Josh

Rob Walling:
It’s another episode of Startups For the Rest of Us. I am your host, Rob Walling, in this episode of Hot Take Tuesday. Einar Vollset and Tracy Osborn join me to talk about once.com, to talk about how a company sold for half a billion dollars and the founders got nothing, at least according to this article. A developer who went from open source to a full-time income. Then we give some book recommendations and have a lightning round of reactions to controversial startup opinions. Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling.
It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of Mailchimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. Microconf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon, so if you’re thinking about joining me and about 225 of your closest bootstrap founder friends, head to microconf.com/us. And with that, let’s dive into Hot Take Tuesday. Tracy Makes back for another Hot Take Tuesday.

Tracy Osborn:
I’m ready to fight with Einar.

Rob Walling:
Yes, it’s going to be great. Einar Vollset, thanks so much for joining us.

Einar Vollset:
Thanks for having me.

Rob Walling:
We have some nice, fun, not at all spicy topics to jump into today. Kick us off. Once.com from 37signals. They’re basically saying, “It’s not software as a service, it’s just a software.” No subscription. You download the code, you set up your VM, your virtual machine or whatever it is. I’m sure they have, what is it, Docker containers and such. But is one-time software the best thing since Clippy, best thing since [inaudible 00:02:14] shooting first? Tracy, I want your opinion on this.

Tracy Osborn:
I think it’s good to have options, but I think there’s a reason why the world moved towards SaaS. And you’re looking at once.com and their first product, Campfire. For anyone who has a technical team who wants to dive in and do everything themselves, then this is a interesting idea to replace Slack. And for folks who just don’t want to go in that direction, again, having the technical teams to do this because Campfire says, “Free updates to any 1.x version.” So that means that updates are going to end at some point. And it says, “Bare bones support included.” So there might be support, but most stuff you’re going to have to figure on your own.
This is why, for most folks, a SaaS product makes more sense for them even if it does have that subscription model and that idea they’re going to be paying for it forever and dealing with price increases and all that. I have other things to say about the product itself, Campfire, but I’m glad to see there’s other options. I can see that this being intriguing to a lot of folks, but not the majority of folks, and that’s why people are paying out the butt for things like Slack.

Rob Walling:
Einar Vollset, are we pivoting TinySeed to invest in one time sale software?

Tracy Osborn:
Why are you asking him?

Einar Vollset:
No. No, we’re definitely not.

Tracy Osborn:
I have opinions about that too.

Rob Walling:
We’ll come back to it.

Einar Vollset:
I think part of this grows out with how after the Slack acquisition, we’re now basically on the Salesforce pricing type in the Salesforce pricing world. So that means just going to get more expensive more quickly as we’re finding out with MicroConf and TinySeed. People get shocked when I tell them what our Slack bill is just for TinySeed and clearly there’s space there for… I actually think Slack itself has sort of failed at, or maybe by choice, but certainly they don’t cater well to this type of community. Not really like a business and not completely volunteer, but this halfway house where you want some of the features, but it really doesn’t make any ton of sense to be spending 50 or a hundred grand just for Slack software. And something like ONCE comes along. And if it’s good enough and you pay $299 once or whatever the price is, then certainly that’s very attractive from a consumer standpoint.
I sort of echo most of the stuff that Tracy says. I think maybe the Basecamp guys are in a unique position, whether they realize quite how unique their sort of position with the fame and their whole… It feels to me their whole marketing approach has been contrarian takes as marketing. That’s sort of been Basecamp stick, so it doesn’t surprise me that a pricing effort like this comes from Basecamp. As much as I love them, I know that they probably get a lot of attention every time they say something unusual or different, so that fits in with that pattern more than anything else, I think. I don’t think it’s a winning formula for your average startup indie hacker, bootstrapper, TinySeed founder to be like, “Oh, screw it. Let’s not charge $250 a month or whatever. Let’s just do $300 once.” We’re already struggling hard enough to get founders to charge enough money of the value, like charge enough so that they capture some of the value that they create. If this becomes a, this is our standard, then that becomes even harder, I think.

Rob Walling:
Yeah. For me as both a founder and as a customer or consumer of software, I don’t want ONCE. And I get it, my opinion, I’m doing mere research instead of market research, but I used to own downloadable software that ran on a server, it was called .NET Invoice. And I will never go back because the headache of support was brutal. People would install it. And people would install it on their own server or on a GoDaddy shared hosting account and it wouldn’t work and it was their problem. They didn’t care it was their problem. They would flame me, they would charge back, they would ask for a refund, they would do whatever. Even though I was like, “Look, it’s your thing.” So then I’d spend an hour or two troubleshooting finally be like, “Oh, your server’s misconfigured here,” and they’re like, “Oh, sorry,” and then they’d fix it. And so two hours of my time for a $300 one time, although it was-

Einar Vollset:
Rob the IT consultants. That’s great. I’m sorry. You missed those days, don’t you?

Rob Walling:
Not at all. And it wasn’t recurring, right? It was 300 one time and then I got 20% annual maintenance, right, so $60 a year per. And I don’t want to do that ever again. I know this long slow SaaS ramp of death is a thing, but also it’s recurring and it’s my servers. And if there’s a problem, I’m responsible for it, but it’s my servers and I know that they’re configured. I know that ONCE says, “Minimal support,” but it’s like, yeah, but come on, people are still going to flame you. They’re still going to charge you back. They don’t give a [inaudible 00:07:10] when you say minimal because they’ll be convinced that it’s your bug. It’s your bug, and then guess what? It’s not, but they don’t care, right?

Einar Vollset:
Right.

Rob Walling:
Because people are idiots on the internet. And so I don’t want it as a entrepreneur, I also don’t want it as a consumer. I would prefer to just please just handle this. I don’t want to spend above, like I have enough trouble. We have a couple apps written in Python and I’m always like, “Where are those hosted, dude? Does anyone have access to those? What if they go down?” It’s like, enough that we’re be… Tracy [inaudible 00:07:38]. So, I don’t know. For me it’s like, as you said, I think it’s a contrarian thing. I think it’s an interesting experiment. I do not at all see that it’s where the market’s going.

Einar Vollset:
Basically, the way that I think about it, you’re basically building in a 100% monthly churn. I spent so much time thinking about how to reduce churn. The fact that you would design your software business model in a way that, “Hey, let’s have a 100% churn every month.”

Rob Walling:
And with .NET Invoice, the first of every month I had zero in revenue and I was like, “I got to start from nothing.” The only thing that worked was if I had ads running or SEO or some recurring traffic source, that was the only way to maintain. For me it was single digit thousands in revenue. Tracy, back to you.

Tracy Osborn:
It doesn’t make sense as a business model in our opinions, I guess for 37signals. It doesn’t make sense for large teams that are using Slack or Teams to switch to something like this because of the lack of supports. And I have some issues with the user experience. I’ve tried it out, I didn’t like it. So this product really only works for maybe small, very savvy tech teams that want to have control of their software and how many of those are out there and what’s going to stop those people from doing something else like Slack free or Discord or anything else? It just doesn’t seem like this is a problem where we’re like, “Okay, Slack is super expensive. It’s awful. People don’t like it, they want a solution for this,” but I don’t see this one being the thing that fixes that problem.

Rob Walling:
I heard Ian Landsman on a podcast, I forget what it was, but he was talking about the launch of this Campfire launch with ONCE. And I can’t find the source of this, but he said that they had sold 800 copies in the first week. 800 times $300 is a quarter million dollars. With 37signals reach, 800 copies just isn’t that much, and it’s not… Look, I know how one time sales go. The first week is the big week and then it goes down from there. It usually doesn’t go up, especially if it’s audience based. So it feels to me, I mean, $250,000 in revenue for them is a rounding error and it doesn’t feel like a success. That doesn’t feel like a success. It’s like, I don’t know. I would think they would need to move a lot more copies for them to be over the moon.

Einar Vollset:
You should get the Basecamp guys on here to ask them how it went.

Rob Walling:
Yeah.

Einar Vollset:
That should be, come on. Yeah, just invite them on and talk about it. Why not?

Rob Walling:
Yep, they’re TinySeed mentors and investors, so.

Tracy Osborn:
Yes, and we love them. We love them for that. I want a product like this to work, but it’s like when you really dig into the focus that would use it, the product itself, the way it’s sold, there’s a lot of issues they’re going to run into and they probably have our already run into at this point. Because I actually haven’t heard many people talk about it since it launched either.

Rob Walling:
No. For a second topic of the day, I go to fundablestartups.com. The headline is, Sell for Half a Billion & Get Nothing, and the summary is that FanDuel was acquired for 465 million in cash, but due to liquidation preferences, the FanDuel founders and most employees received nothing in the massive deal. And I’m going to kick it to you first on this one. Can you let our listeners know what liquidation preferences are and what happened in this deal?

Einar Vollset:
Yeah, I don’t know specifically what happened in this deal, but as a general concept, liquidation preferences are basically this notion that if an investor invests in your company, say they put a $100,000 in and they have a 1x liquidation preference, what that means is basically that when you sell, they get at least a $100,000 back if there is at least a $100,000 back if it’s a 1x liquidation preference. If there’s a 2x liquidation preference, then they get at least double their money back. And if it’s 3x liquidation preference, then they get three times their money back. And there are some nuances beyond that too in terms of like, is the liquidation preference participating or non-participating? So a non-participating 1x liquidation preference means the investor basically has to choose, do they want 1x their money back or do they want to participate in relation to how much they owe of the company?
So obviously, if the transaction is at less than the valuation, they’ll exercise their liquidation preference and get their money back. If it’s larger than that, then they will choose to participate alongside the investors and not get a liquidation preference back. If it’s participating, then they get both. So that means if it’s a 3x participating, liquidation preference means you get three times your money back as the investor and then you participate based on your pro-rata share of the equity. If you don’t know what you’re talking about, if you don’t know what you’re doing, then it can be to the point where sort of unintentionally you didn’t even realize that actually the investors are getting their share plus 3x and you didn’t know that, and that might materially impact the actual money that you put in your pocket at the end of the day.
With this one, I saw this come around for some reason it was back on Twitter the last couple of weeks and I was always like… The headline was this, “Here’s how you sell your business for a billion dollars and make zero.” And I was like, “There’s just no way on God’s green earth that’s actually accurate.” So usually what happens in these kinds of situations is you’re selling for less than the liquidation preference or your latest investors. But a lot of the time, most of the time, and also in this case you want the existing management team and team to stay on because if truly all the money does go directly to the investors, then what’s the point of keeping working there? You might as well just quit and then the company gets run into the ground.
So usually, there’s this notion of a founder or management carve out as part of the transaction. So if they’re selling for 500 million, they might carve out 50 million of that and say, “Okay, 450 goes to the investors and they’ll do whatever they need to do in terms of their liquidation preference or whatever, and then 50 gets carved out as retention bonuses or whatever for the executive team.” Now what seems to have happened here is that the people who truly got zero are the original founders, but those original founders were no longer with the company. And that I can believe, if you are a founder and you basically signed a deal like this and you brought in whatever money, I think it was 275,000 in their latest Series E round and then you walk away, then yeah, I can definitely see how with the 2x liquidation preference, which is high but not [inaudible 00:14:10] or anything like that. I can definitely see how you end up with nothing.
But I think what’s also been lost in that situation is there’s also no way that those founders didn’t get a bunch of money at that Series E. So the founders who walked away, I just do not believe that you get in a situation where you’re raising a 275 million Series E from private equity and family office money and you give up control. And so basically, you agree to 2x liquidation preference and drag along rights and then you take no money off the table as part of that transaction, that I don’t believe. I’m sure that the founders who are now suing already got paid a reasonable amount of money in 2015. I’d be shocked if not, and if not, then they are stupid and their advisors are even worse.

Rob Walling:
And so people listening might say, “Well, there should be no liquidation preferences. Those are predatory,” but they’re not, right? So when TinySeed invests, if we write you a check for $120,000, we have a 1x liquidation preference. And what that means is if tomorrow you were to sell your company for $200,000, we get our 120 back and then you get the rest. And it’s to protect us, because let’s say we invest that 120 for 12%, if we didn’t have a liquidation preference, you could sell it tomorrow for $200,000 and we’d only get 12%, we get 24,000 back, so you could just screw us. So that’s the case at least I know why they exist.

Einar Vollset:
Yeah, there’s a balance there, right? You have to have some level of investor protection, and different investors just have different rights and different approaches to things. We have zero liquidation preference in part because we invest in so many founders. So we have the full spectrum of personalities among our founders, and it just doesn’t make any sense for a professional investor not to have at least a 1x nonparticipating liquidation preference, which is what we have. But there are other investors who basically have 3x liquidation preferences. Yeah.

Rob Walling:
Tracy Makes, what are your thoughts on this?

Tracy Osborn:
I wish I had Einar on my team when I was back the day at my startup and I was joining a accelerator and trying to decide whether I was going to take outside money. I talked about this in MicroConf 2016 is how I met Rob because I started this startup and I bounced back and forth on raising, thinking I was like, “Oh, I’m going to raise money.” And then I was like, “No, I’m going to go back to bootstrapping.” And what actually happened is I raised money from this accelerator. A friend told me that this accelerator had, I want to say at least a 2x liquidation preference might’ve been three, and they were like, “FYI, this could cause trouble in the future.”
I was dumb back then. I was like, “Okay, I’ll sign this anyways,” deciding not to raise money and going to bootstrapping. When I wanted to shut down the business and ideally I would like to sell the business so that I can move on and do other things like join TinySeed. Because of those terms and liquidation preference, and because I hadn’t raised money and because the company was, I couldn’t just as a bootstrap business be like, “All right, cool, I’m sticking myself a $20,000 sale and have some money from that,” but no I had this liquidation preference, I had this investor on board, all these old terms. I would have to pay back two or three times what they invested in me before I would see anything.
So I just had to shut down the business at that point. I got so many emails from people being like, “Why can’t you just sell the business for peanuts and get a little bit of money?” And I was like, “Because I won’t because of this prior investor and the liquidation preference and all that stuff.” So it’s anecdotally, but it’s now I know more about terms and what to look out for when raising money. And hindsight being 2020, I wish that I heard for the great [inaudible 00:17:46], I could have negotiated that in some way, shape, or form, I didn’t do that. I just didn’t know back then. And now I understand how I got into that situation.

Einar Vollset:
Like a lot of founders they just look at the top line number, how much money am I getting in?

Tracy Osborn:
Yeah. Money.

Einar Vollset:
What’s the valuation and the story? And then they’re just like, “Whatever. Everything else will work out. We’ll just make a ton of money and then it doesn’t matter,” but it does matter. And really investor behavior and their terms particularly early on really matters. It can materially impact your ability to fundraise. It can materially impact your ability to sell the company. There’s lots of things with just making sure that the terms that you’re getting are reasonably balanced. It doesn’t have to be super founder-friendly because that 0x liquidation preference doesn’t make any sense either. But finding the right balance there I think is key.

Rob Walling:
And I could see an indie hacker posting this on Twitter and saying, “See? Funding, never raise funding. It’s the devil.” And it’s that’s not the lesson either, right? Funding is a tool. You don’t say that a hammer or a shovel is a tool, but understand when they work and when they don’t and understand what you’re getting into, understand which strings might be attached, educate yourself, hire a good lawyer and don’t just sign paper because funding can get you there faster. And we see this with TinySeed companies every day, so it’s not that it’s good or bad or indifferent, it is just a thing. And yes, there are predatory investors out there. There are really [inaudible 00:19:12] founders who try to screw their investors too. It cuts both ways. And so, that’s where liquidation preferences are a thing that’s part of the ecosystem.

Tracy Osborn:
I think it’s not just understanding the term, but also understanding different scenarios about what those mean. Because there are scenarios where a certain term could make sense and there’s scenarios where certain terms that don’t make sense and just being aware of where those are or will make the future less. Make it easier to plan for the future because you know what direction to go to based on the terms that you have. There is a book… Einar, don’t talk about books later, but I want to talk about, what was it, the book Venture Deals: Be Smarter than Your Lawyer and Venture Capitalist by Brad Feld, that was something I read post my investment in my prior startup that I wish I had read before I took that investment. Because people told me it was predatory. I thought I understood it, but that broke things down in a way where then I really understood what those scenarios meant for me.

Rob Walling:
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Our next story is titled, How I Turned My Open Source Project into a Business. It is the business of email engine. And for me, I mean, it’s an interesting story. Most people who started an open source project are not able to build a business around it. I believe it might even be supporting him full time, but the interesting part for me was he had the open source project and then it was under the AGPL license, which is extremely permissive. And then if you wanted an MIT license, then you had to pay him and it was €250 per year and basically he was making nothing. Like a year and a half, he made €750 in total revenue.
The big shift was basically saying, you need a valid license within 15 minutes after the app where it stops working. So he actually implemented what we would think of as a time-limited SaaS trial, and that instantly changed the whole game. He changed it from almost a donation model, right? It’s like, “Hey, can I have tips? To like, you need to pay to use the software?” Oh yeah, I guess he says at the end, the current MRR is €6,100 and growing steadily, which in Estonia where he lives allows him to pay himself a decent salary. So it is a full-time income. So Tracy, what’s your take on this story?

Tracy Osborn:
This is a fun topic because I have a lot of friends that are in the open source industry and I actually read this article and decided to ask a few friends, and I honestly don’t think that the licenses were the biggest factor here. It’s actually the founder or the creator of this service moving from a, “If I build it, they will come type,” of product to doing essentially sales. Because they talk about raising, they setting the price and they set a way for that they can get that money in and then they increase the pricing. And it’s all those kinds of things that we’ve talked about with founders just in general about, you can’t just build something and hope that people are going to send you money at some point. You have to be thoughtful about your pricing and how people are going to be using your product and do that sales stuff. That was the biggest difference. It wasn’t the changing of the licenses, it was the changing of how this person was selling and looking at the product through their own eyes.

Rob Walling:
Einar Vollset, what are your thoughts?

Einar Vollset:
My thought this is still probably vastly underpriced and he should probably 10X’s prices overnight. That’s what I think.

Rob Walling:
That’s what it feels like to me too.

Einar Vollset:
I mean, stuff [inaudible 00:23:35] around here. He already says it in the thing, 250 a year became 495, became 695, became 795, and finally 895. I’m like, “Brother, how about trying adding in a zero and see how that goes?”

Rob Walling:
There we go.

Einar Vollset:
Why not?

Tracy Osborn:
It’s [inaudible 00:23:47].

Einar Vollset:
What’s the worst that could happen?

Rob Walling:
Inspiring words from a man who knows SaaS pricing. Yep, that’s part of the TinySeed playbook, the not-so-secret part of raising prices. As we move towards wrapping up, I would like to get a book recommendation from each of you, and then we’re going to do a lightning round called Agree or Disagree, and it’s based on the Twitter thread that I started, which is what’s your most controversial opinion about building startups? I got 150 responses to that. I’m probably actually going to cover some of them in depth on a future podcast episode, but we’ll bounce through some of the spicy takes, controversial things, and I want to hear from each of you. Before we do that, Tracy Osborn, do you have a nonfiction book recommendation for folks?

Tracy Osborn:
All right, so in addition to Venture Deals, so if you ever want to raise money or you want to learn about these terms and things that go into taking a venture capital, definitely get Venture Deals by Brad Feld. But the other one I wanted to mention is a negotiation book by Chris Voss, Never Split the Difference. I have so much trouble with negotiation. I don’t like being in a position where I’m arguing against someone for my own benefit because my brain melts into a puddle and I get anxious and all that stuff. And I think this book really helps redefine how negotiation works in a way that really works for my brain, where a lot of it is taking that negotiation, having empathy for the person across the table, but then using that empathy to get what you want and that resonates with me.
So it’s not a fight back and forth when you’re negotiating. It’s seeing from their perspective, bringing up that perspective to that person as you’re going through the negotiation, finding that middle ground. It’s called Not Never Split the Difference, which I think is anti-middle ground, but it was a book that was really useful for me to understand a better way of negotiation.

Rob Walling:
And you also had a fiction book that you accidentally pasted in because you misread it. We might as well just throw that out as a bonus.

Tracy Osborn:
I read more fiction books than I do nonfiction because that was my way of turning off my brain from work, and I probably read about a book a week. Best book I’ve read fiction-wise recently is the Anomaly by French author Hervé Le Tellier. I hopefully I’m saying this correctly. If anyone wants a cool fiction book with beautiful writing, I would recommend just trusting my recommendation and don’t read the description of the book because it has a spoiler, and I think that the journey on that book is worth it to start completely scratch. Make sure you go through the first five chapters. It’s going to seem weird in the beginning, but I think it’s worth it. And I think it’s a good way to turn your brain off of business and read something fun and be transported to another world.

Rob Walling:
Einar Vollset, what’s your book recommendation?

Einar Vollset:
Oh, given that Tracy somehow managed to put three in there, I’m going to push with a combination of things. So, I really liked The Art of Learning by Josh Waitzkin, which is he was this chess wonder kid who also ended up becoming the world number two or world champion in some sort of an Asian fight sport thing that I don’t exactly recall now. He’s a very interesting guy. He’s this consultant to a high performers now and he talks about his approach to learning and how he coaches people on that. So I really like that one. And it is also just a good story. It’s pretty biographical about his growing up and him going through both the chess and the martial arts world.
That one’s good. And then I like a more philosophical book, which is David Deutsch’s, The Beginning of Infinity, which doesn’t really have any takeaways shape or form, particularly as it relates to B2B SaaS. It’s just an interesting way to think about the world that I think counters a lot of the… I think there’s an inherent negativity bias in the world in general. People are pretty convinced that finally, now here we are, it’s going to end very soon because we’re all [inaudible 00:27:30], versus this is the opposite and antidote to that, so I like that a fair bit.

Rob Walling:
Well, since you each gave a few recommendations, I won’t give one this week. People have heard enough from me. I had one, but I’ll table it for now. Now, I want a lightning round this, agree or disagree with these controversial opinions about building startups. We’ll start with Tracy. It’s from Dominic Mon, “Most developers get a better deal sitting it out in big tech.” Meaning instead of becoming a founder, sitting it out and working for FAANG or something, what do you think?

Tracy Osborn:
I mean, is money the only thing that matters or is working on something that’s interesting and challenging and having time freedom and all those other things? It’s like big tech works if you want to just make a whole bunch of money and then potentially be in a situation where you’re working on 09:00 to 05:00 and that’s it. But startups and they’re riskier, but it might be more challenging and more fun in different ways.

Rob Walling:
Einar, what do you think, “Most devs get a better deal sitting it out in big tech.”

Einar Vollset:
Yeah, financially speaking, most likely, yes. I think the expected financial outcome for the median one probably is probably higher, particularly if you get a job at the FAANG in Silicon Valley. Those US type salaries. Yeah, I think so. What you don’t get necessarily is the freedom to do your own thing and potential for a significantly higher outcome than you most likely to get in FAANG.

Rob Walling:
Next tweet is from our very own Interval Set, “Product led growth is where founders too scared to do sales, go to hide.” Tracy, what’s your lightning round take on this?

Tracy Osborn:
I mean, I’m drinking the TinySeed Kool-Aid at this point, so that comes straight from Ainar. I can’t disagree with him.

Rob Walling:
Yep. Ainar, you care to elaborate on this?

Einar Vollset:
I just agree with myself. I think it’s a very wise thing to say. I think in general, this Twitter account really truly is just quality after quality tweet nonstop.

Rob Walling:
Where’s the thumbs down? It is next to the heart, there should be a thumbs down. I want to dislike this tweet just because you said that.

Einar Vollset:
There’s a mute button, surely.

Tracy Osborn:
This relates to the open source stuff where there’s folks who want to build something and are like, “If I build it, people will come. Ooh, product-led growth. My product is going to be so amazing that people are going to be throwing themselves at me to pay me money.” As we’ve seen with many, many companies in TinySeed that marketing and sales is incredibly important.

Einar Vollset:
Yeah. I mean, to elaborate just a little bit more fundamentally what I’m trying to say here is I don’t think people realize that how consultancy sales really is, how you can’t just throw things up there and be like, “Hey, go use it whenever.” Probably the highest value SaaS businesses actually requires the sales, which almost looks like consulting. That’s what I think a lot of the time.

Rob Walling:
Our next take is from [inaudible 00:30:21] and Speaker James Kennedy. His take is, “It is not actually that hard.” Implying that building a startup is not actually that hard. Tracy, what’s your take?

Tracy Osborn:
It’s just the bold. I guess when you look at-

Rob Walling:
Bolds statement.

Tracy Osborn:
The bold statement, when you look at something again in hindsight, I’ll go back to looking at my startup and I look back at what I did with Wedding Lovely compressing those nine years altogether, I would agree that it wasn’t that hard, but the day-to-day stuff can feel like the worst thing in the world. You can go through those dips that it does feel like it’s harder than anything else that you’ve done because you’re having a bad day, things aren’t going well. So I think it’s long-term perspective, it can feel not as hard, but in the short term it’s really hard to tell people that.

Rob Walling:
Einar, what’s your take?

Einar Vollset:
I disagree with James here. I think it’s extremely hard. I think mentally more than anything else. I see that with founders and we support this question and TinySeed, it’s a mental rollercoaster in a way that just going to work and just the stress of it too, particularly once you start having employees that you feel like you’ve got to look after and all that stuff. Yeah, I think it’s hard.

