Why is this AI project that rejected YC being snapped up by VCs?

15 people, 90 days, and achieved a sales volume of 120 million.

More than 25,000 new products are created every day, with a total of 500,000 users in just three months, and a 30-day retention rate of 80%, even surpassing ChatGPT at one point.

This is not another Silicon Valley myth, but a real example of how the Swedish AI startup Lovable is once again refreshing the AI ​​industry and reshaping thousands of industries.

Lovable mainly uses AI+low-code methods to turn application development into "building blocks". Ordinary people can turn ideas into applications in seconds with just simple prompts. In just three months, Lovable itself achieved $17.5 million in annual recurring revenue, with a net increase of $2 million per week, equivalent to $300,000 per day.

In 2023, Anton Osika founded Lovable and served as CEO. He was one of the core founders of the Stockholm AI community. Lovable is not his first entrepreneurial project. At the end of 2020, he founded Depict.ai and served as Chief Technology Officer, mainly applying machine learning technology to the field of e-commerce.

Anton Osika, founder of Lovable, recently gave an interview to 20VC, which explored in depth how the company achieved amazing results in 90 days, as well as the business strategy, technical logic and market trends behind it.

Anton has unique insights into AI technology and entrepreneurship, and is known for discovering young talents and fast execution. He also shared the valuable lessons he learned in the process of starting a business, explaining why he values ​​young people's talent over past resumes in his recruitment strategy, and how to build a superstar startup in Europe rather than Silicon Valley.

Lovable co-founders Anton Osika (left) and Fabian Hedin (right)

Here is a summary of the podcast content:

1. Establish a minimalist product concept: focus on only three core functions and maximize the key experience; avoid "function stacking" and instead "reject" unnecessary complex functions as much as possible; "make the product experience more like Apple" - simple, smooth and intuitive.

2. Implement the MVP (minimum viable product) strategy: complete the core functions in just one weekend, and then spend several weekends polishing and optimizing. After the product is quickly launched, user feedback drives iteration.

3. Create product advantages: The biggest challenges of AI code generation are "quality" and "stability". Lovable continuously optimizes algorithms and engineering architecture to allow users to use AI to write code with greater confidence.

4. Design the official website: Let users directly enter the prompt box (Prompt), so that users can experience the charm of AI-generated software at the first time.

5. Financing strategy: Reject Y Combinator (YC) incubator, only cooperate with "suitable" investors, and don't take money indiscriminately.

6. Business logic: Complete commercial monetization around subscription + ecology and charge according to SaaS. But in the future, value-based pricing may be introduced, allowing users to pay based on actual usage.

7. Industry trends: OpenAI has the highest brand and user recognition, but lacks a clear product direction; Anthropic has more advantages in AI ethics and corporate markets and has strong technical stability; Grok focuses more on business opportunities.

8. Global competition: European entrepreneurs are more likely to fall into "self-limitation", but Lovable's success proves that you can build a world-class technology company even if you are not in Silicon Valley. At the same time, European startups need to learn to “tell stories” and use Silicon Valley-style marketing strategies to capture the minds of users.

The following is the 10,000-word interview text, enjoy!

Harry: I spoke to several of the investors in your first company, Depict. What was your biggest learning from Depict and how did it shape your thinking about Lovable?

Anton: We also expanded at a very fast pace at Depict because we really like to move fast. Although we are relatively young, we have a lot of high-potential talent. I think it's important to take lots of chances at the beginning and try out what works. Once you have more people, you have to follow up and maintain it all, and you have to be more focused. We tried so many things at Depict. But as macroeconomic conditions deteriorated, we were unable to continue our initial expansion trajectory.

Harry: Paul Buchheit, the founder of Gmail, said that a product needs three great features, and simple ones will make them great. Do you agree with this idea of ​​combining product simplicity with functional depth?

Anton: Yes, I think at the product level, it should be as streamlined as possible to make it more like the user experience provided by Apple products. Be excellent at what you want to do, and don't say yes to everything.

Harry: Are there any events that have changed your view on Lovable?

Anton: Strong execution and focus on talent are the two most important things for almost all companies.

