How I'm Building a Billion Dollar Company (Episode 2)

Every day we're losing money. This is really not good. Oh my God, look, Flo team here. He's trying to steal the camera. To get to $100 million in sales. Last week we launched subscriptions. The data hasn't been good. My goal for this episode is actually reach profitability so that we could finally start scaling up ads again. My girlfriend here, and she's going to be unboxing Flo for the first time. Where in the Flo of setting up Flo things are breaking?

Wait, wait, restart.

I'm not going to help you. I want to see what you do. I think I know why some people think that you need to have a subscription in order to actually set the alarm. She got stuck on the select sound screen. Instead of clicking select sound at the bottom, she just hit the arrow on the top left to go back to the alarm screen, and so it didn't automatically set. Let's add a screen that says like, your dog was fed. Alright, the first video for Flow just dropped yesterday and I got a lot of love. I appreciate all of you guys out here supporting me. I got a ton of people saying they're gonna rip the product and I know you motherfuckers are hiding behind the screen right now watching these videos. You guys will have no chance of ever catching up. My friend just sent over to me something that's working really well for him is a web funnel. So directing the ad to a questionnaire. We're also testing out some like offer pages where we put the two docs over one doc and we add some like free free gifts in that, so our average order value goes up. Boys are calling, I gotta get my laptop. Yo, what's up? We're building out the web funnel right now. We're trying to piece together the questions. Question 1 is probably, uh, age. We want gender. How long do you stay on your phone?

How often are you late to events?

We should say like here, like interstitial. That's like X amount of hours a year. Calling Nick right now. What's up, Nick? Basically, the data that's coming in, it seems like everyone thinks like you need the subscription.

I saw a couple emails that were saying like he thought he needed it because he was like he saw an email come in for it. I think people might not see it in the cart and then they see that they get charged for it.

And so like if they want to cancel, we help them cancel. We process a refund. Like the $99 a year. Let's wait like one more week. We should just set it to 100%.

The people that I see in the App Store leaving one-star reviews are saying like the subscription's like required. Our App Store rating's 3.9 right now, which is not great. I got the creators to all leave a rating, but that's not really going to solve the issue long term at all. There's also another screen where we ask for a Flow+ code, like if we can't match your email to a customer. Maybe that screen is just like not obvious.

Yeah, let's make— let's definitely make that more obvious also. It's always stressful, like the early days of stuff, because I remember with Call AI too, like the first version of the app was something we were very not proud of. But they say if you're not embarrassed of what you launch, much with you ship too late. And so like, we'll get there over time. The biggest thing is just prioritizing customer support, like giving everyone refunds if they want. 4 or 5 months from now, we just need everything like really dialed, like all the flows working really well. We need metrics built out for like people that purchase— do they download the app right away? Like, we need a metric of how many Flow+ codes are out there and how many have been activated. And we should have like the time too, like how many are activated within the first day. Could you actually write that one down specifically? Because that's a super important one I want to know. For your next big project, Alex, this will require a lot of analytical thinking, which I think you're very smart, so you'll be good at this. Building out a complex dashboard within the Flow admin panel. The bottom line is we're kind of flying an airplane semi-blind right now. If you go to the Triple Shark dashboard I built out, you could like click into things and see, um, the formulas for how things are calculated. So that will give you a pretty big head start on this.

Is Triple Shark like an external solution right now?

There's something called Triple Whale, which is like a real platform that a lot a lot of people use, but I built out something called Triple Shark for us.

Yeah, okay, I see it.

What a killer Alex is. He just woke up and hopped on the FaceTime, right to work. Good morning guys, I have all this shit on my face because my lips are like really dry and I have some pimples, so I put on some pimple patches. But we're about to meet with— got like 5 and a half hours of sleep. This is what you need to do, it's for the grind. We're gonna do a 2-hour deep dive audit to everything going on in Flow right now. This should be huge for us, like hopefully they could give us like 2 or 3 tips. Like, you guys could get your tax down on Meta by just making this one tweak. I'm sure there's a lot of low-hanging fruit that we just don't know about. We'll see what happens. This is very important. Wow, we just had the call and I am fucking excited. I'm pumped. The main things we learned is that the subscriptions— we figured out that we're probably going to need to A/B test more monthly prices. Like, we should try $20 a month. And we heard that the industry standards are like 25% usually stay subscribed by the end of the year. Our LTV at $20 a month would be something like $150 for the year. And so taking our current conversion rates and doing it with the $20 a month, like, that would be amazing. We would really be able to scale with that number. Going through the funnel, we learned that we really need to emphasize things like where it says free shipping, really build more social proof. Something that we're doing good is entertaining the users right now in our ads. Like, Gabe is doing these crazy stunts, but we really have to hammer the messaging. We don't say things like, if you wake up after 7 AM, you're 50% less likely to be successful in life. And then just like a bunch of random stuff. Like instead of saying 25% off, like we should try 63% off, like random numbers. We should read this book, Influenced by Robert Cialdini. We're gonna fucking just hammer these tests out, get these results. There's a lot of good happening. I'm just pumped. Entrepreneurship is fucking stressful. There's so many ups and downs.

