Hey everybody welcome to That will never work if you want to find out more or apply to be a guest head to Mark Randolph dot com. You can also find there an invitation to join me on discord the pandemic kept kids out of schools and separated families. It was an issue that affected this week's guest Kyle Walgren personally, he wondered how he could recreate the in person feeling of reading bedtime stories when his child was in Canada, when he couldn't fly there from texas. He also wondered how he could stop kids like his from falling behind his solution, the Ed Soma app so far, everyone loves the product, Shaquille O'neal even just joined his advisory board, but he's struggling to translate enthusiastic investor meetings into getting them to pony up the cash. Is it just because he's pre revenue or does he need to dig into other areas like his branding? But let's jump into the episode. Hi, I'm Mark Randolph, co founder of netflix and six other companies over the years I've heard that will never work thousands of times, but I've learned there are things we all can do to increase the chances that they will so join me for that will never work. Welcome Kyle. That will never work.

Hey Mark, how are you?

Um Well, thank you, I'm kind of eager to chat with you. I mean I think um a lot of people face certain circumstances during Covid it turned out to be, I think the birth of many businesses um and it sounds like yours might be one of them. So what I'd love to do is have you kind of start me off by giving us a quick overview of what you've been working on and then maybe we can kind of naturally segue into how I can help. Yeah,

for sure. So during Covid, um like you said, a lot of our problems arose that we had never faced before. Mine was first hand, I was born in Canada. I have two Children in Canada and I was separated through Covid with the border lockdowns. So I found myself having to engage with my Children over video streaming. Um when it became apparent that we weren't going back to school, I realized that me teaching my kids was gonna be something that was very much my reality and with me doing it over, you know, zoom or, or facetime. Um it wasn't going as well as I planned when I was trying to teach my Children to really read, I realized how poor I was at reading. And then when I started looking into the statistics around Reading in America alone, there's over 54 million american adults that can't read the basic menu at a restaurant.

So that started to concern me because the majority of those people were probably the families that wouldn't be able to afford tutoring for their Children during the covid lockdowns and that I, I felt like we were just gonna create a larger literacy gap in America, you know, focused on America but ultimately the entire world was gonna be challenged with the same problems. So I created a video streaming platform that uses voice identification to identify weaknesses in the reader. So whether it's a parent or the child, we can identify um, where the child's weak at create or provide content for them around those needed areas, but we can do that all in real time. So one of the really neat things that have happened over the last little bit or not need, one of the things that have happened in our favor is that the government's made it law in 37 states that you will not be able to pass the third grade without being able to read at a third grade reading level. And typically what they did was standardized testing at the beginning of the year and at the end of the year to make sure that those kids were on track to our knowledge. We are the only product that can do oral readability tests in real time and provide Alexa, I'll measure while reading every piece of content that they read on our platform while sharing that content with their class or with other family members.

So is, is reading out loud a different skill than reading?

Yes, Yes, it is, it's very much is, but it does a couple of things without even knowing. It's something that helps build self confidence in a person. Um, reading aloud does so many things like in a public environment. So uh you get to hear yourself enunciate the words, you know, reading aloud is a way for us to track it. Obviously before there was comprehension testing to make sure that what you read silently was being understood properly. But with oral readability we can actually identify the pronunciation, the comprehension and all that stuff through the oral readability testing.

Yeah, it's it's actually really interesting because I had never occurred to me before that When you read silently, which I guess is 99.99% of reading. Um the only way to really test whether you are reading is a comprehension test uh which doesn't really tell you where you're falling short, whether it's a vocabulary issue, whether it's a grammar issue, whether it's just being able to form the words issue. I mean it's also kind of interesting because you're right, I mean certainly now, I mean it's it's the ability for a for computer speech recognition has become so common and so good. Um we all take that for granted, but of course now your phone, your computer can recognize exactly what you're saying. So it seems like it's not a huge technological

leap

to match up um what it is, someone is saying out loud with the words they're being asked to read. Is that the basic premise for

sure. It's it's kind of like the perfect storm right now, I'm sure everybody's noticed like oh I'm looking for, you know, some staples and all of a sudden there next amazon things telling them they need some staples. So obviously the technology is there to pick up on audio while you're doing things where we were challenged was picking up on Children's enunciation and stuff like that, that's where the major differences in what we're doing. So we had to stack multiple speech speech engines on top of each other to make sure that we were picking up with the accuracy needed to be a literacy tool. Um you know, I'm sure people have spoken to their, their phones and they've heard, you know, mispronunciations or whatever, the word will be written wrong, but we need to be over 98% with our speech engine to actually be considered a literacy tool of value. So we've had to stack a few speech engines together which the technology is now, where it needs to be for this to happen,

