How Adapty Reached a Couple Hundred Mobile App Customers and Raised $500K by Early 2021 (Interview with CEO Vitaly Davydov)

Introduction and Company Background

Nathan Latka

00:00Hello, everyone. My guest today is Vitaly Davydov. He is building a company called Adapty as the founder and CEO. They recently went through 500 Startups, and they're helping people think about how to a b test pricing and paywalls. Vitaly, you ready to take us to the top?

Vitaly Davydov

00:14>> Yeah.

Launch Date and 500 Startups

Nathan Latka

00:15Alright. So when did you guys launch the company?

Vitaly Davydov

00:17>> So we launched the company in October 2019.

Nathan Latka

00:202019. When did you go through 500?

Vitaly Davydov

00:24>> So we were applied at October 2020 and graduated just in February.

Origin Story: From Easy10 to Adapty

Nathan Latka

00:31Okay. So tell me a little bit about, like, why your brain is uniquely positioned to think about AB testing and paywalls. Did you have some horror story in your past about pricing or what's the background?

Vitaly Davydov

00:44>> Yeah. So first of all, we're doing AB testing and paywalls all about mobile and in-app purchases. It's pretty important. And it's all started back in 2016 when me and my co founder were working at Easy10. So in 2016, Easy10 was a top five mobile language learning application. So it pretty huge. And we were pioneers in mobile subscriptions. And I was the one responsible for price testing and user acquisition. And I think for the next two years,

01:18>> we tried everything possible. So, you know, we bought a lot of traffic. We did different experiments from different trials and etcetera. And one day, we decided you know, we built an internal prototype, and we decided one day, hey, maybe we can build a different kind of business out of it. You know, we solved our own problems and decided to build just a global product. And that's how we started Adapty. So we have our own experience working

01:47>> with it. So you launched in 2019.

First Customers and Product Hunt Launch

Nathan Latka

01:50Now, did you build for, like, a year with no customers, or did you have any revenue in 2019?

Vitaly Davydov

01:56>> So... Because we we started development in October, we we didn't have any clients in in 2019. And we had... We got our first client in in January 2020 with the first super early version. And during the next four months or even five months, we've been doing more, you know, beta and testing, how we can do it, how we can manage it, and etc. And then we launched publicly on Product Hunt in June 2020. And since that,

02:28>> you know, started acquiring new users.

Nathan Latka

02:30Tell me about the Product Hunt launch. How many uploads did you get, and were you able to convert the Product Hunt users into paid customers?

Vitaly Davydov

02:38>> It's a good question. So it was a pretty... You know, for us, it wasn't any kind of milestone. So we just decided, hey, maybe it would be cool to celebrate it with the Product Hunt launch. And so we created creatives and launched it. We didn't buy any upvotes, so we organically get over 500, as I remember, upvotes. I don't remember the exact number right now.

Nathan Latka

03:06Yeah, yeah. Was healthy. You got about four zero five upvotes.

Vitaly Davydov

03:09>> Yeah. Completely organic and healthy. And I think we got maybe 10 customers out of it. I really don't remember. I mean, back in this time, we didn't measure our marketing performance. So it was also almost all organic.

Customer Count and End Subscribers

Nathan Latka

03:28So so... I mean, how many customers are you serving today?

Vitaly Davydov

03:33>> So we are serving a couple of 100 of mobile developers.

03:39>> You know, and in total, we serve over over 2,000,000 of subscribers. So because our clients are mobile apps with subscriptions, and we serve hundreds of them, and we serve over 2,000,000 of end subscribers. I mean, people.

Nathan Latka

03:56Yep. So you're mainly selling to the developer then, not a marketer?

Vitaly Davydov

04:03>> I would say that we're selling to software companies, but our clients mostly are marketers. Adapty is built for... Adapty is built for two kind of people. First of all, it's for developers, because we significantly increase the speed of deploying and implementing in app subscriptions. And second, and mainly, it is built for marketers because it can dramatically increase, you know, your conversion rates.

Nathan Latka

04:32Yeah. But that sales process is very different. Selling Adapty to a marketer is very different than selling it to a developer. So when you look at people actually paying for your software, is it mainly the marketers, the CMOs, or is it mainly developers, the CTOs? It

Vitaly Davydov

04:48>> depends on features that they want to use. So I think maybe it's 50/50 to... Between CTOs and CMOs.

