A Product Market Fit Show | Startup Podcast for Founders
00:17:29 · Dan Novaes, Pablo Srugo
And they're like, yes, I would focus all of my energy on earning that if we paid you to listen to music. And then that was like, oh, that's really interesting. And then so we just put like, I don't know if you remember how like Robinhood and at the time there was an app called like Mailbox back in the day. And basically it was like a friend referral system and you could get early access. So we just created a referral system that was like, sign up to get paid to play music. And if you invited people, you would get earlier access. Within two weeks, we had 300,000 people that had organically signed up for that. And that's very similar to the InstaLiker funnel, right, of just telling people. And that stuff worked really well back then. You have to change the game every time because like these referral systems break sometimes. But that's how we got into that. And then we launched that and people were using it. It was going wild, like getting tens of thousands. [00:18:16] S1: Who would be paying on the other side? Like somebody who made a song would want to play or ads? You just play ads and they would pay for that?
00:18:16 · Pablo Srugo, Dan Novaes
[00:18:16] S1: Who would be paying on the other side? Like somebody who made a song would want to play or ads? You just play ads and they would pay for that? [00:18:22] S0: Yeah, the initial model was to play ads. And then we realized it is extremely hard to make money off background usage. Music is a very difficult business in general. And so that's how we actually got into other things that people could do. I'm like, well, what if they earn a little bit with music and then they could boost it with games or they could boost it with shopping or news and stuff. And that's how we got into all these other verticals. And then we noticed like a much deeper product market fit with Android in particular. A lot more budget conscious people on Android than on iOS and the ecosystem was way more open. And so then we focused all of our energy on Android and eventually came to the realization that we were building an operating system really, you know, an earn OS and a phone. The phone eventually came off this crazy idea and we built an earn phone, an actual phone that paid you as you used it. And there was a lot of demand for that. So anyways, that was the multiple kind of iteration to kind of get to the current business model. And I can give you the ups and downs of that as well, you know, that we've learned.
00:19:16 · Pablo Srugo
[00:19:16] S1: Yeah, I'm curious. I mean, at least on the early side, I mean, at some point things just start to work and then you're more like tweaking levers and optimizing things and making things better. Getting the first 300,000 was a huge other, let's say, product market fit moment than finding out that ads for music because it makes sense. I mean, you put a player on your phone, you leave the room, like the advertiser understands that to some degree and so they're like, you know, the CPM you're going to pay, I assume that just, you know, it's just tough to make the math work. Yeah. What's the next thing that you decide, okay, music, kind of a floor, will it pay people for this thing? Like, what's that next thing?
00:19:49 · Dan Novaes, Pablo Srugo
[00:19:49] S0: Yeah, the next thing was like, it was more about, we can make a lot of, with like, games in particular and one of the, another big unlock that we had on, at the time, was actually on, something we could do on Android that we couldn't do on iOS and it was lock screen and so, if you think about your phone, the average person unlocks their phone 70 times to 80 times a day and so we were like, oh, like, you cannot do this with Apple, like, the system doesn't allow you to, I mean, there's a very hacky way to do it now but back then there was not and Android, you could basically have a lock screen music player and so we could show advertising on there as an example and then reward that habit and that was something that was like, per user at the time, those were the good old days, it was like generating like 20, 30 cents a day, like, you know, and if you think about that at a million users, it starts to really scale. [00:20:37] S1: This is an advertiser paying you to put their, let's say, logo or whatever on the lock screen of a user's phone? Yeah,
00:20:37 · Pablo Srugo, Dan Novaes
[00:20:37] S1: This is an advertiser paying you to put their, let's say, logo or whatever on the lock screen of a user's phone? Yeah, [00:20:42] S0: it could be programmatic ads, it could be, you know, because the user just cares about the music, like, they don't, it's not, it's like they're just seeing a display, I mean, think about your phone lock screen, right, so instead of it being an image, it's like, you know, there might be an advert there or something of that nature and you're getting paid for that too so that started working and gains started working really well, you know, offers started working really well, offers actually started crushing in 2021 and so, and to give you context, so first year revenue of Mode in 2019 of what ultimately became Mode at the time was called Current, right, it was a rewards app but then Current, the financial bank came out and then we had this like name thing, it was confusing so we ended up changing the name to Mode and basically, I think we did about just under $100,000 that year, about $100,000 and by 2022, we had done $25,000,000, right, so we had this like 32,481% growth in revenue over that three-year period which ultimately ranked us the number one fastest growing software company on the Deloitte Fast 500, we only lost to a Bill Gates-backed COVID vaccine company. [00:21:45] S1: I'm sure everybody looking at that list is like, what the, what is this? Like, what do you mean?
00:21:45 · Pablo Srugo, Dan Novaes
[00:21:45] S1: I'm sure everybody looking at that list is like, what the, what is this? Like, what do you mean? [00:21:49] S0: It was wild, right, and it was great for our company but here's like where things took a shift. During COVID, money became very cheap, right, and a lot of digital startups did very well. We started seeing this crazy appetite for financial services and crypto in our offers. That was a thing that allowed people to basically, hey, go download Robinhood or go download Coinbase and effectively, you'll get 10 bucks in free Bitcoin for doing that. Their VCs are throwing money hand over fist in these neobanks. Everyone's going public, money's cheap, like, whatever. And what's happening is we're getting all these crypto companies, neobanks, all this stuff, and they're advertising our services. We're sending users into their ecosystem and our revenues are skyrocketing, right, at the same time. Well, after Q1 of 2022, it was our best quarter. Like, Q1 of 2022, like, we actually, I think, did over $10 million in revenue. And then in April, [00:22:41] S1: how many people, by the way, at this point, like, what number of employees do you need for that kind of business? [00:22:46] S0: We had, like, at that time, we had about 110. [00:22:49] S1: So sizable. And did you need that? I mean, this is a question, I mean, I know you're going to server on just a tangent. Could you have done, like, 20 people? Like, is that possible?