20VC: Scaling to $50M ARR in 3 Years, Scaling to $20M ARR with Just $2M Invested; The Story of PhotoRoom, Is This YC's Most Capital Efficient Company with Matthieu Rouif, Co-Founder & CEO @ PhotoRoom

Matthieu Rouif is the Co-Founder and CEO @ PhotoRoom, one of the fastest-growing YC companies having scaled to an astonishing $50M in ARR in just 3 years. Their capital efficiency is immense having scaled to $20M in ARR on just $2M of invested capital. Prior to founding PhotoRoom, Matthieu founded several start-ups, including an app for ski resorts, HeyCrowd, and Replay, a video editor which was ultimately acquired by GoPro. Whilst at GoPro, Mattheiu led all image editing products. In Today's Episode with Matthieu Rouif We Discuss: From GoPro to One of YC's Fastest Growing Companies: How did Matthieu make the move from GoPro to founding PhotoRoom? What are the big mistakes Matthieu made on prior companies that he did differently with PhotoRoom? What does Matthieu know now that he wishes he had known when he started PhotoRoom? 2. Scaling to $20M in ARR with $2M of Cash: What allowed Matthieu and PhotoRoom to be so capital-efficient in their scaling? What are the biggest mistakes founders make when it comes to resource allocation and capital efficiency? On reflection, what did Matthieu not spend money on that he wishes they had spent money on? 3. Consumer Subscription + Photo Editing: Is it a Good Business: What are the customer acquisition costs by channel for PhotoRoom? What are their payback periods on a per-customer basis? How can it be a good business when the churn rate annually is 30-40%? How does this space play out with Canva, Adobe, Veed, Kapwing? Who wins? 4. The Future of AI: Who wins; incumbents or startups? What matters more; data size or model size? Will UI be more or less important in an AI-first world? Why does Matthieu believe that everyone hates command line prompts? Will we see $BN revenue companies created with just 10 people?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Every three, four years, like software efficiency makes it possible for a three X X more team to make the same amount of revenue than a bigger team. So I think this will definitely happen, like a 10 people team doing a billion dollar in revenue. And we're like pushing for that. We actually measure how much revenue per teammate we have at Photo Room. Actually, I think Y C say like they never saw a company going that fast, like with this low capital.

• 0:23Harry Stebbings?

  Fifty million in ARR in just three years. They hit 20 million in ARR on just 2 million of invested capital. This is the immense story of Photo Room, now with over 100 million downloads and one of Y YC's fastest growing and capital efficient companies. I'm so thrilled today to be joined by Photo Room CEO and co-founder Mathieu Rouif. But before we dive into the show with Mathieu today, did you know that every 20 V C episode you listen to is recorded with Riverside? Riverside is insanely good. Like I would pay a thousand dollars per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high profile guests.

• 1:06Harry Stebbings?

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• 1:47Harry Stebbings?

  They happen to us all, but they can be turned around and Arising Ventures is here to help. Arising Ventures is incredible when one of their many success stories is UpCounsel, an online marketplace for businesses to find and hire legal help. UpCounsel was facing legal challenges and a growth curve that no longer matched V C expectations. As they were about to shutter the business, Arising Ventures stepped in to turn things around. Within a week, they crafted a winning deal, buying the assets and taking operational control without transitioning any team members. They got UpCounsel profitable and UpCounsel was able to live on and serve millions of people a month. The arising Ventures team knows what other founders care about because they aren't bankers, they're tech founders themselves, and

• 2:29Harry Stebbings?

  they have a team of operators ready to go should a business need a quick landing. Arising Ventures quickly got UpCounsel back on track and profitable, and they could do the same for your startup. Visit arisingventures.com/20vc today to learn more and connect with the team. And finally, SecureFrame is the leading all-in-one platform for automated security and privacy compliance. SecureFrame simplifies and streamlines the process of getting and staying compliant to the most rigorous global privacy and security standards. SecureFrame's industry-leading compliance automation platform, paired with their in-house compliance experts and former auditors, helps you get audit-ready in weeks, not months, so you can close more deals faster.

• 3:12Harry Stebbings?

  SecureFrame uses over 150 integrations, built-in security training, vendor and risk management, and more to make compliance uncomplicated. SecureFrame makes it fast and easy to achieve and maintain compliance, so you can focus on serving your customers. Automate your security and privacy compliance with SecureFrame. Schedule a demo today at secureframe.com. You have now arrived at your destination. Matt, I am so excited for this. What people don't understand is like for me, when I have founders of products that I love, it's like 10 times more exciting. So first, thank you so much for coming on the show today.

• 3:48Speaker 00

  Thanks, Harith.

• 3:48Harry Stebbings?

  We see PhotoRoom today. What was the aha moment for you that like, I'm going to dedicate many years of my life to creating this product?

• 3:56Speaker 00

  Yeah, that's a great question. Well, first, I've been working on photo video apps for the past 15 years. Like, I started that on campus at Stanford during my master. So it's been a long, long journey. That's why I got into iPhone development was photography. And the aha moment for PhotoRoom is I was at GoPro that has acquired the startup I was working at as a head of product. And, well, we were doing an iPhone app, quick. Video editing and we were being featured by Apple and I don't know if you know these things, but they ask you like, can you provide artwork for tomorrow or yesterday or like very fast? And while we were this small startup being acquired, but the US where they were sleeping, our designer was off and tell myself, well, I'm good with Photoshop, I'm good with computers,

• 4:37Speaker 00

  let's do it. And I opened my computer and well, I ended up spending the afternoon, literally like trying to get what I wanted. I had a clear vision in mind and it just didn't work. Like too many options. I didn't manage to do something I wanted. It was frustrating and I, and at the same time, I'd like on the other part of the office at the ITM and it kind of clicked for me like, okay, we need something easier. Programming got easier, but editing didn't and let's build something. There is an opportunity here.

