Production – September 2, 2022, Stuttgart, Baden-Wurttemberg: Illustration – Tapping Hands … [+]
The venture capital world was recently shocked by a tweet that pulled back the curtain on a little-known area of the technology industry. Deedy Das, principal at Menlo Ventures, tweeted:
“I recently discovered a section of the internet where cracked 18-22 year old indie hacker kids from obscure universities are running growth-hacked bootstrapped mobile apps on TikTok. . Each app has over 100,000 monthly users and earns between $1 million and $5 million annually.” Never underestimate your kids. ”
The tweet went viral on VC Twitter and elsewhere, highlighting a new breed of young entrepreneurs who are quietly building multimillion-dollar app empires outside of the traditional Silicon Valley ecosystem. At the forefront of this movement are two entrepreneurs who embody the phenomenon Das describes: Blake Anderson, 23, and Zach Yadegali, 17.
At a time when venture capital often flows to Ivy League graduates and serial entrepreneurs, Anderson and Yadegali charted a different path. They co-founded three successful apps: RizzGPT, Umax, and Cal AI, which collectively generated an impressive annual recurring revenue (ARR) of $15.4 million. Their stories not only validate Das’s observations, but also provide a blueprint for a new generation of technology entrepreneurs.
The beginning of the journey
At the recent X Space event, Anderson and Yadegali explained their journey on how they got into the world of technology and started so early. “I started programming when I was seven years old,” he recalls. “I really liked making video games, so I got into video games.” After creating several unsuccessful games, Yadegari decided to allow students to play the game during school. , won the gold medal for unblocked gaming websites. “It took off, I marketed it myself, I got 5 million users just by recording TikToks, and then I sold it for six figures,” Yadegali explains.
Yadegari co-founder Anderson had a similar early start. “I built a few small projects, and then I met Zach and together we built Cal AI, which now generates $8 million in annual recurring revenue,” Anderson says.
The Secret Sauce: Viral Marketing and Product Ideas
Anderson and Yadegali credit their success to their unique approach to marketing and product development. “The main thing that made these apps work was our marketing strategy and kind of the product idea,” Anderson explains. Their approach can be broken down into four main steps.
Step 1: Define the problem
The first step in their process is to identify a clear problem to solve. Anderson offers an example. “In Liz GPT’s case, she had a roommate who was like, ‘Hey, what do I say to girls on dating apps?'” So my problem was pretty simple. It’s about building AI applications that help people speak. ”
Scan social media to validate problem ideas. “When you see your content on social media garnering millions of views from people struggling with exactly what you want to solve, that’s a good sign that your product could be scaled.” Anderson advises.
Step 2: Become an audience
Once the problem is identified, the next step is to immerse yourself in your audience’s world. Regarding Umax, Anderson says, “We set up social media accounts, and these don’t have to be official accounts that we use, they can be random anonymous accounts, and any content that makes us look the best.” “I started working on it,” he explains.
Digging deeper like this allows you to understand how your audience thinks and design products that resonate. “We realized that people want two things: they want to be more attractive, and they want to know how attractive they are. That’s it,” says Anderson.
Step 3: Build and test
With a clear understanding of the problem and audience, the team moves on to building and testing. Anderson emphasizes the importance of simplicity. “All the apps I’ve built are very simple in nature, so if you’re trying to build something like a complex consumer social app, this isn’t the case.”
Yadegari goes on to say, “Don’t overcomplicate the technology you use. You don’t want to use something very low-level. You don’t want to use something very low-level. must be used,” he added.
For initial validation, show your prototype to friends and family. “If their response is supportive, you’re probably not headed in the right direction. If their response is something like, ‘Hey, that’s amazing,'” Anderson says. , you are much more likely to have a problem with a viral product on your hands. ”
Step 4: Launch and Marketing
Their marketing strategy revolves around influencer partnerships and careful metric tracking. They use two key metrics.
