Aug. 16, 2020

Selling Esgut for millions and building a top 5 Facebook app company, by Jamal Ashraf.

Selling Esgut for millions and building a top 5 Facebook app company, by Jamal Ashraf.

Jamal Ashraf, the founder of Esgut, talks about how he turned down funding from Naval Ravikant and how the company was acquired by Shervin Pishevar's Social Gaming Network (now Jam City) after a 2 hour conversation at a conference. We also discuss growing to 1 million users just 4 weeks after starting the company, how products can go viral, and what to focus on other than the number of downloads.

Bulk Probiotics: https://bulkprobiotics.com/

Office hours with Make it Studio: https://make-studios.typeform.com/to/bUvZoSwl (it's extremely helpful, trust me).


Transcript

Yeah, alright what Co, founder of one of the five one of the top five, most invulnerable Facebook apps. Alright, let's re, record that this is, for one reason redo and today's a guest speaker. 

We have Jamal Co, founder of one of the top five, most downloadable Facebook apps as good that was acquired by social gaming networks. 

And in this episode, we'll talk about how it became so popular and how it managed to acquire over one million users after just four weeks after it was created. So, called by, you giving us some background on yourself and on as good. 

Sure, thanks for having me. So, after college, I had to stand at the strategy consultants for almost a year. I really didn't like it. So when they decided to quit, I had no idea what to do. 

And a friend of mine from college has left Microsoft after a few years and couldn't, coincidentally, at the same time, just launched their platform to develop applications. 

So we got together and thought about what we could build in a short amount of time. So, we could test out the viability of this platform. 

We decided on this idea of building and called superlatives and the space essentially a. Mimicking that sort of concept of in high school,
for example,
you nominate your friends to be who's most likely to be president, 

or who's most likely to be successful, et cetera, 

et cetera and we just digitize that and we spend a couple of weeks building at doing some surveys kind of building looking at what the growth levers were in the platform and building growth from the ground up within the 

product and yeah so after two weeks,
it launched it and another two weeks we had gotten a million users or so.
And it was just exploding and growing very,
very quickly and over time,
just got really good exploiting the and the channels that Facebook offered, which were mostly primarily through invites and notifications.
And so we just kept growing from there. We built out a portfolio of applications. 

We started hiring more people, we hired a team out in Argentina and grew that to about a dozen people, mostly software engineers and built more and more apps. 
We built an app called entourage, which I think ended up being our biggest app, especially showing off your closest friends on your profile and it just looked like a nice photo collage. 

And now we've got something called hot war, 

which basically just sort of amplified what baseball was on baseball at the time, 

when he couldn't share videos or photos and things like that more music. 

So, you've got the people who do that on their on their hot wall. So, I think at this time, like, really early on we weren't really sure what the strategy was. 

We just that we wanted to get a lot of users downloading our app and kinda figure out what to work on next. Because it wasn't clear what was sort of a repeatable business model at that time. 

We just knew that there was a young audience and I think everybody knows that having a young audience engaging in your platform or your applications. That's a really good thing. 

But it's always unclear what something that's gonna be sticky and what's something that's gonna make money it wasn't until later on that things like farm bill came out and then it became more clear. 

Like, 

what was the sort of sustainable path to revenue by the time we were making around fifty thousand dollars a month, 

just through ads spent a lot of time making sure that we were short financially, 

by getting enough deals going on I think one of our biggest partners was actually yeah, 

and then, 

you know, 

we built maybe like, 

half a dozen applications and. 

I think after about a year. 

We think Lehman Brothers had just collapse we had some earlier discussions, 

like, 

very, 

very light discussions about maybe teaming up with and yeah. 

So, we ultimately just ended up selling the company to a company called social gaming network about a year and a, it was a crazy ride. 

Yeah, I can tell I mean, the whole background that he just explained about as good, it was huge, just so much going on, but let's start with the basics of what's discussed on this, which is fundraising. 