No, I didn't intend to have a $99 charge.

So we've been running this A/B test. We would position it where the 2 docs is the first option and you'd get all these free gifts. But we ran the test and I just saw the results. It looks like it was actually worse. It looks like the overall revenue per user is down like 5% with this variation. Supplement websites are doing this and it works really well, and even not supplements. So like, we had to test it. I don't know why it works for them, to be honest. Yeah, it didn't work for us. I have to go to my flight in 30 minutes. Me and the team are flying out to North Carolina to go to the office of our advisors. I hope that you guys truly see this because this is hurting our business. Everyone stays private in this game. No one likes to be public. We don't gain anything out of this. It's not like I sell something. So, you know, I'm really doing this. I want you guys to see what it really takes. Because if there's one person in the audience that was like me when I was a kid, it will be you. We are on the plane. Yeah, yeah.

Yeah, uppercut punches got him busting up. Potion in this double cup, liquor got him buttered up. Yeah, know my competition, every track is like I got bubble guts. Fast like buckle up.

Yeah, Simon vs. turn an angel into angel dust.

3 out of 4 of the Flow co-founders are here. Dave has made it.

Now we have the whole Flow team here.

What is going on? Oh! Nice to meet you, bro.

Nice to meet you.

Hey, you know what Flow Alarm Clock is? Flo is the alarm that forces you out of bed, you know that, right? I know you know that. I could tell you were Flo. I saw it in his eyes.

I'm the most famous person in Danes. Holy shit. Great night, man.

Guys, have you heard of Flo alarm clock? What?

Do you guys know, like, do you guys see them like running around here? Your cousin has a Flo alarm clock? See?

Yeah.

That's sick.

All four of you created the alarm clock?

Yeah, we have co-founders.

And Timothy Chalamet. I did not like it. It was scary. Okay, wait, I want to get on the boat.

Hey bro, oh my gosh, dude, you got to go by the horn. Wait, give him a float dock. Where's the float dock?

Uh, it's in the side pouch of my backpack over there. Yep. All right, how's the lighting look? The alarm that literally forces you out of bed, or you can have your money back. The only way to shut off this alarm is you have to physically stand up and tap your phone in this dock. The moment you tap on the dock, then your most addicting apps are then blocked for the most important part of your day—

your life.

All right, now let's just—

AI, you doing a backflip at the end off it.

Yeah, dude.

Yeah, I really wish we could do a backflip.

Hey! Oh, it's the best day of my life.

You have anything to say? Spread positivity. Wow, I'd say that was negative energy. Got out, got out the Cali jail. Beautiful. You're amazing. Great night.

Have a good one, man.

What's up? Pause it, pause it, pause it, pause it real quick. Huh? No, no, no, don't, don't pause it.

We have to continuously vlog.

Yeah, we're vlogging right now. Oh, what's up?

What's up? What's up? What's up, baby? Good night, bro!

Tomorrow— good night, bro! That's crazy that we almost just got camera robbed. But I think he was just trying to like grab it off of Gabe and run. It's actually crazy because I'm having a lot of parallels to a year ago when we did this for Kali. I, bro, I'm like noticing these parallels of like similar conversations and similar behaviors. Okay, we have a big day tomorrow, so I should probably go to bed, but I'm pumped. A few good days ahead. Good morning, it is 6:46 AM. I never wake up this early. Just wanted to quickly check the revenue and the profit because Alex has been building out a dashboard for our revenue. Something's wrong with the data or we're just completely fucked. This is May 24th, negative $1.5K profit. Go to the 25th, negative $1.5K profit. Go to the 26th, negative $300 profit. It looks like it's getting better, but I don't know what's going on. This is really not good. Something's fucked up here. We had 1 or 2 good days and then we're like, alright, we could leave it and keep having it, but we want to maximize our LTV right now. So we turned on an experiment and one of the variants turned off having a subscription. And I think that kind of fucked things up a little bit. With the subscription off, that 20% of traffic was just very unprofitable. And then there was also another 20% getting the $10 a month, and that was just not making that much money compared to the yearly. So we just turned that off too. So now it's left as a 3-way split test between the $20 a month, $60 a year, $99 a year. Alright, we got the whole team out here. About to meet up with our advisors to learn some creative sauce. Alright, we just got out of a 4-hour-ish meeting. Now we're gonna do a little debrief at lunch. What do you guys think? That was, that was insane.

That was fantastic. We filmed an ad with them. I mean, what value? I think just being in their presence and seeing the possibility is so powerful.

