Episode 136: From College Choices to Education Empire with Luke Skurman, CEO of Niche
Episode 136: From College Choices to Education Empire with Luke Skurman, CEO of Niche
In this episode of Product Thinking, Luke Skurman, CEO of Niche, joins Melissa Perri to explore the incredible story of Niche's journey from helping students choose the right college to become a successful company in the education industry. They dive into Niche's first years, how the company adapted to the changing landscape, raised funds, and achieved rapid growth when it switched from a survival mindset to a growth mindset.
Luke founded what was initially called College Prowler, which has now evolved into Niche, one of the foremost content startups in the United States. He also co-founded and serves as the Chairman of Thrill Mill, an innovative non-profit accelerator formed of a business plan competition, an incubator, and a music festival.
As a testament to his leadership, Luke is the inaugural curator of the Global Shapers Pittsburgh Hub, an initiative affiliated with the World Economic Forum. Recognizing his entrepreneurial spirit, Ernst & Young honored him as the Entrepreneur of the Year for Western Pennsylvania & West Virginia in 2016.
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You’ll hear them talk about:
[10:26] - Luke revealed that College Prowler's evolution involved retreating to its root idea: a free website monetized through connecting students to colleges, partnerships with financial institutions, and collaborations with military sectors. However, in 2013, the company rebranded into Niche and diversified into covering over 130,000 K-12 schools, inspired by the partial coverage from greatschools.org. 2014 marked Niche's entry into the Places to Live segment, covering U.S. cities, towns, and neighborhoods as the brand identified a link between school quality and housing decisions.
[19:45] - Niche faced a funding challenge, leading Luke and his team to take an unconventional route. They crafted a 100-page Private Placement Memorandum and pitched it to individual, accredited investors, bypassing traditional venture capitalists. Over eighteen months, from late 2015 to early 2017, they met with 161 investors, securing $4.6 million from 60 affirmative responses. By March 2017, Niche had built its sales force, ended ties with its channel partner, and modernized the platform for better accessibility and adaptability, which placed it in a solid position for growth.
[22:00] - During Niche's growth phase, they streamlined their sales process, hiring dedicated account executives to target colleges and K-12 schools. With a platform reminiscent of Glassdoor or Yelp, schools could upgrade to a premium profile, attracting more high-intent traffic. By the end of 2017, the revenue from these new partnerships nearly eclipsed the old channel partner earnings, far surpassing expectations. With increased funds and a forward-looking approach, Niche transitioned from staying afloat to strategic growth and investment.
[27:55] - As a CEO, Luke focuses on reaching $100 million within five to seven years. While Niche's ARR grew, its growth rate decay dipped below 80%. Two challenges arose: a plateau in acquiring new logo ARR annually and stagnation in Niche's expansion revenue despite a strong net retention. The company aimed to move further down the enrollment funnel to address the attribution challenge. Moreover, a pilot with two universities was launched, offering real-time admissions and scholarships through Niche's platform. In 2023, the company has been concentrating on perfecting the "direct admissions" program and onboarding 100 colleges by year's end.
Episode Resources:
Melissa Perry - 00:00:01:
Creating great products isn't just about product managers and their day -to -day interactions with developers. It's about how an organization supports products as a whole – the systems, the processes, and cultures in place that help companies deliver value to their customers. With the help of some boundary pushing guests and inspiration from your most pressing product questions, we'll dive into this system from every angle and help you think like a great product leader. This is the Product Thinking Podcast. Here's your host, Melissa Perry. Hello and welcome to another episode of the Product Thinking Podcast. Today I'm joined by Luke Skurman, who is the CEO of Niche. It was formerly called College Prowler, and he has a great story for us on this growth trajectory that they've been on, how he started the company, how they've met some challenges, and how he overcame them. So welcome, Luke.
Luke Skurman - 00:00:57:
Thank you, Melissa. I'm really excited to connect today.
Melissa Perri - 00:01:00:
So first I have to ask, is it niche or niche? How do you pronounce this word? Because I've never known.
Luke Skurman - 00:01:05:
No problem, great question. It's actually a question that comes up all the time. I grew up saying Niche. I grew up in Northern California, but when we were rebranding the company from College Prowler to Niche, and I know we might touch on that later, we felt like Niche sounded a little less hoity-toity, a little more Americana. So we went with Niche, but really we realized that folks say it in a variety of different ways and there’s we really don't police it by any means. So feel free to say however you feel most comfortable.
Melissa Perri - 00:01:35:
Okay, that makes me feel a lot better. I was really worried about mispronouncing that, but I do think it's a much better name than College Prowler. So congratulations on that. You came up with a really good one.
Luke Skurman - 00:01:47:
Thank you.
Melissa Perri - 00:01:47:
So tell us a little bit about how did College Prowler, and at the time I guess it was called College Prowler, how did it get started? How did you come up with this idea?
