How I'm Building a Billion Dollar Company (Episode 1)

I'm gonna start open sourcing my journey as an entrepreneur. You spent $150K?

Holy shit!

Things are just looking way worse than I thought. Dude, I've had my eye on Flo. Absolute monster, dude. My name's Zach Yadegari. Feels kind of awesome. Zach Yadegari joining us. How much money do you make? Make $1 million every month. Wizkid, Zach Yadegari. Why not bring out the founder? Wait, this is the founder? What's up, man? I started my first company when I was 13 years old. It was an unblocked gaming website. I called it Totally Science, and I sold that when I was 16 for $100K. After that, I founded Cal AI, and in just a year and a half, I scaled that to over $40 million in annual run rate. When I was younger, I always wanted to be an entrepreneur, but I never truly knew what went into actually building and scaling a company. Flow is a bigger brand that will have multiple products under it. Our first product is the Flow alarm clock. Your alarm rings on your phone and you can't stop it until you tap your phone to the Flow doc. You actually have to get up, get out of bed, and go there. So no more doomscrolling. Pause. How did I get the idea for Flow? The idea came when after selling Call.ai, I was just going to take a rest from entrepreneurship. I was trying to enjoy life for the first time without the stress of running a company, but I got bored extremely fast. I'm just not wired that way where I could take breaks for long periods of time. So very quickly I wanted to work on a new project. I wasn't sure exactly what I wanted to work on, but I knew I wanted it to be something, some kind of physical product, probably because of movies like Iron Man wanted to build physical devices, but I didn't know exactly what. And so combining the two ideas, like, all right, big TAM and something physical, I started just looking at a ton of different companies and a ton of different niches. The things with the biggest TAMs are really the things that everyone uses on a day-to-day basis. And some of the biggest companies are just companies that are innovating on some of the technologies people use every day. So for example, Everyone drives a car. Elon Musk built electric cars, self-driving cars with Tesla. Something I realized was that the actual manufacturing time it takes to build a lot of these products is very long. And I'm used to software. I have a lot of ADHD. I want things done instantly. Eventually I came to the idea of, okay, something with sleep and a device similar to Brick. Brick is great for like blocking your phone for screen time, but it doesn't have anything about like alarm functionality. And I was basically thinking, all right, the Brick device, it's very simple. What are other use cases than just screen time? And eventually I realized, huh, it could actually be used as something that helps with your alarm. How did the team come together? Because the team, oh, thought about, all right, who do I actually need to execute this vision and make it happen? One, I needed someone to be face of the brand, someone who was going to be running around, someone that's extremely charismatic. Wanted to model him or her off of the guy that runs Carpe's ads. Carpe, they were this brand I saw at the time where they were just pumping out content and it was super cool. This random guy came up to me on the street and all of a all of a sudden was bombarding me with questions. And at the time I was like, yo, yo, chill. Like, I was just trying to get away from him. He got my Instagram, I got his, and I started looking through his content and I was like, yo, this guy's actually really cool. We ended up getting lunch and I pitched him the idea. I just knew he would be perfect. He's like down for the craziest stuff, super high energy. And that was Gabe. Then I knew that we needed someone to build the website and the app. He just really stuck out as someone that was a fucking grinder. Like, he spends all day working, super quick. He was also just just killer at product design. But one guy in particular, Nick, the last piece of the puzzle. We needed someone on the team who could run our Meta ads. I already knew this guy for a while and brought him on. He's running our media buying, and that's a super important piece of the puzzle because so many agencies, so many media buyers, they just fuck you understanding like the core fundamentals, turning off all the extra shit that Meta tries to turn on for you and just keeping it simple stupid. He's just a killer with like getting all of our campaigns set up. This person prefers to stay private for the time being. We started late February, so the first step was getting the FlowDocs manufactured. We were like calling up a bunch of different manufacturers on Alibaba, and we eventually found one that seemed good for it. They were gonna take 3 months to be made because it was Chinese New Year right around the corner. It was super annoying, and it was just super frustrating. We decided we're gonna fucking rip it anyway. We put a presale, but we did it in a very unique way. Made it feel like there was a lot of scarcity, but we made it clear like your order is not going to ship for a while, but get it now, otherwise you're going to miss out. A month and a half in since actually launching, the last 30 days been slightly under breakeven this entire time. However, our CAC has also went up pretty quickly. One thing that we've been trying to do for a while but we couldn't is a subscription because we've been in presale, our first customers haven't even gotten their docs yet. When we started the company, I injected $200K in the bank account. We spent $150K. We have $10K left in the bank. Holy shit. I just spent $7.5K of that to pay off the ad bill. I just injected another $100K, but I want to ensure that we achieve profitability off of this next $100K. We are about to roll out this test with subscriptions with Nick today. So we'll also get that data and that ideally will allow us to quickly rebound and scale even past where we are today. Should all be operating under the assumption that like this is all we have. We have $105K in the bank right now. We need to achieve profitability off of this $105K. Feels pretty shitty that we have to scale down our ads and lose a little bit of momentum, but sometimes you have to take one step back in order to take two steps forward. Sunday now, and Nick has really been cooking on the subscriptions. Rolled out some tests where we had the subscription live inside the website. Under the Buy Now button, it would basically show an opt-in where you could check it to get Flow Premium. The only thing is we had 50% of people opting in to start their subscription. That's like crazy high. I feel like it might be too deceptive by being under the buttons. It's under the fold of the website, and we're gonna try it again but put the checkbox above the Buy Now button. Another change is when we released it, we did $20 a month. I want to actually start at $10 a month, and then we're gonna A/B test from there. So I had a meeting with Nick earlier today, and I think he just finished the subscription portal so that the user can change their card or unsubscribe if they want to. But there are also some problems within the actual app, and they download the app and have the subscription. It's actually very confusing how to activate it right now. So I'm actually going to get my hands dirty right now. There are a bunch of changes to the app that we want to make on the UI side and haven't coded it in a while. So I popped out Codex, and I'm gonna get cracking. Codex working. We got Xcode loading up the