to the meaning I would derive from building something as a team.
MRR and ARR are great and all, but the best part of the last five years has been working, learning, celebrating, and growing together.
I also did not expect the deep sense of fulfillment from serving creators and entrepreneurs.
The responsibility of tens of thousands of people trusting us with their livelihoods is incredibly motivating and continues to keep us going.
In the last year, we’ve grown from 75 people in one office to 115 people in two offices.
In the next year, our creators will earn over a million dollars every single day.
And yet, we’re only getting started.
If you want an e-mail the next time I write something, sign up for the occasional update.
If you are interested in becoming a part of Teachable, we’re always looking to bring on exceptional people.
If you are curious about becoming an online creator, launching your first course or earning a living sharing your expertise, grab a free ticket to our annual online conference, Teachable Live from September 24th-26th
