Submagic: How a Scrappy MVP Hit $1M ARR with TikTok – with David Zitoun [446]

This is a machine-generated transcript.

[00:00:00] Omer: David, welcome to the show.

[00:00:01] David: Thank you very much for having me.

[00:00:02] Omer: Do you have a favorite quote, something that inspires or motivates you?

[00:00:06] David: Yeah, I've got one that I wrote down. Opportunity only looks like opportunity. Looking backwards today, it looks like risk.

[00:00:15] Omer: I've never heard that one, but I love that.

[00:00:17] David: It's very true.

[00:00:18] Omer: Cool. So tell us about Submagic. What does the product do? Who's it for, and what's the main problem you're hoping to solve?

[00:00:25] David: Yeah, so Submagic helps small businesses between one to 10 people and content agencies, marketing video agencies create powerful short-form videos in just three clicks.

[00:00:37] David: Okay. We are focusing short form content, so the vertical format that you have on TikTok, Instagram reels or YouTube shots. The issue that we are facing is that we're solving is that most of the coaches, real estate agents, small businesses today, they want to attract more customers to their business.

[00:00:53] David: And they don't have the phones to spend on ads or do the classic marketing strategy. The email marketing, the cold calling is now working as much as it was working before, I would say. And now creating content is one of the best efficient way to attract clients to your business. And so the short phone content is one of the most amazing opportunity of, of this year, I would say in the next couple of years, because you don't need to have a million followers who attract a million views. You can have one followers make a million views on Instagram or TikTok and from one piece of content. So thanks to short form content, there are like many small businesses and big businesses that when viral and change the trajectory of the life.

[00:01:33] David: So yeah, it's great. So we help those business like edit the videos like in just three clicks without having any knowledge in editing. Because we believe that videos should be accessible to anyone and it's not already the case.

[00:01:45] Omer: Cool. So give us a sense of the size of the business where you, in terms of revenue, customers size of team.

[00:01:52] David: Yeah. So Submagic is two years old tomorrow. So we are very young company. We are a team of 14 people based all over the world. We don't have offices. We are between like 10 different time zones. And we are at 8 million in revenue today. And yeah, we're growing fast. Small team building with AI.

[00:02:14] Omer: So great traction two years tomorrow that you get to 8 million in ARR.

[00:02:25] Omer: And you were telling me that the first million you hit in 90 days or less. And there's gonna be a lot of people listening to this who are having the opposite experience, where they may be struggling to get the first 10 customers, or they have got to a point where they have some level of early traction, but they've just plateaued.

[00:02:45] Omer: And so I wanna make sure that we dig into your story and we pull out as many lessons as we can in terms of what you did that worked. And more importantly why, so` people listening to this can go away, not just hear your story and what Submagic is all about. But hopefully give them some added momentum to what they're doing with building their own business today.

[00:03:09] Omer: Let's start with like where did the idea for Submagic come from.

[00:03:13] David: So the idea of co Submagic came from an issue, a problem that I was facing. So I was making videos since I'm 12 years old. And I'm passionate about videos in general, creating content. So I was editing videos, I was filming videos.

[00:03:28] David: I, I had the no YouTube channel for a couple of years since I was running regarding my hobbies. And so I was creating short form content and by creating short form content, I wanted to make more captivating short form because I realized when I put captions on my short form, my videos were performing better than when there is no captions.

[00:03:47] David: So I had to make captions for all my shelf from content and doing it on Premier Hall. All those classic web software that I'm used to it and I'm good at video editing. It was even tough for me in time consuming. So I was say like, what's happened for the guy who never edit videos in the life, how he make captions and captions will be like essentials for everyone tomorrow.

[00:04:11] David: Shortform is growing that fast and everybody needs captions to the cap, to the content. And so I wanted to build a tool to enable me, myself to create captivating captions. When I mean by captivating is those captions that you see on Instagram, orik, TikTok or whatever with fx, with things that cap attention.

[00:04:30] David: Three clicks super easily without going to add a premiere. That's how the ideas, the basic ideas of Submagic came from,

[00:04:38] Omer: Back then, there, there are probably a lot of products around today that, that do the captions and we'll talk about that and the general landscape and how you think about that, but back then, I guess people just had the option. Either I've gotta learn how to do video editing myself and then have this painful experience in Premier Pro, whatever I'm using to figure out how to add captions, or I need to go and hire somebody and pay a bunch of money. And if you're trying to create a volume with your shorts videos, and you're like a one person business or a, a realtor or somebody like that, it gets expensive very quickly. And okay, so you've got the idea and it's a pain that you're experiencing yourself. How did you get started? Did you first go out and start looking at what kind of solutions were out there? What was the point where you said, I need to go and build something myself?

[00:05:36] David: First of all I'm building companies since I'm 18. I'm 28, 2 days, and so I started somatic when I was 26. Sorry, when I was 27, no, 20 when I was 26, sorry, I was 26 when I started Submagic. But I start building companies when I was 18. So I love entrepreneurship in general, so I'm used to build companies.

[00:05:55] David: Submagic is my first companies. And so before starting Submagic, I did something differently. I found a co-founder for this project. And finding the co-founder I think is the most important things and the most difficult part of creating a business. And we rarely talk about it. And I think it's really important.