Yeah, no, it's like, dude, there's something with so many people I've done this. It's like just meeting them, just seeing them in person makes you believe, okay, if they can do it, I can do it.

That's exactly it. I was looking at them. I love them. They're great people. I was looking at the fucking guy and I was like, that fucker can do it, bro. What the fuck? There's a lot of good little things that I'm 100% gonna apply that I'm like, wow, that's great. But I think the biggest breakthrough with me was seeing them in the flesh exactly like you said.

Yeah, exactly. They actually gave me so much more belief that like we can do so much better with our creatives. Like there's so much more we need to be doing these like creative meetings like they did. Like there's so much room to improve on like all these micro things. Do all the angles that we can take, like ads about the alarm sound ads where it starts with the alarm ringing and then we like show all the sounds. And then even on the offer side, like going in the $99 a year right now, I'm really excited for that. Like, let's just set that live right now. Yeah, I mean, dude, I think just what he said, like they instilled the belief to get to $100 million in sales in the next 12 months, all it will take is selling 1.3 million units.

So he looked at us and he goes, you can 100% do $100 million in the next 12 months. He goes, 100% you can.

He goes, the only bottleneck that you potentially might have is just ship Pal.ai, like our whole thing. Answer like 20 questions. We just reinforce the fact that they have a problem, we have a solution, and then we get them to buy. And our conversion rate was so high, like highest in the whole app game. We do the same thing here. We ask them so many questions. We're like, you're operating at 50% of your potential. If you get it to 80%, you'll be able to achieve way more. And then they'll be way more likely to buy. Woo!

Let's go!

Yeah, we have a lot of work to get done. Let's do it. Come on. We're here at a coffee shop now. We're gonna do a deep dive into everything— our funnel, our ads, our offer— and we're just gonna write down a list of everything we need to do to improve all of our ideas, and we'll just work to implement them.

I fool you to this game.

Oh sure, we could do checkers. Nick's grinding on this, bro. Make your move, bro. Stop stalling. Okay, sorry. This game is getting intense.

No, that's—

all right, we'll try to repeat it. Can a king jump straight and then diagonal? Kings can't jump forward, they can only jump diagonal. But kings can jump diagonal backwards to take. I'll let you take one of them, but you can't do a triple banger. Okay.

It's a rough day.

I see it. And— GGs. Come on, where's that confidence you had a few moments ago? Ugh. Yeah, I'm toast. I'm toast for shrewls. It's 1 AM. We're nearing completion. We're just setting the web funnel experiment live. Oh, fuck. It's 2 AM. Gabe has a flight at 8:30. I have a flight at 10. Productive trip though. Learned a lot of lessons, got a lot done.

Okay, there's no app. Oh, there's no app. Not cut off on this screen though.

That was great. All right, all right, fire. Yeah, I'm good to set it live.

Let's do it.

We have 34 days now, 33 I think today, to hit $1 million in a month based on a goal we set. We're done for the day. It's now 3 AM. We grinded. So it's been a couple days since the trip, and so we finally got in data from all the experiments we set live. We tested going from the funnel to the product page versus going straight to the product page, and it looks like going to the funnel was about 20% better with the conversion rate. As you guys know, we just set the subscription, the $99 a year live, $2,359. I think we've been averaging like $1,000 in refunds a day, so we are finally profitable. But the problem is I've been getting a lot of calls to my phone of people saying that they didn't know they were being subscribed. And I think the reason we didn't think it was as big of a problem before is for the lower subscription tiers, they didn't care as much. And so, but at the $100 a year, it became pretty clear, like, way too many people don't know that they're subscribing because of this. Like, we could scale this as is, like, we're making healthy margins now, but we don't want to run our business this way. So we're gonna have to figure something out because we don't want to scale. This is just gonna hurt our brand. It's ethically wrong. We want to have a bunch of different products for Flow in the future, and if customers have a bad experience with the first one, they're not going to get any in the future. So we got to figure something out.

This is the phone number that it showed on the account, like from who was charging me. You buy the $40 Flow Alarm, but then you also get charged a 1-year subscription for $100.

Yeah, so there was a 99-year subscription that was like on that page that you didn't intend to have that selected.

No, I didn't intend to have a $99 charge to my account.

No, you're saying you would rather pay monthly?

Yeah, I was just trying to— I mean, I haven't even received the actual Flow Alarm.

Yeah, um, regardless, we could help you, so just email.

Awesome, thank you so much. I really appreciate how helpful you are.

Of course, have a great day. She was like down to pay a monthly charge, so that's really interesting. I wonder if more of our customers would be down. All right, I just got off call with the team. We have to make these changes. I don't like that it's deceptive that people are being subscribed without realizing it, so we're going to the one-time purchase, no subscription model. It's gonna put us back in the trenches. Like, this is going to make us unprofitable again, at least in the short term while we figure it out. Gotta do it. This is business. See you guys in the next episode.