#68 - Cost vs Quality in Edtech - Keith Schacht, Avichal Garg, and Geoff Ralston

**Craig Cannon** (0:00)
Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is about EdTech, and it's with Keith Schacht, Avichal Garg, and Geoff Ralston. Keith is the co-founder of Mystery Science. They make lessons that inspire kids to love science, and they were part of the Summer 2017 batch. Avichal is an expert at YC, and prior to that, he was the Director of Product Management at Facebook.
And Geoff's a partner here at YC, and before that, he co-founded Imagine K12, an EdTech accelerator that now makes up YC's EdTech Vertical.
All right, here we go.

**Geoff Ralston** (0:33)
Avichal, you founded PrepMe in 2001, sold it 10 years later in 2011
That was actually the year we founded Imagine K12, the world's first educational technology accelerator. And Keith, you founded Mystery Science, I think in 2013

**Keith Schacht** (0:51)
We just celebrated our fourth birthday in January.

**Geoff Ralston** (0:53)
And you just celebrated your fourth birthday with Doug Peltz, and you guys actually did YC in summer 2017 So the idea of this podcast was to have a conversation about educational technology, about maybe some current, past and future stories around ed tech.
One of the things that was the initiative for this conversation was a blog post that Avichal wrote in 2011, titled Why Educational Startups Do Not Succeed. His summary of that post, I'll just give it really quickly since he helpfully put it in the post itself, was that entrepreneurs in education built the wrong kind of business. They think of it as a quality problem, when actually it's a cost problem. Building an education does not follow an internet company's growth curve and because of that, it's, you have to think way longer term than venture capitalists are interested in funding you. So the opportunities for servicing education, they're actually not in the US, they're actually in Asia.
So it's not really gonna be relevant for another five years. That was in 2011, so maybe it's relevant now because that would have led us to 2016 Maybe Avichal, you can start by sort of reflecting on why you wrote that post and how you're thinking about it today, and hopefully you guys can start having a conversation about that.

**Avichal Garg** (2:26)
Yeah, I think that's a great summary, that's a great intro. I mean, the genesis of that blog post for us was really, we started this company, we had a lot of ideas around how to make education better using machine learning and using technology and personalization. And it turned out a lot of people wanted that in the early days, and so we got some early signal that that's actually what the market wanted. And then very quickly, things started to plateau from a growth perspective. And I think my conclusion was that we'd saturated a lot of the early adopters and the mainstream market just wanted different things. The mainstream market really cared much more about cost rather than quality.
And the fundamental sort of disconnect between people who start education businesses and the consumer themselves is fundamentally that. The people who start education businesses tend to care much, much more about the quality of the product.
And in the US the average consumer just looks at it differently. And the buying psychology is fundamentally different. And there are a whole host of reasons why that's the case that we can get into that I think actually have very interesting downstream ramifications on things like politics.

**Geoff Ralston** (3:32)
About whether people value education in and of itself.

**Avichal Garg** (3:35)
Yeah, exactly. And I mean, actually, so if we want to sort of unpack that, the thing I think, and I have very little other than anecdotal to back this up. So this is my current belief. So I could be wrong. I'd love to hear probably from Keith why I'm wrong.
But I think what happened was post-World War II America was really good for a lot of people. So I grew up in Ohio, in Kentucky. And so if you're in the 60s or the 70s, you could get a job at the GM factory. You could make a good wage. Your spouse could make a good wage. So maybe together you make $80,000 a year working in the factory. And a house costs $80,000 a year. So that'd be like living in San Francisco, and you and your spouse make like $3 million a year, and you never went to college. I think you would rationally, you would look at that and be like, why would I go to college? I'm making $3 million a year.
I can buy my house, and I can have a great life.