preview in the background. We got the Figma designs that I'm working on and beautiful Miami City in the background. And two coconuts. I don't know what it is, but the last two days, maybe I didn't get that much sleep, but I've been feeling just like stressed and a little bit down. Like I guess just working alone in the apartment. Like my friends that I'm living with, they're not here. Usually when I'm working on things like Cali, UI in the past. Henry and I were together a lot, but especially when developing, it was always like us side by side. So I finally got into a point where I think I'm done with all of the UI changes I needed to do. This whole screen, it looked really ugly before, so we did a whole UI haul in Figma and I implemented that in. So now setting an alarm is a lot more simple and clean. The only thing I need to do is when you click set alarm now, it should not just set it, but also close this automatically. Recently, I haven't programmed much of anything myself. I made like a small side project, just me and my friends. We have this bet where every day we go to the gym, we have to send a video, and if we miss a day, we have to send $1,000 split up among everyone. So I just coded an iMessage bot with my friend Henry. That kind of showed me the power of Codex. Like, it doesn't feel like coding. I mean, I used to actually handwrite every line of code myself, If any of you guys aren't technical, you have no excuse of why you can't be building million-dollar apps right now. Can you just tell the AI what you want it to do and it will do it? One day we sent zero emails to the next day sending thousands. Klaviyo's not used to that and the inbox providers aren't as well, so it's kind of like a slight warm-up period. Let's get it. All right, let's fucking crush it, guys. Let's go. First customers are going to get their orders. All right, guys, flow to the moon. Let's go. See you guys later. Awesome. See you guys. Thanks, Zach. Just ended the start of the week team call. We're able to set the subscription live today, which is awesome because we got the app approved on the App Store. The CPAs are a lot lower than they were previously. They're at $21 today and we need to be under $29 in order to be profitable. Day before it was like $45. The day before it was like $50. Did lower the budgets a few days ago, so that's why it's dropping. We'll be doing like $300K a month right now profitably, which is good, but It's not good enough. We got to be in the millions. So what's gonna take us to the millions is increasing the LTV, which will mostly come from the subscriptions. Nick just finished implementing the premium subscription on the website upsell. Flow Alarm. Then if you scroll down, it says Add Flow Plus. It's only been 2 hours, but so far the results are super promising. Seems like half of the total people that see this are actually opting in. Subscriptions usually convert, at least free trials, more convert than not. And retention is also really good, unlike mobile apps, which is the space I'm more used to. Alex, what are you up to today? Finishing some stuff for my new project, and I'm realizing that to get to the finish line is requiring a lot more effort than anticipated, but it's going to be so worth it. All right, I'm going to dinner. See you later. I just got back from Taking my girl to dinner. What we need to look at is the Recharge dashboard and see how many people actually are opting in. 8K. I think we only spent like 7K by now. I don't think that's accurate that there were only 14 orders because there were way more subscriptions that came in. That's gonna be interesting how that plays out. I can look into this right now and figure it out. Or something is just like not set up properly. So maybe the dashboard's right, and if it is, then I don't know what's going on with Recharge because Recharge is saying there were 34 5 subscriptions started. That doesn't make sense. Nick and I just got to the root of the issue. It was that on the A/B test where they did not see the option to buy the subscription, it was just automatically being added to the cart. So on the screen, it will show the price obviously, and then box where if you want, you can add Flow+ for 3 days free trial. And then we're A/B testing right now, $40 a year versus $9.99 a year. But for the $40 a year, 77% of people are opting in. $9.99 a month, only 45% are opting in. These are both very high metrics. It makes me think like, is this too deceiving? A big issue before that we were having was that the actual overall conversion rate when adding this was a lot lower. But we made this new design before. It was a lot uglier. For the $9.99 a month, it's 30% lower. $40 a year, the conversion rate only goes down 6%. Which is fucking incredible. If we make these changes, then we're gonna be very profitable right off the bat. This is also very unoptimized, like we're gonna do some A/B testing with the prices. There's definitely a strategy that like we don't try to be profitable for day one. We literally just try to make money off of people that renew a year later. That was part of Kaliya's strategy, getting as many subscriptions as possible, break even upfront to make money off the second renewal. And given that it's not an app, because apps notoriously have like pretty high trial cancel rates, we made $8,720 today. Also, CACs have been going down on Facebook. I've been watching. Let's see what they were today. I think we've been getting close to profitability just based off of, um, no subscription. And that's just because we lowered budgets to try to do that. Let's see, we spent about $8,000 on ads. Okay, we made $8,000. $700. So fuck, definitely not profitable. Huh, it's weird that we're still having such high CACs because yesterday the CACs were lower than they are today. These are like the uncertainties in business where you never really know what's going on. Sometimes you'll tweak a variable, it fucks something up, so you're like, shit, let's turn back. And then you turn back the dial to go to the previous variable, but then it's too late and you never get as good as a result that you once had. That happens all the time. You know what? I think the subscription is going to save us. Good morning, guys. 11 AM. Having the subscription option under the Buy Now button, we were just getting so many people opting in. It was like 70%. Thought like there's no way this could be true. People just might not be realizing. We just moved it above the Buy Now button. We're gonna see if the attach rate holds. I'm going to get ready, order myself some Dunkin' Donuts. It may be just like a hot chocolate and then the egg wrap or something. The flow doc, it's white. It's not gray. So Eunice is our designer. He's currently working on updating this. I just had the idea today. I was scrolling through Instagram and I saw someone launch this like octo pouch product. This would 100 fucking percent be a winning product. 1 million percent. I mean, my girlfriend uses one of these. All of her friends use one of these. Everyone my age that's a girl uses one of these. So I think if we ran ads for it, it would go ballistic. I just have to decide, do we want to stay in the tight flow niche of productivity, or do we just want to choose any winning product and run ads for it? I don't know yet. We'll see. We just got dinner, and Henry and Alex thought it would be funny to leave a $10,000 tip on my card after I left. So I got both of their cards, and we're gonna subscribe them to Abbott's platform. $10,000, they just spent. You can afford $50 a month for the rest of our lives. Dude, I posted their cards in my story too. What? What?