Luke Skurman - 00:01:55:
Sure. I was born in New York City. We moved to San Francisco when I was very young. Dad didn't want to live in the suburbs. Mom didn't want to raise me in the city. When I was in high school, I went to a public high school in Northern California and I was just really obsessed with trying to choose the right college. I got my hands on every guidebook, every resource I could imagine and it just became this obsession of mine trying to choose the right college. And I didn't really want to stay in school in California. I wanted to spread my wings, do something more on the East Coast, get closer to cousins, grandparents, uncles, what not. All my research at the time, it felt like the perfect school for me. It felt like it was going to be Wake Forest University, great basketball team, ACC, good academics, good business school. You got a free laptop, a free printer, good weather. It felt like it and check so many boxes then I went to visit it and it was a little bit slow, a little bit of the deep South, a little homogenous for me. It just didn't feel like who I was. Ended up applying to Carnegie Mellon, NYU, Penn and Georgetown. I wanted to go to a school where I could take a nonstop flight in a major city. Didn't get into Penn, didn't get into Georgetown. Came down to Carnegie Mellon versus NYU. I love New York City, but I just wanted more of a campus. I felt like New York was a great place to live, maybe my twenties, but Pittsburgh and Carnegie Mellon just felt right. And then I got to campus and I kept asking people, how did you choose Carnegie Mellon? And people kind of shrugged their shoulders and said, my counselor told me it was good, or my friend told me it was good, or a family member. And I was saying to myself, wow, this is just such a big decision. Gonna move 3000 miles across the country, hundreds of thousands of dollars, make friends, make a network, leads to a job.
This is like a big inflection point in your life. And I felt like people were rolling the dice and it was generally going pretty well, but the whole process felt like it could be improved. And there were a couple of things that felt missing from the journey for me. Number one was that I felt the students kind of, this is user generated content, kind of pre-yell, pre-trip advisor. I didn't feel that they had enough of a voice in the process. And I felt that the existing content was relying too much exclusively on the academics, but I was really curious about Greek life, or dorms, or the weather, or nightlife, or the food, or all the things that make or break the campus experience. I was very confident in visiting a lot of colleges that you could get a great education at many institutions, but where were you gonna really fit in and thrive? And that was the harder thing to ascertain.
Melissa Perri - 00:04:39:
So out of that, what made you go, hey, I'm actually gonna build something for this, right? Like that's pretty big leap.
Luke Skurman - 00:04:44:
So when I was a sophomore in college, so this is the year 2000, like it was the dot.com. I mean, it was so exciting. I mean, you would read about it and it was just wild. It felt like a gold rush going on. And I kind of wrote down in a journal, a bunch of ideas. And I felt like this idea of modernizing how people choose the right college really resonated with me. My friends thought it was cool. And then the fall semester of my junior year, I enrolled in an entrepreneurship class. And for the first time in college, I felt like I found my perfect class. Like I originally thought I was going to go into finance and finance was way too deep and actually theoretical. Entrepreneurship was like a little bit of everything, a little bit of marketing, a little bit of management, a little bit of finance, a little bit of accounting. It was just like a little bit of everything and it felt very creative and I just loved it. And started writing kind of the business plan in an undergraduate entrepreneurship course. And my professor at the time said, Luke, all these dot.coms are failing because they can't get big enough fast enough and they're relying exclusively on advertising revenue. So I might've listened too intently, but I said, that's not going to be us. We're going to generate real revenue and we're going to self publish physical books. So one on Carnegie Mellon, one on Harvard, one on UCLA, literally like a CliffsNotes guide to each individual college. That was the business plan. Literally I didn't know what I was doing, but that was the concept. And upon graduating from college with my bachelor's in 02, began running the company full time and from 02 to 07, that was our only revenue stream with self publishing physical books. And we sold 500,000 books. We sold millions of dollars worth of books, Barnes and Noble, Borders, Books and Million, college bookstores. But the book industry has really low margins, bad cash flow. And if that wasn't enough, you could just feel that most people were going to the internet for information. I love books. In 08, Borders went bankrupt. Private Equities recently bought Barnes and Nobles. Bookstores are unfortunately a shell of what they used to be, and we could just feel that we needed to kind of move more towards the internet.
Melissa Perri - 00:07:08:
That was really smart. You could definitely see like pre-Amazon, you know, books, everybody went to Barnes and Noble, but now everything's consolidated on Amazon. So you're looking at this, this must've been a shock too, right? Like your main thing that you do is now becoming slightly obsolete. So like what's running through your head? Like how are you responding to that and trying to figure out where do we concentrate now? How do we actually like pivot?
