MBA2371 Extended Interview: How Greg Smith Grew Thinkific to a $150M Company

0:08Heyo! Welcome to the$100 MBA show where you get better at business with our practical business lessons. I'm your host, your coach, your teacher, Omar Zinhome. I'm also the co-founder of Webinar Ninja, an independent software company I started back in 2014. And today's episode is a very special extended interview episode where I sit down and extract the wisdom out of some of the best business minds out there. And today is no exception. We have Greg Smith, the founder and CEO of Thinkific, the leading platform for creating, marketing, and selling online courses and membership sites. I sat down with Greg to find out how he started and grew his$150 million business, Thinkific.

0:53We learned how the idea even came about, how he was his first customer, and how he grew his business day after day, year after year, raised capital, and even in public, and now is a public-traded company. There's so many nuggets that he shares in this episode, so let's get into it. Let's get down to business. I wanted to sit down with Greg Smith for a lot of reasons, but mainly because his story is filled with amazing insights and takeaways. He's also been through a lot of different stages in his business, from bootstrapping with a loan from family, to raising capital, to going public, but it all started with a pain, a pain that he had that he wanted to solve.

1:32Let's jump into that conversation with Greg Smith right now, but I'll be back to wrap up today's episode and share a few takeaways. But for now, let's jump into that conversation with Greg Smith, the founder and CEO of Thinkific. Greg Smith, awesome to have you on the podcast. How are you doing today? Great. Pleasure to be here. Thank you. Awesome. Thinkific, your baby, your company, well known in the space in terms of teaching, learning, the creator economy, people creating their own online courses and trainings. I've known for you, known about Thinkific for years. I've known of you for years.

2:07It's good to kind of meet you and talk to you and pull out some of the things I want to learn from you. A lot of reasons why I do these extended interviews is because of selfish reasons. So I can learn. But I want to start with the genesis of the idea of Thinkific. And really, what kind of problem were you trying to solve back? Was it 2012 when you started? Yeah, I mean, Genesis for us was, I was really lucky because I was trying to solve my own problem really in that I had been teaching and tutoring in person, the LSAT, the law school admissions test, and then move that to an online environment in about 2006.

2:47And so for about six years there, it had always been a side project. I went on, finished law school, practiced as a lawyer, but I had this online course going in the LSAT and the course went well. But what we were struggling with is we'd had to build their software on our own. We had been looking for a system that allowed us to have our own content, own it, have it under our own brand, price it, build a business, have it be kind of e-commerce focused where we could actually sell our courses and other programs to people. And we found marketplaces that didn't meet the need. We found LMS that didn't really meet the need.

3:20And so after years of that, and then the other thing that happened is a lot of other people were reaching out saying, we want to do what you did with your LSAT course. So that kind of came full circle to starting Thinkific as a way of solving our own problem that we saw now a whole bunch of other people had as well. Awesome. So you had a problem you wanted to solve. You wanted to kind of solve it for yourself. What were kind of your first steps? Or is it like, I need to learn a code or do I need to find somebody and hire them? What was the like, you know, your next step after you're kind of like, I want to solve this problem?

3:50Yeah, I mean, the learn to code is an interesting one. And I get asked about that by so many founders because I did try learning to code. I did try sort of hiring a few friends and other people to help with that piece. I got lucky. Eventually, my brother came along and said, I know how to code. And let me help you get this up and running. So fortuitous that he was a strong developer. And I mean, he was still learning very much at the time, but learning quickly. So he did a lot of it. I tried. I went to school for a year trying to learn to code in night classes. And eventually my brother said to me, he said, Greg, you know, you could be a good developer, but it's kind of an all or nothing thing.

4:27And I dropped it instantly. I'm like, okay, fine. I'm going to go all in on business that I'm good at and not try and become a software developer. I love that. I love the idea that, hey, I can't do it all. You know, I run a software company myself, Webinar Ninja. And I, a lot of people ask me the same question. I don't know how to code. I took a couple of classes just so I can understand what my engineers are talking about. but in the process, I learned that, okay, I got to know my lane and I just got to focus on what I do best because that's how I could serve my company best. So you started back in 2012, which sounds like, you know, ages ago in the tech world.

