In Berlin, we interviewed Jan Tillmann, the co-founder and CMO of mbrace.

Mbrace is a social discovery app which matches people by their interest in order to bring them together.
Jan talks about the business model of mbrace, its corporate strategy and market development, and shares several advices for first time entrepreneurs.

Transcript of the interview is provided below.

INTRODUCTION

Martin: Hi. Today we are in Berlin with mbrace. Jan, who are you and what do you do?

Jan: Hi. Welcome. My name is Jan, I’m the co-founder of mbrace, responsible for marketing and growth. The company kicked off last summer. We are building social discovery apps and we have a team of 16 people now and we are looking forward to expand.

Martin: What did you do before you started this company?

Jan: Before I joined mbrace as a co-founder, I work for HitFox for 2 years. It is a local incubator where I also met my co-founders Ruben and Lukas. HitFox basically, initially was a group on for games model and then evolved into a game focused incubator for high tech companies.

Ruben and Lukas worked in one of the portfolio companies for browser games and I was responsible for mobile. Just before I came back to Berlin, I lived in San Francisco for about a year to build an office for AppLift which is their portfolio company.

Martin: What did you do in the Silicon Valley and what are the major differences between Berlin’s entrepreneurs and the startup ecosystem in the Silicon Valley startup system?

Jan: Silicon Valley in itself, first of all was an enlightening experience. You meet vast amount of inspiring and really passionate people. The biggest distinction I found was that people are more experienced in setting up companies, like from very junior beginning of their 20s to older people that have been through several iteration of setting up a company. Either failing after a year or actually have some other the big plans. So people are much more experienced, they’ve learnt more lessons, they know how to take struggles and know how to take pitfalls and downfalls, and just more experienced in setting up companies.

In general, Silicon Valley and San Francisco in particular is an amazing place to go and spend time as I think for every founder. And the amount of passion you take, the amount of speed get, the amount of execution knowledge you get, in particular in the locally strong industry for mobile and tech, fintech, software as a service, mobile payment.

It was just fascinating and this is always fun, if you walked down the street and basically look at the door signs and you know basically every single company that you read about on tech launching event before. So it was a very high density. Even if you go to a bar and talk to anybody, there’s a chance that he/she works for Facebook, Google or just be setting up their own companies. If you like, everybody there is just craving for fun ideas and setting up a company.

Martin: So was it easy to get in touch with the people?

Jan: Very easy. I found also much easier than in Berlin. People are just more interested in general and also much more open to network. They, I think part of the reason they are not afraid to share ideas or to share secrets and how each other out. They just know that good ideas are not really worth anything, or tell how to grow a company is not really worth anything.

While the Germans here in Berlin, people are a little bit more enclosed and a little bit shy to tell everything they know and basically help each other out. That’s probably one of the things that will come also when Berlin goes for more iterations of companies.

And the network to talk to relevant people in San Francisco is much denser, so there are thousands of angels, hundreds of VCs. So there would be 500 people relevant for you, if you are in a very niche market. Just software as a service for whatever game company or business, but for that you would already have like 50 angels who do nothing else but this, and probably 2 VCs to do nothing else but this. So it’s very dense. Very interesting.

BUSINESS MODEL

Martin: Let’s talk about the business model of mbrace. How does it work and did you already change it? And what are your future plans in terms of iteration?

Jan: So the initial idea to start mbrace last year was really to build an innovative, very unique social discovery application. To match how it’s happening in real life, to build a better way software supported to meet new, interesting people. But it turned out to be a very complex to start, so we start to kick off with a dating focus product, mbrace 1.0.

So we had the first basic concept ready in June, July last year, formed the company in August and the beta version live in October to show the working proof of concept, the concept we have is working. So a very simple product, just a simple HTML5 based and working across all platforms. With that proof of concept we were able to raise a 7 digit in rounds in December from three local VCs. Then apps live around February, March, and it’s catering to 6 countries.

Now with all these learnings we make, to understand how the users flow, how do they receive the app, what is the stance we take to find a product market fit,  the critical challenges in growing an app. Growing from traction to growth, so the different stages.

We now believe that we are ready to take the next step with the initial area, we have to really build a mobile support, mobile helper, and you’re on the phone you’re connected with the relevant people around you to get the benefit out of it.

Martin: And how is the current matching process working of people with several interests and what make this change in the future?

Jan: As now since it tends towards dating, we make it as simple as possible to break ice between 2 people. So there are several factors going into the algorithm is location, age, common interests, common friends, common events you went to, etc., etc. And then you have this mutual interest, so if I show interest in you and you show interest in me, and we have a match and we can start chatting in the app.

