This Week in Production Ready - Issue #8
VEED.IO and Change Events, Building a business that you hate and Unsexy niches
Bootstrapped Business Spotlight 🔦
Less than 18 months ago this UK based company had zero in revenue. The founders had just been rejected from YCombinator and they’d 3 months of runway left in the bank. Last month, they made $180k MRR and they're now tracking towards $2.2m ARR. They've never raised a penny in funding.
VEED is a browser based video editing tool. The main value prop is that it's easy to use with one-click editing and seamless collaboration. Users can start creating immediately on the site to make personalised videos that can be shared on social media and elsewhere online.
VEED was founded by Sabba Keynejad and Tim Mamedov in early 2019. The founders quit their jobs when the product was still generating no revenue. Sabba had been using legacy Adobe video editing software and realised how clunky and complex it was. Recognising that browser based video editing was technically feasible, Sabba and Tim focused on building an online editor that could crop, trim and add text. They also specifically targeted short-form content creators as their early adopters.
The tool was free for the first 8 months. This meant that when they started charging, they already had 30k MAU. They now rely on a freemium model. Users can edit videos that are up to 10 mins long and under 50mb for free. Anything longer or larger costs $12/month for the basic tier or $24/month for the pro tier. They currently have about 5500 customers with a blended monthly ARPU of $22. They also have a really healthy top of funnel with over 300k monthly visitors to their website.
In an internal company post, Sabba talks about their journey towards $1m ARR.
Bootstrapping is hard work, but as you grow it gets a lot easier. The speed in which you grow makes a HUGE difference to the bootstrapping experience. You need to get the flywheel moving super fast to keep everyone motivated and to get you to ramen profitability.
Churn is 13% a month which is higher than most SaaS companies. They're OK with this as they understand that people may use the product once or infrequently. A lot of them will come back and reactivate at a later date. So they have about 30% retention over an annual cohort.
Right now they're taking about 30% profit from the bottom line. Up until recently, the founders had only been paying themselves $2k per month in salary. So they're still reinvesting the majority of revenue into growth and product development.
The team seem to be incredibly user-centric. Every single user who signs up can book an onboarding call. It might be time consuming but they've learnt a ton through these calls and have narrowed down their user personas and customer profiles. You can also see that this has helped them build a beautiful product which serves their target market really well.
In terms of growth, their strongest lever has been the casual contact viral loop on their free videos — each one displaying the VEED watermark. This helps create brand awareness as video consumers see the logo and then a percentage of these will start using VEED itself. They've also invested heavily in Youtube content making one video a day on topics like auto subtitle creation and editing tips. SEO and content marketing has been the other focus of their marketing efforts with successful posts like this one about how they tried to hustle into YC after getting rejected.
The online video space is getting crowded and there's a bunch of competitors including Wave, Headliner, Kapwing and Story Creator. The market is huge though and there's plenty of niches that require different jobs-to-be-done.
As with any startup, the journey has been far from linear. At one point they needed to find other revenue streams just to keep the lights on.
Me and Tim had to find contract roles to keep money coming in. I remember very clearly standing in Victoria, near our old office after we were kicked out. All our friends had jobs, it was the end of summer and we had nothing. It was really, really bad. Everyone loves you when you're succeeding, but apparently not when you're failing.
They pulled through and right now, they're a team of 20 with half of the headcount working on engineering. Sabba and Tim now spend most of their time managing and less on day-to-day product development.
Their vision is ambitious and they can see a clear path towards future growth. In fact, they're actively targeting $10m ARR in the next couple of years. What would have happened if they’d been accepted into YC? They’d probably have raised $5-10m and given up a chunk of equity. Instead they’re fully independent and charting their own course. All while growing like a VC backed startup. It’s great to see.
They've no future plans to fundraise or sell the business, they're just going to continue doubling down on what's working. And it seems like there's a lot that is working well — huge props to Sabba, Tim and team 👊
There's probably a number of reasons why VEED has taken off as it has. I'd argue though that the main reason has been down to flawless timing around a change event. More of a meta-trend, the art (or luck) associated with shipping a new technology into a market that's about to explode is often the difference between success and failure.
I remember listening to a podcast interview with Dylan Field, the founder of Figma. One of the core motivations in starting the company was to try and build Photoshop in the browser. It was a technical challenge they wanted to take on.
We started looking really deeply into WebGL and kind of convinced ourselves that, yes, it was possible.
The change event in this case was the improvement in WebGL which made it possible to render interactive 2D and 3D graphics within any web browser without the use of plug-ins. Tools like Figma were the first pioneers to benefit from this. The current wave of beneficiaries are online video editing tools like VEED. The next group to ride the WebGL wave will be browser-based game developers.