5:06Talk us through like, what was the landscape starting a SaaS company back then, you know, which was unheard of, you know, I started in 2014. So you started two years before me where like, half the tools that we use every day and half the things that are out there are not available. So what was the landscape like? What were the competitors like? What was it like starting a business in tech back then? Yeah, I mean, different, obviously. I feel like, you know, I look at it as almost there's been three stages of, well, there was like pre-SaaS, then you had SaaS software as a service where you had the early starts, like obviously Salesforce being one of the earliest.

5:42When we got started, there was SaaS. It wasn't that uncommon. Like because you had Shopify was around and others like that. Nothing that we found in our space. You know, I think there might've been others who were getting started around the same time of us, but they were so small like we were that no one had ever heard of them. So we couldn't even find them with extensive Google searches and stuff. And so I think one of the key differences, and I saw kind of chart of this a few years ago was around the time we were starting, you know, three to five years after you started a SaaS company, you could expect like three to seven competitors.

6:16Whereas I think, you know, more recently, it's like a year after you start, you might expect 10 to 20 competitors because it is so much easier. I mean, the benefit is it's easier and cheaper to get started to build things. And there's just a lot more, I think, rapid copycat happening now in SaaS that if something works and then you'll see a lot more people doing something very, very similar very quickly. So in some ways, it's easier and faster. In others, there's more rapid competition these days. Yeah. In preparation of this conversation, I watched a dozen YouTube videos on people reviewing Thinkific and what they like about it versus the other competitors and things like that.

6:55And I always like to kind of learn a little bit about that because often that stuff doesn't happen overnight. It's like in the DNA from the beginning of the company. and one of the things a lot of people talk about is that they love the marketing side of Thinkific, the landing pages, the checkout pages, the ability to kind of run a business with this course platform. And it's not just like a place to host your courses. Was that something intentional from the beginning? And if so, why? Yeah, I mean, definitely intentional. And I like what you say about sort of in the DNA of the company. I mean, the core offerings we were looking to solve or the real problems we're looking to solve was how do we help people with knowledge, passion and expertise make a living from it?

7:39How do we get out there and help them sell that? And so there's two core components. You want to have an amazing product, that learning experience, be it a membership site or a course or otherwise. And you want to be able to go and make a living doing it and selling it. And the interesting thing is, I think, you know, so many of the people in this space, they're usually more passionate about and better at the, I'm passionate about my passion, my expertise, my knowledge. Marketing is often kind of a new world to them and a little bit scary and a harder problem to solve. And so we've definitely put a considerable amount of effort into sort of solving that problem for them and doing that through tooling and other features within the platform.

8:16I love it. I mean, Greg's being modest to those who are listening, but But this is a big part of having a successful business is because you got to think about your customer. You got to think about how do I keep them on my platform? How do I make sure that they're successful with my product? And they're not going to be successful if they're not selling courses. So they need to have great tools to sell, to market, to run a business. Because if they have a course out there and it doesn't sell for three, four, five, six months, they're probably going to churn. And that's the enemy of any SaaS business.

8:50So I love the fact that a lot of people get really caught up in the idea of their business and the so-called problem they're trying to solve, but really don't think about how do I make my customers successful? Because if they win, I win. Incredibly important in any business, but especially in SaaS. what are some of the kind of changes you made along the way to kind of fuel that business kind of running your the business thinkific itself and keep churned down and make customers successful um i mean you kind of hit the nail on the head there and that we look at i'm a big fan of jim collins and a lot of his literature and uh so think about the flywheel the hedgehog concept sort of these are the things that your business is i mean the hedgehog is what you're passionate about, you can make money doing and be the best in the world at.

