Explosive Growth

1. Innovate or Stagnate: The Epiphany at Lehman Brothers

In the end, it’s not the things we did that we regret, it’s the things we didn’t do.

From Wall Street to Startup. The author's journey began on Wall Street, but a desire for innovation and control led him to leave Lehman Brothers and start his own online dating business. This transition highlights the importance of recognizing when a current path doesn't align with inherent drives and passions. The catalyst for change came from an unlikely source: the movie Office Space, which inspired the author to seek a more fulfilling career.

Identifying Inefficiencies. The initial idea for IAmFreeTonight.com stemmed from observing the inefficiencies of existing online dating sites. The author noticed that even attractive, professional women struggled to find dates quickly due to the tedious process of emailing back and forth. This observation underscores the value of identifying pain points and creating solutions that significantly improve existing processes.

Doubling Down for Success. Recognizing the common mistake of underestimating startup capital, the author doubled his initial estimate to provide a financial cushion. This proactive approach allowed him to focus on building the business without the immediate pressure of generating revenue. He also developed a quantitative stock trading system to support himself for the first three years, demonstrating a commitment to self-sufficiency and long-term planning.

2. The Perils of Premature Scaling: Early Lessons from IAmFreeTonight.com

I’ve learned it doesn’t matter how many times you’ve failed, you only have to be right once.

The Network Effect. The author quickly realized the critical importance of the network effect in online dating. A dating site's value increases exponentially with more users, creating a winner-take-all dynamic. This insight shifted the focus from product uniqueness to user acquisition and retention. The author understood that a large, active user base was essential for long-term success.

Marketing Missteps. An early $50,000 investment in a spring break promotion yielded zero signups, highlighting the need for validated marketing strategies. This costly mistake emphasized the importance of testing and validating ideas with minimal financial investment. The author learned that not all marketing efforts are created equal, and careful planning is essential.

Newsjacking and User Quality. The author successfully used "newsjacking" to gain publicity, piggybacking off trending stories like Duke University's basketball loss and Britney Spears's personal life. While these efforts generated initial signups, the users acquired were not the right fit, leading to low retention rates. This experience underscored the importance of attracting users who align with the product's core value proposition.

3. The 10X Factor: Does Your Product Truly Stand Out?

You can market your ass off, but if your product sucks, you’re dead.

Beyond Uniqueness. The author questioned whether IAmFreeTonight.com was truly remarkable, realizing that uniqueness alone wasn't enough. The product needed to be ten times better than existing solutions to overcome switching costs and attract loyal users. This realization led to a search for a "Purple Cow," something truly exceptional that would inspire word-of-mouth growth.

The 10X Effect in Pet Adoption. The author's brother, Darrell, applied the 10X effect to pet adoption with his company AllPaws. By creating a website and app that allowed users to perform detailed searches for pets based on health, behavior, and compatibility, he made the pet adoption experience ten times better. This example illustrates how the 10X effect can be applied across different industries.

Addressing Pain Points. The biggest pain point with IAmFreeTonight.com was the time-consuming profile creation process. The author recognized the need for a solution that would allow users to upload complete profiles with just one click. This insight paved the way for leveraging Facebook's platform to streamline user onboarding.

4. Platform Power: Bet the Company on Emerging Trends

You miss 100 percent of the shots you don’t take.

Facebook's Platform Opportunity. Recognizing the potential of Facebook's new platform API, the author decided to "bet the company" on building a Facebook app. This decision, despite the uncertainty surrounding the platform, proved crucial to the business's survival and growth. The author understood that being an early adopter of emerging technologies could provide a significant competitive advantage.

Open Access vs. Closed Systems. The author recognized the genius of Mark Zuckerberg's decision to launch an open platform, allowing developers to build apps within Facebook. This approach fostered innovation and kept users engaged, contrasting with the closed systems of competitors like MySpace. The author understood that Facebook's long-term vision and commitment to user experience would drive its sustained success.

