Organic growth and Y Combinator
August 24, 2021
Listen to the episode
Hrachik Adzhamyan is CEO and co-founder at Wakie. He is also one of the first Y Combinator alumni from Russia. Wakie is an app for voice calls with strangers. The team aims to solve the problem of social isolation and loneliness which more and more people feel.
In a new episode of our SubHub podcast Hrachik told us:
- how they got accepted into the accelerator;
- how it’s possible that Wakie grows solely organically;
- how it’s possible to work with friends, and still stay friends even after firing them;
- what gamified experience of voice calls feels like in Wakie.
The episode is already available on all popular platforms (in Russian) and, as always, you can read the full transcript below, translated with deepl.com.
Nikita: Hi everyone, welcome to the Subhub podcast where we talk about mobile subscriptions. And with you I’m Nikita Maidanov, with me is the lovely Vitalik Davydov.
Vitaly: Hi, hi, hi.
Nikita: In this podcast we invite top guests who have their own subscription services and who can share all the secrets of success and working with subscriptions in mobile apps.
Vitaly: Support us with likes and comments on your platform and tell your friends about us on social networks. It helps us greatly in promoting the podcast and attracting new strong speakers.
Nikita: And we also do Adapty service, which allows you in an hour to integrate subscriptions into apps, manage them, build cohorts, do A/B tests in one click and other cool stuff. So, we’re already starting our fifth episode. And today we have our next guest with us, Hrachik Ajamian, the founder and CEO of Wakie.
Hrachik: Hi, hi, hi.
Nikita: Tell us a little bit about Wakie – what is it, for those who don’t know?
Hrachik: It’s a mobile application, it’s a social in which there are a lot of strangers. The idea is that you can come and find people to talk to about any mood or topic. People use it because emotionally and socially they often feel isolated or alone.
Vitaly: So, it’s dating?
Hrachik: No, oddly enough. Dating is some kind of inherent part of any environment where there are strangers, like the line for buns. (The word “buns” has a double meaning here).
Yes, there’s flirting and dating going on a lot of times, of course, because it’s strangers. But that’s not the main value. When we talk to people who retain a lot, we ask what value you get here, they say that they’ve met people who have become their friends, and over time these people become best friends.
Nikita: And let’s tell your story, how you came to this.
How Wakie came to be.
Hrachik: It was a systematic way. We started with a joke, I was launching a project in Russia called “Wakiest” where you could set an alarm clock and you would be woken up by someone you didn’t know. That was years ago. I did it because it was fun, and because I wanted to solve my problem with waking up, I was having a really hard time getting up. And I thought talking to people could help me wake up better.
The project made a lot of noise in Russia at one time, and we realized that since it worked so well, let’s try to take it out into the world. So we took it to the US. It didn’t work. And a year and a half or two years later, we went there all over again and got off to a pretty good start in America.
And over time, collecting feedback from users, we began to realize that the alarm clock is some kind of superminor use case that people use as an excuse, but the need is actually much deeper.
That is, people feel lonely, isolated, they feel they have friends, but they’re not ready to call their friends right now. So many interesting things I’ve heard. For example, people say, “You know, I have three best friends, and sometimes I really want to know how they are, talk to them, but I also realize that if I ask now, ‘Hey, how are you doing there?’ The person would say, ‘Oh, brother, great,’ and will definitely say, ‘Hey, I haven’t seen you in a while, let’s see each other. And I feel like I really love this person, I really want to hang out with him, but I absolutely don’t want to see him. But social norms don’t imply that you tell a friend, ‘You know, I don’t want to see you, I just wanted to see how you’re doing.’
And there are thousands of these kinds of nuances that cause people to miss out on the social in their lives, the simple communication. I had a guy telling me about how he’s on Tinder and the only reason he’s on there is he wants deep human conversations, and then these girls start counting on him to communicate with them, to date them, and so on. And he doesn’t want to date anybody, he just wanted to talk to somebody, and it’s more pleasant for him to talk to girls than to guys.
Vitaly: Maybe he’s HR manager?
Hrachik: At heart. Generally, he is an entrepreneur, but, apparently, he hasn’t found his vocation yet.
Vitaliy: I understand, yes.
Hrachik: There are thousands of real reasons why people are socially very deprived. There’s an awesome poll in America, “How many close friends do you have?” It’s been going on for decades. You can watch on the charts how people’s answers change.
And over the last 30 years, the percentage of people who say they have zero friends has gone up. In 30 years, five times as many people feel that none of the people they have around them are willing to call a close friend.
It’s such a worldwide pandemic going on, several countries have opened Loneliness Ministries, and so on. That’s the problem we’re trying to solve.
Nikita: In Russia, you say you made some noise with this “Budist” project. Did you originally plan to make the project viral, or did it just happen because the idea was interesting?
Hrachik: It just happened that way. Of course, we didn’t think it would turn out that way.
Vitaliy: Was it a mobile app or the web?
Hrachik: We didn’t know how to make a mobile app, so we decided to make a web. We understood that it sounds very silly that an alarm clock, you have to wake up before you go to bed, go to your computer and put an alarm clock on the website, but it was easier for us to do that, we did that. And in spite of that, it blew up.
