Josh

Rob Walling:
People ask me often, “What makes an entrepreneur successful across the …” I don’t know, I think the number’s got to be 300 now in terms of founders across the 151 companies I’m invested in. People say, “What’s the difference of those who succeed in those who don’t?” And one of the things I say is those who succeed generally work on things that move the needle. 

Welcome to this week’s episode of Startups For the Rest Of Us. I’m your host, Rob Walling, and this is the show where I talk about bootstrapping and mostly bootstrapping tech companies, software companies, software as a service. It’s funny to think back 10, 11, 12 years where software as a service in SaaS was a term that was around, but it wasn’t obvious that it was going to take over the world. These days, and obviously for the past 5, 6, 7 years, we’ve really focused on that. It is the best business model in the world. I have half a chapter in my new book all about why SaaS is so amazing and really it starts with recurring revenue and that drives everything else. 

Today, we have a Rob Solo adventure. I’m going to start by looking at what it looks like to work on the right things versus the wrong things, and specifically what it looks like to work on something that moves the needle versus something that you’re comfortable with. I have a startup, SaaS specific example of this. Then, I’m going to talk a little bit about left-handed threads, and I’ll leave that as the teaser for that segment. Then, I’ll talk about how your choice of words matters and how using the word luck in a sentence can be an indicator of how you view the world and an indicator of why you’re not succeeding yet. Then, if we have more time, I’ll dive into more topics after that. 

The first topic for today is about working on what will actually move the needle rather than what you are comfortable with. I know a couple startup founders, and I wish I could call them Goofus and Gallant back from the old highlights for children days, but in this case, let’s just say it’s founder A and founder B, neither of whom are TinySeed founders, I should clarify. 

What I’ve had happen in the past is I’ll give examples of someone making a mistake and I’ll have someone reach out to me and be like, “Hey, were you talking about me in that episode?” No, usually in almost all cases I’m not. It’s probably someone that you don’t know. Founder A and founder B run similar SaaS companies in the same space and they are competing against one another. In this moderately contrived example, both founders are looking for ways to market their startup to a very specific niche. Let’s pick the niche of freelance designers, probably freelance web designers just to be specific. As they’re looking at the ways to market to this segment, to this customer type, one chooses to build a community for freelance web designers from scratch. Whether that’s a Facebook community or probably a Slack community if we’re thinking of web designers, maybe if they were CEOs of construction firms or folks in, I’ll say less tech-savvy areas, it might be a Facebook group or a proprietary forums or something. 

Founder A decides to build a community from scratch to bring these freelance web designers together and to provide them with a place where they can gather, ask questions, commiserate, you know what happens in online communities. If you’re part of MicroConf Connect, how amazing that can be. You also might know how much work that is, but that’s what founder A does. Founder B, instead of building a community decides to build a directory of freelance web designers. That directory has several benefits to it. One is obviously there might be some SEO play there where you build a lot of pages with names and keywords and you get inbound links if it’s a good directory. Then the benefit to those freelancers who are listed is that they could potentially get business from this, right? Because that’s essentially what they’re probably looking to do. They’re looking to up level their own skill, they’re looking to be able to charge more over time, and they’re looking to find more work. 

The more work they have, the more they’re able to charge over time. These are two perfectly viable options. On the surface, both of these seem reasonable. You want to gather your customers in a place, you want to have a relationship with your prospects such that they think of you when it comes time to buy your software. The problem is one of these is mostly a one-time investment of work, and it comes with a ton of potential benefits to the freelancers, and that is the directory of freelancers. As I already said, it can provide them with inbound interest, it can provide them with more business. Over time it can allow them to raise their rate and the amount of work for each individual who joins is negligible. 

Even getting it started, it’s setting up some pages, whether you’re doing this manually with no code, whether you have an actual SaaS that you’re paying for to have a directory, it’s not a ton of community management I’ll say. Right? It’s some nuts and bolts. Let’s optimize this. People can fill this in and then let’s approve or disapprove or whatever. And then let’s market this thing and let’s get the links and let’s get the SEO. That in my opinion, is a great approach, assuming that works in your space, it obviously depends on a lot of factors. 

First is founder A who has built a community which comes with a tremendous burden and a workload and an expertise … Hiring a community manager is nowhere near as easy as hiring someone who can, let’s say, manage a directory for what that even amounts to. In addition, a community is going to be private, so there’s really no SEO benefit. Maybe you have a landing page or something, but now you’re trying to get enough people in there that you need the community to work. It doesn’t work with 10 people. A directory does. In fact, a directory if you are marketing it well is actually better with only 10 people because then there aren’t that many choices and the freelancers that are on it are getting more benefit. 

I want to bring this up not specifically to say, “Oh, directories are better than communities.” For crying out loud, how many communities have I started and run in my career? How many directories have I done? I’ve done both these things and it’s about the time and the place and the value and how much effort you want to put in and whether that is core to your business. With MicroConf, community is the central focus of the entire effort. That’s what MicroConf is. When I draw everything that MicroConf offers, the center circle says community, the people, and then everything is off of that. 

Like, hey, there’s a circle out here that is the Slack group, and there’s a circle out here where if you are bootstrapping and you want funding, then TinySeed’s attached there. If you want to be in a mastermind, we have Matching. If you want education, you could probably buy one of my books or go to our YouTube channel for free or to this podcast. Each of these things is around the community. The community is the focus, and we spend a lot of time and money moderating that community. MicroConfconnect.com if you haven’t checked it out. If I were running a SaaS aimed at a niche community would be far down on the list of things that I wanted to start unless I felt like there was an extreme vacuum in the space and I already had an audience where I could kickstart that community. 

For me, if I was thinking about community, I’d be like, “Okay, but first I have to start a podcast or I have to start a blog. I have need enough of an audience or I need thousands of customers that the community builds itself.” It’s just a long road to go and it’s a ton of work. This kind of example is so apparent when you compare these two approaches because people ask me often, “What makes an entrepreneur successful across the …” I don’t know, I think the number’s got to be 300 now in terms of founders across the 151 companies I’m invested in. People say, “What’s the difference of those who succeed in those who don’t?” One of the things I say is, “Those who succeed generally work on things that move the needle, and they’re not afraid to fail, but in general, they don’t fail that much.” Whether it’s 70-30 or 80-20, whatever their ratio is, they analyze stuff well enough, they take the numbers into account, they think it through. 

They don’t just think, “What’s comfortable for me?” “Well, I’ve done podcasts my whole life, so everything is a podcast. When I see a nail, I’m going to try to hammer it in with a podcast because that’s what I do.” They don’t do that. The best founders put that aside and they say, “What is actually the best approach for building an audience or for reaching my prospects in this space?” Rather than going with what I know or what I’m comfortable with. Obviously, you want to blend that a little bit. If you’re really good at something and you’re exceptional, of course you can double down on it. But I see entrepreneurs who just can’t leave their own comfort zone and they won’t try cold outbound, they won’t try pay-per-click ads because in quotes, “They never work.” “They don’t work in my space.” It’s like, no, they [inaudible] work. Google is not a cajillion dollar company because ads don’t work. 

It is frustrating to me when I hear entrepreneurs who are getting in their own way and they have these limiting beliefs, this limited mindset of, well, this doesn’t work in my space, or this doesn’t work in general because I tried it once. What that leads to is you staying in your own comfort zone and doing the things that you’re comfortable with, and those are not always the things that are going to move your needle. Again, before I hear a comment on Twitter or on startupsfortherestofus.com, I’m not saying directories in every case are better than communities, is not the point of this. The point is to work on things that you think are going to move the needle and to get advice from experienced founders to get some data or to make a great gut feel, your best gut feel on what to work on next. Because working on the smart thing rather than what you want to do or what you see other people doing is the approach that’s going to get you to where you want to go. 

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Topic number two is about left-handed threads. If you’ve never seen a left-handed threaded bolt, it will blow your mind the first time you see it. Most of us know righty-tighty, lefty-loosey. If I’m going to screw a bolt in, I’m going to screw it to the right and that will make it go in and then to the left makes it come out. There’s certain applications where that doesn’t make sense. For example, when you’re putting a bicycle together, the left pedal can’t be a standard thread, a right-handed thread because it will unscrew and come off as you pedal it because you’re pedaling it to the left and you’re going to give it friction and unscrew it. The fact that threads are right-handed is completely arbitrary, but it is the way the world works these days. 

A couple months ago, I walked in on my teenager, my 16 year old, and he was trying to assemble something, and I don’t remember it was IKEA furniture, I think it was a standing desk. Sherry and I ordered a separate standing desk that is kind of our media center for recording YouTube videos and all that. There was one thread on it that needed to be left-handed for reasons that aren’t particularly relevant to this story. He sat there for 15 minutes, he couldn’t get it in because he had never heard of a left-handed thread. He is left-handed himself, but it had never occurred to him that you could screw something in by lefty-tighty, righty-loosey. It breaks your brain. What was funny is I came in and he said, “I just can’t get this screw in.” And I said, “I think it’s a left-handed thread.” And he said, “A what?” 

And I flashed back to when I was probably younger than him, I was probably about 10 years old, and I was putting together what was, I think it was a compass or protractor, one of these things for geometry, fifth or sixth grade. I remember it needed a left-handed thread because for the same reasons. Right? Because if you moved to the compass, it would unscrew it. I had never seen one, I didn’t even know it existed. My dad, who’s an electrician, construction worker his whole life obviously had experience with these. And he came in and said, I said, “I’ve been screwing this thing in for 15 minutes. It just won’t go.” He screwed it left-handed and I was like, “I can’t believe that. I didn’t even know this was an option.” Right? But once you see it’s like, well, of course it’s an option. It’s just the threads just go the other way. This is the kind of thing where being exposed to it once, you’ll never forget. I will never forget the moment when I first heard about left-handed threads, and I don’t think my 16-year-old will either. 

Just having that exposure and realizing that this can exist is an important developmental step in our journeys as human beings and learning how things work. Similarly, as I bring this back to startups and being a founder and a bootstrapper running SaaS companies, there are certain things you haven’t been exposed to. Just knowing that they exist and having a vague idea of how to handle them can be incredibly beneficial. That’s where while I’ve become a just-in-time learner, which is someone who when I need to learn something, I find a book or I talk to an expert and I try to learn it in a week and then go do it. But back 10, 15, 20 years ago, I needed exposure to a lot of things because I just didn’t know. I didn’t really know anything. You have this huge sea of blackness. 

These days when I look out over the huge sea, there’s like spots of knowledge that I don’t have, but I know enough to know what I don’t know. When you’re dealing with a left-handed thread, you don’t know enough to know what you don’t know because you’ve never been exposed to it. My point to this is early on in your entrepreneurial journey or your career, whatever you’re doing professionally, I think you need to be exposed to a lot of things. I think that’s why a college education, while I am really torn on our boys going to college because I just don’t think the value is there for the cost, I do think that getting exposure to a wide variety of topics and subjects expands your mind and it can help you figure out what you love doing and what clicks with you. 

In fact, if I hadn’t gone into electrical engineering, became a construction worker, I was going to eventually be an electrical engineer, I probably would’ve done computer vision because even as an undergrad, I took multiple graduate level computer vision courses and I loved them. It was so fascinating, and that was an experience that I never could have had without being exposed to a lot of things. I think that’s why listening to a lot of audiobooks, you’ve probably heard me talk about how I have now 865 audiobooks in my Audible account. I think that’s why founders who I see that are doing well are lifelong readers and learners. That’s why so many of the founders that we know and aspiring founders as well listen to podcasts is because the exposure to these different topics and to hearing what a left-handed thread is or to hearing that once you do something in public, you’re going to have criticism or you’re going to get flamed online for doing something at some point. 

Just realize that is a thing like a left-handed thread, it does exist. The first time you’re asked, “Hey, can we jump on a quick call? I just have some questions for you about your $30 one-time purchase product or $10 a month product.” You’re going to get these. How do you react to that just in advance knowing that that’s going to happen? So you’re not caught flatfooted and having to go to Reddit or somewhere else to ask a question? The first time someone asks you for a discount when you get an enterprise checklist sent for your $300 piece of software like I did back in 2008, and I said, “Yeah, this is hours of work and it’s $300 one time fee with a 20% annual maintenance thing, so $60 a year.” And I said, “Our sales model doesn’t work that way. Sorry.” And that dude got so mad, so mad, “I can’t believe you even run a business. You don’t deserve our money, blah, blah, blah.” 

Then, later I got an apology email from a colleague of his who said, “Yeah, he doesn’t really understand how things work.” And I said, “Look, if you want me to fill out this checklist, I need to charge you 10 times, 20 times what I’m charging. Frankly, I don’t think we are the software for you based on how you’re buying.” 

I had to go through these things and learn them myself, which is fine. It’s a weird thing to say, but I was like the pioneer taking the arrows in the back. The only person I knew who was blogging or talking about being a real software company that didn’t raise venture capital was Joel Spolski with Fog Creek Software. Started reading his blog in 2001. I started my blog in 2005. I didn’t know anyone else talking about it. Then there was Peldi and Patrick McKenzie over the next two or three years, Patio11 as most of you may know, and Peldi is the founder of Balsamiq. That was it. And I was learning from them as much as I, they’ve told me they were learning from me. This was from 2005 to say 2007-2008. 

Then Jason Cohen, I think, started his blog in 2008 or 2009, but this was it. We were learning stuff on our own. We had to figure out, “Oh, there are left-handed threads.” And, “Oh, B2C is actually really crappy and B2B is going to be superior in almost every way.” And, “Oh, we really should charge more. All of us are undercharging.” On and on and on. The best practices that you hear in our spheres today were discovered in those years. Then as MicroConf started, and as we got Jason Cohen, and Heaton Shaw, and Patio11, and Stelli Efty, and myself and other people in a room to do these talks that you now see on YouTube, we were learning those things as we went. They weren’t just in the gestalt. 

To wrap up this topic, what I’m saying is I do think that exposure when you’re first getting started to a broad variety of aspects of startup topics, whether it’s through a podcast like this or through books or through online communities like MicroConf or Twitter. Right? There’s a great ecosystem there with MicroConf founders and beyond. There’s a real advantage to kind of having almost a liberal arts approach. You know what a liberal arts degree is. Right? It’s where you go and you just learn about a bunch of different things. Now, I think there should be some science mixed in there and some engineering, or not just philosophy and psychology and all the other things, but taking that approach that you would take in your first two years of college where you’re just getting a bunch of general education, I think that is pretty important for a lot of us so that we know what exists out there. We may not know how to deal with every solution, but at least then we’ll know who to ask. We’ll know where to go, and we will understand that indeed left-handed threads do exist in this world. 

My last topic for today on this Rob solo adventure comes from a comment made on the MicroConf YouTube channel, and I wish I remembered which video it was, but it was a video where I was talking about how to come up with startup ideas. I think that was it. It was kind of a framework, seven approaches for coming up with SaaS ideas. The first of those seven reasons included asking yourself, what are your unfair advantages? Do you have an audience? Do you have a network? Are you early to a space? 

And then on and on and on, and it’s a 12 to 15 minute video. It’s actually quite dense. I pulled it from a chapter of my next book, oh my gosh, am I really saying this? While I was writing the SaaS playbook, I realized there was a whole chunk of more early stage stuff that was really idea phase and idea validation and all that, that it just didn’t belong in the SASS playbook. I think there’s like 30,000 words, so it’s kind of 100 … What is that 140, 150 page book? I have that in a Google Doc and I need to figure out what I’m going to do with it. But the bottom line is these seven things for this YouTube video came out of that. I talked through a lot of different ways to come up with ideas and frameworks and patterns, and we’ll link that up in the show notes if you want to see it. 

One of the comments was so striking to me because the commenter said, “I’ve heard that YouTube best practices are to give something that excites people in the first two minutes. I’m four minutes in, and all I’m hearing about is what I can do if I’m lucky enough to have an audience or a network.” Lucky enough, think of what that word means. No one lucks into an audience or a network. I don’t know of anyone that has, I talk about hard work, luck, and skill. Of those three, I think an audience and a network both take hell of a lot of hard work. Eventually, I would say I was not skilled at building an audience, nor at building a network and eventually you figure it out with enough hard work. But I was struck by that word lucky, because what does it imply? 

It implies that if you don’t have it’s not your fault. That somehow you didn’t buy the winning lottery ticket to suddenly have a podcast with 35,000 listeners, or you didn’t luck into a YouTube channel with 62,000 subscribers. I don’t tend to be pedantic about people’s sentences or phrasing, but to use the word lucky in that context, it shows a certain mindset, a belief that you have to be lucky to have these things. If you’ve listened to me long enough, I hope you know that’s not true. You don’t have to be lucky to get rich. You don’t have to be lucky to build an audience. You don’t have to be lucky to build a SaaS company to 10K a month that can change your life. You don’t have to be lucky to build an incredible network. You don’t have to be lucky to be a successful entrepreneur. 

Now, hard work, luck, and skill are all always three factors, and the more luck you have, great, but don’t count on it. Put in the hard work and learn the skill and do the work. That’s what I would tell this commenter is it sounds like you are making an excuse that you don’t have something because you don’t want to record 671 podcast episodes over the next 13 years. And once you’ve done that, if you’re not lucky enough to have the audience of your dreams, then you can totally come and talk to me at that point. And I will say, you know what? I was wrong. But what happens in these conversations is folks who think that way, who think that this is all luck, mostly luck. Those are the folks that don’t ship. They don’t put in the time because they think that luck has so much to do with it and that they’re not “a lucky person”. 

And if you’ve learned anything over the past 671 episodes of this podcast, I hope that sharing my journey and the journey of so many of the founders who I’ve spoken with on this show has shown you that while luck can be a factor, it’s not a requirement. Also, that commenter was right. I was four, four and a half minutes into a 13-minute video, and I should have gotten to the point faster. I appreciated the sentiment he was trying to communicate. I just don’t necessarily want others to believe that you need to be lucky to have an audience or a network or a successful company. Speaking of luck, I’m lucky enough to be wrapping up episode 671 of this podcast, and I have a call with the podcast production team here in one minute. This is Rob Walling signing off. I’ll see you next week.

Rob Walling:
Anytime you count on luck, you count on being early to a market. You count on shooting the gap and being there just at the right time as the technology catches up. That’s not a great path. It’s not repeatable. If you want to go for one in a million and buy a lottery ticket, you can do that, right? That’s the venture funded path. But trying to be a boot strapper and rely on luck is super dangerous. 

It’s Startups For The Rest Of Us. I’m Rob Walling. I’m your host as I have been for the past 13 some odd years, 670-ish episodes. Funny story, episode 666 came out just a few weeks back and, of course, there were the requisite jokes and death metal memes on Twitter, which I thought was super fun. And just a few days after 666 came out, it really wanted to be the final episode because our RSS feed stopped updating. And when 667 came out, which was the episode where John Warlow and I talked about building SOPs and increasing the value of your company, it wasn’t appearing in most podcast apps. 

And so I spent a day or two troubleshooting and after, I mean it was, I said five hours on Twitter, it was more like 8, 9, 10 hours back and forth. We had this really old system that was set up kind of before podcast hosts, because traditionally these days you would just use their feed URL, but we’ve been around since before there were podcast hosts. And so although we host with Castos, we were not using their feed URL. And so 8, 9, 10 hours later with support from our old provider, I just decided that we should pull the plug and move our way over to fully embrace the Castos ecosystem. 

So a day or two later, we were all set up and now everything’s in one place and cashed and handled by the trusty folks over at Castos. But it was quite a journey. It’s that moment in your startup where you think to yourself, “I don’t want to be doing this.” You’ll hear me talk a little later in this episode about some, I’d say burnout may be a strong word, but I’m entering, I can feel myself approaching burnout. I can see it in the distance. I’ll go into more details later. But when I feel that way, I don’t want to work on bull [inaudible] tasks, which is [inaudible] around with my RSS feed. 

It’s like the last thing you want to be doing. It’s like you buy a brand new house and everything’s amazing, and then the plumbing line goes out, or the sewage line breaks or some electrical thing that really needs to work goes out. And so you have to spend a bunch of money or a bunch of time fixing it. That’s how it feels when this happens with the RSS feed. And so every X amount of years something goes wrong with it, and I’m just glad to be on the other side of it. So hopefully, if you’re hearing this episode, everything is now fixed and you have the new feed. 

Before I dive into the solo topics that I’m going to be tackling today, I wanted to remind you that there are two exclusive Startups For The Rest Of Us episodes that have never aired on this feed. And you can get them simply by entering your email address at startupsfortherestofus.com. Two never before released podcast episodes called Eight Things You Must Know When Launching Your SaaS, and 10 Things You Should Know as You Scale Your SaaS. So it’s launching and scaling. 

And I have these handy PDF guides for the episodes. If you don’t want to listen to the full MP3, you can look through at the points I make. And these are evergreen episodes of lessons that I’ve learned in the 20-ish years that I’ve been thinking about and starting and advising and investing in SaaS companies. So startupsfortherestofus.com if you want to get on the email list. And with that, let’s dive into my first topic of the day. The first revolves around how I often talk about how success is hard work, luck and skill, and it’s different percentages or varying degrees of each. 

And sometimes you don’t have any luck and you just work really hard and you bring a lot of skill to it, and you’re successful. You brute force it, you grind your way through. And other times, luck is a huge factor and you get 10 times more luck than someone else and maybe you don’t need as much hard work and skill to make it. And other times you put in the hard work and you have the skill, but luck turns against you. And to illustrate this, I want to take you back to 2001. And there is a band called Sugarcult. No one’s ever heard of them. And the only reason I had heard of them is they were kind of like a pop punk band, like a Blink-182 type thing. And a friend of mine went to college with, I don’t know, two or three of the guys in this band. 

And we were into that type of music, me and this friend, let’s just call him Mark. And so my friend and I actually would play guitars because I was in grunge and pop-punk bands around that time. Never did much with it, but it was just a fun hobby that I enjoyed. So he said his friend Sugarcult got signed to a major label and their single was going to come out in mid to late 2001. And I was super envious, right? This is so cool. And he kind of had talked about some of their songs and he’d shown them to me, and they were good band, and they’d been playing together for a lot of years. And the songwriter was good. They had put in the time, they had the skill to do this. We were living in LA at the time, and in LA everyone, you’ll go to a Starbucks there and there’ll be a guitarist playing and singing originals, and it is world-class amazing songs. 

And that was the point when I moved to LA when I realized, “Oh, I’m never going to make it as a musician.” Not that that was ever really on the table. But I realized that there were people who had put in so much more work and were so much more talented than I was on that front, that it was just never going to happen. And that’s the moment where it became, “Hey, this is a hobby and I’m going to do it for fun, and I’m never going to try to make a living at this, right, or be a professional.” But these guys had put in the time, and they were good, and they had put in the work and they were grinding and touring and playing all over la and they had been signed to a major label. And so I was excited for them. 

I didn’t know them. I think I met them once at a party, but they weren’t friends of mine, but they were friends of a friend. And their single was slated to come out in early September. And then September 11 happened, and the attack on the Twin Towers and America was in this massive shock. And it was this huge blow to so many things around this country and safety. And I actually remember there was a huge patriotic push. I think some people who maybe took for granted what it was to live in America or be an American, I think were reminded of that. And I just remember there being a patriotic push like I hadn’t really seen in my lifetime. And so at the same time, I think it was a week or two before September 11, Sugar Cult’s lead single came out. And I remember my friend telling me, “Oh, they’re going to get radio play and they’re going to be on MTV.” 

And I was a little skeptical of that. You kind of hear that stuff. You hang out with enough people in LA and it’s like, “Oh, my commercial’s going to be on”, or “I’m going to be on MTV.” And then it doesn’t happen. They get on the cutting room floor or whatever happens, things change and they don’t make it. But we did actually hear their single on the radio, which I was super impressed by. And this was their big bet. This was their first single off their first album. And if it took hold, then they could potentially have a pretty lucrative career as musicians. And the song, unluckily, as it was, was called Stuck in America. And it was a typical pop punk song of kind of like, “I’m an angsty teen and I’m stuck in-“. It wasn’t like anti-America. 

And in fact, we’ll play a little snippet of it here, but it’s a typical punk song that you would’ve heard for 30 or 40 years from anyone in any country. Not only was it called Stuck in America, but there was a line in it that said, “Everyone’s talking about blowing up the neighborhood”, which had no meaning prior to September 11. It’s just a turn of phrase as these 20 year old, 22-year-old kids just out of college just doing their thing and being angsty. And yet, this all took on this new really negative meaning once September 11 happened.  

Sugarcult:
(Singing)  

Rob Walling:
I remember feeling really bad for these guys because it was their break. And in entertainment you kind of get one break. They had another single, they did get some radio play, they did some touring, but that was really it for them. And to turn this to startups and entrepreneurship, the same thing can happen to you where you go to launch on Product Hunt or you go to hit your email list and some massive Google or Apple project launches on Product Hunt. I don’t know why they would, but you get the idea, you get upstaged and your best laid plans turn into nothing. Or you have your email launch list and that day when you go to launch, some massive crisis in the stock market happens and no one’s paying attention to your emails. Or any newsworthy thing that draws everyone’s attention. You know, you think about the number of things that COVID disrupted. 

Sometimes luck doesn’t play your way. And this is actually why hard work, luck and skill, of those three, I always bank on hard work and skill because I can build my skills and I know I can put in hard work, but luck if you try to count on it, it’s just too unpredictable. And I want strategies and approaches that are repeatable and that as much as possible, not always possible, but as much as possible are relatively proven. And I’ve seen them work over and over. And anytime you count on luck, you count on being early to a market. You count on shooting the gap and being there just at the right time as the technology catches up. That’s not a great path. It’s not repeatable. If you want to go for one in a million and buy a lottery ticket, you can do that, right? That’s a venture funded path. 

But trying to be a bootstrapper and rely on luck is super dangerous. And we see some people doing it. We see in our space some founders who kind of get lucky, and then when they go to do it a second or a third time, they can’t, right? And I’m not trying to say, “Oh, they’re not a good founder”, or “They’re a bad person.” It’s nothing like that. But when you think about building and growing your startup, my advice and the way that I do it myself is to put in the hard work, build the skills, do it over time in a repeatable fashion. Think in years, not months. And maybe you’ll get lucky and maybe you won’t, but it won’t matter. You’ll be successful anyways. And I do still love that quote from Thomas Jefferson, where he said, in essence, the harder I work, the luckier I get. 

And that’s how I think about it, is the more hard work and skill that you put into something, the more likely you are to experience that good fortune, that serendipity when the time comes. 

All right. Second topic of the day. I hinted at it earlier in the intro, and it’s basically that about six months ago I started feeling a twinge. And it’s a twinge of early burnout. And less burnout, it’s more of being tired of the grind of content creation. So for me, I put out 52 episodes of startups for The Rest Of Us every year and have since 2010. 52 individually outlined and recorded and produced YouTube videos, MicroConf.com slash YouTube, and 52 episodes of the MicroConf podcast, MicroConf podcast.com. It’s a lot of content. Also, some other things, live streams, TinySeed, playbooks. There’s all kinds of time spent in front of a microphone or a camera. 

And I’m okay with that. That’s my job. I’ve built my job. This is the best job I’ve ever had. But like anything, no matter if it’s the best job you’ve ever had had, and the job you were designed for, it’s something you’re great at and you enjoy, you do eventually burn out on things. The grind can get to you even if you love it. And so I started seeing this about six months ago, and I kind of started mentioning it to some people I work with, like producer Ron, producer Sandra, like, “Hey, I don’t want to burn out, but this is how I’m thinking about it.” And so I started thinking, how can I figure out how not to burn out? Because I have burned out in the past and it’s bad. And coming back from burnout is way harder than just avoiding it in the first place. 

And so I’ve taken a couple steps and I want to share them with you because I feel like this is my fifth time, seventh time, 10th time, I don’t even know if I can count how many times I’ve felt this, where I notice that I have all these audiobooks about business and startups, and I have all these podcasts about business and startups, and usually the leading factor, the leading indicator, the canary in the coal mine, is that I go to look at them and listen to them and I don’t care about any of it. I find myself just not wanting to learn one more thing about startups or business or entrepreneurship. That is a sign to me that something’s off. Because my entire life, since I was 11 or 12 years old, I have thought about, lived and breathed entrepreneurship in one form or fashion. 

And so anytime that I’m not feeling that way, not feeling positive to think about and talk about entrepreneurship, I know that something’s off and I’ve kind of overdosed a bit, if you will, on the content. And I need to step back and get a fresh perspective such that I can continue to create with inspiration so I’m not forcing it. And so whether this is the fifth or the 10th time I’ve dealt with it, I now have strategies that I use to cope with it to avoid burnout. Now, recovering from burnout is something my wife, Dr. Sherry Walling has talked a lot about. And if you just type in Sherry Walling, recovering from burnout, dealing with burnout, she’s recorded YouTube videos, podcast episodes, and there’s an entire chapter of the book, The Entrepreneur’s Guide, to Keeping Your [inaudible] Together, all about this. So that’s not what I’m talking about. 

I’m actually talking about things that I’m doing myself to avoid burning out, to avoid feeling like I’m phoning it in or avoid feeling like I just don’t want to record the next episode of a YouTube video or a podcast because I’m not there yet. And that’s a good thing, because as I said earlier, it’s easier to avoid it than to come back from it. So a few things that I’m doing. One thing I’ve started doing is I’m taking a break from recording YouTube videos on a weekly basis and even this podcast. So for a few months I’m going to batch them. So I recorded, I don’t know, four YouTube videos in a week, two weeks in a row. And so that’s almost two months of content. And now I can take a break and not have to think about the YouTube videos for a bit, and it allows me to recharge. 

With this podcast, I got to have five or six episodes, and that’s enough of a break. The podcast usually is less of a drain on me than the YouTube videos for whatever reason, probably because I’ve been doing the podcast longer and it just feels more natural. But being able to take a break without losing a week, without missing any weeks is important to me. It’s kind of a personal goal to get 52 of these things out year in, year out. But I will say if I do fall into burnout, if I start to crash and burn, I probably would take some drastic action and either bring in some help or there’s other things I could do, slow down the pace of YouTube videos. I have this thing though, I cannot not ship this podcast every week, so that’s not something that is even on the table. 

So taking a break from the grind and actually recording in advance so that I can get a break is one thing. Another thing that I’ve been doing when possible is just to take time off from work. And I took a full week off with my family, and we went up north and did some kind of glamping up there. That was amazing because there was really no cell service and there was intermittent wifi every day or two. I could check in, but realistically, it was a nice time to unplug, digitally detox. I deleted several social media apps from my phone, which I’ve continued to not pay attention to and that’s been pretty helpful. And then in the next couple of months, I will be taking just a bit more time off than usual. A, it’s summer, my kids are out of school, and it’s just a great time to get outside and travel. 

But also I feel this tug. I feel this hole to want to recharge. And so one of the biggest things, if you do encounter burnout and you go into full fledge burnout, a big thing you have to do is just stop working. Sometimes it’s a month or two, and it’s usually when you feel like you can’t do that, and I’m nowhere near that point, but to pull away for weeks at a time is what allows you to come back down and recharge. And so a few days here, a few days there I feel like should be good for me, given the state of things. 

The other thing I’m doing is I am taking a break from business podcasts and audiobooks and a lot of social media. I’m still on Twitter a little bit, but realistically I just need to step back, need to clear the head. The other thing that I’ve started doing is once or twice a week, I’m working from a new location. I’ve been working from home for about 20, well, more than 20 years now. Geez, it started when? It was 2001. So yeah, almost 22 years on and off. 

I had a few jobs in there, not for very long, unemployable they call me. But I’ve started working from a couple different coffee shops, and I don’t have this massive monitor. I don’t have a good recording set up. It’s super noisy. The desk isn’t the right height, all things are wrong. And yet I get incredible amounts of work done because it’s this new stimulus, it’s a new environment, and it actually causes me to work on things that I really don’t want to work on from my house. It’s like I’m tired of working from my house for now, and so I need to almost mix that up. 

So I think there’s a little bit of, I’m overusing the word burnout, but just frustration or boredom with the same situation. It doesn’t help that the weather’s gorgeous here, right? I’m recording this in early July of 2023, and in Minneapolis, this is the place you want to be, right? It’s amazing here in the summer. And so here I am sitting in the same room that I’ve been sitting in for however long we’ve lived in this house many years, and I look outside and it’s like, “Oh, I kind of don’t want to be here.” But somehow when I’m at a coffee shop, I feel like I am out and about and being with the people. So working from new locations is another thing I’ve done to mix it up. In addition, I’m trying to fill my time with non-work stuff on the weekends and the evenings because I have a tendency to slip into always thinking about work, which is good and bad. 

It’s good because it makes me productive. I’ll be thinking about it while I’m doing dishes or I’m in the shower or I’m working out or whatever, and I come across those amazing shower moments. I think Paul Graham maybe was the person who coined that, but it’s that moment where you solve a problem and it’s just because you happen to be running a background process the whole time. That’s great. The negative side of it is it burns me out. And so as a result, I’ve been trying to do more tabletop gaming. I’ve been picking up my guitar a lot more than I used to. I’ve been revisiting old music that used to inspire me, stuff from the nineties, even the early two thousands. I don’t listen to a lot of that anymore. Whatever it is. It’s like No Effects and Blink-182 and kind of just the grunge and the pop punk from that era. 

And that’s been helping change these patterns because I’ve been listening to the same music now on and off for months, and I’m kind of burned out on it. So going backwards, going back and listening to old Beatles stuff, drinking some coffee, listening to some hard driving songs has really helped start to break that free. I’m trying to break the grooves, get out of the grooves that are in my head. And then the last couple things is I’ve been looking at every task. I’m really mindful now about every task that comes across my desk and I’m figuring out, A if it needs to be done, and B, if someone else can do it, if I can hand it to a VA or someone on my team or just postpone it or snooze it. How urgent is it really? It’s summertime right now. I want to keep pushing things forward, but given my mental state, I’ll say, now is not the time for me to grind. 

There’s a time to grind, and there’s a time to give yourself permission to rest your mind. And that’s the moment that I’m in now. And I think that will last for a few weeks, maybe a couple months. I think a couple months is actually probably a lot longer than it will last. But I think having started this stuff a couple weeks ago, I think that within the next month or two, I will be back. And already, I was at a coffee shop today and I just started going down the Trello board. And instead of being frustrated with all of it, I just hammered through a bunch of tasks. It’s the tasks that stay on your to-do list for weeks and weeks and you think to yourself, “Oh, it’s going to take so much time”, and then you hammer through five of them in two hours. 

I hate those tasks because it’s so frustrating, right? It’s like this procrastination machine that gets in your own head. And so I’ve already been able to break through those. And lastly, the other thing I’ve done is I’ve pulled a few “fun” work projects that are not super urgent, but have been on my list for… it’s kind of a wishlist of I wish this existed. I wish this was getting done. I wanted to make some very minor updates to the WordPress theme on Startups For The Rest Of Us, for example. And there was a couple other things that have just been hanging around. They’ve been bugging me. And so I took the time, I took a few hours and hammered them out and got them started. And I’m excited about those because I wanted to get them going. They’ve been bothering me for a long time, and it is motivating to see motion on those fronts. 

So even though it is not the most urgent thing that I should be working on right now, again, I gave myself permission to maybe do something that isn’t the 100% logical choice, but that will help me be motivated to keep pushing forward. So if you’re experiencing burnout or you feel like you’re approaching it, hopefully those ideas are some helpful tips that you can take away coming from someone, me, who’s dealt with this a lot in my life, and eventually I’ve gotten over it each time. It just takes more time the further I get into it. And so being able to identify it early, I think is a key piece to that. 

My next topic is one I call bad player or bad instrument. So my youngest son, he turns 13 next week, he has been playing violin since he was three. And so he’s a decade into this instrument, and he is really, really good. He will play Bach, Beethoven, Vivaldi, Mozart as written. Normally, when you start out, you have these simplified versions, and he will play these very complex pieces of music virtually flawlessly. He’s a pretty incredible musician. I’m super envious of him, actually. He has perfect pitch. He learned it. It was not natural, but I can clank a cup with a spoon, and he’ll tell me what note it is, and he’ll say, “Oh, that’s a C sharp.” Or he’ll say, “Look, well, it’s between a C and a C sharp.” 

I’m like, “Are you joking?” And then I’ll go play it on my guitar or on the piano, and he’s right. And he’s a way better musician than I am, than I will ever be for sure. So what’s interesting is he picked up his first, I think it’s his first violin from when he was three, maybe it was one from when he was five. It’s this tiny, tiny, tiny little violin, and these things sound terrible. They’re cheap and because people know, the violin makers know, they’re going to only use them for six months or a year and then outgrown them, and they just don’t sound very good. And so he picked it up and he was playing these complex pieces of music on it, but it sounded like crap. 

