From failed startup to 5-figure MRR agency with an AI product

Ritika Mehta tried and failed with her first startup. But she learned from her mistakes and built a 5-figure/mo service business, By Default, through which she's now creating an AI startup.

This time around, she's starting small, iterating quickly, validating every feature, and clearly defining her target customer.

Here's Ritika on how she's doing it. 👇

Lighting the fire

My story started with a hard lesson I learned building a previous tech product while running my marketing agency. The idea for the product came from working with clients, and I built it with the goal of expanding my business and increasing revenue.

At first, things looked great. We launched a subscription-based tool, acquired 20-30 free users, and converted three of them into paying customers. It seemed like a good start. But by the next month, everything dropped to zero.

Here's why:

• My initial users were my clients who signed up out of curiosity, not because they truly needed the product or felt it solved their problem. That's the wrong way to validate an idea.

• The product was built around features I thought were missing from other solutions available — not based on actual customer pain points.

• I relied entirely on my own assumptions, without validating whether there was a real demand for the solution I was offering.

That experience sparked a shift in how I approach building and launching ideas.

It made me realize the importance of reducing the risk of building something nobody wants. Now, my focus is on projects that prioritize idea validation, understanding customer needs, and ensuring solutions are built for real problems — not just assumptions.

Breaking down a diversified business model

These days, I'm the founder and CMO of By Default. Here, I work with startups and consumer brands to help them identify their most valuable customers and build marketing strategies that put those customers at the center.

My goal is to help companies go from being unknown to becoming their customers' most trusted brand.

I do this, and bring in five figures per month, with three things:

Service-based revenue

By Default started as a service-focused business, helping companies identify their ideal customers, uncover pain points, needs, and develop customer-centric go-to-market (GTM) strategies. This remains our primary revenue stream, with tailored offerings that solve real business challenges for our clients. 

We’ve grown revenue by focusing on helping companies more with their customers, which drives repeat business and referrals. 

Marketplace revenue

We also built a curated marketplace to connect our clients with vetted experts they need to execute specific tasks or projects. This model not only adds value to our services but also creates an additional revenue channel by facilitating these connections.

We've grown this revenue stream by vetting the experts closely, ensuring that clients return for additional support.

Product revenue

Our AI-powered product is another way we’re growing revenue. It analyzes marketing performance and engagement to help brands identify their ideal customers.

Revenue is very little right now. While it’s still in private beta, we’ve prioritized testing the willingness of users to pay from the start.  

• Initial pricing validation: We started by allowing early adopters to pay what they felt was fair. This approach gave us an average price point of $25 per month.  

• Pricing optimization: Considering the product’s AI functionality, team usage, and operating costs, we adjusted the pricing to $39 per month.  

• Conversion testing: We tested this pricing with a pool of 147 users and successfully converted 12 into paying customers, which helped validate both the pricing model and product-market fit.  

We're hoping that, by using customer feedback from beta users to refine the product's features and value proposition, we will ensure a strong launch when it’s opened to a larger audience. 

Diversification

By balancing these revenue streams, we’ve created a sustainable model that allows us to grow while delivering value across different customer touch points. Our focus remains on ensuring every part of the business aligns with our mission to help companies build customer-centric strategies.

Learnings from failure

Like I said, my first startup didn’t work. As a solo, non-tech founder building an AI product, it was a steep learning curve.

Here are the key challenges I faced and lessons I’ve learned:

1. Hiring the wrong team – I hired a tech team without fully understanding the roles or skills required, which made it difficult to ensure the right people were in place. You can’t delegate effectively if you don’t have at least a basic understanding of what’s needed.

2. Not validating customers – I targeted a broad market with diverse pain points and needs, which diluted my focus. This resulted in unclear messaging and made it hard to resonate with any specific audience.

3. No feedback loop – I didn’t create a system for gathering and acting on user feedback, which left me disconnected from what customers truly needed.

4. Building too much, too soon – Instead of starting with an MVP, I poured resources into a fully functional product, which slowed me down and increased risk.

