446: Submagic: How a Scrappy MVP Hit $1M ARR with TikTok - with David Zitoun

Summary

The SaaS Podcast - Episode 446 Summary: "Submagic: How a Scrappy MVP Hit $1M ARR with TikTok" with David Zatoon

Podcast Information:

• Title: The SaaS Podcast - SaaS, Startups, Growth Hacking & Entrepreneurship
• Host: Omer Khan
• Guest: David Zatoon, Co-founder and CEO of Submagic
• Release Date: June 5, 2025

---

1. Introduction to Submagic and David Zatoon

Omer Khan introduces David Zatoon, co-founder and CEO of Submagic, a tool designed to help creators and small businesses effortlessly convert their videos into viral-ready shorts with just a few clicks. David shares the inspiration behind Submagic, stemming from his personal challenges with video editing, specifically adding captions to short-form content, which was both tedious and time-consuming.

Notable Quote:

• David Zatoon [00:00]: "Foreign."

---

2. Identifying the Problem and Building the MVP

David explains that in 2023, despite being an experienced video editor, he found the process of adding captions to videos cumbersome. This led him to collaborate with a technical co-founder to develop a Minimum Viable Product (MVP) in under 45 days. The MVP focused on a single core feature: automatically adding captions styled after Alex Hormozi's engaging format.

Notable Quote:

• David Zatoon [06:13]: "We start by saying, okay, you know what? In the next 12 months we're going to do something. Every month we're going to build a new product. 15 days to build an MVP. 15 days to sell the MVP."

---

3. Launch Strategy and Initial Traction via TikTok

With no initial budget, David leveraged TikTok's algorithm by posting rough demo videos showcasing Submagic's capabilities. Despite starting with zero followers, one viral TikTok video within ten days brought approximately 40-50 paying customers. This early success validated the product-market fit and provided the impetus to scale rapidly.

Notable Quote:

• David Zatoon [14:00]: "That video led to a wave of paying customers and gave him the signal to double down."

---

4. Scaling Through Affiliates and Community Building

To amplify growth, David recruited dozens of small creators to promote Submagic as affiliates. He offered a compelling incentive of 30% lifetime commission, which motivated young creators to actively sell the product. Additionally, David established a WhatsApp group called "Submagic Lovers," fostering a community where customers could collaborate on product development. This approach not only drove word-of-mouth retention but also provided invaluable product feedback.

Notable Quote:

• David Zatoon [20:11]: "We add a WhatsApp group with them and understand who they are, where they are spending their time."

---

5. Achieving $1M ARR in 90 Days

Through relentless effort, strategic use of TikTok, and a robust affiliate program, Submagic reached its first million in Annual Recurring Revenue (ARR) within just 90 days. David attributes this rapid growth to perfect timing, the rising popularity of AI tools, and the booming demand for short-form content.

Notable Quote:

• David Zatoon [02:43]: "We hit the first million in ARR in just 90 days."

---

6. Expanding to $5M ARR and Facing Growth Challenges

Within a year, Submagic scaled to $5M ARR by diversifying acquisition channels, including SEO, Google Ads, and influencer marketing. However, this growth phase introduced challenges such as increased churn rates and ineffective paid channels. Despite implementing several strategies like feature additions and pricing tweaks, progress plateaued, prompting the team to reassess their growth strategy.

Notable Quote:

• David Zatoon [39:04]: "Churn is really like links to your product and links to your like typology of business."

---

7. Overcoming the Plateau with Bold Strategies

To reignite growth, Submagic experimented with aggressive pricing strategies, ultimately lowering prices to attract more customers. Additionally, they launched MagicLips, an add-on feature that significantly boosted ARR. These bold moves helped Submagic break through the plateau and continue scaling rapidly.

Notable Quote:

• David Zatoon [41:40]: "We lower our price even lower than the original price. And then it went like this because pricing is very sensitive in our industry."

---

8. Current Status and Ongoing Journey

As of the episode's release, Submagic stands as a bootstrap company generating approximately $8M in ARR with a dedicated team of 14 people spread across 10 different time zones. The company's journey is ongoing, with plans to continue innovating and expanding their product offerings.

---

9. Key Lessons and Advice for Founders

David emphasizes the importance of timing and product-market fit, stating that even the best acquisition channels are ineffective without solving a real, urgent pain point for customers. He advocates for continuous iteration and learning, encouraging founders to view every bet as an opportunity to learn, whether it results in a win or not.

Notable Quotes:

• David Zatoon [28:58]: "Timing was perfect. AI tools were taking off and short form content was booming and the pain they solved was real and urgent."
• David Zatoon [29:30]: "Either I win, either I learned, I never lose."

---

10. Insights from the Lightning Round

In a series of quick-fire questions, David shares additional insights and personal anecdotes:

• Best Business Advice: "Good businesses bring good people and bad businesses bring bad people."
• Recommended Podcast: "I love Naval Ravikant. He's a great guy. I love listening to him."
• Attribute of a Successful Founder: "I'm passionate about what I'm doing and I always find solutions."
• Favorite Productivity Tool: "I am one of the top users of Loom in the world."
• New Business Idea: Hinting at an upcoming product linked to Submagic but keeps details under wraps.
• Fun Fact: "I love food, cars, traveling, and experiencing things. I'm passionate about golf and video creation."
• Passion Outside Work: "Golf, cars, and creating content."

Notable Quote:

• David Zatoon [48:46]: "Good businesses bring good people and bad businesses bring bad people."

---

11. Closing Thoughts and Contact Information

Omer thanks David for sharing Submagic's journey, highlighting the valuable lessons for listeners. David provides his contact information, inviting interested parties to reach out via email at [e-mail] or through LinkedIn.

Notable Quote:

• David Zatoon [51:07]: "Creating content."