So how do you approach that to us? We're raising money for as good or do you only use funding that you got basically from your revenue? So, from those initially fifty K, go for revenue from ads. 
So initially, like, you know, we, we just decided amongst ourselves, hey, let's put our some of our savings into a joint bank account. So if we needed to tap into it, the paper servers, we would do that. But, other than that, we weren't paying ourselves or anything after a few months. 

We would always be glued to the, the charts the chart showed you which Facebook are growing very fast. And one of the apps was called computer. 

If you compare people and it was super viral, 

and I reached out to the person listed on the app who was the, 

his name was I've two, 

I think, 

and I was like, 

hey, 

let's chat about, 

like, 

morality and marketing and see if there's any way we can work together and he's like, 

oh, 

you should talk to my Co, 

founder his name first of all Robin. 

So not people who maybe doesn't don't know this, but in the ball was had started a company called chain and built this app. Compare people on Facebook. 

I think that was his primary thing, and maybe he was also doing some seed funding, but we didn't know who this guy was at all. So then he gave us his contact information. 

So, he reached out to them all and we chat with him about how we could maybe work together and maybe do some cross promotions and things like that. And we ended up doing like a, he ended up, I guess, maybe promoting our app for a bit. 

And I think he just offered to invest in our in our company. So I think for me. 

I was always against taking money that early, because they had this idea that we could raise in a much higher evaluation later on. So, it's more like me. I think my Co, founders probably, like, trying to convince me that, hey, we should take this money. 

And then I was kind of like, hey, like, we, I think we should wait a little bit until things sort of, you know, become more clear, like, where what we're actually going to go after. 

And so we ultimately just didn't take his term sheet offer and decided to keep yeah. 

Keep keep using our revenue that we're making cause back then also, it wasn't something where people were raising, like, Monster seed rounds of ten million dollar valuations. It wasn't anything like that. 
So people were facing,
like,
three or four million dollars on the see,
they were raising,
like,
hundreds of thousands of dollars and their seed,
maybe a million and yeah so so we just ended up bootstrapping it the entire way. 

That's awesome. That's love those stories, to be honest. Of course, since this is fundraising radio, I love stories where people raise monstrous rounds of funding, but less talk about your bootstrapping. So why exactly. 

Did you decide that, you know, you have official funding from your revenue to fuel the growth? Or do you do you actually require any funding besides what you spent on the team on server maintenance, or something like that? 

So the funny thing is, I think we could have actually made even more than fifty thousand dollars a month earlier on because we ended up, like, the traffic that we ended up diverting to our own portfolio apps. 

We could've just ended up selling that traffic to some other apps so we could have double triple quadruple our revenue per month. So I don't think like. 

Honestly, I don't think that, having that kind of revenue scale was really something that we spent a lot of time thinking about, I think, that, you know, later on we started thinking about, like, the sustainability of our revenue. 

Because I think that Facebook started to sort of limit the amount of virality across search channels. So it became harder and harder to to grow. 

So, it's much harder for new entrants to come in and, you know, do what we did basically so quickly. And so,
yeah,
I I think that we just pretty much just try to focus on, 

you know,
growing our apps building out revenue and experimenting with new types of apps, and not pigeonhole ourselves into these sort of silly,
you know,
fun apps. 

But instead, like, work towards building something that, you know, build out sustainable and repeatable revenue now, which turned out to be games. 
Nice, I mean, that's that's just so much interesting stuff going on. I'm curious. What do you think is you've done the most right way. 

So would looking back at the story office, 

got what do you think, 

was your best decision and that company was it to bootstrap instead of, 

you know, 

accepting that term, 

should it or was it focusing on your own portfolio companies and making the revenue more sustainable or what was the decision that you were? 

Like? Okay yeah, I'm proud of that. 

So, I think the thing that I'm most proud about is that we, we didn't pigeonhole ourselves and just, you know, got glued to one particular app or category. Like, we tried many different things because it wasn't clear. 

