Episodes

Rob Walling:
It’s another episode of Startups For, the Rest, Of Us. I’m your host, Rob Walling, and in this episode I sit down with Derek Reimer as we review the key takeaways from MicroConf Europe 2024, which happened just two or three weeks back in Dubrovnik, Croatia. You’ll hear us discuss in this episode several of the most notable talks, as well as some takeaways that we received from the speakers. In addition, I give an overview of the event and I talk about how it sold out in only seven weeks, and there were many folks who wanted to attend the event that weren’t able to get a ticket. So if you’d like to attend the next MicroConf, it’s going to be in New Orleans next March, you can head to MicroConf dot com slash us to get your ticket. Now, the tickets as of today, are the least expensive they will ever be. They’re only going to get more expensive. And this event, if our past events are any indication, will sell out. So MicroConf dot com slash us if you’re interested in heading to New Orleans in March of 2025. And with that, let’s dive right into my conversation with Derek Rimer. 

Derek Rimer, thanks for joining me on the show to talk through MicroComp Europe.  

Derrick Reimer:
Yeah, it’s my pleasure to be back. Just sinking back into central time, having left Europe yesterday.  

Rob Walling:
So you woke up at five 5:00 AM all bright-eyed, Moshi  

Derrick Reimer:
Tailed. I get glimpses of what it’s like to be a true morning person.  

Rob Walling:
Indeed. I love flying West. It’s so nice. And then flying east is like, oh no, I need to take gobs of melatonin and still wake up. Actually, the first night I was there because I got two or three hours sleep on the flight to Dubrovnik, and then first night I was there I stayed up just till eight, which is like a victory. I’m so tired. Oh my gosh. So I take melatonin and I figured usually if I can make it to four or five, I’m super happy. So I wake up and it’s all dark outside and I was like, I got to go to the bathroom and I look at my clock, it’s 10:30 PM and I was kind of awake and I was like, no, I just took a nap. I basically, and I was like, I need to take more melatonin now  

Derrick Reimer:
To  

Rob Walling:
Get down. So I took again and then I was out till three 30 and I was like, no, that’s not enough. So I hate flying east.  

Derrick Reimer:
Yeah, it’s tough. I don’t have a ton of experience with it. And it’s funny, I was chatting with a R on the opening night and regaling it with my story of the 12 hour layover that I had on my way out to Europe. We came a little bit early to do a little vacation ahead of time, and then he was just laughing at me like, oh, you sweet summer child, you don’t know the tricks. Here’s how  

Rob Walling:
I would not do that. As someone who’s gone to Europe a bunch. Yeah, you do start to get a little travel hacky with it. I’m the same way. So this was your first time to MicroConf Europe and you’ve been to many of the US events? Almost all of them, if I recall right.  

Derrick Reimer:
All but the first one because I didn’t know you then. Very first one.  

Rob Walling:
Yeah. Yeah. What a trip. I guess to kick it off, let me give folks an overview of the European event maybe compared to the US event because the US event pre Covid was 300 people and post Covid has been about 2 25, 2 50, and the Europe event is the biggest event we’ve ever done in Europe. This year, I think it was 150 ish, maybe a little more, 155 attendees. And that’s the biggest it’s ever been. We sold it out in seven weeks and that’s been the new thing since covid is obviously there was a huge drop off and then we feel the momentum has come back to the event. So I expect Atlanta sold out, this sold out, and I expect MicroConf New Orleans. This is the announcement. No one’s heard that before. Now. Yeah, aside from, unless you were in dub, brunick, new Orleans, which is going to be next March, I expect that to sell out as well in the next couple months. So 150 ish, 150 to 160 attendees. The room was packed, great energy. There were 30 countries represented and interesting tidbit, we had 30 better half tickets. The guest passes where people can, your spouse or significant other can join you at an evening event. 

30 of those, so that’s 20% of the attendees brought a spouse or significant other, which I believe you yourself did.  

Derrick Reimer:
I did, yeah. And that was really awesome because I feel like I got to meet a lot of people’s plus ones and that gives you a different sense of the person. For sure. When my wife’s with me, she’s hyper social and very good at getting conversations steered towards, I want to meet, I want to talk about you as a person and not just the work, not just the startup you’re working on. Whereas a lot of times for me, a MicroConf conversation will just be like, oh, what are you building? Here’s what I’m building, what are you struggling with? And those are all interesting, but when you start to get a better sense of who the person is, that’s where real connections start to form.  

Rob Walling:
Yeah, big time. I like that about MicroConf. I don’t know of other events that do it. I’m sure there might be some, but one of the important things that we’ve always emphasized is family, relationships, kids if you have ’em, spouse, if you have one, it’s like this is all part of your life and we’re doing this to better our life, not to make a dent in the universe. We’re doing it because we want our lives to be better and your lives are not better if you torch your relationships. And so that is something I enjoyed about this event was that a lot of folks brought, as you said, significant others, that hotel though. So we Dubrovnik, we’ve done it there four times. We’ve done Europe, micro Europe, I believe 11 or 12 times, and four of them have been in Dubrovnik. So no matter how much I say on this podcast, it’s the Dubrovnik Palace Hotel, I believe it’s called. And I say it is one of the nicest hotels I’ve ever stayed in. The rooms are nice, but the view, every room has a full slider view of the Adriatic. You have a deck and all this stuff. I say it and then people don’t believe me. So when you got there, was it one of the best views you’ve ever had in your entire life out of a hotel?  

Derrick Reimer:
Oh, hands down. Yeah. I mean that place is just, yeah, it’s all about the scenery and I didn’t fully know what to expect. Having never been to Croatia before, I never been to Dubrovnik of course. But you get there and you just feel like you’re in another land. The landscape is just different than anything I’ve seen in the us. It’s just, it kind of its own thing. And you feel like you’re transported into another world and there’s not a bad sight line to be seen in that place. It’s  

Rob Walling:
Pretty magical and that’s why we keep coming back to it. And I don’t know, I mean basically I asked the attendees at the end, let us know, do you want to come back here again? Because it is a hotel that it’s hard to get to. I mean for me, for us coming from the US, it’s just a few more hops than I would like. But aside from that, there’s just no drawback to it. It’s such an amazing venue. So with that preamble, I mean I’d like to get into the talks and hear your thoughts and stuff. Talk about the excursions. That’s something we’ve started to do over the past few years as we’ve reshaped and reprogrammed to the event. It used to be nine talks in two days and now it’s like five or six talks, and we fill in the rest of that sometimes with workshops and all the time with excursions where you get out. There was what kayaking this year there was wine tasting, which I believe you did. There was a boat ride to an island and a kind of scavenger hunt. There was some other stuff. I actually don’t remember what all of ’em were. But let’s kick off with excursions. Before we get into the talks, tell us, you picked wine tasting. What was the logic there? And then I guess generally, do you feel like the excursions are a benefit to the event or that you prefer to watch two or three more talks?  

Derrick Reimer:
Yeah, I think the excursions are definitely a benefit. I remember the first few years of going to MicroConf, just feeling almost I’d been sitting in a classroom all day long, not in a bad way. It’s good information coming from the stage, but sometimes it’s information overload and then you’re trying to fit hallway track type conversations in between the cracks and you’re just completely exhausted at the end of the day if you’re maybe more so if you’re introverted like me and a lot of people in that room are, I think so, yeah, the excursions are nice. We go to lunch and then it’s like, alright, you break after lunch for whatever activity you chose. I chose the wine tasting partially because I figured it would just be a good chill environment to sit around and have kind of those ad hoc conversations with folks. Sometimes I think it’s a little more difficult when there’s a big activity. 

And for me, I was like, I don’t know if I want to pack hiking boots and whatever else would be necessary for the more rigorous activities. But yeah, so my excursion, I can say we went into Old Town, tried some olive oil and some wine and it was fun. It was fun to just kind of walk around. And honestly, every time I’ve been on one of these excursions, there’s always at least a small bus ride or something and then you sit on the bus next to someone else and you have a conversation there and then it kind of continues or you kind of cycle around a bit as the excursion goes on. And yeah, I think it’s just a good way to put an around the hallway track. I think sometimes just literally standing in a hallway and having these conversations can feel a little bit stilted, so it’s good to have something to do while you’re having those conversations.  

Rob Walling:
And that’s a good perspective on it. And that’s really why we started. It was like how do we facilitate more relationships in a way that is fun? And we’ve done, there was a hike, right? That was the other one I forgot. But yeah, we’ve done, it’s called beer tasting, what is it? It’s just like a brewery tour is really what we’ve done and we’ve done, gosh, all types of boating and anytime there’s water around, it’s like, Hey, you want a kayak? Hey, you want to get on a boat? So it’s neat to be ax throwing. I think there was a trapeze even here in Minneapolis, Sherry took people to trapeze, which is kind of crazy to think about. But yeah, so those have been fun. And generally we’ve never gotten complaints of like, oh, I wish there were more talks. No one has said that. So that was a change we were going to make in 2020 and then obviously didn’t have the event for a couple years and when we came back we were like, yeah, let’s really do that, kind of change it up. So it has been fun.  

Derrick Reimer:
Yeah.  

Rob Walling:
Alright. So curious to get your take on what you think, having been to a bunch of us events and not the Europe event, what’s the biggest difference or key differences between the two events?  

Derrick Reimer:
So yeah, I would say first and foremost, the location is just completely unique compared to, well Las Vegas where the US event used to be. And then even being in more major US cities, it feels like it has a different vibe, maybe a chiller vibe, I would say being in this amazing old city on the Adriatic Sea, and I think that’s a good thing. I think there’s a certain energy that comes from the US events, and I think that’s partially due to the attendee size too. So there’s more people, there’s more connections to make. The rooms are a little bit louder just because more voices. And at the year event it felt reminded me a little bit of MicroConf us maybe six, seven years ago, a little bit earlier stages of the conference where there’s fewer attendees and you can feel like you can make the rounds a little easier through the room. I honestly felt at us, I’ve been coming so long and there’s an increasingly large cohort of people that I’ve just seen over and over again. So it’s like now going to the US events, it’s like, okay, there’s 30 people that I’ve definitely met before and would love to reconnect with, and that’s almost a little daunting. So being a person based in the US going to Europe, there’s a lot fewer people that I’ve met before at the event. So it feels kind of like an open clean slate to go make new connections, which was cool.  

Rob Walling:
Well, with that, let’s dive into the talks, and we’re not going to talk about every talk obviously, but I like to touch on some key takeaways. I know you astutely took notes because you always take notes, but I was like, Hey, you want our quote a podcast with me after? And I’m sure that’s inspired you to be a little more nerdy on this one. So the event kicked off with KO’s fan favorite Pel Gioni who has done, I don’t even know, man, this is his fourth MicroConf talk. Maybe he’s come to the US a couple times, done some Europe, and he doesn’t really do conference talks anymore, but I emailed him and he’s like, you know what, man, MicroConf, I haven’t done it in a while. I’m going to come out and do it. So I really appreciated it. And his topic was, it was moving from developer to entrepreneur to founder to manager, or I don’t remember the exact details of it, but yeah, why don’t  

Derrick Reimer:
You maker to founder to entrepreneur,  

Rob Walling:
Maker to founder, entrepreneur. Yeah, that’s right. So what were, I don’t know, one or more takeaways that you had from oc?  

Derrick Reimer:
Yeah, he came right out of the gate. I feel like this was a very strong first talk to kind of set the stage. I mean, he in my mind is sort of a mainstay of the community. He’s almost at the Basecamp level of he’s been there, he’s been executing and just doing his thing and obviously doing really well as a company. I think he said there millions in a RR 29 employees. And yeah, he’s obviously been kind of maturing in the way he thinks about business and that’s what came out in this talk. So I think a lot of us are kind of absorbed in the Twitter sphere of people who are trying to often reinvent the way they run their business or trying to just come up with all of the solutions from first principles, thinking of their business as a product. So that’s something that Dy talked about right out of the gate was like, this was a big mistake I made early on was thinking about my business as my second product and thinking, you know what, I’m not going to do what the MBAs do and what people go to business school that’s for big companies. 

I’m a small indie company and I’m just going to do stuff my own way. And I think he has learned over time that often you should just kind of follow the best practices. I mean, management theory is there for a reason. So employees standardized job titles actually because they want something to look reasonable on their resume, should they decide to go work somewhere else and be able to have this transferable experience that’s not just like a happiness engineer or something, but an actual job title. People want to know if they’re getting paid fairly. So what are the salary bands for this role? How do you actually define whether someone fits in a role? So it was very interesting to hear him talk about how he made that progression because I think even if you’re earlier stage, well the earlier you are, the easier it is I think to fall in this trap of now we’re just going to do things differently. We’re just going to come up with our own rule book. So I love to hear this kind of wisdom, this hard earned wisdom from a founder who’s been at it a long time,  

Rob Walling:
Who’s been at it, and it’s not just the number of employees, but he’s been doing it now 15 years. I believe he launched in oh eight or oh nine. And this is the conclusion that pretty much everybody I know eventually comes to is you think you’re going to invent job titles or not have ’em or be, whenever I hear I’m going to do a completely flat org or a democratic org, I’m always like, Nope, good. There’s two in the world that have survived longer than 10 years doing that. It just, we are makers and we want to do creative things. And I love that analogy he said, of your company’s not your product because your product, you have to make a bunch of judgment calls and you’re making stuff up basically as you go along, but your company, there is standards for that or at least frameworks for it. Now I will say that I’ve never run an entire company of 30 people that’s bigger than any company I’ve run. But even at 30, I don’t know that I would have as much process as he does now. Maybe that would be a mistake on my part. Maybe that’s hubris, but I really don’t like process this. I’m not telling you anything 

But listeners, I tend to shy away from it. So I need someone who does bring process because even at a 10 person company, you need some process. And we had no process at Drip because I was just like, eh, this is whatever, we’ll just do the things and it worked, but then it was like it wouldn’t have scaled very well. So there’s this balance. I think Pel D has gotten into the frameworks and used them well. I would almost dial it down a little bit from what he’s done, but maybe, hey, maybe at 30 people, that is what you need. And his learnings are the reason I almost wasn’t going to have a big section in the SaaS playbook about job titles and salaries and management and when to hire managers and how management versus leadership, just all that stuff. And the shock of after we got acquired and seeing a bigger 170 person company, how they operate and how differently it was from us. I was like, oh, there are some really helpful things that smart MBAs know. I’ll discount half of what they know. But the other half is actually quite helpful and the hard part is knowing which half do you take.  

Derrick Reimer:
Yeah, I think there certainly is the risk of overcorrecting on this, especially at different scale. I came away from this thinking like, oh man, I need to be thinking how I could be maybe a little more rigorous about stuff and not just trying to make it up, but I’m also realizing for me, I’m a three person company, so it can still look a lot different. But there’s one kind of overarching principle that he stated that I kind of starred and underlined on my notes. He said, the job of the CEO is to provide clarity, and that takes many different forms. So if you’re talking about a job title or something, it’s like, well, how can you make this as clear as possible so that the employee understands what’s expected of them and you’ve made your expectations clear, you’ve communicated this appropriately. And how do you communicate a product roadmap to your team and how do you communicate to your support people how they ought to respond to feature requests and bug reports and all this stuff? It’s going to look lighter when you’re smaller, but you still ultimately have to provide as much clarity as possible so that no matter how small organization can function well,  

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Rob Walling:
Our next talk was from Andrew Davies, he’s the CMO at Paddle. I assume most people have heard of Paddle and he brought in, it was data-driven approaches to growing your company, right? What were your thoughts on his talk?  

Derrick Reimer:
Yeah, I think he just sort of brought a little bit of his own story into the talk, talking about his experience from being kind of in the earlier stage startup land to now being the CMO of Paddle of big payment processing company. So he had some various tidbits. One thing that he talked about was the kind of general advice in the MicroConf community is raise your prices, always be raising your prices. And he had some nuanced take on that to say, at least in the current climate, he’s finding in the data that just blunt price increases are not working great. And so it’s better to think a little bit more strategically, maybe especially in this current season, about how to segment your pricing, how to maybe play with packaging or add-ons or some ways to say, people who are getting the most value out of these features, you can put them in a different bucket and charge a higher price, but just blanket raising your prices across the board. He’s seeing some pushback against that in the data of not being super effective. And he also talked about pricing localization as a growth driver. Even just this example of expressing your prices in Euros if someone in Europe is viewing your pricing page. And I thought that was really interesting. It doesn’t necessarily change under the covers, I don’t think how your Stripe checkout flow works, but on your pricing page, if you express it in the localized currency, he has seen a nice conversion rate lift. So I thought that was an interesting one too.  

Rob Walling:
Yeah, it’s always neat to have speakers who have a large swath of data and paddle certainly has a lot of subscription and SaaS companies. So I enjoyed Andrew’s talk. One thing I forgot to say at the top when I was kind of giving the overview was this stat about the attendees in the room that I was shocked by. I was so shocked. I asked producer Sonia to verify it, and then I said, can you please show me who responded yes to this? And it’s that 24% of the companies in the room had at least a hundred KMRR.  

Derrick Reimer:
Wow.  

Rob Walling:
At least 1.2 24% shock. I was like, nah, I think they misread that. I think they meant a R. And I started looking and I was seeing the guy and I was like, oh no, I know them. I know them, I know them. So really impressive room to be in, to be honest. And there’s a huge swath that are in the mid to high six figures in terms of a R, it’s a side jack, but I just wanted to mention that of the quality level of the accomplishment of the attendees. And that was evident in the conversations. I have no qualms with someone coming who is pre-revenue, and there were, I dunno, 20% of the audience or something was pre-revenue, which is fine. That’s great. Come and learn and hang out. But if all of the audience or 80% of the audience is pre-revenue, the conversations get a little old looking for an idea. But when people have a business and you can either learn from them, you can hear their war stories, you can maybe give ’em advice from your learnings that that’s the fun of being at a MicroConf.  

Derrick Reimer:
Yeah, totally. Yeah, at risk of this sounding, it’s was all positive or something. That is one thing that I noticed about this MicroConf in particular. And there are ones in the past, I think in the us I think you guys experimented pre covid with starter and growth tracks to try to address the issue of people being at different stages. And I think whether it was by happenstance or just the way that the Europe event has grown over time, it did feel like a pretty good spectrum where there were people ahead of me and people behind me. And those are both interesting conversations to have.  

Rob Walling:
And I like to, in this podcast kind of recap of the event, I like to call out things that went wrong because I don’t want it to be a big puff piece of like, Ooh, wasn’t it great? And everything was great. It was one of the best MicroConf Europes we’ve run. It was in the top two for me personally. And someone asked me, well, what makes it great? And I was like, the attendees, the energy, the vibe, the positivity, and then the talks were all good or better. Usually we do. I mean, usually I spend so much time curating and trying to get, I want everything to be exceptional. That never happens. It just isn’t the way it goes. Even a great speaker has an off talk or an off day, or you’re betting on new speakers and you coach ’em and you do everything you can, but when they get up there, sometimes it doesn’t work. 

So there’s always some mishaps. There’s often logistical mishaps, sprinklers going off in the middle of a room, or small things like the audio popping or the audio qualities, but the room’s too hot. There’s just all things wifi goes out, there’s all things that can go wrong. And I just kept waiting through the event. I was like, don’t say to producer Sonya, wow, everything’s going right. And I’m so surprised. Don’t say that. Don’t say that because the moment you say that, something’s going to go wrong. But I just kept waiting and then we got to the end and I was like, that was one of the least stressful events I’ve run in a long time. And it was just really a really positive event. So I’m guessing that’s how it felt on your end too, as an attendee, I’m hoping.  

Derrick Reimer:
Yeah. Yeah, it was honestly kind of hard to find anything to complain about. It was pretty windy down by the ocean, I’ll say that. Good point. Yeah, you guys couldn’t have turned the wind down, but the sun  

Rob Walling:
Was in my eyes when we were at the evening event. Oh, probably. Here’s one thing that I would do differently is the opening night reception was in a lobby and it was loud and I don’t like loud stuff. So that was probably the one. But I mean, come on. That’s such a rounding error compared to the thing. Totally.  

Derrick Reimer:
Yep.  

Rob Walling:
Anyways, yeah, let’s talk about the next talk was actually because we did excursions that afternoon. And then the next talk was Mr. Omar Zen home talking about 10 things he had learned starting and selling Webinar Ninja. What were your thoughts there?  

Derrick Reimer:
Yeah, I thought it was interesting to kind of contrast Omar with pedi because I think they’re both successful in their own. Obviously Pel has gone the path of the more traditional organic bootstrapping, keep running your company until maybe you want to retire kind of mode. And Omar was definitely more from the lens of, alright, I set out to build something really valuable and I went after it and I hustled. So he started out the gate saying, I intentionally stayed poor while doing this. And I hear the ways that I kind of structured the sacrifices I was going to make in my life so that it was him and his wife. I think they were both part of the business, how they could make this run at building something really valuable and eventually exiting. And he did exit. So it was kind of cool to see a couple of the speakers having this long arc of like, alright, I started, I built and then I sold and here are the lessons that I have. 

So he obviously had 10 of them. I won’t go through all of ’em, but he talked about making it personal, having your, why are you doing this? What is your motivation when things get hard? And that was a good reminder. He talked about hiring. He said, hire slowly fire quickly. Which is something that I think is pretty common wisdom at this point, but always helps to hear it. This just keeps getting reinforced over and over again by people who have been in the trenches for a long time. You talked about evolving your product over time, holding loosely to your product. And this is something that a lot of us hold very strong onto our product and we love it and we love what we curated, but sometimes that’s not what the market needs and you have to be willing to adapt. And so it was just fun to hear these hard-earned insights from someone who made it out to the other side and sold his business.  

Rob Walling:
I really enjoyed his talk. If folks want to see the talks, we do package ’em up and sell them. I believe it’s a hundred or $150 for all the talks. And those obviously get on email list microcomp.com if you want to get notified when those are available. And with that, let’s jump to our next talk, which was Marie Martins from Tally. She’s the co-founder of Tally, and she was on this podcast just, I dunno, two, three months ago talking through her journey, but she told that story with more depth and more details and slides and all that. So what were your takeaways from hers?  

Derrick Reimer:
Yeah, I mean, what a fascinating success story. I remember listening to her on the podcast and thinking, wow, how did they do this? So it was fun to hear her talk even more about it. And I still don’t know if I fully understand all of the ingredients of the success that went into why it worked to Tally. For those who don’t know, it’s this Form Builder product competes with Typeform and they’re managing to make freemium work at really good scale. What do they have? 400,000 free users,  

Rob Walling:
400,000 free users, and they’re building public. So the a RR is what, 1.8 million I believe, and they are fully bootstrapped and it’s just her and her husband and then one support person. So freemium is the driver for them.  

Derrick Reimer:
Yeah, obviously she talked about this on the podcast episode as well, but about their sort of early cold outreach strategy to just hustle and seed the pool of free users. And I’m sure within that got a lot of micro influencers who had audiences or communities they were part of where this could just take hold and spread. She talked about how they latched onto the Notion community in particular. I think their product, she talked about being very aesthetically similar to notion. So people who are in that ecosystem would feel like, oh, this fits naturally with the rest of my tool set. So I think there’s some kind of dynamic there around positioning yourself next to a product that is beloved by a lot of people and feeling like, oh, of course if I use Notion, then of course I’ll just use Tally. And obviously she is a very, very talented marketer, knows how to put her finger on the pulse of what this, at least the initial seed community of people who would latch onto this free product, what these people wanted to see and cause ’em to jump over. So it was inspiring to hear her talk about that. I definitely would love to replicate some of that if I can find ways to do it.  

Rob Walling:
Easier said than done a lot there. There’s a lot happening that’s going right for them that I have a lot of respect for what they’re doing, but man, making that work is one in a hundred or something, you know what I mean? 

And I have a lot of respect for her husband who I got to meet Philip Philippe, I believe, pronounces. But everyone just kept saying, that product is so amazing and so simple and so gorgeous, and so this and that. And so I’m like, obviously he’s a damn good dev. Probably a full, he’s a full set. Cause he’s the only dev on it, so that’s cool too, right? It’s like to me, did you look him in the eye and be like, all right, which of us is better, sir? Which of us is a better full stack? That would’ve been a heck of a, I think if the two of hands touched, does the universe implode because it’s like the two amazing full stack devs? Is that how that works?  

Derrick Reimer:
Yeah, yeah. I think he actually does, she mentioned this in her talk, I wasn’t sure what their division of labor was around design. A lot of times there’s a lot of times it’s a backend front end developer and then someone who does design separate. And it sounds like Philippe does a lot of their design work as well. So  

Rob Walling:
Were you alling him and you’re like, bro, I don’t come from my title. Everyone thinks I’m the best full stack. Don’t even bring it. Yeah. Who’s the full, I don’t know why. I think there’s some has to be some big rival where you both are super chill and super respectful and somehow I want there to be a beef 

Fist fight in the parking lot. So anyways. Yeah, no thanks. I appreciate your sentiments about her talk. It was great to hear the deeper story because in the podcast we can only cover 30 minutes with no visuals, and she crafted it in a way that I really appreciated. Our next talk was an attendee talk. Actually, we only had one attendee talk this year, and it was Tim Vander Castile who submitted a talk about things he had learned building his business. And I hadn’t heard of Tim. And so Tim gets up and starts talking and I’m kind of like, I’m getting tired. It’s the afternoon. And I’m sitting there zone out a little bit, and he’s like, yeah, and then we got our a RR to 35 million. And I was like, whoa. And they bootstrapped and I was like, that’s a thing. And they said, then we sold four and there was an asterisk. It was like, according to public records, I am under NDA, but I can quote a public thing. Then we sold for $300 million. And I was like, what just happened? How have I not heard of this guy? So I was, that was the second slide. I was like, well, now I’m super interested because I just need to hear this story. So with that intro, what was your takeaway from Tim’s talk?  

Derrick Reimer:
Yeah, what a humble guy to be having those numbers attributed to you. I had a chance to talk to him in passing, and my wife actually sat near him at dinner one night and talked to him a bunch more than I had the opportunity to. And he’s just such a normal guy for having sold your business for allegedly $300 million,  

Rob Walling:
Allegedly we’re pretty confident it was at least that is that sentiment.  

Derrick Reimer:
So he had obviously just a 10 minute talk, so three takeaways. But it’s interesting how these sort of dovetailed nicely with both what Omar had touched on and what Pedy had sort of touched on. So he talked about the mistake of being a benevolent dictator for too long early on. You kind of have to control everything that’s happening in your company, but once you start building a team of hopefully people who are smarter than you and better than you at their individual discipline, you start to loosen the grip a little bit and trust your team. So he talked about what he would’ve done differently is empower people earlier and remove himself as a bottleneck more aggressively. And boy do I definitely feel that even with a small team, I think I have the tendency to want to micromanage too much of the business, and even if it’s working on the surface, it’s still, there’s a cost to it. 

My own mental burden and my own managing my own energy can be tough if you’re trying to stay literally on top of every single detail. So that was helpful to hear. He also talked about not thinking enough about culture, and this is something that Pedi talked about a lot. He talked about kind of defining your values and your mission, which again, those sound like very MBA esque concepts that US Bootstrappers wouldn’t want to spend time on, but I thought pedi talked about the benefits of those in a really pragmatic way. Even if your mission is just to stay alive at an early stage, you should state that and everyone on the team should understand that this is what we’re trying to do. And so the way we operate needs to be in service of that. And so Tim talked about, especially as you get bigger, being more thoughtful about the culture you want to craft, that’s one of the few decisions that you do get to make. And the rest, a lot of other decisions should just kind of fall in line with best practices, but you get to choose your culture. So yeah, those are two of my takeaways from Tim’s talk.  

Rob Walling:
And the last talk of the event was yours. Truly, I like to talk on the first day to get it over with, and I can’t remember the last time I’ve talked on the second day actually, but due to scheduling and reasons, I talked last and I talked about breaking through the seven SaaS plateaus, and I finally took that doc that I’ve referenced on this podcast where I have three pre-product market fit and seven, wait, did my talk have eight in it? It had eight, that’s right. I added an extra one 

Because this was the interesting part. Yeah, so I have this document, right with three pre-product market fit plateaus, and I had seven kind of pros once you have strong product-market fit, ways you could plateau. And then those were mostly out of my head and experience and stories and such stories from other founders as well as my own. Then I asked a bunch of TinySeed founders, I have easy access to revenue graphs, so I would look to see where there were plateaus and I was asking founders and an eighth one came up and that’s why I added it. So I guess the title was eight breaking through them. And so I wanted to have, I’ve never presented that material. It’s been sitting in a Google Doc and one reason I never presented, it’s kind of challenging. You can say, well, this is why you plateau because you don’t have enough traffic or leads. 

So the solution is drive more traffic or leads. It’s not actually that helpful to know. So the talk really was to name a framework or at least have to be able to identify. I’m like, I find that it’s helpful for people for me to say there are only 20 B2B SaaS marketing approaches. That’s it. Otherwise you think there are thousands and it’s just like, no, here’s the list. Pick one. Now, maybe I missed one. Maybe there’s 21, but it’s pretty much all of them. So if I say there are eight, is there a chance there are nine? Yeah. Is there a chance there are 23? No, there’s no chance. I know that. I’m not off by that level of magnitude. So trying to codify and get your around the thing is really the goal there. And then I had a story for I guess six or seven of them, like a real life story with a graph that showed someone breaking through the plateau. All that said, that’s the precursor. Did you have any takeaways from the talk?  

Derrick Reimer:
Yeah, I think I know that plateaus are top of mind for a lot of people in conversations that I have at honestly, the last couple of micro comps in particular, I just feel like this is something that a lot of people are coming up against or at least or seeing on the horizon. So I think it’s was really good to get some knowledge out there, at least defining the parameters around the types of plateaus and how to think about fixing them. I know for myself, as I’ve kind of seen plateaus coming in my own business, it’s like, okay, I feel like I could probably be working on many different things. So then the challenge becomes, well, how do you narrow your focus? Because obviously, for example, getting more customers through the door will theoretically solve any plateau if you can just get more customers. But that’s not always the most rational thing to do, just to try to increase top of funnel. So I think this is, yeah, it was just some helpful nuance to think about. Okay, if you look at your churn, is your churn too high? Well then, and you kind of compare that against maybe bands for your industry or whatever, or at your price point,  

Rob Walling:
Like rules of thumb or whatever.  

Derrick Reimer:
Yeah, go to profit. Well, they have a bunch of industry data that you can compare against. And so you can start to use these to hone in and then start thinking about it in a narrower sense of, alright, yes, maybe the answer is get more customers. But also before you try to do that, it’s most rational to think about how to improve retention or how to move out of the churn percentage range that you’re in. I think I’m in a range at a relatively low price point where my churn is higher than I want it to be, and that’s probably just going to be the case because of my price point. So perhaps the solution is think about how do you attract customers who will pay more and that will move you towards a lower churn average, for example. So just some good frameworks I think, to think about this stuff.  