---

Key Takeaways:

1. Identify a Real Problem: Submagic was born out of David's personal frustration with video editing, ensuring the product addressed a genuine need.
2. Rapid MVP Development: Building a focused MVP with one core feature can validate product-market fit swiftly.
3. Leveraging Viral Platforms: Utilizing TikTok's algorithm without an existing follower base can lead to significant traction.
4. Effective Affiliate Programs: Offering generous commissions can motivate affiliates to actively promote your product, driving exponential growth.
5. Community Building: Engaging closely with customers through platforms like WhatsApp fosters loyalty and valuable feedback.
6. Adaptability: Being willing to pivot strategies, such as adjusting pricing or adding new features, is crucial when facing growth plateaus.
7. Continuous Iteration: Embracing a mindset of constant learning and adaptation helps navigate the uncertainties of scaling a business.
8. Focus Over Competition: Prioritizing customer needs and product vision over competitors ensures sustained relevance and growth.

David's journey with Submagic underscores the importance of agility, customer-centricity, and strategic experimentation in building a successful SaaS business.

Transcript

[David Zatoon]

Foreign.

[Omar Khan]

Welcome to another episode of the SaaS podcast. I'm your host Omar Khan and this is a show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch and grow your SaaS business. In this episode I took to David Zatoon, the co founder and CEO of Submagic, a tool that helps creators and small businesses turn their videos into viral ready shorts in just a few clicks. In 2023, David had a simple problem. Even as an experienced video editor, adding captions to short form content was tedious and time consuming. So he teamed up with the technical co founder, built an MVP in less than 45 days and and started charging for it right away. But with no budget. He posted rough demo videos on TikTok, just screen recordings and a few words to camera and after 10 days one finally took off. That video led to a wave of paying customers and gave him the signal to double down. He kept refining the message, talking to users and recruited dozens of small creators to promote Submagic as affiliates. And amazingly, they hit the first million in ARR in just 90 days. But let's be real, it wasn't just because the product was great. David will be the first one to tell you that their timing was perfect, AI tools were taking off and short form content was booming and the pain they solved was real and urgent. Still, it took nonstop effort, cold outreach, trial and error, building community and figuring things out really fast. They also managed to hit the first 5 million in ARR incredibly fast. But that wasn't smooth sailing either. Paid channels flopped, CH churn crept up. They tested features, explored new audiences, tweaked pricing, but progress eventually stalled. For months nothing worked the way they expected and the team had to rethink how to grow all over again. Today, Submagic is a bootstrap company at around 8 million in ARR with a team of just 14 people. And the journey is still unfolding. In this episode you'll learn what David actually did in his TikTok videos that triggered virality and drove conversions. Why his WhatsApp group became the engine for word of mouth retention and rapid product feedback. How he turned micro creators into motivated affiliates using one simple but powerful incentive. We talk about what happened when paid channels, new features and pricing changes all failed at the same time. And how launching a second product and lowering prices helped them break through a long plateau. So I hope you enjoy. David, welcome to the show.

[David Zatoon]

Thank you very much for having me.

[Omar Khan]

Do you have a favorite quote? Something that inspires or motivates you?

[David Zatoon]

Yeah, I've got one that I wrote down. Opportunity only looks like opportunity. Looking backwards today, it looks like risk.

[Omar Khan]

I've never heard that one, but I love that. It's very true. Cool. So tell us about Submagic. What does the product do, who's it for and what's the main problem you're hoping to solve?

[David Zatoon]

Yeah, so Submagic helps small businesses between 1 to 10 people and content agencies, marketing video agencies, create powerful short form videos in just three clicks. Okay. We are focusing short form content. So the vertical format that you have on TikTok, Instagram Reels or YouTube shorts. The issue that we are facing is that, that we are solving is that most of the coaches, real estate agents, small businesses today, they want to attract more customers to their business and they don't have the funds to spend on ads or do the classic marketing strategy, the email marketing, the cold coding is not working as much as it was working before, I would say. And now creating content is one of the best efficient way to attract clients to your business. And so the short form content is one of the most amazing opportunity of, of this year I would say and the next couple of years because you don't need to have like a million followers to attract a million views. You can have like one followers, make million views on Instagram or TikTok and from one piece of content. So thanks to short form content there are like many small businesses and big businesses that went viral and changed the trajectory of the life. So yeah, it's great. So we help those business like edit the videos like in just three clicks without having any knowledge in editing because we believe that videos should be accessible to anyone and it's not already the case.

[Omar Khan]

Cool. So give us a sense of the size of the business. Where are you in terms of revenue, customers, size of team?

[David Zatoon]

Yeah. So Samagic is two years old tomorrow, so we are a very young company. We are a team of 14 people based all over the world. We don't have offices, we are between like 10 different time zones and we are at 8 million in revenue today. And yeah, we're growing fast. Small team building with AI so great traction.

[Omar Khan]

Two years tomorrow that you get to 8 million in ARR. And you were telling me that the first million you hit is in 90 days or less and there's going to be a lot of people listening to this who are having the opposite experience where they may be struggling to get the first 10 customers or they have got to a point where they have some level of early traction. But they've just plateaued. And so I want to make sure that we dig into your story and we pull out as many lessons as we can in terms of what you did that worked and more importantly, why. So people listening to this can kind of go away, not just hear your story and what Submagic is all about, but hopefully give them some added momentum to what they're doing with building their own business today. Let's start with where did the idea for Submagic come from?