We introduced the second ice breaker, which is a challenge. Basically that the local guy can post to me, so “Okay if you want to talk to me, tell me a secret, make me laugh, tell me a joke in different language, what would you cook for me in our first meeting, tell me about the most experienced travel or trip you did”. So it’s a bit more, not just like spray and pray, and it’s like every girl that I see around, but really if I’m interested I put a little bit more effort.

First there’s the ice breaker, and second already tells you a little bit more about the other person, so what type of answer she has. So it was very successful. The feature was very well perceived, since it adds more personal level to the new interaction of somebody new. This is also learning that now will be taken to the new social discovery app. So thinking a lot about the question, like what is it called common interest or common denominator or the core contact that would make sense to connect these 2 people.

There are some apps of course, a lot of apps with social discovery. The most social discovery apps are dating apps because it sells better, but you should be careful. But if you look at app highlight for example, which is a bit similar to our vision and mission. They would just say: “Hey, as Jan is working downstairs, he’s working in startup, I think we should meet”, which is nice, instead of knowing nothing about him. I believe, that really still doesn’t have enough context for me to really go down and meet somebody.

So we try to make it to the next step and really establishes common excuses, common denominator, that really make sense for both parties involved to meet each other.

Martin: How do you feed in the data? Is it the users that is entering all the data, I was there. How do you connect all the space or sources for getting a common data set?

Jan: There are several sources, of course. You have to rely on what the users want to give us and that’s normal. We still use also Facebook login, since it’s very convenient for the users and it gives us a good basic data set to know basically who you are and what you like.

And then the context as location data and a data that we have from several sources. So the event you went to we use from APIs. We build a lot on iBeacon infrastructure that we know who’s currently where. So we just try to add several sources that would enrich users experience for you.

Martin: Is it true that you currently mainly rely on Facebook data for creating your algorithm?

Jan: Yes, we do it on purpose. Because it make sense for the dating focused apps, just to avoid spam. I mean, most dating social discovery app will spam profiles, partly on purpose because they need contents. But we decided that the quality of the user base and the authenticity of user base is critical to a long term success. And Facebook is the easiest way to do this. So when we introduce it, it’s basically on Facebook, the first it’s convenient for its users, but for us, we can checked how many friends that he/she has, if they really exist, etc.

Martin: When you go from the dating app to a more social discovery app, what is the current revenue model and how might it change?

Jan: Since we all came from mobile games, so marketing mobile games are the most competitive category for 2 years. So, we basically know all sorts of different ways to monetize the app. We specifically took on the VC money, so we have enough time to build and grow first, and then introduce the monetization model later on.

In general, and we have all sorts of options available and one of the most number one would be freemium. So we look for really power users or for involving external parties, you can have all the function for free but if you want to have them better, more extreme, more frequent experience, you should pay for small features. And we can involve external parties, event organizers or companies that might be interested to incorporate with us. And there are several successful tests we did to monetize.

Advertising is the least priority. We think that is sponsored user experience that is currently not a truly native ad format that people would use in the app. But we shifted or we place the focus on what iteration and need to monetize after we get the first traction for the new product or towards the end of this year.

We will test. And in the end, we test everything. So we A/B test the product, design, features, communications and every test monetization, to see which base to seek best by its user. It’s the only way to really go bottom up and understand what the users accept and we optimize it for us to make enough to cover all cost. But it’s not how it used to be a year ago, where we can just basically force them to pay or show ads in the app if it doesn’t want it and then go. There’s much competition.

Martin: Jan, you are the Chief Marketing Officer here at mbrace. Can you tell us a little bit more about how you acquire customer especially as you currently only focus on 6 countries?

Jan: So one of the critical disciplines we have to master is how to overcome the cold start, which is a chicken egg problem. If we can get enough users, we can get enough users to have a great new users experience in the app, so we have to overcome the network effects.

Partly we do that by a variety of channels, we can basically switch on and off and scale depending on the usage. We have so, we did a lot of performance based advertising where we basically agree on fixed CPI and the use of Facebook, Twitter or affiliate networks and media buyer to give us traffic of a certain category in a certain location, which is basically an on and off switch to scale. And the long term, we have build and significant traction in-house through social media digital content marketing.

So really getting in front of the user base, potential user base and convince them that we have a really cool product and communicate the added value we have through app and through content marketing we do. The third is a very local event marketing as well. Especially where we launch hub by hub, Berlin, Munich, Hamburg, Singapore, Amsterdam, etc etc.

And we host events, we partnered with local companies. For example in Germany it’s Red Bull, where we really stage events in the target audience to try basically to get lots of signups in a short amount of time.