- RPM (revenue per mil): Revenue generated per 1,000 views
- CPM (cost per mil): How much does it cost to generate 1,000 views?
“Ideally, you can build products with high RPM and low CPM,” Anderson explains. Their approach involves testing with smaller influencers across different niches related to their product, then scaling up in the most profitable channels.
Yadegari continued, “The idea of RPM and CPM in influencer marketing, calculating CPM per post is probably the most difficult thing to do. Perhaps the reason for unprofitability for many companies is that they cannot guarantee the required CPM. ” he adds.
Scaling up: The power of compound interest
While finding new influencers every day is important, the team emphasizes that their growth is exponential rather than linear. “If you have a proven strategy and find that acquiring new influencers will increase views and revenue, this is a sign that it’s time to hire someone to help you,” Yadegali says. ” he explains.
This combined effect is further amplified by network effects within the influencer community. “The more influencers you have, the more influencers you will generally be referred to by your current influencers,” Yadegali points out.
Pricing Strategy: Balancing Revenue and Growth
Anderson takes a nuanced approach to pricing and challenges the common practice of optimizing only for LTV (lifetime value) multiplied by conversion rate. “I think we should focus more on subscriber numbers,” he explains.
For Cal AI, this philosophy results in a relatively low price of $10 per month or $30 per year. Anderson justifies this strategy. “This doesn’t give us the biggest benefit, but it will get more people to use our application.”
“Public perception definitely has a lot to do with it, and that’s why we’re charging $10 a month instead of $20,” Yadegali added.
Onboarding and conversion optimization
The team focuses on the onboarding process and placing paywalls. They use Superwall to optimize their paywall and split test different locations and triggers within their app.
Yadegari shares recent success stories. “When we split-tested conversion rates with CaliEye, we found that adding cool animations between screens, rather than just asking for information, increased conversion rates by about 10%.”
Looking to the future
As their app empire continues to grow, Anderson and Yadegali are exploring new markets and refining their strategies. They see potential in applying viral marketing techniques to non-Gen Z products, such as apps for parents and grandparents.
“I think there’s a huge opportunity to apply these strategies to non-Gen Z products,” Anderson notes. “Parents, and even grandparents, especially apply these distribution techniques.”
Lessons for aspiring entrepreneurs
For those looking to follow in their footsteps, Anderson and Yadegali have some important advice.
- Focus on solving real problems. “When I see that content on social media, I’m going to refer to it again. If it’s been viewed millions of times by people who are struggling with exactly what you’re trying to solve, that means you’re “It’s a good sign that you’re thinking about it, so you can expand your product,” advises Anderson.
- Immerse yourself in your target market. “Be one of these people,” Anderson suggests. “By gaining a deep understanding of how these people thought, we were able to build a six-factor rating system that includes an overall score, a latent score, and other attributes.”
- Start small and repeat. “If an influencer has a poor comments section, we don’t over-index their views,” warns Anderson. “Not all views are created equal.”
- Be prepared to pivot. “If you don’t get found after a few promotions, it may be worth trying in different niches, but most of the time it’s not worth the effort. You need to start something else,” Yadegali advises. .
- Cooperate: “I highly recommend working with people,” Anderson emphasizes. He suggests using platforms like Y Combinator’s co-founder matching platform to find potential partners.
conclusion
Blake Anderson and Zach Yadegari’s story is a testament to the power of understanding your audience, leveraging viral marketing strategies, and constantly iterating on your product. The tech industry will be watching closely to see what these Gen Z entrepreneurs do next as they continue to grow their $15.4 million ARR empire.
Their journey serves as an inspiration and roadmap for aspiring app developers and entrepreneurs looking to make their mark in the competitive world of mobile applications. With their finger on the pulse of Gen Z consumer behavior and a proven track record of developing viral products, Anderson and Yadegali are well-positioned to continue their upward trajectory in the coming years.
