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In episode 635, Rob Walling catches up with Tony Chan, the co-founder of CloudForecast, an AWS cost monitoring tool. Tony shared his victories, challenges, and failures in TinySeed Tales Season 3. It has been over eight months since we recorded the final episode.
In this episode, we reflect and catch up on what’s been happening with Tony and CloudForecast.
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Topics we cover:
- 3:03 – Losing one of CloudForecast’s engineers
- 5:35 – Tony’s approach to hiring engineers
- 8:31 – Did Tony end up hiring someone to help with content marketing?
- 17:32 – What is Tony struggling with right now?
- 21:07 – Managing your founder psychology
- 25:08 – Tony’s recent conundrum
Links from the Show:
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
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Rob Walling:
If you love the smell of startups in the morning, you’re in the right place. It’s Startups For the Rest Of Us. I’m Rob Walling, and here we are diving into a Where Are They Now? episode. Today I’m talking with Tony Chan. You just heard his season just a month or two ago. TinySeed Tales season three wrapped in this podcast feed. But what most people don’t know is that the last time Tony and I spoke to record that final episode was eight months ago. So a lot has happened since then. But before we dive into that, I want to let you know about our next MicroConf local. I’m sitting down with Jason Cohen to do another one of our SaaS snapshots where I have a conversation, I ask questions, we hang out and we learn about what makes Jason Cohen tick, what makes him successful, and get all his thinking on all things bootstrapping and mostly bootstrapping.
The event is November 30th in Austin, Texas at the WP Engine Headquarters. If you’re interested, tickets are at microconf.com/locals. It’s going to be an amazing time. It’s a three-hour event. Part of that will be founder connections. We have a lot of socialization time for founders to meet one another. And then Jason Cohen and I will be sitting down for about 30 or 40 minutes and having that SAS Snapshot Fireside Chat. It’s just a couple hours the afternoon of November 30th. And if you are interested, tickets are at microcomp.com/locals. And with that, let’s dive into my conversation with Tony Chan.
Tony Chan, thanks for coming back on the show, TinySeed Tales slash Startups for the Rest Of Us.
Tony Chan:
Yeah, last time I saw you was at MicroConf.
Rob Walling:
April in Minneapolis. Yep.
Tony Chan:
Yeah. Yeah. And you’ve been busy with the European batch and the American batch and so on. So it’s been a while since we’ve chatted.
Rob Walling:
That’s right. And I’ve been attending a bunch of MicroConfs, but none in your area. But we’ve spoken since then for sure.
Tony Chan:
Here and there.
Rob Walling:
The company stuff. Yeah, just haven’t recorded.
Tony Chan:
Via Slack, async, various things. Rollercoaster ride of stuff that we’ve been through.
Rob Walling:
Okay. So yeah, to set the stage, Tony Chan, co-founder CloudForecast, TinySeed Tales season three. And that just went live. The whole season rolled out over the past couple of months. I mean it ended maybe a month ago. But for people who don’t know, we recorded that from about, it was like 20 months ago is when we started and we ended about eight months ago. So it’s been eight months since that last episode was recorded. And right after we recorded that last episode, you sent me an email, it was like a week or two later. You said, “Oh my gosh, this is such a rollercoaster. So much is different than the last episode.” Already things had changed
Tony Chan:
When we first started TinySeed, we got the seed money. I think even a little bit before then we started putting some pieces together to hire a first engineer. So I don’t even know where the time went. Everything that’s happened, it’s crazy.
Rob Walling:
It goes fast. Well, I mean one of the things you told me, again, within two, three weeks of recording that last episode, I believe you lost one of your engineers. She left, right?
Tony Chan:
Yeah, Katia left the company, I mean was on good terms and good for her. She was able to find some upward mobility at a bigger company where she can learn, probably where she felt that her skills can be developed a little bit further. I mean it’s hard at… And at the time it was three of us and we’re onboarding Arturo, our senior engineer, and we’re maybe hoping Arturo would help develop her a little bit. But I think she was looking for probably a bigger company, more structure. I mean we have some structures in place, but it is hard. A lot of it’s individual contribution of what you could do here at a bootstrap startup. So we were happy for her. I mean, we were sad, but it is what it is. It’s just part of the unexpected things that happened, and you just got to roll with it.
Rob Walling:
Yeah, cause that was the first episode of your season was talking about… You were just about to onboard and then episode two was like, she’s amazing, she’s doing great. And did you take it hard when she left?
Tony Chan:
I think we did at first. Well, I think we also saw it as like, wow, that’s opportunity costs on our side. We invested a lot in time in her in terms of onboarding her and getting her set up and such. But also across the year, she also did really good work for her. I think as founders you have to forget fast. You can’t hold grudges. We don’t want to hold grudges, we want to be good people. We were happy for her. We were sad personally, but also happy with the upward mobility that she was able to find. And it sounded like a really great opportunity, and I think we saw it more as positive. Great. She redesigned her own app. She refactored a bunch of things on the front end side, redid our whole front end and tailwind components in UI, and it set it up for success now, today.
And without the work that she did across the whole year, we would be in a lot different place at the moment with our app on the engineering side. And it’s really set up Arturo, our senior engineer, kind of almost like passing the baton. And he’s doing really well on his side. Then we back-filled one of his friends into Katia’s role and he’s done really well. Having her work and that foundation she placed has sped up our features and how our app looks a lot more professional, polished. Overall, I think that’s a good thing. So we saw it more on a positive light, just to sum it up.
Rob Walling:
Yeah. Because when the season ended, it was you and Francois, co-founders, and then it was Arturo and Katia. And obviously, Katia left. You just said that you’ve back-filled her position. Is it still four of you? Have you hired anybody else?
Tony Chan:
So when Katia left, Arturo was just starting, and he was a senior engineer and we saw that as a game-changing hire in which as an individual contributor he can spec out and do feature requests and build out features without having too much involvement from Francois. He can kind of take over things and lead the team in some ways. So when Katia left, he went through his Rolodex like, “Hey, I know two friends that might be interested in joining the company.” We ended up interviewing two people, and we hired one of the friends. We actually briefly considered hiring both of them, but I think what’s going on with the economic situation at the time with Ukraine and all that kind of stuff, we’re like, we should probably be a little bit more conservative on our cash. We just hired Fernando who started maybe two or three months after him.
So the last six or eight months, six to eight months and last few months, have been almost ramping up and getting into a good rhythm between Francois, Arturo and Fernando. And that’s been a big part of our focus of what things that we need to implement so that they can feel prepared, they can feel enabled. And also it’s put Francois a hot seat to make sure that he is organized on his side and that he’s planning things as well. So we ended up going with the base camp motto of shape up with a six wheat sprint, and that’s worked out really well for us so far in terms of getting into a rhythm of building out feature requests and having the engineers also feel that it’s a short enough period where they don’t feel stuck on a project for so long as well. But the rhythm of product features are going to ramp up, which is amazing to see, amazing to even give that news to our customers as well and what we’re building. And it’s kind of given us a way to be more organized about our product features and roadmap as well.
Rob Walling:
Three engineers and you. It’s a developer-heavy company.
Tony Chan:
Yes, I am solo.
Rob Walling:
And some of the things we talked about during the season were there was this constant push and pull of Tony’s doing too much but also something you were not looking forward to is having to give up control. Moving from a business to a company is a phrase that you brought up.
Tony Chan:
Yeah, so it feels good on the engineering side. That part is in a good rhythm as mentioned. That part feels like, hey there’s a lot of promise here with this. Because right now we have the first half of 2022 planned out, and a lot of this is all spec’d out or mostly spec’d out, and we have a good idea of where we want to go with our product based on our user feedback and the resources that we have with the six week sprint. The business side, not so much. It’s been challenging. I think last time we chatted we weren’t even discussing… I think we were discussing unlocking more on the SEO content side since that seemed like a promising channel. But I don’t think we discussed about hiring someone, right?
Rob Walling:
Hiring someone full time? No.
Tony Chan:
Right. I think we talked about agencies and someone, but we tried to hire someone full time.
Rob Walling:
Oh okay. How’d that go?
Tony Chan:
It went okay. We had to let the person go after 60 days.
Rob Walling:
Oh that’s not good.
Tony Chan:
Yeah. Seemed promising. I think these things are really hard. Nothing to do with him or him personally or his skills. It just ended up not working just to cultural and chemistry fit issues. I just could not get into a good rhythm with him with time zone differences as well. It just didn’t work out for me personally. There’s also the lack of… We thought that not having technical and AWS knowledge would not be as challenging, but it was a lot more challenging than we thought it would be. So overall, the person was decent, but we just could not think a scenario that it could work out after 60 days.
Rob Walling:
So are you going to try to backfill that role?
Tony Chan:
We’ve thought about it. We’re still thinking through it, how that could look. I think we’ve been taking a lot of the lessons learned from that. I have been able to find part-time writers that have knowledge in SEO and also knowledge in AWS that were former engineers that are interested in marketing to help us write content. So that might be a play for us where we just continue hiring part-time contractors. I still have to orchestrate that a bit, but-
Rob Walling:
Yeah, then you’re the manager.
Tony Chan:
I think what’s helped was having this person, and we’re working with this person right now. He knows about SEO. He knows about content marketing. He knows what to expect. He’s very proactive. That has been very helpful for us right now, and I think a lot of that was learning from our attempted hire. Honestly, if we didn’t hire and go through the pain of going through those issues that we ran into, I would not have been able to identify what we need. I would not have been able to identify the person we need to hire, whether part-time or full-time. I think we’ll be a lot sharper when we are ready to hire, when we find that right person to hire. I am on the lookout. I think there is a money issue with that too. These people are not cheap, especially needing the technical chops and the AWS knowledge but also interest in the whole economic pricing of AWS as well.
So it is challenging. I don’t think it’s impossible. There’s probably someone out there. But I do think that the journey of the last two years of SEO content… I know a lot more about SEO content today than I did two years ago. I think we will be sharper of who to hire, the culture fit. And these things are unpredictable. It’s really hard, especially when you hire somebody you just don’t know if it’s going to work out or not.
But I think it’s important to document everything possible. We had a 30, 60, 90-day plan, and it was not going to plan, and it felt like it was not a good fit. So I think having that was very helpful because then we were able to go to the person and have a very fair conversation on why it’s not working out and why things are not going the way they are. It ended up being very mutual on that side. We were very fair with the parting as well. Francois [inaudible 00:12:08]. If it does happen, we want to be fair as possible, like what is the fair thing to do on that side? So I think that was very helpful.
Rob Walling:
It is really hard to hire people when you are not an expert at the thing you’re hiring. It’s the unfortunate reality. I see non-technical single founders trying to hire that first developer, and it’s very tough. And so likewise if you’re trying to hire someone for SEO and a year or two ago you knew a small amount about it, it’s pretty easy to make a misstep there. And the more educated you get… I mean the pattern I see is either the founders learn… Usually the founders learn it. If we look across all the TinySeed companies that you know, most of the founders find one or two marketing approaches that they learn enough to implement and start to get the flywheel going, and then they start replacing themselves, either a piece of it… You know look at ScrapingBee with their content. You look at Ruben with his SEO, like starts off just doing a lot of it yourself and then you replace either pieces of it or you replace the whole mechanism. But by that point, you know it so well that it’s quicker. It’s easier. But it’s a budget thing. Right?
Tony Chan:
Yeah. What’s been helpful, I think there’s a few things that I think you hit the nail on it, is hiring out pieces of it. The writing part is a huge part. The strategy part is a huge part. I’m able to, with this new person, at least do 50% of it, hand it off to him, and he seems pretty knowledgeable on how to take it to the rest of the way, which requires me to not have effort other than reviewing his work afterwards as well. So I think that’s been helpful. And I think the other challenging part too is we’re bootstrap startups. And I think with bootstrap startups, time is one of the most important things you can have as a founder, time and the mental energy to work on things that you need to work on. And that generally means that you need to hire people that are mid-level senior. But those mid-level senior people are very expensive as hires.
And junior people, I think they’re… Some TinySeeds founders relish in working with people that are more junior level and they have SOPs and they have processes in place and all that kind of stuff. I don’t think that is something Francois and I are really good at, the process and all that kind of stuff. So I think that’s why Arturo has worked out really well is just the fact that he can contribute individually. We can do what we need on our side and kind of onboard him and he just takes it the rest away. It just makes your life, for me personally as a bootstrap founder, a lot easier because I have other things to focus on. Francois has a million other things. He doesn’t have time to manage someone. So I think that’s challenging too, is the funding part, the money part as a booster founder. It’s like you need to hire these people but you don’t have the money to hire. So I think that’s hard.
Rob Walling:
There’s a reason companies raise money. And I think back in the days when I was bootstrapping, and I still hear people say this, I don’t know what I would spend money on to accelerate growth. And then you had a certain point where you’re like, I know exactly what I would spend money on to accelerate my growth. And usually it’s hiring. Usually it’s hiring a more senior person than you could otherwise afford. When I was starting Drip, didn’t have much money, hired a lot of junior people. And that worked obviously, but it was tough. It was me training most of the people, and it was a lot of management and a lot of my time just maintaining the team. And if I had had a million in VC, venture funding, we would’ve moved way, way faster.
In fact, that’s what I saw once we got acquired, and then the company acquired us had 38 million in funding. I hired 10 engineers in 18 months. It was crazy. Our velocity was… It was so cool. And that’s just a luxury. And so funding is a tool. Funding is not great. It’s not the worst. Bootstrapping is definitely… I think it’s harder than it used to be honest because of the competition. But I also just think in general, it’s a different kind of difficult.
Tony Chan:
Yeah. I liken it to when you’re playing Doom, there’s nightmare mode, where building a startup, like bootstrap startup, is nightmare mode. But you get through it. Is probably one of the most satisfying things you can do, right?
Rob Walling:
Yeah. There’s pros and cons. You retain the control and you retain… And just for people listening, we know you’re mostly bootstrapped. So every once in a while… I know ScrapingBee published a blog post at one point or went to Hacker News and it was like, “How we bootstrapped to a million and a half ARR.” And people were like, “You didn’t bootstrap. You took a small amount of funding.” But look, venture capitalists, if you raise less than a million, you’re bootstrapped.
Tony Chan:
Right. And yes, the hundred thousand plus that we get from TinySeed, it is a significant sum of money, but it is very small compared to raising a million dollars. The magnitude is a lot different. Someone in our mastermind, Newscatcher, they got into YC, raised a bunch of money. And the six figures only got them so far, and they raised a bunch of money, and that’s exactly what they’re doing. They’re enabling the money to hire people to accelerate their growth and magnify their growth as well. The hundred thousand plus, it’s just a drop in a bucket. I think you tell us, try to spend that in a year, right?
Rob Walling:
Yeah.
Tony Chan:
Even less, as much as possible to test out things.
Rob Walling:
That’s one or two hires.
Tony Chan:
Yeah, it goes by fast. So people’s like, “Oh you’re raising money.” No, the order of magnitude’s a lot different.
Rob Walling:
Yeah, and what you can do with it and get accomplished I think is a lot different. Tony, in true TinySeed Tales format, you know that I always have the questions. Things you’re looking forward to, things that you’re dreading, all that stuff. So if we look back at the last eight months since we last spoke, what has been hard? What has been a thing you’ve struggled with?
Tony Chan:
There’s just so many things. I think it’s a combination of just instability. And I think that’s part of being part of a bootstrap startup, instability in terms of hiring, trying to get us into a good rhythm, finding people that can get us into that good rhythm. We mentioned with losing Katia, ramping up Arturo and then hiring Fernando. That’s a lot, that’s a lot of effort mentally as a founder, and we still have to focus on growing the company. On top of that, our revenue has been flat year to date, and I think the last time we chatted we were on the progress towards about half a million in ARR. And I think we were around 450k ARR at the time. But over the past six months we’ve had a lot of churn. It’s the first time in history of CloudForecast, and we lost our third largest customer decided not to renew their subscription.
It’s not like opportunities have not been there, but some of our growth drivers have been enterprise opportunities. And we like those because when you get them on annuals, they’re very solid ROI. They pay back really well, and they help grow your company really fast. Took a few Ls on those enterprise opportunities, did not close. Some were stalled because a lot of our product is selling up, meaning we work with engineering managers and they have to get approval from the whole team. Mentioned we had some churn as well. It was really hard to stomach. And all that, we just had to continue to run the business. Didn’t have a choice. I think that was really challenging because it was a lot of content switching, going from hiring, how do we continue to progress the business forward while we had all this other stuff going on in the background and seeing our revenue relatively flat.
So I think that was really challenging. It was a really rough stretch for us just to sit there and not watch revenue grow, and it was so easy to get discouraged and get into a funk and just give up. And I think that what makes founders like us different is the ability to learn from it, the ability to mentally move on, find people to chat with and people to check in on you to make sure you’re okay. And so much of what we do is such a rollercoaster ride. Literally, it’s setback on setbacks and setbacks. But how you respond and how you forget about it too is really important. And I joke with Tiffany, my wife. She’s a physician and she brings a lot of what she does at work home, and it’s really… She cares a lot, so it’s really hard for her to forget about her day, takes some time for her to unwind.
While she asked me about my day, I’m like, “I don’t know what happened.” Because I think that’s one of my superpowers, to be able to just move on and forget about it and just learn from it and just not let those setback just wear you down. And I think that’s the biggest thing is we were able to weather the storm a bit and just be able to learn from our mistakes, try different things. Not like we sat there and sat on our hands and did nothing. We definitely did some things to try to move the business forward, tested things out, and just try to be positive too. Our goal was we need to unlock Arturo and Fernando faster, and we needed to focus on that. Regardless of what was else happening on there, we needed to do that, and that was the most important priority at that time.
Rob Walling:
Yeah, I mean it sounds rough. Plateaus suck. They really do. And I mean, to your point, so much of being a founder is managing your own psychology. And so I think you’re a good example of that, potentially, of your superpower of being able to forget the day and to have a short memory of this stuff and just keep going.
Tony Chan:
And a lot of that… We kind of listen back to TinySeed Tale. Reflecting that, I felt like the discussion was managing the psychology and be able to chat with you openly about that, I thought that was really cool, was two guys be able to share our emotions as founders, be able to open up in what we deal with. I don’t think we as guys or even founders do enough of that with each other. And I thought that listening back to it, I’m very fortunate to have that space to be able to open up to you about that. And not only with you, there’s other TinySeed founders. I think that’s been the best thing is be able to chat with them openly about things and being very raw about my emotions and doing that because without that you just stew on it, and it just really affects you negatively.
So I think having the outlet and being able to pour out all those things and those struggles were really helpful for us to get through that. And to piggyback on what you asked was like what are we looking forward to? So we are back on the path of getting to half a million AR. The last two months have been really good. We closed two really big new enterprise opportunities on annual deals. One’s going to be our second largest customer, and the other one covered the one that churned. So there are some bright spots, and they’re bright spots that we’re seeing with our engineering team being able to move the way they are and the velocity that we’re seeing.
I joke it’s going to be scary good in terms of what they can turn out, and with Francois planning and that. So I think that’s going to be amazing to see. And we have a few renewals, and customers have already committed increasing their subscription value with us as well. So setbacks, but it’s three steps back. But you got to, as founders, just push one step forward, just keep pushing the boulder up the hill. And I think that is the most challenging thing to do is managing your psychology to do that.
Rob Walling:
Well, that’s good to hear, man. The fact that you’ve… second largest replaced the one that churned. Things may be looking up. And you know what, they’re going to look up just long enough for you to feel like you’re at the top of the rollercoaster and then guess what’s going to happen? Something else will happen unfortunately.
Tony Chan:
Yep, crashing down again. Yeah. And I think the funny thing is we closed a deal recently, and we had a small customer churn literally two minutes later. I’m like, “Come on.” Yeah, can’t catch a break. But I think that’s the beauty of enterprise opportunities is, especially if you can capture them on annual deals, you get that payback all up front, and in a snap of finger you grow your ARR 15, 20%. And whenever I talk to founders who just get started, I highly encourage them, how can you increase your prices? How can you tap into those bigger customers?
Because those enterprise customers, you can charge thousands of dollars, right? Five, six figure in ARR average contract value deals, and they are easy to work with. They provide great feedback to your product, and they pay back really well and they have solid ROI. So I always encourage fellow founders to, if there’s any enterprise opportunity play, go towards that. And it’s a learning opportunity as well. It took us two, three years to get to where we’re at with that area, but it was incremental progress and learning and getting feedback on features that we need to support those types of customers.
Rob Walling:
So I like that. We can kind of end on a high note in that things are looking up and you’re looking forward to the growth and everything. We’ll revisit. We’ll do another where are they now? here in… I don’t know. I bring Craig and Gather on once a year or something. It’s kind of fun just to revisit. But before we wrap this, I wanted to bring up… It’s a bit of a non-sequitur, but about a week ago you sent me a Slack. I would read it on… I don’t read your personal Slacks to other people. But in this case, I would read it. But in this case, it was an audio Slack.
Tony Chan:
It was a pretty late night. I might have been rambling a little bit. I don’t remember. I might have been distraught or something.
Rob Walling:
You sounded fine. But you were saying basically, AWS re:Invent, it’s put on by Amazon. It’s the biggest event, in person event, in your space, I’d imagine. This is the place that if you’re going to sell to folks using AWS and you’re going to do it in person is the place to be. And you had a conundrum. And what was that? What were you asking me about?
Tony Chan:
The conundrum was not going because I get to do whatever I want. I’m a bootstrap startup. I control my own destiny. I don’t need to go. Why do I need to go, right?
Rob Walling:
Because I don’t want to, right?
Tony Chan:
I don’t want to. I don’t feel like it. It did not seem like a good time. It’s a huge conference, like 60,000 people across 10 hotels or something like that. It’s overwhelming. It’s a whole week. So for me, I was thinking like, oh my gosh, this is going to be really tiring. It’s going to be drained. I’m going to be tired. It’s really hard to break through the noise, business-wise. Because the money’s not a problem. The tickets are $1,800. The hotels are 2,500. It’s whatever. However, on the marketing standpoint, if we want to break the noise, we have to spend a lot of money. And I think when Francois and I were talking about it, it’s going to be really hard to justify an ROI from it just because it’s a big conference.
However, I think after much discussion with you and with Francois, like, why don’t you go with no ROI expectations? Just go, have fun, network, make friends. What’s the worst that can happen? The worst is cool, spend a week. But at very minimum, I’ll get to travel, go to Vegas, meet some friends, meet some new people, experience something new, eat good food. And maybe that’s what comes out of it, and that’s okay. And I think just shifting our mentality a little bit on me going and doing things as well that I might not want to do was a big light bulb moment. Because I think a lot of the things I talk about with founders is sometimes you just got to do things you don’t want to do, and you have to do it. And I think you turned that question on me. What was your feedback?
Rob Walling:
It was kind of like I said, “I understand it because I don’t like big events either, and no one’s making you go. But I think you will get benefit from going either, one of you, and probably don’t attend the sessions, but just try to line up meetings, talk to existing customers, try to get intros.” And I talked a little bit about luck surface area, this concept of it just being in the mix, the number of things that I did that just turned into the next thing. I never would was going to be a business to software. And I ran into this guy Jeff Atwood at Joel Spolsky’s event. And I actually literally walked… He was a blogger and I was coding [inaudible 00:28:13] I was so nervous to introduce myself that I walked all the way out to my car. I was going to drive home. And I went, “I need to go back in.”
And I went back in and I was like, “Jeff Atwood, I’m Rob Walling, Software by Rob.” It was the blog at the time. And he was like, “I love that blog.” And we started talking, and he’s like, “You should speak at BOS next week.” And I was like, “What?” And that led to that, which led to… You know what I mean?
Tony Chan:
Yes.
Rob Walling:
On and on. All these dominoes fell from me doing something that I really didn’t want to do. Look, it doesn’t always work out that way. But I find going to in-person events, which is usually something I don’t want to do, even though I host them myself, it’s terrifying. And yet I have a tough time not imagining. You said leave the ROI assumption. Don’t think about it that way. I think there will be ROI by being there.
Tony Chan:
Yeah, I think the part that resonated me the most is the luck surface and a lot of the CloudForecast journey has been increasing luck surface, has been doing things that we don’t want to do and just putting ourselves out there regardless of how challenging it is or how difficult it is or what we want to do. And it has always paid off for us to a point where we’re at now.
And I think when you mention them, shoot, that’s been so much of our story. And me not going would be very hypocritical of me. And it’ll go back to the foundation of how we’ve built the company and what we’ve done, and the three times we interviewed for TinySeed and the multitude of failures of just dragging ourselves to IC interviews and chatting with people and just chatting with people and just trying to find people to talk with and having conversation with them. That’s so much part of our story. And I felt very backwards as I kind of thought through and reflected, like if I don’t do this, that kind of goes back to how we built the company and the foundation of the company. So I’m going now.
Rob Walling:
You’re going solo to Vegas.
Tony Chan:
Yeah, solo questing. And it’s just interesting of just being able to think through it, how quickly it switches. Now I’m excited to go. I can’t wait. Already hitting up some people, no expectations, just going to enjoy myself. There’s some customers that are going to be there, so trying to meet up. And I think you said it best, I don’t have to go to all the things, but just me being there will hopefully increase some luck surface, and we’ll see what comes out of it.
Rob Walling:
That’s a great way to end it, man. I’m glad you’re heading out and hope it’s worthwhile. Folks want to keep up with you. You are on Twitter @Toeknee123. It’s T-O-E, like the body part, K-N-E-E, like the body part, 123, and of course CloudForecast.io if folks want to see what you’re working on. Thanks for coming on.
Tony Chan:
Thanks Rob. Have a great one.
Rob Walling:
Thanks again to Tony for taking the time not only to record with me today, but to do the six recordings for the TinySeed Tale season. And thank you for coming back every week. Whether you’ve been here for six or 600 episodes, I really appreciate you spending time with me each week. And I do not take that for granted. I know that your time is valuable, and I always want to make the best use of it. As a reminder, we have a YouTube channel, microcomf.com/youtube, where you can hear from me even more each week. If 30 minutes in your ears each week isn’t enough, microcomf.com/youtube. Thanks again for hanging out. This is Rob Walling signing off from episode 635.
If you love the smell of startups in the morning, you’re in the right place. It’s Startups For the Rest Of Us. I’m Rob Walling, and here we are diving into a Where Are They Now? episode. Today I’m talking with Tony Chan. You just heard his season just a month or two ago. TinySeed Tales season three wrapped in this podcast feed. But what most people don’t know is that the last time Tony and I spoke to record that final episode was eight months ago. So a lot has happened since then. But before we dive into that, I want to let you know about our next MicroConf local. I’m sitting down with Jason Cohen to do another one of our SaaS snapshots where I have a conversation, I ask questions, we hang out and we learn about what makes Jason Cohen tick, what makes him successful, and get all his thinking on all things bootstrapping and mostly bootstrapping.
The event is November 30th in Austin, Texas at the WP Engine Headquarters. If you’re interested, tickets are at microconf.com/locals. It’s going to be an amazing time. It’s a three-hour event. Part of that will be founder connections. We have a lot of socialization time for founders to meet one another. And then Jason Cohen and I will be sitting down for about 30 or 40 minutes and having that SAS Snapshot Fireside Chat. It’s just a couple hours the afternoon of November 30th. And if you are interested, tickets are at microcomp.com/locals. And with that, let’s dive into my conversation with Tony Chan.
Tony Chan, thanks for coming back on the show, TinySeed Tales slash Startups for the Rest Of Us.
Tony Chan:
Yeah, last time I saw you was at MicroConf.
Rob Walling:
April in Minneapolis. Yep.
Tony Chan:
Yeah. Yeah. And you’ve been busy with the European batch and the American batch and so on. So it’s been a while since we’ve chatted.
Rob Walling:
That’s right. And I’ve been attending a bunch of MicroConfs, but none in your area. But we’ve spoken since then for sure.
Tony Chan:
Here and there.
Rob Walling:
The company stuff. Yeah, just haven’t recorded.
Tony Chan:
Via Slack, async, various things. Rollercoaster ride of stuff that we’ve been through.
Rob Walling:
Okay. So yeah, to set the stage, Tony Chan, co-founder CloudForecast, TinySeed Tales season three. And that just went live. The whole season rolled out over the past couple of months. I mean it ended maybe a month ago. But for people who don’t know, we recorded that from about, it was like 20 months ago is when we started and we ended about eight months ago. So it’s been eight months since that last episode was recorded. And right after we recorded that last episode, you sent me an email, it was like a week or two later. You said, “Oh my gosh, this is such a rollercoaster. So much is different than the last episode.” Already things had changed
Tony Chan:
When we first started TinySeed, we got the seed money. I think even a little bit before then we started putting some pieces together to hire a first engineer. So I don’t even know where the time went. Everything that’s happened, it’s crazy.
Rob Walling:
It goes fast. Well, I mean one of the things you told me, again, within two, three weeks of recording that last episode, I believe you lost one of your engineers. She left, right?
Tony Chan:
Yeah, Katia left the company, I mean was on good terms and good for her. She was able to find some upward mobility at a bigger company where she can learn, probably where she felt that her skills can be developed a little bit further. I mean it’s hard at… And at the time it was three of us and we’re onboarding Arturo, our senior engineer, and we’re maybe hoping Arturo would help develop her a little bit. But I think she was looking for probably a bigger company, more structure. I mean we have some structures in place, but it is hard. A lot of it’s individual contribution of what you could do here at a bootstrap startup. So we were happy for her. I mean, we were sad, but it is what it is. It’s just part of the unexpected things that happened, and you just got to roll with it.
Rob Walling:
Yeah, cause that was the first episode of your season was talking about… You were just about to onboard and then episode two was like, she’s amazing, she’s doing great. And did you take it hard when she left?
Tony Chan:
I think we did at first. Well, I think we also saw it as like, wow, that’s opportunity costs on our side. We invested a lot in time in her in terms of onboarding her and getting her set up and such. But also across the year, she also did really good work for her. I think as founders you have to forget fast. You can’t hold grudges. We don’t want to hold grudges, we want to be good people. We were happy for her. We were sad personally, but also happy with the upward mobility that she was able to find. And it sounded like a really great opportunity, and I think we saw it more as positive. Great. She redesigned her own app. She refactored a bunch of things on the front end side, redid our whole front end and tailwind components in UI, and it set it up for success now, today.
And without the work that she did across the whole year, we would be in a lot different place at the moment with our app on the engineering side. And it’s really set up Arturo, our senior engineer, kind of almost like passing the baton. And he’s doing really well on his side. Then we back-filled one of his friends into Katia’s role and he’s done really well. Having her work and that foundation she placed has sped up our features and how our app looks a lot more professional, polished. Overall, I think that’s a good thing. So we saw it more on a positive light, just to sum it up.
Rob Walling:
Yeah. Because when the season ended, it was you and Francois, co-founders, and then it was Arturo and Katia. And obviously, Katia left. You just said that you’ve back-filled her position. Is it still four of you? Have you hired anybody else?
Tony Chan:
So when Katia left, Arturo was just starting, and he was a senior engineer and we saw that as a game-changing hire in which as an individual contributor he can spec out and do feature requests and build out features without having too much involvement from Francois. He can kind of take over things and lead the team in some ways. So when Katia left, he went through his Rolodex like, “Hey, I know two friends that might be interested in joining the company.” We ended up interviewing two people, and we hired one of the friends. We actually briefly considered hiring both of them, but I think what’s going on with the economic situation at the time with Ukraine and all that kind of stuff, we’re like, we should probably be a little bit more conservative on our cash. We just hired Fernando who started maybe two or three months after him.
So the last six or eight months, six to eight months and last few months, have been almost ramping up and getting into a good rhythm between Francois, Arturo and Fernando. And that’s been a big part of our focus of what things that we need to implement so that they can feel prepared, they can feel enabled. And also it’s put Francois a hot seat to make sure that he is organized on his side and that he’s planning things as well. So we ended up going with the base camp motto of shape up with a six wheat sprint, and that’s worked out really well for us so far in terms of getting into a rhythm of building out feature requests and having the engineers also feel that it’s a short enough period where they don’t feel stuck on a project for so long as well. But the rhythm of product features are going to ramp up, which is amazing to see, amazing to even give that news to our customers as well and what we’re building. And it’s kind of given us a way to be more organized about our product features and roadmap as well.
Rob Walling:
Three engineers and you. It’s a developer-heavy company.
Tony Chan:
Yes, I am solo.
Rob Walling:
And some of the things we talked about during the season were there was this constant push and pull of Tony’s doing too much but also something you were not looking forward to is having to give up control. Moving from a business to a company is a phrase that you brought up.
Tony Chan:
Yeah, so it feels good on the engineering side. That part is in a good rhythm as mentioned. That part feels like, hey there’s a lot of promise here with this. Because right now we have the first half of 2022 planned out, and a lot of this is all spec’d out or mostly spec’d out, and we have a good idea of where we want to go with our product based on our user feedback and the resources that we have with the six week sprint. The business side, not so much. It’s been challenging. I think last time we chatted we weren’t even discussing… I think we were discussing unlocking more on the SEO content side since that seemed like a promising channel. But I don’t think we discussed about hiring someone, right?
Rob Walling:
Hiring someone full time? No.
Tony Chan:
Right. I think we talked about agencies and someone, but we tried to hire someone full time.
Rob Walling:
Oh okay. How’d that go?
Tony Chan:
It went okay. We had to let the person go after 60 days.
Rob Walling:
Oh that’s not good.
Tony Chan:
Yeah. Seemed promising. I think these things are really hard. Nothing to do with him or him personally or his skills. It just ended up not working just to cultural and chemistry fit issues. I just could not get into a good rhythm with him with time zone differences as well. It just didn’t work out for me personally. There’s also the lack of… We thought that not having technical and AWS knowledge would not be as challenging, but it was a lot more challenging than we thought it would be. So overall, the person was decent, but we just could not think a scenario that it could work out after 60 days.
Rob Walling:
So are you going to try to backfill that role?
Tony Chan:
We’ve thought about it. We’re still thinking through it, how that could look. I think we’ve been taking a lot of the lessons learned from that. I have been able to find part-time writers that have knowledge in SEO and also knowledge in AWS that were former engineers that are interested in marketing to help us write content. So that might be a play for us where we just continue hiring part-time contractors. I still have to orchestrate that a bit, but-
Rob Walling:
Yeah, then you’re the manager.
Tony Chan:
I think what’s helped was having this person, and we’re working with this person right now. He knows about SEO. He knows about content marketing. He knows what to expect. He’s very proactive. That has been very helpful for us right now, and I think a lot of that was learning from our attempted hire. Honestly, if we didn’t hire and go through the pain of going through those issues that we ran into, I would not have been able to identify what we need. I would not have been able to identify the person we need to hire, whether part-time or full-time. I think we’ll be a lot sharper when we are ready to hire, when we find that right person to hire. I am on the lookout. I think there is a money issue with that too. These people are not cheap, especially needing the technical chops and the AWS knowledge but also interest in the whole economic pricing of AWS as well.
So it is challenging. I don’t think it’s impossible. There’s probably someone out there. But I do think that the journey of the last two years of SEO content… I know a lot more about SEO content today than I did two years ago. I think we will be sharper of who to hire, the culture fit. And these things are unpredictable. It’s really hard, especially when you hire somebody you just don’t know if it’s going to work out or not.
But I think it’s important to document everything possible. We had a 30, 60, 90-day plan, and it was not going to plan, and it felt like it was not a good fit. So I think having that was very helpful because then we were able to go to the person and have a very fair conversation on why it’s not working out and why things are not going the way they are. It ended up being very mutual on that side. We were very fair with the parting as well. Francois [inaudible 00:12:08]. If it does happen, we want to be fair as possible, like what is the fair thing to do on that side? So I think that was very helpful.
Rob Walling:
It is really hard to hire people when you are not an expert at the thing you’re hiring. It’s the unfortunate reality. I see non-technical single founders trying to hire that first developer, and it’s very tough. And so likewise if you’re trying to hire someone for SEO and a year or two ago you knew a small amount about it, it’s pretty easy to make a misstep there. And the more educated you get… I mean the pattern I see is either the founders learn… Usually the founders learn it. If we look across all the TinySeed companies that you know, most of the founders find one or two marketing approaches that they learn enough to implement and start to get the flywheel going, and then they start replacing themselves, either a piece of it… You know look at ScrapingBee with their content. You look at Ruben with his SEO, like starts off just doing a lot of it yourself and then you replace either pieces of it or you replace the whole mechanism. But by that point, you know it so well that it’s quicker. It’s easier. But it’s a budget thing. Right?
Tony Chan:
Yeah. What’s been helpful, I think there’s a few things that I think you hit the nail on it, is hiring out pieces of it. The writing part is a huge part. The strategy part is a huge part. I’m able to, with this new person, at least do 50% of it, hand it off to him, and he seems pretty knowledgeable on how to take it to the rest of the way, which requires me to not have effort other than reviewing his work afterwards as well. So I think that’s been helpful. And I think the other challenging part too is we’re bootstrap startups. And I think with bootstrap startups, time is one of the most important things you can have as a founder, time and the mental energy to work on things that you need to work on. And that generally means that you need to hire people that are mid-level senior. But those mid-level senior people are very expensive as hires.
And junior people, I think they’re… Some TinySeeds founders relish in working with people that are more junior level and they have SOPs and they have processes in place and all that kind of stuff. I don’t think that is something Francois and I are really good at, the process and all that kind of stuff. So I think that’s why Arturo has worked out really well is just the fact that he can contribute individually. We can do what we need on our side and kind of onboard him and he just takes it the rest away. It just makes your life, for me personally as a bootstrap founder, a lot easier because I have other things to focus on. Francois has a million other things. He doesn’t have time to manage someone. So I think that’s challenging too, is the funding part, the money part as a booster founder. It’s like you need to hire these people but you don’t have the money to hire. So I think that’s hard.
Rob Walling:
There’s a reason companies raise money. And I think back in the days when I was bootstrapping, and I still hear people say this, I don’t know what I would spend money on to accelerate growth. And then you had a certain point where you’re like, I know exactly what I would spend money on to accelerate my growth. And usually it’s hiring. Usually it’s hiring a more senior person than you could otherwise afford. When I was starting Drip, didn’t have much money, hired a lot of junior people. And that worked obviously, but it was tough. It was me training most of the people, and it was a lot of management and a lot of my time just maintaining the team. And if I had had a million in VC, venture funding, we would’ve moved way, way faster.
In fact, that’s what I saw once we got acquired, and then the company acquired us had 38 million in funding. I hired 10 engineers in 18 months. It was crazy. Our velocity was… It was so cool. And that’s just a luxury. And so funding is a tool. Funding is not great. It’s not the worst. Bootstrapping is definitely… I think it’s harder than it used to be honest because of the competition. But I also just think in general, it’s a different kind of difficult.
Tony Chan:
Yeah. I liken it to when you’re playing Doom, there’s nightmare mode, where building a startup, like bootstrap startup, is nightmare mode. But you get through it. Is probably one of the most satisfying things you can do, right?
Rob Walling:
Yeah. There’s pros and cons. You retain the control and you retain… And just for people listening, we know you’re mostly bootstrapped. So every once in a while… I know ScrapingBee published a blog post at one point or went to Hacker News and it was like, “How we bootstrapped to a million and a half ARR.” And people were like, “You didn’t bootstrap. You took a small amount of funding.” But look, venture capitalists, if you raise less than a million, you’re bootstrapped.
Tony Chan:
Right. And yes, the hundred thousand plus that we get from TinySeed, it is a significant sum of money, but it is very small compared to raising a million dollars. The magnitude is a lot different. Someone in our mastermind, Newscatcher, they got into YC, raised a bunch of money. And the six figures only got them so far, and they raised a bunch of money, and that’s exactly what they’re doing. They’re enabling the money to hire people to accelerate their growth and magnify their growth as well. The hundred thousand plus, it’s just a drop in a bucket. I think you tell us, try to spend that in a year, right?
Rob Walling:
Yeah.
Tony Chan:
Even less, as much as possible to test out things.
Rob Walling:
That’s one or two hires.
Tony Chan:
Yeah, it goes by fast. So people’s like, “Oh you’re raising money.” No, the order of magnitude’s a lot different.
Rob Walling:
Yeah, and what you can do with it and get accomplished I think is a lot different. Tony, in true TinySeed Tales format, you know that I always have the questions. Things you’re looking forward to, things that you’re dreading, all that stuff. So if we look back at the last eight months since we last spoke, what has been hard? What has been a thing you’ve struggled with?
Tony Chan:
There’s just so many things. I think it’s a combination of just instability. And I think that’s part of being part of a bootstrap startup, instability in terms of hiring, trying to get us into a good rhythm, finding people that can get us into that good rhythm. We mentioned with losing Katia, ramping up Arturo and then hiring Fernando. That’s a lot, that’s a lot of effort mentally as a founder, and we still have to focus on growing the company. On top of that, our revenue has been flat year to date, and I think the last time we chatted we were on the progress towards about half a million in ARR. And I think we were around 450k ARR at the time. But over the past six months we’ve had a lot of churn. It’s the first time in history of CloudForecast, and we lost our third largest customer decided not to renew their subscription.
It’s not like opportunities have not been there, but some of our growth drivers have been enterprise opportunities. And we like those because when you get them on annuals, they’re very solid ROI. They pay back really well, and they help grow your company really fast. Took a few Ls on those enterprise opportunities, did not close. Some were stalled because a lot of our product is selling up, meaning we work with engineering managers and they have to get approval from the whole team. Mentioned we had some churn as well. It was really hard to stomach. And all that, we just had to continue to run the business. Didn’t have a choice. I think that was really challenging because it was a lot of content switching, going from hiring, how do we continue to progress the business forward while we had all this other stuff going on in the background and seeing our revenue relatively flat.
So I think that was really challenging. It was a really rough stretch for us just to sit there and not watch revenue grow, and it was so easy to get discouraged and get into a funk and just give up. And I think that what makes founders like us different is the ability to learn from it, the ability to mentally move on, find people to chat with and people to check in on you to make sure you’re okay. And so much of what we do is such a rollercoaster ride. Literally, it’s setback on setbacks and setbacks. But how you respond and how you forget about it too is really important. And I joke with Tiffany, my wife. She’s a physician and she brings a lot of what she does at work home, and it’s really… She cares a lot, so it’s really hard for her to forget about her day, takes some time for her to unwind.
While she asked me about my day, I’m like, “I don’t know what happened.” Because I think that’s one of my superpowers, to be able to just move on and forget about it and just learn from it and just not let those setback just wear you down. And I think that’s the biggest thing is we were able to weather the storm a bit and just be able to learn from our mistakes, try different things. Not like we sat there and sat on our hands and did nothing. We definitely did some things to try to move the business forward, tested things out, and just try to be positive too. Our goal was we need to unlock Arturo and Fernando faster, and we needed to focus on that. Regardless of what was else happening on there, we needed to do that, and that was the most important priority at that time.
Rob Walling:
Yeah, I mean it sounds rough. Plateaus suck. They really do. And I mean, to your point, so much of being a founder is managing your own psychology. And so I think you’re a good example of that, potentially, of your superpower of being able to forget the day and to have a short memory of this stuff and just keep going.
Tony Chan:
And a lot of that… We kind of listen back to TinySeed Tale. Reflecting that, I felt like the discussion was managing the psychology and be able to chat with you openly about that, I thought that was really cool, was two guys be able to share our emotions as founders, be able to open up in what we deal with. I don’t think we as guys or even founders do enough of that with each other. And I thought that listening back to it, I’m very fortunate to have that space to be able to open up to you about that. And not only with you, there’s other TinySeed founders. I think that’s been the best thing is be able to chat with them openly about things and being very raw about my emotions and doing that because without that you just stew on it, and it just really affects you negatively.
So I think having the outlet and being able to pour out all those things and those struggles were really helpful for us to get through that. And to piggyback on what you asked was like what are we looking forward to? So we are back on the path of getting to half a million AR. The last two months have been really good. We closed two really big new enterprise opportunities on annual deals. One’s going to be our second largest customer, and the other one covered the one that churned. So there are some bright spots, and they’re bright spots that we’re seeing with our engineering team being able to move the way they are and the velocity that we’re seeing.
I joke it’s going to be scary good in terms of what they can turn out, and with Francois planning and that. So I think that’s going to be amazing to see. And we have a few renewals, and customers have already committed increasing their subscription value with us as well. So setbacks, but it’s three steps back. But you got to, as founders, just push one step forward, just keep pushing the boulder up the hill. And I think that is the most challenging thing to do is managing your psychology to do that.
Rob Walling:
Well, that’s good to hear, man. The fact that you’ve… second largest replaced the one that churned. Things may be looking up. And you know what, they’re going to look up just long enough for you to feel like you’re at the top of the rollercoaster and then guess what’s going to happen? Something else will happen unfortunately.
Tony Chan:
Yep, crashing down again. Yeah. And I think the funny thing is we closed a deal recently, and we had a small customer churn literally two minutes later. I’m like, “Come on.” Yeah, can’t catch a break. But I think that’s the beauty of enterprise opportunities is, especially if you can capture them on annual deals, you get that payback all up front, and in a snap of finger you grow your ARR 15, 20%. And whenever I talk to founders who just get started, I highly encourage them, how can you increase your prices? How can you tap into those bigger customers?
Because those enterprise customers, you can charge thousands of dollars, right? Five, six figure in ARR average contract value deals, and they are easy to work with. They provide great feedback to your product, and they pay back really well and they have solid ROI. So I always encourage fellow founders to, if there’s any enterprise opportunity play, go towards that. And it’s a learning opportunity as well. It took us two, three years to get to where we’re at with that area, but it was incremental progress and learning and getting feedback on features that we need to support those types of customers.
Rob Walling:
So I like that. We can kind of end on a high note in that things are looking up and you’re looking forward to the growth and everything. We’ll revisit. We’ll do another where are they now? here in… I don’t know. I bring Craig and Gather on once a year or something. It’s kind of fun just to revisit. But before we wrap this, I wanted to bring up… It’s a bit of a non-sequitur, but about a week ago you sent me a Slack. I would read it on… I don’t read your personal Slacks to other people. But in this case, I would read it. But in this case, it was an audio Slack.
Tony Chan:
It was a pretty late night. I might have been rambling a little bit. I don’t remember. I might have been distraught or something.
Rob Walling:
You sounded fine. But you were saying basically, AWS re:Invent, it’s put on by Amazon. It’s the biggest event, in person event, in your space, I’d imagine. This is the place that if you’re going to sell to folks using AWS and you’re going to do it in person is the place to be. And you had a conundrum. And what was that? What were you asking me about?
Tony Chan:
The conundrum was not going because I get to do whatever I want. I’m a bootstrap startup. I control my own destiny. I don’t need to go. Why do I need to go, right?
Rob Walling:
Because I don’t want to, right?
Tony Chan:
I don’t want to. I don’t feel like it. It did not seem like a good time. It’s a huge conference, like 60,000 people across 10 hotels or something like that. It’s overwhelming. It’s a whole week. So for me, I was thinking like, oh my gosh, this is going to be really tiring. It’s going to be drained. I’m going to be tired. It’s really hard to break through the noise, business-wise. Because the money’s not a problem. The tickets are $1,800. The hotels are 2,500. It’s whatever. However, on the marketing standpoint, if we want to break the noise, we have to spend a lot of money. And I think when Francois and I were talking about it, it’s going to be really hard to justify an ROI from it just because it’s a big conference.
However, I think after much discussion with you and with Francois, like, why don’t you go with no ROI expectations? Just go, have fun, network, make friends. What’s the worst that can happen? The worst is cool, spend a week. But at very minimum, I’ll get to travel, go to Vegas, meet some friends, meet some new people, experience something new, eat good food. And maybe that’s what comes out of it, and that’s okay. And I think just shifting our mentality a little bit on me going and doing things as well that I might not want to do was a big light bulb moment. Because I think a lot of the things I talk about with founders is sometimes you just got to do things you don’t want to do, and you have to do it. And I think you turned that question on me. What was your feedback?
Rob Walling:
It was kind of like I said, “I understand it because I don’t like big events either, and no one’s making you go. But I think you will get benefit from going either, one of you, and probably don’t attend the sessions, but just try to line up meetings, talk to existing customers, try to get intros.” And I talked a little bit about luck surface area, this concept of it just being in the mix, the number of things that I did that just turned into the next thing. I never would was going to be a business to software. And I ran into this guy Jeff Atwood at Joel Spolsky’s event. And I actually literally walked… He was a blogger and I was coding [inaudible 00:28:13] I was so nervous to introduce myself that I walked all the way out to my car. I was going to drive home. And I went, “I need to go back in.”
And I went back in and I was like, “Jeff Atwood, I’m Rob Walling, Software by Rob.” It was the blog at the time. And he was like, “I love that blog.” And we started talking, and he’s like, “You should speak at BOS next week.” And I was like, “What?” And that led to that, which led to… You know what I mean?
Tony Chan:
Yes.
Rob Walling:
On and on. All these dominoes fell from me doing something that I really didn’t want to do. Look, it doesn’t always work out that way. But I find going to in-person events, which is usually something I don’t want to do, even though I host them myself, it’s terrifying. And yet I have a tough time not imagining. You said leave the ROI assumption. Don’t think about it that way. I think there will be ROI by being there.
Tony Chan:
Yeah, I think the part that resonated me the most is the luck surface and a lot of the CloudForecast journey has been increasing luck surface, has been doing things that we don’t want to do and just putting ourselves out there regardless of how challenging it is or how difficult it is or what we want to do. And it has always paid off for us to a point where we’re at now.
And I think when you mention them, shoot, that’s been so much of our story. And me not going would be very hypocritical of me. And it’ll go back to the foundation of how we’ve built the company and what we’ve done, and the three times we interviewed for TinySeed and the multitude of failures of just dragging ourselves to IC interviews and chatting with people and just chatting with people and just trying to find people to talk with and having conversation with them. That’s so much part of our story. And I felt very backwards as I kind of thought through and reflected, like if I don’t do this, that kind of goes back to how we built the company and the foundation of the company. So I’m going now.
Rob Walling:
You’re going solo to Vegas.
Tony Chan:
Yeah, solo questing. And it’s just interesting of just being able to think through it, how quickly it switches. Now I’m excited to go. I can’t wait. Already hitting up some people, no expectations, just going to enjoy myself. There’s some customers that are going to be there, so trying to meet up. And I think you said it best, I don’t have to go to all the things, but just me being there will hopefully increase some luck surface, and we’ll see what comes out of it.
Rob Walling:
That’s a great way to end it, man. I’m glad you’re heading out and hope it’s worthwhile. Folks want to keep up with you. You are on Twitter @Toeknee123. It’s T-O-E, like the body part, K-N-E-E, like the body part, 123, and of course CloudForecast.io if folks want to see what you’re working on. Thanks for coming on.
Tony Chan:
Thanks Rob. Have a great one.
Rob Walling:
Thanks again to Tony for taking the time not only to record with me today, but to do the six recordings for the TinySeed Tale season. And thank you for coming back every week. Whether you’ve been here for six or 600 episodes, I really appreciate you spending time with me each week. And I do not take that for granted. I know that your time is valuable, and I always want to make the best use of it. As a reminder, we have a YouTube channel, microcomf.com/youtube, where you can hear from me even more each week. If 30 minutes in your ears each week isn’t enough, microcomf.com/youtube. Thanks again for hanging out. This is Rob Walling signing off from episode 635.
Episode 634 | Naming Your Startup, Tapping Out a Niche, and Licensing Your IP
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In episode 634, join Rob Walling for another solo adventure where he answers listener questions on topics ranging from naming your startup to initial aha moments and how to know if you have tapped out a specific niche.
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Topics we cover:
- 2:38 – Naming your startup
- 6:02 – How to know if you tapped out a specific niche?
- 13:21 – Did you have an initial aha moment when you felt that this was the winning idea to start up?
- 22:25 – How would you value your time if you have a client that is gonna be competing in the same space?
Links from the Show:
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling:
Bootstrapping cares if you can provide value to a group of businesses or individuals who are willing to pay for it. I view it as something that helped me improve my space in life, but also helped me achieve the freedom, purpose, and relationships that I had been seeking for so many years.
Welcome back to Startups For the Rest of Us. It’s another week, another episode. It’s great to be here with you. Thanks for joining me. I’m going to be diving into listener questions today. I don’t know if it’s the YouTube channel taking off, you should check that out, MicroConf.com/Youtube, or if it’s just our audience and our reach expanding through the podcast and other avenues, but I’m getting a lot of listener questions these days, which is great.
Last week I was in Atlanta for MicroConf Local where I sat down with Ben Chestnut, the co-founder of MailChimp, and did what we call a SaaS snapshot where I asked him questions about starting up, about exiting, things he’s learned in his 22 years as a SaaS entrepreneur, if you can believe it. But while I was there, I took a few minutes to do a little workshopping, customer development, as they say. It was just talking to a few of the founders who had shown up for that event.
I was asking folks about their opinions of specific Startups For the Rest of Us episode formats, ranging from we have interviews, sometimes I do founder hot seats, there’s the Hot Take Tuesdays, there are question and answers, there’s Rob Solo Adventures and all these things, and got some really helpful feedback from folks. What I heard is that the Rob Solo Adventures give people frameworks and thoughts to chew on, and that a lot of the questions wind up relating, even if they’re not specific to that founder or that founder’s niche, the specifics and the thought process of thinking them through is helpful.
It’s good to have questions coming through. As always, audio and video go to the top of the stack. A lot of these are video today and they really did jump the line. I think we have almost 20 text questions now. If you’re going to ask a question and you want it answered really in the next few months, to be honest, you’re going to want to send it as an audio or a video question. You can head to startupsfortherestofus.com, click ask a question in the top nav. I’ll dive into my first question in just a second. It’s getting close. MicroConf Europe in Malta is next week. If you don’t have a ticket, head to MicroConf.com/Europe and pick one up.
Hop on a plane. I’ll see you there. I’m so excited. It’s going to be amazing. Great speaker lineup. Of course, Malta, I’ve never been there and I’m really looking forward to it. With that, let’s dive in to our first listener question.
Matt Laskerback:
Hey, Rob, Matt Laskerback with Player Book. If you remember, I asked a question about building an expensive MVP for my gamification of youth playbooks for sports. We did go ahead and get the expensive MVP going, so we’re going to go ahead and have that in about a month. We’re about halfway done there. I did have a question now that I’m approaching marketing about that. We are at a crossroads with the naming, at least initially, of this product. The initial MVP is built around one position on the sports team that is the most complex and I think will hook the right people to being interested in going through our demo process and feedback loop process.
But in the end, the app is more for everyone on the team, and that might be phase two or phase three. Before we get to that point, we want to solve it for this one very complex position. And from there, we can kind of roll it out to the rest of the positions on the team. The question is, do we name at least for the first year or so while we’re getting the word out, do we name the product to that specific position, because I do think that will be an attention grabber for coaches, or do we name it, like I said, Player Book is my original name because it’s for the whole playbook and the entire team?
Marketing toward the initial batching of customers, which will be the hook initially, or to the eventual product, which will be the whole playbook. See? It’s in my head. Anyway, thanks a lot for everything you do for the community. Love to hear your feedback.
Rob Walling:
Thanks for the question, Matt. I do recall your question from a couple months ago. An answer to your question about naming it for the position that you’re going to start in, kind of naming it for a niche, and then land and expand. Personally, names are pretty hard to change. Names start getting tied to your branding. They start getting mentioned everywhere you go in terms of podcasts. You leave a trail of naming breadcrumbs all over the place. If you answer a question on Quora, if you write a blog post, if you get something quoted or published somewhere, it’s going to say Matt, who’s the founder of Player Book, or Matt, who’s the founder of XYZ Position Book, if you pick the XYZ Position.
Personally, I do not like changing names because it’s almost like a positioning pivot, a branding pivot. It’s pretty dramatic. I know some founders who have done it successfully when they realize that the name that they had chosen was not ideal in the space. One example of this is Ruben Gamez had a company called Docsketch that is now SignWell, and it’s an electronic signature app. At a certain point, there was confusion with Docsketch and people would say Docusketch. It was just becoming a headache and an issue that he saw was only going to get worse. He did go through a complete renaming and frankly, it was a lot of work.
It’s not just taking a domain and redirecting things, but it’s all the other work that goes on behind that. A lot of these questions have and it depends, but in this case, I feel pretty strongly about what I would do in your case, and that’s to go with Player Book.
Dylan Pierce:
Hi, Rob. I’m Dylan Pierce from Cleveland, Ohio, and I’m actually a short time listener. I really wish I would’ve found your podcast sooner. I’ve been doing devtrepreneur stuff on my own for about 10 years, and I feel like I could have accelerated my current growth if I would’ve found your podcast much sooner. I had to go through learning this various stages of app development and business development kind of on my own. My most recent attempt has actually been successful, but I’ve hit a plateau. I have an app on a very large e-commerce platform. The first year, it was doing pretty well. It was growing at a very solid fast rate, and lately, it’s plateaued.
I’m wondering if it’s possible to tell that you’ve tapped out a niche. My apps are a certain niche within this e-commerce platform, and I’m wondering if it’s time for me to try to address this niche in a different e-commerce platform with a different app that provides the same solution, or perhaps just add another solution to the existing e-commerce platform I’m familiar with, target it towards the same-ish audience, but with a slightly different solution. How would you determine that there’s no more customers available for you in a certain integration or platform? How would you handle overcoming this plateau and bring your business to the next level?
Keep up the great work. Love the content. It’s very easy listening and very approachable for someone who knows enough development experience to be dangerous and build their own apps and build a business without losing your mind and taking VC money, which is awesome. Great work.
Rob Walling:
Great question, Dylan. Thanks for sending it in. Short time listener, I love it. I love new listeners finding the pod. I like this question because it is a scenario I have lived a few times, and this actually is one of the reasons that there exists a stairstep method for bootstrapping, right? My concept that I talk about where you start with a step one business, which is often a product that has a lot of platform risk. It’s built on someone else’s platform or app store. You do that so that you don’t need to learn all the ins and outs of marketing and you can make a thousand, $10,000 a month, but this is never going to be seven or eight figure business.
And if it becomes that, it’s actually going to have so much platform risk that you could potentially have the entire company tanked by said platform. Dylan, it sounds to me like you’ve built a pretty amazing step one business, which is great. This is how I started too. This is how I see dozens and dozens of entrepreneurs starting, whether it’s an info product, whether it is a Heroku add-on, a Shopify add-on, a WordPress plugin, something built within an ecosystem where the marketing and distribution is mostly handled for you and you just have to worry about writing some copy, doing some support, and continuing to write code and maybe build out features.
Or even in the best cases, you’ve already built the features and there really is not ongoing development, because those are actually the best kind where there really isn’t development, it’s almost more of an autopilot thing. In your case, you have basically an add-on in a large e-commerce player. I’m going to assume it’s Shopify or Big Commerce, WooCommerce or Magento, right? You’re making a decent chunk of money, I’m going to assume 1,000 to $5,000 a month, which is a great step one business. And that makes your car payment, makes your house payment, and it can help you have revenue to then parlay into the next step one business.
You get to step two, that’s when you have enough money coming in monthly to essentially buy out your time, own all your time, and then you can start working on that more ambitious SaaS product or more recurring revenue where it’s a standalone SaaS with a lot less platform risk. What I’d be looking at in terms of is this a step one business and has it plateaued is do I rank in the top three in the App Store? Do most of my customers come from the platform? If they do, do I rank in the top three for the main term or two? If my churn is basically churning out as many new people as I’m getting and I have plateaued, next question I ask is, is it worth going outside the app store, outside the platform to market it?
Can I do SEO to rank in Google for these terms? Are people searching YouTube? Is it worth running pay-per-click ads? Very likely not. Is it worth running ads on Facebook or Instagram? Probably not. But these are other avenues. I actually spent a ton of time, probably six to nine months, trying to expand a step one business, going through all these steps, trying to SEO, pay-per-click, run display ads, doing all types of things, and I could never get it passed… This was DotNetInvoice. At its peak, it was doing about five grand a month, but realistically, most months it was doing 2,500 to four grand. This was not recurring revenue. It was a one-time download.
This is 2006, and I owned that for four or five years before I gave it to a business partner. But I spent a lot of time trying to expand it until I finally realized, unless we completely rewrite this or really expand into different languages and other things, because it gave away the source code with it, so that was one of the key selling points, unless we have multiple source code versions of this or unless we really do expand it, as is, this product really plateaus. It’s a niche within a niche. That was when I realized, well, I actually want multiple step one businesses and clawed my way up to step two. For you, I’d ask that question, do I already rank high in the store?
Do I need to work on my App Store optimization to rank higher, or can I just expand my top of the funnel by doing the steps I just said with SEO, pay-per-click? Answer to those very well might be no, and that’s okay. And lastly, I’d be looking at how many people am I churning out and do I feel like that number is decent? And if my churn is relatively low, then yeah, I think I’ve topped out. But if my churn is high, like higher than usual, and I don’t know what rules of thumb are in your ecosystem, but that’s where I’d be in a private Slack group or a forum or Quora or whatever to try to find out what is a reasonable churn rate in this space?
And if my rate was high, well, then I’d be looking at, well, do I need to build features? Is there a way to retain people, because that can also help you grow past a plateau. Those are the three things I’d be evaluating and looking at. If I realize this business is about as far as I can take it, I would do exactly as you said, which is to be looking at the other platforms. That’s probably the most likely thing I do. I mean, there are two options here.
You could go to the other three or four popular e-commerce platforms and build your plugin for those, or you can think about, does my plugin do something that could apply not to e-commerce, that could apply to SaaS apps or to creators, info marketers, that can apply to designers, developer, whatever else? You take the problem you’ve already solved and you repurpose that. Personally, I think going to other platforms is easier, simpler. You already know the e-comm space and how it works, and just going into the other platforms I think would be reasonable. Of course, I would be doing competitive analysis there where, does this solution already exist in those spaces, and is there an incumbent winner?
How hard is the App Store optimization to rank in these other App Stores? But I think it makes a lot of sense to want to expand it that way. That’s probably the first thing I’d do. Frankly, back with DotNetInvoice, I didn’t have that option. It wasn’t an App Store play. It was getting SEO, some pay-per-click. Was that it? Oh, and some partnerships and such. I didn’t have an easy out to just say, “Well, I’m just going to build this into another ecosystem.” But that is certainly how I’d be thinking about it. Congratulations, Dylan. As a developer who is learning to market as you are and really is in step one and moving towards step two, it’s a great place to be.
Today, you’ve built something people want and are willing to pay for, which is not easy to do. Congrats! I hope my thoughts were helpful. My third question is a text question. I actually snuck one in here because it’s been sitting in the queue for months. I feel like it’s a quick one. We’ll see, but I kind of like the question. It’s from Jonathan Zeller and he asks, “Did you have that initial aha moment when you felt that this was the winner idea to start up? And to follow up, what inspired you to start that first business?” I’ll start with the second question. I wanted to start the first business because I, A, wanted to make more money.
I was always cash strapped as a kid. Kind of grew up working class, made 4.50 an hour at my first job. Really I was working construction out of college and I just knew that I wasn’t going to work a salary job my whole life. I didn’t feel like that was a way to have enough money that I could really call my own shots. And that was my goal, was to work on stuff I wanted to work on. It was never about the money. It was always about the freedom, the time freedom. That was something I had been striving for literally decades, like since I was a teenager. No, I guess it was in junior high. I would buy candy at Costco and sell it when we go on trips, or I’d sell it at school for 5X markup, 10X markup.
And then in high school and in college, I was writing booklets about comic book collecting and about other topics and I was selling them through classified ads. And then I always had zany startup ideas in the ’90s as the internet was coming up. I could never implement them. I wasn’t in those circles to think that that was a thing that I could do. But once it was the early 2000s and I started actually building websites and I realized, “Oh, I’m going to start a business on the web.” I don’t know what it’s going to be, but I did want that next startup idea because I wanted to make it. I wanted to not have to work for other people.
