This article has been revised from its original version.
Since its founding in 2018, Beverly Crest-based educational platform Generation Genius Inc. has grown substantially, all without any venture capital backing.
The company, which is a streaming platform that makes science and math videos for K-8 grade students, has a goal in mind: to become the Netflix Inc. of educational content.
The platform is now used by more than 3 million students across 30% of the nation’s public and private schools. It was this rapid growth that earned the company the number 88 spot on Inc. 5000’s fastest growing companies list this year.
The company started with Jeffrey Vinokur, founder and chief executive office of Generation Genius, who earned a Ph.D. in biochemistry from UCLA and wanted to start a show about science to share his passion with the next generation.
“I wanted to spread that passion as far and wide as I could, and the first step of that was trying to get a TV show, like Bill Nye, but that ultimately didn’t pan out,” Vinokur said. “At that point, I had realized there was this much bigger opportunity to do that type of content for schools.”
With that idea, he connected with Eric Rollman, an Emmy award-winning children’s television producer. Before Generation Genius, Rollman had also worked as the former president of Marvel TV & Animation and of Fox Family Productions Worldwide before each company was acquired by the Walt Disney Co.
“I’d been looking to do something that had more meaning, more substance,” Rollman said. “The idea of working in the science field was near and dear to me because my father was a science teacher…so I loved what (Vinokur) was doing.”
Generation Genius has different subscription packages ranging between $95 to $1,795 a year. These packages come equipped with lesson plans, quizzes and other resources for teachers. In comparison, Disney+, another streaming platform that has some content aimed at children, costs $79.99 a year.
No VC, no problem
When the time came to pitch his business, Vinokur said investors just didn’t see his vision.
“At those early stages, I went out and I put together a deck and I pitched. I flew to San Francisco. I emailed all the billionaires, and nobody really got it,” Vinokur said.
He said he would hear back from investors saying, “Schools don’t have money. How are schools going to pay for this?,” which Vinokur disagreed with, arguing that people will always pay more for quality.
He sent more than 500 pitches to potential investors. He was rejected by everyone.
In 2018, the company finally gained the support of the Howard Hughes Medical Institute, a nonprofit research and philanthropy organization, which gave a $1 million recoupable grant. Generation Genius received additional funding from friends and family, rounding out its total funding to $1.6 million.
The money was utilized to make the first 36 videos aimed at grades three through five.
“It worked, but we weren’t generating lots of cash to fund a whole new batch of videos. We needed more money,” Vinokur explained. “A normal company would go and raise a Series A, so we went to the venture capital people again and this time they were a little more interested, but not fast enough.”
Vinokur said the platform needed to put out new videos between August and September of 2019 because that is when instructors would be buying.
“If you miss that wave, you have to wait until next year,” Vinokur said.
Their solution was crowdfunding. The team put together a web page where average people could invest directly in the company. And the startup ran ads on YouTube.
The company was ultimately able to gather $1.07 million in additional funding, with average investment of about $1,400, just in time to start production on its next round of videos to release that fall.
“We were resonating, but (investors) also were resonating with that this is not just about making money. This money is also going to be making a social impact in the world, which (traditional) investors do not care about,” Vinokur said. “That’s why for this audience, it was different for them.”
Follow the money
Although the most traditional way of building up a company in the modern day has been via venture capital, Michael Chasalow, a professor and director of the Small Business Clinic at USC, said it is not an entrepreneur’s only option.
“You have a story of, ‘I started. I had a friends-and-family round of seed capital. Maybe there were some angel investors. Then I got venture capital, and that took me to the next level,’” Chasalow said. “If you talk to founders who are being candid, many of them will tell you that while venture capitalists are very helpful at moving a company to the next level, they take a huge portion of the company.”
According to Chasalow, besides taking much of the equity, venture capital investors also take control of the companies.
“They push toward certain results. Often, it’s kind of a ‘go big or go home’ model so that venture capitalists are interested in a huge success,” Chasalow explained. “They’re not interested in a terrific success or even one that makes the founder really happy. They need to succeed on a huge scale.”
Chasalow said if startups can avoid venture capital, it’s definitely a better way to go because they are not beholden to investors.
Generation Genius’ Vinokur said if he had gone the venture capital route, Generation Genius would probably be in its Series C stage, however, the company would be heavily diluted because ownership would be shared in so many different directions. In his case, he and Rollman own nearly 100% of the company and have complete autonomy.
“I’m actually so thankful that those investors didn’t invest because they would have taken a large percentage of the company at that stage. But because they did not, that percentage is essentially me and (Rollman’s),” Vinokur said.
“So, I thank them. I’m so thankful that they denied us.”