Tracy Osborn:
It evolves. It’s hard to say that hard because you’re looking at everything, but getting from zero to one is a challenge and then scaling that is a challenge. Then working with employees is a challenge. Then jumping into enterprise sales can be the next challenge. Then having your mindset, right, so you can sell your company is also a challenge. All those things do add up.

Einar Vollset:
I think in general, people underestimate. I think a lot of the time people think like, “Oh, as soon as I get to a million in ARR,” or whatever number or there’s some hurdle, then it’ll just be coasting and just executing more versus that’s not the case. There’s always fresh things. Start again, add new things all the time in order to keep growth up.

Rob Walling:
So do two of you know the definition of a lightning round? You’re not supposed to go back and forth. You’re supposed to just-

Einar Vollset:
Yeah, yeah, yeah. Well, whatever.

Rob Walling:
… weigh in with a quick thought.

Tracy Osborn:
We like talk big.

Rob Walling:
I’m never doing-

Einar Vollset:
Whatever.

Rob Walling:
… a lightning round again with you two. I’m going to replace the-

Tracy Osborn:
I mean, to be fair, this is lightning round compared to our normal discussions.

Rob Walling:
Really, really? Yes.

Einar Vollset:
Yeah, I’m glad you just… Come on. This is superfast.

Tracy Osborn:
We like talking.

Rob Walling:
Our final lightning round is a tweet from Caesar Halmasian. “Startups are a trap. Businesses are way better.” Tracy, are startups a trap and lifestyle businesses way better?

Tracy Osborn:
I don’t like going first. If I’m going to be truly lightning round, I want to hear Einar go first.

Rob Walling:
Einar.

Einar Vollset:
No. You say, [inaudible 00:32:55]. No.

Rob Walling:
Care to elaborate or shall we just move on to…

Einar Vollset:
No. I mean, I think are startups are trapped? No. Lifestyle is way better. It depends what you’re optimizing for. If what you want to do is just futz around and start seven different an info product and some e-commerce drop shipping thing and a couple of SaaS’s and buy something and a newsletter that you monetize and just to start, if that’s what you’re happy doing, that’s great. But if what you’re wanting to do is something bigger, make most likely more money, then startups can definitely be the way. But there are different ways to do that too, right? There’s a difference between bootstrapping a SaaS business that you’re hoping to sell for 20 million bucks compared to starting Open AI where apparently you’re going to raise $7 trillion and build Silicon in the desert, right? They’re just different things. I don’t think anything is better. I think it’s a good thing that Elon Musk decides that he’s going to build Tesla and go to Mars or whatever. That’s fine. It just is what it is. For him, there’s no better or worse, I don’t think.

Rob Walling:
Yeah, I’ve done both, right? I’ve had great lifestyle businesses. I’ve had what I would consider startups. I mean, I would do consider TinySeeds a startup, MicroConf a startup, Drip certainly was, and I fall into the startup camp. Lifestyle business is great and it got a little boring and just working 10 hours a week for making my money was, I wanted something where I could be more ambitious about it and where I could really have a purpose around it. And that I think is what the startups that I’ve chosen to build have brought in addition to monetary rewards that were far beyond the lifestyle businesses. Lifestyle businesses in the short term, of course, you’re making income net profit on it. It’s taxed at income tax rates, and if you exit a startup, right, usually depending on where you live, you get that long-term cap gains and you accelerate, you get 10 years of net profit, 20 years of net profit if I’m talking SaaS. But it depends on multiples and such, but you can really accelerate that earning. Tracy closing thoughts on this tweet?

Tracy Osborn:
Ditto.

Rob Walling:
Nailed it.

Tracy Osborn:
Nice. I just wanted to go there. Boom.

Rob Walling:
Einar Vollset, folks want to keep up with you. Einar Vollset on Twitter, you work on TinySeed. You also are the principal of Discretion Capital. So someone’s listening to this and they have a SaaS company doing at least 2 million ARR and they’re thinking about selling. You’re a sell-side M&A advisory, and they should reach out to you. Einar@discretioncapital.com.

Einar Vollset:
[inaudible 00:35:23].

Rob Walling:
Tracey Makes, you are Tracey Makes on Twitter. So your name is Tracey Osborn. So everyone knows, but I call it your nickname as Tracey Makes, so that is-

Tracy Osborn:
Because I couldn’t get Tracey Osborn on Twitter, so I’m now Tracey Makes, yes.

Rob Walling:
Yes. Tracey Makes on Twitter, tinyseed.com. Anywhere else you want to send folks?

Tracy Osborn:
I’m probably more active on the TinySeed social media accounts than I am on my personal one. So if you’re ever talking with TinySeed [inaudible 00:35:46] on Twitter, that is me. I hesitate to mention this because then people are going to look at it, but I am also trying to get a TikTok account off the ground and I couldn’t get Tracy Makes for that one, so I’m [inaudible 00:35:58].

Rob Walling:
What?

Einar Vollset:
Just in time for it to be banned.

Tracy Osborn:
I know, right? I need to get better at doing videos.

Einar Vollset:
If you get banned right after you launched this, then I’m going to blame you. I’m going to say Tracy, you brought down TikTok with you.

Tracy Osborn:
Yeah. Yeah, my little startup talking about negotiation and other little videos I’m doing took it all down. But itstracymakes on TikTok because that is another place I did not get my preferred username.

Rob Walling:
Oh, so it’s I-T-S-

Tracy Osborn:
Tracy Makes.

Rob Walling:
So, itstracymakes-

Tracy Osborn:
Yep, on TikTok.

Rob Walling:
… on TikTok.

Tracy Osborn:
Yep.

Rob Walling:
Amazing. And if you’re not following me @robwalling on Twitter and saasplaybook.com these days is probably my most recent effort that you should check out. Tracy, thanks for joining me for this Hot Take Tuesday.

Tracy Osborn:
Always fun.

Rob Walling:
Einar, thanks for coming around, man.

Einar Vollset:
Thanks for having me.

Rob Walling:
Thanks again to Tracy and Einar for joining me on this week’s episode. And thank you for listening this week and every week. This is Rob Walling signing off from episode 707.

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us. As always, I’m your host, Rob Walling, and in today’s very special episode, I’m going to be walking through some advice that I’ve been giving over the past 10 plus years on the show, in conference talks, even in some of my books that I’ve really started to rethink as new evidence has presented itself recently. The more conversations I get into on Hacker News and Twitter around these topics of being a founder and launching a startup, rules of thumb and things that I’ve made recommendations on where, look, I’m not the person who says always never. But I will admit with many of these, I’ve said 90%, 95%, 98% of the time, I believe that this advice is sound. And in today’s episode, I’m going to talk about how I’m rethinking that on a few key points. 

The first point that I’m rethinking and want to maybe offer different advice than I have in the past is around pricing. And you’ve heard me say that pricing is the biggest lever in SaaS, and I still believe that. And I know that if your annual contract value is $500 a year, you have maybe 5 or 6 B2B marketing approaches that you can do, and there’s a bunch you cannot because you just can’t afford to do them. And if you’re charging, I don’t know, it’s in the 5 to $7,500 a year, then you probably have 10 or 12 that you can do. And if you’re charging 30,000, 40,000 and up, then all 20 of the B2B SaaS marketing approaches that I talk about on the show and in my book, The SaaS Playbook, are available to you. And all that’s true and I stand by that. 

But what I’ve realized is I think myself and the rest of the MicroConf community have gotten a little too hung up on increasing prices and feeling like raising your prices, A, that it’s the solution to everything. But B, that it’s always good. And I’ve started to take the other side of that argument pretty seriously. Like, what would happen if you lowered prices? A lot of good can come out of that. Imagine that instead of having a product that you’re selling for 200, $300 a month, even $100 a month, you go down market and you charge $10 a month, $20 a month. So many benefits can come from doing that. Things like you’ll attract a lot more customers because how many people or businesses can afford to pay hundreds a month? Well, there’s obviously a lot more that can afford to pay 10 or $20 a month. And so this increases your potential market, your total addressable market, as the VCs would say. I always like to call it the term, the total reachable market because who cares if it’s a total market if you can’t reach them in the ways that you’re marketing. 

But as I’ve thought about it, I’ve realized there are so many benefits. It widens your market. I know that I’ve talked about lower prices increasing churn, and that is true, but realize that there’s a plus side to churn as well. It means that the people who don’t need your product will leave, and you don’t need to support them anymore, and you don’t need to provide them with whatever hard disk space respond to their emails. There are a lot of benefits for people churning out. And so what I’m saying is that 2024 for me is going to be the year of going down market, and that’s going to be my default advice for founders coming to me with issues in their startup. “Are you plateaued? Have you thought about lowering prices? Are you not finding enough customers? Have you thought about lowering prices? None of your marketing is working. Nobody wants to use your product. Have you thought about lowering prices?” 2024, the year of going down market. 

Speaking of down market and lowering prices, there’s another paradigm or piece of advice that I’ve been giving, it’s got to be 14 years, probably more than this, 15 years. And it’s that if you’re going to build software, whether it’s SaaS, downloadable, whatever, that you target businesses, that B2B is superior to B2C. And I’ve really started rethinking that based on evidence again, that I’ve seen Twitter, Hacker News and folks who are charging these $5, $10 downloads for sometimes they’re one time and sometimes it’s monthly. But think about the benefits of targeting consumers. There are a lot, and there’s a lot that I ignore and don’t talk about on this show, and I feel kind of bad about it, which is why I’m recording this episode and putting it out like this because I wanted to get it to you as soon as possible. But think about if your entire addressable market of businesses in your space is 20,000, 50,000, 200,000 businesses, if you shifted your focus and went after consumers, billions. Billions of potential customers. 

So why would you focus on a small market with tens of thousands or at best hundreds of thousands of potential customers when you can have billions of customers? And not only that, but B2C apps, they are just a lot more interesting than B2B apps. B2B apps are kind of boring. Who wants to build CRM software for realtors or the business operating system for gyms and fitness studios when you can build software that’s used by people like you and I, and my brother, and my uncle, and my parents? It’s a way to not only sell to customers, but also to get recognition from people who will finally understand what you do. 

Your mom will no longer say, “My son or my daughter who’s a startup founder, they fix computers.” She might actually be a user of your app. And think about how much cooler that would feel than trying to explain email marketing to someone who has no idea what you’re talking about. And then they basically summarize it by saying, “Oh, so you provide software for people to spam you” which is a response that I got when building Drip a little too often, especially at family reunions. 

But not only that, there’s one other thing that B2C apps have that B2B apps very, very rarely have, and it’s virality. And I have not leaned in nearly enough to that incredibly powerful marketing approach of going viral that B2C apps allow you where consumers just talk and they spread the word for you and you just build the product and you don’t have to market it. And what’s a better dream than building an app with billions of potential customers who market it for you and maybe even your mom or dad will understand what you do? So on this show, I am going to start embracing B2C. And look, I’m not saying it’s better than B2B, but it’s at least on the same level, and I’m going to see how my opinion shake out over the coming year. 

The third thing that’s been bugging me, and I finally was able to put my finger on it last week, is I’ve talked a lot about two-sided marketplaces and how bootstrapping them is difficult and how you shouldn’t do it. And on this episode, I’m taking that back. What I’ve realized is that a SaaS app is a one-sided not marketplace, and a SaaS app has to do a lot. The software is the value. The job to be done is whatever the software is doing. With a two-sided marketplace, not only do you have two sides and much like going B2B to B2C, you now have so many more options for customers. Going from a one-sided not marketplace to a two-sided marketplace gives you so many more options. You now have two audiences that you can market to and sell to. You now have two audiences that you can provide different value propositions to, and you now have two audiences that you can build your product for. So I’ve realized the error of my ways in thinking that just because something is simpler, I.E. a B2B SaaS app doesn’t make it better. 

In addition, the job to be done of a two-sided marketplace, it’s done just by connecting people. All you have to do is take an Uber driver, pair them up with a rider, and it’s done. You don’t need to build a bunch of software that’s really hard to build. You could almost do this with no code or a Google sheet. Imagine eBay and Upwork and how simple those would be to launch today in terms of the software you’d have to build. The value is in connecting the two sides, and that makes these much easier and in fact, much simpler businesses. And I want to apologize for leading you astray on that point for the past many years. 

The fourth and final point I want to cover today is again, something that I want to backtrack on that I’ve talked about. I no longer believe in the value of focus, and I no longer believe that you need to launch a product, solve a problem, find product market fit, and invest time and energy into an idea and iterate on it and get it to the point where you’re providing value. Some people call it product market fit. I call it building something people want and are willing to pay for. Instead, I think that we should all be launching a bunch of things to see what sticks. We’re makers. We should make. We’re builders. We should build. Since it’s all just luck anyway, why wouldn’t I make a bunch of apps and throw them out there and see which ones get traction? If I’m in Las Vegas and I’m playing blackjack and I know that it’s all just luck, why wouldn’t I just play 10 hands figuring one of these will win eventually. 

The best part is I’m now giving you permission as the builder, the coder, the developer, the maker to just go build. All you have to do is build and launch. That’s it. I’m not going to talk to you about selling, about talking to humans, about listening to people’s pain points about marketing. I mean, who wants to learn SEO, who wants to deal with ads and creating content and cold outreach and trying to figure out what to do next amid the pain of launching a startup? No one does. So don’t do it. Look inside and ask yourself, “What do I want to do? What fits my personality?” And I bet if you’re really honest, what fits your personality is to make stuff and launch it and not do any of the hard things. 

So 2024, along with being the year of going down market, B2C, and bootstrapping two-sided marketplaces is going to be the year of launching a bunch of things to see what sticks. Obviously, the show is going to change quite a bit, and I bet you’re super curious to hear what tomorrow’s episode is like in light of my recent revelations. But I do want to point one thing out to you in case you haven’t checked your calendar. Today’s date is April 1st of 2024, and in many countries, today is a April Fool’s Day. So I apologize in arrears and I can be held responsible for nothing I’ve said in this episode. 

The views expressed in this episode of Startups For the Rest of Us are neither the views of MicroConf, TinySeed nor of Rob Walling. They’re the views of April Fool’s Day, 2024. I was really trying to steel man those arguments though, trying to look at the bright sides until it just got a little crazy. I was going to go on. I have three more things. Shouldn’t you build a second product if your first stops growing? What about multi-language support? How about take investment in the launch of the products? What about defining a new category when you’re bootstrapping? No, there’s a lot, I realize. I think I’m taking the joke too far. So I appreciate you listening today. This does not preempt the normal episode of Startups For the Rest of Us this week, so we will be back tomorrow with your normally scheduled episode that will be on topic, super serious as always, not an April Fool’s joke. 

Appreciate you hanging with me today. If you thought this was funny or if I actually got you for even a bit, please hit me up on Twitter. You can send an email to questions@startupsfortherestofus.com. I’m curious at what point most people realized that this was a joke episode because I started getting a little crazy with some of the B2C stuff. And if this is your first episode, if you’re listening to this months down the line, I’m probably putting an introduction, a warning, a disclaimer if you will, not to listen to it, just to skip to the next episode. But if this is your first episode, you may want to go back and listen to the 2, 3, 4 prior to this to see what this show is actually about. If you liked this one, thought it was funny, hit me up on Twitter, and if you didn’t, don’t bother. I’ll be back again in your earbuds tomorrow for another regularly scheduled episode. This is Rob Walling signing off from episode 706.5.

Rob Walling:
MicroConf US in Atlanta is here in just a couple weeks, and this is your last call to buy tickets. We’ve sold more than 90% of the tickets, and we will sell this event out as we have for many years. The event is April 21st through the 23rd in Atlanta, Georgia at the amazing Starling Atlanta. It’s a vibrant, upscale escape for creative souls. It’s going to be a great event.
There are going to be 200-ish of your closest Bootstrap and mostly Bootstrap founder friends who are showing up to hear talks from folks like Rand Fishkin of SparkToro, Asia Orangio of DemandMaven. I’m giving a talk that has never appeared on this YouTube channel, and a talk by Dr. Sherry Walling on staying motivated as an entrepreneur.

We have a special guest MC, Leanna Patch, and a very special guest who has never appeared on the MicroConf stage before, Ben Chestnut, the co-founder of MailChimp. He really doesn’t do many in-person events, but he has agreed to come on and do a fireside chat with me, I’m really looking forward to it.

If you haven’t attended a MicroConf in a few years, we’ve changed the format. We used to have 9 or 10 speakers over two days, so it was a lot of content, a lot of sitting in seats, and we’ve completely reorganized it. We have about five talks, and the afternoons are reserved for interaction for workshops and for our excursions. We’ve done excursions like ax throwing, brewery tours, improv classes. I know we aren’t hosting all of those here in Atlanta, but those are the types of things we do to get you out of the building, a little bit out of your comfort zone, but to be around other founders and make friends because MicroConf is about relationships. And that’s the thing we have doubled down on over the past three or four years as we’ve re-engineered the event from focusing on content to focusing on the community and the relationships that are built between founders.

So if you’re thinking about attending, you want to head to microconf.com/us and buy your ticket.
Unfortunately, I’m going to be unable to help you out when we sell out and you email me asking if you can get a ticket, because once we’re done, we’re done. It’s Microconf.com/us, and if you want to meet up again with about 200-ish of your closest founder friends that from past MicroConfs, from MicroConf Remote, from MicroConf Connect, and of course the Bootstrap community on Twitter started around MicroConf. So many of those folks that you know are going to be attending. So you don’t want to miss out. Microcomp.com/us. Hope to see you there!

Rob Walling:
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I’m Rob Walling, and in this week’s episode, I do a Rob solo adventure, where I’m going to talk through a few topics, always bringing it back to being a bootstrapped or mostly bootstrapped startup founder. Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling. It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. 

I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of Mailchimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. MicroConf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon, so if you’re thinking about joining me and about 225 of your closest bootstrap founder friends, head to MicroConf.com/us. My first topic of today is how the startup world and the bootstrapper, MicroConf community, and I’m kind of breaking those. 

Those are overlapping Venn diagrams, but they really are two different things. I think of the startup world as probably being more of the Silicon Valley high growth stuff, and then bootstrapping, and MicroConf being maybe a subset of that with some overlap. But the idea is that the startup world struggles to not only learn from prior art, but to credit prior art. It’s two related things, but they really are different. So if you’re an academic and you go, let’s say get your PhD in psychology, or in computer science, and you’re writing papers or writing a dissertation or a thesis, it is 100% plagiarism if you claim someone else’s idea as your own, without giving credit. 

It doesn’t mean you can’t talk about ideas that you’ve heard elsewhere, but you give them credit. So if you go on Twitter and you say, “I had this great idea, it’s to do things that don’t scale,” or even if you don’t say, “I had this great idea,” but you go on and say, “Here’s a secret to success, little known, do things that don’t scale in the early days so that those will eventually lead you to be able to scale up,” but you never mention that Paul Graham wrote an essay called Do Things that Don’t Scale, and he wrote it back in, I don’t know, 2006 or 2007. And it is a very commonly known idea and thought that he came up with, and you don’t credit that, you are plagiarizing someone else’s idea, because the people reading that think you came up with it by default. If you say something and don’t credit, they believe you came up with it. Not a week goes by … 

Literally, not a week. Sometimes it’s more than that, that I don’t see someone on Twitter, or YouTube, Reddit, Hacker News, claiming a concept, or even not claiming it, but not crediting a concept that’s pretty well-defined, that either I invented or Paul Graham came up with, or Jason Cohen, or Hiten Shah, that has pretty obvious and clear prior art, and it’s not like someone saying, “Oh, work hard for success.” Right? That’s a pretty generic way of talking about it, but if someone says, “You have to work hard, and you need skills,” and then there’s a little bit of luck involved. Well, obviously, that is exactly the framework that I talk about for achieving success, is hard work, luck, and skill, and so you can rephrase those two things or whatever, but if you pick those exact three things, the odds of that being a coincidence that we both came up with it, that you came up with it on your own without the influence is pretty unlikely. 

And this is really common, like in the creator maker influencer space, the info product, info marketing space. People are just kind of plagiarizing, and I find it frustrating, I think, as someone who does a lot of deep thinking about this stuff and comes up with a lot of frameworks, and seeing things, whether it’s mine or someone else’s, it just never feels right that folks on the internet, in the startup space, I don’t know why they feel like they need to do that. I don’t believe that it’s an accident. I think it’s pretty intentional, but the thing is, is it’s not just crediting prior art and just saying, “Oh, yeah, that person came up with this idea, but here, I’m going to build on top of it,” or, “Here is how I implemented it,” or, “Here is how it impacted me.” It’s not negative to you to just say that, to just give the credit, but the other thing is not just crediting prior art, it’s learning from prior art, and I see so many folks trying to reinvent the wheel and justify it by saying, “Well, I’m going back to first principles,” or, “That’s rule of thumb, common wisdom, therefore, I’m going to go against that.” 

Like the teenager in the family, every what, generation rebels against the prior generation, right? There’s an example of Ryan Breslow, Breslow. I don’t know how you pronounce his name, but he was the founder and CEO of Bolt, and he was the guy … I don’t know, he’s a 20-something who just thought he knew everything, basically, and he went on Twitter, and what, flame Stripe and Y Combinator as being some type of mafia, or a cabal or whatever. Anytime I hear this type of phrasing, I’m like, “Oh, boy, someone really wants some clicks rather than fighting the good fight.” 

But anyways, Bolt was giving loans to their employees so that employees could buy stock options, and then Bolt lost 97% of its value, and so anyone who took out loans to buy their stock options now owes the company money, sometimes thousands, sometimes tens of thousands of dollars. At the same time, this founder, Ryan Breslow, sold millions of dollars of his shares in secondary, so he seems to walk away okay, but it’s kind of a disaster for employees who are now on the hook for these funds. The thing is, this was already attempted. If you listen to the All-In Podcast, you’ll hear David Sacks talk about this, where this had already been attempted in the ’90s, and it was proven to be a disaster, but he was touting it as this great new invention, this employee-friendly thing. A, did no one tell him this is a catastrophic idea, they tried this 30 years ago, and this same thing happened, or B, did people tell him, and he waved that off, right? 

He said, “Well, no, I’m going back to first principles. They did it differently. They did it wrong in the past.” I’m not saying we should be tied to every mistake that everyone makes in the past and never try things that didn’t work, but you have to learn from that art and do it differently. You have to learn from the failures and not just try the same thing again and expect a different outcome. 

If we are not as a community learning from prior art and reading books like Paul Graham’s Hackers & Painters, or the old blog post from Joel Spolsky, old posts from Peldi Guilizzoni, Patrick McKenzie, my books, my old blog posts and podcast episodes, if you just come on the scene and you don’t read any of that, then you can’t stand on the shoulders of giants. There’s a reason that in academics, you study and you go to school to learn what people before you have learned, so that you don’t have to reinvent everything from scratch every two weeks. If you come on the scene and you don’t read any of that, then prior to yesterday’s Twitter feed or Hacker News, do we just start over from zero every week or two, and we don’t drag anything along with us? Now, you could say, “Well, dragging things along is baggage,” and I want to, once again, go back to first principles, but at least know, “What’s been tried?” At least know, “What’s been talked about?” 

And you can make a case to disagree with it, but even that, just knowing what the common wisdom is, and then zigging when everyone else is zagging, at least make that a deliberate decision, not just a decision of, “I’m going to do this because I didn’t educate myself that I need to actually market and sell this,” even though, every week on this podcast I’m saying that. You go and start a B2C business, it has high churn, and you’re surprised everyone is price sensitive, even though every other week, I talk about that. You go and start a B2C two-sided marketplace, try to bootstrap it with no audience, even though I’ve said it so much, it’s become part of the Startups For the Rest of Us drinking game. And look, I’m not saying just me. I’m not saying, “Oh, I should say things, and everyone on the internet should hear it.” 

It’s not the case. There are so many smart people with experience that are talking about these things, and yet, there are so many people who are making the same mistakes over and over because they’re not doing any of the learning or the research on their own in order to stand on the shoulders of giants. As you start your journey, it’s hard enough already. Learn from the mistakes of others. You do not have to make every mistake yourself, and hopefully, if you’re a creator, if you’re recording videos, if you’re putting out podcasts, if you’re tweeting, that next time you mention someone else’s idea or framework, that you give them credit. 

My next topic is a concept I mentioned on a podcast four or five years ago, and then poof, it just disappeared. I had forgotten it. I think it was during an interview, and the idea of it … I want to bring it back up today because I’ve realized that there’s a lot of value in this framework. It’s about early stage product validation, okay? 

So if you’re a later stage founder, you may want to skip this section, but the framework I’m calling the 2-20-200 validation framework. So you know how I have the 1-9-90 rule, right? That’s where I think about 1% of tech companies should consider raising venture, about 9% should consider raising some type of funding, whether it’s angel, TinySeed, indie funding, whatever, and then about 90% should just bootstrap. It’s directionally correct. It’s directionally accurate. 

