Paul Spain:
Greetings. I’m your host, Paul Spain, futurist and chief executive at Gorilla Technology

Paul Spain:
. I really enjoy seeing and helping individuals and their organizations thrive. The New Zealand Business Podcast is all about this through sharing the stories and insights from our best and brightest. The New Zealand Business Podcast is proudly brought to you by One New Zealand and Gorilla Technology Today. Joining me is Shane Smith, co-founder of Education Perfect. He shares about the founding days of Education Perfect right through to today, including how it grew from a humble vocabulary tool into a comprehensive online learning environment and the pivotal moments that shaped its evolution. And it already impacts the future of 1.8 million students every year in high schools across New Zealand and Australia. In 2021, KKR acquired a majority stake in Education Perfect in a deal that valued the Dunedin based firm at over 450 million New Zealand dollars.

Paul Spain:
Shane Smith, great to have you on the podcast. How are you today?

Shane Smith:
Thanks so much, Paul. I’m fantastic and thanks so much for having me along.

Paul Spain:
I like to start for these ones at the beginning a little bit and, you know, keen to hear a little bit about what your backstory is, where you grew up, where you went to school, those sorts of things.

Shane Smith:
My family is actually an immigrant family from South Africa. We moved over when I was about 6 years old. My dad was a general surgeon at the time and was able to move across and move into one of the rural hospitals here in New Zealand, initially in Whanganui and then down to Hawara. We ended up moving around, bouncing around, ending up in Auckland. But one of the things that really came, I guess, out of that part of our background was this deep drive to say, you know, we are new here, we haven’t yet proven ourselves, proven that we belong, we’re still fitting in, we’re still, you know, we’ve got something to prove. And I think that’s something that’s sort of gone through our lives. That plus my dad had an amazing work ethic being a surgeon, which he imparted to us, you know, that our hard work is incredibly important. I was also fortunate enough that my Mum was a high school teacher, but then when she had us, decided that she wanted to raise us full time, which sort of complemented how busy my dad was.

Shane Smith:
And so education was a key part of our family growing up. We were very fortunate to have someone who was very passionate about it supporting us all the way through school as well.

Paul Spain:
Yeah, that’s fantastic. And how many siblings just got the

Shane Smith:
one brother who’s going to come into the story quite a bit as well? That probably actually is the genesis of all of this. I was lucky enough to be born the brother to my brother Craig, who’s two years younger than me.

Paul Spain:
So what’s the short version of what Education Perfect is and why it’s taken up so much of your life and why you’ve ended up with literally millions of students and teachers using this technology?

Shane Smith:
EP Education Perfect is an adaptive online learning platform. It helps teachers to identify strengths and weaknesses of their students. It’s both assessment and learning deeply tied together, and there’s real strength in that synergy there. And it’s used by high school students across English, maths, science, humanities. And we actually started off as Language Perfect. Initially, it was a vocab acquisition tool teaching French, German, Japanese, or all the foreign languages that are taught in New Zealand, and is broadened out to a full learning environment that students use across Australia and New Zealand. So we use by 1.8 million students every year, and we used by about half the high schools in New Zealand and Australia. It’s a huge reach.

Shane Smith:
We also have a presence in Canada and a whole bunch of international schools as well. My brother and I both were really interested in doing things on the computer. He picked up Adobe’s Flash when it came out and was really good at making little games, which he did in his spare time. One of the things that he really enjoyed doing was working out ways to embed them on the screensaver so that if he was in class and a teacher walked past, he could press one button and all of a sudden a screen went from game mode to work mode immediately. He had great fun doing that. We both not only spent a lot of time learning and really enjoyed that learning, but but also did quite a bit of reflection on the process of the learning. And I think that there was a lot that we learned from there that we were able to bring into Language Perfect and Education Perfect eventually around, I guess, our own experiences as students.

Paul Spain:
What was the journey from there through school and into studies? What did that look like for you?

Shane Smith:
Yeah, so we ended up moving up to Auckland because New Zealand decided they wanted to shut down their rural hospitals and so there was a centralization of medical services which forced us to move up. Went through Meadowbank Primary and then Ramire Intermediate and I was fortunate enough to get an academic scholarship to St. Kent’s College out in Pakuranga. And that really did open a huge number of doors for me. We had an amazing range of opportunities at St Kent’s. Craig got really into language learning at St Kent and actually the very first version of Language Perfect was built in one of the classrooms. A take home assignment where Doug Anderson, who was his teacher at the time, I’d like you to go away and build something to help you learn languages with the tools that you have. Craig had a look at vocabulary learning in particular and said, hey, this is really hard.

