#148 ESAI

I’m Josh Muccio, reporting live from the center of hurricane Milton’s eye in Sarasota FL. Just kidding, the hurricane already passed and we are okay. But alas, this is my home studio and you’re listening to The Pitch, where startup founders raise millions and listeners can invest. The pitch for ESAI is coming up right after this. And if you’re not following the show already, hit that subscribe button and turn on notifications.

[clap]

I’m kind of a sucker for a founder who disrupts the very system they were once a part of.

As a college advisor, Julia Dixon saw how her services were helping certain students get into their school of choice. While others got left behind.

Eventually she got fed up with the system, and decided to do something a little crazy: replicate herself by creating an AI that levels the playing field for millions of college applicants every year.

Elizabeth: I was going to say, after you had the caffeinated gummy, you can have the CBD gummy.

Jesse: All day. Hello. 

Today, Julia is pitching Cyan Banister

Julia: Hi, I'm Julia. 

Cyan: Cyan. Nice to meet you. 

Charles Hudson

Charles: Hi, I'm Charles. Nice to meet you. 

Elizabeth Yin

Elizabeth: Elizabeth. Nice to meet you. 

Julia: Nice to meet you. Julia.

Mac Conwell

Mac: Mac. 

Julia: Hey Mac. Nice to meet you. 

And Jesse Middleton

Jesse: Jesse. 

Julia: Jesse. Julia. Nice to meet you. All right. Hi everybody. Thanks for your time. My name is Julia Dixon and I am the founder of ESAI. We are the AI platform that is democratizing college admissions. So you probably won't be surprised to hear that students are paying over $90 billion a year on college tuition. But did you know American families are spending an additional $3 billion a year on college advisors? Those are people like myself. I've spent the last eight years helping students and their families navigate an increasingly chaotic time in college admissions. So if you know anyone who's applied to college recently, you know this process includes navigating everything from declining acceptance rates, to the collapse of the FAFSA this year, to the end of affirmative action, confusing test optional policies, and so much more. And college advisors can majorly reduce some of these stressors, but they can also charge upward of a hundred thousand dollars a year, making them inaccessible to most students. And while there are some great counselors at the school level, the average student to counselor ratio is nearly 400 to 1 nationally, meaning students aren't getting individualized admission support from their schools. So I set out to democratize college admissions with ESAI. It's the first of its kind ethical, gamified, and affordable AI platform for college applicants. We have a suite of AI tools that help students navigate everything from program discovery to college essay support to financial resources, helping them build out a cohesive story without ever outsourcing their writing or ideas entirely. Since launching our MVP last summer, we've already helped over 100,000 students get into their dream school, after reaching over 8 million students on TikTok. We also have a new B2B offering with over 100 high schools and districts already on our partner waitlist. So now, in order to deliver on this demand, we're seeking 1 million in funding for our pre seed round. And we are hoping that you can help us democratize college admissions and allow every student to put their best story forward with ESAI.

Mac: Amazing. Is there a demo that we could see? 

Julia: Yeah. So feel free to kind of pass this around 

Charles: Jesse, can tell us what you see? 

Jesse: Alright, so there's a series of tools here around a story strategist, a school matchmaker, writing your personal statement. It is not a pure like text input, like just type the prompt that you want. It sort of like steps you through each of these. So you're doing it in a way that is simpler, bite sized, which we obviously know in the Gen Z, you've found a lot of your users for TikTok, short form is better than long form.

Julia: Yeah, we believe students are experiencing chatbot overload and they often don't even know what to ask a chatbot. So we really tried to create chunked out tools that help them with specific parts of the process as they need them, so that we can really hold their hand through every piece of an application. 

Jesse: Have you raised money for this so far? And maybe if you have, or have not, what it's cost you to get to 100,000 students and the millions of views on TikTok? 

Julia: Yeah, so all of that was when we were a team of one and completely bootstrapped. So in addition to being a college advisor, I have a background in marketing and specifically content marketing. So I was able to put that to work, reach students without any paid budget on TikTok and get our first 100,000 users of our MVP that way. We just started raising this pre seed round a couple of months ago. We're about 300k into the 1 million, with an additional 200k of soft commits. So we're looking for support to get us through the second half of the round. 

Jesse: It's on a SAFE? 

Julia: It's on a SAFE with a 5 million valuation cap and 20% discount. 

