A Product Market Fit Show | Startup Podcast for Founders
00:08:24 · Pablo Srugo, Dan Novaes
[00:08:24] S1: You had like no cost. [00:08:25] S0: Yeah, pretty much no cost because it was all organic. So one day we were like, I think we were trying to apply to Y Combinator for another idea, to be honest, because it basically, in my mind, I was like, this is not a sustainable business because I had gotten a cease and desist from Facebook that was like, hey, we're going to sue you because you're, you're violating our terms because we did have to use their API. And so it was kind of like the situation where it's like this catch 22, where I was like, okay, how do I do this without their API? You could use the web API, but you couldn't use that, but then they would block that. And it was game of cat and mouse, right? Eventually the app was taken down. It was out there. We made a good amount of money on it, but it was something that wasn't one of these sustainable, like long-term businesses. And so we kind of went into this idea of like running other types of apps and just using that same type of methodology. But that app started everything, right? And we've been working together for 14 years, had like little kind of micro hits along the way. Ultimately until we started Mode almost was like seven years later. It's the first time we generated revenue with Mode. But yeah, it's like basically the startup that never died, you know, and it was a journey, but that was definitely our first. That's like when I knew true product market fit.
00:09:28 · Pablo Srugo, Dan Novaes
[00:09:28] S1: I'm curious, like those people that invested, like the investors, they're part of this company as well, or those are, were those like different entities along the way? [00:09:35] S0: Till this day, my board is, and we have independents, but I have one investor board member, and it's the same investor that backed us 14 years ago. [00:09:44] S1: The mind of a growth hacker or a growth marketer, whatever you want to like, it's just so different, right? It just like goes, and we'll talk about Mode and what you do, like, but it's so at the essence of, it's like Instagram, you know, like people want likes, people want followers, just get them likes, get them followers, and then you just put it on the app store, and it worked. I'm not saying if you did that, it will work every single time. There's probably some serendipity that goes into it, but it's like, how do you just get at the thing that people really want, and not, you know, the stuff around it? Like, we'll help you make your picture nicer. We'll help you craft this caption. That doesn't necessarily get me likes, but if I could pay somebody to put likes, like, I'm guaranteeing that you'll get what you want.
00:10:21 · Dan Novaes
[00:10:21] S0: People make decisions with Ocean, right? We actually recently had like Nikita Bier as like an advisor for, you know, to help us with one of our apps, and he was telling a story, like in this other podcast I was listening to, and he asked him about it, but before he created, I can't remember which one was first, if it was Gas or TBH, but whichever one was first, he was like, there was this app called like Saraha or something. It was all in Arabic. I don't know if you remember this, but like I would just peruse the app stores and see what was trending, and I remember him explaining this at the time, and he has seen this like app called Saraha or something, and it was like all in Arabic, and it was the number one highest downloaded app in the entire app store, right? And that's pretty wild if you think about it, like we're talking about ahead of Instagram, Facebook, Snapchat, all this stuff. He basically was like, he understood the viral loop of it, and if this app, which is in Arabic, it's not even in English, is the number one app in the entire store in the United States, there was clearly a product market fit here. So then he was like, hey, I'm going to make this for teenagers, and you know, he crushed it and sold the first one to Facebook and then rebuilt the same app again a few years later and then sold it to Discord, and obviously probably one of the best product growth people in the world. So I remember I had a similar kind of way of thinking is like I would look at what was trending on App Store, and at the time, it was like these like hashtag apps because people would put all these hashtags so that you could get in the feed, and essentially that's how we came up with the idea of Instaliker, which was like people want Instagram likes. They will do whatever it takes to get Instagram likes, and they have no idea how to get it because people like, I don't know back then, but like I remember people asking, yo, I just posted on Instagram, like will you like the photo? Like people were saying things like that, and I was like, the fact that you have to say that, which is embarrassing if someone said that today, it's wild, right? And so clearly there's a market there. And so anyways, that is the first time I've ever launched something, and there's been a few times in my life where I feel, where you could feel the product market fit.
00:12:04 · Dan Novaes, Pablo Srugo
Sometimes you think it's going to hit product market fit, you're for sure, and then it doesn't, and then you're like, [00:12:10] S1: sure. But I would assume, not having had an experience like that, but having talked to a lot of people, I've had like, once you have an experience that's that binary, you'll never settle for anything else. Like if you launch something and you don't get that, I'm not saying day one, maybe you tweak some things, but I'm curious, do you just shut it down like pretty quickly? You're like, that's the bar. I mean, if, why would I push a boulder up a hill if I know what true PMF looks like?
00:12:31 · Dan Novaes
[00:12:31] S0: I think that's a great question. I think that there's like, it's actually probably been probably one of the questions I've asked myself the most. I think there's levels to it. Actually, that's the best way I can describe it, right? Like that was like insane and it's so much velocity that everything's breaking and you're just trying to fix it and like that happens sometimes. But the problem on the other end is that sometimes these things are short-lived and that was my problem, right? Like that app was like, great, we probably could have made tens of millions of dollars instead of just single digit millions of dollars. But it did set a foundation to a bunch of other stuff. But I think that's the big difference of like a Telegram or a Facebook or something. I mean, that type of product market fit where it's self-sustaining forever. Product market fit is possible and there's many good million dollar apps out there, multi-million dollar apps, even like $10 million apps. They're kind of stuck at some point in time. Like, and I think there's aspects of even like when I think about our businesses and the apps that we buy, like I had this issue with our app, right? Because the Mode Earn app, basically, you know, paying people on their phone, it works really great. But at some point in time, the cost of user acquisition, the payback period goes too far into the future where the unit economics no longer makes sense for the core business. So you either have to develop really great channel partners that can distribute that product or secondly, be willing to basically grow at all costs. And that's, sometimes works. Like you look at Uber, look at Airbnb and stuff, but sometimes it doesn't work, right? And look at the companies that Benny Spoons is going out and buying right now, like Airtable or something like that. And so, I think like, you can build a great business, but there are limitations to a lot of businesses. And I think that that's actually kind of what actually got us into this business model, which is like, hey, there's a lot of product market fit out there. Effectively, the products that we're buying were outsourcing product market fit. There's no incentive structure. People want these apps. If you add an incentive structure, you can put like gas on the, on something that's already working. And then you can grow it to some degree, right?
00:14:23 · Dan Novaes
Maybe we can't grow it like 5x, but if you can grow it to some degree and extract more value, that's great. And we're excited about that. But yeah, I think that that's like a constant thing. Like, you know, it's rare though that you see that. I think the next time we saw that was for our crowd fund is where we saw product market fit and you just know, like you feel it and it happens and then you can dial it in and iterate. But it's, I think every founder should ask themselves, is this a self-sustainable thing that's going to be around forever? Or is this one of these like, take as much as you can and then invest in it into something else, which is also a problem. That was our other problem of why we only made a few million dollars as opposed to tens of millions of dollars. Because in my mind, I was having that constant battle internally, which is like, hey, this isn't sustainable and I need to find something else that is. But then I wouldn't focus on the thing that actually was making all that cash and I was focusing on the thing that, you know, maybe would make way more, but I wasn't proven. And we had a lot of flops. And so if I can go back, I probably would have like, tried to write it out to the absolute max degree that I possibly could. Because there are some things that we could have done, I think, to have the longevity of it a bit further and then use those funds accordingly, you know, at that size. So anyway, so that was a very long-winded answer, but it kind of gives you context of like the way we think about it.