Episode Transcript
Hello, it's Andrew from Xcel. And today I'm going to be talking about XO two. 2.0 products have versions. Why don't companies? I always thought that was kind of strange that companies don't have explicit versioning, like things change over time. People change the company changes the product changes. You might pivot 18 times and. It's kinda nice to have like a, a little line in the sand that you say, you know, this was the old us and this is the new us, and it's a nice way to make abrupt changes in. You know, I imagine when I had previous companies that were a little bit larger, it would have been nice to have this demarcation and just say, you know, yeah, that was the old way we were doing things and this is the new way. Typically the reality is that when you want to make a hard change like that, the only real way to do it is to let people go and bring new blood in that is typically the path of least resistance towards.
Large changes in a particular company. But I think that if you have explicit versioning and you get buy in on that, that might be another way to do it with the existing team members. Anyways, first a lesson. So here's a kind of riddle and a very strange lesson in psychology. So we purchased growth bar. And if you've had a meeting with me recently, I I've I've probably, you know, screamed this at you to get your opinion on this too. But so we purchased grope, regrowth buyer and it required a credit card to sign up.
So, you know, you put in your email and password, you have to put in your credit card and it's a two week free trial. But you have to put your credit card in there and then it auto charges. Once the Once the free trial is over. So there was that right. That's that was kind of how it was. And they were blocking India. So Andy, any Indian IP, they were blocking it. There was a lot of like spam and stuff like that. So that's what they did. So we've done this a bunch before, right? This is acquisition.
Number 10. We know what we're doing. We have a playbook. We we've seen this. We've seen this play out before. We're going to remove the credit card. We're going to open up the app to India. We're going to, and that should increase sign-ups that should obviously increase at the top. Top of funnel. And our assumption was that conversion should increase because that's historically what we've seen. Except the demand dropped to literally zero I'll show you the charts in a second, but zero, like, like absolutely zero. Like no conversions. There was just churn for three weeks. It was an absolute nightmare. So almost without exception, when we buy a new company, I personally still like go in and like break production for at least about an hour. There's just like complete downtime on the application. Usually just I'm trying to understand like how to deploy something or how to fix something or work through the documentation that's been provided, et cetera, but almost always happens.
And that's like, you know, I think the team is getting a little tired of me. Like, okay, we buy something. All right, Andrew's going to break it for a while. And then we fix it. But when we fix it, we document it and then it usually. It doesn't happen again. But this is the first time that I've absolutely tanked a new acquisition in the first 30 days of ownership. So an absolute dumpster fire. So if you're watching this I. The, the the charts, these are from stripes. So purples new customers, yellow is churn, steady state. You know, we might have like eight to 10 new customers a day and some of us would convert. These are, these are just kind of free trials, which, which Stripe in this context. We'll count as a, as a new customer. So that's that one it's like, it's looking pretty good. It's not positive. Right? There is a growth rate on, on most months, I think all months, except for two. And the last two years. We're positive growth. Only two months were negative growth and it was, it was less than a percent if I, if I recall correctly. So then the next image is, is when we remove the credit card and we opened up the app to India. So signups went like crazy, right? Like we were getting hundreds of signups a week, way, way, way more because before a sign up right. Required a credit card. So signup was like a really high intent. Thing. And then of course, when there's just like, anybody can, can sign up that, that doesn't quite mean the same thing as it does when you have to put it in a credit card. But I have never seen this where you remove a credit card and basically demand drops to zero. So. The first couple of days, right. Are the two weeks where it's a two week free trial. So you got to wait. But this just never picked up it. This was week three and, and something felt and looked very wrong with the numbers. And we were just bleeding. It was just churn, churn, Sharon. There were no new customers. So after about three weeks, I said, you know, uncle I've had enough pain. Put it back. So we put the credit card back, sign up back, but we kept India open and you know, this is quite recent, so we don't have, we don't even have more than a week's worth of data, but it's already looking. Looking much, much better. After put, putting the mandatory credit card backups. So here's the riddle. Why did this happen? The most plausible explanation is that by forcing the credit card, you're removing choice. So people are exploring a bunch of these tools, right? Cause there's a ton of competition now. And by paying there's something about that that stops their search. And they say, this is the tool that I found, this is the tool that I'm going to use and I'm already paying for it. So I might as well use it and then they kind of stay right. You know, whatever You know, LTV aside, but just sort of that, that, that initial point. That's the most plausible explanation that, that we could come up with, or the timing of this was crazy. And August was going to be a down month, no matter what we did. And then the third one is just like, Jesus, God only knows. I have no idea. So, if you have any thoughts on this, I, I. I'd I'd love to I'd love to hear them. So the idea that the single largest check that I've ever written in my life is being held up by sign. Some kind of psychological factor is, is scary as hell. This brings me to another point though, is when I talk to people about XO or people that are thinking about like doing something like us, One of their first thoughts is like, oh, well, if I buy company a I can take all the learnings and apply them to company B and then company C gets easier. D gets easier. You know, you can just kind of copy paste stuff. You know, like the Vista all software tastes like chicken. The reality is though it's not that easy. We've done this pricing experiment multiple times. It usually works, usually works. So my new answer is that we will eventually have a playbook and I've already started building a playbook over robust experiments, but they're probabilistic.