[David Zatoon]

So the idea of Submagic came from an issue, a problem that I was facing. So I was making videos since I'm 12 years old and I'm passionate about videos in general, creating content. So I was editing videos, I was filming videos. I had a YouTube channel for like a couple of years, so I was running regarding my hobbies. And so I was, I was creating short form content. And by creating short form content, I wanted to make more captivating short form because I realized when I put captions on my short form, my videos were performing better than when there was no captions. So I had it to make captions for all my short form content and doing it on Premiere Pro or those classic web software that I'm used to it and I'm good at video editing. It was even tough for me, it and time consuming. So I was like, what's happened for the guy who never edit videos in the life, how he make captions and captions will be like essential for everyone tomorrow because short form is growing that fast and everybody needs captions to the content. And so I wanted to build a tool to enable me myself to create captivating captions. What I mean by captivating is those captions that you see on Instagram or TikTok or whatever with effects with things that capture attention in three clicks super easily without going to Adobe Premiere. That's how the ideas, the basic ideas.

[Omar Khan]

Of some magic came from, you know, back then. I mean, there are probably a lot of products around today that do the captions and we'll talk about that and the general landscape and how you think about that. But back then I guess people just had the option, either I've got to learn how to do video editing myself and then have this painful experience in Premiere Pro or whatever I'm using to figure out how to add captions, or I need to go and hire somebody and pay a bunch of money and if you're trying to create a volume with your shorts videos and you're like a one person business or a Realtor or Somebody like that, it gets expensive very, very quickly. And so, okay, so you've got the idea and it's the pain that you're experiencing yourself. How did you get started? Like, did you first go out and start looking at what kind of solutions were out there? What was the point where you said I need to go and build something myself?

[David Zatoon]

First of all, I'm building companies since I'm 18. I'm 28 today. I started some magic when I was 26. Sorry, when I was 27. No, 20 when I was 26. Sorry, I was 26 when I started some magic, but I started building companies when I was 18. So I love entrepreneurship in general. So I'm used to build companies. Submagic is my fourth companies. And so before starting Submagic, I did something differently. I found my co founder for this project. And finding the co founder I think is the most important thing and the most difficult part of creating a business. And we rarely talk about it and I think it's really, really important. I made the mistakes to sometimes having bad partnership in my previous companies and it ending killing my business in sometimes. So I spent a lot of time, first of all, finding my co founders and finding someone who really like understand where I want to go and have the same vision for his life as well. And so I found my co founder after looking for a lot of people, meeting a lot of people for a couple of months. And then when I met this guy, and by the way, I met him through a platform called YC Co founder Mature. So Y Combinator. You have a finger for entrepreneurship. Everyone can use that. It's great. And you can meet some great people. And so I met my co founder. We met in Paris, He's French as well. And so when the first time we met, we were like, okay, what do you want to do? What do I want to do? And we wanted to see if we were aligned on the path we wanted to take together. And at the beginning it was just a question of direction in life. That's it. We didn't talk about some magic. Submagic didn't exist. There is not the problem. And then when we realized that we were aligned then we said to ourselves, together, we said, now we need to try to see if our partnership is working or not. We need to make a try. Okay, before, like creating a company, before, like doing all those things and going all in, we need to try to see if we match together. So how can we try? And so he told me like, I want to see if David, you are capable of selling a software product. Because we wanted to both create software products. And I said to him, I want to see if you are capable of building an mvp, like really fast. And you are good at technical. Because I'm not a technical person. I'm really good at sales, but I'm not a technical person. And he was the opposite. And so we had one thing that we knew that we wanted to build software products that help people, that help people making a better workflow in their day or having a better day in general. And we wanted to do that independently. We didn't want it to raise funds and we wanted to be remote because tfa, my co founder, wanted to live in South Korea. He was about to live in South Korea. And so we were aligned on those things. And we start by saying like, okay, you know what? In the next 12 months we're going to do something. Every month we're going to build a new product. 15 days to build an MVP. 15 days to sell the MVP. Okay, we're going to do that for 12 months. If we are not finding like the right ideas that pop up in the next 12 months, that means we are not very good. Okay, so then we start, we say, okay, what are we doing? And I told Tsifei, I've got my issue about creating content. Maybe we can create a tool to help me create captions. It's going to help me first. I will be the user's number one. So he built the MVP and then I start selling the mvp.

[Omar Khan]

How many products did you build before you worked on that idea? Or was it the first one?

[David Zatoon]

Some Magic was the first product.

[Omar Khan]

So 15 days you get an MVP, then you go out, try to sell it.

[David Zatoon]

Yeah, I would say more like a month and a half instead of 15 days. It took a bit more time, but in a month and a half we had a first version of some Magic that was like ugly. Ugly like a real mvp, like one functionality. But it was working well. Like we didn't do too much things, only one thing. But we did it well. That's for me, that the advice for me for MVPs. People try to build like solid product, everything. No MVP should be like one feature. That's it. The one core features. But do it well. Like it can be ugly, right? But do it well. And put a payment system like payment provider. Because if nobody pays your things, you cannot have the answer to know if your MVP is already like a proof of concept or not. Because everybody can try your product for free, but nobody, like you have to really see who is going to pay for that. And I was like, if people will pay for this ugly product, that means we have a good traction. Because when the product will be like really good, it will be amazing.

[Omar Khan]

So what was that one feature?

[David Zatoon]

Put your videos into some magic. It was a one minute video maximum. We get the transcript and we give you the captions and the captions were automatically put it with the hormozy style. Alex Hormozy, you know, Alex Hormozy with this style. That's it. And you export your videos. That's it.

[Omar Khan]

So it wasn't like you can customize it, you can use different colors, you can do different fonts. It was like this is all you get.

[David Zatoon]

Yeah, One template. That's it. You can just correct your words if there is a mistake. That's it. Nothing else.

[Omar Khan]

Okay, great. So you built that and then over to you, you go out and try to sell it and what happened?