Rob Walling:
Yeah, I appreciate that. That was part of the reason that I decided to do this talk was I see this on Twitter where someone’s like, I’m plateaued. What should I do? And then there’s all this random advice and it’s like you can’t give advice unless you know the Cause. It’s like trying to prescribe a medication when all you see is a symptom. You’re not treating the actual source the actual cause of it. And that was when I realized, all right, somebody needs to get this info out because the thing that I’m going to ask now on Twitter, I’m plateaued. What should I do? I’m going to say, what’s the cause? Which of these eight is it? And if they say, I don’t know, then I’m going to say, you go figure it out and then come back to us and say plateaued because of this. 

So probably next there needs to be a diagnosis criteria of like, well, how do you know which of these eight it is? And I can tell because I see a bunch of businesses, I have the rules of thumb in my head if I can look at your churn or your funnel or whatever, but how do we get those codified in a way that is actually helpful? Here’s the other thing, and I said this, the bleak information or the bleak conclusion is most companies that I see that do hit a plateau don’t make it out. And I think the number of the graphs that I looked through, it was like 80 to between 80 and 90%. Once they plateaued, they just haven’t yet made it out. Now maybe they all will, but it’s like, no, it’s kind of brutal. Yeah, I didn’t know that.  

Derrick Reimer:
I suspect that’s because I think in reality, a lot of the solutions to the plateau involves a pretty significant re-engineering of the business in some way. Whether it’s like tap a new market, add on to the product, or add a second product to your product line to expand your value or going up market, I mean, it’s easy to say and very hard to do because you have to rejigger your go to market strategy and potentially learn new skills or hire new people to do those things. So all this stuff is easier said than done, but it’s helpful to have some foundational frameworks to begin strategizing around it,  

Rob Walling:
I think. So if you’re listening to this and you regret that you did not go to MicroConf Europe, you should come to MicroConf in New Orleans. microcomp.com/us tickets are now on sale, and they are the cheapest they will ever be. The price will only, it goes up every month or two. So if you’re thinking about going, it’s next March 16th through the 18th, that is 2025 in New Orleans, and I hope to see you there. Do you think I’ll see you there, Derek?  

Derrick Reimer:
Oh, for sure.  

Rob Walling:
Yeah. Yeah. Have you been in New Orleans yet?  

Derrick Reimer:
I’ve never been in New Orleans.  

Rob Walling:
Oh, that’s a good excuse to go down there.  

Derrick Reimer:
Yeah, I would be going to MicroConf regardless, most likely. But it’s also a nice little thing to have a new location to check out. That’s an extra incentive.  

Rob Walling:
It is like going back to Vegas again. It’s like, well, I’m definitely not going for the town.  

Derrick Reimer:
I’m  

Rob Walling:
Going for the event. But yeah, we’ve hopped around Atlanta. It was neat to pop in there. It was neat to see Denver. I’ve been there several times. I’ve only been in New Orleans once, so I agree. I’ll do a little sightseeing. I was trying to think of some other places that we could host it that are interesting. Austin, Texas would probably be high on my list, but I think I like the idea of continuing to bounce it around for exactly that reason.  

Derrick Reimer:
Yeah, totally.  

Rob Walling:
Alright, man. Well, thanks so much for joining me on the show today. Folks want to keep up with you. You are at Derek Reimer on X, Twitter, and of course savvy cal.com if folks want to use the best scheduling link on the internet.  

Derrick Reimer:
Indeed. Well, thanks for having me.  

Rob Walling:
Thanks so much to Derek for jumping on the mic with me and helping refresh your memory if you went to MicroConf or to drop some new thoughtful takeaways to you in case you miss the event. Obviously, we’re going to have videos available, as I said during the episode, MicroConf dot com if you’re interested in signing up for the mailing list such that you hear about the video package once that’s around. Thanks so much for joining me this week and every week. I’m Rob Walling, signing off from episode 737.

Rob Walling:
Welcome back to Startups For, the Rest, Of Us. As always, I’m your host, Rob Walling. In this episode, I’m going to be answering later stage questions. I received a ton of good questions on X Twitter a month or so ago when I did a call for them, and I had gotten a little weary of answering the same questions about idea validation and early stage stuff. So these are all folks doing six or seven figures in a RR that have questions ranging from regrets for things you didn’t delegate how to decide to DIY, versus hiring a growth agency, deciding whether a customer type is worth selling to or targeting. And more. Before we dive into the episode, my new course, the SaaS Launchpad, has been live for a few weeks. It has been receiving rave reviews, SaaS launchpad.co. If you want to check it out, it’s for the earliest stage SaaS founders. 

So if you’re looking for an idea, if you want to vet an idea to validate it, if you want to build a launch list, if you want to build an MVP launch your product, this is the course for you. It is the best course I’ve ever put together and it’s really the first course I’ve built in about 14 years. So you can head to SaaS launchpad.co for full details and to check out the course. And one more thing, MicroConf us 2025 tickets have just gone on sale. Every event we’ve run for the past 18 months, I believe maybe more, has sold out and I expect MicroConf US 2025 to be no different. It’s going to take place in New Orleans, March 16th through the 18th of 2025, and right now our lowest priced tickets are available on sale. They will never be lower priced than they are now. We’ve just wrapped up our Dubrovnik event that one sold out, and again, I expect this New Orleans event to sell out. All the details are at microcomp.com/us. Be sure to check it out soon if you’re interested in joining me. And two, 250 of your best founder friends that you’ve known on Twitter that you’ve met in person that you’ve aspired to meet in New Orleans next March. 

My first question for today comes from Tobe. He is Tobe builds on X Twitter. His question is, is there anything you regret doing yourself instead of delegating while trying to grow to 10 KMRR? And I’ll do you one better. I won’t just talk about things I regret, but the most common mistakes I see early stage founders making, and these are founders who listen to startups, For, the Rest, Of, Us, these are TinySeed founders, these are MicroComp founders, and there are some pretty common anti-patterns in this early stage of learning how and when to delegate. Now, delegating is a balance, especially in this early stage if you’re bootstrapping, because oftentimes you should delegate or outsource a bunch of things, but you don’t have the money, right? You don’t have the luxury of a funded competitor who can hire a chief of staff on day one or who can hire a staff to do things that you don’t want to do. 

So there is this balance between your willingness to delegate and the budget you have to do so. But with that said, I think a couple things that I commonly see founders keep doing that they shouldn’t be doing in these early stages are things like bookkeeping or doing your own books in general, doing your own accounting, not hiring a CPA DIYing your own legal. This is one that I did a couple times. I never knock on wood, wound up regretting it, but certainly things that I could easily ever regretted. It had those gone sideways when I downloaded a template for a contract and edited it myself. I think founders who are doing audio video editing in the early days are doing themselves quite a disservice. Audio and video editing are so fulfilling. I dunno if you’ve done it, but it just feels like you’re getting stuff done. 

You’re doing something with your hands and when you ship it, it’s a better end product. It feels really good to do, but it is a tremendous waste of time because audio and video editors even really good ones are what, 15 to $30 an hour? I mean, obviously more expensive and less expensive, but this is an easy one to outsource. Another one that I see founders doing and kind of making a reason for it is continuing to handle their email and live chat support. Now this one depends because if you’re doing high touch sales with a high ticket product and you’re only doing a few sales now and again, then you probably don’t need a support person. But if you do have a wider funnel, lower touch funnel where you have a lot of volume coming through, email support and live chat support if you offer it are some of the first things that I look to outsource. 

Now, the reason I hear a lot of founders keep doing it for way too long as well, it’s only 30 minutes a day and I want to be in communication with my customers. This is the way I keep in touch and get their feedback and hear what should develop in the product. Now, both of those are kind of reasonable. However, I will say that with pretty much every product I’ve launched, I have hired part-time support help. Sometimes that part-time support help would swing across multiple products I owned. Sometimes I would just overpay them for the hours they were working to say, look, you get a minimum of 10 hours a week. I know I don’t have 10 hours of support yet, but I’m going to bring you in and you can write KB docs or you can help with onboarding or there’s a ton of other stuff that I can find depending on your skillset I can find for you to do to kind of fill that time. 

So even if you don’t have a ton of support or it’s sporadic, I’ve always figured out a way around that. So I just don’t believe it as an excuse because it’s never one that I’ve used and I’ve always outsourced support within a few months of taking over or launching an application. The other thing about not being in touch with your customers is that I tend to be known for being in really close contact with my customers. Whether I was running SaaS companies or now MicroConf, TinySeed writing books, I talk with people a lot and putting a support person between me and all the end users did nothing to curb that. It did nothing to dissuade me from talking to and hearing from my customers because my support guy, Andy would say anytime there was new feedback, new input, anything he thought was novel or that I should know, he would either cc me on it or he’d just sign it to me. 

Once it was resolved, any of the rote tasks or the rote responses that he could just hammer out, he would get back to ’em. He would close. I didn’t need to see over and over that someone wanted to reset their password or someone had a question about pricing. Now, if those questions came in a lot, Andy would then say, Hey, a lot of people having questions about pricing, can we clarify this on this page? So there is a key factor here of hiring someone in that support role who is good and is willing to escalate things to you or at least pass things along that they think are notable. Another thing that I regretted, I remember regretting this in the days of Drip was continuing to handle social media for my products. It’s not that I should have hired it out, I just don’t think I should have done any of it. 

I really don’t. Social media did so little for us as a SaaS tool. We were not Intercom and HubSpot and Salesforce. We were a tiny bootstrapped product that was growing and social media was nothing but a headache if you want to know the truth. And if it drove five customers in the entire history of the company, I’d be shocked. And so what I would do these days, I would just get off social media. I wouldn’t try to hire someone for it. I wouldn’t use it as a marketing approach. For now, I would focus on blocking and tackling on SEO, on content, on sales, on real inbound marketing, on integration marketing, on attending live events, on going on podcasts, on talking to my customers. There’s so many other things that I would be doing to not waste time because social media is a distraction that masquerades itself as productivity, and people justify it by saying, well, I’m working well, I’m marketing. 

No, you’re not. You’re not marketing. You’re getting on social media and you’re frankly feeding an addiction that these apps are really good at feeding and they have entire teams engineered to make us feel this way to make us feel productive when it’s actually a distraction. So if I were just starting out today, I would focus on marketing and sales, and I would ignore social media altogether until such a point that it became important. And frankly, there are TinySeed companies doing millions of dollars a year that still have almost no social media presence. So it is not only possible to get there. I would say it is easier to get there if you’re not focused on that distraction. And lastly, the thing that you’re going to have to weigh as a bootstrap founder is the next sentence I’m going to say, which is, I know some devs and I was in this spot where I regretted continuing to write all the code. 

Now, some devs bootstrapped because they want to write all the code, realize that will probably hamper your growth. But if you’re okay with that, that’s why you’ve bootstrapped. So you can be in charge of this and you can dictate the limits or the constraints that you’re willing to put into your business. But I believe that code is usually a certainty. Code is something you can hire someone to do because that next feature does not have any risk versus marketing. And sales usually have a ton of the risk as well as product like deciding what to build, how to take feedback in, how to find product-market fit, all those things are very risky. Those are things that founders should be focused on. I do know some developer founders who continue to write code well into the millions of a RR and even tens of millions for that matter. 

But usually, inevitably they do step away from it because they realize at a certain point it’s just not the best use of their time, even though they love doing it. And to cap this off, Tobe didn’t ask this question, but things that I never regretted doing or spending time on and I never regretted keeping under my purview and not outsourcing, we’re talking to customers constantly. We’re designing the product, and I don’t mean visual design, but deciding what to build, how it was going to operate, how are we going to architect this? What’s the API going to be like the real nitty gritty decisions around building the product. And the third is marketing and sales. I don’t know of a seven or eight figure TinySeed founder that has outsourced or delegated their marketing and sales before they hit a few million in a r. Now, a lot of folks may hire ahead of growth or ahead of marketing, but it’s to take over an effort that’s already in play. 

You’ve heard me talk a lot on this podcast about zero to one and how hard that is as a marketer or as a salesperson and as the founder, I’m a staunch believer that you need to keep that under your own purview until you’ve proven it out and you’ve built it into a process that can be handed off to someone else. So thanks for that question Tobe. I hope it was helpful. My next question is from Miguel Sarena. And Miguel asks, how do you decide to do it yourself versus hire a growth agency to do paid ads, SEO partnerships, et cetera? So this actually piggybacks really well on the last point that I was making is that in general, there are a few roles in a SaaS marketing department, right? There’s marketing strategy, which is deciding, I dunno, what do we try next? What do we do next? 

Where do we put our efforts? So it’s very strategic thinking. High level. There is marketing implementation, which is where you’re an individual contributor and you are clicking the buttons in the Google AdWords console. You are writing the articles or editing the articles and building links and doing that work of SEO or in terms of partnerships, you are going out and building the relationships yourself and getting all that done. So those are individual contributor roles or folks who are actually boots on the ground. And then the third role really is project management, which is kind of making sure everything gets done and there’s more nuance than this, but fundamentally, that’s how I think about a SaaS marketing department, especially in the early stage. So the question of how do you decide to DIY versus hire a growth agency is that as the founder, I would not try to outsource marketing strategy and frankly, project management, maybe I would hire somebody to do it, but realistically, marketing strategy, deciding what to do in what order, how many resources to put behind it, that’s something that me as the founder, I would want to learn how to do. 

In the old days when I was truly, truly bootstrapping and had almost no money, I then had to go learn the marketing approaches. So I also was the Google Ads person. I was the person doing SEO, I was the person doing partnerships. That’s what I had to do. Now, if I’d had any funding, I would’ve hired out those individual roles. And so these days, if you have any modicum of money and you can pay someone who really knows Facebook ads or really knows Instagram ads or really knows Google ads or LinkedIn ads or Twitter ads, I like coming up with the strategy and then hiring someone to implement that specific approach. And the reason is is that if you try to learn it and you try LinkedIn ads and they don’t work, you don’t know if you’re not good at them or if they don’t work for your business or your customer type. 

But if you hire someone who you think is pretty good and you get references and you pay them a couple grand a month for three months and they run ’em and it just doesn’t work, you at least have some modicum of confidence that LinkedIn ads for now probably aren’t the best fit for your business. And so individual contributor marketing roles and sales roles, frankly, like S-D-R-B-D-R stuff are things that I consider hiring out before a million, 2 million, 3 million. And when you’re on a budget, let’s say you’re doing 20 KA month, you don’t have the money to hire an amazing growth marketer, but you might have the ability to hire a freelancer who’s good at SEO or a small micro agency who knows how to do Google ads or LinkedIn ads, or you could hire a part-time biz dev person, which is a head of partnerships to handle those for 10 hours a week of work where they’re focusing on doing that. 

Now, that still means that you are saddled with the strategy and potentially the project management, but that’s the way that I see it working, trying to outsource marketing strategy when you haven’t gone from zero to one yet. I mean, you’ve heard us talk on this podcast. I’ve talked with Derek Rimer, I’ve talked with Ruben Ga as I’ve talked with Craig Hewitt, I’ve talked endlessly on this podcast solo, and it’s just the pattern that I see. People aren’t able to hire out sales and marketing before they get to a repeatable process. And usually that’s when you’re in seven figures of a RR. So thanks for that question, Miguel. I hope that was helpful. Are you drowning in challenging tech decisions? You should check out today’s sponsor tech stack. Unlike typical staffing agencies, these folks are startup specialists. With over a decade of experience in startup software development, tech stack can help your startup build an MVP that’s designed for explosive growth, rapidly expand your team for new features or optimize your existing code base for peak performance. 

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My next question is from Casper Vaughn Reed. Casper indicated their SaaS is doing $17,000 in MRR and asks. I have a product that caters to one-time events. It allows you to create scoreboards and leaderboards and often gets used for seasonal sports and corporate events. Revenue growth has been good around five to 10% month over month, but it’s mainly come from one time transactions. My question is how do I build up a healthy subscription business? I used to have a monthly subscription, but MRR peaked just below 10 K, 90% of my subscriptions churned giving one-time use as a reason. Can I fix it? Do I even need to fix it? Hope this question is an interesting one. I like this question because it really does call out the thought that not every business should be a subscription business. And there are some businesses or some apps or tools or utilities that people may only need to do once or once integrate while maybe it’s once a quarter, once a year. 

And those types of businesses are much more difficult to turn into subscription companies for obvious reasons. So one option is to just not worry about it and to take your 17 KA month. And I guess I said at the beginning of this question that it was 70 KMRR, and that’s not true. He wrote it’s 17 K of monthly revenue. And so I said MRR, because of course I think in SaaS and everything’s MRR, but in this case it is monthly revenue. Take your 17 K and enjoy it and use that to stair step your way up to recurring revenue. That is one option. Another option is to do what a lot of SEO keyword tools have done. When you think about people doing SEO keyword research, if you’re not an agency and you have one website, you often need to do keyword research infrequently. Maybe it’s once a year, maybe it’s once a quarter, maybe it’s once every six months. 

And so churn in those tools can be high. So what have those tools done? Well, they’ve built in things that you would use on a weekly or monthly basis, rank tracking to see where you rank for the keywords that you’re trying to rank for website quality monitors or the SEO monitoring of your site to say, oh, you have broken links, you’re missing these tags to keep everything up to date and in sync and operating well, any type of thing that someone might want a recurring use out of or that they might want to monitor or use on an ongoing basis is one approach to trying to become a subscription tool when you’re currently a one-time use tool. Another way that I see bigger companies doing this is they say, you can only pay annually and you get a year subscription for X amount of dollars. 

And that’s really a tactic that you can use for this. Personally, I don’t love it. It just feels a little like Verizon making their pricing impossible to figure out so that you can’t actually price compare between their own plans and the plans of their competitors. But that certainly is one way that people fight churn is to only sell annual subscriptions. And the problem is there’s problems with it, right? Your customers might get a little miffed if there are other options that are one-time use that are cheaper, they’ll go use them. They will often complain, oh, I used it once and then maybe potentially do a chargeback, ask for a refund. There’s a bunch of challenges with that, but it is an option that I wanted to throw out in the spirit of brainstorming and getting all the ideas out there. And I think from a high level, those are probably the three things that I would consider. 

And probably in your shoes, I would try to make this subscription by building other stuff and seeing if it works. If I had the energy and the excitement and the motivation to do it. And if it doesn’t work, then I would do plan A, which is just leave it as one time and use that to stair step your way up. I don’t know if it’ll work or not. I don’t know if there are other features, other things you can cater to that these folks are trying to do on an ongoing basis. I just don’t understand the business well enough. And if you have absolutely no ideas for how to do that and you’ve asked your customers and they have no ideas for you and you ask your mastermind or a co-founder or an advisor or your spouse or a good friend or this podcast and no one has any ideas, then yeah, there are tools that really just shouldn’t be subscription. 

And that may be the case. I of course, always like to at least try to invest some elbow grease into it. First, I actually did this with T net invoice back in, I dunno, whatever, 2005 or six where it had peaked. It was a one time sale as well, $300 one time with like 20% maintenance a year, and it had peaked between three and 5,000 a month. And so in any given month it was great. It was making my house payment plus a car payment, which I didn’t have because I had big cash for the car. But you get the idea. It was just a nice side income. As I worked full-time during the day and I really tried to grow that business, I was like, I want to get it to 10 K, 12 KA month so that I can quit my day job. 

And I spent about a year nights and weekends trying to do that before I realized this is a step one business. Now that term didn’t exist then hadn’t come up with the STA step method. That would be what, seven years later maybe. But in retrospect, it was something that I never regretted putting that time in and trying to grow it. I learned a lot during that time about what worked, what didn’t work. And when I got to the point where I was out of ideas and out of motivation, then I put it on autopilot and autopilot’s not real realize every 18 months Google would slap it. A competitor would come up, something I’d need to update the code. There were all these things that would happen, but as autopilot as you can make it. And then I moved on to my next thing, and that is actually when I built out a portfolio of products. 

Now with a portfolio of products, never try to grow more than one at a time. You focus on one, you get it to grow, and you get basically that recurring traffic that then builds hopefully recurring revenue and then get it to the point where it’s stable and maybe you autopilot that one too. And so I stacked a bunch of step one businesses to get myself to step two, to buy out my own time, quit the day job, and then I moved on to true recurring revenue with step three. That tends to be my approach is to try things that I think could work that I have the motivation to do and that I think I can learn from whether they work or not, whether they fail or succeed. At least I’ve learned to something from that. So that would tend to be the approach I would take. 

But you of course can look at your own personality and say, do I want to do that? Do I want to try to make it subscription? Or do I just want to take this amazing revenue that is generating and use it to build that standalone SaaS or true recurring revenue? Thanks for that question, Casper. I hope it was helpful. My next question is from Benjamin Hoy on X Twitter, how do I decide whether a customer type is worth selling to or targeting? I have consumers buying my SaaS, but also schools contacting me and occasionally small businesses. How do I decide whether targeting one or the other is worth it? In my experience, you just have to try. So first of all, there’s a difference between selling to and targeting, selling to if they’re approaching you inbound, what’s the real risk there? The risk is a school approaches you says, we want to buy it. 

And you say, great, it’s $500 a month or a thousand dollars a month. Make sure that you charge enough, by the way. And if it’s a school actually charge per year. So 6,000, 12,000, 25,000 a year, whatever you’re going to charge, charge enough to make it worthwhile. And you send them this quote and you can read founding sales by Pete Kanji or you can follow Jen Abel, Matt Ock, Stelli fte, some of the sales folks in the SaaS space and learn, Hey, how do I kind of navigate this? And if the school comes back and says, well, we need you to sign a big security checklist or fill out this 30 page doc to close the deal, then depending on what you’ve charged, do you know if you’ve undercharged and you need to turn down the deal, or if you’ve charged what 30 grand a year, then it becomes worth your time to fill out all of that and deal with procurement. 

So that’s the real danger is that you get into a sales cycle or a sales process and you realize it’s more headache than is worth it. And frankly, it’s going to be hard to know until you try it. The biggest thing though, whether it’s schools or small businesses, is charge enough to make it worthwhile. So charge a little more, especially if you’re resistant to doing it, charge a little more, charge a lot more than you think you need to. And if they say no, what are you out? Nothing. A conversation. And if they say yes, make sure it’s worth it. My dad, who was an electrician for 42 years and became a project manager, used to say, there are no bad jobs. There are only jobs without enough money in them. And what that meant is no matter how grindy a project was, if you had enough profit in that, then it was worth it. 

Similarly, when you’re selling to schools or businesses or enterprises, there are no bad deals. There are only deals that aren’t worth it. You didn’t charge enough. I will tell you that most small businesses what they have a single decision maker, they’re relatively easy to sell to, but if they’re non-technical, I dunno what your product is, if they’re non-technical, then there can be the onboarding headaches, right? This is customer pain versus competitor pain. And so you get to decide. But if you have consumers buying this, you probably already have that. I can’t imagine selling to a small business, that process is going to be very different than selling to an individual. Schools might be different, although private schools and language schools in that tend to operate like small businesses where they are a for-profit and certain people, managers or whatever have credit cards and they often buy a small business. 

If you get into public schools, K through 12 universities, the procurement and all that can be an annual seasonal budgetary cycles. There’s several TinySeed companies that deal with this, and it is a bit more of a pain. But for me, if I were trying to decide whether to sell to them, if they’re already approaching me, I would give it a shot a few times and see what it’s like. Targeting them is another question. Targeting them implies you maybe update your positioning, your H one or you at least add some landing pages. You start doing some SEO for the terms they’re searching for. Do you buy ads? You start marketing to these as an additional ICP. Right? Now, your ideal customer persona or ideal customer profile is consumers. Adding schools and small businesses as additional ICPs can be good. It can be good, especially if you can charge more, right? 

What if you have a personal plan and you have your small business plan and you have your academic plan and whatever. They have different pricing and they have different features, and they have different amounts of the value metric that you’re using if you have one. And that does allow you to segment your users and segment that process. And then maybe schools get a demo, and if they’re a one call close and they pay you enough, it’s worth it. And maybe consumers and small businesses don’t. There can be some benefit to it. Now, the flip side of that is, well, don’t you want to focus on a single ICP? There’s arguments on both sides. I have had businesses where there’s one, and I’ve had businesses where there were three or four drip actually launched with four different ICPs and we actually narrowed over time. So I can see it both ways. 

And again, in your shoes, I would ask myself, am I interested in potentially making more money and learning more about how to deal with other audiences and other ICPs potentially growing this business, making it a better business? Because certainly consumers are not going to pay as much as schools and small businesses. I’d ask myself, do I want to do that? Do I want to learn it? And my answer of course would be yes, because I like trying new things. I’m a maximizer and I’m someone who likes to learn things. So that’s my take Benjamin. Hope it was helpful. And with that, this episode will come to a close. Thanks so much for joining me this week and every week. It’s always great to be on the mic with you. If we’re not connected on X Twitter, which is where I asked for these later stage questions. Let’s connect. I’m at Rob Walling and of course if you have later stage questions, feel free to ping me on Twitter or send them to questions at startups For the Rest Of Us dot com. If you have early stage questions, feel free to send them there as well. I have a decent backlog of those and someday I will get back to them. Thanks for joining me again this week. This is Rob Walling signing off from episode 736.

Rob Walling:
Welcome back to another episode of Startups For, the Rest, Of Us. I’m your host, Rob Walling. In this episode, I’m going to talk about the eight levels of platform risk as well as the three factors that contribute to platform risk. And I’m not just going to talk about the traditional, I have a Shopify app, or heaven forbid, your WordPress web host this week, but I’m going to look at platform risk from a sense of any type of reliance on an external platform. So if you use SendGrid to send email, how does that factor in? If you use AWS for your hosting or you use an open source package like WordPress, and honestly, this is a framework I came up with a few months ago and I jotted it down in a Trello board. I keep for a podcast episode topics, and I was just going to pull it out at some point, probably put it in a book, I’m sure talk about it on the podcast. 

And then the WordPress WP Engine kerfuffle flared up by now, that’s a couple weeks old, but it did remind me that I had this and had never really done a full refinement on it. And so this podcast episode is a way for me to kind of bring that out and talk through my thoughts of platform risk as I see it, especially it’s probably any startup, but realistically, there’s a little bit of a B2B SaaS bent to it, right? Because that’s the 191 investments I’ve made. And so I’ve seen different forms of platform risk blindside companies in different ways, and that is the basis for today’s episode. Before I dive into that, tickets for MicroConf New Orleans are on sale. You can go to MicroConf dot com slash us if you’d like to grab your ticket. The event is being held next March of 2025. Speakers are yet to be announced, and of course, I will be there in New Orleans. And if you want to get together with about 250 of your favorite bootstrapped founder friends, head to MicroConf dot com slash us. The tickets right now are the least expensive they will ever be, and they will go up in price, I don’t know, in a few weeks or a month or whatever. In addition, we are going to sell out. We sold out our Europe event, I believe we sold out at Atlanta last April. So if you want to get a ticket, there is no reason to wait. microcomp.com/us. 

Let’s dive into platform risk. So I’m going to start with these three factors that contribute or define platform risk. And each of these you might think of on a scale, whether it’s one to 10 or one to a hundred, there can be a small amount of risk for a specific factor or a large amount. So the first one I think of is a replacement. So if you are on a platform, whether that is using SendGrid to send email, whether it is hosting on AWS, whether you built a no-code app in Airtable or Bubble, whether you are a Heroku app or Shopify app, is a replacement available for this platform? And how hard is it to switch? And is the pricing approximately the same? So there are more questions than that, but those are kind of the high level, so it’s replacement. So we might think of, well, what is an easy replacement where it’s available? 

It’s not that hard to switch and it’s a commodity, so the pricing is the same. Well, that is something like I would say SendGrid postmark, mandrel mail gun. The switching cost is real. It is a thing, but it’s connecting to a new PI. And it depends on how deeply you’re integrated, obviously, but that switching cost is not catastrophic. And pricing in that space of sending email or even SMS, I think of Twilio and the cajillion, SMS APIs out there are a lot of replacements available, so that’s going to be a much easier spot. But what if you are built on Shopify’s API and you’re in the Shopify app store? Is a replacement available? How hard is it to switch? And is it priced the same? Well, the pricing doesn’t necessarily make sense in that context, but is a replacement available? How hard is it to switch? 

It’s kind of like, no, there really isn’t a replacement. And switching is basically impossible, right? Because if you were just a Shopify app and you’re like, well, they kicked me out of the app store, or they took my API access away, it’s like, well, we can go build a BigCommerce, a Magento, a WooCommerce version, but it’s not the same. It’s not a replacement, and that’s not really switching costs, that’s just building spinning up a whole new product. So the hard to switch is just astronomical. So when we think about replacement from one to 10 or one to a hundred, that takes you from easy to hard, at least in my mind. So the first factor was replacement, second one is customer concentration. And the question here is, are the majority of your customers on this platform, meaning that if you were kicked out or the API access were shut off, or somehow the platform suddenly said, you’re on Twitter’s API, and they say, we need you to pay us $12,000 a month. 

Now to maintain it are 80%, 90%, even 70, 60% of your customers on this platform in a way that essentially will decimate a huge amount of your revenue. Now, what’s interesting is this is separate from the third factor, which is I’m saying lead flow or customer flow. That’s on an ongoing basis receiving new customers, say from an app store listing or a marketplace listing. And that’s different, it’s related, but it’s different than customer concentration because in theory, I could go build a Twitter client, I could be getting zero lead flow from Twitter, but a hundred percent of my customers could be concentrated on Twitter or on Facebook’s API. Again, if I’m an app that postponed, for example, that helps you post to Reddit, Instagram, Facebook, Twitter, and all those Grant, he’s a TinySeed founder, started Postpone and it was just for Reddit. And so when we funded him, we said, your customer concentration is basically a hundred percent Reddit. 

We think you should diversify into other platforms. And he was already on board with that. So now he has a little more diversity across the different platforms. Now, great example with Postpone. Does postpone receive any lead flow from being in a Reddit app marketplace? No. So you can have concentration and you can have the risk of that concentration without the lead flow, and you can have the lead flow. I guess in theory, you could have, let’s say I was on four platforms. I was like Shopify, BigCommerce, WooCommerce, and Magento, and I had 90% of my customers on Shopify and only 10% across the other three. But let’s say the other three were sending me a lot of leads, I just branched into ’em, and usually this is not the case. Usually actually branching into other platforms is a lot harder than you think. We’ve seen Tiny, I’ve seen TinySeed companies and non TinySeed companies try to do it and it can work, but in the majority of cases I’ve seen it hasn’t worked. 