Jesse: Got it. 

Mac: So it's 100,000 on the MVP. Are you charging? 

Julia: So we mostly tested our MVP for free in the last year. However, we have generated about 50K in revenue to date, a lot of that coming from our new enterprise contracts. We are launching our new and improved platform this Friday based on learnings from those initial users. That will really push a conversion from free to paid and we are expecting to do over 400k in revenue just in the B2C product this summer.

Mac: And so long term, this is a B2B2C product? 

Julia: So we are pushing both. Most immediately, our revenue is going to come from the B2C push. We already have a big social presence. We know how to build for Gen Z and we can be a bit scrappier that way. Long term, there are a lot of benefits going direct to schools. It's bigger annual sales, combat some of the seasonality of admissions. And, as a mission based founder, I think we can reach more lower income students if we go into districts where they're not getting as much support. So we are building out a very intentional pipeline of about 200 schools in this next year, and then long term I'm gonna scale from there. 

Mac: What are you thinking about, in terms of the business model, how you might charge? What are you thinking, like a freemium model?

Julia: Yeah, this new platform is a freemium model. On Friday, all students will be able to access our story strategist tool for free. And then if they want access to the entire suite of tools in our platform, it's $49.99 a month, or 250 for the year, which is kind of very intentionally priced out so that even if students maybe only wanted to use this for three months while they're applying, the annual plan would combat some of that and hopefully keep them around longer. 

Mac: So 100k users, got them for free. But what percentage of these users actually finished and created an essay?

Julia: Most students used us for college essay support. Our conversion to paid was already about a 2 percent and most of those users who created account at least used our free essay tools, so that helps them come up with essay topics. Basically, everything I would do as an advisor, which of course isn't outsourcing an entire essay, but is helping them frame their topic or outline or edit. So that's what the majority of students did. 

Jesse: So I'm invested in and on the board of an adjacent company called Teal. It's basically a lot of what you're talking about, but for people in their job search. And it's been an exceptional business to be invested in. It's a huge opportunity. I think one of the unlocks that they had was they've continued to scale past many millions of users, a lot of paying customers, with a very focused organic growth plan that has continued as they've grown, as opposed to having to pay for users. And so I'd be curious. How are you thinking about, scaling top of funnel growth? 

Julia: Yeah, I mean I'm excited about the fact that admissions is kind of the first time as a person maybe you have to think about your life in this big picture way. Like, what is my story and what do I want to do with it? And so we have a cool opportunity to grow with our own users over time and even partner with things like, you know, career readiness platforms to say, Okay, we've started the beginnings of this portfolio for you. We're going to match it to your dream school. Now, how are we going to help you get into programs at that school or your first internship etcetera. So I think the long term growth potential there is really exciting. But we're starting out focus with admissions. 

Elizabeth: Julie, I, I love how your background fits really well with this space and I'm very impressed by you as a marketer. 

Julia: Thank you. 

Elizabeth: I think, for me, one of the things that I don't like about the mechanics of this model is there's constant churn with the direct to consumer model, right? And it's like, you graduate, okay, I no longer need this. And then now you have to go and get the next cohort of people who are going to graduate soon. So it's like, just to get back up to the level of last year, you have to put in a lot of effort and then - and then some to grow. And for me I - I just feel like that kind of growth pattern is really hard, so I'm out. Thank you. 

Julia: I appreciate that. I will add, like, stickiness is really important to us, so we're trying to build in features, like, how do we make your portfolio live on this platform in a way that you do have to keep coming back? And, like, all of your stuff and deadlines live here, and so it's very intentional into how we're building the product. But it is one of the benefits of B2B, too, is we have built in applicants on an annual school contract. That would uh combat some of that.

Charles: How early in the cycle of thinking about college do you acquire people? Is it juniors? Is it sophomores? Is seniors scrambling?

Julia: It's a great question. I mean, right now, most of our users are rising seniors. So people applying to college in real time. But obviously going earlier, things like program discovery are actually best done as early as freshmen or sophomore year. So if you find out what your dream school is, you can figure out what you need to do to get there. If we can get them thinking about this earlier, that's more seats at the school level that we could sell. 

Jesse: How do you think about kind of the initial big market? Does this work for every person who's going to apply to college? Does it work if they're going to apply to trade schools? Does it work if they're outside the US? How do you think about that? 