As Braden Dennis said on the show a couple of weeks ago, “This 2-20-200 validation framework is similar, directionally accurate.” The idea here is that there are three steps, three stages that can happen in order as you try to validate or invalidate a startup idea, and the numbers stand for the approximate number of hours that I think you’re going to spend doing them. So two hours, 20 hours, 200 hours. And the idea here is the first stage of two hours is something you can do relatively quickly. So if you have five different ideas that you’re thinking about evaluating, well then, you spend two hours each to do this very first step. 

And that first step really involves just implementing the 5 P.M. Idea Validation Framework that I’ve talked about on this podcast. You can Google that if you aren’t aware of it. I’ve recorded a YouTube video about it, and I am including it in my next book, which is about the earliest stages of building and launching a SaaS, and that book is already written, actually. I’m just going back and revising a few elements of it, but 5 P.M. Idea Validation Framework is something that, where you go through several steps and you can do it in literally a couple of hours. So if you have five ideas and you want to spend 10 hours over the course of a weekend, or a week, to just get a little better picture of which of these ideas might be the winner … 

And when I say winner, I mean better than the others. You go through the two-hour stage of the 2-20-200 framework. 20 hours is where you take it to the next step, and this is where you either do landing page validation, or you speak one-on-one with potential customers, or you do both. I tend to do both when I’m thinking about building a product. The idea, of course, is that if you’re going to have a marketing funnel and a low-touch product, then you put up that landing page and you try to drive traffic, and the way that you’re going to ultimately market the product, and you see what kind of opt-in you get, and you see what kind of traffic you get, and you see how many emails you collect, versus if you’re going to do high-touch sales, and obviously you want to have more conversations, I think doing both is always better. 

The idea behind 20 hours is, “How long does it take you to put up a landing page and/or reach out to your warm network for these conversations or reach out to your cold network for these conversations?” Set up ads. SEO takes a while, but cold outreach, whatever you’re going to do to start gathering qualitative and quantitative data around this. You’re not just sitting in a research modem like you are with a SEO keyword tool maybe within the two-hour section of this, but you’re getting out and spending more time. This is where, if you have five ideas, you probably don’t want to do all five ideas at the 20-hour mark. 

It’s just a lot of time to invest, and that’s where the first stage, where it’s only two hours into each idea, is helpful to maybe narrow you down to one or two, and then you move on to this second stage, where you spend 20-ish hours. And then the third stage is the 200-hour stage, and that’s where you think about building an MVP. And, of course, an MVP can be a no-code MVP. It can be a human automation MVP, like I talk about in Start Small, Stay Small, or it can be a full-blown coded MVP, and whether we call it an MVP or a V1 or something to get into the hands of people to see if they like it, what parts of it resonate and what don’t? And honestly, I’m putting together a video course right now for MicroConf that’s going to be out in several months, and I dive more deeply into this because there’s a lot to say about it. 

But the idea behind the 2-20-200 framework is to level-set in your mind that it’s not just this big amorphous cloud of “Validate.” It is there are specific stages that you can go through. I’m not saying this is the only way to do it. You can validate any way you want, but this is just a repeatable way to think about, “How am I going to go about being a little more confident?” This is the thing, right now, you’re probably 0% confident that this is a great idea. 

After two hours, are you 10 or 20%? After 20 hours, are you 30, 40%? After 200 hours, do you get to 50, 60, 70%? If it works, maybe. That’s kind of the goal, is to get a little more confidence before you invest a ton of time, tens of hours, if not, hundreds. 

You get a little more confidence, that the thing might work and that you might actually be building something people want, because that really is the hard part, right, building something people want and are willing to pay for. Credit to Paul Graham for saying, “Building something people want.” I added the and are willing to pay for, but doing that is really hard. I’m not saying everything else is simple, but there certainly is more of a playbook once you’ve done that, and my hope is that the 2-20-200 validation framework can be a sort of … It’s not a playbook per se, but sort of a compass or a guiding light as you think about validating your ideas. 

All right, my next topic of today is about design by committee and why I have always believed that it is by far the least efficient way to do things and that you just get bland, crappy output. Your art or your product or whatever it is usually sucks if a bunch of people have input into it. One example I can think of is every school project I ever did, where it was a group project, the more people involved, just the worse the quality was, right? Unless it was like a hand-picked group of people who are all on the same page and had the same vision, it was like the vision just tore everybody in different directions. And even at larger companies that I’ve worked at, after Drip was acquired, or with TinySeed, which isn’t a huge company, I tend to keep input to a minimum of, that everybody around here is really smart and competent because that’s what we like to hire, that’s who I want to work with, but I bring in one, maybe two people even to make really big decisions because the moment that I have six, seven, eight, nine people weighing in on a decision, A, it grinds it to a halt, and B, I find the output is subpar. 

And that two exceptional people who are on the same page with a similar shared vision can build incredible things, but the moment you get to three, four, five, it can often derail that vision. One example of this is a Metallica album called St. Anger. And if you’ve ever watched Some Kind of Monster … That is a documentary. It’s like two and a half hours. It’s actually pretty long, but it’s of Metallica almost breaking up. 

Is it 20 years ago now? Yeah, it’s probably about 20 years ago, and they bring in basically a therapist, like a … It’s like a marriage counselor. No, he’s actually a sports counselor, but if I recall, they’re paying him at 40 grand a month to be on call, and he’s trying to keep the band together. One of the things that a couple of the bandmates had an issue with was that two of the members of Metallica, Lars Ulrich and James Hetfield, had pretty much written all the songs up until then, and the band’s been together since what, the ’80s, since the early ’80s? 

So I mean, you’re talking 20 plus years, and these two guys had written almost all the songs and almost all the lyrics. Other people would come in with a riff or whatever, but then they would take it and they’d run with it, and there were some complaints, I think it was mostly from Kirk Hammett who’s one of the guitarists, that they wanted input. And so in this documentary, Some Kind of Monster, it’s pretty fascinating documentary, actually. If you’re at all into their music, it’s cool, but even if not, just seeing the dynamics and the craziness of trying to keep a band together, it’s a fun watch. I’ve seen it a few times, but one thing they do is they are writing the songs together as a group, and you can … 

It’s just painful. It is just painful to watch them come up with a riff and to hear the song be like, “This is actually a cool song,” and then they’re like, “Cool, so throw out lyrics,” and people are just throwing out random sentences that have nothing to do with each other, and they string them together as the lyrics to these songs. And so if you listen to the lyrics of that album, they’re terrible. They’re terrible, compared to the cohesive … Look, I’m not saying Metallica are the best lyricists at all before that, but at least there’s a story there. 

At least there’s poetry. At least there’s a cohesiveness to each song prior to that, but on this album, in particular, which … Look, a lot of people hate on this album, especially folks who really are into Metallica. I actually really enjoy the snare sound. It sounds like he’s banging on a beer keg, but kind of has this weird … 

It’s a different sound, and it has kind of almost a punk-ish vibe, even though they’re playing metal, but I don’t dislike the album specifically about two or three songs that are good, and the rest I would pass on, but even then, the lyrics are awful, and I don’t typically pay attention to lyrics that much in Metallica songs, but it is noticeably cringe. And I think 99, if not 100% of the reason, that is the case, is because they designed this by committee. They didn’t collaborate. They didn’t get two people or three people together and all with the same vision. It was, “You said you wanted to write, and the therapist said that we have to let you write, so let’s sit here and just write stuff out on a sheet of paper. Just call things out.” 

It almost feels half-hearted, and it certainly feels like they did not put out the best end product they could have because of this one or two people doing it could have done a much better job than the group doing it together. And so why do I bring this up, and why does it relate to startups? Well, back to my point earlier of, whether you’re on a big team or a small team, I feel like some folks are uncertain around what they’re doing and they feel like getting more opinions will add more certainty to that. And what I’ve found in rare exceptions is that the more people get involved, the more noise there is, and more chaos is created. Now, I will say that I’ve found it helpful to kind of semi-crowdsource some naming stuff recently, where I am trying to … 

I mean, I’ve had to name three books in the past. I guess it’s like maybe year, is that right? Yeah, probably last year, I’ve had to name three books and I’ll have to name a course, and I always want those names to be really good and catchy. And so I do brainstorming and I talk to some people and I go to ChatGPT, and I come up with a list, and then I narrow it down, or I come back three days later when it’s cold, and I start narrowing and narrowing, and then I start asking opinions, but I don’t go and ask 20 people’s opinion. I go to like … 

I’ll say my inner circle, and it’s like three or four people that I trust, that I know have taste and I know have an understanding of the space, and I say, “Hey, I have this handful of titles.” I don’t give them 50 titles to choose from, but maybe I’ll give them three or four, what I call short titles, which is like The SaaS Playbook, right? That’s the short title, and then I give them three or four subtitles. And with The SaaS Playbook, it’s build a multi-million dollar startup without venture capital. And so I have three or four of my tops that came out of like 50 plus, but it’s usually pretty obvious which of these I think are going to be great, and I get feedback there, and then I iterate, and I might even brainstorm again, then I go a little broader. 

I might go into the TinySeed Slack, or I might go to a MicroConf Slack, and get some input, and it’s always noisy, right? It’s always fuzzy. You’re guessing like, “Oh, all right, more people like this.” That doesn’t necessarily mean it’s the best one, I’m going to use it, but there’s a signal there, right? And then maybe after that, I might wind up on Twitter, and at that point, I’m probably trying to more confirm my own favorite pick or have two that are so similar that it maybe doesn’t matter, but I certainly don’t want to go to Twitter with 10 different options because you’re going to get 10% of the people liking each of the 10 options, and then how much good does that actually do you? 

So I do think that getting a lot of voices and input at a certain point can help, especially the further along it is, right? Let’s say you’re building a feature, you’re trying to figure out how it is complicated, how to build it, you get one or two people together, and you crank on this thing, and you put it out, and it’s art and it’s science, and you’ve got this amazing screenshot or this design that you’re using, then you bring it to some people who maybe kind of know how your product works, so they’re kind of in the space, right? And then you bring it to a few inner circle customers, and then you get broader and broader and broader, but you refine it as you go. So I’m not saying you can’t get other voices involved, but if you start with 10 people trying to design that same screen or that same idea, it is so difficult, so time-consuming to get everyone on the same page in a way that you can then be productive and actually move forward in a way that’s not just compromise. “Well, we all disagree, so let’s just do the thing in the middle,” and the mushy middle is like eating a mayonnaise sandwich. 

It’s very bland. A note to the listeners, I put mayonnaise on my turkey sandwiches. I also put mustard, and cheese, and often lettuce, and guacamole. I don’t dislike mayonnaise. Last time I said a mayonnaise sandwich, several people thought that I was ragging on mayonnaise, when in fact, what I’m ragging on is a sandwich that is made up of two pieces of white bread and mayonnaise in it. 

That is the analogy I’m going for when I say a mayonnaise sandwich. If it had turkey in it, I’d call it a turkey sandwich, but in this case, I’m saying, yeah, two pieces of bread with mayonnaise is just very bland. That’s the analogy. That’s all we have time for today. Hope you enjoyed this episode. 

Thank you for coming back this and every week, listening to Startups For the Rest of Us. If you haven’t given a five-star rating in iTunes, Apple Podcasts, Google Podcasts, Spotify, wherever your greater podcasts are served, really appreciate it. If you have, could you please go to Amazon or Audible and rate The SaaS Playbook as a five-star? You don’t even have to leave a review, I believe, and it helps me continue to progress on my mission to multiply the world’s population of independent self-sustaining startups. I’ve been doing that since I’ve started blogging in 2005, so almost 20 years. 

Yeah, next year it’ll be 20 years, and each year, as I’ve pushed that boulder up the hill, I’ve been able to increase momentum and grow the audience and grow the number of people that are impacted by this message. At this point, I do it because it changes people’s lives. I want everyone who wants to be an entrepreneur to have the same freedom, purpose, and healthy relationships that you and I do, so I always appreciate any effort you can put forth to help me continue on that mission. This is Rob Walling signing off from episode 706.

Rob Walling:
Another week, another episode of Startups For the Rest of Us. I’m your host, Rob Walling. This week I talk with Braden Dennis, the co-founder of FinChat about their long journey of launching a product with an existing audience. And in fact, if you’ve ever heard me quote the stat that of all the companies I’ve invested in, 170 companies, that less than 5% of them had an audience before they launched their SaaS. FinChat is one of them. And you’ll hear Braden and I talk about the pros and cons of having that audience in this episode. In addition, they also launched a second product and pivoted the entire company to that second product. They’ve been bootstrapped, mostly bootstrapped, and now, they’ve raised venture funding. He and his co-founders have taken a lot of big risks and made big bets, and they’re doing pretty well with it. It’s a really interesting conversation today. I hope you stick around. 

Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling. It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of MailChimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. Microconf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon. So if you’re thinking about joining me and about 225 of your closest bootstrap founder, friends, head to microconf.com/us. 

MicroConf is hiring a director of marketing and operations. You can come work directly with me to help me refine, and expand, and execute on our growth strategy. We have a lot of exciting things going on over the next one to two to three years, frankly, at MicroConf, including a lot of new digital product launches. So if you have a strong background in online marketing, marketing digital courses, course creation, managing a small team and you’re interested in working directly with me to help shape the future of bootstrapped and mostly bootstrapped SaaS companies, head to microconf.com/jobs and you’ll see the listing for this as well as our community manager opening. If you’re interested, please apply and let’s have a conversation. And with that, let’s dive into my conversation with Braden. 

Braden, welcome to the show.  

Braden Dennis:
Rob, it’s so good to be here.  

Rob Walling:
So FinChat.io is your company. You started it with three co-founders. Your H One is the complete research platform for global equities. Do you want to give us an idea of where you stand today, what phase the business is at.  

Braden Dennis:
For sure. So we are a team of 11 people, soon to be 12 in a few days. Seven figures in ARR company, and the platform is for investment research. So we primarily serve professional, sophisticated institutional investors. And we’ve been going more and more kind of upmarket through that process.  

Rob Walling:
And you’ve raised a million and a half seed. Would you call it a seed or a pre-seed round?  

Braden Dennis:
Yeah. I guess, there’s no rules in raising money is one thing I’ve learned. I almost say that it was like a hybrid of a seed and a series A in terms of where we were in scale, but it was a tool for us to get to our next milestones. And we didn’t need more, we didn’t need less. It just felt like a really good number for us.  

Rob Walling:
We’re going to talk about a lot of things today. Building a second product, raising your round, venture versus bootstrapping. ‘Cause you’ve been through a lot in the past couple of years. I want to start by going back to when FinChat was initially launched, it was actually called Stratosphere, right? Stratosphere.io. And you have, is it one of the most popular personal finance podcasts in Canada? You started with an audience, and you built a SaaS, and one reason I want to touch on this is if folks follow me on Twitter or listen to me rant on this podcast, I often say, “Look, if you have an audience, great. That is a great advantage. But if you don’t, don’t go build one for SaaS.” If you’re going to do info products, or courses, or books, of course. But for SaaS, I think it’s more trouble than it’s worth and the time would be better spent doing SEO, or product development, or anything else. But roll us back there. Tell us about your podcast and then how Stratosphere came out of it.  

Braden Dennis:
Well, first I wholeheartedly agree with that sentiment. The podcast network owns two shows, and so I do run it as a separate business. It is an advertising business. If I was to dream up the best lifestyle business, it is truly that. It’s like a few hours of work each week. And I’ve been doing it now for a long time. I was looking at it the other day and I’ve been doing podcasts in various forms for 10 years now. And when we launched it for a while, there was basically no one listening. And then in 2019, since it was about investing, it was starting to take off. But it was taking off right before the big wave brought us even bigger in 2020 when people were doing self-directed investing. And so it’s been a fantastic project, it’s been every single week for 370 episodes now. So I think we’re about half of your catalog.  

Rob Walling:
It’s still a lot, man. Good for you.  

Braden Dennis:
But you can recognize that it is a grind, but I really do enjoy it. I get a lot of career satisfaction out of it. And then to roll that over to the product, to what you said, I say to people, “It gave me a great zero to one type of audience to show the product to, iterate on. Have like really forgiving users for your MVP was great, and I don’t take that for granted. I think it’s amazing to have that. But you do outgrow that audience, and as a business we outgrew it pretty quick because we are starting to focus on more upmarket B2B type clients. And so it gave us a great zero to one, but it is not going to be the thing that gets you 1 to 10 or anything like that. So I agree that it shouldn’t be a main priority for SaaS founders.  

Rob Walling:
And so you had this audience and it’s self-directed investors, kind of people interested in personal finance and investing and you built a SaaS. And what was it, was it like researching stocks?  

Braden Dennis:
It was the tool that I wish I had to save me time for the podcast research essentially, which was just how can I aggregate more historical financials from public companies across the whole world into one place that I can view them really quickly. And the whole concept was just like Yahoo Finance people were really familiar with, but it’s so ad invested and just really limited coverage. And just only has huge scale because they’ve been so good at SEO, and anytime someone searches up a company or a stock, they come up first. But I was trying to build just the MVP of how can I bring in financials from companies around the world in some sort of API feed, and then build Yahoo Finance on steroids to show my podcast audience. It was not some grand vision or product plan really.  

Rob Walling:
Right. And you mentioned you built it, you launch it, people are using it. You decide to go up market. Why was that?  

Braden Dennis:
Well, for all the reasons that you talk about in this podcast, anytime you have really low-price products, you face a lot of churn. It’s really, really hard to scale something when people are paying nine bucks a month, which was the original plan. Right? And so this should come to your listeners as no surprise that as a founder, it’s your job to learn and iterate. Your first plan is never going to be the concrete plan, and our plan right now moving forward is not going to be the plan in two, three years. It’s literally our job to iterate as we go. And so that’s kind of how we found ourselves here.  

Rob Walling:
Got it. And so the audience, as you said, was your zero to one, it got you started. And if I recall, we first talked when you were somewhere around 7 to 10K MRR. And I believe you had gotten bigger, and churn had done some damage ’cause again, $9 a month is, as you said, it’s hard to scale even when you have access to tens of thousands of people or whatever through a podcast. And it was maybe a year later, so I’m thinking, when did you think about start for the rest of his drinking game? When did you think about launching a second product? Because you and I talked about it and usually, as Ruben Gomez and I had spent an entire episode talking about… Usually my response is, “Don’t do that,” and you have to convince me otherwise, right? But you guys did and you executed on it really intelligently. 

I believe I actually used you as an example in that episode of people who had talked me into it. You were one, Jordan Gaul and I think there was a third. But walk us through that in how maybe ChatGPT going live had an impact on your thinking.  

Braden Dennis:
For sure. So the product was called Stratosphere, the company that we originally connected on and got into TinySeed with. Like you said, for context, around seven K in MRR at the time. Lots of churn… Growing, but not a venture scale idea or anything like that. And in the April-ish of 2023, last year, one of my co-founders was like, “We have been aggregating so much financial data. This product’s amazing. What happens if you just talk to it?” We had heard whispers of Bloomberg, the large incumbent trying to build BloombergGPT, but they just have a white paper. What if the small startup beats them to their game? And we did, and it went viral. And so we launched it, we bought the [inaudible 00:10:24]… I couldn’t have bought a domain name faster than FinChat because it was perfect, right? It was the domain for the space. And we launched it in April, and we had 65,000 signups on hour 46 or something of it being live. 

It had gone viral on LinkedIn, it had made its way around Twitter and stuff like this. And it had far surpassed just my reach. That’s when you really know. And we recognized, like, “Okay, this product’s cool. But everything behind it, investors want to know the source.” So when you search up, like, “What was Amazon’s revenue last year?” People want to know the source, and audit it, and go back to the filing that it came for. If people are doing this, especially at a professional scale, I was like, “Perfect. We already built that product. It’s called Stratosphere.” So we brought that in as the layer behind it, and it became one cohesive product. So it was more so just like we built two different styles of front ends and then realized, “Hey, if we just bring them together, this is actually the most compelling product that the market has right now.” 

And it was a scary decision. You and I talked about it. And we decided in an afternoon, we’re like, “This is too obvious.” Right? Like “This is too obvious, and there’s no sense of waiting another day to think about it because this is amazing.” There’s no risk in terms of we don’t have to dish the old product, we’re going to merge it over. And so I think I call it the low-risk experiment gone right, because we shipped that experiment in three weeks. I think it was like two to three weeks, we shipped it from zero to one to domain to live to 65,000 users in two and a half weeks. And so that’s really the key is if that took us four months, oh, gosh, that would’ve been a gigantic distraction at that time.  

Rob Walling:
Yep. And that’s the thing that I see with a lot of folks who do launch that second product is they’re launching it to escape. Usually, it’s to escape something that’s not working and they’re not putting in the hard work on the first thing. And then they take four months, five months, six months to build it, and launch it. And they think about it, and then it is not. You called it what a low-risk experiment gone right, it becomes a high risk experiment. And whether it goes wrong or right, now, you’re six months down the line and you have something that most people won’t have had the intersect. And you had hard work, luck, and skill that all took this. I don’t want anybody to think, “Oh, Braden got lucky. Stratosphere got lucky with FinChat.” It’s like, “No, it was all these things.” Because you launched it in two to three weeks, it wasn’t 30, 40 hours of dev. Somebody put in a lot of hours, your co-founder. 

And the skill, let’s talk about skill. That’s kind of how your preparation, it’s like, “Hey, you guys had the knowledge. You guys had the data.” Without all the data you pulled into Stratosphere, there is no FinChat. That makes sense. I couldn’t have built FinChat on my own in two to three weeks because I didn’t have all the background that you guys had. So I’m calling this out, so listeners who are listening don’t think to themselves, “Oh, well I can launch a second product too.” You are again a counter example, but with good reason because you could do it quickly. And it was a low-risk experiment that if it didn’t go right, you would’ve kept pushing on Stratosphere. Right? So FinChat took off in a way… It wasn’t just users, right? I mean, it was people clamoring for the data and you were like, “Wow, there’s revenue here whether we’re going to close it today or in a month.” 

And so you eventually just merged them. And so if you go to Stratosphere.io now, it redirects you to FinChat, right? And it tells you, “We’ve merged your account settings and dashboards onto FinChat.” Was that part a hard decision at all to merge it in? Was it like, “Well, do we shut it down? Do we run two products?” What was the thinking there?  

Braden Dennis:
Because we knew we were going to roll in that product with the exact same UI, UX experience other than the background, gray is a little bit different. It was an identical experience for those previous users and that’s why we felt really confident. And we even told people, like, “Hey, this is happening.” A lot of people replies on my Twitter being like, “Dude, no. I love the Stratosphere units interface.” And I said, “I promise you. When we launch this tomorrow, I’m going to reply to this thread and be like, ‘See'” And that’s exactly what I did. And they’re just like, “You know what? It’s actually better. You tweaked a few little things that actually improved it.” And as we should, right? As you get a chance to put a fresh coat of paint on stuff. But we didn’t change the experience and that’s really why our users were like, “Okay, the domain’s different. The URL is different. And now, I have all these new features with the AI chat as well.” It’s a no-brainer.  

Rob Walling:
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Why do you think FinChat worked so well so quickly? ‘Cause you had a product… Stratosphere is similar. As you said, the interface was similar, right? There’s a lot of similarities between the two. But it’s a great split test, and you think about in any 10 successes or 10 failures, like, “Was it the founder? Was it the market? Was it the product? What are those magic factors that all come together?” I summarize them as hard work, luck, and skill, but we know it’s very amorphous. You had two similar products in one just up into the right. I’ve seen the graphs. Do you have any sense of why that happened the way it did?  

Braden Dennis:
Before, we were not truly bringing anything differentiated to the market to professionals. We were bringing something differentiated to the market for retail investors who hadn’t had a chance to get a professional accessible research interface. But for those who have been in the business a long time, paying 25 grand a year for each Bloomberg terminal. These incumbents have been building this technology for 30, 40 years and they’ve kind of thought of every use case. And so the expectation for those users is just so much higher. And now, it was something different. Now, I don’t even have to go learn Bloomberg 2.0 as I can just talk to it the same way that I talk to my associate or the intern to pull up a graph comparing these two companies. It’s like, “Hey, can you quickly compare Google Cloud’s business to Amazon Cloud’s business? Build a chart and also, layer in operating margins ’cause I want to know why there’s such a big discrepancy in profitability.” Those are very casual conversations that happen in the office for these people. And then they’re just like type it into FinChat and it creates it. 

And they just had this magical experience for the first time. And so I think differentiation is a roundabout way of saying that it was different for the first time and the timing was right. So I think that that’s probably what it comes down to.  

Rob Walling:
Timing feels like a big piece that people… Everyone’s talking about GPTs, and AI, and LLMs and so it’s going to tend to get noticed at least. And look, if it got noticed and it wasn’t a great product, then it doesn’t go anywhere. Right? As people look at it and blah. But it really is taking advantage of a moment in time that you were at the right place and seized the opportunity. You saw the opportunity, you seized it. You did it quickly. And you rode that wave is what it feels like, right? And sometimes, this is where I always say there’s some luck involved because you weren’t lucky in going viral. You were lucky in the sense that GPT just came out the moment that you had this product. Let’s say you had built Stratosphere five years ago, seven years ago, what were the tech waves that it was AR/VR and it was crypto. Maybe you’d have done a blockchain strategy, whatever. 

