Lomit is the Vice President of Growth at IMVU. Prior to IMVU, Lomit managed growth at early-stage startups including Roku (IPO), TrustedID (acquired by Equifax), Texture (acquired. by Apple) and EarthLink. Lomit is a public speaker, author, advisor, and recognized as a Mobile Hero by Liftoff. Lomit’s new bestselling book Lean AI, is part of Eric Ries’ “The Lean Startup” series, now available at Amazon.
LISTEN TO THIS EPISODE:
Hey, good morning, afternoon, evening, whenever you’re listening to this. But welcome back to another episode of the art of making things happen with me. Steve Sims today, I actually interview a neighbor. This is a funny thing, you know, when we got on the call just before we started to record, suddenly found out that he’s his family and he worked at the off license on the corner of the street that I grew up in, in London. So it’s funny. He’s now in San Francisco, I’m here in Los Angeles and you never know who you’re going to bump into, but I’m going to introduce you to Lomit Patel, a guy behind Roku, some stuff with Apple, Experian. This is a man that’s very, been very, very successful within startup organizations. How to see them at a visualize them, how to scale them. He’s got some great little tips for you. Don’t be scared, but he knows some smart, smart stuff up there in Silicon Valley. Enjoy the episode and grow. If you love it, share it. If you hate it, tell me, and I’ll pick different guests. Anyway. Enjoy the show with Lomit Patel. Hey, Lomit welcome to the show.
Hey Steve. Great to be here.
Now. We were on a little bit of a chinwag before we started this and we’re neighbors. So where did you come from? Yeah, believe it or not.
I grew up for the most part in Leytonstone in East London. And, and it has to be pretty similar to where you came from too. So,
Yeah, just around the corner, I believe, I believe you mentioned that your, your family has a local off license, is that correct? Correct. Yeah, so I was probably in there under age range, selling alcohol as well. Hey, it was East London in the eighties. Everyone was under, but I gave people before we came on a bit of a, a bit of a background on you. I’ve never met people that, let me rephrase this. I know a lot of people that have done great things. We had Alec Stern on recently, who was one of the cow cofounders of constant contact. And so I’ve had founders on of major companies, but you’ve been involved in a Roku trusted ID with Equifax textual, which got acquired by Apple. I’ve not met a person that’s actually been constantly involved with some big launches. They say that, you know, every now and then one goes well, brilliant, but you have had a pretty damn good track record. So tell people what you do and who you are.
Yeah. So my name’s Lomit Patel. I currently I’m the vice president of growth at a startup called IMVU, which is the world’s largest avatar based social networking app. But prior to that, I’ve been fortunate to have worked in startups for over 20 years. And I’m more, fortunately I’ve picked some that actually ended up becoming pretty successful. And so my role generally is I’d usually join startups really early, right when they’ve raised their first round of seed or series, and they’ve kind of got a product, but, you know, the biggest challenge with any company is not just having a product. That’s how are you going to acquire customers and how you’re going to sort of make money at the end of the day? And that, and those are the two areas that I really focus on is coming in and really helping to figure out how can we acquire customers?How can we continue to, to, to keep those customers? And more importantly, how are we going to be figuring out, figure out a business model to make money out of them.
Now you’re actually a fellow Brit, you’re actually up in San Francisco at the moment. Correct.
I am. Yeah.
How long have you been there in San Francisco?
I’ve been here since 2004 and total in the States. I came over in 1997 for, for grad school, which was in St. Louis. And then I spent a bit of time in Chicago, but made it out West in 2004.
And you didn’t think you’ve just gone back to the UK?