Pricing Model and Usage-Based Upsell

Nathan Latka

04:59I see. Okay. Got it. And and again, it's earning 200 today. Now you have, obviously, we have to talk about your pricing. After all, you are a pricing optimization tool. So you have a free plan and then a $99 per month plan and then sort of a pro plus option. What's the average customer paying you per month right now?

Vitaly Davydov

05:18>> I'm not sure that I can disclose this information right now, if it's fine. But our plan is dynamic. I mean, pro plan is starting with 99 per month, but it's extending more as you grow. So it has a dynamical dynamical

05:38>> point here.

Nathan Latka

05:39Just to be clear, So it's fair to say that all paying customers are paying more than $99 per month. Some of them are paying much more.

Vitaly Davydov

05:46>> Yeah. Yes. Of course.

Nathan Latka

05:47So so help me understand. Again, a lot of SaaS founders, when they launch, they don't know how to drive upsell revenue or you're calling it dynamic revenue. Right? What's the dynamic thing that you upsell against?

Vitaly Davydov

06:00>> So our thing is revenue. So we have some revenue threshold, which is 20 k per month. And if you're a developer, you use Adapty for 99 per month flat if you're below 20 k. But after that, you pay $5.99 on every thousand if you're greater than 20 k. Does that make sense?

Nathan Latka

06:22Oh, wow. Yeah. Yeah. Yeah. Yeah. And and so the... I guess I guess that's easy to explain to a new potential customer, but why did you decide to have that be, like, the driver, for example? I I could say, look, lot of our revenue growth has nothing to do with Adapty, but now I'm paying you $5.99 for all the extra revenue we're tracking. Like, this doesn't feel fair.

Vitaly Davydov

06:44>> We believe it it feels fair. And the reason is, as more you grow, as more technical issues you have, and as more, you know, as bad it is for you to have any issues with your billing system, right? And it's, as it's more harder to run experiments as you grow bigger and bigger. So that's why we believe our model is fair. You know, if you compare 10 ks per month MRR versus 1,000,000 per month MRR, they're

07:18>> completely different in how they grow, you know, in server loads and etc. So, yeah, we believe it's kind of fair. Of course, we provide the volume discounts. If you grow super big. But, yeah, we think it makes sense.

Nathan Latka

07:33How much total MRR is flowing through your system currently?

Vitaly Davydov

07:41>> I don't know. Maybe

07:46>> over 20,000,000. I think even more.

Nathan Latka

07:49Yeah. I mean, that's the number. Right? If you grow that to hundreds of millions or a billion, I mean, that's obviously a great indicator for the business.

Vitaly Davydov

07:56>> Yeah.

Nathan Latka

07:59And do you do you... Did you build this? Did your old boss at the at the prior company you guys came from, are they paying for the software?

Vitaly Davydov

08:07>> Sorry. What do you mean?

Nathan Latka

08:09You guys said that you have this problem at your past company. So naturally, one of your first customers should have been your past company, is your past company.

Vitaly Davydov

08:17>> Yeah. Yeah. Of course. So they joined... Yeah. Of course, they joined as a, you know, first first company, and they were testers. Of course.

Team Size and Co-Founders

Nathan Latka

08:24Yep. Talk to me a little bit more about the team. How many of you guys are there?

Vitaly Davydov

08:27>> So now we're a team of 15 people. And by the way, in our landing page, you can find a page for a team and jobs, just in case. Yeah. And we're a team of 15 people and three founders. And all these guys with whom we founded the company, worked before. And we founded a company before. So it's not our first company.

Nathan Latka

08:49So three co founders. How many engineers are on the team?

Vitaly Davydov

08:52>> Seven.

Nathan Latka

08:53Seven engineers. Okay. And when you... When the three of you guys came together to launch the business, I mean, the most dilutive event in any company's history is your co founders, and then it's your seed round usually. How did the three of you guys decide how to split equity?

Vitaly Davydov

09:11>> I don't know. We just negotiated. I mean, it it wasn't a big problem for us. So we just discussed depending on our, you know, needs and responsibilities, it was just split that. So I think we did it in a fair way.

Nathan Latka

09:28Did you guys just do thirty, thirty, 30?