[00:06:12] David: I made the mistakes to sometimes having bad partnership in my previous companies and it ending killing my business and sometimes. So I spent a lot of time, first of all, finding my co-founders and finding someone who really like, understand where I want to go and have the same vision of for his life as well.

[00:06:34] David: And so I found my co-founder after looking for a lot of people, meeting a lot of people for a couple of months. And then when I met this guy, and by the way, I met him through a platform called YCO, founder Match. So Y Combinators, you have afin there for entrepreneurship. Everyone can use that. It's great and you can meet some great people.

[00:06:51] David: And so I met my co-founder, we met in Paris. He's French as well. And so when the first time we met, we were like, okay, what do you want to do? What do I want to do? And we wanted to see if we will align on like the path we wanted to take together. And at the beginning it was just a question of direction in life.

[00:07:09] David: That's it. We didn't talk about Submagic. Submagic didn't exist. There is not the problem. And then when we realized that we will align, then we said to ourself together, we say now we need to try to see if we, our partnership is working or not. We need to make a try. Okay. Before, like creating a company before, like doing all those things and going all in.

[00:07:29] David: We need to try to see if we match together. So how can we try and so he told me like, I want to see if David, you are capable of selling a software product because we wanted to both create software products. And I said to him, I want to see if you are capable of building a MVP like really fast and you're good at technical because I'm not a technical person.

[00:07:49] David: I'm really good at sales, but I'm not a technical person. And he was the opposite. And so we had one thing that we knew that we wanted to build software products that help people. Help people making a better like workflow in their day or having a better day in general. And we wanted to do that independently.

[00:08:08] David: We didn't wanted to raise funds and we didn't. We wanted to be remote because cfe micro founder wanted to live in South Korea. He was about to live in South Korea. And so we were aligned on those things and we start by saying okay, we know what in the next 12 months we're gonna do something. Every month we're gonna build a new product, 15 days to build an MVP, 15 days to sell the MVP.

[00:08:31] David: Okay? We are gonna do that for 12 months. If we are not finding like the right ideas that pop up in the next 12 months, that means we are not very good. Okay? So then we start, we say, okay, what are we doing? And I told to cfe, I've got my issue about creating contents. Maybe we can create a tool to help me create captions.

[00:08:49] David: It's gonna help me. First, I will be the user's number one. So he build the MVP and then I start selling the MVP.

[00:08:56] Omer: How many products did you build before you, you worked on that idea, or was it the first one?

[00:09:01] Omer: Submagic was

[00:09:02] David: the first product.

[00:09:03] Omer: So 15 days you get an MVP, then you go out, try to sell it.

[00:09:08] David: Yeah. I would say more like a month and a half instead of 15 days. It took a bit more time. But in a month and a half we had a first version of Submagic that was like ugly. Ugly, like a real MVP. Like one functionality, but it was working well. Like we didn't do too much things. Only one things, but we did it well.

[00:09:28] David: That's the, for me, that the advice from for MVPs, like people try to build like solid product everything. No, MVP should be like one features, that's it. The one core features, but do it well, like it can be ugly, right? But do it well and put a payment system like payment provider. Because if nobody pays your things, you cannot have the answer to know if your MVP is already like.

[00:09:49] David: A proof of concept or not, because everybody can try your product for free, but nobody like you have to really see who is gonna pay for that. And I was like, if people will pay for this ugly product, that means we have a good traction. Because when the product would be like really good, it'll be amazing.

[00:10:05] Omer: So what was that one feature?

[00:10:07] David: Put your videos into Submagic. It was a one minute video maximum. We get the transcript. And we give you the captions. And the captions. Were automatically put it with the homo style, Alex Homo, Alex homo with his style. That's it. And you export your videos. That's it.

[00:10:21] Omer: So it wasn't like you can customize it, you can use different colors, you can do different fonts. It was like, this is all, you get.

[00:10:28] David: One template. That's it. You can just correct your words if there is a mistake, that's it. Nothing else.

[00:10:33] Omer: Okay, great. So you built that and then over to you, you go out and try to sell it.

[00:10:37] Omer: And what happened?

[00:10:39] David: So I wanted to sell it. So I said first question I asked myself the, we had some like restriction. First one, we didn't have money because we didn't want to raise funds. We say like how we can bootstrap this business. So how can I find customers without spending money? And so I think about myself and say, where could be the people who can use this product, who can benefit from this product where they are?

[00:11:00] David: They are on LinkedIn potentially, because on LinkedIn you can create content. So creators, you can be on YouTube shots or you can be on TikTok. So what I did is like I went on TikTok and I took my phone, I create an contents of magic called sir magic com. And I create an account, sorry, on, on TikTok called Submagic.co.

[00:11:18] David: And I start filming myself and I say Hey guys, if you want to have the same captions like Alex Ozi in three clicks over your short form contents, I'm showing you a website that I just discover and I filmed my web, my laptop, and I say, this is called Subm Magic and nobody knows about it yet. And you put your videos and then you can export it if you want to have a promotional code, David 10, I negotiate that with them.

