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Hi friends 👋 ,
Happy Thursday! The Not Boring Syndicate is back!
Here’s how it works: we source an investment and write a memo, and members of the Not Boring community who are accredited investors have the chance to invest.
The Syndicate is our chance to help founders tell their stories, invest together, and learn about the companies that are building the future. Thus far, I’ve written four investment memos and the Syndicate is building an amazing portfolio:
Apt: Fed and Petr Novikov are building a better way to develop housing. For our first investment memo, we partnered with Jonathan Wasserstrum’s syndicate, which filled its allocation in Apt. Jonathan recently launched a PropTech-focused rolling fund, which I’m backing and highly recommend for people interested in real estate startups. Back him here.
Composer: Led by my former colleague Ben Rollert, Composer allows regular people to build sophisticated portfolios like the ones previously reserved for the ultra-wealthy. We filled the allocation and the company is making amazing progress in preparation for an early 2021 launch. Join the waitlist.
OZE: My sister’s company is killing the paper ledger and replacing it with software for West African businesses. We exceeded our allocation, and I’m personally very excited about the news that Stripe recently bought Nigerian payments company Paystack for $200 million.
Swaypay: Kaeya Majmundar’s company is making incredible progress towards its goal of taking power away from Facebook and Google and giving it back to consumers and brands. We exceeded our allocation, and Swaypay more than doubled its merchant accounts after the memo. If you work for a DTC company, you should apply to work with Swaypay.
Whether you’re an accredited investor interested in participating in the deals or just curious about how startups get off the ground in the earliest days, I hope that everyone comes away from these memos with some new knowledge and a better idea of what the future will look like.
Today, we’re taking a glimpse into the future of job training in a remote-first world.
But first, a word from our sponsor:
This week's Not Boring is brought to you by…
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Now let’s get to it.
SkillMagic: Not Boring Investment Memo
Corporate training is a terrible, huge, market that is quickly becoming much harder and more important as the world shifts to remote work.
If you’ve worked at a growing company before, this problem will be painfully familiar. You show up on your first day, and:
Sit at your desk, pretending to “work” until your orientation and onboarding meetings begin,
Furiously nod your head and take notes in those meetings,
Get an assignment from your manager, go back to your computer and try to figure it out on your own by using your notes, searching internal docs, overwhelming Slack channels, emails, and wherever else your company hides the information you need to succeed,
Finally give in and tap the person next to you on the shoulder to ask them where to find x, y, or z thing,
Rinse, wash, repeat, until you’re the person with the knowledge in your head, and some eager newcomer taps you on the shoulder and interrupts your flow.
Training and onboarding was always rough; now that we’re all working remotely, it’s painful. Instead of tapping a friendly face on the shoulder, you Slack someone in a different time zone and go back and forth interminably until they’re annoyed and you’re embarrassed.
Even if you’ve never experienced the problem before, the numbers tell the story. There’s one in particular that’s been stuck in my mind since I first heard it a year ago: Corporate Learning & Development has a Net Promoter Score (NPS) of -8. Not 8, negative 8. NPS measures whether people would be willing to recommend something to their friends, and has become a widely used tool in determining how happy customers are with a product.
For context, Apple is commonly cited as best-in-class with an NPS of 72. Categories like TV services, which include customer service villains like Comcast and Verizon, set the low bar at -5. People hate Corporate L&D more than they hate Comcast.
Despite that, it’s still a massive market. People need to learn how to do their jobs. In 2019, corporate L&D was a $370 billion market. It’s expected to grow another $52.7 billion, to $422.7 billion in 2024.
It’s even better if your wedge into that huge market has massive tailwinds behind it.
COVID forced work into a remote-first paradigm, and most companies, particularly engineering-heavy startups, won’t ever fully go back to the way things were. For the first time in history, the vast majority of tech companies are interviewing, hiring, and onboarding all of their employees, many of whom work in complex engineering and product roles, remotely.
That leaves tech companies in a tough situation. They need to hire and onboard more engineers than ever before, and they need to do it all remotely, without the face-to-face failsafe they’re used to. Existing learning management systems (LMS) suck (and weren’t built remote-native even if they didn’t) so HR teams and engineering management are forced to pull together information that’s siloed in Google docs, emails, GitHub, and worst of all, peoples’ brains.
