How Yac CEO Justin Mitchell grew Yac to $1.4M revenue and 1K customers in 2024.

hello everyone my guest today is justin mitchell he's the founder and ceo at yak he also builds products at so friendly.com and runs newton mail now justin you're ready to take it to the top yeah absolutely so i'm a yak power user for people that have not used it before describe how it works yeah so yak is asynchronous meetings so the goal with yak is to have such rich communication throughout the day that you just don't have to have those you know long hour long zoom meetings throughout the day back to back you're just communicating over voice through asynchronous voice messages you can attach your screen you can do a video maybe even a selfie vid with your webcam you're sending that off to your team you know the biggest differentiator here is kind of the social graph side of it right so instead of this being content that you're creating and you're putting on a help site somewhere or you're sending in an email you're dumping into your slack all the actual communication happens inside of yak so it's back and forth it's conversational you know this isn't for creators and viewers this is just for back and forth between teammates right and a lot of times that extends into who you talk to professionally as well right whether that's investors or a contractor that you just hired it's back and forth it's voice it's all recorded it respects both people's times because i can send it when i'm free and they can listen when they become free and that's kind of the the long and the short of it yep um and so and so help me understand uh business model how do you guys make money so you can pay more engineers and build product faster yeah so it's you know similar to slacks you got a free tier you know we really learned early on that a lot of people were using this kind of personally at a professional level like i said a freelancer talking to their clients or a startup founder talking to investors or even a coach or a mentor talking to their students and that kind of like one-to-many aspect with one person who's doing the majority of the communication talking to a lot of people we definitely allow you to do for free and that enables things like um you know non-profits and communities to kind of run for free on yak now as soon as you want to upgrade to a team plan you get things like our slack integration group messaging better transcription insights we actually pull out action items and to-do's from the transcription all that stuff's on the paid plan and we've got standard annual and monthly you know we started out with like three different plans and that was just confusing when was that really distinguished what year was that when did you launch uh so we officially launched in uh 2019 but uh the app was actually built november of 2018 as kind of a free hackathon project put it out there and the reaction was really good and so we decided to spin it off as its own venture back startup so before we get to some of the backstory and how you got to where you are so so today just your paid cohort what are folks paneling average per month to use that those extra features yeah so annually you're paying three dollars a user monthly you're paying five dollars a user and you know average team size is somewhere between like eight and ten upwards to maybe 45 depending on kind of like the use case so we have a couple of vcs that are actually using it to talk to all of their portfolio companies and those are like 45 50 people in those teams yeah okay interesting so now let's go back to the back story so you you do this at a hackathon you get it going how did you your first hundred free users using this thing yeah i mean i i talk about this a lot it's one of my favorite stories of yak's kind of genesis is writing the coattails of somebody else's marketing efforts uh i've always been really big on not putting money into ads finding creative other ways to find users and for us that meant you know utilizing product hunt's existing audience you know that's startups it's makers it's designers developers it's exactly who we were trying to target so from a audience perspective it worked out really great for us so we submitted this to the hackathon specifically with the explicit idea of we will win the hackathon because we're really good builders we know how to make something that looks good and once we do that will be free press for our design agency so friendly which was really the idea at the time was let's get you know use this as a marketing funnel um you know get featured by them and then people will come in and find out who built it and they'll hire us that was kind of the idea so yeah we really just kind of leveraged their audience they put us in their newsletter they put us on their medium blog they tweeted about us but it's on their facebook and then we won the hackathons we were on the home page of their website and all of that resulted in thousands of people coming into the funnel for free we didn't have to pay for any of that you know we paid i don't know i guess contractors and a couple developers on our own team for like four days of work to actually build the product out but we'd have to pay for any of this like newsletter sponsorship we're just featured for free because we did a good job and by doing a good job in their hackathon we were obviously promoting their brand and justin when did you when did you post this on product hunt for the first time yak yeah so the makers festival was thanksgiving 2018 so it's like november 28th why can't i find it when i go to your profile and look at what you've made it's i can't there's nothing listed was a different name no uh so the original almost all the way down you might find yelling across cubicles which was what yak actually stands for oh interesting okay i can't oh yelling across cubicle oh that's hysterical i didn't know that okay so you posted this back in december of 2018 you got 429 upvotes um how many how