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Interview with Skyler Lucci, HeyTutor

Skyler Lucci is co-founder and CEO of Los Angeles-based HeyTutor (www.heytutor.com), a startup which has created an online platform which connects and matches students with in-person tutors. The company recently raised a round of funding from Santa Barbara-based ScOps Venture Capital. We caught up with Skyler to hear about HeyTutor, which already has 25 employees and is growing rapidly. Skyler co-founded HeyTutor four years ago with his co-founder Ryan Neman four years ago, when both of them were both just 19 years old.

What is HeyTutor?

HeyTutor is about connecting people hyper-locally. There's lots of noise in the on-demand tutoring space, especially connecting people virtually, however, in my experience, it's in the best interest of consumers to get in-person, local tutoring. The reason the big players have gone the online route, is just the burden of managing those local logistics. Connecting people at scale is super-difficult. Uber, Lyft, Airbnb, and others have had to raise tons of capital and have super-solid foundations to go with the hyper-local play. However, being that I started a tutoring agency when I was 18, Beverly Hills Academics, I was able to understand the logistics on how to operate hyper-locally from the beginning, so HeyTutor could spend money on developing a platform where we knew exactly what we were doing. Now we're in over 100 cities and have over 10,000 clients, 10,000 tutors, and a platform which is working very efficiently, and gives the customer what they want. In terms of where we offer to our customers, we have 250 different areas, from early childhood to studying for an MCAT or the bar. We can match up clients based on their preferences for time of day, and even narrow it down to a specific school district. We're using technology to scale, and use it to be super-efficient, but we're also never going to be entirely hands-off.

You mention it's very difficult to make hyper-local work—what is it that you are doing that allows you to make it work yourself?

If you look at the other players, I believe, on-demand tutors will never exist. What I tell investors, friends, and family, is even though they might hear about all of these new companies calling themselves the “Uber for tutoring” and saying they can provide “on-demand” tutoring, I know that it will never work hyper-locally. Here's the reason why. There are unlimited numbers of people who can drive a car. Basically, you have to be 18 years old and have a license. Uber has a massive supply of drivers, which is why they're able to connect people instantly. In this industry, however, there are only so many people who can tutor calculus, so many people who can tutor the MCAT, within a specific area. The first thing we do, is we do a really good job at acquiring tutors. We pay the highest, and pay really well for our industry. Many of these other services pay under $20 an hour, and ours is an average of $30 to $35 an hour. How we attract the best talent, is we pay on time, and we provide them a lot of freedom. The second part, is our matching technology. Basically, once a sale is made, that client gets links to profiles on HeyTutor, and based on their preferences it might provide tutors within in 50-mile radius, a 20-mile radius, and the tutors who match up with those preferences will be notified through SMS, email, and our apps. The software does most of the job of vetting the tutor, but once that tutor is visible and our team knows they are interested in the job, that's where the hands-on touch comes into play. The team looks over times, messages the tutor, calls them to make sure they are the best fit for the student, and links them together. There's a lot more intricacy going into those algorithms and how the preferences work, but that's the general idea.

Why would tutors use your service rather than just find clients themselves?

That's a great question. The reason why, is the legwork required to get clients is tough. In this industry, customer acquisition costs are super high. If a tutor were to go out and try to advertise like we do, they would go under, and they'd lose money right away. Customer acquisition costs can be as much as $200 an hour. However, because of our marketing and how efficient we are, we're able to make it work. We were able to boot strap the company on only $800, and scaled it to millions in revenues without investment, because of the efficiency of our marketing. The second thing, is tools. If a tutor wants to tutor you, they would usually ask for cash or maybe Venmo, maybe bill you at the end of the month, but they'd have to pay for invoicing software, pay for Quickbooks, pay for bookkeeping, all those things involved in running a business and tracking things. With HeyTutor, we track those lessons, let you write notes down about your clients, we create a tutor profile for you and a hub. Our pitch isn't to be a tutor and work for our company, our pitch is you get to run your own tutoring business on your own platform, and we're not your boss. Instead, what we do is give you massive amounts of leads, do all of the marketing, let you apply to whatever you want, you don't have to worry about billing, and you get paid every single week. It's all automated, and we take care of all the billing and tracking transactions and hours, and you get paid right away. Tracking students, how their lesson are doing, and things like integrated chat are all included and streamlined. It's the hub. It's all of the tools any tutor would want, tracking anything, billing, payment, and leads. In most markets, and especially in markets like LA or New York, there are an endless number of leads.

How did you connect with Kevin and ScOps Venture Capital, and why did you decide to raise a round?

I'm a bootstrapper, and super-scrappy. I never was into the “Oh, let's go fundraise” mode. So, in 2017, we though it was very important for us to understand the unit economics. It's imporant to understand the lifetime value of your customer, understand your customer acquisition costs, and understand your operating margins. After you've done that, and see that it is working, as an entrepreneur, you really start to believe in your product. Once that happens, and it all makes sense, and you have something working as a proof-of-concept, you really are not worried about scaling. What happened with us, is at the early stage, we knew the lifetime value of our customer was massive. We knew customer acquisition costs were a low lower than that value. We started to dump money into sales and marketing and development so we could scale up. We use the cash we brought in, plus our credit cards, which we call our Visa round. That's when you get a 0 percent APR credi card and rack it up until payment day, and move it to another card. That's the Visa round. Anyway, one day we said, holy sh*t, we either need to get some investment or scale back on this. We knew that if we scaled back, we'd be profitable, but we'd stop growing and probably stay stagnant. We considered just keeping it profitable and make the money and be rich, but then we look at how we were doing, and said—how do we keep growing this. Things were growing like crazy, like a hockey stick, and we said, let's go with the hockey stick. To be honest, I had zero connections to investors. Maybe only one or two, but when you start asking people for money, things get cold and lonely quickly. I did a cold outreach to Kevin, and funny enough, he told me something like SEO would never work. It was the worst possible response from an investor, but I decided to just keep responding and chatting. Finally, he said let me send Cormac, who is his son to meet me, and it took three or four meetings for them to get an idea of what the company was doing, and our management team. The reason why I kept contact with Kevin, is I really wanted to work with him because of his background, which is incredible. He founded Doubleclick, which he sold to Google, and he sold his last company to Amazon. The other thing, is it's great that ScOp Venture Capital is not a giant institutional VC firm that is going to hold an entrepreneur by the throat and tell them what to do, when to sell. I think a firm like Kevin's is a lot more flexible, and a lot more invested in the company and management team. He always tells me, most decisions in a startup are operating decisions. If it's a business decision, he says, I expect you to make those decisions. But, if it's things like raising money, bringing on debt, or other financial matters that's when the investors get involved. I could not be more happy to be working with him.

Finally, what's next for the company?

We're taking these new funds, and putting them directly into sales and marketing and development. We have product, people, and have our foundation set. We have the right team and management, and what we're really looking to do now is go into more markets, take market share really quickly, and hire lots of tutors. Supply of tutors is always an issue, and the more supply you have, the more efficiently it will all run. So we're investing in tutors, customers, and product, and plant to raise another round in 2020, which we expect will be north of $10M. One thing, is we're not a fast burn company. There's a huge bubble now we think will burst with companies raising so much money, but burning millions of dollars. Par t of our strategy is unit economics. We are not betting on an acquisition or miracle, but controlled growth, but fast growth.

Thanks, and good luck!