In particular, talent is the most important thing in culture, who you work with, interact with and collaborate with every day.

Harry: So you prefer talent over experience, how is your experience recruiting talent?

Anton: I think that experience can be a bad thing in some cases. You generally want people who are ambitious, who have a lot to prove, who are more open to ways of working as a team. When we are young, we can hire the best people. Many positions are suitable for newcomers. Some newcomers are often quite good. They have not done many projects yet, but they also have the opportunity to grow into founders.

Harry: Would you hire them if they hadn't done anything like this before?

Anton: Mostly, yes. For some positions, such as engineers, they must understand software engineering, and they need to have rich experience in this field before they can tell junior employees what they should do to be appropriate.

Harry: Were you always sure you would succeed? When you were younger, did you think you could be successful at something?

Anton: No, I don’t think so. I’ve always been frustrated that people around me don’t understand things as fast as I do. But at some point I suddenly realized that I was too naive. I keep a record of what might happen in the future, and I think that’s one of the superpowers that makes me successful, but I don’t know how it will happen.

Harry: How did you make your first pot of gold?

Anton: When I was a kid I was always into computers and I loved organizing parties and I noticed that a lot of my neighbors, friends, or family members had computers. They needed my help when they had some maintenance issues and would pay me when the issues were resolved. When I was a teenager, I repaired computers as a side job.

Harry: Wow, you fit all the characteristics of a successful founder that I mentioned on the show. First, making money early, and second, being good at games. These two characteristics are very, very obvious. So, where did the idea of ​​GPT Engineer as a side hustle come from?

Anton: We proposed to start GPT Engineer as a side job.

The idea first originated in the spring after ChatGPT was released. A year before the release, I sensed that as data grew, these models would scale in a big way. I was traveling with my wife, and traveling makes you more creative.

No one was talking about AI agents at the time, and on the plane I started writing a lot of stuff, thinking that a lot of things should be connected, you basically put a large language model in a "for" loop, and then you can have the AI ​​do a lot of the agent stuff.

When I returned to Sweden at the end of my trip, I thought, where do I apply it? Obviously, in software engineering. I talk to people about this all the time, but I feel like no one really has the imagination that I do.

I built the first version of ChatGPT or the API, and then I built an agent that wrote code, and I put the two versions together, and then I worked hard over coffee and finally got the first version (V1) - I had the agent write and create a snake game, and you could get a running snake game on your computer.

Harry: How long did it take you to build the first version of the agent in that coffee meeting?

Anton: I think it was about one weekend, then a few hours of polishing, and then two more weekends of polishing.

Harry: For a lot of founders out there who are listening, what’s the biggest lesson or advice from building a lot of different V1s?

Anton: For most first-time entrepreneurs, I would really focus on the user and the user problem. And thinking, how can I get one person to like what I built in V1? Here is my suggestion. But the fact is, I just posted a video on Twitter and millions of people started using it, studying it.

Initially, I had no idea that I would build a business out of this. I just thought it was interesting…it was an open source project and I started to build a community that continues to work on this open source project.

Later, I talked to my co-founder at the time and told him that this thing could definitely become big. I've been thinking about doing something else and this seems like a good option for me, maybe it's time to find a good replacement to take over my CTO position at Depic.

Harry: As the months went by, the community continued to grow. What happens next?

Anton: I found a great person to serve as CTO. At the same time, I decided I needed to find an awesome co-founder, someone who was the most efficient, no-nonsense, no-bullshit engineer and entrepreneur. He sold a company that I wanted to work with previously. Then I went to his apartment and said, let's plan for the future, and then I asked him to join my team and build the first version of Lovable together.

Harry: You have your co-founder. When do you plan to release Lovable? How is the progress for Lovable and the company?

Anton : Lovable was launched a year after we started building it. In parallel, we released a preview version of the GPT Engineer app. During this period, we obtained user feedback and attracted some attention from some brands.

I think the first version was pretty good and some people really liked it. But the important aha moments didn’t resonate with enough people.

As we continued to iterate on the product over the next year, we packaged all of these things together and became Lovable. I want to build a SaaS business where users build their entire SaaS company and make money through our AI.