Julia: Yeah, I mean, if you boil it down to just people looking at traditional four-year institutions in the US alone, that's almost four million applicants in the US every year. If you add transfer students and grad school applicants, which our platform is set up for as well, that goes up to seven million students in the US alone. If you expand internationally, there's between 25 and 30 million people applying to some sort of higher ed institution every single year. So if the life 

Elizabeth: That's the big money. 

Julia: Yeah. And if the lifetime value is at about 250 right now, and that's just assuming that three month to annual subscription, then we're looking at a 75 billion dollar plus TAM. Of course, that's just B2C and that's just applicants. We do talk to a lot of nonprofits and investors who focus on social impact about alternative post secondary pathways. What if you do want to go direct to trade school, direct to workforce, things like that. In my opinion, our ethos of helping you tell your personal narrative and match that to whatever your dreams are could apply to any of those options. And so it is something that is in our product roadmap that we can add pretty easily. 

Jesse: I will say, I really like what you're doing, so I'd like to invest in this.

Julia: Amazing.

Jesse: um I would do 50k. I think it's an exciting space. As somebody whose guidance counselor was very busy and was not very helpful, I would have loved if this existed. 

Julia: That's the number one feedback we get is, I wish they had this when I was in college.

Jesse: I'm not sure that my eight year old will wind up going to college. I don't know what's going to happen with college by the time he's that old, but if he does, this is something I would want him to have. 

Julia: Amazing. Thank you.

Charles: I'm curious what does the tech and platform give you over simply going directly to ChatGPT, Anthropic, whatever your favorite flavor or AI is?

Julia: Sure. I think at the bare minimum, what we always go back to students don't know what to even ask. So you'd have to be really good at prompt engineering and understand the admissions landscape to know what to ask. But even if you assume that students understand what they need to do, and they understand how to prompt AI well, ChatGPT is just not trained on real time admissions data and doesn't necessarily have an understanding of what it takes to make a great college applicant. So our AI is trained on a proprietary coaching method created by myself and our chief academic officer, who comes from admissions on the higher ed side, as well as trained on real time data. So we can get all the way down to specific classes and even professors at these schools that students can research and even mention in their applications to show demonstrated interest. So, at the end of the day, it's not a chat bot. It's more of a walk you through very specific parts of the process. And I think that's what makes us really different from some of these just specialized AI tools that feel pretty similar to ChatGPT. 

Mac: Currently you say you have 2 percent of your users transitioning to paid. 

Julia: On the MVP we did. Our goal now for the summer, is closer to four and it's set up in a way that we think we can do it.

Mac: Okay. That's not enough. 

The pitch for ESAI will be right back.

Mac: Currently you say you have 2 percent of your users transitioning to paid. 

Julia: On the MVP. We did our goal now for the summer, is closer to four and it's set up in a way that we think we can do it. 

Mac: Okay. That's not enough. 

Julia: I'd say it's a starting place. I mean, we're - 

Mac: It is - it's very much so as a starting place. In my mind, this is a very, very valuable tool. 

Julia: Thank you. 

Mac: The way you're business is structured now, that 2 percent's got to be higher or you're not pricing it right. 

Julia: I agree. I think the MVP gave us a lot of learnings on how we can get that number up and how we can go to not just the four million undergraduate applicants, but the seven million applicants in total. And we've already reached a lot of international applicants who apply to US schools. It's a really big market. A couple of our existing investors are helping us get into some international schools in Asia, for example. There's a lot of potential to grow this at just the admission side, and that's not counting how we can help evolve students into their career over time, too. 

Mac: Seems like it'd be amazing business with a lot of users, but not a lot of revenue. And I don't know where the larger portion of the revenue growth could come from today sitting here. And it could just be I'm just an idiot, right? I don't know. But just doing the back of the napkin math, the math ain't mathing for me. So I'm out. But I need to be a customer because my 13 year old needs to be on this platform ASAP. And the fact that that's true, that me as a parent, I know that you're not charging enough. As a parent, I'm going to pay what I can to help my child get to school. And the crux of it is helping them get their essay ready for the scholarships, which means me paying for your platform may end up saving me money for sending them to college. That's worth a lot to me. 

Julia: Yeah. 

Mac: But for the moment I'm out. 