Shane Smith:
It’s really hard for the teacher to teach. It’s really hard for me as a student to learn. I mean, traditionally we were talking about flashcards that, that you flipped over to see whether you remembered the words or not. And he thought that there was a real opportunity there to do something on the computer that gamified that and broaden a whole lot of best practice pedagogy to make something really cool. So he is, I think he would have been a year 11 or year 12 student at that stage, put together the first highly gamified version of this thing, which he really enjoyed. And then the nugget of that sat there for a few years until he got to university and then sort of grew with that.

Paul Spain:
What did you end up doing in terms of university and so on? Because that, that kind of came first before you started the business.

Shane Smith:
Yeah, I had always wanted to be a medical doctor, so I went through University of Auckland through their med school program. Incredibly hard work. But I loved the learning, I loved the environment, I loved the people around me, I loved the pathway that I was going on and I was really looking forward to being a doctor. In fact, I did practice for a year as a junior house officer and did really enjoy the job as well. That sort of happened on one parallel track in my life. And then in parallel to that, I also was still interested in the computer stuff and so I sort of tinkered on the side line. And then when Craig graduated high school, he decided that he wanted to go into fun and so he went down to Otago University. But while he was down there, he, he had always had this really strong vision that he wanted to be an entrepreneur, he wanted to be a business person, he wanted to be successful.

Shane Smith:
So rather than just going down and taking part in the parties with nothing else. He got involved with probably 10 or 12 projects there where he set up little businesses on the side. He was doing things like selling types of frill neck hats for people going picking in the orchards. And he got involved as a Microsoft ambassador at the time and had a whole bunch of things on the go. At one stage we were building websites for mudbrick wineries. They did this publicity stunt where they had a cheese which they decided to tour around the world. And so we built the website for that. So we were doing all sorts of things and then alongside all of this we were sort of fiddling with the edtech side of things as well.

Shane Smith:
And then in 2007 we entered in what’s called the Audacity, what was called the Audacious Business Competition down in Dunedin. And this was a business comp where you pitched an idea, built a business case, you pitched the judges and then there was a $20,000 prize for the winner.

Paul Spain:
That’s worth making a bit of an effort.

Shane Smith:
That’s worth making a bit of an effort. Particularly as students with no money, I had no business experience, so Craig was the one bill in the business case. But I actually flew down to Dunedin around this time and we sat down and we sort of built this business case together and we submitted it. And Craig went along to what he thought was a feedback day. Turns out that day was actually the interview day by the judges who had. Craig had no idea that he was meant to pitch the company at this stage. So he rocks up to the pitch day and the judges have looked through the thing and they look at him and they say, so we have a bit of feedback. We think this company name Crafty Kiwi Creations, which is what we call it, is rubbish.

Shane Smith:
Craig sort of looks a little bit startled, but then he pulls out a pen and paper and he says, guys, I haven’t actually prepared a pitch here because I didn’t know that we were going to be pitching. But I just love to hear your thoughts about how we can improve this thing. And he sat down and he listened for half an hour of all of the ideas and he sort of volleyed off them. And apparently out of all of the people pitching that day, he was the only person who was actually open to ideas, who was actually willing to listen, who was actually willing to take the feedback. And that was enough for the judges to say, actually of everyone here, we think that Craig and I wasn’t down there at the time but. And Shane, who have the highest chance of succeeding and so we ended up winning the Audacious Business prize and having $20,000 strings free to kick this off. We actually then both took a year out of our university courses, moved back up to Auckland into our parents garage, typical startup story. And for that year worked on this thing full time.

Shane Smith:
And that was a really interesting year. It was a real pressure cooker. We didn’t quite know where to take it or what to do with it. We had lots of ideas. But going from, I guess a fairly freewheeling university set up to one where we have this one focus was quite a challenge for I think both of us at the time. Working so closely together was a challenge that we were encountering for the very first time, which had its ups and its downs as it always does. And we got to near the end of that first year and hadn’t actually made that much progress. And then we had to go back and give a talk to the next group of the Audacious Prize people saying the things that we’d done, what we’d done with this money, how successful we’d been, and all of a sudden there’s this pressure of this event coming up.

Paul Spain:
So what did that pressure create?