Luke Skurman - 00:07:34:
At this point, between 02 and 07, we're working so hard. We're just getting to, let's say, a million dollars in book revenue, but it's not a sustainable business. We're still burning tons of cash. It's not sustainable. And you can just feel that you need to do something quite significant to do evolve from here. Then the next move was we have this kind of depository of incredible content. Let's start charging for access to this great content, kind of like a consumer reports for colleges. And we said to ourselves, again, you're going to spend hundreds of thousands of dollars. You're going to gladly spend money to subscribe. And it was modestly successful. I would call it a single at best. It generated maybe a couple hundred thousand dollars of subscription revenue, but most Americans, I believe, do prefer an advertising -supported model versus a paid model. You can see now 10, 15 years after that, Disney Plus and Netflix and Wall Street Journal and New York Times, there's some models that are working. But by and large, a subscription model is not an easy endeavor to pull off.
Melissa Perri - 00:08:47:
That's really interesting because, you know, as you were saying, I would have thought that if you're investing so much money in things like SAT prep and like preparing for colleges, you would gladly pay a couple bucks per month for a year or so to be able to see what these colleges are about. But did you go out there and talk to them and find out like why people were so adverse to that?
Luke Skurman - 00:09:09:
I think that it's not as big of a market, first of all, as people might think it is. There's about two and a half million high school seniors go to college every year. And then you have to attract those folks. Not all of the students have a credit card. They have to go talk to mom and dad. They have to come back. It was just harder than you thought. And we tried monthly models and yearly subscriptions, but pulling off a subscription model, that was not going to be the big ticket winner either.
Melissa Perri - 00:09:36:
So you went from books and then you tried subscription model. What was next?
Luke Skurman - 00:09:41:
So what was next was essentially the original idea, which was making the website free and then monetizing that really through three revenue streams, connecting students to colleges, working with financial institutions, checking accounts, credit cards, loans, and then doing some work with the military for Army ROTC and Navy ROTC. So 2010 was our first full year as a free site. And we got about 2% of all college-bound high school seniors to create an account. So again, 2.5 million, 2% roughly, we got 50,000 free signups in 2010. By 2012, we had about 25% market share of college-bound high school seniors creating that in the annual account on Niche every year. And then at this point in time, we decided to essentially outsource sales to a channel partner who was already selling into colleges and whatnot. And we said, hey, we'll focus on product and engineering. You can be our sales arm. We'll split the revenue 50-50. And it felt like our main job then was just to build the best user experience, get as much traffic as possible, and they would help us monetize it. And for the first couple of years, that proved relatively successful, but we weren't really getting the feedback loop, wasn't closing back from what the colleges liked or what they didn't like. When we didn't have product engineering and sales all under the same roof, we weren't able to iterate and understand the market quickly and fast enough. While we were kind of on a somewhat of a good glide path with the channel partner, that's when we did decide to rebrand the company from College Prowler to Niche. And part of that was also we wanted to expand our addressable market. We were proud of the product we built. We had college rankings and user generated content and data and outcomes, but we felt like, oh God, we're only in a market where there's two and a half million high school seniors every year. What else can we do? And so in 2013, we rebranded the company from College Prowler to Niche.
Our favorite definition of niche out of the dictionary, out of Merriam -Webster, is a place employment status or activity for which a person or thing is best fitted. We were really happy to get that. We felt like niche really embodied exactly what we were trying to do. And we moved into our second vertical, which was coverage on 130,000 K-12 schools. So at the time there was one nonprofit in California called greatschools .org and we looked them up and said, wow, they have a lot of traffic. They cover individual public schools pretty well. They don't cover private schools that well and they don't cover school districts that well. Can we bring our content recipe from colleges to K-12 schools? So in 2013, we rebranded into Niche and we entered our second vertical, which was K-12 schools. By 2014, we entered our third market, which was places to live, which is coverage on every city, town, neighborhood and suburb of the United States, about 80,000 of them. And we found that if a parent was researching a K-12 school, they were often thinking about moving, that the price of a home is correlated to the quality of the school district. It was this very interconnected decision between school and where to live. So by 2014, we then had these three verticals, colleges, K-12 and places to live. The platform at the time was not mobile first and we had to build things for each vertical. So if we had a search tool, we'd have to build it once for colleges, once for K-12, once for places to live. We had vision at the time to kind of be able to spin up multiple verticals here, but the back end architecture was not scalable at the time and it was not mobile first. So that's kind of where we were through 2014, I would say.
Melissa Perri - 00:13:45:
And how big were you in 2014? Like how many people were working there?
Luke Skurman - 00:13:50:
2014, I would say we were right around 15 to 20 employees and probably bopping around $3 to $5 million in revenue.
Melissa Perri - 00:14:02:
That's a nice way for us to wrap around our heads of where you were at. So you've got these three things going on right now at 2014. Which ones are working? What are you observing in the market and how you're leaning? Is everything like gravy or were you experiencing any trouble?
