After eight years of bootstrapping, Melbourne edtech Compass sets sights overseas with $60 million to spend
Tuesday, November 12, 2019/
After bootstrapping, and shying away from the media spotlight, for eight years, Melbourne edtech startup Compass Education has bagged $60 million in funding, as it expands throughout Australia, and beyond.
The startup was officially incorporated in 2010, but co-founders John de la Motte and Lucas Filer had been building the solution for about a year prior.
Back in 2009, there was “an identifiable gap” in the education space, when it came to technology, de la Motte tells StartupSmart.
The co-founders noticed many schools were working with between 20 and 30 separate systems — one for writing reports, one for organising excursions, one for booking rooms or equipment, and so on — and set about finding a way to consolidate them.
Compass now provides a one-stop shop for school management, providing a platform to make life as easy as possible for teachers in house, and to allow for easy communication with parents.
Having started out in three schools, Compass is now in 1,800, and just passed the milestone of two million users.
Up until December last year, the startup was bootstrapped, de la Motte says. And, while he doesn’t share specific growth figures, he does reveal that since it was founded the business has been profitable every year.
At the end of last year, that growth story paid off, and Compass secured a massive $60 million investment from private equity firm Advent Partners.
Since then, Compass has opened offices in Brisbane, Sydney and Dublin. It’s also planning on opening in Perth in the next four or five weeks. The startup has also signed its first flagship school in Canada.
In the next few years, de la Motte sees the startup having a presence in the UK and the US as well.
That decision to take on investment after eight years of bootstrapping was very much “an acceleration piece”, de la Motte says. The co-founders are now looking to condense their three-year roadmap into just one year.
“We’ve gone on a hiring blitz,” de la Motte says.
Up until 2018, the business didn’t have a sales or marketing team, achieving organic growth largely through word-of-mouth, he explains.
“We still want to be a company that is driven by the organic nature of sales,” he adds.
“We needed to build out the product space … and we also needed to be able to put people locally across different geographies.”
Meeting market demand
At the time, Software-as-a-Service was still a relatively new concept, and so the fledgling startup faced the challenge of explaining to schools why they should be paying for tech on a licence basis.
“There was a bit of uncertainty around this being the model.”
The founders spent a few years focusing on explaining the benefits of such a system, and eventually discovered the value of selling the platform’s security. Compass is security compliant to the same standard as the big banks in Australia, de la Motte says.
“That was a key part for us,” he says.
Compass was investing about $500,000 a year to make sure its compliance was spot on. So clients trusted “it was going to be a more secure platform than having a server sitting in a cleaning cupboard”.
Now, 10 years later, the landscape is a little different. Previously, it was fairly uncommon for parents to be able to access detailed information about their children’s schooling. Now, following the smartphone revolution, there’s an expectation that they can access that information, and in a user-friendly way.
“The expectation that’s coming from parents is on this curve that’s just going straight up,” de la Motte says.
“Parents want access to everything on their mobile device, so for us, that’s been a bit of a re-shift.”
Initially, Compass was built as a system to remove the administrative burden on teachers, and to improve the home-school relationship.
Now, there is pressure coming from those parents to provide an application that stacks up against those they use every day.
Everything parents used to do by physically going into school, they now want to do electronically. And everything they can do electronically, they want to be able to do on their smartphones.
“We made the mistake the last couple of years where we looked at our competitors, and the apps they have, and we would compare ourselves to them,” de la Motte says.
“The thing that we missed is that parents don’t go and download a copy of our competitors’ apps to compare us to. They’re comparing us with the likes of Instagram, Facebook, CarSales, Snapchat, Tinder,” he explains.
“We’ve got this ability to take it to a level that really meets the expectations of parents.”
“You make a choice”
Although the funding round was closed in August last year, there was no media circus, no announcement, and no inclusion in December’s biggest-raise wrap-ups.
Again, it comes down to the fact that Compass has never had a marketing team, let alone a PR team. Even three or four years ago, its website was a single page with a phone number.
“It didn’t even say that we were a school management company,” de la Motte says.
The startup was growing and was profitable without publicity.
“We saw that our place was very much around assisting schools … we didn’t put any attention on the sales and marketing piece.”
So, when Compass did close its massive funding round, it took six months or so for the founders to build out a function to manage publicity, and the potential influx of enquiries afterwards.
“You want to perfect it, so that you’ve got your brand right, that you’ve got your marketing material, your website and all that collateral in place,” de la Motte says.
But, he wouldn’t necessarily have done things any differently. Everyone has their own style, and every startup is different.
“I’m not saying for a second that ours is the way all businesses should operate,” he says.
“But my feeling is that you make a choice.”
Startups can either focus on building the product, reaching out to core customers — in this case, schools — and building through word-of-mouth, or they can make a lot of noise, raise a lot of money and invest in marketing.
Ultimately, it comes down to where your strengths lie, de la Motte says.
“Our strength is building a product, working closely with schools and building strong relationships with customers,” he explains.
Marketing and “selling based on opportunity” is not. So, the co-founders opted to get their heads down and focus on developing the core of the platform.
“If we had gone down the path of an early cap raise … I think it would have been a distraction from what we wanted to build.”
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