It was a site that had a form where you could type in your phone, and in the next form you could choose a time. And then you’d click “set an alarm,” I’d get a text message that someone had set an alarm, and I’d go to that person and wake them up.
I set a reminder in my calendar and went to wake him up. That’s how it was on the first day. The second day 30 people set the alarm, the third 50, on the fourth 100, and it grew like that.
It is pleasant, that I woke up the first two days, and then it became impossible, and already we started to connect users with each other, they woke up. At peak, 150 thousand alarms a day were set by people.
Nikita: So, people called on their own, you didn’t proxy these calls somehow, you didn’t write them down or anything?
Hrachik: To make it a) free, and b) anonymous and safe, we created a toll-free number, 8-800-555-55-55, and it connected you to someone who needs to wake up right now. That is, someone who should have an alarm right now, we directed that call to their cell phone, the phone rang, the person answered, they talked.
Vitaly: Did you regulate the subject of the call somehow? Or you can talk about whatever you want?
Hrachik: We gave some ideological advice like “you should be friendly”, you should start by saying “good morning, sleepyhead”. And he should have responded with “good morning, woke guy.” And people used it very well, overused it. And at some point we started recording these calls, and people could, by common consent, publish the call, and there were just some miracles going on, millions of very funny ones. I mean, there were people calling, some actors, musicians, there was an orchestra that woke people up.
The orchestra would just call and say, “What would you like to hear?” The person would say, “Tchaikovsky.” And they would actually take it and start playing Tchaikovsky to that person. It’s a lot of fun.
Entering the US market
Nikita: How did it happen? Having such a success in Russia, virality, so many wonderful stories, why did we decide to come out to the US, and why didn’t it work the first time? What did you do differently the second time?
Hrachik: Point “a”: This idea was five years old, and I needed it as a user. I went googling something like social alarm clock or something like that once a year for five years – didn’t find anything, thought, man, that’s weird, okay.
And then at some point it hit me, what the heck, it’s got to be done. So I did it. It turned out that the idea was unique, but for some reason it was in demand, it is unclear why no one had done it before.
When we started developing in Russia, of course we thought: what are we building in Russia? I mean, where do you see that? I mean, come to think of it, if Facebook had started in Russia? It’s a small market, it’s incomprehensible.
And it was like I remember now, it was my birthday, I woke up in bed with my girlfriend, I picked up my phone out of habit, I started to check Twitter, and I saw that in America there was a social alarm clock, and I looked, and dudes just copied everything that we had, and launched it in America as an American business, to the whole world. And we were only operating in Moscow at that time, not in Russia.
Nikita: Did you get a big kick out of it?
Hrachik: Very much.
Vitaly: I woke up.
Hrachik: I got up from the bed. That’s what woke me up. That kind of news is a good alarm clock. It became clear that, man, we were losing our market. While we were getting ready to launch something like that in Russia, someone had already decided to take over the world with our technology. So the trigger was that we had to go to America right away.
Why it did not work – my main bet is that the American user, every day he is offered something, all the time someone is trying to shove him something. That is, all values are created there, and his attention is very expensive.
In Russia, new things, even more unique things created in Russia, almost never appear. And when we did, just everybody started talking about it, all mass media talked about it, all people told each other their vivid emotions, and it went around.
In the States, we came and we told it, and 20 people said, “Oh, that’s so funny,” and that was it. We left with our tails between our legs and realizing that we weren’t going to get as much free stuff as we did in Russia. But it was a super valuable trip, because we scared these competitors and they closed.
Nikita: So you physically came and met with your competitors? Or how?
Hrachik: With batons, yes. As we used to do.
Vitaliy: Classic, yes. A standard Russian story.
hrachik: Actually, it was funny, because we decided to speak at the conference. Because that’s how it turned out in Russia. I went to a conference where there were 50 people, and I said, guys, we’re launching a superfan project, who’s interested, come and give me your cell phone numbers, and I’ll register you, and you’ll have unique access, and so on.
And that’s all that was done for marketing in this project. Everything that happened next was natural virality. And in the States, we thought, we have to do the same thing. We went to a conference, and by some miracle it turned out that these guys came to the same conference and presented right in front of us.
Vitaly: Amazing. Were they Russian or not?
Hrachik: They had Russian roots, yeah, they had businesses in the States and everything, but they had Russian roots. And at some point they apparently realize that we’re performing right after them, and no matter what they say, we’ll come out and say that actually, here they are starting out there, but actually it’s our idea. They copied us, we have 100,000 users, and they’re just starting up. And how would we have looked, I guess, more convincing.
So they probably decided to change their whole presentation and concept. Anyway, they said something and nobody understood what they said. They made a very incomprehensible speech. There was no reaction from the audience. There was a super strong reaction from the audience to us. And apparently they realized at that point that it wasn’t going to work – I don’t know. We didn’t approach them. Neither we approached them, nor they approached us. But after that, they literally shut the project down in a couple of weeks.
Vitaly: Listen, do I understand the timeline correctly: here’s Budist was already working in Russia, were you making money or not at that point?
Hrachik: No. We were spending a lot.
Vitaly: And you were like: that’s it, we’re expanding, we’re going to the United States?
