My “maker story” began when I created the viral app Yo, which simply sends the word “Yo” to your friends. It was a journey of ups and downs, from a pretty slow start until it exploded in popularity when launched on Product Hunt, to getting hacked, and finally shutting down two years later. I learned from both successes and failures — lessons that I apply today at my new startup, Anima.
At Anima, we are bridging the gap between designers and developers. Anima lets designers create fully responsive prototypes that look and work exactly like the finished product while easing the handoff to developers by automatically translating the design into developer-friendly code.
Here are the 3 biggest lessons that I learned from Yo, that I have taken with me to Anima:
1. Avoid premature scaling of your team
I, just like many other first-time founders before me, made this classic mistake. You start acting like you have product-market fit before you actually do. As soon as you raise money, you go on to hire and expand your team more than you are really ready to. You have money and now every role brings in a new person but before you know it, you’ve burnt through all the money raised and you’ve scaled prematurely.
Before jumping into mass hiring and scaling the team, you really should burn as little money as possible. Hire just a few people that can wear many hats. Once you have product-market-fit, then you start scaling.
I realized this only after closing Yo. I looked back at where all the money went and realized it went into salaries. That’s when you start to say to yourself, "maybe it was a mistake to hire so many people so soon."
It’s hard to comprehend just how much money goes into salaries, but it’s the number one cost of a startup.
2. Charge your customers from day one
There are two types of startups, the ones where users don’t pay for the product (they are the product; for example, social media and some consumer startups). The growth of these startups is measured by active users. When they have millions of active users, they start to charge for advertisements and partnerships for revenue.
The other type of startups are those where users pay for the product, and it’s crucial to charge from day one. This keeps your startup alive by default.
Charging from day one forces you to focus on real value from the get-go. Your decision-making is pushed towards getting revenue, and this means that you no longer are dependent on raising money to run your business.
At some point, you might choose to raise money (for example, to scale faster), but you are not relying on constantly raising money, and that’s great!
For me, this really stuck out when I was working very hard trying to raise money. I said to myself, “what if I spend all of my time and effort building a product and charging customers instead of trying to raise money?” This seems obvious, but it is often overlooked.
When the music stops and nobody wants to invest anymore. That’s when you realize you don’t want to rely on investors for your business. You want to be able to run your business independently, and perhaps choose at some point, raise money.
3. Retention before growth
It’s basic instinct to go after growth first to reach as many users as possible. But often, you later find out that you have high churn and a lot of customers are leaving you. This is the leaky bucket. In the end, all of your efforts were for nothing. You brought in the users, but now they’re all leaving.
That’s why I learned to fix the leaky bucket before pouring a lot of water into it and turned my focus on retention before focusing on growth.
When Yo was launched on Product Hunt, we had sudden huge growth, but we also had a low retention rate.
Yo had a record growth of 1 million downloads in 4 days. Out of these 1 million downloads, not many stayed for a long period of time.
If there is one big lesson I learned with regards to this point it’s that launching on Product Hunt, for the most part, only happens once.
Before you launch, you better make sure that most of the users you’ll get from a big launch are going to stick around.
How I applied these lessons to Anima
1. We made sure that Anima had real value to our users by having the product-market fit in our hands before setting out to accumulate users.
2. We scaled when we were really ready to. Don’t get me wrong, in the past year our scaling has been huge, but this didn’t happen overnight and certainly not after just getting funding. We scaled when it was right and when we knew what we were selling and where Anima is heading.
3. At Anima we charged from day one. I took my lessons from Yo and together we have forced ourselves to be user-driven and Anima certainly is a product-led growth company.
4. Our focus has been, and continues to be, about happy customers. We put a lot of effort into keeping our customers and providing them with a product that they get real value from and enjoy using. In other words, we go straight to the pain point and provide a unique solution that just isn’t out there in the market.