July 28, 2020 | Ivan Martin
Freshgrade: How COVID-19 is changing online education
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Freshgrade is a learning network that seamlessly integrates a digital portfolio, a flexible grade book, and a real-time communication platform. The company utilizes social-media types of tools to boost the dimensionality of the learnings that happen in the classroom to make sure that students, teachers, and parents can support each other throughout the learning experience. They are based out of Kelowna, BC.
Jason had the opportunity to interview Lane Merrifield, CEO and co-founder of Freshgrade. During the interview, they discussed the size of the impact that COVID-19 has had on the education industry. After the closure of many schools, the virus has turned the industry up on its head and it has left teachers trying to find new tools to substitute the learning processes that were once happening in physical spaces. Jason and Lane discuss how Freshgrade has pivoted to accommodate the transition towards online learning, their newest upcoming version, the dynamics that working from home has brought into the company and how they envision education in a post-COVID 19 world.
Jason and Lane also talked about the ins and outs of the sales cycle in this industry, the efficacy of government programs concerning venture-backed businesses, and how Lane has had to make personal changes to his working routine.
POLICY ACTION RECOMMENDATIONS FOR THE ONLINE EDUCATION SPACE
- Ensure that there are enough programs that are accommodative to venture-backed businesses that would otherwise not be able to qualify for government aid in the form of CERB, the wage subsidy.
- Make sure that the terms offered by the programs backed by the government and the BDC to help ventures are founder-friendly
- Run companies in such a way whereby founders are not pressured by investor enthusiasm or boards to spend resources in a manner that leads them to burn cash and not be able to respond to unexpected situations such as COVID
- Incentivize technological innovations in the space
Headquarters: Kelowna, British Columbia
Number of employees: <20
Government support programs/grants being used pre-COVID: SHRED
Government support programs/grants being used post-COVID: SHRED, IRAP
Core challenges post-COVID: Monetizing their business model after having made the platform free for teachers during COVID, ensuring the proper functionality of their newest version and a proper transition towards long lasting online education,
Jason: Hi Lane. Thank you so much for agreeing to this interview. I am super excited to hear about you and Fresh Grade´s progress and how COVID has been impacting your business. Hopefully, we will be able to share some information and your thoughts with policy makers to help other businesses as well as the government as we come out of this. So to start, could you please share with everybody a little bit about what is exactly that you guys do at Freshgrade.
Lane: Sure thing. Fresh grade is a portfolio platform that allows for the capturing of learning. The idea is that what happens in school is such a black box compared to the rest of our lives, which is full of data. We have social media data coming in on our friends and our family, we’ve got more data than we’ve ever had access to at the office, at the workplace and in our businesses. But school continues to be kind of this black box, even today.
So we thought about making an easy to use platform by utilizing the type of social media tools that people are accustomed to for teachers and students with the objective of capturing the learnings that are taking place in the classroom. This allows us to show learning in a more dimensional way rather than just being like “Hey, here’s a test score, here’s a quiz score and that’s it”. So this helps the learning process while at the same time being able to share with parents what’s going on with their child’s education so they have a better idea of how to help them.
And so we launched it a few years ago. At first it did well but we just kind of kept bumping along and growing year over year. It was nothing crazy, we didn’t have a big huge hockey stick. We started getting some positive feedback. Teachers that started using it, loved it. So our retention was really high. But for a lot of other teachers, they didn’t really want to use another tool because they did not need it. Nonetheless, the stats were in our favor. Parents loved it, the relationship with the parents had never been better and the ability to capture the learning in more dynamic ways was really strong. Student scores also improved.
So we were in a situation where we had all of this great data, but at the end of the day, it was still seen as kind of a nice thing to have but not as a need. And then COVID hits overnight.
What we were doing historically was connecting the parent with what was happening in the classroom. But with COVID, we figured we could use the same tools in our platform to connect the teacher with what was happening at home. Since we already had these great tools and parents already knew how to use them, the transition became far more seamless for teachers, parents and students who were using Fresh Grade compared to other tools. This is because the daily pattern wasn’t changing all that much.