Hrachik: Yes, it was emotional not to lose the main market. That is, we understood that Russia was a springboard. That is, when the project began to take off, we began to think, we had ambitions that, wow, we thought we were making a joke, but everybody needs it, then let the whole world take advantage of that Russia.
And we, of course, were not ready to go anywhere near America or any kind of expansion. We were really very MVP step by step, we really launched Moscow, and we planned to make it stronger in Moscow, and then we would start adding Russian cities-not like America. But these guys forced us to.
Vitaly: At what point did Wakie appear?
Hrachik: We realized two things: first, we had to move away from traditional telephony to mobile and voice IP, because we were spending hundreds of thousands of dollars a month on calls. It was a joke that became abnormally large, and it was growing, and you just couldn’t stop it.
Spending was five thousand rubles a month at first, turned into a hundred thousand rubles a month at some point, then a million and beyond. It was clear that this model was something wild, and we needed voice IP, and it was all unfamiliar technology, voice IP, unfamiliar mobile applications, and so on, but we had to jump in. And yes, we switched to both mobile and voice IP.
Vitaly: How long did it take you to make this transition?
Hrachik: I think eight to nine months.
Vitaly: Quite fast.
Hrachik: Plus, preparation for America. It was the second run, we already understand that we have to start everything more correctly in the States. We went to talk to TechCrunch, they prepared a big article about us. I mean, we kind of took things more slowly. We invested a lot more effort into design, because in Russia we had no design at all. The interface designer did the design for us because we were too bored to spend time on this kind of joke. And it worked, our second run was a very mature product, relatively, visually at least, mature.
Nikita: These call expenses you say, did you somehow finance them with your own money, or did you raise them?
Hrachik: From my own money first. Yes, I had a business, we just started bankrupting that business, we squeezed all the juice out of it into this project. Then we finally bankrupted the business, closed it. We realized that we needed investment, because this thing was growing, apparently, not a joke, but a real startup. We started looking for investments, and some friends, families, and fools found the first pennies, and we spent them quickly.
At some point it became clear that we had to sell the car, because there was nothing left to finance it. Then the calculation showed that selling the car prolonged the life of the company by six days. And that didn’t seem like a very logical move. And at about that point we were like, okay, apparently we’re closing because you sold the car and we’re closing in six days or we’re closing tomorrow. And at that point an article was published about us in Forbes Russia and the first more or less significant investor showed up. From that point on, investments were attracted normally.
Vitaly: I know from my own experience that TechCrunch rarely just writes, it is not always a trivial task to get it. What was the next step? Where did YC come from? How quickly did you get there? Where did the serious fundraising start, how did you find these people?
Hrachik: We applied to YC, they turned us down. Then we applied a second time, they invited us, but we couldn’t go, we were out of the States at the time, and we couldn’t come for the interview. And then we decided to apply a third time. We came, they took us, I then said to Michael YC, “Michael, thank you for taking us.” Because it was obvious that he had straight through us.
I mean, from those who were there, he liked us best, and you could see that the others were in doubt, but he somehow got us through. He says, “How many times did we get you?” I said, “the third time.” He says, “You guys are great. Dropbox was the fifth time we got you. Airbnb on the sixth.” So you guys did good, he says.
That’s how we ended up in YC. And after YC the picture was different, because before YC we were trying to raise money in the States, and it was very difficult, we had a series of six hundred investors who turned us down in a row. It was an emotionally very difficult period because we were a little bit let down by our Russian investors who owed us money, something like $750,000, and at some point they said: oh, you know, the crisis began, we can’t pay back the debt.
And we found ourselves in a very difficult situation: we have no money, our employees are all hungry, and no one in America gives us money. Just some wild Martians, everyone was interested in communicating with us, but no one wanted to give us money.
After YC everything, of course, became much easier. That is, we performed at the demo day, we had one of the most successful performances at the demo day at YC. More than 100 or 130 investors showed interest in investing, and we raised very easy money. All in all, a very unusual experience for most startups. And we got more confident from there. I mean, we were invested in by the Valley’s top funds, which included YC, and the guys from the PayPal mafia, all straight up right dudes.
How Wakie applied for the YC and got accepted
Vitaly: This stage, the application to the YC, is really quite a painful stage. There is the famous questionnaire, which you have to fill out correctly, oral interviews, and so on. Did you somehow prepare for that on purpose? Like, did you spend a lot of time working through it. Or you were like, ah, well, here’s another pitch, well, I’ll pitch, I’ll try to describe everything as clearly as I can.
Hrachik: look, it was right down the line. When we first pitched, we were super serious. We shot this video, everything was licked, just perfect. And they turned us down. The second time, we were like, well, there’s not much of a chance, but okay, we’ll do it. Again we did pretty good. The third time my cofounder came in and said, “Listen, maybe we should go to the YC? I said, well, why waste time on this? He says, well, what’s it got to do with us? I said, come on, I don’t feel like doing it, if you want to, you can do it. He says, ‘Well, what about it, you need a video. I said, well, without the video, send it. He was like, really? I said, well, nothing will happen anyway. And the third time we absolutely carelessly sent the application, and they called us.
