8 Years of Octane AI: 8 Lessons Building a Profitable AI Company

Eight years ago — November 2, 2016, to be exact — marked the public launch of Octane AI. Every week since then has been a wild ride.

In those eight years, the product has transformed from chatbots for celebrities to supporting thousands of e-commerce brands and becoming Shopify’s #1 storefront app. We have created a profitable AI business, raised funding, survived crises, pivoted to find product-market fit and built a product that solves deep pain points for our customers.

Yet there are many, many alternate realities where Octane AI does not exist. As my co-founder Matt and I embark on our 9th year with Octane AI and building with AI, I felt compelled to share a few lessons we’ve learned (and battle scars we’ve gained) along the way. I hope some small part of today’s newsletter will help you on your entrepreneurial journey, whether you are starting an AI company or just trying to accomplish something meaningful.

Let’s get started.

(P.S. My co-founder Matt Schlicht and I are writing $200k-$500k checks to fund the next generation of pre-seed and seed-stage AI companies, so email or DM us if you’re thinking about raising!)

1. Great Product Is Always the Best Marketing

You can’t polish a turd and call it gold. No amount of marketing, sales or partnerships can make up for a bad product. Our #1 priority is always to improve our product. Over the last eight years, we’ve had multiple competitors rise, compete with us, and then fade. The reason why they failed to displace us was always the same — our product was always better than their product.

We continue to have strong competitors, which is why we will always double down on our product. Our product is our north star.

How do you build a great product? You invest in engineers, you ruthlessly prioritize, you listen to your customers, and you anticipate their needs. $50k spent on a sponsorship means $50k that didn’t go into the product — choose your marketing spend wisely. Build a product that drives real ROI and constantly improves and delights customers.

2. Case Studies, Case Studies, Case Studies!

Out of everything we’ve ever done, we have consistently found that great case studies are the #1 thing (outside of product) that accelerates growth. For example, brands cite our case studies in almost every sales call we have; they want to replicate what other successful brands have accomplished.

Here are two examples of case studies that we regularly use that have had a tremendous impact on our company:

1) Jones Road Beauty — the fast-growing skincare brand founded by legendary makeup artist Bobbi Brown — has collected over 800,000 email leads — 80% of their subscribers! Their quiz drives millions in revenue for them.

2) Bambu Earth, a fast-growing skincare brand focused on natural ingredients, makes over $10,000,0000 a year from their Octane AI skincare quiz by driving 100% of their ad traffic to their quiz. It’s a funnel that many other top brands now replicate using Octane AI.

In the end, your customers want to know that your product works — and they want to emulate the success of others in their industry. Nothing accomplishes this more than a great case study. Create case studies focused around ROI and promote the hell out of them on your website, your social and your network. Over time, they will do the selling for you!

3. Invest More in High-Value Integrations

Integrations are a key driver of Octane’s growth and longevity. Our integration with Shopify in 2018 saved the company, and our integration with Klaviyo (a popular commerce-focused email and SMS platform) has driven hundreds of customers to Octane AI — most of our customers now use it.

This doesn’t include the value of our integrations with Attentive (SMS), Zapier, and the top Shopify subscription apps (Recharge, Stay AI, Skio, etc.). In fact, we just announced three more integrations — with Postscript (SMS), Yotpo (email and SMS), and Recart (SMS).

Why do these integrations drive growth? They allow us to tap into networks that could amplify our reach and drive exponential value for our customers. Our Klaviyo integration drives millions of email and SMS sign-ups. Curlsmith, for example, increased their email revenue by 10% and added 100k+ new signups through Octane AI + Klaviyo. (Curlsmith has since been acquired by Helen of Troy.)

Great integrations are a must-have if you are building a SaaS or B2B business.

4. Pricing Is the Hidden Lever to Growth

There are three main levers to revenue growth for a startup. Two are almost always the focus of new founders: sales (acquiring new customers) and churn (reducing the number of customers who leave). The third is the most mysterious and the hardest to get right: pricing.

A great pricing model that increases as the value you generate increases has been a critical difference between stagnation and growth for Octane AI. Pricing is core to net revenue retention (NRR), especially when you need to make more money from existing customers to offset losses from churned ones. If your pricing isn’t dynamic and isn’t tied to the value you drive, you will find your churn problems will compound. Over the course of several years, it will result in millions of dollars in lost revenue and ARR.

Spend as much time testing and iterating pricing as you do your sales or churn processes. Implement pricing models that scale up as your customers succeed. And review your pricing regularly to make sure it’s still working.

5. Build a Team That Is Self-Motivated and Proactive

You can’t be everywhere at once. I’m a big believer in founder mode — founders should be directly involved in the vision and the most important parts of the company (specifically the product). However, founder mode also means finding people who don’t constantly need your attention or feedback. They make things happen and just do things without needing your input. I never have to worry about customer success, account management, sales, or engineering because we have a resourceful and self-reliant team that is motivated by success and gets things done.