Shane Smith:
So that pressure created Craig to reach out to the New Zealand association of Language Teachers and pitch what became the first version of it was the vocab Olympics. It’s now become the language world champs. We worked out that there was copyright issues there after the fact and it was going to be a free competition for anybody in New Zealand who was interested in languages to take part, to use our software. We’d worked out that motivation was a key issue. Learning vocab is not inherently that rewarding, it’s hard work. And so we gamified on top of that. So we put in place a set of algorithms to remember what you’re doing well with, what you need help with and ensure that you are getting hard stuff all the time. But then we added a point system, we added scoreboards, we added something which we call our chairs, which students earn points to be able to then gift little emojis to their classmates.

Shane Smith:
And then we’re able to put this on these big, effectively global leaderboards then and really make a big deal about languages. And one of the things that we learned along the way is that language teachers and language learners feel that they are treated a little bit like second class citizens and that language learning isn’t given the gravitas and the focus that it should be in the school. And that’s reflected on the amount of time that the kids are allocated to do it and the resourcing that they’re given. And so in the process of doing this and working very closely with lots of language teachers around the country, firstly we developed this really deep respect for what language learning can do for students. And we realized that there was a real opportunity here to become the champions for these language teachers. And so at the end of the language Olympics, we got a set of really beautifully printed certificates done. And just like the first 15 gets presented with certificates for various things of the music group, all of a sudden language teachers were coming up and they were able to present their top students with recognition for the work and the learning that they were doing. And this was hugely popular.

Shane Smith:
And so that really, really helped us to kick off. And that was, I guess, the start of our growth engine within language teachers at the time.

Paul Spain:
Fantastic. Now, tell us around the commercial aspects of this because it’s exciting, creating something that can make a difference. But it’s easier said than done to make that work commercially. And I’m sitting here as a parent and I’m thinking, schools never seem to have too much money. You know, sometimes they’re asking for, you know, we need a contribution towards this and that. How did you make that commercial piece work? Because, you know, $20,000 doesn’t go very far. No, it might have felt like a lot, you know, when you won it, but you try and stretch that out for two people over a year, you know, I guess it pays for a Fair amount of 2 minute noodles, but, you know, probably not too much else. And so you’ve got to get those commercial pieces right.

Paul Spain:
So how did you get started on that track and what did it look like, what worked and what didn’t?

Shane Smith:
So I think there are a few pieces there on the commercial side. I think before we were able to really charge for the product, the first thing that we needed to do was firstly get into classrooms to get it in front of teachers and students. And one of the biggest challenges there is that, you know, Craig was 18, I was 20 at the time. We were two very young guys without any formal qualifications in the space. And so building that gravitas to be able to come into schools required quite a bit of conscious effort. So we did a number of things there, such as, you know, from day one we wore suits and the suits were, were about the image. But it was also for ourselves, a very clear delineation to say university stops here and business starts here. And when we’re in business mode, we’re serious about this.

Shane Smith:
That helped to build that gravitas. The other thing that we did is spend a lot of time talking and listening to teachers. So going into classrooms, listening to students, listening to teachers, and then implementing so many of their suggestions to the point where it felt like it was their product that we were building. And it genuinely was. So we were able to use their expertise. And having done that, then we could start having commercial conversations. So that started off as site licenses for schools. I think we had a $700 school site license for our schools when we first started off.

Shane Smith:
We fairly quickly realized that they’re very different sizes of schools and that actually if we wanted to be able to fund the ongoing development and growth of this product, we actually needed to move to a per student subscription model. After, I think the first year or so, we shifted to a per student subscription model. And schools fund this in a number of different ways. There are some schools who have a book list where they send home a set of resource requests. And traditionally on that there would be a languages, often there would be a vocab booklet that students would have. And we worked out, well, actually we can do a whole lot better than anything that this physical book can do here. And so there was then a process of explaining to schools that actually this is a resource just like the physical books are, even if you can’t hold it. And for the schools who were able to then have that book list which they sent out to parents, that’s how that got funded.

Shane Smith:
There is a significant proportion of schools in New Zealand who aren’t able to do that. The government funding situation in New Zealand has been very deliberately giving schools as much choice as possible, which we do support. And so for those schools, they generally fund it out of their own budgets

Paul Spain:
there, you know, early stage, you know, startup, they’re often going out for sort of seed funding and so on. Tell us how you did that. Because obviously the $20,000, you know, didn’t last that long and, and then it took you a period of time to get to a point where you were able to start charging a fee. So walk us through that stage.

