Founder Spotlight: Grockit’s Farbood Nivi

Backed by nearly $11 million from investors that include Reid Hoffman, Mark Pincus, and Benchmark Capital, San Francisco-based Grockit is teaching kids to study for standardized tests through social games online. It’s the kind of approach that some seasoned educators might sniff at. Yet the educational world is precisely where Farb Nivi, Grockit’s 32-year-old CEO, has spent most of his adult life. Indeed, he believes that schools across the nation are ready for some modernizing, via a “benevolent takeover.” (“Sounds better than a hostile takeover, right?” says Nivi.)

Yesterday, Nivi and I talked about Grockit’s origins, how a teacher lands an all-star line-up of investors, and how long it takes to recuperate when you’re knocked from your Vespa by a minivan.

Before founding Grockit, you spent years as a teacher and academic director at Kaplan Test Prep and Princeton Review. How did you wind up as a startup CEO?

After being really steeped in the test prep world for a few years, I left to start teaching my own classes online through WebEx. I figured I could make as much money myself, helping kids with the GMAT curriculum for $300 a class. But my brother has been in VC [VentureHacks cofounder Babak Nivi], and he sort of pushed me to pursue my idea more seriously. With his help, we raised $100,000 in seed money and we just kept spreading the vision. Then Reid [Hoffman] and Mark [Pincus] came on as angels, and once those guys are involved, any VC in the Valley will do a Series A with them.

What have you learned from them?

I’ve tried to surround myself with folks who are smarter than I am and everything they say I just incorporate into my worldview. When Reid says, “Screw everything but distribution,” that goes into my head. If Reid says, “This is the most important thing,” likely it is. I frankly couldn’t do it on my own, and I absorb as much as I can.

With an investor like Pincus, I’m surprised you weren’t advised to piggyback off Facebook to acquire users, rather than build out Grockit as its own destination.

We do have plans to build the application out in Facebook, and you’re right, we could have built something pretty lightweight there. But we’re set on becoming a pretty decent-size business, and a year ago, our investors actually didn’t feel comfortable hanging our business model on Facebook.

You can use Facebook Connect, but I don’t think I’m saying anything anyone doesn’t know by telling you that it borders on nightmarish, having it in your code base. The cost of inserting it and maintaining it is enormous, and they don’t care about you. They can change things any time they like.

Speaking of change, how much has the company changed since you founded in late 2006?Right now it helps users study together and with tutors for the SAT, GRE and other standardized tests, using quizzes and live chat. Was that where you started?

Until now, the business models we’ve been testing have been part of our product development. We opened to the public last February with just the GMAT to figure out the economics of the business. In fact, the product feature set that you see in Grockit today, we started with just 10 percent of that.

Pricing is obviously key here. How have you settled on what you have?

Right now prices pretty much range from $200 to $400 for an online course. Then a GMAT taker can pay just for a bunch of questions, which is $50 a year. Beyond that, you can work with tutors, who charge between $20 and $30 an hour. [Grockit takes 20 percent of their income.]

We’re test crazy over here. When we first pushed out the GMAT questions, we charged $25 bucks, then we started split-testing prices. Some people saw this price and some saw another and the price that beat the others was $50. Sheer numbers of people bought at $50.

Funny that the perceived quality must have been too low otherwise. Either way, I understand that you have about 50,000 registered users. Any idea when you might turn profitable?

We should be profitable in the next couple of years. It’s still mostly under wraps, but we have plans to go into the K-12 world, where we think we’ll be able to generate $10,000 to $30,00 in revenue a year per school. We also plan to sell prep materials to parents.

The idea is to roll out a private Grockit network for every school in the country that will allow students and teachers to collaborate. We’ll create curriculums around English, math, social sciences and science, and the content will be aligned to different states’ standards. We’ll probably say, “Here is the platform and the technology, and for each content area that you want for your students, we’ll sell it to you,” sort of like buying textbooks.

That sounds like a big opportunity, but are early education teachers on board with this whole social networking approach?

Student love Grockit; they love the gaming part. And we think teachers might like it even more because they get to engage with their students in a way that their students are used to and like rather than having to say, “sit at your desk, open your books.”

Who’s authoring these K-12 curricula for you?

We’re paying experts who help create standards for the [110-year-old, private nonprofit entity] College Board, which is as sanctioned as you can get in that world.

Last questions: what have you learned from past ventures that tried to combine education with entertainment?

That there’s a difference between getting kids excited to use a product and monetizing it through their parents. Moving to K-12, it’s a channel for us to make parents aware of our product in a way that they are accustomed to being made aware of products — through their schools. It’s really tough to monetize them through the Web.

And I have to ask: what was your SAT score?

The SAT, I don’t remember. On the ACT, I scored in the 99th percentile. I think I might have been in the 95th percentile for the SAT.

What sort of increase in test scores can your members claim through your current offerings?

That’s a huge challenge for any test prep product. It’s a really hairy space, where people have litigated each other into the ground over what you say and how you say it.

If I put marketing stuff aside, we know that people’s ability, whether SAT writing or reading or math, increases. We have academic proof that this system improves your abilities, and it correlates to how many questions you work in the system. The more you work, the better you get.

How’s life as a manager? What’s been the biggest surprise?

The biggest surprise is how customized you have to make your management style with each person. Everyone responds differently and is motivated differently. You have to do this while getting everyone behind the same vision.

I read in TechCrunch that you were nailed last year on your Vespa. How long were in the hospital, and has the accident changed you?

I was in the hospital a total of almost four weeks over a six-month period and also in recovery about 16 weeks. It did change me. It made me less serious. Well, less serious about the little things and more passionate about the big ones.