So the example there though was to say you could have lead flow in those three smaller non Shopify apps, but not very much customer concentration kind of still early. So these three of is there a replacement, customer concentration and lead flow are the three factors that I think of when I try to rank order these levels of platform risk. So now that I’ve defined these three factors, the contributing factors of platform risk, I want to walk through the eight levels of platform risk, and I will talk through the contributing factors and how they relate to each of them. Interesting data point. As of a week or two ago, I had seven levels of platform risk, and the WordPress WP Engine kerfuffle basically begged the question of, well, let’s say you are built on WordPress, what’s the platform risk of that? And there’s different things. WP Engine uses WordPress and they’re a web host, but what if you had a B2B SaaS company that was built on WordPress as the core, so it was kind of a no-code thing hacked together with plugins. 

That’s almost a related, but a different question. And so I added that as another layer. The answer of course is always, well, it depends on a lot on the specifics of how you rank these. All of these are valid levels. It’s just comparing being built on WordPress versus being hosted on AWS. I have ordered those in a certain way, and I think in different situations they could be swapped a little bit, but to me, this list is directionally correct and it takes those three factors and applies it to a bunch of different scenarios that I’ll give examples of. So moving from least amount of platform risk, what I consider the least amount up to the most amount of platform risk, basically where you have the most exposure and the most risk of your business being killed. And so I’m going to go one through eight again, where one is the lowest, eight is the highest, the most dangerous level one is almost no platform risk. 

It is where you own your own server in a cage with redundant power, you run your own SMTP servers to send emails. The platform risk here is any development language you use, right? Plus your internet service. I mean, basically you are not reliant on a host, you’re not reliant on anything to send email. You’re not built in no code. I guess your oh, and your risk there is where are you getting leads from and do you have customer concentration and where are you’re getting leads from? And in this case, I’m assuming there’s just almost none, right? You have this great variety of leads coming from all over the place, and there’s no customer concentration in terms of them being reliant on an external API. So this ones, it’s so unrealistic, I just kind of want to skip by it. None of us are going to do that, right? 

The second level of platform risk, I think of it as you being reliant on a platform that is a relative commodity and it’s easy to switch away from. Again, relatively easy. I know we could make an argument, I’m going to say SendGrid and Twilio, an SMS provider, email provider, those are commoditized and they are relatively easy to switch. There’s no lead flow, there’s no customer concentration. It truly is just a replacement decision. And one might say, well, SendGrid integration will take you months to migrate away from. Usually that’s not the case. Usually it’s a couple of weeks. I believe we did this with Drip because we went from, we had three or four different email providers that we were using that were APIs that sent emails, and it would take us a matter of weeks to switch, and we were sending hundreds of millions of emails a month. 

So again, this is why it’s probably the most realistic one that a lot of us are exposed to, and this is where it always bothers me. I’ll be on X Twitter and someone will say, oh, man, you build on Airtable or Bubble and there’s platform risk. And some smart outlet comes in and says, oh, yeah, well, you host on AWS and that’s a platform, and you send emails through SendGrid, and so that’s also a platform, and you have risk too. And it’s like, but they’re not the same. And that’s the point of this list is to have them in order of increasing risk or exposure. And I think being reliant on a commodity, whether it’s hosting or whether it is an API of some sort, I think at the same level as imagine if you have a VPS or you have a Docker container and you’re on commodity hosting somewhere, and you can basically just pull that and spin it up in, I don’t know, half a day, a day, two days, whatever. 

It’s that relatively low switch in cost and it is commoditized. I think that fits in this category as well. So the third level of platform risk, which is just a little riskier than the one I just is when you’re using these large cloud providers, Amazon Web Services, Google Cloud, Azure, this is where you still don’t have customer concentration or lead flow, that’s irrelevant. Obviously those are more dangerous. And so those are in the higher levels of platform risk, but moving away from A-W-S-G-C-P, Azure, whoever else, it’s not just spinning up a Docker thing and moving the VPS or whatever. I think the switching costs is significantly more than moving away from an API, like a SendGrid or an SMS because this is the infrastructure where your entire app is, and you start to get reliant on a lot of services. And so this one also has a varying degree. 

It’s a slider of like, well, if I’m only using an EC2 instance and everything’s there, then maybe low-ish switching costs. But by the time I have auto scaling and I have six different types of servers, I have the front end and the API and I have a database and I have Redis servers and I have sidekick workers, and I am using Amazon’s not proprietary, but they’re more like the Redshift thing, and I’m using a bunch of stuff in Amazon. Switching away from that at that point becomes very, very painful and migrating to another platform. You just, again, that’s why it’s the third level I think a platform is. Now, if it’s such a pain to switch, why do I think the risk is relatively low? Because at least to date, A-W-S-G-C-P and Azure are not, they’re not in the business of being aggressive. They have no motivation to, their business model is selling you stuff for a certain amount of money, and so they want you to be happy. 

They keep rolling out new stuff, they keep dropping prices. It’s the opposite of, I’ll get to it in a second, but the no-code providers where they keep raising prices and where any of those could go out of business any day, and they’re not profitable. For most part, I think most of the no-code providers have raised a bunch of money and are still not profitable. And that’s where Judgment McCall like A-W-S-G-C-P and Azure, I don’t think are going to be aggressive and make people want to migrate off, unlike other startups that are still in that early, say, monetization or growth phase. So that was the third level, which was medium to higher switching costs. There are replacements available, again, A-W-S-G-C-P, Azure and others, but there’s no lead flow or customer concentration. 

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The fourth level of platform risk is the one that I added for the WordPress kerfuffle. And here’s an interesting thing. I have an open source software like WordPress, and so that’s kind of vague as the fourth level. Here’s the thing, there’s no customer concentration, there’s no lead flow. The question is, is there a replacement? Is it easy to switch and is it priced the same? Well, open source software doesn’t have to be free as in price, free as in beer, but most of it is, I think the majority of it is. So price is probably less relevant. The question is how hard is it to switch and is a replacement available? And the further question that begs is, well, how deeply are you integrated? If we look at WP Engine, that is obviously reliant on WordPress. Couldn’t WP Engine just fork the WordPress code? I believe it’s GPL, right? 

They fork it now, I guess then there’s a whole plugin ecosystem. I don’t know what happened with there. So that’s an, I don’t know. It feels like there’s risk there, but they have options. If you were a SaaS company and you had built your entire SaaS or your, I guess no low-code SaaS or your entire productized service, say around WordPress, and suddenly WordPress changed their licensing or they, I don’t know, broke all the plugins that you use and they just broke your business, what would be the replacement for that? Well, you’d have to go and build it somewhere else, right? You’d have to go build it in no code, have code written, do it manually. I don’t think a replacement in this case, it’s the job to be done. I know Ghost is similar to WordPress, but the job to be done of what you’ve built in WordPress, I don’t know that it translates so well to just another CMS. 

And so this one’s interesting in that longer term, I have this at four right now, meaning it’s higher risk than say your A-W-S-G-C-P or cloud provider. This would’ve been probably down around two or three before the WP Engine, WordPress kerfuffle, and this is how weird these things are, is that given that WordPress has shown that they are going to be aggressive, not making themselves out to be a friendly platform right now. And so I think that is why for sure I kicked them up in terms of the actual risk, the big question is if you had a business built on WordPress, how hard would it really be to switch? And if oh, in a week or two we could build it in bubble, then this really should probably be down more around SendGrid. The number two right SendGrid SMS providers are where it’s a commodity and it’s easy to switch. 

That’s more of how I would feel about it. But if your business is a 2 billion business that completely relies on the plugin ecosystem and you’re at the mercy of WordPress than I do think that there is a significant level of platform risk. So level five is high switching cost, but there are replacements and there’s no lead flow or customer concentration. The best examples I can think of here are no code. It’s building on Airtable Bubble. I was putting Stripe in there. I don’t know that Stripe fits or doesn’t. I guess switching from stripe’s kind of a pain. And I guess it depends on are you in their subscription ecosystem as to whether it’s like a medium or a high switch in cost. But in any case, this is where in order to switch, you kind of have to rebuild everything from scratch, right? There is no export your code from any no-code platform I’ve heard of. 

And if you could, how do you import it into a different platform where it’s all just proprietary tech, right? And this again, is where the argument that some no coders make or just some people make is like everything has platform risk. And it’s like, yeah, but they’re not all the same. It gets worse if you’re a Shopify app, there’s a super aggressive platform that’s worse than all the ones that mentioned so far, and we’ll get to that one in a minute. And so the idea here is that if you’ve built a million dollar business and it’s a bubble app, how long would it take you to completely rebuild that in another platform if bubble 10 x their pricing if bubble went out of business, if Bubble had two weeks of outages and one might say, well, couldn’t AWS 10 X their pricing? Yeah, highly, highly unlikely. 

I just don’t see it. That’s not been the pattern. But what about AWS going out of business? Highly, highly unlikely. And that’s why I put ’em down at the two level and is AWS going to have a two week outage? Again, highly, highly unlikely. A small no-code startup is more likely to have any of those black swan ish events happen. And that’s why I have them at number five. Coming in at number six, I have all your leads coming from a single marketing channel such as Google. So basically it’s 100% lead flow risk. Now, I’m not including app stores in this like app marketplaces I will get to those are seven and eight, but in this case, I’m thinking of being solely reliant on a single flow of leads. And I think is that a platform risk? I do think there is risk there. There is no replacement usually, right? 

There’s no direct replacement. If you rank in Google and you get amazing organic search trying to replace that with something else, switching costs is irrelevant. You can’t do it, right? Customer concentration is irrelevant because they’re not reliant on Google once they come through SEO, but your lead flow and your plateauing feasibly, it could kill the business. And here’s what’s interesting is you’ll notice in these eight levels, the lower end ones are all kind of technology and it’s the business factors, it’s the growth and new customers and customer concentration that I’ve put at the six, seven, and eight spot. Those are the ones that are so hard to replace. And I’ve seen several businesses killed. You talk about Google changing their algorithm every what, 3, 6, 9 months and entire affiliate businesses that were doing millions of dollars basically go to zero overnight. So the reason I have this as number six is that if bubble 10 x their pricing or had a big outage, you could rebuild that. 

And if you’re hosted on AWS or using SendGrid or using WordPress, you can rebuild it. The risks are there, but they’re lower than if you lose Google where there is no replacement and you lose all your organic rankings, it can be existential to the business. The seventh level of platform risk, I’ve put a friendly app ecosystem. So an example of this is Heroku, like Heroku apps in general, thrive. Heroku has not, at least to date, and this could change, but they have not screwed their developers unlike number eight level of platform risk or aggressive platforms. But Heroku is one example. I’m sure there are many, many others. In fact, we have a list of I think 80 SaaS marketplaces and it’s microcomp.com/latest/ SaaS dash marketplaces. We link it up in the show notes, but there’s Salesforce app exchange, Zoho Marketplace, HubSpot app, marketplace, Pipedrive, less Knowing, CRM, Microsoft App Source, slack app directory, on and on and on. 

There are 80 of ’em. I won’t read them here. And look, here’s the thing, can I name all of the ones that are friendly and all the ones that are aggressive? No, I don’t know enough about them. I would guess that big companies like Salesforce and now Slack because it’s owned by Salesforce are kind of a pain in the ass. And if they’re not yet that they will become that. And I would guess that smaller companies and those that have not yet been acquired by a bigger player, a public company or private equity are going to be likely more friendly. But those are just guidelines. If you think about this, it’s theoretical in a way of like, well, a friendly platform is friendly until it’s not, and that’s really what platform risk is. When we think about the aggressive platforms that I’ll name in level eight, they all were friendly at one point. 

And so that really is the scary part of being built on in that marketplace and why being in a marketplace holds the seventh and eighth spot in terms of platform risk. And the eighth and final level of platform risk is of course an aggressive platform. This is where there is no replacement. You basically have a hundred percent customer concentration. You have a hundred percent of your lead flow from this platform, and the platform is not developer friendly. So this is Shopify, Twitter, Facebook, I’m sure there are more that I could pontificate about. I’m naming these because they have completely decimated companies that we’ve heard about or that I’ve invested in. You hear Jordan Gaal talk about Shopify coming after Cart Hook, and that’s not the first nor the last time that Shopify will do that. We heard Twitter jerk around anyone using their API once Elon Musk bought it, and I think they did this. 

Didn’t they do this about eight or 10 years ago with Twitter clients? I actually don’t remember, but they did something big back then. Facebook, do you remember? I think it was Zynga, right? It was doing tens of millions of dollars on the Facebook app marketplace, and Facebook just pulled the rug out from under room because they don’t give a shit about their developers. I mean, they’ve been pretty obvious about that. They care about Facebook and no one else. And so there are other aggressive platforms. Again, I do not have an exhaustive list. I just don’t have experience with all of the 80 platforms that we’ve listed at that MicroConf link I said earlier. And so this is where there’s just an existential risk if that you have a Shopify app that’s doing millions of dollars a year and they come and knocking, you’re getting all your leads from them, your customers are concentrated on their platform, and there just literally is no replacement. 

There’s nowhere to switch. Again, we can say, oh, we could go to BigCommerce, WooCommerce, and these other things, but it’s not the same. That’s starting a brand new business. And that risk that we’ve seen play out many times, and that’s why these app marketplaces are number eight in my list of eight levels of platform risk. Hope you enjoyed this episode. I think the list is directionally correct, and I could see either there being another one added if someone were to email in question that started For the Rest Of Us dot com, or you hit me up on X Twitter at Rob Walling, I think there might be another one that I’ve maybe not thinking about, or I could see them gently reordering. There is a little bit of an, it depends, right? I said it’s like if you’re built completely under WordPress and completely in it, it depends on is your switching costs low, medium, or high to rebuild it somewhere else? 

That could move that one up or down by one, but it’s not going to move it to three slots. It’s not going to suddenly become as bad as having a Shopify app where they are just known to be really aggressive with it. So that’s what I mean when I say I think the factors are in line, and I think the list is pretty tight. And again, directional correctness such that next time someone on X Twitter says everyone has platform risk, you can chime in with, well, there’s different levels of it, and here are eight of them. This podcast episode, they’ll obviously be listed out in the show notes, and I’m certainly going to be referring back to this in the future, probably included in a book or course at some point. I do think it’s helpful for us all to have a paradigm in a framework around it. So thanks so much for listening this week and every week. It’s great to have you here. This is Rob Walling signing off from episode 735.

Rob Walling:
Welcome to this episode of Startups of the Rest of Us. I’m Rob Walling and this week I talk with Ian Lansman, the founder of HelpSpot. Ian has been bootstrapping for almost 20 years and he started with on-Prem software and then after about 10 years launched a SaaS version. Ian and I have known each other almost that same 20 years from back in the days of Jolen software’s business of software forums. And over the years, Ian has started a few of his own podcasts as well as spoken at MicroConf. I believe I were to guess it was probably around 2014 or 15. So it’s a great conversation because Ian and I have history. I think we were able to pull out some really interesting bits about why he’s bootstrapped for 20 years, why he hasn’t sold and moved on to his next act, how he thinks AI is going to impact the customer service and support space. And if you stick around until the end, you’ll get to hear the company name that is most often confused with HelpSpot and it wasn’t the one that I thought. So with that, let’s dive into our conversation. Lansman, welcome to the show. Thanks for having me on. It’s great to be here. Cannot believe you have not been on this show. No, you’re like OG Bootstrapper.  

Ian Landsman:
Somebody on Twitter reached out and said, I should come on here. And I was like, man, I think I’ve been on there. And then I searched and I was like, man, I haven’t been on there. Wow, that’s crazy.  

Rob Walling:
Yeah, I am glad you reached out. I think someone, your podcast co-host maybe mentioned it on a podcast and I use arvid calls pod scan, and so my name popped up and I went and I’m like, wait, what? Someone wants to go out and start. So I was like, yeah, dude. And I thought the same thing. I was like, I think Ian’s been on it, but to give people context, like 20 year, I mean really early man back in the day, remember how it was, there’s going to be a lot of jokes about how back in the day, there was no customer development, there was no AWS, there was no SaaS right? Where  

Ian Landsman:
Before all that, man, it’s hard to believe we’ve become the old timers. How did that happen?  

Rob Walling:
Oh yeah, big time. Just so people know, you’re the founder of HelpSpot. It’s at helpspot.com, it your H one is your customer service at scale Amplify your support with HelpSpot, the streamlined solution for scaling customer service effectively. So it’s email ticketing, reporting and metrics knowledge base. And since you started so long ago, you were on-Prem for years and then you launched a SaaS. So you have both on-Prem and SaaS, and I think most folks listening know what on-Prem is, but it’s where they actually download your code, your source code, PHP, Laravel, and they will install it on their own server. And then I guess what’s the benefit? Why would today, I would just do the SaaS personally, but the people who still use on-Prem today, why do they do that rather than pay you for the  

Ian Landsman:
SaaS? Yeah, so definitely the majority or SaaS using the SaaS version these days, but we still have new customers in the on-prem and basically there’s some advantages. Big companies or certain specialized companies like in finance, healthcare, they have different rules, potentially laws. They’re also the type of companies that still have IT departments. And so they want to be in control of their own data is usually the main reason in terms of they control the database and they’re backing it up and those things, but also sometimes they’re just running completely off the internet. It’s like, here’s our help desk, it’s for maybe IT in that case and it’s literally not connected to the internet. And so it’s just fully encapsulated in their network behind their firewall. And so they want to do that. And it is an area I think people have abandoned completely that maybe shouldn’t be totally abandoned because there are some, you could charge more. We actually charge the same price currently, but I think there’s a lot of opportunities there to charge a lot more for the people who want it on premise and things like that. So yeah, it’s not that bad if you have a modern SaaS app, it’s not impossible to make an on-premise version. Some things like if you depend on 30 services, that’s going to be hard, but with a little bit of forethought, it’s really not that bad.  

Rob Walling:
We have a few TinySeed companies and I don’t know how many exactly, but when they apply they’ll often say, so we’re SaaS, but we also do on-prem. Is that going to be a deal breaker? And I was like, no, we funded a handful. And again, I don’t know if it’s five or if it’s 10 out of one 70, but there are especially like you said in finance or in certain regulated industries where you really do need or want control of that data and just went on some random spot.  

Ian Landsman:
Yeah, it also gives you some advantages of you’re a tiny bootstrap company, you’re not going to be able to be SOC two compliant, for example, and there’s going to be these type of companies that are like, well, you’re SOC two. Let me talk to your security people, all this stuff. And it’s just like you, it’s you and a couple of people, and so this gives you some outs with those big companies. It’s like, Hey, you know what? You can install in your own SOC two data center and you’re already SOC two and you can, it’s all good and so we’ll charge you for that and everything. And those tend to be also some of the best customers. I mean those are the customers that stay with you for a decade. You’re in there, you’re on a server, just not even the type of companies that are in the mindset of like, oh, somebody launched a new fancier version of this tool we use. Let’s go out and find the fancy. Let’s take a look at this and let’s see if we could switch over. It’s like they’re not, the culture in these companies is not like that, which is great for you as the bootstrapper who isn’t always moving as fast as a VC back company can or some big company that enters your territory. It’s like you got a lot of customers that are just there and they’re happy with your product and they’re not looking around for other solutions.  

Rob Walling:
And I want to be clear, I want to get back to on-prem probably halfway through the interview, what we’re not saying is once.com, right? It’s not you pay once and that’s a different thing. I guess it’s related, but to circle back to where I wanted to start is where is the business at today?  

Ian Landsman:
So we’re profitable doing well, a little under 2 million A RR five employees, I think five, yeah, five full-time employees and a couple of part-time people. So it’s kind of been running, it’s just going, it goes up a few percent every year and it’s fine and we’re profitable and it’s great, and I’ve been running it in sort of that not people say lifestyle, I wouldn’t know if I’d go all the way to lap, but that applies a certain ease of life that I don’t know if I’m all the way achieved. But yeah, not super stressed about that stuff. It’s been nice, especially the last, I think we’re going to talk about the early years. There’s probably more action in some ways, but it’s kind of the last 10 years, my kids have been getting bigger. My oldest just went to college, so it’s sort of been this, I’ve been cool with it being profitable and running well and that’s great. And yeah, I think I’m starting to turn a little corner of some new things I want to do with it as I get more time, kids get older, all that stuff. But yeah, it’s doing well.  

Rob Walling:
This is going to sound like a negative pejorative question, but it’s like how have you not gotten bored? I would get bored. Where 19. It’s next year, 20 years, 

And we all have different personalities and I’m the person who’s never worked the same job even, let’s see, I think MicroConf, well, MicroConf doesn’t totally count, but even for me it was a hobby for many years. But MicroConf and TinySeed now I think are the thing I’ve worked on the longest six years because even Drip from the founding to selling was three and a half years, and then I stayed another two years, so even Drip was five and a half years. So you could tell I just had that personality of like, Ooh, I need to do the next thing. But you’ve stuck with something for 20 years.  

Ian Landsman:
I don’t know. I guess I wouldn’t have thought it would be exactly like that in the beginning necessarily. I think what I’ve done is since it’s been profitable, it’s given me flexibility to do other things along the way. So I ran conferences both in world and online. So similar to what you’ve done with MicroConf as a way to explore things. We built a job board for the Laravel and we run the official job board. I built a product called Thermostat that didn’t really work, and I recently sold off. I built another product that I sold off that didn’t work. So every three or four years I get into something else and that’ll distract me for a little while, probably to HubSpot’s detriment, but also probably practically just something that needed to happen to keep me when I come back to HubSpot after my little excursions, it’s like, oh, it’s still here. 

It’s still doing great. Energized to take on some new stuff and do some new things. And so that’s kind of how I’ve done it. And I think it’s something I’m sure you hear a lot and Bootstrapper sort of problems let’s say, is that you get to a certain level of success and it’s just a little bit of a weird zone where it’s not big enough to sell for the amount of money that’s just like, oh, I’d never have to work again, money, I’m totally set. Don’t worry about it. It’s not quite big enough for that really. Maybe if I sold in 2021 right at the top there. So it’s never been really that. I’ve never had any really appealing offers that’s like, oh yeah, I should sell it. Obviously you could just sell it to sell it and move on to the next thing and still have a nice amount of money, but it’s like, ah, who knows if the second product’s good? I’ve never built a really good second product. I mean, some of these things have been okay, but it’s hard to build a second product, so it’s like, ah, I got the first product that’s done so well. I’m just going to stick with that. That makes  

Rob Walling:
Sense. Let’s go back to the beginning. So you launched it in 2005 and you told me that you quit your day job and coded for six months, which is exactly what we tell people not to do today, right? Don’t quit your day job and live off savings or you said your wife was basically supporting you during that time, but what a gamble To me, it’s terrifying to do that, right? Were you scared at all and why do you think it actually worked? What was that time?  

Ian Landsman:
Yeah, it was, man, it’s so wild to think about now. The world was just incredibly different. In 2004, it started, I wasn’t even a programmer in college or anything. I learned the program on my own and then I was like, okay, I want to do a product. We went through a million product ideas, whatever, finally came on this HubSpot idea because I used a really awful help desk at work that was mainframe based and didn’t accept email and all this stuff. That’s where the world was back then. Just to set the stage, A lot of big companies just used had no help desk or a very poor help desk solution. So it was like, okay, I want to do this. Both me and my wife agreed it’s a good idea. So we had just bought this condo, which was a little bit pricey. I was a little nerve wracking. 

We sold my car, so we had that money, put it in the bank, so we just went down to the one car. My wife kept working, and then, yeah, it’s like I would never give anybody this advice now, but it’s just such a different world because it’s like there was no choice, there was no real frameworks, there’s no Ruby on Rails, no Laravel, none of these things. And so it’s like, okay, I know PHP, I’m just going to have to write it. I don’t even know JavaScript. So I’m literally sitting there with the JavaScript Bible, which is a four inch thick book, learning JavaScript while I’m building the app. And yeah, it’s like I always say I could build V one of HelpSpot today probably in three weeks or something with if I just use all the modern tools and everything we have and just do the very basic version that it was in version one. It’s like, yeah, you could do it, keep your job, do it on the side, all that stuff. But it just would literally never happen. I mean, I worked six days a week, 12 hours a day for six months, and even then it wasn’t great. It was just functional. And so that’s just what you had to do back then, or it wasn’t going to happen. Those were the options  

Rob Walling:
When back when people would raise half a million dollars with just an idea that really doesn’t happen anymore. But you had to do it because as you said, you had to write every line of code and there were really no libraries, and it was, yeah, it was a lot more to be done.  

Ian Landsman:
Even the raising money is something I thought about, but you got to remember in 2004, the dotcom bust just a couple of years before that, the whole VC world was kind of a mess. They weren’t looking to fund individual guys with an idea too much. I’m sure there was some investments, but it wasn’t very common. So we were all, you were there, we were all in these bootstrap circles, Joel on software forum and all kind of just working together to figure out how do we ship software without really any big funding.  

Rob Walling:
That was the thing is the narrative was still raise a bunch of money, but there was Joel and there was, well, it was you  

Ian Landsman:
Eric Sink and  

Rob Walling:
Eric Sink and the  

Ian Landsman:
Wedding Patty 11 was there, Patty  

Rob Walling:
11, and, and that we all knew each other by name, and it was like, oh, yeah, and we’re all trying to figure it out on our own, but also together of like, is this even possible to do? There was no narrative, there were no books on this topic. There were no podcasts. You just, it was forums, right? I mean, that’s what I remember.  

Ian Landsman:
Yeah, just forums. That’s it. There was not much else. Those of us in the community had blogs or whatever, and we talked about it, we talked about in the forums, but yeah, no Twitter, right? No YouTube, nothing. There was not a lot of nice ways to get information about how people do it and different strategies and all that stuff. Joel was writing some books. Eric Sink wrote some awesome books. That was kind of it.  

Rob Walling:
And I remember around that time, I think I had gotten an invoice in oh five or oh six, and I didn’t know, I was like, well, how do you market do SEO AdWords, whatever? So I would go look at, there were no books about startups doing this. It was all the info marketer internet marketing stuff. And so I went and learned copywriting from them and applied it to startups, and I was like, oh, they split tests info. A lot of ’em were very scammy info internet marketers course. So I would take that and then translate it to me, which was the not scammy version. So they were doing split testing, they were doing AdWords, they were doing SEO O, and I learned from those folks and translated it in, and no one was really talking about that in the startup space. It was like startups were raise a bunch of money, go viral and have a big launch party, buy billboards. It was this really odd thing of, it was a weird  

Ian Landsman:
Time,  

Rob Walling:
It really was. But folks like you starting HubSpot, you needed nuts and bolts. How do I get in front of people? How do I sell so that I can have a paycheck next week? Let’s flash forward six months. So you spend six months building, you get to launch day. How do you get the word out?  

Ian Landsman:
Man, it is crazy. You’re going to appreciate this being an email newsletter kind of guy. So I built a list, an email list of, and this was really basically just people from the Joel Software forum and a few people follow my blog, and it was literally like 84 people right now. People launch are like, oh man, I only have a thousand people on the list. What are we going to do? 84 people? And the first month we had $4,000 in sales, and it’s like some people brought it into their companies and brought it to their boss and whatever. And I had started on the SEOA little bit before launch two with the landing page and stuff and help desk software in terms of web-based help desk software was new. So we were first or second for the term help desk software for several years, just kind of like Blue Ocean or whatever, and that was our main marketing channel. But yeah, the initial launch was this 80 person email list. Then the SEO kind of picked up over those first few months, and then that was, it just started going, and we still have a lot of those customers today, but that was the kickoff.  

Rob Walling:
So someone listening to this who has tried to launch and failed thinks you got $4,000 of sales in your first month, what a month. I do want to remind them it’s not 4,000 of MRR.  

Ian Landsman:
No,  

Rob Walling:
It is 4,000 effectively one time. Did you have a maintenance fee each year or how did that work?  

Ian Landsman:
Yeah, so that’s a great point to nobody out there listings even going to think of it that way. Yes, it is not 4,000 MRR and you’re like, woo, baby. We’re launched and going, yes, it was $4,000. There was a owned license. So you buy the license and you own it, and then yearly there’s a support maintenance fee where you pay that and you get updates and you get support. And so if you don’t pay that, you don’t get updates and you don’t get support. So the good thing though is that it was effectively a recurring revenue, and this is all annual, so it was 4,000. It was like a 30 something, 30%, let’s say was the support fee. So it would be whatever it is, like 1500 bucks or whatever a year after that. So each year, that first group of $4,000 would pay us $1,500 to maintain support and updates. It’s a B2B app and it’s a heavy use B2B app where it’s not just like we use it once in a while. It’s like, no, you’re paying people full salaries to sit in this app 40 hours a week and use it. And so generally most companies are going to pay that support, and they did. And so that worked out good long term. But yeah, absolutely. It wasn’t like, oh man, this is monthly. Four grand a month was definitely not that.  

Rob Walling:
Do you remember what your pricing was? I’m just trying to get an idea of how many copies sold to get four grand?  

Ian Landsman:
Oh, geez. I think it was one 50 a license,  

Rob Walling:
So it would’ve been like 30, well, not quite 30, like 26 or 27, somewhere in there. Licenses.  

Ian Landsman:
Yeah, something like that. That’s pretty good. Sounds right.  

Rob Walling:
That’s not bad at all.  

Ian Landsman:
Yeah, I was happy. I was like, whoa. And then we mined that mailing list and so the second month was like a thousand dollars or something crazy, and it was a little nerve wracking there, and then it went up after that and just kept going. It’s an ASCO,  

Rob Walling:
It sounds like.  

Ian Landsman:
Yeah, exactly.  

Rob Walling:
Because the thing that you don’t remember, if you haven’t run a onetime sale business, the sales numbers are a lot higher. T net invoice was my first product and it was 300. Well, it was a hundred when I bought it. I acquired it and then I raised it to 300 and I would sell seven to 10 copies, sometimes up to 13 copies or whatever. So you’re talking like two, three, 4,000 a month. And we did have 20% maintenance, but it really was one time. And so if we lost our SEO rankings or during the financial crisis, we would lose 80% of our revenue overnight. So we’d go from three grand down to 500 because nothing was recurring. So you basically front load it, right? It’s like they’re paying for a year is, which is actually good when you’re bootstrapping, so you get a lot more cash upfront,  

Ian Landsman:
Keeps you in business.  

Rob Walling:
Yeah, it’s pretty nice.  

Ian Landsman:
Yeah. Well, I think that’s too, with the invoicing software, it’s like it’s a little more like, Hey, we use it, it works. Well, maybe with some of us sometime we’ll pay him his renewal, but we don’t really care that much. It’s operational. It’s like if you can get to that next layer of like, no, we have $2 million in payroll using this software, and now we’re taking this big risk. If we’re down for a day, it’s a big problem and we’re losing money and more directly. And so I think when you’re thinking about the kind of business to get into, there are advantages to that kind of thing where it’s a product that people use very heavily, very competitive nowadays too.  

