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OPPORTUNITIES: Click to learn how opportunity sizing works
1. Level 3 - Bootstrapper: A niche learning software that combines traditional video courses with interactive, direct learning.
⭐ Software Ideas subscribers also unlock: ⭐
2. Level 3 - Bootstrapper: A tool that allows you to create an API for any external website.
3. Level 2 - Indie Hacker: Software that makes it easy for companies to build and automate internal swag.
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Opportunity 1:
MasterClass
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Background [1], [2], [3]:
Estimated revenue: $160M ARR
Number of employees: 498
Funding raised: $236.4M
Founded: 2012
Price [4]: $180/year
Opportunity Size:
Level 3 - Bootstrapper
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MasterClass is an online learning platform where users can watch high-quality courses from the world's most famous celebrities.
Using MasterClass, users can take a tennis lessons from Serena Williams, learn new recipes from Gordon Ramsey, and better understand the nature of communication from Dr. Jane Goodall.
Users love MasterClass due to the high-quality videography and famous instructors, as well as the Netflix pricing model (all courses are available for a single subscription).
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MasterClass is one of the few startup unicorns in the Education Technology (EdTech for short) space.
The idea behind MasterClass is simple - instead of having a learning platform with thousands of instructors, why not learn from the best?
By offering lessons from either the most talented or most famous individuals in their industry, MasterClass can claim that they have the highest quality content for the casual learner.
Note the term 'casual'. It's important, and we'll come back to it later.
MasterClass aims to be a fresh take in an industry that has struggled with commoditization. Most of the other large companies in the space work more as a marketplace than as a content creator, enabling course creators to host their content, manage their users, etc., easily.
Unlike these companies, MasterClass takes a direct role in creating the course. This really shows in the quality of their classes, specifically in videography.
Watching a course on MasterClass almost has a documentary-like feel. You won't see someone sitting in front of their computer with a 480p webcam!
But how does MasterClass manage to land these celebrities, and how do they make money?
MasterClass began with a lot of cold outreach (according to the founder, this took YEARS!) to land their first initial celebrity - Dustin Hoffman - who gave a class on acting.
The class was a hit, leading to roughly 30,000 sales over the first four months. [5]
MasterClass would use this success to raise more money, launch another celebrity course, gather more users, and repeat - a cycle that is still happening today.
With MasterClass worth an estimated $800 million as of 2020, they have clearly latched onto a need in the market. [6]
So why are customers buying MasterClass?
For one, it seems that MasterClass has found a unique angle at the intersection of entertainment and education.
If you're a serious student in a field and are looking to improve, odds are a general-purpose class taught by a celebrity isn't going to be the key piece of content that gets you to the next level.
Instead, MasterClass appeals to the curious nature of learners. How do the best in the world think about their craft? How does their mind work?
These are the types of lessons that MasterClass answers. If you're looking to learn as efficiently as possible, you'll probably want to use a more direct learning style - such as hiring a coach who can focus on your specific areas of weakness.
With all of this in mind, you may be wondering why MasterClass has been so successful. If the classes themselves lean towards the entertainment segment, why is this company worth hundreds of millions of dollars?
To understand this, I think it's best to look at the marketing strategy of MasterClass.
MasterClass has a unique advantage in the market that other major companies struggle to compete with - all of their courses are taught by celebrities who already have a following!
This is a potent cycle. By having the course taught by a celebrity, that celebrity's fan base will naturally sign up for their course. And since the only membership option is annual, they are quite likely to stick around and watch a few other courses as well.
This natural, viral growth cycle is one of the primary mechanisms of how MasterClass has continued to bring in new users. This has only gotten more significant during the COVID-19 pandemic, as users are stuck at home with little to do.
Additionally, MasterClass has raised mind-bending amounts of money, with a large amount spent on paid advertising. In regards to growth, MasterClass is a typical VC-backed startup.
By this, I mean that they have no interest in focusing on profitability. Instead, they'd prefer to take any revenue they make and reinvest it in acquiring more users, allowing them to raise more money also to acquire more users, altogether creating an explosive valuation.
Overall, MasterClass has found an angle on the market by appealing to casual learners and seems to be doing well because of it.
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"MasterClass is one of my favorite online learning platforms, and I've had personal experience with a fair share of them (Coursera, Skillshare, edX, Rosetta Stone, CreativeLive, and so on).
Compared to many online courses, MasterClass's follow the format of a one-sided conversation more than an academic setting, which can make learning feel more engaging.
I love that I'm able to learn conventional and not-so-conventional tricks and tips from giants of any industry — some of whom are on my shortlist of favorite authors, actors, musicians, and chefs. Classes are pretty short (2-5 hours total), and the lessons are between 5-25 minutes each.
Plus, the diversity, quality, and flexibility of its online classes is hard to beat. If I'm going through a cooking phase, I can watch bite-sized clips that are interesting and useful. And if something isn't my number one passion, the allure of a "master" helps me remain interested in the lessons.
