I have the opportunity to meet with a lot of investors – often because they think what we’re building is cool. It isn’t some complicated analytical tool for big finance, it’s something they might use themselves (even if they aren’t our target market). They’re excited, they want to be convinced it’s going to be the next big thing; a diamond in the rough.
The issue is, they don’t know if they’re looking at cubic zirconium or the real deal.
We’re building Kindaba: the future of family communication. Safe, private, ad-free, no data-selling, easy for grandma to use, and free to use, all while empowering social impact projects helping refugees, new mothers in rural areas, and more. Just as Slack has revolutionised the way teams communicate, we’re laser-focused on a specific user persona, one with family spread far and wide. Kindaba families live miles apart, think diaspora populations like the Irish, South Asian, Nigerian, Jewish – all tight-knit families who currently have to make do with noisy messengers or poor-on-privacy social networks.
We’re a team obsessed with data. We’ve successfully run viral growth experiments while remaining invite-only. We’ve grown our weekly active user-base by an average of 32 per cent every month without spending anything on user acquisition. We’ve surrounded ourselves with advisors from consumer and product companies like Twitter, FanDuel, Skyscanner and more to understand which metrics are good, and which are just vanity.
Raising investment for what we’re building at an early stage, however, is tough. Because we’re in the social space, and it’s a consumer product, it’s easy to read into what we’re building and think we want to build the next Facebook.
We are building for life beyond Facebook
We are building for life beyond Facebook, but that means precisely that we don’t want to build the next Facebook. We understand the decentralising trends, the move away from fewer all-encompassing social networks to many more defined networks that cater to specific user personas.
Yes, privacy is in the news, and Facebook is taking a beating, but simply offering a private alternative isn’t enough to change user behaviour. Solving the noise problem, however, is. Solve a core problem for one persona, establish a base of support, and listen to your users.
Some unsophisticated investors don’t see this. They see Social as “Facebook vs__”. They see success through a social network lens. Critical mass and value stem from how many connections you have. The more connections you have, the more reason for someone to join, the more activity you post, the more your habits are known, the more targeted an ad experience can be, which leads to high profits.
Kindaba isn’t a social network
It doesn’t matter if everyone and their goldfish are on for you to use it. That’s not where it provides value. What matters is that your family’s on there, those who share the same circumstance as you. Think of Slack vs LinkedIn. LinkedIn is a social network; its value is in the number of people on there who you don’t know. With Slack, you don’t care if everyone in the world uses it or not, just those on your team. Slack is a defined network. So is Kindaba.
The assumption that 200 million users are needed to achieve critical mass isn’t right for products like Kindaba. The mechanics are different. We could choose to be fully profitable at eight million total users, and operationally profitable at three million, all without ads. That’s not to say we don’t expect world domination, but getting to sustainability in the social space isn’t as mysterious as some think.
Understanding traction is also a challenging subject when looking at this space. Signups, network sizes, amount of activity aren’t important at an early stage. They’re based on assumptions of more eyeballs equals more ad revenue.
Traction means different things at different stages
#First – Prove the Need: viral coefficient, day seven retention, day 30 retention. 1000 passionate users who use the product all the time are far more valuable than 20,000 quick signups.
#Second – Prove the Scale: viral coefficient (net CAC), DAU, stickiness (DAU/MAU), percentage activated users, average network activity, sustained growth levels into new markets.
#Third – Prove the Revenue: percentage active users who pay, average revenue per active user.
Experienced early-stage investors get this. They understand the challenges and the work you need to do to make explosive growth look effortless. They don’t miscalculate expectations through uninformed assumptions. They also understand what risk is. One of our investors put it this way:
I want to be convinced that I have a small chance of making a large amount of money.
The most successful early-stage investors can differentiate between short-term proof and long-term opportunity but sadly the majority don’t understand risk. They want to jump on the train after it’s left the station. They assume a seat will always be there for them on this train, but they don’t have the pockets to guarantee a spot later on.
Our investors know it’s going to be hard. They back our data-led approach. We continually demonstrate our laser focus and that gives them faith that we’ll give them the massive return they’re looking for.
The earlier the stage of company you invest in, the more impact you make, and the more likely you’ll be fought for in future company rounds.
Robert Gelb is the CEO of Kindaba, a Seed-stage family communication company. Our product, Kindaba, is a visual intelligent messenger for families spread around the world. Their seed round is led by Gareth Williams, co-founder of Skyscanner, and they have investors including Chris van der Kuyl (4J Studios), Robin Knox (iPOS/iZettle) and SeedHaus.