What I realized is I thought that the Silicon Valley venture capital narrative was the only one, and that’s the thing I kept chasing with these really dumb ideas, including DIG for personal finance. Remember what DIG was? I had one where it was a blog submission service called Flogz with a Z. Yeah, no, you cannot make this stuff up. But these businesses, I was thinking, well, I got to build these things and moonshots and it’s got to be in the popular zeitgeist. Look, DIG is popular and blogs are popular. In the end, the first one that made more than a thousand a month was DotNetInvoice, which I’ve already referenced, and that was actually one that I acquired when it was in the alpha stage in essence.
I was looking through these entrepreneurial boards. Well, it was like web marketing boards, internet marketing boards, and someone said, “We’re looking…” It was two developers. We built this product, DotNetInvoice. It’s written in DotNet. They gave away the source code. You download it and ran it on your own web hosting account, right? Because this is 2005 or ’06. SaaS wasn’t a term or barely. It was Basecamp and MailChimp and I think there was AWeber and Salesforce. I mean, this was it, right? There was literally a handful of companies that was not the movement that it is today. The two developers said, “We built this thing and we have customers,” which was kind of true.
I mean, it was an invoicing software that you have one job and it’s to get math right. There were literally math errors, calculation errors in this software. It was pretty rough. But I saw their posting that said, “We’re looking for a marketer to help us to maybe come team up as a co-founder.” I emailed them and said, “I don’t want to be a co-founder, but I’ll buy this whole thing from you.” They only had a month of PayPal. I mean, there’s so many beginner mistakes I made, but they only had a month of PayPal because blah, blah, blah, reasons, reasons. I was like, oh they’re doing, what was it, seven or $800 a month?
Oh my gosh! I’m going to offer money for this. I did wind up acquiring it, and then the next month it did 150, 200. It turns out they had launched their alpha that month, so they goosed the numbers. It was pretty crappy. But what was interesting is it put my back to the wall, because suddenly, I was out thousands of dollars that I paid for DotNetInvoice and I was kind of terrified that I had. It was all the money I had saved up from consulting on the side. I still had a day job at this point. It really made me realize, I got to clean this up or else I just wasted all this money. I actually in retrospect think that was a really good thing, and it was cool that it was launched.
It already had a marketing website. SEO was weak. They were trying to run some pay-per-click ads. They gave me that account. It was AdWords, and it was selling a few copies a month, I think two to three copies a month for $99 each. It was like two to 300. I started looking at things and I said, “This feels underpriced to me.” I tripled the price, didn’t see a difference in the number of copies sold. Pretty much brought it from that two to 300 up to about almost 900 a month, and then I doubled down on the SEO. This is where I really cut my teeth learning SEO, because I wasn’t just theoretically learning things, I was actually implementing them on a site.
It was a nice advantage that I didn’t have to go through all the headache of building this product. At the time, I was working a day job and then charging $100 an hour as a developer, like a contractor, freelancer consultant, and realizing that I could pay thousands of dollars for this thing that would’ve taken me literally I estimated about 400 hours of time. That would’ve been about 40 grand. This is not the way to think about when you’re acquiring, by the way. These days, you would do it based on revenue and all this other stuff. But it was a nice way to leap ahead 12 to 18 months, because it kind of had weak product market fit, but it had a bunch of infrastructure that had already been put up.
I got to jump ahead and not waste 12 to 18 months by spending thousands of dollars basically to acquire that. I knew it was a winner once I had tripled pricing and it still continued to sell, and then once I was able to goose the SEO, increase the pay-per-click ad budget, and just spend time on it. As I said earlier in this episode, I consistently got it up to between three and 4,000, 2,500 to 4,000 each month. It was a great step one business. I learned a lot. The experience was invaluable. It gave me confidence that I could do it.
I didn’t know anyone else, literally no one else who was doing this, who had a small software product, a lifestyle business, I didn’t even know that term, but it was just a little mini software startup. That was when I thought, “Oh, I’m going to grow this to 10, 20, 50K a month,” or whatever. You already heard how that went, but that wasn’t the point. It gave me the confidence I could do it. It gave me the confidence that it was possible, and it gave me enough revenue. It was more than making our house payment. I started stuffing that in the bank to realize, well, now I can buy the next one, or I can use this to fund my time.
I actually did eventually go down to three days a week, four days a week at the day job, and I was buying out my own time with this revenue from DotNetInvoice. Slowly over time, I was able to cobble together that full-time income. It was absolutely life-changing moment, right? Bootstrapping has been so impactful on my life. I think that’s one of the reasons I started blogging about it around that time, and then started talking about it on this microphone 12 years ago. It’s something that absolutely changes people’s lives, and that’s evidenced by folks who send me emails or who comment on the YouTube channel or who write into this podcast, that bootstrapping can change your life.
Whether it’s changing your life for 2,000, 5,000 a month, or whether it is literally having a 10 million exit, bootstrapping, it’s the great equalizer. You may have seen my tweet where I talked about bootstrapping being permissionless, and that expression was actually coined by Bryce Roberts of Indie.vc, but bootstrapping is permissionless entrepreneurship. You don’t need to go beg an investor to give you money, to beg a book publisher to give you an advance and publish your book and put it in Barnes & Noble. You don’t need to go beg a film studio so that you can get the money to make your film.
When you bootstrap it, you do it yourself. It’s not easy. It’s either nights and weekends, or it’s quitting that day job and watching your burn. It’s relying on a spouse or a significant other to support you while you do it. I mean, there’s a reason that bootstrapping is hard. I will say, it is harder than raising money. It really is. Because once you have funding, you can hire people to do stuff. You worry less about all the nuts and bolts of it. There are pros and cons to all this, but bootstrapping is a hard road, but it’s permissionless. And that is a big reason that I view it as this equalizing force. When I said this was a short question, I guess I was wrong on that. Thanks for the question, Jonathan. Hope that was helpful.
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Arvin:
Hey, Rob, love your show. My question is, I’ve been working on a SaaS that built automations in a CRM targeted towards dentist, and one of my dental clients wants to create his own marketing agency and sell his own CRM. He asked me if he can pay me for the IP. He’s going to do it anyways, create the CRM. He wants to pay me for the automations that I’ve created and the workflows, et cetera. One, how do you value your time considering that I started this four years ago? I started off in Excel and now I’ve looked at different platforms like ActiveCampaign and HubSpot to white label. That’s what I’m basically doing, I’m white labeling that solution and selling it.
The question is one, how would you value your time if you have a client that is going to be competing in the same space? I’m essentially a marketing agency and selling a CRM solution. I’m trying to focus more on the technology side of things and just sell like the CRM solution piece of it and if that’s a good idea at all to sell some of that. It’s constantly evolving. But I think as a form of mutual respect, he wants to give me something for that. I’m not sure what that dollar number is and how to value it. I also understand that the only person I can value my time is me. But any guidance or things to think about would be helpful. Thanks.
Rob Walling:
Thanks for the question, Arvin. This is absolutely the first time I’ve ever had this question or thought about it. It sounds like Arvin has intellectual property in the sense that he’s built workflows and emails that are being sent out for dentists. But Arvin is going to be using standard CRMs like ActiveCampaign, HubSpot, insert name of CRM here versus he has a dental client, it sounds like a dentist that wants to start a CRM, write the code and build a CRM focused on dentists and wants to essentially license the automations and the workflows that Arvin has built, which he could have just stolen them and made you come after him.
That would be a total jerk move, but I’ve seen much worse in the startup space, so I do appreciate the conversation. There are a couple ways to think about this. One is, is it worth partnering up? Does this dentist have deep pockets, and do you want to get into the SaaS space in essence of building out a CRM? It comes with pros and cons, right? Right now you’re an agency or a consultant and you sell your time and you make that cash quick, because you get paid for it on a monthly basis versus building SaaS that’s pushing off a lot of that gain for later. But if you do build that SaaS, then it’s a flywheel. It makes money while you sleep, as they say.”Come, start a SaaS,” they said. “It’ll be fun,” they said. But it does make that ongoing revenue and then the exit multiples are outrageously high. We’ve talked about this, right? I say maybe don’t try to sell right now as the economy is having issues. But normal times, if you build a sass up into the one, 2 million ARR and up, you can sell that let’s say four to six, four to eight revenue multiple, versus the consulting firm, I think you sell it for one times annual revenue. I don’t even know how they sell it. It’s just the multiples are just not there. That’s one way to think about it is, is that something to consider given that you’re both headed in that direction? The answer to that maybe no for a bunch of reasons.
So then we think about, well, you have this intellectual property, and to me, it is a competitive advantage in the short term that you have this. But realistically, other people are going to copy it. There aren’t many workflows I can think of, there aren’t any workflows I can think of in the marketing space that aren’t just duplicated. Once someone sees it working, then they go in and duplicate it. I think in the long term, the value of this IP you’ve created goes down over time. It’s worth less and less over time because other people will implement and copy it and the value for your customers who will hire you are A, that they are hiring you to implement it for them, and B, that you’re going to evolve it over time.
I think that’s something to keep in mind is if I were to license this, I definitely wouldn’t sell it. Because you don’t want to sell the ip, you still want to be able to use it. I would give this other entrepreneur essentially a perpetual license or however you want to phrase that, but it would be a forking of it, meaning as it exists today, here you’re free and clear have a license to it. And then I would go on with my new clients and I would continue to innovate. And then if I were in your shoes, I would continue to innovate on this and it will actually be more and more different from that piece that you’ve licensed as the months go on.
I bet you’ll look back in a year or two and realize, “Oh yeah, there’s a huge difference between where I’m at now and the content that I essentially licensed to this dentist.” From there, it’s a question of, do you go after the one-time cash upfront model of pay me X thousand dollars and you have this perpetual license, or do you look at doing payment over time? That as long as they’re using this IP, you pay me I was going to say a portion of your revenue, but, A, that feels aggressive if he gets big and really crappy for you because he’s not going to make it work. I’m guessing he’s a first time SaaS entrepreneur. As we know, most SaaS apps don’t work, and so that’s not a great way to do it.
But a flat monthly fee is what I was thinking, just a licensing fee, monthly, quarterly, annually, whatever it is, and then they can renew the license as they would like. The thing I would be starting with is when you do a consulting engagement and you charge a client to implement this for them, I would start with, well, how much do I charge for that? How much of that do I think is this IP if I had to create it from scratch? There’s some type of value anchor there. And then realize that he’s not asking for you to do this once or to implement it just for him, he’s asking to be able to essentially license it to then distribute it to anyone who’s on his platform. There has to be a multiple of that.If you charge $10,000 to implement this for a dentist, we think you should charge 30,000, 50,000, 100,000? There’s some number that is higher than 10,000 that I think that this would be worth. And then you look at, do you charge that upfront? Obviously you got to think about there’s going to be legal fees here, so you need to be able to justify paying a lawyer to draft up and review contracts. This is an enterprise sale in essence, and it’s probably going to take a few months, and it’s probably going to take some redlining and going back and forth.
I think the biggest mistake you could make here is undercharging for it, much like most founders do is saying, “Oh yeah, it’s worth five or 10 grand because it’s just some emails,” but it’s like, now you’re going to chew through five grand in legal just to get this deal done. Given your time to close the deal and to make sure everything goes well, this does feel like a 30 to $100,000 thing for me. I’m making up numbers here. I’m not actually into licensing nor selling IP, so I’m not an expert, but I’m trying to ballpark it more like from entrepreneurial first principles and thinking about my founder gut feel of the minimum that I would want to make it worthwhile.
And then you can think about, well, is it an ongoing thing? Is it you have to pay every so often to have this? But then if he’s doing that, he probably expects updates, and then it will not be forked from your existing thing. But if I were paying ongoing, I would want some type of updates and maintenance and that kind of stuff. Here’s the other thing I’d be thinking about and it sounds like he wants to build a SaaS app, but does he also want to do the consulting work?
Because it seems like that’s another avenue to partner up is that you, Arvin, could do the consulting work while he is focused on building this product and also being a dentist I guess, but building the product, which is plenty of work on its own, hiring developers, making product decisions, managing that. I would’ve loved in the early days of Drip to have a consultant like you who is knowledgeable and who I could just have handed a bunch of people onto before I had customer success and before we had a really in-depth team to help folks get onboarded. Hands-off to a paid consultant.
I’m wondering if there’s a partnership available there and if there could be some type of trade or payback over time of if he sends you deals that are worth X, that basically you agree on an ongoing licensing fee. And then if he sends you this many deals, he doesn’t pay you anything because he’s giving you the work that is to you worth a lot of consulting dollars. Those are just a few of the ways that I think about this situation. Thanks for writing in, Arvin. I hope that was helpful. Thanks for sticking around as I went through those questions. We have more questions in the queue for next time. It is great to have you here this week and every week. This is Rob Walling signing off from episode 634.
Bootstrapping cares if you can provide value to a group of businesses or individuals who are willing to pay for it. I view it as something that helped me improve my space in life, but also helped me achieve the freedom, purpose, and relationships that I had been seeking for so many years.
Welcome back to Startups For the Rest of Us. It’s another week, another episode. It’s great to be here with you. Thanks for joining me. I’m going to be diving into listener questions today. I don’t know if it’s the YouTube channel taking off, you should check that out, MicroConf.com/Youtube, or if it’s just our audience and our reach expanding through the podcast and other avenues, but I’m getting a lot of listener questions these days, which is great.
Last week I was in Atlanta for MicroConf Local where I sat down with Ben Chestnut, the co-founder of MailChimp, and did what we call a SaaS snapshot where I asked him questions about starting up, about exiting, things he’s learned in his 22 years as a SaaS entrepreneur, if you can believe it. But while I was there, I took a few minutes to do a little workshopping, customer development, as they say. It was just talking to a few of the founders who had shown up for that event.
I was asking folks about their opinions of specific Startups For the Rest of Us episode formats, ranging from we have interviews, sometimes I do founder hot seats, there’s the Hot Take Tuesdays, there are question and answers, there’s Rob Solo Adventures and all these things, and got some really helpful feedback from folks. What I heard is that the Rob Solo Adventures give people frameworks and thoughts to chew on, and that a lot of the questions wind up relating, even if they’re not specific to that founder or that founder’s niche, the specifics and the thought process of thinking them through is helpful.
It’s good to have questions coming through. As always, audio and video go to the top of the stack. A lot of these are video today and they really did jump the line. I think we have almost 20 text questions now. If you’re going to ask a question and you want it answered really in the next few months, to be honest, you’re going to want to send it as an audio or a video question. You can head to startupsfortherestofus.com, click ask a question in the top nav. I’ll dive into my first question in just a second. It’s getting close. MicroConf Europe in Malta is next week. If you don’t have a ticket, head to MicroConf.com/Europe and pick one up.
Hop on a plane. I’ll see you there. I’m so excited. It’s going to be amazing. Great speaker lineup. Of course, Malta, I’ve never been there and I’m really looking forward to it. With that, let’s dive in to our first listener question.
Matt Laskerback:
Hey, Rob, Matt Laskerback with Player Book. If you remember, I asked a question about building an expensive MVP for my gamification of youth playbooks for sports. We did go ahead and get the expensive MVP going, so we’re going to go ahead and have that in about a month. We’re about halfway done there. I did have a question now that I’m approaching marketing about that. We are at a crossroads with the naming, at least initially, of this product. The initial MVP is built around one position on the sports team that is the most complex and I think will hook the right people to being interested in going through our demo process and feedback loop process.
But in the end, the app is more for everyone on the team, and that might be phase two or phase three. Before we get to that point, we want to solve it for this one very complex position. And from there, we can kind of roll it out to the rest of the positions on the team. The question is, do we name at least for the first year or so while we’re getting the word out, do we name the product to that specific position, because I do think that will be an attention grabber for coaches, or do we name it, like I said, Player Book is my original name because it’s for the whole playbook and the entire team?
Marketing toward the initial batching of customers, which will be the hook initially, or to the eventual product, which will be the whole playbook. See? It’s in my head. Anyway, thanks a lot for everything you do for the community. Love to hear your feedback.
Rob Walling:
Thanks for the question, Matt. I do recall your question from a couple months ago. An answer to your question about naming it for the position that you’re going to start in, kind of naming it for a niche, and then land and expand. Personally, names are pretty hard to change. Names start getting tied to your branding. They start getting mentioned everywhere you go in terms of podcasts. You leave a trail of naming breadcrumbs all over the place. If you answer a question on Quora, if you write a blog post, if you get something quoted or published somewhere, it’s going to say Matt, who’s the founder of Player Book, or Matt, who’s the founder of XYZ Position Book, if you pick the XYZ Position.
Personally, I do not like changing names because it’s almost like a positioning pivot, a branding pivot. It’s pretty dramatic. I know some founders who have done it successfully when they realize that the name that they had chosen was not ideal in the space. One example of this is Ruben Gamez had a company called Docsketch that is now SignWell, and it’s an electronic signature app. At a certain point, there was confusion with Docsketch and people would say Docusketch. It was just becoming a headache and an issue that he saw was only going to get worse. He did go through a complete renaming and frankly, it was a lot of work.
It’s not just taking a domain and redirecting things, but it’s all the other work that goes on behind that. A lot of these questions have and it depends, but in this case, I feel pretty strongly about what I would do in your case, and that’s to go with Player Book.
Dylan Pierce:
Hi, Rob. I’m Dylan Pierce from Cleveland, Ohio, and I’m actually a short time listener. I really wish I would’ve found your podcast sooner. I’ve been doing devtrepreneur stuff on my own for about 10 years, and I feel like I could have accelerated my current growth if I would’ve found your podcast much sooner. I had to go through learning this various stages of app development and business development kind of on my own. My most recent attempt has actually been successful, but I’ve hit a plateau. I have an app on a very large e-commerce platform. The first year, it was doing pretty well. It was growing at a very solid fast rate, and lately, it’s plateaued.
I’m wondering if it’s possible to tell that you’ve tapped out a niche. My apps are a certain niche within this e-commerce platform, and I’m wondering if it’s time for me to try to address this niche in a different e-commerce platform with a different app that provides the same solution, or perhaps just add another solution to the existing e-commerce platform I’m familiar with, target it towards the same-ish audience, but with a slightly different solution. How would you determine that there’s no more customers available for you in a certain integration or platform? How would you handle overcoming this plateau and bring your business to the next level?
Keep up the great work. Love the content. It’s very easy listening and very approachable for someone who knows enough development experience to be dangerous and build their own apps and build a business without losing your mind and taking VC money, which is awesome. Great work.
Rob Walling:
Great question, Dylan. Thanks for sending it in. Short time listener, I love it. I love new listeners finding the pod. I like this question because it is a scenario I have lived a few times, and this actually is one of the reasons that there exists a stairstep method for bootstrapping, right? My concept that I talk about where you start with a step one business, which is often a product that has a lot of platform risk. It’s built on someone else’s platform or app store. You do that so that you don’t need to learn all the ins and outs of marketing and you can make a thousand, $10,000 a month, but this is never going to be seven or eight figure business.
And if it becomes that, it’s actually going to have so much platform risk that you could potentially have the entire company tanked by said platform. Dylan, it sounds to me like you’ve built a pretty amazing step one business, which is great. This is how I started too. This is how I see dozens and dozens of entrepreneurs starting, whether it’s an info product, whether it is a Heroku add-on, a Shopify add-on, a WordPress plugin, something built within an ecosystem where the marketing and distribution is mostly handled for you and you just have to worry about writing some copy, doing some support, and continuing to write code and maybe build out features.
Or even in the best cases, you’ve already built the features and there really is not ongoing development, because those are actually the best kind where there really isn’t development, it’s almost more of an autopilot thing. In your case, you have basically an add-on in a large e-commerce player. I’m going to assume it’s Shopify or Big Commerce, WooCommerce or Magento, right? You’re making a decent chunk of money, I’m going to assume 1,000 to $5,000 a month, which is a great step one business. And that makes your car payment, makes your house payment, and it can help you have revenue to then parlay into the next step one business.
You get to step two, that’s when you have enough money coming in monthly to essentially buy out your time, own all your time, and then you can start working on that more ambitious SaaS product or more recurring revenue where it’s a standalone SaaS with a lot less platform risk. What I’d be looking at in terms of is this a step one business and has it plateaued is do I rank in the top three in the App Store? Do most of my customers come from the platform? If they do, do I rank in the top three for the main term or two? If my churn is basically churning out as many new people as I’m getting and I have plateaued, next question I ask is, is it worth going outside the app store, outside the platform to market it?
Can I do SEO to rank in Google for these terms? Are people searching YouTube? Is it worth running pay-per-click ads? Very likely not. Is it worth running ads on Facebook or Instagram? Probably not. But these are other avenues. I actually spent a ton of time, probably six to nine months, trying to expand a step one business, going through all these steps, trying to SEO, pay-per-click, run display ads, doing all types of things, and I could never get it passed… This was DotNetInvoice. At its peak, it was doing about five grand a month, but realistically, most months it was doing 2,500 to four grand. This was not recurring revenue. It was a one-time download.
This is 2006, and I owned that for four or five years before I gave it to a business partner. But I spent a lot of time trying to expand it until I finally realized, unless we completely rewrite this or really expand into different languages and other things, because it gave away the source code with it, so that was one of the key selling points, unless we have multiple source code versions of this or unless we really do expand it, as is, this product really plateaus. It’s a niche within a niche. That was when I realized, well, I actually want multiple step one businesses and clawed my way up to step two. For you, I’d ask that question, do I already rank high in the store?
Do I need to work on my App Store optimization to rank higher, or can I just expand my top of the funnel by doing the steps I just said with SEO, pay-per-click? Answer to those very well might be no, and that’s okay. And lastly, I’d be looking at how many people am I churning out and do I feel like that number is decent? And if my churn is relatively low, then yeah, I think I’ve topped out. But if my churn is high, like higher than usual, and I don’t know what rules of thumb are in your ecosystem, but that’s where I’d be in a private Slack group or a forum or Quora or whatever to try to find out what is a reasonable churn rate in this space?
And if my rate was high, well, then I’d be looking at, well, do I need to build features? Is there a way to retain people, because that can also help you grow past a plateau. Those are the three things I’d be evaluating and looking at. If I realize this business is about as far as I can take it, I would do exactly as you said, which is to be looking at the other platforms. That’s probably the most likely thing I do. I mean, there are two options here.
You could go to the other three or four popular e-commerce platforms and build your plugin for those, or you can think about, does my plugin do something that could apply not to e-commerce, that could apply to SaaS apps or to creators, info marketers, that can apply to designers, developer, whatever else? You take the problem you’ve already solved and you repurpose that. Personally, I think going to other platforms is easier, simpler. You already know the e-comm space and how it works, and just going into the other platforms I think would be reasonable. Of course, I would be doing competitive analysis there where, does this solution already exist in those spaces, and is there an incumbent winner?
How hard is the App Store optimization to rank in these other App Stores? But I think it makes a lot of sense to want to expand it that way. That’s probably the first thing I’d do. Frankly, back with DotNetInvoice, I didn’t have that option. It wasn’t an App Store play. It was getting SEO, some pay-per-click. Was that it? Oh, and some partnerships and such. I didn’t have an easy out to just say, “Well, I’m just going to build this into another ecosystem.” But that is certainly how I’d be thinking about it. Congratulations, Dylan. As a developer who is learning to market as you are and really is in step one and moving towards step two, it’s a great place to be.
Today, you’ve built something people want and are willing to pay for, which is not easy to do. Congrats! I hope my thoughts were helpful. My third question is a text question. I actually snuck one in here because it’s been sitting in the queue for months. I feel like it’s a quick one. We’ll see, but I kind of like the question. It’s from Jonathan Zeller and he asks, “Did you have that initial aha moment when you felt that this was the winner idea to start up? And to follow up, what inspired you to start that first business?” I’ll start with the second question. I wanted to start the first business because I, A, wanted to make more money.
I was always cash strapped as a kid. Kind of grew up working class, made 4.50 an hour at my first job. Really I was working construction out of college and I just knew that I wasn’t going to work a salary job my whole life. I didn’t feel like that was a way to have enough money that I could really call my own shots. And that was my goal, was to work on stuff I wanted to work on. It was never about the money. It was always about the freedom, the time freedom. That was something I had been striving for literally decades, like since I was a teenager. No, I guess it was in junior high. I would buy candy at Costco and sell it when we go on trips, or I’d sell it at school for 5X markup, 10X markup.
And then in high school and in college, I was writing booklets about comic book collecting and about other topics and I was selling them through classified ads. And then I always had zany startup ideas in the ’90s as the internet was coming up. I could never implement them. I wasn’t in those circles to think that that was a thing that I could do. But once it was the early 2000s and I started actually building websites and I realized, “Oh, I’m going to start a business on the web.” I don’t know what it’s going to be, but I did want that next startup idea because I wanted to make it. I wanted to not have to work for other people.
What I realized is I thought that the Silicon Valley venture capital narrative was the only one, and that’s the thing I kept chasing with these really dumb ideas, including DIG for personal finance. Remember what DIG was? I had one where it was a blog submission service called Flogz with a Z. Yeah, no, you cannot make this stuff up. But these businesses, I was thinking, well, I got to build these things and moonshots and it’s got to be in the popular zeitgeist. Look, DIG is popular and blogs are popular. In the end, the first one that made more than a thousand a month was DotNetInvoice, which I’ve already referenced, and that was actually one that I acquired when it was in the alpha stage in essence.
I was looking through these entrepreneurial boards. Well, it was like web marketing boards, internet marketing boards, and someone said, “We’re looking…” It was two developers. We built this product, DotNetInvoice. It’s written in DotNet. They gave away the source code. You download it and ran it on your own web hosting account, right? Because this is 2005 or ’06. SaaS wasn’t a term or barely. It was Basecamp and MailChimp and I think there was AWeber and Salesforce. I mean, this was it, right? There was literally a handful of companies that was not the movement that it is today. The two developers said, “We built this thing and we have customers,” which was kind of true.
I mean, it was an invoicing software that you have one job and it’s to get math right. There were literally math errors, calculation errors in this software. It was pretty rough. But I saw their posting that said, “We’re looking for a marketer to help us to maybe come team up as a co-founder.” I emailed them and said, “I don’t want to be a co-founder, but I’ll buy this whole thing from you.” They only had a month of PayPal. I mean, there’s so many beginner mistakes I made, but they only had a month of PayPal because blah, blah, blah, reasons, reasons. I was like, oh they’re doing, what was it, seven or $800 a month?
Oh my gosh! I’m going to offer money for this. I did wind up acquiring it, and then the next month it did 150, 200. It turns out they had launched their alpha that month, so they goosed the numbers. It was pretty crappy. But what was interesting is it put my back to the wall, because suddenly, I was out thousands of dollars that I paid for DotNetInvoice and I was kind of terrified that I had. It was all the money I had saved up from consulting on the side. I still had a day job at this point. It really made me realize, I got to clean this up or else I just wasted all this money. I actually in retrospect think that was a really good thing, and it was cool that it was launched.
It already had a marketing website. SEO was weak. They were trying to run some pay-per-click ads. They gave me that account. It was AdWords, and it was selling a few copies a month, I think two to three copies a month for $99 each. It was like two to 300. I started looking at things and I said, “This feels underpriced to me.” I tripled the price, didn’t see a difference in the number of copies sold. Pretty much brought it from that two to 300 up to about almost 900 a month, and then I doubled down on the SEO. This is where I really cut my teeth learning SEO, because I wasn’t just theoretically learning things, I was actually implementing them on a site.
It was a nice advantage that I didn’t have to go through all the headache of building this product. At the time, I was working a day job and then charging $100 an hour as a developer, like a contractor, freelancer consultant, and realizing that I could pay thousands of dollars for this thing that would’ve taken me literally I estimated about 400 hours of time. That would’ve been about 40 grand. This is not the way to think about when you’re acquiring, by the way. These days, you would do it based on revenue and all this other stuff. But it was a nice way to leap ahead 12 to 18 months, because it kind of had weak product market fit, but it had a bunch of infrastructure that had already been put up.
I got to jump ahead and not waste 12 to 18 months by spending thousands of dollars basically to acquire that. I knew it was a winner once I had tripled pricing and it still continued to sell, and then once I was able to goose the SEO, increase the pay-per-click ad budget, and just spend time on it. As I said earlier in this episode, I consistently got it up to between three and 4,000, 2,500 to 4,000 each month. It was a great step one business. I learned a lot. The experience was invaluable. It gave me confidence that I could do it.
I didn’t know anyone else, literally no one else who was doing this, who had a small software product, a lifestyle business, I didn’t even know that term, but it was just a little mini software startup. That was when I thought, “Oh, I’m going to grow this to 10, 20, 50K a month,” or whatever. You already heard how that went, but that wasn’t the point. It gave me the confidence I could do it. It gave me the confidence that it was possible, and it gave me enough revenue. It was more than making our house payment. I started stuffing that in the bank to realize, well, now I can buy the next one, or I can use this to fund my time.
I actually did eventually go down to three days a week, four days a week at the day job, and I was buying out my own time with this revenue from DotNetInvoice. Slowly over time, I was able to cobble together that full-time income. It was absolutely life-changing moment, right? Bootstrapping has been so impactful on my life. I think that’s one of the reasons I started blogging about it around that time, and then started talking about it on this microphone 12 years ago. It’s something that absolutely changes people’s lives, and that’s evidenced by folks who send me emails or who comment on the YouTube channel or who write into this podcast, that bootstrapping can change your life.
Whether it’s changing your life for 2,000, 5,000 a month, or whether it is literally having a 10 million exit, bootstrapping, it’s the great equalizer. You may have seen my tweet where I talked about bootstrapping being permissionless, and that expression was actually coined by Bryce Roberts of Indie.vc, but bootstrapping is permissionless entrepreneurship. You don’t need to go beg an investor to give you money, to beg a book publisher to give you an advance and publish your book and put it in Barnes & Noble. You don’t need to go beg a film studio so that you can get the money to make your film.
When you bootstrap it, you do it yourself. It’s not easy. It’s either nights and weekends, or it’s quitting that day job and watching your burn. It’s relying on a spouse or a significant other to support you while you do it. I mean, there’s a reason that bootstrapping is hard. I will say, it is harder than raising money. It really is. Because once you have funding, you can hire people to do stuff. You worry less about all the nuts and bolts of it. There are pros and cons to all this, but bootstrapping is a hard road, but it’s permissionless. And that is a big reason that I view it as this equalizing force. When I said this was a short question, I guess I was wrong on that. Thanks for the question, Jonathan. Hope that was helpful.
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Arvin:
Hey, Rob, love your show. My question is, I’ve been working on a SaaS that built automations in a CRM targeted towards dentist, and one of my dental clients wants to create his own marketing agency and sell his own CRM. He asked me if he can pay me for the IP. He’s going to do it anyways, create the CRM. He wants to pay me for the automations that I’ve created and the workflows, et cetera. One, how do you value your time considering that I started this four years ago? I started off in Excel and now I’ve looked at different platforms like ActiveCampaign and HubSpot to white label. That’s what I’m basically doing, I’m white labeling that solution and selling it.
The question is one, how would you value your time if you have a client that is going to be competing in the same space? I’m essentially a marketing agency and selling a CRM solution. I’m trying to focus more on the technology side of things and just sell like the CRM solution piece of it and if that’s a good idea at all to sell some of that. It’s constantly evolving. But I think as a form of mutual respect, he wants to give me something for that. I’m not sure what that dollar number is and how to value it. I also understand that the only person I can value my time is me. But any guidance or things to think about would be helpful. Thanks.
Rob Walling:
Thanks for the question, Arvin. This is absolutely the first time I’ve ever had this question or thought about it. It sounds like Arvin has intellectual property in the sense that he’s built workflows and emails that are being sent out for dentists. But Arvin is going to be using standard CRMs like ActiveCampaign, HubSpot, insert name of CRM here versus he has a dental client, it sounds like a dentist that wants to start a CRM, write the code and build a CRM focused on dentists and wants to essentially license the automations and the workflows that Arvin has built, which he could have just stolen them and made you come after him.
That would be a total jerk move, but I’ve seen much worse in the startup space, so I do appreciate the conversation. There are a couple ways to think about this. One is, is it worth partnering up? Does this dentist have deep pockets, and do you want to get into the SaaS space in essence of building out a CRM? It comes with pros and cons, right? Right now you’re an agency or a consultant and you sell your time and you make that cash quick, because you get paid for it on a monthly basis versus building SaaS that’s pushing off a lot of that gain for later. But if you do build that SaaS, then it’s a flywheel. It makes money while you sleep, as they say.”Come, start a SaaS,” they said. “It’ll be fun,” they said. But it does make that ongoing revenue and then the exit multiples are outrageously high. We’ve talked about this, right? I say maybe don’t try to sell right now as the economy is having issues. But normal times, if you build a sass up into the one, 2 million ARR and up, you can sell that let’s say four to six, four to eight revenue multiple, versus the consulting firm, I think you sell it for one times annual revenue. I don’t even know how they sell it. It’s just the multiples are just not there. That’s one way to think about it is, is that something to consider given that you’re both headed in that direction? The answer to that maybe no for a bunch of reasons.
So then we think about, well, you have this intellectual property, and to me, it is a competitive advantage in the short term that you have this. But realistically, other people are going to copy it. There aren’t many workflows I can think of, there aren’t any workflows I can think of in the marketing space that aren’t just duplicated. Once someone sees it working, then they go in and duplicate it. I think in the long term, the value of this IP you’ve created goes down over time. It’s worth less and less over time because other people will implement and copy it and the value for your customers who will hire you are A, that they are hiring you to implement it for them, and B, that you’re going to evolve it over time.
I think that’s something to keep in mind is if I were to license this, I definitely wouldn’t sell it. Because you don’t want to sell the ip, you still want to be able to use it. I would give this other entrepreneur essentially a perpetual license or however you want to phrase that, but it would be a forking of it, meaning as it exists today, here you’re free and clear have a license to it. And then I would go on with my new clients and I would continue to innovate. And then if I were in your shoes, I would continue to innovate on this and it will actually be more and more different from that piece that you’ve licensed as the months go on.
I bet you’ll look back in a year or two and realize, “Oh yeah, there’s a huge difference between where I’m at now and the content that I essentially licensed to this dentist.” From there, it’s a question of, do you go after the one-time cash upfront model of pay me X thousand dollars and you have this perpetual license, or do you look at doing payment over time? That as long as they’re using this IP, you pay me I was going to say a portion of your revenue, but, A, that feels aggressive if he gets big and really crappy for you because he’s not going to make it work. I’m guessing he’s a first time SaaS entrepreneur. As we know, most SaaS apps don’t work, and so that’s not a great way to do it.
But a flat monthly fee is what I was thinking, just a licensing fee, monthly, quarterly, annually, whatever it is, and then they can renew the license as they would like. The thing I would be starting with is when you do a consulting engagement and you charge a client to implement this for them, I would start with, well, how much do I charge for that? How much of that do I think is this IP if I had to create it from scratch? There’s some type of value anchor there. And then realize that he’s not asking for you to do this once or to implement it just for him, he’s asking to be able to essentially license it to then distribute it to anyone who’s on his platform. There has to be a multiple of that.If you charge $10,000 to implement this for a dentist, we think you should charge 30,000, 50,000, 100,000? There’s some number that is higher than 10,000 that I think that this would be worth. And then you look at, do you charge that upfront? Obviously you got to think about there’s going to be legal fees here, so you need to be able to justify paying a lawyer to draft up and review contracts. This is an enterprise sale in essence, and it’s probably going to take a few months, and it’s probably going to take some redlining and going back and forth.
I think the biggest mistake you could make here is undercharging for it, much like most founders do is saying, “Oh yeah, it’s worth five or 10 grand because it’s just some emails,” but it’s like, now you’re going to chew through five grand in legal just to get this deal done. Given your time to close the deal and to make sure everything goes well, this does feel like a 30 to $100,000 thing for me. I’m making up numbers here. I’m not actually into licensing nor selling IP, so I’m not an expert, but I’m trying to ballpark it more like from entrepreneurial first principles and thinking about my founder gut feel of the minimum that I would want to make it worthwhile.
And then you can think about, well, is it an ongoing thing? Is it you have to pay every so often to have this? But then if he’s doing that, he probably expects updates, and then it will not be forked from your existing thing. But if I were paying ongoing, I would want some type of updates and maintenance and that kind of stuff. Here’s the other thing I’d be thinking about and it sounds like he wants to build a SaaS app, but does he also want to do the consulting work?
Because it seems like that’s another avenue to partner up is that you, Arvin, could do the consulting work while he is focused on building this product and also being a dentist I guess, but building the product, which is plenty of work on its own, hiring developers, making product decisions, managing that. I would’ve loved in the early days of Drip to have a consultant like you who is knowledgeable and who I could just have handed a bunch of people onto before I had customer success and before we had a really in-depth team to help folks get onboarded. Hands-off to a paid consultant.
I’m wondering if there’s a partnership available there and if there could be some type of trade or payback over time of if he sends you deals that are worth X, that basically you agree on an ongoing licensing fee. And then if he sends you this many deals, he doesn’t pay you anything because he’s giving you the work that is to you worth a lot of consulting dollars. Those are just a few of the ways that I think about this situation. Thanks for writing in, Arvin. I hope that was helpful. Thanks for sticking around as I went through those questions. We have more questions in the queue for next time. It is great to have you here this week and every week. This is Rob Walling signing off from episode 634.
Episode 633 | Building SaaS Plus a Two-Sided Marketplace
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In episode 633, Rob Walling chats with Matt Wensing, the founder of Summit. Matt is no stranger on the podcast. And we talk about Matt’s decision to change Summit’s brand positioning and the far-reaching impact on his business.
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Topics we cover:
- 2:24 – Matt’s decision to change Summit’s positioning
- 15:22 – Redesigning Summit’s website
- 22:39 – The dangers of scaling up before you have product-market fit
- 24:43 – The response to Summit’s relaunch
- 29:33 – How Summit is evolving into a 2-sided marketplace
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Rob Walling:
Welcome back to Startup For the Rest of Us. I’m your host, Rob Walling, and in this episode I talk with Matt Wensing, the founder of Summit. And we talk about how he’s been grinding away building his SAS and he’s adding a two-sided marketplace. A really interesting conversation, you’re not going to want to miss it.
Before we dive into that, MicroConf Remote is happening today, tomorrow and Thursday. Head to microconfremote.com if you’re interested in early stage B2B SaaS marketing approaches. We’re hearing from Gia Laudi, the co-founder of Forget the Funnel. We’re hearing from the CMO of Crisp, the founder of GymDesk on Capterra marketing, VP of marketing at SparkToro. I’m going to be doing a talk. It’s a fully remote event. It’s very inexpensive. It’s the cheapest MicroConf Remote we’ve ever done. We’re trying to make it accessible to as many people as possible. And even if you miss today, you’ll get the videos when the event ends. That’s microconfremote.com.
And with that, let’s dive into my conversation with Matt. Matt Wensing, thanks for coming back on the show.
Matt Wensing:
Hey Rob, good to see ya.
Rob Walling:
Yeah, it’s great to have you back. Folks know you as the founder of Summit, which is at useSummit.com. And you’ve been on this show, I don’t know, three, four, five times. We answered listener questions at one point, I think. We talked through enterprise sales, I think. And then we’ve talked about your journey with Summit, right? And how the initial launch and then you reroute the code base. And here we are again, this time talking about a pivot. And I’m on your homepage and the H1, gorgeous homepage by the way.
Matt Wensing:
Thank you.
Rob Walling:
Hired an outside designer for this, I assume?
Matt Wensing:
We did. We knew we needed it and they delivered, which was nice.
Rob Walling:
Yeah, it’s really attractive. Folks should check it out. Use Summit.com And the H1 is build low-code simulations, forecasts, calculators, and it’s still flipping. It says Summit Powers engaging apps for sales, marketing and product teams to deploy and use anywhere. Now the last time you were on the show, I would’ve described Summit as a forecasting tool for, originally it was for SaaS, but then I think it just became a forecasting tool for business. So this is different. And today we’re going to talk about how you’ve made that decision, the journey, what is it, 12, 18 month journey to get here. What was the impetus for not continuing to do the forecasting stuff? Was there something about it that wasn’t working?
Matt Wensing:
That’s a great question. Yes, there was. I think the short version is that we found that there’s a learning curve with the product. If you want to become a developer of apps on Summit, let’s put it that way. If you want to build calculators as that, H1 says there’s a learning curve. And that learning curve was really exacerbated by the fact that people would come to it and they would see this canvas, which was something you expect to see in a design tool, but not something you expect to see in a planning tool. You’re thinking, oh, it’s like a spreadsheet. And then we’d always have to explain to people. And no, it has the capabilities of a spreadsheet. But the nice thing is it’s laid out in this infinite canvas, which is much more like a whiteboard. So we used to call it a whiteboard that does math I think was our best positioning statement prior to now.
And through a lot of conversations we found out that while that was resonating with some, and I think that’s always tricky is that it’s working a little bit, that every time we tried to get someone excited to build it, they would get to the end of the road and go, okay, so then? What do I really have? And it’s like, well, you have a canvas, like a blueprint, you can share that with people. And so to answer your question, what wasn’t working was sort what you ended up building with Summit wasn’t a recognizable existing thing, it was a canvas blueprint simulation on a page thing that was completely novel. And there was a lot of chatter about this on startup Twitter, but it’s always this endless debate of a new product category versus an existing product category. And we were basically going down the new product category route, I would say a hundred percent with the whiteboard that does math because that just doesn’t exist yet.
We realized was we need to somehow get people in the position where they can create something that people recognize. And some people wake up every day and go, yeah, I’ve been thinking about that thing. In fact, I’ve tried to build one of those things before and if this is a cheaper, faster, better way to build that thing, then we’d solve that problem. But we just weren’t having enough people wanting to try something new and adopt that learning curve even though the tooling was so powerful. And I think you think about even a new programming language, you could have, I don’t know, go or elixir or pick your language. Sure, some people are going to learn that, but if you really want it to take off, you have to show the world what can you make with this that I need and I can’t make with other things very easily. So we didn’t have that and that was the irritation, if you want to put it that way, the lingering problem weakness that we had in our business was that lack of resonances on what do I make with this?
Rob Walling:
So then folks would be intrigued, they would try it out, they’d never completed the build or they’d complete the build and then be like, I don’t really know how to use this ongoing?
Matt Wensing:
One thing that was really encouraging and remains this way, is that people who want to invest in becoming Summit developers, it’s pretty binary. It’s people either latch onto it and absolutely love it, usually takes a couple breakthroughs, but they go that path. Or like you’re saying, I would say as high as maybe 90 out of a hundred people, they take the two Lego parts. They try to bonk them together, if they don’t click, it’s just not working for them. And that’s the same way as people trying any design tool or new language. It’s just some things fit people’s brains and some things don’t. And hey, if you’re hitting 5% of the population, that’s actually pretty good considering just how unique sometimes these things are in terms of I just don’t think this way. And so they would struggle and they would fall off.
But then what was funny is they still had the original problem. They still wanted to forecast their business, they still wanted to figure out if they needed to raise money, they still wanted to play with their pricing. So all these problems that I just love as a startup founder and it was very frustrating to go, well, wait a minute, why do you have to learn how to develop in this language just to get those benefits? We started to put these two and two together and go, well what if someone who’s already built a thing that does that could just share that with you? Could they publish it somehow and release it to the world and share it with you? Because you want to use something. And this person over here is one of those rare people that built a tool that does that, a thing that does that. How do we connect you two basically became the challenge.
And a lot of people want to read blog post, not everybody wants to write one. And so they were coming to us wanting answers and content and we were sort of telling them, well you got to write your own answers. And we were like, this is silly, why don’t we let people publish their work on Summit? But then it was like, okay, if you publish a Summit thing, what is it? What form does that take?
Rob Walling:
Got it. And that’s when you started calling them calculators because everyone knows what that is. And I’m on your templates page right now and I think most of these you have made you and your team have made to date.
Matt Wensing:
Yep.
Rob Walling:
There’s customer life cycle forecast, there’s a B2B sales pipeline forecast, acquisition and retention calculator, simple monthly savings, ROI calculator. So it’s not all startup based. I mean monthly savings is something a personal finance person would do, but it sounds like the way you’re talking about it, you don’t want to make all of them. You want third party devs to learn the Summit language in essence, which it isn’t technically language, is it? Or is it all drag and drop or do you need some coding ability to be able to build a calculator?
Matt Wensing:
So I would liken it to spreadsheets where you can as point and click, but you do end up typing little snippets of code. So that’s why we call it low code. And it’s a lot of spreadsheet like syntax. And again, that’s where this learning curve comes in and it fits some people’s brains really well. Other people it doesn’t. But it can be learned. And we do have a few hundred folks who know how to make these. We have people publishing new ones, actually we just had our first agency customer learn this as a low code agency tool and say, Oh I get it. We can build calculators for our clients. So that’s starting to happen. But the calculator word just ended up being so critical to solving this puzzle of what is it? And I struggle with that, honestly. That was not an easy word to decide on.
Rob Walling:
Because as you’ve said, you had whiteboard that does math, you had canvas. There are a lot of different words. I struggled with this back in the day. I remember not wanting to be an ESP, right? I was like, well no, drip sends behavioral email at the right time and it does all this stuff. And I kept describing to people what it did. And you know what? I was trying to invent my own category and that was dumb.
Matt Wensing:
Better to be the really amazing player in that calculator space than to invent a new thing, which everybody then has to invest so much mental energy in placing it in their brain. They’re like, but what is it? And I’ll tell you the other thing that bothered me. This sounds like maybe what bothered you too is calculator sounds diminutive, derogatory, just downplays it. You’re like, I mean, come on guys, that’s two plus two. We do so much more than that. And you come to this realization I think when you want to, and that’s sort the other part of this recent journey is when you want to go to market, finally you have to decide, am I going to resonate in appeal to most buyers and bite that bullet if you will, or go cross that step? Or do I want to remain, well this is for the early adopters, the cutting edge. And it’s punk rock, if you’re not into this, it’s not for you.
And it’s like, that’s great, but you’re not going to top the charts. You got to call it something that people wake up in the morning and say, I want that. And that was the proof. So we tried this calculator positioning, I think you probably even saw it in the tiny seed Slack I posted before we went live with the new site. It was like a last minute test, hey, does anybody want a calculator? Just blew up the responses. It was really exciting.
Rob Walling:
I’m going to bring it back to when I finally just threw up my hands and said [censored 00:10:49] it, drip is marketing automation that doesn’t suck. There was just a moment where I was like, I have to do this. Because I didn’t like marketing, I didn’t like the term, it felt so corporate, it felt enterprise. We weren’t that. But I realized we could be that but not be that. We could be the not marketing automation. And so it was a giving into it and it definitely, it allows a customer, you’ve already said it, but when they land on your homepage, they read your H1, what they’re thinking is how does this fit into my mental model of the world and of the software space? How is this something I already know? Is this MailChimp but with xyz? And so if you describe that we’re a whiteboard that does code, it’s like, or whiteboard that does math and we forecast, it’s like okay, I have a whiteboard and you literally have to scroll down.
But if you come to a site that says I can build simulations, I can build calculators, I can build this. At least it gets you part of the way there. You’re right, calculators does not fully describe what these are because when you look at them, they are very powerful. There is a lot more to these your templates than just being a, as you said, nine key calculator or whatever.
Matt Wensing:
Exactly. Exactly. And they’re not even calculators because I don’t think there’s a single one that says punch in nine then plus then three then equals or whatever. Really, they’re programs, they’re apps. But that’s too generic. And I think with positioning you end up having to find a word that gives people just the right grip on what you are and what you aren’t like. I think that was April Dunford’s key insight is that it’s the right words that get people to go, oh, you’re a database for sales and marketing leads as opposed to oh we’re this portal where you do stuff with sales. So calculator ended up being that unlock for us where yes, it’s deme, but based on the responses from all those founders, I think we had a dozen founders respond just to that thread, which I felt like was a pretty good hit rate of people who are even active in the channel on any given 24 hour period, we had 13 people reach out and go, “I’ve always wanted a calculator, we’ve tried to build calculators before. Turns out we needed a JavaScript developer, et cetera, et cetera.” And it was like all this latent frustration and lack of satisfaction with having built calculators in the past. And so we said, okay, this is what they are, this is what we’re going to call them. And then we get people’s attention. And that’s been the hard part.
Rob Walling:
This is actually makes things a lot clearer for me because when you posted in the Slack and you said calculators, I remember thinking, whoa, this is a big pivot. Is this even the same software? Is it the same coat? But now that you tell the story, it’s like, no, it was just what you said. People weren’t quite finishing. There was only a certain subset that want to build it. How can we make it available so as many people want to build can build and as many, many, many more people will want to use them. So therefore we have to make them embeddable and shareable, which is not a… it’s just an extension. This is not a pivot, but it is a repositioning. That’s the big thing, is the words changed.
Matt Wensing:
Definitely. Definitely repositioning. I think the other insight was if you want to make a tool, so ours is a maker tool, you can build stuff with it. If you have a tool like that, they need to be able to make things that people want to use. And that’s extremely reductive. It sounds silly when you say that, but the reason a calculator is exciting is yes, partly because makers recognize those as artifacts that they have seen before and they can make, but then they can also go, oh, I know someone who would use a calculator. They’re never going to want to make one themselves. But if I can make something other people can use, that’s cool. That makes me want to take the time and make the effort to learn how to build these. Because I can think of three people or 20 people or 300 people on my mailing list right now who would want to use a calculator and that’s good for me if they use something I make.
And so that’s the other thing about having a recognizable output is that now the people who make stuff, they know how to communicate that to their audience and say, hey, you think about MicroCon or anything else, hey now we have a runway calculator on our homepage. You can say that as opposed to what would you going to say before? Your audience is going to go, huh? I don’t know if I want to use that. So that was really important to use a term that not only made sense to the makers, but also the makers had confidence that their audiences would also know what the heck that was.
Rob Walling:
Yeah. And so you mentioned to me offline before we started recording that part of this process, this rethinking started when you hired this designer to design this killer homepage. I’ve already said it, but it’s really nice. I’m taken by it. I mean I see a lot of marketing sites for SaaS and there’s something about the fonts and the way it all lines up. I’m sure you paid a pretty penny for it.
Matt Wensing:
Yeah.
Rob Walling:
But what was that and that process you said led you down this thought process of maybe we do need to change things up. You want to tell us that story?
Matt Wensing:
Yeah, that’s worth telling. I’ll condense it down. So we actually thought it was going to be classic project mismanagement or over optimism maybe. We need a new website, we think we know what it’s going to say or we’ll figure it out what it’s going to say part. But the current site, the website we had before was practically fit in one browser window without scrolling. It had 20 words and some testimonials. That was just the movie trailer coming soon poster if you will, with the light saber and the dates. That was pretty much, that was it. It was a promise to ourselves.
And so we basically said, okay, we’re going to figure out the words, but we don’t want to do yet another site using off the shelf components. Pick your framework, let’s hire a designer, or an agency that can help us with that. And they turned out to be, we interviewed a few and they turned out to be strategic in addition to being good at design, which is a pretty rare combination. And the price was, it was pretty, but it wasn’t too many pennies. It was in our budget. We hired them, but they really got us.
And what I mean by that is I don’t think any of us really understood how much work we needed to do to really get that site to where it is today because we did have to go through the repositioning. And I would honestly say, if you can wait to do your new site until after you figure out your new positioning, do it. Because mixing those two together, this is actually the second or third version of a fully designed site that we went through. And the project, instead of taking four weeks took more like six or seven if I remember correctly, maybe eight by the time it was said and done. So it took a lot longer. It was still within budget because it was pretty, I mean it was ridiculous at first.
But the thing they had us do was they really, and I would encourage anyone to do this, just challenged us to tell the story that you need to tell to a before and after day in the life of a prospect. They come to your homepage, what’s the story? What’s the hero’s journey that you want to take that person on from beginning to end? And I’m like, oh, okay. Marketing cliche. But at the same time they talked about jobs to be done, why are they hiring this product? They just asked really deep questions. And I have to say, if they hadn’t done that, it was grueling. I mean, I think 75% of my mental energy and time for all of those weeks went to figuring out the site and the language and the positioning.
So it was a giant investment of company time, but going that deep is, it is the only reason we got the result we did. And so they took us through that journey and they were very patient to adapt as we realized, oh my gosh, they’re calculators, not simulations or whatever that next day’s epiphany was. But they were also good partners in the sense of pushing back on us when we would go a little bit too far and they would say, Okay, now you’re talking about your target audiences, developers in the traditional sense, I don’t think it is. I think low-code developers are probably your audience. Let’s try to stick with that. And so they were that keel right on the ship. But they also forced us to navigate some pretty crazy waters for two months.
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In the scheme of things, two months, I know it feels long while you’re doing it, but it’s pretty substantial result coming out of that time. Sounds very much worth the time investment.
Matt Wensing:
Yeah, it was, full stop. The other thing that we were doing at the time was when we started that journey, we actually didn’t have the published button in the app. So our developer was responding to the positioning changes that we just talked about in real time as well. So we said, and he actually was helping us think up these things like, well what if you could publish it and we put a wizzywig editor or a basic UI on top of it and it was like a calculator interface. This was really a team effort in that sense of going, okay, if we did that, then we would be able to let people publish these and then we could have a page where that thing lived and the user wouldn’t even have to be logged in. It just all came together.
But again, when things come together like that, the biggest risk was spinning and thank goodness was a small team because two months of spinning like that, I told the team this afterwards, if we were a team of 10 or 12 or 20, some people would’ve fallen off the merry go round at some point because they’re like, I just invested a week in this video tutorial. What do you mean we’ve added a publish button? And obviously they’re a good teammate, they’re going to suck it up and delete that, but part of only being able to navigate that in two months and come out the other side with a good result was we’re still a tiny, relatively tiny team working with an agency of two people and we all just had to talk it through and not waste any effort.
And that was probably the hardest part, Rob, was looking at some of our existing help center content, YouTube video tutorials, screenshots, all the marketing work we had out there and going, this isn’t just a change the logo, this is a delete a lot of the existing marketing content. If you do a good job with your positioning, you weave it into everything. And now you’re basically pulling on that route and everything just suddenly looks like, well, on this page you’re talking about building a profit and loss statement. That’s not a calculator. So we have to rewrite that and it guts you in a content sense, which is way more expensive than the… it is actually as expensive as the agency work, right?
Rob Walling:
Yep. And I mean, you called it out, but one of these massive dangers of these companies that raise venture and scale up and hire, you said 10, 20, but I mean think of in the payments space that e-com payments, it’s like bolt and fast were the two and one of them is at like 500 employees or 300 or something and they don’t have product market fit yet. And you have a dozen sales people, like you said, you have videographers, you have people writing marketing copy, you’ve done so much work and then you’re like, oops. Even if it’s not a pivot, if it’s a slight adjustment, it just wastes a lot of people’s time. It wastes a lot of money and it’s why funding should, not funding, but scaling up should come at that point where you have at least that modicum of confidence that you’re not going to have to dramatically change
Matt Wensing:
It. Right. And on that note, yeah, I think there’s virtues in raising some money as we’ve talked about before, but if you spend any amount of money you raise investing in things that you haven’t validated, you run that risk of having to decide to throw it away later. Which means it was a lesson, but it was an expensive lesson. And you’re right. I mean now salespeople, So I did this at my last company. We were were SMB long tail SaaS focus, mostly self-service inbound. And we pivoted completely all into enterprise sales. And we had some sales and marketing folks who either weren’t interested in that transition from a career standpoint because it just wasn’t exciting for them. Or selling a six figure enterprise deal is just a different skill set than answering a phone and selling somebody a $250 a month subscription.
But now you’re talking about lives and careers and that investment is a lot more painful. So yes, absolutely finding that fit first and staying small as you can. I could see a world where you either don’t make it obviously because you throw up your hands or you transition but you don’t fully transition and you half bake the transition and then you’re like, oh, the results aren’t great. Well yeah, that’s because 20% of your team really isn’t bought into it or didn’t update their collateral, so now you’re this two headed thing.
Rob Walling:
And so you’ve made this change and now folks can go and create templates, download calculators, they can embed them, they can do all that stuff. Which your team was kind of, you’re a couple devs, right?
Matt Wensing:
Yep.
Rob Walling:
You plus another. So it designed to be able to just roll with that to basically implement quickly. As you said, you figured out your positioning, you figured out which you want to do, and it’s like, oh [censored 00:25:05], we got to go write some code to now make that possible. But you did and you were doing it in real time. And you essentially, I’ll call it a relaunch, you relaunched it. Was it last month?
Matt Wensing:
Yeah, I think that was the first week of, I want to say August, was that early August?
Rob Walling:
Okay, so almost two months, not quite two months ago. And how is that going? What signals do you have about whether it’s resonating, how it’s resonating and even love to hear an example or two of folks who have either built or embedded the calculator and promoted to their audience or just something, a use case or two.
Matt Wensing:
Yeah. I think what this ultimately did is it enabled us to say yes to people who wanted to use things but not build them. That was the purpose of it. And so the best stories to me are the ones where somebody comes in, they find one of our templates or they find an existing app, they change the labeling, they change the colors, a couple things and then they just take it and they put it into there. So one great story, and this is actually pinned to the top of my Twitter at least today, got this email out of the blue. This person runs a mastermind group, I guess there’s some membership software that they use to run it. And he found a calculator that illustrates sales payback. So if you hire a new salesperson, how long does it take to pay back on that hire? Because you got to think about commissions and contract values.
Like you said, it’s not just a simple nine plus nine calculator. He took it, embedded it on their member’s website. And he just sent me a message, this is the coolest app I’ve used in a very long time. And I knew he didn’t build that. I knew he customized it a tiny bit. I’m not even sure about that, but I knew he went and got the in embed code and he put it on his page and he was super excited. And he might say like, Well, what’s in it for us? The other thing that’s in it for us is we decided the two brand, all of the free embedded calculators as Summit. So now in his membership site or portal, there’s this really awesome calculator doing these complex things with charts and everything else. And then there’s a very clear at the top says sponsored link to get calculators like this, go to Summit.
So he’s happy, he actually has a paid option if he wants to do it, which is to get rid of that sponsorship link and he can pay to white label it. And so he have that model there and it’s just working as designed and none of that friction of him going, well yeah, I’d love to have a calculator that helped our mastermind members understand sales better, but I’m not going to build one and I don’t even want to learn your tool to build one. Even though you’re telling me it’s easier, I just don’t have the time for that.
So that’s an example of just super low friction adoption of the tool that we built. And that’s enough for us to grow this business because we can monetize that. I think that’s the other thing to say. We’re not just saying publish for free, embed for free. There is ways to monetize that, but it skipped the whole challenge of him having to learn how to become a developer. And I think there’s, for every maybe a hundred of him, maybe a thousand of him is probably only one of the other. So now this market size is just much, much bigger. So that’s one example.
We also have content creators that folks know of. So we’re talking to some pretty popular SaaS metrics providers, not surprisingly to say we at blog posts all the time where we’re trying to show people things about retention or acquisition. Can we put a calculator in our blog powered by you guys? And absolutely, here’s one, it’s already built, copy paste. The gears are moving now. And I keep telling the team that we’re building momentum now around this and we had our highest traffic week ever last week including launch weeks. So for founders, you know what I mean? It’s like sure you had that spike but then you’re down into that trough. Being able to look at your floor now as being above where you’ve been before is just things are moving in the right direction. So it’s been good.
And people are also reaching out and saying, I understand now why I might want to learn this and build these because look at this usage. And so that’s nice too. It’s like, oh, can I build these and share them with my audience? Of course, you can do that. So it’s working and the revenue is up. We had our best revenue growth month to date last month, which was awesome. Churn is about the same. So from just a revenue growth standpoint, to see that plateau get broken is another one of those things you look for as a founder because it means something good has changed, right?
Rob Walling:
And on this show I often say don’t bootstrap two-sided marketplaces unless you already have one of the sides. And there’s so many things that you’re not bootstrapping a two-sided marketplace. Number one, you’re not bootstrapping, you have raised funding. And so that gives you some leeway. Number two, you get value out of this. You, being Summit, make money whether there is two sides to the marketplace because right now you’re building calculators and if people want to pay for it. So you are essentially handling the supply side for now. And that’s a nice advantage. If you started Uber, you couldn’t drive all the black cars, you can’t handle all the supply side, you need to… versus now you just need to generate demand and build that supply side until there’s a compelling reason and there’s enough builders that they start to contribute to the supply side. So do you see the bulk of this business or if we group flash forward three years, five years, that the real cash generated in this business is more of a marketplace style or is it still the SaaS? Because right now, so folks know as of this recording, there’s a free trial and then if you want to build stuff, it’s 24 a month, 249 a year. And that’s also if you want to remove branding, I’m assuming off of my calculators that I share and then there’s enterprise beyond that.
Matt Wensing:
Yeah. I see the majority of it coming from the marketplace and the embedding and the sharing. And the reason I say that is I like what you pointed out about Uber, we talk about marketplaces and then we always want rules of thumb. So I agree with you. One of the things we had to wrestle with here before we made this move was what are the ratios, right? If this is Uber, then I need a certain number of drivers for what, couple of riders. It’s a very tough ratio and the other marketplaces might need one to one. Those are hard to cold start or bootstrap because you need almost as many of the hard part as you do of the other, and that’s very difficult to scale. So Uber was, what were they doing? They were subsidizing the heck out of driver earnings just to get drivers out on the road.
Well we realized with this was, wow, if Matt can build a calculator a day, which is the pace I was on a couple weeks ago, and those calculators can each be used by thousands and thousands, potentially hundreds of thousands of people, there’s no limit to the number of people that can use them, then that’s a very high leverage activity. That’s like one Uber driver being able to drive around the state of Florida. That’s absurd. But if that’s the case, then this is easier to cold start and it’s easier to build. And I think looking at those ratios is really important. So I think this ends up looking more like I’m a gamer, at least try to be when I’m relaxing. I think this has more of a gamer marketplace shape to it where for every handful of people who want to be a game developer, you have potentially millions of people who just want to play games. And that’s a lot easier to start then.
And if you’re the publisher, if you’re a Nintendo, you’re like, sure, we can charge a licensing fee to build Nintendo games. But ultimately, and that’s just sort of paying for the software, maybe the customer support and stuff. But ultimately it’s the game players who are going to foot the bill by paying for usage and by looking at ads or whatever the model is. That’s how we’re going to make our money is by selling a million copies of Mario Brothers. But for now, we’ll make Duck Hunt, we’ll make Mario Brothers, we’ll make Zelda, we’ll make the hits and eventually more developers will come online and realize, oh, I want to make something too. So that’s where I see it going. And so we’re focused right now on usage and traffic and the embeds and the sharing because I believe that’s part of the market is much, much, much bigger than I want to be a developer. We need those. But I think even if we had 20, 30, 50 dedicated developers, that’s a lot of the games, if you will, that are getting created monthly or weekly for any platform. Right?
Rob Walling:
And building the demand side is sounds like really what…
Matt Wensing:
Is actually the harder. Yeah, that’s actually the more important part is there’s plenty of talented developers in low code, especially, developers out there. What was important for us was to prove to them that if you build something using this platform, it’s going to get used. It’s like saying, hey come drive for us, they’ll be riders. You need that driver to say, prove it. Prove me that there’s going to be riders because I don’t want to just sit in an empty car and not making any money. So we really need to prove the demand, but I’m for now sort of the driver. We have a couple others, but that can work just given the dynamics.
Rob Walling:
Very cool. Sir, you are Matt Wensing on Twitter. If folks want to follow you and of course usesummit.com if they want to hear about what we’ve been chatting about today. Thanks for joining me.
Matt Wensing:
Thanks Rob, appreciate it.
Rob Walling:
Thanks again to Matt Wensing for joining me this week. And thank you for coming back this week and every week listening to Startups For the Rest of Us. It really means a lot. It means a lot that this audience is growing and it means a lot to me how many folks are mentioning Startups Pod on Twitter, mentioning this in Reddit, Hacker News, all the places. Thank you so much. This is Rob Walling signing off from episode 633.