Teachers create the activities, set their expectations, put in the directions and resources and then the students are able to upload to their own portfolio the work they were doing. Students capture not just the end result but also the work along the way. Everyone can comment on what’s working, what’s not working, ask questions to each other, etc. So overall, this kind of communication loop that we had built originally to extend the classroom into the home, now was in the home extending back out to the teacher in “the classroom”.
I mean, it’s been crazy. The team really has rallied. Originally, we were averaging about four or five million pieces of data being uploaded to the system every week and that has shifted to almost 25 million pieces of data being uploaded every week. We’ve had to upgrade the servers four times now and the infrastructure. The growth numbers are fine but the most impactful thing are the stories that we got from teachers who said, “Hey, I fared so much better than my co-workers”, “This was a lot easier for me and my family”,etc. It’s been great as a growth story.
Certainly from a revenue perspective, the story has been a little different. We haven’t seen that part yet because we wanted to make it free for teachers to use during COVID and make it as successful as possible. And I think we have done that. I think that if we can continue this type of usership into next year, it will sort itself out. I’m not too worried about that part.
Right now, the biggest thing for us is making sure that the tools are working every day, making sure that there are no issues or crashes or bugs in our products. Interestingly, we are currently on the cusp of releasing a brand new version that adds even more powerful tools into the equation which we have actually been working on the last year and a half.
I´d like to think that we responded very quickly and built the ultimate perfect brand new tool that is perfect for the COVID world, but that is just not the truth. I think we are just getting lucky in that we have this brand new tool released in the summer that is going to take everything that we have learned and all the ways in which have grown into the next level.
We obviously were able to modify things easily when COVID since we were in the last handful of sprints. So when that happened, we shifted a few things around, changed vernacular and now it should be the ultimate remote learning tool.
Jason: Very cool. So the tool helps teachers, parents and students with a lot of communication and activity sharing while working remotely. Do you view this tool as something that will continue to support students, teachers and parents when people return to the classroom eventually?
Lane: Yeah, absolutely. Because we had good retention as soon as people tried it, the challenge has always been the headwinds against trying new tools. For a lot of teachers, even young teachers who are happy to try new consumer apps all the time, once they get a certain system in their classroom, they kind of get locked into it. So of course it has always been early adopters who will try everything. But there were a lot of teachers who said “hey listen, I’m sure it’s great. I hear from all my co-workers how much they love it, but I just don’t have the time to adopt anything new right now”.
The whole education world has kind of been turned upside down after COVID, and so has been the openness to try new tools. Even in education circles, people are saying that it’s almost like we have gone forward ten years. I also feel like the whole industry has fast forwarded ten years. Tools and apps that were once just kind of nice and helpful, are now critical in the classroom . Historically, there were also some headwinds with dogmas around the industry and what they wanted to allow their teachers to use. There’s kind of processes and procedures in place to limit teachers from using too many different tools and things like that.
All that got thrown out the window when COVID hit. Now schools were like “Try whatever you want, just figure out a way to make it work and we’ll sort it out later.” And so, it’s great. It did open up a lot of new opportunities for us. Obviously I wish this had been done under different circumstances, but we’re here. I’m just glad that the tool was able to be so helpful.
Jason: Awesome. So it sounds like things are going great for you and for your business with COVID and that you guys are helping a ton of people, which is fantastic. What would you say are some of the most unexpected surprises that you’ve experienced so far with your team or potentially with engagement in terms of supporting the teachers, students and parents to use the product?
Lane: For me the most surprising thing is how flexible everyone had to get almost overnight.
We always had these kinds of crazy hoops that we felt we had to jump through in order to prove ourselves and overnight teachers and parents changed their behavior and it was almost like going back in time and asking ourselves what the end goal is.
The end goal is to try to educate, it is not about just teaching you some stuff for a test. It is not about keeping the same curriculum we have used for the last 20 years so it is what it is. Instead, we were put in a situation where we needed to figure out what works and where to adapt. It is an agility that has swept over the education system that I’ve never seen before. That was really surprising.
