At first, it was announced that it would only be available to users who had already created 10k images, but six days later, Midjourney opened the service up for everyone with up to 25 images.

This is not unexpected, as a company like Midjourney does not want to rely completely on an external platform for its product. Midjourney has had some time to set up its own services and has started migrating users over.

You can head over to Midjourney’s website and create an account via Google or even merge it with your existing Discord account - https://www.midjourney.com/

My Original Post

Good morning. Today, we are diving into the fascinating story of a company that built its product by leveraging community involvement. Surprisingly, they didn’t develop a single feature specifically designed for community engagement. Yet, they boosted their self-funded product to an impressive $200+ million in annual recurring revenue. It’s a wild success story in the AI space with an unconventional but very effective strategy.

In other news, my 5-year-old learned that the national animal of Scotland is the unicorn, and I am currently strategizing how to convince her that we won’t spend our summer vacation in the Scottish Highlands this year.

4-minute read

The Tale of Midjourney

Midjourney is a compelling growth story because it took a different path than most startups. It is a testament to the power of strategic foresight and how a less-traveled path can be risky but very rewarding.

First, a few quick numbers:

Launched in 2022, today their numbers are:

• 📈 19.8 Million Users

  • From 0 to 19.8 million Users in 2 years

• 🚀 23,000 Daily New Users

  • As of November 2023

• 🪝 80% Paid Membership Conversion 

  • Within a week of joining the service, ~80% of users get a paid membership (they recently took away the free tier completely)

• 💰 $200+ Million ARR

  • This was the 2023 projected, it’s likely much higher now

• 💪 ~20 Full-time employees

  • That’s ~$10 million in revenue per employee

• 😎 0$ VC funding

Numbers pulled from Midjourney Discord:

Midjourney CEO David Holz in an interview in 2022:

While all these numbers look like pure success, there is one chart that doesn’t look so exciting. Google Trend for worldwide interest over time is falling. Midjourney is not breaking out of past highs. This is caused by the competition of established companies entering the market and taking over the broader user base.

It’s possible that Midjourney is not worried about this Google trend at all. They want to narrow in on very active, professional users who prefer the depth of their models. Spoiler: That’s exactly what Midjourney is doing.

Here is how Holz described Midjourney’s user segments:

In an interview in 2022, Holz broke user segments down like so:

• 30% of users are professional - graphic artists, rapid idea and concept generation and speed up the creative communication process

• 20% use it for art therapy, emotional, reflective tool

• The rest he mentioned are using it for fun and to try it out. It’s less about art but more about imagination.

Interesting fact, limited compute

Holz says, “With a compute-intense service like Midjourney if there were like 10 million people actively trying to use the service, we might run into limitations of actual compute available to support this.” Indeed, the world is running out of compute.

How did Midjourney scale?

When first onboarding the Midjourney service, I was struck by how cumbersome it was to become an active user. The conventional tactic is to make it as simple and fast as possible to bring new users onto the service and give them the satisfying moment of first use.

Midjourney took a very different approach. They decided to build their distribution on the back of Discord, which introduces an extra hurdle, especially for non-Discord users.

To me, it felt a bit like you want to drive to a restaurant for dinner, but you need to get gas first, …and a car.

Before Midjourney, no example of a company that built a 200mm ARR through Discord existed. But it was a very intentional path with several advantages:

🏎️ Speed—Discord is a platform with readily available baseline features that their SaaS service needs, like user onboarding and management, notifications, feed, and community features; none of this needed to be built.

💵 Cost—Not having to build the above means you don’t need a team to build it, which provides massive cost savings.

👯 Community—Discord comes with built-in community features. Its base feature set is optimized around engagement and allows communities to engage around a topic, which was enormously beneficial for them in engaging their community of professionals and early adopters.

🎯 Focus—Not having to worry about the functionalities above, let them 100% focus on building the best models - their core product.

How the community aspect of Discord was a massive growth lever for Midjourney.

As Nabeel Hyatt, General Partner at Spark Captial, described it on a Reforge podcast, “Midjourney is a product that is easy to start with and hard to master”.

Making your first image with a simple prompt, just to try it, is easy. But diving deeper, optimizing, and getting exactly what you want is incredibly hard.

The beauty of leveraging an engaged community

On Discord, other users can see what you create and you can immediately start a conversation around your prompt and results.

This is how engaged users can create incredible depth. And this is exactly what Midjourney wants. Optimize their models for a professional audience.

Aside from that, Midjourney can directly engage with its users as well. This can help them understand pain points in real time and build a relationship with their most active users.

What are our Key Takeaways?

• Midjourney knew their early adopters had a very high overlap with users on Discord. They could pick the platform because they knew there was less friction.

• As Nabeel Hyatt mentioned, his advice for breakout startups is to choose a channel with low competition. Startups don’t have the resources to compete on the common channels.

• Build deep retention. Using Discord's existing community features created effective habit loops that wouldn’t have formed otherwise.

• The time to market and cost to unlock all these features have been dramatically minimized. This makes it a worthy option for testing product hypotheses or even scaling to $200+ million ARR.

• Focus on your core product and have a well-defined, highly differentiated core offering. Infrastructure around it is a commodity, leverage existing services as much as you can.

AI Corner

Things that made me spit out my drink this week…

Video of Waymo stopping at a Stop-sigh T-shirt

Have a fantastic rest of the week!

Best,

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author.