In just 4 months and 14 days since we have started charging for our product and about 13 months since our online video editor went live, we have hit an important milestone, we have hit ramen profitability.
As of mid October 2019 we are at $5000 in monthly recurring revenue, VEED now pays for two full-time founders (myself and Tim) and two part time developers (Mate and Veljko... Love you guys)
"Ramen profitable means a startup makes just enough to pay the founders' living expenses" - Bad Man PG
We have hustled pretty f****** hard to get here and learnt a LOT along the way. There were a couple of moments where we thought it was all over, like the time we ran out of money and had to get contract work, or the time when we were kicked out of our office.
Oh and time our first two developers quit working for us immediately on the same day. But through all these drastic highs and lows, we have continued to move forward and grow.
Ramen profitability is a huge milestone, but also marks the start of the next big phase of our startup journey as we are moving towards finding product market fit and starting to scale our product to thousands of monthly paid users.
In this post I am going to go through and describe our journey as to how we got to where we are right now and document the main milestones and lessons we have learnt along the way. As bliss as our progress might have seemed from the outside, it has been a real grind with many ups, downs, failures and fuckups. So here goes...
The Backstory - $0 MRR
To start, I think its important to set the scene. In 2014 online video was hailed as the new BIG thing, everyone was banging on about it. We both could see a cultural shift accelerating. We were watching more YouTube than TV, we were flicking through Instagram more than magazines and we were not alone, all our friends were doing that too. Quality user generated content was winning in a big way.
The fact that you can shoot high quality videos with a smartphone and distribute content globally free of charge was changing how we were consuming media and in its wake creating a new generation of celebrities, influencers and publishers. In turn inspiring even more to create. Brands started to take note and the old model of creating two blockbuster TV commercials a year to connect with your audience started to become less relevant.
At this point, I realised that most video editing software was designed for making films and TV shows, not short snappy social media content. After searching, I found no editor that was powerful, yet simple enough, that would allow you to construct a narrative or tell a story. We thought there is definitely a gap in the market, but we were not sure what it was just yet.
We thought we were a great team to solve this problem. I was a recent grad from Central Saint Martins, I had directed music videos for Sony music, had experience working in advertising and branding agencies and a bunch of startups too.
Tim worked on a research project at King's College London and built an automated video editing platform that used AI and Natural Language Processing to summarise news articles and turn them into short, bite-sized informational videos (the project was called VEED)
Tim and I did some research and really liked how Giphy’s gif maker worked and thought it would be super cool to make something similar for video editing. I started designing, Tim started coding.
When we messed - $0 MRR
After Tim graduated from King's College London, we then applied to his university accelerator and got a place. We had the designs, an MVP and were ready to hit the ground running. Tim still had the veed.io domain name, and thought it sounded like video so we used it.
We had limited runway, just enough to cover 3 month of the 12 month program. So we thought that we could win some cash by entering pitch competitions. So we changed our idea from simple online video editor, to automated video editing….
We got really good at winning pitch competitions, like REALLY GOOD. In fact, we won cash at pretty much every competition we entered. We got flown to Dubai to present it at a conference, a VC firm gave us free desk space because they thought we were onto something and we netted tens of thousands of pounds in prize money... crazy right?
During those 6 months we won thousands in grant funding, we were balling and everything was going amazing, so with the money we hired two talented students to help us build this highly anticipated award winning product. From the outside, it might have looked pretty rosey. This is how you run a startup right?
The product seemed like a GREAT idea. The BIG problem was all of the people who said we were doing so well were and awarded us prize money where not our target customers. After that we have built the products MVP, we have spent months trying to sell it with no interest, we got close a few times, but it was clearly not going to work.
So we had a product no one wanted and with about 6 weeks runway left. We got the team to rip everything apart and pivot back to our original idea, the product we had wanted to build from the start - a simple online video editor.
It was horrible, the worst summer ever Tim and I have ever had, we were broke, our startup was not working. To make matters even worse in those last 6 weeks, both of the students we hired had quit and walked out on the same day, a week later the VC firm that gave us free desk-space kicked us out too. It must have been pretty obvious we were crashing hard.
So Tim got a contract Job and sent me half his wages every week so I could keep running the company. Tim would meet me in the office at 6am every morning and then headed off to his contact job for 9am and I would continue hacking and marketing till later in the evening. Fortunately, we managed to launch and get some early users with our MVP.
A few weeks later, while eating a hot dog on London Southbank, I got a cold call from a recruiter offering me a contact job too. We both were tired, drained, and needed a break and some cash too, so I took it.
This is the part where the easy thing would be to give up. We could have easily just fallen back to getting paid well through contracting. But we did not want to give up that easy, we understood the mistakes me made and knew how we could fix them.
