The Killer Advantage of Vertical SaaS: Sitting Down with Civitas Learning CEO Charles Thornburgh
When Charles Thornburgh decided in 2011 that he wanted to leave his post as a division president for Kaplan, move his family from Miami to Austin, and found an education technology company, the first person he needed to sell on the idea was his wife. A few factors were working against him, however. First, Miami was his wife’s hometown. And second, she was pregnant with the couple’s first child.
Yet, surprisingly, Thornburgh says the conversation didn’t last long. Shortly after delivering his pitch, Thornburgh’s wife signed up for the journey. And so far, it’s been a pretty enjoyable one.
Soon after moving to Austin, Thornburgh founded Civitas Learning, an EdTech business that delivers predictive analytics for higher education. To date, the company has raised nearly $28 million in funding from a roster of top investors, and it’s now working with more than 50 higher education partners — a number the business expects to grow significantly in 2015.
In the video below, Thornburgh sits down with Mass Relevance co-founder and Spredfast board member Sam Decker to talk about why he chose to found the business in Austin over his hometown of San Francisco, why he’s a big believer in vertical SaaS, and what advice he has for would-be entrepreneurs.
Watch the Video
On his background in education (and how that inspired Civitas Learning)
- Getting involved in education by accident. As a junior in high school, Thornburgh befriended the co-owner of a SAT prep class company and worked for the business before going to Stanford. After graduating, he offered to buy the business entirely for debt — a decision he was comfortable with as a recent college grad with a negative net worth.
- Performing a risk/reward assessment. The calculus to take out a loan to grow a startup business at 22 years old is very different than the calculus to do the same thing at 35 years old with a wife and two kids, Thornburgh admits. But that’s an assessment that every founder at every stage of life should make before taking the leap.
- Buying into something you’re passionate about. Thornburgh says he was so interested in buying the business because he’d fallen in love with education. “I found something I was genuinely passionate about and pursued it,” Thornburgh says. “Over time, I’ve gone deeper and deeper into the vertical, which has given me an opportunity to see things in the space that others might not see.”
On transitioning from founder to Kaplan executive and back to founder again
- Every experience and company is different. Ultimately, Thornburgh says he can’t compare his experience as a 22-year-old startup CEO to the process of building Civitas Learning in his late-30s. His financial position is completely different, his accumulated knowledge is far greater, and his focus is more acute. “Each experience is unique and you have to treat it that way,” Thornburgh says.
- The benefit of working for someone else. While Thornburgh considers himself an entrepreneur at heart, he says his experience working for Kaplan was irreplaceable. “When I joined Kaplan after the acquisition of TestTakers.com in 2002, it took me 5-6 months to realize how little I knew about being an effective business person,” Thornburgh admits. “That experience taught me that there was a whole lot more I needed to know in order to have the impact I wanted to have.”
On why he founded Civitas Learning
- Addressing a lifelong mission. When he bought TestTakers.com in 1997, Thornburgh’s desire was to use technology and data to expand access to valuable test prep content to kids whose parents couldn’t afford to pay $800 for SAT test prep courses. Today, his business and social missions are extensions of that original goal.
- Realizing higher education is basically a subscription model — and churn is incredibly important. As Provost of Kaplan University, Thornburgh discovered that the cost of losing students was disproportionate to the actual tuition that walked out the door, and that there were also reputational and accreditation costs associated with student churn.
- Delivering a solution for a market need. At Kaplan, Thornburgh wanted to help higher education institutions address those issues and, in turn, improve graduation rates (a win-win for the school and the student), but there was no way to leverage data to create a holistic picture of the drivers of student success. From that pain point, Civitas Learning was born.
On why he chose Austin as the hub for Civitas Learning
- Silicon Valley wasn’t the right answer. Thornburgh grew up in San Francisco and had previously built three tech companies in the Bay Area. But when he founded Civitas, he knew that Silicon Valley wasn’t the right home for his company. It was too expensive and too crowded with businesses competing for tech talent.
- Top tech talent + strong startup ecosystem + low cost of living + warm weather. When he was deciding where to found Civitas Learning, that was the calculation Thornburgh performed. And it left him with one answer: Austin.
- A hub for mission-oriented businesses. Another reason Thornburgh chose Austin: He quickly found that people genuinely cared about what they did. “Austin is very authentic,” Thornburgh explains. “If you’re claiming to be something you’re not, people will call you on it. On the other hand, if you can put a compelling growth story together with a strong social mission, there’s an alchemy to that combination that works really well.”
On why he’s a big proponent of vertical SaaS
- Going dramatically deeper into one problem domain. While the market for vertical SaaS companies is undoubtedly smaller, Thornburgh says there’s value in having complete focus on that domain, coming to understand your customer’s universe more fully, and, as a result, acquiring customers in a much more capital efficient manner.
- Product first; sales and marketing second. In vertical SaaS, businesses spend the bulk of their time on building a product that truly aligns with their market’s pain points and ensuring customers are successful. Conversely, horizontal SaaS companies often have to invest heavily in sales and marketing, which can hinder their ability to service customer needs.
- The combination of art and science. The problem with vertical SaaS — and, specifically, creating a new category within a specific vertical — is that there’s no true playbook to work with. “There’s no formulaic way to do things,” Thornburgh explains. “Often times, you have to combine domain knowledge, data, and creative instinct to curb-jump what’s possible and create products that didn’t exist previously.”
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In a perfect world, people make rational decisions and the best idea always wins. But as we all know, things don’t always work out this way.