Net Dollar Retention Exceeds 100% From Building Credits

Lovable's "Give Your Product Away" Growth Strategy

Lovable's approach to growth includes a counterintuitive but powerful tactic: giving away their product generously, even though it has real costs. This strategy has been fundamental to their explosive growth to $200M ARR in just over a year.

The core insight is that for AI products, removing barriers to entry is critical because the capabilities are so new and mind-blowing. While many companies gate AI features behind paywalls to protect margins (AI has significant LLM pass-through costs), Lovable treats these giveaways as marketing expenses rather than margin-reducing costs.

As Elena Verna explains: "This is part of our growth secret sauce. You have to remove the barrier of entry." The approach is simple but powerful: when someone wants to use Lovable for a hackathon or event, Lovable provides free credits liberally. "If somebody, one of our users, stands up and says, 'Hey, I'm going to have a hackathon at my work on Lovable, can you give us some free credits to play with?' Why would we prevent a person who wants to do all of the marketing and activating for us from using us? We're like, 'Take it, how much do you need?'"

This strategy works particularly well because:

1. The first "wow moment" is critical - seeing what's possible with Lovable creates an addictive experience that drives users to want more
2. It enables organic word-of-mouth growth through users who become advocates
3. It creates a powerful monetization path - when users build something they love, they want to continue and are willing to pay for more credits

The economics work because Lovable isn't spending heavily on traditional marketing or large sales teams. Instead, they're shifting those costs to product usage, which proves more efficient for customer acquisition. As Elena notes, "We track [LLM costs] on freemium and giveaways as our marketing costs... It goes into this is something that we need to spend more in because this is part of our growth secret sauce."

The monetization model aligns perfectly with activation - users who build something valuable want to continue building, leading to strong revenue retention. "Our NDR is quite good because when people build they want to buy more credits to build," Elena explains, highlighting how this creates a virtuous cycle where initial free usage leads to paid expansion.

This approach requires a mindset shift from viewing AI costs as a margin problem to seeing them as an investment in growth. For AI products with mind-blowing capabilities, the more impressive your product, the more you should consider giving it away to accelerate adoption and word-of-mouth.