Harry: You mentioned alternate versions. Do you have any key lessons or advice on how to do a good alternate version?

Anton: Alternative versions are useful because you can control exactly how many people you want to recruit and conduct user interviews with. So I think it's just a matter of getting enough people on the waitlist.

This is a good way to screen people you want to interview. Like, who should you probably look for, who should you talk to, who should you sell to, who would get the most value from your product, and then filter out the people who qualify and talk to them.

Harry: When you're doing user interviews and user feedback, what are some of the key lessons or tips you've learned about doing that well? What's a good question? What's wrong with that? Are there any lessons learned?

Anton: For us, there are two different types of user interviews.

There's the type of just seeing them use the product and then asking them, like, how well do they know the product and so on. This is more like a UX interview.

Another is to find out if they have just tried the product, and we would ask them, have you tried the product. Why are you interested in this? And ask them what problems they face in their business, try to find out what the biggest pain point is that they really want to solve. If I could show customers that I could get the first version out faster with AI, I think I would get more customers.

Harry: How does Lovable change the structure of the team?

Anton: Harry, if you want to create a personal website for yourself, it can be very efficient, you don’t have a team, it’s just you. You just create it with AI. But this is not a team, and when you have existing software and you want to iterate and change that software, the AI ​​could completely screw up and mess up your entire code base. Therefore, you need to work with a software engineer who knows how to improve and always maintain the quality of the product.

Harry: You mentioned that it took people some time to find that aha moment. How important is the timing of your aha moment?

Anton: I think if we could speed up our aha moments, we could double our conversion rate.

When you come to Lovable, you will only see a prompt box, which is very attractive. You will not be taken to the login page, but instead you will see a prompt box. And then for those who enter the prompt box, you get a quick aha moment. That's what I would recommend. Just provide users with some interactive content with immediate rewards.

Harry: You mentioned the tooltip itself. Many guests on previous shows have said that the biggest mistake ChatGPT made was to make chat the default UI for future AI. Do you think the prompts in our products today are the default UI design in the AI ​​era?

Anton: I think so. Hints can do almost anything, just prompt and explain your idea with input text. It is also easy to implement and iterate. Over time, it will become more advanced than just a reminder feature. We were still building the interface for creating software, and no one knew what that interface would look like. But I think the reminder is here to stay.

Harry: You rejected YC. Why did you reject YC?

Anton: We felt that, in the best case scenario, YC would be diluted a lot. At worst, going to San Francisco and experiencing the YC events would be a distraction.

Harry: When does the seed round of financing begin? Is it after the product launch or before the launch?

Anton: The seed round was before we launched the first prototype of the product.

Harry: How did the seed round go before launching a prototype of the product?

Anton: The advice I always follow is to work with investors you like. I knew some people in my past who I thought were awesome and who I wanted to be there for me when things went bad or when they went well.

Harry: How big is this round of financing?

Anton: We started with $3 million and then we added more. We do get a lot of cash because you never know what’s going to happen in the market. So we raised quite a bit of pre-seed financing, almost $8 million.

Harry: Would you recommend founders to raise a sizeable pre-seed round if they could? If money was on the table, would you say take it?

Anton: It depends on how you want to operate it. Like, if you like talk to investors, at the time I said no I just want to build a technology. If you raise a large pre-seed round, you have time to figure these things out. If you like talking to investors, which I think you should, I would do more iterative, smaller rounds.

Harry: A lot of founders today are very sensitive to dilution from day one, which they never were before. For example, 10% is the maximum amount they are willing to give up in a round of financing. What do you think about dilution sensitivity?

Anton: I met a very smart person who said, no, dilution is not that important. It all depends on the size of your cake. My own opinion is to minimize dilution. This is my life's work. So that's my main thought right now. So we've raised this round of funding now.

Harry: When was the product launched? How is the launch process?

Anton: I launched with Loveable on November 21 last year. That was just four months ago.

Harry: So you started launching the product from day one. Is this crazy? How is it going?

