The founder of Khan Academy on the importance of having a product your backers use
This is the latest piece in a series about the nitty gritty of entrepreneurship, for which Moneyish asks tried-and-tested founders of successful startups how they got funded. Read more here.
Salman Khan wants to help you get better at money.
In 2006, the Louisiana native founded Khan Academy, an early web learning pioneer known for its free but engaging courses on everything from high school math to art history. Since then, it has become what Forbes called the “largest school in the world,” with over 12 million monthly users and 2015 revenue of almost $28 million. (The nonprofit is funded via grants by philanthropists.)
While the 40-year-old is best known as an educator—he was inspired to start the school after tutoring his cousins—he’s always been a numbers guy. “In my last career, I saw how little understanding of finance there is,” Khan, a former hedge funder and Harvard MBA, tells Moneyish. “A lot of smart people would be saying things like they’ve no risk investments with 20% returns.”
That’s why Khan Academy teamed up with Bank of America earlier this summer to produce a series of millennial-friendly videos about careers and financial literacy. “Education is not an end to itself,” he says. “You need to know algebra but also how to navigate the world.”
Khan wasn’t always hyper literate when it came to finding his way around the world of funding. Indeed, he kept his old job while looking for sponsors. “It cost about $100,000 just to support myself in Silicon Valley and pay for servers,” says Khan, who went full-time only three years after the service debuted. “That was just to exist at its most basic form.”
That he had a past career in finance and tech helped persuade would-be funders to take meetings. “I had a credible background, so at least people were willing to meet,” he says. Still, for nine to 10 months after going full-time, Khan was repeatedly rejected and living off his savings. But he used the time to build a popular product and the website soon had 60,000 regular users. “We were starting to get good traction,” he says. “People were using it themselves or with their children and they realized there’s no reason why millions of others can’t get the benefit of it.”
Around that time, philanthropist Ann Doerr sent him a small check and he secured a meeting with her. After Khan explained that he wanted to scale the website and expand into other subject areas, Doerr asked how he was supporting himself. “I’m not,” he told her. Shortly after, she and her husband, the legendary Silicon Valley venture capitalist John Doerr, wired Khan $100,000—Khan Academy’s first major donation.
Khan then leveraged his sponsor’s reputation—Doerr was an early backer of Amazon and Google—to persuade big names like the Bill and Melinda Gates Foundation to support his cause. Soon, he found himself in possession of $4 million and able to build a team. “For John to give really validated us,” he says. “It showed others that we were a real, serious thing.”
Currently, Khan Academy gets much of its funding from major donors, though it also accepts contributions of any amounts via its webpage. Other than the Doerrs and the Gates Foundation, the likes of Comcast and Bank of America have pitched in with over $10 million in donations since its inception. The Omidyar Network, led by eBay founder Pierre Omidyar, recently donated around $3 million.
Khan Academy’s proven ability to solve, or at least ameliorate, real world problems like the student debt crisis also helped bring the likes of BofA to the table. “We’re not an antidote in the short-term, but we already make it more likely for people to succeed in college,” he says. “We can help put downward pressure on the price of tuition.”
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