I didn’t, you know just going back to what really drove me to come here in the first place. I was really fascinated with the whole area of like online and internet marketing when it was right, right. In the early days when it was really taking off, I was reading a lot about this you know back in London, but none of this was really happening at the time. And so a lot of these companies like AOL and Yahoo that was sort of popping up, it was all happening here in the States. So what I wanted to do was to ultimately, you know, you know, one of the things that I have in the back of my mind is fuel, be an actor. You got to figure out a way to get to Hollywood, right? If you want to be in startups, you’ve got to figure out a way to get to Silicon Valley in San Francisco. And so, you know, there’s never a linear path to get there. And so for me, you know, the detour was to go through St.Louis to get here. And primarily because I wanted to go to grad school, so I could at least learn a little bit more about the subject and then figure out how I could, you know get into a startup from there.
Was that an easy, and you were there in 2004, was that correct?
In San Francisco? I came in 2004, but yeah, I started working at a startup back in 1999. In Chicago, when I graduated from grad school.
What was it like in 2004 in Silicon Valley? Cause we started to see quite a lot of the names start to pop up about then, didn’t we?
Yeah. So, you know it was, you know, it was a good time, you know, generally, you know, in Silicon Valley, you know there’s always booms and breasts, right.
And so, you know, the first downturn was probably around 2000, 2001. And then you know, after that period, 2004 was kind of time where companies were starting to get more funding and, and grow for starting to happen. So I kinda came in right around that time, you know, to sort of be part of that wave when, when things were going well. And, and, and I kind of wrote that to like 2008 where know the economy kind of took a turn. But the great thing about being here in Silicon Valley for me personally, is that there’s so much opportunity. You know, even when the economy is good and bad, there’s always gonna be startups that they’re going to continue to come out. Cause a lot of the investments happen here and they’re always looking for talent. So, you know, that’s the great, great, great part about, you know, even if you work with a company and let’s say it doesn’t work out, there’s always more opportunities right around the corner they can pivot onto
A lot of people come up to me. I have a lot of people ask me because of the people I know, Oh, can you introduce me because I want to make some investment dollars and I need some seed and I need some found foundation capital. And even recently, when we were speaking to Alec Stern, he was talking about raising capital. He, the fun of that was what three tips would you give someone if they were thinking, Oh, I’ve got this brilliant project. How do I raise capital? How would you tell them to do it?
So the first thing I would say is, is like with anything in life, you, you, you want to start planning for it before you need something, you know? So, so when it comes to raising capital it’s always good to start networking. And I know Steve, you know, you can give people great tips on how to network, but ultimately it’s all about, you know, making sure that that, that you’re starting to plant those seeds and getting to know the people who ultimately are going to be, you know, it’s all about trust at the end of the day. You know, you want to build up that trust before you need to sort of cash in on some of that trust. And so the first part is just being out here, there’s a lot of networking events that go on just, just, just being, just being there by design in, in, in that environment, people are going to get to know about you.
People are always interested in hearing about new ideas and new business pitches. So, you know, always, you know, always start talking about, you know, what you, you know, what your ideas are and, and, and, and eventually you’re gonna attract people that will try to get behind it. You know? So my free tips is one is starting networking early on. The second is identify the, the, the, the venture capitalists that actually invest in those areas of where you’re looking to to, to grow your business because people have different niches right. In a day. So there’s no point in talking to someone in a, for example, a business to business investor, if, if your products will be a business to consumer product, right. So, so, so identify the right niche, make those relationships. And, and then the third part, you know, another way to get in is, is just try to just reach out for mentorship to other founders.
One thing that I’ve come to realize out here is that people are always willing to give back, you know, cause people have been through that journey ahead of you and, and, and part of part of people’s legacy, not only building great businesses, but also trying to help you know, bring the next generation of founders along to, and, and generally most of the seed capital that people get on their startups here come from other founders who have become successful because they want to try and, you know, get back to, to, to, to the next round of entrepreneurs that are coming down the pipeline. And, and, and as part of getting some of that seed capital, they, they’re also willing to open the doors and make the introductions as well. But one, and then one other thing that people don’t realize at the end of the day, you know, building a startup is a team sport, right?