Look for people who love to tinker and do things on their own. Build a team that doesn’t need constant 1:1s and will follow your vision. Look for people during your recruitment process who like to build things in their spare time. Once you’ve found the right team, get them to refer great people to join. We have found referrals from our existing team work out really well.

Most of all, recruit team players that want to win. You will save yourself so much time, energy, and money.

6. Build a Brand That Creates Its Own Inbound

In the early days, Matt and I hit the road, attended every Shopify conference we could, and gave out Octies (our cute robot mascot) to hundreds of customers and partners. We spoke on webinars, sent out newsletters, and created e-commerce magazines and communities (including one of the largest on Clubhouse, remember that app?!). Over time, people started recognizing our brand until it was synonymous with e-commerce quizzes and zero-party data.

Our early investment into the brand now creates a constant stream of inbound demo requests and sign-ups from the Shopify app store. When we meet brands, they know who we are, which helps us skip a step and dive right into the value add.

A great brand creates its own inbound and generates revenue on its own. Don’t overspend on sponsorships. Instead, create content consistently (newsletters, tweets, videos, whatever works for you) and be present at big industry events (especially in your early years). Build relationships across your industry and build goodwill. That goodwill will turn into inbound.

7. Taking Care of Yourself Compounds

Burnout is real. Sleep debt accumulates. Health issues and unhealthy habits compound. You can’t operate a successful company if you don’t listen to your mind and body and give them the attention they need.

Add little things to enhance your wellness. I use a standing desk and walk on a treadmill when I take Zoom calls. I take walk-and-talks if video isn’t absolutely necessary. My wife plays a quick meditation for us every morning before we get out of bed. I block off Friday nights to unwind from the week with my wife. These little things compound in the right direction, giving me more energy and mental clarity.

If you want to play the game for the long term, make sure you take care of your body. Hit the gym, eat right, and cancel unimportant meetings so you can get more sleep. Find time to NOT work to enjoy life and clear your head. If you can’t get away from work for some reason, combine work and working out to take care of yourself even while you get things done — even if it’s just making sure you are moving while you talk.

8. Pick Investors Who Will Have Your Back in the Dark Times

When things get tough—and they will—having investors willing to back you in hard moments can be the difference between having a successful company and no company at all.

In February 2018, our company was hit hard by the fallout from the Cambridge Analytica scandal. At the time, we powered Facebook Messenger chatbots, and Facebook’s response to the crisis was swift: they halted all new chatbot launches. This sudden freeze meant we couldn’t onboard new customers just as we were about to launch our Shopify integration. We had customers lined up and a waitlist of stores ready to use our product. But with only a few months of runway left, the challenges mounted, forcing us to lay off half the team and shift into survival mode.

It was at this point several of our investors stepped up and put more money into the company to make sure we could survive until Facebook re-opened their chatbot platform. That money, plus a well-timed venture debt loan, helped us launch our Shopify app, grow the business, and raise enough money to reach profitability. We eventually pivoted completely away from Facebook to limit our platform risk and become sustainable.

(Forbes wrote an incredible article about our near-death experience if you want all the details.)

Matt and I got lucky with our big investors — Bullpen, Javelin, Boost VC and General Catalyst. They all have had our backs. Without investors like them, Octane AI wouldn’t exist.

Find investors who share your vibe. Speak with the founders they’ve backed to learn more about their style. Find investors who are empathetic to the founders’ journey. (This is why former or current founders are so valuable on a cap table.)

Bonus lesson #9: You Can’t Win If You Are Dead

Seems obvious: you can’t build a great company if your company is already dead. But there are many moments when you will want to give up; things are not working, revenue is not growing, people are leaving, and you are feeling the stress compound.

I am here to tell you not to give up too early. Those moments can be overwhelming — the stress, the exhaustion, the fear — but taking a breath and letting things play out clears the brain and provides clarity. And sometimes, timing is everything. By not dying and building a profitable, thriving business, we were able to be around for the launch of ChatGPT and the rise of AI. Starting an AI company in 2016 — before the large language model was even invented — gave us tremendous credibility with customers, investors, and partners. New, rapid innovations in AI jolted Matt’s energy and my energy. It drove new sales and new products. By not dying, we ended up being in the right place at the right time.

Persistence is everything in startups. Octane AI went through early pivots, product overhauls, and uncertain moments. At times, it would’ve been easier to quit. But we didn’t—and it’s paying off.

Final Thoughts

I can’t believe it’s been eight years since we started our journey in AI (eight-and-a-half if you include the months when we were in stealth mode). I hope these lessons will be useful as you embark on your entrepreneurial journeys.

I’m grateful for the support I’ve received for nearly a decade from our team (past and present), our investors, my co-founder Matt, and my now-wife Deborah.

As we celebrate eight years, we’re doubling down on what’s worked and continuing to explore new ways to push AI forward. Here’s to the next eight!

~ Ben