It’s like you did happen to have that, but you also had the ability to execute so fast that led you to raise your funding ground that we talked earlier. So you took money from TinySeed, right? So you’ve been bootstrapped. You’ve been, what I call, mostly bootstrapped, which is like, I don’t know, 100 grand to 500 grand is kind of mostly bootstrapped, usually. There’s no fine line, but that’s kind of in my head what I think about. And then now, you’ve literally raised venture. You want to talk us through that decision because as a entrepreneur, self-made with your podcast, and you’ve bootstrapped that, we know that you could have bootstrap Stratosphere/FinChat. But you decided to go in between and then take the full step. So talk us through your thinking there.  

Braden Dennis:
And what feels like a short time, I know it’s been several years now. I’ve seen all three of that bootstrapped, mostly bootstrapped, and going venture scale. And even on the same company, which is kind of even more bizarre. But there’s a couple pieces there, right? I say to founders who are thinking about raising money and you mentioned that, what is it 1, 9 and 90 rule? What is that one again? That’s the 1% should go venture.  

Rob Walling:
Should at least consider venture, they’re probably venture ready. And then about 9%, I think, should consider some type of funding ’cause it just makes it a little easier to get off the ground. And that maybe is angel friends and family, maybe it’s TinySeed type money, but it’s non venture money. And then I think about 90% of tech companies, startups, and stuff should probably just bootstrap. And again, you and I talked, it’s directionally correct. It’s not the exact numbers, but yeah, probably 10 times more should do this and 10 times more should do that.  

Braden Dennis:
Yeah, those kind of rule of thumb directionally correct things. I think that this one’s spot on, and it’s just kind of important to be honest with yourself because along that way… What we’ve actually described, the whole genesis of this. When it was a product for my audience, it was a bootstrapped business. It was not even a mostly bootstrapped business, it was fully… This is a cool side project turned main time project that we could generate a decent living for ourselves, basically. It’s not going to support a big team or anything like that, but a good bootstrap project. Two things are actually really working, we had a successful pivot up market to, “Okay, this is not a venture idea. But this could hit 1 million in ARR, maybe two,” that kind of thing. And so we were being honest with ourself about what that outcome looked like. And I even had angels and VCs reach out and I just said, “Look, I’m not getting on the venture route because this isn’t a venture company.” 

I’m an investor myself, it’s my job to be a steward of your capital. I became investor first before company operator. And then when FinChat happened and that explosion happened, our ambitions grew with the opportunity of recognizing it. If you were to see me and my co-founders call about level setting around the ambitions that we wanted to go to, they changed in a massive way in six months. In terms of what we thought was possible, the company we wanted to build, and the company that we thought that there was an opportunity on. So it’s really just being honest with yourself because if you put yourself in the wrong path for your ambitions, or the company, or the market opportunity, you get a lot of conflicting incentives with investors, yourself, what you want to build. And that’s not really good for anyone, no one wins in that situation. And when you’re raising money, I now, am a steward of capital and it’s my fiduciary duty to go for a big outcome. And so that’s what we’re going to do.  

Rob Walling:
Often, when I talk to folks similar who ask me, “Should I raise funding?” I know that you get that question. I tell them, “Look, there’s no right or wrong answer. Know what you’re getting into at each layer. Know that it’s not undoable. Once you take venture, especially like you’re on the venture track, you’ve removed some optionality and that’s okay. Just know that.” So in my case, if I were thinking about it, I can stay bootstrapped for as long as I want. I have all the options. The moment I take any capital, whether it is from a TinySeed, or friends and family, or angels, or whatever, I’ve made a choice. I can no longer be bootstrapped, I have now made that choice and it’s a one-way door. And then once you do venture, it’s similar. So that’s where bootstrapping as long as you can, as long as it makes sense. I think it gives you, not only the optionality, but I can help you discover about the business. Some businesses you’re two, three years in and finally you’re like, “Oh, now, I see there’s a venture opportunity.” Sometimes it takes that long. 

But if you took venture or you took a big round of funding early on, three months in where you’re still trying to find product market fit, you just burn through that cash. You’ve removed your optionality and you’re now like, “Well, I got to grow fast, so I got to spend all this money.” And then finally, a product market fit, no money in the bank. Right? So that’s why I tend to be pretty pro bootstrapping, not just because I don’t see venture as an incredibly viable option, I’ve never been anti venture, but I just think too many people think it’s the default. When I say 1, 9, 90, I want people to have an order of magnitude of when I speak at events, and I say that, people are surprised. I thought everyone raised venture. No, and everyone shouldn’t, right?  

Braden Dennis:
It’s ’cause those are the big headlines you see and those are the kind of vanity metrics that a lot of founders, especially in certain areas are showing off. Raising money in itself is not a milestone, it’s a tool. I love the Craig from Castos, it’s a tool to live in the future. Like that’s exactly… I don’t think I’ve heard of a better saying on what funding is ’cause in itself, it’s not a milestone. It doesn’t create any intrinsic value. And in fact, it might be destructive for intrinsic value for any potential for you to have a successful exit or outcome. Because if you try to sell it for less than what the cap you raised at, then there’s a lot of issues with that, especially if you’re signing traditional venture capital documents, you sign over a lot of control. You create a board, you create… it’s not a milestone, it’s really not. It’s a tool and decision for the company you want to build.  

Rob Walling:
Yep. I often tell people “It’s not the finish line, it’s the starting line. It’s a new starting line.” I’m like, “Okay. Now, we’re going to scale up.”  

Braden Dennis:
And to add on that, it’s one of the only irreversible mistakes is messing up your cap table.  

Rob Walling:
That’s for sure. We’ve seen some come through TinySeed, man. Where it’s like, “Wait-”  

Braden Dennis:
We fail, we make mistakes daily. It’s like in our culture to fail, to ship fast, to move fast, to fail fast. That’s the only thing you can’t mess up is your cap table.  

Rob Walling:
Yeah, it’s so permanent. When we got on the call today, you and I were chatting beforehand. And I had this whole outline of like, “Oh, let’s cover these things. I think these are the most interesting parts of your story so far.” And something you said to me is, “I just made a really hard decision as the CEO of this company and it’s to shut down our API business.” So do you want to give folks context around, you have a web interface, you have an API, and you’ve had a lot of traction with the API. But I believe yesterday, you just decided we’re not accepting new customers. Right? Just talk us through that decision because it’s a hard one. Being a founder is making hard decisions with incomplete information, it’s a big strategic decision. But it sounds like you’re convinced it’s the right way to go.  

Braden Dennis:
Yes. And to give you even more context, I basically realized the writing was all on the wall yesterday and made the decision this morning. That’s how quick I’ve had to make the decision. And some people say, “Maybe sleep on it. Maybe that’s too impulsive.” But as founders, we’re seeing signals for months, and months, and months, and months. It’s not like crap at the fan yesterday, I’m shutting it down today. Right? That’s that founder gut decision and making the decision fast and concisely. Whether it’s wrong or right, you’re going to navigate and you’re going to move forward with it, I think, is really important. ‘Cause the writing’s been on the wall for this for a while. Say six months ago, we saw a lot of interest from fintechs on, “Hey, can we bring FinChat into our platform?” Say, you’re like a broker, a stock trading platform. You’re like the Robin Hood of country X, Y, and Z. 

And we learned the wrong lesson really quick, which was huge six figure deals, quarter million… We signed a deal for a quarter million dollars a year. And for us, we grew up selling $9 a month subscriptions. This is star struck. We hit gold. This is product market fit. The inbound is exceptional, and so we ran with it. What we learned over the next six months and up including until this morning is every deal was very custom. The sales cycle, it was not just slow, it was impossible with the legalities around it, them being so regulated. And our ability to actually execute something that we’re really proud of, we became consultants. And what that did for a team of, at the time, seven, eight now, 12 people, is you completely lose focus on the company that we wanted to build. We know we still want to go up market. We tasted up market, we like it. We like going up market and we learned some good lessons, but we know it’s just not going to be that product. So we decided we’re not taking any more inbound for this. 

Also, I’ve had probably the worst six months of my whole time building this company during that time, and my co-founders agree. Even though we’re making lots of money from it, we were really not enjoying that part of it and we were really stressed out that we were going to be able to deliver that at scale. And so we just said, “Screw it.” There’s a larger opportunity upmarket for an enterprise option here on the FinChat platform, not off platform, which is way more scalable and it’s something we actually know we’re good at. So that’s kind of like my thought process around here, but the learnings and decision making at speed, I think, are what has gotten us here and will continue to get us forward in the future.  

Rob Walling:
Yeah, that’s a good way to summarize it is learning and decision making at high velocity, high speed. Einar Vollset and I talk often about what do the TinySeed founders that we talk to have in common, the ones that are really doing well. And there’s a decisiveness, there is doing a lot of things quickly. And usually, for the most part, working on the right things. Maybe it’s not 100%, but maybe it’s 75 or 80. And if you’re doing enough things at high velocity, something’s going to catch. And that is something that you and your team are exceptional at. And I don’t actually know if it’s you or if it’s your team ’cause I don’t see the inner workings of… You have three co-founders, we’re actually going to talk about that in a second. So four of you total. And the thing I’m surprised by, I’ll say this, let’s dive into the four-co-founder thing. 

One of the things we talk about in TinySeed or even just in MicroConf that we see in state of independent SaaS is that I believe the number is 90% of our MicroConf TinySeed crew is one or two-person companies, which makes sense. One or two co-founder companies, I should say. And then it’s another handful… It might even be more than 90. Actually, it might be like 92, and then there’s like 5% that are three co-founders. And then just one or two that are four people. Because usually, if you get four people together, they don’t make decisions quickly. There’s too many cooks in the kitchen, right? And there are other things that are, not a mess, but there are other things that make it an antipattern or an exception to what we see. 

That hasn’t been the case with you, with FinChat, with Stratosphere. Is that there are four of you, but it seems like you function pretty well, at least from the outside. And it seems like you move very quickly, you make decisions fast. And also, you execute very quickly. Right? Talk us through that sentiment of why start it with four? How has it worked out? And would you do that again? Just all your thinking around it.  

Braden Dennis:
Great questions. Well, first of all, my co-founders, there’s four of us, and these guys are my best friends, including my CTO, who we’ve literally been best friends since we were 10 years old. And so we have kind of complete alignment, and when I get everyone on a call this morning for making this hard decision, it’s just like, “Yeah, of course.” Like “Of course.” We’ve been in it, we’ve been involved. There’s no one catching up on the crap that’s been hitting the fan. There’s no one that’s just tuning in for the first time on making a really hard decision. And I think that that’s really important, just constant communication, constant talking. And one thing that we do is we have a monthly set founders call, which is important because it’s four of us. But every few months, sometimes more if it’s called for… I just call the guys together and just get a realignment of what we want in terms of an outcome. For those three different stages of raising money, not raising money, kind of raising money, it’s like, “What do you guys really want?” 

Because if we’re not all aligned on that, then you’re going to run into a lot of problems. Even if it’s just two co-founders, even… Four co-founders, three co-founders, two co-founders, you got to be aligned on what you really want to build in terms of the company size. Do you want 100 employees. Or do you want zero employees? These are really important decisions to think about before you start building. I just think we get along so great. Everyone has their own really unique talents to offer. At the end of the day, as my role as CEO, they’re leaning on me to make the hard decisions. And have built that trust over a long time that they know I’m going to do, at least, what I believe is the right thing.  

Rob Walling:
And what’s the distribution of work? ‘Cause one of your co-founders is a CTO, as you said. So we know he’s writing code and building stuff. And you’re the CEO, so you’re doing, I’m guessing, operations and a lot of the decision making and driving it forward. Sales calls too, it sounds like?  

Braden Dennis:
Lots of that. Too many of that.  

Rob Walling:
Well, can you ever do too many sales calls?  

Braden Dennis:
Check out my calendar and maybe. Yeah.  

Rob Walling:
What do your other two co-founders do?  

Braden Dennis:
So Adrian’s our COO, he’s done a lot of operations. He helped build out that data team. Since he’s an accountant, he was the perfect fit. I’ve been actually moving over a lot of the operations to unlock more of my time to him to move into a more COO type role. And then Kevin is chief product officer. But him and Ryan are basically CTO one and CTO two. That’s how it works. So two developers that are technical and have a deep understanding, but also have a lot of chops for people skills and building teams. They like that stuff and they’re good at it, so it’s helpful.  

Rob Walling:
Braden Dennis, you are BradoCapital, B-R-A-D-O Capital on Twitter. And FinChat.io is what you’re building. Thanks so much for joining me, man. It was a great conversation.  

Braden Dennis:
No, thanks for having me. I’ve been listening to the podcast for… Oh, shoot. I don’t know. Years and years, and I’ve enjoyed it very much. So happy to be here.  

Rob Walling:
Yeah, it’s great to have you on this side of the mic. 

Thanks so much to Braden for showing up this week and giving his time to help educate the mostly bootstrapped founder community. If you haven’t checked out our YouTube channel, it’s youtube.com/microconf. I’m releasing a new video there every week. It is completely custom created, bespoke, as they might say across the pond. And it’s different content. It’s similar to the podcast, but it’s tighter focus, right? It’s 10 or 15 minutes focused on a single topic, and it’s like having a second podcast. That’s youtube.com/microconf if you want to check it out. Thank you for listening. This is Rob Walling, signing off from episode 705.

Rob Walling:
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When you choose to listen to podcasts, I know you have many options, so I appreciate you listening with Startups For The Rest Of Us. I’m Rob Walling, and in this week’s episode, I’m going to answer some listener questions. I’m going to mix it up this week. I’m going to break all the rules, going crazy, running with scissors up in here, and I am going to answer only text questions. 

I have text questions dating back to May of last year, so that is eight or nine months, if I’m doing math correctly on the fly. So, I’m going to dig in to a few of those just to get into the backlog. But I’d imagine that in the next listener question episode, I’ll get back to the old way of doing audio and video questions first. As always, head to startupsfortherestofus.com, click ask a question in the top nav if you want to send a question into the show. 

But before we get into the episode, I want to invite you to MicroConf Early Stage SaaS Sales Strategies. It’s an online event we’re hosting March 12th and 13th of 2024. It runs from 11:00 AM to 1:00 PM Eastern Time on those two days. And there will be sessions all focused on early stage SaaS sales led by Rachel Leow, Craig Hewitt, Daniel Ebert, Sam Howard. I’ll be MCing, and we’re going to cover strategies to boost your close rate, build a sustainable sales process, and figure out how to overcome the challenges of selling as a technical founder. We’ll also have daily Founder mixer sessions where you’ll get to meet other attendees to network and chat about what you’re working on. Tickets are inexpensive and they are available at microconfremote.com. And with that, let’s dive into the episode. 

Let’s dive into my first listener question. This one’s from just a few weeks ago from Lee. Lee says, “Hey, Rob, on a recent episode of Startups For The Rest Of Us, you mentioned that you don’t like when people use Apple or Basecamp as examples for comparing to their startup. Comparison to Apple seems obvious to me. But why Basecamp/37signals? They seem way more of a model for bootstrappers to emulate. Thanks for that question, Lee. So, the reason I don’t like when people use any type of outlier company is usually you are not in their position. The issue with Basecamp is not that they’re not a solid, mostly bootstrap company, they took a small bit of funding in the early days from Jeff Bezos. I’m not sure if you heard that whole story. 

But the problem is that Basecamp or the founders can come out and say anything. And they can say things like, “We don’t market,” or, “We don’t have any type of marketing analytics,” or, “We don’t check opens on our emails.” They could say, I don’t know that they’ve ever said this, “But we don’t do cold outreach. We don’t focus on SEO. We don’t care about marketing. We just built a great product.” And some of those things they’ve said, and some haven’t. I’m not trying to put words in their mouth, but they can say whatever. 

They have built one of the most successful bootstrapped businesses of all time. People estimate it’s doing what? A 100, 200, 300 some hundreds of millions a year in ARR is estimated. Jason Fried on the MicroConf stage said it throws off tens of millions a year in net profit and that was six, seven, eight years ago. And you know it’s probably grown since then. But the problem is they, as Jason Fried said, I said, “What were the keys to success?” He says, “We did some things right, but timing and we got a little lucky. Luck and timing were one and two.” And I think that’s a great and honest assessment of why Basecamp succeeded. 

If you started your SaaS in what ’04, ’05 and you get a little lucky, then you too cannot market and not check email, open and click rates, and not check analytics numbers. I don’t remember all. But it was things like this that I’ve heard them say. And so, then developers who don’t want to market, or who don’t want to focus on email opens and click rates, who don’t want to do blocking and tackling that 95% of the successful businesses I see doing, they use these quotes or that sentiment to justify it because they say, “Well, look, Basecamp’s successful and they didn’t do it.” The problem is you’re not Basecamp. 

It’s the same thing with Apple. Hey, Steve Jobs said X, Y, Z. And it’s like, but you’re not Steve Jobs. Keep in mind when he said that he was worth a $100 million. And he already had a massive company and he was co-founder with the guy who invented certainly the invention of that decade. But you could argue that the invention of one of the top few inventions of the past 50 years, the personal computer. So, that’s why I have an issue with it. But keep in mind I like and respect Jason Fried. And DHH sometimes says things that are pretty inflammatory that I don’t agree with, but they’ve built a hell of a business and I have respect for what they’ve built. 

The issue is they have really strong opinions about things. And I sometimes think that they would’ve been successful either way, whether they had or had not done those things, but most people are not. Most founders, especially those that “just want to build a great product,” need to get out of their own head, they need to get out of their basement, and they need to start talking to customers, asking them what they need, trying to solve a problem, building shipping iteratively. There’s all different ways you can do it. Basecamp never did that. And that’s cool. They truly scratched their own itch. And that was a thing early on where they were saying, “We scratched their own itch so everyone should.” And it’s like that is one good approach. But there are seven different approaches for finding ideas and problems to solve. 

I actually outlined all of these in a recent YouTube video. They’re doing really well on the MicroConf YouTube channel, Microconf.com/youtube if you want to check it out. And I think it’s something like seven ways to find SaaS ideas or proven ways or something. I have written that up as well. It’s going to be a chapter of my book that is the precursor of The SaaS Playbook. So, it’s the earlier stage stuff of finding ideas and validating. But anyways, that’s why I don’t like it when people use Basecamp as an example because usually it’s to justify an opinion or justify an approach to business that I just don’t see working for anyone else. And I want to state like DHH, Jason Fried, they are TinySeed mentors. They invested in one of the TinySeed funds. So, there’s nothing against them or the way they handle things. It’s just I think as someone just getting started, imagining that since they did it worked and it will work for you, I think is a mistake. 

I got a really nice note from a reader of The SaaS Playbook. He says, “Hi, Rob. This is not a question, but I wanted to send you a big thank you for The SaaS Playbook. I just read it in one go and I’m sure I’ll come back to many of the topics when relevant. I absolutely loved the book and how succinctly and to the point it’s written. I’m a B2C founder myself. Most of the insights are still very relevant. Although you’ve convinced me that my next company should probably be B2B. I’m trying to do that one founder at a time.” One B2C founder at a time trying to convert you. So, thank you for that note. 

If you haven’t read The SaaS Playbook, it’s available at Saasplaybook.com. It has actually just crossed 20,000 copies sold, which just feels incredible. And it’s picking up momentum. And probably every day, every other day I’m seeing folks talk about it on Twitter or Reddit and recommending it. And it’s that word of mouth that really drives book sales at this point. So, I appreciate it if you check it out. And if you have already purchased the book, would love it if you’d head to Audible or Amazon, and just give it a five star review or five star rating. You don’t have to type in a review because that also helps people find it. 

My next question is from Anonymous and he says, “Hello, Rob. I admire your work in the small SaaS space. I find myself stuck in a comfortable and happy job and I’m wondering how best to join the scene. I’m living my childhood dream at my day job. It’s a stable job, lucrative and enjoyable. It’s in a hobby I really enjoy. It’s basically the perfect fit. Between ambition, a desire for more money, and an earlier retirement, and seeing the success of some friends and family who were entrepreneurs, I would still love to own something. I could buy something and focus on automating the activities away, but MicroAcquire looks to have turned into a bit of a wasteland of cheap AI flip jobs.” 

Wow, I haven’t been on there in quite a while, so that’s interesting to hear that is as his sentiment. Back to the email, “I could be a consultant to bootstrap businesses, but my day job is more lucrative on an hourly basis and there are zero missed invoices. I have considered booking a ticket to MicroConf. I’m highly confident I can be of value to the community. I am sure I’m not the first person you’ve met who is interested but tempted by comfort aside from just take the leap of faith. Any thoughts from your experience?” A couple thoughts. I think you should come to MicroConf and you should be around founders. 

One of the reasons MicroConf is so different is that the vast majority of people have a real business. It’s not a bunch of wannapreneurs like so many of the SaaS or startup conferences you go to where it’s people walking around looking for permission, asking for funding. MicroConf is real entrepreneurs building real products to sell to real customers for real money. It’s our people. It’s the folks who would listen to Startups For The Rest Of Us, and take that leap and buy a $1,000, $1,200 ticket, and fly somewhere and make a hotel reservation. These are people who are willing to take action and do it. And so, I think if you’re looking for some motivation, being around those types of people for two and a half days, hearing the talks, having the conversations, I think is highly motivating. If that doesn’t get you unstuck, I don’t know what will. I don’t know you and how you work mentally or how you process all this, but I think that would be a big win. 

And there are still some tickets to Atlanta here, and it’s just about two months. That’s at MicroConf.com/us. That event will sell out. So, I wouldn’t wait if you’re going to do it. The other thing is something that I’ve said when I’ve had similar questions like this in the past. I guess from my perspective, it was a burning desire and need, and that got me through the hard times because it’s going to be a lot of work. And it’s going to be a lot of things you don’t want to do in order to get to the place that you want to be. And so, if you’re not highly motivated to do it, I just don’t know why you would stick with it through the ups and the downs, and whether it’s nights and weekends, or watching your savings drain if you quit without a product already in place. 

I’m trying not to view it just through my lens of how I did it, but I’ve talked to maybe a handful of entrepreneurs, half a dozen, 10, 12 about this topic. Asked them, “Do you think you could have made it without a burning desire?” And everyone’s been like, “No, it was too hard. I wanted to give up, but X, Y, Z thing got me to the next stage or kept me pushing on this product, or pivoting, or whatever it is.” For me, it was a desire to quit my day job, to have equity, to see what it was like to be an entrepreneur, and I didn’t like working for other people. And that’s usually the story that I hear about folks who start as bootstrappers. And then at a certain point, the dopamine comes from doing interesting things, creating, shipping things into the world and having an impact. 

And you start to be like, “Oh, well a couple hundred grand a year isn’t as interesting as a million a year. Oh, @2 million a year, $3 million a year.” And you start to get good at it, and then you start to love it and need it. And if you went back to work for someone as just a director of something or other, a manager of something or other where you’re, I’ll just say more of a cog in a wheel. I’m not saying you are now, but if you went back to a job, it would be tremendously unfulfilling like the volume was turned down to two after volume being turned up to eight, nine or 10 for so many years. But I don’t know, there may be entrepreneurs out there who didn’t have that burning desire and just kept going because they just did. I just have a hard time myself with that paradigm. 

So, if you’re listening to this and you’re a successful entrepreneur, and you have bootstrapped a startup or done something super interesting, and you’re in a similar situation where you weren’t super motivated to do it, but you did it because you wanted to and then it worked out, please write in questions at Startupsfortherestofus.com. I’d love to hear about your experience and how you made it through. I would almost think that if there are folks out there, and there probably are that are out there that have this experience, they almost launched a side project that maybe took off and they got a little lucky. And it’s okay to get lucky. I’m not taking anything away from that. I wish I got lucky with more things I did. But that’s okay. So, maybe that’s what you need original poster. I’m keeping this person anonymous. 

But maybe that is what you need, is to launch some things that are fun that if they work out, hey, great. And if they don’t, then you just let them go. Kind of the typical indie hacker project where someone launches it, puts it on product hunt, Hacker News, Reddit. And then if it doesn’t catch, which most don’t, they just abandon it or they autopilot it and add their new things such that they have this portfolio of products each doing $300 a month. So, yeah, I think that’s how I would think about it. And I definitely, if you love your job, I wouldn’t go and try to freelance, or be a consultant, or whatever. I don’t think that’s going to make any happier. I think it’s going to be product income or starting an actual, a startup where you’re selling a product, not just dollar for hours, that would make any kind of difference in your life. 

So, thanks for writing that email. I think it’s an interesting question and one that hopefully I’ve learned some insight onto. But obviously there are folks out there, if you’re out there and you have had success when you were in his situation, I would love to hear from you. My next question is from Pedro about an early access landing page. “Hey, Rob, thanks for the great content. It’s been incredibly helpful for me right now. So, my question is related to early access landing pages and the development timeline. What are the pros and cons for using early access landing pages before any development? So, the page wouldn’t have a ton of content and it’d just have an email capture form. Versus a more dense landing page with screenshots, feature lists, and sometimes even pricing details. In both cases, the customer conversations would be done. There is a problem to be solved, the product is not done yet, and the goal is to get prospects beyond the ones we are talking to during validation. Thanks a lot.” 