Welcome back to Startup For the Rest of Us. I’m your host, Rob Walling, and in this episode I talk with Matt Wensing, the founder of Summit. And we talk about how he’s been grinding away building his SAS and he’s adding a two-sided marketplace. A really interesting conversation, you’re not going to want to miss it.
Before we dive into that, MicroConf Remote is happening today, tomorrow and Thursday. Head to microconfremote.com if you’re interested in early stage B2B SaaS marketing approaches. We’re hearing from Gia Laudi, the co-founder of Forget the Funnel. We’re hearing from the CMO of Crisp, the founder of GymDesk on Capterra marketing, VP of marketing at SparkToro. I’m going to be doing a talk. It’s a fully remote event. It’s very inexpensive. It’s the cheapest MicroConf Remote we’ve ever done. We’re trying to make it accessible to as many people as possible. And even if you miss today, you’ll get the videos when the event ends. That’s microconfremote.com.
And with that, let’s dive into my conversation with Matt. Matt Wensing, thanks for coming back on the show.
Matt Wensing:
Hey Rob, good to see ya.
Rob Walling:
Yeah, it’s great to have you back. Folks know you as the founder of Summit, which is at useSummit.com. And you’ve been on this show, I don’t know, three, four, five times. We answered listener questions at one point, I think. We talked through enterprise sales, I think. And then we’ve talked about your journey with Summit, right? And how the initial launch and then you reroute the code base. And here we are again, this time talking about a pivot. And I’m on your homepage and the H1, gorgeous homepage by the way.
Matt Wensing:
Thank you.
Rob Walling:
Hired an outside designer for this, I assume?
Matt Wensing:
We did. We knew we needed it and they delivered, which was nice.
Rob Walling:
Yeah, it’s really attractive. Folks should check it out. Use Summit.com And the H1 is build low-code simulations, forecasts, calculators, and it’s still flipping. It says Summit Powers engaging apps for sales, marketing and product teams to deploy and use anywhere. Now the last time you were on the show, I would’ve described Summit as a forecasting tool for, originally it was for SaaS, but then I think it just became a forecasting tool for business. So this is different. And today we’re going to talk about how you’ve made that decision, the journey, what is it, 12, 18 month journey to get here. What was the impetus for not continuing to do the forecasting stuff? Was there something about it that wasn’t working?
Matt Wensing:
That’s a great question. Yes, there was. I think the short version is that we found that there’s a learning curve with the product. If you want to become a developer of apps on Summit, let’s put it that way. If you want to build calculators as that, H1 says there’s a learning curve. And that learning curve was really exacerbated by the fact that people would come to it and they would see this canvas, which was something you expect to see in a design tool, but not something you expect to see in a planning tool. You’re thinking, oh, it’s like a spreadsheet. And then we’d always have to explain to people. And no, it has the capabilities of a spreadsheet. But the nice thing is it’s laid out in this infinite canvas, which is much more like a whiteboard. So we used to call it a whiteboard that does math I think was our best positioning statement prior to now.
And through a lot of conversations we found out that while that was resonating with some, and I think that’s always tricky is that it’s working a little bit, that every time we tried to get someone excited to build it, they would get to the end of the road and go, okay, so then? What do I really have? And it’s like, well, you have a canvas, like a blueprint, you can share that with people. And so to answer your question, what wasn’t working was sort what you ended up building with Summit wasn’t a recognizable existing thing, it was a canvas blueprint simulation on a page thing that was completely novel. And there was a lot of chatter about this on startup Twitter, but it’s always this endless debate of a new product category versus an existing product category. And we were basically going down the new product category route, I would say a hundred percent with the whiteboard that does math because that just doesn’t exist yet.
We realized was we need to somehow get people in the position where they can create something that people recognize. And some people wake up every day and go, yeah, I’ve been thinking about that thing. In fact, I’ve tried to build one of those things before and if this is a cheaper, faster, better way to build that thing, then we’d solve that problem. But we just weren’t having enough people wanting to try something new and adopt that learning curve even though the tooling was so powerful. And I think you think about even a new programming language, you could have, I don’t know, go or elixir or pick your language. Sure, some people are going to learn that, but if you really want it to take off, you have to show the world what can you make with this that I need and I can’t make with other things very easily. So we didn’t have that and that was the irritation, if you want to put it that way, the lingering problem weakness that we had in our business was that lack of resonances on what do I make with this?
Rob Walling:
So then folks would be intrigued, they would try it out, they’d never completed the build or they’d complete the build and then be like, I don’t really know how to use this ongoing?
Matt Wensing:
One thing that was really encouraging and remains this way, is that people who want to invest in becoming Summit developers, it’s pretty binary. It’s people either latch onto it and absolutely love it, usually takes a couple breakthroughs, but they go that path. Or like you’re saying, I would say as high as maybe 90 out of a hundred people, they take the two Lego parts. They try to bonk them together, if they don’t click, it’s just not working for them. And that’s the same way as people trying any design tool or new language. It’s just some things fit people’s brains and some things don’t. And hey, if you’re hitting 5% of the population, that’s actually pretty good considering just how unique sometimes these things are in terms of I just don’t think this way. And so they would struggle and they would fall off.
But then what was funny is they still had the original problem. They still wanted to forecast their business, they still wanted to figure out if they needed to raise money, they still wanted to play with their pricing. So all these problems that I just love as a startup founder and it was very frustrating to go, well, wait a minute, why do you have to learn how to develop in this language just to get those benefits? We started to put these two and two together and go, well what if someone who’s already built a thing that does that could just share that with you? Could they publish it somehow and release it to the world and share it with you? Because you want to use something. And this person over here is one of those rare people that built a tool that does that, a thing that does that. How do we connect you two basically became the challenge.
And a lot of people want to read blog post, not everybody wants to write one. And so they were coming to us wanting answers and content and we were sort of telling them, well you got to write your own answers. And we were like, this is silly, why don’t we let people publish their work on Summit? But then it was like, okay, if you publish a Summit thing, what is it? What form does that take?
Rob Walling:
Got it. And that’s when you started calling them calculators because everyone knows what that is. And I’m on your templates page right now and I think most of these you have made you and your team have made to date.
Matt Wensing:
Yep.
Rob Walling:
There’s customer life cycle forecast, there’s a B2B sales pipeline forecast, acquisition and retention calculator, simple monthly savings, ROI calculator. So it’s not all startup based. I mean monthly savings is something a personal finance person would do, but it sounds like the way you’re talking about it, you don’t want to make all of them. You want third party devs to learn the Summit language in essence, which it isn’t technically language, is it? Or is it all drag and drop or do you need some coding ability to be able to build a calculator?
Matt Wensing:
So I would liken it to spreadsheets where you can as point and click, but you do end up typing little snippets of code. So that’s why we call it low code. And it’s a lot of spreadsheet like syntax. And again, that’s where this learning curve comes in and it fits some people’s brains really well. Other people it doesn’t. But it can be learned. And we do have a few hundred folks who know how to make these. We have people publishing new ones, actually we just had our first agency customer learn this as a low code agency tool and say, Oh I get it. We can build calculators for our clients. So that’s starting to happen. But the calculator word just ended up being so critical to solving this puzzle of what is it? And I struggle with that, honestly. That was not an easy word to decide on.
Rob Walling:
Because as you’ve said, you had whiteboard that does math, you had canvas. There are a lot of different words. I struggled with this back in the day. I remember not wanting to be an ESP, right? I was like, well no, drip sends behavioral email at the right time and it does all this stuff. And I kept describing to people what it did. And you know what? I was trying to invent my own category and that was dumb.
Matt Wensing:
Better to be the really amazing player in that calculator space than to invent a new thing, which everybody then has to invest so much mental energy in placing it in their brain. They’re like, but what is it? And I’ll tell you the other thing that bothered me. This sounds like maybe what bothered you too is calculator sounds diminutive, derogatory, just downplays it. You’re like, I mean, come on guys, that’s two plus two. We do so much more than that. And you come to this realization I think when you want to, and that’s sort the other part of this recent journey is when you want to go to market, finally you have to decide, am I going to resonate in appeal to most buyers and bite that bullet if you will, or go cross that step? Or do I want to remain, well this is for the early adopters, the cutting edge. And it’s punk rock, if you’re not into this, it’s not for you.
And it’s like, that’s great, but you’re not going to top the charts. You got to call it something that people wake up in the morning and say, I want that. And that was the proof. So we tried this calculator positioning, I think you probably even saw it in the tiny seed Slack I posted before we went live with the new site. It was like a last minute test, hey, does anybody want a calculator? Just blew up the responses. It was really exciting.
Rob Walling:
I’m going to bring it back to when I finally just threw up my hands and said [censored 00:10:49] it, drip is marketing automation that doesn’t suck. There was just a moment where I was like, I have to do this. Because I didn’t like marketing, I didn’t like the term, it felt so corporate, it felt enterprise. We weren’t that. But I realized we could be that but not be that. We could be the not marketing automation. And so it was a giving into it and it definitely, it allows a customer, you’ve already said it, but when they land on your homepage, they read your H1, what they’re thinking is how does this fit into my mental model of the world and of the software space? How is this something I already know? Is this MailChimp but with xyz? And so if you describe that we’re a whiteboard that does code, it’s like, or whiteboard that does math and we forecast, it’s like okay, I have a whiteboard and you literally have to scroll down.
But if you come to a site that says I can build simulations, I can build calculators, I can build this. At least it gets you part of the way there. You’re right, calculators does not fully describe what these are because when you look at them, they are very powerful. There is a lot more to these your templates than just being a, as you said, nine key calculator or whatever.
Matt Wensing:
Exactly. Exactly. And they’re not even calculators because I don’t think there’s a single one that says punch in nine then plus then three then equals or whatever. Really, they’re programs, they’re apps. But that’s too generic. And I think with positioning you end up having to find a word that gives people just the right grip on what you are and what you aren’t like. I think that was April Dunford’s key insight is that it’s the right words that get people to go, oh, you’re a database for sales and marketing leads as opposed to oh we’re this portal where you do stuff with sales. So calculator ended up being that unlock for us where yes, it’s deme, but based on the responses from all those founders, I think we had a dozen founders respond just to that thread, which I felt like was a pretty good hit rate of people who are even active in the channel on any given 24 hour period, we had 13 people reach out and go, “I’ve always wanted a calculator, we’ve tried to build calculators before. Turns out we needed a JavaScript developer, et cetera, et cetera.” And it was like all this latent frustration and lack of satisfaction with having built calculators in the past. And so we said, okay, this is what they are, this is what we’re going to call them. And then we get people’s attention. And that’s been the hard part.
Rob Walling:
This is actually makes things a lot clearer for me because when you posted in the Slack and you said calculators, I remember thinking, whoa, this is a big pivot. Is this even the same software? Is it the same coat? But now that you tell the story, it’s like, no, it was just what you said. People weren’t quite finishing. There was only a certain subset that want to build it. How can we make it available so as many people want to build can build and as many, many, many more people will want to use them. So therefore we have to make them embeddable and shareable, which is not a… it’s just an extension. This is not a pivot, but it is a repositioning. That’s the big thing, is the words changed.
Matt Wensing:
Definitely. Definitely repositioning. I think the other insight was if you want to make a tool, so ours is a maker tool, you can build stuff with it. If you have a tool like that, they need to be able to make things that people want to use. And that’s extremely reductive. It sounds silly when you say that, but the reason a calculator is exciting is yes, partly because makers recognize those as artifacts that they have seen before and they can make, but then they can also go, oh, I know someone who would use a calculator. They’re never going to want to make one themselves. But if I can make something other people can use, that’s cool. That makes me want to take the time and make the effort to learn how to build these. Because I can think of three people or 20 people or 300 people on my mailing list right now who would want to use a calculator and that’s good for me if they use something I make.
And so that’s the other thing about having a recognizable output is that now the people who make stuff, they know how to communicate that to their audience and say, hey, you think about MicroCon or anything else, hey now we have a runway calculator on our homepage. You can say that as opposed to what would you going to say before? Your audience is going to go, huh? I don’t know if I want to use that. So that was really important to use a term that not only made sense to the makers, but also the makers had confidence that their audiences would also know what the heck that was.
Rob Walling:
Yeah. And so you mentioned to me offline before we started recording that part of this process, this rethinking started when you hired this designer to design this killer homepage. I’ve already said it, but it’s really nice. I’m taken by it. I mean I see a lot of marketing sites for SaaS and there’s something about the fonts and the way it all lines up. I’m sure you paid a pretty penny for it.
Matt Wensing:
Yeah.
Rob Walling:
But what was that and that process you said led you down this thought process of maybe we do need to change things up. You want to tell us that story?
Matt Wensing:
Yeah, that’s worth telling. I’ll condense it down. So we actually thought it was going to be classic project mismanagement or over optimism maybe. We need a new website, we think we know what it’s going to say or we’ll figure it out what it’s going to say part. But the current site, the website we had before was practically fit in one browser window without scrolling. It had 20 words and some testimonials. That was just the movie trailer coming soon poster if you will, with the light saber and the dates. That was pretty much, that was it. It was a promise to ourselves.
And so we basically said, okay, we’re going to figure out the words, but we don’t want to do yet another site using off the shelf components. Pick your framework, let’s hire a designer, or an agency that can help us with that. And they turned out to be, we interviewed a few and they turned out to be strategic in addition to being good at design, which is a pretty rare combination. And the price was, it was pretty, but it wasn’t too many pennies. It was in our budget. We hired them, but they really got us.
And what I mean by that is I don’t think any of us really understood how much work we needed to do to really get that site to where it is today because we did have to go through the repositioning. And I would honestly say, if you can wait to do your new site until after you figure out your new positioning, do it. Because mixing those two together, this is actually the second or third version of a fully designed site that we went through. And the project, instead of taking four weeks took more like six or seven if I remember correctly, maybe eight by the time it was said and done. So it took a lot longer. It was still within budget because it was pretty, I mean it was ridiculous at first.
But the thing they had us do was they really, and I would encourage anyone to do this, just challenged us to tell the story that you need to tell to a before and after day in the life of a prospect. They come to your homepage, what’s the story? What’s the hero’s journey that you want to take that person on from beginning to end? And I’m like, oh, okay. Marketing cliche. But at the same time they talked about jobs to be done, why are they hiring this product? They just asked really deep questions. And I have to say, if they hadn’t done that, it was grueling. I mean, I think 75% of my mental energy and time for all of those weeks went to figuring out the site and the language and the positioning.
So it was a giant investment of company time, but going that deep is, it is the only reason we got the result we did. And so they took us through that journey and they were very patient to adapt as we realized, oh my gosh, they’re calculators, not simulations or whatever that next day’s epiphany was. But they were also good partners in the sense of pushing back on us when we would go a little bit too far and they would say, Okay, now you’re talking about your target audiences, developers in the traditional sense, I don’t think it is. I think low-code developers are probably your audience. Let’s try to stick with that. And so they were that keel right on the ship. But they also forced us to navigate some pretty crazy waters for two months.
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In the scheme of things, two months, I know it feels long while you’re doing it, but it’s pretty substantial result coming out of that time. Sounds very much worth the time investment.
Matt Wensing:
Yeah, it was, full stop. The other thing that we were doing at the time was when we started that journey, we actually didn’t have the published button in the app. So our developer was responding to the positioning changes that we just talked about in real time as well. So we said, and he actually was helping us think up these things like, well what if you could publish it and we put a wizzywig editor or a basic UI on top of it and it was like a calculator interface. This was really a team effort in that sense of going, okay, if we did that, then we would be able to let people publish these and then we could have a page where that thing lived and the user wouldn’t even have to be logged in. It just all came together.
But again, when things come together like that, the biggest risk was spinning and thank goodness was a small team because two months of spinning like that, I told the team this afterwards, if we were a team of 10 or 12 or 20, some people would’ve fallen off the merry go round at some point because they’re like, I just invested a week in this video tutorial. What do you mean we’ve added a publish button? And obviously they’re a good teammate, they’re going to suck it up and delete that, but part of only being able to navigate that in two months and come out the other side with a good result was we’re still a tiny, relatively tiny team working with an agency of two people and we all just had to talk it through and not waste any effort.
And that was probably the hardest part, Rob, was looking at some of our existing help center content, YouTube video tutorials, screenshots, all the marketing work we had out there and going, this isn’t just a change the logo, this is a delete a lot of the existing marketing content. If you do a good job with your positioning, you weave it into everything. And now you’re basically pulling on that route and everything just suddenly looks like, well, on this page you’re talking about building a profit and loss statement. That’s not a calculator. So we have to rewrite that and it guts you in a content sense, which is way more expensive than the… it is actually as expensive as the agency work, right?
Rob Walling:
Yep. And I mean, you called it out, but one of these massive dangers of these companies that raise venture and scale up and hire, you said 10, 20, but I mean think of in the payments space that e-com payments, it’s like bolt and fast were the two and one of them is at like 500 employees or 300 or something and they don’t have product market fit yet. And you have a dozen sales people, like you said, you have videographers, you have people writing marketing copy, you’ve done so much work and then you’re like, oops. Even if it’s not a pivot, if it’s a slight adjustment, it just wastes a lot of people’s time. It wastes a lot of money and it’s why funding should, not funding, but scaling up should come at that point where you have at least that modicum of confidence that you’re not going to have to dramatically change
Matt Wensing:
It. Right. And on that note, yeah, I think there’s virtues in raising some money as we’ve talked about before, but if you spend any amount of money you raise investing in things that you haven’t validated, you run that risk of having to decide to throw it away later. Which means it was a lesson, but it was an expensive lesson. And you’re right. I mean now salespeople, So I did this at my last company. We were were SMB long tail SaaS focus, mostly self-service inbound. And we pivoted completely all into enterprise sales. And we had some sales and marketing folks who either weren’t interested in that transition from a career standpoint because it just wasn’t exciting for them. Or selling a six figure enterprise deal is just a different skill set than answering a phone and selling somebody a $250 a month subscription.
But now you’re talking about lives and careers and that investment is a lot more painful. So yes, absolutely finding that fit first and staying small as you can. I could see a world where you either don’t make it obviously because you throw up your hands or you transition but you don’t fully transition and you half bake the transition and then you’re like, oh, the results aren’t great. Well yeah, that’s because 20% of your team really isn’t bought into it or didn’t update their collateral, so now you’re this two headed thing.
Rob Walling:
And so you’ve made this change and now folks can go and create templates, download calculators, they can embed them, they can do all that stuff. Which your team was kind of, you’re a couple devs, right?
Matt Wensing:
Yep.
Rob Walling:
You plus another. So it designed to be able to just roll with that to basically implement quickly. As you said, you figured out your positioning, you figured out which you want to do, and it’s like, oh [censored 00:25:05], we got to go write some code to now make that possible. But you did and you were doing it in real time. And you essentially, I’ll call it a relaunch, you relaunched it. Was it last month?
Matt Wensing:
Yeah, I think that was the first week of, I want to say August, was that early August?
Rob Walling:
Okay, so almost two months, not quite two months ago. And how is that going? What signals do you have about whether it’s resonating, how it’s resonating and even love to hear an example or two of folks who have either built or embedded the calculator and promoted to their audience or just something, a use case or two.
Matt Wensing:
Yeah. I think what this ultimately did is it enabled us to say yes to people who wanted to use things but not build them. That was the purpose of it. And so the best stories to me are the ones where somebody comes in, they find one of our templates or they find an existing app, they change the labeling, they change the colors, a couple things and then they just take it and they put it into there. So one great story, and this is actually pinned to the top of my Twitter at least today, got this email out of the blue. This person runs a mastermind group, I guess there’s some membership software that they use to run it. And he found a calculator that illustrates sales payback. So if you hire a new salesperson, how long does it take to pay back on that hire? Because you got to think about commissions and contract values.
Like you said, it’s not just a simple nine plus nine calculator. He took it, embedded it on their member’s website. And he just sent me a message, this is the coolest app I’ve used in a very long time. And I knew he didn’t build that. I knew he customized it a tiny bit. I’m not even sure about that, but I knew he went and got the in embed code and he put it on his page and he was super excited. And he might say like, Well, what’s in it for us? The other thing that’s in it for us is we decided the two brand, all of the free embedded calculators as Summit. So now in his membership site or portal, there’s this really awesome calculator doing these complex things with charts and everything else. And then there’s a very clear at the top says sponsored link to get calculators like this, go to Summit.
So he’s happy, he actually has a paid option if he wants to do it, which is to get rid of that sponsorship link and he can pay to white label it. And so he have that model there and it’s just working as designed and none of that friction of him going, well yeah, I’d love to have a calculator that helped our mastermind members understand sales better, but I’m not going to build one and I don’t even want to learn your tool to build one. Even though you’re telling me it’s easier, I just don’t have the time for that.
So that’s an example of just super low friction adoption of the tool that we built. And that’s enough for us to grow this business because we can monetize that. I think that’s the other thing to say. We’re not just saying publish for free, embed for free. There is ways to monetize that, but it skipped the whole challenge of him having to learn how to become a developer. And I think there’s, for every maybe a hundred of him, maybe a thousand of him is probably only one of the other. So now this market size is just much, much bigger. So that’s one example.
We also have content creators that folks know of. So we’re talking to some pretty popular SaaS metrics providers, not surprisingly to say we at blog posts all the time where we’re trying to show people things about retention or acquisition. Can we put a calculator in our blog powered by you guys? And absolutely, here’s one, it’s already built, copy paste. The gears are moving now. And I keep telling the team that we’re building momentum now around this and we had our highest traffic week ever last week including launch weeks. So for founders, you know what I mean? It’s like sure you had that spike but then you’re down into that trough. Being able to look at your floor now as being above where you’ve been before is just things are moving in the right direction. So it’s been good.
And people are also reaching out and saying, I understand now why I might want to learn this and build these because look at this usage. And so that’s nice too. It’s like, oh, can I build these and share them with my audience? Of course, you can do that. So it’s working and the revenue is up. We had our best revenue growth month to date last month, which was awesome. Churn is about the same. So from just a revenue growth standpoint, to see that plateau get broken is another one of those things you look for as a founder because it means something good has changed, right?
Rob Walling:
And on this show I often say don’t bootstrap two-sided marketplaces unless you already have one of the sides. And there’s so many things that you’re not bootstrapping a two-sided marketplace. Number one, you’re not bootstrapping, you have raised funding. And so that gives you some leeway. Number two, you get value out of this. You, being Summit, make money whether there is two sides to the marketplace because right now you’re building calculators and if people want to pay for it. So you are essentially handling the supply side for now. And that’s a nice advantage. If you started Uber, you couldn’t drive all the black cars, you can’t handle all the supply side, you need to… versus now you just need to generate demand and build that supply side until there’s a compelling reason and there’s enough builders that they start to contribute to the supply side. So do you see the bulk of this business or if we group flash forward three years, five years, that the real cash generated in this business is more of a marketplace style or is it still the SaaS? Because right now, so folks know as of this recording, there’s a free trial and then if you want to build stuff, it’s 24 a month, 249 a year. And that’s also if you want to remove branding, I’m assuming off of my calculators that I share and then there’s enterprise beyond that.
Matt Wensing:
Yeah. I see the majority of it coming from the marketplace and the embedding and the sharing. And the reason I say that is I like what you pointed out about Uber, we talk about marketplaces and then we always want rules of thumb. So I agree with you. One of the things we had to wrestle with here before we made this move was what are the ratios, right? If this is Uber, then I need a certain number of drivers for what, couple of riders. It’s a very tough ratio and the other marketplaces might need one to one. Those are hard to cold start or bootstrap because you need almost as many of the hard part as you do of the other, and that’s very difficult to scale. So Uber was, what were they doing? They were subsidizing the heck out of driver earnings just to get drivers out on the road.
Well we realized with this was, wow, if Matt can build a calculator a day, which is the pace I was on a couple weeks ago, and those calculators can each be used by thousands and thousands, potentially hundreds of thousands of people, there’s no limit to the number of people that can use them, then that’s a very high leverage activity. That’s like one Uber driver being able to drive around the state of Florida. That’s absurd. But if that’s the case, then this is easier to cold start and it’s easier to build. And I think looking at those ratios is really important. So I think this ends up looking more like I’m a gamer, at least try to be when I’m relaxing. I think this has more of a gamer marketplace shape to it where for every handful of people who want to be a game developer, you have potentially millions of people who just want to play games. And that’s a lot easier to start then.
And if you’re the publisher, if you’re a Nintendo, you’re like, sure, we can charge a licensing fee to build Nintendo games. But ultimately, and that’s just sort of paying for the software, maybe the customer support and stuff. But ultimately it’s the game players who are going to foot the bill by paying for usage and by looking at ads or whatever the model is. That’s how we’re going to make our money is by selling a million copies of Mario Brothers. But for now, we’ll make Duck Hunt, we’ll make Mario Brothers, we’ll make Zelda, we’ll make the hits and eventually more developers will come online and realize, oh, I want to make something too. So that’s where I see it going. And so we’re focused right now on usage and traffic and the embeds and the sharing because I believe that’s part of the market is much, much, much bigger than I want to be a developer. We need those. But I think even if we had 20, 30, 50 dedicated developers, that’s a lot of the games, if you will, that are getting created monthly or weekly for any platform. Right?
Rob Walling:
And building the demand side is sounds like really what…
Matt Wensing:
Is actually the harder. Yeah, that’s actually the more important part is there’s plenty of talented developers in low code, especially, developers out there. What was important for us was to prove to them that if you build something using this platform, it’s going to get used. It’s like saying, hey come drive for us, they’ll be riders. You need that driver to say, prove it. Prove me that there’s going to be riders because I don’t want to just sit in an empty car and not making any money. So we really need to prove the demand, but I’m for now sort of the driver. We have a couple others, but that can work just given the dynamics.
Rob Walling:
Very cool. Sir, you are Matt Wensing on Twitter. If folks want to follow you and of course usesummit.com if they want to hear about what we’ve been chatting about today. Thanks for joining me.
Matt Wensing:
Thanks Rob, appreciate it.
Rob Walling:
Thanks again to Matt Wensing for joining me this week. And thank you for coming back this week and every week listening to Startups For the Rest of Us. It really means a lot. It means a lot that this audience is growing and it means a lot to me how many folks are mentioning Startups Pod on Twitter, mentioning this in Reddit, Hacker News, all the places. Thank you so much. This is Rob Walling signing off from episode 633.
Episode 632 | Hot Take Tuesday: Figma Exit, Side Project Distraction, No Code Dogma
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In episode 632, join Rob Walling and Einar Vollset for Hot Take Tuesday, where they analyze and discuss some of the latest news. Some topics covered include the Figma exit, side project distractions, no-code apps, and more.
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Topics we cover:
- 2:35 – Adobe acquires Figma
- 8:20 – Growing one product to $20k MRR vs. launching a bunch of side projects
- 18:43 – Apple’s anti-ad tracking crackdown
- 25:58 – Building no-code apps
- 31:12 – Watching movies at 1.5x speed
Links from the Show:
- Einar Vollset (@einarvollset) I Twitter
- MicroConf Remote
- Adobe snaps up Figma for $20 billion
- Pierre de Wulf’s tweet
- Apple’s ad business set to boom on the back of its own anti-tracking crackdown
- Hana’s tweet
- Ruben’s tweet
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling: Welcome back to Startups for the Rest of Us. I’m your host, Rob Walling. This week we have a show format that I’ve adapted and renamed. Instead of the News Roundup, this is Hot Take Tuesday. Where Einar Vollset comes on the show, and he and I analyze and discuss the Figma exit. We talk about side project distractions, talk about no code and bootstrapping, and look at a tweet that calls them a bit dogmatic. Similar to our News Roundup episodes, normally it would be Tracy, Einar and myself, but Tracy is out of pocket this week. And of course I give people no notice on these things. It’s not like I book them two weeks out, so I literally, I think I Slacked them yesterday and said, “Can you do this at this time tomorrow?” So I really appreciate Einar taking the time out of his schedule to come on the show.
I hope you enjoy this format that we do every few months. But before we dive into the show, I want to let you know that Microconf Remote is next week and we are diving into early stage marketing. We’re going to be talking about marketing with Capterra through SEO, through conversions versus recessions and more. We have Amanda Natividad, who heads up marketing at SparkToro. We have the founder of Gymdesk who is just crushing it and doing really well with Capterra. We have Whitney Deterding from CoSchedule and Gia Laudi, one of the founders of Forget the Funnel. Dates are November 1st through the 3rd, so it’s next week. It’s 11.00 to 12.30 eastern time. So it’s three days, one and a half hours per day. If you buy a ticket, you get the videos, if you can’t make it. Tickets are at microconfremote.com, very inexpensive. This is the least expensive Microconf Remote we’ve ever done. So if you’re in doubt, check it out. I’ll be there live and I hope to see you there. And with that, let’s dive into the show.
Einar Vollset, welcome back to the show.
Einar Vollset:
Hello, thanks for having me.
Rob Walling:
Yeah, I’m excited to do a rebrand. So I used to call these The Bootstrapper News roundtable and then we started calling them News Roundups and you know what they are now?
Einar Vollset:
What?
Rob Walling:
It’s now called Hot Take Tuesday. You like that?
Einar Vollset:
Nice. Is that why Tracy’s not here? Because she’s like the considered opinion, that whole thing?
Rob Walling:
No, I want Tracy on. For the listeners, it’s normally Einar, Tracy and I that record these. Tracy happens to be at a place with bad wifi this week. And I basically gave y’all what, like 24 hours notice to record this. It’s not like I say, “Oh, in two weeks can you do these things?” I’m like panicked. Oh my gosh, I got to get an episode out. And so set you a time. So we’ll have Tracy back next time, but for now, Hot Take Tuesday.
And so today’s episode begins with you and I talking about Figma. Adobe acquired Figma for 20 billion dollars and I have a TechCrunch story that we’ll link to in the show notes. The TechCrunch headline says, “Taking out one of its biggest rivals in digital design.” So Einer Vollset, people, consumers, people who use Figma are shocked and surprised and angry and other befuddled emotions. This was, I would say potentially an expensive acquisition, question mark. I believe they were at just under 200 million ARR, 20 billion is about a hundred x multiple, so that’s high. So let’s hear it. You think it’s a good move for Figma? Good move for Adobe?
Einar Vollset:
Fantastic move for Adobe, I think. I mean, I’m not really in the Adobe space. My wife sort of uses those tools more than I do. But I think given Figma’s growth and the fact that being online first and collaboration first, I think that really they sort of had to do it. Basically, Adobe’s interesting in the sense that it’s not long ago that they used to be one time purchase and they made the move to more of a SaaS model with a recurring subscription model. But fundamentally, at least when they started, it was just like, “Oh yeah, now you can download the latest version but you got to pay us a subscription.” Which is very different to a product that’s like first design, online in a collaborative type environment. Yeah, I mean honestly I wouldn’t be very surprised if this doesn’t run up against some antitrust type issues, some competition issues.
I don’t think it’s a done deal by any stretch of the imagination, but I think for Adobe it was an expensive deal. Particularly when there’s like a hundred times ARR is one thing, which obviously it’s going to be crazy now you’d meet founders with a 500,000 ARR business thinking they can sell it for a hundred times. When you combine the fact that they, that’s the payment they did. But also on top of that, their stock price I think declined at about $20 billion as well on the announcement. So effectively it cost them double that. So yeah, I think expensive but potentially long-term value add for Adobe is sort of my view on it.
Rob Walling:
Yeah, the way I was looking at it was at this point with a company, an acquisition like this, multiples are, it’s after the fact, like that’s we’d back how, they didn’t go in and say, “We we want a hundred x for this company.” That’s not what happened. They basically said, “We don’t want to sell.” And Figma basically said, “There’s no one else to buy. We are the one.” So people know that I collect signatures and I collect comic books, right? Old silver age comic books and there will be a comic where there’s 50 graded at this level, but then at the highest level there’s only one. There’s like one in a 9.8. And you know what? That person can ask whatever they want for it, even if it’s a stupid price, if there’s demand for it. And that’s what it is. Figma’s one of a kind, there’s no competitor that’s close to them.
Einar Vollset:
We see that on the M&A side too. Basically if you’re not for sale, that’s the reason why you get super high valuations. People sometimes say, “Oh, we’ve gotten in the past, we’ve gotten offers that are sort of not a hundred x but in the 20 x ARR offers.” And sometimes I talk to founders who are like, “Yeah, we’d love to get that.” I’m like, “Yeah, but you’re not going to get that if you’re obviously for sale.” Get that if you’re not for sale and basically the buyer has to convince you that no, no, there will be a price. Everything has a price. And I think that’s pretty much what happened here.
Rob Walling:
And if there is a replacement, if there is a close second, if there is a slight commoditization, ‘Oh I can just buy this other company here and get 80% of the value.” You don’t get a hundred x. You have to have such a, and have a trajectory. I mean 200 million, I think they were going to double, almost double again next year in terms of revenue. They’re already on pace to do that.
Einar Vollset:
Yeah, one of the most interesting things about Figma actually is how slow they grew. Initially they were for years and years, they were doing the opposite of what you and me usually recommend people doing and start selling. They weren’t really charging anything. And then the first year, I don’t know if we have the growth chart up here in terms of how they grew, but it took them years to get anywhere near interesting. And then it just took off I guess. It just sort of compounded after the fact.
Rob Walling:
Yeah, they really did. They spent a couple years building and then they weren’t charging at all. I think they had a free plan. They had no paid plan for a while. And it’s interesting. Yeah, this is similar. WhatsApp sold for, wasn’t it WhatsApp that sold to Facebook for 20 billion?
Einar Vollset:
Was it that much?
Rob Walling:
Yeah, I think so. And then Instagram sold for a billion, which at the time they were like six employees, seven employees and then they had no revenue or barely any. These are shocking numbers until you realize, “No Instagram wasn’t going to eat Facebook.” It’s not like If Zuckerberg had not done that and they weren’t for sale and there was no repla…right. This is why you see this.
Einar Vollset:
Yeah, yeah.
Rob Walling:
The other thing is, the day it sold there was so many people upset on Twitter, is where I saw it like, “Oh no, Figma sold, Adobe’s going to ruin it.” And they may or may not. But what do you think? I tweeted they’ve raised two, three hundred million dollars from venture capitalists. What do you think is going to happen? You know what I mean? What is the outcome here?
Einar Vollset:
Yeah, no I think it’s an interesting take. It’s a little bit, the path for them was either to be acquired by someone like Adobe or go public and it’s, “Is the company fundamentally different in how it serves its customer because it’s public versus acquired by a larger competitor?” I don’t know. I don’t really think so.
Rob Walling:
Let’s jump to our second story. This is a tweet and obviously we’re going to link up everything we mention, all the tweets and everything will be in the show notes. You can go to startupsfortherestofus.com to check those out. Or if you want our show notes in your inbox every week, sign up for the email list. You get a couple free guides, you get the 5:00 PM framework that I introduced last week. Einar has been copiously taking notes on the 5:00 PM framework and using it to evaluate.
Einar Vollset:
You introduced the 5:00 PM what?
Rob Walling:
Exactly. So this next story. See people, do you see what I have to deal with? This guy he’s my co-founder, this is rough, wish me luck. All right, so Pierre de Wulf tweeted, Pierre de Wulf is the co-founder of ScrapingBee, a company that has been very public about their bootstrap growth. And last I heard they were talking about what 1.5 million ARR and continuing to grow. They are a TinySeed company so you and I know their revenue. But Pierre’s tweet says, “The energy and efforts to grow 5 products to $1k MRR are far greater than the ones needed to grow one product to $20-$30k MRR. Building new things is fun, but there’s a significant opportunity cost to that…”, and he puts it in bold, FUN, “…to that FUN. Just something to keep in mind.”
So Einar, indie hackers, I don’t just mean indie hackers on the website. I mean developers who go launch side projects, often they’ll do a side project a month and they’ll throw a lot of things at the wall to see what sticks. And there are even some models in this space, some folks you can follow that are balancing all these products and it sounds really exciting and interesting. But I personally I agree with Pierre, I’ve been in this situation and I can tell my story a little later. First I want to kick it to you. What are your thoughts on this? Do you think Pierre’s right and if you do think he’s right, why do people do it then if it’s not essentially the most efficient or smart way to do it?
Einar Vollset:
I think it’s right. I agree with Pierre. I definitely think there’s a cost there, but I think people do it because you get a bump kind of, when you launch a lot of the time to get something and it’s like, “Oh yeah, it’s, there’s a novelty factor.” Maybe you are excited about it as the founder, so you’re maybe pushing a little harder than you might do for something that’s been launched for a while. So you get a little bit of a bump and you get a little bit of that endorphin kick. And I think that’s what people chase a lot of the time. They come around, they’re like, “Yeah, it’s a great thing, now I’m making 500,000 bucks a month, 1500, something like that.” And the reality is post launch, they have to, usually they have to deal with the reality of figuring out whether they actually have product market fit and they’re staring down the barrel of, in some cases pretty significant churn because of your product market fit.
People might sign up for it because you have a big following on Twitter or whatever, try it out. But they’re not going to keep giving you money six months after you launched if they’re not using it, if that’s not something that you’d want. So I think a lot of the time with the launch you get kind of an artificial high when it comes from usage and income and I think people want to, they like that piece and they go after it. And really the hard part is sort of the trough of sorrow as it were where it’s like okay, “We have this product now and now you have this mountain of work to figure out in terms of what features to build, what marketing channels to experiment with, systems that you have to build.” You talk about the difference between building a product, building a business.
I feel like a lot of the people who are doing these multiple products, they just like building products and the newer the better and the shinier the better and they just churn them out. The second step becomes, “How do you build a repeatable sales channel? How do you build out a team? How do you do all that stuff?” And that’s not necessarily as sexy and certainly it’s not as easy to talk about and get kudos on Twitter about. I think that’s definitely true.
I do think there are players who do this well, but they tend to be bigger holding companies. So, our friends at Tiny Capital, they do this pretty well. But if you look at their approach, they very much, like they hire a CEO, incentivize them and let them run it completely. It’s not like Andrew Wilkinson is sitting around and making CEO level tactical decisions for every single business that Tiny holds, that doesn’t work. And I think that becomes the problem because you as an indie hacker or whatever, you don’t have the resources to hire someone for all your five or six or 10 or 12 products. You end up just scatterbraining across them.
Rob Walling:
That’s an interesting take and I like your insight. I hadn’t thought about the dopamine rush over the launch. It had occurred to me that building a product is different than building a business, is different than building a company. And the latter two for makers are a lot less fun, I would say. And so I think that as long as you know what you’re getting into, know the drawbacks to it. Don’t kid yourself that if you are launching a bunch of products and usually the justification I hear is, “Well it’s validated because I scratched my own itch,” or “I’m throwing a bunch of things at the wall and see what sticks.” It’s like nothing’s probably going to stick because you’re going to throw a bunch of things, unless you get really, really lucky. You need to put more into it than just building and launching on Product Hunt and Reddit and Hacker News.
But here’s the thing, it depends on what you’re optimizing for, right? Back in the day, let’s say 12, 13, 14 years ago, I was optimizing for lifestyle. I literally worked about a 10 to 12 hour work week. We had our youngest was little, newborn actually. I was not optimizing for growth, I was not optimizing for even money beyond what I, I was making 150K or something from products. And I lived in Fresno, California and it was totally doable and that was okay. And I actually owned several products. I didn’t build them all though, see I acquired a bunch of them for 12 to 18 months net profit, you know what I mean? I’d pay five grand for something and then invest SEO and I’d be doing three grand a month later. So I was doing a very mini, I was doing a tiny, tiny capital. A mini, tiny capital. But it was more about just optimizing for lifestyle.
And then what happened is I got really bored in all honesty I, working 12 hours a week just isn’t, it isn’t all it’s cracked up to be y’all? And that was when I was like, “I want to do something more ambitious.” I had already had SaaS experience but I wanted to double down on it. So I think the idea of working on a bunch of small things is fine, just know what that means. Know that you are very, very likely limiting your growth and if you are an ambitious bootstrapper and you do want to build that 20 to 30K thing a month or you want to build the hundred to 500K a month thing, you’re not going to do it by launching a bunch of small products.
Einar Vollset:
That’s true. If I’m play devil’s advocate a bit on the other side, it’s like there is value in knowing when to quit something that isn’t working. That is the other side of this. It’s like, “Yes, it’s important that you have some staying power I think, and that you can really give something a real go, but if something isn’t working, it isn’t working.” So that is the opposite side of it. It’s almost like you have two extremes. You have some people who are doggedly chasing this thing that just isn’t working for whatever reason. And then you have the people who are just like, “I’m just going to spin up a new thing once a month.” And I think both of those two are probably a mistake.
Rob Walling:
Right. I think that earlier stage entrepreneurs often miss the signals that they would need to pivot the opportunity. Oftentimes shutting it down completely is not the right call. I’ll bring up Drip is an example. We launched, I had a decent audience, I had people watching, signing up. I had 3,500 on an email launch list. I was marketing the hell out of it. And that thing straight plateaued, between about eight K, nine K, just plateaued. Churn was through the roof right. So it was a limited feature set, it was just email capture and email sequences that’s it. Didn’t send broadcast, was not an ASP and it didn’t have product market fit. So one could say, “Well we built something, it didn’t work, let’s shut it down.” And especially if you didn’t have my reach at the time, it would’ve plateaued at one or two K. The only reason it got to eight or 10 is, it was a bunch of people that were following me, that signed up for it and tried it out.
And so it was a challenging road and you can listen to it on startupstoriespodcast.com. It was grueling. That’s like a 90 minute audio documentary recorded over the course of nine months or a year or something. But it was a search for product market fit and it was like “Slight pivot, we’re going to add this, we’re going to figure out this, we’re going to try this.” And getting there was a hard road to your point earlier, it was not sexy, it was not fun. But then once we hit it, it was like, “Ah, that’s it. Right?” And then all the numbers go in the right direction.
Einar Vollset:
Just another point. I think that also applies more than people think. So I think of particularly bootstrappers, and think they have this view that like, “As long as once I get to that stage I’m golden. I figured out that thing. I’m out of that slump at 5, 2, 3, 4, 5,000. Now it’s just gravy train until IPO.” And we’re seeing that with TinySeed companies too. It’s like that’s just not the case. Very often you need to, not necessarily do a pivot, but you need to do something new or different in order to really take that next sort of step and really take the step up.
So because we often see not so much, it’s something in TinySeed but outside it too, is people get to 500,000 or a million or 2 million and then that’s sort of the limit of where they are with their current growth channels, their current product, their current pricing. It really needs to take that next step. And some founders just aren’t up to it. They’re just not able to, either they’re just so married to this thing that was working really super well and they’re sort of sticking their head in the sand about the fact that, okay now we need to do something else, we need to add another step up. Otherwise this is where we’re going to be stuck forever.
Rob Walling:
That’s right. I mean you hit that plateau, you either need another growth channel. If you need more top of funnel, you need another growth channel. If your churn is really high, you need to, well we don’t, part of going to fit with this segment so we need to add another element.
Einar Vollset:
Or maybe you’re serving SMBs and now you need to figure out, “How do we really sell this to enterprises at a much higher price point?” I think that’s part, ties back to the Figma story earlier. It took them a while to figure out, “How do we stop selling to individual creators and actually start selling to enterprises?” And they wouldn’t have gotten the 200 million ARR without doing that change. And I’m sure at the time that was tricky, but it wasn’t just more the same.
Rob Walling:
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Our next story is about Apple’s ad business and AdGuard.com posits that Apple’s ad business is set to boom on the back of its own anti tracking crackdown. So if you’ll recall, Apple basically has the do not track me between apps prompt now when you open apps, so when I opened a Facebook and it asked me I said, “No don’t track me.” I don’t want Facebook and Insta and all these places tracking me. And so it really limits the reach that the third parties like Facebook and Google and anybody else who makes a ton of money from their tracking pixel and their cookies. And now again AdGuard.com is positing that Apple is stepping in and they are essentially, that they are able to track you the whole time you’re on the phone because it’s their phone. And so I’m curious to you Einar, folks may not know, but you have a lot of background in the mobile and the iOS ecosystem going back more than a decade. And so what are your thoughts on this in terms of A, do you think this is true? Do you think this is fair? What’s happening here?
Einar Vollset:
Yes, I definitely think it’s true. I went through YC with an iPhone app basically, me and my co-founder did. So I have experience dealing with the Apple app store and their policies and how they think about things. There’s no doubt in my mind that Apple is working on some kind of ad play. They’ve been doing ads and I don’t know if you remember this and maybe if you weren’t an Apple developer at the time you were, they had I ad I think it was launched in 2000 early 2010, somewhere.
Rob Walling:
Old school, look at you with the deep cut.
Einar Vollset:
Yeah. And it was basically this, basically it was a program, it was like native ads before native ads were a thing. It was basically a programming element inside of native apps that you could build in and roll it out. I think they shut it down after four or five years because they couldn’t make it work. But it shows that they’ve been thinking about ads and how to differentiate and really they’ve been interested in that space for years and years. And I think it makes total sense. I mean knowing Apple, are they the kind of company that could totally decide to crap all over Facebook and Google’s ad revenues and then claim that, “Yeah this is for the good of the customer,” and then come up with some sort of their own version of this but somehow frame that as we’re doing it for the good of the consumer? We’d be basically creating a walled garden of ads that protects the customer, protects the consumer, but really does kind of the same thing inside their own walled garden. A hundred percent.
Definitely, that’s definitely what Apple could do for sure. If you just look at, I’m sure we’re going to link to the thing, you were saying about the sort of log on prompt, do not track you. I think it’s telling, actually looking at the differences between the two prompts. If you’re a third party app, you have to, otherwise your app won’t get approved. You have to pop up this prompt that says allow so and so app to track your activity across other companies, apps and websites. Your data will be used to deliver personalized ads to you, ask app not to track or allow versus their own prompt is personalized ads. Personalized ads in Apple apps such as the app store and Apple News, help you discover apps, products and services that are relevant to you. We protect your privacy by using device generated blah blah blah blah blah.
And they trump this, turn on personalized ads or turn off personalized ads. What would you like, sir, would you like us to turn on personalized ads for you? That just shows what they’re thinking, that and if you also look at it like, someone else said on Twitter, I think it was Zach Coelius. He was like, “I think Apple’s building basically A, a DSPs like a demand site platform, which is what they claim not to have done for years and years. And the biggest play too is going after TV ads.” And I think that’ll definitely happen. I use Apple TV along with Roku and all the other crap, but Apple TV to watch baseball basically most of the time. And the ads that I get for that are atrocious.
Compared to Google search ads, even just banners and stuff. The stuff that I’m getting obviously because it’s just blasted whatever, what audience watchers baseball. The ads I get are inevitably either political ads for local whatever things in San Francisco, even though I don’t get to vote in the city of San Francisco about the things that measures that they’re pushing for or it’s some sort of a horrible disease that I should call my doctor about, related to do you have heart disease and carpal tunnel? Then it’s this thing, call your doctor about provoke or invoke or something random.
So if you just think about how bad that experience is. Do I think Apple’s thinking about building something in that space inside their walled gardens? 110%, I’d be shocked, shocked if they don’t and they’re going to frame it as consumer protection. They’re going to for say, this is what they did. I mean this is what they do with the Apple store. How come there’s now multiple app stores? What an insane system to basically say, “Oh yeah, yeah Apple, you have to go through and we have to approve everything and you have to use our payment processor.” That tells you how Apple thinks about this stuff outside. A hundred percent they’re going to do, 110%. I guarantee it, guarantee it.
Rob Walling:
And I wonder if you think there’ll be antitrust suits that come out of it or, and not by the government per se, but by, I wonder if Facebook’s going to sue for anti competition at some point. Facebook and Google get together, right?
Einar Vollset:
Could be, if you think about it. When you and me were coming up, everybody was like, “Oh, Microsoft, they’re the big bad wolf,” and they got in all sorts of trouble about distributing Microsoft Excel with their operating system. But this is the same if nothing worse. So I’m expecting, depending on how the political winds are blowing, I think they’ll get some sort of a blowback on this at some point. But I still think they’ll do it because the money is too great.
Rob Walling:
Yeah. That’s the thing.
Einar Vollset:
Why not? Because if you think about it, I started using the iPhone just when it came out and it was like tiny, tiny market share. Apple, the iPhone’s Apple market share in the US is 50% now. Basically it’s not infeasible if Facebook keeps cratering and going after this VR dream, fever dream of Zuckerberg, that basically there are more people that are using Apple devices day to day than use Facebook. And so if that’s the case, then of course they’re going to try to capture the kind of income, the kind of revenue stream that Facebook are, have been monopolizing for so long. So yeah, I know I’m for a hundred percent sure. They’d be idiots not to, they’d do great.
Rob Walling:
It’s interesting to me because I’ve always thought of Facebook and Google as ad companies and therefore I share as little as I possibly can with them. And I’ve always thought of Apple as more of the, well we sell the devices, that’s how we make our money. You can be less concerned about it. It’s not like I’ve given them anything except for my credit card number and to buy things. But this will change my, once someone’s running ads, it changes my perception because I know.
Einar Vollset:
But they’re not ads, it’s just they’re personalized ads.
Rob Walling:
That’s the perfect way.
Einar Vollset:
We protect your privacy Rob.
Rob Walling:
To end this story.
Einar Vollset:
We will look after you. Don’t worry Rob.
Rob Walling:
Our next topic is a tweet from Hana Mohan. Hana spoke at MicroConf Europe a couple years ago, an accomplished entrepreneur who has both bootstrapped a company to exit and has now raised venture funding for her second company. This one’s about no code in bootstrapping. She says, “You don’t need to code in 2022, but you should at least try. The #nocode community has a problem with its rhetoric, like the bootstrapping community. I am not writing either of them off. I am grateful I bootstrapped early on. The ‘way of life’ dogma is a serious problem. Like bootstrapping, no-code is empowering. With it, a domain expert with a day job and no technical experience can build products, without having to hire a team of developers. For them, it’s the only game in town. For others, it’s better framed as a gateway drug. And then she goes on to say, “If you’re a young person in entrepreneurship, make your first dollar but then at least learn some coding.”
It’s a whole thread. People can go read it obviously we’ll link it up. I very much share this sentiment where I think no-code’s amazing and no-code is a tool. And much like a hammer and a screwdriver are tools, they are perfectly suitable for the thing that they get done, right. But I don’t reach for my hammer every time that I want to put a screw in or do something else. So before I weigh in Einar, bootstrapping no-code, are they a bit too religious? Oh that’s actually, there’s another tweet and it’s from Jovan. I can’t, I don’t know how to pronounce his last name. But his was interesting because it lines up with something that happened a couple months ago when Ruben founder of SignWell was on this podcast and we were talking about how no code is awesome and it’s really good for this, but there’s some brittleness issue, there’s some scaling issues and that you know, can’t build a full blown ESP with it, right. There limitations is what we were pointing out.
It was based on a listener question. And sure enough people jumped on it and on Twitter were just like, “No, that’s not true.” But then when I asked for examples of actual full blown SaaS apps like, “That’s not what it’s made for.” So Jovan’s tweet says, “No-code is a religion at this point. Look, I do software development for a living. I prefer to do things in the most convenient way possible, but not a single web app I built in the last two years could be built with no-code.” Why do people get angry when I tell them this? You know what I mean? It’s like, “Well yeah, you shouldn’t get mad.” It’s just.
Einar Vollset:
It’s religion? It just is religion. I’ve always felt that, and actually this funnily enough ties back to the whole Apple story because this is to me, feels like a rehash of some of the conversations we had early 2010s. But because people were going to do this similar thing, it wasn’t no-code, but it was cross platform. You don’t have to build any native apps. It was just put together using this framework and then it compiles down to iOS and Androids and Microsoft phone or whatever they call it. And it was going to be totally, it was going to be the nirvana. And inevitably ended up happening was that people would launch something, it be kind of like 70, 60, 70 percent of the way there and then they’d be like, Oh crap, yeah, we need to support this one native thing. And so they would add a little bit of native integration into this other cross platform thing and then they had to do keep two different code bases now because it’s now a cross platform but with compiled specific compiled things.
It quickly diverged into like, “Well, now you have two code bases again, it’s just that you feel good about the fact that it’s, 50% of it is written in HTML instead of Objective C or Java, whatever.” So I’m very much in the same way. The fact of the matter is for me is like no-code is just code. It’s just a paradigm to build apps. And are there environments, coding environments that are more or less visual? Yes. No-code is, to me is basically a visual programming tool mostly. But I feel like the religion that some people feel around this is completely misplaced, right? I’m like, “These are fine for prototyping tools, they’re fine for what they are.” But this notion that this is a revolution in programming, this doesn’t make any sense to me whatsoever.
Rob Walling:
And you know I’m a fan of bootstrapping. Anyone listening to this knows that. I bootstrapped all my software companies and I’m a fan of no-code within MicroConf and TinySeed, we have at least three and there might be four, full blown line of business apps built on Airtable. And I think we have one on Bubble now maybe. I’m all in on no-code. If we can write less code and it works, let’s do that. If I can have a producer, Ron, who is not a developer, go build an entire system to manage the production of our audio and video in three weeks, two weeks, three weeks and it works. And nobody has to write code and I don’t have to hire a developer and I don’t have to spin up a server. Oh my gosh. So I’m a fan of these things, but the dogma of them, it gets a little old.
I’m saying code or no-code, I am bootstrapping. I think I kind of want to wrap up my thoughts with this tweet that I sent out a couple days ago. It says, “Never raise funding is like saying never use a hammer. Funding is a tool, sometimes it’s the right tool and other times it’s not.” And that’s how I feel about no-code and about bootstrapping and about a lot, frankly about a lot of things in the tech world that folks, I think crypto and Web3 and blockchain are really interesting technologies, but they’re not everything. We’re not going to reinvent everything on them, but they are tools and they can be used for certain things that I think are useful.
Our last topic of the day also comes from Twitter. This is where Hot Take Tuesday’s kind of fun because it, what you notice is when we’re doing quote unquote news roundtables, one of the stories, two of the stories is news because so little news is fully relevant to this podcast audience in a way. I don’t want to cover Facebook’s antitrust, blah blah, blah. Who cares in terms of bootstrapping, in terms of mostly bootstrapping, growing SaaS versus is it feels like things that are on Twitter are so much more relevant.
Much like this last story, which I’ll admit is just a bit of a fun one. But basically Ruben Gamez, I mentioned him earlier, he was considering watching 2001 A Space Odyssey. I said I wouldn’t do it, watch a YouTube summary of it instead, it’s very slow. And then he said, “As slow as the new Blade Runner.” And I said, “I like the new Blade Runner.” But I’ll admit we watched it at 1.5 x speed and the torrent of comments lol. Ruben says, “Lol, wtf, are you doing watching movies at 1.5 x?” You chimed in with, “What?” People, there was a gif that Christoph Engelhardt put. [inaudible 00:32:10] It was just this boom. I took a lot of heat for that, a lot. So I want you to tell me what’s wrong?
Einar Vollset:
I think you’re a psychopath that’s what’s wrong.
Rob Walling:
With watching something slow?
Einar Vollset:
What the hell? It’s like a psychopath test.
Rob Walling:
The movie’s too slow. It’s a good movie but it’s too slow. So you speed it up and make it a good movie.
Einar Vollset:
I’m like one and a half through the conversation too to [inaudible 00:32:34] this other thing.
Rob Walling:
But that’s how I listen to all podcasts.
Einar Vollset:
Oh no Romeo, my Romeo, no. Doesn’t it sound really funny? One and a half X or are you so used to with podcasts listening to one and a half X, you think people don’t have this normal life.
Rob Walling:
Yeah. Haven’t you, have you never listened to an audiobook or a podcast at 1.5 x?
Einar Vollset:
No, never at 1.5 x. 1.2 yes. That’s a tall order.
Rob Walling:
1.2 holy.
Einar Vollset:
1.2
Rob Walling:
Sir, come on.
Einar Vollset:
1.5? It sounds like a cartoon when you get past one and a half. [inaudible 00:33:07]
Rob Walling:
Every audio book. The audio books I listen to, since they record them really slow, I listen between two and 2.5 x and podcasts because it’s natural speaking speed, usually 1.5. And so yeah, 1.5 sounds perfect to me. Sounds natural.
Einar Vollset:
No, sounds insane. You’re insane. Your brain is like.
Rob Walling:
Superior. I am homo superius?
Einar Vollset:
It would be great if you go through, in a conference setting and just speed people up.
Rob Walling:
That’d be so nice. I could talk to more people. That’d be amazing. Here’s the problem with my argument. I’m going to just fully mea culpa. Podcasts and audiobooks, they’re mostly informational, right. Versus a film that is art. Someone commented, “I can’t wait to meet Christopher Nolan and tell him I watched all, your movies are great. I watched them all at two x.” I was like, “Yeah, it’s like bringing A.1. to a really expensive steakhouse. Bringing your soy sauce to the $400 a plate Japanese sushi place.” I’m still going to do it.
Einar Vollset:
Oh my God. Yeah, no, honestly I was, it’s rare that a tweet genuinely shocks me.
Rob Walling:
Especially coming from me, huh?
Einar Vollset:
Yeah. I was like, “What?” Normally your tweets, my tweets as you know, is usually completely all over the place. That’s a disaster. But you always consider a tweet. I was like out of left field, he’s like, “Yeah, Blade Runner one and a half x.”
Rob Walling:
It was only 2049. Well here, and here’s the thing too, I’ll say because we’ll wrap this up soon, but I do not watch every movie or TV show at that. But there are some that are just filmed like I’m watching House of Dragon. It’s a Game of Thrones prequel. It’s a really good show. It is very slow, it’s very considered. There’s these long pauses and honestly.
Einar Vollset:
You should just do what everyone else does man. Don’t watch it at one and a half x. Just sit on your phone and scroll through Twitter while the video’s all in the back.
Rob Walling:
See I have stuff to do. I got things to go, people to see. Anyways, I’ll leave you all with that amazing drop of knowledge. Video speed controller in your Chrome browser if you want to do that. I went so far as to, my boys both want to, they wanted to watch Breaking Bad and I’m like, “I’m not sitting through five seasons of this show.” It’s a good show, but it’s a slow burn and I’ve already seen it and I don’t want to sit. So I said I’ll make you a deal.
The old one, older one is like me and loves watching things 1.5 to two x. Every YouTube video’s at two x, the younger one didn’t want to. And so we tried it at one and a half X and I have to literally, you can’t just, what do you call it, Aircast or air whatever, AirPlay. Because chrome blocks like Netflix and something blocks Netflix and all the services. So I literally have to get an HDMI cable, plug my laptop manually into the side of the computer. It just mirrors it and plug it into the TV. It’s a lot of work to be really weird.
Einar Vollset:
Poor children. That’s what they’re going to be talking to their their therapist about years from now. They’ll be like, “My dad. He [inaudible 00:35:59] all the time. This is why I talk so fast.”
Rob Walling:
My dad was terrible, so traumatizing. On that note, we’re going to wrap up this episode of Hot Take Tuesday. Would love to hear your feedback and input on it. If you are listening, you can tweet me @robwalling where I will be reading your tweets at 1.5 x speed and you can tweet @einarvollset and he will argue back about how the San Francisco giants are really good, even though they’re not doing so well, are they?
Einar Vollset:
Indeed. And thank you so much for having me on.
Rob Walling:
It’s great to have you, man. See you next time.
Einar Vollset:
Ciao.
Rob Walling:
Thanks again to Einar for joining me this week. Hope you enjoyed that show. Thanks for coming back week after week. This podcast audience is growing and it appears to be growing faster than it ever has been in the past, and I really appreciate your support. I see quite a few Reddit threads, Hacker News threads, online discussions where people are giving a shout out to this podcast and to the MicroConf YouTube channel and I really appreciate that because that is the best and easiest way for us to grow. I also appreciate anyone who has left us that five star rating or review. We crossed 1000 reviews. I’m not going to keep pound on this because we hit the goal and it’s just really amazing to have that support from you. So thank you for coming back and listening every week. This is Rob Walling signing off from episode 632.
I hope you enjoy this format that we do every few months. But before we dive into the show, I want to let you know that Microconf Remote is next week and we are diving into early stage marketing. We’re going to be talking about marketing with Capterra through SEO, through conversions versus recessions and more. We have Amanda Natividad, who heads up marketing at SparkToro. We have the founder of Gymdesk who is just crushing it and doing really well with Capterra. We have Whitney Deterding from CoSchedule and Gia Laudi, one of the founders of Forget the Funnel. Dates are November 1st through the 3rd, so it’s next week. It’s 11.00 to 12.30 eastern time. So it’s three days, one and a half hours per day. If you buy a ticket, you get the videos, if you can’t make it. Tickets are at microconfremote.com, very inexpensive. This is the least expensive Microconf Remote we’ve ever done. So if you’re in doubt, check it out. I’ll be there live and I hope to see you there. And with that, let’s dive into the show.
Einar Vollset, welcome back to the show.
Einar Vollset:
Hello, thanks for having me.
Rob Walling:
Yeah, I’m excited to do a rebrand. So I used to call these The Bootstrapper News roundtable and then we started calling them News Roundups and you know what they are now?
Einar Vollset:
What?
Rob Walling:
It’s now called Hot Take Tuesday. You like that?
Einar Vollset:
Nice. Is that why Tracy’s not here? Because she’s like the considered opinion, that whole thing?
Rob Walling:
No, I want Tracy on. For the listeners, it’s normally Einar, Tracy and I that record these. Tracy happens to be at a place with bad wifi this week. And I basically gave y’all what, like 24 hours notice to record this. It’s not like I say, “Oh, in two weeks can you do these things?” I’m like panicked. Oh my gosh, I got to get an episode out. And so set you a time. So we’ll have Tracy back next time, but for now, Hot Take Tuesday.
And so today’s episode begins with you and I talking about Figma. Adobe acquired Figma for 20 billion dollars and I have a TechCrunch story that we’ll link to in the show notes. The TechCrunch headline says, “Taking out one of its biggest rivals in digital design.” So Einer Vollset, people, consumers, people who use Figma are shocked and surprised and angry and other befuddled emotions. This was, I would say potentially an expensive acquisition, question mark. I believe they were at just under 200 million ARR, 20 billion is about a hundred x multiple, so that’s high. So let’s hear it. You think it’s a good move for Figma? Good move for Adobe?
Einar Vollset:
Fantastic move for Adobe, I think. I mean, I’m not really in the Adobe space. My wife sort of uses those tools more than I do. But I think given Figma’s growth and the fact that being online first and collaboration first, I think that really they sort of had to do it. Basically, Adobe’s interesting in the sense that it’s not long ago that they used to be one time purchase and they made the move to more of a SaaS model with a recurring subscription model. But fundamentally, at least when they started, it was just like, “Oh yeah, now you can download the latest version but you got to pay us a subscription.” Which is very different to a product that’s like first design, online in a collaborative type environment. Yeah, I mean honestly I wouldn’t be very surprised if this doesn’t run up against some antitrust type issues, some competition issues.
I don’t think it’s a done deal by any stretch of the imagination, but I think for Adobe it was an expensive deal. Particularly when there’s like a hundred times ARR is one thing, which obviously it’s going to be crazy now you’d meet founders with a 500,000 ARR business thinking they can sell it for a hundred times. When you combine the fact that they, that’s the payment they did. But also on top of that, their stock price I think declined at about $20 billion as well on the announcement. So effectively it cost them double that. So yeah, I think expensive but potentially long-term value add for Adobe is sort of my view on it.
Rob Walling:
Yeah, the way I was looking at it was at this point with a company, an acquisition like this, multiples are, it’s after the fact, like that’s we’d back how, they didn’t go in and say, “We we want a hundred x for this company.” That’s not what happened. They basically said, “We don’t want to sell.” And Figma basically said, “There’s no one else to buy. We are the one.” So people know that I collect signatures and I collect comic books, right? Old silver age comic books and there will be a comic where there’s 50 graded at this level, but then at the highest level there’s only one. There’s like one in a 9.8. And you know what? That person can ask whatever they want for it, even if it’s a stupid price, if there’s demand for it. And that’s what it is. Figma’s one of a kind, there’s no competitor that’s close to them.