And it occurred to me that if you didn’t know him, you wouldn’t know “Is he a bad player or is it a bad instrument?” And by bad, I mean poor quality. The sound quality isn’t great because even if you put an amazing player on a crappy instrument, you’re not going to get an amazing sound. And that got me thinking, of course, as it is apt to do about SaaS marketing. Really startup marketing in general. And about the challenges of knowing if you pick a marketing approach and implement it and it doesn’t work, is it a bad player or a bad instrument? 

Meaning did you just not do it very well? Or is the marketing approach not a fit for your type of company at this point in time? And I hate that uncertainty, right? You don’t want that many variables because then you don’t get to an answer with much certainty. And so there’s been some advice I’ve been giving to a lot of TinySeed companies where they go to start a new marketing approach. And my advice is, “If you have the budget, hire someone who’s really good at this, who has a proven track record doing exactly what you need.” So if it’s cold outreach, hire one of the productized companies that do this. If it is SEO, learn enough about it yourself, but then get advice, pay for advice so you know that you’re doing it well. If it’s pay-per-click ads, Facebook ads, ad words, you know, you get the idea. 

These different marketing tactics, if you have the budget. And of course with TinySeed companies, we’ve given them funding. So the answer usually is they have the budget. And my advice is you want to eliminate the possibility that you’re doing it wrong. And is there still some possibility that you hire someone who’s good at it and they do it wrong? There is, but it’s a lot lower than you trying to figure it out. And this is coming from me, Captain Bootstrap, who learned every marketing approach at all my startups, and at least I either implemented them myself or would then teach junior people that I would hire. I never followed this advice and I wish I had because I wasted a lot of time figuring this stuff out, and I wasted a lot of time figuring out marketing approaches that weren’t a fit for my companies. 

And I don’t regret learning the ones that worked because then I could run them and tweak them and optimize them and all that. And that’s how I grew HitTail into a mid six-figure company. And that’s how we grew Drip into many millions in revenue and all the things that came before it. So I don’t have regrets around it per se, but I know that I spent a lot of time kind of flailing and grinding on things where I probably should have found someone who was better at them than I to hire them to at least prove it out and then maybe I learn it and take it over. Or maybe I keep paying them because if they’re generating new revenue, then I have the money to try that next marketing approach. 

Those are my three topics for today. I hope you enjoyed this Rob solo adventure, and I hope you’re looking forward to the rest of this year. 2023 is shaping up to be super interesting and recovery from 2022. Things are starting to go up into the right a bit more. We’re seeing the stock market recover. We’re seeing some M&A activity start to reemerge. Funding rounds are getting closed just a bit more. It’s not like 2021, but it’s better than 2022. And even if you don’t depend on any of that, there’s just more money moving through the system. And so now’s a great time to focus, double down, avoid burnout, and keep pushing it forward. Thanks so much for listening this and every week. This is Rob Walling signing off from episode 670.  

Rob Walling:
It’s The Startups For the Rest of Us. I’m Rob Walling. This week, I talk with Rick Hymanson, the founder of detamoov, in an episode I like to call 10 years to overnight success. As you listen to this conversation, you’ll hear that Rick bootstrapped his prior company, Shugo, starting in 2008 and grew that company to over a million in ARR and exited in 2018, so a decade working on the same company, and then moved on to start detamoov, which is in the same space. It’s in payroll and HR, and it’s building software for folks who need assistance in those areas.
Rick became a listener of this very podcast in 2021, and his first thought when he was listening was, “Where was this years ago?” He realized this podcast could have saved him a lot of time and a lot of headache. Here he is in this episode to give back to you as someone who has had an exit and is on his second bootstrap startup and who is gaining traction with detamoov. We not only tell his story, but we especially focus on several learnings that he took from his experience building, growing and exiting Shugo.
Before we dive into that, my book, The SaaS Playbook, it’s almost out. I ran a Kickstarter. I have hardcover books here in my office, and I have several thousand sitting at a fulfillment center getting ready to be shipped out to Kickstarter backers. In addition, I have a final proof of the paperback copy that you can still get at saasplaybook.com. If you haven’t given it a look yet, head over there to learn more about what’s in the book and all the stuff that I’ve learned over the years, and I’ve tried to put it into a single tome. With that, let’s dive into my conversation with Rick Hymanson, founder of detamoov.
Rick Hymanson, welcome to Startups for the Rest of Us.

Rick Hymanson:
Cool. Excited to be here.

Rob Walling:
I like to think of your story as 10 years to overnight success because you started a company in, what, ’08, and you create an MVP in ’08, ’09, and then eventually you build it up to a million, more than a million in ARR as a SaaS founder and you sell it in 2018. Shugo was the name of your company, and it’s secure file transfer for payroll providers.
I want to jump to the end of the story and start there. January 2018, your deal finalizes, and you and your co-founders sell Shugo for, I’m just going to say, millions and millions of dollars. We’re not going to get into the purchase price here. I know there’s NDAs and such, but I want to find out where you were when the money hit that bank account, how you discovered looking on your phone or whatever it was and how that felt.

Rick Hymanson:
Yeah. I live in the northeast of the country. I just remember it was early January, and I think anticipation was my feeling of that day. Of course, a huge snowstorm came in, and I kept on going outside to shovel snow, and I kept on coming back in my front door and looking at my cell phone to see when the bank account was hit. I probably went inside and outside about three or four times before it hit. I literally came inside. I looked at my phone. I saw it. I texted my co-founder, and then I literally went back outside and shovel snow again.

Rob Walling:
Life continues it feels like, exactly. I had a same moment. I’ve talked about it. My kid was at cello camp, and I would step outside to sign a doc and then, hours later or whatever it was, you see this number in your bank account that you’re like, “Is that real?” That’s a lot of zeros, right? When that hit you, did you think, oh, my gosh, what am I going to do next? Some founders feel that feeling of loss like, “I’ve worked on something for a decade, and now it’s gone,” or was it more that feeling of, “The future is so bright. I got to wear shades. I can do whatever I want now?”

Rick Hymanson:
I don’t know if it was either. I had always planned that I was going to retire by the time I was 40, and this was after I was 40 years old. I think it was at first it was like, okay, I missed my timeline, as awful as that sounds, but I think it was also relief, too. I knew that I set myself up for my future for what I wanted to do moving forward. I hate to say this. I felt like I could then prioritize projects that I wanted to work on now and not have to focus on making sure that dollars are coming in for my family and their future and what we had to live on. I think that was just where my head was.

Rob Walling:
I call it freedom, purpose and relationships. These are these things I seek. Whether you make a million dollars in an exit or five, 10 million, you have some modicum of freedom at that point to work on what you want for different periods of time. I would say at 10 million, you’re probably for the rest of your life and, at 500,000, maybe you can take a year or whatever depending on where you live, five years if you’re a digital nomad, of course. That’s what you found, right? It’s life-changing because you can now work on whatever you want and you don’t need immediate revenue. Sometimes, I found the paradox of choice creeps in where you can do anything, “What do I decide to work on? How do I decide what to do next?”
Before we go back to the beginning of your story and recount the tale, how did you decide to start your next startup, which is detamoov? It’s spelled D-E-T-A-M-O-O-V. It’s detamoov.com, and the H1 is reinventing the way data moves. detamoov eliminates manual tasks with its no-code data exchange, connectivity and movement platform and, realistically, it’s around moving payroll data. It’s focused on something that your Shugo was also around payroll and HR stuff, so back to the question, it’s like you can work on anything next, you could have taken years off, we’re going to presume, what made you decide to start detamoov specifically?

Rick Hymanson:
Yeah. I mean I didn’t start it right away. We were acquired in 2018, and I spent the next two and a half years working at the acquiring company. I spent a bunch of time still in the industry, still working a little bit on the product that we had built for a while and I really didn’t move forward with detamoov until former customers called me. They felt like there was a big void in the industry still, and they thought that I was someone that could maybe take that on and take it head on. Originally, when they called me, Rob, they were talking about integrating payroll data to retirement vendors, and I thought it was so boring and I just dismissed it. I was like, “This sounds so awful,” but the more I kept thinking about it, I kept on thinking about Zapier and how a Zapier-like solution could be a huge hit in this payroll HR industry and how it could really reinvent the way that these guys work.
Again, it really wasn’t my original thought. It was prior customers coming to me and presenting problems that they had and how they felt that I could solve it. Again, it took me a few months to convince myself that now was the time. I always knew after Shugo was acquired that I would do another venture. I just didn’t know when or what. Honestly, I thought I was going to get out of the payroll industry because I’ve been in it for 20 years, but, again, opportunity knocked and I just felt like it was time.

Rob Walling:
If we flash back now to February of 2008, you started Shugo focused on providing secure data exchange for accountants and you equate it to like share file, that you thought, if it’s something that would help them during tax season, then you brought on a CTO with some equity. I call him your co-founder. Is that the relationship?

Rick Hymanson:
I always treated him like that. I mean, he wasn’t there when we originally started it, but he was so instrumental in what we did and our success that I think it’s a good term to describe him as.

Rob Walling:
You created an MVP over the next couple of years. That’s a long time, man. It’s like, what, it’s 2010, two years later, you finally get it in the hands of accountants and you quickly realize maybe this isn’t going to work. Walk us through that.

Rick Hymanson:
Yes. We had a couple of local accountants that we knew that would be our MVP users. We gave it to them. We put it in their hands, and we noticed a few things right away. Number one, they didn’t use the product whatsoever even though we thought that there was this great need that they had. It just didn’t happen. We saw no data movement whatsoever, and then in these conversations and interviews with them, we just found out that their accounting platforms they were using were including this type of functionality already. Again, we probably started in 2008, like you said. We didn’t have an MVP for a couple of years. We were probably too late, and we just realized we had to pivot.
I had an old mentor that used to tell me all the time, “Just, look, as an entrepreneur, test, test, test. Test different things. Try different things. That’s your job. See what sticks. Obviously, come up with ideas of what you think will work. Test them and see if they work.” Luckily, I was in the payroll industry and folks were like, “Rick, I think what you have we need.” We kind of stumbled upon it because they were struggling with securely exchanging data, and that ventured our foray into the industry that way.

Rob Walling:
This is super interesting. See, when we use the word pivot, there are 12 categories of pivoting. There’s a zoom in and a zoom out, and I know three of them. This feels to me, I may be making one up, but this is almost a positioning pivot where the product doesn’t sound like it had to change. The tech was there. It was just we’re not going to be for accountants, we’re going to be for payroll. Is that pretty accurate?

Rick Hymanson:
It’s almost a hundred percent accurate. That’s a great way to describe it, because the product did not change. I mean, we enhanced it as we grew based upon features and needs that the payroll industry had, but the original product didn’t change at all. The core structure of the system, the core features didn’t change one bit. It was more just a marketing positioning now because we were really trying to target payroll providers. I think, just to describe this, most people think, in the payroll world, ADP pay, checks. These big companies, you have Gusto, new providers out there, but there’s thousands of independent payroll providers across the country, from accountants to just small professional payroll companies, and that’s who we really targeted and worked with.

Rob Walling:
Was it pretty obvious from the start? You got that input, and it’s easy to get a payroll company to say, “Oh, we would use that.” What was it like getting your first, let’s say, five or 10 paying customers? Maybe it’s a long time ago, so I don’t need exact numbers, but do you remember how long it took to get those customers, and was it pretty obvious from the start like, “This has legs?”

Rick Hymanson:
I would say, once we got the first one or two, it’s such a tight-knit industry that the word just started spreading virally, so probably to go from one to two to 10, I’m going to guess it probably only took us about maybe two months at that point in time because people were just talking and a lot of folks had that same need. These payroll companies, a lot of these guys really do talk and value the opinions of each other especially because, back in that time, they were all geographically focused. Someone who was focused let’s just say in New York would trade stories with somebody in Minnesota because they didn’t fear they were competing against each other. That’s how I think it quickly grew. It grew like wildfire to the point where people just talked and word of mouth spread, and we grew pretty quickly from one to two customers to 10.

Rob Walling:
That’s amazing. I want to call out here you started this in essence in 2008. It’s 2013 when you stop consulting, when you go full-time on Shugo. That’s a five-year timeframe. That’s something I think that a lot of listeners and even today’s kind of expectation when I go on Indie Hackers or Hacker News or something, it’s like, oh, I’m full-time from the start or I’m full-time from six months in. I don’t know if it’s a this-is-how-we-did-it-in-the-old-days thing or if this is how I would do it again today, but I did the same thing. I was part-time nights and weekends for years on things that I was building, some of which worked and some of which didn’t. That’s a long time, and I think sometimes that’s just what you have to do, right? You just have to grind it to make this work.
During that five year time, were there moments where you were like, “This isn’t sustainable for me,” because I’m assuming you were working maybe 40 hours a week of consulting and then 20 hours a week on Shugo?

Rick Hymanson:
Yeah, and I think when I look at my lifetime, and it’s kind of weird to say that, but I had just started a family in 2008 as well. At the same time I got married in 2007, first child in 2008, second child in 2009, started the business in 2008. I think there was a lot of moments of doubt because I had two young kids in the first early years, revenue just starting to grow slightly. Obviously, it’s great when you’re making a couple of hundred thousand dollars consulting. Why would you give that up? I think part of our delay was probably, A, what was going on in my life. B, we were making such great money consulting, but I knew in the end I wouldn’t be happy even if I had a million dollars of consulting, working for every hour that I needed to get paid, it just wasn’t what I wanted.

Rob Walling:
Yep, I did the same thing. When I stopped consulting, I was making between 200 and $250,000 a year. We lived in an apartment in New Haven, Connecticut, and then Boston, so our expense wasn’t that much. We were moving around because my wife Sherry was just wrapping up her PhD. When I quit consulting for product income, my product income was just about a hundred grand a year, 105 grand. I took more than a 50% haircut, but I certainly wasn’t doing it for the money. I was doing it for the freedom and the purpose and owning my own thing. I knew that I was building equity. I knew that I was building for long-term something of my own, so that really resonates with me as well.
Before we talk, we’re going to talk, bounce to 2013, when you go full-time. At the end of 2013, you got up to almost a quarter million in ARR, but before that, I want to hear a little anecdote, something you told me offline about having to run out to your car to answer phone calls from… I’m assuming these are support requests or stuff. This is about scrappy. This is about doing what it takes to get it done. Talk me through the things you were doing.

Rick Hymanson:
Yeah. I was consulting and, like we said, the product was out there, we were growing the client base a little bit, and I would always have the support phone number direct to my cell phone. I’m fanatical. I was completely fanatical about getting back to folks. Even now, today, people email me and they’ll probably get a response within five minutes just because I want them to know that I’m looking at things. I just remember support calls would come in, and I’d be in the middle of my consulting work and I would literally, like you said, I would run either to the back of the building or back into my car and take those calls.
What made it even worse was, and I think I mentioned this to you, we made up this fake support rep, a guy named Dan, who was my best friend’s name, because we wanted to make the company look a little bit bigger than what we really were. I would even sometimes answer the phone as Dan or respond to emails as Dan. My co-founder, coincidentally, his name is Rob, he would do the same thing, but that was just the way it was. I mean, I would schedule demos at my lunch hour so that I could easily get demos done and not disrupt my day-to-day work of being a consultant.
Again, to your point, it was what did we need to do to grow this business so that we could stop consulting? Then I stopped consulting, but my partner Rob continued consulting because we knew we needed the income for both of us. My job was to build the business, the sales, the business development side while he continued to bring in other income consulting-wise for the company.

Rob Walling:
By 2013, you’re full-time on Shugo. You get up to 230K in ARR and, in 2014, momentum kicks in, and you end the year around 400K ARR, and Rob stops consulting. Finally, the two of you, this is after six years of working on it, are both full-time. What was that like, because this is a fascinating part in an entrepreneur’s journey, when you go from 40 hours a week day job plus 20-plus hours at night to suddenly you have no day job anymore?
I remember having this whole thing of like, “Do I still work 60 hours? Do I do 60 on the thing or do I just back off and have a real life now?” You know what I mean? It was like this. My head kind of exploded when I did that. What was that experience and that mindset shift like for you?

Rick Hymanson:
I think it was like I just knew that those hours were still there, but I can now focus on this venture. I didn’t have to worry about context switching all the time between consulting and the business. I don’t think the number of hours changed to be honest with you. I think we still worked those hours, but the satisfaction of just knowing that we were building this business, and I think you used the word building the equity of this company, was way more satisfying than what we ever experienced before.
I just remember being in the office at night sometimes till 7:30, 8:00 at night. Again, I had young kids at the time, too, and I’d still be doing this, and I loved it. It was just great. You’re there. You’re building this thing that you know is going to set your future up and you know were helping so many people that, for me, the satisfaction level just rose through the roof.

Rob Walling:
That’s something that I like to touch on periodically to remind folks is when you are building a SaaS company, and we’ll just take a generic SaaS revenue multiple once you’re above about a million, a million and a half that let’s just say you’ll get five X of your ARR, so let’s say you add 5K of MRR in any time period, in a month, in three months, whatever it takes, you multiply that by 12 to get ARR, so that’s 60K, multiply that by five based on our sales multiple, that’s $300,000 of net worth that you are adding to the company. If you’re 50/50, then you’re splitting that in essence. This all assumes an exit. It assumes a bunch of stuff, but that’s how I started thinking about it. At a certain point, I was like, whoa, this is $300,000 of net worth. I don’t know that any relative of mine really had that, aside from their house, in my entire upbringing. You know what I mean?
I didn’t come from that type of money, so I feel you when you say I’m building something real here. I’m building something that can fund my kids’ college funds, all of them. If I work another year of growing this, I can maybe never have to work again. We are in such a unique space I think for that, because e-commerce, if you build an e-commerce company up to a million or 2 million, and you can sell it for one X, two X, right? It’s net profit, and it’s like we have the luxury. What an incredible luxury that we can take advantage of as SaaS founders. Did that occur to you as you were building this business that it was that big?

Rick Hymanson:
It didn’t. I’ll be honest with you, it didn’t. The irony is, when I’m building this new venture, I think about it all the time and especially because at the beginning of this venture self-funded a lot of what we were doing. I kept on thinking to myself, “This little bit of an investment is going to be worth X in the future when we get to that point,” but at this point in time, with this first company, Shugo, I didn’t think about that at all. Again, I was laser focused on can I control my own destiny and get myself to my world of retirement which just meant can I do what I want to do moving forward and not have to feel like I have to do something?

Rob Walling:
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We’re about to get to where your acquisitions started in a minute, but I want to touch on one, maybe two more points before then. In 2014, not only did you end it with 400K in ARR, but you expanded your feature set. You moved from just a secure exchange platform to essentially a lightweight HR platform, so maybe a land and expand is what it feels like a little bit. What was behind that decision?

Rick Hymanson:
Yeah. There was a couple of different points. One was, I think, in the payroll industry at that point in time, I always felt like the employee experience was neglected. A lot of the payroll software vendors really focused on how do we process payroll and do that efficiently, but what about the employees? They’re the guys who are getting their pay stubs, who have to record their hours, who have to request time off. I felt like nobody was really tackling that.
The other thing was just, again, we were in constant communication with our customers. They felt that need, too, and none of their main software providers were offering those solutions, and so we thought this is an opportunity for us to jump in and provide something a little bit different. That’s when we built this mini HR system, lightweight HR system like you said, which basically the employee touched from the moment they were hired, they completed their new hire paperwork, their W-4s, their I-9s, everything else through there, to the moment they were terminated.
There was a huge neglect in the industry, so it was more of us seeing that, but really just constant communication with our customers in what was the void. Everything was built on that secure data exchange platform. That was the underlying piece. Because we had a lot of PII that we were transferring, we had a lot of PII that we were storing, so it was a natural fit from there.

Rob Walling:
The next question I’m going to ask you is a recurring segment on Startups for the Rest of Us, so much so we actually have a sting, an audio sting that my editor puts in after the fact. The question is, Rick, when did you know you had product-market fit?

Rick Hymanson:
Yeah. I think the biggest way was I was at an industry event, and we had built part of our solution for a specific payroll platform, and there’s probably like five or six major payroll platforms out there in the market, so we really had hit this one platform, and a customer of ours who was only using a specific piece of feature set that we had grabbed me aside and he pushed me into the corner. By the way, I’m really good friends with this guy today. He said, “I know what you’re doing for XYZ platform. I need you to do it for mine now.”
That was the moment I think I said to myself, crap, we’re onto something. We could get to X amount of customers with one payroll platform, but if we can get to that second payroll platform, we could double. If we get to the third payroll platform, we could triple, and I think, once that second platform came in and that moment happened, I think I knew.

Rob Walling:
That’s a cool story. Taking us back, at the end of ’14, you’re at 400K. At the end of 2015, you’re at 650K. At the end of 2016, you’re at 850K. I mean, you guys are really executing. These are nice growth numbers, and then, in 2017, you’re basically approached about an acquisition. I know there’s a story of how that came about. In 2018, January, it finally closed. Do you want to walk us through how the acquisition came about? By this time in 2017, you’re north of a million ARR, which is a sweet spot for SaaS. Talk us through that story.

Rick Hymanson:
Yeah. We kept on thinking who are the potential folks that could acquire us at some point. We knew that that was going to be our exit strategy from day one. We really focused a lot on partnerships, how could we partner with other vendors in the industry to really offer a better solution for our customers, because we had a lot of joint customers with a lot of our partners. This one partner, we had built a good relationship with to the point where we would go to industry conferences and we would see them, and the CEO and I would actually plan our travel around the same times and meet up in the airport secretly just to talk, catch up, see how things were going. Really, that’s how it all came about was we had a partnership. The CEO of that company and I became pretty close.
At that point, our acquirer, they had just been purchased by a private equity company, so they knew right away that they were going to add on to the platform that was acquired. I think they got acquired in July 2017. Literally, two days later, the CEO called me, “Rick, we haven’t talked in a month, and I want to tell you why. We were just acquired by a private equity firm. I want you to go meet them.” Ironically, I live in South Jersey right outside of Philadelphia, the private equity firm was right outside of Philadelphia. Literally, it was like a 30-minute ride for me out there to meet these guys. I just remember walking into that office the first day so nervous. I didn’t know what to expect. I’m this guy with these really smart PE guys all around me, didn’t know what to expect. That’s how it all started.

Rob Walling:
From first conversation until close of the deal, cash in your bank, how long did that take?

Rick Hymanson:
It took six months.

Rob Walling:
Oh, wow, that’s not too bad.

Rick Hymanson:
No.

Rob Walling:
That’s not bad at all. Yeah.

Rick Hymanson:
I thought we were going to finalize before December. There was one thing that held us up, and this is just my one thing that I am so laser focused on now. There was one question about IP, and it had to do with a company that we just had a conversation with about product features. I think the private equity guys were a little bit spooked that there could be some sort of IP question. We had to wait to get a sign off from that company that we had that conversation with, so it delayed us probably like two, three weeks. I just remember going, “If this screws out this deal, I am going to go crazy.”

Rob Walling:
Yeah, that’s the thing. When you say two or three weeks, it’s like, okay, two or three weeks or whatever, you are in an incredible pressure cooker, and you’re like, no, any day now, I can have millions of dollars in my bank account, and this (beep) thing is holding it up. I had one of those. It was only like a 48-hour delay, and it was something similar. It was a guy I wound up giving some money to do an IP assignment. It was a contractor. That wasn’t even with Drip. That was with HitTail. It was a much smaller deal, and that still drove me nuts.

Rick Hymanson:
Yeah. It was tough because, to your point, at this point in time, you’re eating, drinking, sleeping this deal. You’ve been through these where you’re going through hundreds and hundreds of pages of documents. Frankly, I don’t know about you, but I don’t understand 50 to 60% of what’s in those documents. I’m just relying on my attorney to guide me down the right path. Even though I try to read it, I just get confused and I don’t really understand what’s going on, but for two to three weeks it was at the back of my head like, “Could this derail what we have going on?” I knew the company we talked to, it was just conversations. There was nothing that really could be impactful. I mean, I understand it now, and that’s why I am so laser focused. Anybody we work with, we’re getting something signed just so that I have it right off the bat.

Rob Walling:
These are things you learn doing it multiple times. You were acquired. Congratulations. You said already that you worked there two and a half years, and then you decided you wanted to start detamoov really in 2021 and then launched it in 2022. You now have close to 70 customers. Are you above that now?

Rick Hymanson:
Yeah. We’re about 70 now. We’ve been adding a few each month. The beauty of our world is we add a customer and they process payroll for hundreds or thousands of clients around the country, so we have the opportunity to hit a lot of small businesses with our solution.

Rob Walling:
It’s a nice way to go. I want to ask you in a second, you’ve basically bootstrapped two businesses now, the one that you’ve already exited and then detamoov. I want to ask you about it. I want to ask you, you took TinySeed funding, kind of ask you why that decision because you obviously could have funded detamoov yourself, but, first, you mentioned specifically offline that Startups for the Rest of Us, you discovered it in 2021, and the quote I think I have from you is, “Where was this years ago?” First, I’m like how did you hear about it in 2021 of all years and, second, I guess, what mindset do you feel like this podcast brought to you, the lessons that it’s brought to you that have been helpful?

Rick Hymanson:
Yeah. It’s funny. I go for a run or a walk every day, and I was just getting bored of listening to music. I’m not a big podcast listener, but I just was like, “Let me just search Apple Podcasts for something like startup businesses,” and I really just stumbled upon it. I remember the first couple of episodes I was listening to, and I was like, “(beep) If I would’ve had this back in 2010 or 2011, those mistakes I’ve made would never have happened,” or they probably would’ve happened, but I probably would’ve learned from them a little bit quicker. I think about some of the guests you’ve had on. They talk about, look, when you’re a startup founder, especially if you’re a technical startup founder, getting into that sales side is difficult. You have to put yourself out there. That was me.
I think I mentioned to you before that I came at first thinking that it was going to be the field of dreams. If you build it, they will come. It doesn’t happen that way. I mean, it sounds great to be that, and you could have the greatest product in the world. That’s not normal. You have to create relationships and be out there. Really, that’s how I came about the podcast, stumbling upon it like that. Some of the lessons that I’ve taken from it is, you talked about, I’ve taken TinySeed funding this time. Why? Part of it was, hey, it’s great to have the funding, but having the mentors, the relationships to grow the community of folks that we have, that was my biggest piece of it here was I knew if I have a question I could ask you or somebody else who’s been through this or another founder who’s been through this, “What do they think?”
I think frankly, too, I enjoy helping the other founders in the TinySeed community. I think I’m in a little bit of a unique position where I’ve been through this once or twice and now I’m going through it again. I think, a lot of the folks, this is their first one. I think that’s been a unique opportunity for me personally, too, because I find that a lot satisfying on my end.

Rob Walling:
It gives you some purpose to be able to give back to folks who are a little bit behind you and then rely on folks who are a little bit ahead of you. That’s I think the best of any community, TinySeed or otherwise. In the spirit of that, of giving back to folks who are listening to this show who may not have built a SaaS company to a million, bootstrapped it and then sold it, you’re now on your way to doing it the second time, and there are differences between the first and second. One, there’s TinySeed you mentioned, of just having some funding and mentorship and all that. Another thing you called out to me, you’ve called it to me a couple of times, are utilizing existing relationships and how the first time maybe you didn’t do that as much, but these days it’s like you’re all about relationships. Would you call it your network? It’s like the people you know who respond. Yeah, talk us through your thought process there of why that’s so valuable to you now.

Rick Hymanson:
Yeah. I think it’s because, especially in the industry that I was in, people would not want to work with you unless they trusted you. I think you had to build trust in a lot of folks in order to have success, in order to grow your client base. In my world, again, at first, I think I was very shy and quiet, and I kind of mentioned that if-you-build-it-they-will-come mentality until I realized like, look, this doesn’t matter. I could have the greatest product in the world, but unless I meet people and talk to people, number one, they’re not going to trust me, and I think, number two, I’m not going to learn where’s the product good, where are their deficiencies, what do we need to improve on, so I just find so much value even day to day.
When we were acquired, I remember at the acquiring company, I said to myself after the first year there, “We’re too comfortable in the walls of this office,” meaning, we weren’t going out there and talking to enough people in my mind that I just felt like it’s such an important piece. I’m honest to a fault. When we goof, I tell people right away, “I screwed up. This is my fault. I take it.” When we have success, it’s great, but it’s because of people who’ve helped us along the way.

Rob Walling:
Something else that you mentioned to me was that one thing you’re doing different this time around is around product and feature requests and saying no. I think you said, “I almost enjoy, yeah, I almost get a little bit of pleasure in saying no these days.” Why? Where does that come from?

Rick Hymanson:
I think, especially if this is your first startup, you think you have to do everything to please everyone. I don’t know how many times, in the first time I went through this, people said to me, if you build X, Y, and Z, it’s going to help us so much. I use this example of this new venture in detamoov. I had a customer in, I guess, it was probably November of 2022, said to me, “If you build this feature, it is going to enable us to help so many companies. We’re going to have hundreds of clients that we put on detamoov to use the product.” I’ve heard that story before. In the past, I built it and then I learned that they never used it. This one around, and the way I do it now, Rob, is if someone really wants something really important, they think it’s huge, I will give them a proposal for us to build it, they’ll pay for it, but I will make it available for every other user of ours, and so basically you’re paying-

Rob Walling:
… and you own the IP.

Rick Hymanson:
I own the IP, so you’re paying to get on the roadmap basically. We just did this with this company back in November. We built this. This feature is going to be amazing. It’s going to solve so many needs, but zero customers on that feature.

Rob Walling:
But they paid for it?

Rick Hymanson:
They paid for it. In the past, I would’ve built the feature, spent development time and have lost out on other potential features or sales and marketing time I could have done to try to get more customers. I do have a lot of pleasure in saying no, but I think, when I hear the same thing four or five times, then I know it’s something we need to build.

Rob Walling:
Those are lessons from a veteran who has… You have battle scars of building features that nobody uses even though they told you they would. I’ve been there, too. Last lesson I think I want to call out and then we’ll wrap is something you mentioned already, which is intellectual property. The fact that it postponed your deal or held up your deal for two to three weeks I’d imagine these days, is it as simple as every employee and every contractor and anyone who works on your code or writes copy or whatever, you sign an IP ownership agreement?

Rick Hymanson:
It’s as simple as that. There’s probably some off-the-shelf that you can use, but I know I have one for every employee, any contractor that we utilize. It’s the first thing. We have to own the IP.

Rob Walling:
Because you don’t want to be there again.

Rick Hymanson:
Exactly, and then, look, as a SaaS-based software company, that’s the value of your business, like you said. I’ve been in this payroll world for 20 years. Payroll companies maybe get one to two X on their revenue, and a lot of that can be held back based upon performance and how many folks stay as part of the customer base. SaaS companies as you well know are completely, completely different, so IP is key.

Rob Walling:
Rick Hymanson, thanks so much for joining me, man. If folks want to keep up with what you’re working on, it’s detamoov.com. It’s D-E-T-A-M-O-O-V dot com, or they can find you on LinkedIn. I will link up your LinkedIn profile in the show notes. Thanks again for coming on the show.

Rick Hymanson:
Thanks, Rob. That was fun. Appreciate it.

Rob Walling:
Thanks to Rick for joining me, and thanks to you for joining me this week and every week on the show. If you keep listening to these episodes, I will keep recording them. This is Rob Walling signing off from episode 669.

Rob Walling:
Welcome to Startups for the Rest of Us. I’m your host, Rob Walling. Today, I sit down with Arvid Kahl and we talk through nine key takeaways from MicroConf US 2023 in Denver that happened just a couple months ago. It was great to get Arvid back on the show. He was on here about two years ago talking about his exit with Feedback Panda. And today, we talk through MicroConf in Denver. As mentioned in the episode, our next MicroConf is in October in Lisbon, Portugal, and then we have one in Atlanta next April. You can head to MicroConf.com if you want to find out more and to buy tickets. We try pretty carefully in today’s show to offer takeaways that have meaning, even if you weren’t at the event. I think a lot of event podcasts are great if you were at the event. And then if you weren’t, they don’t have much meaning.
So hopefully, this is a helpful walkthrough of things that we took away from the event. And if you’re not familiar with Arvid, he and his wife bootstrapped Feedback Panda to an exit. I’m trying to think. It was four or five years ago now. And since then, he’s been writing and building in public. He has about 114,000 Twitter followers, and that becomes important if you make it to the … There’s an after credit scene. It’s a hidden track at the end of the podcast. That’s basically why this is long. We end the episode, and then we talked through some Twitter strategy because I really wanted to hear how he built such a large following so quickly. But Arvid is a maker, he’s a developer, he’s a writer, and he’s a teacher, and he’s written multiple books. You can find out more about him at thebootstrappedfounder.com. And with that, let’s dive into our conversation. Arvid Kahl back on Startups for the Rest of Us. Man, it’s been a while.

Arvid Kahl:
Oh, it’s been a while indeed. Thanks for having me back. I’ve really, really enjoyed the year-and-a-half, two years in between the last time we talked, just post my exit. And now, I’m here. Man, it’s really nice for you to have me on. Thanks so much.

Rob Walling:
I really appreciate you the taking time. I want to talk about MicroConf 2023, which was in Denver just a couple months ago. Usually, I try to record these the week of the event or the week after. But due to circumstances beyond my control, a lot of travel, we’re coming back to it now. But yeah, appreciate it. I want to set the stage for folks who maybe didn’t attend. I mean, there were about 240 attendees at MicroConf Denver this year. That is down from our standard 300 attendees. That’s a pre-COVID number.
So every year, we used to sell it out every year. And in 2019, we had 300 folks there. And then COVID. Two years was zero. And then Minneapolis, which was 2022, was about 150 people, so about half capacity. And this year, we’re back up to 240. And it feels like across all our events, that’s about where we’re hitting. We were at 50% for a while, then 65%, and now I think we’re up around 75%, 80% capacity. And I’m curious from your perspective, obviously COVID kind of scared a lot of us. Some of us, until the moment we got the vaccine. And then I was like, “Yep, I’m at in-person events.” And then other folks are still nervous to come. How do you think about that? When did you start returning to events?

Arvid Kahl:
In Denver. That was the first time I ever went to anything.

Rob Walling:
After COVID? Whoa.

Arvid Kahl:
2023. April 2023. It’s the first time that I left my house effectively.

Rob Walling:
Wow.

Arvid Kahl:
I mean, that’s not really true. We moved from Germany to Canada during the pandemic, so there was a lot of moving there, I guess. But ever since then, I kind of hunkered down at home, built my little media empire or whatever I am doing right now. I don’t really know what to call this. But just built my brand to just write, interact with people, but all online. All on Twitter, all through communities and stuff, and never, ever trying to meet anybody. We got our shots and everything, mostly for the health of our extended family. Because when we moved to Canada, it was really the idea to move to Danielle’s family. Her family is from the area we moved to, and there was a lot of older people here and we just wanted to protect them. So that was the idea. We all got vaccinated, but we still kind of hunkered them. We took tried to protect everybody there.
So I was very much afraid to go anywhere until I thought, “Now it’s kind of time to live a normal life again,” or live a life as we knew it. And when you just said you were at half capacity with 150 and now you’re getting back to 240. Honestly, just thinking about how I perceive this time, it is an incredible accomplishment for you to even have gotten more than zero people back into a conference. It just feels like there’s always this little bit of risk that is involved. And particularly among bootstrappers, I think we look at risk and we have a bus factor that is intense in our businesses. Every single one of us leading a SaaS business with two to three people. If we are out for a week or a month or, God forbid, half a year trying to recover from this thing, the business is gone. So the risk is very strong, which was what always kept me from going anywhere.

Rob Walling:
Well, that’s a ringing endorsement for MicroConf, the fact that that was the place that decided to bring you back.

Arvid Kahl:
You’re pulling out the best in people, right?

Rob Walling:
Indeed. And yeah, it feels really good. I mean, in 2022, as we ran events, I remember saying just getting 50 of us in a room is a W, is a notch in the win column basically. And now that it’s building back up, it’s really exciting. So for folks who don’t know who was is in Denver, I co-emceed it with Lianna Patch, who’s the founder of Punchline Copy. And then we had a handful of speakers, Claire Suellentrop from Forget the Funnel, Dev Basu, Patrick Campbell, John Ndege. And then we had facilitators like yourself, Arvid Kahl from The Bootstrap Founder, talking about founder mental health and such, and then Anthony Eden, Quiet Light, and a few others. It took place over two-and-a-half days and this continues the evolution of MicroConf, where in 2011 we had 12 speakers in two days, and in 2012 we had 10 speakers, and then we had nine for many years.
And now, we literally had five or six main stage speakers this time, and that’s been by Popular demand because we know the value of MicroConf is the connections between people. It’s about the community, it’s about introducing and then deepening those connections. No matter how much founder-by-founder time that we have, there’s always one person who’s like, “We could have used more,” which is a cool sign, right? There’s a bell curve. You’re never going to be right in the center of it. But in this case, we pulled out the stops and really made a lot of efforts towards introducing folks. You have any opening thoughts? You and I each have our top five key takeaways, but you have any opening thoughts before we dive in?