Whenever we see traction basically, then we switch on with the performance marketing as to support traction and make sure that we have enough installs and signups for certain period of time until we hit a percentage benchmark, say 25 – 22 % of the target audience is in the app, and from there normally the app loads okay. So it’s a step by step process and we have basically a mix of 6 to 7 channels, and we basically see what’s working and then we switch on and off.

Martin: Okay. In the current version of mbrace, you use this kind of virality because it’s invite only. What have been your major learnings about how to increase virality?

Jan: Increasing virality is critical and I think for any mobile apps. We have to find features that basically trigger the users to really wanting to invite friends. So, the app itself has to add more value whenever you have friends or the people in the app that you know.

This is critical for K-factor, that is how we measure virality. In one of the first steps, we did that and to get the initial traction was the exclusiveness or the invite only. And that is also part that again, we want to have a super high quality user base.

So that the user can decide: “Hey, this makes sense, I would like to meet it person”, yes or no. And it was just important if you have so many signups that you can’t really distinguish. If you involve external parties to do acquisition for you, they will always be a lot of spam, a lot of good users that would just basically destroy the user experience. So the exclusiveness or the invite only was the mix of “hey, I can invite my friends” and also the strongest way to keep people having high quality.

Martin: So what you recommend everybody to ask community to start with this approach?

Jan: No. I think can’t be said that way. It’s one interesting tool and that you can use but it’s also one of many tools that just have to make sense for the use case. For us, we tested it and it made sense, it worked great, and gaining growth first but for other community it wouldn’t make sense at all. It depends.

It depends on also what’s your strongest denominator in the community. If the community is based on general content, then that wouldn’t make sense to basically limit the exclusiveness of the users. Then it would make more sense to limit maybe who can post or who can contribute contents.

A bit like what Medium did for example in the first month. Everybody could read and join Medium, but only handful of people could post on product. And in the community everybody can join, as long as you can’t do damage, it doesn’t really make sense to limit who can join. So right now they have like 50 – 60 people who post product ideas and soon it probably open up to market.

But in our case, in social discovery app, where the focus is on people, the people are of course also the content. So what you see in the app is the people, so there was a part to educate  very-very high quality, and therefore it make sense to ask you to introduce exclusive only.

Martin: Understood.

CORPORATE STRATEGY

Martin: In terms of corporate strategy, competitors like Lovoo or Tinder. How do you plan to be unique in this kind of market?

Jan: Uniqueness I think derives from added value. Tinder and Lovoo, we don’t see as competitors. They are strong in their market niche for dating and for hookups which we believe is one interesting segment of a market to meet new people but we believe there is much-much more.

Even if we only look at the dating value chain: there are some people who are happy to use dating apps; there are like 80% of all singles who don’t want dating apps; and they’re like most of the people who already have a partner who would still like to meet people. These hookups or dating apps only cover the tip of the iceberg.

We always see it as a comparison to real life. I mean how many people would go to a single party. People go to a party of course to meet new people, but most people I know wouldn’t go to a single party. And we believe that 100% focus dating apps more like single parties in real life and we want to go for the segment that really the way you meet and interact with new people in real life, out of contents, out of added values, through social and recommendations or through your social friendship. That can also be done better or with more fun.

Martin: As currently, you mostly depended on Facebook data, how do you plan to diversify this data sources so you don’t risk your business model?

Jan: It’s a step-by-step approach. At the beginning, there’s a risk of Facebook is also very German-centric and all other countries we didn’t really have any issue at all, people who are asking for us to implement a Facebook login. So the dependence on Facebook data is more the first step to create traction and afterwards we’ll have our own data source, also think about own ways to aggregate the data, of course. But to build that already at the beginning would just add more complexity and would make us slower to get the traction.

Martin: Understood. So you would plan to build your own data source not adding other data sources?

Jan: Yes, I think in the end you have to. At least as a stock and then depending on what’s the users want, user preferences, you can feed in more data sources. Right now we see a lot of from people who like to integrate Instagram or Twitter or any other social networks that would tell something about them that’s interesting. That would just be just added step-by-step. In the end, we will always try to be as close as possible to our users, so we set a certain concept that has to be done for the concept to work. But then what we would add or take out or try is basically based on the users feedback.

MARKET DEVELOPMENT

Martin: Let’s understand the market development. Can you tell us a little bit about the history of social discovery apps and also in terms of user sizes, market sizes and maybe even try to segment it?

Jan: I think it is important to make distinction between social discovery and dating, because most dating apps call themselves social discovery apps.

For looking at the dating market is a strong segment in meeting new people of course, it was a big shift from very annoying and old fashion websites 2 – 3 years ago, shifting to mobile. As the location based information become apparent on the smartphones, people will use it when they have a smartphone 24/7 and to see who is around. Location of course is very important if you would like to meet somebody, I like to meet somebody for a coffee.