Rob Walling:
So you had this on-prem software from oh five until you told me 2015 is when you launched a SaaS version. And the question that popped up in my mind around that is 2015 feels late to launch. SaaS SA first became kind of in the zeitgeist in the, I would say oh seven to oh nine, that MailChimp became a thing. And there was other, I mean certainly there was SaaS before that, but it wasn’t called that. Remember ASPs and whatever the other acronyms, Basecamp, Basecamp, Salesforce, constant Contact, they were around. Even AWeber was really early, but I remember by 20 11, 20 12 SaaS, that was a thing. It was like going, so I would think you having this on-prem would have moved to SaaS, not moved, but just deployed a subscription version earlier. So what was the delay? And I’m not acting like you launched it late, but it’s just in my head. Yeah, that number. So what took that time?  

Ian Landsman:
I think it was really a couple different things. Definitely when I launched, I knew about SaaS and made the decision to not make it SaaS because I didn’t know anything about running servers. There was no money to hire somebody else to run servers. And so I just feel like that wouldn’t have ultimately worked out very well. So it was on premise and then it was kind going along and it was busy and it was fine. And the big, obviously when I took more notice in terms of direct competition was you had Zendesk, which I think was maybe 2008 ish, something in there, and it’s like, oh, okay, this is really becoming a thing now, so I should probably start thinking about more. But we did even before Zendesk earlier on, have a partnership with a hosting company and they ran the hosted version of HubSpot for people. 

And so it was a separate relationship with them. It’s like you came to us, you bought the licenses, you went to them, you paid the monthly hosting fee, but they would actually install help spat and run it for you, and if there was a problem with the server, they’d fix it. So we had this sort of in-between, so that did let us delay. Then another sort of aspect to it is that HubSpot was not in any way conceived as a SaaS, so the data structures are not correct for SaaS and things like that. And so in that earlier phase of the SaaS rise, I think it would’ve been pretty tricky to do it. And what kind of happened later on is we had, then you have AWS, you have really cheap servers and things like that, and so it made it simpler for us to make the move because how HubSpot SaaS version runs is actually everybody gets a tiny AWS like nano server and everybody’s on their own server. 

We do have a centralized big RDS database with multi failover and all that stuff, but we basically deploy it as your own little HubSpot server, and so we don’t have to make the database work for multi-tenant and all these things, and the cost is outrageous. By that point, it was like, okay, two bucks a month you can have a little mini server on AWS. And so that’s the way we rolled it out, and this way we can keep the code base the same for on-premise and cloud and as we go, I think it’s going to start to, we do already make a lot more accommodations for the cloud version since it’s more of the new customers, but that was kind of the transformation there basically.  

Rob Walling:
How painful was that  

Ian Landsman:
To go on  

Rob Walling:
Premises? Oh, it’s painful. Was it brutal?  

Ian Landsman:
Brutal. Very painful. I mean, because there’s a lot involved had to switch. We moved to subscription pricing at that time, but I didn’t want to force everybody’s subscription pricing. And so it’s like if you want to be on the cloud version, you have to move to subscription. So even on-premise customers, now if you’re a new on-premise customer, you’re on subscription. Everybody’s on subscription and it is annual subscription, which is another thing I think founders don’t think enough about is just only having, I’ve only ever had annual, and I think it’s served me pretty well. We are going to experiment with the monthly option here, but again, if you’re in the kind of business where it’s often, it’s literally a committee we’re dealing with and they’re evaluating multiple choices and they’re not really going to switch off on a whim after three months, they’re making a commitment on their end, so not that big a deal. 

So that was kind of a big one. The subscriptions, the tech. Yeah, it was, oh, the other thing is moving people. So we have all these existing customers and they want to move, and it’s a big app. We have customers at 70 gigabyte databases, and so moving them onto the cloud is quite a production. We also allow a lot of customization. It’s kind of one HubSpot’s differentiators from other solutions. There’s a lot of knobs and dials and things you can do. You can even write your own PHP in certain spots if you want to do something very custom, which is something that other help desk software won’t let you customize on that deeper level, obviously, because no way for them to really safely do that. So we still to today, so we did that 10 years ago. Today we still will have at least usually one a month, but sometimes more of customers coming from on-premise to our cloud solution. And yeah, it’s a multi-week operation usually to not pure time, not like 80 hours, but going back and forth and figuring it all out and they check it and blah, blah. So yeah, it’s a big process.  

Rob Walling:
I was going to ask if you still offer on-Prem or if at a certain point, obviously if you sell, have a bunch of customers using it, paying you, you would let them keep going, but the idea of just going to hubspot.com and the only thing you can sign up for is the SaaS. You haven’t done that. You still offer both. What’s the thinking there?  

Ian Landsman:
And we have had competitors. I think Kyoko was also an on-premise like us, and then they moved to SaaS and then they said, that’s it. No more on-premise. Spiceworks also said no more. So people definitely abandon the on-premise. But yeah, for us, I just feel like we definitely obviously have a good amount of customers who still use it. Like I said earlier, those are some of our biggest, best customers. Been with us 14 years and pay us $20,000 a year, big accounts for us. And so definitely eliminating that would be tricky if I’m forcing them to come up to my cloud or go elsewhere, some percentage are obviously going to go elsewhere just naturally, so I don’t want to do that. I could, of course, like you said, just going forward, but again, it’s like a lot of really great customers are in the on-premise. 

So even though it’s only probably 10% of our new business, it’s a valuable 10%. And also I think we haven’t done a great job marketing it recently, and that’s something I want to actually do better and try to get that actually up a little bit. There are interesting trade-offs with on-premise in that it’s more support for sure. There’s just server issues and sometimes the support person takes half a day on somebody else’s problem ultimately that we end up being responsible for helping them, things like that. But again, they’re oftentimes much more higher revenue than the day in day out customer. And they also, there’s other little interesting things like they often pay by check or transfer, which costs either nothing or $10 versus cloud customers that often pay by credit card and costs 5% ultimately and stuff, which when on $10,000, 5% is a lot of money. 

So there are these little other things too. But yeah, that’s kind of the reasons I still think that there’s something there. And also I think in general, we’re seeing Elasticsearch and databases and a lot of the structural things still are even more so offering on-Prem. It might be literally on-Prem, it might be in your AWS cloud, but it’s your cloud, not our cloud. And so I think there’s just still opportunity there that I wouldn’t want to be totally out of the game, especially because no other help desk software, nobody knew when Help Desk software is offering it. None of the existing players are offering it who didn’t already offer it in the past. And so I feel like it is a little bit of a competitive advantage there where it’s like we’re going up against other poorer solutions than just the intercoms of the world with infinite money. It’s like, no, this can be a little niche that we have some advantages in.  

Rob Walling:
No, I think that makes sense. I may seem off topic, but I have a question for you about, well, you were written on some PHP that you hacked together 20 years ago, but then I know at a certain point you integrated and you’re pretty heavily involved in the community. I think you mentioned some of that earlier. Laravel just raised 57 million, I don’t know, two weeks ago maybe. What’s your thinking on that and what that means for the future of Laravel?  

Ian Landsman:
Yeah, so I think it’s really exciting. I mean, I run the official Laravel job board. Taylor Twell, the creator of Laravel, worked at UserScape with me for three years. My company’s name is,  

Rob Walling:
I didn’t know that. Oh, what a trip.  

Ian Landsman:
Yeah.  

Rob Walling:
Did he work on HelpSpot?  

Ian Landsman:
Yeah, yeah. And some other new stuff. In one of my distraction periods, he worked on some new stuff. He worked on HubSpot. But yeah, I actually found him, he was working at a shipping company and I found Laravel and I was like, wow, this is awesome. I want to have a framework to work on new versions of HubSpot with as well as other ideas. And I didn’t like any of the other PHP frameworks even up to then, which is 2010 or something like that. So I reached out to him. I was looking to hire a developer. Anyway, I ended up hiring him. He worked the first three or four months at user scape, just building out Laravel actually in some of the more enterprisey things. It didn’t have already caching and some other things. And then, yeah, we did the conferences together and stuff. Then ultimately he built Forge, which is the main revenue producer at Laravel. 

It’s like a hosting platform or manager. Then that started making a lot of money, and I was like, okay, you should go run that. And so he did. But we’ve stayed close friends and I’m definitely friends with a lot of people in the Laravel community. So yeah, I think the thing is he turned that into a bootstrapped and very profitable business, and again, kind hit that point where he had some bigger ambitions basically to launch this thing called Laravel Cloud, which is going to be Heroku, but for PHP and Laravel, basically, it’s kind of like the shorthand, but that kind of thing obviously requires just even if you have a very profitable business, it’s ultimately you’re going to need a lot of very expensive engineers and lots of servers and security people and all this stuff that starts to get into, if I’m paying, I’m making up numbers here, have no idea what they’re paying. But if you’re paying a security guy $800,000 a year, let’s say, or whatever, that starts to be a lot of money. So to chase those ambitions, that’s what he’s done. So I think so far so good. Like you said, it’s only been a couple months since they raised, so  

Rob Walling:
Now I want to ask you something that I asked you offline, and it was about what’s your biggest fear today? Looking ahead, you’ve run this business for 20 years, and you mentioned it was like how can AI potentially impact this? You want to talk us through your thinking?  

Ian Landsman:
Yeah, so I think this is a topical one. So I think customer service is more directly in the crosshairs of even current AI capabilities to some degree. Obviously you can make the case for like, well, every job is going to be affected or whatever, who knows? But I think this is one where it’s like it’s a cost center. A lot of companies look at As, and they’re like, okay, if AI can do a reasonable job, maybe we’re willing to make changes there. So yeah, I just think it’s a big unknown. I think so far it hasn’t been really disruptive at all, but that doesn’t mean it won’t. There’s definitely been some companies that have made big moves, like Klarna got a lot of press for moving almost all their support to ai, but again, that is a very particular use case where they don’t have a lot of different types of questions. 

Basically it’s like, I want a refund, how do I pay my bill? So I think a very good use case for an ai, they had poor service ratings to begin with, so it’s like, are the AI people going to do any worse? Probably not. So you have some differences there, but yeah, who knows? So I mean on the one hand it’s like those fears of just might consolidate down to a few big AI players who do a fantastic job with it and they just gobble everything up, or is there going to be, is it not going to be a thing at all or more of a middle ground where since we have access to a lot of similar technology, at least ostensibly, right, is we can pay for open AI or whatever else, we can add those tools for the most part, I think there’s going to be probably some things that are going to be beyond our capability, but so I think that’s definitely just a big unknown and we haven’t had that in a long time. And the help desk space, it’s been pretty stable. So this is definitely a new thing that’s out there and it’s like, we’ll see how it goes. We’re definitely adding AI features and maybe that’s just kind of be kind of where it ends up, but we’ll see.  

Rob Walling:
That makes sense. Just out of curiosity, what’s the first one or two AI features you’re adding?  

Ian Landsman:
Yeah, so very early on we did your standard writing helpers. We went farther than most of the other help desk tools I’ve seen have gone where you can define your own prompts and tools for the agents, but still it’s ultimately more on the writing and human creation side. But from there we are working on doing things like auto triaging where it can route inbound tickets to the right categories or right agents and things like that. So that’s going to be one of the first more sort of offensive minded, more active AI elements that we’re going to be adding. And then from there we have some different ideas about how we might do auto responding in a way that’s maybe a little bit safer. So obviously everybody’s trying to go for the holy grail of the AI just responds. You give it anything and it can just respond, but maybe there’s some in-between ground there where it’s more of a human response, but we use the AI to maybe figure out what’s the right response or some different things like that. So some stuff in r and d, some stuff very close to shipping. So that’s kind of where we’re at with it. But it is a big sort of sea change much when I started the company, which is like everybody’s using client server apps or just pure email, and that was the big shift and now it seems like there might be another big shift. I don’t know if it’ll be, it could be bigger than that. It could be less than that. I dunno, who knows, but we’ll see.  

Rob Walling:
So last question for you today before I let you go, I asked offline, I said you named HelpSpot. How did you feel when all these other help desks launched with help? Right, so there was Help Scout and help somewhere else, and what did you say to me?  

Ian Landsman:
Yeah, so those don’t bother me at all. There’s lots of whatever variations, but I thought the spot was kind of my unique thing. I liked the spot and Dharmesh Shaw, who’s the co-founder of HubSpot, was in Joel on software with us and kind of in our circles. And then he starts HubSpot and stole my spot like dude, and now it’s HubSpot. And obviously anytime I say HubSpot and HubSpot and people get confused even more than with Help Scout, although that one does get confused as well sometimes. But yeah, I’d say in terms of naming irks HubSpot,  

Rob Walling:
HubSpot  

Ian Landsman:
Kind of takes the pride from me.  

Rob Walling:
Sometimes that happens, sometimes it happens. Seemed to have  

Ian Landsman:
Done it. I like Dharmesh though. DH is great. Alright. He’s a great  

Rob Walling:
Guy. He’s so gracious and he still, when I wrote this SA playbook, I emailed and said, would you give me an endorsement? And he’s like, of course. And he gave this great endorsement. I put it on the cover of the book. It was so nice. It was like, I’ve been learning from Rob for years. You should too or something. I’m like, oh, you’re the  

Ian Landsman:
Awesome man. That’s crazy. He’s so good. Yeah, a few times I’ve talked to him over the years too. It’s just like, yeah, he’s still like the guy from in the for, you know what I mean? It’s like he’s a billionaire now, but he’s still kind of just humble. The same guy.  

Rob Walling:
Humble and just,  

Ian Landsman:
Yeah. That’s great.  

Rob Walling:
Ian Lansman, thanks for joining me today. Folks want to keep up with what you’re working on, obviously helpspot.com to see the app, and you are Ian Lansman on X Twitter. Anything else you’d like folks to check out? I know you have a few podcasts.  

Ian Landsman:
Yeah, the other thing, I guess the other main thing, if you want to keep up with what I’m doing is mostly technical is my podcast I do with Aaron Francis, and it’s more somewhat technical. There’s a little bit technical, but mostly it’s business and other topics, so it’s more entertaining, I’d say. Yeah, so check that out. We have a lot of people seem to like that, so that’s been fun the last year or so, working on that. Again, one of my little, I can’t really justify it on an ROI basis purely, but it’s a fun thing that I get to work on and is exciting to do.  

Rob Walling:
Awesome.  

Ian Landsman:
Yeah, so check me out  

Rob Walling:
There. Thanks again for coming on the show. Thanks for having me. Thanks again to Ian for coming on the show, and thank you for listening this week and every week. This is Rob Walling signing off from episode 734.

Rob Walling:
I had this epiphany on the spot, and I’d never said this before. I said, weaknesses are fine. We all have strengths and weaknesses. You don’t want blind spots. A blind spot is a weakness that you are not aware of. When you have a weakness and you know about it, you can work around it. If you are the founder who bounces from one thing to the next next who follows each distraction and you realize, you know what, I’m never going to focus on anything long enough to build something great, then you can acknowledge that weakness and stick with things longer than you think you should. But if you’re not aware of it, how can you work around it?  

It’s another episode of Startups. For, the Rest, Of Us. As always, I’m your host, Rob Walling. This week I’m flying solo As I talk through a few topics I’ve been mulling over these past few weeks and months. The first one is going to be about distractions, good distractions, bad distractions, micro, macro, and talking about how to avoid the ones that will derail your plans. I also want to talk about weaknesses versus blind spots. I want to look at how everyone, even the successful founders around you struggle. And then if we have time, I’m going to cover a topic about how you don’t have to be right all the time. In fact, you don’t even need to be right the vast majority of the time to be successful. Before I dive into the topics, if you haven’t picked up a copy of the SaaS Playbook, it has sold just about 30,000 copies.  

I actually haven’t run the numbers in about a month, and last I checked it was at about 29,000. The book is selling really well, and the reviews and ratings and comments both on X, Twitter, Amazon and other places are really encouraging. And it seems the book is resonating with a lot of people. If you haven’t picked it up, SaaS playbook.com or you can get it on Amazon or Audible if you have picked it up, I would love it if you leave me a five star review on Amazon or Audible. That helps people find the book and it helps people gauge whether it’s going to be helpful for them. And with that, let’s dive in to my first topic about distractions. I was going to title this segment, how to Stay Focused even when there are things around you that you’d prefer to be doing. What I realized is all distractions are not bad.  

So I have a couple dichotomies in this section that I want to talk through. The first is I do think there are good distractions. There are distractions that help your mental health. There are distractions that make you happy. There are distractions that have long-term benefits that might distract you from your goals. Your goal is to launch a company or build a company to five, 10, 15 million wherever you’re going. And a quote distraction is anything that maybe you have to spend time doing that isn’t that? And examples of good distractions are going outside, going for a walk, working out, spending time with your family, your kids. Now you might be saying, Rob, spending time with my family or my kids, my spouse? That’s not a distraction. It’s not. I don’t view it as that in my worldview per se, but if we’re looking at a technical definition of your goal is to do X, anything that isn’t getting there is, you could phrase it as a distraction from that.  

Even having a lovely conversation with a friend when you should be focused on shipping a podcast episode could be a good distraction. That’s actually what happened to me with this particular episode. It was Friday afternoon and I wanted to ship this episode so that our editor could start getting it ready. And I was having a delightful conversation that wasn’t getting me towards this goal of shipping this episode, but I asked myself, what is the cost of engaging with this distraction? And that’s a thing that I want you to ask yourself about every distraction that comes up from here and for the rest of your life. Can you imagine if I could actually have that impact on your life, that’d be great. But even for the next day or the next week, what is the cost of engaging with this distraction and what is the benefit of engaging with it?  

The benefit of spending time with your spouse or your kids or people you love is scientifically proven. Humans are so community and relationship driven, there are all kinds of benefits. What is the cost? Well, the cost is I can’t spend that time working on my product or my business or getting that podcast episode shipped. And so as long as you do it in moderation, you’re fine. You spend an hour or two hours or three hours doing something that is a distraction. You can get your work done, you can get your stuff done. If you spend 30, 40, 50 hours a week, some folks who get addicted to video games or addicted to a substance, addicted to alcohol, and they use these things as a distraction, that’s when it breaks down, is when it moves from moderation to perhaps overindulgence. So when you ask yourself, what is the cost of engaging with this distraction?  

Well, if it’s a half hour conversation with a friend, if it’s an hour or two with family, friends or kids, in a lot of cases, that’s going to be the right call. The benefit outweighs the cost in those instances. But then let’s look at playing video games 30, 40, 50 hours a week. What is the cost of that? Well, it’s pretty significant. I imagine it’s going to take a toll on relationships. It’s going to take a toll on your ability to push your business forward. And while there is benefit to playing a video game or having an old fashioned on a Friday afternoon, there is benefit to these activities that make you happy, might be good for your mental health, they might put you around people that you enjoy spending time with. It comes back to this moderation and the cost of engaging with something for an hour versus 10 hours is much different.  

Now, I’ve talked a lot about in the moment distractions, I might call these micro distractions where it’s spending time with someone and playing video games, whatever, versus macro. So what are macro distractions? These are bigger decisions. Let’s launch an entirely new product. Let’s translate our app into Spanish. Let’s make a huge strategic decision that is going to take months and months and hundreds of person hours to implement. Even building a side project. When your first effort, your startup isn’t growing as fast as you want it to be, is that distraction a good thing or a bad thing? Well, I’ll come back to this. Number one, is it in moderation? And two, what is the cost of engaging with this potential distraction? And the macro ones are a little trickier because the worst distractions masquerade as productivity. I want to say that again, the worst distractions masquerade as productivity.  

Because if I know it’s a distraction, if I know, again, it’s playing video games, it’s anything I do for a hobby, I would say, oh, it’s a distraction from work. Again, that’s not my worldview, but let’s be very black and white about it in this segment. And if it’s obvious, and I know it’s a distraction, it’s okay. But I see a lot of entrepreneurs who think that reading more business books, reading hard thing about hard things or a biography about an entrepreneur, they feel like that is educating them on how to start a company. And to me, it’s a distraction. Masquerading is productivity. One of my most popular blog posts back when I was still blogging was called Startup Founders Should Stop Reading Business Books And don’t take the title literally because isn’t the SaaS Playbook a business book? It is. But in the post I talked about how highly tactical, highly prescriptive books like the SaaS Playbook or Traction by Gabriel Weinberg, even like EOS, things that give you information that actually improves your business.  

I put those in a category training of actually showing you tactics and strategies that will get you there faster. Reading books by Malcolm Gladwell, and even a lot of, I mean I like Seth Godin’s books, but a lot of Seth Godin and just frankly, most business books that are out there are just not going to help you grow a startup faster. Take this as someone who reads 30, 40 books a year, I have 900 books in my Audible account that I read books via audio. Obviously if you’ve listened to this podcast for any length of time, I am Pro book. I’ve just written my fifth book, but I know when I’m listening to most books and most podcasts, even if they are business oriented, that they are a distraction, but many entrepreneurs don’t. And that’s when distractions masquerade as productivity. Here’s another distraction that I see masquerading is productivity.  

In our circles of entrepreneurs, it’s launching another product without marketing the one you’ve already launched. Or how about this? It’s focusing on writing more code or answering support tickets or doing something that’s certain without selling what you’ve already built without marketing and selling the thing you’ve already built. Because that’s hard, it’s scary, it’s uncertain. It’s where the resistance lies. It’s what you don’t want to do as a technical founder. So what are the takeaways from this one? I want you to keep in mind this question of what is the cost of engaging with this distraction and what is the benefit of engaging with this distraction? Because the benefit of reading a business book might be it’s just fun. It’s what I do in my off time. It recharges me, and I understand and admit that this is not being productive. It’s a hobby that I have.  

And I think weighing the cost versus the consequences, as you think about distractions and just being deliberate with your time, that’s it. If you’ve known me for any length of time, the value that I put on relationships and on my relationships with my wife and my kids and my friends for that matter, so you’ll know that I’m pro you spending all the time with all the people that you want to feed your soul. I just want you to keep in mind the cost versus the benefit, and to be extremely aware of distractions that masquerade themselves as productivity. At the end of that story is I had a distraction yesterday. I knew that the benefit of it was, it made me happy, and the cost was that I might have to record this episode on a weekend. And here I am Saturday afternoon recording it. And you know what?  

That’s the decision I made. I’m here for it. My next topic is another dichotomy. It’s weaknesses versus blind spots. So I was interviewed on a podcast last week and the host started asking me about personality tests like Myers-Briggs, Enneagram, Colby, a StrengthsFinder. We were kind of batting some stuff around, and I never remember my results from these tests. I actually have taken all of them, I believe, and what I do is I read through, I take what I can learn from them, I internalize that and say, oh, yeah, I should do that. And then sometimes I’m like, that’s not me at all. And then I kind of forget. I don’t remember what number I’m on the Enneagram. I always have to look it up, but when I pull it up, I’m usually like, oh yeah, that’s totally me. It describes me and my strengths and my weaknesses.  

I think it’s pretty good at it. Now you have to take these things for what they’re worth. Some of them are put together by researchers who have 5,000, 10,000, 20,000 people take these and they normalize the results. And they are quite scientifically, I’ll say, accurate, as accurate as you can get with something like this. And then there are other ones that are kind of made up by people not really tested, and you got to take it for what it’s worth. So I always hold them with a grain of salt, but I have found them helpful for me over the years to learn just a little more about my weaknesses. So we were talking on this podcast and I had this epiphany on the spot, and I’d never said this before. I said, weaknesses are fine. We all have strengths and weaknesses. You don’t want blind spots.  

A blind spot is a weakness that you are not aware of. When you have a weakness and you know about it, you can work around it. If you are the founder who bounces from one thing to the next, next who follows each distraction, who maybe has a little bit a DHD, whether it’s clinical or whether it’s just something in your personality and you realize, you know what? I’m never going to focus on anything long enough to build something great, then you can acknowledge that weakness and stick with things longer than you think you should. But if you’re not aware of it, how can you work around it? If your weakness is that you don’t like doing hard things or you don’t want to do or work on anything that you don’t want to work on, and let’s say you are a maker, you’re a builder and you want to write code, you want to build websites, you want to build products.  

If you know that’s a weakness, and you’ll listen to this show or you’ll read books about this topic or hear opinions and advice from folks in your mastermind. If you’re in a community like MicroConf, connect wherever you are getting advice. If you don’t realize that you are constantly doing that and avoiding the hard things and only really doing what you want to do and justifying it with, well, that fits for my personality. You have a blind spot. And the way to know you have a blind spot usually is if you have smart people around you, successful, smart people who are kind of all telling you the same thing and you keep not listening to them and you’re not finding the success that you want. You probably have a blind spot. Blind spots are really tough. The hard part is you don’t know you have them.  

And turning blind spots into weaknesses and learning about a blind spot and kind of admitting that you just have that as a weakness eliminates it, right? So how do you learn about your weaknesses? Well, I think there are three ways, right? There’s introspection. There’s asking yourself, why do I fail at things? Am I the one that starts too many things, never finishes? Am I the one that never starts things after I finish? Am I the one that makes too much? I avoid conflict. I avoid doing hard things, things I don’t want to do, like marketing or sales? Do I avoid hard work? Maybe my weaknesses is I just never learned how to work hard. I don’t have any discipline. Maybe my weaknesses is I’m really disorganized. I think there’s some introspection to be done here. I do think personality tests have been helpful for me.  

I’m not going to prescribe them for you, but I have taken four, maybe five, and I think I listed most of them earlier in this segment. But I have found those helpful for identifying potential weak spots, especially I remember the Enneagram is really good at this. It will say, this is a strength, and here’s the shadow side of that strength because every strength we have when taken too far is a weakness. And I think the Enneagram does a good job of identifying that. So personality test is number two. The other one is people around you and whether you need to ask them, what are the things that I keep screwing up that you’ve noticed? And again, this is maybe it’s your spouse. These are hard conversations. I mean, it can be hard to hear this and just admit like, yeah, that’s me. This is something.  

This is a blind spot that I have that I’m going to turn into a weakness. Again, having strengths and weaknesses is human. Having blind spots is something that if you want to achieve and you want to be a successful entrepreneur, you can do it with blind spots, but they will hold you back. And I absolutely know founders who have blind spots, who ask opinions from smart people, hear about the blind spots and still don’t do anything about them. And it’s that same exact behavior that happens over and over and over is the reason that I see them not succeeding. And it’s tough because if you just can’t engage with it and admit and be okay, oh, this is a weakness, then it’s going to be something that comes up over and over and it’s going to be detrimental to your success. There was introspection. There were personality tests.  

And the third one asking folks around you, and I think, look, this can be co-founder can be folks in a mastermind, can be again, spouse, siblings, anyone who’s close to you, who has watched you work and watched how you succeed and why you succeed and has watched you fail and has seen why that has happened. All of these are data points. There’s probably no one individual that knows all of your weaknesses, including you at this point, but you gather the data and you take it for what it’s worth. And start to think, when I look at who I want to be, do I want to be a successful entrepreneur, will look at other successful entrepreneurs, folks who come on this show. Folks I mentioned on this show, you’re Jason Cohen’s, your Heat, and Shaws, Ben Chestnut, Dharma Shaw. A lot of folks who I’ll say are successful and they’re on podcasts where they speak up MicroConf, you can start to see how they operate and you can get a sense of their thinking when they’re interviewed or if they write stuff or do talks and to ask yourself, can I operate like that?  

Am I operating at that level? And if not, why? And it’s not to copy. I’m not trying to copy anyone or put them on a pedestal. No one is perfect. We all have strengths, we all have weaknesses, but there are always folks that are ahead of you. I know there are many folks ahead of me and they have helped me over the years reflect on myself and say, why have I not achieved what a Jason Cohen Heat and Shaw Dharmesh, I can name all the names again, but why am I not as successful as them? And maybe it’s just choices I made. Maybe it’s I focused more on my family, maybe just my starting point. We say whatever. There could be a bunch of reasons or it may be, huh, because they overcame their weaknesses. And it took me a while. It took me a long time, I think, to turn some of my blind spots into things that I was aware of.  

So hope you enjoyed those thoughts today on weaknesses versus blind spots. The next topic is the idea that everyone struggles. And this actually came from a conversation I was having with Ruben Gomez, founder Sewell, he’s been on the podcast many times. He told me that someone else told him, they said, you are so successful. It makes me feel better that you have trouble at times, that sometimes you struggle with things. And I thought to myself, well, of course I’ve talked to Ruben almost monthly basis for 14 years or something, so I know his struggles because we talk about them. But it’s so interesting on the internet how things might not come across that way. And Ruben of all people is not someone who is humble, bragging and only talks about the good. I mean, he’ll talk about all the stuff, but it isn’t always apparent just how much struggle each of us is going through.  

And frankly, I’m just going to Mia Culpa here, how many mistakes each of us makes even once we kind of know what we’re doing. The level of mistakes that I’ve made in the past 10 years is pretty incredible. So why have I achieved, I would say each year I’ve been more successful than the last. I’ve had more wins than last. I’m happier now. I make more money. Whatever measure I’ve built, more successful companies, I struggle less. I am less stressed. So by all measures, I would say my life has gone up into the right, and yet I’ve done a lot of things that haven’t worked, and I guess this is maybe more of a personal episode than I’ve done in a while, but I wanted to walk through a few of those failure, you know how they failures. I don’t even want to label. They’re just things that I did that basically kind of didn’t work long term.  

They were decisions that I made that were a lot harder than I thought or just didn’t turn out the way that I thought. One of them, man, going back to 2013, so this is 11 years. When we launched Trip, I had some hubris about the fact that it was going to work, that I knew what I was doing, that I’m a successful entrepreneur. It was my fifth company. Yeah, MicroConf was fourth. TinySeed six. Anyways, it’s my fifth company. And I was like, you know what? I know what I’m doing. I have a bit of money in the bank. I have some experience. I have a good network, I have an audience. I’m a product person. I’ve done this before. It’s just going to work. And then we launched and it didn’t work, and it plateaued at eight. You’ve heard the story plateaued at eight grand a month for months on end.  

And I was just distraught and I had a moment where I was like, I’m supposed to be good at this. People listen to me about being an entrepreneur. Don’t I know how to do this? I thought I knew what I was doing. And it turns out I figured it out. It was grinding, it was working with Derek to figure out the next thing to launch and how to pivot the product. And we did. And it took us, I dunno, maybe nine months from launch, nine agonizing months from launch to get to the point where we had product-market fit, and then things took off like a rocket, and then it was like, okay, I do know what I’m doing. I was just overconfident that it would work right away. If you want to hear all that agony, by the way, go to Startup Stories podcast. You can look in any podcast app or you can go to startup stories podcast.com.  