Julia: Cool. Thank you. 

Charles: Yeah, I was on the board of a college for several years and I was on the marketing and admissions committee.

Julia: Very cool. So you know this world.

Charles: Yeah, I do. I think I have a slightly different take on pricing. Willingness to pay is highly variable domestically, but internationally you could charge significantly more for this product, because those people generally aren't eligible for financial aid.

Julia: Yeah. I mean, I guess a note on our pricing too, right now we're at 49.99 based on the amount of tools we already have available. So as we add more, we're looking at adding more tiers of pricing as well. And that might combat some of that. 

Charles: And I think, like, there's something - I mean, the, the equality-minded person in me likes you keeping it inexpensive and accessible, and I guess -

Julia: It's the balance we have to strike as well. 

Charles: And the right answer might be B2B for people where price is an issue, it's effectively free to them, paid for by the school, and just a higher target price for the people that you charge B2C, and an even higher price -

Elizabeth: International.

Charles: And then, cause my big learning from this admissions experience was the international students fundamentally don't understand, this personal essay, like I don't have to - in my home country, I give them my test scores and they tell me where I'm going to school. So there's a lot of idiosyncrasies and there are just simply more universities to research. And I think if you could become a tool that helps international students, you will have a secondary business, which is around helping these students discover colleges, universities that weren't on their road map, that based on what you learn about their interests, background, could be - so I want to invest 25k.

Julia: Okay. 

Charles: I have a whole bunch of questions around the business model and the level of effort between B2B and B2C. I just think there are pockets with higher willingness to pay that you can address if you're clever with pricing.

Julia: I'd love to talk about it with you. Yeah. 

Cyan: Yeah, so I love your mission. I am out. However, I have LPs that I invest on behalf of that are schools. And so it's in my best interest that my schools succeed that I help. So I would love to introduce you to the teams that I work with. 

Julia: That’d be great. 

Cyan: I just know nothing about this. And part of it is cause I dropped out of high school and I - a lot of what you're talking about, I've just been riveted listening, cause I don't understand any of it. So it's one of these things that I just have no domain expertise. I just can't add anything. 

Julia: No, I appreciate that. But would love to meet some of your schools. 

Cyan: Yeah, absolutely. 

Elizabeth: So schools may be another revenue source. You know, a lot of these schools are in the recruiting game and they want to be able to identify talent under a certain criteria early. You probably know this better than anyone. They're willing to pay big dollars for that if they can see those profiles of people earlier. 

Julia: Yeah, and we're learning a lot about our users and what they like and where they might be a good fit for, and we could do some really unique matching for schools that are having trouble with enrollment.

Jesse: You're, you're prompting them. You're like, Hey, while you're writing that essay, have you thought about checking this box and adding this school to your list? That's a thousand dollars to the school.

Charles: The school I was with, they spent a significant amount of money on student acquisition. Because if you think about it, there's some number of schools that are well known and a significant number that are very high quality institutions that are just not as well known. They don't have the same brand recognition. 

Julia: Yeah, completely agree. I'm excited about that as we evolve a little. Cool.

Jesse: Awesome.

Julia: All right. Thank you all so much.

Jesse: Thank you.

Julia: Nice to meet you. 

[thank yous]

[outside applause] 

Jesse: I will admit, I was, I was playing a little game with myself. I wrote: Cyan won't like this because she likes to break the system. 

Elizabeth: Yes. 

Mac: That's the exact same thing I thought. That is 100% what I thought.

Jesse: I was -

Cyan: I stayed quiet for a reason.

Jesse: I know, I know. 

Cyan: Because I didn't wanna like bring my parade and derail her. And so if I'm ever quiet like, like that, that's usually why. I even wrote down: kill the debt machine.

Jesse: So I said it in this, I tell my son all the time, you do not have to go to college. Like, I'm like you - I think the system's broken. But while it exists -

Cyan: But some kids, it makes sense for them, you know.

Jesse: Yeah, totally. And while this system exists, and I think, like, it's going to exist for a while, I think the leveling the playing field is the right move.

Jesse: I tell my son all the time, you do not have to go to college. Like, I'm like you - I think the system's broken. But while it exists -

Cyan: But some kids, it makes sense for them, you know.

Jesse: Yeah, totally. And while this system exists, and I think, like, it's going to exist for a while, I think the leveling the playing field is the right move.