much do you remember how much like website traffic how many signups this drove yeah so i mean that resulted in probably um a thousand signups um downloads really you know let's translate it into downloads um you know i think we probably had at peak maybe like 500 people using the app on the kind of a weekly basis i mean admittedly at this part it was not that great right it was definitely a hackathon project so i was surprised that many people actually got it up and running and a lot of them were in like weird industries we didn't expect either like roche healthcare like kind of an enterprise healthcare company not a fun you know remote first startup um so yeah they just found out about it through product hunt downloaded the app and started using it in their team now fast forward you just published in march of 2020 an updated version that's yak it's beautiful number two product of the day 758 up votes was this as successful as the first one and driving you new users and customers oh yeah absolutely yeah i mean the every time we post it's been really you know good we've had a pretty good rubric for success in terms of like how we do a product hunt launch um and you know the upvotes never translates one-to-one with um what you see traffic-wise to the site 2020 how many um did you get when you posted it yeah so we typically see on like a launch day around 2500 um you know visits to the site it translates into you know probably i don't know 500 some odd users coming in when we launched in march we had 900 new teams sign up that week so i can't tell you what we did launch day but that week we had 900 new teams and those are teams right so those consist of typically three to five people on the low end um so you know it was a big launch for us for sure definitely boosted our numbers up yeah okay so then then fast forward today i mean what do you guys track more number of teams or number of seats in the teams yeah so really we're trying to look at growth in a team so we want to see a team start out with three four people you know expand out to five seven you know eight people and then move up to maybe that 15 number which we think is a good sweet spot for kind of like a larger team um and we're really that's kind of our focus in q1 of this next year is going to be going into existing teams and saying what features are you missing or why aren't you on boarding more people how can we help you get more people because we already have really kind of the mass adoption from multiple companies we want to see those existing teams grow and obviously that means that that results in hey you hit a peak or you hit a usage um you know top out where now you need to upgrade and pay as well so instead of doing like cold call sales and trying to reach new companies we're really trying to go into the existing teams that are using the product saying hey how do we scale this oh we didn't even know that group messaging existed or we didn't even know a slack you know bot was an option and so now that we have these features we're going to go back out to them and say great so upgrade to the teams plan will activate that slack integration for you so how many active teams you have today and how do you define active yeah so active we define as basically an every other day usage because it's a meeting tool right and so we don't necessarily always see daily usage out of each team especially dipping around like weekends right so we're typically looking at like weekly active users so you're looking at about like um 10 000 you know people that are on the platform um you're looking at probably like 300 teams yep yep that's great so 300 teams where at least one person on their team have uses it every other day right got it and there are 10 000 people across the center teams that do use it every other day right so we're looking at you know registrations every day you know we're increasing on a regular basis but we'll have hundreds of people that are registering um you know kind of on a day-to-day basis now of those 300 teams that you define as active how successful have you been at converting them to paid making them hit those limits and actually pull out the credit card absolutely awful but it's also not a you know priority for us right now what's awful like why do you say awful we don't actually enforce a paywall so we say we have a paywall but we don't actually enforce any of it so it'll say like upgrade to get the desktop app but you can technically still download the desktop app without upgrading it says upgrade to get you know group messaging you can just create groups we don't actually block any of that functionality you know a big part of our story has always been really really tight iteration cycles with our users hey like what do you like what do you not like how did this make you feel how did it not make you feel right and so a lot of the pricing is there just so we can get gut reactions did someone upgrade immediately when they saw it or did they upgrade later and then ask them like hey so why did you upgrade and a lot of times it'll be oh i upgraded for the slack integration and that way we know okay that's a mainstay that's going to stay on the pricing page because that was a reason someone upgraded if nobody ever upgrades for some specific reason i'll just put it on the free plan because clearly that's not a reason to upgrade um and so a lot of what we're doing is really just experimentation i love seeing more users in the platform so we're not forcing paid plans right now because it's really all about kind of iterating on product feedback this is a very new way of working we're asking people to not get instant gratification don't hop on a call don't get that answer right away you know send it as a yak message and somebody will apply in 15 15-20 minutes that breaks a lot of norms of the way people think about collaboration in a company that means we have to be very careful about saying hey try this it's different it's a weird way of working