Like, what was gonna be something. That would be sticky with users over a long period of time. So we tried dating we tried, you know, these viral apps. 

We we tried to game and the, the game that we tried, 

right before we got acquired with something called text twirl and it was just sort of a similar version of a game called text twist that I would think was popular on Yahoo or something again. 

It wasn't like something particularly a high on the revenue generating thing, but also got our feet wet and gaming and kinda showed us that hey, all the people that play this game, stick around. 

And I'm sure if we would've kept the company going before, we got acquired. I think we would probably end up building something like a farm bill. Once. I became clear that that was the category to be in. 

Yeah, so I think that so I think that, you know, experimenting across different things and I'm not getting bogged down by one app idea was probably the thing that that helps a lot. Nice. Awesome. 

That's great to hear. And let's talk about growth now. I mean, as just had tremendous growth, you on our premium recall, you mentioned that after two weeks of the release of the first version, which you've built for, like, two weeks right? 

So total of four weeks. So, a month of work, you already got a million of users. How how is that timeline? Right? By the way. 

Yeah, it's about a million users after two weeks early that we were release. That's happy. How did you manage to build something that just do you what did you decide to publish it so fast? I mean, two weeks of development is not an enormous time. 

Many people spend, like, months and months before releasing why did you decide to really so fast? 

So, I think one is that, like, I think we, we have the intuition that, you know, being early and being fast to market and just kinda figuring things out as quickly as possible is useful. 
Even though it's not clear how useful it would be. We just kind of figure that that's sort of the approach that we want to take. So, if we weren't sleeping or eating, we were working. 

So so, you know, we, we actually built this company in Atlanta, and we spent a lot of time, like, working out of my parents basement and yeah. So we. 

We. 

Sorry, I got a little off track like what we're talking about, how you managed to. Oh, right that part. Okay. Let me make sure I'm working best for you. Okay. 

Yeah. So, to get to a million users, like, honestly, our goal is to get a few hundred users after a week. Like, we didn't really understand the significance of what exponential growth actually event. 

And I think at the time, like, you know, most of the, the users on the platform on Facebook were mostly college students or younger people in the United States. And, and it was something new and novel to everyone as well. 

Especially the apps, like, everyone was willing to try them, everyone would respond to notifications and invites and over time, like, people would get sort of worn out by them. 

But at the point, they they weren't so when we started off, it was like, hey, like, we had this app, you know, the user comes to it after they install it. They take like, what superlatives they want that with with superlative. 

They want to nominate a friend for and you pick one so if you pick one friend, and then you, you hit next and you can do it again. And again. So. 

We realized that, hey, you know, this is sort of like a staircase and it each stair that you climb. Like, you're gonna hit a plateau in terms of growth. 

So, you just kind of have to analyze your product and think about, like, well, how do I increase the amount of invites and the amount of notifications that each user consent. 

So, like, for example, on next generation would be like, well, you pick one superlative, you know, who is most likely to be president and then you can take multiple friends, as opposed to just one friend. And there's one version of, like, you know, ten exceeding the amount of growth that you get overnight. 

And then, for example, next step could be like, well, when you first install the app instead of just seeing this list of a bunch of superlatives that you have to think about which one you wanna pick. Well, we pick the superlative for you. 

And then you just focus on picking which friends, and then you add five of those. And then again, you've got, like, ten X growth again. 

So that way, you could be getting, like, I think, at some point, where we're doing, like, a hundred and fifty thousand downloads a day, this is going from like, a goal of a few hundred a week to a hundred thousand. 

So, it was a, it was pretty much like, that's how we thought about it. The other thing that was tricky with that Facebook also had sort of created filters to prevent spam. 

So that people wouldn't be able to send out as many invites notifications that they want, or people who reported an invite or declined too many invites. Then that would hurt your vitality and hurt your growth. So we did we did clever thing. 
I don't think a lot of other people did, so one thing that you could send notifications or limited amount of notifications per user per day. 