Cyan: Yes. 

Jesse: Like, let's give everyone access. 

Charles: Also, I just think helping people find - I will - I have had a bunch of friends who like picked schools for all kinds of random reasons and ended up being unhappy. And I'm like, I bet you there was a school that you could - an equivalent school where you would have been way better, you would have had a way better experience, you'd have been way happier.

Cyan: Well, I also think because of what's going on in the world, there's a lot of people looking for other schools as well. So they're just like, I don't want to go to the Ivy Leagues as it turns out, cause there's a cohort -

Jesse: Or I want to transfer.

Cyan: - that might not - yeah, I want to transfer now. And so there's a lot of things going on where people are like rethinking their decisions. 

Elizabeth: This is very lucrative, but I think part of me feels like, Oh gosh, I hate the helicopter-iness of all of this. 

Josh: The helicopter parenting piece? 

Elizabeth: Oh yeah, like we're funneling people through the gauntlet.

How the VCs really feel, coming up after this

Elizabeth: This is very lucrative, but I think part of me feels like, Oh gosh, I hate the helicopter-iness of all of this. 

Josh: The helicopter parenting? 

Elizabeth: Oh yeah, like we're funneling people through the gauntlet. I guess I just go back and forth between like, do you include more people in the existing system? Or do you try to take down the system? Like this is where I just kind of -

Josh: She does put herself in a position where she can - she can change it. Like she's able to help democratize it.

Elizabeth: But she can't - she can't change ultimately, like, the college thing, right? The idea of, like, getting into college, the value of college, you pay so much for college, you go into debt for college, like, all that. She can't change that. 

Josh: But she mentioned, like, trade schools, and career advice. Like, even just, like, choosing what major, or whether to go to school or not. Like -

Jesse: Yeah, I mean, she could if she wants to. 

Josh: She could help with that whole process.

Jesse: But I'm also, I don't know. 

Elizabeth: I'm skeptical. 

Charles: But I think sometimes you meet founders and you're like, I just don't want to see, like - that's not like a vision of the world that I want to see exist.

Elizabeth: Yeah. I think that's part of my struggle. Like I do think there is a great business in here somewhere. Like personally, I'm like, do I want this? 

Charles: I met a bunch of like fantasy sports companies that wanted to go into gambling. And I was like, you're going to make a lot of money, but this isn't like something I want to support. And so like, you will go make the money. I won't be an investor. And it's just like, that's not - 

Elizabeth: Well, I mean, for something like, cause it's not like, I don't know, a vice category or something. Like I'm open minded to it, but I also still have the concern about the 100% churn every year, pretty much.

Jesse: Yeah, no that's fair. 

Elizabeth: So it's not just this one thing. But philosophically, I'm less excited. 

Cyan: Her and I are really into the idea of a Ready Player One educational universe. 

Elizabeth: Like, I would prefer somebody coming here and saying, we're going to build this new school. 

Cyan: Yeah, a new school.

Josh: A VR school? 

Cyan: Something.

Elizabeth: Something. Yeah.

Cyan: Just something new, like -

Jesse: That's accessible to everyone. 

Elizabeth: Yeah.

Cyan: Like, the old institution is broken. Here's what the new one looks like. 

Elizabeth: I think the issue is, there's What are we trying to solve? Are we trying to solve education? Or are we trying to solve credentialing? I actually think the two should be separate. 

Jesse: I don't disagree with that. 

Charles: They're tightly coupled. 

Elizabeth: They're tightly coupled.

Charles: At the moment.

Cyan: I'm excited that companies are moving in the direction of requiring less accreditation. That is a movement that's actually helping. Because that was the hard requirement that they had on the job descriptions that said you had to have a bachelor's degree or whatever. Which is one of the things I discovered as somebody who doesn't have a degree, is that, that thing on there is just so that they can tell you no. That's it. And so, companies started dropping it and then that actually really helped open up the job marketplace. 

Josh: So I have one final question. Jesse and Charles, if you didn't have the previous experience, you with your portfolio company and you, Charles, with being on the board, did you say you're on a board at admissions? 

Charles: Yeah. On the board of a college. My subcommittee was like marketing and enrollment. 

Cyan: Very topical.

Josh: If you didn't have that view and that insight to evaluate this business with, would you have still invested?