Arvid Kahl:
Man, you’re absolutely right. People come there for other people. And I think, just in general, that’s what makes this conference such a different conference. My opening thought, I compared this to the other conferences that I went to in my life, mostly software conferences or startup conferences. I went to Web Summit one year in Portugal, this massive, tens of thousands, if not hundreds of thousands, of attendees, and these gigantic stars that they invited. They had Ray Dalio on stage and I was like, “Well, that’s not helpful at all.” I mean, it’s great. Ray Dalio is a great writer and investor and he has all these things to share, but I came there and building this little SaaS business. We even had a little booth there just presenting the thing to people and see what they say. And then you have people on stage that are quite unreachable, both in terms of where they are as a contributor to the entrepreneurial community, and just physically unreachable because it was a massive stadium and they were on stage half a mile away from you.
It’s like, “Yeah, this is not about connecting with my fellow people here. This is just about looking at this stage and clapping loudly and big bombastic effects,” and MicroConf is the exact opposite of this. People come not necessarily for the talks. They love the talks and they’re insightful. They take away something from the talks. But the moment the talk is over, people turn to each other. And not to the next thing. They don’t go to the next room. They go to a conversation that they may have already started a couple hours ago. That is super valuable that people don’t turn away from each other, they actually turn towards each other, and I really, really like that.

Rob Walling:
Yeah. And as I was saying, that’s the evolution of MicroConf. In the early days, we started it more as an educational event because there was no one talking about just nuts and bolts, marketing, and launching of startups in 2010, 2011 when this podcast started. It was all these headlines and it was a venture capitalists saying these really high level things that didn’t apply to our type of business. And so MicroConf was like, “Well, let’s educate based on what we know and what other successful founders are actually doing, not just the, ‘Oh, I raised a big round.'” But it’s like, “How did you grow your audience? What are the marketing approaches?”
The first two, three MicroConfs, we were discovering these things together. “Oh, B2B is superior to B2C.” We didn’t know that. I mean, it’s so fundamental now, but that was discovered at MicroConf. “Raise your prices. We’re all underpriced.” That was the first three years. It’s basic things like that that have helped us. I think, collectively, it’s kind of raised the rising tide and has raised all boats. So with that, let’s dive into our top five takeaways. Why don’t you kick us off? These are in no particular order. So if we say it’s your first takeaway, it’s not necessarily the most important. But why don’t you kick us off?

Arvid Kahl:
Yeah, I was going through my experience, my mental recollection of the experience of the conference, which is mostly talking to other people. That’s kind of where this is coming from. And one thing that I noticed in many, many conversations, that just looking at the community of founders that was there, almost everybody was struggling in some way. Obviously, we have a economic situation in the post-COVID world and all that. The internet is weird. Privacy is weird. There’s a lot of stuff going on. Lots of people were looking for ways to pivot, and they were quite expressly mentioning that. They were saying, “We are doing this, this, and this, and this is not working well anymore. Our low-touch SaaS thing that we had running for us so well all of a sudden is not making as much as it did anymore”.
And instead of saying, “Well, how are we going to try to force people back into low-touch SaaS,” which, for some people, the first idea is to go for the golden goose that worked so well until now, a lot of people were asking about, “Well, what else can we do?” And that I found very interesting because that’s such a founder-centric thing, such a bootstrap-y way of, “Well, what else can we do? What’s some thread we can pull?” So I heard a lot of people talking about finding high-touch service offerings, in addition to their low-touch, B2B SaaS that they were already running. That was something that I hadn’t really found that expressly-mentioned anywhere else before. It was a very strong current throughout the conversations that happened with me involved. Obviously, there were different conversations there too. But almost half of the conversations I had were kind of about that.

Rob Walling:
Yeah, and I do think that’s a sign of the increased competition in SaaS today. Bootstrap SaaS is different than it was five years ago and different than it was 10 years ago. And we can say, “It’s easier to get something launched, but that means more people are doing it. It’s harder to be heard through the noise,” or whatever it is. There’s just a lot of SaaS. Everything is becoming SaaSified. Software is eating the world, as Marc Andreessen says, and that does lead to needing other options to maybe keep it going. I mean, I see more bootstraps SaaS founders raising funding now than ever before, and I think that’s also part of it, of, “Huh, you maybe need a little more to get started today than you did a few years ago.” So I could see that as well, adding consulting or going up market. I mean, there’s a bunch of different ways to get that money to get going.
So my first one is going to sound … Well, I don’t know if it sounded obvious to people because I think we sometimes forget this. But nothing beats being in a room together. There’s nothing of higher fidelity. I have four VR headsets in my house and I play VR fishing or golf or other things with basically kind of mastermind-ish folks, kind of mentors or colleagues of mine. Instead of sitting staring at each other on Zoom, we go into VR and we talk business and do this once a month, once every other month. And it’s cool and it’s VR and there’s avatars.
And it’s just not the same because I still have a headset on at my own house. And when I’m at Zoom, we’re staring at each other. You ever been on a four-hour Zoom call, six-hour Zoom call? I have. It is exhausting. And yet at MicroConf, four hours I’m in a room with people, six hours, eight hours. And even though I’m tired and even though I’m extroverted out … I call it an extrovert hangover that I think a lot of us get … even though at the end of eight or 10 hours at MicroConf during the day, in the evening, I’m like, “I want to talk to more people,” because nothing beats being in a physical space together.

Arvid Kahl:
That is my experience too. Just the facilitation of new ideas coming up. Even solutions to people’s problems. I’m kind of getting almost into another one I had here, but let me just throw this in. Let’s do these not in order, but completely randomly and disperse them. But the idea that you could just go to a person that you probably kind of already know from Twitter. I had a lot of people that I had already talked to virtually, met them for the first time, had these wonderful conversations that kind of piggybacked on what we had already done in DMs. You have this baseline understanding of each other’s world already, and then you just jump into other people’s issues.
They’re like, “Oh, yeah. Man, this doesn’t work.” And then you have these opportunities where you can say, “Well, that guy over there,” you can literally point at the person, “has solved this problem just last week. Why don’t you just take it by the hand? And we’ll lead you over there, introduction, bam. Problem solved.” This is just something that no other place could ever potentially solve like this. Unless we live in the Oasis from Ready Player One, but that does not exist. No VR situation can ever facilitate just an actual room with physical beings.

Rob Walling:
And such a big element of that is this thing that I say from stage often, which is you are in a room unlike any room you’ve ever been in before. And I don’t mean these four walls. I mean the 239 other people here. It’s that except for MicroConfs … and maybe there’s other events like this, I haven’t particularly found them. BOS is similar. And the Dynamite Circle, their DC events are similar. But if you are a Bootstraps House founder, there is no other room that you will be in where everyone else is doing what you’re doing and we’re all on the same page.

Arvid Kahl:
Well, that kind of brings me to my number two. If I can just throw this in right here. What I noticed is exactly this, and there is such a common baseline of shared experiences in that room that makes conversations, that makes exchanges, or just even collective problem solving much easier. Everybody has the same problems. And in my talk, I got to actually facilitate conversation between people because everybody has mental health issues. Every single founder in that room was like, “Yeah, I have mental health issues.”

Rob Walling:
We all do.

Arvid Kahl:
And I was talking to people. Literally throughout the whole conference, from day one, meeting them, coming to the hotel, a couple people already there kind of recognized me. I went over, had a chat. And 10 minutes in, I told them what I was going to do. I was going to get people to share mental health issues and how they dealt with them with each other during the talk, if I could call it that because it was mostly people talking to each other not onstage, but offstage. And everybody had a story ready. That was one of the craziest things that I’ve ever, ever noticed or ever witnessed in my life was that I told people, “Yeah, I’m going to talk about social isolation and living with anxiety,” and they were like, “Yeah, so last week.” There was immediately a story. Every single person had a story.
And that shared sentiment of knowing exactly what the other person is talking about when it comes to anxiety, stress, and all these things, that makes conversations so much easier and it makes it so much easier for people to open up. I went on stage, shared my own story, gave them permission to share theirs. And I wasn’t even off-stage for this little 15-minute segment that I gave the audience to talk to each other that the room was buzzing with people sharing their story. That was such a monumental experience for me to see that people were just waiting to get permission to share this. And that is something that MicroConf can do like no other conference because we are the same people trying to build the same kind of businesses.

Rob Walling:
Yeah. That’s a really good point. And to be honest, it’s something that I didn’t realize when we started this. I genuinely thought we’d get in a room together and chat about some things and we’d learn marketing and education or whatever. And after the first year, 2011, I was telling everyone, “Yeah, this is the last one. There’s no way I’m doing this again.” It was so much. It was so hard and so much work. This is back when we ran the logistics, Mike and I ourselves. And people were like, “No. Raise the price. I need this.” That’s when we realized. It’s the “shut up and take my money” meme. We found product market fit. We stumbled into it that first year. But to your point, that’s what it is, is there’s never another time in my year when I’m in a room with that many other people where I know I can go up to anyone and I can tell them, “Oh my gosh. I’m so stressed out because things are bad.” I can say, “Here’s my MRR and my churn. What do you think? Help me with my funnel.”
It’s just all the crap that we talk about on this podcast and on Twitter that’s all just jargon to everyone else. It’s the opposite of jargon. It is our language. It’s our love language at a MicroConf. All right, my number two. So MicroConf, like any SaaS company, is a startup. I mean, we’ve been around now for a while, for 12 years. But we are still experimenting and changing things year to year. And so one learning that I take away every year is that experiments are always scary and they’re often risky, but they can also have a big payoff. And I want to call out what has now been known as the Chaos Lunch. I was calling it the Cluster Flunch. So Producer Xander had this great idea.

Arvid Kahl:
That was awesome. That was great.

Rob Walling:
He said, “What do you think if we send people off in groups of,” I don’t know, it was between eight and 20. “Just get people together and we pre-assign the groups. We put a credit card on file at a bunch of local restaurants within walking distance, so big radius.” And he got, I don’t know what the number was, 10, 15, 20 different restaurants that he called and made lunch reservations. And I’m like, “That sounds cool. That sounds great.” And so I was like, “Sounds like a big risk, though. Are people going to do it? Are they going to walk? The logistics sound complicated.” This is always my thinking, and Xander is great at logistics. It’s one of the things he’s amazing at.
And so it’s noon on the second day and I’m like, “Great. And now, go to this URL within your MicroConf hub and you’re logged in. It should have a number there.” And then, people were in Slack and raising their hand, “A number’s not showing up,” and I was like, “All right.” And so I look at Xander in the back of the room and I’m like, “Xander, what are we doing?” and I see him point to his watch and make a circular motion, which means stall for time. So I’m like, “Lianna Patch with ChatGPT jokes!” and I’m like, “Where’s my magic trick? I left it in my bag.” So we stall for five, six minutes, and eventually I’m like, “Okay.” And people start kind of wandering out the back, maybe thinking about their own lunch because it’s 12:06, 12:07. And eventually, it just came together. We literally all stood around Xander and he’d say, “What’s your name? Here’s your number,” and people were just gathering in groups, and we just figured it out.
If it was 2,000 people, it would’ve been catastrophic. But with 240 people, we were able to figure it out. And that was one of the highlights for me was being matched at these tables. I didn’t know most of the people. I knew a few of the people. Had some amazing conversations because I was forced to meet and we were paired up. Xander and his team were pretty smart about it. They were deliberate. He knew that there should be a balance of … They didn’t put me, you, and Patrick McKenzie at the same table, right? You were at a table. I was at a table. Just to help spread it around. But Chaos Lunch is probably what we’ll call it from now on. And I think it won’t be chaos in the future, but it was a big experiment. It was risky. And in the moment I was like, “Oh my God. This is not going to work.” And then in the end, people raved about it to me personally, and then in the after-event survey.

Arvid Kahl:
It does remind me so much of the Paul Graham “do things that don’t scale” situation. Xander was literally the concierge doing the thing that doesn’t scale at all, but it was really great. It was fun because people were all smiling. I was standing pretty close to Xander because we were trying to find my number, and he was smiling, kind of slightly stressed. But everybody was still, “Ah, we’re going to figure it out.” This is the best potential audience you could do this with because people’s expectation for how things can break immediately are just, “Yeah, sure.” Obviously, we all had downtime. This was literally the non-SaaS version of a little maintenance issue.

Rob Walling:
That’s right.

Arvid Kahl:
It was fun and it gave people great opportunities to just commiserate together. I guess that would be the word. “Okay, this was fun. Now we’re here. Now let’s have a chat. Now let’s get to know each other.” You have this shared, funny, and maybe not the best positive, but still interesting experience. I think that was great.

Rob Walling:
Yeah.

Arvid Kahl:
I think that was a wonderful idea. You should do this every time. Let’s see if you can orchestrate the chaos. Let’s see.

Rob Walling:
Yeah, it reminds me. Basically, we shipped a bug to production is really what that was. But then, we recovered. You fix it and you move on.

Arvid Kahl:
Yeah, that’s right. That was fun.

Rob Walling:
With that, what’s your number three?

Arvid Kahl:
I think my number three is a bit more kind of tactical at this point. Dev gave this wonderful talk and he talked about all these different kinds of new ways of getting your product in front of people. He mentioned discovery ads, and there was this kind of moment in the room where people were like, “What is this?” And I love the fact that we’re 10 years in to this conference where everybody’s sharing stuff with each other all the time, and there’s still something new that people have never really figured out when it comes to marketing your product. And particularly, that whole discovery thing when he explained it, everybody’s like, “Whoa! We can do this?” The idea was really to put your ads in front of, I think, through Gmail or something so that when your competitors’ renewal emails come in, your product gets placed there as an ad, as a competitive product.
You have this thing you mentioned in your opening talk. You have STIR. You have strategies, tactics, inspiration, and relationships. And as much as I love the whole inspiration and relationships part, which is the hallway track and all the things we just talked about, the S and the T, the strategies and the tactics, they’re still there and they’re still amazing and people still get something out of it that they didn’t expect to get. So that was really cool. As an example of this, you still have these super impactful, novel things that you never thought about. And now you know how to do it, which is just really cool.

Rob Walling:
Yeah. And back in the day, MicroConf was 80% strategies and tactics, and then inspiration relationships was kind of like, “Oh, that’ll be the icing on the cake,” and it’s kind of flipped. And I think for the better, where it’s 80% inspiration and relationships and then 20% strategies and tactics. But to your point, my number three is also Dev Basu’s talk. He had five playbooks that he showed. One was discovery ads. I made a note of a couple others. He talked about building comparison pages, how to do that, and then taking advantage of competitor price increases, and then he had two others.
Folks, by the way, if they want to buy the videos for the talks, I think they’re $50 for all of them and it’s at MicroConf.com/US. But I felt the same way, where throwing out a bunch of tactics, talk after talk over a couple days gets old, but hearing a couple that blow your mind throughout the days makes it worth it in addition. Not that the relationships don’t on their own, but if you take away a couple things to experiment with or a mindset shift or anything like that, I think it’s pretty incredible.

Arvid Kahl:
Yeah. It’s kind of front loading value, right? We do this a lot in SaaS, trying to convince people. Eventually, they could convert into a paying user by giving them as much as possible right at the start. I think Dev did an amazing job at that. He gave people something tangible that no matter if there was anything else at the conference that may or may not work for them, that was going to be at least worth considering as something that everybody could do for their business. So that was genius on your part, I guess, to put that talk there, and genius on him to actually put that in the talk. The ST in STIR is at the beginning of the word for that reason. I kind of felt like that was strategic. I’m not sure if it was. But if it was, great. If not, just act like it was.

Rob Walling:
So I used to put together the run of show and put who goes where in the schedule. Xander does that now, and then I review it and sanity check it with him, and it is intentional. If you run events, you learn where to put things. You learn where to put different people in different topics. And certainly, leading was something that’s either high level or tactical. That was very much an intentional decision.

Arvid Kahl:
Thank you for putting my talk right in front of the chaos lunch, so that was a lot of fun.

Rob Walling:
It was. We didn’t know. We just thought it was before lunch. Now, it’s chaos. So it sounds like we shared the same number three. What’s your number four?

Arvid Kahl:
My number four is the thing that you also did in your opening talk presentation. What I noticed is that people have wildly different reasons for why they run their SaaS businesses and they’re all proud of it, and they’re all following these many, many different goals for many, many different reasons, but with the same approach. You did this thing where you had a slideshow up and people were sending in pictures of the reason why they’re coming to the conference, why they’re building their business pretty much up there. You saw people having photos of their family up there, lots of them. People have photos of their pets up there, including our little puppy. She was up there too. I took even a photo of that. It was adorable. I showed that to Danielle. She was like, “Oh my god! Our puppy is at MicroConf!” It was really fun. And you had people sharing objects, private planes or places they wanted to go to, places they wanted to work from, places they wanted to visit.
You had all these many, many different reasons that people were running their business, and I think that level of diversity is really, really cool. It’s not that people are there just for the money. That was one thing that, again, with many of these startup conferences that I’ve been to in my life … and even coding conferences, maybe more technical, not as much money … but people are career driven and they want to reach that next step, the money milestone, or whatever. But this was just, “Yeah, I’m doing this for my kids,” or, “I’m doing this so I can have my own home and that’s it. That’s all I want.” The whole lifestyle business thing? That was so palpable in that moment, and the fact that we opened up with this? That was awesome. That was just, “Okay, we’re all in this together. We come from different places. We have the same experience. Let’s just bring it all together.” That was a lot of fun. I really enjoyed that.

Rob Walling:
Well, that’s what I love about bootstrapping in general is we can all have these different motivations. When you raise venture, you really are going after big money and big impact, I’ll say. I think people often will say, “Oh, I want to make a dent in the world,” kind of because they don’t want to say they want to get rich.

Arvid Kahl:
Yeah.

Rob Walling:
There’s a few maybe that truly want to do that. And look, I’m not taking anything away from it because I started startups to get rich as well. But also, I had a purpose beyond just money. Freedom, purpose, and relationships. These are the reasons I do it. That might be the reason you or any listener does it. Or maybe it’s because they want to have 12 cats in their house like Lianna Patch. Ooh, throwing shade at Lianna.

Arvid Kahl:
Right.

Rob Walling:
Or like you said, that they want to own a home or that they want to travel and visit places. That’s the beauty of bootstrapping is that you’re in control.

Arvid Kahl:
Yeah, you’re in control and it’s kind of aimed at something. It’s not this kind of, “Oh, I have to follow the path that others have laid in front of me.” Our parents tried to push us into a certain direction. Get a job, get a career, and then die, right? We’re not on that path. We are on our own path and we have a goal. We have a reason. And I think that is a strong, strong thing to have, to be surrounded by people who have this.

Rob Walling:
And just to be clear, Lianna and I agreed, before we got on stage, what was on limits and off limits for basically ragging on each other, making jokes at the other expense.

Arvid Kahl:
Okay.

Rob Walling:
I said, “I’m going to joke about how many cats you have,” and she’s like, “Oh, that’s totally fair game,” so I’m continuing that effort here on the podcast. My number four was a talk/workshop from a guy named Arvid Kahl. There’s a lot of takeaways there. But a big takeaway for me is something that I’ve learned for years from my wife, Dr. Sherry Walling, but that you echoed and said in a different way from the stage, which is at any given time, each of us is struggling with something. Sometimes, it’s imposter syndrome. Sometimes, it’s mild depression. Sometimes, it’s deep depression. Sometimes, it’s anxiety. Sometimes, it can be OCD. Just whatever. We are working with something that other people probably don’t see from the outside. And that founder mental health in general is something that has become more talked about, but I still don’t think is talked about enough.
And so I enjoyed your session where you do a slide or two, you talk and then you say, “Talk amongst yourselves and talk about this thing.” And people would awkwardly look around, we had round tables, and then they’d start talking. And then before long, you couldn’t stop them talking, right? Because they were like, “Oh my gosh. I haven’t opened up about this to anyone else, and this is so cool to be able to talk about this in a way that no one mocked me.” I didn’t feel bad. I actually felt better having said this thing I’m struggling with.

Arvid Kahl:
Yeah. Thanks so much. That is most appreciated. I really enjoyed it. It’s weird because it was a very vulnerable moment, not just for me, for everybody in there because you don’t really open up. And I love being on stage. The biggest stage I’ve ever been on, by the way, so thanks for allowing me to even be in the room like this. And after my talk, I guess pre-Chaos Lunch, or mid-chaos, pre-lunch, somebody came up to me and said, “Something just happened at our table that was really interesting.” And I think she said, “I saw somebody who started talking about their issue that they had.” Obviously, everybody was talking about mental health issues, and she saw that this person had never talked about this to anybody else before, and she could see the physical relief that was on their face after and during talking about this.
She thanked me. Not for herself, but for that other person to be able to do this. And I was like, “I just really said you can do this. You all did it all by yourselves.” But it was such a strong moment of, “Okay, we really need this. There are people here who have had these problems for decades and never thought it was worth it or allowed to ever talk to anybody about this. So what I really hope the people, these 250, 240 people that went there, went away from this conference with was we can all allow the people around us to talk more about these things. It’s kind of the pyramid scheme situation where you have one person getting 240 people to open up. Each one of them gets 240 people to open up as well. I would like to see that because you’re absolutely right. It’s severely underrepresented in our community. Even though it is much stronger in our community than others, it needs to reach way more people. That’s for sure.

Rob Walling:
With that, what is your number five, sir?

Arvid Kahl:
Yeah, number five. I think the biggest thing for me at the conference … you mentioned it a couple times already, but I really want to bring it home … is the power of the hallway track. The fact that you can talk to anybody and there is no caste system at this conference. The hallway track obviously is everybody can talk to everybody, hopefully not during, but around the talks and in the evenings and during breakfast. And people meet each other, they go to breakfast together, they organize a dinner with each other or something like this. It extends beyond the literal hallway. It’s just around the conference all the time.
But what I really, really enjoyed is that I noticed that there were masterminds being founded during the hallway track. People met for the very first time and they were like, “Hey, we are vibing. Let’s connect. Let’s go on the Slack, the MicroConf Connect Slack and just have a mastermind there. We always thought we should, but we never did. Now that we know each other, we can do this.” Or people just had ideas that they were pitching to others that were immediately crushed and invalidated. It couldn’t have been better. You have this feedback loop there. And caste system, why I’m saying this is you did a really good job not bringing in the Ray Dalios of the world.
As much as it would probably be super cool to have that kind of person and then talk to them during the hallway track, I think it’s much better to be able to talk to them, or to talk to Claire, or to people like John. Everybody who was a speaker is just a person sitting there as well. You could have a chat with anybody. And I really appreciate that because that’s what makes the conference not one of these “looking at other people” conferences. It’s looking at your peers, everybody around you, and that is super valuable.

Rob Walling:
I’m glad that you noticed, and I’m glad that you’re calling it out because we absolutely get suggestions for speakers like Gary V., Seth Godin, whatever other celebrity person who talks about entrepreneurship or marketing or whatever. And look, I don’t mind those people. I like Seth Godin. I’ve seen him speak. He’s actually a great speaker. I question if he’s a MicroConf speaker. He’d probably do a good job. But to your point, he would fly in and he’d speak and he would leave at lunch, and that is different than what we’ve traditionally tried to do, which is to get folks who are boots on the ground. And actually, most of our speakers want to attend the event as well. And we’ve had a lot of speakers that will speak one year, it’s their first time attending. Then they’ll come back year after year because they’re like, “Oh, this is one of my favorite events,” because of the way it’s run.
So my five is a moment from Patrick Campbell’s talk. Well, actually, there’s two moments. So my favorite word spoken at MicroConf, and I’m totally doing this to call him out, was the word “yet.” And Patrick Campbell, you might wonder, “Rob, why are you paying attention to ‘yet?'” Patrick Campbell was talking about he had this $200 million exit, money in the bank. And at a certain point he was talking about being a bootstrapper, but being able to raise a small amount of funding. And he’s said, “Rob runs TinySeed and I don’t have a skin in the game. I’m not an LP there yet.” And that “yet” told me, “Oh, heck yeah.”
So anyways, that was a side jack. But really, my favorite part of his talk is he has these mental frameworks. One of them was an operating framework of cadence of company and this and that. He had I think three or four of those frameworks. But one that I liked and that I’ve talked about on this podcast, with different naming conventions, was he talked about the journey framework. And there are three founder paths if you’re going to do a SaaS, a startup. I call it lifestyle bootstrapper, an ambitious bootstrapper, and venture track. Those are kind of the three that I say. And notice, venture track is about raising funding. But lifestyle and ambitious, you can raise funding, small amounts or not, it doesn’t really matter. And lifestyle is truly like, “I want to get to $10K a month, $50K a month,” whatever the number is. It’s usually not millions a year. Could be, but usually it’s not. “And I want to work as little as possible. I actually don’t care about growth. I care about massive cash dividends and I’m just doing it for the lifestyle.”
And that’s great. I’ve had many businesses like that and they were amazing. And then I transitioned, and some people do it at certain points and they’re like, “No, I now want to build that multi-million dollar startup. I want to have an eight-figure exit,” eight or nine frankly, because Patrick bootstrapped to a $200 million exit, “and I’m going to hire, I’m do what it takes, and I am going to grow this thing because that’s my ambition. I want to build something big.” And maybe it’s to get rich, maybe it’s to have an amazing purpose, maybe it’s to make an impact. But Patrick had the same thing with different names. There were three founder paths. And it was something like a lifestyle bootstrapper, and then it was in-between, ambitious, which is what he did. That’s what they did with ProfitWell. And then, venture track. And he actually said, “The mistake we made is we didn’t raise some funding. We wanted to grow like a venture-backed company, but we never raised venture, and so it was very, very hard for us.”
So I liked that takeaway of him, his mental model of there being these paths. And as we said earlier, if you’re bootstrapped, you can kind of do what you want. Now, once you raise venture, you can’t anymore. And that’s a decision that people make. It’s not right or wrong. It’s just know what you’re getting into.

Arvid Kahl:
Yeah, that was really interesting. It was really nice of him to, I feel, share the little secrets from inside of his own mind, the things that he wished he had, but hasn’t, and was still successful. But he still kind of talks about it as if it was a mistake to have made, right? Just the insight into somebody’s mind. Even him talking about how his dad asked him if he’s now going to finally become a doctor because he still wasn’t happy with him exiting for $200 million. That’s just the insecurities you have as a person. You just laid them all out and that was really nice. It was a great talk. I really enjoyed it too. That was a lot of fun and really helpful.
I’m just thinking about this because you were mentioning it just now with these three different paths. That’s something that I’ve heard a lot of people figure out because their co-founders are on a different path than they are, right?

Rob Walling:
Yes.

Arvid Kahl:
That is super risky. Something that I just want to throw this in here. If you found with other people, figure out which path they are actually on. Even though you’re working on the same business, they might be thinking about very different outcomes in the future.

Rob Walling:
Right. With any major stakeholders. So it’s co-founders, and if you truly want a lifestyle bootstrap, go do that, but know that your co-founders should be on the same page. And don’t take investment. If you’re going to do that, just don’t take it there. The numbers don’t work. So I see people taking money and then wanting to be like, “I’m going to work half-time on my business and do five other businesses at once.” Even in this day and age, they still do. Even at TinySeed or at NDWC, they don’t work that way. So anyways, if folks are stoked about MicroConf, if they like this and they want to be in a room with a couple hundred amazing people, we have a MicroConf Europe coming up in Lisbon, October 1st through the 3rd. And then, we are in Atlanta next April. And I don’t know those exact dates, and I seem to be having trouble locating them and with my Google-fu right now. But have you decided? Are you coming to either of the next two?

Arvid Kahl:
I’m totally coming to the one in Atlanta.

Rob Walling:
All right.

Arvid Kahl:
That is happening for sure. Not so sure about Europe this year, but I do want to come to the Atlanta one. It would be marked in my calendar if I had the dates, but I’m very much looking forward to that. And just even as an attendee would be great. I would love to do more stuff too with the community there. But it was just fun. My first MicroConf I ever went to in Dubrovnik, back there at the Europe one in 2019, that opened so many doors for me just to meet so many cool people. And now, I got to do this here. I would just come to stand at the window and look inside if that was an option. If you sold out, I would just claw out the window from the outside. It would be worth going to Atlanta for that.

Rob Walling:
You are too kind, sir. I will, of course, be at both of them as always. And so folks who want to check it out, head to MicroConf.com and there’s an events tab at the top. And I will get Producer Xander and his team to add Atlanta because it should be on the list by the time this episode goes live. We will have that there. Arvid Kahl, you are @arvidkahl on Twitter. 114,000 Twitter followers. Look at you!

Arvid Kahl:
Yeah, yo! Isn’t that bizarre?

Rob Walling:
It’s pretty impressive, man. And thebootstrappedfounder.com if folks want to listen. You have a podcast, you have a YouTube channel, and you consult with folks. Well, you have books as well.

Arvid Kahl:
Yeah. I got a lot of small bets going.

Rob Walling:
Email, newsletter.

Arvid Kahl:
Yeah, that’s right.

Rob Walling:
This sounds familiar.

Arvid Kahl:
Yeah!

Rob Walling:
You do a lot of things. I do a lot of things too. It’s fun. And you do consulting for folks as well.

Arvid Kahl:
Well, thanks so much for having me. That was really nice. It’s really nice to just relive the experience, because the two days, they were great. I wish it was two weeks, but obviously …

Rob Walling:
I always do too.

Arvid Kahl:
Not sure if I would. I’m also one of these kind of introvert/extrovert people that are extroverted in their group of people, but introverted usually. So I think two days was perfect. But reliving it with you just now, that was awesome. Thanks so much.

Rob Walling:
Absolutely. Thanks again to Arvid for appearing on the show and for sharing his takeaways from MicroConf US. I hope to see you in October in Lisbon, or in Atlanta in April of 2024. It’s great to have you here this week and every week. This is Rob Walling signing off from episode 668.
Congrats. You made it to the not-so-hidden track that I announced in the intro of the episode. I don’t normally do that. But actually, I’ve had a few people reach out when we have these hidden tracks if I don’t intro them, and they say, “Oh, I think you left something that should have been on the cutting room floor in the episode. Did you mean to publish that?” Yeah, we do. Before we dive into Arvid and my conversation about his Twitter strategy and just how he built a following, one of the funniest moments of this year’s event was when my co-emcee, Lianna Patch, fell off the back of the stage. So let’s roll the audio to that right here.
Want to grab the water bottle?

Lianna Patch:
Why do I have to grab it? The patriarchy. Okay, I’m fine.

Rob Walling:
Ladies and gentlemen, Miss Lianna Patch!

Lianna Patch:
Thank you! Please tweet about that. (Beep) my life.

Rob Walling:
You kicked!

Lianna Patch:
I kicked the light off the stage. I’m not going back down there.

Rob Walling:
After that moment, of course, we continued to joke about it for the next two days because she was fine, not hurt, which is kind of the best of both worlds when you have something funny happened that doesn’t hurt anyone. And with that, let’s roll back into my conversation with Arvid where I asked him, “How did you grow this audience so quickly on Twitter?” Turns out it was maybe three-and-a-half years, and he mostly went from zero to 114,000 Twitter followers.
Anyway, sir, I wanted to keep you around here to ask you how in the hell did you grow your following to 114,000 people so quickly? A, how long did it take from when you really started focusing? And then, what did you do? I mean, these days you are actually doing Twitter consulting in a way. I could hire you to come give me advice, or give me a teardown screen class.

Arvid Kahl:
Teardown is what I call it. Yeah, that’s right.

Rob Walling:
So how’d you figure this out? What are you up to?

Arvid Kahl:
So let me look at this with perfect hindsight. Let’s just start with that. Now honestly, I think I had 400 Twitter follows for most of my life, for many, many years. I think that MicroConf in Dubrovnik that I was mentioning earlier, the one in 2019, that kind of put me on the map in the community because you allowed Danielle and me on stage at both MicroConfs. You kind of pulled me out on stage and we gave this little talk about how we did our business, how we exited it, and what we built into the business for it to be able to exit, and people really seem to like that. We had a YouTube video of that available. There’s a lot of credibility that comes from this.
And that helped me get an initial little footing in our community. People looking at my profile, they knew, “Okay, this guy apparently is not just lying like everybody else on Twitter.” You have a lot of scams, a lot of people with “trying to get rich quickly” stuff that you see, these Hustle University stuff, things where people just paid loads of money to become part of a pyramid scheme. I did not do this because I didn’t want to, and it didn’t look like it because I had some kind of credibility. That really helped me in the beginning. And I started my blog at the same time. So I had something for people to look at, to see if there was actually meaningful content backed up. Not just me talking about it on Twitter, but there’d actually be something else so that was also a thing. So it’s kind of the tandem there.
And then, I just relentlessly engaged with people that I already wanted to talk to on Twitter. That’s been my story and my approach to Twitter for the last, what is it now? Three-and-a-half, oh boy, almost four years soon? Interesting. That’s a long while. Yeah. Every day, I spend at least half an hour actively contributing to other people’s conversations, and that has been my only engagement strategy. I don’t do “follow for follow” or I don’t do weird giveaways every day, or these weird things where you sell your product and you have the countdown thing, “Only 10 left, only nine left.” I just don’t care for this. I try to banish all growth hacks from my Twitter strategy, which only leaves me with being myself.
And that is actually quite enjoyable to some people, that I’m just me talking about the things I like and talking about things that I think are interesting in a way that I think is interesting. That’s really what it is. So my strategy is one of not having too much of a strategy, but actually just engaging with people like you in the hallway track. I would go up to them, talk to them, they say something, I’m listening in as I walk over, I contribute something that I have to say. And I just do this every single day and have done this for years now.

Rob Walling:
And do you get more followers from a standalone tweet or a tweet thread that you start, or from this engagement? When you say engagement, do you mean like, “Oh, Jason Cohen posted something. Hiten Shaw,” whoever. “I’m going to respond to that whether it’s a question or whether it’s a whatever,” is that what you mean by engagement?

Arvid Kahl:
That’s exactly right.

Rob Walling:
Okay. And does that actually get you followers, engaging?

Arvid Kahl:
Way more.

Rob Walling:
Really?

Arvid Kahl:
And not just more, but also better. The followers you get from a viral tweet. You always have to think about Twitter as a funnel, right? We know how funnels work. You have all of the big stuff up top and it gets smaller, smaller, smaller on the way down. And any message that you send on Twitter, be it a reply or a tweet or quote tweet or whatever, can be that initial part of the funnel for somebody, right? Somebody sees your tweet for the very first time. They see your face, hopefully, and not just some weird Web3 avatar. They see a name, hopefully an actual name of a real person, and your Twitter handle, and the message you write. That’s all they see for the very first time when it comes to you. And if that convinces them that you are not an absolute idiot, then they might even click on your name to go to your profile.
And then, it kind of funnels further down. They look at your header image, they look at your bio, they look at the link, how many followers you have, they look at your pinned tweet and your history of tweets. And on every single part of these steps, somebody might or might not follow you or exit the funnel, so that’s kind of how you have to look at Twitter. So obviously, if you present a very, very involved and helpful and contributory message as part of an ongoing conversation, their likelihood of thinking, “Hey, this guy or girl is cool,” is so much higher than when the random wisdom that you just posted into the nether appears on their feed. Because we’re all kind of competing with each other’s tweets, right? The thing you write is kind of absolutely competing with what I write on somebody’s activity feed. So if it happens in the context of somebody else’s conversation that that person is already following, you have this kind of proximity effect by association.
They associate, “Okay, this person is talking to that person. I know that person already. They can’t be that bad. Let’s look at the conversation,” which is why this kind of in-conversation or ongoing conversation engagement is so much stronger. And I said it attracts the right people. A viral tweet where you do something really funny, or you say something that is pretty smart and people amplify it, people come to the viral tweet mostly for the reason of proximity of association. It appears in their feed because somebody they know has retweeted it or talked about it or mentioned it or whatever. So they follow you not because the thing you say is good, but because somebody else they follow follows you as well. And that is a weird expectation level. They don’t follow you for your content. They follow you because somebody else kind of likes you.
These people are so much easier to churn. They will very likely unfollow you because you’re not the right person they thought you were. Or if you had a funny tweet, but you are mostly talking about serious stuff. They come to you for the funny tweet, they don’t see more funny tweets, and they’re gone again, right? It’s like giving somebody something for free. Giving your book away for free and then hoping that the people that you attract are actually going to pay for something. Well, the people who come to you because you gave them something for free likely are not the people who would come to you because they can buy something of you. That’s the kind of methodology why engagement in other people’s conversations is so much stronger.