9:38And the flywheel is sort of the steps that link together and are sort of mutually fulfilling within your business that help build your business. And at the center of all that for us is helping our customers be successful. So really everything we do kind of comes back to and focuses on how do we help them succeed? And that means a combination of things. They have to be able to take their knowledge and passion and extract it and putting it into some sort of product they can deliver and have that be an amazing product that we help them with. But then definitely they have to go and be able to sell it.

10:09And so we've done, it's not just tooling. We do a lot of help and training now with AI. We've introduced some AI elements to help them both build the product and then also go out and sell it rapidly. So we look at things like higher converting landing pages, higher converting checkouts. How do we help them do things like drive traffic or convert that traffic into sales? And then really importantly, and I think sometimes people miss this, certainly early days in our space and still to this day, if you don't have a really high quality back end product, then you spend all of this money making a sale.

10:41And I mean, for our for our customers, you know, they've got a course or a membership. They make a sale. They come in. If the if the back end product, which we're kind of responsible for helping them build, isn't amazing, then their own customers will turn out or worse. they don't refer other people. So if it costs you a hundred dollars to acquire a customer, ideally you want that customer to go and refer three of their friends to it. Cause that makes all of your subsequent acquisitions that much cheaper. And that comes from having an amazing learning product on the backend. And so that's a big part of where we invest as well.

11:08I love it. Um, what Greg just mentioned is what we talk about a lot on the show. You want a business that allows you to push the boulder down the hill, not up the hill. You want it to everything to be in your advantage because business as it is, it's hard. So you got to kind of line things up to make it a little easier. So you guys along the way raised$22 million or so. I work at a coworking space. I'm at my home office right now, but I have a coworking space downtown Sydney and it's sort of like a startup hub coworking place. So there's like half the people that around me are trying to raise money.

11:45Many of them are pre-revenue and think that if they have the right pitch, if they get there in front of the right people, they're going to be able to raise millions of dollars and be okay. Talk me through a little bit about when did you know it's time to raise money for Thinkific and how much for your first round? Like that actually matters a lot. Sure. Yeah. I mean, I'm happy to share all sorts of details on this. Being public, you know, a lot of this stuff is out there in that, well, not all of it, but it makes it easier for me to share details around numbers and revenue and stuff like that.

12:18So first round was a loan from grandma for$25 ,000. A lot of our early work was also funded by just us having the LSAT course that was making money and we were pouring into Thinkific to fund it. My dad cut a small investment check. Then we took in$600 ,000 from Angels, then a million, then$2 million, each of these being a subsequent round with sometimes usually years in between. Then$22 million. A lot of that was secondary, which means some of it went to me and other early investors and founders. And then$180 million in the IPO. So total were around$230 million raised. Oh, wow. I'll weigh off.

13:00Well, the 22 is the most recent round prior to the IPO.

13:06But when to raise, I think, is probably one of the most important questions there. I do find often founders are looking to raise when they shouldn't or before they should. To me, the biggest questions are, if you take in money from somebody else, is it going to meaningfully change the business you have? Is there things you can't do without it that will grow? It'll help you grow way faster because you have it, not just raising because it's the cool thing to do. And everybody says you should go and raise money. And it's, it's seems like a surprisingly simple question, but I find so many founders ask them like, what do you really like?

13:42Like, nevermind your pitch deck. What are you actually going to go and do with this that, you know, multiplies your business? And do you really need the money to do that? And if not, don't raise yet. Yeah. So there is a psychological element too. Like I know when we raised our first 600 ,000, like the first real investor round, we didn't need the money. We were close to profitability. And when the money came in, we ended up just sticking it in the bank and adding to it with our revenue. That made it easy to raise. We didn't need it. But what it did do for us is it gave me more confidence in just kind of go and put the pedal down and go.

14:20There's a couple of things I want to talk about here. Number one is the fact that I always find that, especially in the investment world, in the startup world, that when you don't need it is when you find it easier to raise. Because your business is healthier. You know, people want to invest in a business that is going in the right direction, that is close to profitability, if not profitable. It's just easier to raise when you don't need. It's almost like a law of attraction. Like, I don't really care if I make if I raise or not, but it comes easier. The other thing, and I feel in my experience of being an entrepreneur for 20 years, it's so much easier to be creative, to make better decisions, to run a better business, to have a healthier company when you're not worried about the roof caving in.

