TERP launches an upgrade program targeting publishers. A limited number of publishers are getting the opportunity to upgrade their learning materials to abooks. Access to quality content has proven to be an essential factor for educators and training programs using the TERP Web Service.
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The term "value inflection points" is taken from Bruce Cleveland's book "Transversing the traction gap" and refers to milestones which change the valuation of tech companies. Over the last year, we have focused on two such milestones: To complete post chasm MVP (Minimum Viable Product) and build repeatable processes in sales and marketing to achieve Minimum Viable Repeatability (MVR). We expect both of them to be value inflection points as the first one gives us access to the majority market, and the latter sets up our organization for scaling.
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TERP experienced a sales paradox in 2020. We had a surge of new contracts combined with diminished short-term sales. The paradox was partly due to the corona pandemic, partially because we implemented a new business model, and partly because of capacity issues.
In the information to investors in May 2020, we informed about a lost semester. The lockdown in March effectively stopped all maritime education in the Philippines as they had no contingency plan. The next semester started in August/September, two-three months later than planned, which resulted in only having revenue from one semester in 2020.
Changing to a subscription business model in the second half of 2020 reduced the short-term sales even further. Earlier, we sold textbooks at the beginning of each semester. Now we have recurring revenue every month. A third factor was the capacity of the Customer Success Team. We had neither personnel nor systems to deal with the surge in new contracts. We temporarily stopped all active sales and focused on building our Customer Success Team and related functional units.
The presents of an efficient Customer Success Team has proven to be critical for scaling TERP. They ensure smooth implementation, so we get value out of the signed contracts. We have started to involve the Customer Success Team already in demos made for potential customers. They are also engaged in pilots, which now is much shorter than before. Before, we typically piloted a whole semester. Now we developed a pilot concept with a 30 days timeline.
As a result of these adjustments, we discover the implementation challenges before the contract is signed. The customer already knows their contact person in the Customer Success Team, and the implementation goes smoother. It is not perfect yet, but we are improving our working processes every week. The backlog of contracts not yet under implementation is almost empty. What we focus on now is to strengthen our playbook gradually through a series of systematic experiments. By identifying the best practice for the different parts of the operations and making it a part of our documented playbook, we can hire new personnel with a predictable outcome. Then we can gradually scale the Customer Success Team as our sales grow.
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TERP integrates augmented reality (AR) in abooks when delivering new technology to the ambulance service at Innlandet Hospital Trust (Sykehuset Innlandet) in Norway. The solution will support evidence-based practice. Innovation Norway contributes 2,2 million NOK in grants to the project.
The corona pandemic has created a great demand for distance learning solutions. TERP's primary market so far has been maritime education in Southeast Asia, where the company has provided adaptive textbooks. A key element in this education is practical exercises on a simulator, which conventional distance learning solutions can not replace. The solution TERP has come up with is to integrate augmented reality into the textbooks to run virtual simulations at home on the living room table.
When developing new technology, we are looking for innovative environments that are at the forefront of the use of new technology. We found this environment at Innlandet Hospital Trust. The health organization, which has 26 ambulance stations in Innlandet county, has a strong focus on evidence-based practice and has used virtual reality in employees' training for several years.
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Even though the corona pandemic represents an opportunity for TERP, we have faced some short-term challenges. We canceled all international travels on March 4th and stopped traveling domestically one week later. At the same time, we closed our offices and started working from home.
As we are a distributed organization, the shift to working from home was smooth. However, not being able to visit customers became a challenge both in terms of sales sales and implementation.
After the lockdown, the implementation of Abooks with new customers was even more challenging as the schools had no prior setup to efficiently communicate with students remotely. The lockdown also
had economic consequences as our customers had no personnel available to process our invoices. However, we have compensated
for the delayed payments by reducing costs and renegotiating the terms for our loans. Now schools and universities are re-opening.
The lockdown in March effectively stopped all maritime education
in the Philippines as they had no contingency plan. According to the signals we have received, it looks like the next semester will start in August, two months later than planned. We expect that the delay forms a
new standard where the semesters that used to begin in June and November move to August and January. If so, we will only have revenue from one semester in 2020 as we will deliver our products and services for the second semester at the beginning of 2021. On the other side, the delay will enable us to prepare more content and develop more features supporting distance learning, contributing to higher revenue next semester. Besides this, the corona situation provides us with a surge of new customers. It is too early to conclude if these factors will compensate for the “lost” semester in 2020, but the issue is technical. The overall picture is that the company will be in a much better position despite that the revenue in 2020 might not be as high as previously estimated.