One of the main tricks at YC is that they have a large inbound flow, and they do two things to themselves immediately when they turn down a startup. One: they’re checking to see how persistent the funder is, which means if you get rejected and you don’t try again, that’s a bad sign, how great a chance you have in the business if you give up so easily. The second thing they do: it’s a record track. That is, because you pitched six months ago and pitched again, they can compare where you were and where you are and understand your performance. For us, it turned out that this was the third time they could compare our path.
Generally speaking, they are greatly increasing the odds for themselves by the fact that they say no. So the fact that the third time we had a bad application makes sense, because actually the third time they had a lot more information about us than the first two.
Vitaly: And in the live interview how much emphasis was there at all on the fact that you do mobile apps? That’s when. Was that 2016?
Hrachik: Yes, 2016.
Vitaly: So you were one of the first Russian guys to get into YC?
Vitaly: How much of an emphasis of faith in mobile apps was there then, how much of an emphasis did the guys at that time: shit, yeah, what you do is mobile first, not through the web, how important was that, how much emphasis did they put on that?
Hrachik: I don’t remember that emphasis at all. It was a time when YC was already such a big conveyor belt, and they were going into completely different areas, there were African nonprofits solving the problem of hungry kids. Guys in India solving the problem of hiring, because thousands of resumes are applied for every job and it’s hard to filter. I mean, very diverse products, B2B, B2C, even gaming was one company. Anyway, they were experimenting with everything.
AI, machine learning, if you mention machine learning, it was just getting trendy then, those words. And we all used those two cherished words in our descriptions too, it helped too, I think, in its own way.
Vitaly: But at the same time, nobody did a technical due dill and nobody checked deeply.
Hrachik: No, no, YC is absolutely about people. I mean, they look at people, they understand that these people are likely to make a pivot, whatever they’re with right now. The only thing that matters is whether or not you emotionally trust that these funders are going to achieve something in life.
Everything else counts, too, of course, but the primary thing is what kind of human qualities you have, whether you’re a good person. If you are not a good person, they will not take you to VC. If you are weak and insecure, they will not take you. And so on. So they just maximize the likelihood of success of that person and not that particular business.
Vitaly: I just get asked a lot about whether mobile apps should apply to a gas pedal, for example, whether we were in the 500, you were in the YC, and so on. My answer is always exactly as you say. If you’re ready for it to be a tough thing, if you’re ready to defend your position, if you’re confident in what you’re doing, and you understand why you should go to an accelerator, you probably should.
Because it checks out very quickly. I think YCs already have some kind of framework in their heads on how you just act, how you act in a meeting, how you move. At the level of things like that, they understand how much of a dude you are that’s easy or not easy to break.
Hrachik: Yeah, that’s right. There’s, I think, that kind of neuron trained already. When you’ve got thousands of faunders going through you, the laser already scans the person like that and everything is clear. As for going to the gas pedal or not, it seems to me that what you said last was the most important thing: why go there?
I mean, we had a clear understanding of why we were going there. We had a great Russian background and no American background, and we were not perceived as something understandable by the American venture capital market. Because they did not see any unique Russian startups coming into the valley. They saw Russia copying successful American models.
And we looked very strange, incomprehensible. And we realized that we needed some kind of branding, so that everyone would understand that we were a cool American innovation startup, and not something else. And the YC badge looked like something that… Well, that’s how I turned out. I mean, the moment we had that YC badge, it became a lot easier for us in the States to communicate with people both on investors and on some business interests and so on. And the introductions are easier to get. And YC itself gives a lot of infrastructure inside, of course.
Vitaly: You finished YC, did you attract investments after the demo day?
Vitaly: How much?
Hrachik: We wanted to raise a million, but we ended up raising two.
Vitaly: What did you spend it on?
Hrachik: For the team, we always had one expense – the team. People and server salaries.
Organic growth of Wakie
Vitaly: Tell me more about this. I mean, it’s really hard to imagine modern mobile apps without traffic, without marketing, without that whole story where you buy a bunch of traffic. Where is that variable missing now?
Hrachik: It’s in the luck of the trivial. Our audience was always a word-of-mouth one. And in the States that part has been replicated. When we launched, we had exactly the first pack of some media. And then people were already spreading it and are spreading it to this day. I realize that I’m such a shitty funder. I mean, if I hadn’t been so lucky, it’s not a fact that I would have done well in marketing. I just didn’t have to handle it. But it’s some kind of unreplicated story, it’s in this particular product that people like to talk about it.
It’s very strange because the service is anonymous, and you’re there talking to people you don’t know. You’re never going to meet somebody there that you know in real life. And so there’s no motivation in terms of network effects, no motivation to invite your friends, like on Facebook – all your friends are there, and this one isn’t, you want him there too. It’s very clear. You communicate with everyone in Telegram, and this one is in WhatsApp, you tell him, “Listen, go over there. Very clear network effects.
We have zero network effects, but for some reason people like to tell their friends about it. Somewhere offline they say something like that, why people come and register.
Vitaly: You still don’t understand why that is?
Hrachik: We don’t understand it well, but we don’t understand it well. Poorly understood – it means people get emotional. I mean, they come and experience emotions here where they don’t experience anywhere else, and they can’t keep quiet about it. They just say, come to think of it, I’ve had that.
One of the posts that we got traffic from in America was a guy who wrote on Reddit that I was testing some joke app here, and you can set an alarm there, they’ll wake you up. This was when we were just getting started. And he says, I put it on, and I got a call from some drunken Russian from a bar, yelling Russian swear words at me. And he ends his line with, “This shit is priceless.”
