On the podcast we talk with Andrew about the journey to cash flow positive for Elevate Labs, the importance of creative, and why spending less money can sometimes be the key to figuring out paid user acquisition.
📈 The journey to cash flow positive is a long one, demanding tough decisions along the way
💵 Spending less money can sometimes be the key to figuring out paid user acquisition
🎨 Control and collaboration are key elements of a creative culture
About Andrew Maguire
⚙️ Chief Operating Officer at Elevate Labs and Managing Partner at Volo Ventures
💪 Andrew saw Elevate move from rolling back on ad spend in order to survive, to becoming cash flow positive with record growth in 2022.
💡 “How do you have values that are not just the poster on the wall that no one cares about, but are actually lived in the organization?”
👋 LinkedIn and Twitter
Elevate is responsible for award-winning brain training and sleep and meditation apps that help users stay focused, productive, well-rested, and confident. Elevate COO Andrew shares about the 11 years it took the company to get to cash flow positive.
As Managing Partner at Volo Ventures, Andrew invests in a number of different startups, including ICON, Carta, Zipline, and RevenueCat. The duality of being an app developer and a VC offers Andrew unique insight into creating great apps that hit the mark.
Getting to cash flow positive was tough — especially with the slow death of ATT. “It really hammered us,” Andrew explains. “We were pretty reliant on the quality of Facebook's algorithm.”
A period of experimentation meant that realigning the company values with growth and monetization was top priority. This reassessment encouraged long-term growth and stability. Part of this strategy involved leveraging Elevate’s LTV/CAC to boost the Balance app. “Bringing down the blended cost of acquisition on the Balance side [was] the simplest way to do it,” Andrew explains. “Otherwise attribution is challenging.”
It also meant paying creative its due. “We had the most success on the creative side [as] the whole data landscape is taking a while to sort itself out,” he says. “You have major aspects of the ecosystem — like MMPs and ad networks — [which] everyone's trying to figure out. It takes a while, but creative is very much in your control.”
📈 The journey to cash flow positive is a long one, demanding tough decisions along the way.
Free apps provide a central user base that subscription app developers need to push aggressively with trials. “You need to either have advertising figured out or some sort of freemium model where you have so many people coming in that you can later convert enough of them to build a rapidly growing business,” Andrew explains.
“It's not just LTV/CAC,” he says. “It's also cash flow.” Shady tactics don’t work in the long term — but people use them anyway. Unless you have capital, monthly ad bills are expensive. So Elevate pulled back on ad spend and, after a lot of time and focus, became cash flow positive.
Deciding to raise more capital buys time, but maintaining high spend just exacerbates an unsustainable business model. Scale isn’t always the answer for subscription models, either. Profitability doesn’t necessarily follow as it might with SaaS network effects.
💵 Spending less money can sometimes be the key to figuring out paid user acquisition.
Rolling back on ad spend and really looking at LTV/CAC for Balance and Elevate individually enabled Andrew and his team to realize they could bring the blended cost of acquisition down for Balance by leveraging Elevate users. Otherwise, he says, attribution can be a challenge.
“Our renewable base would have eventually evaporated if we couldn't get the economics to work to drive more scale,” he explains. Thankfully, this razor-sharp focus on the top organizational priority of making money facilitated a real turnaround.
Subscription app developers should always consider alternative (even unorthodox) routes if something isn’t working because the solution can come from the unlikeliest of places.
🎨 Control and collaboration are key elements of a creative culture.
Andrew never really left the VC world, which powerfully reinforces his work with Elevate. “I love building teams and focusing on growth — the other side of the business,” he says.
Elevate experienced most success with creative, of which — unlike MMPs and ad networks — the company remains in firm control. Partnering an amazing content team receptive to business growth with product design forges unique platform-specific ways of authentically connecting with customers.
Growing sophistication enabled scaling up ad spend once again, with “everyone at the company taking responsibility for the quality of the product,” Andrew says. “Source ideas from everywhere, develop really tight cross-functional collaboration, and get really, really good at this.”
[1:46] Inspirational investment: Making waves at Elevate, Volo Ventures invested in RevenueCat based on Jacob’s juice for building a big company and solving real problems.
[6:48] Early elevation: The duality of Volo Ventures and Elevate gives Andrew insight to create great apps while investing at the same time.
[10:25] Living organizational values: An ongoing commitment to incorporate company mission into every aspect of work — from hiring to recognition and performance — is what makes a company really stand out.
[13:25] Pay to play: You need to spend money to make money. Jacob and Andrew discuss getting a handle on LTV, plowing money into advertising, the subscription model, and trials.
[19:20] The slow degradation of ATT: It’s not an overnight thing, but Elevate still took a hammering.
[21:26] Circling the wagons: Andrew talks about the experiments they ran, what worked, and what failed, including pulling back ad spend.
[24:32] The importance of creative and the power of ads: Everyone taking responsibility for the quality of the product builds a culture of creativity with ideas coming from all angles.
[33:22] Blending acquisition costs: When you’re building a second app, you can leverage the customers you already have for the old one to build an even better product. And sometimes free giveaways can scale ad spend in asymmetric ways.
[40:25] Becoming a “real business”: Hitting cash flow positive feels really good. Andrew found that focusing on being lean and scrappy allowed them to scale the business without having to raise more capital.
[46:13] The Volo connection: Andrew, David, and Jacob discuss what’s happening at Volo Ventures.