How I sold GetSmarter for R1.4 billion
We chat to SA entrepreneur Rob Paddock about how he co-founded GetSmarter in 2008 with his brother, Sam, and sold it for US$103 million less than 10 years later.
How did you and Sam come up with the idea for GetSmarter?
I wish I could say it was a perfect convergence of strategic insight and the recognition of an emerging market need, but in reality, it wasn’t. We were trying about six different things at the time, and online education was simply the one that worked.
How did you start and build the business?
My brother and I were working in our parents’ property law firm, Paddocks. My father was also an adjunct professor at the University of Cape Town (UCT), where he gave lectures on property law from time to time. He realised that there was a broader market for education on sectional property law than he could serve, and he wondered whether there was some way to deliver this education without travelling around the country.
That’s where the idea for GetSmarter began. In 2006, we started working with our father and UCT to offer online courses on property management. We soon recognised the potential of online education and decided that we didn’t want to limit ourselves to property law.
We launched GetSmarter in 2008 and offered a series of courses with Stellenbosch University. We also started working with other departments at UCT. It was a period of incredible growth and opportunity, but it really stretched the team to its limits. In less than a year, we went from a couple of hundred students to a couple of thousand.
Fundamentally, we had to keep reengineering ourselves to keep up with that kind of growth. Every one-and-a-half years or so, we had to rethink everything: the people we had on the team, the systems that enabled us to do the work and our own individual growth and ability to stay ahead of the curve.
When did GetSmarter go global?
From 2009 to 2013, our short course portfolio grew immensely fast. Then, in 2013, we got the opportunity to offer full postgraduate degrees with UCT. It was a very big leap for us, but it was one that we had always envisioned.
But then, something radical happened. We realised that there was an even bigger opportunity: to become the preeminent provider of short courses around the world. We looked at what was available in that space and realised that we had developed something unique. So we decided to adjust our strategy and focus on offering short courses on a global stage.
From then on, we spent an increasing amount of time in planes and hotel rooms, building trust and rapport with international universities. And by the end of 2015, we had signed our first agreements with the Massachusetts Institute of Technology (MIT) and the University of Chicago.
Describe one of your biggest moments…
Our first successful programme with MIT in 2016 fundamentally changed the game for us. All of a sudden, we had two international courses with over 1 000 students on each course – students from 112 countries around the world. That didn’t just expand our expectations of what we could achieve, but it also stretched us tremendously, as we suddenly had to meet the international institutions’ high standards, and provide a 24-hour global service.
It was the start of an incredibly exciting journey. We signed the University of Cambridge next, then Harvard, then Oxford University, then the London School of Economics. We had to make many quantum leaps to achieve all this – and although it was extremely stressful, we did it. It comes down to having the right people on your team. At GetSmarter, we always say that human performance precedes operational performance, which precedes financial performance. Your ability to do absolutely anything in business is really based upon people.
How did the acquisition happen?
In late 2016, we got a call from a man named Chip Paucek, the CEO of an American company called 2U. He had seen one of our online ads and wanted to meet with us, so he flew down to Cape Town and we spent an incredible four days with him. After less than six months of negotiations, we signed the deal.
We’ve been privileged to have a lot of interest in acquisition over the years, but we didn’t just want to sell – we wanted to find a company where the combination of parts made a stronger whole. In 2U, we finally found an acquirer that we felt would make the business stronger.
What made you decide to sell?
When we closed the deal in June 2017, the business was profitable and we didn’t need to sell, but at that point, it had been nine years of incredibly hard graft, and Sam and I both felt we needed a break. In 2015 and 2016, for example, I’d spent more time out of the country than in it. I spent about 196 nights per year in the States alone. I got married in 2011 and it was hard not to see my wife for so long. You’ve got to make sacrifices to build a business, but it was certainly taking its toll.
Sam and I have both left day-to-day operations at GetSmarter, but we are still involved in an advisory capacity. It’s a wonderful opportunity for us to balance the scales and invest in family and friendships – because these things don’t take care of themselves.
What was your biggest lesson?
Your business can’t grow if you’re not willing to grow as a person. And I’m not just talking about the hard skills like using Excel better. The soft skills are often even more important. You need to be willing to confront your insecurities, acknowledge your own shortcomings, and identify your opportunities for growth. Running a business forces you to come up against your own limitations – and unless you grow first as an individual, your business cannot grow.
Top tips for entrepreneurs?
- Work on yourself – all growth begins there.
- Family is your base, on top of which all your entrepreneurial ventures will be built.
- Building a successful business can be done, but it takes a huge amount of work. There’s a sacrifice to be made, but if you’re willing to make it, you’ll be 10 steps ahead of most other entrepreneurs.
- South Africans are more capable than we give ourselves credit for.