#GROWTHSTORY How Top Hat Is Transforming the University Education Experience
With an innovative teaching platform used at over 750 leading colleges and universities in North America and a content publishing marketplace that is set to redesign the $10 billion academic textbook market, Top Hat has emerged as a force to reckon with in the education technology space.
In this post, we’ll take a look at how the Toronto-based startup profitably scaled to millions of paying users in a traditionally hard-to-penetrate market.
Early traction: breaking into the university market
Top Hat Monocle, as the company was known initially, was founded in 2009 by two University of Waterloo graduates Mike Silagadze and Mohsen Shahini based on the idea of harnessing the power of mobile devices to improve classroom experience.
Top Hat co-founder Mike Silagadze
When the two software engineers were looking for ways to cash in on the exploding demand for mobile apps, they reflected on their university experience. While technology had advanced leaps and bounds over the last decades, the classroom environment had essentially been in deep freeze.
So, why not build a teaching platform that would transform the traditional passive lecture experience into something engaging and make use of the technology already available to students – smartphones and laptops to turn them into a solution, rather than distraction?
The pair launched a simple web-based application with in-class quizzing and polling functions, essentially looking to replace antiquated classroom response devices known as clickers.
The founders started marketing with the typical enterprise approach, trying to convince university administrators to purchase a campus-wide license for the platform.
It took a little while before they recognized the enterprise-focused go-to-market strategy was a dead end. While the response from school officials was positive, nobody was buying.
Long sales cycle, multiple decision-makers, and constant funding shortages have been stalling technological innovation at schools for decades and also thwarted Top Hat’s early efforts.
So how did the company get off the ground? They took a page out of the textbook publishers’ playbook and went directly to professors with a student-pay subscription model.
It was a game-changer. They started off with a pilot class at their alma mater, and within months Top Hat had 20 professors on board and 3,500 student users at five Ontario universities. The following year, Top Hat grew its user base to 200 professors and over 30,000 students at 30 universities in Canada and the US.
What made the success possible? For one, in North America, professors often make autonomous decisions about their classrooms, so Top Hat had only a single decision-maker to convince to adopt its solution.
And at $20 per semester, the company priced its product inexpensively to make it palatable to thrifty students.
How to double in size year after year
The company’s growth over the last seven years has been stellar. Its user base and revenues have roughly doubled in size every year, and it now has over two million students at schools like Harvard, MIT and UCLA using the platform, all the while it remained profitable. What’s been driving this remarkable growth?
The company understood that it had to deliver greater value within its platform in order to scale, so its product has now evolved from a clicker replacement into a broader teaching tool. Today, Top Hat helps educators get real-time feedback, share homework, create and deliver interactive course content, run tests, and analyze class data to gauge how content is performing and to identify students that need extra help.
Top Hat built its growth on an aggressive outbound sales strategy. With other competitors entering the mobile edtech space, the founders knew they needed to build market share quickly.
The company proved its direct-to-consumer model was profitable and scalable, which made it stand out from many other companies in the edtech space and allowed it to attract VC funding in order to build out a 100+ salesperson team.
Top Hat is sold like a textbook with the current student fee of $26 per term and substantial discounts for annual and lifetime subscriptions.
The sales pitch in the education space is typically more about an emotional appeal and not an ROI. For professors, who are frequently evaluated based on student surveys and student outcomes, Top Hat is solving the problem of increasing classroom engagement, which translates into higher student satisfaction and better performance.
And the company has data to prove it. Independent studies have demonstrated that grades, attendance, and comprehension levels all meaningfully improve in classes that use the Top Hat platform, making it easier to convince professors that it is worth requiring students to buy a term license to use the app.
If enough students use the Top Hat app at one university, the company will try to upsell the university on a bulk license. With the graduation rate among university students across North America of less than 60 percent, schools are interested in a solution that improves student engagement and performance and leads to better retention.
Direct selling was an effective initial growth strategy for Top Hat because there was little awareness of the product category and not many alternative channels to reach its target audience.
But hiring more and more salespeople is neither practical nor economical, and marketing can provide a more scalable and cost-effective solution to customer acquisition, so in 2016 Top Hat has made a shift in its growth strategy with its first senior marketing hire in Nick Stein.
Here are some of the recent initiatives the marketing team has prioritized to drive growth at Top Hat.
- Content marketing. Top Hat is ramping up its content marketing efforts with blog posts, guides, case studies, and webinars to provide educators with resources that help them increase student engagement and success rates.
- Referral marketing. The company incentivizes professors to refer their colleagues with a $20 Amazon e-gift card that is sent once the person being referred sees product demo and an additional $200 card that is sent once the person starts using Top Hat. The company can afford such high referral rewards given that the LTV of each professor relationship is in the thousands of dollars.
- Community building. With initiatives such as its Engage conference, Top Hat Innovative Educator Certification and an exclusive Top Scholars group, the company is looking to build a strong community of professionals who are passionate about innovative education and can champion the company’s products.
Crushing traditional content publishers
Having built a strong footprint in the academic market, the company made the next logical step and that is to expand its product portfolio from classroom engagement tools to the course content itself.
In a quest to capture a large share of the $10 billion academic textbook market, it recently launched Top Hat Marketplace, which allows professors to create and sell content. The idea is to cut price-gouging incumbent publishers like Pearson and McGraw out of the equation and let professors sell through the Top Hat platform directly to students and to each other.
Professors can earn income and students can access interactive textbooks on any device at a much lower cost compared to traditional textbooks priced at $200 to $300.
Top Hat facilitates two publishing models:
- For niche courses, professors write their own textbooks and make them available through the platform.
- For larger scale textbooks, Top Hat enables group authoring and ongoing community feedback, so the textbook can evolve over time. Top Hat currently manages the publishing process for these books in-house to learn from the experience, but the ultimate product it is building is akin to a Git for publishing that fully automates the collaborative aspect.
What’s more, Top Hat’s platform provides professors with built-in editing features to customize these textbooks for their own classes and ability to use auxiliary specialty tools from third party vendors that can plug them into these textbooks via API.
Key takeaways from Top Hat’s growth journey
- Faced with the lack of early traction, the company flipped its marketing strategy and used a bottom-up approach to break into the education market.
- Top Hat’s aggressive sales strategy has helped overcome the slow adoption practices in the higher education space.
- With the content marketplace, Top Hat was able to layer another offering onto an existing sales channel, massively increasing LTV while keeping acquisition costs the same.
What’s next for Top Hat?
The content marketplace, which currently accounts for around 10% of Top Hat’s revenue, is set to supercharge the company’s growth for the next few years, the expectation reflected in the Canadian edtech firm’s $185 million valuation at the latest fund raise earlier this year.
International markets also hold a huge untapped growth potential for Top Hat and expect the company to expand its geographic reach in the near future. The company will be sure to avoid past missteps where it mistakenly applied the sales strategy that was successful in North America in international locales where professors don’t make buying decisions.
Over the last eight years, Top Hat has transformed into a powerful teaching platform that helps professors engage with students and deliver interactive digital content. With its latest initiatives and more innovative products down the line, the company is poised to redefine the future of university education experience.
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