Before Udemy could succeed, we had to solve a chicken and egg problem.

These problems are a constant dilemma for founders. (ie. Funding is needed to scale but scale is needed for funding.)

Here's how we bumbled to a solution that kicked off our $3B business.

**Read On**

At Udemy, we needed instructors to attract students, but instructors would only come if they could sell their courses to students.

How could we get one party to show up without the other?

To compound this issue, we had no money, no credibility and no backers.

Step 1: Fake the Chicken

We had 0 courses but a built-out product. @erenbali created a crawler that went on YouTube and built courses out of YouTube playlists.

Now we had talks from Marissa Meyer & Mark Zuckerberg on our site so any users who came on had something to learn.

Our product finally seemed presentable. Users would be more likely to sign up after looking through and seeing the depth and breadth of content provided.

The launch announcement generated 10,000 users and allowed us to raise our seed round.

However ...

In the back of your mind, you're probably thinking that was a bit of a bullshit move. And you're right.

Most users bounced, and the core issue was not resolved.

Faking the chicken was only a temporary solution for making the chicken.

Step 2: Make the Chicken

Our $1 million seed bought us time. This meant we could immediately acquire new users, right?

Not so fast. In the early days, advertising is a surefire way to run out of money. We didn’t spend money until we knew we were onto something.

Instead we paid ourselves $60,000 each, kept our office in the living room of our 4 bedroom house in Palo Alto, and found a roommate on Craigslist to help reduce our costs.

We continued to make the chicken for 5 months before we finally figured out the right recipe.

In the hunt for the right recipe, we tried everything:

- Spent 100s of hours on the phone w/ potential instructors
- Tried to launch a poker university
- Started a deal that went nowhere with the Learning Annex
- A misadventure into courses on dating

A fun but stressful time.

In the end, it was our initial frugality that led to the big break.

The roommate we found on Craigslist was @mccannatron and his company Startup Digest was taking off.

Frustrated. I said "fuck it, if no one wants to be an instructor, we’ll create a course ourselves"

Partnering with Chris, we launched "How to Raise Capital for Startups by StartupDigest University."

After the initial enthusiasm wore off, I realized that as a 22-year-old I needed backers to make the course more legitimate.

I thought "Easy, I'll ask my investors!"

Two problems:

- They weren't sure of going online and filming videos of themselves. (Yeah, I know.)
- They gave us a $50k check, but that didn't mean they could dedicate time of their day helping us film video content.

However the process still led to the eventual solution.

In an effort to convince an investor I asked,

"Why would you speak to a group of 50 entrepreneurs in person and then hesitate to speak to hundreds of entrepreneurs online?”

Seeing them unconvinced, I realized what we had to do: host a 50-person event and simply record it.

Filmed by a camera crew, the lectures at the event became the first original content on Udemy.

In the first week of it being live, the course did over $25k in revenue.

More importantly, it gave us the clarity to see a use case that worked which we could replicate.

Step 3: Grow the Chicken

Growth is the repetition of a winning formula. Here was Udemy's:

- Find a distribution channel (email newsletter)
- Find an instructor who was knowledgeable about a topic
- Make a deal with a 50-40-10 revenue split (email list, instructor, Udemy)

Once we figured out a basic formula, then we hired people. You don’t need more than 2-3 people to figure it out, but you need more to scale it.

We hired
- Marketers to partner w/ email lists
- A bizdev team to recruit instructors
- A product team to satisfy customer demands

Thanks for reading!

A full post on this topic can be found here: https://www.gaganbiyani.com/blog/udemys-chicken-and-egg-problem

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