Lingokids update since Grant Agreement
The Lingokids subscription platform was officially launched to the public in February 2016 after a brief beta period, with the goal of commencing market validation under a subscription model to parents and educators. The platform was launched under a freemium subscription model in which free users had access to a limited number of activities and paying users received a series of additional benefits including new lessons and activities every month, offline mode for children, progress reports for parents and multi-profile feature to allow multiple children in a household to learn under the same account. As we will set out in the following pages, these first 6 months of market research and project validation have produced very encouraging results and allowed for extensive learning that we are already incorporating in terms of product development, go-to-market strategy and partnerships.
1. An overview of the work done and results of the Feasibility Study:
1.1. Market analysis and risk assessment: Our potential market is determined by three main factors, internet and 3G/data penetration, mobile device penetration and socio-demographic trends. Based on these factors we have identified our core target markets as Latin America and South East and Central Asia. These markets meet the requirements of 1)Low English speaking penetration (less than ~20% in Latam) 2) limited access to quality English learning sources, 3) Fast economic growth (% GDP growth), 4) High fertility rates with large population of children under 7 years of age, 5) high/fast growing mobile device penetration and 6) high/fast growing internet penetration. By 2020 we estimate our Total Market to be approximately $11.4bn while our Serviceable Market would be $5.5bn.
Additionally, we have been carrying out a market intelligence strategy by providing platform access for free to educators, mainly daycares, pre-k and schools, in exchange for feedback and the results have been very positive. As of today we have over 1 thousand educator accounts created and the feedback we have been receiving has been positive. The most desired features that educators would like to see next would be book support as well as the ability to tailor the contents to their liking from a cms (please see product roadmap).
1.2. Regulatory framework analysis: According to our investigations, we have no significant barriers in terms of regulatory issues. Since we only take the parents’ information such as email and telephone number and are not taking any of the children’s data. In terms of child safety, we have instated market standard child protection elements within our product to ensure we are safe for child use. In the majority of market leading apps, the Chinese wall between the children’s interfaces and the parents’ interfaces are kept through adult-identification mechanisms (“what is the sum of 3+8?” for instance). Additionally, we show no advertisements in our products to keep the learning environment safe for child use. These standards keep the learning environment safe for children and our commercial success with both parents and early childhood educators, without complaints about the safety mechanisms, has allowed us to confirm the suitability/sufficiency of our approach. Additionally, we do not share the data with any third parties, which is in-line with a strict privacy policy and benchmark in quality educational programs and compliant with all national regulations.
1.3. Stakeholder’s engagement: As we layout in the following pages we have already partnered with both distribution and content partners that have validated our product and the need for early ELL tools for kids. List of current partners:
• Oxford University Press: content partner under a revenue share agreement
• 7 top Youtube original content creators already onboard in the app featuring their ELL videos for kids
• Vodafone: carrier billing in Spain. Follow-on option deal for rest of Europe.
• Google- featured during the family apps launch in 2015
• Apple – all of our products have been featured by Apple during or after launch
• DTAC/Digicrafts: nº2 telecom in Thailand – premium placement and distribution agreement on the appstore
• Apploaded+Multilaser+Kurio: 3 different OEM tablet makers, over 2M preinstallations planned for Q4 2016
Additionally, we have a strong pipeline of interested partners that have already approved our product internally for massive distribution, including Telefonica Latin America (Vivo), Claro Brazil and Xurpas in SEA. We have also received multiple unsolicited partnership offers that further validate that we have a strong product and there is demand, including an offer for distribution to schools in Turkey; a white-label product for a listed (ASX) Australian mobile content and marketing company for SEA distribution; and a partnership offer from the top global production company for childhood entertainment founded in the early 20th century.
1.4. Operational, technical and financial requirements analysis: We are currently seeking investment of $3M to scale distribution and continue product development over the next 18 to 24 months. We believe we can reach over 6M users and $6.6M Annual Recurring Revenue by the end of 2017 and over 21M users with $28M Annual Recurring Revenue by the end of 2018.
In terms of technical requirements, we will require the development of the platform tools required to attract and retain educators and content creators. Based on the feedback we’ve received we will need to invest resources and effect many engineering hires to develop some of the core product initiatives later described in the business plan and include:
• Parent/educator web cms to allow them to elaborate their own guides to present the material to their children or students.
• Develop a content creator cms in order to allow our content partners to upload and manage their content, making it available to educators and parents for their guides elaboration
• Book support
1.5. IPR protection plan: We have already registered the brand Lingokids in Europe, the US and China. The brand will need to be fully registered for protection in Latin America and the rest of key countries in Q1 2017 after our planned funding round takes place. Additionally, as we develop the machine-learning algorithms and develop the IP strategy of the product, we will need to carry out further registrations.
In conclusion:
We have conducted extensive market validation research by launching the platform live and laying out the foundations for a truly scalable ELL global platform. The validation and learning has come from 5 sources: 1) paying customers that validate the demand (notably with high ROI), 2)industry players in the education space, 3)Venture Capitalists, 4)distributors and 5)content partnerships from global tier-1 providers that have shown a strong interest in the product and company.
The key strategic objectives and takeaways that have emerged as a result of these initial months of validation have been:
• We have confirmed that there is a large, accessible market with latent demand that can be met with attractive margins and ample room to maneuver as the market structure unfolds.
• A clear shift from a linear traditional business model of content creation (app developer studio in education segment) to a true platform with an exponential business model with network effects built into the product. This is the way to achieving a ~$1bn+ valuation as opposed to a $100M valuation.
• This shift to a platform model will require a shift in the competitive advantage that we nurture going forward and will affect the core competencies we need to develop (described in doc)