• 5:03Harry Stebbings?

  I have this strong investing. I get in trouble for this from the team. I really don't like investing in first time founders. I just feel there's so many mistakes that you make when it's your first time. This is your third time.

• 5:15Speaker 00

  Yeah.

• 5:15Harry Stebbings?

  What are the big fuckups that you made with the first two that you've done differently this time?

• 5:21Speaker 00

  I think first one is focus. So really then my second story, like we were doing too many things. We tried to do two products. We were not focused and one thing that worked amazingly well for our photo room is with Elliot, like from the beginning, every six months we would focus more. So we started with video and photo and they say like, okay, let's just do photo. And then we started to say, okay, let's focus on people selling online. And every time we focus with the next number of people like signing in, be happy, being like very engaged with the product. When it works, you can feel the traction, you feel the pool. So I don't think you should expand or like be wider as long as you don't have product market fit, you shouldn't expand anything. And so for instance, we just focused on the iPhone app in the beginning and really to create an amazing experience for these users.

• 6:04Harry Stebbings?

  So we have intense focus, number one. What else would we do differently?

• 6:07Speaker 00

  I think starting companies, like especially for curious people, you learn like it's an acceleration of learnings. You get like you ship faster. So every time you ship, you learn. And well, I think after like fifteen, twelve, I mean, twelve to fifteen years in the field, like you know it by heart, like you're an expert. So I know like mobile apps, I know photo apps. That's the third time I wanted to start subscription, third company, you know? So all these things like you go so much faster in the beginning. So.

• 6:31Harry Stebbings?

  Can I ask, do you think the speed of execution is as important as everyone says?

• 6:35Speaker 00

  Yeah, definitely. I guess actually it's so we have three culture values at Fotorum and one of them is like instant learning. Speed of execution, like ship, learn, iterate is one of them. Like you have a like finite time in life and the number of things you can learn really depends on how many loops you can get in that. And I really want everyone working with us to like, think about it, like, how can you learn faster from what you do from what you ship? So for us, it's critical. I think Elliot McCall founder is like, is like the fastest builder I ever met. Like he ships so fast, it's amazing.

• 7:04Harry Stebbings?

  How do you think about instilling learning as a process? And what I mean by that is I find a lot of people like move fast, move fast, move fast. And they don't actually spend the time to analyze what went right or what went wrong and learn from it. How do you think about learning from the moving fast?

• 7:18Speaker 00

  You have to know what you're trying to learn and that's how you reduce and condense what you want to ship. Like what's, we always say like, what's the B zero of what you want and what do you want to learn from that? Before shipping, try to know what you want to learn from. Otherwise, while you manipulate the result to say like, you've learned something, it's better to like start from a hypothesis and validate it.

• 7:35Harry Stebbings?

  Do you know, I spoke to a mutual friend of ours before the show, Jacob at Revenue Cat.

• 7:40Speaker 00

  Nice.

• 7:40Harry Stebbings?

  And I said, what should I ask Mathieu? And he said, ask him about the McDonald's test. What was the McDonald's test?

• 7:47Speaker 00

  In the early days, and we still do it, like in the street, we would go with Elliot and we would go to McDonald's and literally we would go in the line and offer people like ordering things to ordering food. Like, can we pay for it? And you just test Fotorum. And we would run like, yeah, 10 questions about photography. And then we would let them try the onboarding and really give us feedback. And every time they wouldn't get to the new feature we're trying to do, like it was a new feedback, we discovered something and it was the best learning experience. It actually comes from the Zenly team. They were doing that in Paris. I did it so much that I got banned from the McDonald's from our next to office. So it's just like I couldn't enter it anymore. Like the security guard would come to me and say, you can't get in.

• 8:27Speaker 00

  You can't go in because you're bothering your customers.

• 8:29Harry Stebbings?

  What questions are you asking when you sit down with them?

• 8:32Speaker 00

  Two things. First, you want to understand, like, I mean, how they approach your vertical. So far, it's great. Everyone does photo and it's a big asset. And so I would ask, like, how do you capture your photo? Which app do you use? Like, what do you use it for? Are you using them for fun, for selling, for other stuff? And give you like a kind of an insight. People get comfortable. And then, well, it's really show don't tell. Like, you show them the app, they download the app. And well, it's very difficult because you get frustrated because you know what? You want them to tap, but all the value of it is like them telling you how they feel. What do they understand from the app? What they wish was happening now? And it's user testing, like re-understanding what's the process for them when they see that as a first experience.

• 9:11Harry Stebbings?

  When do you listen to customers versus when do you go, great? But we actually have a product roadmap that we're going to execute against.

• 9:18Speaker 00

  Yeah, first, I think you get a lot of insight from what they expect. Give you an idea, like, we ask people to take a selfie, like, to show them how the app is working. One of the user testing, we realize, well, some people, if you ask them to take a selfie first, they think it's to create an account review. So they're going to spend like actually minutes, like a lot of time in the onboarding, finding the right picture for them because they want to look good. Maybe it's a social network, maybe it's something like this. I would have never guessed that, like, if I hadn't seen it, like, someone doing it. Well, in the early days, it's also about the blockers, like what people understand, what people see, like what they understand from the product itself. So what we would do with Elliot is really, well, going back to the office, like changing the feature a bit, changing the wording and getting back to McDonald's and testing it again. You shouldn't wait longer than like one hour to test again.