Rob Walling:
So you’re not selling a growth hack. It’s just engage. Isn’t it always? It’s the Occam’s razor. It is usually this. It’s the most obvious thing. Be yourself, you’re interesting enough, and comment on things.

Arvid Kahl:
The thing is most people don’t believe that they are interesting enough because they only see other people’s highlight reel, their best and brightest. I saw a TikTok recently and it was … I forgot her name, a famous actress. And somebody asked her, “How do you deal with self-doubt?” and she said, “Well, just go see stupid stuff. Go to the theater production of Oliver that is really, really bad. Sit through it and you will know that whatever you have to say is actually meaningful because look at what just happened in front of you. Watch the worst movies, daytime reality TV. Just see how bad other people are at what they want to do and you will find you’re actually quite good at what you do.”
People just have this tendency to think that they can only ever present the most perfect thing to the world and that is worth it. But just even sharing what you think about and what your decision making framework is, that can be valuable to somebody else. It’s really people are self-limiting so significantly that it’s kind of hard for people to just talk. They want to be a persona. I went through this journey. I started as a person, then I kind of became this founder persona, this neval-esque kind of wisdom person. And now, I so rarely ever tweet one-liners anymore. I just share my thoughts and links to cool stuff or highlight other people’s work, which is so much more enjoyable anyway because you get to expose them to a much bigger audience, which means that at some point in the future, opportunity, surface style, they will come back and something will happen that benefits me. I don’t care about it. I don’t plan on it. But it’s likely to happen, so why not talk about them instead of myself?
There are so many ways where you can actually be a contributor and play the long game, the infinite game, instead of just looking for these growth hacks for the finite game, short-term gains that we’re all kind of looking for because we want to see those numbers go up. Numbers mean very little. When you say I have 100,000 followers, I love the fact that I get to talk to so many people, but I don’t check my follower account. I’m at 114,000 now? That’s interesting. I think last time I checked, it was roughly at 105,000 or something. I try to not focus on these metrics. SaaS founders focus on certain metrics way too much anyway. I’m trying not to make the same mistake on Twitter either.

Rob Walling:
Ladies and gentlemen, wise words from a man who knows how to build a Twitter following. Thanks again, man.

Arvid Kahl:
Absolutely.

Rob Walling:
Welcome back to Startups for the Rest of Us. I’m Rob Walling, and in this week’s episode, I talk with John Warrilow, the author of Built To Sell, The Automatic Customer, and The Art of Selling Your Business. John also runs a very successful SaaS company called Value Builder that is aimed at business advisors and brokers. In my experience of this business world, John is one of the most knowledgeable people about real business exits. This is not Instagram selling for a billion dollars in a weekend. This is about software companies, agencies, manufacturing companies, e-commerce, just the thousands or hundreds of thousands of exits that are below the radar that are not on the front of TechCrunch and that are businesses that sometimes sell for multiples of EBITDA, or in the case of SaaS, often sells for multiple of revenue, but these are not 100X revenue. These are those realistic business exits. John has interviewed hundreds of founders over on Built to Sell Radio, if you’re interested in hearing more about that. But today, he and I dive in how to decouple yourself from your business by creating standard operating procedures.
I know you’ve heard this before. You should create SOPs. We know. So we go a little bit into why and how that can increase your exit multiple, but also how it can reduce your earn-out if you do decide to sell your company and how it can make your job as a founder easier while you’re running the company. We don’t just talk about theory though. We actually talk about this tool that he and his team have developed through a lot of iteration and a lot of customer conversations. It’s called VidGuide at vidguide.com. They’ve taken a really novel tact on it, not only how to create SOPs, but how to get your team to consume them. We dive into that topic for the next 30 or so minutes. John was previously on Startups for the Rest of Us in 2021 episode 532, The Art of Selling Your Business with John Warrilow. It is one of the most popular episodes of this show. If you haven’t heard that, it’s amazing.
John, since he is an interviewer, is a good interviewee because he knows what it takes to put together a good show. So without further ado, let’s dive into my conversation with John. John Warrilow, back for more punishment.

John Warrillow:
I just can’t get enough, Walling.

Rob Walling:
It’s so good to have you here, man. Thanks for taking the time.

John Warrillow:
It’s good to be with you.

Rob Walling:
Yeah. Most folks will remember your episode. It’s one of the more popular episodes of the show, came out about two years ago about building and selling an incredible business. I believe that was right around the time The Art of Selling Your Business, which was your third book, came out.

John Warrillow:
That’s right, yeah.

Rob Walling:
We touched on just a little bit of that. So you’re back and it’s to talk more about exits. Obviously, each of us learn things as time goes on and I’m sure you have some new stuff to share with us. The first thing I want to kick us off with is, so you’re John Warrilow. Most people know your name. You’ve written three books on how to sell a business and how to think it through and you have a successful SaaS company, SaaS application for advisors called the Value Builder. In addition, now you’ve launched another SaaS. So this is a lot, John. As someone who runs two companies plus a podcast and writes books, I know how much this is. Why did you need to launch? This SaaS is called VidGuide at vidguide.com. What was the impetus for that?

John Warrillow:
Well, there’s a very quantitative impetus and then more of a qualitative one. I’ll give you the quantitative one first and that is that for Value Builder, again, sales and marketing software for advisors, we have everybody, the business owners who use it take an intake questionnaire. There’s eight questions, talk about recurring revenue and growth potential. One of the questions is this thing called hub and spoke, which measures the dependence the company has on its owner that we’re assessing. It turns out that across all eight dimensions, the one that business owners score the lowest on is hub and spoke, so this idea that they can build a company that’s successful, that’s got recurring revenue, but if they get hit by a bus, the business stops almost instantly. That was the quantitative impetus, if you will. Qualitatively though, I had a more embarrassing story. When we got to, oh, maybe 20 employees for Value Builder, so this goes back three or four years ago now, we started to see problems in our own system.
At 20 employees is where you can’t have everybody reporting to the founder anymore. You’ve got to have some layers, this drip and so forth. I was noticing we were making silly little trivial mistakes all over the place, and oftentimes, they had knock-on effect. One example comes to mind. We use Salesforce for contact management and people would enter people’s names in all capital letters. So it’d be like Rob, capital R, capital O, capital B. So we’d be emailing these people yelling at them. So something that’s just so simple as to no, no, don’t put names in full capitals when you enter them into CRM. Again, that’s a trivial example. So we got the idea, okay, well, we got to create standard operating procedures. We got to create these systems. I actually hired a lady who was a Six Sigma Black Belt and very, very experienced in this concept of SOPs. She made the most beautiful binder of SOPs with flow charts. It was a full 8.5 x 11 binder full of these things.
I announced to our team, “Hey, we’ve hired this person. She’s made these amazing standard operating procedures. I expect everybody to use them.” I put it to bed thinking, okay, this is solved. We got it all cleaned up, ready to go. And three days later, of course, I see the same mistakes rearing their ugly heads. What I hadn’t realized is that the people who I’d asked to consume and use these SOPs were ignoring them. That was the impetus or the qualitative journey that I wanted to go on this and I’m trying to understand why were you not using the processes we wrote in these binders.

Rob Walling:
So you were trying to solve your own problem in software. It’s eating your own dog food or-

John Warrillow:
Scratching your own itch, yeah.

Rob Walling:
… scratching your own itch, which are fine. I think the majority of probably SaaS companies are started that way, but not the super majority. It’s usually like 50%, 60%. We actually surveyed the audience and scratching your own itch is fine, but a mistake I see folks make, especially developer, builder, entrepreneurs is I have the problem, therefore everyone does, or I have the problem, therefore it’s worth paying for and other people will pay for it. So there’s usually a validation step that I ask folks to do after that is, okay, you do have this problem. Can you find five, 10, 20 others who have it? Can you find out how desperate of a problem? Is it an aspirin or a vitamin? Can you find out maybe how much they would pay for it? That kind of stuff. There’s more research or validation beyond that.
I’m curious if you went through any of those steps or if given that you do have audience and you have reach into insights into a lot of companies, where you went from there. We have a problem. I know that I could probably solve this with software, but were there other steps you took?

John Warrillow:
Yeah. We talked qualitatively to Built To Sell readers. Built To Sell has a website and so we have people who’ve opted in to receive communication from us. We went to them and talked to them about, how do you think about standard operating procedures? What are your frustrations about SOPs? Do you use them? If not, why not? So we talked to and did surveys with both qualitative and quantitatively with the Built To Sell audience. We talked to a lot of people, past guests actually I’ve interviewed on Built to Sell Radio. I talked to them, particularly the SaaS founders, people like David Darmanin who I know think you’ve had on this show. I talked to Dave and others about what is it about getting employees to follow SOPs. What we learned was the world doesn’t need another SOP software.
There’s lots of great written SOP software out there. What we came to learn through the research was the problem was slightly different than we’d originally thought it was. What the research was telling us is that business owners knew they needed SOPs, that this was not a surprise to them. The problem they were experiencing was the same one I was experiencing which was they weren’t using the SOPs. They couldn’t get employees to use them, and that’s a slightly different problem than convincing business owners they need SOPs. We have a bunch of downloads on our website and we looked at the most popular. We have this thing called The Definitive Guide for Creating SOPs, I think is what the white paper is called, but it’s an e-book effectively and it’s along with 12 other e-books. It’s the most popular one in our suite of e-books. So that was again another sign that SOPs, in particular, getting them to work in a business was something our universe cared about.

Rob Walling:
All right. So it’s less about the software to build them, it’s getting people to use them. How did you solve that? What did you do different is really… I had a question written down that was like, why build another SOP creations piece of software? Because I can pick five or 10, I can hit Google. So what did you do differently?

John Warrillow:
Yeah. What we learned is that when we talked to employees and the owners of their companies as to why they weren’t using SOPs, it came down to two things. They were hard to find in the moment and they were hard to read when they accessed them. Hard to find is like my boss put them in a shared drive, which is what we did, by the way. At the time, I think we used Dropbox or Google Drive. I can’t remember. It was Dropbox at the time. We just put them in a folder deep into the file architecture, six layers in, and people just couldn’t find it. When they had a moment, they were actually talking to a customer, they couldn’t find it, and so they skipped the SOP. It’s hard to find. The second problem is that for a lot of us, it’s hard to read. I’m not a great reader. I’m a slow reader. I don’t know if I’m actually dyslexic, but I think I have a slight orientation towards dyslexia, which means that a written document for me is hard to follow. I can do it, but I need a lot of time.
So those were the two things we found out. So the idea that we came up with was to create Loom for SOPs. You think about Loom, we’ve all used it for sharing videos and so forth. Again, we came by this idea honestly, because in my own company, what I found out is when people had a problem, they weren’t referring to this giant manual that we’d spent a lot of money creating. They were recording a quick Loom video and just shooting it to the employee who needed it to know how to fix the problem. So here we are spending all this money on SOPs and yet we were bypassing them to ship little Loom videos. We thought, okay, if Loom works, people want video, it’s easier to consume and digest and metabolize video than it is written SOPs. So video works. What’s the problem with Loom? Well, Loom’s a great tool and it’s perfect for some things. However, what we found was that when you’re sending a Loom in an email, finding that Loom video weeks later when you need it again to watch back was difficult. It was, again, sifting through email.
So what we built is this thing called Flightpath, which means that you can tag a video to a piece of software. For example, if you’re trying to convince or to explain to your employee how to send an invoice out of QuickBooks as example, you can tag your VidGuide to QuickBooks, quickbooks.com. Then when your employee logs into quickbooks.com, the video pops up in front of them. It’s like right in front of them, which is what we’ve heard again and again, is that people value the in context idea of seeing it in context when they’re doing the work. So if you need to figure out how to send an email at a Drip as an example or build a lead page, whatever, you can tag the instructions to the actual software people are using. So that’s how we solve for and made it different than [inaudible 00:12:17]. It’s also got Step Builder. You’ve interviewed Arvid Kahl on this show, have you?

Rob Walling:
Mm-hmm, yeah.

John Warrillow:
Yeah. I interviewed Arvid for Built to Sell Radio and he was describing to me the sale of his company and to transfer FeedbackPanda, he had a one-hour video he shot for the buyer of the business, Kevin McArdle, and basically described how all of the code worked, the code base, how it all stitched together. I showed Arvid VidGuide and he’s like, “Man, if I had this, it would’ve been so much easier,” because the other thing we built is Step Builder, which allows you to basically take a one-hour video that you can shoot and break it into little mini bite-sized videos, create a process. So it’s, again, built from the ground up for creating and sharing SOPs.

Rob Walling:
Right, and it’s a video-first platform-

John Warrillow:
Video [inaudible 00:13:09], yeah.

Rob Walling:
… that focus on that, yeah. See, that’s super interesting. I remember you and I had a conversation at dinner at one point.

John Warrillow:
In Minneapolis, yeah.

Rob Walling:
Yeah. You were explaining VidGuide to me and my question honestly was, there are so many out there, how are you different? The spark moment for me was when you said, “If you’re teaching someone QuickBooks and they go to QuickBooks…” Because it’s a plug-in, right? It’s like a Chrome plug-in or-

John Warrillow:
It’s a Chrome plug-in, yeah.

Rob Walling:
It just says, “We have a VidGuide. We have a company VidGuide for this site.” That is the genius moment because then, I don’t have to ever think, where’s the Dropbox directory? Where’s the binder on my shelf, right?

John Warrillow:
Exactly, yeah.

Rob Walling:
Super interesting. So I’m curious. A lot of times, innovations like this, because you’ve obviously created a novel solution to this, so there’s two things that can happen when you think of a novel software solution. One is it’s ahead of its time, and people are like, “We’re used to doing it this way, and you’re asking us to change behavior.” Let’s talk about that first. I’m curious if that’s happened. Second thing that happens is the moment people say, “Oh, my gosh, that’s a great idea,” competitor copies it. Then you’re stuck with, okay, now I’m competing against them on brand and other things. It’s not that you can’t outcompete them, but a novel feature is only a novel feature until it’s replicated, right?

John Warrillow:
100%.

Rob Walling:
On the first one though, have you found that folks are resistant to it because it’s maybe different than the ways they’ve done it in the past?

John Warrillow:
Yeah, which is why we’ve moved to live onboarding. You can get a big guy to count for as low as 29 bucks a month. There’s different stages, depending on how many employees you have and so forth. But we assumed, okay, for that price point, we’ve got to do everything electronically. It’s got to be all digital onboarding, it’s got to be videos. Again, ironically because it’s a video platform, we really have found that it’s worth investing the time and doing a live onboarding. What I mean by live onboarding is basically a human being scheduled into a scheduling software where there’s a point in time where someone from our team jumps on a call with somebody else and says, “Tell me about your business. What are you trying to standardize? What are you trying to create processes for?” And it’s that, to your point, it’s the change in behavior. It’s the change of way of thinking of SOPs that’s required more heavy lifting than we thought.
It’s got us thinking right now, and I know you’ve talked about this on Startups for the Rest of Us a ton, it’s like do it analog first. Figure out how to get the onboarding right in a very high-touch way, knowing that it doesn’t scale forever, but it’s better to do it right upfront. We’d moved to full white glove concierge onboarding, which is expensive and time-consuming, but I think it’s working to solve the first problem. The second problem you raise is another good one we think a lot about, which is what happens when one of the other SOP software out there does exactly what we’re offering, which of course they all have resources to do, money and their venture back. Couple things on that. Our vision is to really be Loom for SOPs from the ground up. Everything we think about is really about internal knowledge sharing.
Unlike some of the other platforms where they might serve dual purposes, might be a sales enablement tool or for sharing things with your customers, we’re really saying, “No, this is designed for the ground up for employees.” What that means is that we’re always optimizing for that. So yes, somebody could knock off Flightpath, which is the little pop-up inside a Google Chrome browser, but we’ve got four or five other features that you wouldn’t really build unless you were building it for SOP. Again, I mentioned Step Builder, which allows you to take a long video and make it into little steps, swap it, [inaudible 00:16:48] re-record another video. All these things you probably wouldn’t do if you were just a screen recording software or just that SOP software.
Another one we thought about is, you have somebody new join your team. You want to instantly grant them access to all of the SOPs that correspond with their job description. So basically you swap out your bookkeeper for bookkeeper A to bookkeeper B. You want bookkeeper B to have all the stuff that bookkeeper A had access to, or you have someone new join your sales team, you want that new person to instantly have access so you can basically flip a button and then they’ve got access to all of the VidGuides that correspond to being a new salesperson in your company, for example. So it’s like departmentalized, which is again, something you probably wouldn’t do if it was just screen sharing software. Those are some of the ways that we’re trying to, I don’t want to say stay ahead of because I think they’re just different products and different use for different reasons, but if we just stay really focused in our lane, which is really about sharing standard operating procedures with your employees, then I think we’ll be okay even if other people match us on certain features, if that makes sense.

Rob Walling:
Yeah, and that’s how I’d be thinking about it too. Early stage entrepreneurs will come on this podcast and I usually ask them, “How are you differentiated?” Brand is included in that. Do you have a brand that’s strong enough to hold it? I feel like you being ahead of the market right now, we’re in a pretty good spot to defend that. We touched on it a little bit earlier about why SOPs, standard operating procedures are so important for a business, both while it’s running to keep the founders sane and if you go to exit. It makes such a difference. In terms of having a business that is just I have a SaaS business that’s doing several million a year and I have no SOPs versus one that is completely not reliant on the founder, do you have any experience or examples of someone who you’ve heard have a great success story because they were so SOPed up so to speak, or someone who had a really bad story because it was just completely reliant on them? Just any thoughts or examples. I know you’ve interviewed hundreds of founders.

John Warrillow:
Yeah. A couple come to mind instantly. Again, Arvid Kahl, who you’ve had, started FeedbackPanda. Many of your listeners know Arvid is a prominent guy in the community. He built FeedbackPanda and as I mentioned, recorded a video that basically showed the new acquirers how to run the business. I think if you ask Arvid, it was really more about how to get through due diligence, take a letter of intent to closure. Because of course when a prospect or an acquirer is at the due diligence stage, that’s when all the red flags get raised in their mind. It’s like, how will I be able to run this? How will this thing go when Arvid leaves? Is it going to continue? It really, I think, allayed the acquirer, got him to close on the deal and actually consummate the deal. I think that was helpful for Arvid. Another person, have you had Jodie Cook on the show?

Rob Walling:
Mm-mm.

John Warrillow:
Okay, Jodie Cook would be a great… She wrote a wonderful book called The Ten Year Career, but she would be good to get on the show at some point. But Jodie built a company called JC Media, Jodie Cook Media. The early days, she was a digital social media agency and it was all her and all the clients wanted her, a classic story of a service business where all the clients wanted her. She is a very independent woman and was like, “I don’t want to be the bottleneck here. I don’t want to be the client’s best friend for all of these clients.” So she started creating standard operating procedures and she got an offer to acquire her company. I believe, again, I’m going by memory a little bit, but I think the offer was somewhere around seven times earnings, but 60% of it was in an earn-out, meaning that Jodie was being asked to stay on in the future and hit targets in the future and so forth.
And Jodie’s like, “No, no, you don’t understand. I’ve created standard operating procedures. I built this business so it doesn’t depend on me.” The acquirer didn’t buy it, but she just doubled down on SOPs and she leaned even further into it creating a whole library of standard operating procedures such that she was really, at the time of her ultimate exit, not working in the business at all. She got an offer, premium offer, 100% cash at closing. The reason she was able to close without an earn-out is her standard operating procedures. Again, an earn-out is the enemy of any entrepreneur. We’re all entrepreneurial. We’re all independent minded. An earn-out is where you have the golden handcuffs and you have three, five years where you’re working for a company and it’s horrible and it can be horrible, I should say. Standard operating procedures can help alleviate, minimize the importance of an earn-out. It may not eliminate it completely, but certainly reduce the proportion of your proceeds that are at risk. It worked for Jodie and I think she’s another example that comes to mind.

Rob Walling:
Folks listening to this podcast love to hear about validating ideas, early experiments or mistakes that someone might make because we all make them. You and I emailed a little bit in preparation for this and you talked about, “Hey.” Look, John, I’ve made this exact same thing where it’s like I have an audience, people know who I am. I’m going to launch Drip at the time. This is 2013. Then I launched it and it did fine and then it just plateaued really quick. It turns out people were buying because they wanted to make me happier, they wanted to help me out, and we really hadn’t built something people wanted and it took about another 10 months of building-

John Warrillow:
Isn’t that interesting?

Rob Walling:
… yeah, before we launched automations, found product market fit. So I call it actually the curse of the audience where it’s this counterintuitive thing of I have 50,000 people, however many I have on an email list. If you email them and said, “Hey, I’m going to build this thing, would you use it?” a lot of people will say yes, a lot more than would otherwise say yes if you didn’t have that audience. So you can get these noisy or just incorrect signals from your own list and then you have to start sorting out what’s real, what isn’t, who really needs this, how long will they stick around and all that stuff. So with that said, early validation of VidGuide, I’m sure you went to your own Built to Sell list. You want to talk us through how that’s gone?

John Warrillow:
Yeah, for sure. I’ll share with you two different experiences. One validates your point, one maybe provides a different perspective. The first that provides somewhat different perspective is when we first launched VidGuide, we really wanted to set this up as its own company. We didn’t want this to be SOPs by Built to Sell, for example. We really want it to be an independent brand in part because Built To Sell has its own shtick. VidGuide has a different offering and so we wanted to be separate. We created a sequence of landing pages as you do to test the site. We were getting terrible conversion rates. Our conversion rate on a landing page was hovering between 2% and 3%, really bad. So we were driving all this traffic and we tried obviously our own list. We tried some SEO stuff, some PPC stuff, and we were just getting really bad conversion rates.
When I looked at the landing pages through the lens of what would a business owner see when they see this, it’s a URL they’d never heard of, VidGuide. It’s a product that they’ve probably never used or maybe have thought about something similar, but not exactly the same. There’s no immediate corollary unless they’re a big user of Loom, for example. There’s just no brand equity there at all. There’s no trust and we’re saying, “Hey, sign up for a seven-day free trial,” and they’re like, “No” and they bounce off the landing page. We made one very important but subtle difference to the landing page. We put the cover of the book on the landing page. We said, “The folks behind VidGuide are the same folks that are behind the book Built to Sell, which has been endorsed by Seth Godin and Tim Ferriss and blah, blah, blah.”
That one change, having the book on the landing page, boosted our conversion rates from where they were two to three, were up around 18% right now and have not really made any material differences other than the book on the cover. Now, I would agree with you by the way, Rob, that we have had some customers who are like, “I like the book. I’ll sign up for anything that has the book on it.” There is a portion of the market that like the brand and therefore be like, “Yeah, I’m not really in the market recipes offer, but I like the brand.” So it does come with that as a caveat. What I would also tell you is that what we’ve learned is that an endorsement, and probably because it’s relatively new category, an endorsement from an advisor or just a trusted source is a big deal.
We’ve tracked conversion rates to paid on people who sign up through our own list, the Built to Sell list, versus when one of our value builder advisors makes a recommendation to use VidGuide. In the latter case, our conversion rates are much higher. Again, it makes sense. It’s someone you trust, someone you know, someone you’ve worked with in the past saying, “Hey, you guys should use VidGuide.” It’s a huge endorsement and that really does spike our conversion rates from trial to paid. Actually later this month, I’m not sure when this pod will go live, but we are launching it officially to the Value Builder Advisor community and looking to mobilize that community as well because it’s a really important issue for them. This hub and spoke score is one of the big reasons that the businesses don’t reach their full potential because they’re just too dependent on the owners. We’re singing from the same hymn book there, but that was a learning for sure. Have you had April Dunford on the show?

Rob Walling:
Yes. April’s spoken at MicroConf and I definitely had her on MicroConf On Air, which is a livestream show. I’m pretty sure I’ve had her on this podcast.

John Warrillow:
Yeah. She’s great, by the way. Folks should check out her book if they haven’t already done so. But she’s great and she talks about positioning a lot. That is her shtick for sure. We went through April’s methodology for VidGuide and before we did, we were talking a lot about the importance of standard operating procedure. Our messaging was like, “Hey, you need standard operating procedures in your company.” What we came to learn through the April Dunford messaging exercises is that that’s actually not the message. Because again, most people listening to this, most business owners know they need SOPs. They’ve all read the E-Myth. It’s not a big revelation to them that they need standard operating procedures. What they do need though and what we pivoted early in the process, again thanks to April, is this idea of what your real pain point is getting your employees to follow the SOPs you’ve got or getting your employees to follow what’s in your head.
Many entrepreneurs say, “Well, I’ve got an SOP.” You get them to point to it and they’re like, “Well, no, no. Everybody knows it. This is the way it’s done.” What they realize is it’s in their head and they haven’t ever actually articulated it or recorded it or whatever. April was super helpful in getting us to pivot from here’s why you need SOPs to the problem that you need an aspirin for, which is getting your employees to follow the SOPs you already have.

Rob Walling:
See, that’s interesting too because you could use a lot of tools to create SOPs, but how can I find a tool that helps my employees use SOPs? It’s like, I don’t know. So if you are able to do that, which obviously you are with the Chrome browser and the Chrome plug-in and how it pops up, that is a much more difficult problem to solve. Because again, a lot of listeners at this show know how to build tools. A tool can help you build SOPs, but a tool on its own, I think, might struggle to get people to use them unless you have a deep understanding of your customers, the fact that you have this Chrome plug-in and the fact that you have the organizational structure that you said where everything can be tied into the different applications. Without focusing on that, on getting employees to use it, as you said, I guess it’s super easy to have them not, to create them and just have them [inaudible 00:28:40].

John Warrillow:
Yeah. It’s also one of the hidden little secrets of VidGuide is that I think a lot of us as entrepreneurs, a lot of entrepreneurs I talk to on my pod, in the essence, we’re control freaks. There’s a certain way we want it done and it’s probably why we’ve been successful to some extent is because it’s like, “No, this got to be this good. It’s got to be done this way.” What we built is the ability to just basically snoop on your employees. When you share a VidGuide with an employee and you say, “Hey, this is how I want you to do it,” and you tag it to QuickBooks or whatever software you want them to use when they’re doing the activity, then you can actually see through reporting console like, have they watched it? How far into it did they watch it? Did they rate it? Did they provide comments? So you can say like, “Hey, I sent you this VidGuide, but you didn’t watch it, and so the reason you’re making this mistake is because you haven’t done what I told you to do.”
So it gives owners a little bit of snooping ability, which I think some have told us that that’s super valuable for them. It’s not the most progressive way to manage a team, but some people like to inspect what they expect.

Rob Walling:
I say less snooping. I say more about accountability.

John Warrillow:
All right.

Rob Walling:
How about that?

John Warrillow:
You’re saying it in a nicer way.

Rob Walling:
Potato, potato. If I give someone a binder, you’re right, you just have no idea.

John Warrillow:
You’re right.

Rob Walling:
Did they look at it or not? If I send them a video and they don’t watch it and then they do it wrong, that’s a problem. If they don’t watch it and they do it right, fine. I’m not going to micromanage you. But if you don’t watch it, then you do it not the way I said to do it,-

John Warrillow:
Making the same mistake, yeah.

Rob Walling:
… yeah, that’s a real problem.

John Warrillow:
Yeah, for sure.

Rob Walling:
John Warrilow, thanks so much for joining me today. You are John Warrilow on Twitter and of course vidguide.com if you want to hear what we were talking about today, as well as your three books, Built To Sell, The Automatic Customer, and The Art of Selling Your Business. We’ll link all those up in the show notes. Thanks, John.

John Warrillow:
Thanks, Rob. It was super fun.

Rob Walling:
Thanks again to John for joining me. Thank you for coming back every week. If you keep listening, I will keep making these episodes. This is Rob Walling signing off from episode 667.

Rob Walling:
Welcome back to Startups For the Rest of Us, I’m Rob Walling. Today, I sit down with SavvyCal founder, Derrick Reimer, and we answer listener questions, questions about how to validate when entering a competitive space, we give book recommendations for SaaS founders, we talk about whether a non-technical founder should outsource development or try to find a co-founder, and there even might be an appearance from Rob GPT. So without further ado, let’s dive right into the questions.
Derrick Reimer, thanks for coming back on the show.

Derrick Reimer:
Thanks for having me.

Rob Walling:
Got some good questions today, man, handpicked to fit your expertise, it’s almost like people knew you were going to be on the show or something.

Derrick Reimer:
Excited to dive in.

Rob Walling:
Yeah, it’s going to be good. Our first question is an audio question from Gabe about idea validation in a competitive market.

Gabe:
Hey Rob, my name’s Gabe. I’m listening each week from Denver, Colorado. I’m a developer, and I’m looking into getting into SaaS foundership, and I find your podcast and YouTube channel just incredibly helpful. So first off, big fan. Thanks. My question today is around idea validation, I think I’ve got an idea that might have some value, and I’m in the validation stage right now. I want to build a CRM tool for a small and medium-sized business niche that I’ve identified. And the space that I’m looking into doesn’t have any huge incumbents, nothing like Salesforce or anything like that, but there is still a fair amount of competition. How do you think about idea validation when exploring a space where there’s already clear competition? There’s definitely an established market here. And when that’s the case, what do you see as the validation goals I should be working towards? All right, thanks again. Bye.

Rob Walling:
It’s a good question, I bet it’s a pretty common one. You want to kick us off? What are your thoughts?

Derrick Reimer:
Sure, yeah, and I can definitely relate to this one a bit, I myself are in a decently competitive space, so I would say my biggest piece of advice is to start with a clear hypothesis about why the market needs another alternative, right? If it’s crowded already, then clearly buyers have a lot of different options, and it’s a tough road to try to just head into that and mostly have a set of undifferentiated features. So I think one, coming up with that hypothesis of what different needs to be out there? What is there demand for? And then try your best to disprove your hypothesis. Rather than trying to seek validation for it, try to seek the opposite. Try to find reasons why people don’t need this or why what they’re using right now isn’t just good enough.
I would recommend reading The Mom Test by Rob Fitzpatrick. It’s a great primer on how to have these types of conversations with customers without picking up too many false signals, because people will want to be supportive of you, they’ll want to tell you what you want to hear, and that’s exactly not what you want to hear. You want to hear the raw truth from them.

Rob Walling:
Yes and on this one. So I think that if you enter a competitive space, the biggest question you have to ask is what you said, how am I going to be different? Because if there are other competitors, you not only have to be different, you have to be different enough and better enough that they will switch. So the big question I’d be thinking is if people are already using a CRM, switching costs are relatively high for CRMs. Now, that’s good once you have customers, it means your churn is going to be low. That’s bad. And you’re in a competitive space, it’s a hurdle to overcome. And so the biggest probably one or two questions I’d be thinking about is what do people hate about the bigger players? And I know you said there’s no massive incumbent, but there are competitors. I would be digging in everywhere, Capterra, Cora, private Slack groups, Facebook groups, wherever anybody hangs out in this space.
And I would be trying to suss out, just by the conversation, maybe by questions. You don’t want to come out being too obvious, “Hey, what does everybody hate about this one?” And people are like “Ah, building a competitor.” But the idea is that if no one has an issue with your current competitors, why would they switch? Price isn’t enough, but if you want to do price, you’re going to get a lot of cheap demanding customers with high churn, right? Now, you can get some customers that way. Can you build a business doing that? Sure. Are you going to build a business that I would want to run that way? No. And so that’s what I’d be looking at, is what do folks hate about those larger competitors, or at least where… Maybe hate is a strong word, but what did they dislike? And then I think the other two things I’d be thinking about is I’d want to get some sense of the size of the market.
Depends on how big of a business you want. And we don’t need $10 billion markets like Adventure, but there are some markets that are literally $10 million or $20 million, some SaaS markets. And that’s a really small market. I guess it also depends on your goals. If you want to build a $100,000 a year business, okay, 10 million is enough. I think most of us want to build that million dollar, 5 million dollar business. That is going to be really tough if the market is that small. So I’d be thinking, I don’t don’t know, 50, 100 million a year. There’s some number, I haven’t given it a ton of thought, but you don’t want to try to have to capture 50% of the market to achieve your goal. And you’re not going to get an absolute market size. Don’t go into MBA mode. Just get an idea of it. Who are the biggest incumbents? And do some Googling to see if they’ve ever said their revenue at any point, and then just add it up and multiply it by two.
Just take a guess, and it gives you kind of an order of magnitude. Then the last thing I will say, it’s the question that everyone forgets, is how are you going to get customers? It’s that when Ruben Gomez went to do SignWell. He started SEO a year, at least a year before they launched the app. He got a domain, he started building templates for contracts. Or whatever he did for his SEO stuff, he had tens of thousands, if not more uniques a month before that app ever hit the ground. And SEO is just one play. If it’s going to be cold outbound, why not try cold outbound today without any product and just start doing the cold outbound, and saying, “I don’t have a product but I’m trying to solve. Does this pain point really bother you?” And if no one will reply to you today, why are they going to reply once you have a product? What do you think?

Derrick Reimer:
Yeah, no, that’s all really good stuff. I recall one app that I was trying to validate back in the day was for realtors. This is a common thing that a lot of us do. I was buying a house and realized how bad so many parts of the process seemed, to me at least. And I did. I made a spreadsheet of a hundred realtors and called them up. And it was a grueling process, and I got a lot of useful insight about the market, about how they think about things. I think I was thinking about a website builder for realtors or something. So I was like, all their websites suck, and they don’t hook an MLS and the prices are always out of date. And I learned why many of the things are stuck the way they are, and I learned about how realtors actually think about the value of their website. The answer is not very much. And so tons of things that I wouldn’t have learned if I had just assumed that they were thinking about the value of a website like I did. So I think those are all good points.

Rob Walling:
That saved you at least six months of building. You were going to build a Squarespace type, like a striped out Squarespace for realtors. And I remember it was pretty obvious. You’re like, I did these a hundred cold calls. And however many people you talk to, you’re like, “Yeah, this is… No, this is not going to work.” It was one, I found out it’s a market I really don’t want to work in, but two nobody’s going to pay what I need to be worth it.

Derrick Reimer:
Yep.Yep.

Rob Walling:
So thanks for the question, Gabe. I hope that was helpful. Our next question is another audio question from Michael, talks about when it’s worth it and how he’s stressed all the time.

Michael:
Hi Rob. Thank you so much for your podcast. I really enjoy listening to it, especially the Rob Solo Adventures. My name’s Michael. I’m a full-time student, and I created my own SaaS product like 16 months ago, and it’s currently hovering at about 1200 bucks a month. So my current problem is that I’m very anxious about everything, and I’m really stressed out about it. So every time I find new competitor or new competitor gets on the market, I like completely losing it. Or whenever somebody drops comment somewhere and the person isn’t completely satisfied, I’m also completely stressed out about it and worrying about it. So my question to you is, how do you know that it’s worth it? And when would you consider moving on to a new project or a new product? Because the thing is, if I’d made like 10K a month, it wouldn’t be a problem. I think so. I don’t know, but I think so.
But currently, I’m only making like 1200 bucks a month and that’s not worth it for me, but the goal is that it’s worth it sometimes. So very interested in your opinion on whether to move on or not. Thank you so much in advance, and keep up the good work.

Rob Walling:
So Derek, as two people who definitely do not struggle with anxiety at all, nor have we in our life…

Michael:
Never.

Rob Walling:
Can you relate to Michael? And then do you have any advice for him?

Derrick Reimer:
Yes, I certainly can. Something that Michael said, I think this is paraphrase, “If I made 10K a month, this wouldn’t be a problem.” And I totally understand where the inclination is to feel that way, but afraid to say that’s probably not true. In fact, there’s probably going to be more anxiety once there’s more traction and you’re more on the radar of your competitors and you’re more in the game. It only gets more stressful. It’s not hopeless. You can learn to manage that. So it’s not like you’ll be stuck with crippling anxiety the entire time on your founder journey, but it’s a process and it’s one that I’m certainly going through all the time. I’m still constantly dealing with stressors in my business and having to try to… I think the big thing is trying to separate my anxiety or the way I feel about certain aspects of the business from my actual rational decision making.
So I think this question is kind of centered around I’m feeling this anxiety. How do I know when I should quit? And I think I would not view anxiety in and of itself as a reason to move on from your product. Your mental state’s going to fluctuate a lot as a founder, and I think a big part of the game is trying to not be reactive to these emotions, but to separate, separate your rational decision making from how you’re feeling about things. And so I guess that’s encouragement to stick with it if this is what you desire. If you feel like you’re playing in a space that you’re optimistic about and you want to keep forging ahead, but you’re feeling anxious, this is my encouragement to you to stick with it. I would also say if you take a step back and really analyze your business and feel like you don’t have that drive or you’re just not interested in it, then that’s okay too, if you decide that that you’re done with it and if you’re struggling to get traction or whatever, whatever you’re contending with here.
But yeah, I think in general I would just try to separate the anxiety from the rational side of things.