From IMFT to MeetNewPeople. The initial Facebook app was a simple integration of IAmFreeTonight.com's registration page. However, the author quickly realized the importance of keeping users within Facebook to maximize virality. This led to the creation of MeetNewPeople (MNP), an interim app used to test features and optimize the user experience within the Facebook platform.

5. Viral Velocity: Igniting Explosive Growth

Virality isn’t luck. It’s not magic. And it’s not random. There’s a science behind why people talk and share. A recipe. A formula, even.

Incentivizing Invitations. The key to going viral on Facebook was incentivizing users to invite their friends. By offering users higher placement in search results (leading to more matches and messages) in exchange for inviting friends, the author achieved explosive growth. This strategy highlights the importance of understanding user motivations and providing compelling reasons to share the product.

The Power of Language. Small changes in language had a significant impact on user behavior. By "selling the benefit" rather than the feature, the author was able to tap into users' emotions and drive more action. For example, "Invite five friends to find out which of your friends likes you!" proved more effective than "Invite five friends for higher placement in search results!"

Constant Testing and Optimization. The author emphasized the importance of constant experimentation and robust real-time analytics. By building an internal testing platform, the company was able to run over one thousand simultaneous experiments, learning quickly and adapting to user behavior. This culture of experimentation became core to the company's success.

6. Data-Driven Decisions: From $3 Million to $19 Million

Timing, perseverance, and ten years of trying will eventually make you look like an overnight success.

From Ads to Subscriptions. Faced with stagnating revenue and a volatile ad-based model, the author made the difficult decision to switch to a subscription-based model. This move, while initially controversial, led to explosive revenue growth, increasing from $3 million to $19 million in two years. The author understood the importance of controlling the company's destiny and creating a more predictable revenue stream.

The Importance of Testing. The decision to switch to a subscription model was based on rigorous testing in the UK market. However, the author later realized that the testing period was too short to fully understand the long-term impact on user growth and retention. This experience underscored the need for longer testing periods and a more holistic view of the business.

Virtual Gifts and LTV. To further increase revenue, the author introduced virtual gifts, allowing users to spend unlimited amounts of money on top of the monthly subscription rate. This strategy proved particularly successful with "whales" who wanted to stand out from the crowd. The author recognized the potential of virtual gifts to significantly increase the lifetime value (LTV) per customer.

7. The $78 Million Week: Riding the Rollercoaster of Success

A million dollars isn’t cool. You know what’s cool? A billion dollars.

The Bloomberg Effect. A seemingly innocuous article in Bloomberg News triggered a massive surge in the company's stock price, increasing by 1,500 percent in a week. This event highlights the power of media coverage and the importance of timing. The author's personal net worth soared, but he remained focused on the company's long-term success.

The Investor Frenzy. The sudden increase in the company's valuation attracted a flood of investor interest, with many previously uninterested firms now eager to invest. The author leveraged this moment to raise $8.5 million in capital at a favorable valuation. This experience underscores the importance of capitalizing on opportunities when they arise.

The Toxic Deal. Despite the excitement surrounding the capital raise, the author wisely rejected an initial deal with toxic terms that would have jeopardized the company's future. This decision demonstrates the importance of understanding legal documents and prioritizing long-term stability over short-term gains. The author's willingness to walk away from a bad deal ultimately protected the company.

8. Culture as a Competitive Advantage: Building a Thriving Organization

However beautiful the strategy, you should occasionally look at the results.

The Perils of Rapid Growth. The influx of capital led to a rapid expansion of the company, with the staff growing from twelve to nearly fifty employees in a year. This rapid growth created a culture clash, slowing down innovation and eroding organizational health. The author realized the importance of maintaining a strong culture and hiring employees who align with the company's values.

The CIO Framework. To address the challenges of data overload and code bloat, the author implemented a process improvement strategy called CIO (Celebrate, Iterate, or Obliterate). This framework forced the company to evaluate new features and remove those that weren't adding value. The CIO process helped streamline development and improve the user experience.