From our team’s perspective, we had already been allowing remote working, thankfully. So Zoom and all of the working from home dynamics were very deeply embedded in our culture already. The team really hasn’t missed a beat. In fact, some of our sprints have been outperforming where they were a few months ago and so from that perspective, I’m really proud of the team. I think they’ve done a great job.
I also think they see the response from teachers and the impact that Fresh Grade has made and that’s kind of rallied them to work even harder. It really is a very mission-driven organization and a very mission-focused team so it’s been really inspiring to watch them.
Jason: Fantastic. Do you envision your team continuing to work remotely post-COVID or how do you think you’re going to structure things?
Lane: Yeah. We’ve already adopted a bit of a hybrid approach. We’ve opened up our office optionally for some people who don’t have great work from home environments. For one reason or another, they’re choosing to go into the office. There’s others who are choosing to stay home and we’re going to continue to allow that at least until there’s some sort of vaccine or until we have gone through the worst of it. Overall, I think for the foreseeable future it’s probably not going to change much, and thankfully like I said, the teams adapted pretty quickly. It’s not a big team, we are less than 20 people, so it’s not too difficult. We can all jump on the same zoom call which is kind of nice. I remember my Disney days when I was trying to manage over a thousand people, it would get a lot more complicated than this. I’m sure things are a lot more complicated for larger corporations right now.
Jason: School starts in like a month and a half or so. What are you guys seeing in terms of decision making between now and the start of the school year from the customers of your product? I don’t know who your customers are specifically. Is it the School board? Who is deciding on using your product?
Lane: So we obviously offer the free tool for individual teachers and then they offer a paid package for whole school deployments. Usually that comes after a handful of teachers have already been using it. For us right now, it’s just kind of a growth model when we are trying to get as many new teachers trying the product and using it. Usually about a semester after that, we start going and trying to sell into principles and districts.
With this new version, obviously we’re going to put on a lot of time and effort and energy towards promoting it.This is because it really does take a lot of the tools that we know were most utilized during COVID and just adds a ton of functionality and a ton of flexibility to them. So it’s kind of taking what was already working fairly well and just making it that much more powerful.
We’re going to be focusing on just getting the word out with that, introducing it to teachers, getting a lot of our existing teachers to transition over, etc. Like any good software, you keep learning and adapting and improving.
Jason: You mentioned a new version of your product is coming. Are there any other kinds of changes that you think Covid will enable or require your business to make? Are there more competitors appearing in the space? Are there other challenges that you think you will have to overcome as part of your growth?
Lane: There’s always new type of competitors appearing. But education is a funny industry though because it’s not like consumer tech or something where there’s unicorns popping up all the time. There’s really only been a handful of big successes. There’s been a lot of smaller wins, but frankly, it’s a unique industry in that way. It really is a war of attrition in education, it is a long battle.
Typical sales cycles that would be measured in weeks or months, are measured in years in education. There’s a lot of districts or schools that will oftentimes evaluate products for a full year before they even begin to talk about making a purchase. The good news is once you’re in it, it’s very sticky. You end up having good long-term relationships and contracts which is great, but it takes a long time to build these relationships. No one has really cracked the code yet.
We’re working on it in terms of finding some new possible revenue channels and new ways to add value.
Now, In terms of new challenges…Our most immediate challenges were just keeping up with the growth and keeping everything running well. That’s a good challenge to have
Jason: Definitely, it is a great problem and a great challenge.
Lane: And especially with our existing platform. The reason we are releasing a brand new one on a brand new stack is because a lot of it was in an old platform that was more of just an expansion of an MVP that never fully got cleaned up.
I’d always been an investor but I hadn’t really been running it. When I came in a few years ago to take over, that was one of the first things we did. We said, “okay, we’ve got to rebuild this thing.” We were just drowning on tech debt and every feature was taking six months, nine months to implement and then had to be implemented manually into every single version of Android and iOS and iPad. It was a pain. That said, when we found ourselves growing on that platform at a huge clip, it was all hands on deck. There’s bugs that came out at scale that weren’t there before and old skeletons we thought were buried in the closet, tech skeletons that we had to dig up and we had to fix and we had to repair.