So that basically was a trigger to shift a lot of people from the very serious like 70 page questionnaire, 50€ a month web dating portals into the more casual. Very similar to what happened in gaming as well. So the gaming, browser games were basically very stiff and then through the mobile device, having it 24/7 added value for the mobile platform. Then basically it moved into mainstream that’s more casual, which is the same as dating.

But this is not our focus. We focus on social discovery and social discovery that are only a handful of true apps who try to tackle what we are doing. So we add a significant value to your real life not replacing your real life, not replacing what you do in your life but just making it better or making it more fun to meet new people.

Sonar was one, but they failed. Some have been struggling, so a lot of these apps have been founded for 4, 5, 6 years ago. But back then, you didn’t have the data and you need to add the unique user experience. So there are more concepts coming out now to really foster context based information, context based interaction between people in a certain location. And just because now especially with iOS 8, we have a lot of locations and context data about the user that really add value to what’s happening in your real life.

So market size is for, so again for the first part of the dating are going heavily: 2-digits depending on the country and the platform. But the shift is very strong especially with apps like Tinder, making it very mainstream, especially for people who are skeptics before just giving it a try. It’s a bit hype, it’s down a bit now or but at least it’s like have to wait for more people, for more apps to come into this niche and pick up where Tinder left off.

It was just interesting, social discovery in Germany, it’s a new topic. Like the word itself or the decline itself is still new and most people still link it to dating. In other countries, US for example, we had a lot of tech coverage, it’s very innovative, very interesting concepts.

So basically both segments grow on a 2 digit level per year. Especially in the very young emerging markets Eastern Europe, Brazil, Asia, China, India, South East Asia. That’s really a lot.

ADVICE TO ENTREPRENEURS

Martin: So we always try to teach people a little bit of what they shouldn’t do when they start a company, and what they should do. What had been your major learnings over the last years and also from the time that you work at HitFox for example?

Jan: I think, HitFox was an incredible time and I probably have no idea right now how much I learnt. So if you knew, if you haven’t set up your own company yet, it really pays off to work with super smart founders for a year or two. The amount of lessons you learnt is just incredible.

So basically 2 years ago, I made a decision, I set up a company now and just learn everything myself, or do I still work with an incubator with very smart founders. Some people prefer to set up their own company, but for me, I’m very happy that I did the other way and learnt a lot from great people.

The HitFox is a very rapid execution driven company, so very smart business model, the concept you just go out and execute.

  • And the part two to go out and get market feedback is super important. And there is tendency as a founder to lock yourself in, because you’ve read so much, you’ve talked so much, there are so many ideas, you lock yourself in the meeting room, you write all the walls and basically come out with a golden bullet, where you think this is the best concept. But as soon as you talked to the first 5 people, you feel it doesn’t make sense. Users don’t want it, it’s perfect in my head but it doesn’t make sense on paper or life at all. So this is going out part and starting to execute is very important.
  • And then build a team who has this passion for startups and entrepreneurship, who can then also iterate and basically navigate the challenge along the way.

But the going out parts and really focusing on the execution is very important. And that focus, I think is something that people learn, what really important, what is important right now in the step from experienced founders who’s just been there, setting up one or two companies, ideally also failed one or two. That was a great experience at HitFox.

Specifically at mbrace, we were to build our own B2C app. We helped to market most successful B2C apps before, but then building your own is really a different story. Very interesting, very challenging, and we decided after, as a first concept we also did basically top down. We locked ourselves in, we make the concepts that we are going to take real life risk. It worked goods and greats but it didn’t go crazy, because we always cater for a lot of people but not for all of them. That’s why now we switch on to make a more bottom up, so it means lean startup methodology that we basically derive from and hypothesis that we tested every week.

We believe that this feature and the app would lead to this outcome. And only if it’s answered “yes” by all the people we want to answer yes, and it’s done in the app. So, it’s a different approach, it takes a bit longer, but you basically make sure that all of the team is constantly testing on the street, talking to people, to our talent group and getting feedback.

There was, I think, especially need of close product market fit. And the environment where it has to be the best fit is definitely B2C app the competition is so dense. If you look at your smartphone, you probably have 80 – 90 apps installed, but you only use 10. Out of these 10, already 5 are used by Instagram, Whatsapp, Facebook, maybe Twitter and maybe two more. So basically in the end you only compete for 5 or 6 spots on the smartphones against all mobile games, all productivity apps, all other social discovery apps, or media apps, or use apps. It’s a very fierce competition. So you don’t only compete against your close competitor. So also do what you do, but you also compete against all other companies who want to get under thumb screen and that’s why the product market fit needs to be perfect.

Martin: Okay. Thank you very much.

Jan: You’re welcome!

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