It’s not a one man show. And so always start thinking about the team that you want to try to eventually attract, to try and help you sort of, you know make that dream become a reality. And so part of attracting or talking about the team or, or, or identifying, you know, some of the different founding members that you want to bring on a team is that, you know, especially if they’ve been here for awhile, they’ve, they will have a pretty good network too. And that will lead you to helping to find some funding.
That was good when we had Alec Stern on I’ve mentioned him a couple of times already, but one of the things that he came out, which was a powerful to me was when you’ve had a good pitch. And you actually think you’ve just got funded as you walked out of the room, don’t stop pitching because that excitement and enthusiasm has got you thinking, yeah, this is it. People can, people can feed off of that. So when you’ve got some really good news, don’t sit down with the bottle of champagne and celebrate that’s when you should go out there, because people will see that there’s an extra air of confidence about you and extra air of credibility, and people can, people can feed off that. People can see it and smell it. So that’s a, that’s a good one from there. Good, good points on it. Now you’ve been with some massive groups. What was your biggest failing?
My biggest failing. I would say what I’ve come to learn working in early stage startups is, is not basically focusing on stuff, right? Cause, at the end of the day you have finite number of resources and time and money. So, you know, trying to try, try, try to do too many things at the same time you basically ended up and you ended up not doing any of them that well. So the key thing is just, just being laser focused. And so when it comes to a crying customers, as an example, don’t try to like test, you know, like, like three or four different like potential channels, like Google, Facebook, Apple search, or whatever, find one and, and, and, and try to figure it out before you try, try to add the next one, you know? Cause cause ultimately you want to get good at something really and figure it out. And then, and then try to add to that, you know, as you continue to scale,
Did you have any near misses, those ones that you go back and go, Oh my God, if I had done that, it would have been a billion dollars. Do you ever have those kinds of close calls?
In terms of like the companies that I work for? I would say the, I would say the near misses are more like the companies that I didn’t actually end up going and working for, you know, like, should I should kind of work for that company? You know, I mean, I mean, when I was approached by companies like Airbnb back in the early days and there’s a whole slew of other ones that have ended up becoming super successful, but what I’ve come to realize is, you know, I get less hung up on the ones that I, I didn’t, I didn’t make it versus, you know, the ones that I did, what could have done better to have made it bigger and faster. Right. And so, you know, the, the near miss is really comes down to, I would say for me is, is, is, is if you feel strongly in something to, to really stand up and really have a strong conviction for your point of view, you know, especially when you work in these early stage startups, you know, everybody’s kind of open to listening to ideas, but you have to really have, you know, strong conviction and, and have the data and, and, and, and, and stand behind your business case.
You know, if you really believe that a company should be doing something cause part of it is when it comes from the fact where you where you’ve left money on the table, because you didn’t really pursue certain opportunities when you should have done them. And then you kind of go back to it and, and, and, and by then other people have started taking advantage. Other people have already sort of identified those opportunities. So it’s not as new or as, as, as lucrative as it could have been. If you’d taken it before
We actually posted a, my group posted today, a saying that I got out of Elon Musk when I was having was very proudly having a tour of space X with him. And someone actually asked him quite a stupid question, actually, funny enough, it was about NASA. And about how, you know, they were laughing at him and giving him little jabs and pokes. And of course, we’ve just seen him land to people on the international space station with his partner NASA. So, but we were there many years ago, and I remember the time he turned around and he already said, he’s a man of few words. All he said was they laugh at you until they applaud. And I’ve noticed in any business the ones that I’ve been in the other startup and founders that I’ve met, there’s this almost pill of ignorance. There’s this kind of vibe that you’re not really paying attention to. Those people laughing at you as you are to the end goal. And you say about conviction, it’s that complete commitment that, Hey, this can’t fail. There’s no way to, and it’s amazing how sometimes you have that complete or Udacity that it should file, but it doesn’t because of that. Have you ever kind of gone through a moment and then gone, how the hell did that not go wrong? How the hell did that not fail? Have you ever had those?
