A startup is born, and a co-founder dies

November 22, 2013, 7:22 PM UTC
Hansoo Lee

(Poets&Quants) — It was just a few days before Christmas in 2011 when Bhavin Parikh got the email he will never forget. He was on his way to a family dinner in Massachusetts when the message popped into the inbox on his smartphone. It was from his good friend and business partner Hansoo Lee in Berkeley, Calif.

The two were recent MBA graduates from the Haas School of Business at UC-Berkeley who together founded Magoosh, an online test prep company.

“Hey Bhavin,” wrote Lee, “I’ve been diagnosed with a rare form of lung cancer…”

With those simple yet startling words, Parikh’s whole world came crashing down. Lee was the last person he could ever imagine falling ill. His 33-year-old partner rarely smoked. He was fit, active, and full of life. From the very first time they met at Haas as incoming MBA students in 2008, Lee impressed him as a bright and daring young man with a driving ambition and a relentless focus on wanting to become an entrepreneur.

In their fledgling Internet business, Lee was the extroverted leader, an expansive visionary who was always thinking big. By contrast, Parikh was the quiet, contemplative one, the sometimes reluctant, always soft-spoken conservative who often had to be, in his own words, “dragged, kicking and screaming” through the more ambitious objectives pushed by Lee.

By the time Parikh returned to the West Coast, his friend would be forced to give up his active role at their company, and Parikh would be stretched as a leader and as a friend. When Lee was diagnosed, Parikh was deeply concerned about the long-term viability of their business. Magoosh was burning through cash, with month after month of negative cash flow.

And now Parikh was fast losing the friend and partner who convinced him to launch the startup in the first place. The day-to-day interactions that defined their working relationship would devolve into weekly strolls around Berkeley, then monthly phone calls, and finally an occasional email. Some 15 months later, on March 4, 2013, Lee passed away, a victim of complications from Stage IV lung cancer.

If Lee were alive today, he would be proud of his partner and the business they created together. He would also be thrilled to know that his friend can still hear his voice, exhorting him to move faster and bolder, to offset his more natural tendency to play it safe.

The pair first met in 2008 at an admit weekend at the Haas School of Business at the University of California at Berkeley. Lee, then 30, was about to leave Wal-Mart , where he was a senior manager of logistics, strategy, and planning, to get his MBA degree. An Amherst grad born to Korean parents and raised in Florida, Lee had already been the first employee at an Internet startup and knew he wanted to create his own business. Parikh, then 26, had spent five years as a senior consultant at Deloitte after graduating from Duke University. Parikh, raised in Pittsburgh, wasn’t sure what he would do with his MBA but loved working for Deloitte in Philadelphia.

When the two reported to campus in August 2008, they found themselves in the same cohort of 60 incoming MBA students. They also ended up working together on a case competition involving technology and healthcare. “We did this case together and it was okay,” recalls Parikh. “Nothing really came of it.” Except one thing: They met another MBA student, Pejman Pour-Moezzi, who would bring them a big idea.

“He said, ‘Hey, I’m working on something,” says Parikh. “”I’d like to show you guys to see if you would be interested.’ That was half way through the first semester.”

They strolled over to his apartment off campus and Pour-Moezzi described the idea he called Magoosh, a play on a Persian word “Magush,” which refers to a wise person. The concept was to create a community of users who would help each other prepare for the GMAT exam. The forum would be similar to an existing service, BeatTheGMAT, but the interface would embed GMAT prep software. Pour-Moezzi, who had also been a Deloitte consultant before going to Haas, had been working on it with a friend from Deloitte, Vikram Shenoy, who had a master’s in computer science from the University of Southern California.

“It was people-powered test prep, a hybrid of test prep with a forum,” says Parikh. “At the apartment, Hansoo was visibly excited about education. He was passionate about it. He was on the board of an education non-profit. He came to school knowing he wanted to be an entrepreneur. He came to business school with a vision and a purpose. For me, I was interested in technology.”

They worked together over the next few months, launching a crude site in December 2008 and buying Google AdWords to help people find it. The first iteration didn’t really take, but none of them gave up on it, either. Lee and Parikh decided to relinquish their chance at a summer internship. “For Hansoo, giving up an internship was a no-brainer,” remembers Parikh. “For me, I at least had a safety net back at Deloitte. The worst thing that could happen is we don’t pursue Magoosh, but I get this amazing experience to work on a company and I could always go back to Deloitte.”

The failure of the product’s early iteration got them thinking. “Between January and May of 2009, when we realized that the idea of user-based test prep wasn’t really working, we started researching why it wasn’t working,” says Parikh. “We surveyed a lot of our classmates who had taken the GMAT in the past few years. That’s when we realized that what people want are credible experts who know the test. That’s where they want to get their explanations.”

They created mockups of the product, put them in PowerPoint, and asked classmates to come and click through them as if the slides were a website. “As we got feedback,” says Parikh, “we would move the boxes around and change the language and have them click again. We kept doing this until we got to a point where people said, ‘This makes sense. I would sign up for that.’ That is when we decided to build it.” They contracted with a GMAT tutor in Vancouver to supply instructional videos on their site.