Anton: We have paying customers on early versions and then we release. I don’t think it’s that kind of amazing release. We continued to improve the product rapidly, the product started to accelerate, and growth started to accelerate. We grew ARR by 1 million per week.

This number keeps growing and accelerating. We ran into a lot of scaling issues and then patched the holes.

When we saw this explosive growth, there were a lot of quick fixes we needed to do on the product side.

Harry: So you rewrote the product as quickly as possible and kept it stable?

Anton: Yeah, so it took a little over eight weeks. I mean, it's not completely done yet, but we've been doing it for eight weeks.

Harry: You mentioned Like a Millionaire Week. How much are you growing per week now?

Anton: Two million a week.

Harry: What do you think is the most common reason that slows down a company's development process? For founders who are listening, what are some of the common scenarios they should be aware of?

Anton: The reason product development slows down is usually because your product is complex and has a lot of requirements. Harry, you said earlier that a good product should have three things going for it, and I think that's generally a very smart approach. Simplicity guides the product direction and lets you know where you are going and what you are doing.

Harry: Looking back at the development of Lovable since its founding, where have you invested your time and energy from a product perspective? In hindsight, what should you not have done?

Anton: At Lovable, we spend a lot of thought thinking about community and community features within our product. I think if we see slower growth, it might make sense to do that. But now that growth is no longer an issue, you don’t need community features to drive growth. So I think it's a complete waste of energy.

Harry: Do you believe that “build it and they will come” is indeed true today?

Anton: If you are confident that you have a very strong belief in a product with untapped potential and you have the ability to demonstrate the strength of the product, users will come and it will work.

But in most cases, just building it and expecting users to come is too risky. You can build it and let them come, or try to let them come, which is much less risky.

Harry: Nick Revolu once said on a show that the most successful founders he invested in were between 30 and 35 years old. They don’t have the naivety of very young founders, but in some ways they don’t have the obvious weariness or, you know, when you’re young you have more energy than older founders. How do you feel about this, considering your age now?

Anton: I think energy is very important and I think naivety is one of the benefits. But I also make mistakes, lots of them. This is also my first time as a manager.

Harry: What was the biggest mistake you made?

Anton: Think we should change the culture and become bigger, slower, or have more layers of management. This was the biggest mistake I made when there were 40 of us.

Harry: Why do you think so?

Anton: My co-founder and other executives that we talked to said, oh, now you have to hire executives and so on. This is a bad idea.

Harry: So have you started hiring executives?

Anton: Yes. The people I hired weren’t successful, and that slowed me down.

Harry: So when you think about this, what advice would you give to other founders? Don’t believe the bullshit that you can scale without executives?

Anton: A lot of founders hire talent like mercenaries, maybe like technically skilled people, but they play to their capabilities in their field. I hire general talent and empower them as much as possible. If you have a lot of super-smart generalists, adding executives on top of them is high risk and of questionable reward.

Harry: When you grow your user base so quickly, and you grow your revenue so quickly, does the culture of the company break at some point?

Anton: Generally I think so. In other words, he will change and develop. This is something I am very mindful of and why I am so afraid to add too many people.

Harry: What are you worried about?

Anton: The most important thing for everyone in our company is to lead by example and show everyone how much you care about the product, the users, the team, and how the team is doing. Set an example and make sure others care as much as you do. This comes from a sense of ownership over the company culture and the team. If there are a lot of people, it usually gets diluted, and that’s the root cause of cultural breakdown.

Harry: We have a growing team, a growing user base, and growing revenue. We are actually making a lot of money at the moment. Why do Series A financing?

Anton: We can accelerate growth by adding an investor who is a partner and can help us find more great talent on the committee.

Harry: You have quite a few competitors in the United States. Do you also have to raise funds when your competitors have a lot of money?

Anton: I don't think so. We can be self-reliant. When you can do most things yourself, you never need financing. But your competitors can outspend you on talent, customers, and marketing. I'm not afraid of any of that. The only thing that matters is execution. So if you can outperform me in execution, then I'll be scared.

Harry: In what ways can you improve your execution? What do you think you could improve on in terms of execution?