Those every day, to be honest, you know, part of, part of the job leading growth at all of these different startups, whether you’re early or as you continue to like, you know, grow, is that there’s no guarantee that tomorrow is going to be the same as yesterday. Cause every day you’ve got to earn the rights of a crier and customers and they keep driving revenue. And so nothing’s guaranteed. So for me, one of, you know, one of the sayings that I have is every day is day one. So, you know, and, and I try to instill that not only my team, but in the entire company, that every day we’re earning the right to, to, to bring customers in, to, to, to buy our product and, and, and, and, and to potentially become evangelists for our product.There's no guarantee that tomorrow is going to be the same as yesterday. Click To Tweet
And, and so, you know, the, the mindset is always that, you know, I would say the big difference is, you know, when, when you, when you fundamentally change your mind shift from being thinking that you’re entitled to something to where you have to earn something every day, it really changes the way you approach stuff. And, and, and that’s been really true for me through all the startups that I’ve worked at, you know, especially the ones that ended up becoming successful is that every day is a crazy day, because every day is unpredictable. And, and, and, and it’s not only things internally that can impact you, it’s things happening externally. Cause part of the challenge, you a start startup is you and just try to stay under the radar as long as possible before a big company starts sort of seeing you as a friend.
Cause then, then you got to deal with other types of issues that come with that as well. Right. And, and so part of it is just sort of, you know, trying to balance that or trying to stay under the radar and grow as, as quickly as possible. And then by the time that you become visible, that you’ve raised enough capital. So when you go head to head with some of these big companies that you’re able to read, stand the blows and the punches that are going to come your way as well, you know, but, and then by then, hopefully that you built enough of a differentiator that, you know, once, once things come, things come to light, it actually works in your favor. Cause, cause I always try to think of things as like David versus Goliath, where I I’ve always taken the underdog approach and it doesn’t matter how big you get. I always want to be looked upon as the, as the underdog because when you’re number two, you’re always going to try to fight and run harder than number one. Cause, cause you want to, cause I always want to target to, to go off the versus being the target of somebody coming after me. If that makes sense.
It does. I’m going to go back to a statement you made during that you mentioned searching for evangelists of your product. What does that mean?
So what that means is that ultimately you know, you’re going to find people that are either going to love your product or people that aren’t really going to like your product. Right? And, and, and for me, I like to focus on the people that are really you know, find the people that are really gonna become the ones that are going to love the product because in between the people that love your product and the people that don’t like it product, there’s going to be people that sit in the middle and I call them the people that are lukewarm and they’re neither here or needed. And, and so the ones that are really going to, you know, evangelize being a big way, a lot of companies grow is through word of mouth and referrals. And, and so the ones who are more likely, the only people are really likely to do that for you are the people that love your product.
So focus on finding who those people are that love your product, and then try to leverage them and get them excited enough to get behind the product and get behind a cause, get behind a mission. Cause ultimately it’s, you know you know, people don’t just love the product, you know, they have to love what the company stands for. They have to love kind of what the brand, you know, means to them make that emotional connection. And then, and then fire to fuel the fire of that emotional connection so that you can get them fired up to start talking about the product and finding it, telling their friends and family. And that’s how you create the virality. A lot of these tech companies get when they scale up quickly.
Perfect. Perfect. Yeah, I’d heard, I’d heard it before by the early adopters and I’m actually building up those kinds of people that were passionately your frontline. Probably one of the best examples of that is maybe Apple who have completely made a culture and a Colt out of, out of their brand.