Rob Walling:
Yep, that’s it. And it’s easier said than done, but so are most of the hard things that you’ll do in life, especially as an entrepreneur. There’s an entire book written on this very topic called The Entrepreneur Guide to Keeping Your (beep) Together. It’s like $4 on Kindle. And my wife Dr. Sherry Walling wrote it. I contributed a small part of it as well, a lot of anecdotes and such, and it basically is around this topic. I absolutely have struggled with incredible amounts of anxiety most of my adult life. I figured out how to tame it about 10 years ago, took me a long time. And actually, I didn’t work on it before then. I just ignored it and pushed it down. Have I evaluated being on anti-anxiety meds? Yeah. Should I probably have been on them in my thirties? Yeah. I never did, but I think my quality of life would’ve been higher, in all honesty.
I think that there’s a couple ways that I would think about this from a practical perspective. When I first listened to the voicemail and it said, if I was making 10K, it would be worth it, same thing you picked up on. I was like, record scratch. Nope, it’s only going to get worse. Not going to get better, period. If it was 10K, if it was a 100K, you would still hate it. Trust me. I’ve literally been there. Then I actually played this for Sherry just to say, “Oh, what do you think about this?” Right? She’s a psychologist. She’s a founder coach. Right when it hit the 10K line, she said, “Stop it.” And I paused it, and she said, “Yeah, that’s not going to fix it.” So it’s obvious the money isn’t going to make it better. The three things that I noted in my head are doing inner work to figure out how to deal with your own psychology, right? More than being half of a successful founder is managing your own psychology.
That can mean seeing a therapist, which I have done for on and off for years. That can mean getting in a mastermind. It’s only every two weeks, so I might not carry you through, but it’s a sanity check. And then another way is to have a co-founder. And that’s easier said than done also, but I think having a co-founder who is the exact opposite… Don’t look for someone else anxious and stressed you. I will admit that being a co-founder with Einar on TinySeed, he is the exact opposite in those terms. He doesn’t get anxious about anything, which has its own issues, right? But early on, when we were trying to launch TinySeed, I’m like, “Oh my god, the terms, the thing.” And he is like, “Yeah man, we’ll figure it out. We’re really smart and we know what we’re doing.” In so many words, it’s like, “You need to chill out.”
And pretty soon I started kind of modeling that in my own head, right? I was already doing better with all this, but being around someone day to day who I saw, oh, he just kind of shrug (beep) off and it always works. And then I thought to myself, so I don’t shrug (beep) off and it always works in general. I’m exaggerating, but it’s the same thing. So why the (beep) am I dealing with this anxiety every day when we are getting to the same outcomes? We are both having successes, yet I’m in this mental battle in my own head of someone said something negative about me on Twitter, someone, whatever it is. I get it. I still experience all that. Actually, I had someone post overnight on my, I think they DM’d me on my Kickstarter with kind of a rude entitled comment about how I didn’t understand da da da da.
And I was just like, all right, I get to get up and I get to take this with me, I get to be angry or I get to be stressed, or I get to pick what I want to do, and that’s how I deal with it these days.

Derrick Reimer:
The point about masterminds, that just reminded me that this is something I’ve observed about myself. Honestly, I’m going through some things with my business right now that are really challenging, and I’m feeling, at times, low on energy or just frustrated and trying to figure out how to problem solve at a high level. And I often find that when I’m having conversations with fellow founders who may be struggling with maybe not the exact same thing, but something similar enough, and I start to think about rationally. I can remove the emotions a little bit more when I’m thinking about their problems, and I start to share some perspective. And then I realize that, oh, a lot of this perspective actually applies to me as well. I need to get out of my own head and just think step by step. And so I think there’s a benefit to being in community and sharing what you can to help others problem solve. You can often give yourself the gift of some clarity on things just by nature of helping other people.

Rob Walling:
Yeah. I like it. So thanks for the question, Michael. I hope that was helpful. Good luck too. I know it’s a tough place to be in, so I’m glad you wrote in. I’m sure there are a lot of other folks listening who share your sentiment. Our next question is from Greg about whether to find a technical co-founder or to outsource development.

Greg:
Hi, Rob, I’m Greg, and I live in Johannesburg, South Africa. I’ve been listening to your podcast for about five months now. Aside from enjoying it, I think it’s adding value to the way I think about startups. I’m a chartered accountant, which is equivalent of your CPA. And I’m not technical, so I’m not doing any development myself. So my question, and I know there’s a good chance you’ve answered this before, is do you think it’s better to get a technical co-founder or to outsource development? My gut says a technical co-founder because I feel like ongoing development in particular would be easier and more efficient, but I don’t know, and hence the question. But if you do recommend a technical co-founder, how do you find that person? Thanks for any advice, Rob.

Rob Walling:
So Derrick, technical co-founder or not, you are a developer, founder, so you don’t have to make this choice, but in his shoes, how would you think about it?

Derrick Reimer:
Yeah, and I’m curious to hear your perspective on this too because thinking through some different angles here. I would say if you can find that technical co-founder, I think that’s clearly the best option. It’s good to have someone who’s fully invested in the product and in the business and has that expertise, and can look over that side of things, for sure. I think there is kind of a big practical challenge in finding one of those. And so I wouldn’t be hesitant to play it up so much that to say that you have to find a technical co-founder, or else you shouldn’t proceed with starting your business. So a lot of things to consider if you are vetting someone as a technical co-founder. Do you work well together? Do you like each other? Do you know this person, or have you just met you want to give it some time first before you decide to partner up and go into business?
Do you share the same goals? Are you aligned on what you want out of the business? And do you want to sell it? Do you want to run it for a long time? There’s so many things to consider, how do you split the equity, all of that. So I wouldn’t recommend rushing into any kind of co-founder relationship, and certainly there are other paths if you can’t find one. I would say if you don’t end up with a technical co-founder, then I would probably recommend working with an agency as opposed to just hiring and managing your own developers. I’ve seen this happen in multiple cases, where non-technical founder goes and finds their own developers, hires them. And if they get lucky and they happen to be really good at architecting a sound code base, then you might be fine.
But if no one’s on team kind of looking over that, then you could find yourself in a place where you actually have a lot of spaghetti code, and you not being a developer, just aren’t able to keep tabs on that the same. So perhaps an agency where they can provide some oversight over the development process of your first version would be wise.

Rob Walling:
Yeah, it’s a marriage if you’re going to get the co-founder, right? And it’s hard to meet someone and then decide to start a company together right away. So it takes time. All things being equal, you’re going to give away the most equity to your co-founder. You could be a hundred percent and hire an agency. You could be 50-50 or some number in there. The problem is, I believe… I’m forgetting what the exact number is. I should look it up because I keep referencing it here, but the percentage of TinySeed companies that we have funded without a developer co-founder is somewhere in the 10 to 15% range. It’s very, very small. And even the number in the broader that about matches what’s in the broader MicroConf ecosystem based on the state of independent SaaS, and there’s a reason for that. It’s because just getting something built and getting it far enough to revenue without a technical co-founder is very expensive.
And once you get there, as you said, almost always, I will say that this code is (beep). And I’ve seen it a dozen times at least, maybe 30 times. It’s a large number, where even today, as a former developer, if I hired an agency to build a product for me, I wouldn’t be able to QA the code quality. Now, I’d be able to QA the app quality, the functional layers and see when it’s breaking, but it’d be very time consuming for me, and it’s a tough one. I see the companies who don’t have a technical co-founder, where it’s just a subject matter expert, or a subject matter expert and a salesperson, for example. The number one issue for them constantly ongoing sometimes for years is the product. And then they try to find a new developer, and then well, “Ph, we hired juniors, so now we need a senior. Oh, and now the original agency that did it did this and they messed this up, so now we have to rewrite the whole code base.”
I had a friend who rewrote the code base twice because the first agency screwed it up, and then he brought a senior contractor and who wrote the whole thing and then they had to rewrite the whole thing again once he then raised around and then had enough to hire. He was non-technical. So I’m telling the horror stories. I can’t tell, “You you should give away 50% of your company to someone.” I can’t give you that advice. What I can say is the people who don’t have a developer co-founder, over and over and over, I see the same thing, and they just struggle with the product side. Even I quote Craig Hewitt, non-technical founder of CAOs, which he has said is doing seven figures.
And his biggest takeaway is if I did this again, I would either have a co-founder, or I would have enough money to hire someone that I basically know, that I would pay him a full salary, that I would swipe them away, a senior that’s in my country, or really close to me, in my time zones, and I would do it. And that’s been his learning from doing this for six, seven years. It would be tough

Derrick Reimer:
And I think that’s actually a good point. Another option, as opposed to the agency is if you have the cash or the ability to raise it or have, borrow it, or whatever to pay basically a senior level developer who you can even have someone who’s more technical help vet them, help interview them and see if they have good chops. So if you can hire that role, that might get you in a better spot as well

Rob Walling:
Because it’s ownership at that point. When you say outsource, it’s someone who just doesn’t care about your code or your business, in almost all cases. I’m generalizing. Of course, there are some contractors who are really good and really conscientious. A lot of them are dollars per hours, and they’re just trying to get the things shipped and get the money. I say this to someone who was a contractor for many years. And I always tried to be as conscientious as I could. I did have other priorities competing sometimes, and I worked with a lot of people who just didn’t care and were there for a paycheck, as with a lot of jobs. So that’s where outsourcing is, I think that’s going to be tough. But the moment you get someone who it’s like, “Hey, you’re going to be here with…” Even if it’s not 50-50, but it’s like I’ll pay you salary and you’ll get enough equity, few percentage points, whatever that number is, where they do have that “ownership” of it and they want to keep the code base really sparkling clean.
For the second part of his question, which was, if I look for a co-founder, where do I find them? I went to ChatGPT. And not only did I ask ChatGPT, but then I took its answer and I ran it through the voice simulator in my own voice. So we’re about to roll that here. I want to caveat this in advance. I asked ChatGPT four of the questions from this episode, and a lot of the answers were just very generic, unusable. And I would turn them into audio and I was falling asleep because it was just boring and like, “Oh, and do this, and then test, and then…” Whatever. So for this clip, I took the best 800 word response. And these are the best 200 words, so let’s not assume that our job, Derrick, will be obsolete anytime soon.

Derrick Reimer:
Yeah. All right.

Rob Walling:
If you decide to pursue a technical co-founder, here are some approaches to finding the right person. Number one, networking. Attend industry events, meetups, or join online communities where technical professionals gather, cough, cough, MicroConf in-person events and MicroConf Connect, engage with potential co-founders, share your vision and look for individuals who align with your goals. Number two, co-founder matchmaking platforms. Platforms like Co-Founders Lab, Founder Dating, or AngelList can connect you with potential technical co-founders who are looking to join startups. Remember that finding a technical co-founder involves building a relationship based on trust, shared values, and a common vision. Take the time to evaluate potential candidates and ensure that they bring the necessary skills, expertise, and dedication to the table. All right, so first of all, amazing that ChatGPT did the cough, cough MicroConf thing. Isn’t that great? Totally, definitely did not add that in.

Derrick Reimer:
Yeah, that’s hilarious.

Rob Walling:
But here’s the thing. What was the trip is I was going to say go to in-person events and go to online communities. And of course, I was going to mention, since I run both of those for exactly this audience, go to an in-person MicroConf that’s a local air flagship and go to MicroConf Connect. And that really I think was the first point that ChatGPT made. The interesting thing is I didn’t know there were co-founder matchmaking services. Of course there are. Now that I’ve read it, I’m like, yeah, of course that should exists, but ChatGPT just whips it out, so to speak.

Derrick Reimer:
That’s good stuff. Yeah. And it’s a little bit of uncanny valley with the rob voice.

Rob Walling:
That’s creepy.

Derrick Reimer:
Yeah.

Rob Walling:
Figured you’d get a kick out of that. It’s like, is there a Rob really… Rob’s in front of me and he doesn’t have a cold today, so he doesn’t sound that way.

Derrick Reimer:
Yeah, that’s good.

Rob Walling:
I think the other thing, really the issue I have with the matchmaking services, I would love to believe that works. We’ve been asked to do that at MicroConf, to do… Because we do mastermind matchmaking. Why wouldn’t we do founder matchmaking? I’m just skeptical. It’s like matchmaking people for marriage.

Derrick Reimer:
Yeah.

Rob Walling:
It’s really hard to do.

Derrick Reimer:
I was going to say the same thing. There probably should be Hinge for founders, and maybe that probably exists, honestly…

Rob Walling:
What is Hinge?

Derrick Reimer:
… swiping on…

Rob Walling:
Is that like Tinder?

Derrick Reimer:
Hinge, it’s like Tinder. Yeah. You swipe left, swipe right.

Rob Walling:
How do you know what Hinge is?

Derrick Reimer:
I have a single friend.

Rob Walling:
Sure you do.

Derrick Reimer:
Yeah. That’s actually one of my favorite hobbies because she doesn’t like the process of online dating, and I love going through and swiping on profiles because…

Rob Walling:
That’s funny.

Derrick Reimer:
Yeah.

Rob Walling:
Yeah, finding co-founders is hard.

Derrick Reimer:
But yeah, it’s hard. Just finding a life partner, finding a co-founder is similarly complex and difficult. So it’s like, yeah, I guess in that sense probably try multiple different things and kind of see how far you get.

Rob Walling:
And what do you bring to the table. And in your case, you are an accountant in South Africa, so I think you have some budget. Subject matter expertise is, it’s a little bit, but that’s not much compared to a developer who’s going to put in hundreds of hours. Are you going to put in hundreds of hours too? That’s the thing when you start talking about this is if you don’t bring, “I know how to market. I have an MVP built in no code. I have 20 people on a wait list who told me they would buy that.” These are valuable things saying, oh, I know the business problem. I could do customer interviews and find that out. I’m not trying to downplay it too much, but I could talk to 10 accountants and probably find a problem. So it’s not worth, again, hundreds of hours of my time that I would otherwise be billing at 50, 100, $200 an hour. So thanks for the question, Greg. I hope that was helpful.
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Stop burning money, hire Dev smarter, visit lemon.io/startups. Next question is about what to double down on a game that this caller built, or to launch a SaaS app.

Speaker 6:
Hey Rob, this is [inaudible 00:28:26] from Budapest, Hungary, longtime listener and first time caller. I’m facing unique dilemma and [inaudible 00:28:31] sites. Last year, by working a full-time developer job, I accidentally entered the web team business by creating a simple movie team daily game just for fun. To my surprise, attractive clinic daily visitors and generated in of revenue to match budget salary, leading me to reside. Currently, the Dean’s popularity is gradually decreasing along with the whole daily trend, but I still have 10,000 daily users. Simultaneously, I’m excited about building a SaaS product and have some promising [inaudible 00:28:57] ideas, such as real feedback, ChatGPT conversational user feedback that I designed based on my own needs. So I’m at the decision point now. Should I take advantage of my current web game audience and explore related opportunities, or dive into the SaaS word, even if it means starting from zero? I will greatly appreciate your advice.

Rob Walling:
Derrick, as someone who has always longed to build a game to 20,000 daily active users or whatever he said, what are your thoughts on his predicament here?

Derrick Reimer:
Yeah. Well, first of all, congrats on getting something off the ground like that. That’s pretty cool. I would say though that I’m still always going to advocate for B2B SaaS over an ad-based website for consumers. And I think the big thing here is that is just… Games especially are so inherently like hype cycle driven. Even you look at some of the biggest game makers in the world kind of wildly fluctuate on their ability to even stay in business because it’s just so hit based, and it’s very difficult to engineer that, versus B2B SaaS, we have so many different playbooks and resources for identifying, validating marketing, growing your SaaS business, and honestly, most of those just would not apply to trying to build and get traction with the game. So I think for those reasons, I would strongly advocate SaaS over a game.

Rob Walling:
You wrote into a SaaS podcast, what’d you expect? Yeah, I can’t imagine building a game into a revenue stream. Hit based, which is what you said, is exactly how I think of games. It’s kind of saying, “I’m going to write songs for money.” It’s like cool, hope you get lucky. Talk about hard work and skill. To be good at writing songs, do you need a tremendous amount of hard work? Usually, you look at anybody, ed Sheeran, you look at the Lizzo documentary, Beyonce, whatever, there’s a bunch of Netflix documentaries I’ve been watching of them backstage, and they work their ass off. And these are hardworking people. Do they have skill? Hell, yes they do. And as someone myself who’s been in bands and played the guitar for 20 years and sang in bands, and still cannot stand how that my voice is not where I want it to be and these people are there, I know that they have some skill that I personally don’t think I will ever have.
So they have hard work, they have skill. And guess what? They still need a (beep) load of luck to get where they are, and then to stay where they are, right? Because we hear so many people, you’re who come in with a big hit or two and then that hit base nature is tough. I think of games as the same thing. I love games. I play games. I never want to build games as a business myself. So I would be thinking about, how can I sell this thing to give me some runway? I know it’s not monetized, but 10,000 daily active users, that’s a number. It’s not zero. It’s like is there value here? Is there any type of strategic that would buy it? Because if you can get any type of money for it, I would be using that to try to propel me forward on my journey of SaaS. Now, is SaaS as interesting or exciting as building games?

Derrick Reimer:
No.

Rob Walling:
No, no way. But I look for repeatable, relatively predictable ways to build incredible businesses. And I could imagine myself building 50 games, and maybe zero of them working out. I think of the numbers are that bad. And my personality is one that I think if I build even starting out three, four, five SaaS apps, I think one of them can catch if I like… I’m not going to just build three and spray and pray. I don’t like that approach. But if I really follow them through, I think I’m going to catch something eventually that’s going to get me to a place where I quit the day job.

Derrick Reimer:
You look at some of the indie hackers right now, indie makers who are selling into consumer space, your Pieter Levels, Danny Postma, like doing the AI headshots type of stuff. And it’s fascinating to watch their journeys. And a lot of it is propelled, I think off of kind of decently large audiences on social media that you’re able to get big exposure that way. But still, the amount of revenue they’re able to retain is quite low. Churn is crazy high. And they’re constantly having to kind of reinvent what’s the next product, what’s the next little mini hype cycle to try to ride? And it honestly looks so exhausting. I’m happy that they’re achieving some success doing it, but I think it’s a really hard thing to replicate.

Rob Walling:
Yeah, a hamster wheel is what comes to mind of like, I got to build. I got to build. Ooh, and then I product hunted, and I need product hunt, I need Reddit, I need Hacker News, I need whatever other viral pop Twitter, because I have a hundred thousand, 200,000 followers. And then the moment that does down, it’s like, well, I can’t really SEO this. The average revenue per account is too low to do pay-per-click ads. I guess I’ll tweet about it again. You know what I mean? That’s the thing that I think about in terms of building those types of tools. That doesn’t mean you shouldn’t, but it’s certainly not for me. I always wanted… I shouldn’t say always actually… From 2005 till about 2010, 2011, I built little tools like that, and it was cool. I didn’t do it on the hype cycle thing like that, but that’s certainly the way to do it today.
But then I matured or graduated into another form of thinking, which is I want to build a business that’s maybe five or 10 times bigger, but that’s sustainable, right? I want to build something that can be around for years and years and have true enterprise value, not just throw off a ton of cash. Cash is good, but I want to think about the next decade, not about the next 10 months. So thanks for the question. I hope that was helpful. Our next question is from anonymous, and they ask, “Do you have tools or techniques to track how much traffic came from which sources and what the conversion rates were?” Also, any for tracking results of AB testing. So let’s answer the first part of his question and then we will let ChatGPT weigh in one more time on the split testing tools.
The reason I asked chat gpt on this when I asked the whole question and the first part, the answer was generic and stupid and it just wasn’t worth it, but I wasn’t sure these days what are the AB or split testing tools that people are still using and they’re still around because I haven’t done it in a few years.
And so I looked at it and I was like, well, assuming it’s not an AI hallucination, I actually like its answer on this one. But what are your thoughts on that first part, which is how do you track? How many people are coming from where, and if they’re converting?

Derrick Reimer:
Yeah, and I think those are pretty standard features of pretty much any website analytics product. And there’s tons of those on the market today. There’s kind of the old standard of Google Analytics. I know that Google Analytics is going through a major upgrade cycle right now and people are losing their minds.

Rob Walling:
I’ve heard bad things. GA4, I still have… I keep getting emails because I have it on our media sites and TinySeed and all that and I just can’t bring myself to upgrade, and I heard it’s kind of a mess.

Derrick Reimer:
Yep, that’s what I hear. And every founder needs to decide how much they want to try to optimize their experience while also remaining GDPR compliant if that’s something that’s important to you. So there are kind of a set of tools out there that are kind of supposed to be more privacy centric. And the part I like about them is that the way they’re architected, you don’t technically have to put a cookie banner on your website if that’s the only thing that is tracking on there because they’re using technology that doesn’t require cookies and stays within the boundaries of GDPPR. So Fathom Analytics is the one that I use for that. You do give up a little bit of fidelity of data because they can’t remember who a visitor is for very long in order to remain GDPR compliant. So there are some trade offs there, but there’s a number of tools out there that you can explore in any website analytics tool worth their salt will have sources tracking and conversion rates and goals and all that kind of stuff.

Rob Walling:
I thought in three levels of kind of beginning table stakes, intermediate, and advanced. And beginning table stakes for me is a Google Analytics or a Fathom, as you just said. So we’re on the same page with that. The intermediate is more funnel tracking, which is mixed panel or heap. And there’s others, but those are the two that I hear about, a lot of TinySeed companies use them and then the kind of a really advanced platform that is built not only for tracking who comes from where and how they convert, but then it will track them all the way through their life as a customer. So it’ll literally say, “People who came from this particular Facebook ad in this two week period a year ago churned higher than this.” Really deep stuff that even… We didn’t have that at Drip. I couldn’t tell it all the way through. I always was guessing it averages, but SegMetrics. And it’s segmetrics.io. It’s a TinySeed company, and he built it for this reason, for people who are running…
You’re running a hundred grand a month, 200 grand a month, million a month in ads. You have to track that because you can’t just go on averages, right? And it’s worth paying for it. So that’s my mental model, kind of the beginning, intermediate, and advanced as stands today.

Derrick Reimer:
Yeah, I’ll throw one more out there too, June for product analytics, there’s sort of a newer option, but trying to be what Mixpanel was back in the early days, I think Mixpanel has gotten a little, it’s an older product. It’s kind of grown in complexity over time, and June’s trying to breathe new life into the product analytics space. I’ve been enjoying that one.

Rob Walling:
And so for AB testing, also known as split testing, let’s hear from Rob GPT.
On the topic of AB testing tools, when conducting AB tests to compare different versions of your website or landing pages, tools like Optimizely, Google Optimize, or VWO, visual website optimizer, can help you set up and track the results. These tools allow you to create variations, split your traffic and measure the performance of each version based on defined goals. You didn’t ask, but allow me to be obnoxiously verbose as AI is inclined to be. And talk about heat map and session recording tools. Tools like Hotjar and Crazy Egg provide heat maps and session recordings that show how users interact with your website. Heat maps visually represent where users click, scroll, or hover on your pages, while session recordings capture actual user sessions. The interesting thing I thought with ChatGPT is we really didn’t ask about heat mapping.
I actually think that maybe with analytic, I kind of went a step further. I wouldn’t have brought heat mapping into this conversation. And maybe it’s more advanced, but I do think that the to… What do they say, crazy egg and Hotjar? It is good suggestions. Again, I handpick the best parts of a seven part answer. So what did you think? You agree with Rob GPT there?

Derrick Reimer:
Yeah, it seemed pretty on point. I was actually pleasantly surprised that the tooling I… Because haven’t done a lot of marketing website AB testing in the last couple of years either, and those tools are ones that I kind of recognize. Seems like the old standards are kind of still kicking out there.

Rob Walling:
Yeah. I think until… I just don’t know that there’s room for another player right now, until one of those kind of becomes crapified. Aged tools to usually do that, or they go to private equity or whatever, or there’s like enough, there’s enough room for innovation, or man, the UX is really bad, someone just needs a better UX version. It’s like it’s not there yet, but I do think we’ll get there eventually.

Derrick Reimer:
I feel like something like AI generated split test variations or something that might be what the next iteration looks like.

Rob Walling:
Yeah. And there are tools out there that do that. Actually, I was screwing around with one about a year ago before all the ChatGPT stuff.

Derrick Reimer:
Shouldn’t be surprised.

Rob Walling:
He grumbles under it, grumble, grumble. I know, I’m as tired of hearing about as everyone else I’m going to admit. All right, so thanks for the question. Hope that was helpful. Last one of the day, Derrick. I was going to cut a short, but man, books. I just can’t not talk about books, right? I have 843 books in my Audible account, and I’ve listened to at least all the grownup ones because there’s kid books in there. So this question is from Jessica, “Thanks for the great podcast… Someone who’s six months into the first startup has been a great resource and recent episodes. You’ve mentioned a few times that you are the type of person who likes to read whole books on new areas or skills as you’re trying to adopt them.
The last example I can think of is marketing. Have you kept a running list of your favorite books on different topics related to SaaS startups? As an avid reader, I would probably read all the books on such a list. So why don’t we do this? We haven’t coordinated on this, but I’m going to assume you brought a list. So why don’t you go first with one book, and then I’ll do one, and we’ll just go back and forth until we’re out.

Derrick Reimer:
Cool. Yeah, so I’ll caveat that I just picked some books that are sort of on specific subject matters. And I am definitely a proponent of just in time learning, so I would say… I try not to just read 10 different books all on a bunch of different topics, and then hope I can apply them down the road. I would say do yourself a favor and read the book on positioning when you’re working on positioning for example. But that being said, since I just mentioned it, I’ll give this one as an example. Obviously Awesome by April Dunford. I heard her speak at a MicroConf a couple years ago, and she’s awesome. And that was around the time that she published her book, Obviously Awesome, on all about positioning and she has experiences ranging from… I think she worked at IBM or it’s a large database company or something, and has tons of experience kind of doing this at a smaller scale and at a really large scale. So highly recommend that for learning how to position your product.

Rob Walling:
And I totally cheated on this one because not four days ago of YouTube video that I recorded went live on the MicroConf YouTube channel microconf.com/youtube. The title was 12 books Every SaaS Founder Should Read this year. So I actually had already done a bunch of research for that. And what I did was I went to the books that I felt have really stuck around and impacted me over the long-term as a SaaS founder. Then I went to Twitter, because I have blind spots, and I asked. And I probably got 50 different suggestions for books. And some were great, and some were just not right. Some, I’m not going to recommend to people. And I combined that and called in, I called it down to 12 because I kind of thought once one a month for a year. I won’t go through all 12 here. We will obviously link that YouTube video up in the show notes.
It’s a quick watch you can get through all, but the first one that I want to talk about is all… I almost guarantee this on your list too, but it’s Traction by Gabriel Weinberg and Justin [inaudible 00:42:38]. And it needs an update. The tactics in it are now outdated because it’s almost a 10 year old book I think. But it just gives you a way to think about when you have no idea how to market a B2B company. It’s a bunch of… It’s 20 chapters-ish and 20 marketing approaches. And they interviewed an expert in each one, and they said, “How do you do pay-per-click advertising or Facebook advertising?” Noah Kagan, who at the time was growing up absolutely with that, and he just weighed in with a bunch of things and asked him questions. They wrote the chapter. They asked me about growing your business through in-person events, because I was running MicroConf and I just know a lot about them.
But it’s just continues to be a mainstay, maybe not for the details of how to do everything, but almost like a buffet of like, oh, so these are a bunch of the approaches that I could feasibly do. And then there’s more detail on those from a B2B SaaS perspective that I have added in a book that I will suggest in a second. I don’t want to go two in a row, but Traction by Gabriel Weinberg.

Derrick Reimer:
Yep, definitely on my list. And that’s one of the ones that sits on my shelf and I will revisit it every six to 12 months, as I’m thinking about has the nature of my business changed? Should I revisit some traction channels that maybe I experimented with a year or two ago, and now I should take another look at them? So yeah, it’s a great one. I think my next one is, I mentioned earlier in the episode, The Mom Test. This one came to me at a moment where I was just coming off of a failed product because I failed to have customer conversations that weren’t tainted by people wanting me to succeed but not giving me accurate information.
So I was feeling quite disillusioned after that. And when I read this book, it sort of opened my eyes to all the different ways that you can ask questions of customers or potential customers in the wrong way, and then ways to think about framing those conversations so that you’re minimizing false signals. So The Mom Test, I think is just a invaluable resource. It’s very super actionable, very short, and gives you tactics you can start implementing on day one.

Rob Walling:
It’s become a staple in our spaces. The second book is if you want to learn sales as a founder, and it’s called Founding Sales by Pete Kazanjy. First time I’ve ever heard of this book is in the last six months, and I don’t even remember how we got connected, but I wound up interviewing Pete on this show. And so he sent me a copy of his book. And when I opened it, I was like 450 pages, ugh. Normally, that means… To me, that means padding. It means you’re not succinct enough. Turns out, no, what it actually means in his case is he just wrote a book that took you all the way from, I know nothing about sales, all the way to scaling a sales team and hiring sales leaders. So it’s this huge reference tone. So that’s what I like about it. If you don’t need to learn how to do sales and you’re doing low touch, no touch, don’t do it.
But you just flip to any chapter and they’re titled, How to Do Sales as a Founder, How to Build Your Slide Deck for a Sales, How to Give a Demo as a Founder Doing Sales. And then it’s like, How to Hire Your First Sales Person, How to Scale a Sales team, How to Hire Sales Leadership, whatever. There’s like 13, 14 chapters, and they’re just so in depth because he was himself learning along the way. He was a non-sales founder of a SaaS company, and he was recording all of his stuff. And he has the crazy screenshots of terrible demo deck with bad graphics, and he’s like, But it sold things, so just iterate fast.” Anyways, Founding Sales is one that has quickly kind of become a staple in my arsenal.

Derrick Reimer:
I’d say my next one is Lost and Founder by Rand Fishkin. This one’s another kind of great look at a founder’s story as he sort of encountered what not to do when trying to grow and scale your business and how to deal with raising funding or not raising funding and the pitfalls that can come with that. And it’s a really kind of personal story from a really, really smart founder, founder of SEO Moz, and his experience doing that. So highly recommended for any founder thinking about level of ambition for your company and how you want to think about staying independent or raising outside investment or going full venture capital. Think he has a lot of wisdom on that and things to think about as trade offs.

Rob Walling:
My next one is another marketing book. The things that have had a lot of impact on me as a developer were things that were teaching me how to market, right? And one that came up more recently that I didn’t read back in the day, but that has been suggested to me by several TinySeed founders is called The One Page Marketing Plan. And what’s good about it, look, you can go to several other books over the last 10 years and cobble is together, but it just pulls a bunch of stuff into a succinct tone. And it’s not traction where it has these individual market, but it’s like high level thinking about marketing, but not so high level that it’s like, “Marketing is the approach to get people to consider demand for your…” Product. You know what I mean? It’s like I don’t need to read an MBA definition. It’s like in between in a good way, so One Page Marketing Plan.

Derrick Reimer:
I’m going to cheat and mention two books here because they’re quite related, and both things that I’ve diving into recently about specifically interviewing customers and learning about jobs to be done type things. So there’s Deploy Empathy from Michelle Hansen, is kind of a very… I would say it’s a very MicroConf friendly type of book because it is super tactical and she has scripts that you can use in specific cases if you’re having a conversation with a customer about why they switched or about why they canceled or about why they stick around if they’ve been around a long time. She has specific scripts you can use as kind of a starting place for jump starting those conversations. And so it gets down into hands-on stuff. It’s not just theoretical, I guess. Another book kind of along these lines is Demand Side Sales 101 from Bob Moesta, one of the OGs of jobs to ne done framework. And that one is also quite short, easy to read, and kind of frames selling your product through a jobs to be done mindset, as opposed to…
The way that a lot of US software people imagine sales going, which is kind of a greasy, used car salesman type of approach, this is the complete opposite to that. So those are two recs.

Rob Walling:
Those are great ones. My last one, and of course I say last I have 10 more. We just have to stop the podcast at some time, right?

Derrick Reimer:
Yep.

Rob Walling:
Should we just do a whole episode of this? I bet people would like it.

Derrick Reimer:
I bet so.

Rob Walling:
This one kills me to mention because it’s my book, it’s The SaaS Playbook. And I always feel like it’s super G to mention your own book, but in terms of if you want to build a million dollar multimillion dollar sales company, I wrote it because there was nothing else on the market that said the stuff that I thought should be said, right? And so what was funny is when I was going to do my YouTube video, I went to Twitter and people started suggesting it. And I was like, ugh, I can’t really mention my own book.
And then eventually, I was like, I guess I think I should. So I truly like it, or your money back. That’s just how I feel about it. It’s the best book I’ve ever written, and I hope that I like it. I did the Kickstarter. It’s done. You can go to saasplaybook.com. If you’re in the us, you can get a physical copy. If you’re anywhere out in the US, you can get electronic copies. If you really want a physical copy and you’re not in the US, then you’ll have to wait till the fall. That’s when it’ll be on Amazon. But right now, we’re in the middle of Kickstarter fulfillment, hard back books. There’s a bunch of stuff going on, and we just can’t fulfill one off… The ones being ordered on saasplaybook.com are literally shipping from my house.
And I can’t deal with customs, and it’s like $27 to ship to countries that are not that far from us, to ship a book. It’s insane. So all that said, yeah, I’ve mentioned on the podcast here before, you don’t need to hear more about it. It’s kind of everything I know at this point about building these types of companies.

Derrick Reimer:
That’s awesome. And yeah, I can’t wait to add that one to my bookshelf. I’m sure it’ll be one of the ones that I’ll be referencing every X months to just kind of reevaluate the playbook. So I’m really glad that’s in the world.

Rob Walling:
How about you? You have any final books that wrap us up?

Derrick Reimer:
Yeah, it’s funny looking through my… I have this page on my website, derrickreimer.com/booksforfounders, and Start Small Stay Small is definitely on there too, as… That was your first book, right? Your very first? Yeah.

Rob Walling:
Yeah, it was. Yeah.

Derrick Reimer:
Yeah, and that one was super influential in my thinking about starting B2B SaaS companies. And I feel like SaaS Playbook is probably sort of a successor to that. I also really appreciate… I revisit this one every so often. It’s Getting Real by 37 Signals, and it’s one of… I think it might be their first book, and it’s just a bunch of short, little essays. And I feel like they’re just particularly talented at crystallizing ideas and thoughts in really effective ways. And so I just enjoy occasionally those and getting a little bit of renewed insight or renewed enthusiasm for running my own business.

Rob Walling:
Yeah. I love going back to books like that, that were formative. Getting Real was not formative for me. For some reason, I didn’t come across it back in the day, but there are books that I read back then that just blew my mind, changed the way I was thinking about entrepreneurship, about being a solo founder. And I’ll go back and read them years later, and I’ll either, I’ll do both of these things actually, I will pick up on things that I didn’t get, and I’m like, whoa, I didn’t think that was in this book, but now, since I understand where I am now, I understand it at a new level. Other times, I’ll look and be like, wow, super dated. This is so obvious. How did I not know this? And that will just show you how far you’ve come. I didn’t know it because it was 15 years ago and this was not common knowledge in the way that this particular book probably communicated it. So I bet there have to be some moments in Getting Real that are like that for you.

Derrick Reimer:
Yeah, totally.

Rob Walling:
Amazing, sir. Well, Jessica, those are some books we tossed out. Again, there’s like another seven or eight on the 12 Books every SaaS Founder Should Read This Year YouTube video, and derrickreimer.com, right on the homepage, if you scroll down, it says Books for Founders, and you can find out another handful there. Mr. Reimer, thank you so much for taking the time out of your day.

Derrick Reimer:
Thank you. It was a pleasure.

Rob Walling:
Yeah, it was great, man. So folks want to keep up with you on Twitter. You are @DerrickReimer. That’s R-E-I-M-E-R, and savvycal.com, the best scheduling link on the internet.

Derrick Reimer:
Well, thank you, sir.

Rob Walling:
That should be your H1. It’s not, but that’s what I always tell people.

Derrick Reimer:
Oh, well, you’re too kind.

Rob Walling:
Thanks again, man.

Derrick Reimer:
Thanks.

Rob Walling:
It’s always great to have Derrick on the show. Hope you enjoyed his perspective on those questions. I intentionally let this one go long today because I find that sometimes we get on a roll, and cutting it off arbitrarily. Leave some content on the table, so to speak. We were prepared to answer the questions, and hopefully the last 10 minutes or so was as entertaining as the first few. Thanks for sticking around this week and every week. This is Rob Walling signing off from episode 666.