Luke Skurman - 00:14:18:
We were very bullish about what we were doing. So at this point in time, we went out and met with some of the best venture capitalists in the United States, partners at the best firms on the East Coast, on the West Coast, got great meetings. And said, we want to build this platform for life's big decisions from college to high school to where to live, where to work. It could be multiple things. We felt we had traction. We felt like we had a recipe for spitting up more content. We felt like it was really the vision was becoming very clear to us. And every single VC in the country rejected us. They all said very similar things, which were, you've now been doing this for 12 years. Half of your revenues are tied up in this channel, partner. Your revenues are not growing that fast. You're based in Pittsburgh. We can't invest in this business. We like your traffic. We like your user generated content. We like your data, but this is unfortunately not an investable business. It was very tough and frustrating feedback to receive, but we really felt like we weren't going to be denied. We felt like we did want to raise some money. Part of what we wanted to do was build out a division further. And we did want to build out our own sales force in order to vertically integrate sales product and engineering, and then finish out building this platform to make it more mobile first and to be able to make all these things more scalable.
Melissa Perri - 00:15:51:
Okay, so at this time, you've got these channel partners. And for people who maybe don't really wrap their head around what that means, they're doing most of your sales, right? Like what kind of people were channel partners?
Luke Skurman - 00:16:01:
So in this example, the channel partner was, they were, they're famous for being textbook rentals and for different services for selling to students, but the company is called Chegg. They're still around today. They're publicly held. They have their own sales force. At the time they were selling into higher ed right into the admissions office and whatnot. And so we felt like, wow, this is just publicly held company. It has all this prestige. They're doing all this advertising. They're very sophisticated. They can represent us and they can help us kind of get into these colleges on our behalf. And then we split the revenues 50-50 and we really didn't have to have a sales arm. So everything they would send us was basically a very efficient revenue, but we were at their mercy really.
Melissa Perri - 00:16:45:
So that's kind of what made the venture capitalists scared. They were like, all of your revenue is really coming from these people and they have more control over what's coming in than you do.
Luke Skurman - 00:16:54:
And Chegg was selling other products and their own services and representing other things. I mean, we were just one of different things in their basket. And you always want to be in control of your sales. And I think that that was just strategically something that we had a weakness on.
Melissa Perri - 00:17:10:
So now you're thinking about, let's build our own Salesforce so that we can own the sales as well. How was that gonna make the strategy different for what you were doing?
Luke Skurman - 00:17:20:
So if we had our own Salesforce, we would probably have to end the channel relationship because it would be competing and conflicting with what Chegg was doing. So we knew that if we raised some capital, we were likely going to go back for a period of time to replace that Chegg revenue. We needed enough time to kind of buy ourselves that time to be able to hire out and figure out our own go-to-market motion and with our own Salesforce. And then put the gas a little bit on product and engineering as well.
Melissa Perri - 00:17:51:
Got it. Cool. So now you're at this inflection point, you can't raise money. Can you still build? Like what do you do at this point?
Luke Skurman - 00:17:58:
We're at a difficult moment and what we decided to do, which is a pretty untraditional route, is we created what's called a PPM, a Private Placement Memorandum, and it's this giant 100-page prospectus. You go to individual investors as opposed to funds and you tell them, these are the accredited investors that have a certain net worth and say, are you willing to invest in our company at these terms? So instead of begging the VC for a term sheet, you're going to the dentist, the lawyer, the accountant and saying, here's all the risk factors, here's our financials, are you willing to invest money at these terms? And so between late 2015 to early 2017, go on this 18-month very arduous journey to go money to stomach the ability to go backwards in time from the channel partner, but we do end up raising successfully $4.6 million. We end up getting in front of 161 investors. We got about 60 yeses, 100 nos. The smallest check was $25,000. The largest check was $500,000. And it was a total grind. Flying all over the country to raise this money. And by March of 2017, we had raised the $4.6 million. We had started building out our own sales force. We had ended the relationship with the channel partner and we'd really modernize the platform to make it mobile friendly and to be able to spin up new verticals more easily. So we felt like we were in a good position at that point to kind of control our own destiny at that point and go fast.
Melissa Perri - 00:19:50:
So you're now at this phase where you could start building, you want to expand into different verticals. What'd you do next?
Luke Skurman - 00:19:56:
I would say the first thing we really did was get the sales motion right by hiring our own account executives and trying to sell an initial product to colleges and to K-12 schools. We had this incredible audience. We have all this content. We have parents and students who are very engaged who are researching schools. It was a product that was similar to Glassdoor or Yelp where they could basically get an upgraded premium profile on their school. We had every school, whether or not you were a partner or not, but if you became a premium client you got some extra bells and whistles. We could drive even more high intent traffic. And so, what ends up happening in 17 is that much faster than we anticipated, we almost replaced all of the channel partner revenue by the end of 17 much quicker and faster than we and then we had more capital than we had raised than we thought we were going to... We didn't think we'd have as much in the bank as we would still have at that point. So at that moment in time, we really switched from a survival mindset. I would say we were surviving. This has been from 2005 to 2017. I mean, those 12 years, we were very good at surviving, figuring out how to just keep going. But it felt like we were on a treadmill, a little bit of a rat race. We finally kind of switched from a survival mindset to a growth mindset. And we can think a little bit further ahead. We know we can make some investments in the business. We can hire some right people. We have kind of our head above water. It's a massive change in the business to be able to really have that ability to invest as opposed to just survive. It's such a different place to be.