• 10:02Speaker 00

  It's how you iterate faster and learn faster.

• 10:05Harry Stebbings?

  Some would say like, ah, it's like, like background removal as a service, like, cool. But like, it's a feature. How do you advise found, and I'm sure you've been told that respectfully. How do you advise founders who are told that it's a feature, not a product?

• 10:18Speaker 00

  Yeah, I think it happens to a lot of entrepreneurs. It's a great question. I think what's important is you mean to see the depth in the feature. And I think you become like a product and at a feature, the moment you understand like this feature is giving depth to what you can do. To give you an example, okay, you can say background removal. Well, it's like a feature like you do white background. Well, first it's useful for some use cases, but being in the industry for like 10 years before that, I knew, yes, but it's not only that. Like first, as like a product, you can remove background, but you can also blur. You can like focus on what's important. You can do templates, YouTube thumbnail. Like it's like, actually it opens up a lot of opportunities for other features you can build on top of that. So I think seeing this depth that in a product that's coming from it is really important.

• 11:03Speaker 00

  Features that are like minimal, lovable product that you execute extremely well are the beginning of a lot of successful products. I do believe like focusing and making people extremely happy with what you do is more important than being very wide when you approach something new.

• 11:18Harry Stebbings?

  I spoke to many of your investors and yeah, I've got many thoughts back in terms of what we should talk about. The first, which we chatted about before this, was capital efficiency. You scaled to 20 million in AR with 2 million of cash.

• 11:30Speaker 00

  Yeah.

• 11:32Harry Stebbings?

  I've never had that before. I've had the opposite very often, and that's the capital efficient company, by the way, in venture. When you reflect on that journey, 20 million AR, 2 million cash, how did you do this, do you think, so efficiently? When you look back, what are your lessons from that efficient scaling?

• 11:48Speaker 00

  Yeah, I mean, I see capital as a mean, like it's a tool and you can deploy it, but we never came from with the idea of like not spend money and let's like, we reinvest like everything we can in the growth.

• 11:58Harry Stebbings?

  So it wasn't conscious, let's save money, let's be super lean, let's save money?

• 12:02Speaker 00

  I think we like the idea of being lean and like, but we always pay for the best tools, like, so we're not lean on like the best tool for the team. I think we really like to hire like individual contributor and that's part of our culture. We just want to move fast and we know like small team move faster. I think that's one of the reasons why we were very efficient. And then there is thinking like macro. I think there is the App Store story, which is a big part of it. Like so, Apple and Google, like the App Store on mobile, they're giving you distribution. Yes, they take like a cut of it, but basically it means. They offer like a worldwide distribution to five billion people and you you don't need like a big marketing, sales team to do that. So it's very capital efficient, like a very small team, product team can go a very long way. And then in terms of capital efficiency, like one of the

• 12:45Speaker 00

  secret of mobile apps is people are willing to pay upfront. You have a payback of one month, so you don't need that much capital on the ad side.

• 12:53Harry Stebbings?

  Payback of one month. What are the CACs today?

• 12:56Speaker 00

  Well, I won't give the exact number on that, but you can see like how much like people pay on a yearly subscription and you just get the money back in one month.

• 13:04Harry Stebbings?

  How many people pay monthly versus annually?

• 13:07Speaker 00

  If you want to be efficient and you want to be able to scale like fast, like us, I think jumping on the yearly by default is the best option. And it's actually how you create retained users. So most of people like going on yearly is a really good way to scale.

• 13:20Harry Stebbings?

  When you look back on those early days, is there anything that you wish you'd done that you hadn't done?

• 13:25Speaker 00

  We hired great people, so you need to try. Like you, you don't get the right person 100% of the time, but for sure.

• 13:30Harry Stebbings?

  Do you agree with hire fast, fire fast?

• 13:32Speaker 00

  One thing we do is we work a lot with freelancers and that's like a great way because they have so many opportunities. So they're willing to like try and we we give them a lot of freedom and autonomy. You you should be able to know in a few months, like if it's the right person or not.

• 13:44Harry Stebbings?

  How do you know whether to hire a freelancer or a full time?

• 13:47Speaker 00

  For us, like if the person is like willing to, I think you learn a lot from working one way together. We love this model. People come to the office. It's amazing. Like it's actually less risk for them, like because the culture is such an important part, like when you're going to put like a few years.

• 14:00Harry Stebbings?

  Okay, so essentially you hire them as a freelancer first, they come for one or two months, see how it is. And then it's like, hey.

• 14:05Speaker 00

  Yeah, a few weeks even, yeah.

• 14:06Harry Stebbings?

  You know, in a couple of days.

• 14:08Speaker 00

  Yeah. And they ask for, I mean, usually people are super happy to do that. Like they love to try and to like, they have so so much demand and they they don't want to commit like to a job. And sometimes they have already like their status, they're might be working with other companies at the same time. So we were very successful working with a freelancer. A big part of the team has been freelancing at some point. I've been freelancing, you know.

• 14:28Harry Stebbings?

  Have you always had good culture?

• 14:29Speaker 00

  We spent a lot of time, I remember sitting with Elliot, like working even for our first hire, like thinking what what are going to be the three pillar of our culture, what matters to us? So I think we did the process quite early on.

• 14:42Harry Stebbings?

  What were the other two pillars? You mentioned the first about the shipping, iterating.

