Deal Analysis: Generation Genius
Author’s note: This is not a recommendation to invest. Investing is risky and you may lose your entire investment. Do your own independent research, information on this website may be inaccurate or outdated. # Generation Genius - It’s like Netflix for the Classroom Listing Information:
- Raising on StartEngine
- Ends May 27th
- Pre-Money Valuation: $9,000,000
- Amount raised as of 4/14: $412,605
Founded in 2017 by Dr. Jeffrey Vinokur and Eric Rollman, Generation Genius aims to gain a foothold in the $10 Billion a year digital learning market (digital textbooks, smartboards, etc.). Their strategy is to create a database of high quality educational videos and sell subscriptions to schools, teachers and parents. With growing revenue and over $500,000 in sales to date, they are making steady progress.
Generations Genius currently produces content geared towards grades 3 through 5. The videos they produce are focused on science topics, with plans to expand to math and english. The expertise of the founders is mainly in science subjects. It is unclear whether they will be able to mirror their success when covering other disciplines.
Their video subscription plans are segmented into 3 groups, $495 a year for schools, $95 a year for teachers and $5 a month for parents. 80% of their sales are teachers with the average sale being $170. They only offer yearly plans to schools and teachers to avoid the seasonality of summer and winter break.
Their product is also made to closely follow education standards including Next Generation Science Standards, allowing them to be relevant in many markets. Dr. Vinokur states that they “plan to start advertising in the UK, Australia and Canada in September when we have a K-5 product”. Each market having at least 89% overlap with US education standards. Additionally all their programs contain subtitles and spanish translations and have been used by institutions like the Texas School For The Deaf.
Generation Genius downplays the amount of competition in the industry. They only mention their biggest competitor, Discovery Education Streaming Plus, in the comments. Discovery education is already in place for more than 50% of US schools. It provides a similar online service that provides educators with videos and classroom activities. Other competitors include BrainPOP and Mystery Science. It is unclear if the high production value videos of Generation Genius will be enough to differentiate their product from competitors and replace them.
Generation Genius’ sales predictions are very optimistic. Assuming they hold, a $5,000 investment would be valued at $325,000 in 5 years. The model in the image above assumes in Year 2 schools will be paying $995 instead of the current $495 (due to the larger video library). It also assumes a 70% renewal rate and a doubling of ad spend.
The majority of their sales occur through online advertising. Their Day 1 cost of obtaining $1 worth of revenue requires spending 80.6 cents. However for the month of February their cost was 61.5 cents per $1. This indicates that they may be able to optimize their ad spend even further.
With sales data only spanning 9 months, Generation Genius has yet to observe a critical key metric, their renewal rate. This data point is crucial for properly understanding the viability of their sales projections and valuation. This is part of the reason they have declined outside investment and have opted to raise funds through equity crowdfunding.
The founding team behind Generation Genius consists of Dr. Jeffrey Vinokur and Eric Rollman. Dr. Vinokur has a Phd in Biochemistry and has had success performing science experiments for TV shows like Rachel Ray and The View. He also has traveled to 400 schools to conduct presentations. He also stars in many of the videos that Generation Genius produces.
Eric Rollman has a long record of producing educational content, winning an Emmy in 2016 for Best Children’s Series. He is also the former president of Marvels TV & Animation department.
Plan For Funds Raised
Generation Genius plans to spend 80% of their StartEngine raise to produce K-2 content. This will allow them to charge a higher price of $995 to schools and provide a more complete offering. They plan to begin production of K-2 content in May and have it ready for the Fall 2019 school year.
The team has signalled that they are fully committed to this project, Dr. Vinokur has invested $360,000 of his own money, and neither of the founders have taken a salary yet. Additionally both of their equity is vested over 4 years. The bigger question is if there is enough demand in the market for the product to support the sales projections outlined in their proposal. Is their product able to compete? Without a renewal percentage there’s no clear answer.
Learn more and invest on their StartEngine page.