An immense challenge we are facing is the software development capacity. To satisfy the early majority long-term, we have to develop additional features to build a whole product. We have to at least triple the development capacity to deliver according to our tech roadmap. The first step was to acquire the training app company InfoGym. We have integrated their tech team into ours, and we have a setup that allows us to build a larger and more cost-efficient development team. We make ourselves independent of consultants and expect to double the number of development hours we get out of each US dollar invested.
The acquisition of InfoGym brought us much closer to having
what the organization needs, but we might have to strengthen our organization even more. The market is moving very fast due to the current situation, and certainly much quicker than we anticipated when we completed the last funding round. It may be in both the company's and shareholders' interest to acquire additional funding to take full advantage of this unique window of opportunity.
Topics: Blended learning technology challenges Corona
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The corona situation has given us a once-in-a-lifetime opportunity to cross the chasm from the early adopters to the early majority. In other words, we have the chance to evolve from being an enticing solution for innovators to becoming a recognized standard in the mainstream market. Most technology companies never manage to cross the chasm.
It is a chasm because early adopters and the early majority are very different from each other. While early adopters are visionary innovators who test new technologies to make a potential leap and separating themselves from competitors, the early majority are pragmatic. They want proven solutions tested in the market. Preferably a solution provided by the market leader.
Crossing the chasm is not possible unless we define a small beachhead market we can dominate fast. Our beachhead market is maritime education in Southeast Asia (Philippines, Malaysia, Singapore, and Vietnam). There are 110 maritime schools and universities in this market. When we get 33 of these schools as customers, we will become the undisputed market leader with a 30 % market share. As we already have 18; we just need 15 more before we have crossed the chasm.
Besides defining a small market, the key to crossing the chasm is to develop a whole product. Our core product is the web-service enabling customers to create a-books. Along with our content, this forms our generic product. The early majority, however, expects more. They want a complete solution that is easy to implement and that fits seamlessly into their operations. We have to build that solution over the next 12 months.
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After the coronavirus outbreak in March, we created a framework to analyze the corona pandemic's consequences, defining three phases.
We observed how the need for digitalization increased in phase one. Processes that used to take months and years were settled in days. Simultaneously, everyone faced challenges as national authorities used lockdowns to get the pandemic under control.
We assumed that the drivers for digitalization would remain strong in phase two. Partly because of the measures necessary to avoid the spread of the virus until a vaccine is in place and partly because of the need to implement contingency plans in case of new waves of infection.
The last weeks have shown us that our assumptions about phase two were spot on. In many countries, authorities have started to re-open the society, including education and training, but with restrictions. On April 13th, the Philippines' authorities, which is our core market, communicated that schools had to implement measures to maintain social distancing when re-opening. That message caused an explosion of inquiries from schools, universities, and training institutions looking for a solution to implementing some degree of distance learning.
Phase one and two lead to a situation where the masses have adopted technology previously reserved for innovators. New standards on how to organize education and training will evolve during the pandemic. We will not go back to the old ways when entering phase three after we have a vaccine. The use of new technology will reveal better approaches to teaching and leaner operations, thus defining a new normal.
TERP acquires the training app company InfoGym. We know InfoGym very well as both companies are a part of the Leap tech community outside Haugesund. The transaction gives us a much more robust technical team.
The agreement makes investor Harald Mowinckel Troye one of TERP's largest shareholders. Mowinckel Troye is one of the initiators of the Tripod investor community in Bergen.
The InfoGym agreement gives us access to technology we might otherwise have had to develop ourselves. Besides, the expertise in InfoGym will provide us with more efficient technology development. The potential synergies are significant. Within a year, we expect to get twice as much development out of every dollar invested.
Topics: TERP technology InfoGym
Validè Invest has made a 2 million NOK follow-up investment in TERP, making the investment fund our largest investor. During the last year, TERP has increased the equity by 11 million NOK.
- TERP has a strong founder team, an exciting business idea, and a great growth potential, says Valide's director of investments, Johannes Løyning. - They have proven their ability through sales and market positioning in the Philippines. The company's solution can disrupt the publishing industry.
Norwegian Research Council has granted TERP 12.5 million NOK for a machine learning project. By utilizing artificial intelligence TERP will automate the adaptive features in abooks, making the technology more scalable.
Norwegian Computing Center (NCC) and the University of Stavanger (UiS) are research partners. NCC is a European powerhouse within machine learning, and UiS will contribute with expertise in pedagogics. Also, a team of neuropsychologists will contribute.
Besides the Norwegian Research Council grants, the project qualifies for Skattefunn, Tax Deduction Scheme for Companies with Research and Development Projects, increasing the total grants to 70 % of the project costs.