As 2012 comes to a close, it’s time to briefly reflect on the year. This is my story of 2012.
I came across this memorable quote recently from an article about startups raising money:
Investors at the seed level are typically less concerned with the fact that a team has yet to pull off market or customer fit, and much more focused on whether it can weather the storm of running a startup.
My own startup journey has a lot of highs and lows in 2012. I can attest that its very stormy! Hence, the team has to be strong to withstand the bumps and bruises along the way.
You need to be able to fight your way out of a very dark hole and into the light. That’s why its called the trough of sorrow. The majority of startups will die in this phase as they attempt to find their way. This is reality. The majority of small businesses will fail within 2 years. This is where we are now with Native Tongue – in the trough of sorrow.
In our first year, there has been a lot of rain, but more like meteorites that have been dropping down from the sky. But we have survived, we’re still intact and I have my sanity.
Buckle in
In the first week of launching our product, Mandarin Madness on iphone in February, we made over $1,000 AUD. It was making roughly $200/day. We were the #2 Australian education app and featured on the iTunes Australia home page. We were a top 10 grossing education app in Australia. We thought awesome!!
Mandarin Madness makes the iTunes homepage
I quickly calculated that we would do $52k that year on this one product alone. Lets just bang out a few more products – then we would be self funded! Thats $52k x 3 products = $156k annual revenue. No need for raising seed investment. If it did well in Australia, then a similar Spanish product would “smash” it in the US. And the English product would “erupt” in Asia!
So we started beavering away and launched a whole array of new language products this year – Spanish Smash and English Eruption.
However, the sales in the app store started slowing down. We did our best to prop it up. But we learnt something critical about the app store – the first 2 weeks are critical as you are classified as a new app. You are featured as a new app and can also be in the “new and noteworthy” section. We were also beating a lot of the bigger branded apps (except for Spongebob) when we were featured.
When we launched the Spanish and English product it didn’t fare as well as the Chinese one. In fact, we botched the launches and it fell flat. Our dreams of making $1k/week vanished within several weeks.
If I look back, we should have focused on one product, Mandarin Madness. We should have kept polishing and refining it to get product market fit. We went too wide instead of focusing on one vertical and missed the mark. I’ll explain later on what we decided to focus on.
More meteorites
These were just some of the meteorites that rained down on us in the first year. We thought we were close to getting seed investment from some investors. However, that didn’t come through. We were also faced with dwindling cash flow and our runway fast disappearing.
James, one of our co-founders had to do some contracting work to get by. My personal runway was longer, so I kept focusing on the business, as we needed to keep moving forward. We knew that if all of us went to work, and worked on it part time or we came back to it within 6 months, we’d lose all the momentum we had.
We also parted ways with one of our original founders. It didn’t work out. We moved offices from York Butter Factory to South Melbourne. We pitched at several events but didn’t get much investor interest. A lot of things like this happened in the first half of the year.
Chaotic personal life
I also had my own personal situation to figure out. I had moved from Sydney to Melbourne last year, and I had been staying on airbnb and then living with a friend. But I had to find a more permanent and more cost-effective place to stay. I found a place in Northcote and was about to sign a lease.
I came back to Sydney for Christmas and NYE. I found out a few days later, that the landlord decided to kick us all out, citing that the property needed repairs. They gave us 3 months to vacate (in March 2012)*. I didn’t have time to deal with it, and it was only until the last two weeks that I started looking for a new place. It was hectic and we had only 8 days to find a place to live. So I banded together with one of the housemates and another friend, and we found a place within a week. We then signed a 12 months lease.
Up until this point, I also had no possessions in Melbourne other than 2 suitcases. I was sleeping on a mattress for 4 months on the floor. I had acquired the mattress from the previous tenant. I also acquired Anthony’s old desk and chair. I had clothes hangers from my friend Tyson. It was a very nomadic life style I was living but it was all I needed to get by.
Everything I had in Melbourne – two suitcases & a suit
So my own personal situation was somewhat chaotic whilst in Melbourne. I did my best to not let it bother me. I believe that if you can settle your personal life, it will be much easier to focus on your work. I watched a interview video by Steve Blank who believes that entrepreneurs make sense out of chaos and often had a dysfunctional personal life. When things are organised, they actually don’t do that well. So maybe there’s something in that.
The dark months
With our runway dwindling, I was on the path to going broke while paying rent and living expenses in Melbourne. So I decided to move back to Sydney and live with my folks. Both my brothers had moved out last year and we still had several empty rooms including my old room. I figured if I could cut down on my costs, I’d live to fight another day.
There was some adjustment period, but it was fine. My family had missed me while I was living in Melbourne, and I could also take care of my grandma during the day as she lives with us.
But that period between May & June was probably my darkest period this year. I had to move back to Sydney, slightly dejected and I wasn’t sure what I would do – even if I would continue with Native Tongue. Because the team was going to be separated in two different cities which would make things difficult.