15:08You know, like when you have a bit in the bank and you're like, okay, I can breathe, I can make solid decisions, I can think about the next year, the year after. I actually think that's a smart idea, like what you did with the 600K in the beginning. But what I really love is the fact that, and I want to ask you, did you sell your LSAT course on Thinkific? It does now. When we first started, it was on some custom software we wrote. And once we got Thinkific up and to the point where it could support it, we moved it over. Yeah. I thought that was brilliant that you basically became an example of the best client.

15:43Like, you know, this is what we do. I drink the Kool-Aid as well. I sell my own courses. And that's how I got started. A lot of people don't understand the power of that part of the story when you're trying to sell your product. Like you're not just some person that came up with an idea and, you know, put some lines of code together. You're somebody who's trying to really solve a problem for yourself. You understand, you empathize with the customer because I'm selling a course. I'm trying to teach people something. I'm a creator myself. I know that with our software webinar Ninja, people really resonate with the fact that like, you know, when I do my own webinars, they're like, oh, okay, great.

16:20hey, this person knows how I feel because they've been through my path. This is huge because you know the language they use, and you can use that in your marketing. You know the pain points they have, so you can address them in your marketing and sales, but also in your product development, your roadmap. What are some of the things I want to talk about? One of the things I want to ask you is along the way, you kind of had to go from creator to CEO of a public company. Like, how did that transition happen? Was it bittersweet? Was it difficult? Did you have to have a talk with somebody? What happened?

16:58I, yeah, I mean, it's, you know, keep in mind, it didn't happen overnight. It was 12 years in the making. And so a lot of reading, a lot of learning. I've had multiple coaches. I listen to podcasts. I watch what others are doing. I make huge mistakes and then I try and fix them the best I can and learn from them. Um, uh, so just, yeah, it's, it's a lot of learning along the way, but I think being conscious that it is constantly changing and growing. And if your business like ours has is growing, um, at, at points of, you know, 50%, 70%, a hundred something percent year over year. Um, even if you're growing at 20 % year over year, you've got to take a step and say, I need to be growing at at least that rate just to keep up.

17:38And so it's just that constant learning of what's the next stage look like. And I think it's helpful to be focused on the day-to-day sort of operational, but if you're not also thinking about the future and growth and how you're growing into it, then you can get left behind or fall behind in terms of where you need to be. Along the way, did you have any mentors or coaches that helped you? uh yeah i've i mean i've uh some authors i love that i've gone and read and followed fairly closely or even in some cases flown out to sit down with and try and understand what i didn't understand from just reading everything they'd written um coaches definitely so we have a coach for our leadership team as a whole for when we get together and work together and then i have a have often have a personal coach that'll work with me on a once every couple of weeks just work through some problems together.

18:27And then within the team, you know, I, I operate as a bit of a coach to some people on the team and then just having some good members on my team that I can sit down and puzzle a problem with, even if it's not someone that reports to me or I, you know, like work directly with, but I can just sit down and I know they're a good sounding board to work ideas through with. I love this. I love this idea of reaching out to an author that you love or, or maybe wrote a book or had a training and just reaching out to them and saying, you know, can I buy you a$5 ,000 lunch or something, you know, like, you know, have lunch, but maybe pay for them for their time or something like that.

19:02Because we dropped five grand to go to, you know, South by Southwest, you know, like some conference and flying out and all that kind of stuff. And, you know, a few days go by and it's kind of over. The impact that you would get from just sitting with somebody that you can extract so much amazing wisdom from is incredible. Like, I love that idea. I also love the fact that you are conscious of training your team as well, not just yourself and thinking, okay, I'm the leader. I'm making the decisions. There's plenty of people on my team making decisions, which is just as important. So awesome stuff.