Rob Walling:
Being a startup founder is like playing a never ending game of chess, except the pieces keep changing, the board is on fire, and nobody knows the rules. This is Startups For the Rest of Us. I’m your host, Rob Walling. That joke, not very good, was written by ChatGPT, if you can believe it. I mean, ChatGPT is good at a lot of things, but it’s still working out its humor.
This week, I have a great conversation with one of the authors of Forget the Funnel. Gia Laudi and Claire Suellentrop run an agency that works with SaaS companies to help them grow their businesses. It’s called Forget the Funnel, and their book is called Forget the Funnel. And so if you’re already sold on this or you get two minutes into the interview and you want to pick it up, it’s on Amazon. You can just search for Forget the Funnel.
But the book dives deep into jobs to be done, with very specific examples where they have used it to help companies improve their onboarding rates, to help them grow their businesses overall, to find more customers like the ones that are already successful using their product. And what I like about the book, you’ll hear me say in the conversation, is it’s short, it’s compact, doesn’t waste your time, and it has a lot of extremely concrete examples from their experience doing this for clients.
But before we dive into that, if you haven’t checked out our YouTube channel, I’m releasing effectively a Rob solo adventure every week, 52 weeks a year, over at MicroConf.com/YouTube. It’s a 10 to 15 minute video covering all the topics that you would hear us discuss on this podcast, so it’s things like idea validation, it’s how to improve your marketing and sales funnel, how to hire, who to hire.
And I even told my story of buying, growing, and selling HitTail and building and selling Drip. And I told them in a way, like a compact format, in a way that I haven’t done really on this podcast or in any onstage talks that I’ve done. So while the content on the YouTube channel is in the same spirit as this podcast, it’s not the same stuff regurgitated. It’s genuinely new content covering new topics. So MicroConf.com/YouTube if you’re into that sort of thing. And with that, let’s dive into my conversation with Gia Laudi.
Gia Laudi, thanks for joining me on the show.

Gia Laudi:
Thanks for having me, Rob.

Rob Walling:
So we’re going to be talking about Forget the Funnel, which is the name of the book that you co-authored with Claire Suellentrop. Folks who listen to this podcast will recognize Claire’s name. She’s spoken at MicroConf multiple times, she’s been on MicroConf On Air, and you actually spoke at MicroConf Remote, what, about six, eight months ago.
So the subtitle of Forget the Funnel is A Customer-Led Approach for Driving Predictable Recurring Revenue. And the first thing I noticed about the book, as I normally do is, man, this is amazingly short. I love 150, 200 page books. When I pick up a book, a business book that is 400 pages, 450, I’m instantly like, “This is bull,” like some ghost writer pulled a bunch of anecdotes about Microsoft and Intuit from the ’80s to pad it so it looks big on it. And when I see Obviously Awesome by April Dunford, when I see Forget the Funnel, 150, or my own books, I was telling you offline, 200 pages is about where I stop. And if I need more than that, I’m going to write a separate book. So I’m curious if that was an intentional decision on your part.

Gia Laudi:
100%. I definitely took a page, so to speak, from April there. I remember hearing her talk about having a bunch of coffee chats with founders and they all described how they read books as being on a flight. And so she was like, “Okay, so it’s got to be read in a flight,” and I figured if I can take a lesson from April, which I will take all of them, her goal was to write half a book. And all the fallacies around why does a book need to be 300 or 400 pages or over 30K words, and it’s like all about the spine of the book being wide enough and it’s actually pretty arbitrary.
And so, yeah, we were pretty dedicated to write a short and also useful book. So April, big influence there. Rob Fitzpatrick, as well. I would say between the two of them, they were very, very close to Claire and I as we were writing this out.

Rob Walling:
Rob Fitzpatrick, did he write The Mom Test, right?

Gia Laudi:
He wrote The Mom Test, but he also wrote two other books, and one of them was called Write Useful Books. And then he wrote another one about workshops, I’m forgetting the name of it right now, but Write Useful Books was really the book that inspired the brevity in this one. Also, another aspect of this, that it had to be short, was a lot of what we talk about in the book is very practical and very tactical, as we were like, well, we can’t go down that rabbit hole because we need a video walkthrough for that or we need a template or a tool to communicate how to do this specific thing.
So there’s a lot of sections in the book where you’ll get to, where it’s like actually to dive into how to do this process, we’ve got this other resource over here. So we’ve got a complementary workbook as well, which is laughably almost as long as the book itself, it’s like 110 pages, and it’s all tools and stuff to make use of the core material.

Rob Walling:
Obviously we can’t cover the whole book in a podcast, but we’re going to dive into a bit the concept you came up with called customer-led growth, not product-led growth. But I want to first kick us off by finding out, a lot of listeners to this podcast, a lot of different stages, from idea to literally eight figure SaaS companies. What is the ideal stage for this book?

Gia Laudi:
So the companies that will get the most amount of value out of this book, or the teams, I should say, are definitely those who have happily paying customers. So you’ve got a product, whatever your vision might be for it, obviously you’re going to be continuing to evolve your product, but as long as you’ve got customers happily paying for it today, you can get value.
The other aspect of this that I would say, if you are in a situation where you’ve got a product that you have these happily paying customers, but you’re in this situation where you’re like, why haven’t I yet figured out how to articulate what we do, why do I feel like I’m not doing a good enough job describing what we do to our target customer, and why haven’t we been able to bring more people through the front door and activate them in the product, that’s the other flip side of this, is that you’ve gotten to this point where you’ve got high retention, high value, very happy customers, but now you’re like, okay, how do I take this thing to the next level? That’s also who would be a great fit for the book.

Rob Walling:
Got it. So I think of it as a growth book. That term growth hacking and all that, growth marketing, came out whatever, it started to become popular a decade ago. Marketing has always been drive leads to a point and then they stop. Usually it’s like, start a free trial, “Cool, I’m out of here.” Marketing moves on to the next thing.
But it feels like, to me, growth goes much deeper than that. Growth looks inside the product and says, people aren’t onboarding, what do we need to change here? How can we then find more of them? How can we retain them all that? That’s what Forget the Funnel is about.

Gia Laudi:
Sort of. I disagree a little that marketing is solely responsible for leads. In some organizations, yep, 100% that is the understanding for marketing, that marketing is responsible for going out in the world, finding customers who are a good fit for this product, bringing them to the front door, and then converting them on the website. That’s some people’s understanding of marketing as ending there.
We are pretty bullish about marketing’s role post acquisition. So through product activation, getting to value within the product, product retention, continued engagement, customer education, expansion, customer marketing, really even post solving the customer’s problem. So we think of marketing as being very holistic and spanning the entire customer experience. Now, you may not call it marketing. Some people call that product marketing, some people call that-

Rob Walling:
Customer success.

Gia Laudi:
Yeah, customer success. Also, some product teams think about the customer experience through that lens and think about optimizing all of those different areas of the customer experience. So we think of it as and describe it primarily as product marketing, but because product marketing is so wildly misunderstood, we have a hard time using that term. It’s getting a little better than it was when we first started out, but product marketing is a good way to think about it.
Growth is one of those terms that I just, like I can’t. What was marketing doing before the growth term came around, as if marketing wasn’t focused on growth anyway, but I understand that there is an understanding and a function for growth within a lot of companies that is very well-defined as being sort of in that middle of the funnel, so I get that. So yes, I would say it’s kind of all of the above, but predominantly what brings people to this, like we’ve got to solve this scalable customer sort of growth or acquisition is they think it’s marketing. They think, oh, we need more traffic to this website. We need to find out where people are. Marketing is not working. We need to figure out our messaging. That’s what the founders and the teams that come to us think is the problem that they’re solving, is we just need more people to the front door.
And people think of that as a marketing problem to be solved, but truthfully, what ends up happening is we do tip over to the other side and we see that actually you’ve got this opportunity post sign up to introduce your product in more advantageous ways and optimize that experience post-acquisition, help customers get from trial or free into paid, help them reach value as quickly as possible, and then turn them into really high LTV customers. So even though they thought they were coming to us and they think that this is a marketing problem, actually what they discover is that like, oh, it’s really a lot more holistically. And that’s the battle we’re picking with the funnel, too.

Rob Walling:
And I want to talk about funnels in just a second, but in the book you say, “We call this three-phase process the customer-led growth framework. It’s a method we use to help companies of all sizes calm the marketing chaos and hit ambitious revenue targets.” And the three steps are, number one, get inside your best customers’ heads, which you talk copiously about doing interviews, some surveys, but a lot of interviews. Step two, map and measure your customers’ experience, and step three, unlock your biggest growth opportunities.
So CLG, you don’t call it that, I call it that because I look at it-

Gia Laudi:
We can call it CLG.

Rob Walling:
But is that something-

Gia Laudi:
[inaudible 00:10:26]

Rob Walling:
Do you? Oh, that’s cool, because everyone’s talking product-led growth these days and I’m like, eh, slow down, you’re not Slack. But customer-led growth is a nice framing of this thing. You have something in the market, you have some customers that are being successful with it, but what do you do next? And that feels like what the whole book is about.

Gia Laudi:
Yeah, we are definitely not anti-PLG. We love, if anything, we lean towards more product-led companies, and I really, really believe that in order to be successful as a product-led product or business, you need to intimately understand your customers so that you can create effective and scalable experiences for them. If you don’t understand your customers, you don’t understand what led them to sign up or what motivates them to choose you and what parts of the product deliver that value, you’re not going to be able to create scalable product-led experiences for them. So CLG is actually a perfect fit for product-led companies. In fact, the majority of the companies that we work with are product-led.

Rob Walling:
And so let’s talk about funnels a little bit because when I hear the book title is Forget the Funnel, and that’s also the name of the agency you run, correct?

Gia Laudi:
Yeah.

Rob Walling:
You and Claire. Yeah. So see, I was a developer and then I became a marketer and I learned about funnels and I actually like funnels so I don’t want to forget the funnel. But the more I read in read your book, I was like, oh, it’s a cool name, it’s super memorable, but they don’t want me to forget the funnel. This actually helps optimize my funnel. This makes my funnel way more effective. That’s how I was interpreting it. Do you agree with that?

Gia Laudi:
I mean, yes and no. I find that those tools like that, funnels or pirate metrics or lifecycle, sort of the MQL, SQL lifecycle terminology and tools that we use, they’re helpful for teams to think about and communicate about what parts of the customer experience we’re trying to optimize for. And they help facilitate conversation.
And I still use the term funnel when we’re talking about awareness level marketing campaigns. We might slip in a, it’s the top of the funnel in a couple of conversations, but truthfully, that’s kind of where their value ends, in that it’s a helpful communication tool, it’s helpful for creating context. It’s helpful because it’s so well understood. It’s helpful for making sure that you’re talking about the same thing in conversation with others.
But again, it kind of ends there, because my biggest bone to pick I think with those models are that they’re generic. And the idea here is that your product, your customers, and your team even, you’re unique. And if you are thinking about your customers as falling into the same buckets of experiences as all the other products and all the other customers out in the world, you’re losing that nuance. You’re losing that customer understanding and that depth of understanding that can help you be really, really successful.
The other actually thing I would say about funnels is that they have this sort of beginning and an end and we’re in recurring revenue business here. We’re all trying to build a product that serves customers over the long term, builds a relationship with them, high LTV relationships, and funnels don’t account for that. I’ve seen the upside down funnels. I’ve seen all of that (censored), and still, it still doesn’t do the job of communicating that we’re in a relationship here and it’s about helping you get value and helping to solve a problem for you, and not only solving that problem, but what happens after that? What happens after somebody has become a customer and they’ve built a habit around our product? The story does not end there.
Where SaaS gets really, really interesting is after that stage. When we start to get into expansion opportunities and net revenue retention and those kinds of conversations, that’s where things get really, really interesting in the world of SaaS. That is typically not thought about until later stages of growth. But that’s where things get really, really interesting. And so this has a little bit more legs as well.
It also feels less gross for teams to talk about, oh, well our customers are, we’re trying to help customers get to first value, or we want to help our customers reach full value realization. That’s better than saying I’m building a campaign for bottom of funnel. It’s more meaningful. It pays a level of respect to the teams creating the programs as much as it does the customers. It just elevates the conversation a little bit.

Rob Walling:
I often think of funnels and funnel metrics. I have all my rules of thumb of if you ask for a credit card or don’t, and it’s a bunch of numbers, it’s great, but it’s the moment you ask, well, why? Don’t know, funnel doesn’t care. It’s like going to Amazon and seeing a bunch of one star reviews and a bunch of five star ratings without the full review and being like, well look, we got all these one star reviews. Why? Don’t know. There’s no actual review.
And that’s what a funnel is. A funnel tells you numbers, and I can look at a SaaS business and say, ooh, trial to paid is really messed up. That’s a problem. You need to fix that. And to me, that’s a great quantitative thing to know, but there is no, it’s the moment you say why, it’s like now you have to go start talking to people. Now you have to do all the things to find out why it’s broken.
And that’s where I feel as I read through Forget the Funnel, I was like, yes, this is the why. This answers the why of how to make this better. Something I really liked, obviously a lot of jobs to be done stuff in the book, one of the most helpful, I mean it’s like six or seven bullets in a row, it’s on page 24 of the book. And I was reading through it and it said, “In order to get inside your best customer’s heads, you need to understand,” and then it’s these bullets. And I was like, yes, yes, yes. It just gets better and better. The first is what life was like for your customer before they started using your solution. What happened that made them realize this isn’t working, I need something else? What they did next and next and next until they found you. What led them to choose you over all the other options? What value they experience?
And there’s a couple more, I won’t read them all, but it’s like this is textbook to me, at least I’m not a job [inaudible 00:16:30] expert, but as I understand jobs to be done, this is a switch interview. Is that the context?

Gia Laudi:
Yeah.

Rob Walling:
So many people who are listening to this have no idea what I just said, what that means. And I know that most of the best founders I know, they either directly know this about jobs to be done or they intuitively do it without knowing they’re doing it. They’re talking to customers and they’re just in their customers’ heads because they’re so close to the [inaudible 00:16:54]. So you want to talk a little bit about that, expand on how I’ve introed this?

Gia Laudi:
Yeah. So thank you for reading that and not making me remember what they all were, although I know you didn’t get to the end of the list. So the idea there is definitely to have that bird’s eye view, or how we sort of describe it, as that documentary understanding of your customers’ relationship with you from before they even knew you existed. So a lot of times I’ll be on calls with founders and I’ll ask who are your best customers and what led them to sign up? What was that moment that your ideal customers decided that they had to solve this problem or that they couldn’t go on with life anymore the way it was?
And many of them just sort of stare blankly. They don’t know the answer. They want to answer this question, well, they’re at companies of a hundred plus employees and they’re in this certain vertical and we know they have titles that sound like these, but they don’t really understand the why, as you were saying before, of what led to somebody to actually sign up, what was that pain? What was that struggling moment that led to somebody seeking out a solution like yours?
And then what was that life, and that experience, rather, of going from holy (censored), I can’t live like this, there’s got to be a better way. Who do they go and talk to? What conversations do they have? Where do they go? What watering holes did they hang out in? Who did they try to have some conversations with? Who or what were the influences that led them to find you and discover you? And then what was it about your solution? And I’ll even talk from a website perspective, what was it about your website or marketing materials that convinced them to try the thing? And then once they got into the product, what was it that convinced them to keep going?
There’s an amazing question that we ask in research, which is like, what was it that convinced you that this was going to solve your problem? And the answer to just that question can give you so much insight into what sort of not only experience you should provide once somebody gets into your product for the first time, but also what should be the carrot to dangle, so to speak, on the website, and the way to message and position your product for them. So having that deep level of understanding and really all the way from experiencing the problem through to singing your praises or even expanded product usage is kind of what we’re getting at there. Having that holistic understanding, like I was describing before, that funnels just don’t do that good of a job of, but it really gets you that intimate understanding into why somebody chooses you.
And just from getting that understanding, you can do a ton. The world opens up to you in term in terms of opportunity. It’s a good thing and a bad thing when a bunch of opportunities open up to you. So there’s a very specific process that we talk about to deconstruct the customer experience and start thinking about your customers’ experience through the lens of these milestones or leaps of faith that your customers have in your relationship with you so that you can really figure out what are those moments of value that we need to help customers reach, and then once they’ve reached them, then move them on to the next moment of value. That’s the operationalizing of that understanding that we were just describing in that documentary.

Rob Walling:
There are a bunch of people listening to this who either do this natively, intuitively, or they have [inaudible 00:20:15] jobs to be done and implemented it because it was such game changer as it’s hit our space. But there’s also a big chunk who I think don’t do it and they’re skeptical of the value.

Gia Laudi:
You mean of the research side of things?

Rob Walling:
Like we say, talk to customers a lot. I guess I’ll start by saying, we say talk to customers a lot, we all say this. And people say, what do I ask? Well, read Forget the Funnel because there’s a great list of questions on page I think it’s 54, we might even get to them in this. I might do another dramatic reading of your own words back to you. But I mean, it’s just a really good list of questions.
But I think for someone who’s listening to this and they do have successful customers, and whether they’re doing 10K a month or 100K a month, if you don’t know what’s working then when it stops working, how do you fix it? That’s the thing, and that’s what, even if it’s working well, I still think that you need to be having these conversations with your customer. Product market fit is a moving target in almost every space. Even if you found it and everything is working today, is the market going to be the same in eight months, in 10 months, in two years? It’s unlikely, unless you’re in a really regulated space or for some other reason.

Gia Laudi:
Or you add somebody to the team or start working with somebody else who is responsible for creating materials or collateral or programs to help your customers, and they don’t maybe have that same intuitive understanding of your customers that you do. So that’s another advantage to doing the research and operationalizing it, is that it can be used with your team and it democratizes that customer understanding for everyone who’s working on your product and supporting its growth.

Rob Walling:
Yeah, I think that’s a really good point, actually. That was a struggle. So at my last SaaS company, Drip, my co-founder and I were there from day one. It was just the two of us, and we knew our customers inside and out. We didn’t have it from the start, but by the time we built the product up, we were years into it, it’s like we just knew it.
The moment we tried to explain any of this, a new engineer or a designer, or frankly, our first product person we hired when we were at a couple million [inaudible 00:22:18], I was like, huh, I’m not sure how to communicate any of this. So it was just a huge interview. I was like, all right, ask me questions.
And then the cool part is one of them did. He was an experienced professional product manager. And so unlike us hacks who just figured our way through it. But he did put together a ton of documents based on that, that would’ve been way easier. And he actually did go and do a bunch of this. He asked a bunch of maybe not switch questions, but he did talk to a lot of customers to try to codify it in a way that wasn’t just, you know how co-founders are. They’re just like, “I don’t know, we just kind of got here. We figured our way out.”

Gia Laudi:
Just ask me. I know the answers. Just ask me. I’m right here.

Rob Walling:
Super helpful. And that totally works when there are 10 of you. And when I left, there were 120 of us, and it didn’t work anymore because everybody was asking me everything. And it’s like, no, you have to at a certain point scale it.
So I do want to get to some of these questions. I was just reading them again. And this is the type of stuff, Michelle Hanson’s book, Deploy Empathy, is tactical like this. I really like it. Forget the Funnel is the same way, where every few pages I’m like, oh my gosh, a list of questions. Oh, this is exactly either what I used to ask, or I would ask them in different ways, or I should have asked that and didn’t. And it’s that type of stuff, where it’s very prescriptive in a way that I like, especially because I’m not a professional at this. I don’t know this stuff intuitively. I’m not a professional product manager, I just am figuring it out.
But here’s a few of the questions. How are you using product name today? When did you first start using product name? Okay, so with that timeline in mind, take me back to life before product name. Prior to using this product, what were you using instead? If you were using a combination of tools, what were they? Tell me about the moment you realized old way wasn’t cutting it. This is good. What caused that moment? What compelled you to look for something different? Where did you go to look for new solutions? Did you try anything else? And there’s like five or six more just on that page. So is this from you and Claire just doing these interviews a cajillion times?

Gia Laudi:
Yeah, I mean some of these questions are best practices, and also I’m sure some of them come straight from Bob [inaudible 00:24:20], truthfully. But yeah, they are the gold standard style of questions. I don’t know that if you go look for jobs to be done interview questions, you’d probably find similar-ish questions to this. This is the way that we like to word them.
And with the right interviewer, mind you, amazing, amazing insight can come out of asking those questions, an insight that is not only just interesting and insightful, but also can be used in actions and actually turn into something that the team can create some experiences for and optimize for in the short term, and also build upon, as you said, the product evolves, the market evolves, and your customers evolve. So yeah, we really like them and yeah, that’s definitely a popular list for us for sure.

Rob Walling:
Yeah, I like having it here in one place. And so to give folks an idea, we can say talk to customers and we can say talk to potential customers or talk to cancel customers. I mean, talk to whatever to get this information. And then am I right that this information you gather, you’re using it to inform our marketing copy, our messaging, our positioning, our onboarding, even our product direction, even features?

Gia Laudi:
Yeah. So one thing I just want to back up a bit on is turned customers would probably not be the right fit for this type of research. And the reason being that we want to learn from the customers who have been successful with your product. I’m not saying there is no place for win-loss analysis or exit interviews. There absolutely is, and you should be learning from customers in that way, but not if you haven’t done this style of research first. So we’re really trying to figure out of those customers who are really successful with your product that represent what you believe to be a really great opportunity for the future of your company, what are those customers’ answers to these questions?
It is more challenging to do with potential customers for obvious reasons. You can’t ask them about what was it about our product? Obviously they don’t have that context. Learning from potential customers is very interesting and can be helpful, particularly for marketing. But it’s not validated necessarily because those customers have not yet put money down, so to speak, and have been successful in the long run with your product. So I would always start with your existing happily paying customers and then you can supplement with other types of research after that. So this is sort of the foundation, and we use jobs to be done to not only guide the style of research but also encapsulate or capture what we learn.
So we lean really heavily, actually, on customer job statements, as simple as they are, to help not only us while we’re doing the research and making decisions about how to prioritize different groups, but also for the teams that we work with to understand in an instant, so to speak, and really easily understand what are these customers trying to accomplish, what do they need to see in our product, and what are those desired outcomes that they were seeking out?
And that’s just that customer job statement, which is included in a couple of spots in the book. If you can take that research from those amazing customers of yours, those customers you want to clone, so to speak, and articulate what they were trying to do in this customer job statement, then you can think about those customers through that very sort of strategic lens.
You may also do that customer research, by the way, and identify that there’s two different jobs to be done here. That actually happens. I won’t say it happens all the time, but it does happen quite often, where we’re working with companies where there’s like two or three sets of customer jobs that show up in the research and then there’s a decision to be made. Do we want to continue to serve all three of these customers or is there one that we want to lean into? Do we want to park one for a moment and prioritize another?
That happens a lot, especially in situations where you can imagine, oh, we want a low touch SMB offering and we want a more robust, higher touch offering, and we still want to be able to serve both of those customers, but we can’t optimize for most of those customers with all the same materials and experience. So we need to pick one, park the others momentarily, and go forward with the customer mapping process and then go back later and do the same for those other more managed or higher touch customers who may have very different needs coming through the front door, very different needs for their evaluation process. And there’s all that higher touch way to operationalize that.
So you’re conducting this research, you’re not just going to end up with this homogeneous list of like, okay, well here they are, great, now we understand our customers. You’re actually going to see, oh (censored), look at that. Some of these customers came through and I’m glad they’re successful, but truthfully, do we want more of them? Probably not. So let’s eliminate that group and focus on this higher value group that you want to scale and do a better job of optimizing for.

Rob Walling:
So in this conversation, we’ve covered the first piece of the three parts of your book. The first part is getting inside your customers’ heads, and if folks want to dig into the next part, which is mapping your customers’ experiences and then operationalizing your customer insights, they should head to amazon.com, search for Forget the Funnel, or forgetthefunnel.com. Now question for you, it’s on Kindle and physical copy. Do you have an audiobook on the way?

Gia Laudi:
We have recorded the audiobook. It is currently being edited.

Rob Walling:
Edited? Okay. So side jag here, I just finished recording the audiobook of SaaS Playbook last week and I have an editor cranking on it, and of course I listen back and I’m like, oh, should have said that part different. And I was hammering an hour a day just every day, seven days a week until I got it done. I was doing it on weekends because I could do it at my house. And I was just like, yeah, but I can’t do more than an hour because it was driving me nuts. So I really just want to hear what was your experience like recording the audiobook, and you have two authors, did you get together in the same place?

Gia Laudi:
We were in Denver, Rob.

Rob Walling:
At MicroConf?

Gia Laudi:
Yes.

Rob Walling:
That’s amazing. Yeah.

Gia Laudi:
Yeah. That’s why I was in Denver. And so Claire came to speak at the event and she was like, “I’m going to be in Denver. Do you want to meet up?” And I was like, “Hell yes.” So we were in the same location. We didn’t have to record in the same location, but we kind of wanted to. We did it in a day.

Rob Walling:
Holy moly.

Gia Laudi:
I mean, advantage, two authors.

Rob Walling:
Two authors, and it’s 160 pages, so it’s manageable but that’s still got to be, that must have been six hours of recording.

Gia Laudi:
Yep. Yeah, yeah, about that. Well, full recording. I think it’s going to, once it gets edited down-

Rob Walling:
It’ll edit down to about three and a half, four, I would think.

Gia Laudi:
Four hours, that’s right. But it was rough because we were in Denver, and both, do you remember Claire getting up on stage and saying, “I’m losing my voice?”

Rob Walling:
Yes.

Gia Laudi:
So I landed and she was like, “I’m losing my voice, I don’t even know if I can speak tomorrow, let alone the audiobook.” And then I proceeded to lose my voice. So we were both pretty rough. She had recovered and I had not quite recovered yet. So chapter two, I’m like real nasally, it’s terrible.

Rob Walling:
Like you smoked two packs that day. Oh, it’s going to be good.

Gia Laudi:
Oh no.

Rob Walling:
And now that is how everyone will think of your voice. It’s going to be on audible.com forever.

Gia Laudi:
We may have to rerecord. I might listen to it and be like you and be like, no way, I’ve got to rerecord this. I’m nervous to hear it, truthfully.

Rob Walling:
Yeah, well, I’m excited for it. And again, folks can head to Amazon, Forget the Funnel, and then you on Twitter are @GGIIAA. That’s cool, so it’s kind of like Gia, but it’s doubling all the letters, GGIIAA

Gia Laudi:
Yeah. That was my very, very poor choice back in late, early, it was January 2009 and I could have gotten my first name, but I was like, Twitter. I didn’t take it.

Rob Walling:
That’s a three letter.

Gia Laudi:
I could’ve gotten Georgiana. Georgiana, I could have got, not yet. So I couldn’t have gotten the G-I-A, but Georgiana, I could have had my first name and I didn’t take it because I was like, ah, whatever. This is for fun.

Rob Walling:
Yeah, good old Twitter.

Gia Laudi:
Turned in, it was like 13 years ago or something, 14 years ago.

Rob Walling:
And we’ll see. Each week, I wonder how long Twitter’s going to be around.

Gia Laudi:
I know. I know.

Rob Walling:
Anyways, thanks for taking the time to come on and talk Forget the Funnel.

Gia Laudi:
Thanks for having me, Rob.

Rob Walling:
Thanks so much to Gia for coming on the show, and thanks for listening this week and every week. Here’s another bad joke from ChatGPT. As a startup founder, I’ve learned that naming your company is a bit like naming your child. You spend ages thinking about it, you finally pick one, and then you find out someone else on the playground has the same name. This is Rob Walling, signing off from episode 665.

Rob Walling:
Ads can be a good way to get started, but it’s not scalable. I think in the long term, if you want to build a flywheel, then you need that content engine cranking out content, and you need to start ranking for enough terms. Start with the long tail, and you slowly climb up to the head terms that allows you to get 10,000, 50,000, 100,000 uniques a month. They essentially are the demand side, looking for supply. These are the consumers and the businesses with the WordPress websites, and I would be looking to SEO.
Welcome back to The Startups for the Rest of Us. I’m your host, Rob Walling. In this episode, I answer listener questions, pretty amazing video and audio listener questions ranging from positioning a new SaaS with many potential use cases to deciding between consumption versus seat-based pricing, determining whether to expand your business to address customer needs that are outside your core SaaS, and several others. But before we dive into that, I wanted to let you know about my new book, The SaaS Playbook. I know you heard about it when I was running the Kickstarter. We are getting ready to fulfill that Kickstarter here, and it’s going to be probably in the next three, four weeks.
It depends. It depends on when the books show up and all that. But with that in mind, if you didn’t back the Kickstarter, you can still go to saasplaybook.com and pre-order a paperback copy of the book, the audio version, which I just finished reading last week, or an electronic version, like a PDF, EPUB type thing. This book is concise. It’s about 200 pages, and it’s where I densely packed everything that I know about building ambitious SaaS products, seven- and eight-figure ARR companies. I cover things like team and market pricing, marketing. I’d dive deep into it for a couple hundred pages. If you haven’t checked it out, saasplaybook.com. With that, let’s dive into our first listener question.

Simon:
Hey, Rob, I hope you’re well. I’ve been following along with the podcast and MicroConf community for quite some time now and really appreciate all that you do. Thanks for putting it out there. I have a question around positioning. I’ve just launched a SaaS, or a tech-enabled service called Delineate. It’s at delineate.co, and it helps you create predictive models and data products in a much shorter amount of time with a lot less money than what these things would usually cost. For example, you could train a predictive model with machine learning and your CRM data to predict the probability that any given customer is going to churn in the next three months, for example. Or you could externalize these models to create a data product or an engineering-as-marketing tool. Imagine if you were a business broker. You could train the model on a bunch of previous transactions and then create a business valuation calculator, which you could then publish to your website.
My question is the product can do a lot of things. Essentially, anything that involves a predictive model, it can help out with. I’m having trouble knowing where I should focus my energy on the marketing front. There’s just a lot of potential audiences and a lot of potential use cases for the tool, which is great in one way but bad in another because I don’t know where I should focus. I’ve read April Dunford’s book on positioning and loved it, but I do find it’s more relevant for companies that already have a bunch of data on who’s using their product and how. I’m wondering if you have any frameworks, mental models, or thoughts, et cetera, on how you think about approaching a positioning problem for a relatively new business where the tool has many potential use cases and audiences. Thanks again for all that you do, and I’m excited for the new book. Cheers.

Rob Walling:
This is a great question, Simon. Thanks for sending it in. This is a common problem. I’ll say it’s less common than it used to be because I think the idea of niching down or nicheing down has become so much more popular, partially due to the MicroConf community and this podcast, where I learned very early on, 15, 18 years ago, that not having some type of niche to attack, basically, and to own is a real problem in the early days. If you go back and read my first book, Start Small, Stay Small, there’s an entire chapter that’s just about niching down and about finding a single vertical to go after. Now, Start Small, Stay Small was about small lifestyle businesses that could get to maybe 10K, 20K, 30K a month. And these days, I’m thinking bigger than that with TinySeed companies and with the SaaS Playbook.
But if you don’t have $0.5 million or $1 million in the bank, it can be a challenge to not have a niche. Now, are there ways around it? There are. Think of SavvyCal and SignWell. These are a scheduling link and electronic signature, and those are not verticalized. It’s not designed for hairdressers, dog breeders, or web designers. These are broad horizontal platforms. But how have they marketed themselves? SignWell has a founder behind it who is a genius at content marketing and SEO, and it’s a huge market. There’s a ton of search engine and search traffic for it in general, and he knew that before he went into it. So he optimized the entire business around that concept. If you don’t have that here, and I bet you do not, because I don’t think the market you’re in is that big or has that much search volume, then you have to think about how Derrick Reimer with SavvyCal has done it where he had a small audience in the early days.
He’s built SavvyCal to be horizontal, but he focused on calendar power users and founders, executives, and now even sales folks. So it’s not directly niched, but he does have certain roles and certain use cases that he is catering to. But his thing is, he’s just building a more powerful but still really easy-to-use scheduling link. He also has a luxury. That space is very well defined. There are big competitors of Calendly. There’s YouCanBookMe. There’s a handful of big competitors, and he can come in and just carve out a position in the space. With those three things in mind, one I said, nicheing down, one I said, figure out if there’s a boatload of search traffic that you can get in front of, or the third one is to carve out a position in an already crowded market against other competitors where you have a far superior product and you are differentiated enough that people will actively switch.
The other thing that works in both SavvyCal and SignWell’s favor is, the switching cost is relatively low for those tools, versus I’m not sure about the switching costs with your product. If I were in your shoes, I would be looking to model what I’m doing after someone who has done it successfully before me. I would 100% not, if I was bootstrapping, be going after an amorphous horizontal space where you build something for everyone, you build it for no one in essence. I personally would likely be trying to figure out who are my best users, who are my most dedicated users, who will use this at all and love it, who says I can’t live without that? And then figure out, is it because of the task they are accomplishing or is it because of the role that they hold at a company? So then you can start figuring out, “Oh, it turns out chief technology officers or directors of business intelligence at Fortune 1000 companies. There’s two or three of them that really love it.”
You start to hone in on that, and then you build out their use cases before you land and expand. That is, you land with the functionality you have, and then you later expand into other roles, other verticals, or frankly, other use cases. In the meantime, to find that, I would be going on all the podcasts, I would be doing all the SEO, I would be spending all the money on the paper click ads that I could, or the Instagram and Facebook ads. Nothing has to be profitable. You are in customer development mode, and it sounds like you have a product already, but what problem does that solve and for whom? I’ve said this many times on the podcast before. Nowadays, when a founder tells me their idea, I say, “Don’t tell me your idea. Tell me what problem it solves.” And I should add this at the end, “And for whom? Who does it solve this problem for?”
Because that’s equally as important, because if you tell me this solves the problem of organizing my music library, I say, “Great, who needs this?” And you say, “It’s people over the age of 65 who still use MP3s.” Then I think to myself, “Okay, that is a tough market.” Not only is it consumers, but it’s folks who may be averse to paying for technology. Or if you tell me it’s for teenagers who have vinyl record collections, again, it’s like, “Teenagers don’t have a ton of disposable income to pay for software and the vinyl record space. The niche is very small.” I know you’re not serving either of those. They’re just dumb examples. But the idea is that the more you learn about who needs this, not just what problem it solves, but for whom that is where you can start to get traction and find your product market fit. I hope that helps, Simon. Thanks for the question. My next question is about consumption versus seat-based pricing.

Steven:
Hey Rob, my name’s Steven, and I love the show. I have a question about aligning pricing with customer value. I’m building tools for real estate agents, so I think that a single monthly fee will be simpler, but charging on consumption only when an agent closes a transaction seems better aligned with the cycles of their business. When do you think you should consider a consumption versus subscription-based pricing?

Rob Walling:
That’s a good question, Steven. Thanks for sending it in. There’s a bit of it, depends. I think, specifically with real estate, I have a tough time imagining a realtor is going to want to be charged every time they close the deal. Do you know when the deal is closed? Is there any way they can game that and just not close it in your system and therefore never pay you or only pay you for half of the deals they close? That’s something that you really need to think about with pricing is unless you are holding dollar amounts in escrow and when they get distributed, there is an angle there for folks to basically, it’s a hack to get around paying you for your services. There are two schools of thought on this, and honestly, when I’m bootstrapping, I’m usually trying to get recurring revenue such that when the real estate market slows down, I know I’ll have some cancellations, but I have that monthly recurring that’s coming in every month or the annual recurring, as the case may be.
If I’m truly based on transactions, I would go historically look at how many transactions happen in a given month or a given year in the US if that’s the market you’re serving. Then I would look at how many were happening in 2008, ’09, ’10, or in 2020 and try to figure out the swing there. You’re trying to figure out the volatility of how your monthly revenue might change up and down if you don’t have true subscription revenue. My guess is that number’s probably pretty substantial. Maybe it’s 40% or 70% back in the great recession of ’08, ’09, and that would scare me. There’s a reason that I love SaaS and believe it is the best business model. It’s because the revenue is not so bumpy. It’s not so spiky. One other thing to think about is, everyone sells. Eventually you’re going to build a company, and if it’s successful, it’s going to be worth millions of dollars, and you’re going to want to go sell it.
Whether you think you are or not, trust me, everyone sells. It’s just what happens. When you go to sell this, if it is not subscription revenue and the numbers go up and down each month, it is a discount to your valuation. Just something to think about of SaaS is SaaS because of that recurring and always upend to the right mode that it’s in. If you’re going to charge based on a percentage of fees or when an event happens, it’s more of a traditional business. It’s not subscription software. It’s still SaaS because it’s software as a service, but you are changing the model. So I think I am not wildly in favor of it.
However, someone who raises a bunch of venture capital and can wait this out, so to speak, or can try it out and doesn’t need to get to revenue early, if you had a million, 2 million in the bank, 5 million, whatever, you could screw around with this, you could try to only charge based on when someone closes the deal. Because if it doesn’t work out, you just change your pricing later. But if you’re bootstrapped, I don’t think you can justify taking that risk because I think you can have 6 months, 9 months, 12 months of just bumping along the bottom, not being able to grow. For me, I’m all in on subscription revenue models, and that is what I’d be leaning towards. Thanks for the question, Steven. I hope that was helpful. My next question is about whether to expand the business outside of the core problem that the software solves.