There’s gotta be a better way! (There is, of course. That’s why we’re here today.)
SkillMagic is a SaaS product built to help train engineering teams at fast-growing companies “with magical simplicity.” The software provides mobile-first training, onboarding, and ongoing SOPs powered by AI. In the short-term, SkillMagic is building a better solution for the training and onboarding problem familiar to anyone who’s worked in a fast-growing company. What gets me really excited, though, is SkillMagic’s vision for the future -- a world in which learning is clearly tied to performance and best practices flow from company to company.
I’m thrilled to bring SkillMagic to the Not Boring Syndicate for a few reasons:
Founder-Product Fit. Jason Lew, SkillMagic’s founder, has spent his career training and building training programs for engineers at companies as big as Apple and as small as his own startups.
Aligned Product and Go-to-Market. SkillMagic is targeting a niche and growing audience with a simple, easy-to-onboard, self-serve product. It’s classic low-end disruption in a market that needs disrupting.
Huge Market with Low NPS. As mentioned above, corporate training is a massive market (~$370 billion), and people hate it. That’s a powerful combination to attack.
Perfect Timing. The world has gone remote, engineering roles are growing, and the tech to build AI-based learning at scale is here. Gong, a sales training company, has ridden a similar wave to a $2.2 billion valuation in five years.
Massive Vision. If it achieves its vision, SkillMagic will understand what makes employees perform well and build personalized ways for people to get predictably better at their job.
Plus, SkillMagic aligns well with my passion for making people smarter. I even made the most MVP of MVPs to test if it would be possible to better facilitate learning by remixing content that already exists online. (Check out The Process online course.) I, unfortunately, know nothing about building AI products so I gave up. SkillMagic’s CEO, on the other hand, is an expert.
The Not Boring Syndicate has the opportunity to get in at the earliest stage of SkillMagic’s life at an incredibly reasonable valuation relative to all of the other deals I’ve seen. Because Jason values the power of the Not Boring community, he’s letting us take the last allocation in a pre-seed round that will be oversubscribed with angels from leading tech companies.
The company is only a few months old and Jason is doing the hard early work -- building the alpha version of the product, acquiring customers, getting feedback, and iterating -- himself. He’s been building towards this company since he started working at Apple a decade ago.
Jason’s Journey from Apple to Instacart to SkillMagic
Investing in a startup at this very early stage is a bet on two things:
The company should exist and has the potential to be very big.
The founder is the best person to build that company.
Jason is the right person to build SkillMagic. We spoke after our mutual friend Brett introduced us, and the fit struck me immediately. He has experienced the need for better training solutions firsthand, from all sides: as someone building training software at the biggest companies to designing training programs at the smallest to leading hyperscaling of a new engineering team within a larger org.
Jason and I were in the same year at Duke (brief pause to brag that Duke grads have built juggernaut startups like Plaid, Airtable, Coinbase, and Cameo), where he studied Electrical and Computer Engineering, before getting a Masters in Engineering from Cornell. On the side, he taught himself how to build iOS apps.
Not content to just build on Apple, Jason joined Apple as an iPhone Engineer and developed training for the Foxconn workers in China who built Apple’s products. With such a massive operation on the other side of the world, in-person training doesn’t duplicate well, so Jason built software and SOPs to facilitate the process that helped churn out more than 150 million iPhones and iPads to Apple’s exacting standards.
Jason left Apple in 2012 to build his own companies, the most successful of which was MightySignal. He built MightySignal’s product as CTO and helped lead sales & marketing as COO, and built a sales training program that helped generate $1.3mm in ARR profitably before the company sold to Xenon partners (business) and Instacart (team).
At Instacart, Jason built and ran engineering for the Growth Acquisition team, which he helped scale from 0 to 30 people in six months. He took everything that he had learned about training to build the team and get them up to speed quickly, and was able to massively increase acquisition efficiency while maintaining scale.
Now, he’s making what he built for companies like Apple and Instacart available to everyone.
So many tech companies have the same problem that Jason did at Apple, MightySignal, and Instacart: it’s hard to grow efficiently when critical knowledge is siloed in outdated docs, back-and-forth emails, and worst of all—in people’s brains. Remote work makes it even harder to deliver, measure, and recommend necessary learning to those who need it.