Melissa Perri - 00:21:42:
When you did survive really well for 12 years like, what do you think was the secret for that, to make sure that every little bump in the road just wasn't gonna collapse?
Luke Skurman - 00:21:53:
It's just working really hard, keeping employees really engaged. We had a great group of people. And I think at the end of the day, people believed in our mission. They really felt like we had this incredible content. We were really helping people with these really important decisions, like choosing a school, choosing a college, choosing where to live. It galvanized us to keep marching forward. We really felt like we needed to figure this out. We hadn't gotten the business model right, but we knew we had a product that users really cherished and loved, that we really believed that.
Melissa Perri - 00:22:24:
So when you're looking now at going into this growth phase, what's the company looking at like now? How many people do you have? What were we talking about like in scale of revenue compared to before?
Luke Skurman - 00:22:34:
Sure. So at the end of 17, we had, let's say, about a million dollars in ARR, an annual recurring revenue. And today we are over, we're about 330 employees today. And we are comfortably in the tens of millions of dollars of ARR today. Business has, you know, we raised a Series C financing at the end of 19. Assuming we finish off 23 as expected, we will have probably increased headcount by 3x in those four years. And we will have probably 8x the ARR as well in those four years.
Melissa Perri - 00:23:20:
So much bigger than it used to be. And definitely like in less time than it took to get to the first 12 years. Now you're in this growth phase. You've got your platform. You can hire more people. You're trying to figure out how to invest. It must be hard to switch from how do we not overbuild and how do we hire people in part with some of this revenue and find out what's out there? How do you approach that? How did you figure out where to invest?
Luke Skurman - 00:23:44:
I mean, the growth, once we, from 17 really till today, I would say the growth rate has been phenomenal. I mean, it's just been incredible. But what we've realized, I would say over the last six years is that you can't do everything. You have to prioritize and you have to really figure out where you're gonna get the best bang for the buck, where you can really move the needle. And in the beginning of the business, when you're in maybe single digit millions of dollars, you don't have to be quite as precise, but at our stage company, when you want a healthy growth rate and the numbers and the scale is this big, you have to be much more deliberate. Otherwise things, you just won't achieve the plan. You have to be much more thoughtful in your planning and the different initiatives to continue to kind of get the growth rates that you're expecting and then you're trying to drive towards.
Melissa Perri - 00:24:33:
So when you're figuring out what types of things to drive for, or measure how you're doing, what types of things do you look at as a CEO?
Luke Skurman - 00:24:41:
So by and large, I mean, there's something that I think there was like a famous thing that came out. I think it was called triple, triple, double, double, double, where if you triple your ARR two times, so let's say 1 million to 3 million, then 3 million to 9 million, and then you double it to 18 to 36 to 72. A lot of investors are trying to get to $100 million in ARR in about somewhere between five or seven years. And once we finally got kind of product market fit, we had the business model, we got to that first million in ARR in 17. The competitive nature in me was saying, can we be on that journey? I would say we were right there. Maybe a touch short of that, but really damn close to that. But as the numbers get bigger, there's something that I have found that is really important to take a look at, which is called your growth rate decay, where the numbers are getting bigger and the beauty of subscription SaaS type revenue is that by and large it renews, you get some net retention and everything can start to compound and the business feels quite healthy and it's exciting. But what growth rate decay is, so let's just pretend that this year for very simple math, the company's revenues grew 40% this year and last year the company's growth rates grew 50%. So you would grow, you divide the 40 by the 50 and your growth rate decay would be 80. 80 and above is very, very healthy. 80 and below, you got to work on something and you got to focus on why is your growth rate decay slowing down? Why are you decelerating? Are you not getting enough new business? Are you not getting enough expansion revenue from your base? Have you hit saturation in your TAM? There must be some mitigating factor to why you're decelerating and you have to isolate that issue. But from a vanity metric, from investors, from board, everyone's patting you on the back, they're saying you're doing awesome, but our growth rate decay was beginning to dip below 80, even though it was quite exciting, high growth, we were dipping below 80. And there were two central issues that I'd say that we were focused most acutely on.