No way!

Zach, what do you think about the fact that we left a tip? A lot of people DMing me saying I was really wanting a new necklace. You left the 4 numbers at the end the same. Yeah, well, to scare you guys. That's to scare us? Yeah. I've been recording this entire time. Ooh, are you gonna post it? Oh, please don't post it. I just did our weekly creator call. I like gave them some wisdom and I was looking at the data with Nick. So the subscription button above the Buy Now button, the attach rates fucking held. They're the exact same, 69% and 63%, and now there's 67% and 69%. It wasn't more deceptive, like people knew just as well as they know now. The conversion rate is actually slightly decreased with it above. But yeah, so it's like stacked 1, 2, 3. So I think this could be why the conversion rate's down a little bit versus when we put it under the Buy Now button, because they have to to pay for the $40 doc, which verifies that they actually have money on their card. For like apps in the past and other things, you just give a free trial, not charging them anything, then so many cards will decline. So like almost all of the trials are actually converting, which is amazing. We're gonna make like almost an extra $20 per user, which is an extra $20 we could spend on CAC. And let me actually just show you guys, our average order value is something like $44. We spend about $15 per order filling them. That leaves us with $29, which if we didn't have marketing costs, that would be our profit. But we have marketing costs. We could spend up to $29 to acquire a customer. Any more than that and it would be unprofitable. With the subscription on top, $40 a year, let's be conservative, so at least 50% of those are actually going to keep their subscription checked. So that brings us to $20. Out of the people that start a trial, at least like 60% are going to convert, which again, it's looking like it's going to be a lot higher. 60% of $20, $12. And so this $12 gets directly added to the $29 number, which takes us to $41. Now, an average business person would be like, okay, we have $41. Great, we've increased the amount that we could spend by about 50%. Now this gives us a lot of wiggle room to spend more, but let's still stay under the $41 and then we'll be profitable. A smart business person would recognize that this $41 is a recurring subscription. The smart business person would spend $41, would try to get as close to that number as possible without going past it. In a year from now, I will make money. I will make the profit from the renewals. And also, these are like super conservative numbers. Tomorrow morning we're going to set a 4-way split test live. So we're gonna test $40 a year, $50 a year, $10 a month, and then we're gonna try a weekly. We're gonna try $4.99 a week, which is common pricing in apps, but I don't see it much in e-com. Maybe like a month, maybe 2 months to really know, at least to know like what the monthly renewal rates are gonna be. I am so fucking am because this data is looking so promising right now. What's up, you legends? Good morning. We are now setting— everyone will see a subscription now. 25% will see $40 a year, 25% will see $100 a year, 25% will see $5 a week, and 25% will see $10 a month. I decided that I'm just gonna build out a customer support dashboard for us. Maybe it will have like like an alert system where if on a specific day there's all of a sudden an influx of customer support notifications on like a specific thing. It is currently 2:32 PM, so let's see what time it finishes. It's now 7:08, and I've just been working. I had some like calls in between and some distractions, but essentially what's gonna happen is the emails come in, they go in the queue, and then the AI will use the guidelines. The guidelines will kind of be a lot of documents you could give to give it like context on how to handle these queries, and then it will respond, put it in the responded, and if it's something that requires a human, it will go to the escalated folder. All right, what's going on? All the information is very clear. Confirm OTP, Sky text you a code, Sky text me, I book. Yo, what do you think about the color black? Color black? Yeah, we're keeping that in, by the way. Yeah, leave it in the comments who you think someone in this room has never Good. It's 9:40, guys. I'm still grinding. Everything is erroring out right now, so it's just like analyzing one by one, then putting the error state on. Yeah, I am fixing this. Alex is back and it's 11:30. We switched places on the couch. We are cooking. I'm almost done. Like, I'm wiring it up so it could actually cancel and refund orders for these user. Okay, it's 1:15 AM. I just got off a call with Nick. He's going to make it more production ready because I just did a lot of things locally. But yeah, I'm so tired. It's 1 AM. I have to go to bed.