Einar Vollset:
We see that on the M&A side too. Basically if you’re not for sale, that’s the reason why you get super high valuations. People sometimes say, “Oh, we’ve gotten in the past, we’ve gotten offers that are sort of not a hundred x but in the 20 x ARR offers.” And sometimes I talk to founders who are like, “Yeah, we’d love to get that.” I’m like, “Yeah, but you’re not going to get that if you’re obviously for sale.” Get that if you’re not for sale and basically the buyer has to convince you that no, no, there will be a price. Everything has a price. And I think that’s pretty much what happened here.
Rob Walling:
And if there is a replacement, if there is a close second, if there is a slight commoditization, ‘Oh I can just buy this other company here and get 80% of the value.” You don’t get a hundred x. You have to have such a, and have a trajectory. I mean 200 million, I think they were going to double, almost double again next year in terms of revenue. They’re already on pace to do that.
Einar Vollset:
Yeah, one of the most interesting things about Figma actually is how slow they grew. Initially they were for years and years, they were doing the opposite of what you and me usually recommend people doing and start selling. They weren’t really charging anything. And then the first year, I don’t know if we have the growth chart up here in terms of how they grew, but it took them years to get anywhere near interesting. And then it just took off I guess. It just sort of compounded after the fact.
Rob Walling:
Yeah, they really did. They spent a couple years building and then they weren’t charging at all. I think they had a free plan. They had no paid plan for a while. And it’s interesting. Yeah, this is similar. WhatsApp sold for, wasn’t it WhatsApp that sold to Facebook for 20 billion?
Einar Vollset:
Was it that much?
Rob Walling:
Yeah, I think so. And then Instagram sold for a billion, which at the time they were like six employees, seven employees and then they had no revenue or barely any. These are shocking numbers until you realize, “No Instagram wasn’t going to eat Facebook.” It’s not like If Zuckerberg had not done that and they weren’t for sale and there was no repla…right. This is why you see this.
Einar Vollset:
Yeah, yeah.
Rob Walling:
The other thing is, the day it sold there was so many people upset on Twitter, is where I saw it like, “Oh no, Figma sold, Adobe’s going to ruin it.” And they may or may not. But what do you think? I tweeted they’ve raised two, three hundred million dollars from venture capitalists. What do you think is going to happen? You know what I mean? What is the outcome here?
Einar Vollset:
Yeah, no I think it’s an interesting take. It’s a little bit, the path for them was either to be acquired by someone like Adobe or go public and it’s, “Is the company fundamentally different in how it serves its customer because it’s public versus acquired by a larger competitor?” I don’t know. I don’t really think so.
Rob Walling:
Let’s jump to our second story. This is a tweet and obviously we’re going to link up everything we mention, all the tweets and everything will be in the show notes. You can go to startupsfortherestofus.com to check those out. Or if you want our show notes in your inbox every week, sign up for the email list. You get a couple free guides, you get the 5:00 PM framework that I introduced last week. Einar has been copiously taking notes on the 5:00 PM framework and using it to evaluate.
Einar Vollset:
You introduced the 5:00 PM what?
Rob Walling:
Exactly. So this next story. See people, do you see what I have to deal with? This guy he’s my co-founder, this is rough, wish me luck. All right, so Pierre de Wulf tweeted, Pierre de Wulf is the co-founder of ScrapingBee, a company that has been very public about their bootstrap growth. And last I heard they were talking about what 1.5 million ARR and continuing to grow. They are a TinySeed company so you and I know their revenue. But Pierre’s tweet says, “The energy and efforts to grow 5 products to $1k MRR are far greater than the ones needed to grow one product to $20-$30k MRR. Building new things is fun, but there’s a significant opportunity cost to that…”, and he puts it in bold, FUN, “…to that FUN. Just something to keep in mind.”
So Einar, indie hackers, I don’t just mean indie hackers on the website. I mean developers who go launch side projects, often they’ll do a side project a month and they’ll throw a lot of things at the wall to see what sticks. And there are even some models in this space, some folks you can follow that are balancing all these products and it sounds really exciting and interesting. But I personally I agree with Pierre, I’ve been in this situation and I can tell my story a little later. First I want to kick it to you. What are your thoughts on this? Do you think Pierre’s right and if you do think he’s right, why do people do it then if it’s not essentially the most efficient or smart way to do it?
Einar Vollset:
I think it’s right. I agree with Pierre. I definitely think there’s a cost there, but I think people do it because you get a bump kind of, when you launch a lot of the time to get something and it’s like, “Oh yeah, it’s, there’s a novelty factor.” Maybe you are excited about it as the founder, so you’re maybe pushing a little harder than you might do for something that’s been launched for a while. So you get a little bit of a bump and you get a little bit of that endorphin kick. And I think that’s what people chase a lot of the time. They come around, they’re like, “Yeah, it’s a great thing, now I’m making 500,000 bucks a month, 1500, something like that.” And the reality is post launch, they have to, usually they have to deal with the reality of figuring out whether they actually have product market fit and they’re staring down the barrel of, in some cases pretty significant churn because of your product market fit.
People might sign up for it because you have a big following on Twitter or whatever, try it out. But they’re not going to keep giving you money six months after you launched if they’re not using it, if that’s not something that you’d want. So I think a lot of the time with the launch you get kind of an artificial high when it comes from usage and income and I think people want to, they like that piece and they go after it. And really the hard part is sort of the trough of sorrow as it were where it’s like okay, “We have this product now and now you have this mountain of work to figure out in terms of what features to build, what marketing channels to experiment with, systems that you have to build.” You talk about the difference between building a product, building a business.
I feel like a lot of the people who are doing these multiple products, they just like building products and the newer the better and the shinier the better and they just churn them out. The second step becomes, “How do you build a repeatable sales channel? How do you build out a team? How do you do all that stuff?” And that’s not necessarily as sexy and certainly it’s not as easy to talk about and get kudos on Twitter about. I think that’s definitely true.
I do think there are players who do this well, but they tend to be bigger holding companies. So, our friends at Tiny Capital, they do this pretty well. But if you look at their approach, they very much, like they hire a CEO, incentivize them and let them run it completely. It’s not like Andrew Wilkinson is sitting around and making CEO level tactical decisions for every single business that Tiny holds, that doesn’t work. And I think that becomes the problem because you as an indie hacker or whatever, you don’t have the resources to hire someone for all your five or six or 10 or 12 products. You end up just scatterbraining across them.
Rob Walling:
That’s an interesting take and I like your insight. I hadn’t thought about the dopamine rush over the launch. It had occurred to me that building a product is different than building a business, is different than building a company. And the latter two for makers are a lot less fun, I would say. And so I think that as long as you know what you’re getting into, know the drawbacks to it. Don’t kid yourself that if you are launching a bunch of products and usually the justification I hear is, “Well it’s validated because I scratched my own itch,” or “I’m throwing a bunch of things at the wall and see what sticks.” It’s like nothing’s probably going to stick because you’re going to throw a bunch of things, unless you get really, really lucky. You need to put more into it than just building and launching on Product Hunt and Reddit and Hacker News.
But here’s the thing, it depends on what you’re optimizing for, right? Back in the day, let’s say 12, 13, 14 years ago, I was optimizing for lifestyle. I literally worked about a 10 to 12 hour work week. We had our youngest was little, newborn actually. I was not optimizing for growth, I was not optimizing for even money beyond what I, I was making 150K or something from products. And I lived in Fresno, California and it was totally doable and that was okay. And I actually owned several products. I didn’t build them all though, see I acquired a bunch of them for 12 to 18 months net profit, you know what I mean? I’d pay five grand for something and then invest SEO and I’d be doing three grand a month later. So I was doing a very mini, I was doing a tiny, tiny capital. A mini, tiny capital. But it was more about just optimizing for lifestyle.
And then what happened is I got really bored in all honesty I, working 12 hours a week just isn’t, it isn’t all it’s cracked up to be y’all? And that was when I was like, “I want to do something more ambitious.” I had already had SaaS experience but I wanted to double down on it. So I think the idea of working on a bunch of small things is fine, just know what that means. Know that you are very, very likely limiting your growth and if you are an ambitious bootstrapper and you do want to build that 20 to 30K thing a month or you want to build the hundred to 500K a month thing, you’re not going to do it by launching a bunch of small products.
Einar Vollset:
That’s true. If I’m play devil’s advocate a bit on the other side, it’s like there is value in knowing when to quit something that isn’t working. That is the other side of this. It’s like, “Yes, it’s important that you have some staying power I think, and that you can really give something a real go, but if something isn’t working, it isn’t working.” So that is the opposite side of it. It’s almost like you have two extremes. You have some people who are doggedly chasing this thing that just isn’t working for whatever reason. And then you have the people who are just like, “I’m just going to spin up a new thing once a month.” And I think both of those two are probably a mistake.
Rob Walling:
Right. I think that earlier stage entrepreneurs often miss the signals that they would need to pivot the opportunity. Oftentimes shutting it down completely is not the right call. I’ll bring up Drip is an example. We launched, I had a decent audience, I had people watching, signing up. I had 3,500 on an email launch list. I was marketing the hell out of it. And that thing straight plateaued, between about eight K, nine K, just plateaued. Churn was through the roof right. So it was a limited feature set, it was just email capture and email sequences that’s it. Didn’t send broadcast, was not an ASP and it didn’t have product market fit. So one could say, “Well we built something, it didn’t work, let’s shut it down.” And especially if you didn’t have my reach at the time, it would’ve plateaued at one or two K. The only reason it got to eight or 10 is, it was a bunch of people that were following me, that signed up for it and tried it out.
And so it was a challenging road and you can listen to it on startupstoriespodcast.com. It was grueling. That’s like a 90 minute audio documentary recorded over the course of nine months or a year or something. But it was a search for product market fit and it was like “Slight pivot, we’re going to add this, we’re going to figure out this, we’re going to try this.” And getting there was a hard road to your point earlier, it was not sexy, it was not fun. But then once we hit it, it was like, “Ah, that’s it. Right?” And then all the numbers go in the right direction.
Einar Vollset:
Just another point. I think that also applies more than people think. So I think of particularly bootstrappers, and think they have this view that like, “As long as once I get to that stage I’m golden. I figured out that thing. I’m out of that slump at 5, 2, 3, 4, 5,000. Now it’s just gravy train until IPO.” And we’re seeing that with TinySeed companies too. It’s like that’s just not the case. Very often you need to, not necessarily do a pivot, but you need to do something new or different in order to really take that next sort of step and really take the step up.
So because we often see not so much, it’s something in TinySeed but outside it too, is people get to 500,000 or a million or 2 million and then that’s sort of the limit of where they are with their current growth channels, their current product, their current pricing. It really needs to take that next step. And some founders just aren’t up to it. They’re just not able to, either they’re just so married to this thing that was working really super well and they’re sort of sticking their head in the sand about the fact that, okay now we need to do something else, we need to add another step up. Otherwise this is where we’re going to be stuck forever.
Rob Walling:
That’s right. I mean you hit that plateau, you either need another growth channel. If you need more top of funnel, you need another growth channel. If your churn is really high, you need to, well we don’t, part of going to fit with this segment so we need to add another element.
Einar Vollset:
Or maybe you’re serving SMBs and now you need to figure out, “How do we really sell this to enterprises at a much higher price point?” I think that’s part, ties back to the Figma story earlier. It took them a while to figure out, “How do we stop selling to individual creators and actually start selling to enterprises?” And they wouldn’t have gotten the 200 million ARR without doing that change. And I’m sure at the time that was tricky, but it wasn’t just more the same.
Rob Walling:
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Our next story is about Apple’s ad business and AdGuard.com posits that Apple’s ad business is set to boom on the back of its own anti tracking crackdown. So if you’ll recall, Apple basically has the do not track me between apps prompt now when you open apps, so when I opened a Facebook and it asked me I said, “No don’t track me.” I don’t want Facebook and Insta and all these places tracking me. And so it really limits the reach that the third parties like Facebook and Google and anybody else who makes a ton of money from their tracking pixel and their cookies. And now again AdGuard.com is positing that Apple is stepping in and they are essentially, that they are able to track you the whole time you’re on the phone because it’s their phone. And so I’m curious to you Einar, folks may not know, but you have a lot of background in the mobile and the iOS ecosystem going back more than a decade. And so what are your thoughts on this in terms of A, do you think this is true? Do you think this is fair? What’s happening here?
Einar Vollset:
Yes, I definitely think it’s true. I went through YC with an iPhone app basically, me and my co-founder did. So I have experience dealing with the Apple app store and their policies and how they think about things. There’s no doubt in my mind that Apple is working on some kind of ad play. They’ve been doing ads and I don’t know if you remember this and maybe if you weren’t an Apple developer at the time you were, they had I ad I think it was launched in 2000 early 2010, somewhere.
Rob Walling:
Old school, look at you with the deep cut.
Einar Vollset:
Yeah. And it was basically this, basically it was a program, it was like native ads before native ads were a thing. It was basically a programming element inside of native apps that you could build in and roll it out. I think they shut it down after four or five years because they couldn’t make it work. But it shows that they’ve been thinking about ads and how to differentiate and really they’ve been interested in that space for years and years. And I think it makes total sense. I mean knowing Apple, are they the kind of company that could totally decide to crap all over Facebook and Google’s ad revenues and then claim that, “Yeah this is for the good of the customer,” and then come up with some sort of their own version of this but somehow frame that as we’re doing it for the good of the consumer? We’d be basically creating a walled garden of ads that protects the customer, protects the consumer, but really does kind of the same thing inside their own walled garden. A hundred percent.
Definitely, that’s definitely what Apple could do for sure. If you just look at, I’m sure we’re going to link to the thing, you were saying about the sort of log on prompt, do not track you. I think it’s telling, actually looking at the differences between the two prompts. If you’re a third party app, you have to, otherwise your app won’t get approved. You have to pop up this prompt that says allow so and so app to track your activity across other companies, apps and websites. Your data will be used to deliver personalized ads to you, ask app not to track or allow versus their own prompt is personalized ads. Personalized ads in Apple apps such as the app store and Apple News, help you discover apps, products and services that are relevant to you. We protect your privacy by using device generated blah blah blah blah blah.
And they trump this, turn on personalized ads or turn off personalized ads. What would you like, sir, would you like us to turn on personalized ads for you? That just shows what they’re thinking, that and if you also look at it like, someone else said on Twitter, I think it was Zach Coelius. He was like, “I think Apple’s building basically A, a DSPs like a demand site platform, which is what they claim not to have done for years and years. And the biggest play too is going after TV ads.” And I think that’ll definitely happen. I use Apple TV along with Roku and all the other crap, but Apple TV to watch baseball basically most of the time. And the ads that I get for that are atrocious.
Compared to Google search ads, even just banners and stuff. The stuff that I’m getting obviously because it’s just blasted whatever, what audience watchers baseball. The ads I get are inevitably either political ads for local whatever things in San Francisco, even though I don’t get to vote in the city of San Francisco about the things that measures that they’re pushing for or it’s some sort of a horrible disease that I should call my doctor about, related to do you have heart disease and carpal tunnel? Then it’s this thing, call your doctor about provoke or invoke or something random.
So if you just think about how bad that experience is. Do I think Apple’s thinking about building something in that space inside their walled gardens? 110%, I’d be shocked, shocked if they don’t and they’re going to frame it as consumer protection. They’re going to for say, this is what they did. I mean this is what they do with the Apple store. How come there’s now multiple app stores? What an insane system to basically say, “Oh yeah, yeah Apple, you have to go through and we have to approve everything and you have to use our payment processor.” That tells you how Apple thinks about this stuff outside. A hundred percent they’re going to do, 110%. I guarantee it, guarantee it.
Rob Walling:
And I wonder if you think there’ll be antitrust suits that come out of it or, and not by the government per se, but by, I wonder if Facebook’s going to sue for anti competition at some point. Facebook and Google get together, right?
Einar Vollset:
Could be, if you think about it. When you and me were coming up, everybody was like, “Oh, Microsoft, they’re the big bad wolf,” and they got in all sorts of trouble about distributing Microsoft Excel with their operating system. But this is the same if nothing worse. So I’m expecting, depending on how the political winds are blowing, I think they’ll get some sort of a blowback on this at some point. But I still think they’ll do it because the money is too great.
Rob Walling:
Yeah. That’s the thing.
Einar Vollset:
Why not? Because if you think about it, I started using the iPhone just when it came out and it was like tiny, tiny market share. Apple, the iPhone’s Apple market share in the US is 50% now. Basically it’s not infeasible if Facebook keeps cratering and going after this VR dream, fever dream of Zuckerberg, that basically there are more people that are using Apple devices day to day than use Facebook. And so if that’s the case, then of course they’re going to try to capture the kind of income, the kind of revenue stream that Facebook are, have been monopolizing for so long. So yeah, I know I’m for a hundred percent sure. They’d be idiots not to, they’d do great.
Rob Walling:
It’s interesting to me because I’ve always thought of Facebook and Google as ad companies and therefore I share as little as I possibly can with them. And I’ve always thought of Apple as more of the, well we sell the devices, that’s how we make our money. You can be less concerned about it. It’s not like I’ve given them anything except for my credit card number and to buy things. But this will change my, once someone’s running ads, it changes my perception because I know.
Einar Vollset:
But they’re not ads, it’s just they’re personalized ads.
Rob Walling:
That’s the perfect way.
Einar Vollset:
We protect your privacy Rob.
Rob Walling:
To end this story.
Einar Vollset:
We will look after you. Don’t worry Rob.
Rob Walling:
Our next topic is a tweet from Hana Mohan. Hana spoke at MicroConf Europe a couple years ago, an accomplished entrepreneur who has both bootstrapped a company to exit and has now raised venture funding for her second company. This one’s about no code in bootstrapping. She says, “You don’t need to code in 2022, but you should at least try. The #nocode community has a problem with its rhetoric, like the bootstrapping community. I am not writing either of them off. I am grateful I bootstrapped early on. The ‘way of life’ dogma is a serious problem. Like bootstrapping, no-code is empowering. With it, a domain expert with a day job and no technical experience can build products, without having to hire a team of developers. For them, it’s the only game in town. For others, it’s better framed as a gateway drug. And then she goes on to say, “If you’re a young person in entrepreneurship, make your first dollar but then at least learn some coding.”
It’s a whole thread. People can go read it obviously we’ll link it up. I very much share this sentiment where I think no-code’s amazing and no-code is a tool. And much like a hammer and a screwdriver are tools, they are perfectly suitable for the thing that they get done, right. But I don’t reach for my hammer every time that I want to put a screw in or do something else. So before I weigh in Einar, bootstrapping no-code, are they a bit too religious? Oh that’s actually, there’s another tweet and it’s from Jovan. I can’t, I don’t know how to pronounce his last name. But his was interesting because it lines up with something that happened a couple months ago when Ruben founder of SignWell was on this podcast and we were talking about how no code is awesome and it’s really good for this, but there’s some brittleness issue, there’s some scaling issues and that you know, can’t build a full blown ESP with it, right. There limitations is what we were pointing out.
It was based on a listener question. And sure enough people jumped on it and on Twitter were just like, “No, that’s not true.” But then when I asked for examples of actual full blown SaaS apps like, “That’s not what it’s made for.” So Jovan’s tweet says, “No-code is a religion at this point. Look, I do software development for a living. I prefer to do things in the most convenient way possible, but not a single web app I built in the last two years could be built with no-code.” Why do people get angry when I tell them this? You know what I mean? It’s like, “Well yeah, you shouldn’t get mad.” It’s just.
Einar Vollset:
It’s religion? It just is religion. I’ve always felt that, and actually this funnily enough ties back to the whole Apple story because this is to me, feels like a rehash of some of the conversations we had early 2010s. But because people were going to do this similar thing, it wasn’t no-code, but it was cross platform. You don’t have to build any native apps. It was just put together using this framework and then it compiles down to iOS and Androids and Microsoft phone or whatever they call it. And it was going to be totally, it was going to be the nirvana. And inevitably ended up happening was that people would launch something, it be kind of like 70, 60, 70 percent of the way there and then they’d be like, Oh crap, yeah, we need to support this one native thing. And so they would add a little bit of native integration into this other cross platform thing and then they had to do keep two different code bases now because it’s now a cross platform but with compiled specific compiled things.
It quickly diverged into like, “Well, now you have two code bases again, it’s just that you feel good about the fact that it’s, 50% of it is written in HTML instead of Objective C or Java, whatever.” So I’m very much in the same way. The fact of the matter is for me is like no-code is just code. It’s just a paradigm to build apps. And are there environments, coding environments that are more or less visual? Yes. No-code is, to me is basically a visual programming tool mostly. But I feel like the religion that some people feel around this is completely misplaced, right? I’m like, “These are fine for prototyping tools, they’re fine for what they are.” But this notion that this is a revolution in programming, this doesn’t make any sense to me whatsoever.
Rob Walling:
And you know I’m a fan of bootstrapping. Anyone listening to this knows that. I bootstrapped all my software companies and I’m a fan of no-code within MicroConf and TinySeed, we have at least three and there might be four, full blown line of business apps built on Airtable. And I think we have one on Bubble now maybe. I’m all in on no-code. If we can write less code and it works, let’s do that. If I can have a producer, Ron, who is not a developer, go build an entire system to manage the production of our audio and video in three weeks, two weeks, three weeks and it works. And nobody has to write code and I don’t have to hire a developer and I don’t have to spin up a server. Oh my gosh. So I’m a fan of these things, but the dogma of them, it gets a little old.
I’m saying code or no-code, I am bootstrapping. I think I kind of want to wrap up my thoughts with this tweet that I sent out a couple days ago. It says, “Never raise funding is like saying never use a hammer. Funding is a tool, sometimes it’s the right tool and other times it’s not.” And that’s how I feel about no-code and about bootstrapping and about a lot, frankly about a lot of things in the tech world that folks, I think crypto and Web3 and blockchain are really interesting technologies, but they’re not everything. We’re not going to reinvent everything on them, but they are tools and they can be used for certain things that I think are useful.
Our last topic of the day also comes from Twitter. This is where Hot Take Tuesday’s kind of fun because it, what you notice is when we’re doing quote unquote news roundtables, one of the stories, two of the stories is news because so little news is fully relevant to this podcast audience in a way. I don’t want to cover Facebook’s antitrust, blah blah, blah. Who cares in terms of bootstrapping, in terms of mostly bootstrapping, growing SaaS versus is it feels like things that are on Twitter are so much more relevant.
Much like this last story, which I’ll admit is just a bit of a fun one. But basically Ruben Gamez, I mentioned him earlier, he was considering watching 2001 A Space Odyssey. I said I wouldn’t do it, watch a YouTube summary of it instead, it’s very slow. And then he said, “As slow as the new Blade Runner.” And I said, “I like the new Blade Runner.” But I’ll admit we watched it at 1.5 x speed and the torrent of comments lol. Ruben says, “Lol, wtf, are you doing watching movies at 1.5 x?” You chimed in with, “What?” People, there was a gif that Christoph Engelhardt put. [inaudible 00:32:10] It was just this boom. I took a lot of heat for that, a lot. So I want you to tell me what’s wrong?
Einar Vollset:
I think you’re a psychopath that’s what’s wrong.
Rob Walling:
With watching something slow?
Einar Vollset:
What the hell? It’s like a psychopath test.
Rob Walling:
The movie’s too slow. It’s a good movie but it’s too slow. So you speed it up and make it a good movie.
Einar Vollset:
I’m like one and a half through the conversation too to [inaudible 00:32:34] this other thing.
Rob Walling:
But that’s how I listen to all podcasts.
Einar Vollset:
Oh no Romeo, my Romeo, no. Doesn’t it sound really funny? One and a half X or are you so used to with podcasts listening to one and a half X, you think people don’t have this normal life.
Rob Walling:
Yeah. Haven’t you, have you never listened to an audiobook or a podcast at 1.5 x?
Einar Vollset:
No, never at 1.5 x. 1.2 yes. That’s a tall order.
Rob Walling:
1.2 holy.
Einar Vollset:
1.2
Rob Walling:
Sir, come on.
Einar Vollset:
1.5? It sounds like a cartoon when you get past one and a half. [inaudible 00:33:07]
Rob Walling:
Every audio book. The audio books I listen to, since they record them really slow, I listen between two and 2.5 x and podcasts because it’s natural speaking speed, usually 1.5. And so yeah, 1.5 sounds perfect to me. Sounds natural.
Einar Vollset:
No, sounds insane. You’re insane. Your brain is like.
Rob Walling:
Superior. I am homo superius?
Einar Vollset:
It would be great if you go through, in a conference setting and just speed people up.
Rob Walling:
That’d be so nice. I could talk to more people. That’d be amazing. Here’s the problem with my argument. I’m going to just fully mea culpa. Podcasts and audiobooks, they’re mostly informational, right. Versus a film that is art. Someone commented, “I can’t wait to meet Christopher Nolan and tell him I watched all, your movies are great. I watched them all at two x.” I was like, “Yeah, it’s like bringing A.1. to a really expensive steakhouse. Bringing your soy sauce to the $400 a plate Japanese sushi place.” I’m still going to do it.
Einar Vollset:
Oh my God. Yeah, no, honestly I was, it’s rare that a tweet genuinely shocks me.
Rob Walling:
Especially coming from me, huh?
Einar Vollset:
Yeah. I was like, “What?” Normally your tweets, my tweets as you know, is usually completely all over the place. That’s a disaster. But you always consider a tweet. I was like out of left field, he’s like, “Yeah, Blade Runner one and a half x.”
Rob Walling:
It was only 2049. Well here, and here’s the thing too, I’ll say because we’ll wrap this up soon, but I do not watch every movie or TV show at that. But there are some that are just filmed like I’m watching House of Dragon. It’s a Game of Thrones prequel. It’s a really good show. It is very slow, it’s very considered. There’s these long pauses and honestly.
Einar Vollset:
You should just do what everyone else does man. Don’t watch it at one and a half x. Just sit on your phone and scroll through Twitter while the video’s all in the back.
Rob Walling:
See I have stuff to do. I got things to go, people to see. Anyways, I’ll leave you all with that amazing drop of knowledge. Video speed controller in your Chrome browser if you want to do that. I went so far as to, my boys both want to, they wanted to watch Breaking Bad and I’m like, “I’m not sitting through five seasons of this show.” It’s a good show, but it’s a slow burn and I’ve already seen it and I don’t want to sit. So I said I’ll make you a deal.
The old one, older one is like me and loves watching things 1.5 to two x. Every YouTube video’s at two x, the younger one didn’t want to. And so we tried it at one and a half X and I have to literally, you can’t just, what do you call it, Aircast or air whatever, AirPlay. Because chrome blocks like Netflix and something blocks Netflix and all the services. So I literally have to get an HDMI cable, plug my laptop manually into the side of the computer. It just mirrors it and plug it into the TV. It’s a lot of work to be really weird.
Einar Vollset:
Poor children. That’s what they’re going to be talking to their their therapist about years from now. They’ll be like, “My dad. He [inaudible 00:35:59] all the time. This is why I talk so fast.”
Rob Walling:
My dad was terrible, so traumatizing. On that note, we’re going to wrap up this episode of Hot Take Tuesday. Would love to hear your feedback and input on it. If you are listening, you can tweet me @robwalling where I will be reading your tweets at 1.5 x speed and you can tweet @einarvollset and he will argue back about how the San Francisco giants are really good, even though they’re not doing so well, are they?
Einar Vollset:
Indeed. And thank you so much for having me on.
Rob Walling:
It’s great to have you, man. See you next time.
Einar Vollset:
Ciao.
Rob Walling:
Thanks again to Einar for joining me this week. Hope you enjoyed that show. Thanks for coming back week after week. This podcast audience is growing and it appears to be growing faster than it ever has been in the past, and I really appreciate your support. I see quite a few Reddit threads, Hacker News threads, online discussions where people are giving a shout out to this podcast and to the MicroConf YouTube channel and I really appreciate that because that is the best and easiest way for us to grow. I also appreciate anyone who has left us that five star rating or review. We crossed 1000 reviews. I’m not going to keep pound on this because we hit the goal and it’s just really amazing to have that support from you. So thank you for coming back and listening every week. This is Rob Walling signing off from episode 632.
Episode 631 | Re-writing Your Codebase, Stair Stepping, and Difficult Founder Decisions
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In episode 631, join Rob Walling for a solo adventure as he answers listener questions on topics ranging from when to rewrite your codebase to founder salaries and balancing your founder vs. developer mindset.
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Topics we cover:
- 2:32 – Is there any validity that rewriting our code and changing our tech stack will get us to a higher multiple at a future exit?
- 8:08 – Founder salaries
- 12:16 – Using the stair step approach to create a course
- 15:20 – Can you sell a Zapier-type connection between several products as an early MVP for your target market?
- 20:06 – Founder mindset vs. developer mindset
Links from the Show:
- Episode 622 I Making Hard Product Decisions & Growth vs. Profitability with Derrick Reimer
- The Stair Step Approach to Bootstrapping
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling:
So what I did is I emailed Einar Vollset, who, as many of you have heard on the show, has a lot of experience with in particular SaaS M&A, and his response to that question was, and I quote, “Ha ha ha ha ha ha ha ha ha. This is the dumbest (beep) thing I’ve ever heard in my entire (beep) life. Ha ha ha ha ha ha ha.”
Welcome back to Startups For the Rest of Us, I’m Rob Walling, and this week I was going to walk through some Rob solo adventure topics, but I realized that we have such a backlog of questions, and actually several of the questions are kind of Rob solo adventure type topics, asking questions about broader strategic things rather than just detailed tactics, so I am excited to answer several of those. There are many video questions and audio questions, and if you don’t catch the video snippet that we throw up on Twitter each week, you should follow @startupspod on Twitter, because oftentimes you can see the question asker and then see a bit of my response.
Before we dive in to listener questions, I really wanted to thank everyone who has posted a rating into iTunes, a five star rating or review. We passed 1000 ratings, and I’m stoked. 1024 as of a couple hours ago, and reviews ranging from, “Great content every week. Thanks, Rob, for putting out a great show.” To Toms Carb who used the phrase, “Startups For the Rest of Us is truly an MBA on my iPhone. Tuesday mornings are incomplete if I don’t listen to the latest episode.” And lastly, this one from Mark 79 I really like, he said, “Pretty much all the episodes are timeless, so even though a show might be a few years old, the information is still relevant.”
Thanks so much for helping me on this drive to get north of 1000 ratings. We have now joined a select few podcasts that have that many ratings and reviews in the iTunes Apple Podcast store. I know they keep changing the name. And for the record, we have 1024 worldwide ratings and 498 worldwide reviews. So I’m guessing within the next few weeks here we will also cross the 500 mark there. So thanks again for that.
As this episode airs, I am in Atlanta talking to Ben Chestnut at our MicroConf Local. We are going to be in Austin next month. If you’re interested in checking it out, head to microconf.com/locals. And with that, let’s dive into our listener questions.
This first question is anonymous and you’re going to have to forgive me as I think I will probably have uncontrollable laughter at a certain point during this one, and there are some swear words as well, and those will be bleeped per usual. But I received an anonymous question from a longtime listener with the subject line, “Rewriting Our Code Base for Possible Future Sale.” And the question reads, “We have a small dev team at the startup I work for. We have several million in funding and we are growing relatively quickly. Our web app and our tech get rave reviews from our demos and our users. We know it’s scalable and it’s built on one of the standard stacks.” He tells me which stack it is, but I will tell you it’s either Django with Python, Ruby on Rails, PHP Laravel, it’s one of the standard startup stacks that you would expect.
He continues, “Our new CEO is worried that being built on our current stack instead of something that’s more corporate, that our multiplier might be lower for a future exit.” And when he says something more corporate think .NET or Java, something that’s not as common in the startup space.
He continues, “He’s considering building version three of the software from scratch in a more corporate stack instead of continuing, developing, and adding features to our current product. We’ve talked to him about all the startups, deca billion dollar startups, that are literally built on our exact stack and how popular it is, how common it is, and how easy it is to find developers for the stack. Is there any validity that changing our stack in part or full will get us to a higher multiple at a future exit?”
When I received this question, my first response was, “I’ve never heard of that. That sounds very odd.” And I was almost upset by it, because it sounds like someone who maybe doesn’t know what they’re talking about or has a really unique frame of mind. Maybe they have not been in the startup space and they’ve only been in the Fortune 500 space, where perhaps tech would be weighted differently or something. But I was like, “Yeah, this seems like not a good idea.”
So what I did is I emailed Einar Vollset, who, as many of you have heard on the show, has a lot of experience with in particular SaaS M&A, and his response to that question was, and I quote, “Ha ha ha ha ha ha ha ha ha. This is the dumbest (beep) thing I’ve ever heard in my entire (beep) life. Ha ha ha ha ha ha ha.”
And then I was sitting there like, “Okay, so he has confirmed my thoughts on this and that’s good. It’s good to get a second opinion.” Four minutes later I receive another email from Einar that says, “Man, I’m still laughing.” And so then we went back and forth a bit about it. But the last thing, and the one caveat to it, is Einar said, “The only smidge of truth in this is if a particular acquirer already had a team that is qualified in a particular tech stack and your product is built in that tech stack. But really it doesn’t matter for the size deal this would probably be, and how the heck would you know what a specific acquirer is into years from now? Cargo Cult Management. I’d be worried about the CEO cratering the company to be honest.”
So obviously Einar has really strong opinions about it. I also had that inclination. I think he actually put it more eloquently than I did. But I wanted to bring this up because there’s two points to this. Number one, I think we should all be reminded that our frame of reference in the startup space, if we were to move into the Fortune 500 space can often be off for a bit. And this is actually why it’s hard to transition someone, let’s say a project manager or a marketing manager or even a developer at a huge company, 1000, 10,000, 50,000 person company, and pull them into a startup. Because it takes three months, six months, of just undoing what I’ll say are perhaps adaptive habits for being at a large company and really bad habits for being at a startup. Taking way too long to ship things, thinking about things too much, waiting for everybody’s permission, politicizing things. There’s all these things that happen at these big companies almost inevitably.
Vice versa, if you work at a startup and you get a job for a Fortune 500, Fortune 1000 company, it can be really challenging for you to try to fit in because the culture is so dramatically different and the pace and there’s a lot of differences there. So I think this is a good reminder of just how different companies function and how drastic the differences can be in the thinking between someone who maybe had run a half a billion dollar, billion dollar company, and who’s coming to run a handful of million dollar company.
But then the other point I want you to take away, of course, is, unless you’re written in a really odd stack that no one can find developers for, no one’s heard of, usually an exit is not going to depend on your tech stack. Again, if you’re using one of the standard tech stacks, it’s not going to be a big deal.
Now, I will say that when I acquired HitTail back in 2011, it was written in classic ASP, which essentially was a deprecated language and it was very hard to find developers for, and I did rewrite that in Ruby on Rails. And I think I would’ve had a very hard time selling that because it was such an old stack. It was old, it was crufty, it had a lot of issues, so rewriting it in Rails was a decision. Now, I didn’t rewrite it in Rails to fix technical glitches or the code is crufty or anything like that. If it had been Rails, I would’ve left it in Ruby. But the fact that ASP classic, which had, what, come out in ’99 or ’98 or something, and really had been superseded by .NET in 2001/2, I mean at that point it was a decade deprecated language and it would’ve been even worse when I went to later sell it in 2015. So those are some thoughts on rewriting your code base for a potential future sale.
The second topic is one that I saw some folks chattering about on Twitter, and it’s around founder salaries. And there was a comparison between companies that had raised a lot of funding and bootstrap companies. And there were companies that had raised, let’s say, 10 million, 30 million, 40 million, and the founder/CEO was making several hundred thousand, two, three, $400,000, and then someone had bootstrapped a company to a million or two million and they said that they were taking home more money than that founder. Which is probably true. I mean, this is no secret. We know that if you solo bootstrap or do a highly efficient SaaS company and you get it to a million, million and a half, in annual recurring revenue, there’s a ton of profit to be pulled off that and that’s an amazing business.
But the thing that it got me thinking about as folks were discussing it is this balance between near term and future earnings. And Derrick Reimer and I talked about this a few episodes ago where I asked him, “How do you think about this? Because you could take a pretty substantial salary out of your company.” In fact, he’s a TinySeed back company. He could take a quarter million dollars a year without paying TinySeed to anything, because that’s our salary cap. Anything above that, then he would pay us our prorata share of dividends. But I said, “You could take a quarter million out a year. I know that you are not. Why not? Why not just take that out?” In fact, he could take out more than the CEO who raised $50 million and then be happy that he had done that this year and next year. And his response was, “But I can use that money to grow my company and I’d rather grow it faster.”
And it comes back to that multiple of, if I add 1K MRR, that is 12K ARR. And if you think about an exit multiple, if you ever sell, and I’ll just say again, everyone sells, then take an exit multiple of say five times ARR and you’re looking at $60,000 for every 1K of MRR that you add, and usually more money if you’re smart and you’re executing well and you’re a knowledgeable founder and you have that hard work, luck, and skill, usually more money in your bank account means you can grow faster, or you can at least attempt to grow faster. And so the less money you take out, the faster that growth, and so you are actually thinking ahead.
I think of it like Warren Buffett used to say, and I’m paraphrasing, “I’m not cheap, but when I look at a dollar today, I know that I can turn that into 50 or 100 dollars a decade or two from now.” Because I know compound interest and I know compound returns specifically of investing in the stocks in the companies he buys.
And I’ll admit, I think about SaaS the same way. I think about startups the same way. That taking a dollar out of your company today is potentially reducing the growth, and it’s potentially taking an extra five, 10, $15,000 out of your company today, let’s say you could turn that into 1K, MRR. And I know there could be a whole conversation around, well, can you? And is it repeatable? Blah blah, blah. Let’s just say some dollar amount, 20, 30, $40,000, it’s another hire. Do we think they can add 1K of monthly recurring revenue if you hire a marketing person or a sales person or another developer or whatever it is, and instead of taking that out, you invest into that. Well that 1K, again, is 60K to your net worth, but it takes a few years to get there and it takes an exit and it takes other things to happen.
Now, there’s a balance here, because you can also be too far on the side of I’m basically going to live in poverty. I’m going to make 30K a year trying to live in San Francisco because I want to reinvest everything. That’s not healthy either. And so I think paying yourself a salary where you are totally comfortable and where you can pay those bills and you feel fine about it. But having that balance of, again, I’ve had lifestyle businesses where I just maximized the cash I pulled out of them. I would pull out 80% of the revenue as net profit. And it was amazing. These businesses were great and they were great cashflow businesses. But I didn’t mistake them for the longterm play that was eventually going to have my goal, which was to have enough money in the bank that I could work on anything I wanted to anytime and beholden to no one, including Google rankings and all the things that even when you have a profitable startup can get in your way of maintaining its profitability.
Bhavesh:
Hey Rob, quick question regarding stair step approach. If part of the marketing strategy that I’ve got includes writing blogs, I’ve figured out that I could potentially use these content to create a course to my target audience. Would that be a stair step approach or product that I could start using while doing the marketing? Or would that be something well off tangent that I shouldn’t be looking at? Really appreciate it if you could answer this question. Thank you.
Rob Walling:
Thanks for the question, Bhavesh. This is a really good one. The answer is, absolutely. And in fact, in the original version of the stair step that I presented at the Dynamite Circle’s BKK event in Bangkok back in 2014, it was a live presentation, step one, it included eBooks, courses, it included software, like downloadable software and AppSource software and simple things that you could use to get a foothold and learn how to make money on the side and then stack that up for step two.
And then step three was recurring revenue. This was not SaaS focused because, see, the Dynamite Circle is a mix of folks doing eCommerce, there’s Amazon FBA, there’s content sites, there’s productized services, there’s consulting freelancing, and there’s software and SaaS as well. And so when I presented it, I generalized it to that audience and info courses, as you’re saying, were on step one.
And then if you go to look at kind of what’s the seminal blog post for this now, when I actually wrote it up, it does focus on software and then stepping up to SaaS, because that’s really how I think about the world. That’s my more specific view of it. But I have been noodling for a while on taking the stair step method of bootstrapping and basically translating it to the stair step method of entrepreneurship. And it’s a little different, entrepreneurship’s higher level, and that would include this type of thing. And I also think that would include freelancing, maybe productized services, kind of stepping up there. So it’s a great question and the answer in my experience is unequivocally yes. I’ve done this myself, where I had my first book, Start Small, Stay Small, I had a couple online courses, I had a membership website, that was all happening as I had these other step one software products. And then I used those to lever up into SaaS, and from there the rest is history, so to speak.
And I’ve seen other folks doing this, so I think it’s a good skillset, and I think it builds exactly what the stair step is intended to do, which it brings you some revenue, brings you some experience, it brings you some skills, it brings you some confidence, it brings you maybe a bit of an audience and a bit of a network. And all of these things make it so much easier to then launch that subsequent product. So thanks for the question, Bhavesh. I hope that was helpful.
Our next question is also from Bhavesh sent just a couple weeks later.
Bhavesh:
Hey, Rob. I’ve just got a question regarding your stair step approach. Looking at the current situation, do you think from your experience that I can sell a Zapier type connection between several products to produce my value proposition to my market? Because at the moment, the potential users, or future users, are connecting several products together manually using Excel, or without anything, or using Zapier, because that’s what we are currently doing in our business. And my MVP is going to be just an API integration between several applications such as Zero.
Rob Walling:
The recording had a bit of an issue towards the end of his voicemail, so we did have to chop it off, unfortunately, almost mid sentence. But I think we got the gist of the question.
This is a good question. And the idea is creating a Zapier type connection, which is really just integration. It’s integration points between several different tools. And his question really is, can he sell a Zapier type connection between multiple apps? And this is just selling an integration, and the answer is absolutely. How many apps in maybe the Shopify app store, the Zero app store, the Salesforce app store, the insert name of platform here app store are really just piping data from the app itself into other platforms? And maybe it’s only into one, or maybe it’s into multiple, they’re just connectors, and those things sell for either a monthly subscription, sometimes a one time fee.
I think this is an interesting idea if you’re building it specifically for a specific niche, perhaps one that you’re familiar with, or maybe you’re working in that space yourself and you’ve seen this need, because if I go to the same app store, I’m not going to see the need if I don’t have the day to day operational need for this type of thing. And so Bhavesh mentioned a couple tools that he’s trying to tie together, and it was… What was it? Like Zero, which is accounting software and then time tracking and something else I actually forgot already. But you can get the idea that maybe Zapier integrations don’t exist between those three. Or maybe Zapier integrations can be a little finicky and a little brittle, and having basically a first class integration that hits the APIs and is just a single click to enable in my Zero or my project management app, and would I pay $15, $50 a month for something like this if it was a desperate need and I needed it to be super reliable? I would.
And as a result, this becomes a pretty interesting step one business, that if you recall the stair step, the step one businesses are usually smaller. Usually you don’t need to do a ton of marketing, because they already have the traffic and the lead flow coming in from the app store rankings. And these are apps that have platform risk and they are pretty much impossible, virtually impossible, to scale into the millions in revenue. But that’s not what a step one business is for. A step one business is for you to learn that experience and get the skills and all that that I mentioned earlier.
So yeah, I think this is super interesting. And I think the neat part about something like this is you could feasibly try to wire it up in Zapier initially, and the MVP could almost be a no code MVP. But if you are a developer, tying a few APIs together isn’t that hard. It’s not having to build the UX and build all that in. Basically just being able to roll some code around and deploy it and test it out yourself and then start charging people is pretty intriguing. So, thanks again for the question. Bhavesh. I hope that was helpful.
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Justin:
Hey, Rob, this is Justin from Fort Worth, Texas. Longtime listener. I had a quick question regarding the tension that can sometimes arise between your founder mindset and your engineer mindset. As a technical founder, we’re both responsible for the business side and the product, but also for building the technical infrastructure that’s going to support that product and the future growth of that product.
I initially built my SaaS app in Python and Django and specifically did that for the productivity gains that I get out of a language like Python. But as we are moving from proof of concept and beta into the actual product release and we’re getting paying customers on board, my initial thoughts start turning from product to scalability. How do I make it faster? How do I make it more scalable? And I’m constantly having to weigh these thoughts on prioritizing product important features and things that are going to move the product forward versus tech debt that’s on the backend that needs to be fixed. I’ve even thought about rewriting the app in something more performant.
I tend to push those aside, but I’m curious if you ever dealt with that as you were building out your products and how you fought against that to make sure that you’re making the right decisions at the right time. Tech debt’s always going to stack up, we’re always going to deal with it, but oftentimes there’s product things that might be more important. So I’m curious if you ever had to deal with that and what the process was to work through what are the right decisions to make at the right time. Awesome. Well, I appreciate your time and hope you have a great week. See you.
Rob Walling:
All right, Justin, thanks for that. This is absolutely a question every SaaS founder, every software founder, has to answer, and it’s one that I dealt with many times over the years. And pretty much almost without exception, every SaaS founder I talk to, whether I’m investing, advising, or just giving one off advice to, one of the biggest pain points of their job as founder is not enough time. “I can’t do everything. How do I know what to spend time working on? Should I market, should I sell, should I develop?” And I do have this framework around leaning into uncertainty that is like, “What should I be working on in general across the business?” And it’s that you should work on the uncertain things as the founder until you figure them out, and then you should hire folks to do the things that are more certain.
I’ve talked about that on the podcast in the past, I actually wrote a section of my book that is actually getting, I don’t want to say close to being done, because let’s be honest, you finish a book and then like five months later you have all the stuff to actually print the book. You got to get layout and designs and all this other stuff.
But all that said, that’s not really the question that you’re asking. You’re not asking me, “Which parts of the business should I work on,” you’re just asking about playing engineering versus everything else, I think. There’s engineering, which is fixing technical debt, improving performance scalability, then there’s engineering that is building new features, and then there’s everything else. There’s doing sales and marketing and support and all that.
Usually support and customer success tend to be easier because you get a support email, you respond to it. And if you have someone to onboard, you do it. The harder ones are like, “Should I switch over to marketing today or should I work on the product or should I fix tech debt?” And it’s always a tough balance and that’s why being especially a solo founder is pretty tough. And that’s why especially being a solo founder without funding to hire your co-founder, in essence, or to hire someone who can do this other stuff, is even harder. And again, this is why the stair step is such a popular framework, because if you do that, you eliminate a huge piece of your decision making, because at that point you’re either building or supporting.
I mean, that’s kind of it. You build a Shopify plugin, you’re not out marketing that thing, not unless you want it to get past a certain point, but usually it’s in the app store and you’re just getting that traffic coming in. Same with wordpress.org, it’s much less of a going concern than once you have a full blown SaaS app. So a single founder, bootstrapped, first time SaaS founder, is really hard. Nights and weekends especially add to that really, really, really hard.
And this is why I would advise, again, Justin, I know you’re already working on something, so keep doing that, you’re in the middle of a product, but the idea of the stair step and of the step one and step two is to eliminate part of this really difficult time. And that’s also the idea behind raising some funding. And you know that I have not been anti-funding and I’ve not been pro-funding, I just view funding… It’s like saying, “Rob, are you anti-hammers?” And it’s like, “Well, no. When I need a hammer to do a job, I go grab my hammer and I pound in the nail. But I also don’t use it to screw in a screw, because it’s not made for that.”
Funding is a tool, that’s it, so why would I be anti or pro? Know what you’re getting into, use the right tool for the right job, know the trade offs that you have to make with it. But that is why indie funding, TinySeed type funding sources, have become so much more popular for bootstrappers, because you are at a point where it’s really hard and there’s just no two ways about that. And in that situation, it’s a lot of hard decisions with incomplete information, as I like to say.
But to answer your question more specifically, what I’ve seen as folks start to scale and they’re trying to balance, let’s just say, technical debt versus feature building, I will often see either if they’re using sprint models, then one out of every four, one out of every eight sprints is dedicated purely to technical debt and cleanup, or it’s 20%, or some number that you feel comfortable with, of the time is spent cleaning up technical debt as you go forward. So if you’re not doing sprints, it’s one day a week or if you have four developers, five developers, one of them rotates around and just does all technical debt stuff.
80/20 is a reasonable thing to think about. Some teams want to get rid of more technical debt and some don’t care as much about it. So that’s more on the engineering side. If, as a single founder, I was weighing engineering versus marketing, I mean, I think as engineers we want to lean into the stuff we’re comfortable with and we love doing, and of course that’s building product. That’s why we start startups is to build product, and so I think you need to really resist that urge. I think you need to be very mindful that marketing and sales are going to be something that your psyche naturally pulls you away from. Your lizard brain is going to constantly say more code, more code, more code, code works, code makes the business successful. And that’s not necessarily true. It can be, but for the most part, driving more leads, optimizing those funnels, talking to people, making sales and onboarding are what’s going to actually grow the business, and the code is the product that allows the business to exist.
Don’t get me wrong, it provides tons of value to your customer. Obviously, as a product person myself, I don’t minimize the value of the product itself or of the code, but it is just the common trope, and I see it over and over with folks who are just overbuilding and spending way too much perfecting, and they redesigned their homepage and they rewrite their copy and then they have another redesign, and then they redesign in the app because they didn’t like it. And you know what, I’m just going to scrap this in rewrite the whole code base, and then I’m a year and a half later it’s like, why haven’t you just sold? Why haven’t you just sold? Just marketed? Get more people into the app and start growing your MRR. I appreciate the question Justin, it’s a fun one to think through and I hope that was helpful.
So that’s it for today. I hope you enjoyed as I ran through these listener questions. We have a pretty decent backlog, although several of these, since they were video or audio, jumped straight to the top of the stack. It looks like there’s about a dozen text questions and about two or three video questions right now. If you want to ask a question, go to startupsfortherestofus.com and click the link at the top of the page that says ask a question and you could submit one in any format there. Or you can email straight to questions@startupsfortherestofus.com.
This is Rob Walling signing off from episode 631. Thanks so much for joining me this week.
So what I did is I emailed Einar Vollset, who, as many of you have heard on the show, has a lot of experience with in particular SaaS M&A, and his response to that question was, and I quote, “Ha ha ha ha ha ha ha ha ha. This is the dumbest (beep) thing I’ve ever heard in my entire (beep) life. Ha ha ha ha ha ha ha.”
Welcome back to Startups For the Rest of Us, I’m Rob Walling, and this week I was going to walk through some Rob solo adventure topics, but I realized that we have such a backlog of questions, and actually several of the questions are kind of Rob solo adventure type topics, asking questions about broader strategic things rather than just detailed tactics, so I am excited to answer several of those. There are many video questions and audio questions, and if you don’t catch the video snippet that we throw up on Twitter each week, you should follow @startupspod on Twitter, because oftentimes you can see the question asker and then see a bit of my response.
Before we dive in to listener questions, I really wanted to thank everyone who has posted a rating into iTunes, a five star rating or review. We passed 1000 ratings, and I’m stoked. 1024 as of a couple hours ago, and reviews ranging from, “Great content every week. Thanks, Rob, for putting out a great show.” To Toms Carb who used the phrase, “Startups For the Rest of Us is truly an MBA on my iPhone. Tuesday mornings are incomplete if I don’t listen to the latest episode.” And lastly, this one from Mark 79 I really like, he said, “Pretty much all the episodes are timeless, so even though a show might be a few years old, the information is still relevant.”
Thanks so much for helping me on this drive to get north of 1000 ratings. We have now joined a select few podcasts that have that many ratings and reviews in the iTunes Apple Podcast store. I know they keep changing the name. And for the record, we have 1024 worldwide ratings and 498 worldwide reviews. So I’m guessing within the next few weeks here we will also cross the 500 mark there. So thanks again for that.
As this episode airs, I am in Atlanta talking to Ben Chestnut at our MicroConf Local. We are going to be in Austin next month. If you’re interested in checking it out, head to microconf.com/locals. And with that, let’s dive into our listener questions.
This first question is anonymous and you’re going to have to forgive me as I think I will probably have uncontrollable laughter at a certain point during this one, and there are some swear words as well, and those will be bleeped per usual. But I received an anonymous question from a longtime listener with the subject line, “Rewriting Our Code Base for Possible Future Sale.” And the question reads, “We have a small dev team at the startup I work for. We have several million in funding and we are growing relatively quickly. Our web app and our tech get rave reviews from our demos and our users. We know it’s scalable and it’s built on one of the standard stacks.” He tells me which stack it is, but I will tell you it’s either Django with Python, Ruby on Rails, PHP Laravel, it’s one of the standard startup stacks that you would expect.
He continues, “Our new CEO is worried that being built on our current stack instead of something that’s more corporate, that our multiplier might be lower for a future exit.” And when he says something more corporate think .NET or Java, something that’s not as common in the startup space.
He continues, “He’s considering building version three of the software from scratch in a more corporate stack instead of continuing, developing, and adding features to our current product. We’ve talked to him about all the startups, deca billion dollar startups, that are literally built on our exact stack and how popular it is, how common it is, and how easy it is to find developers for the stack. Is there any validity that changing our stack in part or full will get us to a higher multiple at a future exit?”
When I received this question, my first response was, “I’ve never heard of that. That sounds very odd.” And I was almost upset by it, because it sounds like someone who maybe doesn’t know what they’re talking about or has a really unique frame of mind. Maybe they have not been in the startup space and they’ve only been in the Fortune 500 space, where perhaps tech would be weighted differently or something. But I was like, “Yeah, this seems like not a good idea.”
So what I did is I emailed Einar Vollset, who, as many of you have heard on the show, has a lot of experience with in particular SaaS M&A, and his response to that question was, and I quote, “Ha ha ha ha ha ha ha ha ha. This is the dumbest (beep) thing I’ve ever heard in my entire (beep) life. Ha ha ha ha ha ha ha.”
And then I was sitting there like, “Okay, so he has confirmed my thoughts on this and that’s good. It’s good to get a second opinion.” Four minutes later I receive another email from Einar that says, “Man, I’m still laughing.” And so then we went back and forth a bit about it. But the last thing, and the one caveat to it, is Einar said, “The only smidge of truth in this is if a particular acquirer already had a team that is qualified in a particular tech stack and your product is built in that tech stack. But really it doesn’t matter for the size deal this would probably be, and how the heck would you know what a specific acquirer is into years from now? Cargo Cult Management. I’d be worried about the CEO cratering the company to be honest.”
So obviously Einar has really strong opinions about it. I also had that inclination. I think he actually put it more eloquently than I did. But I wanted to bring this up because there’s two points to this. Number one, I think we should all be reminded that our frame of reference in the startup space, if we were to move into the Fortune 500 space can often be off for a bit. And this is actually why it’s hard to transition someone, let’s say a project manager or a marketing manager or even a developer at a huge company, 1000, 10,000, 50,000 person company, and pull them into a startup. Because it takes three months, six months, of just undoing what I’ll say are perhaps adaptive habits for being at a large company and really bad habits for being at a startup. Taking way too long to ship things, thinking about things too much, waiting for everybody’s permission, politicizing things. There’s all these things that happen at these big companies almost inevitably.
Vice versa, if you work at a startup and you get a job for a Fortune 500, Fortune 1000 company, it can be really challenging for you to try to fit in because the culture is so dramatically different and the pace and there’s a lot of differences there. So I think this is a good reminder of just how different companies function and how drastic the differences can be in the thinking between someone who maybe had run a half a billion dollar, billion dollar company, and who’s coming to run a handful of million dollar company.
But then the other point I want you to take away, of course, is, unless you’re written in a really odd stack that no one can find developers for, no one’s heard of, usually an exit is not going to depend on your tech stack. Again, if you’re using one of the standard tech stacks, it’s not going to be a big deal.
Now, I will say that when I acquired HitTail back in 2011, it was written in classic ASP, which essentially was a deprecated language and it was very hard to find developers for, and I did rewrite that in Ruby on Rails. And I think I would’ve had a very hard time selling that because it was such an old stack. It was old, it was crufty, it had a lot of issues, so rewriting it in Rails was a decision. Now, I didn’t rewrite it in Rails to fix technical glitches or the code is crufty or anything like that. If it had been Rails, I would’ve left it in Ruby. But the fact that ASP classic, which had, what, come out in ’99 or ’98 or something, and really had been superseded by .NET in 2001/2, I mean at that point it was a decade deprecated language and it would’ve been even worse when I went to later sell it in 2015. So those are some thoughts on rewriting your code base for a potential future sale.
The second topic is one that I saw some folks chattering about on Twitter, and it’s around founder salaries. And there was a comparison between companies that had raised a lot of funding and bootstrap companies. And there were companies that had raised, let’s say, 10 million, 30 million, 40 million, and the founder/CEO was making several hundred thousand, two, three, $400,000, and then someone had bootstrapped a company to a million or two million and they said that they were taking home more money than that founder. Which is probably true. I mean, this is no secret. We know that if you solo bootstrap or do a highly efficient SaaS company and you get it to a million, million and a half, in annual recurring revenue, there’s a ton of profit to be pulled off that and that’s an amazing business.
But the thing that it got me thinking about as folks were discussing it is this balance between near term and future earnings. And Derrick Reimer and I talked about this a few episodes ago where I asked him, “How do you think about this? Because you could take a pretty substantial salary out of your company.” In fact, he’s a TinySeed back company. He could take a quarter million dollars a year without paying TinySeed to anything, because that’s our salary cap. Anything above that, then he would pay us our prorata share of dividends. But I said, “You could take a quarter million out a year. I know that you are not. Why not? Why not just take that out?” In fact, he could take out more than the CEO who raised $50 million and then be happy that he had done that this year and next year. And his response was, “But I can use that money to grow my company and I’d rather grow it faster.”
And it comes back to that multiple of, if I add 1K MRR, that is 12K ARR. And if you think about an exit multiple, if you ever sell, and I’ll just say again, everyone sells, then take an exit multiple of say five times ARR and you’re looking at $60,000 for every 1K of MRR that you add, and usually more money if you’re smart and you’re executing well and you’re a knowledgeable founder and you have that hard work, luck, and skill, usually more money in your bank account means you can grow faster, or you can at least attempt to grow faster. And so the less money you take out, the faster that growth, and so you are actually thinking ahead.
I think of it like Warren Buffett used to say, and I’m paraphrasing, “I’m not cheap, but when I look at a dollar today, I know that I can turn that into 50 or 100 dollars a decade or two from now.” Because I know compound interest and I know compound returns specifically of investing in the stocks in the companies he buys.
And I’ll admit, I think about SaaS the same way. I think about startups the same way. That taking a dollar out of your company today is potentially reducing the growth, and it’s potentially taking an extra five, 10, $15,000 out of your company today, let’s say you could turn that into 1K, MRR. And I know there could be a whole conversation around, well, can you? And is it repeatable? Blah blah, blah. Let’s just say some dollar amount, 20, 30, $40,000, it’s another hire. Do we think they can add 1K of monthly recurring revenue if you hire a marketing person or a sales person or another developer or whatever it is, and instead of taking that out, you invest into that. Well that 1K, again, is 60K to your net worth, but it takes a few years to get there and it takes an exit and it takes other things to happen.
Now, there’s a balance here, because you can also be too far on the side of I’m basically going to live in poverty. I’m going to make 30K a year trying to live in San Francisco because I want to reinvest everything. That’s not healthy either. And so I think paying yourself a salary where you are totally comfortable and where you can pay those bills and you feel fine about it. But having that balance of, again, I’ve had lifestyle businesses where I just maximized the cash I pulled out of them. I would pull out 80% of the revenue as net profit. And it was amazing. These businesses were great and they were great cashflow businesses. But I didn’t mistake them for the longterm play that was eventually going to have my goal, which was to have enough money in the bank that I could work on anything I wanted to anytime and beholden to no one, including Google rankings and all the things that even when you have a profitable startup can get in your way of maintaining its profitability.
Bhavesh:
Hey Rob, quick question regarding stair step approach. If part of the marketing strategy that I’ve got includes writing blogs, I’ve figured out that I could potentially use these content to create a course to my target audience. Would that be a stair step approach or product that I could start using while doing the marketing? Or would that be something well off tangent that I shouldn’t be looking at? Really appreciate it if you could answer this question. Thank you.
Rob Walling:
Thanks for the question, Bhavesh. This is a really good one. The answer is, absolutely. And in fact, in the original version of the stair step that I presented at the Dynamite Circle’s BKK event in Bangkok back in 2014, it was a live presentation, step one, it included eBooks, courses, it included software, like downloadable software and AppSource software and simple things that you could use to get a foothold and learn how to make money on the side and then stack that up for step two.
And then step three was recurring revenue. This was not SaaS focused because, see, the Dynamite Circle is a mix of folks doing eCommerce, there’s Amazon FBA, there’s content sites, there’s productized services, there’s consulting freelancing, and there’s software and SaaS as well. And so when I presented it, I generalized it to that audience and info courses, as you’re saying, were on step one.
And then if you go to look at kind of what’s the seminal blog post for this now, when I actually wrote it up, it does focus on software and then stepping up to SaaS, because that’s really how I think about the world. That’s my more specific view of it. But I have been noodling for a while on taking the stair step method of bootstrapping and basically translating it to the stair step method of entrepreneurship. And it’s a little different, entrepreneurship’s higher level, and that would include this type of thing. And I also think that would include freelancing, maybe productized services, kind of stepping up there. So it’s a great question and the answer in my experience is unequivocally yes. I’ve done this myself, where I had my first book, Start Small, Stay Small, I had a couple online courses, I had a membership website, that was all happening as I had these other step one software products. And then I used those to lever up into SaaS, and from there the rest is history, so to speak.
And I’ve seen other folks doing this, so I think it’s a good skillset, and I think it builds exactly what the stair step is intended to do, which it brings you some revenue, brings you some experience, it brings you some skills, it brings you some confidence, it brings you maybe a bit of an audience and a bit of a network. And all of these things make it so much easier to then launch that subsequent product. So thanks for the question, Bhavesh. I hope that was helpful.
Our next question is also from Bhavesh sent just a couple weeks later.
Bhavesh:
Hey, Rob. I’ve just got a question regarding your stair step approach. Looking at the current situation, do you think from your experience that I can sell a Zapier type connection between several products to produce my value proposition to my market? Because at the moment, the potential users, or future users, are connecting several products together manually using Excel, or without anything, or using Zapier, because that’s what we are currently doing in our business. And my MVP is going to be just an API integration between several applications such as Zero.
Rob Walling:
The recording had a bit of an issue towards the end of his voicemail, so we did have to chop it off, unfortunately, almost mid sentence. But I think we got the gist of the question.
This is a good question. And the idea is creating a Zapier type connection, which is really just integration. It’s integration points between several different tools. And his question really is, can he sell a Zapier type connection between multiple apps? And this is just selling an integration, and the answer is absolutely. How many apps in maybe the Shopify app store, the Zero app store, the Salesforce app store, the insert name of platform here app store are really just piping data from the app itself into other platforms? And maybe it’s only into one, or maybe it’s into multiple, they’re just connectors, and those things sell for either a monthly subscription, sometimes a one time fee.
I think this is an interesting idea if you’re building it specifically for a specific niche, perhaps one that you’re familiar with, or maybe you’re working in that space yourself and you’ve seen this need, because if I go to the same app store, I’m not going to see the need if I don’t have the day to day operational need for this type of thing. And so Bhavesh mentioned a couple tools that he’s trying to tie together, and it was… What was it? Like Zero, which is accounting software and then time tracking and something else I actually forgot already. But you can get the idea that maybe Zapier integrations don’t exist between those three. Or maybe Zapier integrations can be a little finicky and a little brittle, and having basically a first class integration that hits the APIs and is just a single click to enable in my Zero or my project management app, and would I pay $15, $50 a month for something like this if it was a desperate need and I needed it to be super reliable? I would.
