How Avocode CEO Anh Vu grew to $115.5K revenue and 3.8K customers in 2023.

hello everyone my guest today is vood he's helping designers and developers collaborate faster originally a designer he founded two companies so far with the first company he built 13 products for designers and developers and generated around a million in revenue with his current company avocado they're at around 1.2 million bucks in ar right now and back in 2016 went through 500 startups accelerator in mountain view vood you ready to take us to the top yeah love to all right so you're doing about what 100 a month right now in revenue yeah we're about 110 actually at the moment so a little bit both then uh and you just mentioned across how many customers uh we have about uh three thousand hearing customers three thousand eight hundred yeah 3 800. that's great okay and so i obviously you've been on the show before i think it was like two or three years ago but for people that are not familiar with what you do tell everyone what you do sure so uh we built a collaboration platform that helps designers and developers collaborate so they can build mobile apps or websites or any digital products significantly faster and we're doing that by basically solving a problem that designers no longer have to manually prepare design assets for developers and all they have to do is basically just upload the design and developers can easily grab whatever they need from the design automatically you know image assets code types um fonts colors these kind of stuff so that's what we do and help us understand growth so you're doing 110 grand a month today in revenue what were we doing a year ago uh i think uh last year we were at around uh 80 something like that 80 yeah yeah that's great and where's the growth coming from how are you adding new customers secondly all of that is coming from inbound organic growth we do content lot and um you know basically customers are coming to us not uh doing we don't have any sales team anything like that uh not doing any um sales and basically just creating content we do uh we have a blog post we have a free tool that generates about eight thousand leads every month what's the link what's the link to the free tool uh it's basically appcode.com design converter something like that yeah it basically is a conveyor that converts uh design different design uh files to to to to the one that you want so basically that's a free tool uh yeah you call your design your design converter this converts your psd design to a sketch file that is that is right that's what it does interesting um and then you have up why do you have um the upvote on user voice button on the website uh so basically uh currently we only have like a ps4 sketch and obviously there are other formats as well and um the upvote basically helps us to see what kind of like formats uh users would be interested in for us to build so it's like to um uh for us to know what to do so like adobe xd to sketch converter has 1082 upvotes you're essentially using this to drive your product roadmap you're letting your users use your support system user voice to tell you what to build yes that is correct yeah uh and we do that uh not only on user voice we talk a lot to our users because i think it's very important to understand uh what your users want yeah now if i search convert pds or sorry psd to sketch in google i'm doing this right now ah you come up number one okay so you've optimized for these kinds of search terms i'm looking at the site i land on have you done anything to this from an seo perspective to make sure you rank number one uh we well we focus on those keywords convert psd or phd to sketch and uh basically uh did a lot of seo optimization on the page uh because you know we've done content before and we know what it is about so uh yeah we did a lot of optimization name two things you did on this page that i'm looking at that is not your typical search engine optimization playbook um so what what what did you mean by that or um exactly like people know seo the basics yeah you know have your h1 headers with a good title and blah blah blah name two things you did on this page your convert psd to sketch page that people wouldn't usually expect when they think of seo optimization oh got it so uh interesting stuff is that when we launched this uh sort of converter uh we've decided to put it on the avocado.com um sort of domain because uh that domain was already very well ranked and had a good reputation already so also the url that we've put behind also represents our bike the seo optimization with it so this is the the the fastest uh thing that came into my mind what we did uh when we decided about the optimization so you're saying instead of launching this on its own kind of free website put it under your own to keep driving your own value and then the url it specifically says avacode.com forward slash convert psd to sketch which is the search term people put in google yes that is right and we even bought uh different kind of domains like sketch to psd.com or all bunch of like uh domains like this that would redirect this sort of page so that's what we did as well very interesting okay team size today how many people currently 27. okay 27 people and where's everyone based everyone is based in procter public right now okay so czech republic that's great and then um talk to me a little bit about funding have you bootstrapped or raised capital so we initially bootstrapped to about 30k in mrr and then we've raised uh went also went through the 500 startup accelerator program and that's uh during that time you also raise a little capital so in total we raised about seven hundred thousand dollars from six different investors okay seven hundred thousand bucks and today are you burning capital are you profitable uh so what we're doing is that we are keeping our burn rate very low or close to break even and sort of what we're doing is that we use the uh the growth money that we add every month to hiring to uh are off to like growing the company basically that's what we're doing right so when you say cross the brick even you're saying like you'll burn five thousand bucks a month or ten thousand or what yeah that would be the amount five or closest zero depends on the month okay that's that's not horrible and now are you looking at raising additional capital no uh we are uh quite confident but uh currently uh we're not raising actively at the moment but we of course uh are aiming for the series a but would like to do is uh raise a really strong series that means um not something that we would need money to raise uh the cattle but uh because even if you race at the moment the the capital that we use uh doesn't mean that it will grow exponentially so what we're doing right now is like figuring out uh how to grow faster we're now growing at about five percent month over month and like to get about ten percent to to raise that series a yeah so you want to be adding like 10 grand a new monthly recurring revenue every month basically yeah yeah um when you do raise