[00:11:43] David: That's it. And I post this video for one day, two days, every day. I was posting the same videos, but I was making it a bit differently. Okay. Outside, inside new laptop and stuff like that. And one day, like 10 days after one video went viral, a hundred thousand views bring like clients to Submagic.

[00:12:00] David: That was on TikTok?

[00:12:01] David: That was on TikTok, yeah. Yet. First customers like this brings us like maybe to 50 customers. I don't know, like 40 customers. The subscription was very low. It was 20 Euro subscription, so it was not a big deal. Big deal.

[00:12:15] David: So this was a new profile you created on TikTok.

[00:12:17] David: It's not like you had a big following when you started publishing these videos.

[00:12:21] David: Zero follower, zero, nobody. Yeah.

[00:12:24] Omer: So that's I think in many ways the beauty of that kind of algorithm as you were talking about earlier. It's less about followers, it's just about constantly iterating until you get some kind of content, which just.

[00:12:35] Omer: Clicks or goes viral, which in many ways is how you've built this company and constantly experimented, which we'll talk about. Okay, great. So people sign up. How many of them I. Started paying for this ugly product that did one thing

[00:12:53] David: ugly, but it was good. I don't remember. I remember that the first customers we had was the 1st of May, 2023.

[00:12:59] David: So tomorrow we had the 3rd of April. And I remember, and what I did when I saw the first payment on Stripe, I directly contact this guy. I take his email and I contact him. I say I refund you if you answer my email please just talk to me. And I wanted to know who he was, like how, why he bought this product.

[00:13:18] David: What is he looking for? And what is the, what is personnel of clients? And I was just like talking to him. He say I love it. It's great. I just want to make my captions and faster, and your product is doing well. Please, can you add these things? Can you add these things? Can you do that? Can? And we start having some feedbacks and then I start looking more clients like him.

[00:13:36] David: Like I say, show me who you are and I'm gonna find more people looking the same as you. Because if you buy and you are like that, maybe I will find more people like you and you, they will buy as well. So I start doing the same. Why did you buy the product? What are you looking for or efficiency, speed, time saving.

[00:13:52] David: Okay. This is gonna be the argument I'm gonna put in the video. So tomorrow I'll make a new one and I change the argument, this is just iteration and I start doing that. Like for, yeah, and it brings I don't remember the exact numbers, but it brings like we, we went from zero to maybe 2, 3K MRR, like in, in 15, we 15 days maybe I don't remember exactly the numbers at the beginning, but thanks to TikTok, we had some customers, some people, and we started like having some calls with them a lot. I was calling them every day.

[00:14:21] Omer: So just so I understand, when you figured out who this person was and you said, I'm gonna find more people like you.

[00:14:28] Omer: It wasn't like you were saying, okay, this is the ICP, and then I'm gonna go on TikTok and try to target the same type of people. It was more about, okay, I get who this person is, these are the pains that he has, or these are the reasons why he's using the product. I'm gonna create videos talking about those problems, those solutions, because they hopefully.

[00:14:51] Omer: Will get in front of similar people as this person.

[00:14:54] David: Yeah. The algorithms make the work for you. That's the beauty of the, of TikTok. Like they find the customer, like when you look at your feed on Instagram, like they show you what you want to see. Like you don't look for the content comes to you now.

[00:15:06] David: So that's the beauty of it. TikTok know you very well, like very well. So if you talk the way they want, like it's just like kind of logic like I just saying, like what they're looking for. And also I was saying like, because I know that their first customers was a small business owner. He was starting his business.

[00:15:23] David: And I say if you are a small business owner and you're looking for start occurring, your first customers, this is the product you should use. Submagic. Okay. And I was targeting directly those kind of people as well. But one thing I did that works very well, and I advice to everyone to do that at the beginning of Submagic, we were very close with the customers.

[00:15:42] David: Like very close. Every customers I told you that buy Submagic, I put, I take their WhatsApp and I create a WhatsApp group with them. Okay. And the WhatsApp group was called Submagic Lovers. I put them on the WhatsApp group and I say guys, we're gonna build the product together because they were so hyped with the product that they ask us a lot of features very fast, and we were like building the product with them and they were, became our best product manager in the world.

[00:16:07] David: They were like testing the product for us. They were paying us. We are not paying them. They were paying us. They were giving the best feedbacks ever because they were the users of the product and they just loved the experience of building a product like with a company, like when the last time you build a product with the founder directly on a WhatsApp group, that was an amazing experience with them.

[00:16:28] David: So they never forget about it and they start talking about it around themself, word of mouth and this helped us grow very fast.

[00:16:34] Omer: So you went from basically zero to the first million in a RR we discussed earlier, in about 90 days. What was the, the TikTok stuff sounds great, but was that the main thing that got you to the first million?

[00:16:50] David: So when I saw TikTok, I was doing great. And I saw that when I make viral videos. It brings us more clients. I say, how can I scale this acquisition channel? And so I said to myself, if I make not one viral videos a week, but 10 videos, viral videos a week, I will scale like 10 times faster. But me, myself, I cannot make 10 videos a day.