Charles: No. 

Jesse: I would be in a maybe category. I think in this one, it was total pattern recognition. All the risks that you outlined, I totally see. I just, Teal has built the same engine for very similar, and I'm like if you can solve it for this, the market's slightly smaller in the US than Teal. Teal's like 40 to 50 million people a year change jobs. But like international is so much easier with this than jobs because it's like

Charles: You can charge so much. 

Jesse: They're all applying to US. 

Josh: Yeah. 

Cyan: I like that question because it implies that we pass because maybe we don't have the same experience. We're coming at it from our own worldview of education, which kind of just shows that, you know, investors are going to pick what they're attracted to and what they want to actually spend their intellectual time on. And that's the type of investor that you want. 

Elizabeth: But Jesse, did you say that you dropped out?

Jesse: I dropped out of college to start working. And I also got suspended from high school for computer hacking. And the only reason I got into college is because I wound up fixing a security problem in the school network, which allowed me to get back on to the computers, which had my superintendent write my letter of recommendation, basically outlining why my suspension was not something that they should view as a negative when I went to Drexel. Getting kicked out -

Elizabeth: Wow, what a story. 

Jesse: - may have been the only reason I got in because my grades weren't that great. And my guidance counselor was legit not helpful.

Cyan: We should be celebrating hackers. 

Jesse: My parents were like, we're not really mad at you. We just realized that you need to figure out a way to not go to jail with this skill.

Cyan: Exactly. 

Jesse: You need to channel it into something good. 

Cyan: Like when a kid is identified as breaking things to figure out how they work, they should be immediately put into a school that basically teaches them, that channels that energy because it’s a gift. 

Jesse: I totally agree.

Josh: Yeah, like Xavier's School for Special Children. 

Cyan: And instead it's like - Exactly. Instead we're like, go straight to jail or work for the NSA.

Jesse: Yeah, those are your options. 

Mac: That does happen. 

Cyan: Yep, it does happen. 

Mac: Stuff like that does happen. But like Somebody build that so I can invest in it.

Cyan: Yes. Party round. 

Josh: I feel like we're speaking a lot of businesses into existence today.

Jesse: Yeah, exactly. 

Josh: Particularly Cyan.

Jesse: Cyan, you mentioned something and I didn't think about. I love that point um - we have a couple of college endowments as investors…

Julia walked out of the Pitch Room with a 50k commitment from Jesse, a 25k commitment from Charles, and a split panel about how to solve education.

I’m not personally thrilled about the idea of VR school, but there were some good ideas in there. Let’s keep the discussion going.

Julia: Do we fix the system or do we start over? It's both like we can't just ignore the existing system as it is. It's not going away overnight so we do need to find ways to incrementally make it better. Is college the future? I don't know, but either way, we're going to help you figure out how to reach your goals and tell better stories to get there. And so that, that makes me feel like we're, we're doing something that helps no matter what the answer is. I think both can be true.

Did Jesse and Charles invest after the show? Find out on our season finale at 7pm on December 11th. You can register for the virtual watch party at pitch.show/party

No offer to invest in ESAI is being made to the listening audience on today’s show, but LPs in The Pitch Fund do have access. You can learn more and invest in our debut fund at thepitch.fund

Fund I closes to the general public on December 15th.

Next week on The Pitch … 

Ryan: Our vision is to democratize access to care through telerobotic and autonomous procedures. 

Jesse: Fantastic mission 

Charles: No one will let you do robotic surgery. You make one mistake, you’re out of business.

Ryan: I'm about tearing down the systems that do not work and rebuilding them to support everybody. 

That’s next week! Subscribe to The Pitch right now, and turn on notifications so you don’t miss it. 

Applications are closing soon for season 13 of The Pitch. We’re taping January 14th-16th in Miami, FL. VCs and LPs will fly in from all over the country to attend in person. Founders can learn more at pitch.show/apply

This episode was made by me, Josh Muccio, Lisa Muccio, Anna Ladd, Enoch Kim, and Jackie Papanier. With deal sourcing by Peter Liu and John Alvarez.

Music in this episode is by The Muse Maker, Breakmaster Cylinder, FYRSTYX, Marlon Gibbons, Imagined Nostalgia, and Ganamo

The Pitch is made in partnership with the Vox Media Podcast Network.