you would have thought it would have been available forever ago, but it's just that perfect storm with covid hitting, we realized that there was a problem. Um, and then the technology being there, uh, is there now, So,

so this is certainly, I mean, listen, I'm probably more familiar with this than, you know, for a really bizarre reason, I mean, I'm just about to head to europe, I'm gonna be spending some time in Italy, I lived in Italy for a while, so I would consider myself conversant in italian or I should have used the past tense, I was conversing in italian, it was, you know, more than 10, some odd years ago and boy has that gone away, This is a long way of telling you that I'm now using dual lingo little plug there um,

and which is really cool because it does use speech recognition to measure my ability to read because basically, you know though, if you do nothing but speak, um it's limiting, so it teaches you to write and

to read and to write. So

the reading test is, it puts words on the screen and says read these and then of course it has comprehension. So I'm really, it's really amazing to me how good it is, especially the fact that it can tell how well I'm reading an italian, which, believe me is definitely challenging. They probably had to stack eight or nine different speech engines, recognize my italian pronunciation nonetheless, I get it, but tell me about the things you may have had to build, you can certainly tell when someone does it wrong, but what are you doing to try and have somebody get it right. So

one of the partnerships um, that we entered into early on was with meta metrics, it's Alexa scoring system, they've been around since the early eighties I believe and they become the industry standard in measurement in reading, so we went with probably the most trusted brand in uh reading in the school districts to make sure that we were presenting it properly. But as you read out loud, it'll identify the words and it will highlight them for that instant gratification, right? It turns green as you read them. And then if you start to struggle to break the words down into syllables, If you continue to struggle, you can select the word, it'll enunciate it and then it'll take that word structure and put it into a work bucket. And then our back end of our software will provide content based around that word structure. Um, and then we're able to give Alexa will score and an oral readability score as soon as the contents done. So we can,

what we like to consider ourselves is a bridge for teachers to come back in and see where they need to help their students out. We don't want to go in and replace teachers, that's not our goal. But we want, we know that they're, they're stretched out to their limits, you know, having to try and teach and they don't, you know, sadly make near enough for it, but we want to be a tool that they can lean on to say, hey, you know, little billy is having these challenges and I know that coming into reading class today so we can focus on those areas to get them packed up to speed.

Oh boy, I'm getting a sinking feeling about something, but I'm gonna hold that in reserve for a little bit later. Um, so this sounds great. It sounds like a product which you're pretty far along the path of having it work. Uh, it certainly sounds like there's a need and in fact, even cooler, there's a mandated need. So what's the problem? What can I help you with?

The problem is probably one that I think a lot of founders, uh, I mean, I've got to watch some of your podcasts. I know you have the answer for this, but you know,

I appreciate your vote

of confidence. We were a company that I bootstrapped from the beginning. We've been in operations for almost two years now. We have 19 employees. So I'm sure you understand the, um, financial investment that it's taken between myself and my partner to get to this time, but now we're looking to raise money. Um, I've always thought that building a team would get us that money needed to raise. But now everybody that says, Oh, they invest, precede businesses want to see some sort of revenue for a company like us that can't request revenue until we're 100% perfect. Because of what we do. How can we go about raising money as a pre revenue company? If, if that's all investors seem to want.

Uh, what an astounding hubris of an investor to actually expect that you can make money at this. I mean, don't they realize how good this is for

society. Yeah, no doubt. That's what we we did. We actually um brought Shaquille O'neal on as a marketing partner and when we showed it to him he got it. But I can't seem to get investors to get it. Well

the real question is the get it part and how you define get it. So now I certainly get it in terms of the problem it solves for someone kid who's sitting there learning how to read or one of the 54 million adults who can't read a menu. Um I get that part but that's not necessarily what the responsibility but your responsibility is to an investor. But they have to get Is that if they put money into it they're gonna get their money back. In fact, as I've often said, they're gonna get their money back times 10 or times 100 that's what they have to get. Um and there's two ways to have them get this and uh this will be your listening quiz. So uh listen carefully and

choose the correct answer.

A wave your hands around saying how incredible this product is and how it's gonna help lots of people and we'll figure out how to make money later or answer be Um no, we've actually demonstrated that this is so much in demand that even in a not even in an imperfect version which is only 94% accurate. We've demonstrated that we can sell this and make money on it or answer C We have to be at 98%, but we already have commitments from 17 school districts that they will purchase a full site wide license for this once we have it done. So is the answer A. B.