So I think maybe like ten or twenty per day per user, what most people didn't realize was that you can shoot these notifications across time. 

So if let's say you got a user to send out, like, two hundred invites or notifications to all their friends, single day. Well, we would break that up into, like, hey, will ten, twenty, tomorrow, twenty, the next day, et cetera, et cetera. 

So we wouldn't block that. The other thing was that making sure that a user wouldn't get an invite from the same person for the same app more than once. 

Because if they've got that, if that happened to them, like, either Facebook would flag it or the person would just get really annoyed. And that that would happen. So, I think a lot of people tried to, like. 

You know, be super viral, but then they got locked down and their app got blocked. So then they couldn't grow anymore and yes, I, I think that that's kind of how we thought about it. Nice. 

You just sold down and managed to to, to extend those blocks. That's awesome. So, let's talk more about virtual reality here a little bit. So when people come to me and I see their pitch deck and I see somewhere on that page deck award. 

Virality usual. I'm like, okay, well, let's, let's talk about this, so we usually, I'm really skeptical about those, that sort of things. What do you think about virality now? 

Do you think that's even possible to expect part of your growth to be from her? I'll actually hope, though is going to come from them so rely on that for royalty. 

So, I think if you're a consumer app today, I think it's much much more difficult to grow virally. I, I think it should be part of your strategy, but I don't think it should be the only strategy. 

I think part of that is that, you know, people just don't respond to this anymore. Like,
you know,
if you send an, 

if you get an email that says,
hey,
your friend invited you to such and such like,
you kinda,
I think after after so many years of seeing social applications,
I'm sending out so much of these kind of emails like it just stop working other things are better, probably like,
you know,
like, 
if you can grow via text and get you to text here, different friends. 

But I think the era of social, as we know it from, you know, many years ago, it doesn't exist anymore. I think it happens, but very much more infrequently. 

So, like, now it's more of an occurrence where every one or two years you have, like, a snap chat or a talk. And then for every one of those that actually succeeds like, there's many that just totally fail. 

You probably never even hear about, but but I think it's like, you know, it's it's it's not I don't think it's like a very cohesive strategy today. 

Right, absolutely, I totally agree with you here and definitely on the same page. Sure. So let's talk about your early focus. So in the beginning you're not really thinking about mobilization about your strategy. 

You're just hoping to get as many users to use your app as you mentioned, how do you think that works? 

Would you, if you could go in time, would you change that strategy towards, you know, focusing on monetization or attracting more partners or something else besides, you know, just getting users to use her app? 

I think that is today, I probably focus on engagement, so if you can create something sticky where people are engaging in the platform and creating content on your platform, that's a very good early sign. 

And, you know, if you sort of look at, like, thirty day retention rates for games, and then compare those thirty day retention rates. So, like, social apps, like, games are generally a lot better. So you're, you're, you're onto something. 

If you have a better thirty day retention. And then a lot of these top games so if you have something like, I don't know, twenty five to fifty percent retention, that's something I would keep working on. 

And, yeah, so so I think that a lot of people maybe think about growing really quickly and then if they don't currently quickly, they kinda give up. 

And I, I think that, you know, like, talking about these numbers, like, you know, really after two weeks later, it just doesn't happen today anymore. Like not even close. 

Yeah, that thing, like, like, I've seen so many companies where, after multiple years, you know, if you've got like, a few hundred thousand active users, and those active users are much more valuable than people who are just passing through right? 

Like, who cares if you get ten million users and then, you know, only a thousand them are still using it off their yearly doesn't matter. So, I would just focus on, like, kinda figuring out like, what are the sticky features that people want? 

But I think more over than that, I think it's like a category that you're in. That's really important. So not only engagement. But I think that's a good strategy is like, looking at trends, for example. So if there's something trending, I would jump on that. 

