Going Against a VC-Funded Competitor to Grow to $400/mo

Hello! What's your background, and what are you working on?

I'm Matt Sencenbaugh, and I created Postcard Panda — an iOS app that lets you send eco-friendly postcards in the mail.

I grew up in Washington before moving to California to study computer science at Stanford. I'm currently juggling a part-time job, running a Saas called WrestlingIQ, and attempting to make Postcard Panda viable.

Today over 1k people have used Postcard Panda, with monthly revenue between $400 and $600 dollars in the last few months.

What motivated you to get started with Postcard Panda?

Arrogance.

Back in December of 2013 I was in the midst of some soul searching and traveling after the startup I'd helped found royally screwed a good friend of mine we'd hired. (I quit immediately after.)

I was visiting my parents over Christmas and my dad had taped an episode of Shark Tank which featured an app called Postcard On The Run. Selena Gomez was an investor, and I think one of the 'sharks' invested too. I had that knee-jerk reaction all developers have at some point:

"Why does that idea need venture capital? I can build a better version of that product myself that is also cheaper."

I spent the next six weeks snowboarding in Tahoe and building the v1 of Postcard Panda. I launched to huge crowds downloading my app and sucker punching that Postcard On The Run company right out of the gates.

Kidding. Totally, completely kidding. I launched to crickets and my v1 wasn't better than theirs. Thus Postcard Panda was born.

What went into building the initial product?

I sat in my short-term apartment rental and coded up the first version, using a fairly well known API-to-print service to handle the heavy lifting. I paired everything down to its core and launched an app with only a guest checkout experience and zero bells or whistles. The very first version probably took 30 hours of my time and $700 for a logo.

I did basically everything wrong.

I didn't talk to any potential customers. I didn't do the math on how the unit economics would work. I had no mailing list to launch to. And I had no plan on getting the word out after I launched it.

How have you attracted users and grown Postcard Panda?

This graph should give you an idea of how bleak the app was from February 2014 to September 2015:

Yep, that's $162.85 — or about $8 per month in revenue. Then the "big (lucky) break" happened, which ironically came when Postcard on the Run went out of business. I was lucky enough to be number two in the app store search, and when they pulled the plug I went to number one for 'Postcard On The Run'.

I made $210.94 in revenue in October 2015, which was more than I'd made in the entire life of the app so far. The app was still basically a really bad v1 at that point, but I decided to put more effort with this glimmer of hope.

I launched v4 in November of 2015. V4 offered user accounts, which drove much of the retention and growth for the following year as I rode the coat tails of a company that went out of business (reruns are still a thing!).

User retention is quite good in Postcard Panda, and I do get a fair amount of word of mouth referrals. Once users are in I seem to be in an ok place, although the usage is heavily skewed to typical vacation months so I'm in a yearly cycle. This means that I tend to compare last month vs a year ago when doing metric analysis.

Revenue since October 2015 has at its highest peak been $840.35, and the average somewhere around $400.

V5 recently launched, which adds an optional subscription model and moves things to an eco-friendly printing format. The move to eco-friendly makes me feel better personally, and I hope it will become a real differentiator for Postcard Panda.

Currently, I'm experimenting again with Apple search ads (the first experiment did not go well), plugging away at blogger outreach, and thinking about introducing a referral program.

What's your business model, and how have you grown your revenue?

With the launch of version 5 Postcard Panda makes money in two ways. The first is transactional revenue from postcards. The second is annually recurring revenue from Panda Plus, which is an optional subscription.

I'm in the minority of iOS apps that charge credit cards directly in the app, since in-app purchases are for digital purchases only.

Tip: Apple Pay has been really popular in the app — it's how ~40% of transactions in the last six months have been completed. It's worth the build time if you collect cards directly, and Stripe makes it easy.

The biggest issue with the business model is that the margins are very low, especially when compared to traditional software. Postcard Panda has real costs associated with hiring a printing company, the paper, ink, and stamps.

Your initial gut reaction may be that I get to keep extra revenue since Apple doesn't take a cut anymore, but the unit economics mean that I'm losing much more than 30% to fulfill each order. If you are considering entering the physical goods space as a software developer, spend a fair amount of time in a spreadsheet doing analysis before you pass go.