SkillMagic is a mobile-first interactive training and onboarding app for tech companies, initially focused on engineering and product teams. The product creates a unified knowledge cloud that enables all aspects of training in one place, accessible wherever employees work.
SkillMagic’s solution has three core drivers:
0-to-1 in 1 Hour: Mature LMS companies serve upmarket, and it takes up to six months to go through the sales cycle and get the tool up and running, which is an eternity at a fast-growing startup.
AI-Driven: Getting all of a company’s training documents and data in one place, and combining that with freely available content online, unlocks opportunities to make training better, through things like workflow and content recommendations.
Mobile-First Learner UX. For training to work, people need to enjoy it and complete it on their schedule. By building first-class products on mobile and desktop, SkillMagic enables employees to train whenever and wherever convenient.
The product is dead-simple to start, by design. It’s classic low-end disruption. Instead of a heavy LMS built to serve everyone at any size company, SkillMagic helps new engineering and product hires go from 0-to-1 in 1 hour by:
Ingesting a company’s training and onboarding docs,
Using AI to recommend additional content from the internet that enhances the training on particular subjects (if you’re a junior programmer who codes in Python, for example, it will serve you the top YouTube video on Python),
Serving quizzes in real-time and gating continued learning based on your results, and recommending additional resources based on where you struggle.
On the HR and management side, SkillMagic provides tools to build, track, and improve training programs through a tool called Crystal Ball, that gives leaders:
Feedback on which modules people find useful,
Recommendations based on what works across all of SkillMagic’s customers, like shortening a training video so that more people complete it,
Tools to automatically remind new hires to complete trainings, without managers needing to nag,
A dashboard to track employee engagement and results, in aggregate and on the individual level.
Here’s what some of the alpha product looks like on desktop and mobile:
Magically, Crystal Ball plugs into the company’s tools, like GitHub, to track an employee’s “time to productivity,” or when they completed their first pull request. Over time, SkillMagic will be able to solve one of the corporate training market’s biggest problems: tying results back to training, and calculating an ROI on training time and investment.
Although it’s early and SkillMagic hasn’t raised any money, it’s already booking revenue.
The Four Magic S’s: Self-Serve SaaS
SkillMagic’s go-to-market strategy fits its lightweight product and target customer, busy engineering leaders who just want something that saves them time and gets the best performance out of their people, who are often the most expensive at the company.
SkillMagic takes a bottoms-up sales approach, similar to Slack or Zoom. It’s one thing to say that your approach is like Zoom’s -- everyone wants to compare themselves to Zoom given that it’s stock is up 700% over the past year (Slack is another story 😢 ) -- but it’s another to build a product for which that’s even possible.
Because of SkillMagic’s simplicity and pricing (it costs as little as $25-100 per month today), an engineering manager could decide to use SkillMagic to train her team, sign up in five minutes, upload the company’s training material, and get it in her team’s hands within an hour. That means no heavy sales or onboarding process, which allows SkillMagic to acquire customers much more efficiently than its competitors. It will do so in three phases:
Phase 1: Low-lift onboarding means that SkillMagic can use low-lift, automated acquisition tactics like email.
Phase 2: SkillMagic’s product lends itself to organic acquisition through learning-based content, customer spotlights, and free analysis tools, like the Free Training Analyzer that uses AI to provide feedback and sentiment analysis on companies’ existing training docs.
Phase 3: Use paid acquisition to pour fuel on the fire, and grow efficiently by hiring people to run successful growth channels instead of hiring a legion of salespeople.
This strategy also has another benefit: targeting the smallest customers and onboarding them easily, with a product and cost structure that makes sense for them. I’m a huge fan of what I call the “Compounding Power of Young Users,” the idea that if you are able to get the smallest, youngest users and grow with them over time, you will win in the long-term. I wrote about it in my pieces on Snap, Stripe, and Slack.
SkillMagic is going after “young users,” the engineering teams within small companies. Jason told me, “If a company is already using a competitor, they’re not a good target right now. We want the companies who are doing it all manually.”
This is one of my favorite things about SkillMagic: it’s identified a valuable niche in a massive market full of competitors who are overserving customers and generating an incredibly low industry-wide NPS.
