seedWatcher

PrepMe Doesn't Sleep

"We don't sleep," PrepMe CEO Karan Goel's says when asked about their competitive advantages in the burgeoning test prep market.

Launched in 2005 by Goel and co-founder Avichal Garg, and seeded with $20,000 in prize money from winning the University of Chicago's New Venture Challenge as well as $35,000 from a first place finish in the Fortune Small Business B-Plan Contest, the Chicago-based startup has prepped over 38,000 students for the SAT, PSAT and ACT.

In a nutshell, PrepMe uses the web to deliver an adaptive online course ($299 or $499) that "learns where students are weak and delivers customized materials to focus on each student’s individual weaknesses." The course is supplemented by continuous online testing and personal tutoring (in the $499 platinum course) from top-scoring college students who are experts in the test.

What struck me first about this company is how committed they are to building a long-term and respected business, not just barreling full-speed to the nearest exit. I think it starts at the top, with Karan being a perfect example of a next-gen CEO: actively engaged with the market. And that means listening and responding to the feedback from its customers, employees, advisors, the media and yes, even the bloggers. This is crucial when a company is first starting to grow, since that's when a company builds the framework and systems that will be with them for years.

Take for example, a May 2006 Consumer Reports review of ten online-only SAT prep options. PrepMe, quite new at this point, made the review. The review was less than rosy, mostly citing technical issues related to the platform they were using at the time. Karan responded to the report with a letter pointing out their quick resolution of the platform issues along with the move "onto our own adaptive learning technology which is far more robust than the ASP we were using in the past." He made available his email and phone in the letter, welcoming anyone who experienced any issues with the early version to continue prep for free.

To be sure, the pre-college standardized tests (SAT, ACT, PSAT) are some of the most challenging to manage from a customer service perspective. You have a transient test-taking population (customer) who takes the test on average about two times, who is under intense pressure in the highly selective college admissions process, and isn't exactly what you would call "loyal." Often it's parents making the buying decision but the student who ultimately must consume the prep course and tutoring. PrepMe bridges this gap by partnering with over 110 schools (so far) to offer prep services on an institutional level to enrolled students. This allows for longer-term relationships with educators who in turn have relationships with students and their parents.

I had a chance to ask Karan what lies ahead for PrepMe and he was excited about the upcoming addition of GMAT and LSAT prep, which currently in development. Also in the works, podcast versions of its classes that are viewable on iPods and other mobile devices. "We're trying to be the test-prep company for a new generation," says Goel. They sure seem on the right track.

Would you like a slice of $1 trillion pie?

When you think about the number of standardized tests a student just starting school today will take by the time they finish college some 17 years later, it's pretty remarkable. In the US alone there are over 300 million standardized tests administered each year. Globally, the number is over 1 billion tests a year. Current estimates of the standardized test prep market range between $5-7 billion, with a potential market of about 10 times that and growing at about 10% a year. (Sources: Eduventures, IBISWorld)

Test prep has been a growth story for quite a while, but still only about 10% of students taking those tests pay for prep services such as tutoring, classes or online study tools. Another 40% or so shell out for study guides, quiz books and other self-study material, but that still leaves a whole lot of students out there.

One more number to boggle the brain is the $1 trillion US educational market. We have two trillion-dollar-plus industries in the US: Health Care and Education. The private-sector's share of this pie is growing at a tremendous rate - though it's anyone's guess to exactly how much each year.

There's a reason that the education and learning is a space is one to watch. Web tools are rapidly transforming the traditional physical teacher/classroom model into a vastly more interactive and accessible platform. I think we're really just at the pioneering phase in online learning. The incredible growth of many of the online colleges in the past ten years like the University of Phoenix, DeVry, etc., is really just phase one of the coming revolution. The way our children learn in the next 20 years is going to rapidly change as new tools literally open up the world to them in ways once unthinkable. It won't be out of the question for a 4th-grader to learn Mandarin online in the middle of the school day on a school computer from a teacher in Mainland China. Or perhaps a student in the Congo to learn chemistry from a teacher in a lab in Chicago.

There are a number of different ventures out there looking to make this happen, and there's plenty of room for many different approaches. I think the ones that truly connect people to one another will rise to the top. Those that simply offer content will be fighting a losing battle - learning is interaction. Great teachers are essential and they exist all over the world. Now we just need to connect the students with them and each other.