• 14:46Speaker 00

  Yeah, the first one is challenge toward progress, you know, candid feedback. Like you should be able to challenge anything in the company if you think it's not going great or even like even if it's not your field. Second one is instant learning. So really the idea of shipping and learning from that and how like really we're all learners. The last part is be an artisan. We're all makers and we really love like people that master their craft and are making and are the best at their their craft, sharing that part with others, learning from others. So yeah, be an artisan and that's the name of the entity in France.

• 15:18Harry Stebbings?

  When we look at the scaling, as we said, two million in, twenty million of ARL. At some point around there, I believe one of your investors said there was kind of a plateau in the growth. What happened with the plateau? Why does that happen?

• 15:30Speaker 00

  First, yeah, exceptional growth. Actually, I think Y C say like they never saw a company going that fast, like with this low capital. So indeed, it's quite uncommon. Growth happens with, it's a step function, you know? So you you kind of unlock new things and you just need to be patient and talk a lot to your user, like getting back to talking to them, understanding what are their pain points and exploring that.

• 15:53Harry Stebbings?

  As you said, you can't always be growing up into the right continuously. Is it challenging with team morale when you have a growth plateau?

• 15:59Speaker 00

  Well, yeah, I think we're very like focused and driven by growth. People don't improve something they don't look at, like numbers they don't look at. So we we talk about growth every week and so people are happier when there is growth. So you have to be careful with that. But the company is growing amazing well, we are profitable. So it just like take a step back and understand what are the kind of adjacent needs of your user and go even deeper with that. I mean, it happens all the time. So you don't want to hire people that are here just for growth. You want to hire people that are here for the the mission you're solving.

• 16:28Harry Stebbings?

  You said about kind of the focus on metrics there and you know, metrics move when you pay attention to them. What defines a successful user to you? When you think about the metrics that you focus on, what are they?

• 16:38Speaker 00

  Yeah, for us, it's quite simple. A user who's like successful is a user exploring X number of photos every week. Someone who is engaged and who is successful, like.

• 16:47Harry Stebbings?

  Got it. So the number of exports per week is like defined as the successful user?

• 16:52Speaker 00

  Yeah, in terms of metrics, I think it's really always better to talk about people. So it's like number of people doing that, like doing a one export every week. So a weekly active user is like an amazing signal for us and the signal of someone who's active. But I really love when people like think of not numbers, but people behind the numbers. So I always have like to say this number of people doing something, not like number of exports per week.

• 17:14Harry Stebbings?

  How do you think about Photom? Is it a daily use case product, a weekly use case product, monthly?

• 17:19Speaker 00

  It's interesting. We love our sellers and people like doing e-commerce. That's one of the best persona and kind of our early metric. They, people do list like on a weekly basis. So for us now, it's more of a weekly pattern we see with the app.

• 17:33Harry Stebbings?

  How helpful was it from a product marketing? So I recently did a show with Matt from CloudFlot and it originated because I said focus is the most important thing. Have a very, very specific ICP because it will allow you to have way tighter product marketing, much better use of customer acquisition channels. He was like, what a load of crap.

• 17:53Harry Stebbings?

  He was like, it should go horizontal. You don't know who's going to use your product. You don't know how they're going to use it. And my point is like, you know, when you think about the sellers, you can so efficiently product market to them in the early days and to the age. Because you know exactly the sellers on these three platforms make.

• 18:10Speaker 00

  Exactly.

• 18:11Harry Stebbings?

  Product marketing is much tighter, no?

• 18:13Speaker 00

  I think you can combine both. So we have 100 million downloads, like obviously not all of them are sellers. But I think it's really important in your product development roadmap, when you focus to say, okay, we're going to like to focus on this persona. It's going to be beneficial to others, but to really the way we build it is for this person.

• 18:29Harry Stebbings?

  In terms of acquisition channels, how did the acquisition channels look in the early days? When you were growing really fast, where were they coming from?

• 18:36Speaker 00

  In the early days, I mean, it's the word of mouth. So the story and it's kind of our DNA of Photom is we got product market fit in the early 2020. Gary Vee mentioned us. We got a few eBay influencers that talked about us and we got viral, like very fast growth. And one month later, there was COVID. From one day to another, everyone, well, can't sell offline. So you all need to go online with your products and you can't access a photographer because you compete with other people. So to be honest, like looking back, I didn't realize back then, but we got product market fit. And like one month later, COVID hit. It just like doubled down on our growth and there was the Photom watermark. So if you go on any marketplace, you'll see Photom watermark on a lot of listings and that got the viral growth.

• 19:17Harry Stebbings?

  Do you want people to remove the watermark? Because it's great advertising for you, but you also want them to pay. And so it's.

• 19:24Speaker 00

  Right. I mean, in mobile subscription, like, there is always 10x at least more people that are never going to pay for it. And there are always like at least 10x more people that are, yeah, that are going to be on the free plan. So the number is like, it makes sense. And actually, we have a lot of people that do screenshot, they do screenshot of the image in the editor and just like remove the watermark this way. And we actually measure it, it's big. If they use it a lot, at some point they'll pay.

• 19:46Harry Stebbings?

  What's your yearly churn?

• 19:48Speaker 00

  Well, I won't give you the exact number, but that's the thing I would love to know from all competition, if there is one number.

• 19:53Harry Stebbings?

  Is that the holy grail number, do you think?

• 19:55Speaker 00

  Yeah, I think it's the one that you love to know. Yeah. It's really high for, like, because we're useful. So I think there is.

• 20:01Harry Stebbings?

  Because I, if I'm just totally honest, I'm generally more of an enterprise investor.

• 20:06Speaker 00

  Yeah.

• 20:06Harry Stebbings?