This is a good question and I’m not sure there’s a right or wrong way to do this. I’ll tell you the way I’ve always leaned, but it’s just because it’s been the easier way to do it. I have tended to attack something, a problem that is pretty well-defined and that I can just have a catchy headline that says, “I plan to fix this.” I believe the headline when we launched TinySeed, which was just a landing page and email capture was something like, “Startup funding is broken for bootstrappers,” or, “Startup funding is broken. Here’s how I intend to fix that.” And then it was pros, it was 800 words or a thousand words of talking through how venture capital doesn’t support bootstrappers, but some people want to raise a little bit of money, but they don’t want to go on the venture track. And here are thumbnails of Anner and I looking intensely at things. And I realized that’s a different example because it’s not an app, and so I wouldn’t have included screenshots or features, but I did the same thing certainly with my books. 

My books were usually just… Well, my first book was a headline and two sentences, that was the whole thing. And then an email capture. And it was something like finally a book written for people where venture capitalists aren’t putting a bunch of money in your bank account. And I think it didn’t say people, it said startup founders or developer founders, or something like that. Books are also different. But truthfully, The SaaS Playbook, go to Saasplaybook.com right now and look at that. That is essentially what you’re talking about, which is it’s the cover, it’s pictures of me, it’s pictures of the interior, its features and benefits of the book. That is what we did this time. I had more money, I had more budget, and I knew what was going to be in the book. The book was done by then. And so, I did pay a design firm to design that whole website. And then I’ll go back to Drip. And Drip was just a headline, three or four sentences of copy and an email capture widget. And I think that’s what we launched with. 

So, all I’m telling you is that’s what I’ve done and I don’t want to act like that’s right or wrong. I think it’s easier when you’re first getting started, if you are tackling a simple problem like all CRMs suck and here’s why, here’s how ours is different. Or some other simple obvious pain point that’s pretty easy to communicate in a handful of sentences. I don’t know. I like to keep it simple. I like to keep it simple as well because then people might be intrigued by it and then I can talk to them and say, “How do you think I’m going to fix CRMs? What’s broken about your CRM?” If you give them screenshots and show them how you’re doing it, you are putting your opinion on that. At this point, it’s not customer development. So, I think that’s part of the question, it’s like the more vague you are, the more customer development you can do. If you are actually trying to pre-sell a bit more information is probably warranted. 

So, in all honesty, I could go either way. I think the danger of having screenshots and a lot of info is that means you are taking an opinion and is it a hypothesis that you are certain of? Because if you’re not, then I would tend to hold that information back and let people confirm or deny my hypothesis, confirm or deny my opinions before I become that opinionated about them. You don’t want to be certain of stuff that customers aren’t telling you that you’re just making up in your own head. But the more certain I am of it, I probably would start building out a landing page. You’re going to eventually need that full featured SaaS website. I say need. A 100% need it, but it’s a good thing to have. And I think as you’re developing the product and you become more confident in it, fleshing out that landing page to see if it’s resonating with people and to see if you’re marketing it well, I don’t think that’s a bad idea. So, thanks for your question, Pedro. Hope that was helpful. 

My next question is from EJ. EJ writes, “Dear, Rob. Hope this message finds you well. I’ve been following your entrepreneurial journey with great interest and your story about purchasing a Microsoft business has particularly piqued my curiosity.” I think he’s referring to HitTail, although I purchased several small products, but HitTail is the one I tend to talk about the most. And when I acquired it, I believe it was doing about 1,500 MRR and it was completely flat and had been for a long time. And I eventually grew it up to about 30K MRR At its peak. It was a high churn business, so it was in the 25 to 30K for, I don’t know, quite a long time until I wound up selling it. 

Back to his email. “I understand that platforms like MicroAcquire exist to facilitate these acquisitions, yet I find myself grappling with several questions about the entire process. My primary concern lies in assessing the value and potential of a Microsoft business accurately. In a marketplace where information asymmetry is prevalent, how does one ensure that they’re making an informed and fair purchase rather than falling prey to an overpriced or underperforming business? In your experience, what are the key indicators to look out for or the red flags to avoid during the evaluation process?” So, there’s more questions, but I’ll answer that. The answer is you don’t and you just have to get good at trying to identify red flags. In addition, these days, personally, I would buy through a broker, Quiet Light, Effy International, Empire Flippers. They tend to do, I think, a bit more vetting than MicroAcquire. I’m not saying you shouldn’t buy on MicroAcquire, which is now called Acquire.com by the way. This email is that old. It was before the rebrand. But yeah, there’s definitely going to be some risk. 

If there wasn’t risk, then it would be priced accordingly. I was buying stuff and getting a little bit scammed or lied to back in the 2005 to 2012, 2011 maybe. Was that when I made my last acquisition? Something like that. And sometimes I got lied to and sometimes I didn’t, and I just made sure that I paid a low enough purchase price that it really didn’t come back to bite me. And I also did a ton of due diligence and as much investigation of it as possible. Of course, it’s asymmetric information and I think it’s trying to learn the ropes of what do I really need to look for? 

The key indicators to look out for are red flags to avoid, there’s almost too many to list. I mean, I would look for a book, or an ebook, or an entire YouTube channel, or someone who is the Rob Walling of acquiring businesses. Is there a podcast or some resource? Because I could imagine writing an entire book on this process of buying micro businesses through either the brokers I’ve named or Acquire.com, or I used to… What was the other one? Flippa, Flippa.com. I don’t hear about them as much anymore, but that’s the thing. It is getting more experienced at it so you can gut feel. You start to read a business and you do see that, oh, this is why that one’s a piece of crap and hasn’t sold. 

The other thing is you’re talking about assessing the value and the potential of a SaaS business. Usually for me, the potential was how am I going to market this? The potential is that there’s a marketing channel that I see or an avenue I see that the current person is not exploring that I think will work, and that I have some confidence that I can learn, or that I know how to do right. And without the ability to grow it, I never bought a business. I always bought ones that I wanted to either take from flat line to going up or I wanted to accelerate their growth. The next part of his email says, “Furthermore, once the business has been acquired, the transition phase presents a new set of challenges. How does it want to effectively manage and grow a live product, especially when they’re still in the learning curve phase? Are there specific strategies or resources you found particularly helpful? During this stage?” 

No resources, but the strategies are you get in and you spend a ton of time learning the code base, learning what the existing marketing is, learning where the traffic is coming from, who’s converting and why, looking at the funnels, looking at the bottlenecks. I remember having the instrument several products because there was no… There may be was Google Analytics, but nothing else. So, you just had no funnel measurement. And so, I would see people drop off at this one signup forum that was 10 questions long instead of just asking for a username and a password. And I would see that the pricing was way off. 

So, no resources. I don’t know anybody who talks about this. Maybe someone can write in with suggestions. But the strategies are I would get in and learn the business and literally take ownership of it. Imagine coming into a new company and there is either a product or something else that you have to get in and start driving. And you don’t own it. Let’s say you’re the software development manager and you have to learn the code base. How do you dig into that? You start by one bite at a time, eating that elephant. And so, for me, I would tend to identify what are the things that need to be fixed first and then move through that list. And so, with HitTail specifically, it was unstable. It was buggy and the server was crashing. So, I was like A, I need to learn the code base enough to fix the bugs. And that took a lot of time. It did. It took dozens and dozens of hours digging in just to figure out how this thing worked. 

I actually did the same thing in DotNetInvoice. There were math errors in this invoicing software. And it’s kind of like you have one job and you can’t have math errors in your invoices, and yet there were. And so, it was going page by page through it and being able to figure out, fix the bug, ship new versions. And then, let’s see, with HitTail it was getting it on stable servers, so we did a migration. And then I wanted a redesign of the marketing website and of the app, and that took a couple months with a designer, and then I had to retrofit it onto this old code base, and then it was marketing. And that’s when I said, okay, now I’m going to juice up. I didn’t want to juice up SEO and ads, and whatever, content marketing, and integration marketing, and anything else until I felt like the product was stable and the design was amazing. And that one worked out. It’s not to say that that’s the plan for everything. 

DotNetInvoice had some bugs that I had to fix. That was different. That wasn’t SaaS. It was downloadable software that you ran on a web server. The product looked good for the time and it needed some bug fixes and better support, and then it was just marketing. And I was looking at all the avenues that I could to lmarket.net invoice and grew that from, it was doing a few hundred dollars a month, like three, probably two to $400 a month when I acquired it. And it was usually between about three and $5,000 a month by the time I was able to plateau it. I never got a pass there. But that was a great little side income while I was doing consulting and sometimes had a full-time job as well. 

So, yeah, you just have to dig in and do the work, honestly. I don’t know any other way. Maybe someone out there is smarter than I’m, and they can do it without digging in and doing the work, but that’s just what I did every time. But one thing I did like about it is once I spent money on it, my back was to the wall and that was a helpful motivator to me of like, well, I spent the money. Now I need to figure out how to make this work. And that is also why I bought in spaces that I had a little bit of familiarity with. Like HitTail was an SEO keyword tool. I knew SEO. And DotNetInvoice was invoicing software for .net developers. 

You got the source code. And so, if you didn’t, you either cared about privacy or you cared about having the source code. And so, I was able to talk with the developers and people who were buying it. And learn from them, and converse with them, and figure out how to grow the marketing funnel. And then the last question in the email says, “Lastly, I can’t help but consider the intentions of the current business owners. While I understand that there could be numerous legitimate reasons for selling, I also wonder if there might be instances where the business might have undisclosed issues or skeletons in the closet that the seller is keen to avoid. In your experience, how prevalent is a scenario? And what precautions can one take to safeguard against situations? I understand these are complex questions. Any insights you can provide would be immensely valuable.” 

Yeah, I’m sure there are undisclosed issues or skeletons in the closet, especially if you buy on a marketplace. I’m not saying marketplace buying is bad, but it is, I think, more risky than going through a broker. I’m not saying that brokers validate and verify everything, but there is at least some recourse with a third party involved. So, if something was undisclosed, I would at least know that I could go back to someone and this brokerage has a reputation to uphold. And so, even if the seller disappears, I have some recourse. Yeah, the idea here is probably the same answer that I said to the first question, which is you have to know what you’re doing. You have to know what you’re looking for. And that takes time and experience, which is tough because how do you get that time and experience? The time is looking through a lot of deals and learning what makes them good and bad deals. And the experience for me came from buying smaller. 

Well, my advice would be to buy smaller ones today and then you’ll learn what didn’t work and apply that to the next one. I actually started with an $11,000 acquisition, and that was in, I think it was ’06, 05, or ’06 when I made that. That was a lot of money. That was all the money I had in the business bank account. So, I should have done something smaller. I was building things on the side, so I did have some experience. But that’s how you want to do it. You want to take these small steps and really learn from others. And that’s where I think the information put out by these brokers by Empire Flippers, maybe Acquire.com puts out info. I don’t read their stuff. I imagine they have eBooks on the topics. And Quiet Light, and FE International, and anybody else you can get your hands on, information in that space that’s going to help you learn, is something that I would be consuming if I was actively thinking about this. 

 But yeah, it’s risky. There’s always a chance someone’s not going to disclose things and they’re going to screw you. You’ll never get to a 100%. It’s always scary. What I don’t know is do you get to 80% where you’re 80% certain you’ll be fine? 85%? I don’t know what that number is. But the only way that I know to get better at any of these things you’ve asked about is to put in the time and gain some experience. And without that, I think you’ll just be sitting on the sidelines. So, thanks for that question, EJ. I hope it was helpful. 

My last question for today is from Misha and they ask, “What are your thoughts on choosing tech to build a startup in the MicroConf Slack community, which is Microconfconnect.com? I keep seeing the same two to three questions asked in various channels. For example, my database is slow. The usual, very specific responses pile up, but the core of the question ends up being someone who is new to software development and is seeing a symptom. Often the tech stack is Node.js or some Python weirdness, not Django or some .net thing, et cetera. At this point, why are people not just using Rails or Django? Tons of educational material, plethora of people to hire and more being trained in bootcamps. A library for 99.99% of problems, one would face easiest way to deploy and scale, and most importantly, super stable frameworks. Is this just a matter of helping folks understand the technical and business challenges with making the right choice for what they are building?” 

This is a interesting question. I guess it’s like A, you can have database slowdowns with any tech that you use. If you’re scaling, if you have bad code, I wouldn’t always blame that on the technology. I will agree with you though that if I were to build a SaaS app, which I’m never going to do again, very likely be something like Rails or Django, maybe Laravel. These are probably the top three that I see. Node.js is fine, and I know there’s developers out there screaming at the speaker right now. But I really like these super stable server side frameworks. I don’t like JavaScript, NBC frameworks that… Like React and such that have a bunch of spinners. 

I know there’s unit tests and all this, but it seems like a lot of the problems that I hear about with bootstrap founders who hire developers to build things wind up in this front end. Maybe that’s what Misha is saying is, it’s not the technology necessarily, but there are certain technologies that maybe lend themselves to, well, just different types of issues. Whether it’s performance issues, or whether it’s writing spaghetti code, or whether it’s… Since there’s so many bootcamps putting out people who are less experienced, then that means maybe the code quality overall is lower. 

I don’t know what it is, honestly. But I really like HTML rendered to a browser and then some JavaScript sprinkled in. And I know it to say, “Hey, here’s a old man doing the old man thing.” But it’s like, no, there’s just some stability. That’s a personal preference. I think, Misha, your question of why wouldn’t everyone just use one of these two frameworks? It’s like, well, all the frameworks… These two frameworks don’t cover everything. I know they’re stable, but what if I know PHP? What if I’m a .net developer and I want to build something nights and weekends? That’s all I know. I can spend the time to try to learn a new language. I’m not going to be that great at it. Or I can use what I know and I can build quickly. That’s usually I think what’s happening. But that’s also another thing, and it’s non-technical founders starting a SaaS. 

It’s just hard. I’ve talked about this on this show many times where if I was a non-technical founder trying to start a SaaS, I either wouldn’t or I would try to find a co-founder. A technical co-founder who can head up and own the code. When I say wouldn’t, I mean I would go back and try to stair step my way up, certainly not by building SaaS, probably not by building software. Because thinking that you can just hire a developer to write code and build a product, is like thinking, I can hire a carpenter to come build a house. You can, but you also need an architect, and you need a designer, and you need other skill sets. And how do you know the architect is any good? And once the foundation is poured, it gets really hard to come back and undo that work. 

And the analogy is not perfect. I get it. But thinking that any developer can build a SaaS app is incorrect. In fact, the vast majority cannot. And yet, people hire dev shops that just don’t… They don’t build quality code. They cut corners because you are not going to know any different. That’s the problem, is you can’t evaluate whether the developer is good or not, and you can’t evaluate if they’re rushing. Because even good developers can ship crappy code, low quality code if they’re in a big hurry and they’re being pushed to hit deadlines. There’s a reason that the majority of the MicroConf community are technical. It’s not that we don’t want technical people. In fact, we want more non-technical people because, hey, we need more marketers here. How often have I heard of a developer founder who needs more marketers? So, I’d love to have more marketers in the MicroConf community. 

Same thing with TinySeed though. Last time I looked, I think it’s like 10 or maybe 15% of companies we funded with TinySeed don’t have at least one technical co-founder. It’s a super minority. And there’s a reason for that because getting to the point to where a TinySeed would fund you, it’s obviously not easy. And doing that without a developer who is heading up that side of the business makes it even harder. And in fact, probably the number one issue that tends to face companies that we funded who don’t have a developer co-founder, is they are perpetually dealing on and off, but perpetually dealing with the headaches of that with, “I had a lead dev and then they left, and now I have to replace them.” And it’s like, that’s not the best. It’s a tough situation to be in. And those folks are bearing the burden of having to be the ultimate where the buck stops for a code base, but they’re not a developer. 

Your tech lead leaves and now you have two juniors in a mid-level. And you now have to go find that next tech lead, but you don’t know if they’re any good. It’s an uphill battle. And as appealing as SaaS is, and the fact that it is the best business model on the planet, I believe it is just really difficult. And this is why I talk about doing the stair step method of entrepreneurship, not to go straight to SaaS. And this is why if I was a non-technical founder… I mean these days, I wouldn’t be writing the code. If I were to start a SaaS app, I would try to find the best SaaS developer I knew, whether they lived in my town or not, or I just knew them through MicroConf. And I would work my network. And maybe I would hire them, maybe they’d be a, they wouldn’t. That’s irrelevant. 

Probably if I wanted to keep them around for a long time, then they would get equity, because I would want us to have that shared motivation, because it’s hard in the early days. But I wouldn’t go hire a freelancer, or a contractor, or an agency, or I’ll say just a… Random is not the right word, but you get the picture of AW2 employee who can leave any time and leave this code base. It’s like leaving an open heart surgery patient in the middle of surgery. And SaaS apps unfortunately, you’re always performing open heart surgery on a living patient. And that’s one of the reasons why this is so challenging. So, Misha, I’m not sure I have the best answer of why everyone doesn’t just use Rails or Django, but I sure appreciate your question. And I do agree with you that I think there are some tech stacks that are better designed or better suited for building SaaS applications. So, thanks for writing in. And that wraps another episode of Startups For The Rest Of Us. Thanks for joining me today and every week. This is Rob Walling signing off from episode 704.

Rob Walling:
Whether this is your first or 301st episode of Startups For the Rest of Us, welcome. It’s great to have you here this week. I’m your host, Rob Walling. This week I talk with Jordan Hansen, founder of Cobalt Intelligence, about his really interesting journey of becoming an accidental SaaS entrepreneur. 

Cobalt Intelligence is a SaaS that allows you to do business verification with Secretary of State data, using an API. And in the conversation you’re going to hear how Jordan just got there, almost by accident, that he really didn’t want to launch a SaaS. But he wound up building what is a pretty incredible business and has actually taken funding from TinySeed. You’ll hear us discuss that in the episode. 

I want to address that upfront, actually. I hope that, given this podcast has been going for 700-something episodes, I hope that you know that I don’t use this podcast as a commercial for TinySeed, nor for MicroConf. Obviously, I am motivated to promote things that I’m working on. If I’m running an event, I want you to show up. If I’m running an accelerator, and you want funding, I would love for you to apply. 

But the reason I bring folks like Jordan on and Matt Wensing, Derek Grimmer, Ruben Gomez, and other TinySeed founders I’ve brought on the show in the past several years is because their stories are interesting. They’re knowledgeable. They know how to communicate what made them successful. They’re willing to talk about both failures and successes. They tell their story well. There’s so much to it, and if a company or a founder has all that and can bring the thunder to this podcast, that I think can help keep you motivated or give you some strategies and tactics to succeed, I’m not going to exclude them from that because they happen to be part of MicroConf, or they happen to be part of TinySeed. 

Before we dive into that, tickets for MicroConf US in Atlanta next April 2024 are on sale. This event will sell out. If you’re thinking about coming to Atlanta, April 21st through the 23rd to see me co-host this event with Lianna Patch, and to see speakers like myself, Rand Fishkin, and several others, head to MicroConf.com/US to grab your ticket before they sell out. We had an amazing event just a few months ago in Denver, and I expect the event in Atlanta to be no different. So MicroConf.com/US to grab your ticket today. 

And with that, let’s dive into my conversation with Jordan. 

Jordan, welcome to the show.  

Jordan Hansen:
Hey, thanks, Rob. It’s good to be here.  

Rob Walling:
Yeah, it’s great to have you. So Cobalt Intelligence, your H1 is “Keep up with your pipeline. Automate and integrate SOS, court, and other public data into your MCA underwriting process” – wow – “so you can move forward quickly and confidently.” I-  

Jordan Hansen:
Does that feel long?  

Rob Walling:
Well, no. I don’t know what SOS and MCA is. So it’s like you have these obviously industry-specific terms in your H2, your subtitle in essence. So either that’s a really good decision because you’re speaking exactly to your customer, or you’re alienating people. But that’s for you to let us know. Translate that for us.  

Jordan Hansen:
Yeah. The good thing is I can answer this with confidence because I hired Lianna Patch, and we worked together. She crafted these headlines exactly like this. Whether it’s the right decision or not-  

Rob Walling:
I’d feel pretty confident-  

Jordan Hansen:
I [inaudible 00:04:36] to Lianna.  

Rob Walling:
At that point.  

Jordan Hansen:
Exactly.  

Rob Walling:
Translate for me what I just said then, because there’s a bunch of entrepreneurs listening to this right now, who are like, “I am not sure what this product is”. It’s CobaltIntelligence.com, if folks want to check it out.  

Jordan Hansen:
What we do is we help people in the finance industry. I say banks, but most of the time it’s people doing alternative lending. They’re not banks because they don’t have the volume we look for. But when a bank or a business needs capital for a pizza restaurant, and their oven goes down, they need money to replace that oven immediately. 

If they go to a bank SBA loan, it’s going to be a long time to be able to get that cash. They’re going to go work with an alternative funder, which normally can get them that cash, working capital, something like that, a lot quicker. They have to do the underwriting on this business so they check things like the SOS, which is what we call, it’s the Secretary of State. When you start a business, you register your business. We’re going to do things that check. “Okay, is this business in good standing? When did it file? How old is it? How much history it has?” And then court judgments. Has there been a bad history of credit? That kind of thing, that’s where we’re going to help with these funders. Right now, they’re doing that manually, and we help them just automate that process.  

Rob Walling:
So manually, meaning I am a business in Maine, applied to get a loan from us, or 500 businesses in Maine applied today to get a loan. There’s a lot of volume, you were telling me about.  

Jordan Hansen:
A lot of volume.  

Rob Walling:
I’m going to go to the Maine Secretary of State website, which I know is one of your favorites, and I’m going to log in. I’m going to type in, oh, this business name. Do they exist? And are they in good standing? And do they have a tax bill? That kind of stuff. And you’re saying you have that data for all 50 states, that they can just plug into via – I know there’s a web interface – but it’s mostly an API. Is that right?  

Jordan Hansen:
That’s right.  

Rob Walling:
Your product is mostly an API, yeah.  

Jordan Hansen:
It’s an API. The fact that it’s public data, a portal doesn’t offer a whole lot to them because if they have to go to my portal, then they may as well just go to the state. Again, that’s why banks aren’t great. I remember just talking to a bank last week and they said, “A thousand a year, we could probably do that.” I’m like, “No, our plans start at a thousand look-ups a month.” And they’re like, “Oh, that’s a volume. We need higher volume.” They’re processing hundreds of applications a day.  

Rob Walling:
Okay. I want to get into a little later, because you’re a developer, and you built this yourself. I want to talk a little bit about how you get all that data, because I’m sure people are wondering, “Is this freely available? Is just JSON blobs that are on GitHub that you’re downloading?” 

But before we do that, talk about where the company is. As I often tell people, you can give revenue, you can give team size, just whatever you feel comfortable with to give the listeners an idea what stage you’re at.  

Jordan Hansen:
Yeah. Right now we are three or a team of three, and we are profitable, so we feel pretty good. Two of those are US-based, both engineers as myself, engineer-founder, and then another engineer to give an idea of how much salary that is. We have one offshore marketing person. And we’re doing, thankful, thankfully, we’re profitable as of it’s been about, I guess, the last 10, 12 months we’ve been profitable.  

Rob Walling:
What’s your main channel for finding new customers? Seems like a pretty specialized market.  

Jordan Hansen:
Yeah, it’s interesting because I didn’t know this market existed before. I started building, I was building things constantly, and I just was building them in public, blogging about it, and then making YouTube content is where it started. And then people started reaching out and say, “Hey, I could use this data in my business.” That’s really what we’ve kept it doing. We just continuously are making YouTube content. It’s shifted how we focus that, but it’s still our main bread and butter is content, whether it be blog content or YouTube.  

Rob Walling:
Yeah. That actually takes us back to your origin story, is that you had a good job with golden handcuffs, working at Lenovo. Were you a developer, a senior engineer there?  

Jordan Hansen:
I was, yep.  

Rob Walling:
Yeah. You didn’t want to do a SaaS because you knew SaaS was a drag?  

Jordan Hansen:
It sucked. Oh my gosh, it was terrible.  

Rob Walling:
Because you built one within Lenovo, and it was just a fiasco. Is that what happened?  

Jordan Hansen:
Yeah. It was fine. No, the product was good. We had built a good product. That’s why they hired me in fact. They didn’t have any, they only had on-prem software they were selling. They wanted to build us a cloud-based software. I had done that before. They hired me to focus on that, and they built the whole team around us to build this software. But it was a good product. We did a good job. But it was so hard. They’re Lenovo, so they had a lot more security restrictions, a lot more red tape that we had to get through. But I was like, “I’m never building a SaaS, never.”  

Rob Walling:
That’s why I say stair step. For folks who haven’t built one, they just don’t know how hard it is that first time. And being at a big company doesn’t make it any easier because you have, like you said, all the security, there’s just so much more. 

Paul Graham had this expression when they got acquired by Yahoo, and he said, “We got in there.” I don’t know, they’re 20-somethings at the time. This is in ’90s. He said, “Once we started working at a bigger company, it felt like running through water.” 

Have you ever tried to run in the ocean?  

Jordan Hansen:
It’s so hard. Oh, yeah.  

Rob Walling:
I can’t get anything done. What would take a week at a startup will take two months at a big company, and it’s infuriating. I’m not saying Lenovo is good or bad. I’ve just worked there.  

