In the fall of 2019, Toronto-based Looka was facing major difficulties. By that time, the startup, whose core product was an artificial intelligence-powered logo generator, had just laid off 80 percent of its employees after a rebranding misfire.
“We just realized that we needed to move so insanely quickly. It was like, do this or die.”
– Dawson Whitfield
But two years on, the startup has turned things around. Since October 2019, Looka has tripled its monthly revenue, returned to profitability, and now serves over 100,000 customers each year. Dawson Whitfield, CEO and founder of Looka, told BetaKit the startup’s ultimate rebound resulted from a shift in strategy, which saw Looka change how it delivered new products, overhaul its logo app, and secure recurring revenue.
In the spring of 2019, Looka, then known as Logojoy, announced its name change and plans to expand its product line beyond logos to a wider array of branding services. At the time, the then-profitable company expected its online traffic to take a 30 percent hit due to the name change but anticipated a quick recovery.
In reality, Looka’s traffic dropped by 80 percent, slashing its revenue in half, which Whitfield attributed to the decision to rebrand and expand to new verticals. When it became clear the startup’s recovery would take longer than expected, Looka let go of 80 percent of its employees in two rounds of layoffs.
Going back to the basics
Following the layoffs, Looka was still not profitable, so Whitfield decided the company would need to adjust its strategy. He noted the company’s “one big goal” was to reach profitability by April 2020, and the first step to achieving this was to change the way Looka delivered features.
“We just realized that we needed to move so insanely quickly,” he said. “It was like, do this or die.”
Previously, roughly 10 people would work together on a single new Looka feature. As part of this new strategy, Whitfield and Looka’s CTO, Andrew Martin, were the only team members that worked on products.
“When you have a very small team [of] two people that work 14-hour days and have full control, you can move insanely quickly,” he added.
The pair took what Whitfield called a “ruthless” approach to product development. Instead of putting features through multiple rounds of quality assurance, the company would release the features that worked and completely scrap the ones that didn’t. Looka also conducted rigorous user experience research to ensure a new feature would contribute to increased revenue.
“Rapidly trying new things without really worrying about the downstream impacts of those things was really big for us,” Whitfield said. “That allowed us to just try everything. If the product doesn’t work, remove it. Don’t take it personally.”
This cutthroat product strategy appeared to work for the startup. Within two months, Looka increased revenue per user by 20 percent, and its advertisements were beginning to generate revenue, Whitfield claimed.
Reaching profitability also came down to improving Looka’s conversion rate by over 50 percent, Whitfield said. The startup did this by making over its entire app, which meant updating its onboarding and logo generation capabilities and fixing “the swaths of bugs” in the app.
“Once we revamped the app, our ranking on Google started to climb, [since] we were once again being listed as a top logo maker around the web, and thankfully Google noticed,” Whitfield said, adding that the firm successfully returned to profitability by April 2020.
Tapping into recurring revenue
Once Looka had reattained profitability, the startup was ready to pursue its 2019 endeavour to expand into a wider range of branding services. This was particularly necessary since most of Looka’s revenue was still based on one-time customer payments.
“We had brutally learned that when you have a fully transactional revenue base, it can disappear overnight,” Whitfield said. “So, a big goal for us was moving into recurring revenue.”
In October 2020, Looka launched its branding subscription product. Rather than building the product in-house, Looka white-labelled another company’s API to accelerate the launch. “If we had to build it, it would [have taken] a year and a half and about $2 million,” Whitfield said.
The subscription product consists of two priced offerings: a standard brand kit subscription that offers over 300 ready-to-use branded assets for $96 per year, and a web subscription for $192 per year, which includes the brand kit features and an AI-generated website. The pricing of Looka’s flagship logo maker remains free to use, with a one-time purchase of $20 for PNG downloads.
Whitfield said the response to Looka’s subscription offering was “fantastic.” Within a year of that launch, more than half of the company’s revenue is recurring, and Looka now boasts over 50,000 paying subscribers. The CEO also claimed that lifetime value (which estimates the average revenue that a customer will generate throughout their lifespan) has grown by 76 percent since November 2019.
Time to move beyond logos
Now, Looka employs 16 people full-time and approximately 15 contractors. Of the employees that were laid off in 2019, Whitfield said “two or three” have rejoined.
Whitfield wants to keep the team relatively lean, with plans to add five product team members over the next nine months.
This year, Looka also launched a website building feature and a print shop, and plans to launch a domain offering in the coming weeks. By expanding its offering to more web and marketing services, Looka has now placed itself in front of some larger players in the branding space, such as Wix, GoDaddy, and Mailchimp.
While Looka continues its push to become an all-in-one branding platform, Whitfield said the company has not forgotten its flagship product, and one of its key priorities is for its logo maker “to remain best in class.”
“We see the logo maker as one thing that will always be our bread and butter,” Whitfield said. “It’s always a thing that we’ll do better than anybody else.”
Image source Looka.