  And when I look at consumer subscription, I've had this out with Nico adjacent. And I do, when they're churning 30, 35%, I'm not saying this is you, but just consumer subscription, 25 to 40% of their customers every year. How do we make that business work?

• 20:19Speaker 00

  Yeah, the dynamic is, I think you need to live with the idea of mobile software is 10x bigger than anything you'll do on desktop anyway. We're addressing 5 billion people, like, I mean, my kids, the first app they use is photography, they use photo room, you know, it's like, one of the first software you use in your life is photo editing and probably the last one you're used to. So, I mean, you're addressing 5 billion people, it's much bigger than anyone else, for sure, any SaaS business. But it's really the top of funnel is huge and you should embrace that for mobile subscription.

• 20:47Harry Stebbings?

  I'm just going for this because I am too intrigued. I see everyone's kind of coming into each other's space. Suddenly you've got Canva moving into other people's space, Adobe moving into other people's space, you moving up. And I'm looking at it going, I don't know how this plays out because everyone's trying to just eat all of the pie.

• 21:03Speaker 00

  Yeah.

• 21:03Harry Stebbings?

  How do you think it plays out when you look at your photo room, your Canva, your Adobe, your Mojo, your, what happens?

• 21:10Speaker 00

  What we really try for is making studio quality photo accessible to like any professional, any entrepreneur in the world. And I think for that, we focus on like a different use case than Canva, which is more for design on your desktop. Or Adobe, which is for the experts, like it's, Adobe is for the tens of millions. Millions of people that are spending the day in front of their computer and they're like they're experts. We are providing the service for people that can't afford that. So we are making it more accessible. Stand next more people because they are on their phone and it's a wider audience. But I actually don't think it's the same product that you can develop. You need to like choose the one and we'll all make like a more than a billion in revenue. I mean, the Adobe is already doing it and Canva close to that.

• 21:53Harry Stebbings?

  Canva's well over.

• 21:54Speaker 00

  Yeah, so Canva is well over, well, we're on the same track and we'll be doing one billion for a different audience.

• 21:59Harry Stebbings?

  Do you need to move into enterprise?

• 22:01Speaker 00

  Well, we already.

• 22:02Harry Stebbings?

  And you need to move into desktop?

• 22:03Speaker 00

  Our customers are like small businesses or B two B. Enterprise, we're already like, that was our, we started with the photo room API. So we have like iOS, Android, web API. We can render the same thing, which is quite unique. And we were very successful with the API. There was, you sense a strong pull. And so last May, you get the Barbie movie. And they.

• 22:25Harry Stebbings?

  Love a bit of Margot Robbie.

• 22:26Speaker 00

  Yeah.

• 22:28Speaker 00

  And they did like a big part of their marketing was using photo room to create like a Barbie poster for anyone in their audience. So they use our tech and anyone like not a pro could create pro quality posters. I mean, the Kardashian, Rihanna, they use that at tens of millions of users. And that's like the API is taking off with that. And that's one example. So that's what we've been doing for the past year. We're just delivering to more people with the enterprise part and the API.

• 22:50Harry Stebbings?

  What worries you most when you look at the future of the space and you see everyone concerned you?

• 22:55Speaker 00

  As you say, like the field is moving very fast and AI is making a lot of product that kind of obsolete. So you have to think of like, to make sure you're not building like old product with new tech. I think that's a very important part. To give you an example, the first company I made, I was trying to make like postcards and print them from my smartphone. Well, looking back, the obvious answer is like, that's not what you want to do. You want with the new smartphone, you want to create Instagram. Like you want to share an image of where you are and share it with your friends. That's like the new product with the new tech. And I think it's very important for photo room, like when the tech is moving that fast to, okay, what's the new way of doing that? Not like the old way with this tech. And so you need to destroy your product all the time.

• 23:35Harry Stebbings?

  Do you think founders say are using new tech being AI to solve old problems?

• 23:40Speaker 00

  I think what's happening with AI is you have like all past products that are building tech to serve their existing customers. So if you take an example, like this is the idea of the copilot, right? If you're an incumbent, you're a car maker, you're going to build like the navigation board, you're going to build like some security features, but it's just on top of what's already existing. If you're the newcomer, if you're the founder, you're building the Tesla, you're building the autopilot part where the input is like, I want to go to this place, I want it to be like a scenic drive and it gets it done.

• 24:12Harry Stebbings?

  I do want to dive into the depths of AI. If we just start from the top, the one thing that I'm always questioning is like, what's more important? Is it model size or is it data size?

• 24:22Speaker 00

  I think on data, what matters is quality more than size. And on the model size, it's a trade off. So it depends on what you want to do, like bigger is higher quality, but it's also a lot slower. And what Fathom does is like being 10x faster than everything on market because we are focusing on one use case. So you can take smaller model because you have like a specific use case and that's very key. So it's kind of a product trade off when you talk to your customer. And again, that's one thing we do is we talk a lot to your users and understand what are the trade off they want to have with the AI part.

• 24:54Harry Stebbings?

  Can I ask you, when you look at, you know, what you've done with your own models, given the size of your team, is that worrying for the future of AI in terms of commoditization?

• 25:03Speaker 00

  I think who benefits the most from, like first, like the leader in the space on the full stack. So you look at ChatGPT, they do like the product and the API. And so I do think you need to own the full stack if you want to deliver high quality product, like the tech informs the product and the product informs the tech and you build this like a feedback loop.

• 25:21Harry Stebbings?

  Do you think the foundational models will be commoditized there? Would you be a buyer of OpenAI?

