AltSchool \USA

Synthesis uses a **three-tier freemium model** designed to maximize user acquisition (free AI tutor), convert power users to high-margin subscriptions (pods), and capture enterprise revenue (schools): **Tier 1: Synthesis Tutor (Free Forever)** — The core AI tutoring app remains free with unlimited usage for individual students. Monetization comes from (a) **optional premium features** ($9.99/month 'Synthesis Plus'): unlimited group study rooms, advanced progress analytics for parents, offline mode, and priority AI response times. Target 3-5% conversion rate from free to paid individual users. At 1M free users, this generates $30-50k MRR. (b) **Referral commissions**: when free users join a paid pod via the platform, Synthesis earns 10% of the first year's subscription ($149 × 12 months × 10% = $179 per referral). This creates a flywheel where free users recruit each other into pods. **Tier 2: Synthesis Pod ($149/month per pod)** — The high-margin SaaS product for parents/educators running learning pods (5-15 students). Includes AI curriculum planner, progress tracking, compliance templates, and access to the educator marketplace. **Unit economics**: $149/month × 12 = $1,788 annual revenue per pod. COGS ~$30/month (AI API costs for 10 students, Supabase/Vercel hosting) = 80% gross margins. CAC target is $200-300 (Facebook/Instagram ads + webinars), yielding 6-9 month payback. At 1,000 pods, this is $1.8M ARR. **Expansion revenue** comes from the educator marketplace: Synthesis takes a 15% commission on all bookings (if a pod hires a teacher for $50/hour × 10 hours/week × 40 weeks = $20k/year, Synthesis earns $3k). Target 30% of pods using the marketplace, adding $900/pod/year = $900k additional ARR at 1,000 pods. **Tier 3: Synthesis School ($8-12/student/year)** — Enterprise B2B for traditional schools (public, private, charter). Priced at $10/student/year for schools with 500+ students ($5k minimum contract). Includes teacher dashboards, gradebook integration, class-wide analytics, and white-label options. **Sales motion**: bottom-up (teachers request the tool after seeing students use it at home) + top-down (sales rep closes district contracts). Target 50 schools averaging 800 students each in Year 2 = 40,000 students × $10 = $400k ARR. Gross margins ~90% (negligible incremental AI costs at scale). Expansion revenue via **outcome-based upsells**: charge schools an additional $20-30/student/year if students improve 1+ grade levels on standardized tests (measured via pre/post assessments). This aligns incentives and creates a premium tier for high-performing schools. **Year 3+ Revenue Streams**: (1) **Curriculum Marketplace** — allow educators to sell custom lesson plans/courses on the platform (Synthesis takes 30% commission, similar to Teachable/Gumroad). Target $2-5M GMV by Year 3. (2) **API/Data Licensing** — sell anonymized learning data and the fine-tuned LLM to textbook publishers and EdTech companies ($50-100k per contract). (3) **International Expansion** — launch in ESA-friendly countries (UK, Australia, Canada) with localized curriculum. **5-Year Revenue Projection**: Year 1: $350k ARR (200 pods, 10 schools, 5k paid individuals). Year 2: $3.2M ARR (1,000 pods, 50 schools, 30k paid individuals). Year 3: $12M ARR (3,000 pods, 200 schools, 100k paid individuals, marketplace GMV). Year 4: $35M ARR (8,000 pods, 500 schools, international launch). Year 5: $80M ARR (15,000 pods, 1,200 schools, API licensing). **Target gross margins: 75-80% blended** (pods and schools are 80-90%, individual subscriptions are 60-70% due to higher support costs). This model is capital-efficient (CAC payback <9 months), defensible (data moat + network effects), and scalable (near-zero marginal cost per student). Exit comps: IXL ($1B+ valuation at ~$200M revenue, 5x multiple) or acquisition by Duolingo/Khan Academy/Google at 8-12x ARR ($640M-$960M at Year 5 revenue).