And as a result, this becomes a pretty interesting step one business, that if you recall the stair step, the step one businesses are usually smaller. Usually you don’t need to do a ton of marketing, because they already have the traffic and the lead flow coming in from the app store rankings. And these are apps that have platform risk and they are pretty much impossible, virtually impossible, to scale into the millions in revenue. But that’s not what a step one business is for. A step one business is for you to learn that experience and get the skills and all that that I mentioned earlier.
So yeah, I think this is super interesting. And I think the neat part about something like this is you could feasibly try to wire it up in Zapier initially, and the MVP could almost be a no code MVP. But if you are a developer, tying a few APIs together isn’t that hard. It’s not having to build the UX and build all that in. Basically just being able to roll some code around and deploy it and test it out yourself and then start charging people is pretty intriguing. So, thanks again for the question. Bhavesh. I hope that was helpful.
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Justin:
Hey, Rob, this is Justin from Fort Worth, Texas. Longtime listener. I had a quick question regarding the tension that can sometimes arise between your founder mindset and your engineer mindset. As a technical founder, we’re both responsible for the business side and the product, but also for building the technical infrastructure that’s going to support that product and the future growth of that product.
I initially built my SaaS app in Python and Django and specifically did that for the productivity gains that I get out of a language like Python. But as we are moving from proof of concept and beta into the actual product release and we’re getting paying customers on board, my initial thoughts start turning from product to scalability. How do I make it faster? How do I make it more scalable? And I’m constantly having to weigh these thoughts on prioritizing product important features and things that are going to move the product forward versus tech debt that’s on the backend that needs to be fixed. I’ve even thought about rewriting the app in something more performant.
I tend to push those aside, but I’m curious if you ever dealt with that as you were building out your products and how you fought against that to make sure that you’re making the right decisions at the right time. Tech debt’s always going to stack up, we’re always going to deal with it, but oftentimes there’s product things that might be more important. So I’m curious if you ever had to deal with that and what the process was to work through what are the right decisions to make at the right time. Awesome. Well, I appreciate your time and hope you have a great week. See you.
Rob Walling:
All right, Justin, thanks for that. This is absolutely a question every SaaS founder, every software founder, has to answer, and it’s one that I dealt with many times over the years. And pretty much almost without exception, every SaaS founder I talk to, whether I’m investing, advising, or just giving one off advice to, one of the biggest pain points of their job as founder is not enough time. “I can’t do everything. How do I know what to spend time working on? Should I market, should I sell, should I develop?” And I do have this framework around leaning into uncertainty that is like, “What should I be working on in general across the business?” And it’s that you should work on the uncertain things as the founder until you figure them out, and then you should hire folks to do the things that are more certain.
I’ve talked about that on the podcast in the past, I actually wrote a section of my book that is actually getting, I don’t want to say close to being done, because let’s be honest, you finish a book and then like five months later you have all the stuff to actually print the book. You got to get layout and designs and all this other stuff.
But all that said, that’s not really the question that you’re asking. You’re not asking me, “Which parts of the business should I work on,” you’re just asking about playing engineering versus everything else, I think. There’s engineering, which is fixing technical debt, improving performance scalability, then there’s engineering that is building new features, and then there’s everything else. There’s doing sales and marketing and support and all that.
Usually support and customer success tend to be easier because you get a support email, you respond to it. And if you have someone to onboard, you do it. The harder ones are like, “Should I switch over to marketing today or should I work on the product or should I fix tech debt?” And it’s always a tough balance and that’s why being especially a solo founder is pretty tough. And that’s why especially being a solo founder without funding to hire your co-founder, in essence, or to hire someone who can do this other stuff, is even harder. And again, this is why the stair step is such a popular framework, because if you do that, you eliminate a huge piece of your decision making, because at that point you’re either building or supporting.
I mean, that’s kind of it. You build a Shopify plugin, you’re not out marketing that thing, not unless you want it to get past a certain point, but usually it’s in the app store and you’re just getting that traffic coming in. Same with wordpress.org, it’s much less of a going concern than once you have a full blown SaaS app. So a single founder, bootstrapped, first time SaaS founder, is really hard. Nights and weekends especially add to that really, really, really hard.
And this is why I would advise, again, Justin, I know you’re already working on something, so keep doing that, you’re in the middle of a product, but the idea of the stair step and of the step one and step two is to eliminate part of this really difficult time. And that’s also the idea behind raising some funding. And you know that I have not been anti-funding and I’ve not been pro-funding, I just view funding… It’s like saying, “Rob, are you anti-hammers?” And it’s like, “Well, no. When I need a hammer to do a job, I go grab my hammer and I pound in the nail. But I also don’t use it to screw in a screw, because it’s not made for that.”
Funding is a tool, that’s it, so why would I be anti or pro? Know what you’re getting into, use the right tool for the right job, know the trade offs that you have to make with it. But that is why indie funding, TinySeed type funding sources, have become so much more popular for bootstrappers, because you are at a point where it’s really hard and there’s just no two ways about that. And in that situation, it’s a lot of hard decisions with incomplete information, as I like to say.
But to answer your question more specifically, what I’ve seen as folks start to scale and they’re trying to balance, let’s just say, technical debt versus feature building, I will often see either if they’re using sprint models, then one out of every four, one out of every eight sprints is dedicated purely to technical debt and cleanup, or it’s 20%, or some number that you feel comfortable with, of the time is spent cleaning up technical debt as you go forward. So if you’re not doing sprints, it’s one day a week or if you have four developers, five developers, one of them rotates around and just does all technical debt stuff.
80/20 is a reasonable thing to think about. Some teams want to get rid of more technical debt and some don’t care as much about it. So that’s more on the engineering side. If, as a single founder, I was weighing engineering versus marketing, I mean, I think as engineers we want to lean into the stuff we’re comfortable with and we love doing, and of course that’s building product. That’s why we start startups is to build product, and so I think you need to really resist that urge. I think you need to be very mindful that marketing and sales are going to be something that your psyche naturally pulls you away from. Your lizard brain is going to constantly say more code, more code, more code, code works, code makes the business successful. And that’s not necessarily true. It can be, but for the most part, driving more leads, optimizing those funnels, talking to people, making sales and onboarding are what’s going to actually grow the business, and the code is the product that allows the business to exist.
Don’t get me wrong, it provides tons of value to your customer. Obviously, as a product person myself, I don’t minimize the value of the product itself or of the code, but it is just the common trope, and I see it over and over with folks who are just overbuilding and spending way too much perfecting, and they redesigned their homepage and they rewrite their copy and then they have another redesign, and then they redesign in the app because they didn’t like it. And you know what, I’m just going to scrap this in rewrite the whole code base, and then I’m a year and a half later it’s like, why haven’t you just sold? Why haven’t you just sold? Just marketed? Get more people into the app and start growing your MRR. I appreciate the question Justin, it’s a fun one to think through and I hope that was helpful.
So that’s it for today. I hope you enjoyed as I ran through these listener questions. We have a pretty decent backlog, although several of these, since they were video or audio, jumped straight to the top of the stack. It looks like there’s about a dozen text questions and about two or three video questions right now. If you want to ask a question, go to startupsfortherestofus.com and click the link at the top of the page that says ask a question and you could submit one in any format there. Or you can email straight to questions@startupsfortherestofus.com.
This is Rob Walling signing off from episode 631. Thanks so much for joining me this week.
Episode 630 | Approaching $1M ARR as a Niche SaaS Founder
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In episode 630, Rob Walling chats with Jonathan Weinberg, who is the founder of Builder Prime, a CRM software for home improvement contractors. We chat about how he came up with the idea for Builder Prime, getting early traction, and finding product-market fit.
Topics we cover:
- 2:46 – Getting Builder Prime to almost $1M ARR
- 3:32 – Deciding who to hire next
- 4:40 – How did Jonathan come up with the idea for Builder Prime?
- 8:29 – Jonathan’s decision to quit his day job and work on Builder Prime before it made any money
- 10:55 – The unique steps that Jonathan took to get early traction
- 17:05 – When did Jonathan realize he had product-market fit?
- 24:04 – Jonathan’s hockey stick growth moment
- 28:31 – What’s next for Jonathan?
Links from the Show:
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling:
Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling. This is the podcast for folks who want to build amazing startups, but they want to maintain their freedom, their purpose and their relationships as they do that.
You can describe these startups as bootstrapped or mostly bootstrapped or non-venture track or indie SaaS. It’s a bunch of different ways, but we know that the gestalt of the movement is that people want to be in control of their destiny and not beholden to anyone else.
I really appreciate if you’ve left a review or a rating in Apple Podcasts. I’m on my drive for 1,000 ratings and as of a couple days ago, 998. The most recent review was from Val Sopi. He said, “Startups For the Rest of Us is everything you need in a podcast show about bootstrapping a SaaS business. From pricing strategies to marketing, all the way to real stories from the trenches, it has it all.” Thanks for that, Val.
You don’t even have to write a review. If you click that five star button in Apple Podcasts, we’re going to hit 1,000 in no time.
I really do appreciate everyone’s support. It helps us grow the podcast, and it helps keep me motivated to keep shipping episodes.
Today I talk with Jonathan Weinberg. He’s a single founder of an app called Builder Prime, which is CRM software for home improvement contractors.
Jonathan is approaching a million ARR as a niche SaaS founder. He’s serving home improvement contractors. Obviously, there are only so many of those in the country and only so many of those who don’t want to use paper and pencil or don’t want to use Excel, and actually do want to purchase a SaaS app to handle a lot of their client communication.
We touch on how he came up with the idea, how he got early traction. We of course, have our recurring Startups For the Rest of Us segment, when did you know you had product market fit and others. I hope you enjoy this story. Let’s dive in. Jonathan, thanks for joining me on Startups for the Rest of Us.
Jonathan Weinberg:
Oh, thanks so much for having me, Rob, come to be here.
Rob Walling:
Yeah, it’s good to have you, man. You’re a listener of the show. Right?
Jonathan Weinberg:
I am. I was a late starter, to discover the podcast, but since I did discover it, that’s basically every single week.
Rob Walling:
Oh, awesome. That’s cool. So we’re here to talk about Builder Prime, sir. This is a pretty incredible SaaS company that you’ve built.
I think a lot of folks listening to this, would love to build a company that has been mostly bootstrapped to this point and have the success that you’ve had.
Your H1 is the only does-it-all-contractor, CRM software suite. Builder Prime has every tool you need to scale your home improvement business. That’s how I usually describe it when I mention it, here and there, ’cause it’s such a good example of a niche piece. I’m always like, it’s CRM software for home improvement contractors. Is that how you describe it too?
Jonathan Weinberg:
Yeah, that’s the brief version of how I would describe it. Yeah.
Rob Walling:
Talk about where you are, in terms of progress.
Jonathan Weinberg:
Absolutely. So we’re about to hit a pretty big milestone in the next month or two. We should be hitting a million in ARR. So, pretty excited about that.
We’ve got five people on the team, including myself, right now. Looking to grow that out a little bit further. Hopefully going to be hiring another couple of people here in the next few months, just going from there.
Rob Walling:
That’s cool, man. A million ARR with only five people, so you’re running it pretty profitably I’m guessing.
Jonathan Weinberg:
Yeah. I mean, I’m looking for places to spend money now, but yeah. The last two employees to the team was actually pretty recent, started just a couple of months ago.
So, we were three for a while. Now we’re five. Hopefully getting to seven in the next couple of months, but yeah.
Rob Walling:
Do you find it hard to decide on what the next role is to hire? Because this is something I hear from a lot of founders. It’s like the first hire, I can give a lot of guidance. It’s like, usually support’s pretty easy to outsource. Or you have to build features to keep up with the market, so you’re going to hire developer, or well, we need to do marketing set.
I would say the first one may be easier to figure out. But as you go, once you’re at five, it’s like, well, what is six? Aren’t there competing priorities for that? How do you think about that as a founder?
Jonathan Weinberg:
Yeah. I mean, it’s actually not that difficult. It’s one of two things. One is, well, what job do I want to fire myself from next? That certainly provides input into it.
The other thing that, for example, I find myself keep trying to get to, I keep trying and trying and trying to focus on marketing. I can never focus on marketing, so I need to hire somebody for that. So, it’s pretty straightforward.
I’ve gone back and forth, as to whether my next one should be that marketing person or another developer. But yeah, I’m going to do both of it at the same-ish time. So, it hasn’t been too difficult to figure out what’s next.
Rob Walling:
I want to take people back to the early days of Builder Prime, so they can hear how you came up with the idea, whether you validated it, whether you built it.
I’m chuckling because you are the reason that in the State of Independent SaaS survey, when we ask, how did you come up with your idea, and you are the reason that there is an option on there that says poor customer experience. Is that the origin of this?
Jonathan Weinberg:
It’s not, actually. No. It was actually a great customer experience, which is the odd thing. I had no experience in the home improvement, business prior to this.
We bought our first house in 2011. We went to get our bathroom remodeled. We went through the whole process of selecting a contractor and getting the job done. It was actually just an amazing experience.
Loved the transformation. Started thinking about, oh, this would be cool to have a business, my own home improvement business, where I can do work like this. But I was never really going to get away from the tech side of things.
So, the idea just started to sit in the back of my head as far as, well, if I were doing a business like this, what type of tech would I want? What type of systems would I want, to be able to manage this effectively?
There were inefficiencies, in terms of how our contractor operated. Yeah, if I were doing this, I would fix those things, for sure. I could do this much better, if I pictured myself in his shoes, with these types of tools. So, that’s really where it came from. But it was a great experience really, that drove it.
Yeah. I did not validate the idea. Not the most advisable thing, but it seems to have worked out. So, it really just from there, after I got the idea in my head, sat there for a while and finally started to tinker and all of that.
I called up a couple of contractors that I knew, including the one that did our bathroom and just asked, “Hey, is this something that you think is needed? Is this something you would use?”
Of course it was, “Oh yeah, that sounds really cool,” but nobody committed to anything. Nobody said, “Oh yeah, I want to pay you now and once it’s ready, let me know.” Nothing like that.
So, it was really just building stuff and building and building and building and hoping that it was going to work.
Rob Walling:
So playing with fire a little bit?
Jonathan Weinberg:
Yeah.
Rob Walling:
Which is dangerous. You could’ve built for a long time and not got traction. Yeah.
Jonathan Weinberg:
Yeah. I mean, I was getting a lot of early feedback. As I was building, there were a few different people in the industry that I was getting feedback from. So, it wasn’t like I was completely building in a vacuum. So there was a lot of that.
But yeah, it was 2016 that I quit my job. It was really not until mid-2017, that I got my first paid customer.
So, I was just building the whole time. I wasn’t even sure if it was ready yet. I was getting feedback the whole way, as I was developing. But my first paid customer is not the one who was providing that feedback, actually.
Rob Walling:
Couple things that are interesting. One, for some reason I had it encoded in my mind, that you had a home improvement contractor who did work and you thought the work was good, but you didn’t like the experience. Therefore, you set out to build it.
It sounds like that’s a half truth. It’s human memory. You told me this story once, three years ago, probably, on TinySeed interview or at a 2- minute thing, where I’m doing six calls back to back. I think I encoded that in my head.
Jonathan Weinberg:
Part of the sales experience was not the greatest. For example, the part of getting the contract, it was a Word Doc. I had to print it out, sign it, scan it, send it back.
So, there were parts of the sales process and parts of the communication that were not the greatest. That’s where I set out to try and solve some of those issues. So, that could be where some of that’s coming from.
Rob Walling:
Right. So you didn’t do much validation. You had a few phone conversations. You quit your job without a product. So, did you have money in the bank? You have a trust fund?
Jonathan Weinberg:
I did pretty well in my career. For the first 12 years I was in corporate America, worked my way up the ladder into middle management. Middle management was not for me.
For me, I either got to be all the way at the top or all the way at the bottom. I think I can be happy in either of those spots, but I don’t like being in the middle. But yeah, that just wasn’t the right thing.
I saved up money. I’m a conservative spender, so I saved up a good bit of money. I knew I wanted to do this. I was saving up for that purpose. I wanted to have some runway to be able to basically not make any money for a little while.
Rob Walling:
Were you married at the time?
Jonathan Weinberg:
I was married. No, I had both of my kids, so they were five and two.
Rob Walling:
How did you get your wife on board with that decision to quit the day job with no income?
Jonathan Weinberg:
Yeah. She was always very supportive. Part of it, we were living in Pittsburgh, Pennsylvania at the time. She wanted to move back to New York City, where we had lived prior.
I’m originally from New York. I really liked living in Pittsburgh. So part of her idea was, hey, let’s move back to New York. We’ll be closer to your parents. We’ll get more help with the kids. You can quit your job and do what you want to do. So, that was part of it.
So we moved back and to a much more expensive place to live. I still quit my job.
Rob Walling:
Was that scary for you? Because that would feel very stressful to me, to quit the job. Or did you just say, worst case, I go back and get a job?
Jonathan Weinberg:
Yeah. Oh, man. The first six months, I would say, at least of making no money, was a shocker for me. It was so stressful. I’ve never been in that position before. That part, it was an adjustment. It was definitely an adjustment and a roller coaster.
Rob Walling:
I can imagine. So you quit the job. You have two young kids. You’re building a startup, which I’ve been in pretty much the identical situation. Not where I quit the job though. I had other income coming in from products.
So you built for a year before you got your first customer, it sounds like, 12 to 18 months.
Jonathan Weinberg:
Yeah, about six months. Yeah.
Rob Walling:
Oh, only six months? Okay.
Jonathan Weinberg:
Yeah. I mean, there were nights and weekends before [inaudible 00:10:51] all that, but yeah.
Rob Walling:
Sure. Sure. In process, yeah. How did you get your early traction? How did you get your first whatever, five or 10, 15 customers?
Jonathan Weinberg:
It was just iterating, listening to feedback. There was one really interesting and helpful thing that happened. I believe he was my third customer. I met him at a local home improvement contractor association meeting here, that I joined up.
He became my third customer, was really into it, lots of great feedback. He was helping me to understand some of the things from the industry and what kinds of things were important. A lot of it was really great.
I tried to use my filter as far as, okay, yeah, that makes sense. This, I’m not so sure this fits with the vision. But he was giving me a lot of really good feedback.
At the end of 2018, start of 2019, he was already a customer for a while, but he called me up. He’s like, “I had to fire my office manager.” He’s a window and door company.
He’s like, “I had to fire my office manager and I really need some help. I need somebody in the office. Why don’t you come and work for me? I’ll pay you to be my office manager.”
Nah, I can’t do that. I’m working on the business. I got to keep growing this thing. I got to keep working on it. I got to focus on it.
He kept coming back, “Why don’t you come? Why don’t you come work for me? Why don’t you come work for me?”
I thought about it a little bit more. Honestly, my runway was running out. At that point, I don’t think I had started paying myself yet. So, it was like two years in and I still hadn’t paid myself. The runway was starting to get less than I was comfortable with.
You know what? He said I can do demos. I can work on it half the time. I just got to be in the office, do about half… basically work four hours, half the time each day.
It’s like, all right, you know what, let’s try it. Turns out it was one of the greatest things that could’ve happened.
I got to use my own product as a user, every day. I got real time, amazing feedback, as far as what’s needed and what this industry really needs. That was the time that I did a bit of a pivot.
Prior to that, to be honest with you, I didn’t know I was building a CRM. If you would’ve told me when I was first starting it that, hey, you’re going to pivot this into a CRM, I was like, I’m not going to build a tool for sales. I’m not the sales guy.
But based on where the need was and the feedback from him and from other customers, it’s just kind of where things naturally went. That’s where the gap was. That’s where the need was. That’s where we started getting a lot of really good feedback about those types of things that we were building.
So, it was during that time of being a user of my own product and working directly in the industry at the same time and learning a lot more about the industry, that I didn’t know, that actually helped to shape what it is now.
Rob Walling:
What was it before?
Jonathan Weinberg:
It was more of a project management tool.
Rob Walling:
For during the project?
Jonathan Weinberg:
Yeah. I mean, it did the contract process, like I was saying earlier, about how the process around signing the contract wasn’t great. So, we built the e-signatures and all of that type of… and the ability to create the estimate, get it signed and do all of that early on.
And then it was about scheduling the job and scheduling your employees and your subcontractors and having a Gantt chart, with dependencies between this task and that task.
All of that stuff is actually still there. It’s still in the product. That’s one of the things that that’s made us a little bit unique compared to our competitors, is because other CRMs in this space, there are other CRMs for home improvement companies and they don’t have either that production project management at all or some of them don’t even have the estimating. The ones that do, it’s much lighter.
So, like you were reading the H-1 earlier, the does-it-all CRM software suite, it does more than the CRM because that’s kind of how we started. We started with the estimate and the production management side, and then the CRM pivot came later. But that’s really been the focus of the product development for the last three years.
Rob Walling:
In terms of finding early customers, a lot of folks find that’s very difficult because it’s the cold start problem, where you basically have no brand name. No one knows who you are. No one knows how to find you, no one knows that they should be looking for you.
So was it cold outreach in the early days? Did you make it to the top of Hacker News and the r/construction subreddit?
Jonathan Weinberg:
One of the things, so with that pivot and repositioning as a CRM, that’s what people search for. That’s why we always say, hey, what do you do? Oh, we’re a CRM for home improvement companies, because people are searching. The people know the term CRM. They know they’re supposed to have one. They know it’s a big part of what their businesses are, especially the ones that are growing and scaling and have a significant volume of leads that they need to track and manage. So, people searched for that.
We built out a couple of… I’ll say maybe five or so different copies of the landing page, with different H-1s on it. It was best CRM for painting contractors. It was a different header image. It was best CRM for window and door companies, with a different header image.
It was basically just a copy of the landing page, but it seems to have worked reasonably well for people that were looking for us in those real specific niches.
Rob Walling:
Right. So it was an SEO play then?
Jonathan Weinberg:
Yeah. Yeah. Yeah. Pretty much. And then there’s some word of mouth as well.
Rob Walling:
Yeah, I would imagine that. Construction is a small industry. My brother runs an electrical contractor. There are not a kajillion of these contractors.
Even if you talk in California alone or in the country, they talk a lot. The owners talk to each other. So, I can imagine if you get a reputation that that brand… Once you get past the cold start and you are now known as a solid product, I would imagine people would be passing that around.
All right, Jonathan. We’re going to do the Startups For the Rest of Us segment, when did you know had product market fit?
Jonathan Weinberg:
Like most people will say, it’s a sliding scale of product market fit. I think in the early days or the earlier days, I’ll say, started to realize that we’re getting there, based on just customer feedback.
Even though we didn’t have a lot of customers just yet, the ones that we did have, we’re talking to them all the time. It’s very hard for us to get any kind of customer without talking to them, at least for one or two meetings, if not a good bit more. So, we get a lot of feedback.
We would have people come and say, “I’ve been searching for something like this for so long, I can’t believe I finally found it.” They would say different things where it’s like, they were fans. They were actual fans. It’s not often that somebody says, I love my CRM, but we were getting people saying, “I love this CRM.”
It was like, all right, we’re on the right direction. We’re finding a need. There’s a need here. We’re filling it, at least for some of them. We got to do it for more, but at least for some of them, we’re filling it. So, that was the first part of it.
A little bit later on, this is a little over a year ago, we had a really bad outage. I did a database upgrade over the weekend. Monday morning came.
During the week is when we have much higher traffic than on the weekend. Monday morning came. About 10:00 AM, everything started to crap out.
There was just, people couldn’t use it. The database was just obviously not able to keep up with the load. We just upgraded the database. Why is it now having all of these problems? We’re out for probably at least a good four hours. This is the stuff that nightmares are made of.
But the thing is, we’re getting calls from customers saying, “What’s going on? I can’t access it. Keep us posted.” They’re saying, “I don’t know what to do without the system. I don’t know what’s going on. I don’t know how to do anything.”
So, it was clear that, people are using this software. It’s helping them. With it not being there, it’s a big problem. So, that was another little clue I guess, as to, yeah, it sounds like we’ve got some product market fit.
People are really using it. They’re getting a lot of value out of it. Being down for any period of time is a big problem. So, that was another part of it.
Then as we continued on from there, net negative churn. So that’s a pretty good indicator that people are not churning out. That’s another really good indicator.
Even just yesterday, we got a phone call from a manufacturer for concrete coatings. We have a lot of customers that are dealers for this particular product. They do concrete coating jobs. We happen to work really, really well with them.
They called us yesterday and they said, “We’re having a national dealer meeting in December. We are going to kick out your competitor that’s been sponsoring for the last however many years. We’d really like you to be there, because we keep getting such great feedback from all of our dealers, about the product.”
That’s just the next level. It’s like, all right. I mean, they’re not just telling us they like the product. They’re telling everybody they like the product. Obviously, the revenue and the metrics tend to speak for themselves as well.
So yeah, it’s been a sliding scale. I think it’s something that you’re always trying to get better, in terms of the product market fit.
We’re continuing to do that. There’s still a lot of things that we’re continuing to do, to evolve the product and keep up with a changing market.
I mean, markets aren’t static. Markets change. So, you also have to keep the product up with a changing market. It’s never ending, trying to keep up with it.
Rob Walling:
I’m glad you called that out because I always say on this show, product market fit is a continuum. It’s not a one or a zero. It’s more like a one to a hundred.
At different times, with different audiences, you have more or less product market fit, stronger and weaker, as we like to say.
In addition, you just said markets are not static and they change. I have absolutely seen products get pretty strong product market fit, and then the needs of the market change.
An open source tool comes out, for example, that suddenly a lot of people start using and is almost the equivalent of what you’ve built. And suddenly it’s like, now I have strong product market fit again, not have people canceling, have people really, really want what I’ve built. I have to pivot. I have to add more features. I have to give more value. There’s something there.
So there aren’t that many software companies that last 10, 20 years. There are some. We can call them out. But even those that last, they don’t do it with one product. Microsoft, Oracle, Intuit, whoever we could throw out who’s been…
Even, I guess MailChimp’s one. But man, there’s some exceptions around there. Their product is now several products, just under one subscription. It’s not just email marketing anymore. It’s landing pages. It’s Facebook ads, I think you can build directly, MailChimp. So, they’ve added a bunch of stuff.
These are good problems to have because you don’t run into these until you have the kind of traction that you do, until you start getting bigger and you do have product market fit. Then you get the competitors coming in.
The other thing I want to call out is this idea that folks are such advocates for you. They’re such fans of your product that they’re telling everyone they know, it sounds like.
That is what Jason Lemkin calls a mini-brand. He says, when you hit about… once you get north of one million ARR….
I distinctly remember this happening with Drip. It was a little before that because of the circles we ran in, where everybody talks online. So, it was somewhere between half a million and 750, if I recall.
But you’re seeing that now, where you’re not Pepsi, you’re not Disney, you’re not Marvel. But a mini-brand is that, you have a brand within your circle, that a lot of people have heard about you.
In fact these days, I bet if a group of contractors are sitting around the campfire, I bet they’ll be surprised if a person there hasn’t at least heard of Builder Prime.
Jonathan Weinberg:
Yeah. I think that the market is also a lot bigger than people might expect. We’re still such a small player in this space. There’s so many people that are using other CRMs and estimating tools and all that kind of stuff. There’s so many people that are not using anything or don’t even know that this is something that they need, or maybe it’s something they don’t need yet.
So, I think there’s still a lot more opportunity to break in, in terms of name recognition. People really, even if they’re not customers, at least hearing of us, a lot more have these days.
It’s funny. There was a story… this was about a year ago or so, where one of our vendors got an Uber. Somehow, they got to talking about what they do. The vendor that got the Uber, the person driving actually also worked at a home improvement company that was a customer of ours.
They got to say, “Oh yeah, I use Builder Prime every day.” The vendor’s like, “Oh yeah, we work closely with them,” which was kind of crazy to hear.
There’s still so much room to grow, in terms of this industry and then that name recognition, but we’re definitely starting to make a dent.
Rob Walling:
I’m looking at your MRR graph. There was a point, it was maybe late last year, early this year, where you hit what I call the bootstrapper hockey stick. Because venture says the hockey stick, and you see Facebook and Google. That’s just next level stuff. But for bootstrappers, your growth really started accelerating at a certain point.
You and I had had a conversation last year, where you said, “Right now I’m growing at,” whatever you were growing at. You’re like, “I want to double or triple that by the end of the year. How do I do it?”
Came up with a bunch of strategies. You obviously executed pretty well. So my question on this is, how did that happen?
Every bootstrapper wants to achieve the bootstrapper hockey stick. What do you think you did that worked?
Jonathan Weinberg:
The flat part of that hockey stick is actually where we screwed up. We made two big changes at the same time, right around Memorial Day last year.
We changed our pricing, which essentially resulted in an increase in price. We also started moving away from emphasizing, book a call with us. Book a call with us. Let us help you. Let us help you.
So, we tried to push people more to self-service. They weren’t looking for self-service. They wanted that hand holding, those calls, those Zoom sessions. So, we did both of those things at the same time.
We weren’t quite sure what the problem was, but basically, we flattened out for a few months. And then it’s like, well, people aren’t complaining about the price. That doesn’t seem to be where we’re having the resistance.
Let’s reverse course. Let’s go completely the opposite on the phone calls and the onboardings and all those Zoom meetings. Let’s get meetings on the calendar. That’s our new focus. Let’s get meetings on the calendar.
So, we did that and things turned around. Not only that, they turned around with higher pricing. So, we had that little blip, but the higher pricing definitely was a driver.
Besides that, it was also just continuing to iterate, add some key features. For example, we added automated text messaging and SMS-based marketing and all of that kind of stuff.
That was actually a big driver for people to upgrade their subscriptions. It a completely different revenue stream, because we charged separately for text messaging, in addition to being on a higher tier subscription.
So, some different things like that. But definitely the price increase, continued seeking of that product market fit and some key new features and revenue streams, I think altogether, is what really helped to accelerate that growth from that point.
Rob Walling:
Yeah. Often, when we see an acceleration in growth, pricing has something to do with it, pricing and/or the sales model. It’s both things you were trying to change.
Obviously, your recommendation at this point would be, don’t change both of them at once. That would be mine as well. Right?
Jonathan Weinberg:
Yeah. Yeah.
Rob Walling:
You do one. You let it settle because you know all your metrics, you know your numbers. When you change two things, you’re like, uh-oh, I don’t really know. I don’t know which of these impacted it.
But what’s funny is, you quickly reversed course. You were A, willing to make pretty drastic changes, like raising prices and changing your sales model, which is scary and risky, but you were willing to take that risk and maybe make a mistake.
B, you did them relatively quickly and you undid the mistake relatively quickly and you pushed forward.
That’s what I see great founders doing is that, A, willingness to make mistake, B, the willingness to do things quickly and C, the willingness to make potentially scary, strategic high-level changes because those are often the ones that move the needle a lot.
You can make a bunch of little tactical things like, well, let’s do a little more SEO, or let’s do a little more cold outbound. Or you can say, well, let’s double our pricing. Let’s go demo only or no demos anymore. These are drastic changes, and they can be scary.
Jonathan Weinberg:
Yeah. Definitely don’t do both at the same time. One big thing at a time. But yeah, at least we figured out what the… We let it go for a couple of months. It was the summer. Everyone was saying, oh, the summer is slow.
So, it was like, oh, it was probably just slow summer. We just happened to make these changes right before that kicked in.
But that wasn’t the case. It wasn’t because of the slow summer. We screwed that up, and we didn’t know which one it was. But we took an educated guess, reversed as quickly as possible, and everything started coming back stronger than before.
Rob Walling:
Before we wrap up, I want to ask you maybe one or two more questions. With permission I want to talk about this topic that you raised to, I think it was Anar and I, via email a few weeks back.
You were saying, “I’m working a lot and there’s a chance I might want to… What’s next? Should I sell the business? Should I think about selling the business?”
You had a big decision. Where are you today? Where did you wind up? What was that decision process like for you? Because I know that there are a lot of folks who build a great business and who get to this point, whether it’s half a million, two million, five million ARR, where you have a lot of options on the table, to get liquidity. You also have, not enough diversification is what it mines to. ‘Cause you have literally millions of dollars in net worth, tied up in a software company. So, talk us through what you were thinking and where you wound up today.
Jonathan Weinberg:
Yeah. Yeah, for sure. So we’re reaching that stage where there are more options on the table. I work a lot. I work too much. I am seeking more balance.
I think the idea of selling is a bit of an overreaction to that. I would go from working too hard to not working at all.
I love doing this. I love what I do. I’ve been doing it for six years now, and I’m not tired of it.
I don’t want to work quite as much as I’m working now. I’d like to get that down to normal levels, be more present for other areas of my life and my family and everything like that, but I don’t want to go to not… I don’t know what I would do next. I like doing this.
So I started thinking more about, well, maybe take some chips off the table and see if I get some investment, take on additional equity partners or something like that.
Honestly, I could do that, but it’s going to take time and effort away from what I want to do. That’s continue to build and continue to just…
I can hire more people. I can grow the team, I can do all that stuff. I don’t need the money for that. It would just be really for me, personally.
You had mentioned something on the podcast just recently, about how every additional, let’s say thousand dollars in MRR that you add, well, that’s times 12 for ARR and times whatever multiple you want to go with. Let’s say a 5X multiple. Every month, you’re adding 60,000… for every thousand dollars of MMR, that’s $60,000 in equity that you’re adding to the value of the company.
You start thinking about that even in higher amounts that you’re adding each month. And it’s like, wow, that’s pretty powerful.
So I’m going to keep trying to fire myself from as many things as I can and grow the team and just work towards working less, but there’s no need to do anything different.
I love what I do, and I really want to keep building this. See how big we can make it. Keep helping more people. Keep getting more of those fans. That’s really what I’ve always sought out to do, is to build something that people use on a large scale and get a lot of value out of.
So, if I can continue doing that and just not stressing myself out quite as much as I am now, that’s really where I want to be at.
Rob Walling:
Yeah. Given all that, for you, where you’re at, selling would be a permanent solution to a temporary problem, because you’re going to be able to figure out how to get around the overwork and the stress. I believe in you to do that.
I do think a lot of founders come to that point where they feel the stress and an exit just becomes… it’s one possible solution, but there are many others. It’s to be less stressed. It’s to figure out how to do that, whether through hiring, whether through… I mean, there’s tons of options.
I’ve done therapy. There’s a lot that you can do. You can take a sabbatical. I know a founder who took a sabbatical just a couple months ago. He’d been working on a company like 10 years now. He’s kind of burning out. He took three months off because they’re bigger. He could actually do that.
So, there’s a lot of ways to think about that. I think if you’re listening to this and you’re at a point where you’re thinking about selling, A, now’s not the best time to sell because the economy. But B, just make sure that there are permanent reasons why you want to sell. It’s not just temporary roadblock stuff.
Jonathan Weinberg:
Yeah, no, very well said.
Rob Walling:
Thank you so much for joining me, sir. If folks want to see what you’re up to, BuilderPrime.com. I appreciate it.
Jonathan Weinberg:
Yeah. Thanks so much for having me, Rob.
Rob Walling:
Thanks so much to Jonathan, for joining me on the show. It’s always great to have longtime listeners on the show. It’s great for a couple reasons, because they know the format of the show, they know how we tell stories here.
But also, it makes me feel incredible to have folks who may have not had a business at all and decided to start a side hustle, and then they go full time. And then, eventually they’re approaching a million ARR. They’ve built an amazing company, that has changed their life and provided them with the freedom and the purpose and allowed them to maintain incredible relationships, while they remain in control of their company and of their destiny.
Very meaningful to me, to have folks like Jonathan on the show, who have followed my journey, have followed this podcast, have followed MicroConf, TinySeed, whatever it is. That’s the mission of all of those things, to multiply the number of independent SaaS founders in the world. So, thanks for joining me again this week and every week. This is Rob Walling, signing off from episode 630.
Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling. This is the podcast for folks who want to build amazing startups, but they want to maintain their freedom, their purpose and their relationships as they do that.
You can describe these startups as bootstrapped or mostly bootstrapped or non-venture track or indie SaaS. It’s a bunch of different ways, but we know that the gestalt of the movement is that people want to be in control of their destiny and not beholden to anyone else.
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Today I talk with Jonathan Weinberg. He’s a single founder of an app called Builder Prime, which is CRM software for home improvement contractors.
Jonathan is approaching a million ARR as a niche SaaS founder. He’s serving home improvement contractors. Obviously, there are only so many of those in the country and only so many of those who don’t want to use paper and pencil or don’t want to use Excel, and actually do want to purchase a SaaS app to handle a lot of their client communication.
We touch on how he came up with the idea, how he got early traction. We of course, have our recurring Startups For the Rest of Us segment, when did you know you had product market fit and others. I hope you enjoy this story. Let’s dive in. Jonathan, thanks for joining me on Startups for the Rest of Us.
Jonathan Weinberg:
Oh, thanks so much for having me, Rob, come to be here.
Rob Walling:
Yeah, it’s good to have you, man. You’re a listener of the show. Right?
Jonathan Weinberg:
I am. I was a late starter, to discover the podcast, but since I did discover it, that’s basically every single week.
Rob Walling:
Oh, awesome. That’s cool. So we’re here to talk about Builder Prime, sir. This is a pretty incredible SaaS company that you’ve built.
I think a lot of folks listening to this, would love to build a company that has been mostly bootstrapped to this point and have the success that you’ve had.
Your H1 is the only does-it-all-contractor, CRM software suite. Builder Prime has every tool you need to scale your home improvement business. That’s how I usually describe it when I mention it, here and there, ’cause it’s such a good example of a niche piece. I’m always like, it’s CRM software for home improvement contractors. Is that how you describe it too?
Jonathan Weinberg:
Yeah, that’s the brief version of how I would describe it. Yeah.
Rob Walling:
Talk about where you are, in terms of progress.
Jonathan Weinberg:
Absolutely. So we’re about to hit a pretty big milestone in the next month or two. We should be hitting a million in ARR. So, pretty excited about that.
We’ve got five people on the team, including myself, right now. Looking to grow that out a little bit further. Hopefully going to be hiring another couple of people here in the next few months, just going from there.
Rob Walling:
That’s cool, man. A million ARR with only five people, so you’re running it pretty profitably I’m guessing.
Jonathan Weinberg:
Yeah. I mean, I’m looking for places to spend money now, but yeah. The last two employees to the team was actually pretty recent, started just a couple of months ago.
So, we were three for a while. Now we’re five. Hopefully getting to seven in the next couple of months, but yeah.
Rob Walling:
Do you find it hard to decide on what the next role is to hire? Because this is something I hear from a lot of founders. It’s like the first hire, I can give a lot of guidance. It’s like, usually support’s pretty easy to outsource. Or you have to build features to keep up with the market, so you’re going to hire developer, or well, we need to do marketing set.
I would say the first one may be easier to figure out. But as you go, once you’re at five, it’s like, well, what is six? Aren’t there competing priorities for that? How do you think about that as a founder?
Jonathan Weinberg:
Yeah. I mean, it’s actually not that difficult. It’s one of two things. One is, well, what job do I want to fire myself from next? That certainly provides input into it.
The other thing that, for example, I find myself keep trying to get to, I keep trying and trying and trying to focus on marketing. I can never focus on marketing, so I need to hire somebody for that. So, it’s pretty straightforward.
I’ve gone back and forth, as to whether my next one should be that marketing person or another developer. But yeah, I’m going to do both of it at the same-ish time. So, it hasn’t been too difficult to figure out what’s next.
Rob Walling:
I want to take people back to the early days of Builder Prime, so they can hear how you came up with the idea, whether you validated it, whether you built it.
I’m chuckling because you are the reason that in the State of Independent SaaS survey, when we ask, how did you come up with your idea, and you are the reason that there is an option on there that says poor customer experience. Is that the origin of this?
Jonathan Weinberg:
It’s not, actually. No. It was actually a great customer experience, which is the odd thing. I had no experience in the home improvement, business prior to this.
We bought our first house in 2011. We went to get our bathroom remodeled. We went through the whole process of selecting a contractor and getting the job done. It was actually just an amazing experience.
Loved the transformation. Started thinking about, oh, this would be cool to have a business, my own home improvement business, where I can do work like this. But I was never really going to get away from the tech side of things.
So, the idea just started to sit in the back of my head as far as, well, if I were doing a business like this, what type of tech would I want? What type of systems would I want, to be able to manage this effectively?
There were inefficiencies, in terms of how our contractor operated. Yeah, if I were doing this, I would fix those things, for sure. I could do this much better, if I pictured myself in his shoes, with these types of tools. So, that’s really where it came from. But it was a great experience really, that drove it.
Yeah. I did not validate the idea. Not the most advisable thing, but it seems to have worked out. So, it really just from there, after I got the idea in my head, sat there for a while and finally started to tinker and all of that.
I called up a couple of contractors that I knew, including the one that did our bathroom and just asked, “Hey, is this something that you think is needed? Is this something you would use?”
Of course it was, “Oh yeah, that sounds really cool,” but nobody committed to anything. Nobody said, “Oh yeah, I want to pay you now and once it’s ready, let me know.” Nothing like that.
So, it was really just building stuff and building and building and building and hoping that it was going to work.
Rob Walling:
So playing with fire a little bit?
Jonathan Weinberg:
Yeah.
Rob Walling:
Which is dangerous. You could’ve built for a long time and not got traction. Yeah.
Jonathan Weinberg:
Yeah. I mean, I was getting a lot of early feedback. As I was building, there were a few different people in the industry that I was getting feedback from. So, it wasn’t like I was completely building in a vacuum. So there was a lot of that.
But yeah, it was 2016 that I quit my job. It was really not until mid-2017, that I got my first paid customer.
So, I was just building the whole time. I wasn’t even sure if it was ready yet. I was getting feedback the whole way, as I was developing. But my first paid customer is not the one who was providing that feedback, actually.
Rob Walling:
Couple things that are interesting. One, for some reason I had it encoded in my mind, that you had a home improvement contractor who did work and you thought the work was good, but you didn’t like the experience. Therefore, you set out to build it.
It sounds like that’s a half truth. It’s human memory. You told me this story once, three years ago, probably, on TinySeed interview or at a 2- minute thing, where I’m doing six calls back to back. I think I encoded that in my head.
Jonathan Weinberg:
Part of the sales experience was not the greatest. For example, the part of getting the contract, it was a Word Doc. I had to print it out, sign it, scan it, send it back.
So, there were parts of the sales process and parts of the communication that were not the greatest. That’s where I set out to try and solve some of those issues. So, that could be where some of that’s coming from.
Rob Walling:
Right. So you didn’t do much validation. You had a few phone conversations. You quit your job without a product. So, did you have money in the bank? You have a trust fund?
Jonathan Weinberg:
I did pretty well in my career. For the first 12 years I was in corporate America, worked my way up the ladder into middle management. Middle management was not for me.
For me, I either got to be all the way at the top or all the way at the bottom. I think I can be happy in either of those spots, but I don’t like being in the middle. But yeah, that just wasn’t the right thing.
I saved up money. I’m a conservative spender, so I saved up a good bit of money. I knew I wanted to do this. I was saving up for that purpose. I wanted to have some runway to be able to basically not make any money for a little while.
Rob Walling:
Were you married at the time?
Jonathan Weinberg:
I was married. No, I had both of my kids, so they were five and two.
Rob Walling:
How did you get your wife on board with that decision to quit the day job with no income?
Jonathan Weinberg:
Yeah. She was always very supportive. Part of it, we were living in Pittsburgh, Pennsylvania at the time. She wanted to move back to New York City, where we had lived prior.
I’m originally from New York. I really liked living in Pittsburgh. So part of her idea was, hey, let’s move back to New York. We’ll be closer to your parents. We’ll get more help with the kids. You can quit your job and do what you want to do. So, that was part of it.
So we moved back and to a much more expensive place to live. I still quit my job.
Rob Walling:
Was that scary for you? Because that would feel very stressful to me, to quit the job. Or did you just say, worst case, I go back and get a job?
Jonathan Weinberg:
Yeah. Oh, man. The first six months, I would say, at least of making no money, was a shocker for me. It was so stressful. I’ve never been in that position before. That part, it was an adjustment. It was definitely an adjustment and a roller coaster.
Rob Walling:
I can imagine. So you quit the job. You have two young kids. You’re building a startup, which I’ve been in pretty much the identical situation. Not where I quit the job though. I had other income coming in from products.
So you built for a year before you got your first customer, it sounds like, 12 to 18 months.
Jonathan Weinberg:
Yeah, about six months. Yeah.
Rob Walling:
Oh, only six months? Okay.
Jonathan Weinberg:
Yeah. I mean, there were nights and weekends before [inaudible 00:10:51] all that, but yeah.
Rob Walling:
Sure. Sure. In process, yeah. How did you get your early traction? How did you get your first whatever, five or 10, 15 customers?
Jonathan Weinberg:
It was just iterating, listening to feedback. There was one really interesting and helpful thing that happened. I believe he was my third customer. I met him at a local home improvement contractor association meeting here, that I joined up.
He became my third customer, was really into it, lots of great feedback. He was helping me to understand some of the things from the industry and what kinds of things were important. A lot of it was really great.
I tried to use my filter as far as, okay, yeah, that makes sense. This, I’m not so sure this fits with the vision. But he was giving me a lot of really good feedback.
At the end of 2018, start of 2019, he was already a customer for a while, but he called me up. He’s like, “I had to fire my office manager.” He’s a window and door company.
He’s like, “I had to fire my office manager and I really need some help. I need somebody in the office. Why don’t you come and work for me? I’ll pay you to be my office manager.”
Nah, I can’t do that. I’m working on the business. I got to keep growing this thing. I got to keep working on it. I got to focus on it.
He kept coming back, “Why don’t you come? Why don’t you come work for me? Why don’t you come work for me?”
I thought about it a little bit more. Honestly, my runway was running out. At that point, I don’t think I had started paying myself yet. So, it was like two years in and I still hadn’t paid myself. The runway was starting to get less than I was comfortable with.
You know what? He said I can do demos. I can work on it half the time. I just got to be in the office, do about half… basically work four hours, half the time each day.
It’s like, all right, you know what, let’s try it. Turns out it was one of the greatest things that could’ve happened.
I got to use my own product as a user, every day. I got real time, amazing feedback, as far as what’s needed and what this industry really needs. That was the time that I did a bit of a pivot.
Prior to that, to be honest with you, I didn’t know I was building a CRM. If you would’ve told me when I was first starting it that, hey, you’re going to pivot this into a CRM, I was like, I’m not going to build a tool for sales. I’m not the sales guy.
But based on where the need was and the feedback from him and from other customers, it’s just kind of where things naturally went. That’s where the gap was. That’s where the need was. That’s where we started getting a lot of really good feedback about those types of things that we were building.
So, it was during that time of being a user of my own product and working directly in the industry at the same time and learning a lot more about the industry, that I didn’t know, that actually helped to shape what it is now.
Rob Walling:
What was it before?
Jonathan Weinberg:
It was more of a project management tool.
Rob Walling:
For during the project?
Jonathan Weinberg:
Yeah. I mean, it did the contract process, like I was saying earlier, about how the process around signing the contract wasn’t great. So, we built the e-signatures and all of that type of… and the ability to create the estimate, get it signed and do all of that early on.
And then it was about scheduling the job and scheduling your employees and your subcontractors and having a Gantt chart, with dependencies between this task and that task.
All of that stuff is actually still there. It’s still in the product. That’s one of the things that that’s made us a little bit unique compared to our competitors, is because other CRMs in this space, there are other CRMs for home improvement companies and they don’t have either that production project management at all or some of them don’t even have the estimating. The ones that do, it’s much lighter.
So, like you were reading the H-1 earlier, the does-it-all CRM software suite, it does more than the CRM because that’s kind of how we started. We started with the estimate and the production management side, and then the CRM pivot came later. But that’s really been the focus of the product development for the last three years.
Rob Walling:
In terms of finding early customers, a lot of folks find that’s very difficult because it’s the cold start problem, where you basically have no brand name. No one knows who you are. No one knows how to find you, no one knows that they should be looking for you.
So was it cold outreach in the early days? Did you make it to the top of Hacker News and the r/construction subreddit?
Jonathan Weinberg:
One of the things, so with that pivot and repositioning as a CRM, that’s what people search for. That’s why we always say, hey, what do you do? Oh, we’re a CRM for home improvement companies, because people are searching. The people know the term CRM. They know they’re supposed to have one. They know it’s a big part of what their businesses are, especially the ones that are growing and scaling and have a significant volume of leads that they need to track and manage. So, people searched for that.
We built out a couple of… I’ll say maybe five or so different copies of the landing page, with different H-1s on it. It was best CRM for painting contractors. It was a different header image. It was best CRM for window and door companies, with a different header image.
It was basically just a copy of the landing page, but it seems to have worked reasonably well for people that were looking for us in those real specific niches.
Rob Walling:
Right. So it was an SEO play then?
Jonathan Weinberg:
Yeah. Yeah. Yeah. Pretty much. And then there’s some word of mouth as well.
Rob Walling:
Yeah, I would imagine that. Construction is a small industry. My brother runs an electrical contractor. There are not a kajillion of these contractors.
Even if you talk in California alone or in the country, they talk a lot. The owners talk to each other. So, I can imagine if you get a reputation that that brand… Once you get past the cold start and you are now known as a solid product, I would imagine people would be passing that around.
All right, Jonathan. We’re going to do the Startups For the Rest of Us segment, when did you know had product market fit?
Jonathan Weinberg:
Like most people will say, it’s a sliding scale of product market fit. I think in the early days or the earlier days, I’ll say, started to realize that we’re getting there, based on just customer feedback.
Even though we didn’t have a lot of customers just yet, the ones that we did have, we’re talking to them all the time. It’s very hard for us to get any kind of customer without talking to them, at least for one or two meetings, if not a good bit more. So, we get a lot of feedback.
We would have people come and say, “I’ve been searching for something like this for so long, I can’t believe I finally found it.” They would say different things where it’s like, they were fans. They were actual fans. It’s not often that somebody says, I love my CRM, but we were getting people saying, “I love this CRM.”
It was like, all right, we’re on the right direction. We’re finding a need. There’s a need here. We’re filling it, at least for some of them. We got to do it for more, but at least for some of them, we’re filling it. So, that was the first part of it.
A little bit later on, this is a little over a year ago, we had a really bad outage. I did a database upgrade over the weekend. Monday morning came.
During the week is when we have much higher traffic than on the weekend. Monday morning came. About 10:00 AM, everything started to crap out.
There was just, people couldn’t use it. The database was just obviously not able to keep up with the load. We just upgraded the database. Why is it now having all of these problems? We’re out for probably at least a good four hours. This is the stuff that nightmares are made of.
But the thing is, we’re getting calls from customers saying, “What’s going on? I can’t access it. Keep us posted.” They’re saying, “I don’t know what to do without the system. I don’t know what’s going on. I don’t know how to do anything.”
So, it was clear that, people are using this software. It’s helping them. With it not being there, it’s a big problem. So, that was another little clue I guess, as to, yeah, it sounds like we’ve got some product market fit.
People are really using it. They’re getting a lot of value out of it. Being down for any period of time is a big problem. So, that was another part of it.
Then as we continued on from there, net negative churn. So that’s a pretty good indicator that people are not churning out. That’s another really good indicator.
Even just yesterday, we got a phone call from a manufacturer for concrete coatings. We have a lot of customers that are dealers for this particular product. They do concrete coating jobs. We happen to work really, really well with them.
They called us yesterday and they said, “We’re having a national dealer meeting in December. We are going to kick out your competitor that’s been sponsoring for the last however many years. We’d really like you to be there, because we keep getting such great feedback from all of our dealers, about the product.”
That’s just the next level. It’s like, all right. I mean, they’re not just telling us they like the product. They’re telling everybody they like the product. Obviously, the revenue and the metrics tend to speak for themselves as well.
So yeah, it’s been a sliding scale. I think it’s something that you’re always trying to get better, in terms of the product market fit.
We’re continuing to do that. There’s still a lot of things that we’re continuing to do, to evolve the product and keep up with a changing market.
I mean, markets aren’t static. Markets change. So, you also have to keep the product up with a changing market. It’s never ending, trying to keep up with it.
Rob Walling:
I’m glad you called that out because I always say on this show, product market fit is a continuum. It’s not a one or a zero. It’s more like a one to a hundred.
At different times, with different audiences, you have more or less product market fit, stronger and weaker, as we like to say.
In addition, you just said markets are not static and they change. I have absolutely seen products get pretty strong product market fit, and then the needs of the market change.
An open source tool comes out, for example, that suddenly a lot of people start using and is almost the equivalent of what you’ve built. And suddenly it’s like, now I have strong product market fit again, not have people canceling, have people really, really want what I’ve built. I have to pivot. I have to add more features. I have to give more value. There’s something there.
So there aren’t that many software companies that last 10, 20 years. There are some. We can call them out. But even those that last, they don’t do it with one product. Microsoft, Oracle, Intuit, whoever we could throw out who’s been…
Even, I guess MailChimp’s one. But man, there’s some exceptions around there. Their product is now several products, just under one subscription. It’s not just email marketing anymore. It’s landing pages. It’s Facebook ads, I think you can build directly, MailChimp. So, they’ve added a bunch of stuff.
These are good problems to have because you don’t run into these until you have the kind of traction that you do, until you start getting bigger and you do have product market fit. Then you get the competitors coming in.
The other thing I want to call out is this idea that folks are such advocates for you. They’re such fans of your product that they’re telling everyone they know, it sounds like.
That is what Jason Lemkin calls a mini-brand. He says, when you hit about… once you get north of one million ARR….
I distinctly remember this happening with Drip. It was a little before that because of the circles we ran in, where everybody talks online. So, it was somewhere between half a million and 750, if I recall.
But you’re seeing that now, where you’re not Pepsi, you’re not Disney, you’re not Marvel. But a mini-brand is that, you have a brand within your circle, that a lot of people have heard about you.
In fact these days, I bet if a group of contractors are sitting around the campfire, I bet they’ll be surprised if a person there hasn’t at least heard of Builder Prime.
Jonathan Weinberg:
Yeah. I think that the market is also a lot bigger than people might expect. We’re still such a small player in this space. There’s so many people that are using other CRMs and estimating tools and all that kind of stuff. There’s so many people that are not using anything or don’t even know that this is something that they need, or maybe it’s something they don’t need yet.
So, I think there’s still a lot more opportunity to break in, in terms of name recognition. People really, even if they’re not customers, at least hearing of us, a lot more have these days.
It’s funny. There was a story… this was about a year ago or so, where one of our vendors got an Uber. Somehow, they got to talking about what they do. The vendor that got the Uber, the person driving actually also worked at a home improvement company that was a customer of ours.
They got to say, “Oh yeah, I use Builder Prime every day.” The vendor’s like, “Oh yeah, we work closely with them,” which was kind of crazy to hear.
There’s still so much room to grow, in terms of this industry and then that name recognition, but we’re definitely starting to make a dent.
Rob Walling:
I’m looking at your MRR graph. There was a point, it was maybe late last year, early this year, where you hit what I call the bootstrapper hockey stick. Because venture says the hockey stick, and you see Facebook and Google. That’s just next level stuff. But for bootstrappers, your growth really started accelerating at a certain point.
You and I had had a conversation last year, where you said, “Right now I’m growing at,” whatever you were growing at. You’re like, “I want to double or triple that by the end of the year. How do I do it?”
Came up with a bunch of strategies. You obviously executed pretty well. So my question on this is, how did that happen?
Every bootstrapper wants to achieve the bootstrapper hockey stick. What do you think you did that worked?
Jonathan Weinberg:
The flat part of that hockey stick is actually where we screwed up. We made two big changes at the same time, right around Memorial Day last year.
We changed our pricing, which essentially resulted in an increase in price. We also started moving away from emphasizing, book a call with us. Book a call with us. Let us help you. Let us help you.
So, we tried to push people more to self-service. They weren’t looking for self-service. They wanted that hand holding, those calls, those Zoom sessions. So, we did both of those things at the same time.
We weren’t quite sure what the problem was, but basically, we flattened out for a few months. And then it’s like, well, people aren’t complaining about the price. That doesn’t seem to be where we’re having the resistance.
Let’s reverse course. Let’s go completely the opposite on the phone calls and the onboardings and all those Zoom meetings. Let’s get meetings on the calendar. That’s our new focus. Let’s get meetings on the calendar.
So, we did that and things turned around. Not only that, they turned around with higher pricing. So, we had that little blip, but the higher pricing definitely was a driver.
Besides that, it was also just continuing to iterate, add some key features. For example, we added automated text messaging and SMS-based marketing and all of that kind of stuff.
That was actually a big driver for people to upgrade their subscriptions. It a completely different revenue stream, because we charged separately for text messaging, in addition to being on a higher tier subscription.
So, some different things like that. But definitely the price increase, continued seeking of that product market fit and some key new features and revenue streams, I think altogether, is what really helped to accelerate that growth from that point.
Rob Walling:
Yeah. Often, when we see an acceleration in growth, pricing has something to do with it, pricing and/or the sales model. It’s both things you were trying to change.
Obviously, your recommendation at this point would be, don’t change both of them at once. That would be mine as well. Right?
Jonathan Weinberg:
Yeah. Yeah.
Rob Walling:
You do one. You let it settle because you know all your metrics, you know your numbers. When you change two things, you’re like, uh-oh, I don’t really know. I don’t know which of these impacted it.
But what’s funny is, you quickly reversed course. You were A, willing to make pretty drastic changes, like raising prices and changing your sales model, which is scary and risky, but you were willing to take that risk and maybe make a mistake.
B, you did them relatively quickly and you undid the mistake relatively quickly and you pushed forward.
That’s what I see great founders doing is that, A, willingness to make mistake, B, the willingness to do things quickly and C, the willingness to make potentially scary, strategic high-level changes because those are often the ones that move the needle a lot.
You can make a bunch of little tactical things like, well, let’s do a little more SEO, or let’s do a little more cold outbound. Or you can say, well, let’s double our pricing. Let’s go demo only or no demos anymore. These are drastic changes, and they can be scary.
Jonathan Weinberg:
Yeah. Definitely don’t do both at the same time. One big thing at a time. But yeah, at least we figured out what the… We let it go for a couple of months. It was the summer. Everyone was saying, oh, the summer is slow.
So, it was like, oh, it was probably just slow summer. We just happened to make these changes right before that kicked in.
But that wasn’t the case. It wasn’t because of the slow summer. We screwed that up, and we didn’t know which one it was. But we took an educated guess, reversed as quickly as possible, and everything started coming back stronger than before.
Rob Walling:
Before we wrap up, I want to ask you maybe one or two more questions. With permission I want to talk about this topic that you raised to, I think it was Anar and I, via email a few weeks back.
You were saying, “I’m working a lot and there’s a chance I might want to… What’s next? Should I sell the business? Should I think about selling the business?”
You had a big decision. Where are you today? Where did you wind up? What was that decision process like for you? Because I know that there are a lot of folks who build a great business and who get to this point, whether it’s half a million, two million, five million ARR, where you have a lot of options on the table, to get liquidity. You also have, not enough diversification is what it mines to. ‘Cause you have literally millions of dollars in net worth, tied up in a software company. So, talk us through what you were thinking and where you wound up today.
Jonathan Weinberg:
Yeah. Yeah, for sure. So we’re reaching that stage where there are more options on the table. I work a lot. I work too much. I am seeking more balance.
I think the idea of selling is a bit of an overreaction to that. I would go from working too hard to not working at all.
I love doing this. I love what I do. I’ve been doing it for six years now, and I’m not tired of it.
I don’t want to work quite as much as I’m working now. I’d like to get that down to normal levels, be more present for other areas of my life and my family and everything like that, but I don’t want to go to not… I don’t know what I would do next. I like doing this.
So I started thinking more about, well, maybe take some chips off the table and see if I get some investment, take on additional equity partners or something like that.
Honestly, I could do that, but it’s going to take time and effort away from what I want to do. That’s continue to build and continue to just…
I can hire more people. I can grow the team, I can do all that stuff. I don’t need the money for that. It would just be really for me, personally.
You had mentioned something on the podcast just recently, about how every additional, let’s say thousand dollars in MRR that you add, well, that’s times 12 for ARR and times whatever multiple you want to go with. Let’s say a 5X multiple. Every month, you’re adding 60,000… for every thousand dollars of MMR, that’s $60,000 in equity that you’re adding to the value of the company.
You start thinking about that even in higher amounts that you’re adding each month. And it’s like, wow, that’s pretty powerful.
So I’m going to keep trying to fire myself from as many things as I can and grow the team and just work towards working less, but there’s no need to do anything different.
I love what I do, and I really want to keep building this. See how big we can make it. Keep helping more people. Keep getting more of those fans. That’s really what I’ve always sought out to do, is to build something that people use on a large scale and get a lot of value out of.
So, if I can continue doing that and just not stressing myself out quite as much as I am now, that’s really where I want to be at.
Rob Walling:
Yeah. Given all that, for you, where you’re at, selling would be a permanent solution to a temporary problem, because you’re going to be able to figure out how to get around the overwork and the stress. I believe in you to do that.
I do think a lot of founders come to that point where they feel the stress and an exit just becomes… it’s one possible solution, but there are many others. It’s to be less stressed. It’s to figure out how to do that, whether through hiring, whether through… I mean, there’s tons of options.
I’ve done therapy. There’s a lot that you can do. You can take a sabbatical. I know a founder who took a sabbatical just a couple months ago. He’d been working on a company like 10 years now. He’s kind of burning out. He took three months off because they’re bigger. He could actually do that.
So, there’s a lot of ways to think about that. I think if you’re listening to this and you’re at a point where you’re thinking about selling, A, now’s not the best time to sell because the economy. But B, just make sure that there are permanent reasons why you want to sell. It’s not just temporary roadblock stuff.
Jonathan Weinberg:
Yeah, no, very well said.
Rob Walling:
Thank you so much for joining me, sir. If folks want to see what you’re up to, BuilderPrime.com. I appreciate it.
Jonathan Weinberg:
Yeah. Thanks so much for having me, Rob.
Rob Walling:
Thanks so much to Jonathan, for joining me on the show. It’s always great to have longtime listeners on the show. It’s great for a couple reasons, because they know the format of the show, they know how we tell stories here.
But also, it makes me feel incredible to have folks who may have not had a business at all and decided to start a side hustle, and then they go full time. And then, eventually they’re approaching a million ARR. They’ve built an amazing company, that has changed their life and provided them with the freedom and the purpose and allowed them to maintain incredible relationships, while they remain in control of their company and of their destiny.
Very meaningful to me, to have folks like Jonathan on the show, who have followed my journey, have followed this podcast, have followed MicroConf, TinySeed, whatever it is. That’s the mission of all of those things, to multiply the number of independent SaaS founders in the world. So, thanks for joining me again this week and every week. This is Rob Walling, signing off from episode 630.
Episode 629 | TinySeed Tales s3e6: Looking Ahead to $1M ARR
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In the final episode of TinySeed Tales Season 3, Rob Walling checks in with Tony Chan of CloudForecast. They reflect on some of the most prominent challenges and milestones that the business has faced over the last year.
Topics we cover:
- 1:31 – Tony reflects on attending his first MicroConf Growth in Minneapolis
- 3:30 – An update on how CloudForecast’s content marketing efforts are going
- 7:59 – Getting an article featured at the top of Reddit
- 11:16 – An update on how their new senior engineer is doing
- 16:18 – Why Tony prefers to hire full-time employees
- 18:26 – An update on CloudForecast’s sales pipeline
- 20:50 – Tony reflects on the challenges of figuring out where to invest time and capital
- 24:30 – The importance of getting low-level tasks off your plate
- 28:36 – What is Tony least looking forward to in the next year?
- 30:38 – What is Tony most looking forward to in the next year?