SkillMagic is in a Huge Market with a Comically Low NPS
Corporate training and L&D is an enormous market in which almost all of the end users are unhappy.
For new markets, as we’ve discussed before, Total Addressable Market calculations are fairly worthless. For an existing market from which a startup is trying to steal share, it’s more important. SkillMagic is trying to steal share from large incumbents with slow onboarding and overbuilt products, so it’s worth looking at how big that market is.
To start, SkillMagic is going after SMBs that don’t currently use training software. A quick bottoms-up analysis:
There are 2 million SMBs with under 200 employees in the US alone
That’s a $2 billion opportunity.
As SkillMagic improves its product and wins its niche, it will expand and go after the Learning Management Solutions, which is currently a $9.2 billion market globally. The biggest opportunity, though, comes from the $370 billion corporate training market. Before COVID, much of this training was done in-person, but remote work will force companies to adopt software solutions to replace face-to-face training. If just 10% of that market moves online, it’s a $37 billion TAM for SkillMagic as it evolves and serves more roles.
Even better from SkillMagic’s perspective, Corporate L&D in its current form is one of the least-loved products out there, with an NPS of -8.
When it moves on from targeting just those who don’t use existing solutions, SkillMagic will face an army of slow-moving competitors, like a David and Goliath battle in which the smaller, nimbler opponent uses its speed to beat the larger, heavily-favored one.
SkillMagic represents the third wave of training software:
2000s. Early, enterprise-focused incumbents came onto the market with poor, mobile-unfriendly UX, subpar analytics, and long sales cycles.
2010s. In the past decade, improved products like Lessonly and Workramp offered customers a better UX and mobile solutions, but still feature enterprise sales cycles, more general products, and long integration periods.
While the space might seem crowded, there are structural shifts afoot that make 2020 the perfect year to come to market with a new solution, one that is remote-first, built for engineers, and AI-driven.
SkillMagic benefits from the confluence of five important factors, some of which have already combined to create a unicorn in an adjacent space.
Remote Work. COVID accelerated the trend to remote work, and today, every team at a startup is a distributed team. Companies need new tools to train employees in this new environment.
Engineering Growth. SkillMagic is built for engineers, and engineering roles are the fastest-growing category in the world. According to LinkedIn’s 2020 Emerging Jobs Report, the five fastest-growing roles are all within engineering, as are seven of the top ten. Because it’s harder to train for than a role like customer service or sales, engineering has been overlooked by existing LMS solutions.
New Data Infrastructure. Better machine learning algorithms and products like Snowflake, the cloud data platform that had one of the year’s most successful IPOs, mean that AI-driven training is cheaper, easier, and more feasible to implement than ever before. People have been promising AI-based learning for years, but it’s actually possible now.
Increased Compliance Needs (GDPR, CCPA). Companies need to comply with the EU’s General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA), which means that their employees need to know what they mean and how to stay within bounds. This seems like a minor thing, but translating the regulation into code is complex and a real pain point for engineering leadership. It’s a wedge that SkillMagic can use to get in the door.
Unbundling of LMS for Functional Specificity. LMS solutions to date have been a product of their sales cycles. Because the process is so long and the products are so expensive, existing LMS solutions need to work for the entire company, which means that they work perfectly for no one. This creates an opportunity for function-specific solutions.
Gong is an AI-powered training tool for sales teams. It uses natural language processing (NLP) to analyze sales pitches and meetings, and then uses that information to train existing salespeople and new hires. The company launched in 2015, raised a $65 million Series C from Sequoia in December 2019, and after just eight months, raised a $200 million Series D in August led by Coatue that valued the company at $2.2 billion. The reason for the quick rise? Revenue tripled in the first half of the year due to the new challenges related to remote training - particularly for an industry that depended on learning through observing.
It makes sense that sales would be the first function to have a successful vertical-specific training function. Its output is easily measured. If a salesperson sold more this quarter than last quarter after using Gong, the ROI is easily calculable.
Engineering is next. According to VC Tomasz Tunguz, Engineering is the second biggest OpEx line item at a SaaS company, right after Sales and Marketing. It hasn’t happened yet, because Engineering is a little bit harder to measure, but Jason’s vision is to build a product that ties the performance of everyone on the team back to their training.