Derek and I recorded 10 to 15 minutes a week for a year, and then I cut it all to actually not all of it together. I think it was nine hours of audio and I cut it down to 90 minutes and kind of just packed it all in. So you can hear this longitudinal agonizing trip towards product-market fit as we finally did get there. But in the middle, I have a little bit of PTSD. When I listened to it, it was such a hard time of not even knowing what we were building and if we’re building anything for anyone and if it was all just a waste of time. So that was one, like I said, 10 or 11 years ago. How about MicroConf Locals? We launched local events. We are going to do, I’m trying to think of how many we did in our biggest year, but we have our two big flagship events where we have the one in us, the one in Europe.  

We’re going to be in Croatia here and just a week or two after this comes out. But then we wanted to do local events, which were like these First, we were going to do one day events where it’s like eight hours, four speakers and fly into some major cities, and we started doing those and the uptake was not great, and it was a lot of effort. And so we said, well, what if we just make ’em like three hours in the afternoon, almost like a happy hour? I would either do a short talk or I’d interview someone. So I would fly in with a producer and we would basically produce a three hour event. And they were fine. The events themselves were really good, and the people who came, it was awesome, but the local interest wasn’t there. We couldn’t charge enough even to make them break even.  

We were losing money on them, and it was burning me and the producer out because we were on the road all the time, and I went to, I don’t even know, it was 10 events, 12 events last year. It’s just way too much travel. And it wasn’t just the being there, it was getting on the plane. It would wreck 48 hours, 72 hours of stuff that I could be doing that’s not being on a plane, right? It’s recording podcasts, it’s recording videos, it’s writing another book. It’s all the opportunity cost of the travel and the time. And so that was an effort that we decided to, I’ll say put on pause, but it’s done. And so is it a mistake? Is it failure? Well, we certainly struggled, certainly had trouble at times. My whole team burned out last about a year ago, including me, and it was rough, but it was a calculated bet of if this works, it’s going to be great.  

We can do more. We can have local MCs. We had all these plans, but the interest wasn’t there, so I don’t regret it. It’s not a mistake. But we did struggle and we agonized. I agonized over whether to keep doing them. These are hard decisions. Strategic decisions are big and difficult, and it’s like how do you make hard decisions, right? This is a question. How do you know when to quit? How often do you hear this question asked of anyone? Right? It comes into this podcast. People ask Seth Godin all the time. He wrote that book, the Dip, but how do you know when to quit? It was because I knew when it was time, maybe I waited a little too long, but I was out of ideas and it wasn’t working, and I was like, I just want this to be done. And that’s how we knew when it was time to quit another effort.  

That certainly is not a failure. It was the YouTube channel, and the YouTube channel is still doing really well. It grew very quickly over about 18 months, I think we went from like 10,000 to maybe 80,000 subscribers, and then it plateaued. The worldwide audience of entrepreneurs who want to build SaaS companies isn’t that big. Maybe, I don’t dunno, a hundred, 150,000. It’s not millions of people. So to plateau at 80 ish is not the end of the world. But the question was, so do we keep doing this? We were shipping a video a week. It was an absolute grind, and the grind was worth it When it was successful, the grind was worth it when we were adding a thousand to 1500 subscribers every week. Love it. You see that number going up into the right. I can grind for a very long time when that’s happening, but when it starts being three or 400 a week, I have to ask myself, is this worth my time to outline record the cost to edit producer Ron’s time, just all the effort we’re putting behind this?  

Or what if we did less? What if we didn’t do any YouTube videos? What if we did half as many, so it’s every other week we could put that time, that energy, and frankly, those dollars into some other way to build the audience. And so again, not a mistake, but it is a struggle and a hard decision. It was challenging. I think it was six, seven months ago when I finally said, man, we’ve been plateaued for six months. I think we just have to turn this attention to something else. And frankly, we turned that towards the course. SaaS launchpad.co. You haven’t checked it out. It’s all about finding ideas, validating, building a launch list and launching. It’s really the second course I’ve ever built. First one was 14 years ago. This one is way, way better, more complete, more thorough. The course is $500 and it’s worth it.  

I mean, I’ll just say that it’s the best course, certainly best course I’ve ever produced and one of the best pieces of content I’ve ever produced. It’s almost 10 hours of content. It’s really in depth. And if you want to learn more about launching your own SaaS SaaS launchpad.co, so hopefully that segment makes you feel better if you weren’t aware that even successful people struggle at times. Alright, last topic. This one’s a quicker one. I was watching a video, I believe it was Roger Federer, who is an incredibly successful tennis player. I believe he was giving a graduation speech. He said, I’ve played in 1,526 singles matches. I won 80% of those matches, but I only won 54% of the points. So let that sink in, barely more than half of the points and yet won 80% of the matches. I love this metaphor as you don’t have to be right that often.  

I won’t belabor this metaphor and start talking about baseball and how the all time grades only hit the ball, what 30, 40% of the time you get. The point is that successful founders aren’t right all the time. They aren’t right a hundred percent of the time. They’re not even right. 90% of the time. They might, I mean, I don’t know what the number is, but is it 60? It might be be as low as 60, but they try enough things, they move fast enough and enough of their things work. I was talking about this point, and Ruben actually pointed out to me that when I say enough of the things that they try work, he said, you know what you should include there is that they usually don’t work right off the bat that they do work if you iterate on it and focus on it.  

And I really liked that distinction. When I say they work on a lot of things and most of the things they do work is most 55, 60, 65, 70, it’s in there somewhere. Seriously, it’s not 80 or 90%. 80 or 90% of the things I do don’t work. But the ones that do have asymmetric upside and they push the business forward and they push my life forward and they work, and that’s the pattern that I see with successful entrepreneurs and frankly, someone who’s successful at all with their life. They just generally learn to make good decisions and follow through. But I want to underscore that point of for it to work for you to be successful on 54% of those points as Roger Federer, that usually won’t just happen right off the bat. It’s not like I’m going to start this marketing approach. Yeah, it’s just going to work. I’m going to launch this product. Oh, it just worked right off the bat because successful folks, 54% of the time are right. That’s not how it works. You launch something, you iterate, you take feedback. You try that marketing approach, you iterate, you take feedback, and eventually you kind of grind it to the point where it works. Usually 55, 60, 60 5% of the time. That’s going to be it for me today. Thank you so much for listening this week and every week. This is Rob Walling signing off from episode 733.

Rob Walling:
You’re traveling through another dimension, a dimension not only of sight and sound, but of mind, a journey into a wondrous land whose boundaries are that of imagination. That’s a signpost ahead. Your next stop startups For, the Rest Of Us. Welcome to this week’s episode. I am Rob Walling and you might recognize that intro from the amazing and talented Rod Sterling who created and wrote so many episodes of one of my favorite series, the Twilight Zone, but this is not the Twilight Zone. This is Startups For, the Rest, Of Us, where every week since 2010, I’ve shipped an episode focused on helping bootstrapped and mostly bootstrap startup founders. We’re founders who seek freedom, purpose and relationships, and we don’t want to sacrifice our life in order to build our startup, but we want our startup to change our life for the better. Today’s conversation is pretty incredible. 

It’s a founder who effectively bootstrapped. He uses the word bootstrap because they raised a couple hundred thousand dollars and if you’re in venture capital land that is bootstrapped, usually it’s anything less than a million is considered. Bootstrap built his company with a co-founder for 15 years and had three subsequent exits to private equity where he sold a portion of his equity in each one. The last exit was for $615 million. It’s an incredible story and my guest today is extremely knowledgeable and extremely accomplished. Before we dive into my conversation, the SaaS Launchpad is live. It is the best course I have ever created. It is the most comprehensive. There are reviews coming in already of people who are blown away by the depth and the quality and the quantity of the content. It’s at SaaS launchpad.co if you’re interested. And as of the day this episode goes live, if you buy the course in the next six days before September 30th, you’re going to be able to get on a live q and a call with me where we’re going to do a group call, talk about questions people have from the course or probably about anything else. 

To be honest, SaaS launchpad.co. I’m so confident in this course we have a 30 day no questions asked money back guarantee, so really there is no risk for you to check it out. That’s SaaS launchpad.co. And with that, let’s dive into my conversation. 

Jeff, thanks so much for joining me on Startups For, the Rest, Of Us. Hey Rob, thanks for having me. Yeah, so as background for folks, you are at retired founder on Twitter, and your story is pretty incredible. Your, I’ll call it your personal H one, which is your Twitter bio says, retired SaaS founder sold the business for more than $600 million Seeking purpose and community post exit. You bootstrapped a company and sold it for a crazy amount of money. So why hasn’t everyone heard of you? Why is it in your name across the marquee, there’s people with huge YouTube followings that have done a fraction of what you’ve done, what’s going on  

Jeff:
There? I guess the obvious answer would be, I must not be that interesting, but perhaps beneath that is I like to keep a low profile just for my own safety and security, and by being anonymous, it also helps me be completely authentic with anything I have to talk about.  

Rob Walling:
And then we’ll dig into that today you’re willing to talk numbers and all the stuff you were telling me in the pre-interview, I was like, whoa, okay, that’s great. And so that is, you’re anonymous, but I have vetted that you in fact have done these things. And so folks listening as the first anonymous guest, it’s kind of neat to have someone who has had such an incredible journey. I want to start by taking us to the end, so to speak, the exit and you can explain how it’s actually exits, but what I really want to go to is that moment that you refresh that bank balance and you realize I never have to work again. I’m all set. What was that emotion? What was that feeling?  

Jeff:
Oh man, the first word that comes to mind is relief. And following that probably enthusiasm. As a bootstrap founder, it’s very difficult to take a lot of risk. So when we sold the business the first time to a private equity firm, and if anyone wants to contact me on Twitter or wherever, I’d be glad to share details about who our banker was, who the private equity firms were, but I’m going to keep those anonymous as well for now. But I was excited to work with people and actually be able to put money into the business and pursue some of the crazy ideas that I had as a founder. But when you’ve got 98% of your net worth wrapped up in your business, it’s really challenging to say, Hey, you know what? This is a crazy idea and I think it’s a five x payoff. If it works, it’s hard to pursue those things. 

But the first thing was relief. Man, I listened to your latest podcast and your guest talked about sleeping for 14 hours. If anyone gets to retirement, I dunno if this is good news or bad news, but the best thing is the sleep. It’s just so great to sleep. It’s so peaceful. Oh, it’s so peaceful. I went a dozen or more years where I was asleep, I was unconscious, but I was still at work. My dreams were all involving work and to be able to actually get to sleep is great. So that was the first thing,  

Rob Walling:
The biggest perk. Yeah, and to give folks an idea of the timeline real quick, we’ll talk through this in more detail, but you co-founded the business in 2003. You sold a majority share of it to private equity in 2017, so 14 years. But then you got a what they call a second bite at the apple and a third bite at the apple, meaning you rolled equity and you had another exit in 2020 and then you had a final exit in 2022. That’s the $615 million exit and it was 14 times a r. So that’s an interesting thing. Let’s talk about that real quick because people ask all the time, if I’m doing 2 million and growing at blah, what’s my revenue multiple? And it’s always like, it just depends. I can do a bell curve of the past 20 exits that I know of. I can give you the range, but I know a friend of mine who is a m and a advisor and he got someone a 23 XARR offer and then I heard someone three days ago who got a two XARR. So is that the range? It’s two to 23, it just depends, right? It depends on the space and the market and the growth and the this and that. There are the most common parts of the bell curve for SaaS 10 to be in that, what is it four to? It’s about five to seven, but you see five to eight and it depends on the market. So 14 is a great, great multiple. Why was that the case?  

Jeff:
It was a combination of things. I mean the market was very strong at that moment in time in early 2022, so that can’t be disregarded, but the mental model I used when describing this to people considering selling their business is a slot machine, and I didn’t know this going in or I would’ve had some better numbers, but just excluding market conditions. You take your revenue is sort of the first real of a four real slot machine and then you take your gross margin. I’d never really calculated our gross margin. I mean I knew how the business worked, but I’d never really dug into what our gross margins were. We were about 90% gross margin. It was a mature product. It was all our own code and open source. We didn’t have any licensing costs. We had high gross margin. That’s real. Number two. Third is retention. I knew we took really good care of our customers. It was one of the reasons we had I think such a good outcome and took so long was our patients, but we took really good care of our customers. We had 117% net retention, so it was  

Rob Walling:
Negative 17% churn.  

Jeff:
Yeah, negative 17% churn.  

Rob Walling:
That’s unbelievable  

Jeff:
And happy to talk about some of the strategies that helped that. My favorite of which is short-term generous, long-term, greedy, which I’m glad to talk about later, but the fourth reel is growth, and at the time we sold the first time we got seven times revenue, so seven not nearly as good as 14 obviously. But if you think about that slot machine, our growth was only about 20, 22% a year when we sold. So if we would’ve had a hundred percent growth and 90% gross margin and 117%, that would’ve been a jackpot. But we were kind of like jackpot, jackpot potato for that last reel on growth, but perhaps the private equity company that acquired the majority stakes saw that we had. We had a lot of potential because we weren’t aggressively spending in sales and marketing at that time.  

Rob Walling:
And let’s give folks an idea of what the business was. We’re not going to name the business because very quickly someone could find your identity, but it was a bootstrapped SaaS company. And what industry did you operate in?  

Jeff:
Yeah, we were business to business security software and if anyone wants to find me, I’m not hiding, send me a message online or on Twitter or something and just like with you, glad to introduce myself, but it was business to business SaaS.  

Rob Walling:
Got it. And starting in oh three, there really wasn’t, I put in quotes, there wasn’t SaaS, constant contact was around and MailChimp was just, and Basecamp was a couple years later, but were you charging a subscription when you launched it in oh three or was it one time back then and then you migrated to subscription later?  

Jeff:
It was an abject failure to get licenses is the honest answer. That’s amazing. I’m a salesman by trade, so of course we were trying to get a hundred grand for the software and then the way it used to work is you’d pick 15, 20% maintenance ongoing, but we weren’t able to do that. We were two guys in a dog and the dog was a loner and nobody wanted to give us the money. It was really Salesforce that I recall as being one of the real earliest pay as you go, the difference in our case, we adopted the pricing model of a subscription, which I think was very healthy for customers and for the tech companies, but we were still OnPrem, so we were shipping servers, still probably shipping on-prem servers to customers, but it was really the licensing that was rather novel at that time in 2003, and again, driven out of necessity, not some kind of foresight or wisdom.  

Rob Walling:
Ben Chestnut, co-founder, MailChimp, I interviewed him at MicroConf, he basically said the same thing. He was like, we were just charging one time because that’s what we thought software was and then suddenly we realized we need, I don’t remember why they switched to subscriptions, but it was very much an accident for them as well. So talk to me, you told me offline that you started in oh three, you became profitable in oh seven, so four years of what I would call grinding. Were you working a day job at the same time? How can you be an unprofitable, bootstrapped company? Those two things, you don’t have burn rate because you don’t have cash in the bank.  

Jeff:
Yeah, I was not working another job. I was unemployable at the time for clarity as well. We did raise $350,000 of an angel round, so mostly bootstrapped  

Rob Walling:
Is how I should call  

Jeff:
It. And that was the last capital. That was the last capital then. And I had a previous company that I sold in a.com company that let’s not venture into waste time in the interview here, but I had a little bit of money left over from that after failing at a couple of things in between. So we were burning money at home for a long time. It was a tough first five years.  

Rob Walling:
So mostly bootstrapped is obviously what I refer to that as. So as you hit profitability in oh seven, what did the company look like? Was it still small? Was it you and your co-founder? Did you have much of a team?  

Jeff:
Yeah, it was a first year. We did a million dollars of revenue was 2007, I think we were at about seven employees then, so it was just the two of us for a year. We did $9,920 of revenue our first year in 2003. Yes, I remember. And I have a copy of the purchase order I could put my hands on right now.  

Rob Walling:
That’s cool.  

Jeff:
That was a big day. Yeah, a million dollars of recurring revenue  

Rob Walling:
In the journey between oh three and 18, which 15 years. That’s when you retired. You did the first part of your exit, partial exit in 17, then you retired in 18, and then you had these other exits afterwards because you just owned shares. Right. What I want to find out is do you have a memory of I guess one of the hardest time periods or one of the hardest moments, a time where you kind of said, well, this might be it, this isn’t going to work. Or maybe it was months of stress fighting spammer. There’s always, every entrepreneur has many of these stories, but you have any go-to story of like, this was terrible.  

Jeff:
Yeah, I’ll give you one early and I’ll give you one late. The one early is sort of a combination of stories, but I remember a year in two years in something like that, I mean we are doing almost no revenue and it’s just not working. And I think we were a little bit early for the market we were in and it’s security software, so it’s difficult to get a beach head and just thinking, man, if I had any other opportunity, I mean any opportunity like three grand a month and a dental plan and just like relief from the pain I’m going through, I would’ve jumped on it. And I remember a particular moment where I was fighting with the printer or something like that and I was just really angry and frustrated and I think that’s one of the things, I mean I hope your audience takes from me and from each other is that it’s hard, man. 

It’s hard and it’s lonely and having somebody to talk to authentically where you’re not in pitch mode and talking about how great it is and feeling like everybody else is doing great and you’re not, but it’s really hard. It was hard and it was lonely. The second one I’d give you was late in the process and was a contributor to deciding to sell the business, and this was 2015, I believe, where we were doing well and I had taken a loan, I built an office building for the company and I took a loan of $6 million with a personal guarantee. I didn’t have that kind of money, but the company had cashflow at that point to support that, and we had a security breach. Nothing was lost, but someone got through the first level of our security. It wasn’t our software as a piece of open source code. 

I don’t remember what it was, but we were stuck and one of our customers said, Hey, we’ve got a red light on the dashboard here. Somebody broke through the front line of security here and they’re checking the doors to the vault. Then another customer, same thing. So we were under attack at that moment in time and I just signed a loan for $6 million to build this and in security software, one bad line of code could ruin you, wasn’t our code, couldn’t fix it. Totally out of our hands, and that’s a moment, I won’t forget, that’s a moment that all the ships were down and we didn’t really have any ability to play the hand. It just, our team came together and when fix was available, we fixed it. But that’s one that I won’t forget.  

Rob Walling:
Yeah, that sounds terrifying and that the longer you do this, I’ve seen so many founders now get hacked, get cease and desist. I have employees embezzle have, it’s just these edge case things you hear about, you’re like, well, that’s such an, that’ll never happen, but it’s like, no, it’s either I have view across 191 companies, so that’s a law of large numbers. It’s going to happen to some of ’em. Or you had your one company but you did it for 15 years and so the odds of something happening in that timeframe is, and it’s terrifying. How did you handle it in the moment? Some people completely freeze up and don’t know what to do and panic and that’s there’s fight, flight or freeze I think are the reactions. Do you remember panicking and then calming down and saying, well, we just got to fix this or what was your MO there?  

Jeff:
Yeah, I got plenty of weaknesses, but panic is not one of ’em. Equanimity I think is one of my strong suits, but this was a case. I’m a salesman by trade, so I didn’t have any ability to understand really what was going on and had to rely on the team. And I believe it was a Friday night and we just got to the point where there wasn’t anything else we could do. I think we approached it rationally and then you talk about the events that just sort of happen to you. There’s just a big wheel in the sky that spins and sometimes your number comes up and that happens. That could be getting a disease or getting in a car wreck or in this case having a piece of software that you were using that had a vulnerability. And fortunately we were able to work through it. Fortunately, the other safeguards that were present in our software held strong. I dunno if it’s interesting, but a lot of security software you could say is like it’s an alarm or it’s a fence or a moat or a gate or something. We were a vault. We protected the vault of some very important customer information, casinos, law firms, banks, hospitals, things like that. So it was not a system that could fail without massive repercussions for everyone. So anyway, glad to have that behind.  

Rob Walling:
This is going to be a tricky question or maybe you’ve already thought about this, but why did the business work? Why did it work so well that it was obviously a massive success for you and your co-founder and even the private equity firms that bought it and resold it. What is at that core, feel free to talk about you and your co-founder that you executed Well, I think the founders themselves have to be pretty instrumental in any business like this working, but people say, well, it’s the market or the idea was the right time. We got a little lucky with timing. We got whatever. How do you think about why this business works so well?  

Jeff:
Yeah, a combination of things. It’s always a great question in a group to say, Hey, what percentage was success and what percent was luck? And it was definitely a combination. I think of it like winning a poker tournament. Sure it’s possible to not even know what you’re doing and just go in 20 times in a row and win. I think one, it was a good idea. It was my co-founder’s idea. It was ahead of its time, but it was a good idea and we caught a wave five years in, 10 years in that picked up steam. I would say we had a good division of labor in the startup where my co-founder was a brilliant coder. He was technical, I was sales, so if it had to do with code, it was him. If it had to do with the business, it was me and we stayed out of each other’s way, which was good. 

We didn’t go too far too fast. If I would’ve had an ability to raise venture capital early, I probably would’ve done it and that probably would’ve been a mistake. So again, we took the long view on things, short-term generous, long-term, greedy, anything we could do to get the product in the customer’s hands and using it, we know we would succeed in the long run. We deferred gratification, so we didn’t have a big fancy office. We had a crummy office for a long time while we were profitable. We didn’t get hit by a lightning bolt out of the sky is definitely one.  

Rob Walling:
So we just didn’t get killed in the stayed  

Jeff:
Alive, cease and desist letter sued by a customer, a breach, sued by, we never got sued, which is nice. So really a combination of things. Rob, over the long period of time, I mean I don’t want to shoo away any credit. I think we made more good decisions than bad decisions. I think we recovered quickly from our bad decisions. We weren’t afraid to take certain risks that had favorable payoff conditions and we weren’t in a rush. We went, I call it bootstrap. We had a small amount of money from outside investors that got us over the line.  

Rob Walling:
Yeah, that’s a big thing. I mean, there’s so many directions I want to take that I’ve talked a lot lately about how, or be it lately, about how I think success of when I look at TinySeed companies, are the founders multiplied by the market or the opportunity? And the reason it’s multiplied is let’s say you have a founder who’s a one out of 10. If we’re just going to have a numerical rating scale, but it’s a great market opportunity, they will execute mediocre and they may have a middling a success, but if you have a founder who’s a nine and they have a real market or it’s a market that they don’t get a little bit lucky with or they don’t hit at the right time or whatever, then it’s similar, it’s middling. And we see a few tiny sea founders just like you are such a good founder and I’m so sorry that you’re just not getting the traction. 

This sucks. But it sounds like between you and your co-founder, that division of labor, and it sounds like both of you really executed well and then you have that market and that multiple, you multiply the nine by nine or the 10 by 10, suddenly you’re at a hundred versus these are all contrived, but you get the idea what I’m saying. And there are more factors in that, right? I mean there’s luck involved and there’s all kinds of stuff, but it’s crazy to see such an outsized outcome. There just aren’t that many nine figure bootstrapped exits like this. So I want to touch on something you’ve said a couple times now and it’s short-term generous, long-term, greedy. Can you flesh that out? What you mean by that?  

Jeff:
I think this is one of the benefits of being a bootstrap company. We didn’t have a quarterly number that we needed to make, and that means you don’t ever sell the product to someone who’s not a good fit. You sure try not to. There could be an occasion where there’s a prospect and they really should buy your competitor’s product, but you need the money or you need to make your number for the quarter. And we never did that. And then there were occasions where maybe the person we were dealing with had a very low budget authority, including our first sale of $9,920 in December of 2003. And you think, well, geez, this is a customer that should be a hundred thousand dollars a year customer, $50,000 a year customer, and the person you’re dealing with is enthusiastic about it, but they can’t convince their management or they don’t have the budget. 

And we’d say, what do you got? Can you sign for 5,000? And we would do that. We would do that consistently. The way our licensing worked as well was the product did not have a feature that would exclude someone from using the product because they’d exceeded a license account. So we sold on concurrent licenses. There’s a number of ways to do it, and it was also a generous way to do it was concurrent versus named users, which people liked. And then if we thought, Hey, you’re going to need, let’s say 50 concurrent users and that’s whatever it is, 10 grand a month, we would say, I’ll tell you what, first year we’re going to charge you for five and take advantage of us. I mean, just rip us in half, get up to, I hope you get up to 75, catch up with you next year, and if that’s a problem, we will work with you from there. 

So you go from, you could be sitting around forever trying to get that 50 concurrent license thing, but I’ll sell it to you for cheap for five because I know you’re going to like the product. I know we’re going to take care of you. I would say also we had a methodology or a viewpoint that we never tried to avoid our customers. We had a phone number that spelled the company’s name and you could call that number and one of our people would pick up the phone and help you through a problem. And that the idea was always, let’s try to give great support where no matter what, even if you forgot your password, we’re not going to farm you out to someone else. We’re not going to send you through an IVR. We’re going to try to get a human to pick up the phone and then after we surprise and delight you with some great service, we’re going to take an opportunity to say, Hey, by the way, is there anyone else in the company maybe that could use the product? Or are there other things we could do better than once you’ve done a good job serving them? So that’s just another example of being generous and greedy at the same time.  

Rob Walling:
Yeah, I like that. It’s really long-term thinking, and I like the way you say long-term, greedy. It’s intriguing to be thinking that way because so many folks don’t think about running a company for 15 years. Right, myself included, although I have run MicroComp now for 15 years, I think 14, as you were going along, did it feel like 15 years or was it just something that you kind of didn’t question and you just did every day? Similar to I talk about why this podcast has shipped every week since 2010. People say, wow, that’s a long time. It doesn’t feel, I mean when I look back, it’s a long time, but this isn’t work for me. I do this, I love it. And frankly, MicroConf is just something, it’s just part of me and it’s what I do. My last SaaS company Drip was, it was not an identity, and I never thought I’d run that business for 15 years. So I’m just trying to give examples of some of those really fit of, I’m just going to do it and it did what it did and others, I keep going. So I’m curious to what your feelings were during that 15 years of working on it.  

Jeff:
Yeah, it’s a great question. I’d say time moved at different speeds in different parts of our history. So the first couple of years crawling over broken glass, it was like time in the dentist chair. It couldn’t have gone slower. The first few years felt like a hundred years once we got to profitable and had a pretty good sense that we were going to be okay, that part went fast. So from 2007 till the time we sold a majority share, that 10 years might’ve felt like two. Although there were some struggles of course along the way. I don’t mean to think it was all sunshine and roses during that 10 years, but that time was really good. We had a small team. It was a good team. We worked well together. It was small enough where you knew everybody. It was big enough that you could take a vacation and expect that the company would still be alive when you returned.  

Rob Walling:
I want to ask you a question that I think some people are probably thinking right now, which is with an exit like this, you yourself took home a tremendous amount of money. Is it just shy of a hundred million? Is that accurate?  

Jeff:
Yeah, the total, I’m happy to walk through the transactions if it’s useful, but yeah, I think that the total was about $88 million  

Rob Walling:
That went to you directly.  

Jeff:
That went to me from the equity sale in three chunks.  

Rob Walling:
How do you keep going? What do you do next? That money, I know it came in three chunks, but how do you think about how to stay busy? If I had that much money, I wouldn’t go back and grind, right? I mean, hell, I have way less money than that. I’m not going to go back and grind. You know what I mean? So it’s like how do you possibly think about what to do next to keep yourself happy, to have an impact, to keep learning, to stay sharp without maybe getting back in the game? Unless, did you ever consider getting back in the game?  

Jeff:
Yeah, boy Rob, I could go hours on this. I’ll try to distill it as best I can. Everyone has a number in mind. If I could get this amount of money, then I’d be set and I’d be done. Mine was 10 million. And I think most people, when you say, my number’s 10, you really think of 20. So that was life changing. I was done there. And then first check was 21, second check was about 43rd check was 27, 28. And I remember in vivid detail the day we sold cash in the check, taking my family out to dinner in a limousine, what we had to eat, I could bring you to the table where I sat. Second time we sold Rob $40 million. It closed early in the morning. I was in a conference room by myself. I don’t remember what I did that day. I mean, we might’ve gotten pizza that night. 

Honest to God, I don’t even remember, and I’m not sure how useful this is to your audience, but I mentioned this on another podcast I was on. I think most people have a default perfect amount of spending, meaning maybe you can afford to fly first class and stay in a nicer hotel and I dunno, have a decent car. Whatever it is, everyone has their sort of ideal amount of spend. And when you have less than that, life is of course painful because wanting to rise up to that. There’s also another side, and I can already feel the eyes rolling in the audience that my eyes would’ve been rolling as well, that when you’re above that, if you have more money than you can spend, it creates a certain kind of an issue as well. And just some examples of that are feeling the need to maybe go do it again or give it away, and it’s just more challenging than you’d think. 

I made a lot of the mistakes that I think people who sold their business make you do what the world tells you you should do. You go to try to work with nonprofits and you realize how frustrating and slow that is. If you’re a founder. I bought a bunch of stuff. I had four houses in a jet at one point and realized stuff isn’t where it’s at. Experience and community and relationships are much more valuable than that. And I also grossly underestimated how much I would miss the structure and the purpose and the identity that I had in my former life. And I know I’ve been talking a long time, I can hear myself talking, but I just want to say to the audience, if you’re rolling your eyes right now or you’re saying, what a moron, just believe me when I say when I was starting, I would’ve said the same thing. How is it possible you have this giant pile of money and you don’t just write off it at the sunset and spend the rest of your days with frozen drinks and sunsets and boats?  

Rob Walling:
Well, it’s boring. I did it for six months, and again, my exit was much smaller than yours, but took six months off after and I was like, I was in my early forties. This is not what I’m doing forever. I need to learn, me personally, I need to learn. I need to have an impact. I need to do all that. The thing I struggled with was my whole life growing up, we didn’t have much money, so it was always a constraint. I had a very scarce mindset around money, and a big part of me for entrepreneurship was like, I want to have the freedom to work on interesting things that I want to, but I also want to be set for life at some point. That was a goal. And so I achieved that goal and then I was like, whoa, I’m like 40 years. 

That’s been the driving goal for me. My North Star was to have enough money in the bank in cash that I never had to work again. And then I was like, so what do I do now? And I had MicroConf this podcast, I had stuff that I could work on and do, but I needed a new North star. And my new North Star became to multiply the world’s population of independent self-sustaining startups that is now truly my North star. Everything I do with books, the podcast, YouTube, MicroConf, TinySeed, that’s what I do because it brings me joy and it is, I view it now as my legacy. Did you have a similar transition where you were like, my north star is growing the company or wealth or whatever, and then you had to take, I mean, it took me six plus months to figure mine out of thinking about it a lot. I was actually kind of stressed about it, but did you reorient around something new?  

Jeff:
Oh gosh, bie, congratulations. By the way, you have accomplished something. A lot of people in my situation or similar have not six months is a, you’re much smarter than me and a lot of others that I’ve worked, and I stood up a group called Beyond the Finish Line. It’s b tfl.org if anyone is in the same situation. But I can distill a lot of the conversation is this, I want you to picture a Venn diagram, two circles. One of them is doing something important with people and trust. It’s being back in the trenches. It’s going to war with your friends and being an important part and being useful in that. Okay, that’s one circle. And the other one is absolute freedom and autonomy and independence to do whatever you want anytime you want. And as it turns out, the joke is it’s not a Venn diagram. There’s two circles. 