Number one was we seem to have hit some sort of a plateau of how much brand new logo ARR we could generate each year. Somewhat of a fine night market, there's only so many colleges, so many K -12 schools in the country. But we were starting, there was only so much we could get at that contract value. And then the expansion revenue, we had higher than 100% net retention, we were getting more than what was up for renewal each year, but not materially more. So it really felt like, I felt like we're in this big TAM though, even though there's only 2000 colleges in the country, the education sector is by and large the fifth biggest sector in the United States. There's 70 million students go to college every year. We get about a million high school students register every year on Niche. If a million students are going to go to college, let's say it's 25 grand a year for four years, $100,000 times a million students, we're influencing $100 billion of tuition revenue every single year. That's a big industry. And yet we're generating tens of millions of dollars of ARR. It didn't feel like we were getting our fair share for how much influence we were having. We were the most trafficked site in the United States for students and parents researching schools. We had 35% of colleges as our clients, we had 50% of college-bound high school seniors registered as a full user. We had both sides of the market making progress. It felt like something was off. And so what we kept poking on was how do we really get more credit and how do we increase contract value and unlock this further? And in our business, there's a big issue related to attribution and first source and second source. So if a college buys names of high school sophomores from the PSAT after taking the they can buy all those names. That same student comes on our platform very engaged their senior year, they're doing all the research, they're really engaged. And then we send that student over to the college's CRM.
The college can say, oh, it's a duplicate name. I'm sorry. We're not giving you any credit for that name, even though in the moment they're ready to take action right now. The sophomore has never even maybe even expressed interest in that school. That's called a first source, second source, or first source, last source attribution. A lot of industries kind of have to go through similar dynamics. And We felt like one of the ways to solve this was to get further down the enrollment funnel, to go further down and to prove out our attribution even clearer and just make it so clear the true impact that we were having. We kept thinking about this. We wanted to change the trajectory of the growth rate decay. We wanted to really get higher contract value. We wanted to get more credit. We wanted to keep modernizing how students applied and attended college and just be a force for good in this sector that hadn't modernized for the last 100 years. Kept looking at it, kept looking at it, and we realized that 60% of colleges in the United States have an 80% acceptance rate. Everyone talks about Harvard, Yale, and Princeton, and they're phenomenal institutions, but they are really the minority. There are only 200 colleges in the country that have an acceptance rate of less than 50%. And a lot of people want to go to those top 200 colleges, but by and large, the vast majority of colleges are great schools, and they accept more than apply. They do. It's not that hard to get into college, but for a while, most families feel this tremendous stress and burden of getting in, and they think it's so stressful. They don't think they can get in. They don't feel qualified, but in reality, the majority of colleges have an 80% acceptance rate. And so, we kept looking at this and met with some colleges in December of 2021. Businesses was really in a healthy place, was big, we were doing well, but I was really determined to try to change this growth rate decay issue. I went to this university president, and I said, you all have an 85% acceptance rate, and you have a 12% yield. A yield is if you accept 100 students, 12 end up coming. I said, you have a very noisy and inefficient funnel. You basically accept everyone, and no one shows up. I said, it's not fun for your admissions team. They're stressed out. It's very stressful for the students and the families. No one's really winning in this regard. What I'd really love for you to all consider is that when a student creates an account on Niche, we get 37 pieces of data. They've already indicated on our platform that they're interested in your institution. We would like in real time to offer that student admission to your university. Just let them in. Say you've been accepted, and we want you to provide them a scholarship. Because what most families don't realize is that later on in the process, maybe after filling out their FAFSA, maybe after getting competing offers, they end up getting the scholarship or they get a discount rate, and they rarely pay the full sticker price. Up front, you don't realize that.
Maybe if you're a very savvy buyer, you know this, but most, if you see that it costs $50,000, you say, oh, I think it costs $50,000. You don't realize that they may discount it down to $25,000. So we argued. Let them in right on the niche platform and provide them with the scholarship. The president's looking at me and he says, they're going to take no action, just let them in and give them the scholarship. I said, that's exactly what we want you to do. So we got two colleges to participate in an unpaid pilot very late in the spring of 22, one launched in February and one launched in April. Even for colleges that have a high acceptance rate that are regional colleges, February and April are very late in the process. Even students that are staying close to home that have a going to less selective school, they may have already made up their mind in February or April. But what ended up happening is between the two schools, we influenced 40 enrollments and they understood that between them, those were incremental enrollments they were absolutely not going to get otherwise. So roughly $25,000 times four years is $100,000 times 40 students. We helped find them $4 million tuition revenue they would not have gotten otherwise, helped them hit their admissions goals, their enrollment goals, and we really felt like we really had ... There was enough here in the pilot to keep going. So then what we decided to do was formalize a paid beta where our clients pay for our core services that were working, that were on a healthy trajectory, but then we would charge an extra fee to be part of this new program that we called Direct Admissions. And it was really an opportunity to sell both the core and Direct Admissions as kind of more incremental enrollments to their institution. And so we ran that. We were originally targeting 10 colleges as a paid beta. And the demand was higher than we thought. We had 25 colleges in a paid beta for this admission cycle. So that's from the fall of 22 through summer of 23. And that beta cohort of colleges has proven out to be very successful. It looks like a minimum of 20 of the 25 full renew and then we could get as many as 23 or 24 to come back. So it's somewhere, let's say about a 90% renewal rate on a beta program. And we locked arms in the fall of 22, a facilitator doing some work with the executive team. And she really encouraged us and she said, what's the one thing that you have to accomplish in 2023? Not two, not three, not four, the one thing. We said, we have to make direct admissions a success. That was the thing.