Shane Smith:
Yeah, I mean, obviously year on year, there was always the question of, well, do we have the funds to do this ourselves? Do we need to look externally? We had a strong view that if we could fund things ourselves, and by funding things ourselves, that really meant funding them from our customer base. With schools pledging to purchase for the following year to give us the budget to then go and hire the people who we needed to deliver that. If we could do that, then A few things would happen. The first is that we would retain full control of where the company was going. And that was important for us because we wanted to build a company that was successful commercially, but also had very real impact. And we wanted to have that balance. And we knew that if we control it, we would be able to call the shots and make that happen. So that was the first bit.

Shane Smith:
The second one was that year on year, we had a sense of the size of the market segment that we were in. And we knew that if we focused on going out and talking to customers and building both sales and our understanding of their needs, then we were going to grow in proportion to the size of that segment. And there was always this fear that if we were to bring on external capital, we would then be able to, I guess, take a whole bunch of risks, but have the opportunity to outgrow the market segment and then end up with an overhang where your revenues didn’t match your expenses, and then be in trouble on that side. And so, from our perspective, growing organically with the market was a fantastic strategy. It also meant that for us as young entrepreneurs, starting from a knowledge base of close to zero, it gave us an opportunity to grow with the company by growing organically. It also meant that both from a technical side and a business side, I was focused on the technical side. My brother was really great on the business side. And we were both growing our skillset as we went.

Shane Smith:
We had one year, I think it would have been around 2012. We were fortunate enough to get some funding from Callahan Innovation at the time to be able to expand what we were doing. This was around the point where we were transitioning from language learning to teaching all subjects in the school, the education perfect product. And with this big injection of funding, we doubled the size of our staff there. And on the one hand, we got a lot done. But within six months, we had probably half the team who were focused on one area, who created their own little subculture, which was completely different to the rest of the business. And we had a massive personnel challenge on our hands, which we then had to go and over a period of time, unwind and bring back into the fold as such. And it was one example for us how, you know, growing too fast without the skill set to do that is actually as dangerous as not having the capital to grow in the first place.

Shane Smith:
So for us, that balance of being forced to go out to our customers every year and to tell them what was coming and to get their buy in, that it was worthy enough that they’d prepared to put their subscriptions into it was ground truth. It grounded us to what was really important.

Paul Spain:
So you saw that, that opportunity, this was really pivotal. Right. And your future of going from being software that was going to help youngsters learn languages to software that was going to help, you know, right across, I guess, you know, virtually every, every potential subject. How did you come to that conclusion? Because that’s a really big sort of, you know, flip from, from this really tight focus to then zooming out a little bit.

Shane Smith:
Absolutely.

Paul Spain:
And potentially being able to apply that impact and create that sort of level of engagement, but much more broadly.

Shane Smith:
Yeah. So we hit a Point in 2012 where we looked at the world around us and we realized that language learning is a really cool, quite narrow niche. And there were starting to be online competitors who were providing free solutions. They didn’t do many of the things that we do, and to this day, they don’t do many of the things that we do. But we saw, hey, well, there’s a massive risk here that we’re so concentrated in this one space that we could end up sort of crushed out. But also we sort of looked to the future and we thought, well, what are the winning companies going to be like 10 years from now? And we realized, well, those winning companies are probably going to do lots of things and then they’re going to be able to integrate them really effectively and get synergies from that integration. And so we realized, well, actually, we need to take some of these ideas that we’ve been holding in our back pocket. We need to branch out, we need to take a big risk and we need to take all the things that were hugely successful for language learning and bring them to science, into English, into maths.

Paul Spain:
So this was effectively the moment where you both put on your futurist hats and you looked out to building the half a billion dollar and beyond business that education perfect is today.

Shane Smith:
I mean, I must say, this is where my brother Craig has had amazing vision. I think this is something that is reflective of the vision that he had. He always knew that we had the potential to build something that had significant impact on the world, that had significant scale. One of the decision points that I had along the way, obviously I trained as a doctor. I completed my training, I was going through the practicing and at the same time, the company now was doing really, really well. And I had to get in my head, well, what do I want out of life, what I want to achieve? I finally realized that in some ways the medicine and what we were doing with language, Perfect was the same thing in that we were serving people, we were helping them, and by using software, I had the ability to create this enormous leverage, and I could impact the lives of millions of students in a way that I simply couldn’t do. Treating patients one by one, although obviously the interaction is completely different and there’s a huge amount of value and. And direct interaction like that with patients as well.

Shane Smith:
So definitely impact is something that we’re really focused on. It’s so easy to build an edtech product that looks good and is exciting, but then doesn’t actually deliver the goods. But really why we come into the office day in, day out is because we want students to be able to learn more effectively. We want teachers to be able to teach more effectively. And so we care about it, and we know that schools really care about it as well, and government departments, so it’s really important.