There’s no overlap. That’s great. And so the key I believe, is to find something as you did, and I have friends that are in the group that have found something that is worthy of sacrifice of that second circle. So if there’s something that you feel passionate about or you feel like you’re giving back enough, you’re useful enough, you’re willing to say, I’m a skier. So I’m willing to say, you know what? We’ve got perfect ski conditions today. I got six inches of powder. It’s blue skies. The lines are short, it’s 20 degrees and the light’s good. And I have to say, I can’t do it. I can’t go out. I can’t go ski today. So it has to be something that’s worthy of sacrificing your independence. So kudos to you for finding that. And the North Star I use now, or I try to use now is energy. 

So if I’ve got something like I’m enjoying talking to you, I was looking forward to talking with you today. If it’s giving me energy, it’s good. And it doesn’t matter how much money you have in the bank, Robin, anyone else listening, it doesn’t matter how much money you have in the bank, if you’ve got low energy, life sucks. It doesn’t matter that you can push a button on your phone and have a plane come pick you up somewhere. If you’re not at looking forward to the day and you’re not looking forward to what you’re doing, your energy’s low. Life sucks. And if your energy’s high, it, maybe I’m working on a home repair project or something, if my energy’s good, life is good. So that’s the new scoreboard because it’s not money anymore.  

Rob Walling:
And that is a big mental shift that I think some people make and some people don’t. And so I want to wrap the interview and give folks a few calls to action. You have several different things that you’re working on. You already mentioned beyond the finish line, which is btl.org, and as you said, if someone is post economic, they can hit up there. In addition, you are at retired founder on Twitter and retired founder.com, and I wanted to read not your H one. Your H one is Hello fellow founder, and you talk about your exit, but the second paragraph down is this is not a pitch for anything. I have nothing to sell you. I have enough money, so I love that I have enough money, so I promise this is not an intro to my coaching service, paid subscription or anything else. My only goal is to help founders. And so you have a contact page there if folks want to reach out, and what do you want them to reach out about? What typically do people want advice from you about?  

Jeff:
Yeah, so let me start with the negative response on that, which is the real generic ones I can’t help with. What kind of business should I start those? I try to write, and I’ll need to spruce up my website before this publishes, but I’ll try to write a very basic applies to everyone, answer to a very basic, applies to everyone, question the ones that are useful or people that have a particular situation or problem that I can help with. If someone does business to consumer or they’re trying to open up a market in Asia or something, I can’t help, but I’ve had, I dunno how many calls and this brings me energy, so I’m so happy to do it, which is why I don’t need money. I don’t have a coaching service, I don’t have anything else. It just gives me energy. I’ve been, I think, an authentic ear for the people who are going through it. 

And that’s where I think I can provide some good in the world from people who can’t make payroll, from people who are thinking about a big partnership, thinking about selling. Their spouse is telling them to get a real job. I talked to a guy whose co-founder committed suicide in their apartment. I’ve talked to people who are in the process of making mistakes that I’ve made. And I think it’s really a relief for a founder to be able to talk to someone who’s been through it and can say, yeah, me too. You’re not alone and it’s going to be okay while not having to secretly pitch me for an investment. I make no investments. No investments in anything. That’s the trade. I’ll not write a check, but I’ll not ask you. I don’t want any shares, warrants, options, nothing. I want nothing.  

Rob Walling:
And they don’t need to pay you. You don’t charge per hour. You don’t have a product. Yeah, very cool. All right, so that’s retired founder.com if folks want to reach out. In addition, you mentioned to me that you are interested in doing more podcast YouTube videos. So if someone’s listening to this and they feel like Jeff might be a good guest on their show, you can obviously ask him. He’s very open about a lot of stuff. He could dig more into the transaction. There’s a lot more that we could talk about, but due to time we won’t. So feel free to contact Jeff, either DM on Twitter or head to retired founder.com. Jeff, thanks so much for joining me on the show.  

Jeff:
Thanks for having me, Rob. I really appreciate and enjoy your work. Nice to be in touch with you.  

Rob Walling:
Thanks so much to Jeff for joining me on this week’s episode of Startups For, the Rest, Of Us. And if you think Jeff’s story was interesting and that he’s knowledgeable, after our conversation on this episode, I asked him if he would be a TinySeed mentor and he accepted. So this is how we’ve built at TinySeed. What I believe is the best mentor network in the world for B2B SaaS companies is finding people who are not the headline name, who have had their name splashed all over everything that we all know. It’s people who have been grinding in the trenches and built an incredible knowledge base and experience, put in the hard work, learned the skills, maybe got a little lucky, maybe it doesn’t matter. It doesn’t matter how lucky you get if you sell for that amount of money. I really appreciated Jeff’s transparency and him sharing his knowledge. And as I said, he’s now a TinySeed mentor. So that gives you an idea of the types of quality and experience that we’re looking for in that role. Thank you for listening to this episode and every episode. This is Rob Walling signing off from episode 732.

Rob Walling:
You’re listening to Startups For, the Rest, Of Us. My name is Rob Walling and I am your host this week and every week on the show today, I welcome back Derek Reimer and we talk through some really interesting listener questions, how to delegate as a perfectionist, how to organize and think about SaaS partnerships and planning your next quarter as a as super small team. We’ll jump into those questions in just a moment. If you haven’t checked out my new course, the SaaS launchpad, head to SaaS launchpad.co. This is the first course I have created in 14 years. It is incredibly in depth. It’s a video course with transcripts and worksheets and quizzes, and it’s all about early stage. It’s all about going from zero to one, going from finding ideas to vetting them, to getting them launched successfully. SaaS launchpad.co if you want to check it out. Now let’s dive in to listener questions. Derek Rimer, thanks for coming back on the show.  

Derrick Reimer:
Pleasure to be back.  

Rob Walling:
So I have some really good questions today. Continuing on this topic of more intermediate to advanced questions. The first one is from hello, it’s Ali on Twitter. Ali asks, we’re at $32,000. I’m going to assume that’s MRR and we’ve done it through long hours, endless experimentation and a lot of good luck, hard work, luck and skill. Sounds like. My question is, how should co-founders with perfectionist tendencies delegate work and what qualities should they look for when hiring? And then Ali actually goes on to ask two or three more questions, which we can take in due time. But as someone with perfectionist tendencies, we laugh because you and I are both that way in certain areas. So  

Derrick Reimer:
That’s the name of our band.  

Rob Walling:
That is my co-founders with perfectionist Tendencies. Tendencies, just perfectionist tendencies for short, what are we? Like a third wave ska band.  

Derrick Reimer:
Yeah, perfectionist.  

Rob Walling:
Yeah. No, I think that’s it. You can be the guy. You’re the guy just dancing on stage. I love to dance. Tuba, no drum, major drum major. You’re drum major drum  

Derrick Reimer:
Sax.  

Rob Walling:
Alright, and sacks. I forgot that everything’s in B flat people. We have to play it all in B flat. Okay, so back to Ollie’s insightful question, perfectionist tendencies, which I think a lot of founders, not all, but a good chunk of founders become founders because they really want control over things. They don’t like a day job because they’re ordered around and they work with people they don’t want to work with and they can’t hire and fire, but whatever. And I want to control because if I can control everything, it will be better. And oftentimes that’s true, but it doesn’t scale. You can’t run, I say Canton quotes, you can’t run a million dollar 2 million a or SaaS company with just you at some point you have to let some stuff go. So to that point, how do you think about hiring people to do that you’re a perfectionist about and what qualities do you look for?  

Derrick Reimer:
So I think there’s, as I was thinking this through, there’s kind of two buckets, two different kinds of delegation I think. So there’s the mindset or the task before you of I have some less skilled work that’s not worth spending my valuable founder time on and when I could be working on higher leverage things, so maybe bookkeeping or scraping some data to build a cold email list or even support, which is I think is something that a lot of founders hold on for way too long. So there’s kind of that bucket of things that’s like, okay, my time’s valuable and this stuff is potentially not worth my time. Then there’s the stuff that’s like the business needs certain expertise in order to keep moving forward. And though I want to hold onto this thing, actually I’m not the best person for the job. So then that’s delegating stuff that’s really not in your zone of genius. 

And a lot of times when you’re just starting out, depending on what your resources are, how much funding you may have or may not have, you just got to roll up your sleeves and do it. But I think that that ends up holding you back at a certain point if you’re just holding on too tightly onto something where it’s not actually in your zone of genius. So for that, it feels like an obvious answer, but it’s like, look for someone better than me at the job, someone who has that particular specialty. So I think about the initial branding for iCal. I did myself and it was fine. And then we came to the point of I feel like this is holding us back in certain ways with being able to really push our marketing forward. And I looked to someone who’s just this amazing kind of brand designer and has just a ton of skills on the aesthetic side of things where I just get a little bit limited. 

And it was so fun to work with someone who is actually an expertise in their field. So I feel like I don’t know this one, it takes a while to get to the place where you’re comfortable with it, but as soon as you embrace the fact that no, it really is a joy to work with people who are actually better at stuff than you and you get to be a collaborator with them, it’s not that you have to totally offload it and now you have no say ideally if you’re still the founder in the CEO driver seat or whatever, you are still collaborating on important things, but you’re not the bottleneck anymore on holding back that area of the business. Those are some initial rambling thoughts.  

Rob Walling:
I think it’s a key differentiator you’ve made between delegating things that you really shouldn’t be doing. I would include customer support in that. Now, in the early days, doing customer support is really helpful. As a founder you learn a ton as you transition. I believe I did email support with Drip for three months, four months, and then we brought Andy in to, he was doing part-time stuff, but he obviously is better at customer support than I am. And people say, well, I don’t want to lose touch with my customers. It’s like, yeah, Andy fed me all the feedback. Anything that was real feedback, we like, Ooh, this is coming up, you and I learned about it, you and I fixed it. So I would lump that in. But I like that differentiation of what starting to figure out what is your zone of genius? Because just because you’re a developer, not everyone listens to the show as a developer, but a lot, just because a developer doesn’t necessarily mean that development and or product are your zone of genius, you might find that you’re really good at left brainin marketing as folks like Ruben found out as folks. 

I found out, I’ve been writing codes since I was eight years old and I loved and I was a developer and I identified as a developer. It turns out I’m pretty good at building audiences and at coming up with educational frameworks that the stair step method and being an entrepreneur is making hard decisions with incomplete information and writing books. And I have this other thing that I’ve found in myself of almost like, I don’t know, it’s marketing, it’s copywriting, it’s whatever, brand building and stuff. So all that said, there are really only what six areas of a SaaS company. There’s product which is deciding what do we build next and how do we build it, how does it work? There’s design, which is obviously the visual aspect of that. There’s engineering, which is building right in the code, keeping things going. There’s marketing, there’s sales, there’s support and there’s success. And then there’s hr, legal and finance. But you should delegate all that. I mean you have to do it. Look on day one, you have to do all those. If you’re a single founder, if there’s two of you, you have to split up those six, seven things I just named. But what you said is exactly right, which is if you’re going to hire, you need to hire someone who’s better at it than you. And that’s something that I really didn’t realize until in the last 10 years.  

Derrick Reimer:
Yeah, I think that’s what a lot of us, when you put yourself in a position, maybe an artificially elevated position of I know best I started this company and I have the vision for it. And I mean I totally understand this pull to hold on tightly to everything. And I think sometimes that can lead you down a path of like, okay, I just need to find extra hands. I just need extra hands to delegate, to offload some of the stuff that I’m still going to hold on tightly to and own. And I remember when we required, drip was acquired and we joined Lead Pages and we brought on Brian Reed as our first designer. And I never fashioned myself as a graphic designer, but I think I’m a pretty good UI ux designer. But working with Brian definitely opened my eyes to like, okay, here’s somebody who has worked in companies where we need to actually start to scale a design department. 

And that is a different thing than having the expertise to take something from zero into something that customers love and use to then scale it into systems. So he started working on what’s our design system and it’s not, doesn’t necessarily mean spending a bunch of time working on something that’s not actually moving the product forward. A bunch of internal work. We did very lean on developing our design system so that we weren’t just spending a bunch of time spinning wheels, but he brought this experience on thinking about how do we scale this so that when we bring on more designers, they understand the system and we’re working in a coherent manner. So it’s like, yeah, I mean he had more expertise at that than me and it was really cool to work with someone then who brought that to the table and it was a really fun collaboration. So I think that’s the big word of encouragement here is to recognize that it doesn’t devalue what you bring to the table, but working with a subject matter expert on some of these disciplines is actually really fun. I think when you get used to it. Yeah,  

Rob Walling:
It is. And you can learn from them. When we were acquired, I was stressing to everyone about, oh my gosh, I have to go work for somebody. You have to go work for this company for a bit of time. And Ruben actually asked me, he said, what can you learn? How can you make this the best it can be? What can you learn? And we got in there and it’s like I had been running marketing for Drip, right? Working with Zach, who’s our junior marketing hire. And I was like, yeah, I’m pretty good. Drip’s growing obviously, so I must be good at it. Hey, I’m really hiring. Hey good marketer. Look at me. And we get in there and I’m like, oh, I don’t know shit about this. We figured it out, but I was not fine. I was middle of the road by the time we got in there. 

Just people who knew how to execute and like you said, build systems and just be better at it. So I was a perfectionist with every word, every word that was on that website I had written right? I wrote all the copy up till that point and I did want to let it go. I was just tired of having to, for me to write all the copy when I was trying to run this company. But what I realized was people came in and rewrote it and at first I was like, Ooh, that’s not mine. And then I was like, huh, that’s actually a lot better. So that’s the tough part, but it’s tough when you’re bootstrapping and you’re at 5K MRR. It’s like, can you hire someone who’s way better at you in these things? Maybe not. And that becomes the struggle of I start looking, I do start looking in cheaper locales. 

I say overseas being in the us, but really it could be South America, central America to find someone who is senior and who’s better at me than I am at that thing. And to maybe not give away my zone of genius. I wouldn’t hire someone to host the podcast and be high level strategy for MicroConf and TinySeed to be the face of the brand. You know what I mean? Those things. Those are kind of the things I need to keep doing. So in your SaaS in your company or if you’re a consultant or whatever, you’re listening to you, what are the things that you really need to do without the self-importance of I really need to do everything the best, but really get down to it? Most of us are good at one, maybe two things for you. I would say it’s product. It’s the ability to think of what to build, how to build it, how to elegantly incorporate it in, and then engineering the actual nuts and bolts of writing code and design is a third. I mean your full stack obviously. But to me design is kind of a third discipline, even though you’re very, very good at it. I think you’re actually genius level at the other two and you’re quite good at design. 

So those are things that you tend to hold onto with Cal.  

Derrick Reimer:
And I think just in general, this perfectionism quality that a lot of us have is it can be a really helpful inclination what allows you, drives you forward on performing your best work in certain areas. But I also think the blind spot that comes from that is especially early on, you’re talking about when you don’t have a lot of resources to go hire a world-class, fill in the blank, and you have to try to be a little bit more scrappy with bringing in extra hands. I think there is that phase where you just don’t have the luxury of being able to go find an all-star and then it’s an exercise in figuring out what stuff actually matters. And I think I’m still trying to grow in this area, to be honest. It’s a big struggle for me because I tend to think that a lot of things matter a ton, especially as I am, I’m competing on user experience. 

So all the details have to be on point, but the fact of the matter is you can get by with certain things. Just take for example, like an educational video that you send to a customer that explains how to do something right. My inclination is to want to either not do it or do it at a very, very high degree of execution. And really what matters most is that the customer understands how something works and that knowledge is transferred. And if it’s lacking that extra polish that would come from something that’s from a world class video producer or something, that’s okay in the early days, maybe you want to work to the place where everything you put out is at that atom wa and level of polish, but most of us don’t have just the resources to be able to do that and it’s not going to move the needle in that big of a way. So you need to just convince yourself about what things are really, really important and what stuff you, is it okay to just be good enough on?  

Rob Walling:
That’s exactly right. That is something that I’ve learned throughout my career and it took me a long time. Well, the first one was learning to just not do some things that seemed important that you just don’t do ’em all together and it doesn’t matter. The second thing is when I can phone it in, and that’s not, it’s do it quickly is really what it is. When can I do an unedited loom? This is like, Hey, I’m rob here, blah, blah, blah, and I kind of mess around, watch this on two x because it’s not great and send it to a customer most of the time, probably if it’s a one-off thing, you know what I mean? It’s like you can just crank on these things and then when to really polish it and when does it matter. And differentiating between those three levels is a skill that I think is very helpful to develop. 

We’ve actually answered one of Ollie’s later questions, which was how would you decide what to delegate and what to keep? We’ve kind of talked about that zone of genius. Are there things founders should never delegate? And I don’t say never, but certainly there are certain things that if you love doing a man, you’re really good at it and the business needs it. That’s kind of what you want to keep. Your role will change over time is gives you’re a million, 5 million, 10 million, you got to move more into strategy, blah, blah, blah. I would also say something we haven’t brought in is I have this very simple dichotomy of risk versus certainty. There are areas of your business where there’s just a bunch of, I don’t know, we don’t have marketing, we don’t have leads and I don’t really know how to close sales demos and there’s a bunch of uncertainty or risk there. 

And then there are things like customer support. We get the same 10 questions every day. We have a kb. I know that someone with knowledge of the product can do that. So that’s a certain thing In a lot of instances as your code base matures, not in the first month, but two, three years down the line, there’s a lot of certainty in writing code. Now you may have to spec it out, you may have to say, oh, it’s this feature and we’re going to hit all these. But you have a map in your head of like, I can code this or I can hand it to a developer who’s good and who I know will write high quality code and they can do it. And so that’s how I think about stuff in my businesses is where’s the risk or uncertainty? That’s what the founder should be working on. It is so easy and tantalizing and it’s like a big bowl of ice cream to work on certainty. It makes me feel good. It makes me feel like I’m good stuff. It is entrepreneurial procrastination, unfortunately, if you have any type of money to hire someone, go for the areas of certainty.  

Derrick Reimer:
Yeah, I think you just touched on this, but it sort of Jason Cohen’s joy, skill, need framework, which has been a really helpful framing for me to think about this. And I mean he’s sort of proven to be the master at reinventing his roles as now he’s gotten his companies to much later stages than a lot of us have. So he’s moved out of CEO into CTO and then into kind of a strategist. And so he’s very good at thinking about this and releasing the reins on control when he recognizes that he needs to reorient himself into the ideal zone. And I think a lot of us can’t necessarily be right in the middle of that joy skill, need Venn diagram because again, resource constraints. But I think if you recognize where you are in that, and I think a lot of makers are like joy and skill. 

We are very good at building products and we love doing it, but the business probably needs more marketing. I think that’s the story for maybe 90% of indie hackers and people who are come from the angle of developer founder, and maybe you have the resources to bring in marketing help. Maybe you have to roll up your sleeves and do it yourself, but even just being aware that okay, even if you don’t find it that joyful, joyous to do that work, it needs to be done. So you got to force yourself to do that. And maybe there’s, in the course of wearing many hats, maybe you do also spend some time doing the stuff that you really love. You should maybe, I don’t think you should give it all up. You might find yourself burned out and delegate when you can to bring in help so that you don’t feel like you’re just failing at marketing and not getting anywhere. But I think just being cognizant of the traps of focusing only on the stuff that you enjoy and that you’re skilled at, but not missing that key component of what does the business need.  

Rob Walling:
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And Ali’s, last question is, would you recommend several people across several marketing channels or finding a generalist? The answer is, it depends. Depends on budget really, and it depends on the stage. But here’s the biggest thing. There’s kind of three ways to structure a marketing department in SaaS. It’s the infinity budget plan, which is I have infinity dollars that I’ve raised from gie, they just keep depositing this in my bank account. Derek, it’s great. I would hire a high level marketing strategist slash project manager and then I would hire five independent, I’m sorry, individual contributors. They could be freelance or contracted or they could be W2, it doesn’t matter. But one is just expert copywriter and one is an expert AdWords and one is an expert Facebook and one is an expert. You get the idea. It’s like each marketing channel that just costs a load of money and so almost none of us can do it. 

So when I look at the TinySeed companies that are doing seven figures in a RR, I have this list that I keep this quite a few of ’em. Every single one of them, without exception, the founder has figured out enough about marketing or sales or lead gen driving new customers. They have not outsourced that for the start. Now some of them at a certain point get to 500 a million a year, 2 million. They do, they hire ahead of growth, but they already know the engines. The engines are already in place. I don’t know anyone, maybe there’s an exception here or there. So we can bring up who has just hired that out of like, cool, go find out how to find more customers. It’s much like doing sales demos like the founder. You just have to do it if you’re going to do it in the early days. 

So usually the model is one of the founders says, I’m going to learn marketing or lead gen because the reason I differentiate is marketing I tend to think of as inbound. And then outbound is not marketing that’s outbound. So I’m kind of lead gen. I’m combining two into that term lead gen, but they learn marketing well enough that then they, and they probably start as the ic, the individual contributor. I remember logging into the AdWords console and logging into the Facebook ads console and writing blog posts for seo. Like I did all of that. Am I the best in the world at it? No. Did I do it until we figured out, oh, this kind of works, and then I went and hired freelancers to take over. Yeah, there are some exceptions to this. If you have budget, obviously running ad platforms, LinkedIn, Facebook, AdWords, Instagram, obviously those do have experts that you can hire and are way better than you and they aren’t that expensive. 

So I would consider doing that from the start. But even to test, but almost everything else, it’s usually the founder being that strategist and then hiring ICS first, the founder doing the IC work and then hiring individual contributors to help out with that as you get budget. Because as marketing works, the company grows and as the company grows, you have more revenue and you take that revenue and you should invest that back in marketing. Usually it’s marketing and sales are the first things that you should be doing as you’re growing SaaS company. You have anything to add to that?  

Derrick Reimer:
Yeah, I mean, I think my own story is a little bit of an outlier case in part because I could find, because Corey Haynes was available who’s a very good generalist marketer, founder minded person. So a lot of times people have this type of person on their co-founding team and Corey happened to be available and is a collaborator for me to work with because I was at the time, didn’t have a developer, so I was just building product day and night, but also we were getting it off the ground and trying to do launches and figure out how do we get SEO engines rolling and how do we kind of working through the strategy. So we collaborated together on developing the strategy and it was just helpful to have an extra mind to think about these things. And then he did a lot of the sort of delegation of, okay, we want articles. We’re going to sub these out to a freelancer. And so he was in charge of, or a pool of freelancers, so he was in charge of building the spreadsheet of the keywords and it was all very collaborative between the two of us, but he was just basically in that role of the boots on the ground kind of project managing marketing stuff. And so that worked well for us. I don’t know how many generalist marketers are out there available to do that type of work as a contractor. So at the time I probably  

Rob Walling:
Almost no one.  

Derrick Reimer:
Yeah, yeah. I mean, I probably wouldn’t have been able to hire full-time a marketer. It perhaps would’ve been too expensive at the time. So  

Rob Walling:
You have a luxury of a marketer wants to work with you because of who you are and because of the beautiful products you build and they know that you’re going to execute quickly. The zero to one marketing is what kind we talk about. That’s the founder level marketing, trying to figure it out. And Corey Haynes can do that. Agent GIO can do that. Any founder who succeeds can usually do that. I mean, I can pretty much list all of the successful fast-growing companies within TinySeed or MicroConf, like, oh, the founder has some hand in the marketing or sales. So you’re right, you’re the exception. It doesn’t mean that’s where it’s like, it’s not always a never, but in general, pretty 80, 95, 8% of the time, that’s the pattern that I see. So thanks for those questions, Ali. Our thoughts were helpful. Next question comes from Tiago, his ex Twitter handle is WBE Tiago. 

He says, how do you manage partnerships with other SaaS or products in your industry? What do you look for? What partnering with other SaaS, how do you reach out to them? What are red flags? And I asked him, tell me more what you mean by partnering. And he said, I mean guest posts, integrations, giveaways, joint ventures, that kind of stuff. I wanted you to weigh in on this because Avi, you’ve done a lot, quite a few partnerships and I think some of them have resulted in good results. So I’m curious your thoughts and then obviously I have my own just from my own experience.  

Derrick Reimer:
Yeah, I mean I think just in general, these are a lot trickier in practice than they look. I think oftentimes, so many times I think partnerships are fraught with the dynamic of if someone is much larger than you, do they feel like you’re getting more of the benefit than them or vice versa, what do you both have to bring to the table? So early on in Savvy Cal, there was one particular partnership attempt with a company that was related and sort of made sense for us to explore building an integration at a deeper level than just our baseline integrations. And it ended up being a pretty big waste of time in the end because they felt like they were so much larger and ultimately they were kind of afraid to drive too much traffic to us. That felt out of balance. And so I think there’s going into any kind of partnership, it’s important to have a deep understanding of what’s the vision for how you’re actually better together, why bother doing anything at all? 

Because if there’s not a foundational story that we can all agree on, then these things are going to either quickly or very slowly crop up and kind of taint the whole endeavor. So sometimes it’s getting your product in the hands of their customers helps drive retention or fill in a gap in functionality where they’re losing sales because they can’t provide this thing and your product can fill in that gap. So it’s that question of how do you both win with whatever it is. And it could be as simple as like we’re going to build an integration and email our customers both about that. I mean, those are oftentimes pretty simple, especially if they have an API or you have an API, depending on the direction that the integration needs to go, a lot of times they can be pretty simple and the main benefit is it’s helpful for their customers. 

Maybe you get a back link from their website on their docs and there’s kind of a good little link together. And other times when it’s deeper, I think the big thing is looking for are they actually willing to invest in this or is it just sort of a transactional sort of thing. I’ve had outreach from larger companies that are almost like putting me through kind of a BDR process where they’re like, you can tell they’re reaching out to a lot of companies asking for integrations because they have some person, random person in their partnerships department who just is working the long tail of trying to get their service integrated with a bunch of other people. And those are not super high value. I don’t have any evidence that their customers actually want to use my product. They just are looking for another backlink and another notch on their list of integrations to be able to say we integrate with thousands of tools. So I think it’s trying to make sure, is there an actual case here? Have you actually heard demand from your customers for something like my product and vice versa, can we develop something meaningful here or is it kind of just this transactional, we’re hoping to get a quick win on some traffic.  

Rob Walling:
Yeah, I think that’s a really good way to think about it, to go up one level higher in terms of strategy, I think about integrations and partnerships as kind of the same thing, but an integration involves writing code, so a partnership, let’s just say it’s a JV partnership, joint venture partnership. This is what internet marketers used to do in the early two thousands where it’s like, I have a list. You have a list. Let’s cross promote our course to the other list. It’s free sales, and we can either do a one for one trade of we email without affiliate links, I email my list about yours, you email your list about mine, no affiliate links, or we can do the same thing and do affiliate deals, and that can happen. I did several of those with Hit Tail, which is a long tail SEO keyword tool. You remember Derek? We worked on it.  

Derrick Reimer:
Oh, yes.  

Rob Walling:
And I reached out to Rank Trackers. We did not have rank tracking, and I sent 10 emails and I got eight responses of like, absolutely, let’s do this. And what assets did I have? Well, we had however many thousand, I’m trying to even remember what the numbers were, but it was like a thousand customers and a marketing list of 10 or 15,000 maybe at the time. No, it was bigger than that actually, because maybe it was 20,000. And so I would reach out and say, let’s just do one for one emails. Just say, I want to use your rank tracker and then I want to recommend it and use Tail and recommend it, and that’s it. And we did that. Was it a massive flywheel that completely grew the business? No. But was it something that absolutely worked every time we did it? Yes, it would drive dozens of new customers. 

It would drive hundreds if not a thousand or 2000 of MRR if the list was big enough. So that’s a joint venture where you don’t have to write any code. You’re literally writing marketing copy. And then in integration, to your point, I see there’s integrations that you do for your customers. You integrate with Stripe because everyone wants you to integrate with Stripe. Stripe’s not going to promote you, PayPal’s not going to promote you. They may not even list you in their lab market, but you do it for your customers. Then there’s integrations you do for integration marketing, which is, remember with Drip, we integrated with Send, and we had 35 integrations, so I can’t remember them, but they were lesser known, even Gumroad at the time. We probably integrated with them in 2013 or 14. They were around, but they were not as known as they’re today. 

We integrated with them because our customers were asking, they were like, oh, I use Sendell, I use Gumroad. But also I approached them and I said, I want to integrate with you. We’re getting requests from customers. Here’s a screenshot of an email. Here’s things we can offer. We can publish a blog post. We can email our email list of, it’s probably by that time, 20, 25,000. We can post a tweet, we can write a knowledge based article. We can mention your company and app. We can host a webinar if you want. And so I would offer all that up and say, what can you reciprocate with? And whatever they could, we would just one for one those things. So if they could only do a blog post in a tweet, we did a blog post in a tweet, and if they said, you know what? This isn’t a fit. We can’t do it. I would seriously debate whether to do it to the integration if I was doing it more for marketing purposes. By the way, the whole list I just read is from the SaaS Playbook, page 97. If you want to know all the things that we used to do, I’ll tell you, the SaaS Playbook’s a great reference for me so that I remember these. You know what I mean? 

I don’t remember that list off the top of my head. So that’s how I think about it. I mean, you and I are definitely on the same page in terms of be cautious with just building things, thinking that it’s going to be promoted. I would get a commitment, I’ll say a verbal commit. It was in an email. This is what we’re going to do. What can you do? This is what we’re going to do back. So I had something in writing in case a product manager or a marketing manager switch things up later. I think that’s it. Oh, I guess Tiago asked how do you reach out to them? I mean, with Hit Tail, I did a bunch of cold email with Drip. It was a lot of warm network stuff as Drip became a brand, people knew it and it was easy to reach out and say, Hey, I’m the co-founder of Drip, and we want to do this. And what’s the other thing, Derek, going to events, going to MicroConf. There are a lot of people there at a MicroConf business software, even a bigger SaaS event. This is why I say build your network, not your audience. That network is so much more valuable than 10,000 people on X Twitter following you having five people that you can integrate with or co-promote or get in front of their audience is worth five times, 10 times the value of a social media following.  