5. Seeking funding too early – I approached investors without any traction, which made it difficult to prove the value of the product.

6. Misaligned pitch – My pitch deck focused too heavily on the big idea and market potential, instead of demonstrating product validation and user demand.

Now, with my new AI product, I’m taking a completely different approach. It’s already being used by my clients and mid-size GTM agencies, and I’m ensuring every step is grounded in customer insights.

This time, I’m:

• Clearly defining and understanding my target customer segment.

• Validating every feature to ensure it solves a real problem.

• Starting small and iterating based on feedback.

These lessons have shaped how I build and launch products, focusing on solving actual customer pain points rather than relying on assumptions.

Growing via a quiz

To attract users and grow By Default, I focused on creating valuable, targeted experiences for our ideal audience. One of the key initiatives was developing a quick quiz designed to help brands assess how well they understand their customers.

This quiz not only generates leads for the service side of the business but also gives brands an idea on how well they know their customers and builds their confidence in what needs to be done next.

Here’s how I approached growth:  

1. Setting clear goals: I started by setting a measurable goal, to onboard 20 users in the early stages. This gave me a clear target and helped me focus my efforts.  

1. Leveraging existing connections: I reached out to my email list and existing clients, introducing them to the product directly and gathering their feedback. Their input was invaluable, as it highlighted additional pain points I hadn’t considered and provided direction to refine our offering.  

1. Engaging in niche-based communities: I actively participated in niche communities where my ideal customers hang out. I shared the idea with them and directly got the feedback.

1. Growing the user base: Through these efforts, we surpassed the initial goal and grew to over 100 users. This early traction validated the approach and encouraged me to double down on what was working.  

1. Creating and promoting the customer quiz: Like I said, the customer quiz has been a game-changer. It serves two purposes:  Attracting potential clients for the service side of By Default and bringing in early users for the product.  I manually vetted the quiz responses to ensure the right people gained access, which helped maintain a high-quality user base. I’ve been actively promoting the quiz on LinkedIn, which has proven effective in driving leads and engagement.  

2. Building brand awareness and refining messaging: Beyond user acquisition, these efforts have helped build brand awareness and establish trust within our audience. I’ve also been able to refine the narrative and positioning for when we publicly launch the product, ensuring it resonates deeply with the market. 

Take advantage of these opportunities

I’ve found a few particular things helpful in my journey:

1. The Hard Thing About Hard Things: This book completely changed how I approach problems and challenges in running a company. It’s been a game-changer for navigating tough decisions and building resilience.

2. Writing a newsletter: This has been one of the best ways to connect with customers and build a community of like-minded people facing similar challenges. It allows me to share the process of building my company and fosters meaningful relationships. Especially now, as AI and algorithms increasingly taking control of audience visibility on other platforms, an email list remains one of the most reliable and relevant ways to connect directly with people. Plus, it brings in a bit of revenue — about $150 MRR. To maintain high engagement, I regularly clean out inactive email addresses, which helps keep my open rate above 45% and click rate at 8%.

3. Being active on LinkedIn: Initially, I posted three to four pieces of content weekly, but didn’t see much ROI. I shifted my strategy by engaging with others’ posts first and then connecting with them. This approach has helped build credibility and occasionally provides solutions to the challenges I face.

4. Adopting a customer-centric marketing approach: Putting customers at the center of my marketing strategy has been incredibly valuable. Customers provide a reality check, both before and after launching a product, and often hold the key to solving marketing challenges. The more I understand my customers, the better I can build and communicate solutions that truly resonate.

Parting advice: Build habits

Learn to build habits — intentionally, slowly, and without working hard on it.

A key skill I’ve developed, and that I advise developing, is focusing on building small, sustainable habits. Consistency is key when it comes to making progress, especially in the early stages. By developing habits, you create a system that keeps you moving forward, even on days when motivation or productivity is low.

Remember, it's not about making huge leaps every day; it’s about showing up consistently and letting those small, daily actions compound over time.

That's what I'm doing. You can follow along on LinkedIn. And check out By Default