Right, right? Perfect. That's a great description. And I think that, yeah, I think nowadays it's pretty much impossible to get one million users in just a couple of weeks. 
So, let's do a little bit more time traveling here and let's go back in times when you just we're starting as good if you could go there and change something, what would it be? 

I guess I probably wouldn't have Hollywood. It wouldn't have been necessary to hire so many people. Like, I think instead of focusing on, like, what we're gonna build, like, the focus turned into, like, how are we gonna manage all these people and create work for them? 

Like, the apps that, like, people, these people that we hired built, like, we're one of the bigger ops just became a lot to manage and it also became, like, a money pit. So I think it would have made more sense. 

Have been slower in terms of hiring like we had hired. I I think the first person we hired was an intern, and he actually went to Georgia tech. It's a great programmer. 

I think that, you know, just finding more people like him if we absolutely needed somebody else would have made a lot more sense. 

But hiring, like, a dozen people where it was difficult to sort of gauge, like the, the quality and those sorts of things just sort of made things a bit more complicated. 

Right, yeah, I think there's actual great advice in terms of hiring. I mean, I have a small team of my own working on fundraising as just so tough to manage them. Sometimes it is just like three people besides myself. 

So it is tough, but let's talk about the acquisition, so the happy ending that you've got at the very end of this as got story, how do you happen how did you get in touch with your with the social gaming network? 

So we actually went to a conference in San Diego, I think it's called the grafting social web conference or something like that. 

Basically, 

all these app developers are going there and yeah, 

we, 

we had never talked to Sherman before Sherman, 

who is the founder of social gaming network and I think we just spotted him and we just introduce ourselves and we ended up chatting for a few hours and after, 

like, 

maybe half an hour here, 

just like you are the guys that yeah. 

That we're looking for to join JN and I think he sort of threw out some numbers by the end of the conversation. 

And then, maybe the next day he sent us an email saying, hey, here are some sort of basic terms that you guys had kind of said you're agreeable to and. 

We didn't really negotiate too much. Just kinda went over the legal documents with the lawyers and just tried to wrap it up really quickly. We ended up flying to San Francisco and. 
Working out of the office for a couple of weeks, and just, you know, sign the deal. That's just the whole story is so fast. Like, every single event is happening so quickly. 

And the acquisition is not the exception here. I mean, how long did the whole process take you like months? 

Yeah, exactly about about a month. Actually, it probably took a couple of weeks to get the papers in order and then, like, another couple of weeks to kind of go back and forth before we sign them. 

I don't think their earlier documents looked really that different. I mean, there was like, you know, it was it was an all cash offer and then I think there were some revenue share for the next couple of years. 

And I think there was an extra earn out, depending on different metrics over the next year or so. And that, that that's pretty much it. 

I mean, I think that's, I mean, number, it was just the cash pilot offer, and then we ended up just joining them as employees. Nice. That's really cool. 

And by the way, for those who don't know the term, or now, it's like, when you get word for twenty million, usually, we get ten million cash, five million, the equity of the company that got acquired. 

I mean, that acquired you and five more million in, or now is which means, like, if the integration goes well, if you hit certain milestones down, you've got extra five minutes. So just clarify that. 

And let's talk about what happened after that was interesting. What are you working on right now? 

Sure, so I actually became really interested in gut bacteria and micro bio. So that's basically like these sort of microbes that live inside of your body and out number yourselves. 

Like, you know, a hundred to one, there's hundreds of trillions of species of these microbes in our bodies and most of them, we don't even know much about. 

And I got really into like, 

bio hacking and just wanted to figure out how maybe optimizing things in my body could help me had more energy, 

feel less tired or less fatigue maybe control stress a bit more. 

And, you know, I like, looked far into the, you're talking to a lot of these and microbiology and founders of different companies that were making micro biome drugs. 

Like, I have a a friend who is working on Micro, biome drugs that help with sleep and another one that's helping with with depression. So essentially like a pill with bacteria in it. 

Basically, like, you can think about a more targeted probiotics and I thought, well, there are two ways to this one is, like, going through a phase that. 