I’m really excited about this new platform. Obviously it is a modern tech stack, it’s all react native, it’s all built for scale and so I think it’s gonna be great. I know there’s gonna be obvious hiccups as with any new launch but we’ve been testing the platform and we have been on beta for over a year now, so we’ve learned a lot. We’ve seen where a lot of the hiccups were, so we have stabilized them, we’ve hardened them and now it’s really about launching it big time and getting out of beta.
Jason: Very exciting. So you guys are based out of Kelowna. Why Kelowna?
Lane: Why not Kelowna? That’s the beauty of tech! The beauty of tech is oftentimes as long as you’ve got an internet connection, you go where people want to live, right? Recruitment has been great because people love living here and it’s certainly one of the most desirable parts of Canada, which is helpful. We also have an outpost in Vancouver. We’ve got a handful of our senior people that were recruited from there and are still living in Vancouver, which is great. Again, that’s part of the remote work that we had already been doing.
That’s certainly part of it and more and more, especially with COVID and people having to be hunkered down in their homes a lot more. Kelowna is going through like record growth right now because of it. All of the sudden everyone’s waking up and going like “Well, if I have to be stuck at home, why don’t I live in a place a little more enjoyable or why don’t I invest a little more on where I live”. So yeah, it’s good for the community here, we’ve got a great little tech scene, it’s been fun to be a part of it. I say that Kelowna is like a teenager, it’s full of potential and hasn’t fully decided what it wants to be when it grows up but it’s got a great set of talent. A lot of people who’ve kind of been successful in other parts of Canada, have decided to move here and now are kind of coming together and making some great products.
Jason: Awesome. Definitely… I’m not gonna lie. On my bike trip, I think Kelowna is probably top two of the places I would want to live… I just got to convince my girlfriend to come with me.
Lane: There you go! You know, we actually have an amazing hospital here, it’s UBC’s teaching hospital here.
Jason: Oh nice! So the government has rolled out a lot of support programs to tackle COVID and help businesses. There has been an unprecedented amount of fiscal policy stimulus directed towards small businesses. Have you guys been able to take advantage of any of these programs and if you did, were these helpful to you?
Lane: So yeah, unfortunately, we weren’t able to take advantage of some of the payroll protection and some other programs because our revenues were not down enough. Which is good! I’m happy about that. But, you know.. It’s got better now but when the programs first came out, they were very directed towards traditional businesses. There wasn’t much acknowledgment of the fact that, especially for venture-backed companies, raising became almost impossible for a long time. It’s starting to open back up again, but there was a long season where lots of companies went down. After COVID hit, If you were a pre-revenue venture bat and you were three months or four months before your raise, you couldn’t pay your bills and you also wouldn’t qualify for the traditional governmental programs.
Thankfully there’ve been a few new programs that have come out and that are helping. Some more owners than others. We’ve applied to the IRAP program and we’re able to benefit from that. Not in a huge way, but certainly, every bit helps. So that’s great. Obviously we were able to get our SHRED, which we apply for every year but that was accelerated a little bit because of COVID. Fortunately, we’re in a unique position where our business was not as dramatically impacted. In fact, quite the opposite… it was impacted in a positive way. So overall, we couldn’t quite apply for as much as what was out there so I can’t speak to all the programs but I do know that our government certainly responded and we fared a lot better than some of my friends to the South.
Jason: Yeah. Do you have any ideas in terms of programs that you would like to see rolled out either for you or on programs that you think could be helpful for other businesses?
Lane: I was a bit disappointed that the government partnered with the BDC on a program that was about doing loans for companies that were needing to raise. The program was backed by the inside ramp. The problem is, as it typically is with the BDC and some other banks, that the program was not exactly founder friendly. Whether it was the percentage of equity that they wanted or the interest rate that they were charging, it appeared to me that it was really high. Some of the stuff ended up looking more like credit card debt than real governmental support for small businesses.