Links from the Show:
- Tony Chan (@toeknee123) I Twitter
- CloudForecast
- Cost of living the cloud life: Fossil fuel consumption as a service
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling: Welcome to TinySeed Tales. This is the final episode of season six, where I spoke with Tony from CloudForecast and covered their journey for just about a year when they were part of the TinySeed accelerator batch. This episode serves as a nice capstone to the season. We reflect on where they’ve come from, and we look ahead at where they’re going. Thanks so much for joining me for season three of TinySeed Tales. Feel free to reach out at Rob Walling on Twitter. And let me know if you enjoy these episodes and would like to hear a season four.
And with that, let’s dive into this episode of TinySeed Tales. It is very hard to switch from being tactical where we’re at right now to being more strategic and looking at the bigger picture of our business. And it does feel very scary and it’s hard to remove control over what I’ve been doing for the last three or four years. Welcome back to TinySeed Tales. A series where I follow a founder through their struggles, victories and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed. The first start accelerator designed for bootstraps.
This is the final episode of our season with CloudForecast, the AWS cost monitoring service. Today, Tony and I are going to revisit some of the most prominent challenges and milestones that the business has faced over the last year or so. Sir, it’s been two months since we last spoke and I feel like there’s a lot to catch up on.
Tony Chan: Yeah, we had MicroConf. That was really cool. Good seeing you in person and TinySeed retreat and we’re at the end of TinySeed. So a lot has happened. Every time we meet up, there’s always something crazy going on. Rob Walling: For people to level set, this was MicroConf in Minneapolis in early 2022. And you had been to MicroConf before?
Tony Chan: No, this was my first one.
Rob Walling: Was that? Okay.
Tony Chan: Never been. So it was very overwhelming, but overwhelming in a good way. So I really enjoyed my time.
Rob Walling: Awesome. Think you’ll come to a future one?
Tony Chan: For sure. I think this might be a mainstay of when we go to every year. I think the big thing we’re looking forward to is just reconnecting with people that we met in person or met for the first time. But I think this is going to be something we go to every single year. We got hooked.
Rob Walling: It happens to the best of us and it really does happen to a lot of people. And there’s a reason we have a high return rate because it is for me, just because I put it on doesn’t mean it didn’t change my life too. And the first several years for me were like, oh my gosh, we’re building a community of like-minded people. And everyone here is that. I think someone use the phrase, we’re a band of misfits. It’s a bunch of boot strappers. You don’t ever see this many bootstrappers, especially with this focus in a room. And they all know what our stupid acronyms mean and they all know what you’re going through. And the roller coaster stuff we’ve talked about on this podcast. They’re all doing it too. Tony Chan: Yeah, it’s definitely re energizing, it was a bit of therapy too, because a lot of the dinners that I had, everyone talked about things they were going through and everyone can relate and it was really nice to get a lot of things I’m struggling with personally or things I’m doing well in and people understand and they can relate and they know exactly what’s going on without you having to provide a lot of context and explain things. They know exactly what’s going on as well and know how to listen and provide the right advice at the right time. Rob Walling: So beyond MicroConf, you had mentioned last episode that you were looking forward to your content, an SEO getting rolled out. That you were getting started with being more strategic about planning it and that you were looking forward to learning more iterating and starting to see results. That was two months ago, update us on where you are. Tony Chan: I wouldn’t say we’re doing more of it as in we’re publishing a lot more content, but we’re being very intentional of how we approach things and getting the most of what we have existing. So one of the big focuses that we have right now is actually redesigning our blog. So it will be more conversion friendly or signup friendly or allow users to go through and climb through our content pieces that we’re pushing out and being very intentional about the UIX design. So we’re looking forward to that. Ironically, we are on Jekyll, but we’re moving to WordPress. And it was a very intentional decision for me. As a non technical founder, every time we needed to make a change or adjustment on our Jekyll instance, it requires Francois time. It requires this time to devote to it, to adjust some zings there’s custom work that needs to be done. Whereas for us, WordPress allows me to do what’s needed and test things out, try things out, and allows me to have control over it. And when we hire someone that is less of a barrier entry for them to adjust things. There is a lot of controversy with WordPress, engineers and developers don’t like it, but the utility of it’s still there, as long as you’re doing it the right way, it should work out perfectly fine. And there’s a lot of great blogs and websites and resources that are built on WordPress today. And it works perfectly fine. So Francois I think on his side, he was okay with that and he understood the utility and the business decision of moving to WordPress. So we’re doing that right now. So that’s a big undertaking of migrating everything over. And then from there it gives us a lot more options to try things out, moving call to actions, building pillar pages, and expand that further and just build resource pages. I think it’ll be pretty cool once we have that. So it’s almost like doing more with what we have right now. And not necessarily when we think of SEO content, we think of it. We publish more content. We publish more, we publish 10 articles a month, but it’s not about that. It’s like, how can we take what’s existing and make sure it converts. And users also are getting value of what we’re writing about too. So less is more. Rob Walling: That platform conversion process, I always find frustrating because for me, it’s like standing still. It’s like your end users, won’t notice and won’t care, but you need to do this for a business purpose. We’re on Squarespace, for example, with TinySeed MicroConf and the page load time sucks. And that’s not good in terms of SEO rankings. And so we have looked at migrating and the bottom line is, it’s probably $10,000 and a month of work. It just sets us back in terms of, to me it feels like wasted person hours that could be dedicated to something else like actually creating new content or helping founders or whatever. So to me it’s a little bit like dealing with legal crap. Oh, GDPR request. Oh, GDPR changed again. It’s just those things that are like plumbing that no one notices, but you need to do to keep your business afloat. Tony Chan: Yeah. I agree with you on that. And it’s hard, especially for us with limited resources. A lot of our customers don’t see about probably 50% of the work I personally do, or even Francois does when he’s refactoring a bunch of code and making sure the app is working or he is doing some baseline work in our database. So it sets us up for success and expanded features. Users don’t see that. And I wouldn’t say it gets discouraging, especially if it takes longer, but it’s hard to sit through that when I know that in the short term, it stalls. Rob Walling: When your team is moving mountains to migrate a site or refactor code, it can definitely feel frustrating that your customers probably won’t appreciate all the effort. But here moving to WordPress is in service of improving CloudForecast blog. Even if people aren’t noticing what’s happening behind the scenes, their content strategy is receiving some attention. You mentioned offline before we started recording that you have an article at the top of Reddit right now, which can cut both ways. It’s great because you get a lot of attention and it sucks because you get a lot of attention. So what is your current sentiment about being at the top of Reddit and having what thousands, if not tens of thousands of eyes on your piece? Tony Chan: Part of me is like, I want off of it. I want off this ride. I don’t know. I care deeply what people think about me. I care deeply about what people think about our company and how we approach things as well. This piece was supposed to be just fun and it’s just an informational piece. Rob Walling: It has a Photoshop picture of Jeff Bezos writing a rocket with a cowboy hat on or something. Tony Chan: Yeah, we talked about Jurassic park and there’s no part in the piece where we’re taking an absolute stance on how we reduce carbon footprint with data centers and all that stuff. We had a researcher who spent a lot of his academic career doing research. So the statistics don’t lie. I know that he’s vetted out further, but it was just so surprising to see so many assumptions and things that people extracted from the article. And it was very irrelevant to what we wrote about. So I think that was really hard to see and really hard to stomach. We are exposed and there’s no going back at this point. Rob Walling: Yeah. It’s tough. I’ve been to at the top of hacker news, many times with blog posts where I took a stance. Some when I didn’t take the stance, people were claiming top Reddit, top of dig back in the day. Each of these, it always feels like that and it sucks. Because what happens, what I found is there’s often a bunch of positive comments and then the further it goes on, people come out with these big, weird negative takes. Sometimes it’s true trolling. And other times there’s something about social media that the more it’s exposed to suddenly someone has to be the big contrarian and show how smart they are. And I’ve written 3000 word pieces that are as long as a book chapter that I’ll spend eight to 12 hours writing and someone will copy and paste, not even a sentence, but a single phrase out of it and make a comment on it out of context and imply that it meant XYZ when it totally doesn’t if you read even the sentence before it and after it. But it’s just like, it’s really, I think a tragedy of social media. Tony Chan: And I think if people met me in person too, they would not say that to my face or they’ll see that I’m a pretty reasonable person. Then we don’t take things that seriously. So it’s been a good day. It’s cool to see our article uploaded and people commenting and such, but it’s been heavy today to a point where I’m like, I’m probably just going to take the rest of the day off and sit on the couch and play some video games to get my mind off of it. Rob Walling: We’ll link to the article in the show notes if you’re curious. It seems like all that attention has taken a toll on Tony, but characteristically, he can see the bright side of having controversy on Reddit, ignore the trolls and focus on the engagement. To focus on something more positive, I caught up with Tony about Arturo, the new senior engineer that he and Francois had just hired in the last episode. They were pretty excited about onboarding and let’s check in. One of your big wins from last episode was you hired a senior engineer. Very, I have it in all caps very quickly, crazy fast. And one of the things that your co-founder Francois who was on the last episode talked about was, he was most looking forward to that developer Arturo starting and having another engineer and how that would basically be game changing for you and the company. And so I guess to start with, how big is your team now that he’s on board and how has that been progressing the onboarding? Tony Chan: We’re team of four now, including Francois and I, and that’s now including all the part-time freelance agencies and contractors we’ve hired to execute different parts of the business. But Arturo has been amazing same with when Kattya started, but he has brought a level of professionalism expertise from his previous job in bringing it here. And he compliments Francois really because he’s very thorough, not saying Francois is not, but he’s very thorough in terms of how he thinks about projects. He’s always thinking about customers as well, which is awesome and amazing. Even I think at this point, he’s about six weeks into his job and I believe on week two, he was already pushing code into production. And so it was extremely helpful. An example is, Kattya has been working on our full redesign of our app and we finally soft launched it recently to our users. We haven’t announced it publicly yet, but there were so many little tasks that needed to be done and it was very meticulous and very nuanced. And I think there was about maybe 60 tasks total just complete it. And he just jumped in and proactively solved some problems that we were trying to figure out, took care of projects that didn’t require Francois to jump in. He just say, Hey, I’ll do this. Let me connect with Kattya. We’ll figure it out. And Francois did not have to get involved. So I think for Francois it’s been a big relief on his side as he can push out ideas and get things started. And then Arturo from start to finish, knows how to research, do what’s needed to execute it and then come back to us and give us some ideas. So he’s been a huge help in that way. And we hope that as we grow out some of that team, he can be a really good force and good model for how we want our engineers to act and be like within our organization as a boost strap startup. I think the thing that I really respect about him and what he does is he’s very, very proactive. There’s not one part where he’s like, Hey, can I help? Can I help? Can I help? And his mentality is I can figure it out. I can figure it out. And that is the ideal startup founder mentality as well or someone who works at startup. It’s a problem that might be really tough, but I can figure it out. And I think it’s a very important skill to have versus, Hey, I don’t know what to do. I’m stuck. So I think that’s been the most amazing thing that I’ve noticed from Arturo’s productivity and what he’s been producing. Rob Walling: That’s great to find someone like that. That can go too far in one direction where someone will take two days to grind on something, but they could’ve asked you and you would’ve told him the answer in 20 minutes or something. I’ve had employees like that or team members, but it doesn’t sound like he’s doing that. It sounds like he’s a good balance of wanting to and being able to figure stuff out on his own. Tony Chan: Yeah. We put him on a pretty big project that he’s working on right now. He’s redoing a bit of how we approach some of our features and how we build reports. We send reports to our users about their AWS cost via email slack and Microsoft Teams. Right now the report is very black boxed. There’s not much you can change. You can adjust some threshold and such, but what you see is what you get, that’s the email. So he’s rewriting some of our backend and moving away from Scala and moving it back to Ruby. So that way we have some flexibility, because right now there’s some mismatch on the backend, but he’s rewriting some of those things. And then by doing that, we are going to give users a lot more flexibility of types of reports that they can see or template report. So if users want to send a report to the CFO and there’s some information that is particular to the CFO, they can select that template and send that type of report out. Or if there’s a specific DevOps team that they care about certain metrics, we’re going to give them the flexibility to be able to build those reports, to only show them information they want to see. So we’re very excited that he’s tasked with this pretty big project, but I think he’s up for the challenge, Rob Walling: Something you and I talked about in an earlier episode was that you had a part-time SDR and realized very quickly that wasn’t enough that you wanted to move more towards someone who’s working more hours. I know that since then, cold outreach wasn’t necessarily a great win for you guys. So you’ve pivoted away from that altogether, I believe. But you really said, I don’t think we’re going to do any more part-time employees. Might hire some contractors to do black box work or might hire agencies, but we have the resources and we need the speed of having people in house full time. Is that where you are? Is that where you sit today? Tony Chan: Yeah, I think that’s still very much our mentality and I think our mentality has evolved a bit, chatting with people and learning from that lesson as well. I think Francois, I put our heads together and what kind of company we want to build, what kind of employees we want to hire. And last episode, we talk a lot about intentionality of how we do that. And one of the big themes that Francois I came up with was like, we want to hire really smart people and give them the space to do really cool things, and have them be fulfilled with our jobs. And I think that’s what we’re seeing with Kattya. We’re seeing that with Arturo. That’s why Francois and I started our own business. We wanted the space to do something really cool. We wanted the space to help people out. We wanted the space to bring value to people. So yeah, as mentioned, that’s evolved from, if you hire someone part-time, it’s harder to have them invested in it, especially if they’re spending only 10, 20 hours. But someone that’s full-time 40 hours investing their career, very smart and sharp and they just want the creative space to do good work and bring good stuff to the table and learn. We want that to be something we can provide as a company now that we have more resources financially and the way our company’s growing, Rob Walling: Something else you talked about last episode was that your sales pipeline was increasing and you really have had some ups and downs during this year of troughs where you have no sales pipeline and it was disappearing and then nobody was closing. And then suddenly you had this really big enterprise deal. Come through the double juror, MRR overnight. And last episode, it seems like things were upbeat, that you were optimistic and that the pipeline was doing well. Where does that stand today? Have you closed any of those and what’s the pipeline look like? Tony Chan: Right now, we have a few enterprise deals that we’re actually about to close by the end of the month, the signals are very strong on that side. Some of the sales calls we had with particularly one, there’s no better feeling when we sell them to these companies, it’s multiple people are at the table, leveraging our product. And it’s a bottom up approach. So usually a DevOps engineer or engineering manager, they need to try out the product and then they need to get approval from people above them. So it’s a very bottom up approach. And every call that we’ve had with some of these opportunities, we just had to sit back and our point of contact sold our product to the team. We didn’t even have to say anything. And there’s no better feeling knowing that you have that advocate within the organization that gets your value, gets what you’re doing and understands where our value is and vouching for you within the organization. That is very powerful to me. So back to your question, we had a very stellar March in terms of signups and opportunities. We soft launched a free community plan too, we’re seeing really good traction on that. I don’t think we even publicly announced it and people are signing up using it, which is really great to see. April was not as strong as March in terms of just pure signups, but the pipeline of enterprise opportunities is relatively the same there. So we close these deals. I feel pretty good about where we’re at, but at the same time it’s still hard. We still have a lot of things going on. So it was hard to keep focused on that amongst the many other parts of the business that also need attention as well. So I think the challenge right now that we’re running into is, where do we prioritize the time? And what’s the most important right now? So I think that’s been a big struggle for me at the moment Rob Walling: That’s been the running theme of this season, is almost every episode you say something like, we don’t want to make the wrong decision on where to invest our funds. I’m not exactly sure where we should be investing our time. How do we do it intelligently? And should we deploy more and then used summit? And you said, we have a lot of capital and we doubled our MR. We have even more cap. And suddenly it felt like this weight. I won’t say suddenly, it was pretty much been the running thing this whole year. Where do you stand with that these days? Tony Chan: I feel like it’s getting heavier and heavier on my side. Rob Walling: Oh man. Tony Chan: I say that but it’s like, every month as we grew and as we got more capital, the weight gets heavier and heavier, especially on the business side, I’m solo right now. I’m the only one doing everything from marketing to customer success to support. Sales, Francois helps me out here and there, but it’s a lot. And we get more customers, the more people that we have to support. And the more log visitors that come in, the more pages I have to make sure they’re optimized for SEO and they’re published well and it’s promoted well and the whole process of content marketing that we’re running through. So the weight is getting heavier and heavier every month for sure. And I think, even though I’ve said it multiple times, but it’s been different themes in different ways. The cool thing is we’ve been learning too. We’ve been able to pivot, even though I might have dealt with an issue the previous month and where should I prioritize? We talked to a few TinySeed mentors and advisors and they give us some advice and we’re like, okay, cool. That is how we should approach it. And we execute on it and it makes things feel a little bit better. But yeah, it’s still a lot of work, especially for me. Not going to lie. I do feel overwhelmed more so than before. And Francois definitely agrees with that as well. Rob Walling: And I wonder if that’s something that’ll get better long term or if it’ll just continue. Tony Chan: One thing that was really helpful too, is I had mentioned that we were working with DemandMaven and that was a huge weight off my shoulders because they pretty much set up a pretty strong plan for us the next year on where we should be focusing on. I think one thing that you run into as a founder is those decisions you make, you always wonder if it’s the right one or the decisions you’re making at the moment, or you’re already in the middle of it, is it the right decision? And you talk about a lot. You’re making a lot of decisions without complete data or knowledge. A lot of it’s a educated guess of what you have in front of you. And the outcome of the Demand Maven research that they did with our customers were a few things. One is, they said you should invest in content and SEO. Great, that affirms our approach and what we’re doing right now. And it feels good to know that someone who chatted with our users who are a lot smarter than us in marketing have affirmed our approach of how we approach with content and SEO. So that’s really cool. So I think that has been helpful with that and getting a different perspective of our business, because I think sometimes when you’re in it so deep and you’re on a day to day, it’s really hard to step back and see the bigger picture and think strategically about things as well. Rob Walling: That’s the value of advisors, mentors, mastermind groups, and high quality consultants. They give you a sanity check, a second opinion when DemandMaven have been validated Tony’s content and SEO strategy, he had a massive weight lifted from his shoulders, but despite all the help and mentorship Tony’s received this last year, he’s still struggling with a different burden. As I reflected on this season of TinySeed Tales, I went back and listened to the first couple episodes. And something you said in the very first episode was that you wanted to get low end tasks off your plate, that you were still doing too much stuff in the business. And I don’t remember if the context was customer support and success or if it was internal ops and that stuff. Do you still feel that way or do you feel like you have been able to get some of those tasks off your plate? Tony Chan: I still feel very much that way. I think Francois framed it really well. He has gotten help and he has a lot of weight off his shoulders on the technical side. And that was a intentional plan for us because we want to iterate on features. We want to serve our users. We want to listen to their feedback and build product and features that they’re asking for. And now Francois is at a point where he can take a step back, think strategically, plan out some things at a higher level and be able to pass it off to his engineering team and whoever we hire in the future. Whereas for me, all those things I’m still dealing with. And I think on top of that, my learning process of SEO content marketing and what does that mean? So I think a lot of that has been very overwhelming for me and we still want to do that, be able to pass things off. And I think the big area that we’re looking into currently is actually hiring someone in SEO content. So we’re actually looking for a SEO content marketing manager at the moment. So we can hand off this big piece of marketing that I’ve been learning how to do and have someone smarter in place. So it frees up my time so I can work on other parts of the business, like customer success, closing sales ops, and so on. I think that would be a huge relief for me. Rob Walling: Yeah. I was going to offer the advice that I don’t think your next hire should be a full-time developer. You’re getting heavy on the dev side. Tony Chan: Yeah. We’re all set there. And Francois was like, Hey, I think you need some help. And I was joking with my wife the other day. If I had the opportunity to just brain dump everything I have in my head right now and put it on a list, it can be probably 200 pieces deep in terms of what needs to be done. I’m training myself to be okay with the business, not doing as well as other pieces to focus on one particular thing, which right now is how do we find that person that can fill in the SEO content marketing manager role. And that is my sole focus. So I’m using your trick of labeling a bunch of emails that I don’t need to look at right now, archiving it. And just once a week, just try to truck through it versus me feeling very overwhelmed, looking at it and doing it. That is not the priority. The priority for the business at the moment is to find someone on the marketing side to help and contribute and help grow our revenue. That is the number one priority. Nothing else matters at the moment. Rob Walling: I don’t think Tony will have much of a problem finding their content marketing manager, he and Francois have done a great job filling other important roles with smart driven people. They’re really committed to maintaining an intentional company culture that puts employees first. Building that culture didn’t happen overnight. CloudForecast started TinySeed with two founders and now they’re four people full time. Plus a bunch of part-timers and agencies. They have almost four ex that revenue from the time when they applied to TinySeed, they dealt with Francois’ paternity leave. Tony had to learn how to deploy capital and hire people and onboard them. It’s been a cool journey over the last 12 months. Now I’m thinking about what will happen in the next year. So there will be a TinySeed Tales where are they now episode in, let’s say a year where you come on, start for the rest of us. And we talk about what’s been your biggest win of the last year, your biggest loss whatever’s been going on with you. So in the spirit of wrapping this up, what are you least looking forward to in the next year? Tony Chan: Yeah, I think it’s not like I’m not looking forward to, but it is on the back of my mind. You’ve talked about it. It’s like you go from a startup to becoming a business, from a business to become a company we’re in between of a business and a company. So meaning Francois and I still have a lot of control on a day to day and we still contribute a lot and do a lot of things to push the business forward. And that’s great. But in order for us to be successful, we need to scale. We need to hire people. We need to put really smart people in places that we are bad at, or we just have a deficiency in. And I think that’s scary. We’re taking the control that we’ve had the last three or four years and giving other people the keys to do really great work. No doubt in my mind, they will be successful, especially if we hire the right people, but it is very hard to switch from being tactical where we’re at right now to being more strategic and looking at the bigger picture of our business and trying to become a company. So change is really hard. I think change is really hard for a lot of different people, whether it’s life or you’re moving or you’re moving to a new city. This is very much a change in our business right now where it does feel very scary and it’s hard to remove control over what I’ve been doing for the last three or four years. I’m sure Francois feels probably the same way, but with the different context of him being an engineering side. So this is needed to grow the business, but how do we approach it? How do we shift? I don’t know. There’s just so many questions that come from it of getting to that point. Rob Walling: I can’t wait to hear how it goes. And what are you most excited for over this next year? What do you hope has happened that you can talk about when you come back on the show? Tony Chan: Yeah, I think one is building more of the business side and getting people in the door, hiring people. As mentioned, we are working on a SEO content marketing manager hire at the moment. So getting that person started, hopefully we can have someone come in, maybe on the ops admin customer success support side as well. So that’s another thing off my plate and someone that can handle that as well. So maybe in a year and a half will be a team of six to eight people. That is determined obviously by MRR growth. And I really hope that, especially by the end of 2023, DemandMaven have been challenged us as like, can you double your MRR by the end of 2023? So right now we’re hovering around 450 about to approach 500K in ARR. They think that if we execute the plan to the T, obviously it’s more of a guidance approach rather than this is what you need to do step by step, but here are some gaps and such. They have confidence that we can hit $1 million in ARR. It is a very lofty goal. It’s very scary as well because it’s taken a lot of effort for us to get to close to 500K, think this is about year four for us. Can we do that in a year and a half and move another half a million in just a year and a half. They seem to have confidence to us. Some people do as well. So that is what I hope. Not saying it will happen, but that’s my hope is we hit 1 million by the end of 2023. Rob Walling: Best Of luck, Tony. I actually think you’re going to reach your next goal earlier than you think. And then it’s on to the next one. Thanks for listening.
And with that, let’s dive into this episode of TinySeed Tales. It is very hard to switch from being tactical where we’re at right now to being more strategic and looking at the bigger picture of our business. And it does feel very scary and it’s hard to remove control over what I’ve been doing for the last three or four years. Welcome back to TinySeed Tales. A series where I follow a founder through their struggles, victories and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed. The first start accelerator designed for bootstraps.
This is the final episode of our season with CloudForecast, the AWS cost monitoring service. Today, Tony and I are going to revisit some of the most prominent challenges and milestones that the business has faced over the last year or so. Sir, it’s been two months since we last spoke and I feel like there’s a lot to catch up on.
Tony Chan: Yeah, we had MicroConf. That was really cool. Good seeing you in person and TinySeed retreat and we’re at the end of TinySeed. So a lot has happened. Every time we meet up, there’s always something crazy going on. Rob Walling: For people to level set, this was MicroConf in Minneapolis in early 2022. And you had been to MicroConf before?
Tony Chan: No, this was my first one.
Rob Walling: Was that? Okay.
Tony Chan: Never been. So it was very overwhelming, but overwhelming in a good way. So I really enjoyed my time.
Rob Walling: Awesome. Think you’ll come to a future one?
Tony Chan: For sure. I think this might be a mainstay of when we go to every year. I think the big thing we’re looking forward to is just reconnecting with people that we met in person or met for the first time. But I think this is going to be something we go to every single year. We got hooked.
Rob Walling: It happens to the best of us and it really does happen to a lot of people. And there’s a reason we have a high return rate because it is for me, just because I put it on doesn’t mean it didn’t change my life too. And the first several years for me were like, oh my gosh, we’re building a community of like-minded people. And everyone here is that. I think someone use the phrase, we’re a band of misfits. It’s a bunch of boot strappers. You don’t ever see this many bootstrappers, especially with this focus in a room. And they all know what our stupid acronyms mean and they all know what you’re going through. And the roller coaster stuff we’ve talked about on this podcast. They’re all doing it too. Tony Chan: Yeah, it’s definitely re energizing, it was a bit of therapy too, because a lot of the dinners that I had, everyone talked about things they were going through and everyone can relate and it was really nice to get a lot of things I’m struggling with personally or things I’m doing well in and people understand and they can relate and they know exactly what’s going on without you having to provide a lot of context and explain things. They know exactly what’s going on as well and know how to listen and provide the right advice at the right time. Rob Walling: So beyond MicroConf, you had mentioned last episode that you were looking forward to your content, an SEO getting rolled out. That you were getting started with being more strategic about planning it and that you were looking forward to learning more iterating and starting to see results. That was two months ago, update us on where you are. Tony Chan: I wouldn’t say we’re doing more of it as in we’re publishing a lot more content, but we’re being very intentional of how we approach things and getting the most of what we have existing. So one of the big focuses that we have right now is actually redesigning our blog. So it will be more conversion friendly or signup friendly or allow users to go through and climb through our content pieces that we’re pushing out and being very intentional about the UIX design. So we’re looking forward to that. Ironically, we are on Jekyll, but we’re moving to WordPress. And it was a very intentional decision for me. As a non technical founder, every time we needed to make a change or adjustment on our Jekyll instance, it requires Francois time. It requires this time to devote to it, to adjust some zings there’s custom work that needs to be done. Whereas for us, WordPress allows me to do what’s needed and test things out, try things out, and allows me to have control over it. And when we hire someone that is less of a barrier entry for them to adjust things. There is a lot of controversy with WordPress, engineers and developers don’t like it, but the utility of it’s still there, as long as you’re doing it the right way, it should work out perfectly fine. And there’s a lot of great blogs and websites and resources that are built on WordPress today. And it works perfectly fine. So Francois I think on his side, he was okay with that and he understood the utility and the business decision of moving to WordPress. So we’re doing that right now. So that’s a big undertaking of migrating everything over. And then from there it gives us a lot more options to try things out, moving call to actions, building pillar pages, and expand that further and just build resource pages. I think it’ll be pretty cool once we have that. So it’s almost like doing more with what we have right now. And not necessarily when we think of SEO content, we think of it. We publish more content. We publish more, we publish 10 articles a month, but it’s not about that. It’s like, how can we take what’s existing and make sure it converts. And users also are getting value of what we’re writing about too. So less is more. Rob Walling: That platform conversion process, I always find frustrating because for me, it’s like standing still. It’s like your end users, won’t notice and won’t care, but you need to do this for a business purpose. We’re on Squarespace, for example, with TinySeed MicroConf and the page load time sucks. And that’s not good in terms of SEO rankings. And so we have looked at migrating and the bottom line is, it’s probably $10,000 and a month of work. It just sets us back in terms of, to me it feels like wasted person hours that could be dedicated to something else like actually creating new content or helping founders or whatever. So to me it’s a little bit like dealing with legal crap. Oh, GDPR request. Oh, GDPR changed again. It’s just those things that are like plumbing that no one notices, but you need to do to keep your business afloat. Tony Chan: Yeah. I agree with you on that. And it’s hard, especially for us with limited resources. A lot of our customers don’t see about probably 50% of the work I personally do, or even Francois does when he’s refactoring a bunch of code and making sure the app is working or he is doing some baseline work in our database. So it sets us up for success and expanded features. Users don’t see that. And I wouldn’t say it gets discouraging, especially if it takes longer, but it’s hard to sit through that when I know that in the short term, it stalls. Rob Walling: When your team is moving mountains to migrate a site or refactor code, it can definitely feel frustrating that your customers probably won’t appreciate all the effort. But here moving to WordPress is in service of improving CloudForecast blog. Even if people aren’t noticing what’s happening behind the scenes, their content strategy is receiving some attention. You mentioned offline before we started recording that you have an article at the top of Reddit right now, which can cut both ways. It’s great because you get a lot of attention and it sucks because you get a lot of attention. So what is your current sentiment about being at the top of Reddit and having what thousands, if not tens of thousands of eyes on your piece? Tony Chan: Part of me is like, I want off of it. I want off this ride. I don’t know. I care deeply what people think about me. I care deeply about what people think about our company and how we approach things as well. This piece was supposed to be just fun and it’s just an informational piece. Rob Walling: It has a Photoshop picture of Jeff Bezos writing a rocket with a cowboy hat on or something. Tony Chan: Yeah, we talked about Jurassic park and there’s no part in the piece where we’re taking an absolute stance on how we reduce carbon footprint with data centers and all that stuff. We had a researcher who spent a lot of his academic career doing research. So the statistics don’t lie. I know that he’s vetted out further, but it was just so surprising to see so many assumptions and things that people extracted from the article. And it was very irrelevant to what we wrote about. So I think that was really hard to see and really hard to stomach. We are exposed and there’s no going back at this point. Rob Walling: Yeah. It’s tough. I’ve been to at the top of hacker news, many times with blog posts where I took a stance. Some when I didn’t take the stance, people were claiming top Reddit, top of dig back in the day. Each of these, it always feels like that and it sucks. Because what happens, what I found is there’s often a bunch of positive comments and then the further it goes on, people come out with these big, weird negative takes. Sometimes it’s true trolling. And other times there’s something about social media that the more it’s exposed to suddenly someone has to be the big contrarian and show how smart they are. And I’ve written 3000 word pieces that are as long as a book chapter that I’ll spend eight to 12 hours writing and someone will copy and paste, not even a sentence, but a single phrase out of it and make a comment on it out of context and imply that it meant XYZ when it totally doesn’t if you read even the sentence before it and after it. But it’s just like, it’s really, I think a tragedy of social media. Tony Chan: And I think if people met me in person too, they would not say that to my face or they’ll see that I’m a pretty reasonable person. Then we don’t take things that seriously. So it’s been a good day. It’s cool to see our article uploaded and people commenting and such, but it’s been heavy today to a point where I’m like, I’m probably just going to take the rest of the day off and sit on the couch and play some video games to get my mind off of it. Rob Walling: We’ll link to the article in the show notes if you’re curious. It seems like all that attention has taken a toll on Tony, but characteristically, he can see the bright side of having controversy on Reddit, ignore the trolls and focus on the engagement. To focus on something more positive, I caught up with Tony about Arturo, the new senior engineer that he and Francois had just hired in the last episode. They were pretty excited about onboarding and let’s check in. One of your big wins from last episode was you hired a senior engineer. Very, I have it in all caps very quickly, crazy fast. And one of the things that your co-founder Francois who was on the last episode talked about was, he was most looking forward to that developer Arturo starting and having another engineer and how that would basically be game changing for you and the company. And so I guess to start with, how big is your team now that he’s on board and how has that been progressing the onboarding? Tony Chan: We’re team of four now, including Francois and I, and that’s now including all the part-time freelance agencies and contractors we’ve hired to execute different parts of the business. But Arturo has been amazing same with when Kattya started, but he has brought a level of professionalism expertise from his previous job in bringing it here. And he compliments Francois really because he’s very thorough, not saying Francois is not, but he’s very thorough in terms of how he thinks about projects. He’s always thinking about customers as well, which is awesome and amazing. Even I think at this point, he’s about six weeks into his job and I believe on week two, he was already pushing code into production. And so it was extremely helpful. An example is, Kattya has been working on our full redesign of our app and we finally soft launched it recently to our users. We haven’t announced it publicly yet, but there were so many little tasks that needed to be done and it was very meticulous and very nuanced. And I think there was about maybe 60 tasks total just complete it. And he just jumped in and proactively solved some problems that we were trying to figure out, took care of projects that didn’t require Francois to jump in. He just say, Hey, I’ll do this. Let me connect with Kattya. We’ll figure it out. And Francois did not have to get involved. So I think for Francois it’s been a big relief on his side as he can push out ideas and get things started. And then Arturo from start to finish, knows how to research, do what’s needed to execute it and then come back to us and give us some ideas. So he’s been a huge help in that way. And we hope that as we grow out some of that team, he can be a really good force and good model for how we want our engineers to act and be like within our organization as a boost strap startup. I think the thing that I really respect about him and what he does is he’s very, very proactive. There’s not one part where he’s like, Hey, can I help? Can I help? Can I help? And his mentality is I can figure it out. I can figure it out. And that is the ideal startup founder mentality as well or someone who works at startup. It’s a problem that might be really tough, but I can figure it out. And I think it’s a very important skill to have versus, Hey, I don’t know what to do. I’m stuck. So I think that’s been the most amazing thing that I’ve noticed from Arturo’s productivity and what he’s been producing. Rob Walling: That’s great to find someone like that. That can go too far in one direction where someone will take two days to grind on something, but they could’ve asked you and you would’ve told him the answer in 20 minutes or something. I’ve had employees like that or team members, but it doesn’t sound like he’s doing that. It sounds like he’s a good balance of wanting to and being able to figure stuff out on his own. Tony Chan: Yeah. We put him on a pretty big project that he’s working on right now. He’s redoing a bit of how we approach some of our features and how we build reports. We send reports to our users about their AWS cost via email slack and Microsoft Teams. Right now the report is very black boxed. There’s not much you can change. You can adjust some threshold and such, but what you see is what you get, that’s the email. So he’s rewriting some of our backend and moving away from Scala and moving it back to Ruby. So that way we have some flexibility, because right now there’s some mismatch on the backend, but he’s rewriting some of those things. And then by doing that, we are going to give users a lot more flexibility of types of reports that they can see or template report. So if users want to send a report to the CFO and there’s some information that is particular to the CFO, they can select that template and send that type of report out. Or if there’s a specific DevOps team that they care about certain metrics, we’re going to give them the flexibility to be able to build those reports, to only show them information they want to see. So we’re very excited that he’s tasked with this pretty big project, but I think he’s up for the challenge, Rob Walling: Something you and I talked about in an earlier episode was that you had a part-time SDR and realized very quickly that wasn’t enough that you wanted to move more towards someone who’s working more hours. I know that since then, cold outreach wasn’t necessarily a great win for you guys. So you’ve pivoted away from that altogether, I believe. But you really said, I don’t think we’re going to do any more part-time employees. Might hire some contractors to do black box work or might hire agencies, but we have the resources and we need the speed of having people in house full time. Is that where you are? Is that where you sit today? Tony Chan: Yeah, I think that’s still very much our mentality and I think our mentality has evolved a bit, chatting with people and learning from that lesson as well. I think Francois, I put our heads together and what kind of company we want to build, what kind of employees we want to hire. And last episode, we talk a lot about intentionality of how we do that. And one of the big themes that Francois I came up with was like, we want to hire really smart people and give them the space to do really cool things, and have them be fulfilled with our jobs. And I think that’s what we’re seeing with Kattya. We’re seeing that with Arturo. That’s why Francois and I started our own business. We wanted the space to do something really cool. We wanted the space to help people out. We wanted the space to bring value to people. So yeah, as mentioned, that’s evolved from, if you hire someone part-time, it’s harder to have them invested in it, especially if they’re spending only 10, 20 hours. But someone that’s full-time 40 hours investing their career, very smart and sharp and they just want the creative space to do good work and bring good stuff to the table and learn. We want that to be something we can provide as a company now that we have more resources financially and the way our company’s growing, Rob Walling: Something else you talked about last episode was that your sales pipeline was increasing and you really have had some ups and downs during this year of troughs where you have no sales pipeline and it was disappearing and then nobody was closing. And then suddenly you had this really big enterprise deal. Come through the double juror, MRR overnight. And last episode, it seems like things were upbeat, that you were optimistic and that the pipeline was doing well. Where does that stand today? Have you closed any of those and what’s the pipeline look like? Tony Chan: Right now, we have a few enterprise deals that we’re actually about to close by the end of the month, the signals are very strong on that side. Some of the sales calls we had with particularly one, there’s no better feeling when we sell them to these companies, it’s multiple people are at the table, leveraging our product. And it’s a bottom up approach. So usually a DevOps engineer or engineering manager, they need to try out the product and then they need to get approval from people above them. So it’s a very bottom up approach. And every call that we’ve had with some of these opportunities, we just had to sit back and our point of contact sold our product to the team. We didn’t even have to say anything. And there’s no better feeling knowing that you have that advocate within the organization that gets your value, gets what you’re doing and understands where our value is and vouching for you within the organization. That is very powerful to me. So back to your question, we had a very stellar March in terms of signups and opportunities. We soft launched a free community plan too, we’re seeing really good traction on that. I don’t think we even publicly announced it and people are signing up using it, which is really great to see. April was not as strong as March in terms of just pure signups, but the pipeline of enterprise opportunities is relatively the same there. So we close these deals. I feel pretty good about where we’re at, but at the same time it’s still hard. We still have a lot of things going on. So it was hard to keep focused on that amongst the many other parts of the business that also need attention as well. So I think the challenge right now that we’re running into is, where do we prioritize the time? And what’s the most important right now? So I think that’s been a big struggle for me at the moment Rob Walling: That’s been the running theme of this season, is almost every episode you say something like, we don’t want to make the wrong decision on where to invest our funds. I’m not exactly sure where we should be investing our time. How do we do it intelligently? And should we deploy more and then used summit? And you said, we have a lot of capital and we doubled our MR. We have even more cap. And suddenly it felt like this weight. I won’t say suddenly, it was pretty much been the running thing this whole year. Where do you stand with that these days? Tony Chan: I feel like it’s getting heavier and heavier on my side. Rob Walling: Oh man. Tony Chan: I say that but it’s like, every month as we grew and as we got more capital, the weight gets heavier and heavier, especially on the business side, I’m solo right now. I’m the only one doing everything from marketing to customer success to support. Sales, Francois helps me out here and there, but it’s a lot. And we get more customers, the more people that we have to support. And the more log visitors that come in, the more pages I have to make sure they’re optimized for SEO and they’re published well and it’s promoted well and the whole process of content marketing that we’re running through. So the weight is getting heavier and heavier every month for sure. And I think, even though I’ve said it multiple times, but it’s been different themes in different ways. The cool thing is we’ve been learning too. We’ve been able to pivot, even though I might have dealt with an issue the previous month and where should I prioritize? We talked to a few TinySeed mentors and advisors and they give us some advice and we’re like, okay, cool. That is how we should approach it. And we execute on it and it makes things feel a little bit better. But yeah, it’s still a lot of work, especially for me. Not going to lie. I do feel overwhelmed more so than before. And Francois definitely agrees with that as well. Rob Walling: And I wonder if that’s something that’ll get better long term or if it’ll just continue. Tony Chan: One thing that was really helpful too, is I had mentioned that we were working with DemandMaven and that was a huge weight off my shoulders because they pretty much set up a pretty strong plan for us the next year on where we should be focusing on. I think one thing that you run into as a founder is those decisions you make, you always wonder if it’s the right one or the decisions you’re making at the moment, or you’re already in the middle of it, is it the right decision? And you talk about a lot. You’re making a lot of decisions without complete data or knowledge. A lot of it’s a educated guess of what you have in front of you. And the outcome of the Demand Maven research that they did with our customers were a few things. One is, they said you should invest in content and SEO. Great, that affirms our approach and what we’re doing right now. And it feels good to know that someone who chatted with our users who are a lot smarter than us in marketing have affirmed our approach of how we approach with content and SEO. So that’s really cool. So I think that has been helpful with that and getting a different perspective of our business, because I think sometimes when you’re in it so deep and you’re on a day to day, it’s really hard to step back and see the bigger picture and think strategically about things as well. Rob Walling: That’s the value of advisors, mentors, mastermind groups, and high quality consultants. They give you a sanity check, a second opinion when DemandMaven have been validated Tony’s content and SEO strategy, he had a massive weight lifted from his shoulders, but despite all the help and mentorship Tony’s received this last year, he’s still struggling with a different burden. As I reflected on this season of TinySeed Tales, I went back and listened to the first couple episodes. And something you said in the very first episode was that you wanted to get low end tasks off your plate, that you were still doing too much stuff in the business. And I don’t remember if the context was customer support and success or if it was internal ops and that stuff. Do you still feel that way or do you feel like you have been able to get some of those tasks off your plate? Tony Chan: I still feel very much that way. I think Francois framed it really well. He has gotten help and he has a lot of weight off his shoulders on the technical side. And that was a intentional plan for us because we want to iterate on features. We want to serve our users. We want to listen to their feedback and build product and features that they’re asking for. And now Francois is at a point where he can take a step back, think strategically, plan out some things at a higher level and be able to pass it off to his engineering team and whoever we hire in the future. Whereas for me, all those things I’m still dealing with. And I think on top of that, my learning process of SEO content marketing and what does that mean? So I think a lot of that has been very overwhelming for me and we still want to do that, be able to pass things off. And I think the big area that we’re looking into currently is actually hiring someone in SEO content. So we’re actually looking for a SEO content marketing manager at the moment. So we can hand off this big piece of marketing that I’ve been learning how to do and have someone smarter in place. So it frees up my time so I can work on other parts of the business, like customer success, closing sales ops, and so on. I think that would be a huge relief for me. Rob Walling: Yeah. I was going to offer the advice that I don’t think your next hire should be a full-time developer. You’re getting heavy on the dev side. Tony Chan: Yeah. We’re all set there. And Francois was like, Hey, I think you need some help. And I was joking with my wife the other day. If I had the opportunity to just brain dump everything I have in my head right now and put it on a list, it can be probably 200 pieces deep in terms of what needs to be done. I’m training myself to be okay with the business, not doing as well as other pieces to focus on one particular thing, which right now is how do we find that person that can fill in the SEO content marketing manager role. And that is my sole focus. So I’m using your trick of labeling a bunch of emails that I don’t need to look at right now, archiving it. And just once a week, just try to truck through it versus me feeling very overwhelmed, looking at it and doing it. That is not the priority. The priority for the business at the moment is to find someone on the marketing side to help and contribute and help grow our revenue. That is the number one priority. Nothing else matters at the moment. Rob Walling: I don’t think Tony will have much of a problem finding their content marketing manager, he and Francois have done a great job filling other important roles with smart driven people. They’re really committed to maintaining an intentional company culture that puts employees first. Building that culture didn’t happen overnight. CloudForecast started TinySeed with two founders and now they’re four people full time. Plus a bunch of part-timers and agencies. They have almost four ex that revenue from the time when they applied to TinySeed, they dealt with Francois’ paternity leave. Tony had to learn how to deploy capital and hire people and onboard them. It’s been a cool journey over the last 12 months. Now I’m thinking about what will happen in the next year. So there will be a TinySeed Tales where are they now episode in, let’s say a year where you come on, start for the rest of us. And we talk about what’s been your biggest win of the last year, your biggest loss whatever’s been going on with you. So in the spirit of wrapping this up, what are you least looking forward to in the next year? Tony Chan: Yeah, I think it’s not like I’m not looking forward to, but it is on the back of my mind. You’ve talked about it. It’s like you go from a startup to becoming a business, from a business to become a company we’re in between of a business and a company. So meaning Francois and I still have a lot of control on a day to day and we still contribute a lot and do a lot of things to push the business forward. And that’s great. But in order for us to be successful, we need to scale. We need to hire people. We need to put really smart people in places that we are bad at, or we just have a deficiency in. And I think that’s scary. We’re taking the control that we’ve had the last three or four years and giving other people the keys to do really great work. No doubt in my mind, they will be successful, especially if we hire the right people, but it is very hard to switch from being tactical where we’re at right now to being more strategic and looking at the bigger picture of our business and trying to become a company. So change is really hard. I think change is really hard for a lot of different people, whether it’s life or you’re moving or you’re moving to a new city. This is very much a change in our business right now where it does feel very scary and it’s hard to remove control over what I’ve been doing for the last three or four years. I’m sure Francois feels probably the same way, but with the different context of him being an engineering side. So this is needed to grow the business, but how do we approach it? How do we shift? I don’t know. There’s just so many questions that come from it of getting to that point. Rob Walling: I can’t wait to hear how it goes. And what are you most excited for over this next year? What do you hope has happened that you can talk about when you come back on the show? Tony Chan: Yeah, I think one is building more of the business side and getting people in the door, hiring people. As mentioned, we are working on a SEO content marketing manager hire at the moment. So getting that person started, hopefully we can have someone come in, maybe on the ops admin customer success support side as well. So that’s another thing off my plate and someone that can handle that as well. So maybe in a year and a half will be a team of six to eight people. That is determined obviously by MRR growth. And I really hope that, especially by the end of 2023, DemandMaven have been challenged us as like, can you double your MRR by the end of 2023? So right now we’re hovering around 450 about to approach 500K in ARR. They think that if we execute the plan to the T, obviously it’s more of a guidance approach rather than this is what you need to do step by step, but here are some gaps and such. They have confidence that we can hit $1 million in ARR. It is a very lofty goal. It’s very scary as well because it’s taken a lot of effort for us to get to close to 500K, think this is about year four for us. Can we do that in a year and a half and move another half a million in just a year and a half. They seem to have confidence to us. Some people do as well. So that is what I hope. Not saying it will happen, but that’s my hope is we hit 1 million by the end of 2023. Rob Walling: Best Of luck, Tony. I actually think you’re going to reach your next goal earlier than you think. And then it’s on to the next one. Thanks for listening.
Episode 628 | The 5 PM Pre-Validation Framework
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In episode 628, join Rob Walling on a solo adventure where he dives into his newest framework. The 5 PM Pre-Validation Framework is a helpful way to evaluate different startup ideas through a set of criteria to gauge the size of the opportunity.
Want to download the PDF version the the 5 PM Pre-Validation Framework? Join the Startups For The Rest Us Mailing List, and we’ll send you the link in the first email. Look for the orange email opt-in widget on the page.
Topics we cover:
- 3:37 – Why is it called The 5 P.M. Idea Validation Framework?
- 4:06 – Problem
- 6:23 – Purchaser
- 8:17 – Pricing Model
- 9:00 – Market
- 12:48 – Product-Founder Fit
- 13:21 – Pain to validate the product
- 13:59 – Evaluating two business ideas through Rob’s 5PM framework
Links from the Show:
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling:
This week I’d like to make the announcement of our early lineup for MicroConf US 2023. This is in Denver, Colorado next April. It will be co-hosted by Lianna Patch of Punchline Copy. We’ll have talks from Dev Basu, the CEO of Powered by Search, Patrick Campbell, founder of ProfitWell, currently the Chief Strategy Officer of Paddle.
And we will have our special guest, Syed Balkhi, the CEO of Awesome Motive, in addition to myself co-hosting with Lianna, and I’ll be doing a talk. If you want to hang out with a couple hundred non-venture track, indie SaaS founders in Denver, Colorado, next April, head to microconf.com/growth. It’s going to be an amazing time. I hope to see you there.
Welcome back to Startups For The Rest of Us. I’m your host, Rob Walling. This is the podcast for bootstrap and mostly bootstrapped SaaS companies that want to build incredible businesses without sacrificing their freedom, their purpose, or their relationships along the way.
I have, what I consider, an interesting episode today. I’m going to dive in to an idea validation framework I’m calling 5 P.M., because it is, after all, five o’clock somewhere. So this is not about happy hour, nor is it about drinking mezcal and bourbon. As much as I like to do those things, it’s a framework that looks at startup ideas and uses different criteria and different lenses through which to view them.
So, I’ll get in to what 5 P.M. stands for in just a minute. I did want to thank everyone who has left a rating in Apple Podcast. Since I started my drive to 1000 ratings, we have jumped a substantial number and I don’t remember the exact number, but I think we were in the mid eight hundreds approaching 900.
We’re now at 995 ratings, which is just incredible. We’re about to cross that four figure mark. Ratings are different than reviews. Ratings are when you log into Apple Podcast and you just click five stars. And if you could do that, that’d be amazing. But we also got a bunch of new reviews this week. Bjorn Brinjar from Iceland. I was just in Iceland a couple weeks ago, would’ve been cool to hang out. Bjorn says, “The best resource on launching a SaaS app. Discovered the show six years ago, went back and listened to all episodes and never missed a new release. Following Rob’s playbook, currently stair stepping a SaaS product towards 1000 MRR. Highly recommended.”
That’s awesome. Thanks, Bjorn. Steve at Devia Software says, “Not just for pure startups. In a world filled with fluff content, this podcast really delivers. I’ve been running a software company for over 15 years. It’s devia.com, and every episode sparks at least one talking point with our team.”
Solist from Denmark says, “Great inspiration for me as a bootstrap SaaS founders. And SkiBikeSkiClimb from the US says, “Rob W., The person behind your success.”
SkiBikeSki wrote me a letter in their review. “Hey Rob, recently sold most of my business with an option to sell the rest in all caps. I could not have done it without your guidance through your podcast. Worked on it about 20 hours a week since 2014. I live in Montana, close to a ski resort. Backcountry skiing, rock climbing, and mountain biking. And thanks to you one of those things got done five days a week for the past eight years. I’ve created a great lifestyle business for sure. I started the business in my fifties with no knowledge on how to run a SaaS biz and everything I thought at the start was wrong. 300 episodes later. Here I am.”
This is awesome. Thank you again, so much, if you’ve left a rating or a review. And since we’re five away from a thousand, it’d be great if you could log in and click that five star button. And with that, let’s dive in to my idea validation framework I’m calling the 5 P.M. Framework.
So, the reason I’m calling it that is there are five Ps and one M in the framework. Yes, it’s that clever. So in relative order of importance, the letters that make up the acronym are problem, purchaser, pricing model, market, that’s the M, product founder fit, and pain to validate. And below each of those, of course, there are sub bullets, right? So under problem, some things to think through and answer about the problem are, is this an important problem? And is this an urgent problem? Vitamin versus aspirin.
So if you’ve ever seen those matrices where it’s tasks that are on your plate and it’s how important and how urgent, and there’s four boxes. In essence, is this an urgent and an important problem? Is this a not urgent and an important problem? Not urgent, not important? It’s interesting to think about that, not as a two different binaries, but actually as a four-boxed matrix.
In addition, I have a note that I’ve started saying to founders when they want to tell me about their idea and I say, “Don’t tell me what your idea is, tell me what problem it solves.” Start with the problem, and then you can tell me what you want to build to solve it, because I actually care way more about the problem you’re solving, than your idea. Because your idea is one solution to that problem. Think about that. Think about when a customer emails you and says, “I would love to be able to send an email whenever I click something in your app, so can we add a ‘send email’ button to this particular space in your workflow?”
And you think to yourself, that would be a really weird place for that button and no one else will want to do that. But is there a way to generalize this? Is there a way to add an automation that happens every time someone does a certain thing and one of those automations is sending an email, but there are 10 other options. This is where a customer brings a solution to you that’s not a good one, but they do have a problem they need solved and you can figure out a bunch of different ways to solve that. That’s what I’m saying here. Don’t tell me your idea, tell me what problem it solves. And then from there we can think through, well is your idea the best way to solve that problem or are there other ways? Is software even the best way to do this? Or is a productized service or is consulting or is a two-sided marketplace? There are so many different ways that you can solve the same problem.
I’m going to run through the other letters and then I want to do at least one, maybe two examples depending on how much time we have, and run them through this 5 P.M. filter. This is very much a work in progress by the way. It’s something that has obviously taken shape over 10 plus years of thinking about it. And I had a bunch of notes, and at the encouragement of some folks on my team at MicroConf and Tiny Seed, I’ve been trying to codify and refine it and sharpen it a bit.
So, I want to go through the letters and then do at least one, two examples depending on how much time we have. The first one was problem. The second P is purchaser. And so this is obviously about your buyer, right? Does this buyer tend to adopt new technology? So we can compare medical devices, we can compare attorneys with developers and maybe web designers, right?
So, attorneys, a lot of them tend to be pretty tech resistant. Medical devices, of course there’s new tech coming out, but it’s a very hard sale to make, right? Versus web designers, web developers, they’ll try a lot of different things. People on product hunt are going to be more likely to adopt new technology.
Is the purchaser willing, and do they have the ability, to pay? And so, this really falls in line with price sensitivity, right? It’s an IT department at a Fortune 500 company, of course, has massive budget, versus a musician or a hobbyist. Someone wants to record a podcast about their Dungeons and Dragons game. The willingness and ability to pair much lower than a lot of other markets in with particular buyers.
And lastly, on purchaser, I have this phrase and I’m going to try to figure out a better word for it, but right now I have sophistication is what it is. And really it’s, are they a consumer? So it’s B2C sale. Are they aspirational or hobbyists? So it’s like B2A, B to Aspirational. I think of photographers. It’s kind of pro-sumer almost, B2P. One of these B2P, B2A, such as photographers or bloggers. I want to make money online folks who are more likely to try something and then churn out. Maybe one level above a consumer. It’s not like a Netflix subscription, but they are paying to try to make money.
Again, photographers. Maybe they do weddings here and there, but they are more likely to kind of churn out of their hobby or churn out of this kind of money making endeavor, because it is such a small business.
And then we have B2B, which obviously is a business, and B2E, which is enterprise. Going to take longer sales cycles, fewer deals, large deals. Now, is there a B2SMB and a B to larger B? Of course there is, but let’s, for now, I like these four categories. Consumer, aspirational, business, and enterprise.
So, that was the second P. The third one is pricing model. Can this work as a subscription? I do talk to some folks who bring an idea and I’m like, that’s kind of a one time use thing. I just don’t think a subscription makes sense here. So, that’s just a simple off-the-cuff check, that estimate of the average revenue per account. And this is one that really comes with experience, I think, in knowing different industries and their willingness to pay. And then is it going to be monthly fee, mostly annual? Is it a share of revenue? Dot, dot, dot.
There are a lot of different options. I think we have six different options, maybe seven that we ask about in the state of independent SaaS survey about different pricing models. So those are the first three Ps. And again, I’m kind of putting these in order of importance, in the way that I would evaluate these. And as we go lower, each of these is still important but less important than the one above it.
So, we had the three Ps. Now we have the M and this is the market. How big is the market? The total reachable market, not the total addressable market. Obviously, the difference is every veterinarian in the country versus every veterinarian that you can reasonably reach without spending a gajillion dollars. Size matters a lot to venture-backed companies, because they want to be billion or 10 billion companies.
It matters a heck of a lot less to our types of startups. If you want to get to a million ARR, five million of annual recurring revenue, the market does not have to be that large as long as people do have that willingness to pay, that we talked about in the purchaser P.
And this is actually a good time for me to interject and say I see this 5 P.M. Framework as evaluating business ideas that can at least get to seven figures of ARR. Maybe they can do eight and maybe they can do 50 million or a 100 million and get to nine figure. But this is not for a tiny little lifestyle business. Let’s say you want to do 10K, 20K, MRR. Those are amazing businesses, don’t get me wrong. I’ve had a few in my day and they were great. If you want to think about building a business like that, go read, Start Small, Stay Small. It’s $10 on Kindle.
And basically, I walk through how I was building businesses like that, that are truly these amazing lifestyle businesses that just throw off cash. The valuation criteria is much less relevant with the start small, stay small lifestyle SaaS. That’s more about finding a traffic source and getting in front of it, right? It’s finding existing demand, whether it’s organic search in one of the top 10, 20 search engines. It’s getting in an app store or an add-on store where there’s existing traffic and just channeling that and building this great little business.
But this is that next step. These are the kinds of companies that come to Microconf Growth. These are the kinds of companies we fund with Tiny Seed. These are the kinds of companies I’m writing my next book for. It’s that spiritual successor to Start Small, Stay Small where it’s like, well I want to build a five million ARR company. How should we think about that? And so, that’s where that total reachable market can be a lot smaller than you might think. So again, we are in market, which is the M in the 5 P.M. Framework and that was size.
The next is ease of reaching customers. Are they online? What marketing channels do I need to use? What are the cost of these going to be? What stage is the market in? Is it early? Is it mid? Is it mature? Is it growing or flat? Is it declining? These are all types of things to think about. When I think about Josh Pigford launching Baremetrics, 10 years ago-ish. Early market, because Stripe was still pretty new. It was early market, it was growing quickly, amazing time to get into it. When I think of 80 PNR, launching what became WooCommerce, although it was called WooThemes back in the day.
Was WordPress early? Was it growing fast? Yes and yes, so if you can get into a market like that, very hard to do and very hard to do multiple times especially. But if you can do that, that can give you some tailwinds. Not the CSS framework. Actual winds that are… And not even actual winds, just a hypothetical, metaphorical tailwinds that are blown. You get the picture. I think I’ve taken this one a little too far.
And lastly in the market is competition. How much competition is there? Are they big companies? Are they other startups? So, that’s 3P.M.. So if I only had these, this would be the 3P.M. Framework and unfortunately we wouldn’t be able to have an adult beverage. And I realize as I’m talking through these, there’s a lot here. And so what I’m going to do is I’m going to take this Google doc that is currently just a list of indented bullets. I’m going to send it to producer Ron. And we’re going to, in some form or fashion, make it accessible such that if you opt into the startupsfortherestofus.com email list. This will come to you in the first email.
And so, it may be something as simple as an undesigned pdf or if we can put Startups For the Rest of Us branding on it in time, we will do that. But either way, you will get the information I am talking through here. And, of course, we’ll have a high level summary of the top level 5 P.M. bullets in the show notes.
Our fourth P is product founder fit. So, the questions to think about here are what about your background and access to this market makes you think you should build this? If the product is highly technical, do you have the tech chops? If it’s a crowded space, do you have marketing chops? If you have an audience or a network in this space? These are unique advantages that you have. And do you like this problem or are you just doing it opportunistically? You don’t have to love it. That’s the thing. None of these things I’m bringing up are absolute deal breakers. Each one is just another data point to gather when evaluating the idea.
And the fifth P is the pain to validate it. And I’m still figuring out if this is pain to validate or pain to actually build it, but I think since it’s idea phase, I like the idea of things that are easier to build an MVP for, that are easier to validate. Should get some credit for that if you can have a few conversations and validate this versus having to spend months building software. I think that’s important. I don’t think this one is nearly as important as the other four Ps and the M, to be honest. And that is why it’s fifth, and I’ve considered making it the 4P.M. Framework, but I think this deserves some consideration.
I also like the idea that, of course, it’s five o’clock somewhere, as I’ve said. And so now, I’m going to walk through two ideas and run them quickly through this 5 P.M. filter and kind of talk through how I view them. And there’s no conclusion, there’s no score out of a hundred. Not yet anyways. But the idea is to see some of the pros and cons and think through whether an idea is better than another or whether we think an idea will fly. So, I’m going to talk through an idea that Jon Yongfook tweeted about on September 12th. We’ll include a link to the tweet in the show notes. And this business idea actually appears in my most recent YouTube video that I recorded. If you’re not subscribed to the Microconf YouTube channel and should check it out.
But we have a video called ‘Seven SaaS Ideas I’m surprised No One Has Built Yet.’ And that’s the working title, so might change by the time this episode goes live. And frankly, the YouTube video may go live just a few days after this episode, but if you go to microconf.com/youtube, you can subscribe to the channel and then you can get notifications when new videos go live. But our ‘SaaS Ideas No One Has Built Yet’ or ‘SaaS Ideas You Should Steal Now’ have been a really popular series.
And I’ve started crowdsourcing some ideas when people want to basically give them away or have I… Things they want to see in the world, they aren’t going to build themselves, in essence. And so, this one just happened to be in my Twitter feed because I follow Jon Yongfook, as should you. And he says, “Opportunity for an indie hacker.”
My sister works in recruitment and she says there is no decent NPS tool, that’s net promoter score, that integrates with their ATS, which is an applicant tracking system so HR folks use that to track incoming job applicants. So, no NPS tool that integrates with their ATS, which is JobAdder, which has an open API. She’s only found one tool so far and it’s $800 a month, a bit too steep for small recruitment firms. Interesting idea, so let’s walk it through the 5 P.M..
So, the problem. What’s the problem? The problem is we want to get NPS scores from people who apply to our job, who wind up in our ATS, to use the nerdy three-letter acronym. So we want to get NPS from them and there’s no easy or cheap way to do it. That’s the problem. Is it an important problem? I think so. I think HR departments and people ops folks are probably graded.
Assuming that that’s a KPI. Assuming that that is something that their managers look at, then it’s an important problem. But if you were to talk to 10 HR professionals and they’re like, “Yeah, we don’t care about NPS of our applicants,” then I don’t know. Then it’s not important. So, I would start with conversations. I probably know myself, five HR or people ops people. And so I would email each of them and I would say, Do you run NPS? How important is it? Do you look at it? And if there’s mixed results, you got to keep doing the research.
And then there’s an urgency, which is a vitamin versus aspirin. So in this case, if it is important, then it’s probably urgent, as well. If it’s important then they can’t wait a year to do it, because they need that KPI, right? So, in this case the importance maybe pushes some emergency.
So, so far, let’s assume that it is important and urgent. This is intriguing. I’m intrigued by this idea. So the purchaser, does this market adopt new technology? So HR professionals, people ops folks. Yeah, there’s a lot of really big people ops tech, HR tech, so I would give this a yes, as good as any. Maybe not as much as web developers and entrepreneurs and all of us who hang out on Product Hunt Hacker News.
But I think there’s a lot of value here. Willingness to pay? Price sensitivity? Nah, they have budgets. And sophistication. These are solidly in the B2B. There’s not aspirational people doing a hobby, right? HR is not a hobby, so B2B or B2E sales. The pricing model subscription, well sure, because they need to run NPS constantly. I think that’s great. The ARPA estimate, right here we have the only one is $800 a month, so let’s just say our average revenue per account is half that, 400 a month, 200 a month.
These are good numbers. You can build a decent business on this, as long as the sales cycles are not brutal. And then is it monthly, annual or other? In this case, I would guess you’d want to go annual, because I think the sales cycle is going to be a little involvement in doing it. It kind of depends on the specifics of, is it just an add-on in their little app store or are you doing a one, two, three call closes and we want to do annual?
So, those were the first three Ps, now we do the market. The size, total reachable market, is the HR space big? It’s huge, right? It’s massive. There’s a lot of buyers out there. Ease of reaching them? Are the online? Well, of course. They’re on LinkedIn. Pay per click ads are going to work. They’re probably in a bunch of Facebook groups and Slack groups. There are a lot of places that you can reach them online, so I would say in general, not terribly hard to reach.
Is the market early or mature? Growing flat or declining? I would say it’s growing and it’s definitely not early, because there is a lot of HR tech, people ops tech. But I would say I don’t know what’s in between early and mature. I’m wondering if there’s maybe an in between moniker I need for that. But personally, I think it’s at a pretty good spot to enter because there is an ecosystem, money’s being spent, and you’re basically just attaching to an existing system.
Product founder fit. Well, we’d need a theoretical founder in this case, so let’s say me. What about my background and access to this market makes you think you should build this? So for me, I actually don’t have much access and I don’t think I should build this because I don’t really have… I don’t know many HR people and I’m not an expert in it. And then there was… Do you have tech chops and marketing chops? Unique advantage audience network in the space? Do you love the problem? So, these would be questions you ask yourself for almost all those. For me, it’s mostly not. I do not have a unique advantage.