Paul Spain:
Now maybe you can break down a little bit how the two of you kind of worked together and how your roles were complementary or not and how you were able to make that work, because I imagine there’ll be certain siblings that could never work together, but together you both built an incredible enterprise.

Shane Smith:
Yeah, I mean, I think that was very much a moving piece as we went through. So I remember back in 2007, 2008, ish, when we took the time off and we were working together at the time, I was obviously the older brother, and Craig said to me, hey, Shane, do you want to be the CEO of this company? And I was always interested in the education side and the technology side, but the business bit of it was something that really was Craig’s. Craig’s focus. And so I actually said, look, you know what? I’m not sure that I’m cut out to be CEO here. I think this is something that you should do. And I focused very much on the technical side of the business and also ensuring that what we built really worked so effectively. I made things that people loved, and Craig gave me a huge amount of direction and feedback around what our customers were saying and built the business side of the business. Now, I think Craig’s pretty probably capable of doing the whole thing himself, but we did work out a way that we worked very well together.

Shane Smith:
There was a bit of history to this. So I took this year out in 2007, 2008.

Paul Spain:
And did you go back and work after that? For a period, yeah.

Shane Smith:
And then at the end of that, I went back to university and I finished my medical degree. So for the following three years or so, I was Back studying full time and we were then doing things where all of my nights and evenings were focused on ep, all of my days were focused on my medical studies. But Craig was full time doing EP when I came back into the company after my house officer year in 2012 and when I stepped back into the company, there was a really interesting moment there where I had been doing a very high functioning role being a junior doctor myself, a lot of self confidence in my own ability. Craig had been doing a very high functioning role being the CEO of this company. And we stepped into the room together and all of a sudden there was all this argy bargy around, well, who’s going to do what? Where are the boundaries? Craig has always been an enormous fan of the E myth and so he really likes to put in place processes for everything. He put in place those processes for me as well. And all of a sudden I’m getting a performance review from my younger brother and he’s just going through the document step by step and I’m like, hold on, this feels weird. And so it took us a while and there was probably about 12 months where we were trying to figure out how we work together and eventually we flipped into this mode where I would very much focus on the technical product side, he would very much focus on the business side.

Shane Smith:
And that worked. And we built that respect for each other over those years to the point where we were super, super tight knit. In about 2013, 2014, we both moved back down to Dunedin where most of our staff were at this stage. And for the next five years we lived in the same shared flat, we went to the same gym, we went to work together, we’d eat dinner together afterwards, we’d go and exercise together at the pool or whatever. And so it’s a super, super high intensity environment where we just spent so, so much time together. And I’m always going to look on that, look back on the time fondly because it was a really special time for both of us then.

Paul Spain:
I mean, what was that side of it look like in terms of the finances and the realities in terms of being able to hire people that you were keen to have. Cause, you know, it sounds like you certainly had vision the whole way along. So I can imagine there was always, you know, that desire to be adding people to achieve the next thing and so on. But all of these elements have a cost.

Shane Smith:
That’s true. So initially we were hiring university students or new grads from Otago University because number one, that’s who we knew. Number two, that’s who we could afford. We were working on a really tight budget at all times and then over a period of time we were able to expand that out to bring in more skill and more experience into the business. One particular key hire was a real estate sales manager who came in to help us with our sales team. But he’d had many years of experience working with sales teams, working with people. He was an incredible people person. Craig has amazing vision, he’s got amazing drive.

Shane Smith:
He is willing to do anything within moral bounds to make things work. Sometimes that can make him a little bit difficult to connect with because his brain jumps from over here all the way to 100 over the course of a weekend and all of a sudden the plans change.

Paul Spain:
That doesn’t sound right. Entrepreneurs don’t operate like that. I’ve never seen.

Shane Smith:
And so one of the things that Jason was amazing in doing, he mentored Craig extensively on that communication, on that interpersonal skill side of things. Craig grew a huge amount in that process. But also Jason really helped us to add a layer of professionalism to the business and create that connection, I guess, between the big ideas and then actually how we’re going to get everyone else on board so that they’re as excited about where we’re going as we are. Around 2014 we got involved with NZQA, so the qualifications Authority who wanted to run the first high stakes online examination in New Zealand. And we showed them the assessment process platform that we had at the time and where we thought it could go. I think when we started off we thought that they’d get kids to write an essay online and then submit that, which seemed pretty easy. They came back to us and said, well no, actually we want to do a maths exam online and actually we want this to be as good as writing on paper kind of thing, which was a much, much harder task. These exams were going to count towards kids final grades.