• 25:25Speaker 00

  For what we're not specializing like techs, that's what we do all the time. We start from like something that's open source commoditized to understand the product value. But if you want to build a mode, you have to understand what to train and iterate for your own model. So I do think commoditization brings value to the innovation for like open source. But then the best player will be able to like retrain something on top of it and start to really commoditize it. There is value in having the tech and understanding the training in that side.

• 25:51Harry Stebbings?

  Who do you think benefits more today? Is it incumbents or is it startups?

• 25:56Speaker 00

  Yeah, I think both benefits from it. Like it's a reshuffling, but I mean, I told you the exception story, but another part of it is like I had been working on AI. So we were the first to ship like a before Coral exists to the iPhone framework, an app with AI to do video editing at GoPro. And one of the frustration for me is like, it's very difficult when you have an existing audience and an existing, yeah, an existing user base, an existing product to just kill it or destroy it and build something new. So I think long term, like who benefits most is all the entrepreneurs. And what I'm like paranoid about is more like, what is this new team of, well, Matt and Elliot are going to build like in the 2023, that is going to be something we haven't seen in the space.

• 26:36Harry Stebbings?

  How do you feel about the co-pilot strategy? I had someone on the show say it's the last dying breath of incumbents, which I quite like.

• 26:43Speaker 00

  Yeah, I'm quite aligned with that. It's quite brutal for them and I'm sure some will survive. But I think the problem is where I see that being very true is if you have an audience today, you have programmers, you have designer, you don't want to alienate them, you want to give them extra value. So you're kind of thinking, what can I build for them that makes their life easier? But you don't want to like have something that's kind of a notopilot to replace them. It's very difficult for the incumbent to say like, okay, we're going to like kill the product you've been using, make it totally different and make you useless. So that's very difficult where I think what's very interesting for the autopilot analogy is you, you address people that couldn't afford that before. That's what Photom is doing. And you're, you have a small business, you can't afford like a

• 27:26Speaker 00

  freelancer to, to help you. You don't have the skills, you don't have the time. Yeah, if you take the co-pilot analogy, you don't have the time to learn to drive. The co-pilot just tells you where to go, but you still need a driver, right? So what we give them is more like a notopilot where they They come up with like their restaurant where it is and we just like serve that to them. Like we serve the visual, we automate that part, so.

• 27:47Harry Stebbings?

  What do you think are the biggest misconceptions people have around AI?

• 27:50Speaker 00

  Two things. The first one, it's only the beginning, like product so not optimized. Like there's so much thing people are going to build on top of what's happening right now. So just one person done, like it's opening so much thing you can build on top of. Like it's easier to build new ways to build new way to consume content. So that's like people that kind of judge like this is not quality, I quality enough. Like people have spent like a few months on that. Photom is three years old, so it's only the beginning. A more like practical thing I think is the second misconception is people don't like to write prompts. Like it's kind of a common line interface and for other things it doesn't make sense to like to input text.

• 28:28Harry Stebbings?

  So people, sorry, I'm fascinated about it. People don't like to input prompts. I totally agree with you. So what do you think that the common line interface of the future is?

• 28:35Speaker 00

  Yeah, I think it's like we say for human, an image is worth a thousand words. Well, it's true for machines too, like from one photo you get like more than 10,000 words of 1,000 words of things you can build on top of. So I think the input will depend on what's the job you want to get done. And we'll have a lot of changes in the way, kind of the atomic part of UX. Like maybe keyboard doesn't make as much sense on a smartphone in in six months or stuff like.

• 29:01Harry Stebbings?

  Do you think UI becomes less or more important in a world where AI is first? Again, I guess on the show recently, UI total BS in a world of AI first. You'll speak to your phone more, you'll have less of a physical relationship with your phone because you're not inputting things.

• 29:17Speaker 00

  UI will change dramatically. The basic input are going to be different. Like I don't think like the keyboard, for instance, if you can like dictate is such, it's such a pain on a smartphone to like pull out of the screen with a keyboard. So this should go away, like voice is going to be more affordable. So a lot of unstructured data from today, like images, voice are going to be much more understandable by people and by software, sorry. And I think it does change, like mobile change a lot, like with touchscreen. Well, I do think AI is going to change a lot of that.

• 29:45Harry Stebbings?

  Does the business model of the future change in AI? Or we still have per seat, we moved, a lot of people say, well, we'll move to a consumption based model.

• 29:52Speaker 00

  Yeah, I think the more in the business model you can align for with your customers, the better. Going back to first principle, you want to have a system of alignment of interest and the best business model like success.

• 30:04Harry Stebbings?

  Can I, as we mentioned text versus video there and also images as well. When we think about cost of query for your business model, it's much more expensive, I imagine. The cost per query given images versus a text.

• 30:18Speaker 00

  Yeah.

• 30:18Harry Stebbings?

  How does that change when comparing text versus image?

• 30:22Speaker 00

  So indeed, like GPUs are a bit more expensive, it's more as Gen AI, I think, so the margin. I mean, the cost of GPUs, but I think it will go down. And but one thing that is coming is we are making like, again, it's day one or month one of Gen AI. So someone, we we came up with an improvement, like open source it, image generation is two X faster. So I think it's just like a question of time and in a few months, the cost of generation for text and image will go down a lot.

• 30:47Harry Stebbings?

  Do you think VCs are over excited about generative AI? Is the hype reaching hype bubble?

• 30:53Speaker 00

  Well, I think if there is a overreaction, like it's kind of amplified too much. I I do think like it's one of the biggest opportunity of the decade, at least for entrepreneurs. So starting from that, but maybe they overhyped that part even more than it is.

