Do you remember watching Schoolhouse Rock and learning something in an entertaining and enjoyable way? If you are wondering why no one is bringing this immersive style of learning back, you should know that Flocabulary is on it. A bootstrapped for over a decade, the NYC-based startup has raised its first round by using rap as their medium of education primarily for grades K-12. The company has already tasted success with a reported 25% reading improvement in users.
Today we sit down with cofounder and CEO Alex Rappaport to talk about the company as well as the details of the company’s first round.
Who were your investors and how much did you raise?
We raised $1.5M in convertible debt from Rethink Education, an education-focused VC firm based in White Plains. We had bootstrapped for more than 12 years, so it’s a little hard to put a label on this round. I’d call it a bridge between self-funding and potential bigger rounds to come. The strategy was to provide some cash flow and growth capital, but also to bring on some strategic investors who are connected in our space. The guys at Rethink were showing their value as advisors and networkers before the deal was even done. We’re thrilled to be working with them.
Tell us about your product or service.
Flocabulary is a web-based learning program for all grades and subjects that uses educational hip-hop music to engage students and increase achievement. Some teachers have called us the “Schoolhouse Rock” of the hip-hop generation, but our product goes much deeper than songs and videos. We build instructional resources around the videos we create, and we’re aiming to help students develop core literacy skills across the curriculum. Teachers in more than 50,000 schools have used our program. You can check out a free video on linear equations here. Remember this from 8th grade math?
What inspired you to start the company?
In the beginning, we thought it would be cool if a rapper released an album of songs that used SAT-level vocabulary words. We decided to be that rapper. But after we started visiting schools to perform for kids, we realized that there was a much bigger problem we wanted to solve. In short, kids are not engaged in school, and when kids are not engaged, they don’t achieve at their highest potential. By using educational rap as a springboard, we believed that learning could be more fun, accessible and effective for students of all backgrounds. We’ve seen that borne out in various studies we’ve conducted over the years.
How is it different?
For one thing, we use rap to teach. That’s rare and different in itself. But there are differences in our philosophy as well. We’ve always been committed to students first. While we align our materials to federal and state educational standards, and have immense respect for pedagogy and research, we’re not making these videos for parents or teachers or administrators. We believe students will be more motivated to learn when their interests are authentically respected and reflected in the curriculum. If you lose the kids, you’ve lost everything. So we work hard to create real music alongside rigorous curriculum.
What market you are targeting and how big is it?
We’re primarily focused on the U.S. public K-12 school market. There are around 100,000 schools across 14,000 school districts. We’re starting to explore other markets as well. The consumer, international and corporate training markets are particularly interesting right now.
What’s your business model?
We have a recurring subscription model with plans for individual teachers as well as schools and districts. Most subscriptions renew annually. Our marketing is built on a free trial model. Teachers at more than 50,000 schools have participated in our trial. We currently have paying subscribers in more than 12,000 schools across 3,500 districts.
We also generate revenue through licensing and custom content. One of our most recent partnerships was with Bill and Melinda Gates. We created two videos to help explain the major priorities in their 2016 Annual Letter. We also recently teamed up with the UN.
What has it been like to build this company for 12 years and then take on a round of funding?
Bootstrapping is hard, but it gives you time to establish core values. I think that’s important before getting flooded with cash and spending it on kombucha. We know who we are, and we know how we want to make an impact. Scaling on this solid foundation feels more secure to me, and it’s a point of pride that we’ve been able to take it this far on our own. The narrative in the tech world can seem to center around how much you can raise, as though the amount raised equates to the level of success. I’ve always been of the mind that running a company with strong growth and happy people is a better mark of success.
One other thing I’ve noticed is how much attention we’ve gotten from closing the round. Raising money is definitely a shortcut to generating buzz in the startup world. But I’m not sure that’s a reason to rush it.
What was the funding process like?
We had never gone the institutional route before, so I had a lot to learn. I started by reaching out to other founders in the space who had gone through it. Then I came up with a list of my top 5 target VCs and found people who could make warm intros. One lesson I learned is that you only get one shot to be introduced to someone. You should choose your introducer wisely. What if your target hates the person introducing you to him or her? Guilt by association isn’t going to help your case.
After getting the intros, the question was how much money and from whom. We ended up getting a term sheet for an A round but turned it down. After bootstrapping for so long, we decided to be more incremental about raising capital and opted for the convertible note. Plus, we were in the rare position of not having our backs up against the wall and needing to raise. So we took our time and chose the firm we felt most aligned with.
What are the biggest challenges that you faced while raising capital?
There were many challenges. Honestly, some investors didn’t seem to know what to do with our business. We had bootstrapped to significant scale and were profitable. We were too big for a lot of VCs and too small for PE. In some cases, our revenue even hurt us because investors felt our model and market was too defined. That struck me as a little bit crazy.
What factors about your business led your investors to write the check?
On one hand, we’re solving a real problem, particularly around engagement and accessibility in the classroom. Our investors genuinely care about education, and I think they recognize that we’re taking a unique approach that will impact the kids who need it most. We also have strong numbers. We bootstrapped to more than $5M in annual revenue – a rarity in edtech – and have been profitable since 2008.
What are the milestones you plan to achieve in the next six months?
This summer, we’re launching a set of features that will teach core literacy skills and also provide an outlet for student creativity. One of those features is called Lyric Lab, which will allow students to write their own academic rap songs. This is the next level for Flocabulary, and it’s where education is going in general. Edtech is generally too passive. We’re now building tools that will put students in the center of the learning experience and use technology to bring the curriculum to life in unprecedented ways.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Take advantage of the amazing resources we have here – meetups, co-working spaces, incubators, accelerators. There has never been a better time to become an entrepreneur. Access to capital, technology and mentorship is easy. The trick is getting started and sticking with it. It took us about 8 years to hit our stride. Many of the best companies didn’t make it overnight. Solve a real problem, listen to your market and make something people want to buy.
Where do you see the company going now over the near term?
We’re going to deepen our product and widen our sales model. The K-12 market remains our primary focus, but we’re actively exploring new markets and new partners. Because music is such a strong cultural force, Flocabulary has infinite potential. We just have to unlock it in a disciplined way.
What’s your favorite restaurant in the city?
All things considered? Franny’s on Flatbush in Brooklyn.