This post became viral on Reddit, and we got like 30 or 50 thousand installs from America from that one post. There was a similar story in Thailand once. Some guy wrote a post, it went viral on Thai Facebook, and we got tens of thousands of Thai users within hours. And they came. And the English version of the app started writing everything in Thai. And in an instant, our app became Thai. All of our users didn’t understand what was going on.
And there are a lot of stories like that. We’re bad at marketing, but we got lucky with natural virality for really mystical reasons, or something, emotional, not objective.
Monetization of Wakie
Nikita: You didn’t have monetization then, did you? At what point did it appear?
Hrachik: About a year and a half ago, we decided that let’s do monetization. Because we wanted to make the model looped, self-sufficient. I’ve been watching where the venture capital market is going, and Uber has a very interesting divergence in time to the negative side of the business model, the further it goes, the more.
And you realize that if we’re in for another crisis… and there’s more money in the market at the same time. That is, the market is overflowing with cheap money, and no one knows where to put it.
It reminds me of the situation in 2000. And I thought that if the market suddenly burst like this, the venture capital model would feel very bad for a while. It would be good to feel self-sufficient at that point. So we decided to do monetization.
And for about a year we were tightly focused just on monetization, the whole team we did monetization, became profitable, and then recently said, okay, along the way. Everything is good with money, you can see that we can make a lot more money than we’re making. Let’s pause and get back to the product. Because our product, unfortunately, hasn’t exploded. We don’t have Hockey Stick crazy. It feels okay, it makes money, it has an audience and so on.
But it all rests on the product. It’s not yet performing the way it needs to become a product for a hundred million people. And this is something we have to work on. And monetization, it shows itself very well; people pay steadily, more than 10% of daily active users are on a premium subscription, and there are also one-time payments. So, everything feels pretty stable.
Nikita: Tell us about the subscription.
Hrachik: The App is free. Everything there is free to use. But there are little extra features that are not necessary at all, but if you’re an active user – and our audience is fanatical about using the app: there are people who have been using the app for five, eight, or ten hours a day for years – and these people want all the goodies.
For example, in the premium subscription there is such a thing as the ability to publish in feeds not just topics with text, but polls, where you can choose the answer options. Or, if you’re a premium member, you can customize your profile. I mean, you can make a background photo, you can make your avatar’s shape not round, but star, or square, or there are dozens of shapes.
And that kind of emotional stuff. I mean, they say I can express myself. One of the main values. Just when we talk about value with users, they say I can spend time with my friends, with those who have become friends. And the second thing is I can express myself. Like, Facebook, Twitter, Instagram and I can’t be the full version of myself because my grandmother and my kids and my friends and my co-workers are sitting there and I have to behave. Like, somehow, how would all those people fit in. And in Wakie, because it’s a semi-anonymous environment like that, no one knows who’s who, it’s very easy for you to be real.
Nikita: And the one-time purchases?
Hrachik: We have two products, one is called compliments, it’s kind of like Odnoklassniki gifts, they’re pictures, you can give them to each other. We release new ones from time to time, they’re not like on Odnoklassniki, but they’re beautiful, very emotional vector pictures in the style of stickers from Telegram, something like that.
You can give them to each other, and there are different prices. The expensive ones cost 2500 Wakie-coins, which is our domestic currency. And people willingly give that to each other. So conventionally, from $1 to $40 worth of these compliments, people all give it to each other.
And the second thing is that you can promote your topic. So, you post something, you want more people to see it – you’ll promote it for 30 Wakie-coins, for 100, for 250 – more people will see it, you’ll get more interlocutors, more new friends, and so on.
Vitaly: Is it for better monetization and better experiments, or does it increase virality, or is there a web to app of some kind?
Hrachik: We wanted to give people the opportunity to pay less money than it costs, conventionally, the dashes that the storas give us. I mean, minimally, a dollar or 50 cents. And I want to give people the opportunity to pay something for 10 cents.
The second thing is I wanted to give people rewards for some things. For example, a person helps the community a lot and is an active user; he helps everywhere, protects, cares, and so on.
We lacked tools so that we could make intelligible rewards that could be reused in the product. Plus, it’s very convenient to buy a lot of coins and then spend them. If you want to give this gift, not every time to go and this payment process, confirmation of payment through face ID, but that you have bought once, and then you easily part with this accumulated, because you have ten thousand coins on your account, and the gift costs a hundred coins. And you don’t think twice about giving it to someone because he’s a cool guy.
Nikita: How did you work on monetization in general? Did you conduct any experiments, did you run tests, or did you just know what you needed, did it, and it worked?
Hrachik: No, we were testing, of course. We took a lot of very small steps. Nothing made sense at first. One-time payments would work better, or subscriptions. Should subscriptions be competitive or should you just buy a monthly premium account as a one-time payment.
There were a lot of questions. We were experimenting with all of that, actually. We didn’t know anything about paywalls, some kind of entities.
Vitaly: So in the end, when you were spinning these parameters, what’s more important to you: price or period? That is, which changes had more effects or more knowledge for you?
