Lenny's Podcast: Product | Career | Growth
00:07:26 · Lenny Rachitsky, Elena Verna
[00:07:26] S0: Okay. Absurd. I think people are getting used to these insane numbers. And not long ago, it was like, okay, if you had a million ARR in a year, you're doing pretty well. [00:07:36] S1: Yeah. Yeah. I think it's still you're doing pretty well if you have a million ARR in one year. This is this is one of the once in a lifetime type of companies and the category, the way that it's evolving. So I want to make sure that people don't all sunset this as a benchmark for success because it should never be. In some categories, it might be even faster as we continue evolving technology. But I don't think that it's realistic to expect it out of your business that you're starting right now. [00:08:08] S0: That is such an important point you're making there. It's so discouraging to founders to hear these stories of, okay, 200,000,000 nuts. And again, this is ARR. There's a lot of companies, especially in the data labeling space, I've had them all on the podcast, that are very fast growing, but they're not recurring revenue. There's also, they pay out their people to do this data labeling. So the revenue numbers there don't really equate. Recurring $200,000,000 a year is absurd. [00:08:36] S1: Yeah, it is absurd. I really wanna make sure that people understand as we go through this episode as to why it's happening, because part of it is unlovable, part of it is just in the market and how it's moving. So when you're setting yourself as a benchmark, so you know which benchmarks you actually to use and whether Lovable is the benchmark that you should be using.
00:08:36 · Elena Verna, Lenny Rachitsky
[00:08:36] S1: Yeah, it is absurd. I really wanna make sure that people understand as we go through this episode as to why it's happening, because part of it is unlovable, part of it is just in the market and how it's moving. So when you're setting yourself as a benchmark, so you know which benchmarks you actually to use and whether Lovable is the benchmark that you should be using. [00:08:56] S0: Cool. I'm gonna get into that next. Last question, just I wanna see what you can share here. A lot of people look at these numbers. A lot of people are very skeptical. These are lasting, durable numbers. Like, who are these people? How is there $200,000,000 being spent on Lovable? Anything you can have about just, like, give people confidence this is real. This is gonna last. This is a a really durable business.
00:09:18 · Elena Verna
[00:09:18] S1: Well, I saw Stripe receipts, so it is real as far as I'm concerned, unless Stripe dashboard is lying to us. But it is money getting deposited in our bank account. But let's talk about who's actually contributing to that number. We do have a really large use case of people starting their own companies on Lovable. So we call it a founder use case where somebody that is non technical that has never been able to code or create a piece of software is now able to come in and actually build an app completely from scratch. And some of them are already monetizing it, some of it just using it for lead gen, for other services or some physical goods, for example, that they're selling. Some of them are just still building. And we monetize on the act of building. So that progression of like building up to your product market fit takes quite a bit of time. And even with Lovable, we're so much more efficient and effective compared to hiring an engineer in terms of the price, but it still takes time. So we have a lot of founders, whether it's B2C, whether there's B2B or consumer products, business products, e commerce, whatever it is. But on the other side, we have a lot of employees within companies using Lovable as well, where they're building internal tools or they're building prototypes, they're building landing pages. So that is another use case that is very relevant and quite efficient for us. But then there is a hype and discovery that is happening as well. Because when I think about software, I think about it. I talked to John Cutler actually, and he gave me this framework that is like completely stuck in my mind of software always goes through capabilities stage first, like what is possible to actually create with this? Then it needs to transition into value of how is it that am I going to get value out of this? And then you can start thinking about scaling it, of which aspects of my life and my work that can actually go in. And we're right now very much in the capability stage with vibe coding because everybody's just exploring what can I do? And the beautiful thing here is that what you can do changes every month to three months. So you constantly need to come back and you need to see what has changed. So a lot of people use it for personal reasons. I build myself tutoring apps for my kid.
00:11:33 · Elena Verna, Lenny Rachitsky
So he has to answer questions in order to get some screen time accumulated for him. I build my own portfolio. I see people doing wonderful things. My favorite story that I always say, there's this man that created a proposal on Lovable. So his fiancee had to answer questions and like she had to complete this game. And then at the end, was like this big reveal and he proposed to her. But people just unlock the most creative things that they build on Lovable. And that's where the revenue is coming from. The one piece that is working very well for us in terms of how monetization model is set up and how it interjects with your activation moment, which we can also cover. But that is what's driving that both conversion and retention rates. [00:12:17] S0: Let me ask you one question that's on people's minds. Imagine as you talk about this, just what is what is retention look like?
00:12:22 · Elena Verna
[00:12:22] S1: Yeah. So retention, really, I look at it in two ways. Retention that it comes as a subscriber retention. So how much mini pay subscribers do we get and how many of them are we capable of renewing? There's also very important aspect of it is how many of them can we expand? Because if you can get positive or above a 100% net dollar retention, which is super important metric for investors. If you don't know about net dollar retention, please read it up. That's like a superpower to get bigger multiple if you can show NDR that is over 100. And then there's actual engagement retention as well, because that is the leading indicator for how your paid retention is going to look like. For paid retention, I know there is so much on the market of, oh, this is a high product and it just it's a leaky bucket and it has really high churn rates. Although I'm not I shouldn't share it's not public numbers for us to share actual retention. However, what I can say it's on par with benchmarks of other B2B SaaS products that I've ever worked at. And I worked with Miro, Dropbox, SurveyMonkey, Netlify, Amplitude and others. So are we absolutely crushing with paid retention? No. Are we where most of the other companies are? Yes. Our NDR is quite good because when people bill, they want to buy more credits to bill. So we're seeing really good revenue retention, but we're honestly more focused right now on engagement retention than even paid retention because our North Star is just to get as much usage as possible, and we will fix and tune our monetization model afterwards. So engagement retention, I would say, is by far bigger priority focus for us at the moment.
00:14:04 · Lenny Rachitsky, Elena Verna
[00:14:04] S0: That is incredibly interesting and optimistic to hear because of the growth rate. Rarely is growth rate this high and retention is on par with great companies. [00:14:15] S1: Yeah. And I'll just say too, which is a little bit maybe counterintuitive to... Would be to a lot of companies. We don't optimize for revenue at all. In fact, internally, we have a lot of discussions about how can we give more products away? How can we reduce our revenue growth rate by just getting more paid subscribers, more users using Lovable to just get bigger share of the market. So our revenue is an outcome of us just trying to get more people through the door, not us trying to optimize for revenue per user or to get them to monetize at the higher rate. So there's like a very interesting path here where by actually focusing on the inputs like you should, it translates to a good output, but we don't look at that output as something that we're trying to grow. [00:15:02] S0: Let's talk about growth. Let's talk about what you've learned about growth in this space. You had this post online where you said that you've had to throw out most of your growth playbook. This is a huge deal. You've led growth a lot of really successful companies. Lovable is growing incredibly well. This tells me there's a lot we can learn from what you've seen. So tell us what you're seeing, what's still working, what's not working, what you've learned about what it takes to drive growth at a company like Lovable.