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Shocking: YongoPal plans to make Money

With an unfair move towards its competitors YongoPal won the big price of $25k in the Business Plan competition. Their plan for YongoPal is making money from the beginning by charging its customers. Can you believe that? Charging your customers for a service?

All joking aside, YongoPal the start up from Seattle that connects Korean students with native speakers in the US won the UW Business plan competition although they were the black horse in the race according to Christopher Griffin, one of the judges.

I think YongoPal stands for a new generation on online education startups that are very niche, built around a single idea and focused on making money from day one. Lenguajero was of course one of the first examples but according to August Flanagan, one of the Co-Founders, the community for Spanish and English learners is a failed start up as they did not have the charging of customers built in the DNA of the product right from the start.

It seems like investors are getting a bit tired of hearing predictions “if we get 1% of the market and then start converting our free users to our premium service we will get break even in 2020″.

[...] Why did I push the case for a zero-IP startup with few customers?

It’s called CLARITY, folks. And while we can argue all day long about the market prospects for a small startup with zero IP, commodity technology, and better-funded “professional” competitors, what YongoPal did was present an incredibly clear picture of its market, the reasons for choosing it, the things that make it unique, and how they plan to attack it. And they did this with a clear-eyed confidence that wasn’t arrogant, but evinced the street-level research they had done to understand just what the heck they were aiming for.

In nearly every other case—specifically in the cases of all the finalists in the bio-medical space—huge assumptions were made, from revenue projections to time-to-market estimates to purchasing dynamics. And given the time-to-market for many of these products, a few-degree variance becomes the wrong side of the galaxy by the time 2014 or beyond arrives. In contrast, YongoPal was aiming for a time frame closer to, say, next Tuesday. [...]

Christopher Griffin about YongoPal

I think there are some good takeaways in this piece. Build a business on what you know, not what you assume. Darien Brown, the Co-Founder of YongoPal actually lived / studied in Korea and was having paid conversations with college students for $40 USD per hour. YongoPal is charging the students $11 USD per hour during the closed beta and will later on higher the pricing. Hence the business model of YongoPal is based on real life data and not on statistics that someone somewhere published someday.

Of course the proof will be in the pudding but then again, YongoPal is using guerilla marketing tactics. They are not targeting their users via the internet but by connecting with “sellers” on the campus. Right now they are targeting universities and colleges in the Seoul area only, a potential 120k customers. To reach those students YongoPal is connecting with the student organisations on the campus and offering them a cut for every paying student they refer.

I am looking forward having Darien Brown for an EDUKWEST interview the coming Monday as to me this is one of the most promising start ups in online education right now.

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  • chinamike

    I have a friend who started offering a similar service in Korea 3 years ago. Three years later, still ticking over but nothing big.

    It sounds like what makes these guys special is that they have defined the parameters of their market very clearly, they are marketing locally, they are marketing heavily offline, and they have recruited people to tell their story live.

    Oh, you might want to ask some questions about the restrictions on tutoring in Korea. These restrictions make Korea like nowhere else that I know of.

    • http://kirstenwinkler.com KirstenWinkler

      The question is: do you want to build the next Facebook / Twitter in education or do you want to build a decent business that pays the bills for you, your team and the other people involved. As long as you don't take funding I think this is still a very good option :).

      • chinamike

        You seem to be championing the idea of finding a niche, quickly becoming profitable and not giving into the siren song of ruling the language learning world.

        But I'm curious, why do you advise against outside funding?

        • http://kirstenwinkler.com KirstenWinkler

          I don't advise against funding in general. Funding is good where it fits. Funding can be like a millstone around your neck as investors search an exit. They don't really care if your company is making money, they care if they can sell their share one day for 10x.

          If start ups concentrate on “how can we make money today” rather than “we will make money one day as soon as” it is healthier in general, I'd say.

          And if YogoPal dominates the niche of English conversation (lessons) on the South Korean market I don't think the guys would need to worry anymore.

  • http://twitter.com/darienbrown Darien Brown

    Hey Kirsten,

    Just wanted to make a quick correction; we are not charging $40 per hour for our conversations. Sorry if I ever said anything to give you that impression! We are much more reasonably priced than this, and want to make sure that our American conversation partners are fairly compensated relative to what we earn.

    Thanks for the write-up, though!

    -Darien

    • http://kirstenwinkler.com KirstenWinkler

      Thx Darien. But I think you COULD charge $40 USD :). We'll talk about this on EDUKWEST ;).

      • chinamike

        He could, but now that he has mapped out his business for others to see (at the UW bis plan competition) a charge of $40 NOW would be an invitation to other competitors to join in and under price him.

        I think at an early stage it makes sense to use pricing to discourage other competitors. But it also makes sense to leave yourself some flexibility to raise prices later (but never admit to that in print or an interview.) :)

        • http://kirstenwinkler.com KirstenWinkler

          I can try ;)

  • http://lenguajero.com August Flanagan

    YongoPal is a great group of guys. I'm glad to see them moving forward in the direction they are, and wish them all the best of luck.

  • http://lenguajero.com August Flanagan

    YongoPal is a great group of guys. I'm glad to see them moving forward in the direction they are, and wish them all the best of luck.