Vitaly Davydov

09:32>> No.

Nathan Latka

09:33Okay. So... Yeah. So so that... That's what

09:34I'm getting at. Right? Explain why somebody would get a little bit more in terms of what value they're bringing to the business.

Vitaly Davydov

09:41>> I think it depends on again, responsibilities. Because companies sometimes can live without somebody. So I strongly believe company cannot live without CEO. That's for sure. Most companies cannot live without head of sales and CMOs. But probably you can live without, you know, CTO. You can hire CTO. It depends on your business.

10:13>> That's super simple. So given these numbers and given this idea, you can calculate your equation.

Nathan Latka

10:20All of the... Are all of your founders still active? Crunchbase only lists you and Kirill. Did you guys have a bit of a co founder fallout? Who's the third co founder?

Vitaly Davydov

10:31>> Yeah. We didn't add the third co founder. He's VP of sales and COO.

Nathan Latka

10:36Oh, you added him later?

Vitaly Davydov

10:39>> Yeah. A bit later. Maybe we added him in in April.

Nathan Latka

10:45Okay. Okay. Got it. That makes good sense. So 15 people on the team, three co founders, seven engineers. Do you have any quota carrying sales reps or no?

Vitaly Davydov

10:55>> We have advisers, and we have some other guys like designers, you know, You

11:03>> one have full time that is managing a quota currently?

Funding History and 500 Startups

Nathan Latka

11:06No. Okay. Okay. Got it. Interesting. And then talk to me about how you funded the business. I think you've raised some from 500 startups. How much have you raised to date?

Vitaly Davydov

11:16>> Yeah. So we started bootstrapped because it was our second company and we had some savings from our last company. Then we raised our proceeds from two funds, one angel and 500 startups.

Nathan Latka

11:29And what year was that?

Vitaly Davydov

11:31>> It was 500 k.

Nathan Latka

11:32In what year? Last year?

Vitaly Davydov

11:34>> In 2020. Right? In August? Yep.

Prior Company: Machine Learning Consulting

Nathan Latka

11:37Okay. Good. So so raise 500 k from 500 Startups. And and you keep talking about the prior company. I'd love to learn a little bit about that. What company did you guys work on before this?

Vitaly Davydov

11:46>> Yeah. So we work at a company called Patecho Labs. It's probably hard to pronounce. But what we did is we did the consulting in machine learning, mostly for mobile apps. So we did things like chatbots, natural language processing, some things about computer vision, running and deploying machine learning models, you know, all these mathematical and statistical stuff. And the reason is because we have a pretty strong degree in computer and data science. So it was kind of

12:20>> a logical way for us.

Customer Acquisition and Growth Tactics

Nathan Latka

12:22And, Vitaly, when you take learnings from that company, plus your first two years in business here at Adapty, and you're looking at growing from 200 customers to 2,000 customers, how are you getting customers today? What... What's your CAC?

Vitaly Davydov

12:36>> So there's there's a number of ways we can we can grow. First of for us, it's kind of important to grow by word-of-mouth. Because people know us and they tell other developers about how

12:50>> cool is our product, and it costs us nothing, except of maybe technical support.

12:58>> We also use some organic growth. Again, people search for us. We do run GDU review campaigns. It's all pretty standard. I mean, we don't have anything special here. It's mostly organic.

Nathan Latka

13:11Yeah. But organic is kind of an easy answer. Right? When I hear someone tell me that it's just organic growth, it tells me they don't actually know how to pour fuel on the fire. They don't actually know where growth is coming from. They just say word-of-mouth and organic. So, I mean, have you identified things you can pour gas on to really drive faster?

Vitaly Davydov

13:29>> I would say yes, but I don't want to disclosure it.

Nathan Latka

13:33Okay. Why is that? I mean, is there something you can teach us there without compromising, I guess, the business strategy?

Growth Advice: Run a Blog, Test Fast

Vitaly Davydov

13:40>> I mean, it maybe it's pretty sensitive because we have a kind of strong competitors here. But I will say that, you know, just if you want to drive for gain equal growth, which is, I believe, kind of important for B2B and SaaS companies, do blog. Run blog, run podcasts, run, you know, some... Just create an information, useful information, and develop stickiness so people read it more, share it. Yeah.

