John Katzman of Noodle: 5 Things I Wish Someone Told Me Before I Began Leading My Company
For everybody in the company, but starting with the CEO, there are two or three metrics that matter, which you should know like the back of your hand. If someone asks you at a board meeting, you’ll know it off the bat. Those metrics will be different for every company and different over time. What are the metrics that matter, and do you know them? Push that with real rigor.
As part of our series called “5 Things I Wish Someone Told Me Before I Began Leading My Company” I had the pleasure of interviewing John Katzman.
John Katzman is a serial entrepreneur who has taken three education technology startups from concept to nine-figure revenues. In his early 20s he founded The Princeton Review, which had a serious impact on US college admissions. John then established 2U, which brought online technologies to higher education, and in 2010 founded The Noodle Companies, whose operating companies work with students, families, and universities to lower the cost of and increase access to the best higher education programs. Noodle is funded by leading educational technology venture capital firms including Owl Ventures, ReThink Education, Newmarkets, The Lumina Foundation and more.
Thank you so much for joining us! Can you tell us a story about what brought you to this specific career path?
As a freshman in college, I was working in a convenience store and saw an ad for SAT tutors. The job paid some incredible amount, like $25 an hour; I got it, and made my spending money teaching SAT prep and coding computer systems for that company to analyze tests and students’ responses. When I graduated, I went to work on Wall Street and realized it was much more fun teaching the SAT, so I left after about 6 weeks and started The Princeton Review. My idea was to build the company for a couple of years and make enough money to start a software company. Things went well, though, and I went with it. For about 20 years I had a rolling 3-year plan to sell the business and took it public in 2001.
I didn’t enjoy running a public company. I spent a great deal of time with accountants and lawyers, and less time with customers, so I made the decision to focus on product and bring in professional management. About that time, I was asked to fund a chair in educational entrepreneurship at the University of Southern California. That led to a discussion about what it meant to be entrepreneurial in education; I challenged the dean to take her teacher prep program, which graduated 50 students a year, online and to scale. At the time, online education was populated only by subprime educators. She seemed interested, and it led to a robust conversation with her team. In 2008, I brought the idea to my board; they hated it and gave me permission to leave the company and do it myself.
I founded 2U, which was initially named 2Tor, to create online programs at the top universities. At some point the board decided it made sense to take the company public, which they had every right to do, but I decided to leave the company. I started feeling that the way Online Program Managers (OPMs) had evolved was not good for kids or for schools, that the model, which had been great in 2008, had run its course and was no longer the right answer. Rather than just yell about it, I started a competitor, a new form of partnership with universities, and that is Noodle. Today I spoke with an Ivy (League university) about starting an online MBA.
Can you tell us a story about the hard times you faced when you first started your journey?
The existence of The Princeton Review is deeply embarrassing for the College Board (creator and owner of the SAT), because we were calling out the fact that their test was very coachable and flawed in any number of ways. They sued us for violating their copyright; after a million negotiations and years of fighting we effectively won the case, settling for $50,000 to make it go away. By suing me they got me a lot of press, and we quadrupled in size almost immediately. But it was extremely hard and stressful. When they sued us, we had been around for about four years and I was 24 or 25 years old. I went in with my lawyer, who was 5’5”, and the testing company came in with 11 lawyers from a white shoe law firm, none of whom was under 6’4”: it was totally daunting. They had the lawsuit’s papers sealed and then leaked them to the New York Times. The judge was Maryanne Trump Barry, Donald’s sister; she was furious that they had leaked them and unsealed them. About 75 articles, including one on the front page of the New York Times, were written about the case. That really launched the company. But it was incredibly stressful.
Where did you get the drive to continue even though things were so hard?
It never would have occurred to me not to fight back. When I started, the SAT got me into college: it was written for someone like me. As I tutored more and more students, I realized that this is just a test of middle school math and English. There’s nothing magical about it. They referred to it as an IQ test at the time, the Scholastic Aptitude Test. I used to make fun of it. I didn’t think they were evil, just incompetent. And then they sued. Their whole point was to put this kid out of business, and they invoked in me a kind of rage around their arrogance. They’ve never been held accountable for the damage they’ve done to the education system in this country, and they act so righteous. They wanted to put the person calling them out, out of business. The whole mindset of standards is a problem.
So, how are things going today? How did grit and resilience lead to your eventual success?