Yeah. You know and one of the ways to do that is, is, is, and the way Apple’s done it is, you know, they’ve kind of taken a contrarian view on, on how to do stuff, right. But they don’t kind of follow the crowd. Like, you know, most tech companies are all about, you know, doing things and building for the masses with Apple. One example is they always price their products higher, right? Because cause they’re associated higher price, higher quality. They know that they know a lot of people aren’t willing to pay for that. But the one-star aren’t willing to pay for that are going to become the influences because they’re the ones who are going to go walk around and showing off their Apple products. Me included being one of those Apple fanboys. But, but, but the idea is, you know, you, you, you know, you know, you, you, you’re trying to give people, you know, something that, that makes them stand out in their community versus somebody else, whether that’s your product, the symbol that, that it gives them or emotional way, it makes them feel.
So when someone comes to you with an idea, what’s the first thing you ask yourself?
The first thing that I asked myself depending on what the idea is, you know, I mean, if the idea is as a joke, if it, if it’s a meal at a restaurant, I might go, Oh, well, it sounds interesting. I’ll go try it out. But, but, but when it comes to business, you know, one of the things that I’m always thinking about when it comes to growth is, is, is, is how viable is this idea in terms of like, you know, what kind of impact can it really have? You know, cause it, cause there’s certain ideas that are great, but the impact would be pretty limited in terms of how many people it could actually appeal to. And so, you know, for me, you know, one of the things that I always try to make decisions on is, is, is a trade off of, of time, money, and resources to, to put behind an idea to, to, to really figure out if that idea is going to go somewhere. And so, you know, the question I ask is really how much of an impact is it going to have to be, to grow in the business? And based on that, then take the next steps to really do the due diligence around how, how, how what’s the quickest and easiest way to execute and test it out.The question I ask is really how much of an impact is it going to have to be, to grow in the business? Click To Tweet
Now we know, we know about Silicon Valley, Silicon Valley is very famous. I’ve actually done a couple of my speakeasies up there. So I’ve actually been fortunate of visiting the old Apple campus to the Google campus. Tesla, Fremont, you know, I’ve had a lot of time what basically let’s be blunt for a lot of people that don’t realize is Silicon Valley is a village. And even the height of the buildings are very low. It is literally like a peaceful little village. Yeah. It just houses some of the biggest brands in the planet. Do you have to go to Silicon Valley to have a tech startup company?
So, you know I’ll tell you my funny story before I get into that, Steve. So when I moved here, I had this like vision, like Silicon Valley, you know, like, you know, it’s like coming to like, you know, the macro of, of startup dreams. And it’s kinda like, you know, when you go to Vegas, at least you go into the strip and you see a whole slew of stuff. When I came here and I was thinking, where’s the sign, I don’t see Silicon Valley. Where is this? You know, to your point, you know, it is a huge let down because it’s basically, you just, it’s just this series of different suburbs that have been put together. Right. You know, and, and, and, and become known as Silicon Valley for the most part, it’s just ordinary office buildings. Right. Or you get these big corporate corporations that have the little, like, you know, signs outside the buildings.
But yeah. I mean for the most part you know, it, you know, it was just funny, like when, when, when I came here, you know, but what, but, but I tell you what it is. It’s not the fact that it’s Silicon Valley. It’s the fact that it’s the concentration of all of these venture capitalists here. And so what happens is, cause, cause it’s all about following the money at the end of the day and all the money that goes into startups, the majority of that is concentrated here. And so that’s, that’s, that’s, that’s the fuel that basically ignites the idea. Like everybody has ideas for creating startups and you don’t have to be from Silicon Valley to do that. But reason why most of them end up coming here is, is because it’s an incubator because cause here they have access to venture capitalists to get, get financing.
They have access to the skill sets of engineers and programmers and business folks that you pretty much need to execute on the idea. And then you have access to, you know, pretty good colleges and universities, right? So, so the talent’s here, the people are here, the money’s here. So, you know, you can kind of, you know, take an idea and execute on it pretty quickly. But, but, but now, you know, I mean, I mean, I mean this was the fall. Now the world has gone a lot bigger in terms of like it’s so much easier to work remotely and do a lot of these things. So I don’t think you necessarily need events in Silicon Valley to get a startup going. Cause there’s a lot of, there’s a lot of other cities that are starting to build up their own areas where you can start startups for a lot less, but the big differences, you know you know, will they get access to get in VCs, invest in, in companies from there. So, so it, you know, that’s the challenge, right? It’s like, you know, you might want to start here. You, you, you need to build relationships with VCs and as long as you have those relationships, then you can probably start your business somewhere else, as well, as long as you have access to, to the skill set to help. Yes.