So those are all awesome. They're all awesome. Um and we've done, see, we've we've done, see I've got 28 school districts willing to do paid pilots. Um we've got a reading fluency company with 10,000 students willing to do paid pilots for us. But for some reason we're showing the L. O. I. S. From these institutions are or you know, programs and that's not enough for the investors. They're like real revenue is in the bank and this is revenue on paper. So I'm going with answer C. Because that's the direction we went. But it still feels like that's not enough.

Well, it's good that it wasn't just answer A because if you have listened and watched the podcast numerous times, you know, that answer is no longer good enough. It was good. It was amazingly enough. Good enough 25 years ago when demonstrating these things was so difficult you could raise money with the hand waving and the uh the excitement about the category. And even the worst thing that I hate seeing in DEx is a look at the size of the total, it's $100 billion market. We just need 1%. So no one goes for that crap anymore. You're absolutely right. It's all about, it's all about traction. Um I'm surprised that actually having written commitments from um all of these school districts isn't sufficient. How firm are these commitments

there? You know, these people are willing to sit down in the room with the investors and talk to them about the need and tell them why they're excited about it the um and what they're willing to do with it. We've got, you know, a great response from them, the data that we're putting together for these school districts and just to give you a little bit more uh concept because they're like, well how are you gonna make money? Obviously we're a SAS product that charges a subscription model. But right now when I said Perfect storm is if a child gets held back, it costs the government or the state $7000 roughly depending on the state roughly $7000 a year. For $98.50 a year. We can make sure that you have every p piece of data needed to get in front of that child's issues with reading and reading fluency before it ever comes to that. So the saving concept for the government should be a no brainer in itself. The fact that we have these districts um or charter schools uh, you know, waiting for us to launch it and helping us pilot it.

I felt like would be the the ticket. Um for me, you know, obviously Mark your network is your net worth. And I felt like, um, without a warm introduction into investment lately you kinda get overlooked.

Yeah, there's a number of things for us to unpack here. Um, Everybody has heard those wonderful stories about, oh yeah, we submitted this script, 50 different agents and 50 different companies and no one everyone rejected it. And then the 51st accepted it. Uh, and that became usual suspects, which I think is one of those classic stories. And we've all heard that, you know, I, I pitched this 6241 times and the last one they accepted it and this became some huge success. Yeah, yeah,

yeah. But, but I would never count on that. I'm bringing that story up because usually the simplest solution is the obvious one. And if you've gotten 20 or 30 investors who don't even want to engage with you in in putting together some type of offer, that might make sense to mitigate the risk. It's a very strong signal that you're right, something is wrong. So, you know, listen, I'm a very persistent guy, but I'm certainly not persistent to the point that I'm willing to keep pushing, you know, what's the definition of insanity? It's trying the exact same thing over and over again and hoping for a different result. So

there's

a couple of things. And uh, I'm getting ready for this one. So that 11 is that the other one piece is that, um, let's take for a moment the argument that your proof isn't strong enough, that letter of intent is not enough. Um, and so part of me says that rather than pushing on investor after investor investor to accept what you have is you should begin pushing on maybe school districts to give you what you need. And really what you need is a N. R. E. Deal, you know, a nonrefundable engineering deal. We're basically in exchange for the right to, um,

the right to use this software under some wonderful terms. They're putting the money up front. In other words, rather than them, they're hedging their bets. Now, imagine this letter of intent isn't a binding purchase order That says Yes, if you deliver this on September one for the next 2023 school year. Um, here's how much we're gonna pay you. This is a contract. I doubt they've done that. But certainly if you want this money, the only thing better than money in the bank is a firm commitment that there'll be money in the bank. And so partly it's maybe how you're going to the school districts. And rather than having them raise basically,

rather than you waving your answer a rather than you waving your hands and saying this is incredible. It solves the need. You've basically said, look at all the school districts willing to wave their hands and say what an amazing thing this is, but you may need to convert this even further.

No, that makes sense. You hit on a very interesting point. I've never thought about that at all. Um,

very interesting. Yeah, it's done reasonably, it's reasonably common when someone is solving a hard technical problem and there's someone who really wants that problem solved for their own business and they're willing to put their money where their mouth is and they're willing to enter into this contract that says, we're willing to help fund the development of this product because it's so important to us. Um, and we'll take some risk along with you because we've looked at the engineering that we look at the tech you're doing, we think it's pretty good, we think you can do this. So we'll put some money in now, which is non refundable, it's what you're gonna use to build the product. And in exchange, they're gonna get a very sweet deal on the back end for using it. But I think you have a deeper problem here. And um, if you flash back now to earlier in our discussion when I kind of, I'm not sure whether I winced or whether I moaned or

what,

how I chose to make a parent that there was something that bothered me and it was the fact that you're selling to school districts. It's like, oh God, that is with my apologies to school districts, the hardest category in the world to sell to. And he says that with the understanding that people are gonna come back and tell me how wrong that is, but it's brutal. And um, you know, I was on the board of an Edtech startup, so I had a chance to literally to see that one very much from firsthand, but I've also been involved with a number of other companies who are in Edtech um, and had so many conversations that I just know it's an incredibly hard market to attack.