Normal drug companies go through and finding some sort of target market or target product that has efficacy against some sort of illness or disease. 

And, like, for example, IBM or some digestive system, like acid reflux, et cetera, and you go through phase one, clinical trials and phase three clinical trials. You have to raise, like, a hundred million dollars. 
It's a lot of work. And it takes a long time. 
That was another sort of a way to go about it is to just get, 
you know, 

somebody has advocacy, 

but then you just get approval for from the FDA for safety, 

and you don't need to go through all these trials and things like that. 

So, for example, there's gotta be Matt, who is working on or who launched a company that helps with the hangovers and it's just a bacteria that helps deal with your body deal with that better. 

So you can get over the hangover much more quickly. But I guess, like, I'm thinking about what I wanted to launch, I thought that, you know, there's so much noise. 

Like, there's so many probiotic strains that, that say that they do so many different things. And many of them never succeeded in terms of marketing, like to think about digestion. You probably think of like. 

Culture L or a line, or something like that. And they're just like one species of bacteria and I mean, not to say that they don't help with the but it's just like there's probably so many different things you could be taking for digestion. 

But how do you market it, how to distribute it? Like, it just seems very, very difficult because there's so much noise out there. 

So, 

I thought, 

why don't I just get my feet wet and understand, 

like, 

you know, 

how do we, 

how do customers of probiotics perceive value and, 

you know, 

how to how to actually market to them and how to distribute your product to them. 

So I started something called bulk probiotics. That's B. U. L. K. probiotics. And I found myself spending hundreds of dollars a month buying probiotics, which is crazy. 

And just talking to a bunch of people who buy probiotics or surveys and focus groups, they also have the same problem where there's like yeah, this is too expensive. I can't keep this up, but they need to take probiotics for the rest of their life. 

Mainly for digestion, so both probiotics is a way where you can buy, like, your favorite probiotics essentially at half the cost but it's just not branded with like, a line or cultural or whatever. 
It's just our own brand and so it's pretty early days, but I guess I feel gratification from working on it 
because I know that in the future, like, I'll have a lot of learning from this. 
And maybe I'll work on something Therapeutics that again could just help more people and I'm also just helping people who just can't afford probiotics. And it just feels good talking to them every day. 

And you're getting an email saying, like, hey, like, thanks so much for doing this like, I, I can actually afford some probiotics and yeah so it's it's just for the cold, you're doing good work. 

They're in good luck with that stuff, 

but less two questions first a lot of founders after exiting I, 

after they have a successful exit, 

they start mentoring, 

other startup founders and doing some angel investments. 

Do do any of that, 

or are you mainly focused on their on the current company but with the prep probiotics so apart from bulk probiotics, 

I get asked to do mentor mentorship for different accelerators and things like that. 

I just don't take. I just don't take them up. I kinda just wanna focus on this for the time being and yeah, so this is pretty much like what I do full time. 

Got it yeah, I mean, it's super hard to to run a business into a lot of membership so yeah. Total interest. So last question sure. Then call to action. What's the one thing that you think the listener should do? As soon as the episode is over? 

Yeah, so if you or your parents or any friends that have, you know, anxiety or stress or digestive issues, like, check out bulk probiotics dot com and reach out to us. 

And, you know, I I know a lot of founders that take probiotics and they just show much more energy. I know a lot of people who just solely offer probiotics, stop drinking caffeine, because they don't need to take it anymore. So yeah. 

Awesome. Yeah, we'll definitely leave a link to both com in the description of this episode. So if someone re forgot this super simple, nice name, you should check out the description of this episode. I'll leave it there. 

And my personal call to action would be as usually go to the will also leave the link to registering for office hours that make a studio, which we just started hosting. And where I personally help people find the best ways to fundraise. 

I help them explain you explain them how to do this stuff and if they even need fundraising at the stage where they are at so, go to the stripping of this episode's tons of helpful stuff away to there, and have a great day.