but i promise it's more productive and we really want to get that feedback loop and that's ultimately more important to us right now especially as a venture back company versus a bootstrap company if this was fully bootstrapped and we had to build out a huge team there would be no other money coming into the company we would have to be forcing a lot of paid upgrades right now though because of the fact that we have investors we're looking at getting kind of mass adoption before chasing those paid plans yeah growth is really going to be this the kind of focus going into q1 of next year though how many are paid personally they put out a credit card they're paying for a seat yeah so about ten percent of our teams are paid okay which is great for having zero actual pay wall that hits them is that is that effectively 30 teams in about a thousand seats are actually paid between three and five a month yeah there you go that's great and so what would you like to see in terms of growth year over year if we do this interview in a year what do you hope those numbers are yeah so i'd like to see team sizes like 5xing that's really my goal obviously team size um translates directly into a higher monthly rate um but for us it's really about getting adoption because once you change the way someone is communicating inside their org they start dropping those other things which are fighting on the balance sheet you know we've even priced this thing specifically around like we assume you will have slack so we don't be more expensive than slack we're gonna come right underneath it in terms of a monthly price we're also thinking about how much zoom cost and how much all these other tools cost right and so as we start to change these habits we can start messing with pricing a little bit more because we don't have to worry so much about all the other sas tools that you pay for the number one thing that we've heard from teams that have used this is you know you get in at say a bottoms-down approach and you've got or a top-down approach and you've got um a team lead who is like this is great i want to start using it the number one feed i've always gotten from them has been i cannot get my team on another sas app they're gonna kill me like i love this but they're gonna kill me if i tell them we have to use another sas app then you go from bottoms up and you have a group of people that start using it and they go oh this is amazing and then they go pitch it to a team lead the team lead is always on board they're like this is great i was going to ask you to do it anyway yeah so we started kind of flipping the script and saying employees you will save so much time you will get off work earlier you might even get fridays off right all these things to kind of save them time and sanity during their day because we know that once we get to the team lead stage they're fine with it they're good so justin i'm really trying to get mass adoption on that like employee level first got it you can go up the tiers an upgrade of course yeah let me we'll just cause we're short on time here i want to sneak in a bunch of extra questions you've got about a thousand people across 30 teams today actively paying for it where were you a year ago a thousand people but less oh so you know probably about a fourth of that to be honest oh about a year ago i mean we haven't even hit a year right so march 2019 or march 2020 my bad march 2020 is when we actually launched this available to everybody it was early access before that so they weren't even able to um you know get in without like an invite code so in march 2020 we were actually going to do this at south by southwest but then covet hit and we had to do everything digitally yeah okay great so 250 to 1000 today that's great growth you're doing a lot of this stuff digitally um churn is obviously critical you can measure churn from a revenue term perspective but also just an act you know you used to have x amount active do they stay active so how are you measuring turn right now and what is it yeah so churn is improving all the time but probably very awful for us and we don't measure it on revenue right now it's definitely on usage so how do you imagine what is it on youtube yeah so we're seeing it based off of like active users on a daily basis um we definitely have a cliff like if you start sending group messages you you never turn like if you're a group messenger for some reason that's like a huge sticking point and you just start to stay with the product if you've never sent like a group message we definitely see you turn early so a lot of what we're doing right now is kind of like optimizing in funnel stuff as soon as you get in like introducing them into the concept of group messaging here's a channel here's how you create one here's how you invite more people and there's so much that we need to do to improve on that like i said it's a weird concept it's a different way of working so if you don't introduce these concepts early on um we we see people turn really fast and so what we're working on is that like first impression how do we tell you of a new connection how do we tell you're in a new group how do we prompt you to send a message into that group how do we create those kind of sticky moments early on justin what's the team size today yes we're seven full time how many engineers uh so we've got four engineers and how any quota carrying sales reps uh no we're all kind of engineering and design right now a little bit of marketing thrown in there so besides besides our next iron besides product hunt how are you getting users um a lot of it's really organic um we we're very fortunate to be top of mind so audio this though to me this strikes me justin can when as a product where you should be like crazy tracking viral coefficient and optimizing for getting up to you know 1.1 1.2 are you guys tracking this sort of stuff no and it's definitely a downfall in terms of kind of like inter-app virality and that's