Nathan Latka

14:12But this idea is not revolutionary. Launching a blog is like playbook 101 stuff.

Vitaly Davydov

14:17>> Exactly.

Nathan Latka

14:18How are you going to execute in a way that your competitors are not executing?

Vitaly Davydov

14:23>> I mean, it's not a big secret how you grow. You just need to do it.

14:29>> That's my personal opinion and what I've been taught in 500 startups. I mean, they have pretty standard ways how you grow in running a blog. I understand that it sounds pretty simple. But when it comes to execution, you need to create a content plan. You need to understand what you need to write about. You need to do it in an interesting way so people must read your content and understand, maybe convert to paid subscribers and etcetera.

14:58>> And it's all very company specific. So there are tons of internal secrets here. But in general, there's nothing special. You just need to do it and do it and run as many experiments and as fast as you can. This is, I think, just a general idea around when you run a company, just try to do something fast. Yep. Not something, but everything.

Nathan Latka

15:22Well, we can't do everything. We can certainly test fast and then keep the winners and then go from there.

Vitaly Davydov

15:27>> Yeah. Just test fast.

Revenue Discussion

Nathan Latka

15:28Yep. And tell me before we wrap up, I mean, can I take 200 customers times that minimum price point of a $100 a month? You guys are doing more than 20,000 a month right now in revenue.

Vitaly Davydov

15:38>> I don't disclose this number.

Nathan Latka

15:40Well, you already disclosed 200 paid customers and I already asked you what your minimum price point was and you said a $100 a month. So can't I just multiply those two together to get 20,000 a month in revenue?

Vitaly Davydov

15:50>> Well, you can.

Nathan Latka

15:52Great. So so why would that not be accurate?

Vitaly Davydov

15:57>> We have some volume discounts, for example. We have some, other discounts, so it's kind of different.

Nathan Latka

16:04I see. I see. Do you think you can break $20,000 a month this year?

Vitaly Davydov

16:08>> Yeah.

Famous Five Rapid Fire

Nathan Latka

16:09Got it. Well, hey, listen. We're rooting for you, man. Let's wrap up here with the famous five. Number one, what's your favorite book?

Vitaly Davydov

16:17>> It will be...

16:21>> The Last Book of Ben Horowitz.

Nathan Latka

16:23Okay. The Hard Thing About Hard Things?

Vitaly Davydov

16:26>> Yes. Exactly.

Nathan Latka

16:27Number two, is there a CEO you're following or studying?

Vitaly Davydov

16:31>> Sorry. What's the question?

Nathan Latka

16:32Is there a CEO you're following or studying?

Vitaly Davydov

16:39>> Probably no. Okay. I just tried to pick different ideas from different CEOs.

Nathan Latka

16:45No problem. Number three, besides your own, what's your favorite online tool for building Adapty?

Vitaly Davydov

16:51>> Webflow.

Nathan Latka

16:52Number four, how many hours of sleep do you get every night?

Vitaly Davydov

16:56>> Sorry. One more time?

Nathan Latka

16:57How many hours of sleep do you get every night?

Vitaly Davydov

17:02>> Maybe six.

Nathan Latka

17:03Six. Okay. And what's your situation? Married? Single? Kids?

Vitaly Davydov

17:09>> Have a girlfriend.

Nathan Latka

17:11Okay. No no kids run around?

Vitaly Davydov

17:13>> No kids. I'm too young for kids.

Nathan Latka

17:16Old are you?

Vitaly Davydov

17:17>> 26.

17:18>> 26.

Nathan Latka

17:19Last question. What's something you wish you knew when you were 20?

Vitaly Davydov

17:25>> In my in my in my 20.

Nathan Latka

17:27When you were 20, what's something you wish you knew?

Vitaly Davydov

17:31>> Oh, man.

17:34>> But it's not scary to start something when you're alone.

Nathan Latka

17:39Guys, Adapty is helping you do pricing and AB testing live real time on your paywalls. They launched just a year and a half, two years ago. They raised $500,000 to get going over 200 customers today as as they look to continue to scale, got their first 10 customers from a product hunt launch. Vitaly, thanks for taking us to the top.

Vitaly Davydov

17:55>> Thank you, Nathan.

Nathan Latka

17:58One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday one

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