I do see some of the positive aspects of it where they are willing to take risks on companies that maybe other banks would not take. But unfortunately, sometimes they end up charging more like a payday loan company instead of the seasoned and experienced investor group that we know them to be. So overall, I think there is some room to grow there.
I know of three or four companies that applied for the program, and when they saw the details they backed out of it because they said it would obliterate their cap table and that kind of stuff.
Jason: I think that is great feedback, I’ve heard that from a few other founders as well where they said that their terms were a little bit more onerous. Sometimes, Interest rates were high but relative to their risk, appropriate. However, some of the secondary terms in there made it tough for the businesses to accept.
Lane: I’m not an expert on it but I know some VCs that took a look at the terms and said “Listen, if you run off at these terms, we’ll give you more money. But we don’t recommend these terms really”.
Jason: Absolutely. So we keep hearing how this is an unprecedented time and no one could have predicted this. Pandemics are a one in one hundred plus years kind of thing. However, if you had a time machine and you could go back and speak to yourself a year ago and convince Lane that this virus was coming, what are some of the things that you would have done to prepare differently?
Lane: Thankfully, I think the business was in fairly good shape. Like I said, we had already gone through the old tech change, we had done a handful of layoffs several months before, and kind of made the team really nimble and very focused, we had brought our burn rate way down, so a lot of those things obviously ended up being huge for us post-COVID.
I feel honestly really lucky that just by running the business aggressively and intentionally preCOVID, it set us up really well for when the virus hit to not be caught with a lot of stuff to clean up because we had already been keeping things pretty clean and tidy.
I would go back and tell myself, this is gonna last a lot longer than you think. You know, the entrepreneur optimist in me approached this whole situation with the same level of optimism thinking “Oh yeah, it’ll be a few months like this and that will be it. The media loves to sensationalize things so they say this will last into the summer but I think probably it is going to be two or three months and then things will be back to normal”. I think we all wanted that and that we all hoped for that but honestly, I didn’t plan or set up for the long term.
Frankly, it was only about a month ago that I got my office properly set up because it just felt so temporary. I said to myself that I wouldn’t put a lot of time into this temporary setup. It’s not obviously not a temporary situation.
The other thing is I had to learn how to be more intentional about brakes. I think being in an office, there are natural breaks that come, natural kinds of pauses in the day. I realized it was so easy for me to just blur right from the last Zoom call into some emails and then into some slack messages and right into the next zoom call to go back into emails. I would blink and four or five hours had gone by and I had not stopped at all. But one thing I did know was that I was exhausted, I’d become certainly more agitated, frustrated and I was getting edgy and I did not know why. I’ve had to learn a lot about how to be more intentional with brakes and things like that. I wish I would have learned some of that stuff faster. I think I made myself a lot more miserable than I needed to be for a few months there, yeah cool.
Jason: Are there any questions I have not asked that I should be asking?
Lane: Not really. I think these are great questions. I love that you’re diving into some of the stuff because companies and businesses are so diverse. The impact with this is so unique to every single industry. I feel for a lot of my friends who were in the restaurant or in the hospitality industry right now.
I feel for a lot of my friends who were literally two weeks from closing around and the whole COVID thing happened and put things on hold. Some of them ended up having to miss payroll because, understandably, all the VCs and LPs and everyone just shut down for about two months.
At Fresh Grade, we have been able to keep plotting along. We’ve got some great supportive investors and I think we’ve recently been really smart with their investment. It has further reinforced my recommendation and the advice that I give to founders all the time. Which is… don’t spend any more than you have to. Look for those opportunities to pour gasoline on the fire but don’t let the enthusiasm of the board or the enthusiasm of your investors get you on a spending spree that winds you up in having to take a lot of shots in the dark where you blow through a lot of cash. You never know when times like these will hit.
If we wouldn’t have been as disciplined as we had been for the previous year, I think that even with the growth opportunity, we would not have been able to survive. We would not have been in a situation to be as agile as we were.
Jason: Awesome. Thank you so much for your time Lane. Those were all the questions that I had.
Lane: Thank you, have a safe bike trip!