[David Zatoon]

So I wanted to sell it. So I said like, first question I asked myself, we had some like restriction first one, we didn't have money because we didn't want to raise funds. We say like, how we can bootstrap this business? So how can I find customers without spending money? And so I think about myself say, where could be the people who can use this product? Who can benefit from this product? Where they are? They are on LinkedIn potentially. Because on LinkedIn you can create content so creators. You can be on YouTube shorts or you can be on TikTok. So what I did is like I went on TikTok and I took my phone, I create an account on Submagic called Submagic Co and I create an account, sorry, on TikTok called Submagic Co and I start filming myself and I say like, hey guys, if you want to have the same captions like Alex or Mozzie in three clicks over your short form contents, I'm showing you a website that I just discovered and I filmed my laptop and I say this is called Submagic and nobody knows about it yet. And you put your videos and then you can export it. If you want to have like a promotional code, David 10 I negotiate that with them. That's it. And I post this video for like one day today. Every day I was posting the same videos but I was making it a bit differently. Okay, Outside, inside, new laptop and stuff like that. And one day, like 10 days after 1 video went viral, a hundred thousand views bring like clients to some magic.

[Omar Khan]

That was on TikTok.

[David Zatoon]

That was on TikTok Yeah. First customers like this brings us like maybe to 50 customers, I don't know, like 40 customers. The subscription was very low, it was €20 subscription. So it was not a big deal. A big deal.

[Omar Khan]

So this was a new profile you created on TikTok. It's not like you had a big following when you started publishing these videos.

[David Zatoon]

Zero, follower, zero, nobody.

[Omar Khan]

Yeah, so that's, I think in many ways the beauty of that kind of algorithm as you were talking about earlier, it's less about followers, it's just about constantly iterating until you get some kind of content which just clicks or goes viral, which in many ways is how you've built this company and constantly experimenting which we'll talk about. Okay, great. So people sign up. How many of them started paying for this ugly product that did one thing.

[David Zatoon]

Ugly, but it was good. I remember that the first customers we had was the 1st of May, 2023. So tomorrow we had the 30th of April and I remember and what I did when I saw the first payment on stripe, I directly contact this guy, I take his email and I contact him. I say like I refund you if you answer my email, like please just talk to me. And I wanted to know who he was, like how, why he bought this product, what is he looking for, what is his Persona of clients? And I was just like talking to him, he said like I love it, it's great. I just want to make my captions faster and your product is doing well. Please can you add these things? Can you add these things? Can you do that? And we start having some feedbacks and then I start looking more clients like him. Like I say show me who you are and I'm going to find more people looking the same as you. Because if you buy and you are like that, maybe I will find more people like you and you, they will buy as well. So I start doing the same. Why did you buy the product? What are you looking for? Or efficiency, speed, time saving. Okay, this is going to be the argument I'm going to put in the video. So tomorrow I'll make a new one and I change the argument. You know what, this is just iterating and I start doing that like four. Yeah. And it brings like I don't remember the exact numbers but it brings like we went from 0 to maybe 2,3k MMR like in 15 days maybe. I don't remember exactly the numbers at the beginning but thanks to TikTok we add some customers, some people and we started having some Calls with them a lot. I was calling them every day.

[Omar Khan]

So just to understand when you figured out who this person was and you said, I'm going to find more people like you, it wasn't like you were saying, okay, this is the ICP. And then I'm going to go on TikTok and try to target the same type of people. It was more about, okay, I get who this person is. These are the pains that he has or these are the reasons why he's using the product. I'm going to create videos talking about those problems, those solutions, because they hopefully will get in front of similar people as this person.

[David Zatoon]

Yeah, the algorithms make the work for you. That's the beauty of TikTok. Like they find the customer. When you look at your feed on Instagram, they show you what you want to see. You don't look for the content. The content comes to you now. So that's the beauty of it. TikTok know you very well, like very, very well. So if you talk the way they want, like it's just like kind of logic, like I just saying like what they are looking for. And also I was saying like, because I know that the first customers was a small business owner, he was starting his business. And I say, if you are a small business owner and you are looking for, start accruing your first customers, this is the product you should use some magic, okay? And I was tagging directly those kind of people as well. But one thing I did that works very, very well and I advise to everyone to do that. At the beginning of Submagic, we were very close with the customers. Like very close. Every customers, I told you that by Submagic I take their WhatsApp and I create a WhatsApp group with them. Okay? And the WhatsApp group was called Submagic Lovers. I put them on the WhatsApp group and I said like, guys, we're going to build the product together. Because they were so hyped with the product that they asked us a lot of features very fast and we were like building the product with them and they became our best product manager in the world. They were like testing the product for us. They were paying us. We are not paying them, they were paying us. They were giving the best feedbacks ever because they were the users of the product and they just love the experience of building a product with a company. When the last time you build a product with a founder directly on a WhatsApp group, that was an amazing experience with them. So they never forget about it. And they start talking about it around themselves, word of mouth. And this helped us grow very fast.

[Omar Khan]

So you went from basically zero to the first million in ARR we discussed earlier in about 90 days. What was the, I mean the TikTok stuff sounds great, but was that the main thing that got you to the first million?

[David Zatoon]

So when I saw TikTok, it was doing great. And I saw that when I make viral videos, it brings us more clients. I say, how can I scale this acquisition channel? And so I said to myself, if I make not one viral video a week, but like 10 videos, viral videos a week, I will scale like 10 times faster. But me, myself, I cannot make 10 videos a day, it's too much. So I start hiring some small creators between like 18 to 25 years old. And I was telling them, like, you're going to become an affiliate of Stuff Magic, you're going to sell this product, you're going to make the same videos as I do, and I'm going to give you 30% commission on the lifetime value of every customer that you're going to bring to me. And I can tell you what, when you make a video that makes more than 20,000 views, you will make at least $500 because this is what happens to me. So I had the proof that promoting some magic on TikTok was doing great. And so I hired like 50, 70 of small affiliates, like young guys, students. And I was same thing, WhatsApp group with them. They were my sellers. They were like sales guy. And I was like, guys, today you, everyone needs to create content for Submagic. And what they did, they just like creating brand new accounts called like Omer, Submagic or David, some magic, whatever. Zero followers. The logo of Submagic affiliate link. And they were just posting one piece of content every day. And this was the deal.