The biggest drivers of revenue growth have come from a few features and seasonality. User accounts were a big win, since they enabled customers to save their payment methods and allowed to duplicate postcards and send them to more people. (I have a couple customers who have sent 100+ cards to family members.)

Summer months are my best by far… unfortunately I haven't found the hack to make it July every month of the year yet.

Here's a look at the last several months of revenue:

V5 included a price change as well as the subscription option, and you can see that it has already been a better month than September for a traditionally non-vacation month.

What are your goals for the future?

The big driver of change in v5 was my angst about the environmental impact of sending postcards in the mail. The cards I send are now printed on FSC-certified, 100% post-consumer recycled paper using a chlorine-free process with non-toxic inks. My printing partner is also powered by the wind.

My goals for the future are to attempt to migrate the postcard industry towards a more environmental future. Hopefully that means that Postcard Panda also does better as a business, but I generally hope to apply pressure to other companies to follow suit.

In terms of raw numbers, I'm hoping to hit $1k per month in revenue in the next six months.

If you had to start over, what would you do differently?

If I had to start over I would work directly with a real printing shop, rather than using an API. I got burned with my first API partner because they deprecated their iOS SDK without letting me know. One day the production app just stopped working.

For v5 of Postcard Panda I did some outreach to many eco-friendly printing partners to get prices and estimates. I had to spend about an extra week building out the back end infrastructure to generate batches of PDFs from user submitted postcards, but now I get to keep more of the margin.

It really wasn't that scary to seek out a business relationship even though I had never done that before. If you want to sound smart, and potentially high brow, you can call it "disintermediation".

Some people might say that getting a partner lined up is too much effort for an "MVP", but I disagree. An often overlooked challenge in business is personal motivation.

If the business you are starting today turns out to be successful, would you still want to be running it or would you be miserable? If you aren't motivated enough to put in the effort to make a project actually viable, then you probably shouldn't be starting it in the first place.

You absolutely need to be ruthless with pairing down your idea to the core to get something out the door, but that doesn't mean taking shortcuts that cleave all of the usefulness out of your product.

Have you found anything particularly helpful or advantageous?

One of the best things I ever did was move to part-time, which has given me an "infinite runway" to work on my own stuff. I don't think I would leave my day job even if Postcard Panda covered my salary, but it's a nice balance that leaves me a lot less stressed and creatively satisfied.

Another hack that I've recently adopted is having a separate checking account for each project. (This can be a separate personal checking account if you are a sole proprietor.) Then I "invest" the project with a "seed" fund, which to me usually means taking a small amount of money out of my savings — $5,000 or less.

I have a simple spreadsheet where I then track all of my revenue and expenses for the project. Early on in the project this tends to be negative, so I then either pay my credit card directly from that account or transfer it to my main savings where my card gets paid from.

This simulates a burn rate and makes you honest about how much you are spending on the project. It's really easy to spend thousands of dollars on unneeded tooling if your project's expenses are blended with your personal expenses. It's a lot harder to do that if you have a tiny number dwindling down to zero in a bank account.

I tend to use the Pomodoro Technique for focus and exercise four to six times a week to stay physically sharp. It's amazing how much physical activity also improves my mental acuity.

I read quite a bit with a skew heavily towards sci-fi and fantasy. My favorite author in that genre is likely Brandon Sanderson, with my favorite "classic" being Snow Crash by Neal Stephenson. If you could care less for that style of fiction, my book recommendations for entrepreneurs are:

• The Innovator's Solution
• Competing Against Luck
• Thinking Fast and Slow
• Big Magic
• Rework

What's your advice for indie hackers who are just starting out?

Keep grinding.

I was a wrestler for most of my life, and the competitors I respected most on the mat were people with consistent, ferocious energy reserves. No flashy moves or huge peaks and valleys of energy. Just smart, consistent effort through an entire match backed up by a lot of training behind the scenes. The same is true for makers looking to start a business.

This stuff takes a long time to materialize, so you have to be ready to be in it for the long haul. Of course you need to make really smart decisions, but every day that you show up with energy is a win for the business.

Where can we go to learn more?

You can find my personal blog at mattsencenbaugh.com, and my Twitter @MattSencenbaugh.

Please feel free to leave a comment or question below. I'll be hanging around to answer questions.