That was the way to really get the business unlocking our potential further to change that trajectory of that growth rate decay. And from a product and engineering perspective, sometimes in hindsight, I recognized that when we were running a lot of different initiatives, the context switching, everything was hard. But if we could really aim some of our best folks on a really heady goal and really swarm a big concept, it could move the needle in a more dramatic way. So we put half of product and engineering on direct admissions. And the goal was really by late summer of 23, we wanna really be in a position to renew the beta clients, get even more colleges on the platform for this admission cycle. And from the user's perspective, there were three big features that we wanted. Number one was have a full platform with real-time notifications. They create the account, they get real-time offers, have a dashboard where they can compare the different offers that they've received, and then be able to filter which colleges offer direct admissions. So our product team, our engineering team did an incredible job that's launched successfully. That's this month in August here, that's big success. And we're on track to have 100 colleges in direct admissions by the end of this calendar year.
Melissa Perri - 00:37:36:
Wow, that's amazing. That's a great story of starting with a hypothesis too and testing it all the way through. So when you were doing the two tests with the first two schools and then you went into beta testing, it sounded like you didn't build out everything, right? Cause you now have to add these features. How did you figure out how to scope it? And how'd you run that experiment rather than like charging all the way through? And you could have built out the whole platform. Like why start small?
Luke Skurman - 00:38:02:
The two pilots, they were very manual, very laborious. We just said, let's throw headcount at it. We just have to make this work. Our Chief Operating Officer, Athena Meyer, she really quarterbacked the pilots and she's really been overseeing the beta program. And she previously was our Chief Product Officer. So we were fortunate to have someone with strong product chops helping to lead the charge here. But originally we were worried that we would overbuild when we didn't really understand all the problems of the clients and all of the users. And we said, let's just make it manual. And that's okay. Big problem, big opportunity. And then we'll begin to automate it and make it into the platform. But as we got to 25 colleges in the beta program, we realized that there were some limitations doing it manually, that we needed to move even faster from a product and engineering perspective and we couldn't afford to wait any longer. We had to start building out the platform solution sooner than we originally anticipated. It was really that the precipice of it was that the user was starting to receive too many different offers and it didn't feel congruent. And we needed to make sure that all of that felt holistic and smart and intelligent for the user, for the student.
Melissa Perri - 00:39:25:
So building that out too, it sounds like it did start though from a problem where you were like, we need to actually solve this problem, otherwise it's going to affect our test, like the results of it.
Luke Skurman - 00:39:34:
Oh, absolutely, yeah.
Melissa Perri - 00:39:35:
And when I think a lot of companies get really scared about doing some of these things manual, right? They go, oh, well, if they perceive that it's not a fully built out, you know, software function, you know, they're going to just churn. Did you find that or did you find that people were generally happy with it?
Luke Skurman - 00:39:53:
We were very upfront with the beta clients. This is a beta program. We're looking for your feedback. We're not trying to charge you for every nickel that we believe we're generating from a value perspective. And I think people were open to it. There was a real belief in higher ed that status quo was not working, that there are a lot more colleges than there are students interested. There's a demographic issue where there's less students just in general being born. There's concern right now in the value of college. The admission staff was stressed out. There's more student loan debt than credit card debt. There were tests optional where people weren't being required to take the SAT or the ACT. There was all these factors coming in at once. I think everyone realized that it needed to change and evolve. So there was a willingness on all sides to at least try this out.
Melissa Perri - 00:40:45:
That's really nice. I'm glad everybody was really on that same page. And I think it did help that you explained that to them. I try to tell people when you're running a test, you're not just gonna blindly put it up there, especially if it's manual without that context. You have to actually tell people what they're in for. So really great example of it. So you launched Direct Emissions. It sounds like it went swimmingly. It sounds like it's doing really, really well. So you've got maybe 100 colleges gonna be on by the end of the year. How did that affect the company? What kind of results did you see from this?
Luke Skurman - 00:41:16:
We're on track to hit all of our company level goals. We're moving very quickly. I mean, to go from two unpaid pilots in the spring of 22 to have a hundred paid clients with a platform by the end of 23 is moving very fast. Even for a nimble organization, our board has really applauded us for how well we've been able to get everyone cross-functionally on the same page, from legal and finance to product to sales to engineering, while keeping that healthy core business going but I would say the other thing that has really been in our favor is that our employees love direct admissions. They love that this is really a way to equal out the playing field, shift more of the power dynamic towards the families, a little bit away from the colleges, equal the playing field and really modernize the whole process. And so our employees have been energized about it from day one. And then when we do user research videos and whatnot, I mean, the videos of our students saying they've got accepted, they feel wanted, they feel appreciated. I mean, now feel good enough that I can go to college. It's just been so energizing on so many fronts.
