To tour Magoosh’s Berkeley offices is to visit the unremarkable. Nestled inside an office building on Milvia Street, the company would be easy to miss if it weren’t for the homemade logo affixed across several windows. Unlike many of Silicon Valley’s hot startups which boast multi-million dollar valuations, lavish perks such as free booze, gyms and electric scooters, Magoosh’s offices are tame — open-plan layout, app-booked conference rooms and a handful of standing desks thrown in, it’s all relatively quiet.
That’s not to say Silicon Valley’s clichés are absent: Apple products abound, there is a game room complete with a ping-pong table and the majority of the employees are young. And Magoosh has taken the Valley’s money — though nowhere near as much of it as many of its peers. And its four founders were once part of the Haas Business School at UC Berkeley, designed to manufacture entrepreneurs, much like Stanford has done historically.
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Launched in 2009, Magoosh is in the education business: it creates digital tools that prospective students use to study for standardized tests such as the GRE, GMAT and LSAT. To help students prepare for those tests, the company has built a veritable arsenal of software products that span mobile and desktops. The company touts its relatively inexpensive offerings — for example GRE prep costs $129 for one month of access, or $149 for six months — and says they are about a quarter of the price of those of its competitors. Helped by a free trial to hook prospective customers, Magoosh CEO Bhavin Parikh says the company has captured about 10% of the students who take the GRE and GMAT every year.
Parikh doesn’t talk in the world-changing platitudes — myths in many cases — that many of his peers across the bay do. He talks, matter of factly, about his company’s steady growth. The importance, above all else, of trust in his enterprise. He talks modestly of his rent-controlled Berkeley apartment, and of enjoying the perks the city has to offer: good coffee, food, engineering talent. Quiet. And he talks about how the cancer-related death of the company’s co-founder, Hansoo Lee, affected him and the business.
“[It was] shocking and incredibly difficult,” Parikh said in a telephone interview. “At the time we didn’t really have the business figured out, and we were in the middle of raising more capital. He was the CEO and the one who would have gone out to make the pitch.”
But Parikh elected to press on. Lee had forced Parikh to learn skills a CEO needs — being able to speak with investors, leadership, how to manage people — which allowed him to take over the role Lee once had. “I was so thankful that he dragged me along on this journey,” Parikh said. “For me, it was more of a lack of confidence in myself, than a lack of skill. He always had confidence in me, more than I did, that I could do these things.”
One of Magoosh’s first investors, Michael Berolzheimer, founder and CEO of boutique venture capital firm Bee Partners, said it’s unusual in the startup community for a company to survive the death of a founder. “Magoosh has survived and thrived in spite of it,” he said.
With 31 employees, $7.5 million in banked 2015 sales and a projected $11 million to $12 million in 2016, Magoosh is set to log more than 45% growth this year compared with last. A former employee said that growth has slowed slightly from the 60% to 70% during their tenure at the company from 2010 to 2015.
Earlier this year, Magoosh was ranked fifth on the San Francisco Business Times’ “Fast 100” list, a ranking of the top 100 fastest growing private companies in the Bay Area. It is also ranked second on the newspaper’s list of the top 50 fast growing private companies in the East Bay.
Neither Parikh nor his financiers would discuss the company’s books in any greater detail — except to say that they were not looking to raise more capital.
“We are cash-flow positive since May of 2012, and we are profitable,” Parikh said, adding that, as a result, he wasn’t interested in taking on additional investments. He said that even if he did raise money, he wouldn’t know what area of the business to spend it on — current operations fully fund the company’s growth.
At the moment the plan is to expand into new exams. And that takes time, Parikh said, because in order to penetrate the market the company has to spend about two years building trust among its customers. There are a number of ways Magoosh does so but, aside from advertising buys on radio networks such as NPR, one of the most effective is offering free or trial versions of its software.
Parikh won’t discuss an exit strategy, or plans to IPO, if they exist. But he would say the company would entertain an acquisition bid, though is not actively shopping for buyers.
Founded in Berkeley, Parikh said the company plans to stay put for the time being. The employees appreciate the location — a block from the downtown BART station, in the same building that Ace Hardware recently moved into. Moreover, Berkeley is a “walkable town” and Parikh said he can live in the city without a car. “There’s balance. The city feels family oriented, it’s not as busy as San Francisco.”
Magoosh is also close to the university, which Parikh said is a major strength. It gives him access to talent coming out of school — its first engineer, for example, Zach Millman, studied at Cal.
Aside from attracting talent, Parikh said he enjoys encouraging other entrepreneurs who are part of UC Berkeley’s business program, and tries to speak at the school a few times a year.
So the company plans to stay in Berkeley as it grows. “We didn’t see an advantage to leaving,” said Parikh.
In terms of the city government, Parikh said that it has been helpful organizing startup events through initiatives such as the Berkeley Startup Cluster and the university. And, in general, he said, the city has helped bring together startups in order to share insights.
The company has also made an effort to get involved in the community: it was a sponsor of the Berkeley Public Schools Fund fundraising luncheon earlier this year.
Millman said he was the first non-founding employee and was brought on board to improve the company’s software after the initial version was farmed out via contract to India. Though Millman has since left the company, he said the company expected him to have a life of outside of work, and would recommend working for Parikh.
“Unlike other Silicon Valley companies, nothing was an emergency that required pulling an all-nighter,” he said. “Bhavin enjoys running the company in an ethical and sustainable way.”
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