i mean how much would you want to raise yeah i think uh we'll be looking at uh some somewhere between five to ten okay so let's say you raised five million dollars like what what what in the ideal world what valuation would you raise that out you think um yeah i think would be willing to give up to about 15 percent of the company at that point okay so so multiply that by eight so you're that's like a 40 million dollar pre-money evaluation something like that [Music] you said you give up 15 or five fifteen one five oh fifteen okay so yeah more sorry more like thirty pre something like that yeah um great interesting uh which would be about you're doing 1.4 ish right now maybe you do upgrade to 2 million by the time you race so you're looking at like a 15x something like that is there a lot of voodoo is there a lot of is there a lot of money in the czech republic or do you think you'll come back and raise from the states uh we'll definitely come uh to the state's race uh we already have us investors so uh that's when we initially start and then uh there are a lot of cattle also in uh cities like berlin or london i don't think that czech republic has uh that many investors maybe one or two but they still want to kind of invest with uh stronger investors from london or the silicon valley yeah when did you launch company what year uh 2014 2014. okay and then fast forward today so churn what's your churn rate uh so net revenue journeys are at one point six percent and uh the user trained about five percent net revenue retention uh net revenue retention uh networking nutrient is 1.6 so um okay that's monthly or annually uh that's monthly okay monthly so that means that means you're losing about 25-30 percent of your user base each year yeah yeah um and that's logo churn or revenue churn oh you said revenue yeah that's right yeah revenue term per year now and you said that's also net so you're adding back expansion do you have a lot of expansion revenue or no yeah we have a lot of expansion as well so uh uses upgrades within our product from which plan to which plan is most popular so basically we can leave per user pricing so how the upgrade is working is that by adding users uh to your team okay so over the past 12 months what percent uh what percent expansion have you had on historical accounts no i i can't really uh i don't know that number that's okay but i can say that uh we're adding in terms like expansion is about six or seven thousand dollars monthly in in expansion revenue yeah from old accounts not from signing up new customers no no from just expansion okay i mean so that already puts you at like you said growth month over month right now is five percent i mean that alone puts you at seven percent plus you haven't even added in your new customers you're signing up so what growth are you actually at five percent today or more like fifteen no no it's five uh five to six something like that at the moment okay but you understand why it's confusing you just told me you're adding seven grand of new mrr strictly from upsells yeah but we're also losing that like through churn as well so you know combine everything yeah got it i'm with you now good okay what about uh new customers right so what are you paying to get a new customer that's going to pay you 30 bucks a month uh we don't really pay anything we only well fully weighted so include your content team i know you have marketing content people yeah so we would spend about twenty thousand dollars monthly on like everything i'd say including the content uh the team salaries things like that but we don't actively spend money on ads or anything like that so twenty thousand on the salaries of the people doing content marketing things like that and how many new customers per month are you adding about 300 yeah okay so i can divide 320 000 you're paying like 60 70 bucks kind of rough math but 60 or 70 bucks in cac yeah yeah i mean that's probably uh what we're paying lifetime value would be around 400 okay and walk me through how you calculate that um the lifetime value yep yeah so basically uh to combine the return rate and then um the average revenue per customer so base based on the churn rate we're seeing that the customer stays without about 13 months something like that and then multiply that by i'm determine you produce a per account yeah some something something's off here a little bit because you just said that you said 1.6 net revenue churn monthly um yeah right so multiplied by 12 to get annual that's like 25 annual churn which means theoretically it should take you like four or five years to churn 70 or 80 percent of the cohort which means lifetime value should be way longer than 13 months um you see what i'm saying yeah yeah i i'm kind of looking at bare metrics right now so yeah see what it says because basically basically if you are assuming a lifetime value of 13 months what you're basically telling me is that your churn rate is like eight percent gross per month is that right uh the churn rate of the load return yeah yeah i uh yeah i think it's a bit lower but we've quite lowered the churn for the last couple of months so i was just assuming uh the the length of an average customer to be 13 months because that's like the assumption i have it's like a concern it's a conservative assumption yeah so that's what i had in mind but when i looked at bernie tricks it's five yeah yeah okay very good all right good stuff uh let's wrap up here on uh sorry voodoo with the famous five number one what's your favorite business book uh so currently it would be uh the hard things about hard things from by ben harvest number two is there a ceo you're following or studying um i don't know probably not right now okay number three what's your favorite online tool for building your company [Music] um i use a lot of dropbox paper at the moment okay number four how many hours of sleep to get every night at least seven yeah seven that's good and number uh sorry and what's your situation married single kids uh i'm about to get married uh this year so later too yeah oh congratulations so no kids yet nah and how old are you 27 27 last question what do you wish your 20 year old self knew uh i would probably tell myself to ask more for help because it's always it takes longer to figure out things on your own and if you can get smarter people who have more experience than you then ask for help guys they help designers and developers work together doing 110 000 per month right now up from 80 000 a month just a year ago growing today at five percent year over year 3800 customers paying 30 bucks a month founded in 2014. most their growth is coming inbound via a free tool they have it's just an seo playbook it's a the search term is psd to sketch converter it's doing well 700 000 raised team at 27 in the czech republic burning only five grand per month uh 1.6 net revenue churn monthly spending about 70 bucks all in on cac to get new customers assuming about a 400 lifetime value thank you for taking us to the top thank you as well and have a good one ethan thanks