- Winning awards is not the same as running a company
- Build stuff your users want
- Validate with your users before building
- The co-founder relationship needs to be strong
- Know when to pivot
BETA - $0 MRR
Tim and I were working weekday mornings, evenings and weekends and after a few months it was paying off, we were talking to users and our startup was growing. As we were getting paid pretty well while contracting, we thought it would be a good idea to hire two developers to keep VEED moving at a good pace.
We searched high and low and where SUPER lucky to eventually find Veljko and Mate. We have learnt a lot from our previous failed hires and vowed to never make the same mistakes again.
Traffic was increasing every week and just 4 month after everything came crashing down, we had built VEED to 20K monthly active users. As my contract job came to an end I moved back onto VEED full time with Veljko and Mate. We were building fast, iterating on product and growing at a good speed and Tim was working all hours too and kept company’s runway topped up.
- It is possible to have two jobs
- The only time a startup fails, is when your let it fail
- Talk to your users and iterate fast
First Paid Users - $200 MRR
I received an email that recommended we apply to join the next cohort of well known startup accelerator.
Tim and I thought that there is no harm in filling out the application, so on a train ride home to see my mum, a few days before the deadline, I filled out the application.
To our surprise a few weeks later we had a phone interview, that went well. Just 4 weeks later, we were in Mountain View California interviewing for a place on the program.
Essentially, we got rejected, and from our rejection email feedback, we believed we got rejected for not having any revenue. So we added a $5 pay wall that weekend and converted our first 20 paid users. We then emailed them and asked them to reconsider.
They said no..
Unfortunately, as this weekend was so mad, we did not have time to appreciate the huge milestone that we just overcome. We had always dreamed of making our first monthly revenue online and now we had it. What was even more shocking is that we found 20 users that weekend to pay for our buggy video editing app.
- You need to charge your users early to learn if this is a product they will pay for.
- By charging users, you will understand where the value is for them.
- Rejection is not a bad thing.
- It is not always easy to not see the value in something you have built.
Summer 2019 - $3000 MRR
We returned back on London in mid June, doubled our prices to $10 and got our heads down talking to our paid users. We quickly worked out that for our paid users adding subtitles to videos and also automatic subtitle transcription were by far the most popular features. With this knowledge, we worked hard on making those features amazing.
Since we started making money, we began getting a lot of inbound investor interest. Additionally investors we previously spoke with also started to get super keen. Ultimately we decided to not take any investment, we did not want any distractions and though the lack of runway would make us focus hard to getting our product to profitability.
Which was stupid.
But we wanted them ourselves, so we have built them anyway. We also changed a lot of our development processes to enable us to move much faster and speed up our lead times to deliver features and bug fixes. All this allowed us to hit 2oo paid users.
In August, we had realised that at our current growth rate we would run out of money in the next 3 months yet again. So we doubled our prices again to $20 and something CRAZY happened.
- Users continued to pay for our app
- Churn fell by 40%
- New users drop by only 10%
Following this, we had our best month yet and best of all, we were projected to reach ramen profitability on the exact same week our personal funds would run out.
As counterproductive as putting prices up feels, charging $20 for VEED brought in a different and more serious type of user, they need the product and they are happy to pay for it and have different needs to the $5 users we originally had. Things started looking up for the first time in ages.
Finally overtime, our product matured and stability got better, we believe this is also a leading factor in how we reduced revenue churn to from an embarrassing 40% to less than 10% in just a few months.
- Put your prices up, again and again.
- Don't build features for the sake of it, it is a waste of time.
- Try to avoid unnecessary distractions like investors.
October 2019 - $5000 MRR
October 17th, 2:02pm - $5K MRR, after everything we have been through to date it does not feel real. Altho we have pretty much made every mistake in the book many times over and I believe we will continue to keep messing up too, but our trajectory suggests we are not going to have to go back to contracting now. We are really excited to continue building our product and now can also see a path to really accelerate growth.
- Getting your first company off the ground takes longer than you think.
- A profitable companies don't rely on anyone else.
How do we run VEED on $5K Mo?
Tim and I pay ourselves about $1666 each and we pay Mate and Viljko the same. In not sure how everyone else spends their money, but this is a breakdown of how I spend my money.
$200 Social Life
$100 Eating out
$100 Maybe a new pair of trainers or something..
It's not a lot, I cut corners where I can; I pack lunch, ride my bike to work (much nicer than the tube), make the most of free drinks at events before going out ;) But we are all so happy to be working on a product we love, it really does not matter. We are filled with excitement and push hard for growth.
We have free cloud services for the next 8 months, but will easily cover this by the end of next month too. All other bills come out of our personal accounts right now.
We really hope this blog post was valuable. We would love for other early stage founders to read and share this so others do not make the same mistakes we did. Join our mailing list if you would like to get update from us as we build our VEED and as always, feel free to drop us an email if you have any questions.
If you enjoyed this post, we would really appreciate an upvote wherever you found it, it helps other discover the article!