Shane Smith:
They were proving what they knew. And so we needed to make an interface that had as low of friction as possible and it just needed to work, which was a completely different experience to what we previously had with the learning. Obviously we’d run the language Olympics in the past which got to tens and tens of thousands of students online. So we knew how to handle scale but at the same time getting something where, where it was just absolutely, absolutely going to work for this exam and then preventing cheating, making maths work in a way that kids were able to engage with was a huge task. In the process of doing all of that, for the first time there were a bunch of Teachers who could see, oh, these guys are actually doing something meaningful here. And we were able to hire our first teachers to come and help us implement that EM CAT Electronic Mathematics Common Assessment Task, which was an internal assessment run by schools but done like an exam. And in fact I think our first hire was a guy called James Sancho who’s still with the business. Fantastic teacher, fantastic guy.

Shane Smith:
And once we had a few people on staff then the floodgates broke open and all of a sudden people looked and said, well hold on, this is actually a pretty attractive career path here. They’re building something really meaningful. It’s different to the work that I’ve previously been doing as a teacher. And that was a massive unlock for us at the stage. So building that gravitas, building that sense of credibility was so key there. I know I’ve meandered a little bit,

Paul Spain:
but here, but no, that’s fascinating. Now walk us through the opportunity that arose to get some funding from Callaghan. What did that look like for you?

Shane Smith:
Yeah, so I mean the Callaghan funding was all built around effectively tax rebates. It meant that if we employed people in New Zealand and were able to demonstrate that we were building something that was going to be going to turn into an export eventually, in fact in the very short term and build a business and build a base that was going to lead to long term employment, that then we were able to get a tax rebate on these people’s salaries. And we’ve had a fantastic relationship with. It was Callahan Innovation, I think they’ve now renamed it, but with the people there over many years and I think we have done good on, on that investment as such. You know, we have provided an expanding base of employment for many people in New Zealand. We employed close to 250ftes at the moment with, with well significantly more than half of those being in New Zealand. So Dunedin, Christchurch, Auckland, Wellington. And I think as a net win for the country, those schemes have been incredibly successful there and have paid themselves back many times over.

Paul Spain:
Would you have moved so quickly without that rebate opportunity?

Shane Smith:
I think we were always right on the edge of what we could afford. And so, you know, in economics everything sits in the margin, right? And so the ability to get those rebates meant that we could grow faster. It meant that we could hire a broader range of people. It also meant that we kept our hiring focus very much in New Zealand for a long time because the incentive structure was set up. So that was a great choice. And so I think that certainly for us definitely helped us to grow. And it also led to a lot more employment in New Zealand for all those people, which is fantastic.

Paul Spain:
Walk us through the, you know, where you got to where there was an opportunity ultimately to sell the business. And you know, what, what led you to that point and how did, how did that play out? Because. Yeah, how far in were you when that happened?

Shane Smith:
Yeah, so that happened at the 10 year mark. So we did, we, Craig and I were focused on this entirely for a decade. And then Craig had an internal goal that he wanted to grow this for 10 years and achieve a significant exit at that stage that achieved financial independence for him and wanted to do it in that timeframe. And I think we ended up selling with two or three days to go in that timeframe. And as I’d mentioned, we were living together in the same house, working together, the same gym, the same meals. And it was this pressure cooker that was incredibly effective for that phase of our lives. But it did mean that we were fairly unidimensional as people. I mean, I remember setting up a Tinder dating profile shortly after the sale.

Shane Smith:
And kind of all I had to say about myself was this, what, what I did for work. And at the time I didn’t realize how weird that was, but we were fairly unidimensional as people. And so we realized, hey, we hadn’t gone and done an oe. We hadn’t sort of gone and been boisterous and young for a period of time. And we had a window that was going to close at some stage if we wanted to experience some of those things. The other thing that was happening is that after a decade we were tired and we realized that it was far better that there was going to be someone else who could come in, who could be hungry, who could be driven, who could, could have that energy that we had injected into the business for so long because we weren’t going to be able to keep doing it forever. And so we did set up a sales process, reviewed a number of potential candidates to purchase the business, went through a number of interview processes. Craig is someone who is incredibly forward thinking.

Shane Smith:
And so one of the things that he did prior to the sale is, is that he put in place management structure to run this business without him in it. So he e miffed the business in the truest sense. And so there was a spreadsheet with all the things that people needed to do to make this business work really well. We had excellent people in each of those positions. And so the day the business sold, Craig actually was Literally able to step away without any negative impact in the business. I stayed very involved right up until the sale period and then supported it afterwards for a period of time. So I actually did six weeks in the business supporting them and then six weeks where I’d step out of the business. And I went and did a whole bunch of travel there, which was actually really great to help me to let go.