Jordan Hansen:
That was a good team. Honestly, we were probably almost like a little company within the bigger company, so I feel like I loved it. They were good people and a really good team. And we made a lot of really awesome stuff. But it still was, like you said, there was still a lot of, we had to go security checks all the time.  

Rob Walling:
It’s challenging, yeah, yeah.  

Jordan Hansen:
Yeah, it was hard.  

Rob Walling:
So you’re working the day job at Lenovo. Am I right that you were creating blog and YouTube content around web scraping just as a hobby?  

Jordan Hansen:
Yeah, I needed something. I remember listening to a book by John Sonmez. I don’t know if you’ve heard of him.  

Rob Walling:
Yeah.  

Jordan Hansen:
Anyway, he has this book, Soft Skills for Software Engineers, and he said, “You should write a blog.” And I was like, “Everyone says to write a blog.” 

But I was determined. I really wanted my own business. I had one in college, and I was like, “I know that’s where I want to be eventually.” But I didn’t want it to be just a dream. “I got to take some action.” So I just started writing a blog post a week about web scraping, about getting data publicly. 

And the blogs, they sucked at the beginning, and they probably sucked a lot during the way too. But it forced me to find the cool stuff. I had to like, “Okay, what am I going to write this week? Let’s find something I can web scrape.” And that really is how it started.  

Rob Walling:
Why web scraping? Is that something you had done at a job, or you just decided to do it?  

Jordan Hansen:
I had a friend that hired me to do a contract job for his business, and it was around web scraping. I thought it was fun and interesting, and I was trying to pick something that wasn’t, a little more on the fringe. It wasn’t something that everyone was doing. I felt maybe intimidated to do just software because there’s really good software engineers. I’m pretty good, but I don’t know if I’m the best. But I felt like this was something a little more, that not every single software engineer could say they were good at.  

Rob Walling:
Yeah, I like that, picking a specialty, a niche from the start. So you’re blogging, and were you doing YouTube?  

Jordan Hansen:
Not for a while. I did probably blogging for a year, every week for probably a year plus. And then I switched over to YouTube as well. 

I just started… Honestly, my YouTube videos at the beginning, we were just down doing that Tennessee retreat, and we had breakout mastermind groups, and people talked about some wins you had. And I just harped. YouTube is so, so good. My videos at the beginning, it literally was an hour and a half of me writing code. That was it. 

Now, I wasn’t entertaining, definitely not, and I probably had 30 to 50 views on it. But I just kept making them. Because I was building stuff every day, I’d wake up early in the morning, it was like 5:00 A.M. or 6:00 A.M. I’d record before my day job and just code whatever stuff and put it all, just throw it up on YouTube, no editing at all. 

The thing is, it just builds. People started following more and more. And then I get people reaching out, like, “Hey, I need this data”, or “I need different things”. Why not do it?  

Rob Walling:
That’s interesting. How much… Just hearing you say, “I shipped a blog post every week for a year”, that’s something most people won’t do. 52 blog posts is nothing. That’s nothing easy. And then to create videos, you’re like, “Oh, I was just recording.” You kind of matter-of-fact it when you say it, but it’s a lot of work. You weren’t making money off it. You didn’t have a huge audience, not like you had tens of thousands of people. You probably had hundreds, I’m guessing, reading and following. So it’s not that much. Why did you keep doing it for that long? What was the internal motivation that kept you going?  

Jordan Hansen:
That’s a good question. I really think it was because I was that determined to find… I wanted a side business. I wanted a business. I wanted my own… I wanted to be a Rob Walling one day. 

I didn’t know who you were at that time, but sorry, don’t be offended. 

But no, I wanted to have my own business, and I felt like I love the people I worked with, but I wanted to be my own boss. I did not like being told what to do. Lenovo was probably as good as it could have gotten for a software job, but I wanted that, to have built my own thing.  

Rob Walling:
You have the genetic flaw we call entrepreneurship.  

Jordan Hansen:
That’s right.  

Rob Walling:
I often call it unemployable.  

Jordan Hansen:
That’s right.  

Rob Walling:
I remember becoming unemployable. I still had to work for a few years after that. But the moment where I was like, “Oh, I’m never doing this again. The moment that I can quit this job, I’m done, and I’m never going back.” 

Okay, so you’re doing it nights and weekends. You’re shipping these videos. So how does that turn into launching a SaaS that you said you didn’t ever want to do?  

Jordan Hansen:
Again, I was there at Lenovo, and I had a plan. I was like, “I’m going to get to a point eventually where I can quit.” I started saving my money more. 

As the videos came out, I would start to get some people doing one-off contract work. They’re like, “Okay, can I get this done? Can I get this done?” And I occasionally signed people up for recurring… They had me on retainer, essentially, to collect data for them. So I had some income coming in. I was making some money there, and I was selling occasional things. I would get some sponsored videos and posts too occasionally. So I probably had, I don’t know, 10 grand to 20 grand a year on the side that was coming. Not a lot, but I kept saving the money, and I was like, “Okay, with the goal to quit.” 

That’s kind of how it took me. Now, I didn’t get to the SaaS part. Even when I quit my job at Lenovo, I was like, “Okay.” I told my wife, “Hey, we have enough money in the bank that we should be good to live how we are for two years, I think, with the revenue we have coming.” And so she’s like, “Yeah, totally, let’s do it.” 

I quit. Again, no intention of doing SaaS. I was just going to do contract work, build something. But recurring revenue was really, I wanted that. I had done things before where I had sold a one-off, and I hated it, just because people came back to you, especially when it’s software, they want tweaks. I hate getting in that pricing discussion. I just wanted recurring revenue is really what I wanted.  

Rob Walling:
Was that 2021?  

Jordan Hansen:
That was 2021.  

Rob Walling:
This was going on, yeah. You took the leap with two years of savings in the bank. Congratulations. 

I know a handful of entrepreneurs that have done that. I was never able to do it, just to pull together that much cash to be able to do it. 

I would be super… For me, watching my savings burn down would be pretty tough. How did that feel? I’m sure the first day you quit, and you show up for your new job, which is working for yourself, got to feel amazing.  

Jordan Hansen:
It was amazing, right. Oh, so good. It was the best feeling ever.  

Rob Walling:
And did you, over the course of the next weeks or month, did you start to feel a little bit like, “Oh man, I got to make this work fast because I’m going to be losing tens of thousands of dollars over six months,” or whatever.  

Jordan Hansen:
There was stress. I don’t think it was intense stress. I had enough. Again, when I quit, it was a mix of savings, plus I had money coming in. I was like, “Oh, I’ll just keep having to build these customers, and I’ll have enough to take it over”, whatever it is. The problem was I was building products, but they weren’t really software products. It was more like a weird mix of, “Hey, I’ll send you an email a day with data.” It’s probably a SaaS kind of. I didn’t have any login. I’m just going to send you a CSV and invoice you once a month, and you’ll just pay me. That’s what I wanted to build. I was like, “No login, no SaaS, and we’ll just go from there.”  

Rob Walling:
You applied to TinySeed, and you were pretty early. I’m not sure I remember. I saw you sent me some notes, and I didn’t remember you being as early as you were, but…  

Jordan Hansen:
I don’t know. Maybe you read it wrong, and that’s what got me in because I felt pretty lucky.  

Rob Walling:
Did you apply in ’21 or ’22?  

Jordan Hansen:
I applied in ’22. In fact, I didn’t even know what TinySeed was in ’21, didn’t know what you were in ’21 until the very end.  

Rob Walling:
Yeah. Tell us how you got there then.  

Jordan Hansen:
Yeah. I started actually building a software business. It was just these products that I was building. As I got to more of this public data, I was just building up connections, and I was like, “You know what? This would be kind of cool to use and sell.” And then I had some people reach out and say they wanted it. That’s what exposed me to it. “So, okay, I think this is something where I could actually charge as a software as a SaaS or a software as a service business.” 

I started looking around for podcasts. I’m a big consumer of podcasts, and someone recommended yours. They were like, “Hey, this is one of the top ones you should listen to. I started listening to it like crazy. That’s where I got exposed to TinySeed, and it drew… I’m married with three kids. I’m 39 now, so when I quit, I was mid-thirties. I wasn’t going to be someone that’s going to go venture and work 80-hour weeks. I’m never going to do that. 

It was really a decision of… Funding was never on my radar, didn’t want it. But what you kept talking about, this lifestyle, you were saying, the type of business you were building, what TinySeed showed, promised that really appealed to me. I was like, “Maybe.” But I felt very imposter. Again, I didn’t want to be in the software business. I wasn’t someone who had been doing software since college. It was a whim. It was 2022, spring of 2022. I think you probably had said, “Hey, the application’s a piece of cake. Check it out.” And it was a piece of cake. You or Tracy, I don’t know who built that. I think Tracy built the application.  

Rob Walling:
Tracy did.  

Jordan Hansen:
It was so easy. I went and looked at it, and I was like, “Really? I can answer these questions.” I had to look up, I think, some of the definitions because I was like, “I don’t know what these software terms are.”  

Rob Walling:
Right, right. See, that’s something that I want folks to keep in mind. If you’re listening to this, and you feel like an imposter, but you have a business that’s doing revenue, and you’re like, “Oh, I should never apply to TinySeed because I don’t qualify”, or whatever. That’s not usually true. 

I also want to call out, this podcast and my interviews are not advertisements for TinySeed. You just as well could have gotten involved with the MicroConf ecosystem, never applied to TinySeed. And that’s okay too. The reason we have all this stuff, we have mastermind matching for people who want to pay for that. We have TinySeed funding and the accelerator for folks who want to participate in that. We have the state of independent SaaS for people who want to… We have in-person events. Some people want to go, some people don’t. 

I don’t have an agenda with… You’re not on here because you got into TinySeed. You’re on here because you have an interesting story to tell, and I think it can inspire people who may not want to build a SaaS, and you did, or may have a SaaS, but think they’re an imposter, which you did as well. You know what I mean? 

Now you’re much further than that down the road, with full-time employees and profitable and growing and all that. That’s the point of the conversation is to inspire folks to follow the path that you followed. 

You must’ve been surprised then. Do you remember what your revenue was?  

Jordan Hansen:
Yes. I had been selling, like I said, I had been selling other products. I had some recurring revenue, but it wasn’t the SaaS revenue. I had about $4,000 a month in that, which felt okay. But I felt like it was cheating to almost list it. I had to put a disclaimer because I only had $300 of actually the SaaS revenue. Had just launched it, very pre-beta, so barely anything was coming in there.  

Rob Walling:
We funded a few companies like this, where there’s a mix of revenue. But if it’s recurring, if the 4,000 was one-time, or it was truly consulting revenue for dollars for hours writing code, we would’ve said, “Get the SaaS further along. Please reapply.” 

But I remember there being… It was like, “Well, it’s recurring revenue, and it’s heavily related. It gets you to Ramen profitability, close to default alive.” We’ve invested in a handful of businesses like that, where it’s like, “Ooh.” Actually, we really like APIs anyways, just as a business model. We’ve had some pretty big successes within TinySeed. So we like them anyways. We like you, we like developer-founders, which you are. And we liked that you had traction in this space, where we’re like, “This is a niche of a niche. We don’t have any other A, no other TinySeed companies in it, but you can dominate.” 

I really like vertical software. We do at TinySeed because you can dominate it. You’re not competing with whoever – Microsoft, Google, Facebook. You don’t have to be the best marketer. You just have to be better than the other five in your niche. Obviously, you are. 

I want to give folks context, who think, “$300 MRR? How did he get in?” There’s more to it than that. You had more than 4,000 in revenue. It happened to not all be from the SaaS, but there’s nuance. This is when people say, “Should I apply to TinySeed?” And it’s oftentimes, if you’re in doubt, do it. And we’ll just talk. We’ll talk it out. I want to figure out here more about what the revenue’s from and just more about how the business breaks down. 

Now, as I said, I don’t want to make this a commercial for TinySeed. But I know you’ve gotten so much out of TinySeed, and I want to give you the opportunity to say that because it seems like you were… I don’t know if you were surprised by that, or maybe you’re surprised by how much you’ve gotten out of it. Just talk us through it.  

Jordan Hansen:
Yeah. I want to say Rob didn’t pay me. He didn’t ask me to come on and talk about TinySeed. If you’re listening to this podcast, you probably know not the hard salesman of this. He’s very low-key, and that’s how this was. 

But before this, I was a solo founder, feeling like an imposter, did not have a history of… I was a corporate job guy. There’s entrepreneur guys that I feel like they’ve been in software forever doing these things, and they were really comfortable with his ecosystem. I was not. Whenever I was having a decision to make, I was questioning it, even should I even stick with this product? That was a big decision I had all the time. And it was constant. I was asking my wife, but she didn’t know either. So I had no one I felt like I could trust to talk to about it. 

And I wanted a co-founder, but I had had co-founders in the past, and so I did not want a co-founder. I wanted the dream co-founder that would work. So applying to TinySeed, the money was good, but I needed someone to talk to. I wanted a community to talk to and say, “Hey, is this crazy? Is this not?” Honestly, it’s probably been a big… Getting into TinySeed was A, validation of my idea, that, hey, this actually is something I could focus on. 

I thought this, gone back and thought about this a lot. I don’t know if I would’ve focused on it. I probably would’ve chased another shiny thing. “Oh, someone else asked me about this, so I’m going to try to build that now.” The fact that I could now focus on it, which I feel like most businesses, when you focus on one thing, that’s where the growth happens. You just have to keep going. It’s going to suck for a while, and it’s going to continue sucking, probably for a long time. But keeping with it really just, that’s where the dividends come.  

Rob Walling:
It sounds like it made a big difference. And it’s not, as you said, the money’s the money. It’s fine. The community, the mastermind we match you in, the other folks that you can hit me up… You and I just had a call about your strategy for the next six months right before recording this podcast episode. You can just hit me up, get on my calendar at any time.  

Jordan Hansen:
Huge difference, yeah.  

Rob Walling:
And there’s 250 founders in TinySeed. We have 40 or 50 mentors, and you can hit them up. That’s really the value, I think, of… And to be honest, as an entrepreneur myself, I’m still a startup founder. TinySeed and MicroConf are startups. We have found product-market fit, but we have to worry about pricing. We have to worry about moats and this and that. That’s one of our moats. Anybody can raise money and hand out checks. Who can build a community like TinySeed? Not that many. And who has the alumni network? And who has the mentor network of the B2B SaaS founder  

Jordan Hansen:
It’s a special thing. It really is. They’re some of my best friends now, fellow TinySeed founders. When I go to the events, it’s a blast. You hang out with them. We just had the first one where we could bring some family, and my wife came. And she’s not really the most social person sometimes, but she was loving it. She was like, “Oh, these people are amazing.” I’m like, “Yeah, this is what I talking to you about. This is why I come home, and I’m like, ‘Hey, that’s my best friend, Jason. Hey, that’s my best friend, John. These are my guys I hang out with all the time.'”  

Rob Walling:
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Yeah, that’s cool. 

All right. In true Startups For the Rest of Us fashion, I have a question for you. 

When did you know you had product-market fit?  

Jordan Hansen:
Product-market fit, that’s a tough one. You hear people, I heard your podcast with Noah Kagan. I don’t know, this came out just before we were, the last one I listened to anyway. And he’s like, “You’re going to know.” I guess I kind of know. People are paying me, and I’m living. I feel very lucky for where I am. But man, I’m just constantly faced with doubt. What else can I do? Am I there enough? I don’t feel like we’re exploding yet, but since we joined TinySeed, we’ve probably been four to six, so a lot of growth since we’ve joined, which has been amazing. It’s easy to have those multiples when you only have $400 when you join. Doesn’t take much to multiply. But I would probably say when I knew I had product-market fit, it’s never, not yet.  

Rob Walling:
See, I think you’re being modest. The fact that you have people paying you thousands or tens of thousands a year means that you’ve built something that people want and are willing to pay for. Now the question is, you usually have product-market fit with your core customers who are not canceling. The question is how many of those exist in the world? And can you reach them at a scale? And what’s the switching cost? There’s all this other stuff. 

We might say, and as we usually say, their product-market fit is not a binary. It’s not a one or a zero. It is a continuum. Product-market fit also, per my conversation with Ruben a few weeks ago, you can have strong product-market fit with a certain group or with a certain product. And then you launch this second piece of it, and it’s like, “Oh, we don’t have it with this new customer type. There’s multiple ICPs, ideal customer profiles.” 

I think you have it strong with a certain group of folks, and I think you’re just in the process of figuring out can you expand that? Yeah. Or can you strengthen it with them?  

Jordan Hansen:
Certainly, maybe some of the things you’ve noticed is when you get on a phone call with someone, and it’s the easiest sales call of your life. They’re just like, “All right. I’m ready. Let’s go.”  

Rob Walling:
Oh, yeah. Yeah, that’s what it is.  

Jordan Hansen:
Then you know okay, okay, there’s something here. I don’t have to convince these people, I don’t have to sell the vision. They get it. They’re already looking for it. When that happens, that’s probably what it feels like.  

Rob Walling:
I teased it earlier, about you have all this data, you have an API. Where does this data come from that you have in your database that you’re basically selling access to?  

Jordan Hansen:
Yeah. Like I said, it’s mostly public information. Pretty much all of it is public information. Our customers, they do buy data from places that aren’t public, but I worry… You worry about credibility of that data. 

Anything we get, it’s something that we have some kind of integration with a state. A lot of times we even purchase the data from the state. Sometimes we just have integrations built into those states. But it’s all public data in fact. And we also have where we do Freedom of Information Requests, where we’ll just ask the state, they provide that data. Legally, they have to provide it. It’s public data, all this business data. That’s the data we’re providing to our customers. We’re just automating it and maintaining a large software infrastructure that goes through automating that collection and that data.  

Rob Walling:
I want to talk about what I think you’ve told me has probably been the hardest part of the journey, and it’s about YouTube because you had traction. You were publishing videos. You still have traction, but that was a nice source of customers. And then someday, somebody comes a-knocking. Walk us through that story.  

Jordan Hansen:
Yeah, it’s a tough one. I showed you this graph early, before this conversation, and there’s a notable spike. Like I said, most of my videos before a certain time, they were not very big. Most of them were just I got a hundred views here and there. 

But at some point, I started gaining traction, and the video… It was earlier last year, in 2023, in the spring, it just started. I don’t know what it was. It was a video had already been out for probably a year plus. But YouTube picked it up in the algorithm, and we went from 800 subscribers to 2000 subscribers to 3000 to 8,000 subscribers within two months. 

Usage went up like crazy. But some of the problem that happened was the data, the stuff we were talking about, did not overlap very well with our target customers. We had to make the business decision.”Okay, this is more distracting than it is helpful.” It was so hard because you build up some ego and pride and the fact that people are reaching out to you. We were getting a lot more comments, and they were saying… 

It was just at the beginning of this rise where we started to take… We took all the videos down. We had 350 videos published. We took probably 300 of them and put them down. They’re private now, and I feel bad. People still comment, and they say, “Hey, can we get access to these videos?” And I say, “I had to make the business decision to take them down.” 

It was a source of leads too, because while most of it wasn’t overlapping, most of it was distracting. The overlap existed. We probably lost a little bit of source of leads as well. It felt good to be the man that knew stuff, that could talk about things, and just that little bit of credibility. It disappeared for a second. 

I remember discussing it with my wife, and I think with you too. Yeah, we did. You and I met and talked about it, to say, “Okay, I think I need to make this decision.” But I was really proud of myself that… It was a hundred percent the right decision for the business, and I’m proud of myself that I made it, even though it really ended up in being… 

Since then, we were 8,200 subscribers, I think, and we’ve lost subscribers. Now, we’re still making YouTube content, but it’s a little bit shifted and focused more on our customers. Now those people that subscribed originally for a different type of content, they’re churning out, which is fine. I understand. Not offended at all, but my pride takes a little hit.  

Rob Walling:
Sure. Because these numbers, this is the thing with vanity metrics, and I’m going to say YouTube subscribers are vanity metrics more so-  

Jordan Hansen:
A hundred percent.  

Rob Walling:
Email subscribers are not vanity metrics, unless if your open rate’s really low, whatever. Certain people beat their lists up. But email subscribers are the highest form of audience in my opinion. And podcast subscribers are actually very, very high because it’s usually, it’s podcast listens, it’s downloads. If you have 30,000, then you get 30,000 downloads, and we approximate those as listens. 

YouTube subscribers are like Twitter followers, where you can have 30,000 YouTube subscribers, and you publish a video, and you get what? A thousand views on it or something. That’s pretty common. Unless it catches the algorithm, it doesn’t even get shown to all your people. 

That’s the problem with Vanity metrics is you have these 8,000 subscribers, and that’s a number. And you’re like, “I want that to go up into the right, because we want all numbers to go up to the right.” 

But you realize that there’s this focus problem, there’s a mismatch. That’s something that most, especially with content, I don’t think people think about that enough. “Oh, my content is getting eyeballs, but is it achieving? What’s the end goal?” The end goal is bringing more people into the business, assuming it’s a business channel. On YouTube, it’s Cobalt Intelligence. So it is truly your business channel. It’s not like you’re building a personal brand around Jordan. You’re building it around the business. The goal really is to promote the business. 

Now, some could argue, “Well, look at HubSpot”, or “Look at Salesforce.” Look at these other companies. They do just put out broad, broad, broad stuff. Well, that’s because they’re public companies with a deca-billion dollar valuations.  

Jordan Hansen:
And they sell to a huge horizontal audience.  

Rob Walling:
Huge swath.  

Jordan Hansen:
They catch one little person over here, over there, and it could be someone valuable.  

Rob Walling:
Thousands, if not tens of thousands, of customers versus Cobalt, which has a fraction of that number. You don’t need that many because you charge so much more. So you know that lack of focus can actually be, it can be detrimental to the marketing, just because you have people seeing it.  

Jordan Hansen:
I had to make the decision because I love those subscribers. It felt good, and it was nice, the ego, the pride. Like you said, it’s a metric, it’s a vanity metric. While I did like that, I decided I liked money more. Really, that’s what it came down to. It’s like, “Hey, do I want the subscribers? Or do I want more dollars?” I like dollars more today at least. Maybe one day that changes.  

Rob Walling:
Jordan, as we wrap up, if you can describe your journey, because your journey feels, I guess, I say it’s unusual. But it’s probably not. It’s actually not that uncommon for folks to… It’s like accidental entrepreneurship almost. You knew you wanted to be an entrepreneur. Maybe accidental SaaS founder. Reflect on the last several years and how things have panned out for you.  

Jordan Hansen:
Yeah. That’s what I would hope the most. Whenever I talk to people, I just don’t think it’s as hard as people think it is. More importantly is that they take action and actually do something. So often, at least that I’ve visited in that trap, where I didn’t do anything. 

I just feel lucky, even meeting with other TinySeed companies. I didn’t choose this industry really. I stumbled upon it, and I’m just feel grateful that I have people that are willing pay. But not only that, the biggest way that we are increasing our revenue so quickly is the fact that we can charge a lot of money. Honestly, people are willing to pay for it. If we had a product where we could only charge $15 a month or $20 a month, revenue growth, it would just be insanely difficult. Now I can land one customer, and we add 20% to our revenue. 

I just feel really lucky that I happened to be in this, not only with TinySeed that’s been helpful to focus, but also just happen to have a product that’s good. And I don’t take that for granted at all. I recognize that I’m lucky to be where I am.  

Rob Walling:
Jordan, thanks so much for joining me on the show. If folks want to keep up with you on Twitter, you are jordbhansen with E-N at the end. And of course CobaltIntelligence.com if they want to see what you’re working on. Thanks so much, man.  

Jordan Hansen:
Thank you.  

Rob Walling:
Thanks again to Jordan for coming on the show. If you’ve bought my book, the SaaS Playbook, and haven’t yet left a five-star rating on Amazon or Audible or wherever you get your books, it would mean a lot to me. If you log into the site, and click that five star, I don’t even think you have to write a review. I think you can just rate it, and it goes a long way towards helping more people discover the book. The book has crossed 20,000 copies sold, which feels amazing. As you know, my mission is to multiply the world’s population of independent, self-sustaining startups. The more folks I can get this book into the hands of, the more I can continue leaning into that mission. 

I hope you enjoyed this week’s show. This is Rob Walling signing off from Episode 703.

Rob Walling:
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I love the smell of startups in the morning. You’re listening to Startups For the Rest of Us. I’m your host, Rob Walling. Thank you if you responded to my tweet about episode 700. That was very meaningful. A lot of people weighed in on that thread and I just really appreciated all the well wishes and all the folks who said that this podcast has impacted you on your journey and it’s made a difference in your entrepreneurial career because that’s why I’m here, that’s why I do this every week. 

Today, for the first time in quite a while, I’m doing a solo listener question episode. I have some voicemails piling up. I’m going to be covering topics ranging from which episodes of this podcast are good for beginners, whether someone should focus on revenue or profit, how to compete in a competitive space and being concerned about that, as well as when do conditions warrant lowering your prices. 