A couple of my clients actually started and you mentioned the word incubators and one of them started, the, one of my clients started one in San Diego. The other one started in Los Angeles. And the incubators were for anyone out there that does want to incubator is it’s basically a shared office space where if you’ve got an idea, you’re a startup, you can mend a desk and it’s got, you know, food comes in during the day and it’s basically like it’s really well put together that you’ve got everything you want when you’re in a room with loads of other people. One of the good things about incubators is the people, sorry, I’m hearing some banging now I saw one of the good thing about incubators is that it has that connection with VCs. So are you for or against, or do you have a different opinion on the incubators?
No. My opinion on the Incubators is, you know, it’s, it’s basically a program to really get likeminded people in, in one place. And then generally a lot of people that go through incubator programs are first time entrepreneurs. So a lot of times these people are really young founders that are coming in, so they don’t have a lot of prior experience. And so through the incubator program, they get mentorship, they get access to advisors. For example, you know, I’m an advisor with a couple of different startups, you know, that are either gone through associated with incubator programs or through vc’s. But, but the idea is that it helps them to develop and stress, test their ideas and create a plan, which then they are able to get some seed capital for that to at least go test it out. And, and, and, and, and based on how that test goes, then they get access to go talk to some bigger VC firms where they can raise the bigger round of money to help take the idea and make it bigger. But, but yeah, I think it’s good. You know it’s kinda like going to go to university, right? If you want to learn about business, then you want to go to a business school. The good part of going to business school is getting access to the professors who, where you can get the knowledge from part of it is building your network, being around like minded people who, who are passionate about the same subject. And then the third part is you know, in the incubator program is the security that you have where, you know, you don’t have to really worry about you know kind of, kind of your costs of like the cost of living is pretty, pretty high in Silicon Valley. So if you go through an incubator program, there’ll be able to provide you with, with cheap housing and stuff like that. Right. Which you normally get like in your first year of going to university where they have dorms or whatever.
Yeah. Yeah. It’s a good place to be. And I think the key word, I think the key that you’ve repeated a few times during this is really surrounding yourself with like minded individuals. Yeah. That’s all across the board, whether it be venture capital’s growth, incubators, Silicon Valley location is to those people that can help you most surround yourself with good people. So glad you’ve been emphasized in that. Now we spoke about what you look at when you look at a business. And one of the things you looked at was his viability and the viability is also can we call it scalability? You know, how big can it go? Does it have a ceiling now we discussed earlier before, and I believe you’ve got a book on this subject, how AI is actually helping us doing the scaling. And a lot of people are terrified of these variables that are going to come in and steal our lives and wives, and world and everything. But why, why is AI something that we should be focusing on now?
Yeah. So you know, you know, I’ve recently come out with a book called lean AI and, and it’s actually based on the success that I had at this, at his current company that I work at with IMVU where, you know, most the big difference that we did in terms of growing a business was to really pivot into an AI and automation to really help us to execute better, faster and smarter than other tech companies to really grow the business. And, you know, be the reason why AI is really important. Now, Steve, more than ever is that we have so much customer data access to so much customer data cause you know, everything that you’re doing or your phones your laptop, you know, you’re leaving this huge digital footprint of all of your actions.
