The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:55:31 · Luke Harries
[00:55:31] S1: I think people largely think about retention for consumer and pros team as wrong. So for enterprise, it's very clear, which is you sign one contract, say you sign a large enterprise, hypothetically Slack, and you land them one seat and then you expand, and then you can look through and be like, oh, our NRR after one year is we're now on 150% NRR. Great. That contract's grown. If you think about the way it's actually grown underneath, it's like seat expansion within Slack. I'm sure lots of those individuals have churned. On an individual user, they're probably not growing that individual user's revenue more than a 100% instead of you're growing within that account base. And I think when you look at consumer and prosumer, yes, for that individual user, you may only be on 87 revenue retention. But what then happens is you build a product on Lovable, you then share it with a bunch of your friends, and for more people sign up to Lovable. And so when you take into account the natural virality rates, I think your overall NRR of that one account you've grown may actually be a lot higher. You should still look at the individual, like, seat retention. I think it's fine to have it below the 100% on the individual level. And then when you zoom out and taking into account the organic growth, which comes because of it, that you do want to be over a 100%.
00:56:50 · Harry Stebbings, Luke Harries
[00:56:50] S0: You know what's nuts is actually the fact that the revenues are growing so fast by the time the rounds are done. Yes. I mean, when we did Lovable, I think it trebled its revenue by the time the round had completed. [00:57:01] S1: And I [00:57:01] S0: was like, I would wanna retrade on price. Like, it was actually only a 10 x revenue multiple when we did it. Yeah. Yeah. Fucking nuts. [00:57:08] S1: Yeah. We we both invested in Lovable. And at the end of q one on ElevenLabs, we did very well. We had, like, our best quarter ever. We had more enterprise using it. We had more consumers, more prosumers. I was, like, tapping myself on the back, you know, growth team. I was like, we did pretty well. And then we got the, email from Lovable with their latest results. I was like, okay. We need to up our game a bit. [00:57:28] S0: Back to what... No one leaves the office. No one leaves the... Don't let Matti see this email. Don't let Matti see this email. What do you actually think happens there? Does Lovable become a $10,000,000,000 company and change the way that we create websites? Does it do Squarespace, Wix, you know, adopt similar process? What happens?
00:57:28 · Harry Stebbings, Luke Harries
[00:57:28] S0: Back to what... No one leaves the office. No one leaves the... Don't let Matti see this email. Don't let Matti see this email. What do you actually think happens there? Does Lovable become a $10,000,000,000 company and change the way that we create websites? Does it do Squarespace, Wix, you know, adopt similar process? What happens? [00:57:47] S1: I think there's a few ways they could go. Overall, though, I'm just very bullish. I don't see a reason that the level of intelligence in these AI models will slow down. And so given that it will keep rising, I think you're going to see more and more engineering. We're already at, say, 60% of all our code being AI generated. Then you have, like, the broader life cycle of all the testing, deployment infrastructure. There's no reason why any of that couldn't be all done by AI as well. And so I think Lovable's in a fantastic place to own that core stack. The tricky bit, I think, at the start is how do you make it super secure? How do you get enterprises to build it? How do you do full apps? And I think Replit is kind of dead at the wheel at the moment. I don't hear the recent things they've been launching, and so I could imagine that Lovable going in that direction. You're cringing. [00:58:35] S0: No. I... I'm with you totally. I remember when they were the hottest company. [00:58:38] S1: Yes. Yeah. [00:58:39] S0: Actually, I haven't I haven't heard anything.
00:58:39 · Harry Stebbings, Luke Harries
[00:58:39] S0: Actually, I haven't I haven't heard anything. [00:58:41] S1: Yeah. It's tricky. It's tricky. But I could imagine that, you know, Lovable, you sell to a large enterprise, you get behind their firewall, and you just keep as an internal app, then you can, like, massively expand within that with far less risk. Maybe make it read only seats as the primary use case, but Anton's super smart. I'm sure he'll work out. [00:58:58] S0: I totally agree. I love Lovable, and I think they're fantastic. Do you enjoy angel investing? [00:59:03] S1: It's fun. I missed ElevenLabs, so I'm not sure how good I am. We had Runna, the running app, and they just did fantastically well. That's my first exit. They just sold to Strava. Yeah. It's a Incredible team. So I just find it as a really fun way to partner with people who I really back. [00:59:20] S0: Dude, I wanna dive into a quick fire. So I say a short statement. You give me your immediate thoughts. Does that sound okay? Great. Number one, what's the most common or expensive mistake that you see early founders making?
00:59:20 · Harry Stebbings, Luke Harries
[00:59:20] S0: Dude, I wanna dive into a quick fire. So I say a short statement. You give me your immediate thoughts. Does that sound okay? Great. Number one, what's the most common or expensive mistake that you see early founders making? [00:59:31] S1: The biggest mistake I see early founders making, particularly for b to b, is doing paid marketing too early. Because if you don't have PMF yet, you're not going to get paid marketing working, and you're gonna spend all your time and all your engineering time optimizing funnels and conversion and creating these different creative and ads and caring about your rankings and your your meta metrics. None of that actually matters apart from just build an incredible product. And I think the core loop of do incredible launches and build an incredible product is enough for any b to b or prosumer product to get that initial product market fit, and then you can start testing out different paid channels. The caveat though I'd say is if you are a consumer, distribution... With b to b, you basically know if you build an exceptional product, you can staff the sales team to it, and they'd be able to scale it. So distribution is not as much of a risk. With consumer, it's very different where distribution is a key part. You could create an incredible product, but if no one hears about it, then you can't scale it. And so instead, you may want to consider performance marketing earlier, but, I would try and lead to other channels which also increase brand.
00:59:31 · Luke Harries, Harry Stebbings
[00:59:31] S1: The biggest mistake I see early founders making, particularly for b to b, is doing paid marketing too early. Because if you don't have PMF yet, you're not going to get paid marketing working, and you're gonna spend all your time and all your engineering time optimizing funnels and conversion and creating these different creative and ads and caring about your rankings and your your meta metrics. None of that actually matters apart from just build an incredible product. And I think the core loop of do incredible launches and build an incredible product is enough for any b to b or prosumer product to get that initial product market fit, and then you can start testing out different paid channels. The caveat though I'd say is if you are a consumer, distribution... With b to b, you basically know if you build an exceptional product, you can staff the sales team to it, and they'd be able to scale it. So distribution is not as much of a risk. With consumer, it's very different where distribution is a key part. You could create an incredible product, but if no one hears about it, then you can't scale it. And so instead, you may want to consider performance marketing earlier, but, I would try and lead to other channels which also increase brand. [01:00:38] S0: I totally agree with you. The one thing I find paid really helpful for is if you're strategic around how you use it for testing. And so if you use it for testing on different messaging. [01:00:46] S1: I've never seen that work. [01:00:49] S0: Have you? I mean, it...