Today, SkillMagic is building a fast, easy-to-use product that looks simple on the front-end to serve a very specific target market. But the simple front-end masks a lot of complexity in the back-end that will become more important over time, and is one of the main reasons I got so excited when I first talked to Jason.
Behind-the-scenes, SkillMagic is building up a database of what makes which types of employees the most productive. Payroll expenses account for around 70% of total costs at most businesses, but training employees is still left up to a patchwork series of tools and guesswork in place of analytics. That’s insane. Until now, it was difficult to tie training to performance, but now that an increasing amount of work is done on software that has open APIs, it’s possible to connect what someone has learned with what they do on the job.
SkillMagic x GitHub can answer whether engineers who perform well on certain assessments are more likely to commit pull requests to production more quickly and whether they continue to outperform over time.
SkillMagic x Salesforce can answer whether salespeople who complete the company history module sell more.
SkillMagic x Slack can answer whether customer success people who complete more product modules ask teammates fewer questions and have faster resolution times.
As more companies use SkillMagic, the company will have data not just for each specific company, but cross-company benchmarks. They’ll know which types of training, upfront and ongoing, company-specific and generally available, get the most out of people.
It might even allow companies to Moneyball hiring. When companies have confidence in their training programs, they can take risks on less experienced or underappreciated talent knowing that they can bring them up to speed.
Once any company starts understanding, with real numbers, who to hire and how to improve their people’s performance, every company will have to, or get left behind.
Early stage investing comes with major risks, and SkillMagic is no different. As with any early stage investment, the numbers suggest that you should expect any money you put into an early stage startup to go to $0. Here are a few SkillMagic-specific risks:
Single Founder. Currently, Jason is SkillMagic. Many investors like to see co-founders with complementary skill sets working together to start a company. That said, Jason has a proven track record of hiring quality engineers and salespeople, and will use the proceeds from the round in part to build out a team.
Execution: SkillMagic is working closely with early customers to help define the product roadmap, so the product may end up looking significantly different than it does today.
Business Model: SkillMagic is very early, which means, among other risks, that there are no revenue projections to base data off of or unit economic calculations. That said, if SkillMagic executes against its plan, it should have typical SaaS margins. The self-serve model is appealing, but it’s also difficult to pull off. SkillMagic may have difficulty acquiring customers and need to hire a bigger sales team than expected.
Competition: Larger, better-funded competitors or new startups could attempt to build a product to compete with SkillMagic.
Industry: The L&D and training market might not grow in-line with projections, and budgets to train and upskill staff may decrease. That said, SkillMagic’s affordable and transparent pricing might be an advantage in that scenario.
There are certainly risks that neither I nor SkillMagic is currently aware of that could sink the business. This is not investment advice, and you should do your own diligence before deciding whether to invest. To help facilitate that, we’ll be hosting a Q&A with Jason early next week and will send details to all Syndicate LPs.
Led by a founder who has spent his career training and building training for engineers at the best companies in the world, SkillMagic is attacking an enormous market that has underdelivered to date. Gong achieved a $2.2 billion valuation in five years by using software and AI to modernize sales training, and SkillMagic has the opportunity to do the same thing for engineering.
As engineering becomes more prevalent, every company becomes a tech company, and remote work becomes the norm, engineering training software will become a necessity at any company that wants to get the best performance out of its employees. In the conservative case, delivering a better, easier-to-use, faster-to-onboard experience and smarter learning programs is a solid opportunity.
If SkillMagic achieves its big vision, though, it will understand better than any other company what makes employees perform well, and can build tools for anyone to get better at what they do. That will make companies hum and expand opportunity to people who might otherwise be skipped over because they don’t have the right credentials. Jason’s is a WorldBuilding vision: he’s starting with employee knowledge as the atomic unit and expanding outward.
It’s early, but I’m so excited about what SkillMagic can become. If you’re an accredited investor and would like to learn more, you can apply to join the Not Boring Syndicate by clicking the button below. I’ll be sharing more details -- including deal terms, a deck, and an invitation to a Q&A with Jason -- over on AngelList.
And if you run an engineering team at a growing company, sign up for SkillMagic here:
Thanks for listening, and see you on Monday,