Derrick Reimer:
Yeah, I think that’s the majority of, well, we have our integrations with the big players, but the smaller players that we integrate with, a lot of that is came from some degree of warm connection to the point where I could reach out, ping them and DM them or email them and make the case like you talked about, we’re hearing a lot of customers mention wanting to integrate our two products together. Here’s what we’re seeing. Are you guys seeing anything similar? And just start the discussion on have you heard anything? Oh, that’s interesting. You want to do a test? We get the ball rolling on conversation for good reason and not just be cold outreach  

Rob Walling:
To your point. And that’s something that didn’t use to happen. So if it’s happening to you now where you’re like, oh boy, I’m in a funnel, this is because marketers ruin everything. That’s exactly why. Our last question for the day was a question that was posted on a YouTube video from YouTube username and Derek Ddu, Plessy two 15, and I don’t remember what video was on, but the question is I would love a follow up to this episode on how you prioritize your Q3 or any quarter. So obviously building a SaaS versus what I do these days is different, but the question still applies. So I’m going to kick it over to you first. Derek Kremer, how do you plan for your quarter of Savvy Cal?  

Derrick Reimer:
Oh, yeah. There’s no notion of quarterly planning in my flow, and I think that’s probably the case for a lot. Same for me, for a lot of startups,  

Rob Walling:
Part of our biggest strength is that we are so nimble and can move so quickly, and frankly, 90 days in the life of a startup is like a year in the life of a big company. So trying to think of now, I don’t know, I’m going to be responding to customer inquiries and things as the market shifting. How can I move really fast? And so planning a quarter ahead would be, that’s just anathema to what you’re doing until you’re at, I don’t know, I don’t want 5 million, 10 million. When you have a bigger team, that’s when planning needs to happen. You got to get a bunch of departments on board and we’re going to launch this feature. So we need sales to learn about the feature, and we need support to know how to support the feature. We need success to know how to success the feature, and we need marketing to know how to market the feature. You know what I mean? That’s when you need quarterly planning. You can’t just come with a feature and say, Hey, we’re pushing this live tomorrow. That starts breaking things. So there’s a certain point at 2030 employees maybe where you need that. But today, so how do you do it? How far ahead do you plan?  

Derrick Reimer:
, I mean we generally have a sense for what the next four to six weeks looks like. I’m not a religious follower of Shape Up. I think that’s a pretty popular methodology from the Basecamp folks that people have latched onto as sort of a way to budget your time as a team and say, what are we going to? Let’s fix the time budget and then get done whatever we can on what we set out to do and flex the scope as needed. And I think that’s kind of generally, folks have coalesced around that as a good way to shape your work. And I think it scales down to pretty early stage as well. You might want to keep the cycle a little shorter. Six weeks feels long for super early stage, but when you get to a place of product maturity where you’re really just kind of incrementally improving it, I’ve seen that be a pretty helpful time range. And yeah, the goal there is to try to say, we’re going to build this thing and we’re going to build whatever version of it we can get done within our time constraints so that you don’t let projects just run away on you.  

Rob Walling:
Yeah, it depends on the stage and the super early stage. You and I would plan a day or two ahead. I mean, there were some features that took a week or whatever, and it’s like, all right, we’re going to plan for that. But we would shift pretty frequently when it was two or three of us because we could, and then it started being like, well, let’s do one to two weeks out. And one to two weeks was fairly locked in, although we would sometimes pivot of like, oh my gosh, there’s a huge opportunity here. But then what happens is, in my head, I kind of knew what two to four, two to six weeks was, but it was fuzzier. It was like, well, we do when we get there, but I kind of have an idea. And then as your code base matures, as your marketing matures, just your whole company matures. 

You hit 10, 20, 30 K, maybe 50 KMRR, that timeframe just slipped, not slips, but it moves out a bit. Like you’re saying you’re now at about four to six weeks of being more in focus, and I bet, but I bet still if I were to say, all right, so what are you going to do from six to 12 weeks? You have a fuzzy idea. You have a general idea. You’re not going to lock in and be like, oh, it’s this and that, but you kind of know, but once you get there, you’re then going to plan that far out.  

Derrick Reimer:
I wonder, have you seen, because I know the notion of quarters is very normative in sales in the realm of sales, sales organizations often think in terms of quarters, probably even more so than product development teams. But I wonder, do you have a sense of when does that normally kick in? Is it 20 to 30 team size ish, or when do sales teams need to start running on quarters basically?  

Rob Walling:
I don’t actually know. So sales team specifically, I don’t know, and obviously big Salesforce and these huge companies that have this Slack and all that, have these big sales teams run like that? Even if you were to ask me why do they do that? I have a guess. Oh, you have a deadline and your salespeople motivated by this and that, and maybe the commission’s paid quarterly, but I don’t actually know, so I’d be curious to get someone on the podcast, to be honest, a Jen Abel or a Matt Ock or someone else who really knows sales and said, why is that? Is it just because that’s how you’ve always done it? Is it, I mean, here’s something man, A friend of mine works at Intel and has, we both graduated college at the same time and he got a job and has worked at the same company the whole time, and I’m on my 23rd job, not literally, but close. Anyways, from the time he started, he would say, yeah, we’re doing our quarterly blah in the engineering department. They’re designing chips that are fabricated. You imagine the pipeline of that, the waterfall, this nature of that where it’s like 

You have to lock it in, you have to freeze this, and you put it’s in silicon and then it’s blah, blah, blah. So they did quarterly stuff and I was kind of like, why do you do that? And he’s like, well, that’s just how the company operates. And it does to me feel like an older school thing coming from that of Intel. But I also think you have to get people on a cadence of some kind, otherwise you’re just flailing around. Like we said, if you have six, seven departments and each department is five to 50 to a hundred people, obviously Intel’s bigger than that, but in a startup you got to have some type of cadence to get everybody on. This is the group of things that we’re going to do in each department during this quarter.  

Derrick Reimer:
I would venture to guess that, again, speaking a little bit from ignorance here, but that product teams, even when you’re 10, 20, $50 million company, I’m not convinced that a product development team should ever lock themselves into something that rigid, no, maybe sales. Maybe sales, but depending on when you bring in the adult supervision and people who know what they’re doing from large company sales orgs, maybe that’s the right way. But I would be very leery about ever of trying to apply that to a product development cycle.  

Rob Walling:
And I totally agree with that. And those are the companies where we eat their lunch as right, those are the companies. When you start moving my quarter by half a year on product development, no, good night. That’s when we’re going to demolish. You remember it? Was it Infusionsoft? They’re now named Keap. I thought they did one release a year and we were  

Derrick Reimer:
Pushing code, some kind of version thing, applied SaaS, which is like why  

Rob Walling:
Old school? And it was an old school mentality, and that’s not how you win in the market today, given how competitive it is. Awesome, man. Well, thanks so much again for joining me. Folks, want to follow you on X Twitter? You are Derek Reimer, and if they want to use the best scheduling link on the internet savvy cal.com. There it is. Thanks again, man. Thanks. Thanks again to Derek Rimer for joining me on the show. He’ll be back again in another month or two. If you enjoyed this episode, it’d be amazing to get a five star review in Apple podcasts or Google whatever they’re calling it these days. A thumbs up on YouTube or a like question mark plus thumbs up, something in Spotify. I don’t know how Spotify does if you’re listening to Spotify, look around to see if there’s a heart, but it’s great to have you here this week and every week, I’m Rob Walling signing off from episode 731. Well, hello, listener. You’ve stumbled upon our secret track, if you remember the track, endless nameless from Nirvana’s. Nevermind. That’s what you’re about to hear, except that was just a metaphor. I hope you picked up on that. Mr. Derek Rimer, I have questions for you. Oh boy. 

These are questions that I asked chat GPT to generate for me. My prompt was what are five intermediate level questions to evaluate a software developer’s understanding of Ruby on Rails? The first question, just so everybody knows, Derek has no idea what these questions are coming, and to be honest, I’m a little concerned. The answers might not be right. I don’t know. GBT give me questions and answers, so we’ll see. I’ll compare what you say to chat. Alright. First is, what are concerns in Rails and how do you use them to refactor an organized code?  

Derrick Reimer:
Okay, a concern in Rails, and this is funny too because my Rails knowledge is about five years outdated, so well boy. But I think a concern is basically a mix in, it’s a way to abstract some logic into a separate, my terminology is all messed up. I’ve been in functional land. It’s like a separate, it’s not a class. Is it a module? Do you have modules in Ruby? I think it’s a module. Great.  

Rob Walling:
I love this. Just so everyone knows, Derek wrote tens of thousands of lines of Ruby on Rails code for Drip, the entire big monolith written in Rails. So you had a decade of rail, you had a lot of years in Rails, but it’s funny how quick, like you said, it’s five years old and you’ve replaced a bunch of that knowledge with, is it Elixir Phoenix? Is that  

Derrick Reimer:
Basically, yeah, so it’s more like functional paradigms. I haven’t written object oriented code in a while. It was funny, I was doing a podcast episode with Ben Ornstein recently who was also a Ruby Rails expert back in the day. And I was trying to explain how something would work in Ruby Land, but I was using all the wrong names for the active record accessories. I was just so used to the naming conventions from Elixir,  

Rob Walling:
You recoded it. So in the early days when I was becoming a professional developer, meaning getting paid for it, I was a full-time employee of a dev shop. And so every project was a different language, and so it was like PHP, it was original active server pages before.net. There was ColdFusion. I learned Pearl this dates, it was 20, 24 years ago. But I rolled through ’em all and I remember being like, all right, I’m not great at any of these, but at least I had a big swath of it. Then at a certain point I went where the money was, which is.net, and I dove deep, deep, deep into net, and then I was 5, 6, 7 years into that, and the pay rates were great, but when I tried to then come back to anything to PHPI was like, I just can’t. The paradigms are so different. You have to unlearn it, and that’s where it’s tough. Totally.  

Speaker 3:
Yep.  

Rob Walling:
It’s good that I come prepared then, because I also asked no joke, Chad, GBT, what are five intermediate level elixir Phoenix questions? I did this on purpose, so let’s see if these are easier. We’ll just skip the rails one. We don’t have to do five. Let’s do a couple. First is  

Derrick Reimer:
Wait on the concerns. Was I right? What did Chad GT say?  

Rob Walling:
Actually didn’t say, it just said, this question tests their knowledge of code organization and how to keep their models and controllers clean and maintainable.  

Speaker 3:
Okay.  

Rob Walling:
So maybe someone can tweet us XX, Twitter us at Derek Reimer at Rob Walling and let us know, Hey, was Derek right? I’m guessing you’re right. That’s going to be my, alright. How does the Phoenix framework handle real-time communication? Explain the role of channels and presence in Phoenix?  

Derrick Reimer:
Ooh, yes. So this is actually one of the cool benefits of Elixir because it’s built on Erling, which has all of this very realtime capabilities built into it because it was built by Ericsson back in the day for running text message infrastructure. So think of all of these gazillions of processes and need to be running, and they’re all in parallel and they don’t necessarily need to affect each other. So it’s just designed inherently with that in mind of many, many processes that shouldn’t crash each other. And this works really well for web socket’s use cases where you have a bunch of people potentially on your site and you want to keep an open channel via web sockets to be able to stream data back and forth over a channel. So channels are the mechanism that Phoenix has for basically opening web socket connections and then sending data up and down that pipe instead of going through old school HTP requests, which are a little bit slower. And then the presence feature. This is actually a tricky computer science problem to solve when you’re active on a browser window and you want to show that that person is actually present there. Keeping that state synchronized with the server is kind of tricky and you just get that for free from sockets. So yeah.  

Rob Walling:
Yeah, I think that’s correct because once again, I said, here’s the problem. I asked Chad JPT for questions that I liked for an interview. It didn’t give me the answer. It just says what each question will test. So yes, correct. Derek ding,  

Derrick Reimer:
Am I hired?  

Rob Walling:
You’re hired. These are the questions. We never ask these questions. Remember in interviews or like, no. Do you have a take home test or we can look at some of your code,  

Derrick Reimer:
Right? Yeah, yeah. Explaining how a web request works.  

Rob Walling:
Yes, exactly. What is H-T-T-P-S? Alright, last one. What are gen servers in Elixir, GEN servers in Elixir and how would you use them in a Phoenix application?  

Derrick Reimer:
Yes. So gen servers, this is kind of hearkens back to that fundamental architecture I was just talking about, but basically it’s a way to manage state in an elixir application. And it’s a little bit quirky. This is kind of more in the advanced principles of Elixir that a lot of new elixir developers don’t even necessarily have to learn about in order to get started with it. But if you start peeling back the layers on how Phoenix works and then how to do certain tricky things that involve, you have this centralized state and you need to make calls to it or just either fetch, fetch data out of that state or just make a mutation call or something. And it’s like the shared state that’s shared across all the processes that might be running in an elixir application. So we use these as an example, like this cool little subsystem where we have to throttle how many requests we make to the Microsoft API. Like they don’t allow more than five simultaneous requests at a time to any given API token. And this is actually a pretty difficult problem to solve in a distributed system, but using a gen server, we can basically spin up a pool of threads, sort and these threads service requests. And if you get 10 coming in at the same time, they kind of line up in the pool and you can control concurrency. So that’s just one example of how you can use gen servers to help out.  

Rob Walling:
I love that you’re giving me really serious complete answers. It’s just that I’m like, wow, do you really know your, of course you do. And you’re taking this serious, it’s great. It’s great. So anyone listening, I’m trying to get hired. Here you are. I really need a gig, man. Alright, last question In Dungeons and Dragons fifth edition, what is Hunter’s Mark? So just so for context, Derek has played a, well, it’s a seventh level ranger now named Ford, Ford Ranger, and you have played this ranger for I believe, five years now. I think the first game was in late 2019 that we played five years Hunter’s. Mark is a critical key component of a ranger. So Derek, what does hunter’s mark do?  

Derrick Reimer:
Oh boy. Okay. I think it’s a spell right and it allows me to mark an opponent and when I do that, I gain some sort of advantage on attacks. I don’t remember what that advantage is.  

Rob Walling:
You gain extra damage.  

Derrick Reimer:
Extra damage.  

Rob Walling:
There we go. Yep. So it’s not technically advantage on attack. That would mean like 2D 20, you take the high one, but once you hit, you get an extra D six.  

Derrick Reimer:
Lowercase a advantage.  

Rob Walling:
Exactly. I’ll give you, yeah, credit on that.  

Derrick Reimer:
Okay. Alright,  

Rob Walling:
Well thank you for playing the startups For, the Rest Of Us pop quiz.  

Derrick Reimer:
Yes. I’ll just be waiting to hear from HR about that.  

Rob Walling:
Yep. We’ll be back in touch. Got that job. Okay, cool. Thanks. Let you know. Awesome.

Rob Walling:
Welcome back to another episode of Startups For, the Rest, Of Us. I’m your host, Rob Walling, and in this episode I talk through lessons that I’ve learned investing in more than 170 companies, specifically through my startup accelerator TinySeed. And if you’re a B2B SaaS founder who’s looking for the right amount of money, mentorship, community advice for me and our amazing mentors, you can head to TinySeed dot com slash apply. Applications are open right now for about the next two weeks, and I’d love to see you apply. Now between TinySeed and mine and Sherry’s personal investments, we are over 190 companies, but I wanted to limit the percentages, the numbers, the takeaways to only those where TinySeed has written a check in the past. I guess the first check was written about five years ago, and so that gives us a pretty tight timeframe and a more cohesive decision-making approach because we’ve been much more deliberate about the types of businesses that we fund. 

So today’s episode is stemmed from a question I got in a private slack group by man where someone said, you’re basically five years, we’re six years from the announcement of TinySeed almost, but we are just over five years from the first check being written. And he asked, are there any patterns or takeaways that you’re noticing across these 170 plus companies? And that’s what I’m going to share today. Now, I want to make a note. I have almost two dozen of these takeaways and that’s too long for a podcast episode. It would run well over an hour. So what I did is I split off six of them and I put them in a YouTube video on the microcom channel, and it has a name similar to this. It probably just came out a couple days ago, and it’s six things that I’ve learned investing in more than 170 companies over five years, something like that. So if you head to microcomp.com/youtube, it should be one of the last couple videos published, or you can look in the show notes of this podcast and click through directly to that video. If you want to get the other takeaways that I didn’t include in this podcast. 

I am going to list these in no particular order. They just came to me in this order as I was trying to think of what are the patterns that we’ve seen. First one is the survivability of B2B SaaS and maybe specifically within our portfolio because obviously we are pretty picky, pretty cosy about the companies we let in, but broader than that B2B SaaS in general, once you get a little bit of traction, it doesn’t fail very often. So more than 170 investments, approximately 2% of those have been written off, have shut down, not sold, and basically moved on to their next act. So very, very small, what I’d call a failure rate, much, much smaller than you would see in a traditional more risky venture fund. Now, I want to couch this. It’s still early. We funded, I don’t know, approximately 45 companies in the past 12 months. 

And so obviously the failure rate of those would be much lower because they haven’t had time to fail. So I don’t want to act like for eternity for the next 10 20 years, there’s going to be a 2% failure rate, but we did start writing checks five years ago, and even among those companies, a failure rate is still extremely low. The other number that I found interesting, and I just confirmed these in our as of this morning, is that 4% of TinySeed companies have exited, meaning sold for enough cash that TinySeed at least got our money back. And in some cases, as you’ve heard with Iran GRE’s exit on this podcast, we received many, many times our money back, but 4% have exited, 2% have been written off. So there’s still a lot of companies in play, and as I said before, it’s still early. 

I mean, we are in the first inning in terms of B2B SaaS taking five years when a traditional startup might take two years because the long slow SaaS ramp of death just takes a long time for things to unfold. Now, my second takeaway is just how valuable SaaS is. You’ve heard me say this on this show where I talk about if you’re over say 2 million in annual recurring revenue and you’re still growing at 40, 50% a year, whatever it is, you can sell at a four to seven x multiple. And so this is all loose numbers. Please don’t I get quoted on Twitter saying this stuff, but I’m just trying to give you a general idea, but let’s say a five x multiple. So if I add 1000 MRR to my company this month, that is 12 KARR multiply that times a five x multiple if I were to sell it, and I’m adding $60,000 in theory to my net worth every single month that I had one K of MRR. 

So now think about adding 5K of MRR, which many, many tiny C companies are doing 5K times 12 is 60 times five is $300,000 to the value of that company. So I’ve been talking about how valuable SaaS is for many, many years. There’s a reason that I began focusing on SaaS, what 12 was it? 12, 13 years ago? And part of it’s the recurring revenue, part of it’s the cheat codes, the net negative churn, but a big part of it is it’s just really, really valuable and that value can be seen in the profits you take out or it can be seen in the exits. So in our coined this term that I really like, it’s called the TinySeed millionaire rate. And what it is is of all the companies that are no longer in operation, so this includes those that have sold and those that have been written off that have shut down of all of those. 

So I told you before, it’s 4% exits, 2% written off. So 6% of those companies, 43% of the founders are now millionaires. Let that sink in for a minute. I’m not saying 43% of the exited companies made the founders millionaires. I’m saying 43% of all companies that are no longer autonomously operating, meaning they’ve either sold or they’ve shut down, 43% of those founders are now millionaires. Now, that doesn’t mean TinySeed one in all of those exits because imagine if we invest at for round numbers, let’s say TinySeed invest at a million dollar valuation or 1.2, whatever it is, and someone sells their company for $2 million and they’re a single founder, they are now a millionaire and TinySeed received whatever it is, not quite two x back on our money. That’s not a home run for us as an investment fund investing in bootstrapped SaaS, we do have to return a lot more than two X to our investors or a bit more than two x. 

And given that some companies will fail, we obviously need higher returns, but that doesn’t discount the fact that the TinySeed millionaire rate is 43%. If you’ve known me for any length of time, you know me as someone who is truly out to help raise the tide, help raise all boats, obviously with TinySeed, with MicroConf, it’s a for-profit entity. Everything I do makes money, but I’m genuinely here to help people and it brings me no end to joy to know that that many individuals join TinySeed received are mentorship, our advice, our investment, and are now millionaires and they can move on to their next act. I’m sure someone in the audit is saying, oh, a million bucks isn’t what it used to. And it’s like, I get it. They can’t live for the rest of their life on that. But I would say that if this is your first startup or if you don’t already have a million dollars in your bank account, that a million dollars is absolutely life changing money. 

It’s not never have to work again, money, but it does change your life. It changes the way that you can think about the financial safety of yourself and your family. And every time I think about this number, I smile ear to ear, I’m just so happy the TinySeed is having this impact. People ask me, why do you still do what you do? You could write off into the sunset or you could just write books or you could just record podcasts. This is why, this is exactly why I still record 52 episodes of this a year, 26 YouTube videos, why I’m kind of on track to ship a book every 18 to 24 months because I love doing things that have an impact on people. And to me, while the end goal of everything is not wealth, it’s not all about money. This is changing people’s lives and I’m here for it. 

The third learning is something I mentioned on this podcast. It was a prediction for this year, and it’s that vertical and orthogonal SaaS appear to have fewer headwinds than horizontal SaaS. You know what horizontal is? It’s like competing against MailChimp where it’s every SMB, every business in the entire country can use it. Versus vertical is where you build MailChimp for realtors, for example, and orthogonal is if you were to build a piece of software that focuses on a specific role or title at a company. So applicant tracking systems, for example, target HR directors, so that’s orthogonal, vertical and have their own because they’re niche, right? The idea is that when we think of niche, we think of vertical only. And so I’ve started using this term orthogonal to describe this other way to niche in to slice it. And what we’re seeing is in general, horizontal companies are competing with big venture funded incumbents, really successful folks where there’s a lot of money in the space and it’s hard to differentiate, and you don’t really know who your ideal customer profile is. 

You kind of have an idea, but you don’t know exactly where to find them. There’s no in-person event you can afford to go to. There’s no ad targeting say on Facebook or Instagram where you’re targeting by demographics and psychographics that will work for horizontal. I shouldn’t say there isn’t any, but it’s very, very hard to do. Versus if you know exactly who your customer is, whether it’s this type of business or this role at a company, it is easier to do cold outreach and ads and just all the marketing approaches become easier. And you don’t have to be the best marketer in the world, you just have to be the best marketer in your niche. And that’s the difference that we see. And so I’m not going to go through exact numbers here. Obviously we don’t give out our performance numbers in public, but in general, the trend is that we do see vertical and orthogonal SaaS companies not only growing faster, they tend to have lower churn. 

Honestly, if they’re doing well in these spaces, there are net negative churn and it’s still early, but it does seem like the exit multiples are higher because there is more appetite from acquirers, from strategics and private equity to go after these niche plays, presumably because they also know their numbers, they know how hard it is to market, and they know what negative churn can do for a business. And so with all that in mind, the metrics are better, blah, blah, blah. So it’s still early. And here’s the thing. I know someone on the internet is going to come and post, but that’s not true across all 10,000 SaaS companies. Look, my one counter example is going to try to disprove up. I’m not trying to state a physical law like gravity in this podcast. What I’m doing is I’m looking at trends across things that we are seeing. These are not statements of fact. I’m not saying that every horizontal product TinySeed has is not growing, is nothing like that. It is trends, it’s numbers, it’s bell curves. So yes, you can do your post and say, I’m a horizontal, and look, I have net negative turn. Great. I ran a relatively horizontal play called Drip, and that had net negative turn too. So that was a great business. So I’m not saying don’t start horizontal either. I’m just telling you vertical and orthogonal. There’s some real advantages to doing that. 

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He really exceeded my expectations. Chaz said he definitely used lemon.io again when he’s looking for a senior level engineer to learn more and get a 15% discount on your first four weeks of working with a developer head to lemon.io/startups. That’s lemon.io/startups. Takeaway number four is we’ve done some, it’s really back of the napkin surveys, show of hands where I’ve said, okay, the original thesis of TinySeed was some people will want to grow quickly, be ambitious and sell for some number. They have in mind 10, 15, 20 million or more as we’ve seen, versus run a company for years, decades and take out profits. What we didn’t know is what the breakdown would be. Is it 50 50 to more people want to take up profits? With my show of hands surveys that I’ve done in several TinySeed Zooms, it appears that it’s about 15%, maybe 20 that want to grow a company for the longterm and take out profits. 

So it is the, call it the super majority that do want to have that big exit. And I think there are reasons for this, right? We are choosing for more ambitious founders. Like if you want to be a lifestyle bootstrapper and truly run a 10, 20, $30,000 a month company and pull it all out, that’s great, but the numbers don’t work for TinySeed to invest in you. And so I do think a much bigger chunk of those folks, whether you call, I call ’em lifestyle, you could call ’em indie hackers, although I think that is actually a different definition, but you get the idea those folks really do want a lifestyle business, and that’s great. I’ve had some of those, but the idea of joining TinySeed and taking funding and then wanting to do that is obviously a super minority of folks. I do think there’s some selection bias in that for sure. 

And I also think that when people hear me do this analysis where I went through the whole one K goes to 12 KARR times five is 60 grand, and someone puts a check in front of you that you’re like, I don’t really want to sell. And they’re like, cool, here’s your relatively early stage business and here’s $3 million. Suddenly things really shift. Things really shift. I remember the first time I saw a seven figure number written down in an email for a potential acquirer to acquire one of my companies, and I was like, this is it. If I say yes to this, I am set for a very, very long time, and this will be absolutely life changing. I remember almost being in a weird, it’s not euphoric state, but it’s hair stands up on the back of your neck and kind of lose time and even kind of can hear ringing in your ear. 

It was that. I was like, whoa. I was so shocked how in theory I had been thinking, oh yeah, if we sell this company someday, of course it’ll sell for a lot. But the moment that I saw that number, it changed everything. I was like, that’s real. That could really be cash in my bank account. And I think that as folks think about that, especially if you are either a first time founder or a founder who’s never had a big exit who has $50,000 in their bank account and a couple hundred grand a retirement account, and you realize that, yeah, maybe I could see this for the long term. Maybe I could grow this company for 10 years, but if I sell now, I’m set for life and I can work on whatever I want forever. The calculus really changes. So whatever way you choose, if you’re listening to this, maybe you’re thinking about, I want to be able to retire for three to six months, as most entrepreneurs do before they get back in the game, or you want to run it for the longterm, that’s okay. 

I’m just calling out some patterns that I’m seeing with our companies. The fifth takeaway is I looked at only our seven and eight figure a RR companies. So if companies doing millions or north of 10 million in annual recurring revenue, and I found that the founder count for these types of companies are very close to being in line with all the founders across the ecosystem from the state of independent SaaS reports. So in this example, 53% of seven and eight figure TinySeed companies are single founders, 33% are two founders, 14% have three or more founders. And just to compare again, the successful TinySeed companies, 53% are single founders and in the broader state of independence, SaaS, MicroConf, startups, the rest of us ecosystem, 51% are solar founders. So 53 versus 51 with two founders, it’s 33 versus 34, and with three or more founders, it’s 14 versus about 15 and a half. 

So the route, why do I bring this up then? Well, I don’t think founder count, at least in this analysis, has that much of a difference on success. I know that growth numbers in the state of independent SaaS show that for some reason there’s an anomaly with three founder companies. I’m still curious to figure out why that is, but I find it fun to often compare to the broader ecosystem with this much smaller and tighter dataset that we have. My sixth learning, really it’s just a thing to share, is that we have had to turn down many deals where we have made offers or we’re about to make offers, but their cap tables were ruined. So an example of this is founder left and took their equity and whether they own a third or half the company, they didn’t have vesting in place. And now the company is kind of unfundable. 

If you come to us and we’re typically the first money into a company and the founders own less than 70%, that’s not a good sign. And sometimes we are the second money in. So there are exceptions to that, but certainly you want the founders to own 80%, 70 to 80% and up. And so we’ve seen companies where again, there’s one or two founders left and they own like 50% of the equity and they can’t raise funding in the future. They’re basically working to put money in someone else’s pocket. It’s just a really bad scene. The other thing we’ve seen is that there are some really sharky investors out there that give extremely low valuations, or they have these exploding terms where if you raise before paying them back, then suddenly they own three times the equity that their original document said. And these investment terms can make the company uninvestible unfortunate, but we’ve especially seen it in Europe where an angel will invest at, I dunno, I’m trying to think of an example. 

There was $50,000 check for 25% of the company, so they invested a $200,000 valuation and that it’s just rough. So now you have this investor who’s not doing anything, not providing a value add, and it’s on the cusp for us of like, Ooh, would we be willing to do that? But realistically, I’m just giving you examples of ways that it’s easy to torture cap table. Be careful. We are less picky, I would say, than bigger venture funds if they see that, they just walk away. So with your ownership percentages, which is what I’m referring to with cap table, you just want to be careful with that. I’ve been shocked at the number that we have seen, and it’s common enough that we ask for the cap table after the first round. If we do a verbal interview and then you go to the second round, we just say, give us a spreadsheet with your cap table. 

And probably half the cases, I have a question about it, who is this person? What did they contribute? If someone owns 10%, 12% of your company, I’m always like, how did this happen? It also shows a judgment thing. If someone’s like, oh, they helped us a few years back and they did some design work and gave us some advice, and so they got 12% of your company. Like that to me shows a questionable judgment is maybe a strong, maybe a lack of knowledge of the space of how things work, but it’s at least something that we have to dig into to be sure that you don’t make that mistake in the future. A next thing that we’ve seen is subsequent fundraising. So when you join TinySeed, you do not commit to raising additional funds. You just keep the option to do so if, if it makes sense for you. 

And within the first few years, it was about a third of our companies went on to raise additional funding after the 2022 crash where funding valuations hit 10 year lows and money is just not as easily accessible. I think it’s probably closer to about a quarter, like 25% of TinySeed companies, and this is not, you have to discount the prior year that we’ve invested. Like the most recent year, probably zero to a handful of those companies have even thought about fundraising because they still have the TinySeed money, they’re in the batch year. But we look at anybody who’s a year or 18 months prior to now, what percentage and ballpark. I would say it’s around that one In four mark, we had a company apply with six co-founders. That was an interesting one. They had a lot of products were very scattered and we weren’t able to fund them. 

Can you imagine? I mean, none of them owned more than 16% of the company and making decisions would be very, very challenging. So that was a red flag of frankly, decision making. When we got into that, then we saw a company apply with zero founders. There was actually one founder of course working on it, but they owned 25% of this early stage company. So I am kind of like, are they really a founder when they are basically working for someone else? To me, that feels like a nice equity grant to an employee. He called himself a founder, but in essence, this is one of those cap tables that we could not fund because a founder working for 25% equity, it just doesn’t make sense. Alright, to wrap things up, the most common topics that I advise on the people pull me into one-on-one conversations during my office hours are the following four things. 

Number one, raising prices or fixing, changing, correcting pricing. It’s not always about raising sometimes the value metrics off. Sometimes they just don’t feel right about the pricing, so we talk through it. The second is, I’m at a plateau or I’m about to hit a plateau. How do I break through it? And those are the conversations that have fueled this mythical doc that I’ve put together, which is just a bulleted list of all the plateau reasons that I know of with B2B SaaS that someday I’ll figure out a way to package it up in a way that’s actually helpful. But plateaus are a common thing. Someone wrote into this podcast I believe, and said, I heard the most bootstrap SaaS companies plateau at 20 or 30 K. Why is that? And the answer is, that’s not true. It’s not that most do. I see SaaS companies plateauing early because they don’t have product-market fit. 