And then pain to validate. How much time to market build an MVP, is an interesting one. So I do think early validation, for me, the next steps would be to talk to as many HR professionals as I could. The nice part is I’d start with JobAdder per what Jon Yongfook said. And I would try to find as many JobAdder customers as I could and have conversations. I would be in the other JobAdder forums. Is there a JobAdder Slack group? Anyone using that?
Can I go to BuiltWith and Datanyze and figure out who’s using using JobAdder and reach out with, “I’m not selling anything. I don’t have anything to sell you. I’m a developer. I’m an entrepreneur. I’m thinking about building something. Do you have this need?” That’d be a pretty good way to start validating that. And if people are clamoring for it and you get that urgency and importance, then that’s where I start thinking about, what’s the minimum code that I can write to validate this?
And maybe it’s no code, maybe it’s low code. I don’t know what their API’s like or whatever. But I think building a super manual… Imagine it sends an email that’s hard coded into a JSON file or a text file that you have. And imagine that to make a change to it, even to the wording, you have to go commit a change to the trunk and deploy it. That’s fine. That’s an MVP. This is a definition and you can build that out and make it better over time.
And then there are some things I didn’t include here that I probably need to add the framework of platform risk. How much platform risk if you just build on JobAdder? There’s definitely some, but in this case, how many ATSs are there? There are a lot, and there’s some leading ones and you could start building NPS tools for them. Although they may exist, this requires more research on your part. So overall, I like this idea. Do I think it could be a seven figure idea just doing NPS for JobAdder? Absolutely not. The market’s just not big enough.
But do I think that this could be a really interesting foothold or a wedge into a market, because doing things in public creates opportunity, right? It’s those who are shipping things that suddenly realize, oh, what if I pivot this into that? Or what if I add this extra piece to it? And suddenly, you build and build and you can find yourself expanding and building a pretty incredible business, even starting with small aspirations.
And the other idea I’m going to run through quickly was actually suggested by a Microconf Connect member named Jeff Gates. Jeff is an involved member of that community. And Jeff, I appreciate the suggestion that you posted. The idea software for independently owned airport hotels to rent out extra parking spaces for air travelers. And again, this appears in the YouTube videos of ‘SaaS Ideas I’m Surprised No One Has Built Yet.’.
And so, let’s talk about this. Software for independently owned airport hotels to rent out extra parking spaces for air travelers. So, the problem is we’re assuming, and we haven’t validated this, that independently owned airport hotels have parking spaces that they want to monetize. That’s the problem you’re trying to solve. I don’t know if it’s a problem. We need to figure that out. This would be part of the validation step of starting to talk to them. I also wonder, do not independently owned airport hotels need to rent out parking spaces and do they have a system? Because I like making one sale to Marriott, even if it takes a long time, and getting a whole bunch of seats. A whole bunch of hotels that have to pay rather than doing the one offs. Now, the one-offs will be easier upfront, but the big money will be with the chains.
So our two questions, is it important? And is it urgent? Is it an important problem? I don’t know. This is a tough one and this is where I need to have conversations with them. It sounds great. You’re going to make them more money, but if they’re not aware of this problem and you’re going to have to tell them you can do this and you should think about this… Imagine going up to the front desk and talking to a middle manager checking people in. You have to convince them that it’s important enough that then they bring their boss or then they talk to the owner of the hotel.
So unless hotels are already thinking about this, I don’t know if it’s important. The other thing is urgency. Well, it’s always urgent to make more money, but is solving this particular problem urgent or is remodeling their rooms or hiring the next waiter in the restaurant, are those urgent? Those are very urgent problems, because the hotel can’t function without them.
This one feels perhaps less urgent than what it takes to continue running the hotel, but the draw of money can sometimes provide urgency. I don’t know. I’m going to give this one a mid-grade. It certainly is not high on the urgency scale, I think. In terms of the purchaser, do independent hotel owners adopt new tech? A bit. I don’t think they’re jumping on it. They’re certainly not like web developers, designers, and all that. The example I keep using. I think they probably adopt it. It’s going to really depend, right? It’s going to depend on the owner, which I think is more in the brick and mortar. If you’re a lawyer or you’re a realtor or you’re someone who owns a hotel, you don’t necessarily care about the tech, you care about the problem they solve. So, I would say this is lower on the adopting new technology scale.
Are they willing to pay? Do they have the ability to pay? I would say usually they probably aren’t willing to, they probably have the ability. But in this case, I think I would structure the pricing in a way where I made a certain amount per spot that was rented or something to make it a no brainer, at least to start with, such that this became less of a concern.
And lastly, sophistication. Are they a consumer? Are they aspirational? Business or enterprise? I would certainly say they’re a business. Now some of these, if they’re sole proprietors, they can think a little, it can be a little cheap. I don’t know how big these hotels are. Certainly at airport hotels, I’m thinking, they’re probably big enough that most are owned by some type of corporation rather than an individual. It’s not a B&B with six rooms in it, right? These are going to be businesses run more like businesses, so that’s the sophistication I would put them at.
Now the pricing model is the subscription. Well, of course, because they’re going to be doing this on an ongoing basis. And so, if you can charge a monthly fee, great. This one I do think, especially early on, I would probably make it that no brainer pricing of, as you rent spaces out, we take a cut or a dollar per space. Not a dollar, but a dollar amount per space. Average avenue per account estimate. I don’t know, but I do know that to make this sale worthwhile, you’re going to want, I would say, at least… I don’t know. Four or 500 a month per account. And maybe it’s a thousand. You’re not going to know how many calls to close until you get into it. So, this is not something you’re going to charge 50 bucks, a hundred bucks a month for. Yeah, it’s just not going to be worth the effort.
And then in terms of the market, the size, I don’t know how big this market is actually, if we just look at independently own airport hotels, because most of the airport hotels that I see are the big name brands. They’re the Marriotts, the Hyatts and everything, so I don’t know. And I do have a question about that in my head that I would want to do more research.
How easy are they to reach? I think this is a tough one. Certainly not as easy to reach as HR professionals that we just talked to, right? It’s like where do people who own these hotels hang out? And you only want airport hotels, too, so that actually makes it tougher. So, I can imagine in-person events, the trade events where all the hotel owners go and there’s probably a trade magazine and trade websites and maybe some trade groups. That’s great. But are there airport hotel trade groups? Because it makes it harder to justify the spend if you go to this big event, but only 10% of the customers are airport hotels. That does pose a challenge.
Bouncing to product founder fit. This again is, what about your background in marketing and tech chops? It’s going to come down to you as the founder. I can’t imagine most founders would have a unique advantage in this space. And do you love this problem? I don’t know. I don’t know how many founders are going to love this problem. You also have to figure that out for your own. And then pain to validate, This one’s interesting because I think a conversations would certainly be 10, 20, 30 conversations. I need to have a lot to understand more about this. And then the second thing I’d be thinking is how can I build this with a minimum amount of effort for a pilot with one or two of these hotels?
And realistically, I think there’s going to be a lot of effort on the hotels part to block off certain spots, put numbers, put signs, say no one park here unless you have booked it through the XYZ system, right? That’s probably going to be more effort than anything. I think that you can do a responsive web app or maybe a mobile app. I would try to do it with one of these no code builders. This seems really like a CRUD app. You do CRUD plus payment, right? Create, read, update, delete. And then add Stripe payments in.
And so, the minimum amount could be a responsive web app. A lot of people are going to want to do it on their phone, not to administer it, but the consumer side, right, of people actually booking it. So, responsive web app or a mobile app would be great. And then some type of web admin that basically…
But I’m talking MVP. Do you even need a web admin or, I don’t think you do, because really it’s a matter of the hotel providing you with a Google sheet or a spreadsheet of these are the numbers of the spots and these are the prices or whatever it is. And then this is where you just stuff it into your database using, using SQL and you just go from there. You don’t have an admin console. You do everything manually from the start. And so now that it’s in that database, then the customer facing mobile web app says this is available on this date for this price. And when they click to buy it now, there’s a Stripe payments link. I forget the technical term for it, but it’s a pretty easy checkout process.
And that’s what I’d be thinking about in terms of this idea, is how can I validate it? So I’m less certain that there’s a desperate need for this one compared to the HR NPS idea. And so, how do we get around that? Well, we try to validate as much as possible and that’s through the conversations I said. And then that’s through not writing a bunch of code, but writing the minimum amount of code to get the hotel to try it out. You’re going to have to convince the hotel to, as I said, put up signage for parking spots, but also to promote it, right?
Because otherwise, I guess you’re going to be promoting. I haven’t thought through this part actually. Are you going to be promoting as the founder? I guess you’re going to want a two-sided marketplace, because you’re going to want interest coming to your site. Or is this something they’re promoting?
So that’s a whole… In the interest of time, I won’t go down that thread right now, in terms of how I think about it. But I hope that today’s episode, diving into the 5 P.M. Framework has been enlightening. I know that I got into some nitty gritty there and I appreciate you sticking with me. As I said, if you go to startupsfortherestofus.com and enter your email address, we will make sure that the full 5 P.M. Framework is sent to you via email.
And as always, I appreciate you showing up and listening as I nerd out on all things SaaS and startups. This is Rob Walling signing off from episode 628, and I’ll be back in your ears again next week.
This week I’d like to make the announcement of our early lineup for MicroConf US 2023. This is in Denver, Colorado next April. It will be co-hosted by Lianna Patch of Punchline Copy. We’ll have talks from Dev Basu, the CEO of Powered by Search, Patrick Campbell, founder of ProfitWell, currently the Chief Strategy Officer of Paddle.
And we will have our special guest, Syed Balkhi, the CEO of Awesome Motive, in addition to myself co-hosting with Lianna, and I’ll be doing a talk. If you want to hang out with a couple hundred non-venture track, indie SaaS founders in Denver, Colorado, next April, head to microconf.com/growth. It’s going to be an amazing time. I hope to see you there.
Welcome back to Startups For The Rest of Us. I’m your host, Rob Walling. This is the podcast for bootstrap and mostly bootstrapped SaaS companies that want to build incredible businesses without sacrificing their freedom, their purpose, or their relationships along the way.
I have, what I consider, an interesting episode today. I’m going to dive in to an idea validation framework I’m calling 5 P.M., because it is, after all, five o’clock somewhere. So this is not about happy hour, nor is it about drinking mezcal and bourbon. As much as I like to do those things, it’s a framework that looks at startup ideas and uses different criteria and different lenses through which to view them.
So, I’ll get in to what 5 P.M. stands for in just a minute. I did want to thank everyone who has left a rating in Apple Podcast. Since I started my drive to 1000 ratings, we have jumped a substantial number and I don’t remember the exact number, but I think we were in the mid eight hundreds approaching 900.
We’re now at 995 ratings, which is just incredible. We’re about to cross that four figure mark. Ratings are different than reviews. Ratings are when you log into Apple Podcast and you just click five stars. And if you could do that, that’d be amazing. But we also got a bunch of new reviews this week. Bjorn Brinjar from Iceland. I was just in Iceland a couple weeks ago, would’ve been cool to hang out. Bjorn says, “The best resource on launching a SaaS app. Discovered the show six years ago, went back and listened to all episodes and never missed a new release. Following Rob’s playbook, currently stair stepping a SaaS product towards 1000 MRR. Highly recommended.”
That’s awesome. Thanks, Bjorn. Steve at Devia Software says, “Not just for pure startups. In a world filled with fluff content, this podcast really delivers. I’ve been running a software company for over 15 years. It’s devia.com, and every episode sparks at least one talking point with our team.”
Solist from Denmark says, “Great inspiration for me as a bootstrap SaaS founders. And SkiBikeSkiClimb from the US says, “Rob W., The person behind your success.”
SkiBikeSki wrote me a letter in their review. “Hey Rob, recently sold most of my business with an option to sell the rest in all caps. I could not have done it without your guidance through your podcast. Worked on it about 20 hours a week since 2014. I live in Montana, close to a ski resort. Backcountry skiing, rock climbing, and mountain biking. And thanks to you one of those things got done five days a week for the past eight years. I’ve created a great lifestyle business for sure. I started the business in my fifties with no knowledge on how to run a SaaS biz and everything I thought at the start was wrong. 300 episodes later. Here I am.”
This is awesome. Thank you again, so much, if you’ve left a rating or a review. And since we’re five away from a thousand, it’d be great if you could log in and click that five star button. And with that, let’s dive in to my idea validation framework I’m calling the 5 P.M. Framework.
So, the reason I’m calling it that is there are five Ps and one M in the framework. Yes, it’s that clever. So in relative order of importance, the letters that make up the acronym are problem, purchaser, pricing model, market, that’s the M, product founder fit, and pain to validate. And below each of those, of course, there are sub bullets, right? So under problem, some things to think through and answer about the problem are, is this an important problem? And is this an urgent problem? Vitamin versus aspirin.
So if you’ve ever seen those matrices where it’s tasks that are on your plate and it’s how important and how urgent, and there’s four boxes. In essence, is this an urgent and an important problem? Is this a not urgent and an important problem? Not urgent, not important? It’s interesting to think about that, not as a two different binaries, but actually as a four-boxed matrix.
In addition, I have a note that I’ve started saying to founders when they want to tell me about their idea and I say, “Don’t tell me what your idea is, tell me what problem it solves.” Start with the problem, and then you can tell me what you want to build to solve it, because I actually care way more about the problem you’re solving, than your idea. Because your idea is one solution to that problem. Think about that. Think about when a customer emails you and says, “I would love to be able to send an email whenever I click something in your app, so can we add a ‘send email’ button to this particular space in your workflow?”
And you think to yourself, that would be a really weird place for that button and no one else will want to do that. But is there a way to generalize this? Is there a way to add an automation that happens every time someone does a certain thing and one of those automations is sending an email, but there are 10 other options. This is where a customer brings a solution to you that’s not a good one, but they do have a problem they need solved and you can figure out a bunch of different ways to solve that. That’s what I’m saying here. Don’t tell me your idea, tell me what problem it solves. And then from there we can think through, well is your idea the best way to solve that problem or are there other ways? Is software even the best way to do this? Or is a productized service or is consulting or is a two-sided marketplace? There are so many different ways that you can solve the same problem.
I’m going to run through the other letters and then I want to do at least one, maybe two examples depending on how much time we have, and run them through this 5 P.M. filter. This is very much a work in progress by the way. It’s something that has obviously taken shape over 10 plus years of thinking about it. And I had a bunch of notes, and at the encouragement of some folks on my team at MicroConf and Tiny Seed, I’ve been trying to codify and refine it and sharpen it a bit.
So, I want to go through the letters and then do at least one, two examples depending on how much time we have. The first one was problem. The second P is purchaser. And so this is obviously about your buyer, right? Does this buyer tend to adopt new technology? So we can compare medical devices, we can compare attorneys with developers and maybe web designers, right?
So, attorneys, a lot of them tend to be pretty tech resistant. Medical devices, of course there’s new tech coming out, but it’s a very hard sale to make, right? Versus web designers, web developers, they’ll try a lot of different things. People on product hunt are going to be more likely to adopt new technology.
Is the purchaser willing, and do they have the ability, to pay? And so, this really falls in line with price sensitivity, right? It’s an IT department at a Fortune 500 company, of course, has massive budget, versus a musician or a hobbyist. Someone wants to record a podcast about their Dungeons and Dragons game. The willingness and ability to pair much lower than a lot of other markets in with particular buyers.
And lastly, on purchaser, I have this phrase and I’m going to try to figure out a better word for it, but right now I have sophistication is what it is. And really it’s, are they a consumer? So it’s B2C sale. Are they aspirational or hobbyists? So it’s like B2A, B to Aspirational. I think of photographers. It’s kind of pro-sumer almost, B2P. One of these B2P, B2A, such as photographers or bloggers. I want to make money online folks who are more likely to try something and then churn out. Maybe one level above a consumer. It’s not like a Netflix subscription, but they are paying to try to make money.
Again, photographers. Maybe they do weddings here and there, but they are more likely to kind of churn out of their hobby or churn out of this kind of money making endeavor, because it is such a small business.
And then we have B2B, which obviously is a business, and B2E, which is enterprise. Going to take longer sales cycles, fewer deals, large deals. Now, is there a B2SMB and a B to larger B? Of course there is, but let’s, for now, I like these four categories. Consumer, aspirational, business, and enterprise.
So, that was the second P. The third one is pricing model. Can this work as a subscription? I do talk to some folks who bring an idea and I’m like, that’s kind of a one time use thing. I just don’t think a subscription makes sense here. So, that’s just a simple off-the-cuff check, that estimate of the average revenue per account. And this is one that really comes with experience, I think, in knowing different industries and their willingness to pay. And then is it going to be monthly fee, mostly annual? Is it a share of revenue? Dot, dot, dot.
There are a lot of different options. I think we have six different options, maybe seven that we ask about in the state of independent SaaS survey about different pricing models. So those are the first three Ps. And again, I’m kind of putting these in order of importance, in the way that I would evaluate these. And as we go lower, each of these is still important but less important than the one above it.
So, we had the three Ps. Now we have the M and this is the market. How big is the market? The total reachable market, not the total addressable market. Obviously, the difference is every veterinarian in the country versus every veterinarian that you can reasonably reach without spending a gajillion dollars. Size matters a lot to venture-backed companies, because they want to be billion or 10 billion companies.
It matters a heck of a lot less to our types of startups. If you want to get to a million ARR, five million of annual recurring revenue, the market does not have to be that large as long as people do have that willingness to pay, that we talked about in the purchaser P.
And this is actually a good time for me to interject and say I see this 5 P.M. Framework as evaluating business ideas that can at least get to seven figures of ARR. Maybe they can do eight and maybe they can do 50 million or a 100 million and get to nine figure. But this is not for a tiny little lifestyle business. Let’s say you want to do 10K, 20K, MRR. Those are amazing businesses, don’t get me wrong. I’ve had a few in my day and they were great. If you want to think about building a business like that, go read, Start Small, Stay Small. It’s $10 on Kindle.
And basically, I walk through how I was building businesses like that, that are truly these amazing lifestyle businesses that just throw off cash. The valuation criteria is much less relevant with the start small, stay small lifestyle SaaS. That’s more about finding a traffic source and getting in front of it, right? It’s finding existing demand, whether it’s organic search in one of the top 10, 20 search engines. It’s getting in an app store or an add-on store where there’s existing traffic and just channeling that and building this great little business.
But this is that next step. These are the kinds of companies that come to Microconf Growth. These are the kinds of companies we fund with Tiny Seed. These are the kinds of companies I’m writing my next book for. It’s that spiritual successor to Start Small, Stay Small where it’s like, well I want to build a five million ARR company. How should we think about that? And so, that’s where that total reachable market can be a lot smaller than you might think. So again, we are in market, which is the M in the 5 P.M. Framework and that was size.
The next is ease of reaching customers. Are they online? What marketing channels do I need to use? What are the cost of these going to be? What stage is the market in? Is it early? Is it mid? Is it mature? Is it growing or flat? Is it declining? These are all types of things to think about. When I think about Josh Pigford launching Baremetrics, 10 years ago-ish. Early market, because Stripe was still pretty new. It was early market, it was growing quickly, amazing time to get into it. When I think of 80 PNR, launching what became WooCommerce, although it was called WooThemes back in the day.
Was WordPress early? Was it growing fast? Yes and yes, so if you can get into a market like that, very hard to do and very hard to do multiple times especially. But if you can do that, that can give you some tailwinds. Not the CSS framework. Actual winds that are… And not even actual winds, just a hypothetical, metaphorical tailwinds that are blown. You get the picture. I think I’ve taken this one a little too far.
And lastly in the market is competition. How much competition is there? Are they big companies? Are they other startups? So, that’s 3P.M.. So if I only had these, this would be the 3P.M. Framework and unfortunately we wouldn’t be able to have an adult beverage. And I realize as I’m talking through these, there’s a lot here. And so what I’m going to do is I’m going to take this Google doc that is currently just a list of indented bullets. I’m going to send it to producer Ron. And we’re going to, in some form or fashion, make it accessible such that if you opt into the startupsfortherestofus.com email list. This will come to you in the first email.
And so, it may be something as simple as an undesigned pdf or if we can put Startups For the Rest of Us branding on it in time, we will do that. But either way, you will get the information I am talking through here. And, of course, we’ll have a high level summary of the top level 5 P.M. bullets in the show notes.
Our fourth P is product founder fit. So, the questions to think about here are what about your background and access to this market makes you think you should build this? If the product is highly technical, do you have the tech chops? If it’s a crowded space, do you have marketing chops? If you have an audience or a network in this space? These are unique advantages that you have. And do you like this problem or are you just doing it opportunistically? You don’t have to love it. That’s the thing. None of these things I’m bringing up are absolute deal breakers. Each one is just another data point to gather when evaluating the idea.
And the fifth P is the pain to validate it. And I’m still figuring out if this is pain to validate or pain to actually build it, but I think since it’s idea phase, I like the idea of things that are easier to build an MVP for, that are easier to validate. Should get some credit for that if you can have a few conversations and validate this versus having to spend months building software. I think that’s important. I don’t think this one is nearly as important as the other four Ps and the M, to be honest. And that is why it’s fifth, and I’ve considered making it the 4P.M. Framework, but I think this deserves some consideration.
I also like the idea that, of course, it’s five o’clock somewhere, as I’ve said. And so now, I’m going to walk through two ideas and run them quickly through this 5 P.M. filter and kind of talk through how I view them. And there’s no conclusion, there’s no score out of a hundred. Not yet anyways. But the idea is to see some of the pros and cons and think through whether an idea is better than another or whether we think an idea will fly. So, I’m going to talk through an idea that Jon Yongfook tweeted about on September 12th. We’ll include a link to the tweet in the show notes. And this business idea actually appears in my most recent YouTube video that I recorded. If you’re not subscribed to the Microconf YouTube channel and should check it out.
But we have a video called ‘Seven SaaS Ideas I’m surprised No One Has Built Yet.’ And that’s the working title, so might change by the time this episode goes live. And frankly, the YouTube video may go live just a few days after this episode, but if you go to microconf.com/youtube, you can subscribe to the channel and then you can get notifications when new videos go live. But our ‘SaaS Ideas No One Has Built Yet’ or ‘SaaS Ideas You Should Steal Now’ have been a really popular series.
And I’ve started crowdsourcing some ideas when people want to basically give them away or have I… Things they want to see in the world, they aren’t going to build themselves, in essence. And so, this one just happened to be in my Twitter feed because I follow Jon Yongfook, as should you. And he says, “Opportunity for an indie hacker.”
My sister works in recruitment and she says there is no decent NPS tool, that’s net promoter score, that integrates with their ATS, which is an applicant tracking system so HR folks use that to track incoming job applicants. So, no NPS tool that integrates with their ATS, which is JobAdder, which has an open API. She’s only found one tool so far and it’s $800 a month, a bit too steep for small recruitment firms. Interesting idea, so let’s walk it through the 5 P.M..
So, the problem. What’s the problem? The problem is we want to get NPS scores from people who apply to our job, who wind up in our ATS, to use the nerdy three-letter acronym. So we want to get NPS from them and there’s no easy or cheap way to do it. That’s the problem. Is it an important problem? I think so. I think HR departments and people ops folks are probably graded.
Assuming that that’s a KPI. Assuming that that is something that their managers look at, then it’s an important problem. But if you were to talk to 10 HR professionals and they’re like, “Yeah, we don’t care about NPS of our applicants,” then I don’t know. Then it’s not important. So, I would start with conversations. I probably know myself, five HR or people ops people. And so I would email each of them and I would say, Do you run NPS? How important is it? Do you look at it? And if there’s mixed results, you got to keep doing the research.
And then there’s an urgency, which is a vitamin versus aspirin. So in this case, if it is important, then it’s probably urgent, as well. If it’s important then they can’t wait a year to do it, because they need that KPI, right? So, in this case the importance maybe pushes some emergency.
So, so far, let’s assume that it is important and urgent. This is intriguing. I’m intrigued by this idea. So the purchaser, does this market adopt new technology? So HR professionals, people ops folks. Yeah, there’s a lot of really big people ops tech, HR tech, so I would give this a yes, as good as any. Maybe not as much as web developers and entrepreneurs and all of us who hang out on Product Hunt Hacker News.
But I think there’s a lot of value here. Willingness to pay? Price sensitivity? Nah, they have budgets. And sophistication. These are solidly in the B2B. There’s not aspirational people doing a hobby, right? HR is not a hobby, so B2B or B2E sales. The pricing model subscription, well sure, because they need to run NPS constantly. I think that’s great. The ARPA estimate, right here we have the only one is $800 a month, so let’s just say our average revenue per account is half that, 400 a month, 200 a month.
These are good numbers. You can build a decent business on this, as long as the sales cycles are not brutal. And then is it monthly, annual or other? In this case, I would guess you’d want to go annual, because I think the sales cycle is going to be a little involvement in doing it. It kind of depends on the specifics of, is it just an add-on in their little app store or are you doing a one, two, three call closes and we want to do annual?
So, those were the first three Ps, now we do the market. The size, total reachable market, is the HR space big? It’s huge, right? It’s massive. There’s a lot of buyers out there. Ease of reaching them? Are the online? Well, of course. They’re on LinkedIn. Pay per click ads are going to work. They’re probably in a bunch of Facebook groups and Slack groups. There are a lot of places that you can reach them online, so I would say in general, not terribly hard to reach.
Is the market early or mature? Growing flat or declining? I would say it’s growing and it’s definitely not early, because there is a lot of HR tech, people ops tech. But I would say I don’t know what’s in between early and mature. I’m wondering if there’s maybe an in between moniker I need for that. But personally, I think it’s at a pretty good spot to enter because there is an ecosystem, money’s being spent, and you’re basically just attaching to an existing system.
Product founder fit. Well, we’d need a theoretical founder in this case, so let’s say me. What about my background and access to this market makes you think you should build this? So for me, I actually don’t have much access and I don’t think I should build this because I don’t really have… I don’t know many HR people and I’m not an expert in it. And then there was… Do you have tech chops and marketing chops? Unique advantage audience network in the space? Do you love the problem? So, these would be questions you ask yourself for almost all those. For me, it’s mostly not. I do not have a unique advantage.
And then pain to validate. How much time to market build an MVP, is an interesting one. So I do think early validation, for me, the next steps would be to talk to as many HR professionals as I could. The nice part is I’d start with JobAdder per what Jon Yongfook said. And I would try to find as many JobAdder customers as I could and have conversations. I would be in the other JobAdder forums. Is there a JobAdder Slack group? Anyone using that?
Can I go to BuiltWith and Datanyze and figure out who’s using using JobAdder and reach out with, “I’m not selling anything. I don’t have anything to sell you. I’m a developer. I’m an entrepreneur. I’m thinking about building something. Do you have this need?” That’d be a pretty good way to start validating that. And if people are clamoring for it and you get that urgency and importance, then that’s where I start thinking about, what’s the minimum code that I can write to validate this?
And maybe it’s no code, maybe it’s low code. I don’t know what their API’s like or whatever. But I think building a super manual… Imagine it sends an email that’s hard coded into a JSON file or a text file that you have. And imagine that to make a change to it, even to the wording, you have to go commit a change to the trunk and deploy it. That’s fine. That’s an MVP. This is a definition and you can build that out and make it better over time.
And then there are some things I didn’t include here that I probably need to add the framework of platform risk. How much platform risk if you just build on JobAdder? There’s definitely some, but in this case, how many ATSs are there? There are a lot, and there’s some leading ones and you could start building NPS tools for them. Although they may exist, this requires more research on your part. So overall, I like this idea. Do I think it could be a seven figure idea just doing NPS for JobAdder? Absolutely not. The market’s just not big enough.
But do I think that this could be a really interesting foothold or a wedge into a market, because doing things in public creates opportunity, right? It’s those who are shipping things that suddenly realize, oh, what if I pivot this into that? Or what if I add this extra piece to it? And suddenly, you build and build and you can find yourself expanding and building a pretty incredible business, even starting with small aspirations.
And the other idea I’m going to run through quickly was actually suggested by a Microconf Connect member named Jeff Gates. Jeff is an involved member of that community. And Jeff, I appreciate the suggestion that you posted. The idea software for independently owned airport hotels to rent out extra parking spaces for air travelers. And again, this appears in the YouTube videos of ‘SaaS Ideas I’m Surprised No One Has Built Yet.’.
And so, let’s talk about this. Software for independently owned airport hotels to rent out extra parking spaces for air travelers. So, the problem is we’re assuming, and we haven’t validated this, that independently owned airport hotels have parking spaces that they want to monetize. That’s the problem you’re trying to solve. I don’t know if it’s a problem. We need to figure that out. This would be part of the validation step of starting to talk to them. I also wonder, do not independently owned airport hotels need to rent out parking spaces and do they have a system? Because I like making one sale to Marriott, even if it takes a long time, and getting a whole bunch of seats. A whole bunch of hotels that have to pay rather than doing the one offs. Now, the one-offs will be easier upfront, but the big money will be with the chains.
So our two questions, is it important? And is it urgent? Is it an important problem? I don’t know. This is a tough one and this is where I need to have conversations with them. It sounds great. You’re going to make them more money, but if they’re not aware of this problem and you’re going to have to tell them you can do this and you should think about this… Imagine going up to the front desk and talking to a middle manager checking people in. You have to convince them that it’s important enough that then they bring their boss or then they talk to the owner of the hotel.
So unless hotels are already thinking about this, I don’t know if it’s important. The other thing is urgency. Well, it’s always urgent to make more money, but is solving this particular problem urgent or is remodeling their rooms or hiring the next waiter in the restaurant, are those urgent? Those are very urgent problems, because the hotel can’t function without them.
This one feels perhaps less urgent than what it takes to continue running the hotel, but the draw of money can sometimes provide urgency. I don’t know. I’m going to give this one a mid-grade. It certainly is not high on the urgency scale, I think. In terms of the purchaser, do independent hotel owners adopt new tech? A bit. I don’t think they’re jumping on it. They’re certainly not like web developers, designers, and all that. The example I keep using. I think they probably adopt it. It’s going to really depend, right? It’s going to depend on the owner, which I think is more in the brick and mortar. If you’re a lawyer or you’re a realtor or you’re someone who owns a hotel, you don’t necessarily care about the tech, you care about the problem they solve. So, I would say this is lower on the adopting new technology scale.
Are they willing to pay? Do they have the ability to pay? I would say usually they probably aren’t willing to, they probably have the ability. But in this case, I think I would structure the pricing in a way where I made a certain amount per spot that was rented or something to make it a no brainer, at least to start with, such that this became less of a concern.
And lastly, sophistication. Are they a consumer? Are they aspirational? Business or enterprise? I would certainly say they’re a business. Now some of these, if they’re sole proprietors, they can think a little, it can be a little cheap. I don’t know how big these hotels are. Certainly at airport hotels, I’m thinking, they’re probably big enough that most are owned by some type of corporation rather than an individual. It’s not a B&B with six rooms in it, right? These are going to be businesses run more like businesses, so that’s the sophistication I would put them at.
Now the pricing model is the subscription. Well, of course, because they’re going to be doing this on an ongoing basis. And so, if you can charge a monthly fee, great. This one I do think, especially early on, I would probably make it that no brainer pricing of, as you rent spaces out, we take a cut or a dollar per space. Not a dollar, but a dollar amount per space. Average avenue per account estimate. I don’t know, but I do know that to make this sale worthwhile, you’re going to want, I would say, at least… I don’t know. Four or 500 a month per account. And maybe it’s a thousand. You’re not going to know how many calls to close until you get into it. So, this is not something you’re going to charge 50 bucks, a hundred bucks a month for. Yeah, it’s just not going to be worth the effort.
And then in terms of the market, the size, I don’t know how big this market is actually, if we just look at independently own airport hotels, because most of the airport hotels that I see are the big name brands. They’re the Marriotts, the Hyatts and everything, so I don’t know. And I do have a question about that in my head that I would want to do more research.
How easy are they to reach? I think this is a tough one. Certainly not as easy to reach as HR professionals that we just talked to, right? It’s like where do people who own these hotels hang out? And you only want airport hotels, too, so that actually makes it tougher. So, I can imagine in-person events, the trade events where all the hotel owners go and there’s probably a trade magazine and trade websites and maybe some trade groups. That’s great. But are there airport hotel trade groups? Because it makes it harder to justify the spend if you go to this big event, but only 10% of the customers are airport hotels. That does pose a challenge.
Bouncing to product founder fit. This again is, what about your background in marketing and tech chops? It’s going to come down to you as the founder. I can’t imagine most founders would have a unique advantage in this space. And do you love this problem? I don’t know. I don’t know how many founders are going to love this problem. You also have to figure that out for your own. And then pain to validate, This one’s interesting because I think a conversations would certainly be 10, 20, 30 conversations. I need to have a lot to understand more about this. And then the second thing I’d be thinking is how can I build this with a minimum amount of effort for a pilot with one or two of these hotels?
And realistically, I think there’s going to be a lot of effort on the hotels part to block off certain spots, put numbers, put signs, say no one park here unless you have booked it through the XYZ system, right? That’s probably going to be more effort than anything. I think that you can do a responsive web app or maybe a mobile app. I would try to do it with one of these no code builders. This seems really like a CRUD app. You do CRUD plus payment, right? Create, read, update, delete. And then add Stripe payments in.
And so, the minimum amount could be a responsive web app. A lot of people are going to want to do it on their phone, not to administer it, but the consumer side, right, of people actually booking it. So, responsive web app or a mobile app would be great. And then some type of web admin that basically…
But I’m talking MVP. Do you even need a web admin or, I don’t think you do, because really it’s a matter of the hotel providing you with a Google sheet or a spreadsheet of these are the numbers of the spots and these are the prices or whatever it is. And then this is where you just stuff it into your database using, using SQL and you just go from there. You don’t have an admin console. You do everything manually from the start. And so now that it’s in that database, then the customer facing mobile web app says this is available on this date for this price. And when they click to buy it now, there’s a Stripe payments link. I forget the technical term for it, but it’s a pretty easy checkout process.
And that’s what I’d be thinking about in terms of this idea, is how can I validate it? So I’m less certain that there’s a desperate need for this one compared to the HR NPS idea. And so, how do we get around that? Well, we try to validate as much as possible and that’s through the conversations I said. And then that’s through not writing a bunch of code, but writing the minimum amount of code to get the hotel to try it out. You’re going to have to convince the hotel to, as I said, put up signage for parking spots, but also to promote it, right?
Because otherwise, I guess you’re going to be promoting. I haven’t thought through this part actually. Are you going to be promoting as the founder? I guess you’re going to want a two-sided marketplace, because you’re going to want interest coming to your site. Or is this something they’re promoting?
So that’s a whole… In the interest of time, I won’t go down that thread right now, in terms of how I think about it. But I hope that today’s episode, diving into the 5 P.M. Framework has been enlightening. I know that I got into some nitty gritty there and I appreciate you sticking with me. As I said, if you go to startupsfortherestofus.com and enter your email address, we will make sure that the full 5 P.M. Framework is sent to you via email.
And as always, I appreciate you showing up and listening as I nerd out on all things SaaS and startups. This is Rob Walling signing off from episode 628, and I’ll be back in your ears again next week.
Episode 627 | TinySeed Tales s3e5: Meeting the Co-Founder
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In the penultimate episode of TinySeed Tales Season 3, Rob Walling checks in with Tony Chan of CloudForecast.
Tony shares some recent big wins, including hiring a senior engineer. We also meet Tony’s cofounder, Francois Lagier, for the first time.
Topics we cover:
- 1:49 – The story of how Tony and Francois first met
- 2:14 – Hiring a senior engineer at CloudForecast
- 8:51 – Tony shares two recent big wins at CloudForecast
- 14:31 – The paradox of choice that all startup founders face
- 16:30 – CloudForecast dives into some new content marketing and SEO initiatives
- 18:35 – What are Tony and Francois looking forward to in the next month?
Links from the Show:
- Tony Chan (@toeknee123) I Twitter
- Francois Lagier (@francoislagier) I Twitter
- CloudForecast
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling:
Welcome back to TinySeed Tales. This is the penultimate episode of season three where we meet Tony’s co-founder. I hope you’ve been enjoying this season so far. If you like it, it’d be awesome if you could reach out to me on Twitter at Rob Walling at Start-Ups Pod and let me know if you’d like a fourth season. At this point, I have not started recording one, and I am looking to hear if there’s interest in hearing more stories like this. And with that, let’s dive into this episode of TinySeed Tales.
Tony Chan:
We’re pretty intentional about our interview process. Come off disorganized, and you come off like you don’t know what you’re doing, and you’re just roping in random people here and there, and you’re not setting up the right expectations, it can look really bad. Especially our very, very good candidate can sniff that out.
Rob Walling:
Welcome back to TinySeed Tales, a series where I follow a founder through their struggles, victories, and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for bootstrappers. So far this season, I’ve been talking to Tony Chan of Cloud Forecast. Today we’ll be joined by a new voice. So Tony, this week you brought a friend with you. Would you like to introduce the third person here on the pod?
Tony Chan:
Yeah. I had to drag and convince Francois, my technical co-founder, to join us. So he is on the line, and I think it’ll be great to get his perspective on how things are going since you’ve heard from me the last four episodes.
Rob Walling:
And we keep hearing you mention this co-founder by name. Finally.
Tony Chan:
So he exists. He’s not fake.
Rob Walling:
He actually exists.
Tony Chan:
Yeah. He’s my French counterpart and my co-founder the last three years, and I’ve known Francois since 2011, so we’ve been working together for quite some time.
Rob Walling:
Francois, how’s it going?
Francois Lagier:
Hi, everybody. Yeah, it’s been 10 years since Tony and I know each other which is crazy.
Rob Walling:
How did you meet?
Francois Lagier:
We both work at the same startup. He was the Director of Customer Success, and he was kind of doing everything, and I was one of the lead engineer over there.
Rob Walling:
The company where Tony and Francois first met was called Perfect Audience. We talked a bit more about it back in the first episode of this season, but let’s get back to the present.
I want to kick today off by revisiting a couple things from the last episode, episode four. When Tony and I last spoke, he mentioned that in a month, in essence, you had doubled your MRR up to 35,000, which is just a huge shock to the system where suddenly you have this influx of capital. Tony had mentioned that with the money you were thinking about hiring a senior engineer, didn’t have concrete plans yet. What’s happened with that?
Francois Lagier:
We found one. First, we look at the type of person we wanted to hire. The seniority, the experience, and we really wanted to bring someone on board that would really help us bring the app to another level. Someone with a lot of experience, someone that can help us grow the skill sets that we have in the team, that can help us grow the engineers that we have in the team, including myself. We went on LinkedIn. We did a long list of older people that we think would be a right fit, and we found one, actually the first one. It was way too easy, and I think Tony and I should not get used to that because it should not be that easy to find someone.It took us two weeks.
Tony Chan:
We got so lucky with that one. I was joking with Francois that we should probably play the lot right after that because hiring someone of this person’s caliber in such a short time is unheard of.
Rob Walling:
And how did that come about? The specifics?
Francois Lagier:
Tony and I defined the type of person we wanted. I went on LinkedIn using sales navigator, which is usually a sales product, and I start searching leads, senior engineers based on connections that I believe I could get an intro. That person was actually a former co-worker of TinySeed, so I asked her to make an intro asking if he was looking for a job. He said yes. Week after we had a first interview. Next week we did four interviews, and three days after that, he had an offer, and he’s starting March 1st.
Tony Chan:
And all this happened while I was in Hawaii, so Francois was slacking me, and he was super stressed about it because he was a good person overall, culturally good fit and everything, and he was just stressing like, “Okay, how can we make this work? How can we make this work?” While I’m on the beach, trying to text him, “We’ll make it work. Just chill out a bit. We’ll make it happen.” And when literally the Friday, that week I got back, he set up three interviews and got it all ready. So I flew back from Hawaii, had an interview, and then we made an offer, and then in few days he just accepted it, so it happened really fast.
Rob Walling:
And Francois, what were you worried about when you were saying, “How are we going to make this work?” What were you worried wasn’t going to work?
Francois Lagier:
The person told me that he was looking for new opportunities, and during my first interview, I could clearly see that there’s a perfect culture of it with the type of company we want to run and the type of company he wanted to join, and I was just concerned he’s going to find another company, especially with COVID and the remote market is crazy, and this person is looking [inaudible 00:05:06], so if he was start looking for a job, he’s going to find one very quickly, so I just wanted to move fast. But at the same time, do things the right way so line up the right interview with the right persons, figure out the interview tests for more senior candidates, so I wanted to do it either right way, but I also wanted to do it fast. So we don’t miss him.
Rob Walling:
I always feel that sense of urgency when I find someone amazing on the first interview, and I’m like, “This is the perfect fit.” I always ask myself two questions. Number one, how quickly can we move? And number two, what am I missing? Is there a blind spot? Do they have a secret red flag that I didn’t pick up in that interview?
Tony Chan:
And we’re pretty intentional about our interview process. And I think that comes from the experience of Francois being at Twitter. It’s not our first rodeo. So when we set up a process, we have it all nailed down from start to finish and roping into right people. So he chatted with Francois and then he started messaging me. Then he chatted with me and then we wanted to make sure Kattya was on board as well, so we built that into the process and then looped back with Francois in the technical interview. And then we had an advisor of ours, also a friend of ours, who was Francois’s former boss to also vet this person as well. So it’s always important to have a process, and the person on the other hand also understand what the expectation is, right? Because it really shows what type of company you are and what kind of process oriented company you are.
So instead of trying to duct tape everything together, right, just making sure that it looks professional, that’s still very important and making sure you hire the right person because if you come off disorganized and you come off like you don’t know what you’re doing, and you’re just roping in random people here and there, and you’re not setting up the right expectations, it can look really bad. Especially a very, very good candidate can sniff that out.
I’m still awed that someone of his caliber and someone of his experience would be willing to work for a company like ours. And not saying that we are terrible or what-not, but we’re a small bootstrap startup. There’s a lot of opportunities out there in the world that could use him in other companies as well, but the fact that he chose us, and he was very excited about us, that is super encouraging to hear and super encouraging for Francois and I being owners that we’re building things the right way and that we were able to sell him on the vision, right? Because that’s a risk that he’s willing to take as well on us, and he’s betting on us as well.
Rob Walling:
I agree. And it’s a very competitive landscape right now, and good developers can kind of pick where they want to go. What do you think made the difference for him?
Tony Chan:
I think the main difference was just meeting Francois and I in person, seeing how we work together, and the culture that we’re trying to build. Francois and I always talk about this and just being good people and being fair, having empathy and building a good culture has been always the important thing for us while building a business. The business can go sideways and fail and what-not, but knowing that we tried to build things the right way and knowing that we try to be good people while doing it, we can sleep at night. And I think, well, I hope it came out while we were interviewing with him.
Rob Walling:
I’m always impressed with Tony’s grasp of healthy company culture. He knows that a job interview goes both ways, and the chaotic impression that an unprepared interviewer can give. Tony talks a lot about intentionality, and I think it’s an important core value to a company that seeks to grow and maintain happy employees. The new engineer is named Arturo and hiring him is a definite victory for Tony and Francois. Hopefully it hasn’t been the only win in recent months.
If I were to guess, I think it’s been about six weeks since we talked, just for context. Are there any other big wins that you can think of since we last spoke?
Francois Lagier:
There was a couple. The first one is kind of a win where I think we reach another level in time of companies. Where the first year Tony and I had no idea what we were doing, we’re just trying things, and any of the things we were trying was working on notes. The second year we had clients, we can talk to them and try to build stuff that they like, that they wanted. The third year, we have bigger clients, and we can ask even more questions. The fourth year with the new enterprise deal, we have even more clients, and we have more money that we can play with and try new things. And I think that’s a win because now we can plan things the right way and do things the right way.
Where before, as a bootstrap startup, we don’t have millions in the bank. We would always try to act our way around it. Now we have a bit more cash, and we can do things the right way for sure. The second one, it’s our pipeline is getting better. We have new enterprise opportunities that Tony’s working on. November, December’s always slow for us, so it’s always nice to see the sign ups going back up.
Rob Walling:
Do you feel like the holidays, do you feel like it was a December lull with the pipeline?
Francois Lagier:
Yeah. Between Thanksgiving and Christmas, it’s always [inaudible 00:10:09] opportunities. People don’t reply to Tony because they are on vacation. The company will not start a new project around that time, so it’s pretty dead for us which is also a good time for us to launch new things and really focus on the engineering side and product development side, but at the end, revenue is our key metric, so we want that pipeline to be nice and healthy.
Rob Walling:
Yeah. That makes sense. It’s a typical business to business seasonality, right? December was always awful for all of my B2B apps and then either April or May usually had a lull, and I ascribed it to tax month here in the U.S. We sold majority to U.S. customers, and December would sometimes just completely be completely flat, a zero growth. We’d be growing 5 or 10 grand a month, and then it would go to zero in December. And I was like, “This is incredible. It’s like hitting the breaks.” And then April slash May, it would just slow down. It would get cut in half or get cut by 75%, but there was still some growth. And I know all businesses, all B2B apps are not like that, but that was just my experience.
Francois Lagier:
I think that’s also why TinySeeds is very useful to us, where we talked to other founders, and they see the exact same thing. That help us realize that we are not the problem, it’s just, it’s a B2B thing.
Rob Walling:
Yeah, that’s a good point. Because there was a lot of conversation in the Slack, many threads about is everyone else seeing this and everyone else feeling this way about it? Is it slow for you as well? Some people started slowing down in November and then some folks held on until December and then the majority kicked back in because I see the updates right, I get the updates on the first of the month from all the companies, and overwhelmingly, the February 1st update for January was, in general, they were all positive of things are really kicked back in gear. There’s still a handful that are not, and to your point, to those, you’re not matching the pattern, so it may be your individual space or may be your app itself, your business, is slowing down due to other factors.
Francois Lagier:
The perfect example of TinySeed founders community was during COVID where I think during June and July, it was kind of dead for us, and that’s because that was the first time in couple of years that everybody could go on vacation, right? So it had nothing to do with our business, it’s just like that was the first time people could actually travel a little bit and take some time off. And every founders we talked to kind of noticed the same thing.
Rob Walling:
I always find it interesting that you can literally have more money than you know what to do with and your business can still grind to a halt during holidays and vacations. In some ways, time is a much more nuanced obstacle to overcome than money. Tony and Francois are finding that out firsthand right now.
Francois Lagier:
I think there’s a lot of initiative that we want to take with Tony when it comes to marketing, when it comes to product development, when we talk to sales and anything, and it’s kind of overwhelming. Where do we spend our time planning? Where it’s only two founders, and it’s hard to decide what should be a focus in term of product or in term of content marketing, and we’ve talked to a lot of mentors from TinySeed trying to figure out what’s the best way forward, but it’s a challenging decision to make. I think Tony’s going to focus a lot on the content marketing is this the right decision? We have no idea. And I think that’s kind of, I think Rob, you mentioned that a lot, our job is to make the best decision with incomplete data. That’s exactly where we are right now. Where what’s next, we’re just not sure, but that’s just part of being a founder.
Tony Chan:
And a lot of that is also trying to reframe my mindset on it’s not only the ROI but how can I remove myself some of the processes and hire people. So Francois has a pretty good cadence with Kattya and soon with Arturo who will be joining, but how can we start thinking about our business more strategically and putting our heads towards that area versus me being the glue and duct taping everything together and doing things the right way versus before it was just slap together. For example, our websites on WordPress, our documentations on Jekyll and then our blog is on another instance at Jekyll. So it’s like, how do we move from that so we can do things the right way and look professional? But also how can we hire the right people so we can think about the bigger picture and things? And it’s almost a big transition period of our business of where we’re at, at the moment.
Rob Walling:
Yeah. I’ve often talked about these stages of building a startup in general. And I said, at first you build a product, then you build a business, and then you build a company. And usually the product is you’re just scraping along to build something that anyone wants and then you start getting some revenue and now you can kind of spend that. And that’s when I say you’re kind of starting to build a business. And if when you have 10K, 20K, 30K a month, and you’re starting to try to figure out where to invest it, that can get complicated.
And I think this is something that every founder, almost every founder, I guess if you’re like a narcissistic sociopath, you know exactly that you’re right, and you’re doing all the amazing stuff, but everyone I know who starts a company is always wondering, “What should I do next from these infinite possibilities? I can literally do anything.” And that’s a challenge. It’s the paradox of choice really? Right? That you don’t know what will get you to your goal the fastest, so you just have to take your best educated guess, gather data, take a guess, experiment, and see what works.
Francois Lagier:
Do you think bootstrap founders run into this issue even more because they don’t have millions in the bank to try 10 things at the same time?
Rob Walling:
I do think that because we have to do it in series, not in parallel. I have a friend, I’m invested in his company, and I think he just raised $5 million, $6 million. He’s hiring up a big staff, and they can literally do seven different things at once. They’re doing content and SEO and ads and they’re building the product and they’re doing PR and you can’t do that. You have to pick one, maybe two.
Tony Chan:
Yeah. I feel like the margin for error on our side is a lot slimmer, right? I wouldn’t say you have to hit home runs, but you really have to be on point with the decisions you make because the money and time invested, the funds are limited, right, even though we have unlimited possibilities.
Rob Walling:
Tony, where is the content SEO effort? Where does that stand? Have you started working on it?
Tony Chan:
Yeah. So there are some initiatives that we’re investing in. We are working with the company to help us with quality back link building on a broad level to help us bring up our domain rating a little bit so we can rank for things a little bit higher. I mean, we already work with an agency that have technical writers to help us write in depth or just top of the funnel content for us, which has been great. But we talked to ScrapingBee, we talked to a few other TinySeed founders. The common theme that we’re hearing is just doing things a little bit more internally because you have a little bit more in control what’s being outputted as well.
So there’s a level of process that Francois and I have been just trying to figure out. It’s almost like a business in a business that we’re building, and that’s the one advice that ScrapingBee put out there. So things are moving, we’re producing content, right, but it’s like, how can we be a bit more intentional about our investment and what type of things that we’re writing and just planning out further 6 to 12 months in advance versus before it was just a month to month sprint of what we’re going to write and such. So just being a little bit more strategic about how we’re producing things overall.
Rob Walling:
I do find it funny that when Tony and I talked last time, I take notes of what he says, and I have probably a paraphrase quote that says, “Kind of overwhelmed deciding how to spend this money well.” And then for the not loss challenge that Francois said is, “Overwhelming deciding where to invest our time.” And I think that’s going to be a theme for a bit, and I wouldn’t expect that to go away too soon. It does get easier over time as you have more resources and as you get further along and you rule things out over time and discover new opportunities. But with that said Francois, I’m curious, let’s say Tony and I talk again in a month, what thing are you most looking forward to?
Francois Lagier:
Arturo is going to start on March 1st, and the same way we did with Kattya, we’re going to have a month long onboarding with small projects around the apps we can learn or stack, but after that, we’re going to start being able to plan what’s next. He has the experience to be able to lead a big project without me being involved on the day-to-day, and I can’t wait to see what that project’s going to be. And we have a few of them in mind, but when he can start working with that, bringing Kattya on board on the front end side and everything that can really bring her up to the next level and potentially implement features that our clients have been asking forever, but we never got a chance to do it or the time to do it or the money to do it as well, which will bring overall a better experience for our clients, new features, and a better way for clients to monitor our DWS cost, which is at the end, our mission and our goal.
Tony Chan:
Gives me time to play more Pokemon and Zelda, I guess.
Rob Walling:
Boom. Look at that.
Tony Chan:
I’m on the same page as Francois. We’ve always been very product led with marketing kind of tailing right behind it a bit, and we’ve built our company to really focus on customer feedback and what our users are saying and what they want and what Francois and I ultimately want is that we just want to make people’s lives easier and bring value to them. That gives us the most fulfillment. So the fact that we have an engineering department and product department and someone can lead and Francois can not worry so much about ROI and all the nitty gritty stuff, I think our products and what we’re building and the niche that we are focused on, we are only going to improve from there, right, especially with the resources we have there.
I’m also looking forward to what we’re doing on the content side, right? We’re starting to invest money. It’s still early on, and we have some technical things on that side that we’re trying to solve, but I think in a month or two, I’m hoping that we learn a bit more and what we’ve always been able to do is just figure things out, learn, ask the right advice, get the right people in place to run those processes, and hopefully continue to grow our business, so I think in two months we’d be in pretty good shape, and I think in two months, that’s close to our end of TinySeed as well, so I’m looking forward to it, not like, hey, it’s over, but it’s going to be bittersweet because we really enjoyed our time meeting other founders through the retreats and such. We’ll still be part of the community, but it’s going to be a whole year, and that’s kind of crazy to us.
Rob Walling:
Yeah, it sure is. It goes fast. It goes fast for me, too I’ll admit. All the founders say, “Man, it goes so fast.” But it really does. I think for all of us because when your head’s down building the business, you’re not really looking at the calendar. And I feel like if I were to say, “Where will you be in a year?” We think, “We can get so much done. Do you realize how much further along our product will be and how many marketing reports will have and how much bigger we’ll be?” And then oftentimes it takes a little longer than you’d think it might, and I think that makes time feel shorter. How about you, Francois? Anything you’re dreading over the next month or two?
Francois Lagier:
Not dreading. I think the one thing we are going to be careful is making sure the onboarding goes really well, the same way we do with Kattya. I don’t have any concerns around it, it’s more something that we need to be on top of. I think it’s interesting because my mindset kind of changed since the baby’s around the house now where I don’t worry as much about the business because there’s no metrics or discussions with client that make me feel I should worry about the business. It’s moving. It’s moving at the right pace. We are having the right discussions with Tony, and we’re making the right moves which doesn’t mean it’s going to work out, but we’re doing what we can, which is definitely not the question you asked, but that’s what it led to.
Tony Chan:
Yeah, I wouldn’t say I’m dreading it, but the areas that as Francois mentioned that we’re going to put a lot of attention and I feel like a lot of brain power, right, which would lead to a little bit of dread. I think Francois and I enjoy a lot of it even if we dread it, right, is just making sure we’re on point with onboarding Arturo and making sure that we build the culture that he feels included and also for future employees as well, right? Being very on point with that and being very intentional about every step of the process so he feels like he’s part of the team, he’s contributing and doing what’s needed to move. That is the core part. And there’s a lot of brain power to make sure that happens, right? There’s a lot of effort to do that. And there’s a lot of upfront investment mentally to do that.
However, I think long term that will pay its dividends. The other thing too is making decisions, it’s tough, right? There’s always one or two ways or three or four ways that you can do things, right? Whether it’s on a nitty gritty level, it’s like, “Oh, should we move everything to WordPress? Okay. Move to WordPress. How do we do it? Who should we talk to? Who should we hire? How much should we should invest?” But at the same time, it’s like, “Okay, we have the money. Let’s just put money in there and figure it out and find someone to help us figure that out and ask the right questions.” Right? And who do we get involved in that? So it’s like, it’s tough making decisions as you mentioned, but it’s stuff that needs to be done. And once again, looking at the big picture and making sure that we’re grateful that we could even spend money and even invest in it and be able to do that.
Rob Walling:
It’s always refreshing to hear a positive attitude on this journey, and I have to give props to Tony and Francois for keeping their heads on straight. In the coming episodes, we’ll be keeping an eye on the state of Cloud Forecast’s content strategy, and we’ll check in with how new hire Arturo integrates with the team. That’s next time on TinySeed Tales.
Welcome back to TinySeed Tales. This is the penultimate episode of season three where we meet Tony’s co-founder. I hope you’ve been enjoying this season so far. If you like it, it’d be awesome if you could reach out to me on Twitter at Rob Walling at Start-Ups Pod and let me know if you’d like a fourth season. At this point, I have not started recording one, and I am looking to hear if there’s interest in hearing more stories like this. And with that, let’s dive into this episode of TinySeed Tales.
Tony Chan:
We’re pretty intentional about our interview process. Come off disorganized, and you come off like you don’t know what you’re doing, and you’re just roping in random people here and there, and you’re not setting up the right expectations, it can look really bad. Especially our very, very good candidate can sniff that out.
Rob Walling:
Welcome back to TinySeed Tales, a series where I follow a founder through their struggles, victories, and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for bootstrappers. So far this season, I’ve been talking to Tony Chan of Cloud Forecast. Today we’ll be joined by a new voice. So Tony, this week you brought a friend with you. Would you like to introduce the third person here on the pod?
Tony Chan:
Yeah. I had to drag and convince Francois, my technical co-founder, to join us. So he is on the line, and I think it’ll be great to get his perspective on how things are going since you’ve heard from me the last four episodes.
Rob Walling:
And we keep hearing you mention this co-founder by name. Finally.
Tony Chan:
So he exists. He’s not fake.
Rob Walling:
He actually exists.
Tony Chan:
Yeah. He’s my French counterpart and my co-founder the last three years, and I’ve known Francois since 2011, so we’ve been working together for quite some time.
Rob Walling:
Francois, how’s it going?
Francois Lagier:
Hi, everybody. Yeah, it’s been 10 years since Tony and I know each other which is crazy.
Rob Walling:
How did you meet?
Francois Lagier:
We both work at the same startup. He was the Director of Customer Success, and he was kind of doing everything, and I was one of the lead engineer over there.
Rob Walling:
The company where Tony and Francois first met was called Perfect Audience. We talked a bit more about it back in the first episode of this season, but let’s get back to the present.
I want to kick today off by revisiting a couple things from the last episode, episode four. When Tony and I last spoke, he mentioned that in a month, in essence, you had doubled your MRR up to 35,000, which is just a huge shock to the system where suddenly you have this influx of capital. Tony had mentioned that with the money you were thinking about hiring a senior engineer, didn’t have concrete plans yet. What’s happened with that?
Francois Lagier:
We found one. First, we look at the type of person we wanted to hire. The seniority, the experience, and we really wanted to bring someone on board that would really help us bring the app to another level. Someone with a lot of experience, someone that can help us grow the skill sets that we have in the team, that can help us grow the engineers that we have in the team, including myself. We went on LinkedIn. We did a long list of older people that we think would be a right fit, and we found one, actually the first one. It was way too easy, and I think Tony and I should not get used to that because it should not be that easy to find someone.It took us two weeks.
Tony Chan:
We got so lucky with that one. I was joking with Francois that we should probably play the lot right after that because hiring someone of this person’s caliber in such a short time is unheard of.
Rob Walling:
And how did that come about? The specifics?
Francois Lagier:
Tony and I defined the type of person we wanted. I went on LinkedIn using sales navigator, which is usually a sales product, and I start searching leads, senior engineers based on connections that I believe I could get an intro. That person was actually a former co-worker of TinySeed, so I asked her to make an intro asking if he was looking for a job. He said yes. Week after we had a first interview. Next week we did four interviews, and three days after that, he had an offer, and he’s starting March 1st.
Tony Chan:
And all this happened while I was in Hawaii, so Francois was slacking me, and he was super stressed about it because he was a good person overall, culturally good fit and everything, and he was just stressing like, “Okay, how can we make this work? How can we make this work?” While I’m on the beach, trying to text him, “We’ll make it work. Just chill out a bit. We’ll make it happen.” And when literally the Friday, that week I got back, he set up three interviews and got it all ready. So I flew back from Hawaii, had an interview, and then we made an offer, and then in few days he just accepted it, so it happened really fast.
Rob Walling:
And Francois, what were you worried about when you were saying, “How are we going to make this work?” What were you worried wasn’t going to work?
Francois Lagier:
The person told me that he was looking for new opportunities, and during my first interview, I could clearly see that there’s a perfect culture of it with the type of company we want to run and the type of company he wanted to join, and I was just concerned he’s going to find another company, especially with COVID and the remote market is crazy, and this person is looking [inaudible 00:05:06], so if he was start looking for a job, he’s going to find one very quickly, so I just wanted to move fast. But at the same time, do things the right way so line up the right interview with the right persons, figure out the interview tests for more senior candidates, so I wanted to do it either right way, but I also wanted to do it fast. So we don’t miss him.
Rob Walling:
I always feel that sense of urgency when I find someone amazing on the first interview, and I’m like, “This is the perfect fit.” I always ask myself two questions. Number one, how quickly can we move? And number two, what am I missing? Is there a blind spot? Do they have a secret red flag that I didn’t pick up in that interview?
Tony Chan:
And we’re pretty intentional about our interview process. And I think that comes from the experience of Francois being at Twitter. It’s not our first rodeo. So when we set up a process, we have it all nailed down from start to finish and roping into right people. So he chatted with Francois and then he started messaging me. Then he chatted with me and then we wanted to make sure Kattya was on board as well, so we built that into the process and then looped back with Francois in the technical interview. And then we had an advisor of ours, also a friend of ours, who was Francois’s former boss to also vet this person as well. So it’s always important to have a process, and the person on the other hand also understand what the expectation is, right? Because it really shows what type of company you are and what kind of process oriented company you are.
So instead of trying to duct tape everything together, right, just making sure that it looks professional, that’s still very important and making sure you hire the right person because if you come off disorganized and you come off like you don’t know what you’re doing, and you’re just roping in random people here and there, and you’re not setting up the right expectations, it can look really bad. Especially a very, very good candidate can sniff that out.
I’m still awed that someone of his caliber and someone of his experience would be willing to work for a company like ours. And not saying that we are terrible or what-not, but we’re a small bootstrap startup. There’s a lot of opportunities out there in the world that could use him in other companies as well, but the fact that he chose us, and he was very excited about us, that is super encouraging to hear and super encouraging for Francois and I being owners that we’re building things the right way and that we were able to sell him on the vision, right? Because that’s a risk that he’s willing to take as well on us, and he’s betting on us as well.
Rob Walling:
I agree. And it’s a very competitive landscape right now, and good developers can kind of pick where they want to go. What do you think made the difference for him?
Tony Chan:
I think the main difference was just meeting Francois and I in person, seeing how we work together, and the culture that we’re trying to build. Francois and I always talk about this and just being good people and being fair, having empathy and building a good culture has been always the important thing for us while building a business. The business can go sideways and fail and what-not, but knowing that we tried to build things the right way and knowing that we try to be good people while doing it, we can sleep at night. And I think, well, I hope it came out while we were interviewing with him.
Rob Walling:
I’m always impressed with Tony’s grasp of healthy company culture. He knows that a job interview goes both ways, and the chaotic impression that an unprepared interviewer can give. Tony talks a lot about intentionality, and I think it’s an important core value to a company that seeks to grow and maintain happy employees. The new engineer is named Arturo and hiring him is a definite victory for Tony and Francois. Hopefully it hasn’t been the only win in recent months.
If I were to guess, I think it’s been about six weeks since we talked, just for context. Are there any other big wins that you can think of since we last spoke?
Francois Lagier:
There was a couple. The first one is kind of a win where I think we reach another level in time of companies. Where the first year Tony and I had no idea what we were doing, we’re just trying things, and any of the things we were trying was working on notes. The second year we had clients, we can talk to them and try to build stuff that they like, that they wanted. The third year, we have bigger clients, and we can ask even more questions. The fourth year with the new enterprise deal, we have even more clients, and we have more money that we can play with and try new things. And I think that’s a win because now we can plan things the right way and do things the right way.
Where before, as a bootstrap startup, we don’t have millions in the bank. We would always try to act our way around it. Now we have a bit more cash, and we can do things the right way for sure. The second one, it’s our pipeline is getting better. We have new enterprise opportunities that Tony’s working on. November, December’s always slow for us, so it’s always nice to see the sign ups going back up.
Rob Walling:
Do you feel like the holidays, do you feel like it was a December lull with the pipeline?
Francois Lagier:
Yeah. Between Thanksgiving and Christmas, it’s always [inaudible 00:10:09] opportunities. People don’t reply to Tony because they are on vacation. The company will not start a new project around that time, so it’s pretty dead for us which is also a good time for us to launch new things and really focus on the engineering side and product development side, but at the end, revenue is our key metric, so we want that pipeline to be nice and healthy.