Yeah, it's a heavy lift. So we focused on private and charter schools because it's not, we don't have to ask for funding from the government or for them to put any anything in. One of the things though, that is in the public markets is they have this etc. Funding that they put together, which is to help kids catch up from covid relief. So there is that, but I agree with you. Mark selling to the, the public markets is next to impossible. Um, so that we are focusing on, go to market strategy on private and charter schools just because they do have the funding available internally without having to get confirmation from a huge district.

So one thing I was going to suggest by basically dumping all over trying to sell to the schools Is trying to find in the short term because right now this is not what your business model is going to be forever, but you have a short term problem to solve which is to demonstrate that your product is so good that someone's willing to pay for it right? Um and perhaps someone who's willing to pay for it at a 92% accuracy or an 89% accuracy. And um and I would begin shifting my sense ago, let's begin selling to someone right now. Like today who is willing to pay for this

with that being said, can I ask a question around

that mark? Yeah of course. One

of the things that's really interesting about what you're suggesting is that we're seeing a huge request for our downloads because we are piloting the product. We're seeing a huge request from countries like India Singapore that are focused on E. S. L. So our english as a second language. So we are seeing a huge request for downloads to be used as an english as a second language tool which we wouldn't have to have those accuracy numbers at that position.

And well yes that's exactly where I'm going with this. Is that when you have a product which is being built to reach meet Nasa standards, you know you know what that costs. Yeah where basically everything gotta be quadruple redundant. And so no you start by building the technology and using an applications where it's not does not it's more fault tolerant. Um and begin getting it right and get the uses, I mean a classic example of this is uh, again stepping on a third rail here, but like look at, you know, Tesla's approach to, um, fully autonomous driving, anyone who's driven a Tesla know that that is not even close to fully autonomous, but their principle is if we put a system in place, begins racking up huge numbers of miles and an application where it does not need to be 100% accurate, it gives us a lead and whether that how that plays out,

it doesn't play out is unknown, but it's a point that you shift things around to application more fault tolerance so you can do it now and you begin to say, well if these guys aren't willing to commit because they need a certain level of accuracy because they need a certain level of polish, then fine, let's sell it to someone who wants it now. And I'd argue it does not need to be in India or in Singapore that there's tons of parents, there's tons of individual teachers, there's tons of people who probably will be willing to pay for this right now and shifting it again, does not need to be your long term business model. But if you begin to get in a class, three of the kids whose parents are springing for this and they begin to see this, it's an incredible viral thing, which it spreads through the class and then more importantly, eventually you have one class in a school doing it and all of a sudden the other third grade teachers see this now, you have six third grades in the school and then it spreads to a second school in the district. And pretty soon the district goes,

why is everyone using this? In other words? They're not um it's not a distraction, it's not something which is a waste of time. But it solves a problem now, which let's just solve the people who are willing to tolerate this because listen, don't let perfection be the enemy of the good. And a lot of people are gonna feel that way.

Yeah. No for sure. And that's what I've been trying to wrap my head around.

So in other words, so yes, if you can sell to Singapore as E. S. L. You can sell to Singapore and India or Singapore. Great do that. But make it available here in the United States. And if parents are not interested rather than going, oh calling me back in a year and going this is frustrated. How come they won't take that as a signal that maybe people don't want this as badly as uh as you think, I mean I think school districts is great but they're really notoriously hard. Even in private schools. There's just not a lot of money in education and certainly not a lot of extra money in education and there's huge pressure on teacher salary because the school districts want department private schools alike. They want to put as much money as they can into certain areas. So anything they can do by cutting out technology. They will,

I'm not saying you can't, and I'm not saying especially with the tailwind, you have that, you won't be able to, but I'm saying start making money today and let this huge groundswell happen where everyone goes, oh my God, have you heard about this? Um, and let that begin pulling, what will happen is if you put this thing, okay, take one more run here. If you put this thing out Countrywide, any student in the country can get it. So all of a sudden you are seated in hundreds, if not thousands of school districts,

both. And by the way, we don't call them private independent versus public schools. Um, You're, you're seated now you have one or two seats, sometimes five seats in 1000 different schools. What you're gonna get is not the 20 schools that you've approached, you're gonna get the ones who feel they have the biggest problem. You're going to find the ones with the most forward thinking district superintendent, you're going to find the ones who are the most technology savvy and they're going to raise their hands and they're going to come to you first. I mean it's the reason that so many startups start start by selling to venture backed tech and that's a terrible market because venture backed tech goes out of business at a rate, like 4 to 5 times more, if not 100 times faster than enterprise does, But in venture backed tech, you generally have the ceo of the company who's very tech savvy making the decisions and you can sell to them easily and they want it and they're desperate for it and they see it as a competitive advantage and its seeds it.