Every experience like that gives you more confidence that you’ll survive the next problem. It helped me realize that the next time something happened, it would work out. And those moments when you feel like ‘we are at the top of the world,’ you know there’s a huge problem you haven’t seen yet heading toward you. Don’t believe your own press and don’t freak out when something bad happens. It helped me realize that I have a bit of resilience. And it’s important not to celebrate success prematurely. Being a Jets fan also helps with that.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
In the early days at The Princeton Review we would print the materials a couple of days before class was given. One Friday I sent a high school kid to pick them up; he got distracted and came back to the office after 5:00pm without having gotten them. We were going to use them the next day. It was pre-internet, and I spent an hour randomly calling telephone information in the City, on Long Island, in Westchester and New Jersey trying to find the owner of the print shop, calling everybody with his name within 30 miles of New York. So, I’m standing on a street corner, and I call this number and ask, “Is Paul Hymas there?” and it was him. He drove into the city and opened the shop for me, and I was a client for a decade after that. The lesson learned was that not everything has to be done at the very last minute. I learned to be persistent, to have a plan B, but also that you don’t have to fly as close to the treetops.
What do you think makes your company stand out? Can you share a story?
We are utterly transparent with our own people and with our client schools. When we focused on diversity, the first thing we did was commit to publishing annually a breakdown of the company at each tier of management: what percent are men and women, what percent are white, Black, Hispanic, and Asian, and what their relative incomes are. We are committed to examining whether we are diverse at every level and whether we are compensating people fairly. The general approach of transparency is unique to us; we publish the analysis for our employees.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not burn out?
To CEOs and start up people I’d say that the best advice I ever got about this was from my high school headmaster. He was dealing with a stressful situation: I had gone back to the school to say hi to some old friends, including him, and noted that he looked physically terrific even though he was stressed. He told me that when he was under the most stress, he would work out every day, and said it not only relieved him of stress but gave him a ton of energy to attack the problem. I know that it’s awfully hard to stay in shape and run a company. But I work hard to stay no more than a month away from being in good shape. Being in B+ shape is much less work, and then when you need it, you can up your workouts to get in great shape within a month. It is unrealistic to run a company and be in good shape for the long term. But it’s totally realistic to stay a month away from good shape.
None of us can achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
My brother Richard. I’ve always been on his board; he’s always been on mine. His advice is almost always right and maybe half the time I take it. The best advice he gave me is that sometimes when everybody says you’re wrong, it’s because you’re wrong. Being entrepreneurial, a lot of times you go up against common wisdom. You can let your ego and adrenaline get in the way of seeing that, sometimes, you are wrong.
How have you used your success to bring goodness to the world?
I mentor dozens of young entrepreneurs, have funded two chairs at universities, and have been a steady voice toward an intelligent approach to for-profits and education reform. I’ve created really good work environments for thousands of people.
What are your “5 things I wish someone told me before I started leading my company” and why.
1. Every entrepreneur should take an accounting class and really understand how to read balance sheets and income statements, how to create a budget, pro forma, long-term plan.
2. For everybody in the company, but starting with the CEO, there are two or three metrics that matter, which you should know like the back of your hand. If someone asks you at a board meeting, you’ll know it off the bat. Those metrics will be different for every company and different over time. What are the metrics that matter, and do you know them? Push that with real rigor.
3. I didn’t at first fully grasp the notion of Total Addressable Market (TAM). To size a start-up, what are people spending on this thing? There’s a problem and I have a solution and have put together a team that’s really qualified to implement that solution and solve the problem. But most first-time entrepreneurs don’t really understand the size of the problem they want to address. Elon Musk with Tesla could have said ‘here’s the size of the gas car market.’ That’s real. That’s the TAM. To raise money, at the point where investors are going to come in, an entrepreneur must understand TAM. I did not fully understand it with The Princeton Review.
4. The way things look at 3AM is not the way they look at 9AM. The anxieties every entrepreneur has, like ‘will I make payroll this week?’ at 3AM, have answers at 9AM.
5. Start with mission. What are you trying to do that matters? That will keep you going a long way.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-).
I would create a movement focusing on accountability in education. Measurement in education is too important to be left to psychometricians. The things we measure in the short term, like attendance and test scores, don’t matter. It is the things that predict long-term outcomes that do matter, but which we don’t measure. Will you be employed at a living wage, will you be happy and healthy, a contributing member of society?
Figuring out metrics that are flexible and blend things you can measure in the short, medium, and long term would create a tremendous amount of change for the better. Take different curricular approaches, different philosophical and pedagogical approaches.: How do the kids who try different approaches do in high school? Do they finish? What are their grades? Do they go to college? Over the next five years we could easily determine which curriculum and structural process approaches work. Yet we don’t. This country’s 55 million students a year create buckets of data that we throw away. In this incredibly data-rich age, we know nothing about what works.
This is a $500–600 billion K-12 industry and doing this might take a couple million dollars. The average tech company spends 20 to 25 percent on research and development, but with schools, we spend nothing. Well under 1 percent. Is it really a surprise that things change so little? We need a different approach to data and accountability. The starting point is what do we want to measure, and how?
How can our readers follow you on social media?
Twitter: @JohnKatzman, @NoodleEducation
FB: @Noodle
IG: @Noodle_Test