But before we get into the episode, I want to invite you to MicroConf Remote: Early Stage SaaS Sales Strategies. It’s an online event. We’re hosting March 12th and 13th of 2024. It runs from 11:00 AM to 1:00 PM Eastern Time on those two days. And there will be sessions all focused on early stage SaaS sales led by Rachel Leow, Craig Hewitt, Daniel Hebert, Sam Howard. I’ll be emceeing. And we’re going to cover strategies to boost your close rate, build a sustainable sales process, and figure out how to overcome the challenges of selling as a technical founder. We’ll also have Daily Founder Mixer Sessions where you’ll get to meet other attendees to network and chat about what you’re working on. Tickets are inexpensive and they are available at microconfremote.com. 

Let’s dive into the first question of the day. As always, voicemails, audio or video, go to the top of the stack. You can always send in a question by going to startupsfortherestofus.com. Click Ask a question in the top nav.  

Samuel:
Hi Rob, Samuel from Sweden here. I’ve been following you the past years and you’ve inspired me to build my own products and launch some stuff. But now also I would like to introduce this thinking to some of my friends who are really skilled but not into this entrepreneurial bootstrapping thinking. So I wonder what episodes would you recommend me to introduce them with? You’ve done a lot of episodes, but maybe you have a few that could summarize it and get them going. Thanks.  

Rob Walling:
It’s a good question and my answer is, it depends, of course. Honestly, is a podcast the best way to introduce someone to a concept like this? I think it might be a book or a blog post for that matter. So if you want to send them a blog post, I would Google The Stair Step Method of Entrepreneurship and send them that. If you think a book would be better for them, and obviously that can be audio or PDF or Kindle or a paperback, it’s going to be up to you. Start Small, Stay Small is old and it’s a bit dated, but the philosophy is really laid out well in that book. And I’d say 75% of what’s in there still holds true today. It’s the mental side of it. It’s transitioning from developer to entrepreneur. And that book is cheap. It’s 10 bucks on Kindle. And there’s an audio version on Audible. So whatever they like to learn in, that might be the starting point. 

The Saas Playbook, in my opinion, is a much better book. It’s, I’m a better writer. I have more knowledge. It covers more topics. It covers topics I think are overall maybe more relevant to today’s space. And again, that’s similar, it’s 10 to $25 depending on which format folks want to dig into. 

Now if instead they watch a lot of YouTube, then you could go to microconf.com/YouTube and we have a playlist called Building Your First SaaS: The Ultimate Crash Course. It’s a lot of videos, but it kind of gets you in the mindset of what we do here. 

I personally think books are just, they’re a more compact way to do it and they’re probably a more approachable way than recommending episodes of a podcast. 

With that said, if I really wanted to dig in and recommend episodes of the podcast, I would go to the greatest hits tab in the top nav of Startups For the Rest of Us. There’s some interesting solo adventures in that list that I think do a decent job of communicating what we do and how we think. I know it looks like there is episode 222, this stair-step approach to launching products that’s back from 2015, so it’s almost 10 years old. But that’s certainly going to be kind of the podcast version of the blog post I recommended earlier. 

So thanks for that question. I hope my answer was helpful. Now for my next question about focusing on revenue versus profit.  

Cat:
Hi Rob. My name is Cat Wildman. I run a startup called Powered by Diversity. We’ve been running since September 2020 and I went full-time in 2022. We closed 2023 just shy of 200K pounds profit. Not profit, revenue. My question is about profit though. So in 2024 we’re targeting 500K and we’re tracking to meet that target already. 

Now my question is about valuations and profit. So I have been going on top line. So you know you’re ready for series A when you’re at 1 million pounds recurring revenue. We’re tracking to get that not this year but the year after. And we’ll get there. However, I had an acquisition offer in 2023 and they were valuing us on profit. 

My question to you is, we are growing, though we are never going to have a massive batch of cash in the bank because we’re spending it all to grow.We spend everything that comes in on achieving that top line revenue target. So what is the startup to do? Are we going to end up… Is this world of SaaS up moving away from top line valuations and into profit? Do we hit our top line valuation and then sit and become really profitable and then sell? What is going on with this profit versus top line? Because I really don’t know what to do because when you look at our P&L, we’re not very profitable at all. I think our profit, our cash at the end of 2023 was like 8.5K because we spent it all in order to get to the 200K top line revenue. And it’s going to be the same in 2024. Please help me.  

Rob Walling:
It’s a good question, Cat. It’s something that we have touched on in the past on the show, but it’s not something that I think I’ve covered probably in a couple years now. 

And so here are the rules of thumb. These are just rules of thumb. There’s always exceptions to this. I am going to give an exception almost right at the start. But in general, once you get past, it used to be a million ARR, this is SaaS only. I’m not talking about building info products or courses or building a gym or a coffee shop. I’m talking about building B2B SaaS. It used to be north of a million ARR, now it’s, I’m going to say it’s closer to 1.5 million. It’s somewhere in that range. That’s when buyers will start to evaluate you based on revenue and growth are really the one and two. Actually, growth is number one and revenue is number two and churn I think is number three in terms of what they’re valuing you based on. 

Not everyone will do that though. And in fact, there are these micro private equity firms or value buyers that will buy you based on net profit no matter what because they know that you haven’t been going for profit and they want to push the price down as much as they can and get a deal on it. When you’re sub a million ARR, I don’t know that I’ve heard of very many. There’s exceptions, but as a rule, you’re going to be selling for a multiple of net profit. 

I have an exception already. We had a company we were looking to back with TinySeed, we made him an offer. He verbally accepted and then he got an acquisition offer. I’m going to make up numbers here, but say he was doing 80,000 ARR, so it’s early stage, a pretty good fit for TinySeed still. He sold for 10X that, and it was just a top line thing. And why did he sell for 10X that? Well, the multiple’s almost irrelevant at that point because that’s what he needed to give up on the business. And he got all cash. It was a good offer. 

So it’s not an always thing, but it’s kind of the general rule of thumb the way it works is net profit up to about a million and a half ARR. And above that, if you’re dealing with the right buyers, so it’d be strategics or the bigger private equity who are not value buyers, they’re going to look at you at a revenue multiple based on growth. And if you are looking at value buyers or you’re below a million or a million and a half ARR, then yeah, you’re going to be looking at net profit. And that’s why if I was growing a company looking to exit in the next few years, I would not be worried about profit. I would be pumping every dollar I had back into the engine to get it to grow faster and grow bigger. 

And even if I wasn’t looking to exit, even if I was looking to pull profits out in the long term, if you can get that in a healthy, organic, sustainable growth and you can get your company to 2, 3, 4, 5 million, you do have so much more leeway there to then pump the brakes to back off on the growth and just get a lot more cash out of the business. 

So thanks for that question, Cat. I hope my insights were helpful.  

Speaker 4:
Absolutely love your podcast. Such an eye opener to so many questions that I’ve had and continue to have as I progress down this journey. Can’t wait to attend my first MicroConf conference when you are next in Europe. I know audio recorded questions get bumped up to the top of the queue, so hopefully you’ll be able to answer this one soon. 

Similar to yourself back in the day, I’m currently a consultant looking to scratch my own itch and create a SaaS platform for myself and my peers. But let me be honest, I’m crapping my pants. I really work in a fast-paced world of business process automation and AI and the niche solution on delivering is even faster. I’ve built some sort of following, a few thousand people on LinkedIn through blogging and newsletters and talking to my peers in depth about their challenges and I’m developing an MVP of what I know what I think is going to solve their problem from the conversations that we’ve had. 

The solution logic is a little tricky for me and that’s taken quite a long time, quite a few weeks to get this MVP up and running. I’m constantly looking over my shoulder as the market seems to be progressing at the solution that I have. But I feel that this solution really hits the nail on the head to solve my problems, my client problems and my peers. But do I continue developing myself or do I find some developer resource who can help me arrive faster at a workable MVP to present to my first potential client who’s a huge corporation, 33,000 employees? So there’s someone I have contact in there that potentially could buy this solution if it works and I can demonstrate it. And also, what are your top three elements to be differentiating myself in this market full of startups and companies with lots of backing and funding?  

Rob Walling:
All right, so there’s a lot there. I appreciate you sending that question in. So to answer the first part, which is, “Do I bring a developer on or do I continue building it on my own?” Without more details, I just can’t tell you what to do. The way I would think about this decision though is, “Am I making enough progress on my own and do I think that the code I’m writing or whatever I’m doing to build an MVP, because an MVP does not have to involve code at all, but is the solution I’m building going to satisfy these needs in a way that I could quickly transition to a scalable solution if I needed to? Or am I writing (beep) code and it’s going to crash or not scale because I’m kind of teaching myself, I’m a hobby developer as I go?” 

And it just depends. Without knowing your market and your space and more information about your financial situation, if you don’t have the money, don’t bring a developer on. Just let it take longer. Teach yourself. I used to go to library and check out books on Perl and PHP and HTML because I didn’t have the money to hire someone. But if you have the money, then maybe. And at that point, then you need to look for a reputable developer because the worst thing you can do, and the thing I see non-technical founders make over and over, is hiring developers to build stuff and they don’t know how to hire developers because they’re not technical and the code is crap and then it’s not scalable anyways and they’ve spent a bunch of money. 

So my answer is, I don’t know. It depends on too many factors. I think this is where you have to make a hard decision with incomplete information. And if you’re making progress on your own and you’re building it, if you feel like you’re going to build something that’s going to solve their needs, then I don’t know why you wouldn’t keep doing that. So many people build nights and weekends. However, if I had a bucket of cash and you know some developers or you can find a referral to a reputable developer or an agency, is it something you should consider? Possibly. It’s really hard to know and it depends on a lot of factors. 

Your second question was about differentiating yourself in a competitive space. And frankly, as a startup, you don’t want to punch pound for pound at big competitors. What are their biggest weaknesses? Their biggest weaknesses are they don’t listen to customers if they don’t move fast enough. Usually, they don’t have the best developers, designers because they don’t want to work there. So their software is usually pretty crappy, there’s a lot of politics. And usually, their customers don’t like their software, don’t like how much they charge, don’t like how they sell, don’t like that they get locked into these contracts. There’s all this stuff that big companies do that you need to figure out how to use against them, use their biggest strengths against them. 

So you need to move fast. You need to build amazingly easy to use software. You need to sell it in exactly the way that your early customers want to buy it. Not forever. You’ll adjust that eventually. You’ll raise prices eventually. Right now, I would come in, I’m assuming if they’re big players in the space, that big brand names that they’ve raised their prices over and over and over because that’s the playbook and it leaves a ton of room below them, to be cheaper. And cheap is not your number one value prop I would say, but it is part of that package. You have to do all this stuff. And you find these hated competitors and you basically look to recruit refugees from them who just want out. So that is the number 1, 2, 3, and 4 things I would be doing to use my big competitor’s strengths against them. 

My next question is from Dylan about when it’s warranted to lower prices.  

Dylan:
Hey there, Rob, this is Dylan Pierce from Cleveland, Ohio. Thanks for taking the time to answer my last question. It’s been a few months and your answer was really helpful. 

So my new question for you is, have you ever had a scenario where you realized that you had to lower your pricing? I know the mantra is to always find ways to increase your price, and that makes sense. Differentiation your bootstraps, you can’t necessarily compete in the race to the bottom. But what are some signals where you found that your market, you just absolutely need to lower prices to be competitive? 

So some background for me, I’ve built a product that integrates with eCommerce platforms. This product uses computer vision and it’s typically reserved for banks and FinTech or startups that have a developer team that they can integrate over APIs and have that complexity to onboard. Whereas my solution is a simple plug-and-play app and it adds this functionality with the eCommerce use case in mind. 

I’ve been noticing recently that there’s been churn due to competitors that have much lower pricing but take a different approach than I do, less quality. But at the same time, I also rank number one for the key terms I care about. So I am considering lowering pricing just because of the pushback I’m getting from new leads as well as retaining existing customers due to a lower priced, in my opinion, a lower quality approach. But in the end, it seems like the sensitivity to quality isn’t so high. So at what point would you consider lowering prices? What are your thoughts on that? Thanks.  

Rob Walling:
I love this question because it’s not something that we tend to talk about very much on the show, because frankly it is so rare in my decades of doing this and then advising and investing. I can think of definitely two companies. I mean, I’m talking thousands and thousands that I’ve seen and that I’ve advised to raise prices and all that. I think two for sure that I can think of by name, and there’s got to be at least one or two more. So it can happen. There is absolutely a time when the signals are pointing to you lowering prices. And usually, the signals are pretty much what you’re saying. If you’re getting a lot of churn because your customers are going to a competitor and they’re siding price as the number one issue, or if you’re losing deals, if you’re doing more high-touch sales, sounds like you’re not doing that, you’ll get a sense that like, “Ooh, we’re too expensive.” 

Now, you’re always going to have complaints about price. And in fact, if you’re not getting any complaints about price, then your price is too low. But in this case, yes, can there be signals? There can be. And it sounds like you might be in that position right now. Churn and losing deals are the number one and two, right? It’s people putting their money where their mouth is. And if their switching costs are low out of your product to another one, that makes it even more painful. If switching costs are high, it’s a little less motivation for you to need to lower prices. 

But obviously, you can either raise prices too much. You can just keep increasing, increasing to where you kind of lose product market fit or where you’re the most expensive product in your space in your category and you don’t provide any additional value, then yeah, you’re overpriced. Especially the more of a commodity you are, it really is a race on price. The more of a brand you are that people just know you and you’re the best and no one gets fired for buying IBM, these days it’s Salesforce or HubSpot, Intercom. These are these expensive tools and it’s like, “Well, how can they charge so much?” Because they can. Because they’re a brand and they’re trusted and they integrate with everybody and no one gets fired for using them. 

So in your case, would I lower prices? I would certainly consider it if I was losing deals and if I was churning to these other competitors. Even if it’s an inferior product, I would certainly try to figure out a way to better communicate that. But if you’re doing low touch sales and you are viewed as a relative commodity to these other apps, it’s something I’d consider. 

Here’s the other thing, is can you think about lowering prices on the low end? So your entry level plans, the published plans so to speak, such that you are an obvious… You’re at parity with these other solutions or maybe you’re 10% more or whatever. But then as folks graduate up to tiers, as they get more value from your product, as they get more usage out of your product, that the price does increase with the value that you provide. That’s how I’d be thinking about it. Thanks for your question. I hope that was helpful. 

My next question is from anonymous about pursuing career growth versus staying and building on the side.  

Speaker 6:
Hi Rob. I’m relatively new to the startups for the rest of this universe, but I’ve been loving the podcast and the SaaS Playbook. They’ve helped make what has long been an abstract goal of self-employment seem realistic, actionable, and attainable. 

Now to my question. I’ve been at my current company for almost a decade, which as I’m sure you know is an eternity in software time. I’ve learned a ton and I’ve had lots of opportunities for growth, which is why I’ve stayed. Lately though, I’ve been feeling like I’ve reached the extent of my growth potential here and the grass is starting to look greener elsewhere. I think a move to a different company would let me learn a lot more about how other businesses function and grow and might help spur more of my own startup ideas by exposing me to other teams and industries. I’m also concerned that staying at the same company for much longer will limit my future employability. Startups don’t seem to like seeing 10 plus years of tenure on a resume. 

On the other hand, I have stability, flexibility, and institutional knowledge here, which means more free time to develop my own ideas and hopefully start on the stair-step approach or start bootstrapping something meaningful. If I make a move, that means that I’ll have to put in more intense time at work learning about a new product, code base, and team, and I’d be starting over on trust and stability. I know it’s hard to give specific advice based on a high-level overview, but I’m wondering if you have any general thoughts on this type of situation. Pursue career moves that might pay off long-term or use the current stability and flexibility to focus on building on the side right now? Thanks for your time. I really appreciate your work.  

Rob Walling:
Yeah, I appreciate the question. And you’re correct, I can’t give you direct advice about this because it’s your life and it’s your career. The way I think about it though is timing and timeline. If you move to another job now, I think in the long run it will benefit you. It’s likely to benefit you for the reasons you said of being exposed to new ways of doing things and new code bases and all that. 

The question is, do you have the months? I don’t think it’s years, but you’re definitely going to lose months of building back that trust and learning code bases and this and that in your life right now. I don’t know how old you are. I don’t know if you’re planning to have a child in 12 months. And so you have some kind of timeframe. Or if it’s like [inaudible 00:21:36], it’s looser, like, “I have 3, 4, 5 years to make this work,” then I think playing the long game, I probably would look for another job. You’re also likely to get a raise when you do that. You get exposed to new things. 

So all things being equal, I tend to want to do the thing that’s going to expose me to new experiences. That maybe makes me a little uncomfortable because I don’t love change myself and changing a job always came with uncertainty. Sometimes that uncertainty was a good thing and sometimes it wasn’t. Sometimes the job change was good and sometimes it wasn’t. I would lean towards being exposed to new people, expanding your network because now you have your old network, all the people you work with at your old company, you have the people you work with at your new company. It’s beneficial. But again, to me, it comes down to what is your time pressure in terms of your life timeline that you need to fit within in order to have enough revenue and what timeframe to quit the day job. So I hope you don’t take that as direct advice, but just a thought experiment of how I would think about it. 

My next question and the final question for the day is about cap tables.  

Steve:
Hey Rob, this is Steve Davis, a long time listener and a periodic correspondent. I was wondering if sometime you could do a deep dive into cap tables. It seems to be something that can cause people trouble later in their business. And I know you’ve had some great ideas like everyone earning in and such. So I hope you cover this sometime. And again, thank you for years of both insight and entertainment. Have a great holiday season. Bye-Bye.  

Rob Walling:
Thanks for that question, Steve. It’s good to hear from you after emailing with you a bit over the years. 

So for this one, I don’t know that I need to do a deep dive. It honestly doesn’t feel that complicated to me. I think I have three rules that I’m going to give you. First, I’m going to define what a cap table is for those who don’t know. It’s short for capitalization table. All it means is who owns what shares in your company, who owns what percentage of your company. And at the start, it’s one line. You can put it in a Google sheet. Most startups that I’ve seen are managing it in an Excel sheet or a Google Doc and it’s like, “This founder owns this much or we just know that that it is in the operating agreement” or whatever. 

When it gets complicated is if you take outside investors, if you create a stock option plan, if you take safes, which are a promise of future equity at a certain cap, then it starts to become muddy of how much. It’s not muddy per se, but it can be confusing if you don’t have it all mapped out of how much you and everyone else on the cap table owns and will own when that equity converts. 

So my simple, easy to remember, Rob’s patented rules to managing your cap table, number one, is everyone vests, even founders. So if you start a company with one other co-founder, both of you should vest into your equity. That just means that you have to work there for years in order to receive 100% of your equity grant. Usually, it’s a four-year vesting period. Standard is four with a one-year cliff, meaning you get zero equity until 12 months. Sometimes with founders, you wave the cliff and people get it from month one. You can talk to a lawyer and see what they say, but a big mistake that founders make with their cap table is not having people vest. You start a company with one other person, they walk away after six months. If they own 50% of your company, company’s DOA at that point. You will never raise funding for that company. You’ll be working to put money in the pocket of that founder who left. It’s catastrophic for the company and it’s not something you want to do. So everyone vest. 

Number two is, it’s a loose world of thumb, but don’t sell more than 10 or 20% of your company in a single round. So for example, we have seen companies apply to TinySeed that we wanted to fund. And if the founders, by the time they reach us between one, two or three of them, however many there are, if they own less than 80% of their company, we start to ask questions. And if they own less than 70%, it’s a bad sign. So we’ve seen some folks come in where it’s a single founder where sold 70% of his company to an early investor for not enough money to be honest. That’s tough. It’s really tough, because again, it makes the business… I’m not saying it’s DOA, but it’s like do you want to put in five or 10 years of work into this thing to basically line the pockets as someone who wrote you a check several years ago for not that much money? 

So loose rule of thumb, even tight rule of thumb is I would be super suspect if I was selling more than… If you’re doing a bootstrap or funding round, it’s like 10 or 15%. Sometimes you can sell 20%. I’ve seen it venture, it’s more 20 or 25. But in our space, in the MicroConf indie space, it’s in that 10 to 15% ranges where I would be sticking if I was going to raise funding. 

And the third point or rule is understand your safes and your convertible notes. So this is where you understand what it is and how it works. Safe is a promise of future equity. Convertible note will convert in the future and give whoever gave you that loan. Convertible note is technically on the books a loan that you’re paying interest on, but then it converts to equity at a certain point. Usually it’s your next funding round or it’s after X amount of years. 

We’ve seen a founder, we’ve seen multiple founders who didn’t understand their safes and were telling us, “No, I see. I own 90% of the company.” And we’re like, “No. When that safe converts, they own 80%, 90%.” In one case, I think it was actually 100%. It was a bizarre case. But really understand, like don’t DIY your own legal. This is where you don’t do your own legal yourself. 

Here are things I don’t skimp on. Tattoos, LASIK surgery, and legal, and shoes actually. Those are the four. I’m sure there are more than that. But these are things that are important to get right the first time, because if you screw them up, it’s not good down the line. So if you’re going to raise any type of funding, but certainly if it’s going to be safes and convertible notes, understand what that’s going to do to your cap table. 

And when you’re in these early stages before you’ve… Let’s say you’re going to raise venture down the line, you really need to own the vast majority of your company before you get to that pre-seed and seed round because if you don’t, you’re going to get diluted down to nothing by the time you get to the point where you have a liquidity event. So thanks for that question, Steve. I hope it was helpful for you and for other listeners. 

One of the callers today mentioned the SaaS Playbook and I realized the other day it’s crossed 20,000 copies sold. So it is quickly catching up to my best-selling book of all time, Start Small, Stay Small. What’s interesting is I posted to Twitter probably six or eight weeks ago that the SaaS Playbook had crossed 10,000 copies sold. Turns out, I did my math wrong. I actually missed an entire swath of books that had sold and it was probably closer to 14,000 or 15,000 when I posted that. And since then it’s crossed 20,000, which is incredible. 

Start Small, Stay Small, I had always had in my head that it had sold like 15,000, 16,000, 17,000 in that realm. I logged in to just Amazon KDP and it was well over 20,000 just there. It doesn’t include Audible, it doesn’t include all my direct sales. So I’ve now realized that I should probably keep better track of this just so I know. I like to know the numbers. Start Small, Stay Small as a self-published book has now sold more than 30,000 copies. Pretty incredible. I want to get an exact number on that. I need to go back through my records. But as a self-published book, I’m going to be honest, it feels pretty incredible. 

Now, that book has been out for 14 years now. So for the SaaS Playbook in eight months, 20,000, so it’s catching up quickly and still selling, I don’t know, 800 copies a month, 1,000 copies a month right now. It feels really good. And it feels like I talked about playing the long game in episode 700. This is all that coming to fruition, right? To be able to write a book, given the years of experience that I have and both the hard knocks that I’ve learned, but also now learning through the hard knocks of others to be able to put it in a book and then be able to get the distribution and get the word of mouth. I mean, not a day goes by that I don’t see some type of mention of MicroConf or the podcast or SaaS Playbook somewhere out there on social media or Reddit, Hacker News. 

So I really appreciate you being part of this community, this community of misfits as we call it these days with MicroConf, and this community, this audience of this podcast, and just taking it all in and helping promote. I guess it’s this mission that bootstrapping is actually, in a lot of cases, in most cases, is the right call. We don’t have to be prisoners to this narrative that the venture industrial complex tells us that we’re not important if we don’t raise funding, we’re not important if we don’t sell for a billion dollars. That we are actually changing a lot of lives for the better. Whether you’re bootstrapping or you’re helping others bootstrap, this community is incredibly supportive and I find it incredibly motivating to be part of it. So thanks for showing up this week and every week. This is Rob Walling signing off from episode 702.

Rob Walling:
Another week, another episode of Startups of the Rest of Us. I’m your host, Rob Walling, and in this episode I talk with Matt Wensing, the founder of Summit, about his long journey, multi-year journey, finding product market fit. While I’m not recording a series of podcast episodes about product market fit, this does remind me of Ruben Gomez’s episode maybe, what, four or five ago, where he talked about the long journey to finding it and then finding it with a certain subset of customers and certain features and then realizing, oh, the API is a completely different product I now have to find product market fit for. And in this episode, Matt Wensing and I just talk about his journey with Summit over the past. I think we talk about it in the episode. It’s took four years, four plus years of building, talking to customers, launching, finding out he kind of hit the mark, made some revenue, found out that wasn’t the right tool. 

So then he went back to zero basically and started again building new features. You might know Matt from Twitter or from his podcast that wrapped up just a few months ago called Out Of Beta. Before we dive into that, applications for TinySeed are opening on February 12th and close on February 25th. If you’re not familiar with TinySeed, it’s the accelerator I run for ambitious, mostly bootstrapped B2B SaaS founders. Even if you’re interested in applying outside of the window of February 12th to February 25th, you can join our mailing list to be notified when applications open again, visit TinySeed.com/apply to get on the mailing list or to apply. I want to invite you to MicroComp Remote Early Stage SaaS Sales Strategies. It’s an online event we’re hosting March 12th and 13th of 2024. 

It runs from 11:00 AM to 1:00 PM Eastern Time on those two days. And there will be sessions all focused on early stage SaaS sales led by Rachel Leow, Craig Hewitt, Daniel Ebert, Sam Howard, I’ll be MCing. And we’re going to cover strategies to boost your close rate, build a sustainable sales process, and figure out how to overcome the challenges of selling as a technical founder. We’ll also have daily founder mixer sessions where you’ll get to meet other attendees to network and chat about what you’re working on. Tickets are inexpensive and they are available at microcompremote.com. So with that, let’s dive into my conversation with Matt. Matt Wensing, welcome back to the show.  