The Power of Core Values. To create a more cohesive and focused organization, the author defined five core values: Experiment, Own It, Be Quick, Plan and Execute, and Collaborate. These values served as guiding principles for decision-making and helped attract and retain employees who aligned with the company's culture. The author understood that a strong culture was essential for sustained success.

9. The Innovator's Dilemma: Reinventing for Sustained Growth

If a product’s future is unlikely to be remarkable—if you can’t imagine a future in which people are once again fascinated by your product—it’s time to realize that the game has changed. Instead of investing in a dying product, take profits and reinvest them in building something new.

The Threat of Disruption. The emergence of Tinder posed a significant threat to SNAP Interactive's existing business. The author recognized the need to reinvent the company and create new, innovative products to compete in the changing landscape. This realization led to a deep dive into Clayton Christensen's "The Innovator's Dilemma."

The Need for Separation. The author understood that sharing resources between the core product (AYI) and new initiatives would lead to suboptimal results. He decided to create a separate team with its own budget and KPIs to focus exclusively on innovation. This decision was crucial for fostering creativity and avoiding the distractions of the existing business.

The CEO Shift. To fully commit to the new product development, the author stepped down as CEO and appointed Alex Harrington to take over. This move allowed the author to focus 100 percent of his efforts on building the new product, signaling the company's commitment to innovation. The author also took a 50 percent pay cut to further align the project like a startup.

10. The Grade: Solving Problems and Sustaining Growth through Vision, Values, and Data

Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.

Eliminate Loneliness. The author recognized the need for a compelling mission statement to inspire employees and guide decision-making. The company adopted the mission "Eliminate Loneliness," which provided a clear focus and resonated with employees. This mission statement influenced every decision made thereafter.

The Ninety-Day Sprint. To address declining performance, the author implemented a ninety-day sprint focused on doubling the number of replies to user messages. This unified goal galvanized the company and led to a 400 percent increase in replies. The ninety-day sprint demonstrated the power of focus and collaboration.

Hackathons to the Rescue. To foster innovation and creativity, the author introduced monthly hackathons. These events allowed employees to work on their own ideas and collaborate with others, leading to the development of valuable tools and features. The hackathons helped sustain growth and keep the company innovative.

11. Tinder Cracks the Code: The Power of Simplicity and Focus

If you use your money to create exceptional products and services, you won’t need to spend it on advertising.

The "Playing Tinder" Phenomenon. The author observed a group of women "playing Tinder" at a bar, realizing that the app had successfully removed the stigma associated with online dating. This observation highlighted the importance of understanding user perceptions and creating a product that is both fun and acceptable. Tinder's success stemmed from its ability to make dating feel like a game rather than a chore.

The Female-First Approach. Tinder's design prioritized the female user experience by preventing unwanted messages. This feature addressed a major pain point for women in online dating and contributed to the app's rapid growth. The author understood that creating a safe and respectful environment for women was essential for success.

GPS and Instant Gratification. Tinder leveraged GPS technology to show users potential matches nearby, enabling quick and easy meetups. This feature provided instant gratification and made the dating process more efficient. The author recognized the power of leveraging technology to enhance the user experience.

12. Making "The Grade": Solving Problems and Sustaining Growth through Vision, Values, and Data

To launch a business means successfully solving problems. Solving problems means listening.

Accountability and Respect. The Grade was designed to address the problem of harassment and inappropriate behavior in online dating. By grading users based on their profile, messaging, and peer reviews, The Grade created a community of high-quality singles who were held accountable for their actions. This approach resonated with users and attracted significant media attention.

Data-Driven Storytelling. The author leveraged the company's expertise in data analysis to create compelling stories that attracted users and generated media coverage. These stories, often controversial or taboo, provided valuable insights into the dating landscape. The author understood the power of data to drive engagement and brand awareness.

The Media Page Advantage. The author created a robust media page on the company's website, providing journalists with easy access to information, images, and videos. This proactive approach made it easier for the press to cover the company and contributed to its successful launch. The author understood the importance of making it easy for the media to tell the company's story.

Last updated: February 12, 2025