[00:17:11] David: It's too much. So I start hiring some small creators between 18 to 25 years old, and I was telling them like, you're gonna become ne of magic. You're gonna sell this product, you're gonna make the same videos as I do. And I'm gonna give you 30% commission on the lifetime value of every customer that you're gonna bring to me.

[00:17:30] David: And I can tell you what, when you make a video that makes more than 20,000 views, you will make at least 500 bucks because this is what happens to me. So I had to prove that I. Promoting Submagic on TikTok was doing great. And so I heard like 50, 70 of small affiliates, like young guys, students, and I was, same thing.

[00:17:51] David: WhatsApp group with them, they were my sellers. They were like sales guy. And I was like, guys, today everyone needs to create content for Submagic. And what they did, they just like creating brand new accounts called like OER Submagic or David CAG whatever, zero followers, the logo of Submagic affiliate link.

[00:18:07] David: And they were just posting one piece of content every day. This was the deal. How did you find these guys score on TikTok? You look on TikTok, followers are followers. You reach out to them like really? This is not complicated. You just look small creators like looking online. That's it.

[00:18:23] Omer: And at 30% on lifetime, a lot of people would overthink this, right?

[00:18:30] Omer: In terms of, oh, is this the right kind of. Commission should it be for a year? Should it be whatever? But at this point, when you're this early on, you just need to get the traction right? You just need to incentivize people. 'cause you can always fine tune how you reward affiliates in the future, but it's gotta be pretty compelling to get that many people on board.

[00:18:54] Omer: Like how long did it take for you to get these? Like 60, 70 people.

[00:18:58] David: I don't know, maybe like a week. I did, I was spending my all day doing that. So I was like contacting maybe 1000 people and out of the 1000 I get 50 people. But for the question you asked me, like getting the commission and those kind of things, I see a lot of like early, first time founders generally do these kind of mistakes. They are spending too much time on details that nobody cares, like their business are making $0 and they're caring about how much they will give as a commission. Be generous in JR in life. I learned that from my values and my parents, but be generous with people and you will get a lot of if I make you rich, you will make me rich if I make my a rich.

[00:19:37] David: They will promote more and more Submagic because if they are not successful, they will stop promoting my products. So I would just want it to be like generous with them yeah. And I know that I will not make my, like the majority of the money from Submagic will not come from those 50 people.

[00:19:50] David: It was just the beginning. So I make a very incentive deal, like nobody knows the brand at the beginning, so I need to attract them. So be generous with them and then they will reward you at the end of the day.

[00:19:59] Omer: So that affiliate vehicle was basically the main way that you got to the first million in a RR very fast.

[00:20:10] Omer: And I asked you earlier, I said what were the, what was the struggle? What it sounds like it was too easy and you, your response was, you said I don't mean to be arrogant, but it. It wasn't really that hard. We, the issues we had came later, which we'll talk about. And then I said there, there's a lot of people who are gonna be listening to this who are stuck at trying to get the first 10 customers or have plateaued at, a certain amount of MRR who are gonna be like, banging their heads against the wall saying, what am I doing wrong?

[00:20:38] Omer: What how come it's so easy for David? And you tell us that story about your friend that you were telling me earlier.

[00:20:46] David: Yeah. I think I want just to say one thing before telling about the stories of my friend is that we, we had pretty much luck. Like we were lucky in a way because Submagic and people needs to know that we arrive at the right time.

[00:21:02] David: Timing was perfect. Okay. And timing has a big impact in the growth of a company. Timing, and we had a very massive product market fit. Okay. We are solving a big pain. We, it's Submagic is not a nice to have, it's a must to have for the people who use Submagic. And there is a big difference between the NICE two and the master two.

[00:21:21] David: And majority of people like complain about how, why did they're not growing? Or they focus on grow to market instead of focusing on product market fit. But be before looking at the acquisition channel you can get to grow. Look at if your product is really solving a pain, a real pain. Because for me, this is the number one thing you should look at.

[00:21:40] David: And then you can see about how you can scale Christian Shannon and stuff like that. But we were lucky in a way that we arrived at the perfect moment where Chad G PT were booming. Short form content was like the beginning, the rising of short form content. Alex Zi was booming. We surf on this wave, like Alex Zi.

[00:21:55] David: We use this branding, not this branding, but the template almost his style. He builds the style. Everybody wants to copy Alexia as well. So we use that and I use my own product as well to promote Submagic, like I was doing my caption myself. So it was like a kind of a flywheel of a lot of the things that write correct.

[00:22:14] David: And also like I can promote Submagic on TikTok, but not all the product can be found. If your software is like for, it depends on what is your audience, but you cannot find. Like it was perfect for us. Like really you guys have to understand that we were really like at the right position, right time, white things for Submagic to say regarding your story with my friends.

[00:22:38] David: Can you tell me again your question regarding these things? Regarding my friend?

[00:22:41] Omer: Yeah. So we were talking about people who. Listening to this, maybe they're struggling to get traction or maybe they've got, a one or 2K in MRR or something like that, and they're just not figuring, able to grow.

[00:22:55] Omer: And then you start telling me that story about your friend who was in a similar situation.