Dennis:
Hey, Rob, I absolutely love the pod, and I thank you very much for all the help you do for us new founders navigating the controlled chaos of a new startup. I’m working on a startup called FitFeed, which is a social encouragement platform where we build and host wellness challenges for organizations. We’ve seen pretty good traction with users and have several paying customers now. My question for you is, our business is really focused on the technology of building and hosting these challenges, but we’ve now had several customers ask us for marketing as a service for their challenge, and we don’t currently have the resources nor the expertise to offer this to our customers. I was wondering what your thoughts are on the best way to approach this. We do not have the funds to hire a marketing person. As a small bootstrapped startup, should we try to learn this on our own or outsource it to a third party, either through payment or through some type of partnership? Thanks for all you do and your advice, and looking forward to hearing your response.

Rob Walling:
This is another one that, in general, I have an answer. Then specifically for you, given what you’re up to and that you don’t have the expertise nor the money to do it, to me, it’s like I probably wouldn’t do it. It feels like a huge distraction for you specifically, but there are some factors that I use to weigh this. For example, if doing outside services, third-party services, whether it’s hiring freelancers to do it, whether it’s learning something internal to my company and doing it such that people get onboarded, a good example of this is with Drip, we would take a customer’s ebook or a series of blog posts and we would turn them into an email mini-course. It’s copying, pasting, formatting, some things like that. So I had essentially a support person who took that over and would build it for them.
That was a pain, and we did it for free if you paid for a few months in advance, and frankly, it helped people get onboarded and stick around. So if you can think of something like that that is truly an addition that will get people onboarded or will keep them around, then I think there’s some justification there. The caveat is, you need to charge a lot for this because this is services and it’s a pain in the ass. If you haven’t run an agency before, dealing with clients who are nitpicky and you’re going to do marketing, what happens if you don’t get the results that they want? That would put you in a tough situation, obviously. I think, if anything, I would consider partnering with a third party. If I could find an agency or a freelancer who is reliable and who would do this marketing for them, then maybe take a cut. Maybe you take a 10%, 20% commission for the referral.
Personally, if I’m building SaaS, I know that I need to focus and go all in to make it because, look, most SaaS companies don’t work. Most SaaS products don’t get enough users that they’re even worth building. So you’re thinking about adding to that the additional headache of servicing essentially agency customers, it’s folks who want consulting services. Now, I’m not saying never do consulting services. There are absolutely amazing SaaS companies that add consulting services, make buckets of money from them, and then when they do go to exit, eventually the SaaS revenue is multiplied by SaaS revenue multiples and the consulting revenue is multiplied by a much smaller multiple of one x, two x, or some very small number. But that doesn’t mean it’s not worth doing. But in this case, I don’t know. It just feels like a lot of work.
If you said we do have the expertise in house, because usually what I had is, I would say yes to things that I thought we could pull off, whether I had the expertise personally and I could delegate it to someone junior on the team or whether someone else on my team had the expertise and I knew that we could crank on it. But if this truly is something outside of your expertise, folks have asked for, I would look for referral partners and look for a way to potentially monetize that so you don’t have to deal with the headache and the lack of focus of actually implementing something that’s so far outside your core business. Thanks for the question, Dennis. I hope that was helpful.
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A reminder that the reason all these questions are audio or video is that those go to the top of the stack. So I still do have a backlog of 30 written questions that are getting preempted by those sending in questions through video ask on the website. If you go to startupsfortherestofus.com, click the Ask a Question in the top navigation, and whether you’re on a phone, your laptop, or whatever, you can send an audio or a video question, and those go to the top of the stack. The next question comes to us from Spain.

Gonzalo:
Hey, this is Gonzalo from Spain. I recently discovered your podcast, and I’m loving it, especially the Q&A episodes. I wanted to ask, I am a worker developer and I also teach people how to build their own websites. I’m focused on the Spanish-speaking countries, and a year ago I bought an online business that is very related to what I do, where worker developers pay a monthly fee to get access to job offers from website owners looking for those professionals, for those freelancers.
I’m not having trouble getting the freelancers to subscribe to pay, but I am struggling getting traffic from the companies looking for those professionals. I’ve tried SEO, I’ve tried Google Ads, but it’s difficult to make a difference in terms of keywords because I cannot differentiate with the search intent. The keywords are the same for freelancers looking for gigs and for people looking for freelancers, at least very similar. Because of that, I’m exploring other ad platforms like Twitter ads, LinkedIn ads, and it does not seem very scalable to me. I don’t know if you have any insights on how I could get traffic from that specific kind of people, like the companies or people looking for workers, freelancers. Thanks. I appreciate any inside spot.

Rob Walling:
It’s a good question, and it comes back to my rule. Don’t bootstrap a two-sided marketplace. That’s exactly what this is, unless you have access to one of the sides, and it does sound like one side. The WordPress developers is easy to get to sign up, and that makes sense. Usually, in a two-sided marketplace, one side will absolutely come because these WordPress freelancers, they want business. So that’s not a surprise to me that it’s easy to get them, but the other side, that’s what everyone’s trying to get. That’s what Upwork is trying to get. That’s what every freelance WordPress developer is trying to rank for.
I bet I’m guessing that the ads for those agencies are bidding these up, and I’m guessing the ads are pretty expensive as a result. But with that in mind, in your shoes, when I think about what you’re actually trying to do, which is to attract people who have WordPress websites, people, companies, whatever, who have WordPress websites and want freelancers because you’ve started a marketplace and you already have the freelancers, I would be thinking about one, if you’re running Google Ads, which it sounds like you might be, I would hone in on the negative keyword list for your ads to really try to exclude anyone who is a WordPress developer searching for this because you don’t want them. You want the folks who are looking for freelancers.
If you’ve already tried that, great, but if not, I would dive pretty deep into how I could engineer that to eliminate folks who are searching for the wrong side of your marketplace. Then the other thing I would do is what pretty much every two-sided marketplace that we know of has done and the way they have succeeded, and it’s content marketing and SEO. I have a tough time imagining you are going to build a sustainable two-sided marketplace if you have to fill one side perpetually with ads. Now, ads can be a good way to get started, but it’s not scalable. I think in the long term, if you want to build a flywheel, then you need that content engine cranking out content, and you need to start ranking for enough terms. Start with the long tail, and you’ll slowly climb up to the head terms that allows you to get 10,000, 50,000, 100,000 uniques a month.
They essentially are the demand side, looking for supply. These are the consumers and the businesses with the WordPress websites, and I would be looking to SEO. That’s the play here. I guess the only other approach I’ve seen is audience. I think of the Tropical MBA guys starting Dynamite Jobs, and they had both sides of the marketplace, not because of SEO or of pay-per-click ads, but because of their podcast and their community, the Dynamite Circle, and so they used that to their advantage. That’s probably the other way. I’m trying to think… Oh, I’ve seen a job board started based on audience. Joel Spolsky, back in the day, started, I think it was called the Business of Software job board, and authenticjobs.com, I believe, was started by someone who also had an audience. But usually it’s audience or content/SEO. I would be looking at one of those plays for that side of the marketplace. Thanks for writing in. I hope that was helpful. My last question of the day is asking for advice about being a single parent and managing your time.

Jake:
Hello, Rob. Thank you very much for the amazing content and insight you share about this industry. My question for you is, what advice or examples can you share about single parents who try to get something started in this industry? I know we have very little time, so I know every minute counts, so I’d love to hear your thoughts. Thank you.

Rob Walling:
Thanks for the question, Jake. Definitely one that has never been asked on the show. Certainly had time management questions asked, and there, I usually go into being effective versus being efficient, and you really can only work on the thing that needs to get done, and you can’t waste time even if you’re co-parenting with someone. I remember when each of our kids was born, just how much less time I suddenly had. I can imagine as a single parent, which I’ve really only been for weeks at a time, let’s say, when Sherry will go out of town and then you have even less time and you have to get everything done. The ways that I would think about it aside from just trying to get more effective and really focusing on the things that move the needle are, I would ask myself, “Do I have the budget to hire someone to do these other things?”
Whether that’s around the house, like I need a personal assistant to make meals and to handle all of my personal mail, dry cleaning, and delivery of things, there’s folks called house managers who can do this, and you may not have the budget for it, and that’s fine, but that’s where I’d be putting my thought to is, like, “Do I need someone to personally handle stuff such that I have just a bit more free time?” Such that when I have that two hours a night after my kids go to bed, do I need to sit down and pay a bunch of bills and worry about scheduling a contractor to come fix the sprinklers, or am I able to focus on work because I’ve handed that off to someone else? Similarly, I would ask myself, “Is there anything I’m working on now that I can outsource?”
Whether it’s design work or development, it’s only if you have a budget and it’s only if things are mapped out. The thing with handing off your business tasks right now is, I know they’re so amorphous and all over the place because it’s all research, it’s trying, it’s testing, and it’s stuff I think founders need to do versus paying bills, dry cleaning, running errands, grocery shopping, whatever else. Those are things that I think are a little bit easier. It’s a solved problem, and it’s not that complicated. Again, that comes down to budget. You may or may not have it, but it’s one idea. I’m not saying hire someone full-time, by the way. This is not like, “Oh, if you’re independently wealthy and you can spend $8,000 a month.” That’s not what I’m saying. You can find folks for less than that to help out 5 hours a week, 10 hours a week to just take care of stuff. You are more free to do it.
The other thing that I would think about is how to build something very small and get a quick win. I would not personally be trying to build a multimillion dollar SaaS company if I were in your position of just not having very much time because it takes so much time and it takes so much focus that I would either be looking at a step one business, like I talk about here all the time from the Stair Step Method, or even writing a course, building an info product, writing a book, doing a video course on one of the two-sided marketplaces, the Udemy, the Udacity, then whoever else is left in that space, teachable, did they have a two-sided marketplace? Anyways, these are things where they won’t create revenue forever, but they teach you how to build something, get it out into the market, and do some type of marketing.
The time commitment and the focus commitment is so much less than building software. So if you have a unique advantage, meaning you are a good writer, or you are good on the microphone, or you are good on video, then I would consider just building a course because, look, selling information, it is easier, it is simpler than building software. I love that idea as a step one, maybe pre-building a step one software business just to learn and get your feet wet, make a few hundred dollars or a few thousand, whatever you do make. I don’t know if this involves building an audience. Obviously, if you want to build a name for yourself long-term in the space that you’re building the product for, then maybe this is where you start that podcast, or you start the YouTube channel, or you start the writing, whatever it is you’re going to do.
But if you just want to dip your toe in the water, I fully think that you can do it without that, and you can get in front of other people’s traffic, but they take a cut of the sale. But that’s fine. You’re not necessarily doing this to get rich. You’re doing it for the learning, to get your feet under you, and to start shipping something to realize how much work it actually is. It’s a lot of work. It’s a lot of hours. I think that if you try this and, let’s say, you want to put out an ebook in the next couple months, and you get to the end and you’re like, “Oh my gosh, that was so much work.” From the writing to the copy editing to the layout to the cover design, to then promoting it, to uploading it, marketing it, selling it, refunds, support, whatever else you need to get to the end of that, and it feels like that, then you really know that for now you probably shouldn’t do a software product because it is 10 times more complicated on almost all the angles that I just mentioned.
It’s definitely tough. Each of us has our own headwinds in our lives, and some of those are more challenging than others, and certainly having young kids is super challenging. Whether you’re a single parent or you have a co-parent, it is a difficult time. As someone who went through it myself and someone who has raised young kids as I was starting companies, all I can say is, its hard, and I don’t know of any silver bullets that can really make it that much easier other than the thought process I offered, which is just pick something a lot smaller that doesn’t require as much focus as SaaS. Thanks for the question, Jake. I hope that was helpful.
Thanks for listening this week and every week. I hope you enjoyed the listener questions. Still more in the queue. I’ll be back at you again in a couple weeks answering more, hopefully with a co-host on that one. But if you keep listening, I’ll keep recording. This is Rob Walling signing off from episode 664.
You’ve made it to the hidden track of this week’s episode. I got a question where the subject line is not a SaaS question, and it’s about Dungeons and Dragons, so if you don’t care about D&D or my thoughts or comment on it, then probably just want to move along to the next episode. But the cool part is, it’s actually from one of the folks who asked a question in this episode, but I’m going to keep him anonymous here. He said, “Thanks for the amazing content. You said something in the last couple episodes that made me realize I’m not the only one because you also played D&D. I thought I was the only one that loved to talk business, and in the same group could also talk about Dungeons and Dragons.” And he’s referring back to where I said, I’ve played D&D with DM, Dungeon Master, once a month right now.
I’d love to do it more. I just don’t have the time. But I Dungeon Master once a month, and I handcrafted this group. It’s my 17-year-old son, and then it’s local startup founders, and I guess one guy I used to work with at Drip, but he works at a SaaS startup, so it’s all SaaS startup people. I did that on purpose because, for me, while gaming is fun, I like doing it with people I like, and when I don’t know the people there, it’s less interesting for me. It’s much more of a social endeavor. Anyways, back to his email, he said, “The people I played D&D with are good people, but they don’t have a drive to create, innovate, drive business growth, or create something new.” So me interjecting back in here, I would’ve a tough time in a group like that personally.
Then he says, “It is a commitment to play, and I only have time to play once a month, if that. But it’s fun to engage and come up with fun storytelling and creative solutions.” I agree. That’s what I love about Dungeons and Dragons, it gives my mind a break from business. If I don’t distract myself with things like Dungeons and Dragons, then my mind is going all the time thinking about, “Oh, what should the next podcast have? What should the next YouTube video have?” And even just reading books about games, about the history of games, or reading adventure modules that I may never play or never run is interesting to me. It’s a bit like reading fiction, but I know that it might have some applicability at some point, and it’s a way that I try to turn off my mind once in a while.
He has a question for me. The question is, “Do you have a favorite class?” So in Dungeons and Dragons, there’s race or heritage, and that is where you can be a human, an alpha dwarf, a tiefling, whatever it is. And then there is the class. Are you a fighter? Are you a sorcerer? Are you a thief or a rogue? They changed the names of these things. Personally, I tend to play either thieves, which I think they’re called rogues in fifth edition, but I like folks who can backstab and sneak around and hide in the shadows, or I really like clerics. I like those folks. They have healing, but also they have that brute force. Usually in high armor class, you get that flail, you get the mace, get the hammer, or even you can use an ax because, in first edition D&D, you couldn’t use edged weapons. If you were a cleric, it was for game balance, but now you can use them.
I really like having the ability to heal, whether it’s myself or others, but also be able to deal damage. I will be honest though. I’ve never played a druid, never played a monk. There’s a lot of classes that I haven’t played. While I do really playing some type of a magic wielder, again, sorcerer or warlock, whatever, I often find that with the limited amount of time that I have to prepare, if I were going to play as a player, that I tend to want to really dive in and figure out all the spells and optimize that. I just don’t want to spend the time or don’t have the time. Almost like the simpler gameplay of being a cleric.
Yes, I know you have cleric spells too, but those always feel pretty obvious to me. The ones that I’m going to need and use. But I’ll be honest, I don’t play as a player very often. I Dungeon Master a lot. Once a month, it’s not that much. When we go to events, because my son and I go to several gaming cons throughout the year, I don’t usually play D&D there. I usually am trying to play games I haven’t played before because I like learning new things and maybe figuring out a game that I really like that I can later go by. I can’t honestly remember the last time I was a player in a gaming session. Actually, it might have been Mike Tabor who ran a D&D game at MicroConf. He does it every year. I just don’t have time to do it. Last time I did, it was maybe 2018, 2019, and I played there.
I played a barbarian. We were like 10th level because it was a really hard adventure, and I had some three attacks per round, and when I would rage, I had advantage on everything and double damages. It was just bananas. So I really enjoyed that too, for a one-shot. It was super fun just being a massive tank, really high AC and doing crazy amounts of damage. Anyways, it’s nerdy stuff, but I love it. I believe we need pursuits outside of our work and family, even if it’s only once a month, once every other month, just to have something that recharges our batteries, something we do for ourselves.

Rob Walling:
Welcome back. To start off, for the rest of us, this is the show where we focus on bootstrapping and mostly bootstrapping SaaS companies. Today, I sit down with my TinySeed co-founder, Einar Vollset, and we talk through five insights SaaS founders should know about AI, about OpenAI, ChatGPT, LOMs. All the things you’re probably kind of tired of hearing about. But here’s the different tact that we took that I’m not hearing other podcasts and other pundits make on this topic. I tried to put a mental framework around AI that SaaS founders would understand. It’s how I would be thinking about this if I were a startup founder, and frankly, it’s how I’m advising my almost 150 investments to be thinking about this. So I kick it off by going through four categories of AI. So we had some taxonomy to think about and I talk about generative categorization, summarization, and predictive.
And then we walk through five things that I think you as a founder should be thinking about. If you’re putting your head in the sand and thinking AI’s not going to change everything, that’s a problem because it’s going to change quite a few things. But before we dive into that, tickets for MicroConf Europe this October are available for sale microconf.com/europe. MicroConf Europe is in Lisbon October 1st through the third speakers include Michelle Hansen of Geocodio, Sherry Walling of ZenFounder, myself, Stephen Innala-Craven of Stridist, and several others yet to be announced. It’s going to be an amazing event. Tickets are already flying off the shelves, as they say, microconf.com/europe if you’re interested. And with that, let’s dive into my conversation with interval set on five insights SaaS founders should know about AI. Einar, thanks for coming back on the show.

Einar Vollset:
Glad you have me.

Rob Walling:
It is awesome. We’re going to be digging into AI today, obviously talking about things that SaaS founders, whether bootstrapped or not really should be thinking about. I want to kick it off by maybe giving folks an idea of how you’ve been digging into AI, how you’re thinking about it and how much you’ve been screwing around with it. In essence, you’ve also, and you’ve been doing internal presentations to TinySeed companies. Of all the people I know you’re one of the people who has given it the most thoughts, so to speak.

Einar Vollset:
Well, thank you. Yeah, I mean, I started looking at it I guess in August or September last year, and it wasn’t really on my radar all that much. I have to be perfectly honest, we’ve invested in a couple of AI companies or companies that used AI. It was a key part of it back in I guess 21. And I nearly did my PhD on AI, which actually looking back at it, I’m glad that I didn’t because it was, looking back, it was a terrible time to have done your PhD on AI, but it sort of started, came definitely to the forefront in the fall. And particularly with ChatGPT, it became very evident to me that this was probably one of the bigger shifts in terms of a technical capability that would impact startups. I think at the very least the biggest comparative change that I’ve seen was probably when the iPhone was launched, and I think it’s definitely a bigger shift than that and potentially as big as the internet becoming a commercial commercially viable thing to do.
So I started really digging into it. I thought AI’s an interesting thing. People have weird reactions to it and there are the doomsters out there who are like… We should just call an airstrikes whenever the loss function falls too much. But equally, I think a little bit more of the considered concern meant, well, if you can just ask the AI to do everything, why do you even need SaaS companies anymore? Why do you need needle and stuff? So I started digging into it quite deeply, probably November, December timeframe. And it became evident to me that this was something that we needed to both for the portfolio for TinySeed, but also for the work that I do with Discretion Capital. We needed to lean into it. And probably most of my experimentation today and the systems that we’ve been building has been augmenting our systems for discretion capital in terms of using AI to understand the SaaS, specifically the B2B SaaS market worldwide.
And that has allowed us to basically have a step change. We’re basically gone from tracking the number of SaaS companies that we’re tracking and what they’re doing, and all this stuff has probably gone from 10% of the market to nearly a 100%. So it’s an order of magnitude change and it’s been key to me to try to understand, obviously that’s a huge benefit to us, but also I wanted to understand how it would impact our portfolio at TinySeed. Because we’re invested in so many companies, I felt like there’s probably at least a third, if not more, which there could be a severe competitive impact on the stuff. So I started digging into it. Most of my focus has not been so much on the visual models like the stable diffusion and dollies and stuff, but mostly on the large language models like ChatGPT or Flan-T5 coming out of Google and just trying to understand like, “Okay, how does this impact, how can we do this?”
There’s an odd dynamic in the AI world, I feel like, because it’s on one hand you have people who think it’ll be just snap your fingers and it’ll take over the world. And the other hand you have people who are like, “Oh, this is just auto complete, it’s bull- like why even bother with it?” The most standard thing I hear is like, “Ah, this is Web 3.0. Once again, it’s like NFT craze.” And I’m like, “Brother, it’s not NFT craze. Whatever it is, it’s not that.” So yeah, that’s been my angle. Like I said, my academic background is very much on the systems applied side, and so trying to understand, reading a lot of papers and trying to understand what can it do, what can it not do, what are best practices? And like you say, also trying to get the TinySeed portfolio companies up to speed as fast as possible in terms of understanding what they can expect.

Rob Walling:
And there’s a certain amount of just learning what it can do and not do as you’re saying. And then in three months, six months, 12 months, trying to get ahead around what might it be able to do at that point. Then taking that and viewing it through the lens of SaaS companies, whether funded or not. I mean that’s what we’re trying to do internally. It’s for folks who don’t know, you mentioned discretion capital, that is the sell side M&A firm where you help SaaS companies between one and 20 million ARR exit. You’re in processes. So a bunch of SaaS companies, tens of thousands, literally private equity companies, all this stuff that you do with that. So they know why both tiny seed and discretion capital. And frankly MicroConf and this podcast has an interest in this topic because I keep saying ignore AI at your peril.
I’ve heard the same thing about is this the next web three? Is this the next whatever other technology had a big hype cycle and then flamed out. Yes, there’s a big hype cycle, but I think this is much more no code where no code had a hype cycle and people are like, “I don’t know, it doesn’t really just code.” It’s always just code, you have these [inaudible 00:07:06] but no code is changing things at a grassroots level. It’s changing things for a lot of people. AI is going to do that times a hundred. I think you and I are both in agreement on that.

Einar Vollset:
A 100%. I mean, to give you an idea, it’s rare. The whole NFT thing like that, in my normy friends in Europe, that’s usually my standard measure of how do people interact with technology. And my normy friends in Europe, they never even heard of NFTs. It was like a, “What? Who cares about this? Ran Ethereum, who gives a shit? No code, I don’t care.” But ChatGPT, it was immediately, I was talking to my brother once and he is like, “Oh yeah, crap.” Normally it would take us three, four weeks to write this report that we charge a bunch of money for. And actually, yeah, it can be done in two days now real people are seeing real impact. And I think if you have technical founders who are sticking their head in the sand about the capability just become available, I think it has a massive, massive mistake, a huge mistake.

Rob Walling:
My brother runs a construction firm in the Bay Area, and similarly, he and I talked about it for 20 minutes and I started showing him, I was like, “It’s not like construction is the most high-tech industry.” But he was telling me about briefs he has to write or things he has to summarize or things he has to consume or you know what I mean? It’s just the moment we got in a text, I was like, “Oh, well let’s just… Here, give me that in a PDF so I can copy paste it right in the ChatGPT and just ask it some questions.” And it was a 100%, right? “No.” “But will it be a 100%, right? In the next three, six, 12 whatever, it’s going to get there so.”

Einar Vollset:
It’s going to get there. And I think a lot of the time, technical founders, they underestimate how much of the world economy consists of people who take bits of text and produce bits of text and give it to other people, and those people produce other bits of text depending on the inputs of that bits of text. That’s a lot of the economy in the world.

Rob Walling:
Yeah, it’s crazy. So, hey, when you said you’re Normy friends, so I use the term muggles. Oh, my muggle friends, you know that? It’s from Harry Potter when in the Wizarding school, right? Oh, the Muggles are like the normies, the who don’t have magic. Anyways, I want to kick it off. I put together an outline of my thoughts. The reason I wanted to have you on is I could totally have done a solo episode around this, but I want someone who knows more about it than I am to say, “I disagree. Oh, I do agree. Oh, I agree plus, plus.”

Einar Vollset:
I’m happy to disagree, bro. Always.

Rob Walling:
Oh, I know. That’s to derail. The podcast is your goal. All right. So I have been trying to get my head around the categories of AI that this is not capture everything in the world, but as I’ve seen uses of chat, GPT and Dolly and the OpenAI API, I think that in my head there are four categories, is the only word I can come up with. But the first is generative. This is where you type in something and it spits something out. So that’s like create an outline for a YouTube video titled How To Invest in Bootstrap Startups.
And then it just does an outline. It creates it based on its predictive stuff. Or you can type into Dolly, you can type in create a picture of Einar Vollset with a San Francisco Giants hat on. “Ooh, no, who’s your with a White Sox?”

Einar Vollset:
The Dodgers?

Rob Walling:
That would be great. The Dodgers, “Oh yeah, no. Ooh. All right.” Note to self, putting it on my trailer board, create a picture of Einar Vollset with a Dodgers hat on and waving a big foam finger that says, “I love Tommy Lasorda.” Am I in the wrong decade? Is that us?

Einar Vollset:
I don’t even know who that is. That sounds good to be.

Rob Walling:
Ooh, it’s a deep cut for people who watched baseball in the 80s, they totally know what I’m talking about. But anyways, so that’s what I’m calling generative AI generating things. Second one is categorization. If I feed it 1000 URLs, can it tell me which of these is an e-commerce website versus an agency versus a SaaS app? And then the third I have is summarization, which is a little bit, you could call this generative, but I’m breaking it out because I’m having a ChatGPT and other tools summarize a YouTube video and try to turn it into a tweet thread, for example. So there’s a summary and there’s a bit of generation. And then the fourth one I have is predictive. And this is one where internally I think we’ve talked or brainstormed, just like, “Well, could you input all the inputs of all the successful mastermind that we’ve matched in Microconf?”
And then when the new batch comes in, you put those inputs in and have it try to predict what we should match. Because that matching process is extremely manual right now. And I don’t know that we have enough data and we’ve matched a thousand founders. If we had a million, I would say we have enough data, but I just don’t know there’s enough that it could do it. So those are the four things, generative categorization, summarization, and predictive. I’ve gone to Google and tried to type in what are the types of AI, what are the categories of AI to try to get someone much smarter than me has thought about it in this way, but I don’t seem to be able to find it. Do you have thoughts? Do you feel like I’m on base there? Any other types that I’m missing?

Einar Vollset:
No, I think that’s reasonably fair. I probably think of it slightly differently. I think in general there is this notion, I mean in general, everything is generative. Fundamentally, a lot of the text models are just like, “They’re extremely flexible APIs, basically it’s just text in, text out.” So that’s true. I mean, I think as a broad class as the way I think about, there are classification, which is sort of similar to predictions where it’s like, “Here’s something, which bucket does this fall into?” It could be anything. It could be like, “Is this URL or SaaS app like we do for discretion capital? Or it’s like you say, given this background, does this person fall into this or that mastermind fit?” I think that’s true, and I think summarization is probably also one of the key ways to basically get value very quickly. And one of the key things there is, it’s remarkable to me, you were saying when you were talking to your brother, it’s like it’s remarkable to me how often you can just put dirty data in there and it’ll just clean it up and figure it out.
You could take raw HTL, messed up JavaScript from a website, dump it in there and say, “Hey, give me, what does this business do? Give me the summarize of what this page is.” Even though if you were to do that with pre LMs, then that would be a pain in the to do. And I think for me, that’s one of the key mind shifts that this technology does is basically programming in general is extremely precise. Math is very precise, programming is very precise. I mean, it’s like if you want to interact with text, you better clean up your text. It better be in a specific format. Ideally it’s in the table of some kind. You normalize the data, you deal with it. And it’s much easier as a programmer to deal with exact numbers and things than it is to deal with different various corpus of text.
And I think that’s probably one of the main things to keep in mind when you’re thinking about use cases is that it effectively gives you new fuzzy tools. So it gives you a way to grasp in a fuzzy imprecise way, grab text and text formats and get value from that in a way that is almost impossible to do in a generic way before. Because before you had to handle every side case and every possible whatever, versus with these tools, you can just roughly grab some text and indicate the sort of thing that you want to be able to do and it’ll refine it and like you say, summarize it and put it into a more valuable format where you can interact with it. And in fact, one of the most precise formats or one of the most interesting things is these things around embedding.
So I think that’s the next step that people get to. They start playing with it and they do the thing and then they sort of, “Go. Okay, how do I represent many of this thing? And being able to take extremely diverse textual, maybe dirty text sources and turn it into a very concise textual representation of something that contained information or even better an embedding that you can embed in a database and do things like vector search on.” I think that’s one of the key things to really understand when you’re trying to think about the use cases and how it applies to a SaaS.

Rob Walling:
Yeah, and that’s why it’s helpful for me to have these categories of what it can do, even if they’re all generative, you’re right, they’re all just generative. But as I break it down-

Einar Vollset:
Breaking down the next step.

Rob Walling:
But I’m thinking as a founder, let’s say I ran an email service provider today, or I ran a CRM, I would want to say, when do I ask my users to generate text or to generate images? Well, obviously when they’re writing an email, what are they getting that email from? Are they just trying to summarize something else? So should I build a summarization engine into my ESP, right? Or in my CRM, when I type in the URL of my contact, the sales lead shouldn’t AI maybe try to categorize that because that’s my second category, categorize it and say, “Hey, is this an e-commerce company?”
Or even pull in a summary or write a summary of this company does the X, Y, Z in three sentences such that the sales rep doesn’t have to do that. So having those four categories, and again, I’m not saying if we listen to this in a year, I bet we’ll be like, “Oh yeah, those categories were off. But I think they’re close.” And I think that’s a model of, if I was running a SaaS app today, I would apply each of those four generative categorizations, summarization and predictive to say, where in the app would my users benefit from it doing one of those? Or where do I ask them to do it today that AI can at least give them a start?

Einar Vollset:
And I agree with that, and I think it sort of relates to some of the other ways that I think about it and is what I tell TinySeed founders too is, it’s important given this new capability to not just… It’s completely the wrong approach to think that this is just NFTs and stick your head in the sand that is fundamentally wrong. I’ll take an argument with anybody who thinks that, but even if you think it’s like this is something that is great and you want to utilize, I think it’s such a big change in capability that it’s always behooves you to take a step back and look at the businesses that you have and the customers that you have and the use cases and the problems that you’re solving for your customers, and take a big sort of step back and get up to the 30,000 feet level and think about what are the sort of jobs to be done in that generically for my customers and what is now possible given that this capability exists that didn’t exist a year or two ago, what can I do differently?
I think some people will end up not getting the most of this or be left by the wayside because they’re a little bit too close to their existing solution. They’re like, “Oh, I’ll just add a chatbot to my thing, or we can do this.” And it becomes very hard to build any defensive mode around that because it’s like anyone can add a chat chat. There’s got to be, at one point I was looking at product hunt and it was every single thing except two things on that day’s product hunt was chat to my PDF docs.

Rob Walling:
It’s too obvious.

Einar Vollset:
It’s like 12 different ones. It’s like, “Yeah, okay.”

Rob Walling:
Exactly.

Einar Vollset:
Well, this is the tutorial case for almost all large language models like, “Come on. This is not a product. This is an auxiliary thing.” And it’s important that you take a step back and say, “Okay, what problems can I now? Maybe I can solve the same problems or bigger problems for my customers than what I was able to do before.”

Rob Walling:
Yeah, that’s our first point really. I have five points in an outline today. We may do more depending on other thoughts you have, but really the first one is to take those four categories that we’ve just talked about and ask yourself where each of them could be applied to your SaaS to help your customers to just make it better is to mental model. And as you said, the obvious ideas of putting a chatbot is not going to be enough.
My second thought or the second point that I’ve realized ties right into what you just said with the chat PDF and how eight out of 10 on product hunt were that unless you build something novel that is non-obvious and relatively difficult to build, AI is not a differentiator if all you’re doing is engineering a prompt and you can build it in a weekend, even though it can do something totally cool, anyone else can do that next weekend. That’s a big mistake. Everyone can use it. The obvious idea is, again, summarizing X, Y, Z or building a chat for your PDF, there are going to be hundreds of those, so you have to go further and think about moats are still moats and five hours of code is not a moat.

Einar Vollset:
Yeah, I definitely think that’s true. I think basically the key thing to think about in terms of how I think about founders and their SaaS businesses is like you say, I think it’s important not just to think, “Hey, don’t just stick your head into that.” If it’s two hours worth of work and it adds a really cool capability to your app, you should definitely do that. It’s a mistake, not two, but you can’t think that that’s a competitive advantage, an additional mode than what you currently have.
What you really want to be doing I think, is to say, “Okay, I have my mode. How can I further add to it with AI?” And I think if you don’t do that, if some obvious stuff that people eventually will come around to realizing, “Oh, we should add this capability that the LOM gives us to the problem domain that you’re working in. If you don’t do that, then someone else will and someone may come out as left field and basically because you refuse to go with the times and add this capability to your product, then that might be a competitive advantage for someone else because they choose to do it and we refuse to do so.”
There’s going to be some failure modes there where people are sticking their head in the sand about this and being like, “Oh, it doesn’t matter, whatever.” I think a lot of people, not a lot of people, but some people are going to get out competed by this low-hanging fruit. But the flip side is like you say, the low hanging fruit isn’t in itself emote,

Rob Walling:
It’s more an accelerant. I think of it, I mean there’s a ton of examples we could use, but remember when rails came out for Ruby and somebody… I don’t remember if it was DKH or someone on the team there built Twitter, a small version of Twitter MVP version in 20 minutes on a video, and people were like, “Oh my gosh, now I can build Twitter in 20 minutes.” And it’s like, “Yeah, that’s cool. That’s no longer a differentiator, like the code to build that.” And so if you were still writing Ruby with no rails and building web apps, suddenly you were way slower than everyone else. And in fact, if you were using… I mean, there’s a reason Laravel came out with PHP, Django came out with Python because those languages became much, much slower than Ruby at building web apps. And so again, it’s an accelerant. It feels like, “Oh my gosh, I’m ahead of everyone, but it’s like everyone else can use this too..”

Einar Vollset:
Yeah, it’s true. And the way to think about it, I used the iPhone example early on, this is almost like, which I know is strange. It’s almost like you can, if you have a web app, you can flip lick fingers and all of a sudden you have a native mobile app that works and that’s what it’s like. And if you think about it that it’s like, “Well, it’s so easy just to add a mobile app.” You just click your fingers and you have it, so it’s not a mote, but if you don’t do that, someone else will. And then that will be a competitive advantage for them.

Rob Walling:
Becomes table stakes in this space, right?

Einar Vollset:
Yeah.

Rob Walling:
All right, so that was the second point. The third thing, I’m curious if you agree with me on this, but I wrote this out, the big AI ideas, trying to build your own models, your own LOMs and the massive horizontal plays, building a search engine with AI, it’s like these are big, these are going to be billion and billion dollar companies, I think those are already done. They’re going to be won by OpenAI, by Google, by Microsoft, by Facebook, IBM, whoever else gets into it. These players are so massive and so well funded that if you’re a mostly bootstrap company like the Saas WISI, it’s just too big. What do you think about that?

Einar Vollset:
I agree with that. So for example, one of the things that I have running in just in my local MacBook is I’ve taken Google Takeouts, exported all my email from all my email accounts and basically created a chatbot that allows me to talk to about my email. So I can ask, “Okay, when did I meet so-and-so? Or who are the people that I talked to after I went to this conference?” That sort of thing. It’s very, very cool. But do I think it’s a standalone business? Do you think it’s a good business for a bootstrapper to start? No, because it’s such an obvious thing for the big email providers just to add out of the box. I’m almost a little shocked that Google hasn’t already added away for you to interact with Gmail that is like that. And so that’s effectively, I think the big players will take the low-hanging fruits and accelerate on their way and add that compare, add to the existing competitive mode.
So I wouldn’t want to start an AI email startup type client. That doesn’t make any sense, at least not for a bootstrap type business. Now, if you add Neumann and you raised a gazillion dollars, sure, go for it. But most people aren’t like that. They don’t necessarily do that. So yeah, I 100% agree with that, I still think the same is sort of true for search. Now some of these big hairy ideas that are like, once you realize understand what it does and understand the technology, then it’s an obvious idea. If it’s an obvious idea and a huge competitive market, but large incumbents what those guys are going to take that they’re going to own that piece.
And so building your startups around that and thinking like, “Oh, I’m smarter. I’m more nimble, I’m doing whatever.” I’m like, “You know what? connecting Gmails data with OpenAIs APIs and calling that your startup, that’s not competitive mode.” That’s not going to work for you. You have to go after like, “What is your existing mode, what is something new, something completely new that doesn’t require people to change that behavior in order to be for you to be successful.”