Anton: I think it's about doing less. I think we at Lovable could do with less. A lot of people have great ideas, and every idea is great, but you can only have so many, and you should only execute some of them.

Harry: We mentioned team and culture. You’ve been very keen on building in Europe, keeping the team in Europe, and becoming a European company. A lot of people have told me that staying in Europe is deliberately not doing what’s best for your career. If you're in Silicon Valley, you'll be more successful. How do you react to them?

Anton: The most important thing is talent and culture, and Europe has more raw talent. The culture is not like that of the US, but I have to say that the US culture is more suitable for the success of startups, which is well known.

Harry: What exactly do you think this culture is?

Anton: It's about ambition, growth and helping startups get going. In Europe people live a life with work-life balance, in Sweden we talk about Jant’s Law, which is that you should be better than others.

Harry: If someone told you that you would be more successful if you were in Silicon Valley, how would you respond to them?

Anton: If you are a founder, you have more freedom to use those talents to be successful.

Of course, there are many benefits to being in Silicon Valley. I think starting a business in Europe is a bit like choosing the hard mode in a game. I was excited to play on hard mode and show that you can create an alternative company that is lovable in Europe.

Harry: How do you respond to some people who think that Lovable cannot generate sustainable revenue from AI and that it does not have user stickiness?

Anton: Our first month retention rate is better than ChatGPT’s first month retention rate for paying customers. So it's about 85% and rising. Some people come in and swipe their credit cards because they want to try it out and learn, and that's a given.

Harry: What do you do to significantly improve retention?

Anton: The simplest thing we can do is to provide more of the important aha moments and make sure all of our users get more of the important aha moments about how to use the product.

The most important of these is that when you feel you are stuck and the AI ​​can’t understand you, as a user you can learn a lot about how to resolve this situation. It’s about how you prompt, how you understand why the AI ​​isn’t working, and explain or clearly articulate the problems you’re seeing. The problems you discover might be issues you run into when building more complex features, which might require hiring an engineer to make small changes to the code base. This is something our users should know, but may not be something every user knows.

Harry: What is your key goal today? If there was one metric for the entire team to focus on, what would it be?

Anton: The number of users, the team using what they build from beginning to end, and paying attention to what users are building. That’s what we’re focusing on.

Harry: What's the quantity today?

Anton: So we have close to 40,000 paying customers.

Harry: Are you concerned about the time it takes to create a website from the beginning?

Anton: We care about it, it's about how much we can improve, but it's not something we necessarily focus on. We're just making the core AI part better, and that's what we're focused on.

Harry: Whose model are you currently working on?

Anton: We use all the models from OpenAI, Google Gemini, and the main tool for writing code is the Claude model from Anthropic.

Harry: Let’s say you have Anthropic, which is worth $60 billion, OpenAI, which is worth $300 billion, and Grok, which is worth $50 billion. Which would you buy and which would you sell?

Anton: I care about the best talent here. I think Elon is very good at discovering talent, so I would buy Grok. I think they are also good at finding business opportunities. Although Anthropic is my favorite, I love the culture and leadership there. I would be short OpenAI, while they are doing well in this bad situation, they have not proven over the past year that they can have clear product direction and focus.

Harry: The two most important things in the next wave are to establish a brand image, gain recognition from consumers, and launch front-end products for consumers. OpenAI has done this very successfully. When you look at the brand, everyone’s mother knows ChatGPT. They don’t even know OpenAI, but they know ChatGPT.

Anton: I think we are still in the early days of AI. If you look at corporate revenue, Anthropic went from almost nothing to OpenAI and has absolute dominance. I don't know what Grok will do here, but I expect Grok to be like OpenAI, which lost all its best talent to Anthropic. I think Grok might be onto something here.

Harry: I was talking to a very smart friend of mine a while ago and he said the biggest worry is that open source or large companies with huge distribution advantages will come into the market and win. What do you think about this? Is this worrying?

Anton: Big companies move very slowly in many areas. Therefore, they will never have the best product on the market. Some of these big players have distribution advantages, but overall this will be a growing market and as a startup you can easily carve out a sweet spot in certain market segments.

