A Product Market Fit Show | Startup Podcast for Founders
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?
00:22:49 · Pablo Srugo, Dan Novaes
[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? [00:22:56] S0: I think 20 would have been difficult, but I definitely could have done 50. Right. 40 to 50. But I was, you see, I drank the Kool-Aid myself. You know what I mean? So it's kind of like, at that time, I'm like, oh, we're going to raise a round from the vision fund and this and that. Like, you know, and that's what you're focused on. [00:23:12] S1: In hindsight, it all looks like, obviously, it's not going to work. Like, you're this kind of, like, payer and this. But when you're in that, in the middle of it, and shit's going up to the roof and you're talking about vision fund, what is the vision that you're, like, what is it that you imagine yourself becoming?
00:23:26 · Dan Novaes, Pablo Srugo
[00:23:26] S0: So basically, the thesis was like, look, we're the closest company to make the smartphone career better. At the time, we had launched our earned phone. We got it into Walmart. We got it into Best Buy, Target, all these places. And we're like, look, you know, people are spending, and this is, this is actually true, like, even till this day, it's like, if we're spending 40 to 60 hours on their phone every week, right? If you sleep eight hours a day, there are only 112 waking hours left. If you were spending one third to one half of your waking life on this device, where is the money you're going to? It's going to the things that you almost bought, the ads, like, you know, that's why these companies are worth trillions of dollars. Thesis was, hey, of the 7 billion smartphones out there, the largest percentage are actually for more budget conscious consumers that actually need a little bit of extra money. And this phone could actually be free at this point in time. If you take everything someone does and share that revenue back with them, you can make this like a piece of gig income, right, of some sort. And so that was the idea is that we are going to make phones for your better and subsidize that entire cost. It's the eighth biggest expense in the household is the phone plan. [00:24:26] S1: it's not just the device, like, you're talking about the monthly plan?