Matt Wensing:
Thanks, Rob.  

Rob Walling:
It’s great to have you, man. So last time, I think you’ve been on the show two or three times, but last time was in November of 2022, episode 633 titled Building SaaS Plus A Two-Sided Marketplace. And in that episode we talked through how you started Summit was originally Sim SaaS and it was SaaS simulation and forecasting tool. You renamed it to Summit, which is a really good call by the way, usesummit.com if folks want to check it out. Then you pivoted or narrowed focus or whatever you want to call it into low-code calculators, simulations, forecasts. Then you were calculators for sales and marketing I believe. And today your H one is everything you need to start scoring leads and you have just, it’s been like what, three years, four years? And you’ve traveled a lot of H ones, sir. So that’s what I want to talk about today is how you’re feeling about where you are, how it’s working, how it’s been, how it’s going. Yeah,  

Matt Wensing:
That’s great. I love that Traveled H ones. Yeah, I’d like to think that the way back machine would be an honest way to look at everyone’s H ones through that light. It’s a favorite thing of mine, but it’s been a while. And during the last, I guess call it 14, 15 months since we last talked on this show, we have really done two things. First of all, we added sales and marketing as our target market. Sales and marketing are gigantic. I mean each of those words contains millions of people and hundreds of job titles I would say we’re even more focused in marketing now. And what we learned in 2023 was shortly after we talked, I started doing sales and selling really to those teams that we had found in the sort of early days of figuring out sales and marketing as a use case or a target market, and working with them just realizing that what we were doing was relatively high touch. 

It was working with some pretty strong brands, et cetera, that have pretty robust marketing teams. And when they do things, it’s a project and they take it on as a project, and that just means that there’s a lot of collaboration needed, a lot of conversation, et cetera. And so in that sense, what we had was a good fit because it was this broad platform for sales and marketing. As I said, calculators that are low code, no code, you can build them without an engineering deployment or degree. And that was a really great fit for that sales motion. But what we decided at the end of the year, and this was just a short three months ago now, was we look back at 2023 and said, okay, we’ve done this work for these clients. We want more customers and we want to acquire more customers more quickly. How do we do that? And that meant we wanted to reopen self-serve. 

And what we found was just this broadly appealing, broadly positioned and broadly expressed platform. It was perfect for those sales again and those conversations. But when you come to a website and it says that if you go through self-service, it’s not really clear what you’re getting. It’s not really clear what’s on the other side. So we really needed to really pick a lane to run in for self-serve to be viable.  

Rob Walling:
So that was just a few months ago. And I guess how is it because everything’s an experiment until it’s not, right, and so how’s it going today? How do you feel about the H one? How do you feel about the move back to self-serve in terms of growth, in terms of your confidence in that decision?  

Matt Wensing:
Yeah, so what we were trying to fix, maybe we’ll talk about that. What we were trying to fix ultimately was a top of funnel challenge, I would say. And what that meant was, and there’s a lot of ways to solve that. So in some sense we just said, “Hey, we can just tweet more buy ads, LinkedIn, whatever it is, we can get the name out there and we can send people to the site.” 

 But then it was sort of then what? And so we didn’t have a lot of confidence that if we invested in those grow the funnel activities, that people would come to the site and they would have this eureka moment around, I know what this is, I know what it’s for. And in fact, I was kind of thinking about wanting one of these. It wasn’t an existing product category. That’s how some people would put it. 

And so by choosing an existing product category, which is lead scoring now, we solved a bunch of problems that really I think would’ve wrecked the ship if we had opened up self-service without doing that. And that means that what we’re seeing now is okay, people come to the site, they comment on our posts on LinkedIn saying, I know what this is sort of thing, and this is really cool and I like this. And they tag their sales team member in on it and say, “Hey, we were just talking about this. That’s really exciting.” And we’ve had enough people go through the onboarding, at least in the first, we just announced this, I think January, let’s call it 15th or so ish. We waited for Christmas. So we launched it literally three or four days before Christmas. We didn’t tell anybody because it’s not when you want anybody either filing a support ticket or struggling to onboard themselves. 

But we also didn’t want to come back to, I mean, you know the feeling. Coming back the first week of January to an unfinished project is just a terrible feeling. So we got it out there and it’s been live, it’s been announced for about a week. We’ve had a few dozen people I’ll share go through the onboarding and we are learning where they stop, where they continue, et cetera. Now we also have a seven-day trial, so very early in terms of data, but so far the data is this, people come to the site, they click the try it free button, they start going through the onboarding, and that’s awesome because that wasn’t happening before. So now it’s like, okay, great, we have some volume coming in now it’s an optimization game or a what’s broken game or a leaky bucket problem, whatever you want to use to say let’s get them all the way through now. 

And now I’m kind of in a world, it’s funny, we’ve known each other for a while, TinySeed batch one. And so in a lot of ways now that we have this existing product category and people are coming and they’re coming through our funnel in some sense, a lot of the advice that I was hearing my batch mates get in the first batch, TinySeed, where they’re like, oh, got this many people signing up, but this many people are completing whatever, what do I do? That’s all very relevant for us now in sunset.  

Rob Walling:
And that’s the perfect time for people to join TinySeed is once they have a little bit of traction. You were in batch one and we took some flyers, we backed people. You were one of the early, you didn’t even have a product in market, I don’t think.  

Matt Wensing:
No.  

Rob Walling:
And what we realized pretty quickly is, A, it takes a lot longer than we all think. You thought you’d have product market fit in six months and it’s a few years later. And then as TinySeed, the advice I can give, give someone an early stage advice, but it’s like what’s the advice? It’s like go learn stuff until you figure it out. And once you figure it out and you’re at five grand a month, maybe six, seven, eight grand a month, TinySeed I think is really designed for that stage, which is why we do that. The SaaS playbook is 100% written for that as well. 

It’s like you have some customers, you have a loose, loose product market fit and you’re trying to strengthen it. And that is the more I can be really prescriptive at that point stuff before that, I have this whole book, it’s like 30,000 words written. It’s called Idea to Launch or Idea Attraction, something like that. But it’s a lot of like, and then you have to go with your gut feel and there’s a founder vision that you then have all this noisy noise coming at you and you’re trying to figure out which of these do I listen to? And it’s hard decisions with incomplete information, really incomplete.  

Matt Wensing:
So that’s the data side. Empirically, I don’t have results that I’m going to be doing flips about. It’s not sales zero. We have some trials going on, which is great. But the bigger thing is as a team, and maybe this is more of founder CEO hat on, for the team to have that clarity around this is the initial sort of killer app or use case that we’re bringing to market. We can run that prescriptive playbook, if you will. We can look at problems and we don’t have to question, well, maybe no one in the world needs this. Right? That’s a very sick thought to have or makes you sick sort of thought to have in the early days. So you’re like, I just don’t know if people even want this thing. 

So to have that in the rear-view I would say is the biggest benefit. And honestly, now the only thing that comes up is people, past customers or people who’ve heard this story before will go, “Wait, wait, I thought you were way broader. I thought you did way more than that.” And I have to just tell them, and I’ll use this podcast as an opportunity to say, we still have all that. But we just realized that if that was the front door, people were just going to stand there and go, “Wow, I don’t even know where to begin.” And that’s not good.  

Rob Walling:
Right. And niching down to either roles, like you said, marketing or sales or niching down to use cases is because the paradox of choice or even the paradox of understanding of how do I come to the website, I read the H one and I’m like, that’s not a category. I don’t … What is this? And then I have to read your H two and then I have to read your, and that is not, that’s like death because people aren’t going to spend the time to understand it.  

Matt Wensing:
Exactly. And I think what you get is when you’re very broad, you get people who are just, I’m willing to try anything. So music is a fun category. It’s like imagine if you were like, we help you create awesome music. If that was your H one, you’re going to get some cool kids if you will, to try out whatever the heck it is because they’re musicians. But it’s not until you say like, oh, we improve the quality of your audio tracks specifically at this frequency or whatever. It’s like, okay, now the mainstream who uses Ableton Live and all these other things, GarageBand, they’re like, oh, I know where that fits in. And actually I need one of those and then go back to Wayback Machine. 

And I love this. Look at WP Engine, great example. They’re like the experiential platform for blog hosting on the internet now or whatever. But back in the day, it was safe, fast and secure WordPress hosting, and I think they might’ve even gone back, but they had to be narrow to start. I think we all had to be narrow to start. We were broad to start to find our narrow, if you will, to find that use case. And then we had about four days of meetings in Q4 and said, you know what? This use case makes a lot of sense. Let’s go all in on that. And so far so good.  

Rob Walling:
So there are definitely people listening to this right now who are where you were six, 12, 18 months ago, which is I’ve launched something and it’s not getting the traction that I want fast enough. And people don’t quite get it. And there’s 100 different paths you could go down. There’s 20 different things you could try. You have customers telling you stuff, you have advisors telling you stuff, you have your own gut, you have team members, you have all, I said it earlier, noisy noise, which is a dumb phrase, but you just got a bunch of noise and a bunch of coming at you that you have to filter and then make decisions. So how did you do that? Because I’ve done a couple talks about this, about it’s very fuzzy and I like to hear different people’s takes on it because much product market fit, everyone seems to have a different definition of it. Everyone seems to have a different approach for what you’ve been doing for the past couple years. So what was your process like and who did you listen to and how did you know who to listen to?  

Matt Wensing:
Yeah, we started out the year, I would say customers obviously number one. And that came from, I would say there are actually times to not listen to your current customers. And I say current, underlining current because those customers are not the ones that are going to get you to your dreams or where you’re trying to go. Forget dreams, the next milestone. It’s like, oh shoot, we’ve got to change customer base. We didn’t have to do that. So we got to say, great, whatever we’re hearing from customers, obviously they’re humans. We have to deal with the fact of their current priorities are not tomorrows and it’s all changing, but we got to read between the lines, do a good job of interviewing them, really understand how they work. And being in Slack channels with a dozen or more customers all year last year, I learned a ton about how marketing is being done in 2023 and now 2024. 

So that helped. And then I would say the other thing we did, and I’m just going to add, there’s a wide variety of frameworks and ways you can think about this. The one that really helped us here was follow the workflow. So what we found was it was, okay, we’re building lead magnets for people in a high touch way. They’re using our platform to build these magnets. We’re helping them. It’s a mix. It’s high touch. What we really said after that is like, okay, we know we want to launch self-service. We know we want this to be turnkey. Let’s follow the workflow. And what happens after a lead gets captured by a lead magnet? What’s the very next thing that people want to do with it? And we say, oh, well, they have to triage, they qualify it, right? Is this a good lead? Is this a bad lead, et cetera. 

So for us it was sort of like it’s just the next step in the workflow for us is where we found this. And then we started to look at that. Okay, okay, is that universal? Is there an app there? Is there a use case? Oh yeah, lead qualification. Oh, is there a mathematical component to that? We’re all these calculator … Oh yeah, scoring. Well shoot. It’s kind of like right there. And then the more we ask, we’re like, okay, existing category, it’s kind of sleepy, meaning I like to say it’s the Baltic Avenue of the monopoly board. It’s not the boardwalk or the park place where there’s just obviously it’s super fancy and everybody’s in on it and it’s super competitive. It’s kind of like, okay, yeah, it’s a category, but it’s not super competitive. So it felt like also a step in the workflow where we could bring a better product to market and stand up well in any kind of comparison with other products that are out there, differentiation, all that. 

So I would say the three things really, customers understand their workflows following those to a step in the journey that was adjacent to us and then saying, can we compete at this step? And once we said, we were like, okay, that’s really cool because that step is actually very narrow by comparison to build a lead magnet from scratch, which is like a no-code exercise of a blank canvas. This is, hey, I’ve got an email address and I need to turn it into a score from zero to 100. And everybody basically needs to do the same thing. And the only difference is you have a different definition of a ideal customer than I do. So you’re like, okay, that has a nice scalability to it. So in this case, it was following the workflow. In other cases, it’s a different tool. That’s why these things are fun. It’s like just have a toolbox full of these ways of looking at it.  

Rob Walling:
And so lead scoring, if folks aren’t familiar with that, can you tell who uses that and what the purpose of it is?  

Matt Wensing:
Yes. This was another interesting thing. There’s actually two things people think about when it comes to lead scoring. First is the traditional definition. If you have HubSpot or something and you look at an article that says how to do lead scoring or close partner of ours, you’ll see an article that says, hey, somebody came to your website, they sign up for a webinar that’s 10 points. They downloaded an ebook, that’s five points, et cetera. And you build a score based on the behaviors of visitor or prospect, and that score just grows over time. The other one is what we just hinted at. Hey, Rob comes to my website. I need to know if Rob is a qualified prospect, should I even reach out to Rob? Is he worth my time? Just based on what data is in Clearbit or what data the world knows about Rob. 

And so Summit offers both. So we can both take an email address and you define your ideal custom profile. We match them up and we say, Hey, Rob is a great fit based on what you’re looking for. Actually Rob is not who you’re looking for because it’s a Gmail address. Or he works works at a massive company and you’re selling to SMBs, whatever it is. So I like to put those on two axes. One is behavior scoring. Is Rob acting like he has the intent to purchase something? And the other one is just persona fit scoring is Rob the shape of person we’re looking for? And obviously the best case is high intent, high fit. And then you can kind of think from there of low intent, low fit.  

Rob Walling:
And I’m familiar with lead scoring because we built it into Drip. It was a feature for us, but it wasn’t like this. So you actually go out to Clearbit and you augment the leads and then you get job titles, this and that. Since we were an email marketing platform, we basically did it based on folks interactions with your website. We had JavaScript on your site, how many emails they opened and clicked. And you could define, we had predefined lead scoring of like, hey, for every open, it’s one point added and for every click it’s three or whatever. But you could then go in and change that. 

So it’s pretty configurable, but that’s different. That’s activity based lead scoring. It said nothing about your ICP, it’s just their really into what you’re writing. That’s what we had and we had planned to go out and augment and we never got there. It wasn’t important enough for us. But the reason I bring that up is it was a feature of Drip, and I’d imagine it’s a feature of CRMs or HubSpots or Salesforce. I don’t know. I’ve never used it, but I’m sure it’s in them. So how are you thinking about that as this is your whole product as lead scoring, but it can be a feature of other. Is there danger there?  

Matt Wensing:
Yeah, there is danger there. And I’ll say that if our company, if we didn’t still have that broad platform in the background, this would be a risk. And the risk is, I raised venture money, we raised venture money, we’re going big. I don’t think you can build the kind of scale company that I want to build based on just this product category, which as you said, is for many people as a feature. Now there are companies that are out there, competitors, you can look them up if you type in lead scoring, you see a lot of their ads where they’re charging 500 bucks a month, a thousand bucks a month, $3,000 a month for lead scoring. And frankly, we’re doing kind of the same thing for a lot less and more scalably. We have that benefit of releasing something recently and all the modern tech that you get to bring to bear on the problem. 

So it is a category, it’s not just a feature, but it’s pretty small. It in terms of it is not a venture scale category. So if somebody came to you and said, “Hey, I want to build an entire company, the lead scoring, I want to raise five million bucks.” That doesn’t make sense. It’s not big enough. But given our goals as a company right now, the way I talk about it internally is, Hey guys, we want to be, we are a platform, but what good is a platform without a killer app or game or use case? I said up until now, we’ve basically been the, hey, here’s a PlayStation and we also include this ability to build your own PlayStation game. And you’re like, very few people-  

Rob Walling:
[inaudible 00:20:51] this is not fun at all.  

Matt Wensing:
And some people think it sounds extremely fun, and that’s like the 0.0001% and then 99% repeating of people go, I was looking for a game I could just play. I’m just looking for fun. So I said, look, we’re selling our first game. We hope this is a killer game. It’s bundled into the platform. It’s like the cartridge that comes included, and that’s enough. We think we can sell enough of that game, if you will, to drive enough console sales to extend the metaphor to get ourselves to the revenue milestone we have next. And that means that, hey, when we get to that milestone, it’s sort of like, Hey, what game do we want to create next? Do we want to create something completely different? Probably related, but then we can branch out. But the risk would be, yeah, hey, this is the whole platform is about this. 

And fortunately we didn’t have to do that. Believe it or not, the lead scoring product, if you will, is literally just an app that we built using our own platform and technology. So when you get a license or a subscription, you’ll see that app suddenly show up in your own library of things. And it’d be like having a file included with Figma or a song included with iTunes or whatever it just comes with. And that means that we really, the product itself to build probably took two or three weeks using our own platform. What took a lot longer was a lot more work was the marketing and the messaging and the positioning to narrow that focus.  

Rob Walling:
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Matt Wensing:
Three.  

Rob Walling:
Okay, so you’re pretty small and lean then. And you’ve mentioned that you’ve raised venture and you want to go venture scale. I want to call that out. I don’t know, 80 plus percent of the listeners are folks who want to bootstrap and probably about 80, 75% and 20, 25% are open to raising some kind of funding, at least according, I think it’s a state of independent SaaS where we ask that. But even most of those would do more of a TinySeed round or an angel round and don’t want to go venture scale, but there’s that 1% or 3% folks who want to go venture. 

I want to call that out because if you’re listening to this and you’re thinking about bootstrapping, this is a tough path to go down to build a big platform. And you have different goals than someone who maybe wants to exit for 10 million. And so you want to go, like you say, venture scale and it means like, no, this is 100 million, this is a billion. No, whatever. It is a huge number. What brought you to that decision? Because you bootstrapped your first company. We’ve talked about that here on the show. You had an eight figure exit. Congratulations, sir. And so why in this new one, you took TinySeed funding in the very first batch and then you’ve raised one or two rounds, I believe from venture. What was the impetus for you to make that decision?  

Matt Wensing:
I think I practically swore off the idea of venture when I first left my last business. I think a lot of people do because they go through it and they go, wow, it wasn’t a short journey. A lot of stuff happens downstream of it. I think with certain investors like yourself with Bryce Roberts who have more of a revenue focused mindset, fortunately you can actually leave a lot of that thinking, let’s say behind, but for me it was, okay, I’m just going to build this thing. And the more I investigated the market and the more I built to address what I found, I sort of found that gap and I realized this gap is actually really, really big and it’s very horizontal. And so now actually when I look at it, I go, okay, we’re solving lead scoring, which is a mathematical problem in the marketing space, if you will, but the need for math in the marketing space is kind of endless. 

And so it’s this really thin layer that just goes out forever, if you will. And I really spent the first several years of this, well, I say I spent the first six to 12 months of this going, I’m not doing that, I’m not doing that again. I’m just going to have my little nice little shoe store in the corner. Or as others say, my nice little Italian restaurant, there’s a coffee shop, that’s what we’re going to do. But then I found this thing and it was really broad and horizontal, but then it took raising venture capital and it took years of market discovery to figure out, okay, how big is it? No, really, how big is it? Who needs it? Where do they need it now? And really to deliver something to the market that can create revenue today but still holds onto that big vision. 

I think that’s the challenge of going the venture path in 2024 even is, unless you’re going to be the raised gobs of money and [inaudible 00:26:40] this doesn’t matter, I think that’s gone. I think the real challenge even the venture folks have now is how do I have a gigantic vision but then ship something quickly that gets to revenue quickly? And that’s a whole different muscle right? Now we know how challenging that is. Doing both is, it’s very hard. It’s very hard.  

Rob Walling:
And I want to call out that you have raised venture, and when people hear that, usually they think scale up, hire a bunch of employees. That’s usually the path for it. You have not done that. And in fact, if you had, you probably would’ve run out of money. I mean, the odds are pretty, if you’d scaled up to 10, 15, 20 employees too early, that’s the problem with, so some people say, well, don’t raise funding too early. And I say, but you can raise it early. Just don’t scale up too early. Because if you’re still trying to find product market fit and you’re still kind of narrowing or pivoting or whatever term we want to use for it, and you’re at 15 or 20 people and you have to just reorient the Titanic every six months, it’s not even that many people, but 15 versus three-  

Matt Wensing:
Way different.  

Rob Walling:
Worlds apart, right?  

Matt Wensing:
Yeah, I agree. We stayed small. I mean, the most we’ve ever had is four people, which was contractors and a couple employees working on it. And that has allowed us to explore this market opportunity for years. It’s allowed us to build a technology, a no-code platform from scratch, which just takes time. It’s not even just that it takes time to write the lines of code. It’s knowing what lines of code to write based on the market, and there is no one source of information out there that you can just go to get all the answers and then build the thing to spec in three months. And so the bigger the opportunity, you kind of need more time to steep in market and in those conversations and ideas to figure out where is it really? Because when we go in, we want to go in, we want to go all in, but we’ve got to be really sure. 

And I think the going all in part is just like you said, you hire enough people, you’ve basically created this complex system of scaling that back is super hard. Imagine you have 10 or 15 people and you’re like, I don’t even know if we can reduce this to two or three people at this point because I don’t know how to do seven of the things that are being done by other people. You’ve created, unfortunately, this thing where you remove one or a large enough chunk and the whole thing just kind of implodes. And that’s where these companies get, it’s not like when you have 1,000 employees, you can suddenly scale it back to 100 and still keep going. You can very easily set off a spiral.  

Rob Walling:
And so we’ve talked a little bit about ICP, you use that phrase ideal customer profile. Who is yours today? If someone’s listening to this, we have marketers who listen to this, sales folks, we got developers, we got whatever. But if someone’s thinking like, well, is something I could use, whether it’s your day job or in their own company, who do you think it’s ideal for?  

Matt Wensing:
Yeah, this is ideal for a company that is investing already pretty heavily in customer acquisition. So if you’re still not really doing that or you’re founder-led sales, I think when you’re doing founder-led sales, you’re sort of just, I’ll talk to anybody, right, at that stage. Beyond that, you get to the point of saying, we’re acquiring leads. And I’ll give you an example. Ideal customer who is a customer of ours already that I was talking to yesterday, they’re spending a good amount on paid acquisition. And they’re essentially, if you want to look at buying leads, buying email addresses to not have a quick and easy way to qualify those at scale. So you’re getting hundreds a month, thousands a month, you are going to waste resources in outreach, phone calls, discovery calls, et cetera. And you might be like, oh, what does an email cost you? 

Well, even emailing an unqualified lead cost you something because it’s not just the penny cost to send it or whatever, the micro pennies, it’s the, this is spam, this is irrelevant. I am not interested in this. Or even just somebody wasting your time with the call. So it’s companies that are, I would say, acquiring customers pretty aggressively in terms of paid acquisition or they have a lot of inbound organic and they want to give VIP treatment to customers that are just phenomenal opportunities, but they no longer have time to, you get a trial sign up and you’re at that stage, you get a trial sign up and you’re like, ooh, I’m going to go type in that web address. I’m going to look them up on LinkedIn. You kind of this manual little grunt work to figure out who this is. And you’re like, pop in champagne. 

It’s somebody that’s actually a big logo. You can’t do that anymore. When that doesn’t scale, then you’re a good fit for this. When you get to the point where you’re like, I have more email addresses than I can do that lookup for, I wish I had a way to just start to, again, sift through these and figure out which ones are worth my time, worth a personal touch. And I think these days with automation and AI and all the, it’s even more valuable then to give that personal touch to people who are really great fit and that’s who we’re a great fit for. So I would say put it on numbers perspective, scaling up. So million plus AR, probably sales hires have been there for a while. You kind of know what you’re doing and now you’re investing in SDRs or customer acquisition lead gen to get more people in the door.  

Rob Walling:
Matt Wensing, thanks for joining me on the show, man. People want to keep up with you. You are on Twitter, x.com/mattwensing. I don’t call it XI, I’m going to call it Twitter until, because they still redirect.  

Matt Wensing:
They do.  

Rob Walling:
I just want [inaudible 00:31:57] x.com and it goes to twitter.com. So I’m like, no, it’s still Twitter. I’m not changing this thing, the icon. You know what tripped me out is on my iPhone to get to Twitter, you pull it down and now if you search for T-W-I-T-T-E-R, it doesn’t show up. You have to type in X. So they’ve done it on the iPhone already and I’m waiting for the internet to catch up.  

Matt Wensing:
Out of my cold dead hands.  

Rob Walling:
I know, that’s how I feel. Anyways, man, thanks so much for coming back on the show.  

Matt Wensing:
Thanks for having me,  

Rob Walling:
Rob. And once again, usesummit.com if folks want to check out Summit. Thanks to Matt for joining me again this week, and thanks to you for coming back this and every week. As a reminder, I published a book middle of last year called The SaaS Playbook. It is selling really well. It’s about to hit 20,000 copies. I’m pretty stoked about that. If you haven’t bought The SaaS Playbook, you can buy it directly from me, SaaSplaybook.com or head to Amazon. And if you have bought it and you’ve read it and you think it’s worth a five star review on Amazon or Audible, I would really appreciate it. It helps more people find the book. It helps me continue to drive my mission forward of multiplying the world’s population of independent self-sustaining startups, and it helps keep me motivated to keep writing books and keep producing the show. This is Rob Walling signing off from episode 701.