For me, it's worth the $180 — especially this year, when I'm stuck at home and trying out new hobbies. It's informative without feeling overly stringent or overwhelming — a good fit for lockdown. But, if you're interested in deep-diving into only one topic, I'd recommend auditing a class at Coursera or edX rather than dropping $180 just to access one MasterClass."
- Remi Rosmarin and Mara Leighton [7]
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Udemy: $325.1M ARR [8]
Price: [9]
For individuals: Pay per course
For businesses: $360/user/year
Udemy is one of the largest Online Learning Software solutions on the market. Like we discussed above, Udemy acts as a hosting solution and marketplace and is not directly involved in the creation of the courses on its website.
Udemy is best known for its massive number of course offerings. As an instructor, Udemy offers a huge number of potential members of your course, making it an appealing offer for individuals who don't haven't spent the time to acquire a personal audience.
However, leveraging the marketplace comes at a cost. Udemy doesn't charge any fees for using its software, instead of charging as much as 75% of the revenue of a sale depending on if that sale came through Udemy's advertising, natively through Udemy's search engine, or directly from the course creator. [10]
A large part of Udemy's revenue also comes from its business section, Udemy Business, which offers a selection of 5,500 courses for a single annual rate.
Users enjoy Udemy for the comprehensive course offerings, but it can take some work to find the highest-quality courses on the site and avoid low-effort, out-of-date, or simply poor quality courses.
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Coursera: $293.5M ARR [11]
Price: [12]
For individuals: Pay per course or $399/year for Coursera Plus
For businesses: $399/user/year
Coursera is one of the other major players in the industry. While also offering a comprehensive course selection, Coursera focuses its content on credential-based learning.
In other words, they want to equip learners for the skills they need to get a job, a raise, or both!
Coursera focuses on giving its paid users access to certificates and even specializations that students can show to employers.
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Kasparovchess: Revenue Unknown
Price: [13]
While I don't normally discuss brand-new companies in the competition section, I feel that this one deserves to be the exception.
Garry Kasparov is one of the most well-known chess players, having become the youngest World Chess Champion ever at 22.
When MasterClass wanted to host a chess course, they chose Kasparov to be the celebrity to do it.
And while that course was certainly successful, Kasparov was reportedly unsatisfied with the format.
He felt that he couldn't offer a single course that truly had something to offer to players of every level and that the course leaned closer to entertainment than education. [14]
However, Kasparov realized that a high-quality content platform was a fantastic idea and that bringing on teachers who potential subscribers would recognize could lead to a very successful niche play.
As such, Kasparov decided to launch Kasparovchess, a chess-only platform aimed at building a community around the game of chess, emphasizing expert-led instruction.
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The market for Online Learning Software is huge, and we've only been able to scratch the surface of this industry in the brief time we have to look at this market altogether.
On the one hand, you have comprehensive learning solutions such as Udemy, which cover all the bases. Casual learners, employment-seeking students, and large enterprises can all find a solution that they will be happy with on their platform.
We also looked at opportunities that play in this general education market but have positioned themselves towards one particular market aspect. For Coursera, it's professional courses and certifications. For MasterClass, it's entertainment and celebrity endorsement.
Finally, we looked at how smaller companies are making their own space in markets with Kasparovchess - a niche in a particular type of education, targeting both serious and casual learners by creating a platform that is uniquely suited to that niche.
As a bootstrapped or self-funded company, we can't hope to compete with solutions like Udemy directly.
Instead, we'll look to niche down to a specific learning category and make our learning platform the most engaging and interactive on the market for learning that particular material!
We can apply this niche-based strategy to any niche you feel there exists an opportunity for - and I highly encourage you to do so - but to give a concrete example, we'll be looking at a niche play in the online poker education space.
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If you look at the list of poker courses on a website like Udemy, you'll find a wide range of different topics on the subject. From courses like "Essential Poker Math for No Limit Holdem" to "Fundamentals of Exploitative Online Poker: Exploit Your Opponents Through HUD Stats, Player Tendencies, and Table Selection," there's a huge amount of strategy that experts can teach to poker players of all skill levels.
That being said, buying a course on poker that is only a video course is not nearly as engaging as it could be!
For one, you can't apply your learning directly in the course. Say we offered a beginner course where we taught about which hands were worth more than others.
With a video-based course, the only thing that we could do is create a video that listed out all of the different hand values and encourage the reader to stop and memorize them.
But this isn't very engaging or very fun!
Let's look at a more advanced topic - such as the Essential Poker Math course. For those of you who aren't poker players, poker math is essentially a mental calculation of your odds of the next card being the card you want and comparing that to the bid you have to place to see the next card.
You can combine those two mental calculations to determine if it statistically makes sense to bid the needed amount to stay in the game!
For example, let's say that you're playing Texas Hold 'em, and you need the next card to be a heart to get five hearts - which is called a flush.
Since you have four of the thirteen hearts already in play, you know that there are nine hearts left. In poker, these are called "outs." If you have 46 cards left in the deck, that means you have a 9/46 chance to draw the card you need, which is just under 20%.
Next, you can look at the pot odds. Let's say the pot (the amount of money you stand to win) is at $100, and you are being asked to bet $10 to stay in the game.