I don't know if like I trust like the intelligence tracking, if that makes sense. It's kind of what we already discussed. Like, I don't know if it cookies people the right way. We We could also, like, when it comes to positioning of Flow+, like, we could potentially still run it in the way we are, but make it very clear in the funnel on the, on Shopify, on our product pages, like, you get everything you need to, like, use the core features of the alarm. And then there's this other section.

Just unchecking it would accomplish that. Unchecking the subscription by default.

But I'm in the funnel, like, like, it's just like this new thing you gotta consider and think about. And that's That's my two thoughts. That tells me like Brick's going for $60. If they can run it $60, then they have a new customer offer, right? I think we could run at $50.

Well, I just think that there's something more to be done here, something more to be tested.

All of us call like 10, 20 people and ask them like, why didn't you make a purchase? Like, look at your existing— This person is not available.

Hi, my name is Zach Yadegari. Hi, this is— hey, how are you? Is this Sierra? Yeah, who's this? Hey, it's Zach Yadegari. I'm one of the co-founders of Flow Alarm. I saw that you just went on our website and you were thinking about purchasing. I'm actually calling because we launched the store recently, and what, what were your thoughts looking at it, and why did you ultimately decide not to purchase?

One of my biggest things right now that I'm dealing with is just getting out of bed. Yeah, I do scroll a little bit, but, um, just right now I'm kind of still looking at all of my options.

Did you by any chance see the— that there's an option for a subscription? Is that like, if you were to purchase, is that something you think you would move forward with or you wouldn't?

Potentially, yeah. I was just kind of scrolling around looking at different things.

Was it clear that you could use it without having the subscription?

No, but I also didn't look that closely into it.

Thank you so much, Sierra. You've been super helpful. Yeah, of course.

Good luck, guys.

All right, thank you. Bye-bye. It's, uh, 10:30 PM. I was just with Alex hanging out, and only some of our ads are from the affiliate creators, and most of our affiliate creators are on the 10% plan, not 15%. Am I seeing a profitable day? Hopefully the CAC keeps going down tomorrow. And I started looking through our graphs. We use Triple Whale, and I realized all of this data is fucking inaccurate. We're losing money off of just the doc without the subscription. Also, let's just check in on how the A/B test is doing. But what I'm more interested in is the attach rate. How many people that subscribe are actually subscribing to the plan? So it looks like these are the two that are the fewest to be— that people are subscribing to. And then the $10 a month and $40 a year, I don't know, like, I don't know how profitable we are. We can make an offer saying, hey, if Flow doesn't successfully get you out of bed, you get your money back. I guess I honestly, I didn't know it was this bad. So I'm like really stressed right now. I've been looking through the Facebook Ads Manager and for whatever reason our CACs just spiked today. I mean, I have to think it was because we added the subscription to every product and maybe it's gonna come down or something, but right now Things are just looking way worse than I thought. I mean, I thought we were golden with these subscriptions.