So during those summer months, they poured themselves into building the new product. Shenoy returned to India to work on it from there. With Pour-Moezzi, who chose to take an internship at Mozilla, Lee rented a place on Arch St. in Berkeley. It quickly became the first official Magoosh headquarters. They worked in the basement or on the back patio every day, engrossed in the build that was informed by a Workshop for Startups taught the previous semester by Professor David Charron.

Lee and Parikh started to click. “Hansoo and I had a really good rhythm,” says Parikh.” It was easy to communicate. We developed a close bond. The one thing Hansoo and I had that was truly special was that we were both completely committed to Magoosh.”

Out of that shared interest came a deep and profound friendship, even a dependence. “It was well beyond a business thing,” says Parikh. “We spent a lot of time together in social settings. We drank together. We ate together.” They would typically saunter over to Cesar, a tapas bar in North Berkeley where Lee would swill scotch and Parikh would down Imperial Stout. They’d block out the date on a calendar every two weeks on Thursday nights.

By July, they had an MVP — a minimal viable product. “It’s the minimum you could put out that might show value to customers,” adds Parikh. “The first time we put it out it was one question, one video explanation, and a box for people to enter their email address. It was a quant question. And then we just started building the site in front of people’s eyes. We added a question and another question and then 10 questions. We kept improving the product to turn on payment in late August or early September of 2009. That was when we had our first paying customer. That was a big day because we had finally built something that someone was willing to pay for. We charged $29 a month.”

By the time their second year of MBA studies began, they were feeling pretty good. The big challenge, however, was whether they could grow the business to pursue it full-time after graduation in May 2010. “At some point, you start getting less excited about each incremental sale and start thinking about how is this going to sustain the business?” Parikh recalls worrying. “How are we going to pay ourselves, cover expenses, and scale the business? It was tough to make the decision to pursue the startup. But Hansoo was definitely a driving force. ‘Let’s do it,’ he said. ‘We’ll regret it if we don’t.’”

Lee and Parikh decided to move forward. Pour-Moezzi ultimately chose to take a job with Microsoft when he got his MBA. Shenoy, already in India, left the business when it became harder to remain a partner remotely from another country.

The close bond Lee and Parikh formed during those summer months revealed major personality differences between the two and a number of constructive disagreements. “He was more fearless in the sense that he was willing to put himself out there. He wanted to go and meet as many people as he could and tell the world what we were working on. I was a little more reserved and practical. I was okay with telling customers about it, but when it came to investors I said, ‘Let’s not really bother with them. Let’s really nail it.’ But he had this confidence that was amazing. He was charismatic and he had this vision of where we could take the company.

“When I couldn’t think of a way to execute on something, I would sometimes assume it just wasn’t possible. For Hansoo, nothing was impossible. He was that driving force. He would say, ‘We could do this. And my job was to ask, ‘Okay, how do we get there?’ He stretched me, and then I actually helped us move the ball forward.”

Their biggest dispute occurred shortly after they graduated and were working full time on the business in the fall of 2010. Up until then, they had scrounged together about $70,000 for their business, having won $10,000 in an Intel-UC-Berkeley contest and $50,000 from Northbridge Venture Partners. But now Lee felt strongly that they needed to raise significantly more money from investors to grow the company. Parikh preferred to bootstrap their business. The disagreement was so profound that at one point Parikh suggested that he would be willing to leave the business altogether.

“Those were tough discussions,” recalls Parikh. “He felt that if we raised funding, we would be able to really make a difference: to grow Magoosh much bigger, to reach more people, to serve test prep to a lot of people who don’t have access to it today. The potential was so much greater. For me, it was more of the practical side. If we raise funding, we’re going to have to grow big, and at the time, I thought we would have to give up some equity and control.”

It was during a lengthy three-hour walk around the Berkeley campus that Lee tried to convince his friend to go along with a plan to raise $750,000. “At one point, I said, ‘You know, if you really believe in this, maybe I shouldn’t continue on in the company because maybe this is not what I want. It’s what you want.’ That was not an option for him. He said, ‘No we are doing this together, and I’m going to convince you.’And he did.”

By April 2011, Lee was able to raise half a million dollars. They used the money to build a team, market their product, pay each other modest salaries, and get a real office. The GMAT prep product began to take off, and then they began focusing on the GRE, which was about to change in August 2011. Magoosh got its new GRE product out the door a month before the launch of the new test. In November, Lee was on Fox Business to promote Magoosh’s new SAT prep service. He looked his usual charismatic and promotional self, talking up the benefits of offering test prep for free to high school students who otherwise might not be able to access those services.

Little more than a month later, Parikh would get the email from his friend while in a car on his way to dinner with his wife’s family. “I saw it and I didn’t say anything,” he remembers. “As we were getting out of the car, I told my wife.”