• 31:06Harry Stebbings?

  Do you think ninety nine percent of VC dollars today invested in generative AI will go to zero? And maybe they need to for development to happen.

• 31:14Speaker 00

  Yeah.

• 31:14Harry Stebbings?

  But still go to zero.

• 31:15Speaker 00

  Well, what's the success star, a success rate for a startup is like five percent, right? So it's just saying.

• 31:20Harry Stebbings?

  I I don't I don't know about that. I don't know the actual success rate on getting a one X back. But like a lot of startup, like, and it's like, what is success?

• 31:26Speaker 00

  Yeah.

• 31:26Harry Stebbings?

  Yeah, billion dollar companies, I don't know, half a percent, a quarter of a percent, whatever it is. But actually, companies that lose all your money, quite rare.

• 31:35Speaker 00

  Yeah, all right.

• 31:36Harry Stebbings?

  Do you see what I mean?

• 31:37Speaker 00

  Yeah, yeah. People are very ambitious. A lot of companies are doing research based AI. I think that's why quite unique about Fotorum is we're really doing like user centric AI. And when you do research, I think the failure is higher than like when you're building a product.

• 31:50Harry Stebbings?

  What's he's a centric AI?

• 31:52Speaker 00

  We use the feedback from the users to like tune, learn with the model. And what we do is we learn from how they use the product. I told you about not writing prompts, but we really develop the app for the user not to have to write prompts in the app. We realize on the mobile phone, like people don't want to wait. So we make image generation like less than one second. And that's like a killer feature because no one does it. And so that's kind of you make architectural choice of your model that are based on the user feedback and learning them like fail in McDonald's using your app kind of.

• 32:22Harry Stebbings?

  We we spoke about a little bit about your kids beforehand. Your children will be generative AI first generation children. What does that mean for how they think about the world, culture, identity? How do you think about that?

• 32:34Speaker 00

  I mean, for product development, it's always been super interesting to see like a good app is an app that a five years old can use it. We actually use that internally. We have this my only model of like ideal customer. And one of one part of that is like a five years old should be able to use photo in terms of accessibility. And you see them like it's amazing how quickly they understand the UX.

• 32:52Harry Stebbings?

  Many people have said to me, ah, we're going to have multi billion dollar companies with 10 people. Really see differences in terms of capital efficiency to build massive business. Do you agree with that? Or we just find new jobs for them to do?

• 33:03Speaker 00

  Uh, yeah, I agree on the the trend. Every three, four years, like software efficiency makes it possible for a three X X more team to take to make the same amount of revenue than a bigger team. And that's actually a big opportunity for entrepreneurs and an investment. So I think this will definitely happen, like a 10 people team doing a billion dollar in revenue. And we're like pushing for that on impact, like we actually measure how much revenue per teammate we have at photo rooms. How do you measure the impact of a teammate? And that's the good way of looking at it. You don't want not to hire someone you need because of that, obviously. And we are like, we doubled the team in like the past six months. So we are like growing very fast.

• 33:41Harry Stebbings?

  I spoke to Jan LeCoeur before the show and he said, you just got to ask him, mate, why is so much happening in Paris?

• 33:46Speaker 00

  Well, I think Yan is a good responsible for that. Like there are the best PhD talents that are in the big tech labs and are still in Paris. There is a very good undergrad system for engineering. We do a lot of math, which is good for AI. Plus the labs creates a very good environment. People did stay after that. And then amazing companies, amazing startups that are like now building from Paris. You have the poolside team that moved from California to to Paris. You have the DAS team, the Mistral team. So I think the ecosystem on AI, which is kept velocity and it's been in the building for the past 10 years. And now it's like, it's the best AI ecosystem in Europe. So that's, and it's escape velocity. So people just are attracted to it now.

• 34:26Harry Stebbings?

  Final one, and then we will do a quick fire. But we we talked about kids earlier. If you could call yourself up the night before your first, you have three now, and say, you know, Matt, you shouldn't do this, what would you tell yourself?

• 34:38Speaker 00

  I think it's very difficult to know what it is beforehand.

• 34:40Harry Stebbings?

  It makes you a better leader.

• 34:42Speaker 00

  You have to think how you make them grow. You have to be an example for them. And I I believe strongly that the best way to lead is like showing a strong example of the way you should do it, like being very hardworking, transparent about what you do, like being an example. And I think that's the best way to lead and teach.

• 34:58Harry Stebbings?

  Do you believe in balance?

• 35:00Speaker 00

  Not much. I think I I like to do things 100%. But I do have like the kids that I see them, but there is some balance to find in that.

• 35:07Harry Stebbings?

  Is that tough?

• 35:08Speaker 00

  Yeah, it's it's tough on that part.

• 35:10Harry Stebbings?

  Do you see the kids much?

• 35:11Speaker 00

  Yeah, I spend a lot of time with them.

• 35:12Harry Stebbings?

  Your wife's gonna be listening to this like, you know, more, yeah. Always more time.

• 35:18Speaker 00

  Yeah, exactly.

• 35:20Harry Stebbings?

  Okay, we're gonna do a quick fire. So I say short statement, you give me your immediate thoughts. That's not okay?

• 35:24Speaker 00

  Yeah.

• 35:24Harry Stebbings?

  OpenAI, long or short?