[Omar Khan]

How did you find these guys?

[David Zatoon]

Scroll on TikTok. You look on TikTok followers are followers. You reach out to them. Like really, like this is not complicated. You just look small creators, like, like looking online. That's it.

[Omar Khan]

And at 30% on Lifetime, I mean a lot of people would kind of overthink this, right? In terms of, oh, is this the right kind of commission? Should it be for a year, should it be whatever. But at this point when you're this early on, you just need to get the traction right, you just need to incentivize people because you can always fine tune how you reward affiliates in the future. But it's got to be pretty compelling to get that many people on board. Like how long did it take for you to get these like 60, 70 people?

[David Zatoon]

I don't know, maybe like a week. I was spending my all day doing that like so I was like contacting maybe 1,000 people and out of the 1,000 I get 50 people. But for the question you asked me like getting the commission and those kind of things, I see a lot of early first time founders generally do these kind of mistakes. They are spending too much time on details that nobody cares. Their businesses are making $0 and they are caring about how much they will give as a commission. Be generous in general in life. I learned that from my values and my parents. But be generous with people and you will get a lot of. If I make you rich, you will make me rich. If I make my affiliates rich, they will promote more and more submagic because if they are not successful they will stop promoting my products. So I would just want it to be generous with them. And I know that I will not make my. The majority of the money from submagic will not come from those 50 people. It was just the beginning. So I make a very incentive deal. Nobody knows the brand at the beginning so I need to attract them. So be generous with them and then they will reward you at the end of the day.

[Omar Khan]

So that affiliate vehicle was basically the main way that you got to the first million in ARR very fast. And I asked you earlier, I said, well, what was the struggle? It sounds like it was too easy. And your response was, you said, I don't mean to be arrogant but it wasn't really that hard. The issues we had came later, which we'll talk about. And then, you know, I said, well there's a lot of people who are going to be listening to this who are stuck at like trying to get the first 10 customers or have plateaued at a certain amount of MRR who are going to be like banging their heads against the wall saying, you know, what am I doing wrong? How come it's so easy for David and you tell us that story about your friend that you were telling me earlier.

[David Zatoon]

Yeah, I think I want just to say one thing before telling about the stories of my friend is that we had pretty much luck. Like we were lucky in a way because some magic and people need to know that we arrive at the right time. Like timing was perfect. Okay. And timing has a big impact in the growth of a company. Timing and we had a very massive product market fit. Okay? We are solving a big pain. Some magic is not a nice to have It's a must to have for the people who use somemagic. And there is a big difference between the nice to have and a must to have. And majority of people complain about why they are not growing or they focus on grow to market instead of focusing on product market fit. But before looking at the acquisition channel you can get to grow, look at if your product is really solving a pain, a real pain. Because for me this is the number one thing you should look at and then you can see about how you can scale acquisition channel and stuff like that. But we were lucky in a way that we arrived at the perfect moment where ChatGPT were booming. Short form content was like the beginning, the rising of short form content. Alex Armozy was booming. We surf on this wave like Alex Almozi, we use his branding, not his branding, but the template, Almozi's style. He built the style. Everybody wanted to copy Alex Amozy as well. So we use that and I use my own product as well to promote some magic. Like I was doing my caption myself. So it was like a kind of a flywheel of a lot of the things that were correct. And also like I can promote some magic on TikTok, but not all the product can be found. Like if your software is like for it depends what is your audience. But you cannot find like it was perfect for us. Like really, you guys have to understand that. But we were really like at the right position, right time white things for some magic to say. Regarding your story with my friends, can you tell me again your question regarding these things regarding my friend?

[Omar Khan]

Yeah, so we were talking about people who are listening to this. Maybe they're struggling to get traction or Maybe they've got 1 or 2k in MRR or something like that and they're just not figuring, you know, able to grow. And then you started telling me that story about your friend who was in a similar situation.

[David Zatoon]

Correct? Yeah. So I got a, I got some, a guy contact me today and asked me like David, like I want advice from you regarding go to market, like acquisition channel, same question. How did you grow from zero to one? What was the, the acquisition channel like? And I, I'm like, there is no magic tricks. Like there is no like how to say like a shortcut. Like there is no dumb magic acquisition challenge that will change the trajectory of your life. Those people who are trying to look at that, they are getting wrong. And we just. Every business is different and every business has a different path. Like you cannot copy and reapply what Works for us. Maybe if we do some magic tomorrow again. Like imagine we start some magic again tomorrow from zero. I can bet that some magic will never work. It's too late. We are not on the right timing anymore. So timing is so important. The acquisition channel we used two years ago, maybe not relevant today. So the mindset we have is just we iterate a lot, we just try so much things. And my advice to my friend was like instead of focusing on the go to market and the acquisition channel, just take your 5, 10, 50 customers. You say I'm at 5k Mr. I say that's crazy, that's amazing. Go contact those 5k people. Like I don't know those hundred people that makes the 5K mirror. Reach out to them, talk to them, build a WhatsApp group with them and understand who they are, where they are spending their time. Are they scrolling on TikTok? No, so don't do TikTok. Are they on LinkedIn? Just basic question, talk to them. They have the answer. And some people get like so many times they overcomplicated things and the answer is right in front of you. Your customers have the answer of majority of your problems, but you need to be really good at listening them. And it's not easy but it helps us a lot.

