Mike and Albert Lee explain why MyFitnessPal took its first VC round from Accel and Kleiner Perkins after eight years bootstrapping. They cover the shift from AdSense revenue to scaling a team from tiny to 100 people, and what they learned about hiring and spending when capital arrived.
Chapters
So, uh, fast forward a bit to when you, when you took that, that first and only VC round.
Yeah.
Um, what was it that made you think, after all these years of bootstrapping and running on growth, right, that you needed to take outside money?
Yeah. Well, um, you know, it was, it was a really big decision for us. So, uh, just to give you guys some perspective, we had been self-financed for 8 years at that point, um, growing like crazy. We had like millions and millions of dollars in revenue. Um, and, and, and frankly, we had been chased by VCs. So we have, like, a really weird fundraising story where, you know, we weren't going out and trying to ask people for money. They were coming to us. I mean, we literally had VCs who would, like, knock on our door and just show up. And, you know, which is obviously, like, a great position to be in. But that was happening for years, and we kept saying no. We were really stressed about it, frankly, because, you know, we had a great thing going. We were making plenty of money, and we were worried that getting a VC involved would actually screw things up. And so, you know, but we got to know a lot of the firms, and, you know, the thing that I think really, you know, made us switch our decision is that, A, we really liked a lot of the VCs that we were working with, and we also realized that the opportunity was really, really big. You know, the more we thought about it, the more we saw how MyFitnessPal could really become the health platform, right?
Mm-hmm.
Which is a massive, massive, you know, $100 billion opportunity. If you're going after something like that, then you've got to have— you want to— if you're kind of trying to compete in the Olympics, you want to have like an Olympic-class coach, you want to have an Olympic-class team, and that's where— and you need resources to do all that, and that's really what swayed our decision. And, you know, in hindsight, I mean, it was one of the best decisions we ever made, was actually going and doing that. You know, our partners, the funds we worked with were great. They added a ton of value. You know, they helped us recruit.
They helped us with strategy.
We got BD deals because of them. I mean, like, it was a giant inflection point for us.
So just to back up a second, what was the business that you— you were making tons of money. How— like, what was the— what's the revenue engine in MyFitnessPal at the time?
Yeah. We were making money in the absolute dumbest and worst way possible, which was we were— it was all from banner ads, and it was all essentially AdSense. So we didn't have, like, a direct sales team. We just didn't care about any of that stuff, because we knew that what we wanted— what we knew we had to do was build the best product and grow as fast as possible. But because we were self-financed, we needed to make money somehow. So we just did it in the easiest and simplest way possible.
Just slapped an AdSense code on the footer or header.
Yeah, some little JavaScript that we stuck on the page, and checks started rolling in. Yeah, I mean, the way we made it work was we just had massive scale with very low costs. I think at one point, we had something north of 20 million users, and we had 4 employees. And we just did the whole thing by ourselves.
Wow.
You know, it takes obviously the right team to do that. You know, we had a couple guys that were just amazing. You know, they could do everything from iOS development all the way to the backend. Like, you know, and you can also work really, really fast if you have people like that because, you know, literally there's no like inter-team communication. It's all one person, right? So, yeah, so, I mean, really, well, it was really eye-opening. Like, today we have 100 people, and I don't know if we're going that much faster than when we were actually just 4 people.
Mm-hmm.
That's one thing I think that was a little bit of a hard lesson to learn. I mean, we are definitely going faster. Don't get me wrong. We have an amazing team now. But it actually took a lot of— there was a lot of pain points along the way as we were scaling that team about how to actually work together. And, you know, we learned the hard way, I think, for a while what that took to be efficient at scale.
But it might not be 25 times faster than you were with 4 people, right? Oh, definitely not.
Definitely not.
So that's diminishing returns a bit. I kind of feel like what you said, massive scale with very low costs, like, you guys should put that on a sign and put it up here, because that is such a mantra of— like, that's such a great crystallization of a really successful Yeah. You guys were achieving—
I think there's a really strong predisposition to want to answer problems by adding people. And so it's something you actually have to struggle with, particularly, I think— and this is the flip side of the fundraising— is for many years, we're sitting here. It's like we've got our bank account that we're building through the revenue that we're kind of scratching to earn. And then you all of a sudden have $18 million in the bank. And, you know, I think there's a little bit of a freedom with that, which is great, which means you can think big about the opportunities you want to chase. But at the same time, I think it also starts to feel like, well, I can just spend money because I have it.
Yeah.
And so I think that's a really— that's something that I think was also a lesson, you know? And it's funny because I think when we talk to a lot of VCs, beforehand, they were— a lot of them were warning us of that effect, going like, hey, you know, I think one thing that a lot of people love about this business is that you guys have been bootstrapping it for 8 years. And so it seems— it feels like there's a lot of operational discipline to how you think about spending money. But every single person that we know that's got money is like, the first thing they do is like, they just go out and start spending it right away.
Yeah.
And that's going to happen to you. They said that.
And I remember we were like, no. No, that'll never happen to us.
We're immune to that. And, you know, I think I think when we looked at it, probably 6 to 9 months later, you're like, whoa, wait a second. Like, all of a sudden, we had a lot more people.
And you're not talking about, like, gold-plated ping pong tables. I mean, you're talking about, like, hiring people that you think you need to solve a particular problem, right?
That's right.
Yeah.
We just got really loose operationally. The first 6 months after we raised, you know, we were going crazy hiring people. We weren't doing all the the gold-plated stuff, but we were— and we wanted to be aggressive. So we probably spent the first 6 to 9 months overspending, and then the next 6 to 9 months kind of trying to unwind that, actually, and get back into the zone that we wanted to be in.