Paul Spain:
And what was that like, having sort of six weeks in and then six weeks out to go and travel the world or do, you know, do all sorts of things?

Shane Smith:
Honestly, it’s one of my favourite years of my life. It was fantastic because I had that connection back to the thing that I’d built and spent all this part of my life doing. I had the first experiences of the freedom of being able to do what I wanted with my time and so got to experience travel for the very first time. Had some fantastic trips then, but then was always coming back to people I knew and a role that I enjoyed and was appreciated in. And so it was actually, it worked really, really well. And by the end of that year we had a fantastic understanding and the team was doing really well there as well.

Paul Spain:
Now, there’s an interesting aspect in terms of selling the business, where I think you told me that you were encouraged to keep a bit of a stake for both yourself and for Craig. So you. What did that look like? And in hindsight, what were the lessons about that?

Shane Smith:
So the sales process itself was a really interesting one because we got to see all of these other parties out there and their views on the world and the kind of questions that they asked and the ways that they interact with us. And the group who we eventually went with as the purchasers, a group called 5e Capital in Australia, really struck us from like, the first moment we met them as firstly, hugely intelligent, but also incredibly socially skilled. They came in, they expressed a huge amount of respect for what we’d built. They were very focused from day dot for generating alignment. And this was actually something we learned a lot from them. So they were the ones who put in place the management equity plan, which really motivated a team that we had in place. And they also, as part of that, requested that we kept a stake in the business, which kept us interested. I mean, I think we would have been interested anyway, but it definitely kept us over the years having an ongoing interest there.

Shane Smith:
And the other thing that they did incredibly well is that Craig can have some quite strongly held views on things. And he was really worried that the partners that we brought in would see the Business as it was, have their own viewpoints on where they wanted to take it and that there was going to be friction to the point where there was kind of a breakdown in relationship relatively quickly in that process. And the 5V guys did almost the inverse of that. They spent 12 months where they just really dove deep to understand both how the business worked, but also the ethos of the business, the impact side of the business, what drove people, what motivated people, what our customers cared about. And they also ensured that they frequently asked Craig for his opinion. And they didn’t always agree with Craig’s opinion, but they always respected it. And so over the years, we’ve actually, for the first three or four years where 5e was the majority owner, we were on the board. And then when our newest owners, KKR’s Impact Fund, purchased in, there were too many board members for us to also be board members.

Shane Smith:
But we’ve stayed as observers on the board and that style of interaction and the respect for our opinions has meant that actually we’ve loved being on this journey with them. We’ve loved seeing the management team that we had in place take the business and just really grow it and do amazing things with it. And it’s been fun and it’s been a really pleasant experience. So that worst case scenario that we were, I guess, emotionally prepared for selling the business very much didn’t eventuate. And actually we’ve had a fantastic journey and in the process, I mean, for the 5e guys, it’s been an incredibly successful venture. On their side, they, over a course of the three or four years that they held the business grew the value tenfold, which for them is, is a fantastic investment. And, and they deserve that. I mean, they did amazing things to the business.

Paul Spain:
Wow. And, and I guess good for, for you and Craig as well, that you’d kept some equity in there and it, and it grew in value over.

Shane Smith:
That certainly helps.

Paul Spain:
Yeah, yeah. So after you had done that handover, you and Craig, you know, still had that connection through the board, but largely you, you know, you stepped well away from the business for quite a period of years. So maybe just walk us through that a little bit.

Shane Smith:
It’s actually quite an interesting experience going from having a role that has been such a large part of your life for so long to all of a sudden not having that part of your life. And as I mentioned, we were fairly unidimensional as people in some ways. And so there was definitely a process after that of working out, well, who am I now? How do I fit into this world just because I was good at this thing, does that make me good at everything else or not? We had some fantastic. I mean, initially what we did is we just took a bit of a break, to be honest. We’d worked so incredibly hard for so long. We were due a break and we took a bit of a break. But after a while, there was a point where you need to be stimulated, you need meaningful social interaction. There’s so many things that actually your workplace role actually provides up and above that salary.