It's not enough to rely on a technological improvement though. There needs to be a corresponding push from the market side to really create that tinderbox environment. In the case of VEED, they benefited from both WebGL upgrades and a rising demand for video editing from content creators.
Still waters are bad for startups. Startups win in messy, chaotic, wave-filled current driven waters. That requires a change event bigger than the startup itself
So that means there's usually two types of change events:
Technology inflections — for example, around the time Mike invested in Lyft, GPS locators in cell phones had just gotten good enough for ride-sharing
Adoption inflections — also around the time of Mike’s Lyft investment, it had gotten to a point where enough people now had smartphones that you could count anyone who wanted to drive/ride being able to do so
Of course, the cruel irony is that it's often impossible to see these change events in advance. You might only be able to tell in retrospect — after your startup has hit some critical mass and taken off. I do think it's helpful though for any founder to think about their product positioning and the relative go-to-market strategy. Is there a change event that you want to target? Will this be a tech change or an adoption change? Do you need both or can you prosper without any change event?
I mapped out some of the most popular workplace collaboration tools based on a 2x2 matrix — small tech change event<>large tech change event on one axis — small adoption change event<>large adoption change event on the other axis:
Those in the '10x Play' quadrant are creating products in existing markets with no real tech or adoption change events. So they need to be 10x better than the competition to stand out (eg Superhuman is the ultimate 1→N gmail client).
The 'Fresh Angle' products are able to ride some larger tech change event. They do this though in existing markets with lower adoption changes (eg Yac and Loom with their novel audio/visual approach in the async collaboration space).
The 'Gap Fillers' find a niche and create products without much tech innovation in newer markets that are changing (eg Officevibe and the advent of direct employee feedback).
The 'Bold Movers' are effectively creating new products in new markets based on both a large tech change event and a large adoption change event (eg Otter.ai and their speech-to-text service that Zoom uses to live transcribe remote meetings).
Like with any model there's errors in it — still I think it's pretty interesting to see which products fall into each quadrant. For bootstrappers it might be worth thinking about which quadrant they want to land in for their specific vertical.
Traditionally, anything more speculative that’s based on a large tech change event has required VC money to build out properly. Indie makers have therefore found the most success as ‘Gap Fillers’ where they can serve an emerging market without the high R&D costs associated with large tech change events.
Bootstrapped businesses like VEED buck this trend though. They’ve nailed both the tech & adoption change events and their growth trajectory is something to behold. Maybe that’s a future we’re heading towards — indie makers forging out new markets based on adoption changes whilst piggybacking on larger tech change events. All done without the need for any outside funding. That could be a game changer.
Interesting Reads 👓
The No-Code Generation is arriving — Danny Crichton
Jerry Colona on Co-Founder Resentment — Jerry Colona
You don’t need to quit your job to make — Steph Smith
How to brainstorm great business ideas — Courtland Allen
A simple marketing audit: the why and how — Agata Krzysztofik & Elen Veenpere
Worthy Podcasts/Videos 🎙📹
Noah Kagan is the founder of 8 figure business Sumo/AppSumo. In this video, he breaks down what he would do to start a million dollar business over a weekend.
Paul Jarvis is the author of the book “Company of One”. In this interview, he dives into what happens when you create a profitable business, but in doing so, you realise it’s not something you want to be a part of. Margo Aaron explains what happened for her, how she dealt with it, and how she’s going to avoid doing it again.
Helpful Products & Resources 🛠
Copysmith — AI that creates compelling content in under 10 seconds
Readable — a free website readability tool
The 30 Most Influential Books Recommended By Proven Entrepreneurs (2020) - A roundup from all the founder interviews conducted on Starter Story
Looking to Partner Up on Indie Hackers — a great open community for anyone looking for a potential co-founder or partner in their next venture
Product Explorer — a categorized database of 15k+ products across Product Hunt, Shopify Apps and the Chrome store
NightOwl — let this mac app automagically toggle to dark mode when the sun sets
And from the Twitterverse...
There were some great responses to this question. It was an eyeopener just reading about the most obscure unsexy businesses I’d never heard of 👀
I love the concept behind LiveRecover. Having run an ecommerce store in the past, I know the pain of abandoned carts well. It looks like Dennis and team have built a compelling offering which has driven an incredible $4m in recovered sales 🔥
Dru’s business Trends.vc has gone from $200 in revenue to $38k in October. It looks like he made the right call to turn down the investment offer 😅
What a great position to be in — the absolute epitome of optionality 🌍
That’s a wrap for this week folks. Thanks for reading 🤙