So we will have to be very cautious about tracking the results and across different companies over time. And. And it is very difficult when you think about that too. If I have a developer product and I'm comparing it to some. Sales tool. Is that even valid to, to compare those two, even if the pricing experiment is roughly the same. So at some level. Yes, right. It's, it's valid to compare those, but, and in many cases it might have a completely different outcome in a completely different market. So that is, I think what our strategy will be in terms of playbook is not only will we have to have the experiments, but we'll have to sort of, you know, and this is, this is a, this is a very interesting topic to how do you capture sort of like this, the, the entire state of the company at that time? For any given experiment, otherwise it's really difficult to tell with any kind of with any kind of probability. What is going to happen if you apply this to another company? So, if you can't tell it's been an exciting. Month and a half, two months over here. All right, so back to XO. So, so we've been around for about two and a half years now. The initial group has had a hundred percent turn turnover. We now only have four full-time people, three developers, one partner, Danny. And then, you know, contractors agencies and stuff like that. Last month we let go of a longtime customer support person, a long time developer, and those conversations always, always suck. We also shaved a thousand bucks over our, our cloud bill. And you know, we had to pay right. The. The engineers on the team to go and do those kinds of cost optimization efforts. So all of this with letting people go doing stupid stuff or stuff that feels stupid, like cutting down on costs. Is never fun, but as part of 2.0, getting profitable is really important to us. And this is kind of our, our year of efficiency. If you've been following what Mr. Zuck has been, has been up to and he has done it to tremendous, tremendous results. At the moment, all three of us, all three partners are fully allocated. So as of today, we've closed the fund. So we've raised just over 500,000. That's before we put in our 10%. So we're looking at deals between five and 600,000. And we plan on running in the black for the rest of the year. And if we continue holding onto our our, our customer base, we should see some decent growth still for 2023. And then looking good for 2024. So, what is Two point, oh, I just put it into three bullet points. I started business school last week and I've been kind of like kicking around the idea of kind of a culture doc. But I only came up with three bullet points so far. So one is we're profitable. That one's pretty clear, right? So when we go to buy something, we can use this to filter. Should we buy this? Is it profitable? Will help us get profitable, et cetera, et cetera. Number two, we deliver. Excellent.
So when a developer submits a PR. They could say, is this excellent? Right? Is this code excellent? Is this the right way to do this? Are we cutting corners? When I'm reviewing this pull request, is this. Done the right way or should we spend a little bit more time and you know, clean up some of the tech debt or spend a little time organizing the code base a little bit better. Is this excellent? It's not good. It's not great. It needs to be excellent. And then showing up for each other. Right.
So. If let's say you're struggling to figure out if you should communicate a thing or not or how to communicate it or when to communicate it. Part of that is showing up for each other. So in, in my view, that means in at certain times over communicating or if, if there is bad news or somebody is going through a difficult period of time. You pick up the slack, right? That's what showing up for each other means. Means to me. So I don't think. That I'll be riding any kind of Ray Dalio's principles level stuff anytime soon. But you know what. It's all right. Everything starts with an aspiration. Flip fund update. As I already alluded to, we closed the fund this week over a 500,000 which is really cool. We have an email list of like 850 subscribers. And we're able to raise about a little over half a million from just 800. Email subscribers. And almost everyone that invested was a w had been reading us and following us for a little while, which is why. We were able to have such a kind of high level straightforward deck, because I think the people that had been reading our stuff for a good while already had a pretty high level of trust in what we were doing and how we were doing it. And so we were able to raise that relatively quickly. The only real buy box change for this flip fund that we might relax is for our own portfolio. We've been focusing now on product led growth type companies for a bunch of reasons I've already talked about. But for the flip fund specifically, if we had more of a sales led motion, I think we might just be able to control our destiny a little bit better. In terms of having to double a company in 24 months, right. If you can put your customers on a spreadsheet and go get a yes, no. From each one of them. Obviously in practice, that's like, you know, a whole, a whole thing, but it is nice psychologically to say, we sell to. Dog daycare centers, whatever. And I can put all of those in the U S on a spreadsheet, and then I can go and try and reach out to literally every single one. That is a very nice, that is a very nice, clear. Process at least relative to product led growth, where you're running a lot of experiments. Most of them fail. Some of them work. Even if they do work, let's say for instance, growth bar has one particular landing page. That's like a free tool. It's like a metadata generator thing. And that brings in a shit ton of traffic to growth bar. But with a product led growth experiment like that, the next question to ask is like, okay, the experiment where we're bringing in traffic, but what's the quality of that experiment or what's the quality of that traffic does that traffic convert? Are we attracting the right people, you have all those problems. And then what I suspect is partly happening with growth bar too, is that. The traffic that we're getting is not bringing in the right types of people that are our ideal customers. That's always a challenge with product led growth is. Yes, not only are you trying to, you know, post short form video across 19 different channels on a daily basis or multiple times a day, just to cut through the noise. But then the people that you actually do reach need to also be you know, pretty well aligned with your value proposition. Otherwise they're not going to pay. EXOS community. So on another note, I I've been dancing with this idea and I'm a huge fan of Cody Sanchez and what she's done with contrarian thinking. You know, in the, and then the contrarian capital fund that she's raised from that community. Just awesome. She seems to be like a full-time content creator. And I know she has at least now a team, but at a certain point she didn't. Right. And so I've been extremely impressed with how she's managed to put all that together. And I'm dancing with the idea that XO could do the same thing. We would just focus on SAS. So we do have a small community on discord. There's like, I don't know, 50, 60, 70 people in there now. But it's just pretty useless in there. Like nobody's asking questions. No, one's really getting any value of it. Value from it. And if you have any suggestions on how to make a community like that, more valuable. I I'd love your ideas. You know, and I've also been thinking about creating a course, but I, man, I have a lot of angst around being one of the people that create courses, even though I consume them and I have no judgment on the people that create them. And sometimes they're utterly useless and sometimes they're extremely valuable.
And so, you know, it's, I guess it's one of those things where I just kinda need to, to either not do it right. And just find another course of action or, or just do it and get over it. But if I do, it'll probably. B, either free or very cheap at first until I'm convinced that there's a significant amount of value for for people out there. So that's it. Echo 2.0.