[Omar Khan]

Tell me about what you just said a minute ago about iterating a lot. And that's something that you do. It's kind of like, I guess it's part of the culture of the business that you've built in practice. Like just help us understand, like what does that look like? Are you guys like every week let's run a different experiment. What kind of experiments do you run? How do you, what does it mean? Iterate a lot in practice?

[David Zatoon]

Good question. Iterating means for me, like I have another quote that I hesitate giving you at the beginning of the podcast, but say it was like either I win, either I learned, I never lose. Okay, this is my mindset. I never lose, I learn or I win. And so building a business is just like making some bets over bets over bets. Okay? You bet on stuff, you never know if it's going to work. And it's the same way with venture capital. Like they're just betting on companies and they bet a lot of different companies because if one is working, that's amazing. Same mindset as a business. You need to make small bets everywhere and be good at cutting the bets when they're not working very fast. And so we just learned this methodology by just testing some stuff in marketing in product, in customer experience, the same way. Or we should try TikTok ads. Okay, what is the investments? What is the time? What, what is the potential error? I. Okay, let's try. Oh, it didn't work. Iterate adjust, no work. Okay, we stop, we cut, let's go on this, let's go and try. And then we just write down the playbook. We just write down what did we do. We document everything to know like, because the worst thing is to repeat the same mistakes. Okay, we just want to do one thing to the business and I say that to all the team every time. Just write down what you do and just learn from our mistakes. And so this iteration thing, there is no specific process, I would say that we follow, but it's just like actually we are testing a new market, Brazil, and we have a mission where every week we have a meeting with all my teams that is focused on these things and we put some bets, like, okay, we're going to try that, we're going to put the currency of Brazil and things, we're going to lower down the price there. We're going to try some stuff and it happens that it didn't work as planned, but it's fine. We learned that these things didn't work. So we're going to do differently after. And you need to be very agile and go very fast because startups is hard and especially software is going fast in all the directions. So you need to try a lot of things and when the bet is working well, double down on it. That's what we did well.

[Omar Khan]

So I love that. I think that most people get the idea of saying, let's try lots of different things. Let's come up with, you know, we have a hypothesis, right? If we try doing X, it might help move the needle on Y or whatever. I think the struggle comes in two possible ways. Number one is, okay, we tried this thing and it's not working. But how long do we keep trying before we stop? One week, two weeks? A month, but longer. And then also if it didn't work and we stop, but we say, you know what, maybe we need to go and tweak it this way and try a slightly different approach. How many times do we do that before we sort of give up? So you could almost kind of pick one thing and just keep iterating on it infinitely. Right. So what's the framework or the process you use to say enough is enough, time to move on, do something else?

[David Zatoon]

Good question. Because it's really like you just point what is tough in this iterating things, I would say there is two things. First, there is the logical approach that we use that is like when we start, for example, I take the example of the Brazilian markets. We want to expand in Brazil. Okay. So before expanding and start this mission, we're going to list everything we could do to become successful in Brazil. We're going to put the price in the right currency, we're going to lower down the price, we're going to take influencers there. We're going to like list everything we think we should do in order to succeed. Okay. Then when we have that, we are like, we look at with all the team, we say, like, are we happy with that? Do we miss something? Okay. Okay, we're good. Okay. We're going to try all of that and then we're going to try all of that and after, if it's not working, there is something called the gut feelings that I try to listen a lot and I'm doing business with a lot of my feelings and I'm like, do I feel like we still need to push or it's just like none of you, it's like it's not working and I don't have the answer, but I just try to listen myself a lot and feel like when I think there is an opportunity I should push more. There is no specific reason, like specific answer. Because sometimes you're right, sometimes you need to reiterate, keep on going, keep on going, keep on going. And one day it's working and boom. And another way you can do that for the rest of your life and you have no results and you lose your time. So you need to work intelligently, be organized in terms of what you should try. And then one day be honest with yourself, be honest with your market, be close to your customers and, and then figure it out, the right answer.

[Omar Khan]

I think that's a great answer. I think in many ways when that falls over is when people try to be logical and they try to be too logical at every step of the way. And at some point you have to also rely on intuition or your gut when there isn't clear data. But a decision needs to be made. Right. And so I think that's actually a great answer. I like that. So affiliates got you to the first million. Let's talk about getting to 2 million, 3 million. What did you start doing? Was it just pushing, doubling down on the affiliate space or did you feel that that was kind of, you know, you needed to explore other channels?

[David Zatoon]

Yeah. When we start having some funds because Millionaire is a great business already we were three at this time. So very profitable. And we start saving some money so we could invest in new things. So we make new bets. Like when I see money, I see that as an opportunity to make some new try and new bets. So let's go by strategy. We try new things. Oh, could we try paid ads? Let's try that. Google Ads. Let's try that. We tried SEO. We start investing in SEO. As soon as we get a lot of profit, a little bit of profit, we start hiring someone to manage the SEO at Some Magic because we believe in SEO for the long term of the business. And it was a great bet because today SEO is bringing 25% of the sales of Some Magic and it's the best, the most efficient acquisition channel of us. But it took a lot of time. But to come back on your question. Yeah, affiliation. We start expanding affiliation. We hire someone to manage the affiliation full time and he starts looking for more affiliates, not only in TikTok but in website listing the top AI tools, those kind of things. And then we start doing influence marketing. I love influence marketing. For my first business, I skyrocket my first business with influence marketing. And I just apply the same tactics on SAPMagic. And it was great because the influencers at this moment, and especially also today, but they were so happy to promote a tool like SAPMagic because we were solving a big pain. And we come back to the same question at the beginning. Find your product market fit. It needs to be a must to have. Because if it's a must to have, the influencers will be like, yeah, it's obvious I want to talk about this product. It makes sense for my audience. It's going to bring a lot of values. So you're going to negotiate good price. They're going to talk about it much more than like without having to push them. And then it will convert better. Nobody wants to promote a product that is nice to have. All right, so it's kind of this flywheel and influence marketing, SEO, paid ads, Google Ads, word of mouth. And this leads to word of mouth, like at some magic. And I finish on that. Sorry to be a little bit long on this question, but like the number one acquisition channel of SAPMagic today is Word of Mouse. And how did we bring word of Mouse to some Magic? Since day one, we focus on customer experience. I told you about these things where we build this WhatsApp group. This is the best customer experience you can get on the software. There is no better customer experience in My opinion and I love Brian Chesky for explaining what is a 10 star customer experience. But he's so right. Build like Nutter. A good but an exceptional customer experience. Because this will lead to like people will never forget about your brand. They will talk about it around themselves and I want that every customer that come into Submagic brings me to more customers. This is the best marketing you can have. And yeah, kind of things like this. So it's a mix, it's different. Like things. Some things didn't work well, some things work better with pushing.