Melissa Perri - 00:42:25:
That sounds really, really exciting, like a great project to really work on. So you've managed to take this company now, find this extreme focus, and there's a lot of executives out there, I think, who are, you know, said, how do I get people to focus? How do I make sure that we're actually growing? How do we make sure we're building the right things? What's your advice for them that you've learned throughout this process?
Luke Skurman - 00:42:48:
I definitely feel like you have to go after opportunities that are really big and bold. You do. I think it's better to swing big on one giant opportunity than to try to piecemeal together with five smaller opportunities. I also do believe you have to self-reflect and understand where do you really have core competencies. So, if I'd love to be in the payment space or I'd love to be in the job space, but we just have never done those things before, they may be big opportunities, but they're harder. So, I think it's the balance of where do you have domain expertise, core competencies, and where's the opportunity truly big enough to really move the needle.
Melissa Perri - 00:43:31:
Yeah, it's really good advice to kind of hone in and start to analyze that. And when you were talking about like not spreading people too thin over five big opportunities, I just want to clarify for the listeners too, when you're doing the beta tests with the two teams, did you put everybody around that or that was after you proved that it was actually a success?
Luke Skurman - 00:43:49:
The two unpaid pilots was a very small SWAT team, really Athena, our COO was really leading. Once it started to move towards a paid beta program and it was going to get up to 25 colleges, that's when we needed to start throwing a lot more folks at it.
Melissa Perri - 00:44:08:
Great, so that's when we're like, okay, we know this is working. We actually have some signals here. Let's go all in. Like we're doing this. Or executives as well thinking about your whole trajectory. You've been doing this for... Very long time. What do you feel like you wish you knew when you started this or in early days that you do know now?
Luke Skurman - 00:44:27:
I would say that they may seem simple and maybe they are. And I wish it hadn't taken me so long to understand these principles. But I think there are three things I would say it comes back to mission is at its core. You have to really love and believe in what you're doing and you really have to realize it always takes longer than you think. But beyond a true belief in mission, one I would say is the team. You're a product of who you surround yourself with. Sometimes you need to stretch and hire executives and more experienced people. Sometimes you need to scrap your early career people, but you need a phenomenal team. You do need a great team. And as CEO founder, it takes real effort to build out the team. You have to recruit, you have to sell, you have to work it. But you got to get that team in place. It's absolutely critical to get the team in place. So I would say team is critical. We raised the series C financing. All of our employees were based in Pittsburgh. We really had never hired any outside executives. And we've really embraced now distributed work. And we now have a great number of VPs and C-suite executives that have a lot of two-sided marketplace experience. And we've really brought on so much great talent to the team. So I'd say team is number one.
Number two is really honing in on your strategy. Where are you really gonna win? Where are you going next year? Where are you going in the next three to five years? Where are you playing in? And really being able to articulate it in a way that's clear enough for your board, for your executives, for the whole company that everyone really gets it. And you have to say it over and over and over and over again, you do. But you have to understand and be clear and deliberate and explicit with your strategy. And then number three, I know there's product-led orgs and there's sales-led orgs. And I really do deep down believe we are a product-led org. But when you have investors and you have boards and you're working on creating enterprise value, you're for better or for worse, you're usually being measured by your revenues, your growth rate, your profitability, and you're kind of on that stream and you have to stay on that stream. And so you have to be really tight on your GTM, your go-to-market strategy, how you're selling, how you're renewing, how you're expanding, how you're coming out with new products. You have to be super tight with your GTM, you do. So I would say GTM, overall business strategy, which leads to product strategy, and then your team. Those are the three things that I really think it comes down to.
Melissa Perri - 00:47:04:
Well, I think that's great advice for everybody listening out here. Thank you so much, Luke, for being on the podcast today. If people want to learn more about you, where can they find you?
Luke Skurman - 00:47:12:
Can email me, luke@niche.com. Always happy to get an email from folks and probably of all the social channels, the one I'm probably the most active on is LinkedIn, which is just, I guess my handle is /Skurman, my last name, S -K -U -R -M -A -N, but you can just let me out, Luke Skurman.
Melissa Perri - 00:47:30:
And we'll put those links in our show notes as well. Well, thank you so much for listening to the Product Thinking Podcast. We'll be back next week with another Dear Melissa on Wednesdays, so make sure that you send me any of your questions that you have about product management or anything. So we will see you next time.
Luke Skurman - 00:47:46:
Thank you Melissa, really appreciate it.