Rob Walling:
Or like we talked about above, you have existing moats probably within your company today. And using AI to make your product better is a way to extend those. And accelerate 0.4 that I’d like to communicate is in addition to thinking about how AI can be integrated into your product as features, which is 0.1, I think most SaaS founders, and frankly most entrepreneurs should probably be using AI internal to their company. Whether you’re doing content marketing or you’re trying to repurpose a YouTube video to Twitter or a YouTube video to a blog post, whether you say, draft a cold email based on my homepage to this type of buyer and have it give you a 101 oh, no, that’s not funny enough. I mean, you can go back and forth with it to help outline YouTube videos. I will admit some of the YouTube videos that I’m putting out.
I go to ChatGPT and say, “Outline a video 12 best business books to read this year, blah, blah, blah.” But then I’ll say, “Nope, not good enough. Regenerate. Regenerate. It’s not even 50% for me, it’s probably 25% I use or a third of what it gives me, but it helps get me outside of my own box.” So we’re using it for content generation, and I feel like small software companies especially really took advantage of when virtual assistances were $5 an hour in 2008. That was a game changer for my little company at the time. And I think that if you’re not using AI in your own internal workflows, again, this is not building it as a feature in your app, but helping it make you faster. I think it’s something that you should be thinking about. What do you think?

Einar Vollset:
Yeah, a 100% agree with that. I mean, I think the obvious case where this applies immediately is code. I don’t write code anymore without AI helping me out, and I probably do only about 20% or 30% of the typing. It just moves faster. I don’t bother if I have a new Python library that I need to figure out how to use, I don’t bother trying to ask Stack Overflow anymore. I just am like, “I don’t read the docs.” My standard thing is, “Hey, I want to use this library in Python. Can you write me up some codes to do it?” For example, I wanted some visualization code. I’ve never been good at a visualization code. And I was like, “Okay, because there all kind of complex. They’re a pain in us to deal with visualization stuff.” So I was just asking ChatGPT, “Hey, can you visualize these 2000 embeddings for me?”
Or whatever it was, and it just did. It was like, “yeah, just cut and paste this stuff in here, make sure you PIP install this library.” And boom, it was doing the visualization, the three-dimensional visualization that I wanted to do without me having to really ever look outside ChatGPT to understand how the library works. And I think that applies. I also think it’s like if you are in a profession or a party or thing is where you’re generating text, for example, reports and things like that, internally, you’re in a massive disadvantage if you’re not using that. Anything that you’re outsourcing to your VA or you have some medium level employee write text for that stuff, you should probably be looking at can, how can I augment this capability with it like an LOM?

Rob Walling:
I have a caveat to this one and I’m curious about it around with you just a little bit. It relates to this one plus the first point about building features into SaaS, but I feel like not every SaaS app itself needs or can use AI inside of it as a feature, but I do think every SaaS company or every SaaS founder could be using it internally pretty much, and everyone internally has something they can use ChatGPT or AI for. But I was trying to think of examples, and I mean there isn’t a great use case for it. What about Ruben’s company sign? Well, right, it’s electronic signature. How could AI be integrated in that? Because I can’t think of a great example off the top of my head.

Einar Vollset:
Sure, I can.

Rob Walling:
Okay.

Einar Vollset:
Hi, Ruben. Basically you have a company, it signs a bunch of documents, a bunch of contracts. How does the company keep track of its obligations that it’s signed? How does it know that?

Rob Walling:
You mean what’s in the documents? Like knowing what it’s-

Einar Vollset:
Yeah.

Rob Walling:
That’s interesting. So it becomes a knowledge base.

Einar Vollset:
All the contracts that are given, I mean contract management is driven can turn into a contract management. You can add a contract management capability to sign. Well, it could be like, “Yeah, part of the thing, you signed this contract and it says when you’re going to get paid, summarizes your obligations to the client. Did you meet this? Yes or no? It understands every commitment you’ve made and can summarize it for you.” So, yeah no-

Rob Walling:
I like that. This is why-

Einar Vollset:
That’s a good example. There might be, but that particular case-

Rob Walling:
I like that one.

Einar Vollset:
… definitely I can see.

Rob Walling:
How about let’s do one more and then we’ll move on. I think in the world there is a percentage that won’t use, but it’s probably pretty small.

Einar Vollset:
I’m sure.

Rob Walling:
Yeah. But what about SavvyCal, right? Derek Reimer startup scheduling link competes with Calendly like-

Einar Vollset:
Absolutely. I want to be able to talk about my SavvyCal account links like, “Okay. Hey, summarize, what did I do with my… How many times have I talked to this person before? When was the last time I talked to these people?” It’s unstructured, semi-structured data about what I did with my days that can be generated in text? Absolutely. You can use that built in. And actually it ties into one of the things I haven’t done, like I mentioned, my email is a good example of how I’m using it to talk about, basically talk to my inbox. One of the things that I’m not doing that’s kind of the low hanging fruit there too, is I want to be able to integrate it into my calendar and just say, so I emailed this person that and that date, and also by the way, I chatted to them, I had a Zoom call with them on such and such a date. That should be part of the information that summarizes into what I’m doing. So yeah, I think both of us two have pretty large, actually large language model in this case.

Rob Walling:
Cool. So let’s move on from there to the fifth point. And this is one I’m sure you’ve thought about. So I’m curious, I think we both agree on it, but the question here that I would ask myself as a founder, is my business model a ticking time bomb. Because some businesses are, if you’re a big team of analysts presenting data and you’re doing a bunch of manual work and you’re summarizing things like that becomes like you said, what was it the three-week report becomes a two-day thing? Well, once anyone can do that, that’s a problem. So how should founders, what should they be thinking about and how can you escape that? How can you not let your business basically be completely deprecated by AI in those cases? It’s not everybody, but there is a subset of SaaS out there.

Einar Vollset:
There are. And I think the use cases where you have… Again, maybe before it, a part of your mote was, “Oh, this is really dirty data. It’s hard to deal with. It’s imprecise. It requires verification.” So you end up outsourcing to a call center in the Philippines, or not call center, but outsourcing overseas, and you’re paying people to do textual analysis or updating reports manually because it’s super hard to do with the existing technology. I think that particular model, I think if that was my moat, if that’s what I did, I would be worried. I don’t necessarily think it’s like… So here’s the thing, it relates to what LOMs are bad at. You can’t have it. People say, “Oh, I can’t do math. I can’t do two times to the power, eight times, whatever, six, whatever.” That’s not like… Yeah, but that’s what it does.
That’s just a calculator. It doesn’t matter. That’s what it’s good at. What it’s also, another thing it’s not good at is queries like all the. Give me all the whatever it is in the world. It doesn’t do well at that just because that’s not what it’s good at. That’s not being able to iterate every role a database is not something that it’s good at. And so I think the moat that exists from building out and managing and quality assurance on a team of people in the Philippines say, I think that’s going to go away. But that doesn’t mean, I think that the entirety of those businesses are just three lines of code and ChatGPT anymore. It just becomes a different moat.
And if you lean then too heavily on that existing moat, then yeah, I think you’ll be out competed. But I think a lot, this is what I’m saying is for those kind of businesses, it makes sense to sit down and say, “Okay, let’s just admit that this particular thing is no longer a mode. What can we do given the capabilities that we already have and the customer relationships and the understanding of how we get that data, what can we build? It’s almost like, “Yeah, if you’ve been cruising along on that mode by yourself, you’re going to be in trouble.”

Rob Walling:
And I’m here less to be, what do you call it, doom and gloom? The world is not over. I mean, we are in as entrepreneurs, we are in the best spot possible. One of the best spots possible to take advantage of this. This is exactly, I keep likening it back to having a VA for $5 an hour because in 2007 and 2008, I was running these very small businesses. I didn’t have huge budgets, and I was either writing all the code myself and I was doing all the support myself because the only people I knew lived where I did in LA and I paid developers $75 an hour and I paid admins $30 an hour and I had no profit margin. And then when I read the four-hour work week, I was like, “What? I can do that?” And so I did, and it made my $3,000 a month net invoice suddenly be a 90% profit margin business. And that changed the game for me. And that’s when I realized, “Oh, I can do this.”
So I think AI is that plus, plus, I think it’s even more different. And I was in a position, and at the time people were like, “Oh no, offshoring, outsourcing, all Americans are going to have no jobs.” And I was like, “A, that’s not true. And B, a lot of us knowledge workers and developers and entrepreneurs are at a great place to take advantage of it.” So that’s my mental model of this.

Einar Vollset:
I agree. I mean, I think it’s an amazing time to be alive and it’s also an amazing time to be the bootstrap or nearly bootstrap a self entrepreneur because even just being aware that this exists and being able to write code, they can call an API, they can do some stuff that’s an amazing. You’re like heads and shoulders above your average, Joe and I think doom and glooming on it is completely pointless. It’s going to change. It’s change our lives, I think mostly for the better and having an optimistic view of where this is going to go and have it be like, “This is amazing. What cool things can I do now?” I think is the right attitude as opposed to the [inaudible 00:34:45] like, “Oh, all SaaS are going to go away. Everything’s going to hell. And then by the way, the AIs will take over and murder us all.

Rob Walling:
Right. And look, is there a spot to say, “Will people lose jobs and will it have social impact, especially on just the lower end of data processing, data entry, whatever?” Yeah. This is not the podcast where we talk about that kind of stuff, but it certainly could have an impact. So as a listener, hopefully that was helpful to hear Einar and my thoughts on this, obviously we have, I would say a relatively unique perspective being invested in a lot of companies and just being knee-deep in SaaS day in and day out. If folks want to keep up with you, you are Einar Vollset on Twitter, and we mentioned discretion capital at discretioncapital.com as well as TinySeed of course that’s what we work on together.

Einar Vollset:
Indeed.

Rob Walling:
Thanks again for joining me, man.

Einar Vollset:
Thank you.

Rob Walling:
Thanks again to Einar for joining me this week, and thanks to you for joining me every week. I’ll be back in your earbuds again next Tuesday. This is Rob Walling signing off from episode 663.

Rob Walling:
The big question is can I find people to talk to? If no one will talk to you, this is such a good lesson. I’ve said this on the podcast before, but I think it deserves to be stated again. It’s that if you try to validate a product before you build it and you cold call, cold email, cold dm, run ads, whatever it is you do, and no one will talk to you about this problem. How are you going to get them to talk to you once you’re selling something?
Welcome to yet another episode of Startups for the Rest of Us, I’m your host, Rob Walling. Today I’m answering listener questions. We’ve had an amazing influx of audio and video questions and so I’m going to be digging into those today. My first question is from Misha about switching jobs while bootstrapping a company.

Misha:
Hi Rob, my name is Misha. I have a question, should I switch jobs while bootstrapping a SaaS company? We haven’t launched yet. Our plan is to launch in about two months. The reason I’m looking to switch jobs is while at my current gig I can do the job easy enough and block out time to work on the SaaS product. It comes with plenty of what I call emotional politics, things that are distracting things that add emotional stress to the day and kind of sap motivation and focus. The new job is more technical work, so it’s a little bit less or quite a bit less on these emotional politics because I can focus on doing software development basically.
It also comes with a pretty significant pay increase of about 20% and that would be helpful since we haven’t launched the company yet and it’s more cash I can feel like I can devote into that space. So wondering how do you think about just bootstrap in your company knowing one’s going to be a long road before you can quit it, quit your day job for this bootstrapped company, but at the same time need to provide for yourself and your family. And how do you decide which opportunities to take and when to take them? Thank you.

Rob Walling:
Definitely an interesting question and one I myself faced many times and I’m sure a lot of bootstrap founders face as well. The way I would think about it is that if I haven’t launched yet with my side project and let’s say my goal is to get to $10,000 in MRR, that even with a little bit of expenses I can quit my day job and maybe the ultimate goal is to get to millions in ARR, but let’s just say the short term goal is to quit the day job. If I haven’t launched yet, the odds of me getting to 10K, MRR in 12 months are pretty thin. It’s possible if you get lucky, if everything comes together in a way that doesn’t usually come together as we see in the state of independent SaaS, just how many folks struggle to get past that initial $500 or $1,000 of MRR.
Let’s just say maybe on average, I’m making numbers up here, but let’s say that most apps take 12 to 18 months from launch to get to 10K, MRR. And if you’re lucky, it’s a little shorter and if you’re unlucky it’s longer or you never get there. With that in mind, I would ask myself, am I okay working at my current job with the politics making 20% less for 12 to 18 plus months?
So that’s one way to frame it. The other way I think about this is how much disruption will this have on my life and my ability to work on this side project? The good part is it sounds like you already have a job offer, so we can scratch the whole scouring job boards looking for jobs part of the process and just assume you’re at a decision point where you already have an offer and you could just accept it.
So then how many weeks or months is this going to kind of disrupt your personal life and frankly cause you to need to focus on the new job to make a good first impression and to get it to where you’re, you’re a trusted resource. Whenever I started a new job, I was always hustling, especially in the early days because I wanted that first impression to be that I got (beep) done and then people would stop bothering me. And so when I think about that, it sounds like you already have that with your current job. So how many months does it take you to get that with the new job? And I don’t know what the answer is, maybe it’s six weeks, maybe it’s six months, it probably depends, but that is going to probably pull time and focus away from your side project.
Next question is how much? Do you think you’ll still be able to do some work on your side project? I would absolutely expect so, but those are the two sides of the decision as I see it. It’s how long am I willing to work at my current job knowing that it’s going to take me a long time if I ever hit 10K, MRR with this project, the side project versus how much disruption will I have in the short term? A few months, probably. I mean if I were to guess I’d say in two to three months, if you hustle you can make a great impression. People kind of stop micromanaging you and you’ll have that, I think that mental bandwidth to be able to continue pushing on the side project. So that’s the calculus. I know what I would do in your shoes. I don’t want to make recommendations, but if I were in your shoes, I probably would switch jobs. I hated politics so much in any job that I worked at that that would be the leading factor for me to want to switch up because that alone would be a cognitive load for me if day-to-day I was dealing with that and I think that would make me less happy in my personal life.
And I also think it would probably negatively impact my ability to work on my side project or what it may do is make me work more on my side project such that I could get out of it faster. But that’s how I would think about it. But to each their own, it truly does depend on your prediction of how you think these things will play out and your own ability to deal with a crappy job because in the short term it will set you back, but in the long term I would guess it’s probably going to be a better choice.
The one other thing I’ll mention, it’s almost a tangent, but most employers, especially hiring developers are going to have you sign an IP assignment agreement and in that you will have to name any side projects that you are working on that you want to retain ownership of.
And so that’s something to think about and some companies will just ban you from working on side projects and they say, “We own everything you do even on your own computer at your house in the evening.” Now I think that’s bull crap and I personally would never sign one of those but find out in advance if this company has a clause like that because then that changes the decision obviously because you don’t just want to say, “Oh, they’ll never figure it out.” Because that’s a huge danger of you building something successful and then having someone else with a claim to own it. But if they don’t have a clause like that and they just say, “Name the things you’re working on.” And maybe you need to get permission or maybe you don’t, maybe they just want to know what it is that you’re working on the side, then you will have to list it and the new employer will know that you’re working on this thing. So that’s just one other factor I would keep in mind as I thought this through. Thanks for the question Misha. Hope that was helpful. My next question is from anonymous and it’s about factors for an acquisition.

Speaker 3:
Hey Rob, longtime listener since way before I started our company, which I’ll keep anonymous for reasons that will then become obvious, but we’re now approaching about $2 million ARR and we’re evaluating acquisition opportunities. And I guess I had predominantly two questions. So one, we are a very small team, we’re about four people full-time and we’re trying to understand when we can get a realistic valuation on revenue versus SDE. We’ve been optimizing for SDE for a long time and we’re just unsure when we can sort of pivot to the revenue valuation multiple. And the second was I’d love to know how you thought about an earn out in terms of when you were evaluating offers for Drips. So obviously… pay each year, but I don’t think that’s sufficient because I just, there’s a huge premium we place on our freedom and our ability to not be an employee and I just don’t see that talked about very much in terms of how people actually value that. And I’d love to hear about your thought process in terms of how you were evaluating opportunities and interest for Drip.

Rob Walling:
Anonymous cutout there for just a couple seconds in the middle. I think we get the gist of the two questions he’s asking. The first question is, small team $2 million ARR, how easy is it to get a revenue multiple versus SDE, I should define SDE, it’s kind of like net profit but it’s called seller discretionary earnings. And what it means is you take your net profit and then you add things back in like the owner’s salary or if you pay for your cell phone and your internet from the company, maybe a company car, whatever it is that you’re pulling out that really are discretionary earnings that if you left would remain in the company, those are added back in to net profit. And so you can imagine that a company doing $2 million ARR that is generating $1.2 million in, let’s just say net profit SDE, make them equivalent, $1.2 million and you get a five X multiple, you get $6 million, that’s great, but if you’re going to get a revenue multiple, you can often get the same multiple if you’re growing fast enough.
So five X on, $2 million ARR is going to give you $10 million. So it’s a big difference between the two and sometimes it’s even larger. General rule of thumb, and this is so general and it depends, so please don’t take this as gospel, but usually when you get to about $1 million ARRs, sometimes $1.5 million if you are growing quickly and growth is a big key to this and your churn is not super high, there’s a bunch of factors. But if it’s a really strong business, that’s when you can start asking for revenue multiples. So if you’re selling something that’s doing $250K a year, pretty much expect to sell for a seller discretionary earnings, multiple, SDE multiple. If you’re doing $750K a year, odds are pretty dang high. There’s, I’ve seen some exceptions, I saw someone doing 75K a year get $750,000 in cash for their company. It happens but it’s not the norm.
So you think about it as a bell curve, where in the center is the likelihood or the frequency that it happens. And then as you go out, there are these outlier multiples right? To the left, it’s low multiples and to the right it’s high multiples and it just depends on how desperate someone is to acquire your tech, or your company and are there any equivalent replacements on the market that they can acquire. ‘Cause if you’ve built something truly unique or you’re way ahead of everyone else, you’ve built an amazing team, whatever it is, that can be a huge factor in jacking that multiple up if they can’t find an equivalent replacement to buy. So all that said, the biggest factor is growth, right? And if you’re growing 100% year over year at $2 million ARR, I don’t see why you wouldn’t be able to get a revenue multiple.
Now I didn’t write any rules, it’s a market and so selling right now is better than selling last year, but not as good as selling two years ago when everything was frothy. So two years ago maybe if you were going 40% year over year, you know could get a revenue multiple and maybe now it’s 50, 60, 70, there’s some number in there. It just depends on the acquirers. Most acquirers are either private equity firms or strategic acquirers where there is a logical fit into their business that you will fit into. And so if you are growing quickly and you have relatively low churn, so there’s like a path to keep growing, and you’re in a space where there are PE buyers or strategic buyers, then that’s where it starts to make sense. And that’s where you contact like a sell side SaaS broker, like Discretion Capital, it’s run by my good friend and Tinyseed co-founder Einar Vollset
And that’s where they help folks who once they get into that single digit or double-digit million ARR, they can run a process and they know all the big players of private equity players, the strategics and they put together a, it’s a whole process, it’s months worth of work and it’s something that they do very well and that’s how you get top dollar for something like this. It doesn’t just happen by accident. The reason you run this process is to get multiple buyers. If you’ve read the book, the Art of Selling Your Business by John Warlow, it’s very good and it talks about the way you get maximum bids. The way you get maximum sale price is by having multiple buyers. And the best way to do that is to run this process and the best way to run a process is not to do it on your own because you don’t know how to do it, right?
I remember thinking I was going to run my own process and I think that’s a terrible way to go. I think you will always leave money on the table when you go that route. With that said, if you’ve optimized for profit, which it sounds like you have, it can be really difficult to make that pivot because you’ve kept the team super small and you probably have sacrificed growth for profitability. And I’ve talked about this many times on this show, where in the short term it can be easy to say, “Oh look how profitable we are. We’re a half a million-dollar business that threw up 400 grand for the founder.” That’s amazing. But if you could instead grow twice as fast, you can sell that thing for 10 times more than if you’re milking it for cash, right? Private equity and strategic acquirers, they don’t care very much at all about profitability.
Now if you’re lose buckets of money, of course, but if you’re running at breakeven and you’re doubling every year and you’re in the millions, people will take a look, like you will have buyers champing at the bit. So it can be difficult to make that pivot because if you’re growing at 20% a year and you’re super profitable, it seems like you’ve built a great business, you’ve built a great lifestyle business even at $2 million a year. And I’m not saying no one will buy you for a revenue multiple, but it’s definitely more challenging. It’s a lot to say on this topic. I should probably get Einar Vollset back on the podcast and we can talk this through ’cause it’s a super interesting question.
Second part of his question was about thinking of earn outs. Meaning you’re going to work at the acquirer for a year, two years, three years, whatever, and you get part of the purchase price up front and then you get these progress payments that may happen after one, two and three years.
So general rule of thumb is if you’re going to sell for many millions of dollars, if you go to say Facebook, or Google, or a huge brand name company, big tech, pretty much three year earn out is standard. There are exceptions but usually it’s three years with smaller, I’ll say known name tech companies. The ones that we’ve heard of but maybe are not mentioned in the New York Times or people are not frequently protesting them in the Silicon Valley. Those usually ballpark about two year earn out. But have I seen folks sell a company and walk away within weeks of closing? I have once again think of the bell curve. How often does that happen? Not very often and I have seen folks negotiate earn outs lower down to 12 months, 18 months, not with big tech but with these smaller PE acquirers and other things, especially if you have a team in place.
And that’s another thing, a lot of us founders think, I’m going to keep the team small ’cause it makes it easy, that’s great, but then everything relies on you, so your earn out’s going to be longer if you don’t have a team in place to do things. If you’re still making the product decisions, or you’re still writing code, or you’re still involved in the day-to-day of that business, the acquirer doesn’t want you to go away because they don’t want to have to replace you. So the more you hire and the more you delegate, the better position you are in to negotiate and say, “I’m basically an observer in this company.” If you can say this company’s growing and I only work 15 hours a week on it, 10 hours a week, some small number because everyone else is doing all the work that is actually the best position to be in to walk away within months or whatever, 12, 18 months of an acquisition.
But to really answer Anonymous’ this question he was asking, it’s a huge premium to place on your freedom. Even if you get a million dollars, 2 million during this earn out to work another year or two, is it worth it? And in my book, I knew that if I was going to sell for enough money that I never had to work again. I was going to work to minimize that earn out, but I was okay to work there for a period of time that made it worth it that when I got out I could do whatever I wanted. And so if that had been four years, no there’s no chance, three years, nope, wouldn’t have done it, two years felt too long. So I really negotiated that down. Actually there’s a reason our acquisition took 13 months, I’m not sure I’m talking about this, but I negotiated a lot of stuff and they were really keen to buy us and that helped.
I wasn’t as keen to sell, but I certainly was intrigued by the idea of diversifying my holdings from this one company that was worth millions and millions of dollars, to having cash in the bank and being able to put that into other assets. I kind of wish there was secondary that existed back then. It really wasn’t a thing where you could actually take chips off the table. If I could have sold 10% of it for $1 million dollars or whatever the numbers would’ve been, that would’ve been super intriguing, right? ‘Cause that’s a way of diversifying that is something that’s more possible today. We do it ourselves through our Tinyseed syndicate, where if a founder’s doing a few million a year and they want to take a chunk of money off the table, sell it to investors in order to keep going and grow that company, that’s something that is now an option and it’s not as frowned upon as it used to be.
But with all that said, you’re right. It’s a big trade-off to work for someone else for a year or 18 months or whatever that number is in my book though, the cash just has to be worth it. What you get out of the deal has to be worth that money. And again, I could imagine a deal falling apart if the cash was amazing and they said, “You have a three year or four year earn out.” I would say “No way.” The opportunity cost is just too great. And so if you want that earn out to be as small as possible, then you need to figure out how to make this company run itself a little more than it probably is today with only four employees, and then realize the odds of getting it below even a year I think are pretty slim.
One other thing that I would say is I have heard of folks kind of getting a full time earn out for a year and then having six months or a year as almost a consultant where it’s like you back off, no one reports to you but you will commit X hours per week at an hourly rate to continue working on it.
So there’s some in-betweens there. You’re still tied to it, but you’re kind of not under the thumb of the acquirer so to speak. There’s a lot there. Thanks for that question Anonymous. I hope it was helpful. My next question is from Victor about whether to take a role as a founding engineer or try to start a lifestyle business.

Victor:
Hi Rob, I’m Victor. I’m a JavaScript full stack developer and I’m not sure what to do with my career. So I have an offer to be a founding engineer on an agile backed or BC back startup and that would lead me to perhaps a more corporate job or a role as a founding engineer, corporate engineering, managing people and perhaps sacrificing time for money. So I’m not sure that’s what I really want to, I learned to code to have a lifestyles business, but I feel like the alternative is going backwards because I know how to code the super complex app using JavaScript, but if I have to perhaps become a Shopify developer or a WordPress developer and then leverage that experience to build an app with that for my customers, I would be doing things that I think of super simple. So the question is what should I do? Should I kind of go backwards and build for people that then I can help sell a plug into? Or should I go for the more conventional or perhaps conventional startups career where I become part of a founding team and then in the future perhaps fund my own company or become a CEO of that company? Thank you for the space.

Rob Walling:
It’s a good question, Victor. I think there’s a bit about risk versus reward here, but there’s also a bit about freedom in this decision. I guess I want to comment, start by commenting on one thing you said. You said, “I feel like the alternative is going backwards because I know how to code super complex apps using JavaScript, but if I opt to become a Shopify developer, WordPress developer, then leverage that experience, I’ll be building super simple things.” That would carry absolutely zero weight in my decision personally. If I’m going to try to start a business, I don’t care about the technology. Are you building it for fun and for the challenge? Because if you are, go work on an open source project, maybe start your own, go do fun hobby projects, screw around with AI, and crypto, and Python sentiment analysis APIs, just have fun, go do it.
But if you want to make money from something then know that you’re going to have to do away with your technical preferences and there’s a decent chance you’re going to build stuff that’s going to be too simple for you. Or you acquire something and it has a (beep) code base that you don’t want to work on. I’ve done both of those things. It didn’t matter because my goal was to get to the point where I could quit my day job, and if that’s the goal, then you have to make that the number one goal in my opinion to get there in any timeframe that makes sense. And look, I know I talk a lot about the stair step approach and building Shopify apps or WordPress plugins, you don’t have to do that either. They’re all types of routes you can go. You could just try to build that standalone SaaS app. It’s going to be harder, but if you want to build something complicated, you can go try to do that.
For me, the calculus I put into it is if I’m going to be a founding engineer at a company, and this means there are founders, two or three founders, and they have the bulk of the equity and then as a founding engineer, you’re probably one of the first one, two, or three engineers, so you might get a percent, or 3%, or 5%, some number. It’s usually pretty small. Probably in a venture backed company there’ll probably be like 1%. And so I am betting that those founders are going to be able to execute and make this company a reality. And if they’re raising venture, I’m just guessing that they are, the odds are they won’t. The odds are that they won’t succeed because that’s how venture works. And so when I think about my own decisions of working as a founding engineer versus starting my own stuff, I had more confidence that I could execute on these small stair step one and two opportunities with a higher likelihood that I would have just enough success.
Maybe it was $2,000 a month to make my house payment. Maybe it was 10 grand a month to quit my job. I thought the odds of me doing that were better than this company selling for what, $100 million, $1 billion dollar, whatever that number would have to be for it to make sense for them to sell and for it to make sense for the opportunity cost that I was going to put in.
Now, I’m thinking about being a founding engineer as kind of being all in on it. That likely means you’re going to work long hours, you’re going to be really focused on it, you’re going to be driving it to succeed because you’re all in on it. You have this equity and you want that to grow,
And maybe that’s not correct. Maybe you can work 40 hours a week and then do the side project on the side and that would be perhaps the best of both worlds.
I don’t know the particular situation and of course I’m not saying don’t be the founding engineer. I don’t really like to give advice, but I like to say in your shoes, this is how I thought about this when I was at your stage. It’s an interesting question, Victor, thanks for sending it in. My next question is from Ryan who’s thinking about selling his business for five years of runway. “I’ve been looking into selling my project management company. I’ve been bootstrapping for seven years on my own. I make $180,000 a year. It’s ARR, growth is low at 15% a year and I’m struggling to market and develop on such a large project and I’m getting tired.”
I’m going to assume this is software. He’s said project management company. Oh, I’m going to assume it is a SaaS app.
“I’ve received an offer to buy the company for $500,000 in cash, which is four times STE plus $125,000 seller note or alternative revenue royalties on top of the cash, still working out the details. It’s a full share sale, no earn out, it’s not an amount of money that will change my life in any way, but it could buy me five years to work on what’s next and it’s tempting. Two questions given the current financial climate, you think it’s a reasonable deal. Second question, what revenue or growth do you see in tiny seed companies over five years? Surely with product market fit, getting back to $180K ARR within two to three years should be possible, especially if I can reinvest earnings into the company rather than paying my salary. Thanks for your advice, Ryan.”
Sorry it took me so long to get to this one, Ryan. The text questions they do fall to the bottom of the stack. I wanted to get this one in. It’s a few months old even though there are still more audio and video questions.
So my opinion is, current financial climate, do I think it’s a reasonable deal? It doesn’t sound terrible to me. It sounds about in line, so it’s kind of a five times seller discretionary earnings with 20% of that on a note. Yes, the market is what, 4 to 6-ish STE. Again, you can get 2.7 if your app is declining, and you can get 7 if it’s in a super hot space and growing rate. There’s all these numbers, but 4 to 6 I think is a typical range, five to 7 in that range. So to get 5 for this when it’s not growing superfast and you’re kind of tired of it, I can’t give you advice, but in your shoes, I would probably personally cash it out. I love the idea of having that money in the bank to be able to just focus on something else full-time that I have a ton of motivation to work on and I have effectively infinite runway.
I know five years isn’t infinite, but that’s a really long time. To your second question about revenue growth in tiny seed companies over five years, I mean we’ve been around for five years. We’ve only been funding companies for four years, but yeah, there’s a huge bell curve. You see people on the bottom that are flat and people on top that are doubling MRR for one month to the next. So it’s a huge difference. Depends on market factors, all the stuff that you would expect, but getting back to 180K of ARR, which is $15,000 a month in two to three years, I think is absolutely possible. I think especially if you use one of your unfair advantages and hopefully you have one now that you have this app under your belt. Do you have a network in the space, an audience in the space? Can you sell to the same customers? Do you see a problem already that you think has a gap and has a pretty desperate need to be solved? There’s a lot of things you’ve probably learned from growing this first company that I think will allow you to stair step your way up and potentially grow faster with the second one.
Now there’s also the danger of you always forget how hard it is in the early days, and I’ve said this, I remember I said this on Twitter and Heaton Shaw responded, “Absolutely, every time.” And he’s on what is fourth or fifth product? And you just forget that the first 12 months you think you’re going to get there faster because you know what you’re doing, and you have the money, and you have the focus and you should be able to get there faster and you don’t, right?
It’s super frustrating. Trying to find product market fit is the huge question mark because you might find it in three months and you might find it in 18 months. And that’s the biggest difference is, as you build something people want and are willing to pay for it. It’s like how quickly can you get there? And without knowing your individual skillset and the market you’re going after, it’s really hard to guess how long that will take. But if you were to come to me and say, “I’m an experienced entrepreneur, I have half a million dollars in the bank, I have years of runway, do you think I can get to $15,000 of MRR?” I would probably bet on, yes. Good question, Ryan, thanks for sending it in.
My last question for the day is from Gavin about whether it’s time to move on.
Gavin says, “I built teencybit.com, a daycare management app targeted towards home daycares. I was inspired by my mom who runs one of these small in-home daycares, but she won’t use it. She’s helped me test some things but doesn’t seem interested in using it. This sucks. I’ve emailed some local daycares with little response. My question is, when do I learn that this isn’t going anywhere? Did I try something in a space where I really just didn’t have enough connections? Is there a cheap way to market this and further this test? I feel ready to give up and try something else, but I also don’t want to give up on something that could actually make some money. What should I try before giving up?”
So specifically with this case, I know that daycares are notoriously cheap, especially home daycares because they think consumers, and I remember our sons were at an in-home daycare. It was actually good friends of ours, and at one point I asked the owner about the software she used for billing and she said, “Yeah, they charged like $5 a month flat,” or $10 a month. It was incredibly cheap. And I was like, “Really? They don’t take a percent of the payment?” She said, “No, if they did that, I wouldn’t use them.” And I was like, “Wow, what if they went to $20 or $30 a month?” She said, “Yeah, that’s too expensive.” And I remember being like, oh, that’s a mentality. It’s this really frugal. I have my house and I have this little home business but not a good market.
That’s what I took away from that, and I’m making a very broad generalization based on that one interaction, but sounds like maybe you found that a bit as well. I think the biggest thing I would think about of what do I try before giving up? Well certainly try to ask my mom why she doesn’t want to use this? Is it too complicated? Is it just easier to do on paper? Is it easier to do the way you’re used to in Excel spreadsheets or whatever it is, and maybe that’s just your mom, but then if you can’t get other people to talk to you to also tell you why they will or won’t use it, then you’ve kind of hit roadblocks, right?
The question you ask is there a cheap way to market this and further test this? I don’t know. Is there search engine engine traffic for this? Have you gone to a keyword tool? Have you looked on Facebook groups? And Cora’s not a great place for this, but where do home daycare folks hang out and do they have this need? It’s like I would go back to pretending I didn’t have a product and I would try to run it through the 5:00 PM framework. You’ve heard it here on the podcast, you can Google it’s 20, 30 episodes ago, but I would reevaluate this idea, now that you have the software, you kind of have invested a bunch of time, but it’s a sunk cost, right?
You’re not going to get that back by pushing on this further. And I would be trying to look at this through the lens of where is the traffic? Again, it sounds like you wrote code based on one person having that need, and this tends to be that scratch your own itch fallacy of well, I have the need and so everyone else does too. And let me tell you, the hundreds of products that I’ve seen fail because you have a need yourself or one other person has it and you don’t set up a landing page and drive traffic. You don’t get 10, 20, 30 other people to buy-in and say, “Absolutely, I would want that.” Before we launched Drip, I had 11 yeses who’d said they’d pay $100 dollars a month. Before Jason Cohen launched a WP Engine. He had 40 people who said they would pay, I think it was a $100 a month as well for WordPress hosting.
That’s not the only way to validate, but it is a way to get around this, certainly putting up a landing page and trying to send paper, click Facebook, Instagram traffic, Google AdWords traffic, to it and gathering emails, probably not going to work. And those are the two ways I think about validation. You have your landing page smoke test, and then you have your individual conversations. And so again, I would go back to that step one phase one before I even had a product and figure out, is this thing viable? Stop working on the product, it doesn’t matter at this point. The big question is, can I find people to talk to? If no one will talk to you, this is such a good lesson. I’ve said this on the podcast before, but I think it deserves to be stated again, it’s that if you try to validate a product before you build it and you cold call, cold email, cold dm, run ads, whatever it is you do, and no one will talk to you about this problem, how are you going to get them to talk to you once you’re selling something?
That’s when it becomes even harder and developers think, “Oh no, once I have a product, then it’ll be much easier because I have something to show them.” No, all you’re trying to find out, is this pain real? How have they tried to solve it? Are they willing to pay to have this solved? And you can read books like the Mom Test or Michelle Hansen’s, Deploy Empathy to find out questions you should be asking, but if no one will get back to you, either it isn’t a pain point or you’re not doing a very good job of outreach. When I outreached, I would say, “,I’m a developer founder, I’m a local entrepreneur. I don’t have anything to sell you, but this is a problem I’m trying to solve. I’m wondering if it’s a problem for your business. Even if you respond with five words of yes it is, no it isn’t, that would be amazing.”
It’s like email them again. I mean that that’s kind of the things I would do before I gave up on an idea like this. With that said, personally, I would’ve a tough time going into the home daycare market because it’s basically a B2C app, but you have to build it like a B2B app and it’s not going to have the virality of B2C, right?
The reason B2C works is because people talk about it and they recommend it to one another, and usually there’s a viral loop built in and it’s mass market, so anyone can use it. But you’re building an app that has B2C price sensitivity, but in B2B form, and that’s kind of the worst of both worlds. So thanks for the email, Gavin, hope that was helpful.
And that’s a wrap for today. Hope you enjoyed those listener questions as much as I did. If you have a question you want to hear me, or me and a guest answer on this show, head to startupsfortherestofus.com. On your mobile, you can do this. You just click a button, you can record audio, you can record video, or you can send a text question. You can also email questions at startupsfortherestofus.com, and we are getting a nice influx of questions, so these episodes will keep coming out and I look forward to hearing from y’all. This is Rob Walling signing off from episode 662.