[Omar Khan]

So influencer marketing, you start doing alongside the affiliates and all the other things and slowly you're getting distraction. And it didn't take you that long to get to 5 million in ARR. With what we're talking about here roughly in terms of timeline, how long did that take?

[David Zatoon]

12 months, 13 months I would say exactly. To get to five.

[Omar Khan]

And then you hit a plateau.

[David Zatoon]

Yeah.

[Omar Khan]

What happened?

[David Zatoon]

S curve, like growth in software is S curve. We talk about this famous S curve. But it's right. I didn't expect that. I was like, oh, we're going to go to 20 million, it's going to be good. But yeah, obviously there is something called churn in software. So people are leaving your software. You are correct. Customers, some people are leaving. So when you don't acquire as much as customers as you need to compensate the churn, you're hitting a plateau. Every business is like that. And so we hit this plateau at 5 and it was a great experience. We learned so much from this experience. Like six, seven months. Very tough. Not very tough. We need to step back again. And I was saying we're not saving lives somewhere, we're just solving video editing. It was a good problem. It was a rich problem. How you solved your plateau at five. But it was great experience. Well, we did. When we face this plateau, we start questioning ourselves a lot. Okay, where this is coming from? Oh, the churn. So we need to lower the churn. Why do we have so much high ch? Oh my God. Other business, they have 3% churn. We have like 15% churn. What's wrong? And, and we understand that at the end of the day we try a lot of things to solve these churn issues. But churn is really like links to your product and links to your like I would say like typology of business. People want to try and make short form content for maybe 1, 2, 3 videos and that's it. And it's fine. It's not because your product is shit. It's because they don't need your product anymore. And that's fine. And we analyzed that during. We have like different ICPs. And one ICP, we're staying much longer than the other one. And it was the agency, the marketing agency, they use Submagic every day. They make thousands of videos on Submagic. And so we were just focusing more on those clients. So we said, we're not going to reach 5% churn in 10 years, we're going to reach maybe 10% and that's fine, but we're just going to focus more on the right customers. Other things that we tried, we tried acquiring more customers. Okay, we need to go faster, we need to go bigger. So we tried to double down on different acquisition channel to acquiring more customers. It didn't work. We spend money for nothing, but we learn. And then we realized, we said, okay, it's a product problem, we need to add more features, we add more features. But it didn't work. So it was tough in a way that we were trying a lot of things but without results for like seven, eight, nine months, no results, nothing.

[Omar Khan]

What changes did eventually work and get growth going again?

[David Zatoon]

We start making some tests more bold about like how we can optimize our acquisition channel, how we can optimize our flow when someone is subscribing to SAPMagic, to the, to the one who is buying. How we can test about the pricing. We never touched the pricing for one year, never. So we say, maybe there is something to play with the price. And we change the pricing and it help us like break this plateau. It was a mix. It was not only like the pricing, but pricing had an impact, a great impact. We tried a lot of things. For example, we try to everybody say that you want to stop your plateau, like increase your price. Every customer increase your price. That's it. So we increase your price. Business went like this instead of going like this. It went like that. And we're like, what? And so we tried to do the opposite. We lower our price even lower than the original price. And then it went like this because pricing is very sensitive in our industry. We have competitors and people are like, we can attract much more customers by lowering our price. And then we add a new product called MagicLips, an add on that grows fast as well that we launched in January. So since January we break the plateau, like really, like, we break it really hard. When I mean like before that we were like growing, but not as fast as before. And after that, yeah, we grew faster.

[Omar Khan]

So you mentioned Magic clips. And then when I was looking at Submagic, to me it was like, okay, there is this one use case where you are helping people who create these short form videos to easily add captions to their videos. And then you have these magic clips, which is probably the kind of thing that, you know, is kind of more relevant to someone like me who takes a, a recording like this of you and me talking for 45, 50 minutes and generate some clips, some shorts from that. What's the most interesting content that we can turn into shorts? And so when I looked at some magic, it was a little bit confusing for me because it was like, okay, there's this caption piece which probably competes with certain types of players out there. And then you've got these kind of these AI magic clips, which is a sort of a slightly different use case which competes with maybe some other people. And so it kind of got me thinking about like, who is the ICP here? Am I the right icp? Because right now I'm not creating shorts that need captions. I just need to turn my long form, I just need the magic clips. And the magic clips, it looks like an add on to something else. Does that make sense?