• 35:26Speaker 00

  I mean, I'm long on the, and the team is sharp. They have like a brand now and yeah, Sam is super sharp. So I'm long on them. What's the biggest misconception, like the single biggest on AI? I think it's just people judge the result, but it's moving so fast. It's like, people don't understand how a five people team came up with an algorithm or like a 10 people team. So like now there is optimization, there is product building. So it's just the beginning of building super useful, exceptional product on top of it. You can have dinner with anyone in the world that are alive. Who do you have dinner with? I'm going to go with Steve Jobs is maybe a cliche, Walt Disney maybe. Which brand do you most respect and why?

• 36:05Speaker 00

  I was gonna say Nike. It enables people, like this idea of pushing people to be like, to do more, like just do it entrepreneurs. And I can love, I love that part. I like that. What's the strongest belief you had, which turned out to be wrong? I had a very strong belief that you can only innovate and be creative in person. And while we started the photo room with Elliot and COVID hit. And we just like, okay, it's time to build a remote company and, and be hybrid and always thriving. We are very international. So it really changed my mind on that. So now you're hybrid? Yeah, we meet once a month in Paris, like a beautiful HQ, but the team is all over Europe and that brings like so much diversity to the team and to the product we build that.

• 36:46Speaker 00

  And it's such a pleasure to work with like different nationalities from all over the world. Are you in the office every day? Yeah, I am. I am. But the team don't need to be? No, like a 30%, a third of the team is in the office there every day. And then once a month they come in? Yeah, it's the amazing, most amazing time. Like we did like a Barbie team day about that. Like we, yeah, we were very creative. I think creativity is a muscle. So we just like find new activities all the time. And this is kind of the home of the team. What's better and what's worse about being hybrid? Better is it's more diverse. I like kind of the glass ceiling of at GoPro of being like 30 French dudes. And you don't account for all the needs of everyone. And now we have a more inclusive, diverse way of developing product.

• 37:28Speaker 00

  And it's like, and you learn so much from people from different fields and different countries. The worst part is there are a few like fine details on building crafting products that are not always as easy to get. I think tools will come for that, but that's, that's would be the worst part.

• 37:44Harry Stebbings?

  I also think like share of voice is better when it's done remotely. People don't feel as intimidated to speak up in a lot of cases.

• 37:52Speaker 00

  That's right. I think if you do, especially we have a very transparent culture. We have a no DMs culture. So like you don't write DMs, like every, it's an open space, your Slack is an open space and we just do thread like people whispering. You know, that we try to be organized on that, but I think it brings a lot of people can speak up and a very like high transparency culture on that.

• 38:11Harry Stebbings?

  That's what I have to ask on that. No DMs. So if you are with Elliot and you're like, Harry, Harry's not, he's not performing. Do you agree with me? That would be on a DM though.

• 38:20Speaker 00

  Yeah, no DM as a policy, except like on like salaries or stuff.

• 38:24Harry Stebbings?

  Or performance management letting people go.

• 38:26Speaker 00

  If there is something you want to challenge someone towards, like you, it should be public, like especially. So we try as much as possible to do it and it's a good like way to start from, like the default should be DM. I don't know, you don't want to take some kind of screen estate in the, in the channel and don't say something you think people don't care. But brings this transparency, this openness to like just speak in the open.

• 38:46Harry Stebbings?

  How impactful was Y C?

• 38:48Speaker 00

  It's been like one of the best decisions for the company. Like I think it puts us on the one billion trajectory, one billion revenue.

• 38:54Harry Stebbings?

  Why? Just like, what did they do? I'm just intrigued.

• 38:57Speaker 00

  As a product builder, you come with like a lot of insights, a lot of things you want to build. And you're not like, I made a lot of progress on, for instance, storytelling and really being efficient at scaling. And I mean, that's kind of a bias, like you don't do Y C if you don't want to scale and do like one billion dollar in revenue. So I think it's like a nurturing bias phenomenon and we still talk to them, like we still talk to our partners all the time and they are like really helpful. Where are we? Gustav and Eric.

• 39:23Harry Stebbings?

  And then final one, if we think about photo room in 10 years' time, which is 2033, where are we then, Matt?

• 39:29Speaker 00

  Yeah, I think, well, we are in the dictionary. You're fiddling something. You know, our vision is, I talked about Nike, but really what we want to give is every entrepreneur, every like professional, the power to create Nike level visuals. This kind of visual agency that's powered by AI that does the job and automated that iterates. And design is, you know, a reaction from, so it's evolving fast. It will increase the quality of the content that's in rage. Segmented for all the, if you're a small entrepreneur, like the trend is like there are more and more like small businesses, very small businesses selling on Shopify and Amazon and marketplaces. So we're going towards a more diverse world in terms of e-commerce. We're just helping people to be, to thrive in that, to be proud of what they do, like good visual.

• 40:12Speaker 00

  I mean, good visual for your show or like you're proud of yourself and you have like the TikTok content is amazing. So we want them to be proud of what they do. Like they started their chef, you start a restaurant. It's great to be proud of what you do and to be unique, like generating something unique for them.

• 40:26Harry Stebbings?

  This is such a pleasure to see you, Matt. Thank you so much for joining me.

• 40:28Speaker 00

  Thanks, Harry. Great questions.

• 40:32Harry Stebbings?

  I absolutely love that. It's such a natural discussion with Matt there and I always so much prefer to put the schedule aside and really just have a normal conversation. If you want to see more from us behind the scenes, of course you can on YouTube by searching for two zero VC, that's twenty VC. But before we leave you today, did you know that every twenty VC episode you listen to is recorded with Riverside? Riverside is insanely good. Like I would pay a thousand dollars per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high profile guests. Second, they record your video and audio track separately and in the background.

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• 42:37Harry Stebbings?

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• 43:22Harry Stebbings?

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