Harry: I think one of the real shifts that you have to deal with is moving from PLG and sort of prosumer products to enterprise services. How do you feel about this shift? Isn’t this worrying given the rate at which revenues are growing?

Anton: If we were going to start a business, I would want to do it well. But we are not doing enterprise services for the time being. What we want is to be the best place for developers to create products and make millions of the most talented developers satisfied. If we do that successfully, then it will be a good transition into a lot of other areas, including enterprise services.

Harry: As we look to the future, if you had to choose, what are you most worried about? Is it regulatory challenges, competition or a hype cycle?

Anton: I think if a competitor was really, really good at marketing, then I would be concerned.

Harry: How important is branding?

Anton: Brand image is a product of the product. There are other factors as well. The product is the most important. Then good products plus awareness create a brand. I think that's enough. So it's more of a downstream effect or something.

Harry: When you get to $2 million in additional ARR per week, you’re going to have more and more investors wanting to give you money. What do you think? What makes it worth embracing rather than a distraction?

Anton: Stop looking for me, it's a distraction. When we know exactly how we want to spend the money, it becomes worth it. Or maybe this is a partner we really want to work with and we’ll never regret saying yes to them.

Harry: What would give the company a huge boost?

Anton: Hire one or two more perfect technical product talents.

Next is the quick question and answer session -

Harry: What do you think most people around you don't believe?

Anton: We have very smart models today. I think this is where people disagree with me. Models are smarter than humans, but models don’t have the same memory as we do, and they don’t have enough context.

Harry: How quickly will we add context and memory given the scale we have today?

Anton: What needs to be added is the process of deciding how to store the memory. I think this is something that needs to be added. It has to store all of these things. For example, my conversation with Harry has to be stored in the system somehow. My childhood almost had to be stored, too. I have no idea. This will take years.

Harry: Suppose you could buy and hold a public company's stock for 10 years. Which one would you buy and hold?

Anton: Talent plays a key role. The first thing that comes to mind is Tesla. Their positioning outside of software is also interesting.

Harry: What is the most important quality of a founder?

Anton: I think it’s good judgment, especially in selecting talent. I like to hire people who can see potential in their employees.

Harry: What is your biggest weakness as a CEO right now?

Anton: I'm not as good at multitasking as I'd like to be.

Harry: If Lovable failed tomorrow, what would be the reason? For example, if an investor wrote a pre-mortem analysis, what would be the reason why Lovable could not develop smoothly?

Anton: All I can think of is that we lost momentum and excitement. That’s what drives us forward today.

Harry: What have you changed your mind about in the past 12 months?

Anton: You don't need to rely on a base model provider. They will all be great. There won't be just one winner here.

Harry: What is your favorite failure?

Anton: My favorite failure is when the adaptation didn’t work out so I could do more.

Harry: What are you most concerned about in today's world?

Anton: I hope the entire leadership is truly idealistic and can be more friendly to people who disagree with them. But leadership in today’s world is generally a bit corrupt and small-minded, and that’s what worries me.

Harry: What was your biggest shortcoming before the public market?

Anton: Just like a SaaS company with per-seat pricing, their ICP will be replaced by AI SaaS, and AI SaaS will only replace employees.

Harry: What is the future of pricing in an AI world?

Anton: I think it depends on the defensibility of the business. If you’re selling to businesses that never change their SaaS software, you should try to develop some value-based pricing. I don't know how you get proper value-based pricing, I would consider doing that. Beyond that, I think you shouldn't innovate too much on pricing, just do things that have been proven to work.

Harry: What excites you most about the next 10 years?

Anton: I hope that artificial intelligence can help us humans better understand each other and achieve a win-win situation. That would be awesome. I'm excited about this. Our leadership is actually being enhanced by super AGI.

Reference Links:

Europe’s Fastest Growing AI Startup: Lovable’s Explosive Growth Story

From the 20VC Podcast: Lovable on hitting $17.5M in ARR in 3 Months

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This article comes from the WeChat public account "Silicon Rabbit" , author: Amelie, editor: Xuushan, and is authorized to be published by 36Kr.