Hey everybody, welcome back to another week of the Product Market Fit Newsletter🚀🚀
If you are new to the newsletter, subscribe to receive weekly updates on startup growth and venture capital fundraising strategies.
This week on The Founder Toolbox:
On Premium Founder Toolbox:
On Premium Product Market Fit: How investors think - how to make investors work for you
How Linktree built an unicorn with the simplest tech product
1. The Problem
Liktree came as a solution of Instagram only allowing for one link in the bio of your instagram profile.
“We were managing a few Instagram accounts for bands and festivals — posting about tours, new tracks, and merch. We were getting sick of having to change the link in the bio every time we posted and figured there must be a simpler way to manage that link. So we asked our developer to knock up a really simple landing page we could load multiple links onto and have the ability to track and manage those links from an app. He made a basic version in six hours.”
2. The Solution
Simple: a Link that aggregates all your links
3. The Team
Alex Zaccaria, his brother Anthony Zaccaria and Nick Humphreys had found Bolster a marketing agency together and were managing social media accounts for their clients
.
At some point, they realized they were updating all the time the singular bio links and that felt like a huge waste of time and also many times it got overlooked, so many liks would just fail to appear with a loss on sales.
Needless to say, they decided to build a solution for it (This was back in 2006).
4. The business model
Linktree operates on a tiered subscription business model with four plans: Free, Starter, Pro, and Premium.
4. The Funding
Linktree raised $165.5M in total funding 🔥
However - and this is very interesting and unusual - they were cashflow positive and bootstrapped for the first 4 years.
It wasn’t until Oct 2020 when they raised their first round.
Follow the equity story 👇
1. Oct 2020 $10.7M Series A
Other interesting investors:
The founder of Patreon and Harry Stebbins (this guy you have to follow)
.
2. Mar 2021 Series B $45M
Index and Coatue, led the round and Insight and Airtree followed on. Btw Index is an investor at Patreon and Discord, so it really understood the opportunity for Linktree.
3. Mar 2022 Series B + Round of $110M - 1.2B Valuation
Just one year after Series B Linktree raised $100M at a valuation of $1.2B, achieving the Unicorn status.
4. The growth
1. Creating a solution for a really particular pain many people had.
The first product was so simple yet practical, that it gained traction really early on.
2. Freemium model since day 1 - still is
You see, freemium model allows for the startup to give value to the potential customer early on, without asking anything in return.
This starts creating a bond with the user, with whom the startup will build trust.
Whenever the user wants to upgrade to more services you’ll be in the top of mind, because they already use your product, like the experience and trust it.
3. The flywheel effect - viral growth
This, together with it being free, is the key to understand Linktree’s super fast growth.
With a viral growth loop each new user or customer brings in more new users or customers, creating a cycle of exponential growth.
For Linktree was super simple: whenever a person would start using Linktree, all their social media followers would see it right away.
Whenever any of your followers clicked on you Linktree, they’d see the landing page with all the links, it would look cool for them and then they’d see they can create their own for free, and boom. Viral loop achieved.
You see, word of mouth here is organic, if you are using Linktree many people are going to see it.
4. Incentives to keep users interacting
There’s nothing more powerful that a cool dashboard that allows you to see how your audience is growing/ your potential clients interacting.
Linktree understood this early on and built an analytics suite to trac clicks and views on the links.
5. Educational resources and templates
Linktree template library receives 37,000 organic traffic every month.
Linktree is using educational content and resources to attract the users that aren’t sure about the value or use of it.
This creates another loop that is very interesting, although I think they are missing out on a great growth loop potential - the Notion Templates strategy.
6. Fast iteration based on user feedback
I love this: you should definitely do this if you have a startup 🔥
The team had a slack channel where they gathered user feedback, they used Productboard to rank feature requests. The more times a feature was requested, the more priority it had.
5. The revenues
Well, it’s not gold everything that shines. And although they were able to make Linktree grow a lot the lasts years, the company is burning a lot of money.
Linktree’s revenue jumped 81 per cent from $13.8 million the year before to $25 million and its user base grew by 76 per cent to an undisclosed figure. But its losses also leapt up from about $3 million to $50 million as the company’s spending grew.
Two industry figures, speaking on condition of anonymity, said Linktree’s revenue growth was unimpressive relative to its spending. One said it was “well below benchmarks across almost any measure of efficiency.”