There would be a flurry of emails over the next few days, including Lee’s belief that his prognosis was pretty good. When the diagnosis was made on December 21, no one knew how lethal the disease would become. Two days before Christmas, Lee checked into UCSF Medical Center for a lymph node biopsy. Genetic tests suggested that his cancer could be treated with a drug called Tarceva, a more targeted and less toxic treatment.

Parikh would slowly assume more and more of Lee’s duties as chief executive officer. Every week, he would walk to Lee’s nearby apartment, and the two would stroll through Berkeley. The company hadn’t hit its stride. It was making some money, but not enough to pay everyone’s salary. So there was much to discuss.

“We had thought about raising a true Series A round in the millions, but with him being out, that would have been exceptionally hard because he was the face of Magoosh. I had relationships with investors, but not to the degree he did. But those walks energized him because instead of thinking about … his prognosis, he began to think about Magoosh and the progress of the company.”

On February 19, good news arrived. The results of his first scan — after taking Tarceva for over a month and undergoing two weeks of targeted radiation — were encouraging. It showed significant shrinkage of the tumor in his lung.

On March 10, however, Lee was rushed to the emergency room when his left lung stopped working. He had to have an emergency broncosopy to restore breathing into his left lung. “As things got worse for him, we started doing monthly phone calls, and then he moved to San Francisco to be closer to the hospital,” remembers Parikh.

By mid-April, his doctors assigned him to a more traditional regimen of chemo in addition to the Tarceva. Two months later, after a third round of chemotherapy, Lee wrote on his Facebook page that the treatment had “tested me physically, mentally and emotionally more than anything I’ve ever encountered…. The constant reminders of my disease are difficult to avoid. Bring a vigilant patient versus being all consumed by my disease is a balancing act that is taxing on the psyche.”

Increasingly, Parikh found himself alone. “At first, it was hard,” he says. “We always talked about how he and I had a good tension. Knowing that he wasn’t around, I had to keep myself in check. He knew it was a bit of a challenge for me. He would talk to me about it and tried to share his optimism and almost infect me with his optimism.”

Parikh led Magoosh to a cash flow positive state by May 2012 and raised $250,000 of additional funding on his own. “At that point, I started to gain a lot of confidence that we can do something special here,” says Parikh, whose only contact with his partner became an occasional email exchange.

In July, Lee posted a photo of himself propped up with pillows in a hospital bed. He was bare-chested in the photo, his green hospital gown pulled down to his waist. There was an oxygen tube in his nose and his legs were wrapped in white bandages. A month later, on August 8, Lee had completed his fifth chemo cycle, an eight-hour procedure at UCSF. He was taking 20 pills a day just to combat the side effects of the chemo.

Then, nothing. Lee fell silent. It was less than eight months since his diagnosis. But there were no more Facebook posts, no more emails. “I remember thinking I hadn’t heard from him in awhile,” says Parikh. “I started getting nervous but didn’t want to. I would email periodically and say, ‘Hey, I’m thinking of you. Hope things are getting better.’ He didn’t need to respond because I didn’t want him to feel any obligation.”

The Christmas holiday passed, and on Jan. 30, while at a dinner with the Magoosh team, Parikh received an email from Lee saying he was returning from the hospital and that things were looking better. The Magoosh team filmed a celebratory video for Lee’s 35th birthday on February 21 and posted it on Facebook. But Lee fell too ill to ever acknowledge it.

In Parikh’s last conversation with Lee, two weeks before he died on March 4, 2013, Parikh was on the phone for a full hour. “He sounded very coherent. He asked me how the team was doing. It was a very good, positive conservation. He told me two things: He wanted to make sure I would stay focused on the right aspects of the business, and he wanted me not to think too small. I never expected anything to happen over the next two weeks.”

After Lee’s death, Parikh would work closely with Lee’s fiancée, Wendy Lim, and Pour-Moezzi, to create the Hansoo Lee fellowship to honor their friend. The fellowship provides a stipend and mentorship to help Berkeley-Haas MBA students pursue entrepreneurial ventures full-time instead of pursuing an internship — just as Lee and Parikh did during the summer of 2009.

Magoosh continues to thrive under Parikh. There are now more employees at Magoosh who never met Lee than those who did. The company remains cash flow positive and has grown from a team of five to 13 full-time staffers, and it is making a big dent in the GRE space and starting to have a bigger impact in the GMAT prep world. The platform has more than 200 lesson videos and over 1,000 explanation videos, one for every test question. Magoosh boasts customers from more than 150 countries, with 70% of users based in the U.S.

What remains of Lee are the memories and a legacy carried out by a friend. “I miss him every day,” says Parikh. “I think about what he would say to me personally. I can see his mannerisms and sometimes hear his voice. There are some things he said that stick with me and I use them as fuel to just continue growing the business. I knew that what he wanted for me was to push forward. It didn’t feel like there was another option, really. Hopefully, he is looking down and saying, ‘This is what I wanted.’”

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