[00:22:59] David: Correct. Yeah. So I got some, a guy contact me today and ask me like, David, like I want to advise from you regarding grow go to market, like acquisition channel. Same question. How did you grow from zero to one?

[00:23:11] David: What was the acquisition channel like? And I'm like, there is no magic tricks. There is no how do you say, like a shortcut, like there is no dumb magic acquisition that will change the trajectory of your life. Those people who try to look at that, they are getting wrong, and we just, every business is different and every business has a different path.

[00:23:32] David: Like you cannot copy and reapply what works for us. Maybe if we do Submagic tomorrow, again, imagine we start Submagic again tomorrow from zero. I can bet that the magic will never work. It's too late. We are not on the right timing anymore. So timing is so important. Like the acquisition channel we used two years ago may be not relevant today.

[00:23:50] David: So the mindset we have is just, we iterate a lot. We just try out so much things. And my advice to my friend was like, instead of focusing on the go-to market and the acquisition channel, like just take your 5, 10, 50 customer, you say I'm a 5K MRR. I say, that's crazy. That's amazing. Go contact those 5K people like the those, I don't know, those a hundred people that makes the 5K mirror.

[00:24:13] David: Reach out to them, talk to them, build a WhatsApp group with them and understand who they are, where they are spending their time. Are they scrolling on TikTok? No. So don't do TikTok. Are they on LinkedIn? May just basic question, talk to them. They have the answer. And some people get so many times they over complicated things.

[00:24:34] David: And the answer is right in front of you. Your customers have the answer of majority of your problems, but you need to be really good at listening them and then, and it's not easy, but it's very, it's helped us a lot.

[00:24:48] Omer: Tell me about the you, what you just said a minute ago about iterating a lot, and that's something that.

[00:24:56] Omer: You do. It's I guess it's part of the culture of the business that you've built in practice. Just help us understand what does that look like? Are you guys like, every week let's run a different experiment. What kind of experiments do you run? How do what does it mean, iterate a lot in practice?

[00:25:13] David: Good question. Iterating means for me like. I have another quote that I hesitate giving you at the beginning of the podcast, but say it was like, either I win, either I learn, I never lose. Okay. This is my mindset. I never lose. I learn or I win. And so building a business is just like making some bets over beds, over bed.

[00:25:37] David: Okay? You bet on stuff you never know it's gonna, if it's gonna work. So the way. And it's the same way with venture capital, like they're just betting on companies and they bet a lot of different companies because if one is working, that's amazing. Same mindset as a business, you need to make small bets on everywhere and be good at cutting the bets when they're not working very fast.

[00:25:59] David: And so we just learned this methodology by just testing some stuff in marketing, in product, in customer experience, the same way. Or we should try TikTok ads. Okay, what is the investments? What is the time? What is the potential error? I, okay, let's try, oh, it didn't work, iterate, adjust. No work. Okay, we stop, we cut.

[00:26:20] David: Let's go on this. Let's go and try. And then we just write down the playbook. We just write down what did we do? We document everything to know because the worst thing is to repeat the same mistakes. Okay? We just want to do one thing to do to the business. And I say that to all the team every time.

[00:26:34] David: Just write down what you do. Just learn from our mistakes. And so these iteration thing, there is no like a specific process I would say that we follow, but it's just like actually we are testing a new markets, Brazil, and we have a mission where every week we have a meeting with all my teams that is like a focus on these things.

[00:26:52] David: And we put some bets like, okay, we're gonna try that, we're gonna put the div the currency of Brazilians. We're gonna lower down the price there. We're gonna try some stuff. And it happens that it didn't work as planned, but it's fine. We learned that these things didn't work, so we are gonna do differently after.

[00:27:08] David: And we, you need to be very agile and have go very fast because startups is hard and especially software is going fast in all the directions. So you need to. Yeah, you need to try a lot of things and when the bet is working, double down on it. That's why we did well.

[00:27:25] Omer: So I love that.

[00:27:27] Omer: I think that most people get the idea of saying, let's try lots of different things. Let's come up with, we have a hypothesis, right? We, if we do, if we try doing X, it might help move the needle on Y or whatever The, I think the struggle comes in two, two possible ways. Number one is, okay, we tried this thing.

[00:27:46] Omer: And it's not working. But how long do we keep trying before we stop? One week, two weeks, a month, but I, longer. And then also, if it didn't work and we stop, but we say, you know what? Maybe we need to go and tweak it this way and try a slightly different approach. How many times do we do that before we give up?

[00:28:11] Omer: So you could almost pick one thing and just keep iterating on it, like infinitely. So what's the framework or the process you use to say. Enough is enough time to move on. Do something else.

[00:28:27] David: Good question. Because it's really like the you, you just point. What is tough in this iterating things?

[00:28:34] David: I would say there is two things. First, there is the logical approach that we use that is like when we start, for example, I take the example of the Brazilian markets. We want to expand in Brazil. Okay? So before expanding and start this mission, we're gonna list everything we could do to become successful in Brazil.

[00:28:52] David: We are gonna put the price in the right currency, we are gonna lower down the price. We're gonna take influencers there. We're gonna list everything we sh we think we should do in order to succeed. Okay? Then when we have that, we're like, we look at with all the team, we say are we okay with that?