I see them plateauing at 20 or 30 K because they only have one marketing approach and the top of funnel is her churn is too high, and I see them plateauing it a million a RR because their churn is too high or they’ve tapped out the market or there’s all these reasons and then they can plateau at 3 million because competitors, blah, blah, blah. So lots of different reasons for plateauing and it is a very common topic of conversation. The third one unfortunately, is co-founder disputes where one co-founder is living, wants to leave, thinks the other should leave, is asking for advice about a buyout or should they just walk away? Should they give some equity back? It gets really complicated. It is like a divorce because folks have worked together, have been friends, have built and started something that is valuable, sometimes not valuable enough. 

If it was worth $20 million, then maybe you sell it and split the money. But if it’s worth half a million or a million and you’ve spent years working on it, do you really want to liquidate that to the what’s going to be the lowest bidder because you’re not going to get a great price for it and distribute a few hundred thousand dollars to each person that they get taxed on. It is tough. So I don’t mediate co-founder disputes per se. I’m not a mediator. We do have folks that we recommend our founders talk to if they need that, but I definitely am someone that people talk to about advice. Hey, here’s going on. How should I think about it? What are my options? That’s usually the big one is what are my or our options in this case? And of course, now I have a whole laundry list of options when these things come up. 

And the fourth one that folks get my advice on is raising funding or selling a company. And usually it’s not like, how do I raise funding? How should I think about this? Should I raise funding or sell the company? There are questions then about what are next steps and how should I think about it? What are typical valuations? All of that. But as you can see, I get brought in at big strategic points. Now, I also get brought in, I got brought in for some great just nitpicky questions the other day of per seat licensing advice on how to optimize a marketing channel, what marketing, let’s brainstorm marketing channels to go after next. But if I’m grouping them, it really is those four that I mentioned. As a reminder, I have six more learnings that I did not mention in this episode that I mentioned over on the YouTube channel. 

You can click the link in the show notes or go to MicroConf dot com slash YouTube and look for a video of approximately the same title as this episode. And another reminder, if you are a SaaS founder and you want the right amount of funding advice, mentorship community TinySeed dot com slash apply. Applications are open now, and if you are an accredited investor and you’re interested in investing in companies like this, the tiny C millionaire rate is 43% on companies no longer in operation. So obviously we’re having some success. Head over to tiny c.com/invest can fill out a form. There it goes, straight to my good friend, Einar Vollset, whom you’ve heard on this podcast before. Thanks so much for joining me for this week’s episode. It’s great to have you this week and every week. This is Rob Walling signing off from episode 729.

Rob Walling:
It’s Startup To The Rest Of Us. I’m Rob Walling, and this week I talk to Eran Galperin, the founder of Gymdesk, about how he bootstrapped and frankly mostly bootstrapped Gymdesk to a more than $32.5 million exit. It really is an incredible story of Eran launching this product on the side and working for years, nights, and weekends until it clicked. And this is a good example of if he had launched it and expected it to just work in a month or three months and was launching 10 things, Gymdesk would not be where it is today. It was the sheer focus and the relentless execution and showing up night after night, weekend after weekend until he could quit his day job that got Gymdesk to such an incredible life-changing generational wealth-generating opportunity. 

I sometimes have TinySeed founders on this show, not because they are TinySeed founders, but because they have really interesting stories and most TinySeed founders are also part of the Startup To The Rest Of Us and the MicroConf community and Eran is no exception. I do ask Eran why he applied to TinySeed in this episode and you’ll hear his answer if you feel like TinySeed could be a fit for you as a bootstrapped SaaS founder, head to TinySeed.com/apply. We are opening applications for our fall batch within the next week, and that will run for about two weeks. If you hear this after September of 2024, you can always go to TinySeed.com/apply to get on our email list and learn about our next open enrollment. In addition, if you are an accredited investor and you’re interested in investing in companies like Gymdesk, ambitious B2B, bootstrapped SaaS founders, head to TinySeed.com/invest. And with that, let’s dive into my conversation with Eran. 

Hey, Eran Galperin, welcome to the show.  

Eran Galperin:
Hey Rob, how’s it going?  

Rob Walling:
It’s good, man. It’s been a long time coming. I’m glad to have you on here. So folks have probably noticed from the title of this episode that you had a $32.5 million strategic growth investment from Five Elms Capital. And I want to start the show by asking you what did it feel like that moment where you’ve refreshed your bank balance and you saw more zeros than you probably ever imagined that you would have?  

Eran Galperin:
It’s surprisingly a large feeling of relief. It was the end of a very grueling, even though not long, maybe in competitive terms, but for me, long process of three months where basically every day I doubted that this would actually end up well. And many times as sort of a psychological trick, I would kind of let myself feel, “So what if it falls apart? It’s all good.” When the money hit the bank account. Actually it happened very fast. We closed the deal on a Friday, 30 minutes before the wire cut off time and the funds were in the bank account the same day. I did not expect that before the weekend and I’m just like, “I guess it’s over. I guess it’s done. I can have a real night’s sleep today and maybe the entire weekend.” And I literally slept 14 hours a day for the entire weekend. That mainly just a massive feeling of relief. All this weight just washed down.  

Rob Walling:
That’s incredible. And had you been planning in your head of, “Once I have this money, I’m going to do XYZ with it.” Or did it just come in and you thought to yourself, “Well, this is it, I’m set for life at this point”?  

Eran Galperin:
It’s kind of a mix of both. So I didn’t really have an idea for things to buy, but I already had in my head financial plan of how I’m going to deploy this. I’m a proponent of the FIRE methodology, if you heard of it. Financial independence retire early and it’s basically revolves around investing in fund indexes that return a very stable amount every year and with this amount of money, I’m basically set for life if I follow this approach. So I knew I was going to do that. I ended up upgrading my car to basically the same model but newer and higher trim because I really liked that car. And now we’re in the process of, we bought a piece of land here in Tokyo where I live and we’re building a house on it. So that’s super exciting. Not something that I actually planned, but a month after the sale was completed, it’s like, “You know what? We should start looking into it.” And we’re now in the process. Those are the major things.  

Rob Walling:
What kind of car do you have?  

Eran Galperin:
So now I have an Audi RS3 for people who are into that kind of stuff.  

Rob Walling:
Nice.  

Eran Galperin:
It’s a nice car. It’s still compact, which fits with the very narrow streets of Tokyo, but it’s just a slight upgrade from the previous car, which was an S3. Basically exactly the same car on the inside, but a small upgrade that I felt like was well-deserved.  

Rob Walling:
Yeah, no doubt. And for folks listening, when I say you received a 32.5 million strategic growth investment for your company, Gymdesk, and we’ll get into what Gymdesk is and what it does in a minute, what does that term mean? Because a lot of folks might be thinking, “Oh, a growth investment, that means you raised money that went into the company.”  

Eran Galperin:
So our investor is a private equity firm and they did a majority acquisition of the company. They bought a majority stake of the company. I am left with a minority stake in it, and some of the funds are going to be used to grow the company. The majority of it is for them to acquire the controlling stake of the company. This is what the amount that is on the public statement is for.  

Rob Walling:
And so that means it goes to you and other shareholders and full disclosure, you’re a TinySeed company and so TinySeed obviously received some money as well, but that’s not why you’re on the show. You’re on this program because your story is pretty remarkable in terms of how you executed, how fast you grew and how you went about the sale process. 

So I want to roll us back a few years. Before I do that, I want to let folks know Gymdesk. Gymdesk.com, your H1 is gym management software that frees up your time and helps you grow simplified billing, enrollment, member management and marketing features that help you grow your gym or martial arts school. 

So take me back before you started Gymdesk and I know the inside baseball, Martial Arts on Rails was actually what Gymdesk was called, which is such a cool name for developers. I’m like, “Well of course I know exactly why he named it that.” But such not a cool name for non-developers, right? Because clunky, it’s long. People are like, “What do you mean on rails?” Did you get a lot of that? Is that why? Because you rebranded the company in ’21 or ’22 I think.  

Eran Galperin:
Most of our customers just referred to us as MA on Rails or just MAOR or some reason. I hated that acronym, but a lot of them used it and I just ran with it. So yeah, at the time I just winded down a previous company, a VC-backed company called BinPress that raised a seed round and just didn’t grow enough to raise another round and I was kind of burnt out on the VC model. It’s like I felt that company had potential, but because it didn’t fit the VC timeline, it had to shut down. 

So I wanted to go in a different direction. Me and my co-founder kind of split paths. He moved to the dark side and became a VC partner, and I started a bootstrap company back then that was called Martial Arts on Rails. I wanted to combine my hobby of many years, which was training in Brazilian jiu-jitsu, nine years at the time with my professional skills in software development. 

I did a lot of market research initially, I kind of tried avoiding going into the vertical we ended up going in, which is business management software because there’s some very entrenched players in this space. Now I know that that’s actually an advantage. They do a lot of the customer education for us. There’s obviously a lot of potential revenue to be had because they’re so big, but back then it looked very intimidating. 

Eventually I did decide to go that route just because everybody I talked to in this space said the current incumbents were just so awful. So I don’t want to name any names, but anybody in this space knows exactly who they are and I felt with my experience in user experience and software development, I could bring something better to the market. We launched in 2016 and me being a technical founder in every stop previously I was the CTO, some kind of engineering leader. I quickly realized that I had zero idea on how to acquire customers. And so began this kind of slow trial from zero to a livable wage over the course of three and a half years during which I got a full-time job as initially a software engineer and eventually a CTO of a e-commerce company in L.A. And only in 2019 I started working full-time on the business.  

Rob Walling:
Got it. So you were three years in, three years and nights and weekends on Martial Arts on Rails, which became Gymdesk. So that’s interesting. So it’s not the overnight success that people might paint it out to be, right?  

Eran Galperin:
It actually, it didn’t feel quick to me the last couple of years went in a blur when we were growing pretty fast every year, but the first five were a slog for sure.  

Rob Walling:
This is something I talk a lot about online or on this podcast is folks who don’t stick with an idea long enough and they launch one thing and then one thing and then one thing, “Nothing’s taking off so I’m just going to…” You were three and a half years in before you even had a full-time income, and then there was kind of a, I’d call it like a bootstrap or hockey stick moment where we saw this because you applied to TinySeed, I believe in 2021. You were cranking up, I think you were. Do you remember you were 30, 40K MRR by then?  

Eran Galperin:
Yeah, I was around 35K and by the time the program started already 40 and I remember having chats with some of the founders and the meetup we had in Arizona and they’re like, “You’re at 40K, why did you join TinySeed?” 

And I had a different calculation than them in my mind because I had the same kind of dilemma when I was thinking about applying. It’s like, “We’re doing pretty well. What can I get from TinySeed that I can’t get by myself?” And the framework that I use is if TinySeed helps increase the value of the company by more than the equity that they take, which was 10%, then it’s worth it. And it ended up being way worth it. So I think in that regard, it doesn’t matter that we were at 35 because we came in for maybe different reasons than some of the other companies in the batch.  

Rob Walling:
There are different reasons why some folks come in because they’re super early stage and they really do want guidance help finding product market fit. You didn’t need that. You already had it pretty strong. Some folks come in like I could really use the 120 to 250K investment. You didn’t really. Now I know it was a little bit helpful, but that’s not why you were doing it. Why did you decide, and really I think the question is what did you ultimately get out of TinySeed that makes you say it was worth it?  

Eran Galperin:
A lot of it, well, it started with me following your content on Startups For The Rest Of Us. I’ve talked to many investors and I can tell when somebody actually knows what they’re talking about. They’re not just repeating stuff they read on somebody else’s blog, listened to on a podcast, which is the case with a lot of the investors that I see. And I was coming in to get that kind of advice one-on-one. 

This is my first company that I’m building bootstrap first company that I got to a certain scale that I haven’t been able to at previous companies and I’m going into a lot of uncharted territory. I remember that we had pricing realignment engagement together. Me and you sat together and talked it over. That was a very scary process for me. We had a lot of long-term customers and I’m about to really ramp up the pricing on them and it helps so much that I can do it with somebody that already ran this playbook, also seen it fail at other companies, even your own after acquisition, I guess. That really helped me do this confidently and it went super well and actually kickstarted the next upward strand in our revenue growth and there were multiple such instances. This is the main reason that I joined TinySeed.  

Rob Walling:
I think that makes a lot of sense. Community and mentorship are the two things most people name most often and it sounds like the mentorship and advice was a big piece for you. 

You entered an extremely competitive space. There’s one 900 pound gorilla who as you said, no one likes, but there are dozens. I mean I’ll say every TinySeed batch we get one or two applicants at least that make it into calls that do something similar to this. Why did you succeed?  

Eran Galperin:
I think I can tell pretty accurately why we succeeded and it’s because we went against what everybody else in the market is doing. So we have the 900 pound gorilla like you mentioned, and a lot of the similar competitors kind of copied their playbook. They have a product and I think this is coming in a lot of B2B verticals that is very outdated and difficult to use. I guess the thinking is that business software doesn’t need to be accessible or easy to use and they just have a very strong sales motion and a lot of our other competitors are pretty much the same. I mean their products started at different points in time, so you can kind of tell, “Oh, this one is from ’08, this one is from 2011.” But they never bothered updating it afterwards. 

When I started Gymdesk without any sales knowledge, the only thing I can do was just talk to customers and make the product better. I myself went through a transformation with this company where I used to be that technical person that engineering lead that it would come to with customer complaints and it’s like, “Yeah, they’re using it wrong. They’re not very smart.” I would say mean things like that. And with this product I kind of realized it’s actually the opposite. The dumber, the feedback looks like the more opportunity there is to make the product better, and I really took that to heart and through this endless feedback loop made a product that just makes everything so much easier than our competitors. We might have a similar feature set, but the way those features and flows are implemented is completely different. And this is where I feel we really made our first kind of differentiation in the market. 

The other side of it is with the customer service. So anybody who works with me knows how responsive I am to emails, and it was the same with customers in the going when I was the only one talking to them. And when I started hiring for customer service, I made sure that we stayed with that mentality. Somebody sends a report that something is not working, we have to get back to them as early as possible and resolve it as quickly as possible. Not just issues, but also small feature requests where it seems like it’s a no-brainer. We would roll those out sometimes same day. You can find reviews of us on Capterra and other websites where the guy’s like, “Yeah, I messaged customer service, I talked to the CEO, and on the same day I get a new feature that solves our use case.” And you can’t beat that kind of experience. So this is how we kind of build our brand in this space.  

Rob Walling:
Got it. So you’ve referenced product that you built your product differently. It’s not just great product, but it is actually zigging when others were zagging, sales motion, they were really heavily on sales and you were more allowed self-serve I’m assuming, but.  

Eran Galperin:
I’m 100% optimized for self-serve, so it’s maybe a bit ridiculous, but in the early days, I actually refused doing demos. I just hate getting on video calls with people I don’t know. And people would email in, “I want the demo.” It’s like, “Yeah, we don’t do that. I’ll be happy to answer your questions over email, which is the medium I’m comfortable with.” But for years we just didn’t do any demos. We do do demos now. We have a full team, they help with onboarding, but because we didn’t have any demos and none of that motion at all, I really had to make the product shine in those aspects. So every time people would say, “Oh, I can’t do this in onboarding.” It’s like, “Okay, let me go back to the product and fix it like that instead of getting on a call and explaining to you how to do it.”  

Rob Walling:
And then support, as you’re saying, was exceptional. There’s one other thing you didn’t touch on that I watched firsthand. I watched you execute exceptionally well, like top 10%, top 5% of founders that I work with, and you are a technical founder who in 2016 launched Martial Arts on Rails and you didn’t know how to market. By the time I knew you in 2021, you knew enough about how to market that you were driving consistent, consistent, consistent growth. I say that word three times because it was just every month there were no plateaus. And then it just got better. I mean, the growth got faster. You eventually hired a head of growth and I mean you coming from development to marketing, a lot of people, as much as I say it on this podcast of all the successful TinySeed companies, all the TinySeed companies doing seven figures, pretty much inevitably one of the founders runs marketing from the start. 

Now you can eventually hire someone to do it, blah, blah, blah, but trying to outsource marketing when you’re 10K MRR, you and I both know that’s probably not a good idea. So my question is there’s a long way of asking how did you figure this out? How did you get good at driving tons of leads because everything else you said, building a great product, great support, self-serve people do that, and then they flounder and they plateau at 10K because they don’t know how to drive traffic. So I don’t know how to drive traffic or leads. How did you figure this out?  

Eran Galperin:
Yeah, I mean that’s definitely the part of building this company that took me the longest to figure out. I do have some background in writing, so I’ve written a lot over the years, mostly technical writing, but eventually moved into, I wrote about startups going through accelerators, stuff like that. So I had that in my back pocket. Also, some experience with technical SEO, so I thought for sure with SEO I could drive some leads to the product. Turns out that was also naive. It took me quite a while to figure out the SEO for this company, but now I have such a good handle on it that I advise other SaaS companies on this particular topic. 

I just had a call with one of the TinySeed companies where I analyzed their entire SEO structure and gave them actionable items. This is one of the things, it’s not like this with every marketing channel. Maybe it is, I haven’t figured it out yet, but specifically with organic traffic, you can approach it almost like an engineering challenge and really figure out a plan to attack it. And we built a really structured repeatable process there to expand and also retain the land that we acquire in SEO because to keep your rankings, it’s very difficult in a competitive market. 

It took me, I want to say five years to really figure that out. In 2021, when we hired the first full-time employee that was a content marketing editor, I knew this is our strongest channel and this is our best writer and I want to just keep investing in this channel. And it paid off. We still drive most of our leads through SEO. I think it’s over 60, 70% of our leads come through that channel, and they’re all extremely qualified leads. It’s a channel with a lot of buying intent. So yeah, it’s definitely something I had to work on. But just persistence with everything else, trying and failing, trying and failing and figuring it out, that’s how we did it.  

Rob Walling:
And to give folks an idea from ’21 to ’22 you doubled, from ’22 to ’23 you doubled, from ’23 to ’24 is not over, but you’re on pace to double. So it is like a really interesting growth curve. I like to call this because you started in 2016, it’s eight years to overnight success because all the people on X-Twitter want to know, how many people do you and I know that would stick with something for five years kind of grinding it out to figure it out?  

Eran Galperin:
I follow some people on Twitter that literally what they do is they build a tiny SaaS product and they give it a couple of months and then they sell it for peanuts on microacquire.com, I think it just acquire.com now. And just move on to the next. And they keep hoping that one of those will blow up, but that’s not how it works. If you’re going to only stay with it for a few months, it’s never going to happen.  

Rob Walling:
I want to dive into the acquisition because you received a lot of inbound interest. You told me offline, you said you initially ignored it. So it was what, 2021, you start receiving private equity firms that are reaching out, and this is a very common thing. People hit mid six figures, get into the seven figures, and it just happens. So how are you thinking about and dealing with all that inbound interest?  

Eran Galperin:
When it started initially, first of all, the language that they use in a lot of this inbound, it is very vague. I didn’t think it was about buying the company. I thought it was venture investment basically. They talk about growth equity, like we said at the beginning. At that time, I didn’t know exactly what that meant. It’s like, “Oh, are you interested in growth investment into your company?” I’m like, “No, I’m bootstrapped. Not interested in that.” 

Eventually one of them actually used direct language and I’m like, “Okay, interesting. I think we’re too small, but let’s talk and see where it’s at.” And we were too small at that time, but I started to get a sense of how things might go. And between 2021 and 2023, I must have taken close to 40 calls with different private investors, search funds, all sorts of different constellations. And I really got a pretty good lay of the land as to what a potential outcome might look like and at what revenue numbers it would make sense to sell. And I started having this kind of mental funnel in my head. It’s like, “Okay, if we hit those benchmarks, maybe it’s time to start thinking about running a process.”  

Rob Walling:
Got it. Why not run the company forever and take out profits?  

Eran Galperin:
That’s definitely an option. And some people do this, but I started to feel some burnout even in 2021. I ran the company with a bootstrapper’s mindset, always hiring maybe a couple of steps later than I really should have because I’m optimizing for profits. It’s really hard to disconnect the revenue going into the company from your own finances. At the end of the day, anything that’s left over in the company is your revenue personally, and I was doing a lot, just maybe doing too much was feeling burnout. And at some point it’s like, “You know what? I would be happy to take a step back and let somebody else run the company.” 

There’s also when you’re at a smaller scale and you self-select for the customers, everybody’s nice and it’s a pleasure to work with, but as you hit a certain scale, the small percentage of people that, I can’t think of a better word, just nasty people and you have to deal with them. And it gets to the point those people are above the level of even a full-time customer service person to handle, it leaves a dent in you. It always feels like they’re going to ruin your company’s reputation. We had people like trash us and all the social media channels for the pettiest stuff. I have stories that just make my blood boil when I think about it and I just don’t want to deal with it. Does this emotional connection as a founder, CEO, that maybe a professional CEO would not have because they didn’t build the company, they don’t feel it in their bones and somebody is just saying nasty things about them online and I just wanted to kind of remove myself a little bit from that.  

Rob Walling:
Yeah, I experienced the same thing. We don’t talk about that very much, but that stuff takes a toll on you. I don’t know if you got threatened, but I got threatened multiple times with where I’m like, “Do you mean that? This is becoming a safety issue.” It’s a law of large numbers. It’s like at a few hundred customers you kind of know everybody, at 1000 users, customers, it becomes a lot. And then we eventually had a free plan, so we had 30, 40,000 users at a certain point. It’s like you’re going to get some mentally unstable, demanding, narcissistic folks. And yeah, I can see it. Everyone sells. Like I say this, everyone sells eventually. I never thought MailChimp would sell and they eventually sold. I mean really, I had all these examples and they’ve all sold except for I think Basecamp is probably the one that I think about. 

So then I guess the question then is you start feeling like, all right, I’m burning out. This business is obviously worth a lot of money, but how did you know when it was time to sell? Because you could have sold it at a million ARR or two. It’s like do you just arbitrarily pick a point? What was it like for you?  

Eran Galperin:
So because we received so much inbound interest, I did really have a lot of insight into where an optimal result might happen, and it did seem to really funnel around a few million in ARR. That’s where a lot of the bigger players that can actually pay the big multiples start getting interested. At the lower ARR there’s definitely interest, but people would try for bargain. The multiples are lower, the terms are not as good, and I saw a very direct line to that number. With our growth numbers I was running this kind of projection P&L where if we continue at the same pace that we’ve been growing and add a little bit to it every few months, and it ended up being almost to the dollar accurate all the way up to 3 million. So as long as I was continuing with the trend that I built there, I’m like, “You know what? I’m good. I don’t need to sell now.” 

Unless I see crazy warning signs. And by the way, those crazy customers, those were the warning signs, like, “Is this it? Is this where I’m taking a tumble down death row for the company?” That did make me wonder, maybe it’s time to sell now before I really run into that customers that tries to ruin our business. But as long as we kept on that trend I could see the path. It didn’t seem too long. So if it was like five years into the future, I would not be able to do it. But it was about two years into the future I was like, “I think I can hold on for that and have a life-changing outcome there.”  

Rob Walling:
And let’s talk through the sales process because you’re one of the few people that I can talk to about how painful this is. And here’s the hard part is if you go on social media, if I say on this podcast, “Oh, it was so stressful. It was really stressful. No, trust me, it’s really stressful.” People say, “I’m sure it wasn’t that stressful. And also you walked away with money that you never had to work again. So really just deal with it.” But it drives people, it can drive people to the edge, to the brink, to the point of not sleeping to the point of I started having, hallucinations is not the right word, that would take it too far, but I started making shit up in my head that just wasn’t true. And at a certain point, Sherry, my wife was like, “Hey, do you know that that’s not, you’re in a weird place. You’re really fighting with people in a way that’s not healthy for you.” 

So for you, you worked with Discretion Capital folks on the podcast. No, A&R runs that and helps as a sell side advisory for SaaS doing multi-millions. And what was the process like for you? You can talk maybe a little bit about the mechanics of it, of how it actually panned out, but also personally, emotionally, what that all felt like.  

Eran Galperin:
Yeah, the process was much more stressful that I anticipated, and it’s mostly psychological in its core. First of all, it’s a very technical process. That’s another thing that I didn’t anticipate everybody reads about due diligence. It seems like a very straightforward thing. You just provide the documents for the company, you let them look at your code base, la-da-dee-la-da and you’re done. And it’s so great, but it’s actually so technical and complicated. There were times during due diligence and it’s mostly around stuff like taxes and company structure that the other side’s legal team would just disappear for three, four days a week looking into something. And I’m like, “Is this a big problem? Is this a small problem? Is this taking down the deal?” I just have no idea. And this kind of ambiguity where you have no idea if things are going well or not for weeks at a time, it really gets to you eventually. 

And it’s a lot very minute things written in some contract from few years ago, and it’s like, “Is this a problem? It looks so minor. Is this really a problem?” And they’re like, “We don’t know. We’re going to need more time to find out.” It’s like, “Sounds bad.” But you just stick with it and eventually you get through due diligence and then you have the purchase agreement aspect. I thought once we’re done with due diligence, we’re done. We just need to sign the contracts and get on with our lives. But hell no. That was just half of the process. It was crazy.  

Rob Walling:
You keep spring [inaudible 00:29:21]. Yeah, you just don’t know.  

Eran Galperin:
Yeah, you just don’t know those things. Luckily I had Einar to provide some emotional support. He told me that basically his role once the process starts is to be therapist for the founders. And it pretty much ended that way. Every time I would go to him, it’s like, “How big is this issue?” And it’s like, “Don’t worry. It happens in every sale process.” Like, “Okay, if Einar says it happens every time, it’s fine.”  

Rob Walling:
It’ll be okay.  

Eran Galperin:
So he would calm me down and this would happen a lot. Him and my lawyer, I want to give credit to Kaiser, just did an amazing job, especially during the purchase agreements. Every word in those agreements can have such a long-term effect on your life and you’re like, “I don’t even know what any of this means.” So having a really good lawyer that is patient and kind enough to explain it in a way that you can understand is so important. 

And still, we would get hung up on things where us and the buyer had some sort of disagreement on, and is this solvable? I don’t know. And again, days would go by, weeks would go by from my end, this is the only thing going on in my life other than running the business, but they’re dealing with multiple deals at the same time. So I don’t know if they’re just ghosting me or actually busy. Is this a tactic that they’re using to get me to come to their side? It’s super stressful. I usually consider myself a very even-keeled person, and I was taken aback by how stressed I got near the end of the deal. Even though we had all this inbound interest, I felt like if this deal falls apart and we go back to market, we will be able to get a really good outcome regardless. 

But I just didn’t, once you get too deep into it, you hate so much to go back to the beginning, do the due diligence again, like, “Oh my god, to go for that will be a nightmare.” So yeah, near the end of the process, I literally got insomnia. I would lie down in my bed, refreshing, looking for emails from the lawyer that I felt like, “Okay, I have to get out of bed, respond to this now, otherwise I’m going to stop this deal for the weekend because it’s a Friday.” And it’s got to the point where once I turn the phone off and I’m trying to go to sleep, I just can’t fall asleep. So it’s like, “Okay, it’s eight A.M. I’m just getting up. I didn’t sleep today. I’ll just keep going.” And, “Oh, what do you know? Another email came in from the lawyer. So good thing I didn’t go to sleep.” And it just stayed like that for the last couple of weeks of the process.  

Rob Walling:
Yeah, it’s brutal. It’s brutal on your mental health and on your physical health. Not sleeping is rough too. Then that, just everything else is distorted. You can’t get through that, but you made it to the finish line. We started with this conversation, hearing you refreshing that bank balance and seeing all the zeros, huge sense of relief. You’re still a CEO of Gymdesk, but what are you doing now as you look ahead over the next six months, five years? What’s on your mind and what are you doing with regards to Gymdesk and with other projects?  

Eran Galperin:
Yeah, so as I mentioned, one of the goals, or rather one of the reasons for selling the company was due to burnout. And when I was talking the terms with the buyer, I mentioned that I would like to step down as CEO after the company is sold and probably over the course of maybe a year or two, eventually walk away from the company or at least have the ability to do that. So currently I’m still the CEO. We closed the deal two and a half months ago. We’re in the process of recruiting a professional CEO to come in and take over for me. 

I literally had an interview just before this call, an hour long interview, by the way, it’s been a fascinating process interviewing for the CEO position. I’m talking to really incredible people and I’m super excited to potentially work with those people. With me taking a small role in the company, mainly focusing on product. That’s where I feel I can make the most impact at the company. I’ve been doing well in the other aspects, but those are definitely not my strong suits. So going back to focusing on product and over time, reducing my involvement in the company. I still hold some minority stake in the company, so I want it to do well, but maybe more on a consultancy basis eventually. 

The main thing for me right now, and I already started doing that, is I’m looking to help mentor other B2B SaaS founders from that zero to one and a potential sale process, and also do some angel investing in that same realm. So I’m talking to a few founders already. Those conversations actually are incredibly invigorating for me.  

Rob Walling:
You get to see the other side.  

Eran Galperin:
Yeah, I’m just incredibly happy to talk about those topics. It’s like I have somebody who also understands what I’m talking about and having those conversations kind of like what we’re doing right now.  

Rob Walling:
Yeah, this is the best job I’ve ever had, what I do both on this podcast, but running my heart on a TinySeed, I get to do that every day. And you see the appeal of it. It keeps you in the game, it keeps your head sharp, but you don’t necessarily have to do the grind that you did for so many years where everything’s hanging by a thread. If someone just heard you talk about, “Hey, I am mentoring and potentially angel investing, they wanted to reach out to you, what would be the easiest way for them to reach you?  

Eran Galperin:
So I have my personal website, it’s EranGalperin.com if you just Google my name, you’ll find it. You can contact me through there. Also, I’m on Twitter and LinkedIn, easy to find. Feel free to reach out if you want to talk. I’m super excited to talk to founders about B2B SaaS. It’s kind of my thing right now.  

Rob Walling:
Yeah, and it’s not just, “Hey, talk to me if you want me to invest or something.” But it’s like you’re pretty free with your advice and you have obviously a lot of knowledge and experience having grown this company in extremely competitive space and having an incredible life-changing exit.  

Eran Galperin:
Yeah, it always gets me worked up to talk to a founders in the early stages and hearing about what they’re doing. It’s like, “Wow, that’s so exciting.” So yeah, I love having those calls.  

Rob Walling:
Eran Galperin, thanks so much for joining me on the show today.  

Eran Galperin:
Thank you so much, Rob. Been a pleasure.  

Rob Walling:
It was an absolute pleasure having Eran on the show. I hope you enjoyed this episode and took away some motivation and some lessons and some learnings that will help you grow your business this week. This is Rob Walling signing off from episode 728.