Hrachik: On the whole, we got very well from the first times. I mean, all of our subsequent experiments after the first one we rolled out gave worsening results, not improving ones. We did, unfortunately.
But there was one thing that worked out very well – when we decided to test an annual subscription, it turned out that a lot of people, especially our users in America and Saudi Arabia, which are the two countries that bring us the most money, and these guys buy an annual subscription without thinking at all. There’s a very good conversion rate there, and there’s a lot of money in the moment.
I mean, they come in and immediately give us a significant amount, more than the LTV of most users, right away.
But probably the biggest effect has been to realize that annual subscriptions are cool, not just monthly subscriptions. We had weekly, monthly, three-monthly, and then annual.
And so the annual very much completed that model. And today, by the way, we rolled out in production something that just came back from our monetization days – that if you buy an annual subscription, we’ll give you Wakie coins, 1,000 Wakie coins.
And this thing was amazing, it doubled the revenue in the moment from that point of sale, where we did it. And we tested it for a few weeks, we couldn’t believe that we could really double the revenue with such a small thing, but it was confirmed, yes, statistically significant data.
And we rolled that out today for everyone.
Vitaly: Have you tried all sorts of things like cashback, internal currency? Just internal currency, it really opens up some crazy mechanics in my head that you can do.
Nikita: In games, very often the first purchase of each dash, currency, it doubles. That is, the first time for 169 rubles is 10 thousand, the first time you get 2,000.
Monetization vs product development
Hrachik: I say because of that, we see that we can make a lot of money from this product. It’s pretty clear-cut there. The problem is that making money is easy, compared to making a product that hundreds of millions of people need is such a trivial task.
We sat down, we spent a year, and we realized that we would make as much as we needed to. But the temptation is great to do this and not make a product that’s really big. And we will make millions of dollars in the moment, but there will never be billions if we monetize.
So monetization has accomplished its mission so far. It’s proven what it is. And we all, what you’re saying, realize that there’s a lot more that we haven’t tried. But we can’t waste our time on that.
Vitaly: Wow. So, you consciously said, here we’ve gotten to a point where we’re fine, we’re enough, we have enough to spare, and we switch to making qualitative changes in product functionality to get to a whole new level in terms of product metrics.
Hrachik: Sure. I mean, we’re in the money here including, let’s say, 100x or 1000x compared to what we’re going to do in monetization, let’s say, 20x. Through monetization it’s clearer and easier, but the ceiling, here it is, is very clear. And there’s no ceiling there.
Vitaly: You’ve got such a really tru-venchy approach, of course, and reflection. It’s pretty cool to hear that.
Hrachik: Yeah, but there’s no mission to put $50,000 a month in your pocket and be happy. That’s not the thing we’re creating, after all. I’ve personally casdelined hundreds, maybe thousands of our users, I’ve done hour-long Zoom interviews with them, deep very conversation about their values, why they use it. And a lot of these people talk about how we’ve either saved their lives, or raised the quality of life by an order of magnitude, or they’ve seen a lot of people that we’ve saved lives.
We were kind of doing the joke thing. It turned out to be such a big life need for people. Uncovered. There’s no one good tool in the world, and we’re not a good tool for a person who feels emotionally socially isolated either. And he wants something so simply human, like you and a friend in the kitchen drinking vodka until five in the morning and having a very sincere conversation.
People have very little of this, and no one gives anything close, some way to solve it. The closest thing is dating, but of course they don’t give even a fraction of that. Social media even less so. Social media creates this problem and exacerbates it in a big way. There is a huge problem that people today only solve by avoiding the problem. they escape to Netflix, to porn, to movies, to computer games, to sleep and to work. And these are the places where you can hide from the feeling that as a social animal you are terribly dissatisfied with your social life. And no one has been able to solve that. And neither have we. Judging by our current size, we haven’t even come close to solving this problem, and the problem is growing.
Vitaly: Why hasn’t Clubhouse solved it?
Hrachik: Oh, Clubhouse didn’t try to solve it. Clubhouse is a radio, it’s a podcast, it’s a place where you listen, not talk. We create an environment where there’s direct interaction with you. You talk, he talks, and you interact.
We have the Clubhouse functionality that came out a year and a half before Clubhouse. But it’s not a room of five thousand people and three people talking. It’s the opposite, a thousand rooms where five people, three people, ten people are sitting and they’re all talking and they’re all making human relationships, experiencing emotions.
And the Clubhouse is a place where you come and consume other people’s content. So, functionally it’s the same thing, but the values are fundamentally different.
Nikita: And in the context of all of this, what exactly are you doing now? I mean, are you trying to finalize the product to solve this problem through user interviews and product discourses, how does that work?
Hrachik: Yeah, when we finished monetizing, we decided, okay, let’s get back into the product, but how do you get back into working on the product, on the retention and the values? We decided we had to get the best education in the world. So we went and found out what the best education in the world was. It turned out to be Reforge. We bought Reforge, and we had three people go through the Reforge retention program, engagement, it was super helpful. It was a very good program.
They turned us down, they’re like YC too, they turn everybody down. We talked them into taking that $6,000 from us for a long time, and they finally took it, let us in. And we got a lot of use out of it. While we were analyzing our product on Reforge, we realized one important thing: the product should consist of only two parts. The first is how you meet people. You come in, you don’t know anything here, and you meet people, you get to know them. The second is how you maintain and develop these relationships that you’ve created.