[David Zatoon]

Yeah, totally. You're right. So Submagic is a product that we turn short form videos into viral videos. We help you make your content looks more engaging. So we're going to add the captions, we're going to add the B rolls, we're going to add the transitions, we're going to add the hook title at the beginning, the music, everything you need to make your video look great. Right? We boost your videos. And then our user were telling us like, thank you, David, it's great. But what we do before I'm recording my podcast or my YouTube videos and I'm finding the best moments out of it to put it into some magic to make it go viral. And so we say like, yeah, we should build the product to find the best moment because our job is to make you go viral. So we're going to help you find the best moments into your long form content. Instead of just putting your short form directly to Submagic, we're going to find which one is viral and we do that extremely well. And then we're going to do the magic source of some magic, and then you're going to add your captions, everything you need to make your videos go live. It just makes sense. And yeah, so the use case is pretty much the same. We have the same ICP for both products, but not everyone is making long form content for sure. But some of them like you. This podcast needs to be a short form at the end of the day. Of course you need to like to sell this podcast. We need to make a lot of short form and to publish it everywhere. Everybody needs to see extract from this podcast. And so you're going to probably do it by yourself on Premiere Pro. Spend a lot of time or pay an editor to do that. It's going to take a long time or you're going to put it into some magic and in 10 minutes you have like 20 clips ready to go.

[Omar Khan]

How do you think about competition? Is that something you spend a lot of time on? Because this is a space that when you were looking for a solution for yourself, there wasn't a lot out there. And the solutions were pretty either painful or maybe a bit too expensive. Hiring people to go and create this stuff for you. I'd say today there's probably a huge influx of a whole bunch of players trying to get a piece of this market. How do you think about this space? How do you think about competitors?

[David Zatoon]

We are not very focused on competitors, to be honest. We are very focused about our vision, what we want to build and our products and my customers. That all matters for me. Like my customers, I spend 50% of my time having some calls with customers, just talking to them. That's my job. I'm close to my customers. I need to know what they want, what they need. The same job I was doing two years ago and still doing the same. Exactly the same. And I'm very proud of doing that. I think every CEO should like, I don't know, talk to their customers a lot. But anyway, so looking competition, yes, of course there is like a lot of products that try to do the same as we did. Like when we entered the market, we were the first one kind of doing the way we were doing the things. We're the first ones. And I think this play about Submagic is not like only a product things. It's also a distribution play. Like product has not as like we are in a time where building product is not that difficult as it was like 10 years ago. You see lovable. You see cursor. Yeah, it's crazy what you can build. So I would say yes, there are some tools, but I don't know them, to be honest. We have some competitors, I would say 2, 3 that raise like 50 million, 20 million, 70 million. And they are on different paths. Like we are all taking different paths, different approach. Some of them are on The App Store. We are not on the App Store. We have different ICPs, we have different use case, not exactly the same use case, for example. And we are very proud of the direction we take. And it's great to have competition. They are innovating. We are innovating as well. I see competition as a good thing. If you have no competition, that means you have no markets, you have no business. Like. Yeah, so, yeah, that's what I think.

[Omar Khan]

All right, on that note, we should wrap up. So let's get onto the lightning round. Got seven quick fire questions for you. Ready?

[David Zatoon]

You ready?

[Omar Khan]

What's one of the best pieces of business advice you've received?

[David Zatoon]

I wrote down this quote. It's not really like someone who give me this advice, but it's a realization I get from my experience is that good businesses bring good people and bad businesses bring bad people. Easy as this.

[Omar Khan]

What book would you recommend to our audience and why?

[David Zatoon]

Okay, I don't read books, unfortunately, but I listen to a lot of podcasts. I will recommend a podcast instead of books. And I love Jason Fried from 37 Signals or his co founder, David. So you can listen everything from these guys. I love them. And otherwise I love Naval Ravikant. He's a great guy. I love listening him. So I think it's a great piece of podcast.

[Omar Khan]

Yeah, I could listen to Naval like all day.

[David Zatoon]

Great. Amazing. Have you listened the Last 1? The 1 of 3 hours with Chris Williamson?

[Omar Khan]

No. I saw him promoting the shorts and the clips everywhere and I was like, where's the long form version of this? But it's like I have to watch that. What's one attribute or characteristic in your mind of a successful founder?

[David Zatoon]

I'm passionate about what I'm doing and I always find solution. I'm a problem solver. I find solution for everything. And so there is no problem. There is always solution.

[Omar Khan]

What's your favorite personal productivity tool or habit?

[David Zatoon]

I am one of the top users of Loom in the world. I do Looms all day long because we are remote and I love loom.

[Omar Khan]

Love it. What's a new or crazy business idea you'd love to pursue if you had the time?

[David Zatoon]

There is one that we are working on that's maybe going to be live soon. I want to keep it as a surprise, but it's going to be linked to some magic. Like linked to our customers as well. In the same space, in the same vertical, I would say, but one big pain that we're trying to solve.

[Omar Khan]

Okay, well, we'll look out for that, then what's an interesting or fun fact about you that most people don't know?

[David Zatoon]

I love. I'm very epicurean. I don't see if you say that in English, but I love food, I love cars, I love traveling, I love experiencing things. I'm passionate about golf. I'm passionate about cars. Yeah. I love nature as well. So I love experiencing things in life.

[Omar Khan]

Cool. And finally, what's one of your most important passions outside of your work?

[David Zatoon]

Yeah. Golf, cars and video. I would say creating content.

[Omar Khan]

Awesome. Thank you so much for joining me. It's been a pleasure trying to unpack, like, what's happened in the last two years. It's been a whirlwind kind of journey. Hopefully we gave people listening to this some ideas, some inspiration, something that they can take away and apply to their own business. If people want to check out Sub Magic, they can go to Sub Magic. And if folks want to get in touch with you, what's the best way for them to do that?

[David Zatoon]

They can reach out to me by email, davidmagic.com or other on LinkedIn. Sometimes I try to go on LinkedIn as well.

[Omar Khan]

Awesome. Thanks, man. It's been a pleasure and I wish you and the team the best of success.

[David Zatoon]

Thank you very much, Omar. Thank you.

[Omar Khan]

My pleasure. Cheers.