💼 The Future of Test Prep (Business #1)

🤔What It Is

Acely.ai is an app that provides AI generated practice problems and full-length exams for the SAT®, ACT®, and various AP exams.

💸The Business

To date, paid test prep for high school students has typically come from any of the following sources:

• Self-Study Resources (Such as exam prep books and practice problems)

• Private Tutoring (Which can easily run upwards of $100/hr)

• Online Courses/In-Person Prep Classes (Usually cheaper than private tutoring, but both can still be expensive)

As a current tutor and former student, I know the limitations of all these methodologies. The first limitation is typically cost (as clearly its expensive), and the second is the ability to diagnose weaknesses, and, as a result, improve your skills in those areas.

Acely.ai provides an AI tool that diagnoses your weaknesses and can generate endless practice problems to address your flaws and improve your end score.

They currently offer the service for students and educators preparing for:

• The SAT®

• The ACT®

• AP Exams (Bio, English Lit, World History, and US History)

🧑‍💻The Model

💰Revenue Streams

The acely.ai pricing model is relatively straightforward. The longer you subscribe, the cheaper your monthly cost is. Their current pricing model as of 4/20/24 was the following:

• 1 month subscription - $99

• 3 months subscription - $199 ($66.33/month)

• 6 months subscription - $299 ($49.38/month)

They also offer a 3-day free trial that can be useful in determining if the tool is an appropriate fit.

🔻Potential Expenses (Expected)

I would assume the cost segmentation is similar to most software products with expenses such as:

• Software costs (Servers, Data maintenance)

• Marketing

• Talent (Software engineers)

• Customer Support

• Operations

😎 Customer Appeal

Acely.ai is an improvement on the typical test prep strategies because it combines the diagnoses tools that a tutor could provide, and it is able to provide unlimited practice questions.

As for the cost, purchasing the software for 6-months at $300 seems expensive, but recall the hourly cost of a private tutor or a private class. Those could cost north of $300 for just a few weeks of service.

One additional interesting nugget: Per their website, you can use some of the features of Acely.ai for free, including unlimited practice questions, after the free-trial. You will not have all tools such as the diagnosis tests, but all students would benefit from a free unlimited practice question feature.

👍The Good Stuff

• Growing Industry - This “Test Prep” industry is larger than most people think. Per Business Research Insights, the global test preparation market is scheduled to grow to over 750 million by 2032.

• “Test Required” > “Test Optional” – While many colleges are still test-optional, many schools are once again requiring a SAT® or ACT® score for admissions. See how schools like Harvard and Caltech rolled back their COVID-era policies. It is likely that we will begin to see a shift back to most colleges requiring the exams for admissions.

• Expanding the Offering – Currently acely.ai is only offering a product for a select few exams. The offering could be expanded to other exams including: more AP exams, the LSAT/GMAT/GRE, and professional exams (CPA, Bar, CFP, etc.)

👎The Risks

• Customer Retention – Most SaaS (Software as a Service) businesses really excel when the customers will be around for many years. Most students would only be using Acely.ai for a few months while preparing for their exam(s).

• Competition – Given the AI boom, it is only a matter of time until an industry leader (such as Princeton Review, Kaplan, Barron’s, etc.) create a similar product. Additionally, Khan Academy (Which partners with College Board), offers a free version of prep for SAT® and certain AP exams that already offers similar features as Acely.ai.

• Exam Fluctuations – The growing generative AI space and its corresponding products are reliant on the data that is used to train the AI models. As any former student well knows, exams and their formats change over time. For Acely.ai to have a reliable model, the data will need to be continuously updated to meet the ever changing testing landscape.

• Target Audience – As a tutor, I have firsthand seen this last issue. Trying to sell a service to a high-school student with little to no income is difficult and not something you should be attempting. You want to be targeting parents/teachers who would have the financial means to pay for the product.

🧠 The Op Ed

I think products like acely.ai are the future of the test prep industry. However, if I was the owner of acely.ai, I would target a sale of the company to a larger player in the test prep industry (like Princeton Review, etc.) and integrate the software into their offering.

As previously stated, parents are the real target audience for this product. When it comes to the test prep industry, most parents will do a quick internet search for prep books and websites. Unless acely.ai can pass industry leaders at the top of search results, their great product will not be visible to the TRUE consumers/customers in this industry.

If acely.ai does not decide to look for a sale, I would look to partner with creators that appeal to the high-school/college-age generation. If you cannot market to parents effectively, your next best bet is to market to students who can convince their parents that they need acely.ai to study for their exams. I would also target tutors who could leverage the software when preparing their students, and potentially use them as salesmen/women for the product.