Those are the two parts. And we realized that we’ve been developing the second part a lot all along, which is, if you’ve met friends here, it’s awesome to maintain relationships, develop relationships with them. There’s a lot of tools for that.
But in the part of the first step, the funnel, where you have to get to know people, we’re doing really badly. It’s just a disaster. And while we were doing analytics on Reforge, we realized that dating specifically in voice communication is something that neither we nor anyone else in the world has done well. We’ve been digging into this problem for months, and we recently found a solution.
We’re doing the first tests on a few thousand users, and there are some explosive metrics right now. So there’s a possibility that in the next few months we’re going to show a very big innovation in how strangers in the modern version can meet and communicate with strangers.
Gamification of voice calls in Wakie
Hrachik: To make it clear what this is from analogies – we did what Twitter did with text in relation to Facebook. That is, it said, here’s a blog platform, we’ll limit it, we’ll make it 140 characters, there will be lots and lots of mini-messages, full of content. What they’ve done with respect to photos, when you have photos, you have these static things, and then you have storis that change on their own, you change them very quickly, you click through. And what TickTock did about YouTube. He said, we’re going to make the videos soupy short, very fast transition, they’re full of emotion.
We did the same thing with voice. We connect people, two strangers, instantly, you just come in and say, “Come in,” it connects you instantly, within two seconds, to a complete stranger. Doesn’t give you time to say, hey, how are you? We’ve taken away all of these entities of calling habitual and throw you into a very hysterical game environment where you’re chopped up for 30 seconds in a game of voice.
We chop for 30 seconds very emotionally, all the time not enough time and so on, and then we rip up the call and give you a “talk to the next person” button. And you can get to know dozens of people like that within ten minutes. It’s a lot of fun. But sometimes you have chemistry with a person and then there’s a same person button. And you might want to talk to the same person again.
And if the other person also pressed same person, then you have magic, chemistry, match, and you get into a second level game, it’s not as hysterical anymore, you’ll already have two minutes, and it’s a little more measured there.
It’s also a game mechanic, we’ll also control how you communicate and get to know each other, but now a little bit more measured, you can’t just experience emotions, you can understand what kind of person. If it’s okay there, there’s a third level game and so on.
In short, it gradually gives you a chance to get to know people, but overall it gives you a lot of mini-emotional experiences that are nothing like a phone call, but it also gives you terabytes of information about the person you’re talking to in a second, because, really, 30 seconds of voice, laughter, pauses and so on in a conversation with a person gives you more information about them than a week of texting.
Vitaly: Apparently, it’s a game of Russian cities.
Hrachik: Kind of like that, yeah.
Nikita: The most interesting part of us got some kind of hysterical voiceover.
Hrachik: Right, yeah. But everything takes just seconds, it’s all a very compressed format. And cities is a good analogy, but to play cities, you have to get these friends together, go to the cottage, sit down. And here you’ve experienced the desire, and in a few seconds you say, that’s it, you’re playing with a stranger.
That speed is a very fundamental component here. And this thing is showing itself very well so far. It’s the result of a tremendous amount of research that we’ve done in the last six months. And it looks like it’s going to work and we’ll probably get it ready and roll it out for everyone.
Vitaly: That sounds impressive. By the way, it’s interesting, when you talk about Reforge you’re the second person out of five to mention this program.
Hrachik: Yes, great stuff. Systematic, the right people wrote it. I know some of the people personally who wrote the content for Reforge, when I told my investors, guys, who should I consult with about this or that, who’s the best in the world, I was referred to these people by my investors, and did the introductions with them. And in Reforge, they took and just scaled up the transfer of that knowledge, that experience and approach to everyone who wanted to. It’s a cool thing.
Vitaly: It’s more like Nikita, what you’re saying, that you know a lot of people, and Hrachik knows Bill Gates.
Hrachik: I know one man.
Nikita: Did you wake him up?
Vitaly: I got the call.
Hrachik: Yes, I was randomly connected for 30 seconds in the game.
Vitaly: Bill, come on, come on.
Nikita: The main thing is that the chemistry appeared.
How it feels like to work with friends and relatives
Hrachik: I had a funny situation once, I went to a friend’s birthday party, and he rented a bar, and he made a general part of the bar with a lot of people, and a closed part for close friends. And we were hanging out in that private part, and then, you know, how socializing happens in the States – people just randomly come up and just meet each other. They cut in, even if you’re standing chatting with someone, they cut into your conversation. And I’m standing alone, eating some canapés, and a man comes up to me and says, hey, I’m Steve, who are you, what do you do? I look, it’s Steve Blank, alive. And in the States it’s a lot easier to meet someone important in the Valley somehow.
Vitaly: You work with your brother, you’ve been working with him for a long time, you’re doing your second business with him. How does it work?
Hrachik: When I was 16 – I’ll start from afar – I was really into technology and computers and everything. I was learning on my own, I bought a book on HTML, I was learning how to program. And at some point, my brother, 2.5 years older, who was far from IT, got a job at a web studio. And I was stunned, I said, look, I’m an IT guy, why do you work at the web studio and I don’t? Tell them to call me for an interview, maybe they’ll hire me too.