And, and, you know, when you sign up for these different services or you buy different products, all these companies are getting all of this data on you, but, but now the velocity of the amount of data that’s been collected so vast that unless you get like huge armies of data scientists going through all of this data, it’s really hard to extract insights really quickly to take action on, on what you should or shouldn’t be doing with that data. And that’s where AI is, is a great tool to leverage because AI is able to basically have machines think and behave like humans. And, and, and so, you know, instead of having, you know, instead of being limited by the number of data scientists that you can have looking at this data, looking at this data, you have these machines that look at the data and extract value and insights in real time.
And that’s the key piece, you know, it’s like, you know, having money in the bank, you know, unless you’re going to invest that money, it’s just sitting in earning nominal interest and with data, unless you take some actionable insights in real time, it doesn’t provide any value to growing a business. And, and, and so, you know, once, once you extract those insights and, and, and, and then you layer in automation to automate a lot of the processes to take those actions, then you have this compounded impact of, of really exponentially growing your business extremely better, faster and smarter than somebody who’s trying to get a lot of these things done with humans that are still trying to take them to try and execute these different processes of taking data, and then trying to, you know, make the changes to try and help the business grow.
So you’re talking about a thousand, a thousand brains working on different alternatives and examples, and then cross reference them all within a, and basically that’s why an AI platform is, is looking at how things can go and then looking at every other possible golf shoe, all of that, the downside. Is that, is that correct?
That’s correct. Yeah, But I wouldn’t even limit it to a thousand cause it’s limitless with AI, right? Yeah.
Perfect. The problem when someone says AI, and this is the point that I want to make clear is everyone thinks is the chat bots, that you get, when you phone up your credit card firm or somebody, or when you’re keen, they think that that’s AI. They don’t realize that it’s actually, you know, unimaginable crowdsourcing in the cloud of so many different concepts of what could happen here. What would be the knock on effect all within seconds. That’s where the AI really has proven us the answers within seconds without the years, that would have been normally behind it, if at all.
Yeah. Ultimately it comes down to use cases and, and there’s so many different use cases of AI. The, the unfortunate part is that a lot of, you know, a lot of the new stories that people hear about or get exposed to are all about robots taking over people’s jobs and alive because cause that’s the sexiest stories, right? That get a little of attention. So, but, but the truth is, you know, in between that and, and, and, and how AI is actually used today, you know, there’s a huge gap and what I’m talking about, the way we use AI, and I can give you a really simple example, but it has a profound impact on any business, which is how do you spend your budget as efficiently as possible? And so with any growth team or user acquisition team, you know in, in tech startups primarily you spending millions of dollars a month, depending on how successful your, or what scale you at, you know, and, and, and, and ultimately when you’re spending that money, there’s two things that you, that you’re responsible.
One is to acquire new customers as efficiently as possible. And then the second thing is what is your return on investment? Like, like if you’re spending a dollar, how much, how much are you earning back for the business? And the third part is how long has it taken to recoup that money back? So it’s the payback is a return on investment and it’s a cost to acquire a customer. And, and the way I got inspired to really build this AI platform that I do, that I talk about in my book is that ultimately all the systems where you spend money reverence on Google or Facebook, Apple search, or this different like programmatic ad partners, all of those are like exchanges. It’s kind of like the stock market, which I know you could relate to pretty well because in the stock market, you know, it doesn’t matter if the price is going up or a price is going down.
A smart investor is able to make money on the volatility. And, and, and the same thing goes with when it comes to buying advertising, you know, cause you want to buy your advertising as cost effectively as possible to, to, to attract, to target the right customer with the right message at the right time to try and get them to come into your product and to buy your product. And so, you know, all of these places, people don’t realize whether you buy advertising on Google or Facebook or any anybody else, they’re all ad, they’re all exchanges like the stock market. And so, you know, if you have AI, then your AI is able to identify the right time to actually buy something and the right time not to buy something, you know, based on, you know, how much competition is going on at any given time.