And as soon as you can, you get the hell out of that market and get into enterprise. But that can be your approach, find the people who want this. The individuals use that as a seating strategy to find the schools and the teachers in the districts that are willing to raise their hands and go all do this and do it fast. I mean my God, you are bootstrapping 19

employees

that

I've only been in America for five years. I've built to other businesses and sold them already in this time. So,

so Kyle you are the, you're the american success story immigrant struggling immigrant comes from it. Well maybe not, Canada is what I'm thinking of.

You know, it makes

good. This is awesome. Um, I love what you're doing. You're taking your chops and you're applying it to something really, really helpful. That's really gonna mean improving literacy rates Holy mackerel and doing it right here in the United States. Fantastic. And blows my mind That 54 million adults have so many reading problems, but start making some money at it. So you don't quite a business and don't go broke doing this,

it's a huge problem. And if if we had more time, I could you, it really digests into how the economy works, literacy. It really unfolds into the entire economy and how people interact. So it's really deeper than just being able to breed. But um, you, you cute, you spark something that the wheels are turning now for sure. That's

my job. I'm like the wheel turner. You know, it's um, if you listen, you're doing an amazing thing and you don't need to go down the path of how good this is for society. But we're at the intersection of if you want, what's good for society, use your personal fortune and fund it yourself and feel really, really good about that. And I'm serious. Or you go to nonprofits whose entire purpose is funding things which are good for society, but yet don't have a strong enough underpinning for the profit motive. But that's not neither of those first two things. What you asked my advice on, you said, no,

I want to go down the, I want this to be an economically viable venture and you're approaching people who purpose shimmer pus. Uh, let me see how my $2 million is going to turn into 20 or 200 million because that's, I did not go to my LPS, I, my limited partners and say, I'm gonna lose all your money, but just think how good

you're gonna feel about it.

You know,

you said,

I'm gonna, I'm gonna make you a, well, I'm gonna make you a ship ton of money. Um, and I'm gonna try and focus on the ed tech markets that we have a little bit of feeling good about it. But believe me, if you don't get the order of those operations there, that's your test for the mass side. If you don't get the order of operations right, you're, you're sunk. So recognize that when you, you know, you swim with the sharks, you got to do the right thing here. And that is,

don't lament the fact that these crazy people don't see the value and they just want to see revenue. So for God's sake, go out there and show them revenue. And I cannot believe that if this thing is as valuable, that there aren't at least some of those, uh, of the other 250 million, 353 100 million americans who can read, you're, uh, you're paid, um, advertising that says this is going to help their child succeed. This is going to keep their child from being left back. Um, you're not going to start generating some revenue.

And besides the fact that you have some revenue to show as, you know, the best way to improve the product is through is through flow, which is why you're doing the tests that you said the betas you're doing Anyway, got me on a rant. Uh I'm glad I got the wheels turning.

No, it's been good. It's been very educational. That's

my purpose. There will not be a quiz. Uh you don't need to read anything, but I think it's really cool and um I'm a believer so now make yourself viable so that you can have this one be a success so you can then solve an even bigger societal problem. Next

I appreciate it. Mike.

So Kyle, here's the deal. Uh there's not gonna be a quiz, but I do need you to stop back in later at some point and and let me know. I'd love to uh at some point I'd love to shoot you invite to join our our that will never work community, which is all entrepreneurs helping other entrepreneurs because I think yeah, you could help a lot of people, but I think you might find some people there who could help you out as well. I'm

always willing to learn song

well sounds good, Kyle, Good luck. And uh we'll uh we'll talk later.

Thank you. I appreciate

it. Well, I hope both Kyle and you got some actionable tips on how to best approach your funding goals. There's a clear need for better support of child literacy and it's good to see a company trying to find a new approach to solving this problem. I want to apply to be a guest sign up to my newsletter or join our discord community. Just head to Mark Randolph dot com or if you're feeling social, follow me on instagram, twitter linkedin. And yes, even Tiktok

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