something that's definitely going to be a huge focus for us this year um you know we've been fortunate to have that top of mind behavior so we're being referred from other users saying hey i've heard about this we really need that to come from our own existing users hey i'm using this right like this is what you should be using and that's definitely something we need to work on in terms of giving users easy ways to kind of invite people into the platform and we're doing that um you know a lot with like public groups that you can invite people to you now have yak.com profile pages that you can paste places so a lot of what we're working on is kind of that inter-app virality got it and talking about funding you raise capital how much yeah so we raised a little bit under 2.2 to date we uh hopefully we'll have a new funding announcement very soon here um as we kind of go into series a that's great what are you targeting in a series a like is there a target amount you want to raise yeah so we're working around kind of an 8 million number we're remote we're based in florida you know we can do a lot with a little and so eight million gets us you know quite a long way yep and what i'm obviously this is a very sensitive thing you have to negotiate it but generally speaking what sort of valuation are you going to try and get to if you do raise eight you don't want to get over diluted yeah absolutely i mean we were you know small startup with you know no pedigree and so valuation's always been something we're super sensitive about um you know as we've gone through these funding processes that's actually been kind of the number one thing we've had to you know fight for um industry-wise we're doing really well in terms of like other audio startups other remote startups that are raising kind of like the 30-40 range and so we're targeting somewhere kind of south right underneath that just kind of given size and current traction so maybe like 25 to 30 million dollar pre-money yeah and are you guys i mean i don't think you're past i'm just doing math a thousand customers at five bucks a seat on the high end because some of them are at three bucks a seat would be about 600 000 run rate today i mean can you break a million dollar run right in the next quarter or two you know it's really the goal for this year is to hit the million ar um that's what we're kind of aiming for this like first two quarters is to start um you know working towards that goal like i said it's not really been our um you know our focus right now we're really looking at user adoption over ar yeah um you know that's growth is kind of the north star right now is how many users can we get on this platform and where are you at right before we wrap up what are you adding today in terms of total new users uh so we add a couple hundred um every week right now a couple hundred dollars on kind of the day and news cycles yeah very cool we'll come back on in a year man give us an update let us know how much you're growing and again i am uh i can't even show people a screenshot i am a i'm a power user still getting addicted to the desktop app but loving the the mobile app it's so much easier to use and and um i can't be able to pull notes out of it via transcriptions i think that's going to be a big thing yeah try the zapier zap it's really cool you can definitely pull transcripts out make blogs out of them all kinds of great stuff i love that let's wrap up justin with the famous five number one favorite business book ooh um i love rework um by jason freed number two is there a ceo you're following or studying um you know i really like uh the guys at webflow i'm a big fan of the way that they ship and the products that they're putting out so i love vlad and everything that they're doing there number three what's your favorite online tool for building yak ooh um webflow is huge the first version of webflow was actually built in uh the first version of yak was actually built in webflow and exported out all of our websites done in webflow so that's huge for us so yeah i think i'm going to stick with that number three how many hours of sleep to get every night uh you know it's getting better um i have two foster kids now and so that's uh totally thrown off my personal life but i'm looking at like six or seven that's not bad and are you married i am yes okay married two kids and how are you uh so i just turned 30. yeah congratulations a big 3-0 last question what's something you wish you knew when you were 20 uh i wish that i had started coding earlier um i can code i don't like to but i definitely wish that i'd invested in it earlier so that i could uh just kind of crank things out on my own without having to ask a developer for help justin last question i meant to ask this is so friendly the agency on the cap table of yak no no no affiliation other than the team seamlessly moved over to the uh startup so it's so friendly shut down is it or is it still doing agency still its own thing so so friendly owns newton and that's about the only thing it does right now is just owns newton it does a couple design contracts a year just to you know help out other startups yeah um but uh outside of that the team is fully moved over to yak and we just kind of let it sit there and um gather cloud guys there we have it yak.com asynchronous audio communication launch back in 2018 they've now got about a thousand folks actually paying seats across 30 custom companies but really what they're targeting is just growth usage-based growth adding a couple hundred new folks every single week they've got over 10 000 users on the platform on 300 teams users is defined as active at least once every other day they've raised about 2.5 million bucks 2.2 million to keep growing this they have another funding announcement coming up here shortly stay tuned justin thanks for taking us to the top one more thing before you go we have a brand new show every 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