And so if you’re doing that across, you know, 10 to 20 different platforms, then what it does is it pivot from one platform to another platform in real time, based on how much competition is going on to find you the most efficient customer crying a customer. And the simplest way to think about all these different platforms is it’s like having a portfolio of different stocks, right? If you don’t want to put all your money on an app, or you might want to invest some in Apple, maybe some in Procter and Gamble, but you want to have a diversified portfolio, but at any given time, you, you know, you want to keep, you know figuring out what’s the right stocks that you want to keep buying, which are the right ones. Do you want to keep selling? Because cause either way you’ll be able to make money based on the spread and, and that, and that’s pretty much how I built my system.
I got inspiration by looking at the big finance companies, because a lot of them have already done a lot of the work on creating these AI systems that are used to try and, you know, help their traders figure out when’s the right time to buy and when’s the right time to sell based on data signals. And all these data signals are coming from historical stock prices, as well as what’s happening in real time, based on the economic situation. And so, you know, the same thing with data signals with advertising, you know, you know, every, every company tech company gets a lot of customer data. So you’re able to use that customer data to identify who’s the right type of audience you want to attract across these different places. And through running all these experiments, you’re able to identify how to get truly personalized in terms of what’s the right message to the right user at the right time, but the differences, how much are you willing to pay?
That’s what really brings into profitability of, are you able to acquire customers more cost effectively and able to get the highest return on investment and, and, and the fastest payback period and long story short. Once we started applying AI and automation, we were able to see our cost to a prior customer, go down over 3.5 X, which was huge for our business IMVU. We saw our RRI go up over four X. And so in terms of the payback, and this is the one thing that this is huge for any startup or any business is cashflow at the end of the day. It’s like, you know, how much cash do you have on hand? And so, you know, the huge part is that before it used to take us about four to six months to recruit back the money that we’re spending to acquire customers to break even, and then make profit on them.
Now, we are able to recoup back that money within 28 days. So literally we’re basically use cash to acquire customers. And then we recycle that money to buy more customers, to buy more customers, because we’re able to get that, that, that, that loop has become so much shorter. And, and so that, that puts us in a really good position where we don’t have to keep raising more money. Cause ultimately the reason why startups get into trouble is because they keep raising more money, they dilute their value. And as you raise more money and you’re not able to get profitable pretty quickly, that’s when, you know you know, the value of the business skills now.Ultimately the reason why startups get into trouble is because they keep raising more money, they dilute their value. Click To Tweet
And that book, the book is lean AI, correct?
That’s correct. Yes. Now, and it’s actually part of the Eric Ries, the lean startup series, which was a really, you know, well known book in Silicon Valley about how startups grow. And so you know, I was really fortunate that you know, they, they wanted this book to be part of that series.
Can it be purchased on Amazon or is it different places to grab?
Yeah, Amazon’s the best place to buy it? You know, it’s, it’s available nationally through, you know, all these other like retailers, but, but Amazon is the best place to go buy exact the best deal on the book.
Well, man, this has been great. If not unnerving, it’s made our eyes open. I love the scalability. I love the multiple crowd sourcing of intelligence on it. So is there anything you want to leave our listeners with that could give them a tip of motivation for the day before we sign off?
The tip of motivation is always think of every day is day one. You know, it’s like, you can’t change what happened yesterday, and don’t get hung up on thinking too much about tomorrow. Just, just focus on what you can do and make the best of today and try to be, you know, just try to give it your best shot every day. And for me, you know, not only in business, but in life, I always try to think about ways that I can continue to improve myself a little bit each every day. It’s what about making those small progress? That when you look back over the year and then look over like 10 years compounds into something really meaningful. So take a longterm view in life, but always, always be focused, motivated like every day is like day one for you.
That’s solid. That’s good. Lomit my neighbor. Yeah. It’s funny that we’ve come this far and where we were chatting with each other and we were probably strolling past each other during those days. It’s a small world Lomit. Thank you very much for being part of show. It’s been an absolute pleasure to have yeah.
Absolute pleasure to be here. Thanks, Steve. Thanks for having me.