Shane Smith:
Craig’s really interesting because what he did, which is a typical thing, Craig thinks he put it in a spreadsheet and he said, right, well, these are the things that my workplace role provided me. It provided me with purpose, provided me with socialization, it provided me with a routine, it provided me with a reason why I had to grow and learn. Okay. And I think there were a few other things there. Okay, now let’s pull out these things one by one and then let’s work out how I’m going to replace these with other parts of our lives. The things that were most meaningful for us in the long term were things that didn’t involve money at all and involved us leading with our time and our efforts and I guess, our hearts. So we got really heavily into marine conservation. So we spent a fair bit of time in Fiji.

Shane Smith:
I got really into underwater photography. And as a part of that, we met a fantastic marine biologist on one of the islands in Fiji. Covid came through. And obviously the COVID period for Fiji was economically terrible. Something like 50% of their GDP disappeared overnight. And all of a sudden these islands, which had been doing incredibly well from a marine conservation perspective very fairly, had had people living there saying, well, hold on, that remedy is gone. Now I need to feed my family. And so I’m going to return to fishing.

Shane Smith:
And actually, some of the best fishing areas are the ones that were previously protected, for example. And so we assisted during that period. We set up a. A trust there called the Drawanga Marine Conservation Trust. And we assisted this marine biologist, Rob, to continue funding that area that involved at the time, things like food parcels for the local villages so that they had enough food so that they didn’t feel the urge to then go and fish in these areas that were that been put aside for conservation. It’s just been fantastic to be involved with the whole process. There is a resort on the island where we have got really friendly with the owners there. We’ve helped them with both their business, but also ensuring that their business is able to then fund the conservation side of what they’re doing there.

Shane Smith:
So we got really heavily into that and sort of built a different part of our lives, a new set of friends, a new focus. The other thing that happened during that time is that I met my now fiancé in Australia and in 2024 I’d finally convinced her to take a 12 month sabbatical off her job for us to go and do an adventure together before we settled down and had kids. March 2024 ChatGPT comes out with GPT4 and I think I was sitting in New Zealand at the time in the south island and I saw this thing and my brain just exploded. Like I’m sure many of our brains exploded. And immediately I could see that this new technology was going to have an enormous impact in the education space if managed well. And at the time I spent a number of days putting together a whole lot of different ways that we could engage with this technology. Actually, poor Julia had to deal with Shane being half present for our sabbatical and half focused on his AI. Stuff that he was obsessing over.

Paul Spain:
I can imagine, yeah.

Shane Smith:
And as part of that, I put together a set of reports and prototypes that I then took to our board and said, hey, I think this is going to be really important for our business going forward. And over about a six month period, I’d come into each of the board meetings and say, what are we doing in this space? And we had a fantastic management team in place, but they were all fully committed and focused on the direction that the business was going in that stage. And no one had any capacity. They were doing their jobs and doing their jobs well. There wasn’t any space to then really explore something as experimental as this. So in October 2024 I said, well, would you like me to come back and just kind of kickstart the process here and get things moving? When I saw this technology, the thing that really struck me is that previously with previous sets of technology, we’ve been able to give feedback to students about closed answers. So multi choice or a few words at a time. But these large language models work with text natively and that means that they can open up a space for feedback and coaching and direction of students that were simply not possible before.

Shane Smith:
The ability then for AI to be there in the moment when students are responding repeatedly as many times as the student wants is really exciting and really transformative.

Paul Spain:
Why do you think education Perfect had the traction that it has done? Why have you grown so well and been so dominant?

Shane Smith:
We’ve gone in and spent a lot of time listening to and talking with both teachers and students, understanding what their needs are and then going out and taking that feedback and building what they want. Plus, we provide high quality curriculum aligned material that works really well in the platform so that teachers don’t need to go and make it from scratch themselves. So platform content, support and training all wrapped up together in a form that is really focused on what teachers actually need. It’s that combination that’s been really successful.

Paul Spain:
Great. Well been absolutely fascinating talking with you, so thank you very much. Shane Smith, anything else you wanted to add that we’ve missed?

Shane Smith:
Thanks Paul. This has been a fantastic chat. It’s been really, really fun. Thanks for having me on the show.

Paul Spain:
Great. Thank you. Cheers.

Paul Spain:
Be sure to listen in to other episodes for featuring many of New Zealand’s most successful leaders, including founders such as Sir Rod Drury of 0, Brooke Roberts of Sharesies, Sir Michael Hill and many, many more, the New Zealand Business Podcast course is brought to you by One New Zealand and Gorilla Technology.

Paul Spain:
Thanks for listening in.

Paul Spain:
We’ll catch you soon. The New Zealand Business Podcast brought to you by Guerrilla Technology, your strategic and proactive IT partner.