[00:29:08] David: Do we miss something? Okay. Okay, we're good. Okay. We're gonna try all of that and then we're gonna try all of that and. After, if it's not walking, there is something called the gut feelings that I try to listen a lot and I'm doing business with a lot of my feelings and I'm like, do I feel like we still need to push?

[00:29:28] David: Or it's just like none of you is it's not walking and I don't have the answer, but I just try to listen myself a lot and feel like when I sing, there is an opportunity I should push more. There is no specific reason, like specific answer because sometimes you're right, sometimes you need to reiterate, keep on going, keep on, and one day it's working and boom.

[00:29:47] David: And another way you can do that for the rest of your life and you have no results and you lose your time. And so you need to walk intelligently, be organized. In terms of what you should try, and then one day when be honest with yourself, be honest with your market, be close to your customers and then figure it out to the right answer.

[00:30:04] Omer: I, I think that's a great answer. I think in many ways when that falls over is when people try to be logical and they try to be too logical at every step of the way. And at some point you have to also rely on intuition. Your gut when there isn't clear data and, but a decision needs to be made. And so I think that's actually a great answer. I like that. So affiliates got you to the first million. Let's talk about getting to 2 million, 3 million. What did you start doing? Was it just pushing, doubling down on the affiliate piece or? Did you feel that that was you you needed to explore other channels?

[00:30:48] David: Yeah. We start when we start having some funds because million and R is a great business already. We were three at this time, so very profitable and we start saving some money so we could invest in new things. So we makes new bets. Like when I see money, I see that as an opportunity to make some new try and new bets.

[00:31:05] David: So let's go. Strategy. We try new things. Oh, could we try paid ads? Let's try that. Google ads. Let's try that. We tried SEO. We start investing in SEO. As soon as we get like the. A lot of profit really a little bit of profit. We start hiring someone to, to manage the SEO at Submagic because we believe in SEO for the long term of the business.

[00:31:24] David: And it was a great bet because today, SEO is bringing 25% of the sales of Submagic, and it's the best, the most efficient acquisition channel of us. But it took a lot of time. But to come back on your question, yeah. Affiliation. We start expanding affiliation. We hire someone to manage the affiliation full time, and he start looking for more affiliates, not only in TikTok, but in like website listing the top AI tools, those kind of things.

[00:31:48] David: And then we start doing influence marketing. I love influence marketing. I, for my first business, I scale skyrocketed, my first business with Influence Marketing, and I just try apply the same tactics. On Submagic and it was great because the influencers at this moment, and it is actually and also today, but they were so happy to promote a tool like Submagic.

[00:32:11] David: Because we were solving a big pain and we come back to the same question at the beginning. Find your product market fit. It needs to be a must to have. Because if it's a must to have, the influencers will be like, yeah, it's obvious. I want to talk about this product. It makes sense for my audience.

[00:32:23] David: It's gonna bring a lot of values, so you're gonna negotiate good price. They're gonna talk about it much more than like we, without having to push them and then it'll convert better. Nobody wants to promote a product that is a nice to have. Alright, it's this flywheel and influence marketing, SEO, paid ads, Google ads, word of mouse.

[00:32:42] David: And this leads to word of mouse, like at Submagic. And I finish on that. Sorry to be a little bit long on this question, but like the number one acquisition channel of Submagic today is word of mouse. Okay. And how did we bring word of mouse to Submagic since day one? We focus on customer experience.

[00:32:58] David: I told you about these things where we build this WhatsApp group, this is the best customer experience you can get on the software. There is no better customer experience in my opinion. And I love Branch Key for explaining what is a 10, 10 star customer experience. But this is, he's so right, build like not a good but an exceptional customer experience because this will lead to people will never forget about your brand.

[00:33:19] David: They will talk about it around themself. And I want that every customer that come into Submagic brings me to more customers. This is the best marketing you can have and yeah, kind of thing like this. So it's a mix. It's different like things, some things didn't work some things work better. We push.

[00:33:37] Omer: And so influencer marketing you start doing alongside the affiliates and all the other things. And slowly you're getting the, this traction. And it didn't take you that long to get to 5 million in ARR with what we're talking about here, roughly in terms of timeline, how long did that take?

[00:33:57] David: 12. 12 months. 12, 13 months, I would say exactly to get to five.

[00:34:04] Omer: Then you hit a plateau. Yeah. What happened?

[00:34:07] David: Scur growth in software is scur. We talk about this famous S-curve, but it's right. I didn't expect that. I was like, oh, we're gonna go to 20 million. It's gonna be good. But yeah, obviously there is something called churn in software.

[00:34:18] David: So people are leaving your software. People are, you are correct customers. Some people are leaving. So when you don't occur as much as customers as you need to compensate the churn, you're hitting a plate. Every business is like that. And so we hit this this plateau at five. And it was a great experience.

[00:34:36] David: Like we learned so much from this experience. Like six, seven months, very tough, not very tough. Like we need to step back again. And I was saying like, we're not saving lives somewhere. We're just like solving like video editing. It was a good problem. It was a rich problem. Oh, how you solve your plateau at five.

