Why we invested in YellowClass

Because when it comes to kids, fun is mandatory and learning is a by-product

This post was originally published here.

Late last year, my colleague Maanav mentioned that he had met this amazing team at YellowClass who were doing interactive online hobby classes for kids, had an overwhelmingly positive response, and that I might want to check that out.

To be honest, I was skeptical before meeting the team. Despite our strong belief in extracurriculars, personality development, and creative thinking, we shared the common concern that the market size might not be large enough, given the lack of breadth in users’ willingness to pay for these solutions. I was also unsure about what’ll represent meaningful core differentiation, given the rising abundance of companies in this space. With a low barrier to entry and many companies getting built on heavy doses of ad spends, there were some red flags.

Somewhere in my first interaction with Anshul and Arpit, those concerns began to slowly fade into the background. Both co-founders are repeat entrepreneurs and were at the onset of building a venture to help people find roommates right before Covid crashed that market.

They are also parents to lovely young kids, who they labored to keep engaged during the lockdown. For lack of avenues to do something fun, the majority of their kids' screen-time went into watching cartoons, arts & craft videos, etc on Hotstar, Netflix, & YouTube, consuming these passive content libraries for hours straight. It also implied that parents had to constantly monitor the content and the screen time. And as it (often) happens, their moms would share these problems with other moms over WhatsApp, Facebook groups, a ton of them struggling to find inspiring mentors (online or offline) who could engage their kids in a hobby.

That’s when they sensed an opportunity and explored this market, observing that:

1. Market is driven by whatever supply is available in a close radius. In an offline hobby class ecosystem, the neighborhood housewife is teaching limited stuff.

2. Brands have offline centers for studying and playing sports but nothing for kids’ hobbies. Logistics become a pain because you always need a guardian.

3. Online solutions are largely thin-layered marketplaces, enabling very little trust in the supply, and the content and delivery. Moreover, there was little bias towards quality.

Both built a very healthy respect for the complexities of managing a kid's “playtime”.  The energy, expertise, active engagement, and quality are some challenges they saw. The most glaring piece of consumer insight staring at them was that, for kids, fun is mandatory and learning is a by-product. This was quite un-intuitive to how businesses have to come to think of ‘learning’ solutions.

And with this in mind, they started hosting daily live classes and adding moms to these WhatsApp groups. Every day, sharp at 6 pm, there’d be a new curated activity like pottery, painting, dancing, writing, calligraphy, etc. So instead of a marketplace, they started building a network of sorts, funneling all these moms (and sometimes dads) on WhatsApp groups giving them regular access to a wide variety of activities.

What started with ~20 kids attending a class, quickly grew to 1000+ kids simultaneously attending a class (through Facebook and YouTube live) and a WhatsApp-led community of 30K+ moms in a matter of a few weeks.

In our following rounds of conversations, I began to develop a deep regard for the business they were building. To start with, their business metrics were quite convincing. The classes clearly struck a chord with the kids and the parents. The majority of their growth came from word of mouth through moms, and the retention & the frequency of a kid attending classes was really high. The NPS was excellent — moms were not only loving the activity their kids were doing, but they were also themselves participating with the kids as well! Moreover, moms were flaunting their kids' activity, posting pictures of their kids' creations on Facebook and Instagram, getting YellowClass additional virality and network effects.

Anshul and Arpit were equally impressive. Not only did they have a remarkable pulse of their users, but they were also very keen on business problems like churn, monetization, and managing supply. Most importantly, I became convinced that by trying to make this market demand-driven (rather than supply-driven as it currently is), there was a serious opportunity to expand the TAM. And to be able to do that with the current supply, YellowClass had to build a large top-of-funnel distribution for these teachers.

YellowClass’s unique approach created social network effects, which in most cases are the hardest to deploy and if done rightly, represent a significant advantage and a model that’s defensible in the longer run.

Today, I’m delighted to announce our seed-stage investment into YellowClass. While we were working on the investment, the company has continued its extraordinary momentum, surpassing the milestone of million watch-time minutes in a single day!

With the promise of an engaging activity that parents would love their kids to do (and moms would love to flaunt), providing superior engagement, mentors, and a wide array of classes, YellowClass is quite uniquely positioned to become the market leader in this space.

PS: If you’re curious and would like the opportunity to work at this rocketship, YellowClass is looking to add amazing people to its engineering team. Email us at hello@investopad.com.