Since its inception in 2018, Beverly Crest-based education platform Generation Genius Inc. has grown significantly, and all without venture capital.
The company, a streaming platform that creates science and math videos for K-8 students, has one goal in mind: to become Netflix Inc. for educational content.
The platform is now used by more than 3 million students in 30% of the country’s public and private schools.
This rapid growth earned the company 88th place on the Inc. 5000 list of Fastest Growing Companies that year.
The company started with Jeffrey Vinokur, co-founder and CEO of Generation Genius, who holds a Ph.D. in biochemistry from UCLA and wanted to start a show about science to share his passion with the next generation.
“I wanted to spread that passion as far and wide as possible, and the first step was to try and get a TV show like Bill Nye, but that ultimately didn’t work out,” Vinokur said. “It was at that point that I realized there was a much greater opportunity to create this type of content for schools.”
With this idea, he bonded with Eric Rollman, an Emmy-winning children’s television producer. Prior to Generation Genius, Rollman also served as past president of Marvel TV & Animation and Fox Family Productions Worldwide before both companies were acquired by The Walt Disney Co.
“I wanted to do something that had more meaning and substance,” Rollman said. “The idea of working in the science field was very close to my heart because my dad was a science teacher… so I loved what[Vinokur]was doing.”
Generation Genius offers various subscription packages ranging from $95 to $1,795 per year. These packs come with lesson plans, quizzes, and other resources for teachers. In comparison, Disney+, another streaming platform for kids, costs $79.99 per year.
No VC, no problem
When it came time to unveil his company, Vinokur said investors just didn’t see his vision.
“In those early stages, I would go out and build a deck and pitch it. I flew to San Francisco. I emailed all the billionaires and no one really got it,” Vinokur said.
He said he would hear from investors who would say, “Schools don’t have money. How are schools going to pay for it?”, to which Vinokur disagreed, arguing that people were paying more and more for quality.
He sent out more than 500 pitches to potential investors. He was rejected by everyone.
Finally, in 2019, the company received support from the Howard Hughes Medical Institute, a nonprofit research and philanthropy organization, which awarded a $1 million repayable grant. Generation Genius received additional funding from friends and family, rounding out its total funding to $1.6 million.
The money was used to create the first 36 videos for grades three through five.
“It worked, but we didn’t generate a lot of money to fund a whole series of new videos. We needed more money,” explained Vinokur. “A normal company would do a Series A, so we went back to the venture capital guys and this time they were a little more interested, but not fast enough.”
Vinokur said the platform had to release new videos between August and September 2019 because that’s when instructors would start buying.
Their solution was crowdfunding. The team put together a website where ordinary people could invest directly in the company. And the startup ran ads on YouTube.
The company was eventually able to raise $1.7 million in additional funds with an average investment of about $1,400, just in time to begin production on the next round of videos to be released in the fall shall be.
“We got involved, but (investors) also got involved, that it’s not just about making money. That money will also have a social impact in the world that (traditional) investors don’t care about,” Vinokur said.
Follow the money
Although the most traditional way to start a business today is through venture capital, Michael Chasalow, professor and director of the Small Business Clinic at USC, said it’s not an entrepreneur’s only option.
“They have a history of ‘I started. I had a seed capital round with friends and family. Maybe there were some angel investors. Then I got venture capital, and that took me to the next level,'” Chasalow said. “If you talk to founders who are open, many of them will tell you that while venture capitalists are very helpful in taking a company to the next level, they are a huge part of the business.”
According to Chasalow, VC investors not only take over a large part of the equity, but also take control of the companies.
“They push for certain outcomes. Often it’s kind of a go big or go home model, so venture capitalists are interested in big hits,” Chasalow explained. “They’re not interested in a terrific success or even one that makes the founder really happy. You have to be successful on a grand scale.”
Chasalow said if startups could avoid venture capital, it’s definitely a better way because they’re not beholden to investors.
Vinokur said that if he had gone the venture capital route, Generation Genius would likely be in the Series C phase, but the company would be severely diluted because ownership would be split in so many different directions. In his case, he and Rollman own 100% of the company and are fully independent.
“I’m actually so grateful that these investors didn’t invest because they would have taken a large percentage of the company at that point. But because they didn’t, that percentage is essentially me and (Rollmans),” said Vinokur of Generation Genius.
“So thank you. I am so thankful they refused us.”