[00:34:53] David: But it was great experience. What we did when we faced this plateau, we start questioning ourself a lot. Okay, where this is coming from, oh, the churn. So we need to lower the churn. Why do we have so much high churn? Oh my god. Other business, they have 3% churn. We have 15% churn. What's wrong? And we understand that at the end of the day, we try a lot of things to solve these churn issues, but churn is really links to your product and links to your, like how you, I would say like typology of business, people want to try and make short form content for maybe 1, 2, 3 videos and that's it. And it's fine. It's not because your product is shit, it's because we don't need your product anymore. And that's fine.

[00:35:34] David: And we analyze that. Doing what we have, like different ICPs and one ICP we're staying much longer than the other one. It was the agency, the marketing agency, they use Submagic every day. They make thousands of videos on Submagic. And so we were just focusing more on those clients. So we said we're gonna, we are not gonna reach 5% shown in 10 years, we're gonna reach maybe 10% and that's fine, but we are just gonna focus more on the right customers.

[00:36:00] David: All those things that we tried. We try occurring more customers. Okay, we need to go faster. We need to go bigger. So we tried to double down on different acquisition channel to agreeing more customers. It didn't work. We spent money for nothing, but we learn. And then we realized, we said, okay, it's the product problems.

[00:36:16] David: We need to add more features. We had more features, but it didn't work. So it was tough in a way that we are trying a lot of things, but without results for 7, 8, 9 months, no results, nothing.

[00:36:28] Omer: What changes did eventually work and get growth going again.

[00:36:33] David: Which we start making some tests more bold about like how we can optimize our acquisition channel, how we can optimize our flow when someone is subscribing to Submagic to the one who is buying, how we can test about the pricing.

[00:36:47] David: We never touched the pricing for one year. Never. So we said maybe there is something to play with the price and we change the pricing. It helped us like break, break this plateau. It was a mix. It was not only like the pricing, but pricing had an impact, a great impact. We tried a lot of things. For example, we try to, everybody say that you want to stop your plateau, increase your price.

[00:37:10] David: Every customers increase your price. That's it. So we increase your price. Business went like this. Instead of going like this, it went like that. And we're like, what? And so we tried to do the opposite. We lower our price. Even lower than the original price. And then it went like this because pricing is very sensitive in our industry.

[00:37:29] David: We have competitors and people are like, we can attract much more customers by lowering our price. And then we add a new product called Magic Clips, an add-on that grows fast as well, that we launch in January. So since January we break the plateau, like really we break it really hard. What I mean like before that we were like growing but not as fast as before and after that Yeah we grew faster.

[00:37:54] Omer: So I, you mentioned Magic Clips and then when I was looking at Submagic, to me it was like, okay, there is this one use case where you are helping people who create these short form videos to easily add captions to their videos. And then you have these magic clips. Which is probably the kind of thing that, is more relevant to someone like me who takes a, a recording like this of you and me talking for, 45, 50 minutes and generate some clips, some shorts from that, what's the most interesting content that we can turn into to shorts?

[00:38:31] Omer: And so when I looked at Submagic, it was a little bit confusing for me because it was like, okay, there's this caption piece which probably competes with certain types of. Players out there. And then you've got these kind of, these AI magic clips, which is a sort of a slightly different use case, which competes with maybe some other people.

[00:38:50] Omer: And so it got me thinking about who is the ICP here? Am I the right ICP? Because right now I'm not creating shorts that need captions. I just need to turn my long form. I just need the Magic clips. And the magic clips. It looks like an add-on to something else. Does that make sense?

[00:39:05] David: Yeah, totally.

[00:39:06] David: You're right. So Submagic, a product that we turn short form videos into viral videos. We help you make your content looks more engaging. So we're gonna add the captions, we're gonna add the B walls. We're gonna add the transitions. We're gonna add the hook title at the beginning, the music, everything you need to make your video looks great, right?

[00:39:27] David: We boost your videos and then our user were telling us like, thank you David. It's great. But what we do before. I'm recording my podcast or my YouTube videos and I'm finding the best moments out of it to put it into Submagic to make it go viral. And so we say yeah, we should build the product to find the best moment, because our job is to make you go viral.

[00:39:51] David: So we are gonna help you find the best moments into your long form contents. Instead of just putting your short form directly to Submagic, we are gonna find it. Which one is viral? And we do that extremely well. And then we are gonna do the magic source of Submagic hug, and then you're going to add your captions to everything you need to make your videos go live.

[00:40:08] David: It just makes sense. And yeah, so the use case is pretty much the same. We have the same ICP for both products, but not everyone is making long form content for sure. But but some of them, like you this podcast needs to be a short form at the end of the day. Of course, you need to like. To sell this podcast, we need to make a lot of short form and to publish it everywhere.

[00:40:28] David: Everybody needs to see extract from this podcast. And so you're gonna probably do it by yourself on Premier Pro, spend a lot of time or by pay an editor to do that. It's gonna take a long time or you're gonna put it into Submagic and in 10 minutes you have 20 clips, like ready to go.

[00:40:43] Omer: How do you think about competition?