With all of this information, you can treat it as a simple math problem. You are being asked to pay $10 for a ~20% chance to earn $100. A 20% chance to earn $100 means that you will earn $20 on average (a concept called "expected value").
In other words, you are paying $10 with the expectation to earn $20 on average - a good bet!
While these odds are an advanced topic for casual players, poker odds are a fundamental part of the game that is a requirement for players looking to improve.
If you've struggled to follow my example above, you'll understand the pain that we're discussing! A video or text-based course can teach you the theory, but you need to apply your learning directly to improve quickly.
And that's something an online course can't give you...
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But what if we combined a poker engine with an online learning platform?
This way, instead of providing the user with a ton of one-sided information, we could teach through an actual (albeit a mock) game!
For example, what if you were taking the course on poker odds, and during the explanation above it actually took you through a mock game, asking you to calculate the outs, pot odds, and expected value?
This type of learning would be far more engaging since it involves direct application of the lessons involved.
By giving instructors the tools to set up mock games and give quizzes directly within those games, they have an entirely new tool at their disposal for making their courses more engaging!
Most importantly, this will lead to increased sales for the course creators!
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We've discussed this idea for online poker, a great market since it has a group of passionate students and a game that is easily added to our Online Learning Software. These are the two main themes to look for in a niche for this opportunity.
So far, we've only talked about online games, but this can easily apply outside of gaming as well!
But to keep our example specific, we'll stick with poker for now.
As such, the key aspects of the MVP will look something like this:
- Online Marketplace
Of course, the main feature of our platform will be our marketplace, where course creators can list courses for purchase.
We'll need to manage payments and payouts for our users, using a tool such as Stripe Connect to handle payouts at scale easily.
- Course Builder
Of course, we'll also need to enable our course creators to build their course!
Here, we'll want to allow users to upload video and written content and leverage our game engine to create mock scenarios for the user, quiz users throughout the scenario, etc.
- Game Engine
Of course, the core differentiator of our product is the built-in game engine. We'll want to create a real poker game that can be set up exactly as the course creator wants to create the most realistic learning experience possible.
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- Short-Term Distribution Channels:
(Channels that offer immediate ROI, but can be challenging to scale)
The first challenge we'll see with this product is getting our first content creators on our platform and creating courses.
To do this, one easy way will be to reach out to content creators who have already released content on general-purpose websites like Udemy and encourage them to re-format their content for our specialized website.
We can even offer to do the extra work of adding the interactive elements ourselves at first!
This focus on the content creators is similar to how MasterClass has grown their platform so quickly - by bringing on creators who already have an audience, we'll be able to get a few of those audience members to also look at other courses on our platform, growing our platform without needing any advertising on our part!
- Medium-Term Distribution Channels:
(Usually take a while to get started, but will grow linearly with your business)
Like MasterClass, I think the best way to grow this platform will be to look for partnerships with bigger and bigger names in the poker community.
As our platform grows, we'll be able to land big names on our platform more easily, helping it grow and landing even more users on the website, creating a viral loop!
- Long-Term Distribution Channels
(Can only be done after the product is established and/or offers exponential growth)
As the platform reaches a critical mass where most poker players trying to improve have heard of it, we can start expanding our services.
One interesting way to grow the product would be to leverage our game engine to allow for actual games between users. We could then capture those games and even save them to a user's profile for review and coaching.
Since many course creators will also be interested in supplementing their income with coaching, this would be a win-win for everyone! Content creators would get a platform where they can directly work with users, review their games and see what mistakes they make, and our free platform would likely encourage even more users to check out our website.
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Overall, this is a fantastic opportunity for several reasons.
First of all, it plays the niche angle hard. Since we'll have interactive learning that is leagues above the main learning solutions in the market, we'll have a competitive advantage that the largest companies don't have the ability to copy.
Secondly, being a marketplace and a course hosting software allows us to provide value in multiple ways to course creators. It also enables us to diversify our income by charging for both the actual hosting and any sales made through the marketplace.
Third, this business model allows for growth simply by bringing on the right content creators (which is one of the core innovations of MasterClass), which offers a unique way of growing the product that you rarely see in SaaS products.
If you're a founder interested in building a comprehensive, multi-faceted software product, this is a great opportunity for you!
However, if you're looking for an opportunity that can eventually compete with general-purpose learning solutions such as Udemy, you'll need to look elsewhere, as this product is heavily niche-dependent.
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Click here to get the premium subscription to Software Ideas and unlock:
- ✔️✔️✔️ 3x the market reports and analysis, every week!
- 📝 Access to the newsletter archive, with over 100 in-depth market reports and opportunities.
- 💡 Access to The Foundation course, an in-progress video series focused on how to validate an idea and get your first $2,000 in MRR.
- 💰 Over $50,000 in discounts for starting your next software company through our partnership with Secret.
- 💖 Many more perks on the way, including a private community exclusively for Software Ideas members!
If you're a founder who is actively looking to start your next software company, click here to sign up for a premium subscription!
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Talk to you next week!
- Kevin Conti
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