In a way, I was also slightly relieved. I felt at times I was stuck in Melbourne, unable to see my family and friends. I flew back to Sydney several times for weddings and for Christmas, but it was always brief. However, money was tight, and I needed to save money. Paying $230/week for rent alone, plus expenses for bills, food + entertainment expenses was too much in an early stage startup.
Things start picking up again
But somehow we made it work.
I started hanging out with my friend Alvin at his place as he had just resigned from his job and was working on Pocketbook. Bosco then joined him, and the 3 of us started co-working together in his apartment. I couldn’t afford to go to a co-working space (even though they are great), but this was just as good. I had two guys that were working on another startup and it re-created that startup vibe. I was excited to work again on my own thing, and I felt like they were extra members who would give me ideas and inspiration, and feedback.
Presenting at Tech23 – duck face bonus
There were certain events that happened in the next few months which gave us a shot in the arm. I pitched at the Sydstart event and was awarded 6th place in September. In October, I made it into Tech23, one of Australia’s most prestigious technology conferences. The top 23 up and coming companies were selected. We made the short list and I got to present again. You can read my insiders perspective here. We were amongst the best tech companies in Australia.
We were able to get several great blog reviews of our products and formed a partnership with a language blogger for a competition. We also had interest from several schools for a trial. I was also featured in the BRW in an article on “How to make the perfect pitch“.
Featured in BRW
We also got around the distance factor, and I was speaking to my co-founder every day on the phone when we had to or communicated via email.
Renewed focus
We felt stretched with the number of products in our portfolio – we had over 10 products! So we decided in June 2012 to concentrate our effort on one product for one platform and in one market. We released a free version of Spanish Smash (Personalised) on iOS for the US market, as it has a large number of Spanish language learners (6 million).
It was initially only available in English and then we added Korean and Russian translations. Its now doing about 180 – 200 downloads a day. The upsell rate is 5% for in-app-purchase modules or to the full paid version. This app now represents roughly 35% of our total downloads. We still haven’t “cracked” the US market, but downloads are increasing month on month in the US. The app is also reguarly featured in Russia, Korea, Netherlands and now in China.
Our airbnb moment
I noticed there was a new word game called Letterpress which was simply brilliant. I showed my co-founder and he liked it too. I predicted that this new app would be popular. We had our “airbnb moment” where we thought we could fund the business with some crazy idea. I knew the story all too well as I had worked at airbnb.
Airbnb sold boxes of Obama cereal at Obama’s inaugruation. So we decided to make a cheat app for Letterpress and sell copies of our cheat app. We actually made it in one week, but decided to work on it for another week to polish it up. We submitted it to the app store with a free version and upsell for $0.99. It only sold a few copies and started dying. We kept iterating on it and recently rebranded it to LP strategy and have about 1,000 downloads to date and its one of the top ranked cheat apps for Letterpress. I believe that we have the best cheat app for Letterpress, however its quite crowded now as there about 20 of these apps now in the app store.
Lets make it rain Obama O’s!
But the one thing it did was show that we could make mobile apps and we could do it fast. We could respond to market conditions and opportunities, and we had a strong resolve. We could figure out a way to survive.
We also applied for the Startmate incubator on the final day. Out of 220 applications from around the country, we were one of the 20 teams selected for interview. We ultimately didn’t get in, but meeting with 15 of Australia’s top investors in one afternoon and getting their feedback was worthwhile. It also validated our efforts to date to make it to the final round.
Backup plan
We had a back up plan in case we didn’t get into Startmate. We decided we could try consulting on behalf of the business rather than as individuals. We would make apps for other people. We’d already made roughly 10 apps in total. So we created a landing page on unbounce and prepared some keywords for google adwords.
As soon as we got word that we didn’t get in, we re-calibrated and our backup plan kicked into gear. We started running the google adwords campaigns. Within a few days, we started getting clicks and enquiries. We have a number of enquiries we are following up on, and this is how we are going to fund our business. Partly through growing and also by doing work for other people. When I spoke to a lot of startups, this is what a lot of them had to do to get by in the early days. If you’d like to build an app, check out our consulting page.
Snapshot
This is where we are now. We believe that we will lose nothing by revealing our figures, in fact it will help us measure our success.
– Revenues: $1k/month in revenue. Annual revenue approx $11k.
– Downloads: 90,000 downloads. This is across our 3 games. On iOS, Android, Amazon Kindle.
– Monthly Active Users (MAU): 18% iOS.
Ideally, we want to be doing 10x in terms of revenue ($10k/month) to be self sustaining.
What we need to do in 2013
1. Focus on a product and customer segment.
2. Improve the game mechanics
3. Increase user retention
4. Increase life time value (LTV)
5. Grow the consulting business
Final word
Thanks to everyone that has supported Native Tongue – friends, family, colleagues, our customers, and the startup community. If you are in startup, then don’t forget your hard hat and your raincoat, cause its going to get rocky in 2013! You have to learn how to withstand the meteorites 🙂
I’m out like 2012,
Matt Ho.
@inspiredworlds
*The landlord & agent took us to court over property damages, even though we were only there for a few months. We ended up getting most of our bond back and I invested my bond money into my housemate’s new startup. Double down ftw.