[00:40:44] Omer: Is that something you spend a lot of time on because. This is a space that when you were looking for a solution for yourself, there wasn't a lot out there and this, the kind of, the solutions were pretty either painful or maybe a bit too expensive. Hiring people to go and create this stuff for you.

[00:41:07] Omer: I'd say today there's probably a huge influx of. A whole bunch of players trying to get a piece of this market. How do you think about this space? How do you think about competitors?

[00:41:20] David: We are not very focused on competitors, to be honest. Honest. We are very focused on about like whole vision, what we want to build and our product and my customers.

[00:41:28] David: That's all matters for me. Like my customers. I spend 50% of my time having some calls with customers, just talking to them. That's my job. Like I'm close to my customers. I need to know what they want, what they need. Like the same job I was doing two years ago, I'm still doing the same, exactly the same and I'm very proud of doing that.

[00:41:50] David: I think every CEO should like, I don't know, talk to their customers a lot. But anyway, so looking competition, yes, of course there is like a lot of product that try to do the same as we did. Like when we were in under market, we were the first one kind of doing the way we were doing the things we're the first ones.

[00:42:07] David: And I think display about the magic is not a like only a product things, it's also a distribution play. Like product has not as, like we are in a time where building product is not that difficult as it was like 10 years ago. Loveable, cursory. It's crazy what you can build. So I would say.

[00:42:29] David: Yes, there are some tools, but I don't know them to be honest. We have some competitors, I would say two, three, that raise like 50 million, 20 million, 70 millions. And they are on different paths. Like we are all taking different paths, different approach. Some of them are on the app store, we are not on the app store.

[00:42:46] David: We have different ICPs. We are different use case. Exactly. Not exactly the same use case, for example. And. We are very proud of the direction we take, and it's great to have competition like they are like innovating. We are innovating as well. I see competition as a good things. If you have no, if you have no competition, that means you have no markets, you have no business.

[00:43:05] David: Yeah. So yeah that's what I think.

[00:43:08] Omer: All right. On that note we should wrap up. Let's get onto the lightning round. Got seven quick fire questions for you. You ready? You ready? What's one of the best pieces of business advice you've received?

[00:43:19] David: I wrote down this quote. It's not really someone who give me this advice, but it's a realization I get from my experience is that good businesses brings good people and bad businesses bring bad people.

[00:43:32] David: Easy as this.

[00:43:33] Omer: What book would you recommend to our audience and why? Okay.

[00:43:37] David: I don't read books unfortunately, but I listen a lot of podcasts. I will recommend a podcast instead of books. And I love Jason Fried from 37 Signals, or his cofounder David, so he can listen everything from these guys. I love them.

[00:43:51] David: And otherwise I love novel. He's a great guy. I love listening in, so I think it's a good piece of podcast.

[00:43:58] Omer: Yeah. I could listen to Noah like all day.

[00:44:00] David: Great. Amazing. Have you listened the last one, the one of three hours with Chris Philamon?

[00:44:04] Omer: No I saw him like promoting the shorts and the clips everywhere and I was like, where's the long form version of this?

[00:44:09] Omer: But it's I have to watch that. What's one attribute or characteristic in your mind of a successful founder?

[00:44:15] David: I'm passionate about what I'm doing. And I always find solution. I'm a problem solvers. I find solution for everything. And so there is no problem. There is always solution.

[00:44:28] Omer: What's your favorite personal productivity tool or habit?

[00:44:31] David: I am one of the top users of Loom in the World. I do like looms like all day long because we are remote and I love loom.

[00:44:41] Omer: Alright. What's a new or crazy business idea you'd love to pursue if you had the time?

[00:44:45] David: There is one that we are, working on that's maybe gonna be live soon.

[00:44:50] David: I want to keep it as a surprise, but it's gonna be linked to Submagic, linked to our customers as well in the same space, in the same vertical, I would say, but one big pain that we're trying to solve.

[00:44:59] Omer: Okay. We'll look out for that then. What's an interesting or fun fact about you that most people don't know?

[00:45:03] David: I love I'm very epicurean. I don't see if you say that in English, but I love I love food. I love cars. I love traveling. I love I love experiencing things. I'm passionate about golf. I'm passionate about cars. Yeah, I love nature as well, so I love experiencing things in life.

[00:45:19] Omer: Cool. And finally, what's one of your most important passions outside of your work?

[00:45:24] David: Yeah. Golf cars, video and video. I would say creating content.

[00:45:30] Omer: Awesome. Thank you so much for joining me. It's been a pleasure. Try and unpack like what's happened in the last two years. It's been a whirlwind. I. Kind of journey.

[00:45:39] Omer: Hopefully we gave people listening to this, some ideas, some inspirations, something that they can take away and apply to their own business. If people want to check out Subm Magic, they can go to Submagic.co. And if folks wanna get in touch with you, what's the best way for them to do that?

[00:45:53] David: They can reach out to me by email, david[at]submagic.co.

[00:45:56] David: Or other on LinkedIn. Sometimes I try to go on LinkedIn as well.

[00:45:59] Omer: Awesome. Thanks man. It's been a pleasure and I wish you and the team the best of success.

[00:46:03] David: Thank you very much, Omer. Thank you.

[00:46:05] Omer: My pleasure. Cheers.