19:35I want to talk a little bit about Thinkific, the product itself, because I find it really interesting and fascinating in the space. And I think it's interesting that you live in Vancouver, you're Canadian. there's a lot of Canada in Thinkific. And I mean this in a positive way because I always say that I've never met a Canadian I don't like because you guys are very polite, very nice, very sweet and thoughtful. And one of the things I want to talk about first is your pricing plans. You have a very generous free plan. And like we talk about on the show, when it comes to free plans, this is like a customer acquisition.

20:13It's not like a pricing model. It's a way to kind of, it's like one of the best, you know, lead magnets you can ever create. But I want to talk about how did you guys decide on this free plan? How did you decide on what's included and how and why did you make it so generous? Yeah, I mean, the interesting thing is actually a little less generous than I think it was at one point. So we've done a lot of experimentation on it of trying, you know, adding and taking away things, not from the people who are actively on it usually, but from the one from new people as they come in. And what you experienced today is slightly different than it was a year ago or two years ago or 10 years ago.

20:46So it is with pricing, I think, especially in SaaS, it's something you should be, I think that conventional, I find it hard to keep up with this, but the conventional wisdom is like, you should be revisiting it twice a year. I think that's a little too quick, but we're trying to look at it every year and just understand, are we doing it the right way? And at that, don't hear pricing increases. That's not always just raise your prices 10%. I think there are companies who do that. I think they're missing opportunities there of it could even be lowering your entry point and increasing your high point.

21:15It could be opening freemium or moving just to free trial. So one thing we tried at one point was dropping the freemium and moving to free trials. We have experimented with more on the, say, transactional fee, whereas right now it's pretty much, you know, no transaction fees and you just come in and pay a monthly fee. So really it comes down to understanding where your customers get value, where you're adding value for them and what they're willing to pay for, studying that constantly, and then experimenting around what kind of pricing changes you can make. I love it. And what I really like about your business model is that you're conscious of the fact that, you know, you have to invest in your customer.

21:56Like I got to give them something so they can get started. I know if they have a course and they start selling the course, even if they have one student, they're going to want to stick around because that student is going to have access to that course. So it's a great idea. I think that a lot of companies, they kind of have short-term thinking. They're trying to make a quick buck, and they don't really think about investing in their customers. um what did you uh decide when when you went to the free model and you went to the free plan um what were some of the things that you thought okay how do i get them to uh you know get started invest in them make sure they have a course and then what is the the attraction to move into the next you know plan so they could be a paid customer yeah so and i didn't totally answer your question on why the free plan and why why so generous there and i think you kind of help me with that a bit there in the answer in that it really was about showing them value first and having them come in and saying, we're confident that we can help make people be successful.

23:00And so why let an initial price point get in the way of that, right? Give them something for free that they can play around with, show them value from. And when they start to see that value, they get to make that option to move up. And that allows us like the why is we get to see thousands of people come in and try that out in a time period where you might otherwise see dozens because it is free. It makes it so easy for people to try it. And then we're confident our product adds so much value. They'll make that choice to upgrade as opposed to, you know, putting it all, hiding it and saying, you know, only once you've paid us, do we get to show you the product you're buying?

23:33I'd rather say, you know, like in any, in so many other industries, you get to really look at the product you're buying before you purchase it. So that was kind of the concept behind freemium for us. Not that we're the first to do freemium. And definitely there's other companies that do great that you really don't get to see the product until you purchase it. On that piece of when do we introduce the customer into or try to ask them to pay us, a lot of our mentality on what goes on free versus what goes on paid is if it's something they need to be successful initially and get started, we should make it free, right?

24:10Like help them be successful. That's what we want. We're with them. We're with them through the whole journey. Help them be successful, put it on free. If it's something that it's more vanity or ego or nice to have or desire, so like a custom URL or, you know, very personalized branding, things like this, or a very specific feature that you really don't need to be successful, but you're, you know, to fulfill their vision the way they want it exactly, they need this more niche feature. That's the stuff that starts to pull them up into the free plans. We're sorry, the paid plans. As your business starts to evolve, it gets better.