YongoPal, UW Business Plan Winner, Looks to Cash In on Video Language Lessons—and Some Lessons of Its Own

With the end of May comes another brood of promising young companies born of the University of Washington’s business plan competition. After many months of hard work, coaching, and pitching, they’re ready to strike out on their own. This year’s group of semi-finalist companies was particularly diverse, representing the fields of consumer Internet, materials, energy, mobile payments, imaging, medical devices, and health diagnostics.

In the end, the $25,000 grand prize went to YongoPal, an online video-based language learning startup led by co-founders Darien Brown and Jon Hickey. Here at Xconomy, we’d like to extend our congratulations to this company as well as the other finalists and prize winners: Empowering Engineering Technologies, Febris, Emergent Detection, Native Roots, GreenStone International, Snovision, WISErg, and EnVitrum.

YongoPal has been around for just over a year, and comprises five people; Daron Hall, Kyung Hee Yun, and Brian Suchland joined the company in addition to the two founders. The idea is to connect university students in South Korea with their peers in the U.S. via online video chat—via laptop or desktop and webcam—so they can practice conversational English with native speakers. The Korean students pay an hourly fee, most of which goes to the U.S. students. Why Korea? Private English education for adults (including college students) is an $8 billion market there—far more than in any other country.

Earlier today, I spoke with Brown, YongoPal’s co-founder and CEO, to hear more about the company, and his team’s experience in the UW competition. Here’s an edited transcript of our chat:

Xconomy: Tell us a little about your background. How did you get into this?

Darien Brown: I studied history and, briefly, secondary education at Whitworth University. In the fall of 2005, I spent a semester in Daegu, South Korea, at Keimyung University. It was a lot of fun. As an international student, something I realized early on was that a big reason the school wanted to bring in English-speaking students was for the benefit of their own students. We lived in immersion dorms where the students weren’t allowed to speak Korean. Then I spent my first year in Seattle in 2007-08, working as an office assistant. For a while after that, I worked in inside sales at [e-learning company] Giant Campus.

X: So what was the genesis of YongoPal?

DB: In Korea, my American friends and I ended up being hooked up with jobs having conversations with other students for pay. We would meet up with other students on campus or at coffee shops off campus and have conversations for $40 an hour. It was the going rate for having a conversation with an English speaker. In February 2008, I decided I should give this a try online. I had a friend in Korea, and he met up with me on Skype. People were paying to have conversations. But I stopped offering these conversations because it was really time consuming, and we realized we couldn’t scale it outside of my friend’s friends. We were billing with PayPal, and in Korea, people don’t use PayPal. Without an infrastructure that was familiar or comfortable to them, we weren’t able to grow it. Then I took the job at Giant Campus.

I was laid off from Giant Campus last May [2009]. Jon Hickey and I were roommates, and we’d known each other since elementary school; we grew up together in Richland. He decided he wanted me to get back into this, and wanted to do it with me. He had taken a class over the winter in the Master of Communication in Digital Media program at UW. They spec’d out the media space, and he’d learned how to spec out Web applications. So it was sort of him kicking me in the butt to reboot the project.

X: What was the UW business plan competition like? What did you learn during this time?

DB: When we entered, we didn’t think we’d need money. We thought we were completely bootstrappable. Our reasons for entering had little to do with winning and everything to do with getting to the investment round so we could meet people from the community and build a support network. We were very surprised to make the sweet 16. Our expectations were really low in terms of advancing in the competition.

As it turned out, we realized our market is incredibly seasonal, and that we’d need to raise money. We have two and a half months in summer and winter [school breaks, when private education kicks in] that we need to hit every time. So we were actually worried that the competition could distract us. It was Megan Muir [from DLA Piper] who emphasized that we couldn’t treat the competition as a distraction. Being in the sweet 16 and delivering a poor presentation could be a liability for us. So [our motivation] had less to do with winning and more to do with not tarnishing our reputation in front of a lot of important people.

We launched in private beta in April. We had a lot of positive interest from [Korean] students. We talked to a student club organizer and she was really excited. Within 10 or 11 hours, we got 18 signups from her club. But then people weren’t using their accounts. We were really worried for a while; we spent a lot of time getting in touch with these people. They ended up telling us they were way too busy with their schoolwork, and wanted to use it during the summer.

X: What’s your strategy for acquiring customers? How do you find these students, and how do they pay?

DB: We’re targeting specific universities in the Seoul area. There’s a huge concentration of colleges and universities in the Seoul area, about 60 colleges. We’re targeting six schools, [which amounts to] 120,000 students. As a private company, you can’t really work through official university channels. But we found we could distribute through university club organizations. They’re not worried about protecting their brands. Also they have a financial incentive that universities don’t have. So we can pay club organizations a percentage [of the proceeds in exchange for sending us business]. They have the need to raise funds for club activities.

They pay with a credit card. We’ve integrated a merchant service into our service. For the private beta, they’re paying a discounted price in U.S. dollars, $11 per hour.

In the U.S. we’re targeting key universities. We only want current university students using our service, so we can connect foreign students with their peers. We’re building some traction at Harvard, Stanford, and University of Washington.

X: How are you different from your competitors, such as Livemocha in the Seattle area?

DB: Most of our competitors are Korean companies. The education culture is such that their classrooms are very teacher centric. They teach toward exams, and it puts the teacher at the center of the classroom. Other learning styles aren’t emphasized in Korea. When it comes to one-on-one English education programs, even when done online, they still tend to use credentialed teachers for those interactions. If you want one-on-one interaction, you’ll be speaking with a credentialed English teacher. That’s how the market is divided. But how valuable is it to speak with a credentialed teacher if you just want to practice your English with a native speaker? Our students have told us that’s not important.

Livemocha is a conversation exchange platform. If you’re a Korean student who wants to practice English, you have to find a native speaker who’s learning Korean. It’s also a very tricky market. In my mind, if a company is approaching this market [English education in Korea], and it’s not the only thing they’re focused on, they’re going to screw it up. The market for English in Korea is very special—they vastly outspend the rest of the world on English education. University students are our niche for now, but adults in Korea spend about $8 billion on private English education.

X: What do you think about Chatroulette (the chat-with-random-strangers site), and how do you screen your customers?

DB: We actually use the same Adobe tool for our service as Chatroulette. It’s a real-time media flow protocol. So the conversations are actually peer-to-peer, not routed through a server. Also you’re cutting out server costs, which makes it really inexpensive to use. I think there could be some educational potential in a service like Chatroulette, if the people using it could be properly screened.

At YongoPal, we have a rating system to let people rate [conversation] partners. To make sure we have the right people in the system to begin with, we’re going to make people use their official university e-mail addresses. Right now, we have to approve them. I look them up on Facebook [for instance]. We make sure they are who they say they are.

X: What is your outlook for the coming year? And will there be a strong mobile component?

DB: The only thing we’d do in mobile is scheduling, given the current technology. In a year, we’d like to hit breakeven, and be profitable by the end of next summer (2011). We hit the summer marketing a bit late this year. This is our opportunity to make sure what we’re making is completely customizable to the needs of our students. This is our opportunity to iterate our model and polish it up. Our first real big push to market will be the fall, for the winter season (mid-December to early March). For “cram schools” and English camps, it’s a big season for private educators.

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