And he did, and they called me in and actually hired me. I was a system administrator assistant, happy, 16 years old, I was running around, reinstalling the Windows, I bought some hard drives at Savelovsky.
And two weeks later I was fired. And I thought I was great, but they fired me. And my brother, to save my psyche, said that they were wrong, you can’t do that. And they really fired me for biased reasons. And he said, you and I are going to make a company, and it’s going to have the right principles. You and I will do everything on the basis of a very deep philosophy, ideology, and such events, such injustices and nonsense in our company will be impossible. I said, well, you know, you’re the smart one, the older one.
And he went and actually created a legal entity, because everything has to be done right from the start. He and I wrote a paper, a memorandum, about our relationship. That our brotherhood with him would always be more important than our business. About how we would always be open to perceive and hear each other. That if one day one of us thinks he or she needs to get out of the business, we will do it as gently and properly as possible, without harming the business or our relationship. And so on.
And we really, sixteen- and eighteen-year-old guys have gotten very serious about what the relationship is with a significant other in the business and how not to screw it up, because that’s pretty much what happens with everybody.
And, gosh, it worked. We stayed brothers all these years and helped each other and got through everything. And I with that approach, then I had the experience of hiring friends into my company, and then I had to fire them one day. And I hired three or four people over the years and fired them years later. And I stayed on great terms with all of those people.
And all of this happened because of the approach that my brother instilled in me. That first on the shore talk about values, talk about principles and take really on paper write, sign, just like formalists, put your signatures, that you really meant it, really.
Vitaly: I have exactly the same approach. I don’t work with my brother, but I also work with a very close friend. And it’s more or less the same way with us. But let’s say if you were doing a new company, would you do it with friends, relatives?
Hrachik: That’s not something I would look at. I mean, I know I can do business with friends, relatives. The fundamental thing for me is to have a group of people who, for this particular business, have the right set of attributes.
For example, I’m an innovator by nature, but I’m bad at day-to-day operations, it’s very hard for me to get myself to do the same predictable thing every day. That said, throw me into a completely unfamiliar environment where it’s total chaos, and I can navigate there and make things work.
I understand that I have strengths and weaknesses, I understand what kind of business I’m starting, what kind of features, peculiarities and habits the founders of this business need. And I’m going to put together exactly the right team of skills. And skills are not about the ability to program and so on. These are exactly questions of personality traits.
Vitaly: Does your brother complement you in places where you’re not very strong?
Hrachik: Yes, absolutely. I mean, he and I have done a series of different companies, and in all of them it has saved us, the fact that we are different enough. I would say that if we had another third person, I mean, there are some other nuances that the two of us lack. I mean, we cover a lot, but we don’t cover some things. But I didn’t realize that at the time. Now I’m much more subtle about these entities and I would still take a third, conventionally, if we were starting out.
Vitaly: It’s funny that YC said that, conventionally, three is the most correct combination of cofounders. Of course, there’s no right combination, there’s a bunch of super-successful solo faunders and so on. But statistically, three co-founders is kind of the lowest risk that the company won’t fall apart.
Hrachik: Yes, there are successful founders and singles, great successful founders, and two, and three, and five I know. But three actually purely mathematically makes sense. I heard from one of my grandfathers this message to have three kids. And he was saying that if you have one child, you will spoil him, if you have two, you will certainly give one attention and the other one will not, and one of them will be offended and it will greatly affect his life, the way he experiences himself in life.
If you make three, you don’t have to deal with them at all, they will balance themselves out. Even if you gesture, a three will be a super-balanced system that will always find the ways. If you have a fight with one, then the other one will hug you. If two can’t agree, the third will act as arbitrator. And so on. Makes sense. Realistically, purely mathematically, three is an interesting number.
Advice: When to start and when not to start your business
Nikita: Hrachik, maybe you can give some advice to our listeners? This advice for those who are still thinking about starting something.
Hrachik: Don’t start. My main message is: don’t do companies, get a job: everything is more clear, more predictable, and there’s more money. Everything will be fine. I always try to talk people out of doing business. And if I can’t do it, those people are real entrepreneurs who can’t be stopped, and they’re certainly torn. If you can’t do it, necessarily situations will come up a little bit later that you’ll want to over do it. And only those who can’t should do the business, it seems to me.
But at the same time, once you’ve started, you can’t limit yourself to the ceiling. To think that, well, I’m out there it’s somebody somewhere. I think Elon Musk must be smart, he must be rich. No, there are no limits. Lots of examples of people who create out of nowhere, the same Elon Musk, the guy from South Africa who just went and turned the world upside down. And all stories are like that, give or take.
So, I think the main risk that entrepreneurs have in Russia is that there are enough people in Russia to want to do business here, 160 million people. And it’s hard to think globally when you have a potential audience in an understandable language and with an understandable culture. But of course you have to think globally. You have to prepare from the very beginning that you’re creating global values for humanity, not aiming at one small market.
This is not the truth, these are approaches that are close to me personally. You can make a cool restaurant in Saratov and be a happy man, there is nothing wrong with that either.
Nikita: Cool. Thank you for coming. It was very interesting to listen.
Vitaly: Thank you very much, yes.
Hrachik: Thank you!