Rob Walling:
Yeah. That makes sense. It’s a typical business to business seasonality, right? December was always awful for all of my B2B apps and then either April or May usually had a lull, and I ascribed it to tax month here in the U.S. We sold majority to U.S. customers, and December would sometimes just completely be completely flat, a zero growth. We’d be growing 5 or 10 grand a month, and then it would go to zero in December. And I was like, “This is incredible. It’s like hitting the breaks.” And then April slash May, it would just slow down. It would get cut in half or get cut by 75%, but there was still some growth. And I know all businesses, all B2B apps are not like that, but that was just my experience.
Francois Lagier:
I think that’s also why TinySeeds is very useful to us, where we talked to other founders, and they see the exact same thing. That help us realize that we are not the problem, it’s just, it’s a B2B thing.
Rob Walling:
Yeah, that’s a good point. Because there was a lot of conversation in the Slack, many threads about is everyone else seeing this and everyone else feeling this way about it? Is it slow for you as well? Some people started slowing down in November and then some folks held on until December and then the majority kicked back in because I see the updates right, I get the updates on the first of the month from all the companies, and overwhelmingly, the February 1st update for January was, in general, they were all positive of things are really kicked back in gear. There’s still a handful that are not, and to your point, to those, you’re not matching the pattern, so it may be your individual space or may be your app itself, your business, is slowing down due to other factors.
Francois Lagier:
The perfect example of TinySeed founders community was during COVID where I think during June and July, it was kind of dead for us, and that’s because that was the first time in couple of years that everybody could go on vacation, right? So it had nothing to do with our business, it’s just like that was the first time people could actually travel a little bit and take some time off. And every founders we talked to kind of noticed the same thing.
Rob Walling:
I always find it interesting that you can literally have more money than you know what to do with and your business can still grind to a halt during holidays and vacations. In some ways, time is a much more nuanced obstacle to overcome than money. Tony and Francois are finding that out firsthand right now.
Francois Lagier:
I think there’s a lot of initiative that we want to take with Tony when it comes to marketing, when it comes to product development, when we talk to sales and anything, and it’s kind of overwhelming. Where do we spend our time planning? Where it’s only two founders, and it’s hard to decide what should be a focus in term of product or in term of content marketing, and we’ve talked to a lot of mentors from TinySeed trying to figure out what’s the best way forward, but it’s a challenging decision to make. I think Tony’s going to focus a lot on the content marketing is this the right decision? We have no idea. And I think that’s kind of, I think Rob, you mentioned that a lot, our job is to make the best decision with incomplete data. That’s exactly where we are right now. Where what’s next, we’re just not sure, but that’s just part of being a founder.
Tony Chan:
And a lot of that is also trying to reframe my mindset on it’s not only the ROI but how can I remove myself some of the processes and hire people. So Francois has a pretty good cadence with Kattya and soon with Arturo who will be joining, but how can we start thinking about our business more strategically and putting our heads towards that area versus me being the glue and duct taping everything together and doing things the right way versus before it was just slap together. For example, our websites on WordPress, our documentations on Jekyll and then our blog is on another instance at Jekyll. So it’s like, how do we move from that so we can do things the right way and look professional? But also how can we hire the right people so we can think about the bigger picture and things? And it’s almost a big transition period of our business of where we’re at, at the moment.
Rob Walling:
Yeah. I’ve often talked about these stages of building a startup in general. And I said, at first you build a product, then you build a business, and then you build a company. And usually the product is you’re just scraping along to build something that anyone wants and then you start getting some revenue and now you can kind of spend that. And that’s when I say you’re kind of starting to build a business. And if when you have 10K, 20K, 30K a month, and you’re starting to try to figure out where to invest it, that can get complicated.
And I think this is something that every founder, almost every founder, I guess if you’re like a narcissistic sociopath, you know exactly that you’re right, and you’re doing all the amazing stuff, but everyone I know who starts a company is always wondering, “What should I do next from these infinite possibilities? I can literally do anything.” And that’s a challenge. It’s the paradox of choice really? Right? That you don’t know what will get you to your goal the fastest, so you just have to take your best educated guess, gather data, take a guess, experiment, and see what works.
Francois Lagier:
Do you think bootstrap founders run into this issue even more because they don’t have millions in the bank to try 10 things at the same time?
Rob Walling:
I do think that because we have to do it in series, not in parallel. I have a friend, I’m invested in his company, and I think he just raised $5 million, $6 million. He’s hiring up a big staff, and they can literally do seven different things at once. They’re doing content and SEO and ads and they’re building the product and they’re doing PR and you can’t do that. You have to pick one, maybe two.
Tony Chan:
Yeah. I feel like the margin for error on our side is a lot slimmer, right? I wouldn’t say you have to hit home runs, but you really have to be on point with the decisions you make because the money and time invested, the funds are limited, right, even though we have unlimited possibilities.
Rob Walling:
Tony, where is the content SEO effort? Where does that stand? Have you started working on it?
Tony Chan:
Yeah. So there are some initiatives that we’re investing in. We are working with the company to help us with quality back link building on a broad level to help us bring up our domain rating a little bit so we can rank for things a little bit higher. I mean, we already work with an agency that have technical writers to help us write in depth or just top of the funnel content for us, which has been great. But we talked to ScrapingBee, we talked to a few other TinySeed founders. The common theme that we’re hearing is just doing things a little bit more internally because you have a little bit more in control what’s being outputted as well.
So there’s a level of process that Francois and I have been just trying to figure out. It’s almost like a business in a business that we’re building, and that’s the one advice that ScrapingBee put out there. So things are moving, we’re producing content, right, but it’s like, how can we be a bit more intentional about our investment and what type of things that we’re writing and just planning out further 6 to 12 months in advance versus before it was just a month to month sprint of what we’re going to write and such. So just being a little bit more strategic about how we’re producing things overall.
Rob Walling:
I do find it funny that when Tony and I talked last time, I take notes of what he says, and I have probably a paraphrase quote that says, “Kind of overwhelmed deciding how to spend this money well.” And then for the not loss challenge that Francois said is, “Overwhelming deciding where to invest our time.” And I think that’s going to be a theme for a bit, and I wouldn’t expect that to go away too soon. It does get easier over time as you have more resources and as you get further along and you rule things out over time and discover new opportunities. But with that said Francois, I’m curious, let’s say Tony and I talk again in a month, what thing are you most looking forward to?
Francois Lagier:
Arturo is going to start on March 1st, and the same way we did with Kattya, we’re going to have a month long onboarding with small projects around the apps we can learn or stack, but after that, we’re going to start being able to plan what’s next. He has the experience to be able to lead a big project without me being involved on the day-to-day, and I can’t wait to see what that project’s going to be. And we have a few of them in mind, but when he can start working with that, bringing Kattya on board on the front end side and everything that can really bring her up to the next level and potentially implement features that our clients have been asking forever, but we never got a chance to do it or the time to do it or the money to do it as well, which will bring overall a better experience for our clients, new features, and a better way for clients to monitor our DWS cost, which is at the end, our mission and our goal.
Tony Chan:
Gives me time to play more Pokemon and Zelda, I guess.
Rob Walling:
Boom. Look at that.
Tony Chan:
I’m on the same page as Francois. We’ve always been very product led with marketing kind of tailing right behind it a bit, and we’ve built our company to really focus on customer feedback and what our users are saying and what they want and what Francois and I ultimately want is that we just want to make people’s lives easier and bring value to them. That gives us the most fulfillment. So the fact that we have an engineering department and product department and someone can lead and Francois can not worry so much about ROI and all the nitty gritty stuff, I think our products and what we’re building and the niche that we are focused on, we are only going to improve from there, right, especially with the resources we have there.
I’m also looking forward to what we’re doing on the content side, right? We’re starting to invest money. It’s still early on, and we have some technical things on that side that we’re trying to solve, but I think in a month or two, I’m hoping that we learn a bit more and what we’ve always been able to do is just figure things out, learn, ask the right advice, get the right people in place to run those processes, and hopefully continue to grow our business, so I think in two months we’d be in pretty good shape, and I think in two months, that’s close to our end of TinySeed as well, so I’m looking forward to it, not like, hey, it’s over, but it’s going to be bittersweet because we really enjoyed our time meeting other founders through the retreats and such. We’ll still be part of the community, but it’s going to be a whole year, and that’s kind of crazy to us.
Rob Walling:
Yeah, it sure is. It goes fast. It goes fast for me, too I’ll admit. All the founders say, “Man, it goes so fast.” But it really does. I think for all of us because when your head’s down building the business, you’re not really looking at the calendar. And I feel like if I were to say, “Where will you be in a year?” We think, “We can get so much done. Do you realize how much further along our product will be and how many marketing reports will have and how much bigger we’ll be?” And then oftentimes it takes a little longer than you’d think it might, and I think that makes time feel shorter. How about you, Francois? Anything you’re dreading over the next month or two?
Francois Lagier:
Not dreading. I think the one thing we are going to be careful is making sure the onboarding goes really well, the same way we do with Kattya. I don’t have any concerns around it, it’s more something that we need to be on top of. I think it’s interesting because my mindset kind of changed since the baby’s around the house now where I don’t worry as much about the business because there’s no metrics or discussions with client that make me feel I should worry about the business. It’s moving. It’s moving at the right pace. We are having the right discussions with Tony, and we’re making the right moves which doesn’t mean it’s going to work out, but we’re doing what we can, which is definitely not the question you asked, but that’s what it led to.
Tony Chan:
Yeah, I wouldn’t say I’m dreading it, but the areas that as Francois mentioned that we’re going to put a lot of attention and I feel like a lot of brain power, right, which would lead to a little bit of dread. I think Francois and I enjoy a lot of it even if we dread it, right, is just making sure we’re on point with onboarding Arturo and making sure that we build the culture that he feels included and also for future employees as well, right? Being very on point with that and being very intentional about every step of the process so he feels like he’s part of the team, he’s contributing and doing what’s needed to move. That is the core part. And there’s a lot of brain power to make sure that happens, right? There’s a lot of effort to do that. And there’s a lot of upfront investment mentally to do that.
However, I think long term that will pay its dividends. The other thing too is making decisions, it’s tough, right? There’s always one or two ways or three or four ways that you can do things, right? Whether it’s on a nitty gritty level, it’s like, “Oh, should we move everything to WordPress? Okay. Move to WordPress. How do we do it? Who should we talk to? Who should we hire? How much should we should invest?” But at the same time, it’s like, “Okay, we have the money. Let’s just put money in there and figure it out and find someone to help us figure that out and ask the right questions.” Right? And who do we get involved in that? So it’s like, it’s tough making decisions as you mentioned, but it’s stuff that needs to be done. And once again, looking at the big picture and making sure that we’re grateful that we could even spend money and even invest in it and be able to do that.
Rob Walling:
It’s always refreshing to hear a positive attitude on this journey, and I have to give props to Tony and Francois for keeping their heads on straight. In the coming episodes, we’ll be keeping an eye on the state of Cloud Forecast’s content strategy, and we’ll check in with how new hire Arturo integrates with the team. That’s next time on TinySeed Tales.
Episode 626 | Scratching an Itch, Launching a Free SEO Tool, and Growing to $18k MRR
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In episode 626, Rob Walling chats with Nick Swan, the founder of SEOTesting.com. SEOTesting helps SEO professionals and agencies automate the reporting of page updates and changes. Nick originally launched it as a free tool under a different name.
In this episode, we cover when Nick decided to charge for it, renaming the tool, rewriting the codebase, and the journey to growing to $18,000 MRR.
Topics we cover:
- 3:17 – Growing SEOTesting.com to $18,000 MRR
- 4:53 – What kinds of businesses use SEOTesting.com?
- 8:11 – The decision to build SEOTesting
- 12:33 – Launching SEOTesting as a free tool
- 15:39 – When Nick started to charge for SEOTesting?
- 18:16 – Nick’s initial pricing strategy and rollout
- 27:06 – Reflecting on the initial launch
- 29:49 – Nick’s thought process for pivoting and changing the company name
- 34:45 – Reaching product-market fit
- 36:01 – Nick’s decision to bring on a co-founder a few years in
- 39:32 – Prioritizing marketing vs. development
Links from the Show:
- Nick Swan (@NickSwan) I Twitter
- SEOTesting.com
- TinySeed
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Subscribe & Review: iTunes | Spotify | Stitcher
Rob Walling:
If you happen to be listening to this while you’re at Business of Software in Boston this week, my co-founder, Einar Vollset, is there live on the scene in Boston. And if you’d like to link up with him, if you’re interested in perhaps applying to TinySeed or, better yet, if you’re interested in potentially investing in our syndicate or in one of our next funds, you should reach out to Einar Vollset on Twitter. That’s E-I-N-A-R, V-O-L-L-S-E-T. His DMs are open. Or if you happen to see him in the hallway, just say hey. I’ve been a big fan of Mark Littlewood and the team at BOS since years, 2009 I think was the first one that I did attendee talk at and then I spoke at the next event. And as always, we wish Mark and his team at the best as they run their event this week.
Rob Walling:
It’s another episode of Startups For the Rest of Us. I’m your host, Rob Walling, and this week I talk with Nick Swan, the founder of SEOTesting. We run through his experience launching a free tool, starting to charge for that, gaining traction, renaming the tool, getting a new domain name, rewriting the code base. It’s a really interesting and fascinating journey of growing SEOTesting.com to 18k MRR. Before we dive into our conversation, I want to thank you if you have rated this podcast in Apple Podcast, I’ve been trying to get to 1000 worldwide ratings, because there are so very few podcasts that have that number of ratings in the tool, and I believe when I started asking we were around high 800s and now I look today 977 ratings. And a rating doesn’t even need a review, you can just click five stars. So if you haven’t rated this podcast, I’d appreciate it.
Rob Walling:
Our most recent review is a five star review that says my favorite Startup podcast. It’s from Jazz Manders from Australia. I just spent eight and a half hours of a solo road trip listening to back to back Startups For the Rest of Us episodes, such a positive way to pass the time. I really appreciate that sentiment, Jazz Manders. And as always, these are the things that I bookmark and I read when I’m feeling discouraged. When I’m busy crying myself to sleep tonight, I think about these amazing ratings interviews and I really do appreciate them, and they do help this podcast find more listeners like you so thanks so much for helping out. And with that, let’s dive into my conversation with the founder of SEOTesting. Nick Swan, welcome to Startups For the Rest of Us.
Nick Swan:
Hi Rob, thanks for having me on. Excited to be on the show that I’ve listened to since the beginning, I think. Long time listener, first time caller or something, is that what I’ve got to say?
Rob Walling:
Yep. Something like that exactly. It’s great to have you on, man. We’ve interacted over the years, because I remembered you applied to TinySeed. You’re just one of the names that I recognized probably from Twitter or just MicroConf events or MicroConf Connect, whatever it is, and so it’s been cool getting to know you over the past several months. I want to give the podcast audience a chance to find out what you’re working on and where you are. And to start, I want to ask you’re running SEOTesting.com and curious where the business is, give folks an idea of where you’re at in the entrepreneurial journey.
Nick Swan:
Up until now we’ve been open with our numbers on Twitter. We do an update perhaps every quarter or so. At the moment we’re just over $18,000 monthly recurring revenue, just over 330 customers. There’s a small team of us, so there’s myself, Phil, who’s joined as a technical co-founder, which we’ll go into, and Tiago, who’s joined to help with customer service or customer support and some content, and then we make use of some freelancers and contractors and so on as well when and where we need them.
Rob Walling:
That sounds like a nice svelte team. I like those early days where it’s three to five people and you’re doing 20k MRI. Are you running at break even? Are you running negative right now given that you have a bit of TinySeed investment?
Nick Swan:
In general, we’re running at break even and that is mostly because any spare cash we would put into testing new marketing channels. Since having a TinySeed money come in, we’ve been back and forth and wondering what to do with it, so it’s still sitting in the bank account right now, which is a nice feeling having it there as a safety cushion type thing, but we’re going to invest that in one off projects or doing one off tests on different channels as well. So we’re going to go through a website redesign that will be a one off project and we’ll put some TinySeed money towards that, then we’re going to try some paid advertising channels that we’ll put the money towards as well. So we will in general run negatively I guess, but on a month to month basis I see it as being break even.
Rob Walling:
I realize I jumped the gun and didn’t do my standard read the H1. I’m supposed to say, “Your H1 is automate the reporting of page updates and changes, run SEO tests to see what works, track the performance of pages changed, tie your work to results in an exact and impactful way.” You want to give one example of how, I almost said webmaster, holy moly, a startup founder and internet marketer, someone who’s thinking about doing SEO, what would they use SEOTesting for?
Nick Swan:
It is a testing tool, that’s how we market it, that’s what we’ve called it, and we go through a bit of history of how we got to this point, but it’s basically a tool for reporting how a page has performed after you’ve made a change, so how it’s performed in the search results from a Google perspective. We’ll get the data before you made the change and then you can make your change and then compare it to the data after that change. So you can compare the clicks from Google, the impressions in the search results, the position of it and the click through rate as well. It’s interesting you say about the H1, we’ve just changed that last week from doing a bunch of customer interviews so it’s in a testing phase in its own, but from the testing point of view of the tool, it’s ended up having two uses.
Nick Swan:
So there is a testing aspect to it and that’s what a lot of customers use it for. So this is good if you are changing page titles, meta descriptions, and you want to test if the click through rate improves from those new page titles or meta descriptions, but we found out again from customer interviews that a lot of people and especially agencies are just using it as a general reporting tool. So as part of their client engagement and their retainer, they’re going to do some content refreshes on pages and things like that. And then so setting up a test, once they publish their changes, they can then show the client how it performed before they made their content refresh and compare it to afterwards to show how they’re making their impact results and giving them our return on investment and so on.
Rob Walling:
I find that so many internet marketing or online marketing SAS tools will start with the idea of, well, I imagine a marketer at a company can do this or a founder and our bootstrap solopreneur founder could use it and over time there usually becomes a use case for some agency to have some type of reporting or a dashboard or a client log. There’s some value to agencies. And sometimes that becomes the bigger and better part of the business because an agency, as a marketer at a SAS company or at a startup, there’s one person and maybe they do one project at a time, but at an agency, if they adopt something and they have 10, 20, 30 staff, suddenly that volume and that usage and even the value to them could be superior.
Nick Swan:
Certainly. And for a long time it’s been difficult for people doing SEO to show the results of their work as well, because it takes a long time or it can take a while for Google to index new content, for the results to start showing through. So anything that you can do to show the impact of your work in a quicker and more effective way, rather than having to look at data every day in Search Console and copy it and paste it into Excel and all those kind of things, it helps people in that way. I don’t know if it was on this podcast or another podcast I was listening to that said eventually all SAS tools just end up with a big reporting section ib their use, and eventually one of their benefits is the reports that come out of that tool. So we are at that point and it’s good. It’s been great talking to customers and finding this out, and that’s obviously how it’s impacting us in terms of changing our H1 and how we’re going to market it and talk to people about it as well.
Rob Walling:
And you sold a prior software company before this, so what led you to start SEOTesting? Now, for the listener, it wasn’t SEOTesting. When we started it was called SanityCheck. We’ll call it SEOTesting for the rest of the interview, but we will talk about that name change and the thought behind it. So you sell your prior startup, was it SAA?
Nick Swan:
No. So it was around Microsoft SharePoint. It was add-ins, web parts, like WordPress plugins but for Microsoft SharePoint, downloadable bits of software. And it was in the enterprise software space, but we weren’t really an enterprise software company. We were a small bootstrapped business. Again, it grew up to about 20 people. We started 2007. I think I sold my shares in it in 2013. I’d got to the point where I’d had enough of SharePoint. I saw it was changing in direction in a big way, so it was going a lot more cloud based so there’s going to have to be a big reworking of the kind of components and products that we’d built. My co-founder Brett still wanted to carry on with the business and so we came from an agreement where it was going to be a management buy out of my shares and we partnered on good terms, which is good.
Nick Swan:
The business is still going now and doing well, which is nice to see as well, but that gave me a bit of runway in terms of looking at what to do next. And what I find interesting is new ideas, new business models, that kind of thing. Lightning Tools was a previous company. I play golf so I thought I’m going to build websites for golf professionals. Turns out they don’t like paying money for golf professionals.
Rob Walling:
How’d that turn out? Yeah, exactly. I wished you’d have written in with a question here. I would’ve been like, “Oh, I hate to tell you don’t do things, but that’s…”
Nick Swan:
Well, I thought I like playing golf. I like going to golf courses. I can spend more time doing that and talking to golf professionals. It all sounds great. That was an idea that didn’t really work. So I ended up doing some affiliate marketing, so I built a voucher codes, website discount codes website. And that did really, really well as it went through Google updates and other people got impacted by updates and so on. And during that I was doing lots of click through rate testing, so we used the same page title format across all our retailer pages. And so coming up with a better crafted page title could lead to a nice increase in click through rate. It’s all a numbers game. You’ll get 100 clicks, four of those would click on an ad or on a discount code and you’d get a little small percentage of each sale.
Nick Swan:
So getting the page title could make a big difference to monthly revenue and so on. I started doing all this page title, click through rate testing, and it was just taking ages to track all the results in a spreadsheet, so every day looking at the results in Search Console and so on. And I think it was through your SEO tool that you made a big switch over from Google Analytics to Google Search Console for various reasons for your data, and so I think that made me think the Google Search Console API is something interesting to look at, and it was from there looking at Search Console. First of all, there was only three months worth of data available within that tool.
Nick Swan:
So the first thing I tried to build was just something that archived the data to put it all into a database and so on. And then it was then I realized that, hey, I can build some tooling around this testing thing to stop me having to look at the data manually each day, each week or whenever, and do some reporting around it. And that’s how the tool came out of just scratching my own itch really.
Rob Walling:
Got it. And so you were building this for your own purposes with this voucher code website. So it was an internal tool much like Drip was actually. It was an internal tool we built for ourselves and then realized this could be a product. And so did you realize there was more potential in SEOTesting and you bail on the voucher code or what happened with that business as you, I guess I’ll say, started focusing on SEOTesting?
Nick Swan:
The voucher codes sector is like any kind of affiliate marketing. It’s a real cutthroat business, so people will block out SEO, everything they can do to get ranking in Google and we were trying to do things the right way, but it was just really depressing seeing people buying thousands of links and ranking above you and Google doing absolutely nothing about it because it’s just a space they didn’t really care about or want to touch or improve. So as SEOTesting or SanityCheck gained a bit of usage from others in the community and so on, I diverted my attention to that. Again, because it was a new business model and a new tool, I don’t want to go to shiny objects syndrome type thing, but I’d done affiliate marketing and that voucher code space for three or four years and so SAS was a good thing to move into, I thought, and a new thing to try out and learn.
Rob Walling:
And so then you scratched your own itch, which if you’ve heard me I talk about this as scratch your own itch is a nice trait to have in a business you’re starting, but it’s not a panacea. It’s not like, “Well, you just do that and everything works.” It’s just Indie Hackers is littered with these projects of people who scratched their own itch and nothing came of it because no one else wanted it or no one was actually willing to pay for it, or you couldn’t reach people at any kind of scale. So you had built something that you wanted, did you do any validation beyond that or did you just start leaning into it and start marketing it to see if people wanted it?
Nick Swan:
I just started leaning into it to be honest. So I tried the approach of building things for other people, which was the Golf marketing website thing, and so I know this is survivorship bias in terms of this story, but I was in the mindset, well, if I build something and it’s useful for me and it’s saving myself time then that’s a good result out of this. And so it was bare bones SAS. I wouldn’t even call it a SAS app. It was just a tool that you could register for. It had the default bootstrap user interface, all that kind of stuff, and I was in a lot of or still am in a lot of SEO communities at the time, Facebook groups and Slack channels and so on. And so I just shared it there and said, “Look, here’s a free tool, give it a try, let me know what you think about it.” And that’s where the initial feedback and initial user group came from.
Rob Walling:
That’s interesting. So you did validate it because you built something for yourself, it probably didn’t require a ton of polish to make a free tool, and you basically say, “Here’s a free tool. Does anyone care?” And if it had been crickets, maybe wouldn’t have pursued it, but people signed up and started using it and then that was your early user base of people. Did you start getting feature requests and people wanting more to the tool?
Nick Swan:
Yeah. Early users, as you know, they love giving feedback and feature requests and so on. And so the feature requests started to roll in. Again, I was building an SEO tool, so it was things that were going to help me with my SEO work, and so a lot of the feature requests were good ones and I was able to build into the tool. And I guess we’ll come into how that perhaps made us have to choose a position that the tool is going to go into at a later date rather than being a general SEO tool. But the good thing about the SEO community is people are outspoken and willing to give feedback and get involved with free tools and help out, always willing to try stuff, which is great.
Rob Walling:
And so at this point, it’s very simple. It’s one or two main features. It’s the archiving of Google Search Console and tracking of results over time. Is that pretty much it?
Nick Swan:
Pretty much it, yeah. From that point of view, people just started saying, “Well, I’m doing this in Excel, can your tool do that? I’m exporting all the data and then doing this in Excel, can you build able a report for me that’ll do that?” And it was always like, “Yeah, that’s a great idea. This is a great idea. Let’s do it.” I miss those days thinking about actually, because it was so much easier to build stuff quickly.
Rob Walling:
Where it’s exciting. I can crank this out in a day.
Nick Swan:
I know. And people are like, “Wow, that’s amazing. You’ve done it so quickly.”
Rob Walling:
Because they’re used to month long road roadmaps or quarter long roadmaps or whatever. And I also love the refrain of I’m doing this in Excel, can you build it? Because, as we say often on the show, it’s like every Excel spreadsheet is a SAS opportunity to some extent for another. So then you have a free tool, you’re getting requests to for different reports. At what point do you think I need to start charging for this?
Nick Swan:
It’s interesting. I can’t remember. This is back in 2016, 2017, so it’s quite a while ago, and it was only me working on it. It was probably five months as running as a free beater. So that’s quite a period of time I think. And it must have been at some point I was like, “Wow, I need to start charging for this. I’m a host and a server,” that kind of stuff. And also I need to find out if it is a product that people are willing to pay for, because it’s all well and good that people are using a free beater and so on, but if I want to take it to the next level we’ve got to check that people are willing to pay for it.
Rob Walling:
The Paul Graham quote is the hardest part is building something people want. And I’ve always tacked on building something people want and are willing to pay for, because I’ve seen too many people build things that people want. They want to use it, but there’s no actual desire to pay for it. So five months isn’t bad. I have seen folks launch free tools, get a bunch of users, and then they either let it go on too long where it’s a free tool or they try to charge for it and no one’s willing to pay. That might be called the solopreneur or the indie hacker trap of just, well, I’m going to get as many people. As you were doing it, did you ever have that doubt of I’m giving away a lot, am I wasting a bunch of time?
Nick Swan:
Not really, because, again, I was building a tool for myself so I had that mindset of, well, if no one’s going to pay for it, it’s still saving myself time and my day to day SEO work. So I always had that to fall back on, because I certainly will have had those doubts, will anyone pay for it? That’s really the justification that you’re looking for. And for me, I enjoy building things that to save people time, help them solve problems and they enjoy using and the monthly recurring revenue and the money that comes in from that is by proxy of doing those things, so the money’s good obviously, and the monthly recurring revenue is nice and it’s nice to see it go up, but I think it’s just a result of doing those things in terms of building stuff that people find really, really useful.
Rob Walling:
It sounds like your happiness comes from the building, the making, the creating, and if you had infinite money, you would still build, make and create. Is that right?
Nick Swan:
I think so. Yeah. I can’t see a day where I retire. Whatever happens, I’ll still be working on things and coding on things. Maybe I might go back to the golf professional website idea and do it for free.
Rob Walling:
I love that. So you have a free tool, you’re five months in, you’re thinking I should start charging for this, and what’s next? How do you come up with your initial pricing? And what was the rollout when you told people, “I’m going to start charging for this tool.”?
Nick Swan:
Well, I put together the plans and I started with a price and it was far too low, so we did it on a per website that you’re going to add to the tool model and we scaled it that way. I think it started at $10 per month, which looking back on it in reflection it should have been higher than that, but you’re always nervous and worried and you want to get people on board. But I was all ready to turn the paid plans on, send out the email newsletter to say that we’re going to start charging, but we had been warning people as they signed up for the beater that at some point this is going to become a paid product.
Nick Swan:
But then we’ve got three small children and we had the news that we had to go to the doctors with one of our kids, and we went there, it as a Friday afternoon and a doctor said, “You need to go straight to the hospital.” Didn’t say what it was, but you know it’s going to be serious from that point of view and we were told that our daughter who was three and a half at the time was diagnosed with leukemia. So it went from literally it was the Friday, the Monday I think I was going to turn on paid plans and launch that, and so that turned everything upside down.
Rob Walling:
I can imagine. Really sorry to hear that. So did you postpone the pricing change? Were you just consumed with essentially you have a family crisis going on? How do you react to that?
Nick Swan:
It was just left as it was at the time. So for the first three days, we were just stuck in the hospital, we didn’t leave just as they did tests on Isabelle. Literally, as soon as we got there, she started having blood transfusions and platelet transfusions within two hour, so it was a real whirlwind of stuff going on and a lot to take on board. Then we went from our district hospital up to the main hospital in Bristol where they do all the children’s cancer treatment and so on, and so we were up there for two and a half weeks. I had my laptop with me. I could do bits and pieces.
Nick Swan:
I’d not announced to anybody that the launch of paid plans was coming, so it was just a case of just leaving things as they were and let the free beater continue for a bit longer. But from a work perspective, everything was just on hold for two weeks. Thankfully, story’s got a good outcome, Isabelle’s treatment went really, really well. She’s just a normal nine year old girl now, but it was obviously a stressful time and looking back on it I don’t know how to summarize. It really is difficult.
Rob Walling:
These are these hard things that we want to perhaps summarize and I’m glad there’s happy ending. We want to summarize it in, well, it was a hard time, but I got through it, which is true, but there’s also probably scars. Look, I’ve been through with the deaths in our families and Sherry losing her brother to suicide have been through stuff that has completely decimated us, and I don’t know that I’ll ever heal from that fully. There are still battle scars and scar tissue that I think is just not going to go away for me. Did it recur after they figured it out? And I don’t want to say cure, but what is it? It goes into remission and then she’s fine. Has it been okay since then?
Nick Swan:
Yeah. And it’s funny how you say she’s lucky and you look back on it and say, “We were lucky,” because she had the most common type of leukemia from diagnosis and the most treatable type. And so although it was two years of treatment and in and out of hospital on a weekly and daily basis, once you get through the first six months, it’s called maintenance, so she has 18 months worth of small amounts of chemotherapy and stuff like that. Once the intense bit of treatment is done, the biggest risk to her was infection from other illnesses like chickenpox and septicemia and things like that, but again, thankfully she got through all that without any big issue. The funny thing was because as a family we closed in as a group and we couldn’t go anywhere to soft play or swimming, the normal things you do as a kid. I think we ended up having six months of normality and then COVID happened and it was all locked down again anyway. So when it did go back to being locked down, we were like, “Well, this is almost like normal life for us.”
Rob Walling:
What an interesting adaptive advantage, because you’re like, “We’ve already been doing this.”
Nick Swan:
And in terms of battle scars, it’s funny what you’re saying, I still have. And this is part of the reason for wanting to join TinySeed as well. I have issues with long-term planning because for such a long period of time we would make plans and I would make plans in terms of what I want to do with the product, set some goals, things we want to try and accomplish and where we wanted to get to, but then Isabelle would spike a temperature, we’d be in hospital for a week and all those plans will get thrown out the window. And so I still have an issue with thinking long term.
Nick Swan:
Joining TinySeed has been one of the reasons for doing that was to set some more lofty goals, think a bit bigger, think about perhaps where we can take the business too. But again, it was just a case of Isabelle’s finished, we can get back to a bit of normality, we booked a holiday and so on, but then COVID hits and lockdown, holidays canceled. And so I can see the things that was affecting me from Isabelle’s illness, I can imagine it’s affected other people in terms of long term planning and stuff like that. It’s interesting.
Rob Walling:
Well, obviously glad things worked out and amazing to be working with you with TinySeed to help you think more long term about stuff. I’m curious, so two and a half weeks you’re in the hospital and then when does this click happen in you where you’re like, “It’s not just the time, it’s the mental energy to I’m going to do this big rollout of pricing and charging people for this product.” How long did you wait on that?
Nick Swan:
I think it was about three months. And so after the initial two weeks had been in hospital full-time, I think I sent out an email to all the people who were using SanityCheck, as it was called then, and just said, “Look, this is what happened.” Because I’d become quite good friends with these people as well, because I know I’m them from Facebook communities and they’ve been using the tool and we’ve been emailing backwards and forwards and stuff. They’ve been emailing in over those couple of weeks and they hadn’t heard from me, so I just let everyone know what was going on. And so it was quite nice actually over that 18 months period of Isabelle’s treatment, I’d keep people updated how she was doing, which was really nice. And so in hospital I had my laptop with me, not a lot of time to use it apart from in the evenings and late at night, but there was a lot of time of doing nothing where I could think and plan.
Nick Swan:
And so there was a lot of time of planning and thinking things out on paper. And so when you sit down at your computer and you bash something out, but then you realize you’re working on the wrong thing or you’ll go back and forth between different things, I did all of that thinking away from a computer and on pen and paper and so on, so that when I did have a bit of time to work, it was like I knew exactly what I was going to do and get done. And so looking back on that time, I was probably as productive as I would’ve been in terms of if I was in front of a computer for the full time, just because I did all of my thinking away from a computer. So then when I had two hours to work, it was really focused work that I made sure I got done what I wanted to get done and had it all planned out.
Rob Walling:
That’s super interesting. So then you had all this, I think of it caulking a bow or you’re just pulling back this crossbow and getting ready to let it go and launch this, so you do, you start charging, you let people know this is the pricing. Now the first question I have is did you only charge for additional features or did you charge people for stuff they had already been getting for free for six months? And then the second question is how did it all work out?
Nick Swan:
There was nothing free. We went just to having a paid plan. So we went from free beta to there being a 14 day trial, and then you’d start paying after those 14 days of trialing the product out. And it went well. There was an initial surge of customers, obviously from the people that had been using it as a free beater. And then obviously after the first couple of months where you get that big surge, you get a bit of a reset and then you realize that you need to do some marketing and letting other people know about the tool, and you start the slow SAS ramp of death from that point.
Rob Walling:
I want to call something out because it sounds like from the start you had said, “This is a free beta, but we will charge for this.” It wasn’t this is a free tool and suddenly you started charging for it, because that’s a mistake I see a lot of folks make. Were you pretty intentional about communicating to everyone it’s free for now?
Nick Swan:
Yeah, we had that on the landing page, probably the registration page and so on, so I didn’t want to set people’s expectations that this was going to be a free beater forever and then do a beta and switch, whatever it’s called, and say, “Hey, you need to start charging now.” It was always going to be this is going to be a paid product at some point. It’s an interesting question as to if no one had paid for it what I’d have done then, whether I’d have switched back to a [inaudible 00:26:49] because of the thing I said about just wanting to enjoying helping people and building things that people find useful, what I’d have done then, but we were always very upfront about we’re going to charge. And it’s interesting, I keep going backwards and forth between I and we, but it was only me at that particular time, so it’s funny.
Rob Walling:
Sometimes it’s hard and now you have co-founder Phil. And so were you happy with that initial, I’ll call it a launch, in essence of paid launch, and did it get to a few thousand MRR?
Nick Swan:
It got to a couple of thousand monthly recurring revenue. It continued to grow then and it did well. We did quite well with some paid Twitter advertising. Twitter’s good in terms of a SEO community. Again, I say good, there’s lots of moaning and shouting and arguing on there, but there are lots of SEO people on Twitter, which is when people are all together in one place, it’s a good place to be able to do some advertising also on. And so we’ve got some initial traction on Twitter. Word of mouth has always been good. So people like speaking about the good tools that they’re finding to help them with their SEO work. So we’ve always had good word of mouth marketing, which I know is difficult to scale, but it’s invaluable I guess from a thing you can’t buy or pay for.
Nick Swan:
I’m not sure if that makes sense or is right, so it continued to grow slowly. It’s funny because when we were working on Microsoft SharePoint, we were building on someone else’s platform and every two or three years they’d release a new version of SharePoint that we’d need to weigh our features and things that we built, and so I always said, “I’m never going to build on someone else’s platform.” We obviously did in terms of building on Google Search Console API and so our main part of the tool at this point was the archiving of the data, because only three months of data was available in Search Console. In January after, so this would’ve been 2018, they launched 18 months worth of data for everybody. So that had an impact then in terms of plans for the tool, what we were going to do with it. We didn’t know what was going to happen in terms of people having all that data available, but it had a long term impact on our eventual plans of what we were going to do with it and so on.
Rob Walling:
With HitTail, which is the SEO tool that you mentioned earlier that used Search Console, I was using, it was an unofficial API to scrape Search Console and they would break it about every year or so, and so I’d have to go and hack the code to fix it. And so I was frustrated with that and said, “Next company I start, no platform risk.” And then you start an ESP and you’re like, “I send emails and I can use Mailgun or SendGrid or whatever I want to do, spit out my own service if I need to. No platform risk.” Well, the platform there are the black lists, the spam list, and they are run by just random people, and one person sent an email to the head of one of these lists and said, “These guys are letting people send spam,” and they blocked us with no judge jury. They were the execution.
Rob Walling:
And it’s like, “Screw you.” And they’re one of the top 10 or top five in the world. So it was all of a sudden our IPS were blocked and SendGrid’s freaking out because they’re SendGrid’s IPS at the time. And it’s just there’s platform rescue everywhere is the unfortunate reality. I think there’s different grades of it, different levels. So you start having success, the tool is called SanityCheck at the time, at a certain point you rename it to SEOTesting and you got the .com for that, which is a great domain. Talk me through that, either the thought process, if the domain suddenly appeared and you’re like, “That’s it,” or if SanityCheck you’re like, “This just isn’t it long term,” and you went out seeking it.
Nick Swan:
There were a few things really. So because we were archiving lots of Search Console data, the database was getting quite big and I’m a developer or database administrator, so at some point I knew this was going to become an issue and I was going to have some sleepless nights about it. So there was a thought process of, well, now there’s 18 months worth of data available in Search Console anyway, do I need to be archiving all this data? That was one part of the thought process. The second thing was we’d plateaued in monthly recurring revenue and it started to get harder and harder in terms of getting new customers, so I got to the point where I did a bunch of customer interviews, I looked at some data, so what good customers or successful customers were using the tool for, and it all came back to the SEO testing functionality within the tool.
Nick Swan:
They didn’t really care about the archiving of data anymore. 18 months worth of data was more than enough for a lot of people. And SEO and Google changed so much that data from 18 months plus ago anyway isn’t worth that much. It’s not as valuable as it used to be because of the changes in the search result pages that are going on. So having that data from the customer interviews positioning was a big thing at the time as it still is now. I think April Dunford’s book had just come out, so I’d read that. I actually arranged a call with Asia Arangio, so from her agency she was doing free 30 minute consultation calls. So I got a call booked with her, jumped on a cal, and I said what I was thinking of doing about I’m focusing on the SEO testing bit of functionality.
Nick Swan:
I also said as well to her, and we had been getting this feedback from customers, because we had added ad hoc reports that people were requesting, people were seeing it as a general SEO tool or were thinking it was a general SEO tool. And so they were asking how does this compare to Ahrefs, how does it compare to SEMrefs? And I don’t want to compete with those companies. One’s a public listed company. One’s a massive company. And I’m a customer of Ahrefs as well, so I use their back-link data in bits and pieces. We were never going to go into that space that they occupy, but people were comparing us against those. So I said to Asia, “I’m thinking a positioning myself as an SEO testing tool to move myself away from being compared to those as the bigger tools.”
Nick Swan:
And she said, “That’s a great idea. Positioning yourself away from competitors is a thing to do.” And so she gave it a thumbs up as an idea. The idea was then to focus on the SEO testing functionality. You then, I say you as in you would probably think of doing the same thing, you just start checking domain names. And so I just checked SEOTesting randomly, and I think it was for sale on one of the domain name marketplaces, so I made an offer, quite a low offer, I think to start with and they came back and said, “It’s too low, but here’s a counter offer of, I think, it was $2,500,” which I thought was good value for money.
Rob Walling:
That’s a steal.
Nick Swan:
And so he was quite open, he said, “Look, I’m an IT person as well. I’m a marketer. I think you’ll do some interesting stuff with it. I just want to see the domain name put to use.” Which is from a people that own domain names and market and then sell them is you don’t usually get that take from people. So I was very grateful we bought it off in and that made the decision to go to the SEO testing route cemented it. I then decided to rebuild the app from scratch, which was we can go back and forth on whether that was a wise decision or not, but I needed to remove a big part of the archiving functionality that was in SanityCheck and work directly with just the Search Console API. So it made sense to rebuild it from scratch, but throughout those four months of rebuilding, I was like, “Is this the right decision?” From a positioning point of view, as much as should I be rewriting it from scratch point of view.
Rob Walling:
That’s a big risk. In retrospect it seems to me like it was the right decision, you agree?
Nick Swan:
Totally. Yeah. You’ve got the question about product market fit and my answer is I don’t feel with SanityCheck we ever got to product market fit, but with SEOTesting from launching paid plans on that, because I did a small free beater on that as well, because COVID hit exactly the week that we were launching SEOTesting, so I was at a point again where I was going to launch paid plans for a tool and then something big happened that I had to change those plans, but from the point of SEOTesting launching paid plans within nine months we got to the same monthly recurring revenue point that SanityCheck had got to in two and a half years. And so although a lot of the functionality was the same within the tools, just the naming and the positioning of the tool just made it a lot clearer to people what it was we were doing and it made more sense to them.
Rob Walling:
And that does lead me to our Startups For the Rest of Us segment. Nick, when did you know you had product market fit? And when I say when, by the way, just for the record, when is not just, well, April 2020, because that’s not actually helpful, but it’s when and how. What were the signs where you felt like this is really working, I have built something people want and are willing to pay for. And folks who listen to this podcast know that I asked this question a little tongue in cheek because product market fit I don’t believe it’s a binary, it is a continuum, and so it’s almost like when did you believe you started having stronger product market fit? We could say there’s one to 10 and when did you hit a six or seven or whatever, but it’s just in terms of when did things really feel like they were clicking and it’s like, “We are solving a problem for a lot of people, people are willing to pay for it, and now it’s more how do we get in front of more people.”?
Nick Swan:
It was definitely when we matched the SanityCheck monthly recurring revenue within nine months, but also I’d say, this isn’t a quantifiable thing, but it was just a feeling. It was just people understood the product more, they knew what they were signing up for, it was just an easier sell, and so pretty quickly within terms of launching SEOTesting I knew it was the right decision in terms of a positioning thing, but then also in terms of a product market fit, it was definitely the right decision.
Rob Walling:
And as we move towards wrapping up, I want to cover one topic that I think will be interesting to folks. And it’s you took on a co-founder, Phil, who you’ve mentioned a couple times, but a late co-founder because you started building in 2015, 16 and Phil came on in 2020, 2021?
Nick Swan:
Yes, that’s right.
Rob Walling:
And so what was your decision making process there of bringing another individual who has enough equity in a company that you refer to him as your co-founder?
Nick Swan:
When I started building the first version of SEOTesting, my previous software company, we’d got up to 20 people. The affiliate marketing website, we had 15 people. I just had enough of managing people and doing HR type things, and so with SanityCheck I decided, as an experiment, I was just going to run it as a one person software company just to see how big I could grow it as one person. So I did make use of contractors and freelancers to help out with various design tasks and things like that, but we got to a reasonable moment of monthly recurring revenue just as me, but a lot of people will think this is the dream in terms of waking up and deciding what you want to work on, but that is good for so long and then you need a bit of direction. So I made the decision the summer of last year to grow a team. I was just tired, bored, whichever way you want to put it, of working by myself.
Nick Swan:
I wanted people to brainstorm with, to celebrate the victories with, all that kind of stuff, and so I made the decision that I was going to build a team and I, first of all, looked at who I know already and who I’ve enjoyed working with in the past, and Phil was one of those people. He was building his own SAS tool, but he hadn’t quite got any traction on it yet. So I said to him, “You fancy doing some contracting on some specific bits of functionality we want built?” So he started doing it on that basis to start with, and we got along so well I was like, “Look, do you want to come on board full time? You can take technical co-founder status. There’s a chance of going through this TinySeed route, which will be good for you from SEO testing perspective, but also in what you want to do in the future in terms of building your own SAS tool as well.”
Nick Swan:
And so we’ve gone on from that point and it’s going well. To the point, I’ve got to say actually last Monday I committed to not writing any code anymore.
Rob Walling:
That’s a big step for a developer who’s been writing for a decade or two. How does that feel?
Nick Swan:
Actually it feels really good. I know when we got together in London for the TinySeed get together, this was one of my concerns around I should be spending more time marketing, but I enjoy coding. And I’ve actually got to the point now where I want to stop coding and I want to spend more time on marketing, which I think is a nice place to be in.
Rob Walling:
And I went through the same process and people would ask me for years and years, “What do you do?” I’m a developer. And suddenly I was like, “I still say I’m a developer, but I’m not actually writing code anymore.” And so I think it can be part of our identity and leaving that behind can be challenging, but I know that you’d been thinking about it for a long time. I don’t think this is something that suddenly came out of the blue.
Nick Swan:
No. To prepare for this interview, interestingly, I went through the past two years of journals, so I write a journal every couple of times a week or so on with thoughts about what’s going on and so on, and the past year was this is a marketing week, I need to focus on marketing, I need to get some marketing done, and that was a reoccurring theme. And I can see that although that was my aim for that week, I didn’t get much marketing work done. So having read through those journals, I felt a real sense of frustration and dropping the code is something I need to do for us to make progress, because it’s not just me now. There’s a team around SEOTesting and we’ve taken a commitment to TinySeed in terms of taking some investment and growing the business, so it feels like the right time for me and the right thing to do as well.
Rob Walling:
Nick, thanks so much for joining me on the show today. If folks want to keep up with you on Twitter, you are Nick Swan, spelled just like it sounds. And of course SEOTesting.com if they want to see what you’re working on. Thanks again for joining me.
Nick Swan:
Thanks, Rob.
Rob Walling:
Thanks for listening and subscribing to this podcast. It’s amazing being able to put myself into a creative endeavor like this and have so many folks tuning in and getting value and inspiration strategies and tactics from the work that we’re doing here. So thanks for listening all these months or years, however long you’ve been around. I hope you’re enjoying TinySeed Tales season three. We have another couple episodes of that season before we wrap it. I’ll be back in your ears again same time, same place next week. This is Rob Walling signing off from episode 626.
If you happen to be listening to this while you’re at Business of Software in Boston this week, my co-founder, Einar Vollset, is there live on the scene in Boston. And if you’d like to link up with him, if you’re interested in perhaps applying to TinySeed or, better yet, if you’re interested in potentially investing in our syndicate or in one of our next funds, you should reach out to Einar Vollset on Twitter. That’s E-I-N-A-R, V-O-L-L-S-E-T. His DMs are open. Or if you happen to see him in the hallway, just say hey. I’ve been a big fan of Mark Littlewood and the team at BOS since years, 2009 I think was the first one that I did attendee talk at and then I spoke at the next event. And as always, we wish Mark and his team at the best as they run their event this week.
Rob Walling:
It’s another episode of Startups For the Rest of Us. I’m your host, Rob Walling, and this week I talk with Nick Swan, the founder of SEOTesting. We run through his experience launching a free tool, starting to charge for that, gaining traction, renaming the tool, getting a new domain name, rewriting the code base. It’s a really interesting and fascinating journey of growing SEOTesting.com to 18k MRR. Before we dive into our conversation, I want to thank you if you have rated this podcast in Apple Podcast, I’ve been trying to get to 1000 worldwide ratings, because there are so very few podcasts that have that number of ratings in the tool, and I believe when I started asking we were around high 800s and now I look today 977 ratings. And a rating doesn’t even need a review, you can just click five stars. So if you haven’t rated this podcast, I’d appreciate it.
Rob Walling:
Our most recent review is a five star review that says my favorite Startup podcast. It’s from Jazz Manders from Australia. I just spent eight and a half hours of a solo road trip listening to back to back Startups For the Rest of Us episodes, such a positive way to pass the time. I really appreciate that sentiment, Jazz Manders. And as always, these are the things that I bookmark and I read when I’m feeling discouraged. When I’m busy crying myself to sleep tonight, I think about these amazing ratings interviews and I really do appreciate them, and they do help this podcast find more listeners like you so thanks so much for helping out. And with that, let’s dive into my conversation with the founder of SEOTesting. Nick Swan, welcome to Startups For the Rest of Us.
Nick Swan:
Hi Rob, thanks for having me on. Excited to be on the show that I’ve listened to since the beginning, I think. Long time listener, first time caller or something, is that what I’ve got to say?
Rob Walling:
Yep. Something like that exactly. It’s great to have you on, man. We’ve interacted over the years, because I remembered you applied to TinySeed. You’re just one of the names that I recognized probably from Twitter or just MicroConf events or MicroConf Connect, whatever it is, and so it’s been cool getting to know you over the past several months. I want to give the podcast audience a chance to find out what you’re working on and where you are. And to start, I want to ask you’re running SEOTesting.com and curious where the business is, give folks an idea of where you’re at in the entrepreneurial journey.
Nick Swan:
Up until now we’ve been open with our numbers on Twitter. We do an update perhaps every quarter or so. At the moment we’re just over $18,000 monthly recurring revenue, just over 330 customers. There’s a small team of us, so there’s myself, Phil, who’s joined as a technical co-founder, which we’ll go into, and Tiago, who’s joined to help with customer service or customer support and some content, and then we make use of some freelancers and contractors and so on as well when and where we need them.
Rob Walling:
That sounds like a nice svelte team. I like those early days where it’s three to five people and you’re doing 20k MRI. Are you running at break even? Are you running negative right now given that you have a bit of TinySeed investment?
Nick Swan:
In general, we’re running at break even and that is mostly because any spare cash we would put into testing new marketing channels. Since having a TinySeed money come in, we’ve been back and forth and wondering what to do with it, so it’s still sitting in the bank account right now, which is a nice feeling having it there as a safety cushion type thing, but we’re going to invest that in one off projects or doing one off tests on different channels as well. So we’re going to go through a website redesign that will be a one off project and we’ll put some TinySeed money towards that, then we’re going to try some paid advertising channels that we’ll put the money towards as well. So we will in general run negatively I guess, but on a month to month basis I see it as being break even.
Rob Walling:
I realize I jumped the gun and didn’t do my standard read the H1. I’m supposed to say, “Your H1 is automate the reporting of page updates and changes, run SEO tests to see what works, track the performance of pages changed, tie your work to results in an exact and impactful way.” You want to give one example of how, I almost said webmaster, holy moly, a startup founder and internet marketer, someone who’s thinking about doing SEO, what would they use SEOTesting for?
Nick Swan:
It is a testing tool, that’s how we market it, that’s what we’ve called it, and we go through a bit of history of how we got to this point, but it’s basically a tool for reporting how a page has performed after you’ve made a change, so how it’s performed in the search results from a Google perspective. We’ll get the data before you made the change and then you can make your change and then compare it to the data after that change. So you can compare the clicks from Google, the impressions in the search results, the position of it and the click through rate as well. It’s interesting you say about the H1, we’ve just changed that last week from doing a bunch of customer interviews so it’s in a testing phase in its own, but from the testing point of view of the tool, it’s ended up having two uses.
Nick Swan:
So there is a testing aspect to it and that’s what a lot of customers use it for. So this is good if you are changing page titles, meta descriptions, and you want to test if the click through rate improves from those new page titles or meta descriptions, but we found out again from customer interviews that a lot of people and especially agencies are just using it as a general reporting tool. So as part of their client engagement and their retainer, they’re going to do some content refreshes on pages and things like that. And then so setting up a test, once they publish their changes, they can then show the client how it performed before they made their content refresh and compare it to afterwards to show how they’re making their impact results and giving them our return on investment and so on.
Rob Walling:
I find that so many internet marketing or online marketing SAS tools will start with the idea of, well, I imagine a marketer at a company can do this or a founder and our bootstrap solopreneur founder could use it and over time there usually becomes a use case for some agency to have some type of reporting or a dashboard or a client log. There’s some value to agencies. And sometimes that becomes the bigger and better part of the business because an agency, as a marketer at a SAS company or at a startup, there’s one person and maybe they do one project at a time, but at an agency, if they adopt something and they have 10, 20, 30 staff, suddenly that volume and that usage and even the value to them could be superior.
Nick Swan:
Certainly. And for a long time it’s been difficult for people doing SEO to show the results of their work as well, because it takes a long time or it can take a while for Google to index new content, for the results to start showing through. So anything that you can do to show the impact of your work in a quicker and more effective way, rather than having to look at data every day in Search Console and copy it and paste it into Excel and all those kind of things, it helps people in that way. I don’t know if it was on this podcast or another podcast I was listening to that said eventually all SAS tools just end up with a big reporting section ib their use, and eventually one of their benefits is the reports that come out of that tool. So we are at that point and it’s good. It’s been great talking to customers and finding this out, and that’s obviously how it’s impacting us in terms of changing our H1 and how we’re going to market it and talk to people about it as well.
Rob Walling:
And you sold a prior software company before this, so what led you to start SEOTesting? Now, for the listener, it wasn’t SEOTesting. When we started it was called SanityCheck. We’ll call it SEOTesting for the rest of the interview, but we will talk about that name change and the thought behind it. So you sell your prior startup, was it SAA?
Nick Swan:
No. So it was around Microsoft SharePoint. It was add-ins, web parts, like WordPress plugins but for Microsoft SharePoint, downloadable bits of software. And it was in the enterprise software space, but we weren’t really an enterprise software company. We were a small bootstrapped business. Again, it grew up to about 20 people. We started 2007. I think I sold my shares in it in 2013. I’d got to the point where I’d had enough of SharePoint. I saw it was changing in direction in a big way, so it was going a lot more cloud based so there’s going to have to be a big reworking of the kind of components and products that we’d built. My co-founder Brett still wanted to carry on with the business and so we came from an agreement where it was going to be a management buy out of my shares and we partnered on good terms, which is good.
Nick Swan:
The business is still going now and doing well, which is nice to see as well, but that gave me a bit of runway in terms of looking at what to do next. And what I find interesting is new ideas, new business models, that kind of thing. Lightning Tools was a previous company. I play golf so I thought I’m going to build websites for golf professionals. Turns out they don’t like paying money for golf professionals.
Rob Walling:
How’d that turn out? Yeah, exactly. I wished you’d have written in with a question here. I would’ve been like, “Oh, I hate to tell you don’t do things, but that’s…”
Nick Swan:
Well, I thought I like playing golf. I like going to golf courses. I can spend more time doing that and talking to golf professionals. It all sounds great. That was an idea that didn’t really work. So I ended up doing some affiliate marketing, so I built a voucher codes, website discount codes website. And that did really, really well as it went through Google updates and other people got impacted by updates and so on. And during that I was doing lots of click through rate testing, so we used the same page title format across all our retailer pages. And so coming up with a better crafted page title could lead to a nice increase in click through rate. It’s all a numbers game. You’ll get 100 clicks, four of those would click on an ad or on a discount code and you’d get a little small percentage of each sale.
Nick Swan:
So getting the page title could make a big difference to monthly revenue and so on. I started doing all this page title, click through rate testing, and it was just taking ages to track all the results in a spreadsheet, so every day looking at the results in Search Console and so on. And I think it was through your SEO tool that you made a big switch over from Google Analytics to Google Search Console for various reasons for your data, and so I think that made me think the Google Search Console API is something interesting to look at, and it was from there looking at Search Console. First of all, there was only three months worth of data available within that tool.
Nick Swan:
So the first thing I tried to build was just something that archived the data to put it all into a database and so on. And then it was then I realized that, hey, I can build some tooling around this testing thing to stop me having to look at the data manually each day, each week or whenever, and do some reporting around it. And that’s how the tool came out of just scratching my own itch really.
Rob Walling:
Got it. And so you were building this for your own purposes with this voucher code website. So it was an internal tool much like Drip was actually. It was an internal tool we built for ourselves and then realized this could be a product. And so did you realize there was more potential in SEOTesting and you bail on the voucher code or what happened with that business as you, I guess I’ll say, started focusing on SEOTesting?
Nick Swan:
The voucher codes sector is like any kind of affiliate marketing. It’s a real cutthroat business, so people will block out SEO, everything they can do to get ranking in Google and we were trying to do things the right way, but it was just really depressing seeing people buying thousands of links and ranking above you and Google doing absolutely nothing about it because it’s just a space they didn’t really care about or want to touch or improve. So as SEOTesting or SanityCheck gained a bit of usage from others in the community and so on, I diverted my attention to that. Again, because it was a new business model and a new tool, I don’t want to go to shiny objects syndrome type thing, but I’d done affiliate marketing and that voucher code space for three or four years and so SAS was a good thing to move into, I thought, and a new thing to try out and learn.
Rob Walling:
And so then you scratched your own itch, which if you’ve heard me I talk about this as scratch your own itch is a nice trait to have in a business you’re starting, but it’s not a panacea. It’s not like, “Well, you just do that and everything works.” It’s just Indie Hackers is littered with these projects of people who scratched their own itch and nothing came of it because no one else wanted it or no one was actually willing to pay for it, or you couldn’t reach people at any kind of scale. So you had built something that you wanted, did you do any validation beyond that or did you just start leaning into it and start marketing it to see if people wanted it?
Nick Swan:
I just started leaning into it to be honest. So I tried the approach of building things for other people, which was the Golf marketing website thing, and so I know this is survivorship bias in terms of this story, but I was in the mindset, well, if I build something and it’s useful for me and it’s saving myself time then that’s a good result out of this. And so it was bare bones SAS. I wouldn’t even call it a SAS app. It was just a tool that you could register for. It had the default bootstrap user interface, all that kind of stuff, and I was in a lot of or still am in a lot of SEO communities at the time, Facebook groups and Slack channels and so on. And so I just shared it there and said, “Look, here’s a free tool, give it a try, let me know what you think about it.” And that’s where the initial feedback and initial user group came from.
Rob Walling:
That’s interesting. So you did validate it because you built something for yourself, it probably didn’t require a ton of polish to make a free tool, and you basically say, “Here’s a free tool. Does anyone care?” And if it had been crickets, maybe wouldn’t have pursued it, but people signed up and started using it and then that was your early user base of people. Did you start getting feature requests and people wanting more to the tool?
Nick Swan:
Yeah. Early users, as you know, they love giving feedback and feature requests and so on. And so the feature requests started to roll in. Again, I was building an SEO tool, so it was things that were going to help me with my SEO work, and so a lot of the feature requests were good ones and I was able to build into the tool. And I guess we’ll come into how that perhaps made us have to choose a position that the tool is going to go into at a later date rather than being a general SEO tool. But the good thing about the SEO community is people are outspoken and willing to give feedback and get involved with free tools and help out, always willing to try stuff, which is great.
Rob Walling:
And so at this point, it’s very simple. It’s one or two main features. It’s the archiving of Google Search Console and tracking of results over time. Is that pretty much it?
Nick Swan:
Pretty much it, yeah. From that point of view, people just started saying, “Well, I’m doing this in Excel, can your tool do that? I’m exporting all the data and then doing this in Excel, can you build able a report for me that’ll do that?” And it was always like, “Yeah, that’s a great idea. This is a great idea. Let’s do it.” I miss those days thinking about actually, because it was so much easier to build stuff quickly.
Rob Walling:
Where it’s exciting. I can crank this out in a day.
Nick Swan:
I know. And people are like, “Wow, that’s amazing. You’ve done it so quickly.”
Rob Walling:
Because they’re used to month long road roadmaps or quarter long roadmaps or whatever. And I also love the refrain of I’m doing this in Excel, can you build it? Because, as we say often on the show, it’s like every Excel spreadsheet is a SAS opportunity to some extent for another. So then you have a free tool, you’re getting requests to for different reports. At what point do you think I need to start charging for this?
Nick Swan:
It’s interesting. I can’t remember. This is back in 2016, 2017, so it’s quite a while ago, and it was only me working on it. It was probably five months as running as a free beater. So that’s quite a period of time I think. And it must have been at some point I was like, “Wow, I need to start charging for this. I’m a host and a server,” that kind of stuff. And also I need to find out if it is a product that people are willing to pay for, because it’s all well and good that people are using a free beater and so on, but if I want to take it to the next level we’ve got to check that people are willing to pay for it.
Rob Walling:
The Paul Graham quote is the hardest part is building something people want. And I’ve always tacked on building something people want and are willing to pay for, because I’ve seen too many people build things that people want. They want to use it, but there’s no actual desire to pay for it. So five months isn’t bad. I have seen folks launch free tools, get a bunch of users, and then they either let it go on too long where it’s a free tool or they try to charge for it and no one’s willing to pay. That might be called the solopreneur or the indie hacker trap of just, well, I’m going to get as many people. As you were doing it, did you ever have that doubt of I’m giving away a lot, am I wasting a bunch of time?
Nick Swan:
Not really, because, again, I was building a tool for myself so I had that mindset of, well, if no one’s going to pay for it, it’s still saving myself time and my day to day SEO work. So I always had that to fall back on, because I certainly will have had those doubts, will anyone pay for it? That’s really the justification that you’re looking for. And for me, I enjoy building things that to save people time, help them solve problems and they enjoy using and the monthly recurring revenue and the money that comes in from that is by proxy of doing those things, so the money’s good obviously, and the monthly recurring revenue is nice and it’s nice to see it go up, but I think it’s just a result of doing those things in terms of building stuff that people find really, really useful.
Rob Walling:
It sounds like your happiness comes from the building, the making, the creating, and if you had infinite money, you would still build, make and create. Is that right?
Nick Swan:
I think so. Yeah. I can’t see a day where I retire. Whatever happens, I’ll still be working on things and coding on things. Maybe I might go back to the golf professional website idea and do it for free.
Rob Walling:
I love that. So you have a free tool, you’re five months in, you’re thinking I should start charging for this, and what’s next? How do you come up with your initial pricing? And what was the rollout when you told people, “I’m going to start charging for this tool.”?
Nick Swan:
Well, I put together the plans and I started with a price and it was far too low, so we did it on a per website that you’re going to add to the tool model and we scaled it that way. I think it started at $10 per month, which looking back on it in reflection it should have been higher than that, but you’re always nervous and worried and you want to get people on board. But I was all ready to turn the paid plans on, send out the email newsletter to say that we’re going to start charging, but we had been warning people as they signed up for the beater that at some point this is going to become a paid product.
Nick Swan:
But then we’ve got three small children and we had the news that we had to go to the doctors with one of our kids, and we went there, it as a Friday afternoon and a doctor said, “You need to go straight to the hospital.” Didn’t say what it was, but you know it’s going to be serious from that point of view and we were told that our daughter who was three and a half at the time was diagnosed with leukemia. So it went from literally it was the Friday, the Monday I think I was going to turn on paid plans and launch that, and so that turned everything upside down.
Rob Walling:
I can imagine. Really sorry to hear that. So did you postpone the pricing change? Were you just consumed with essentially you have a family crisis going on? How do you react to that?
Nick Swan:
It was just left as it was at the time. So for the first three days, we were just stuck in the hospital, we didn’t leave just as they did tests on Isabelle. Literally, as soon as we got there, she started having blood transfusions and platelet transfusions within two hour, so it was a real whirlwind of stuff going on and a lot to take on board. Then we went from our district hospital up to the main hospital in Bristol where they do all the children’s cancer treatment and so on, and so we were up there for two and a half weeks. I had my laptop with me. I could do bits and pieces.
Nick Swan:
I’d not announced to anybody that the launch of paid plans was coming, so it was just a case of just leaving things as they were and let the free beater continue for a bit longer. But from a work perspective, everything was just on hold for two weeks. Thankfully, story’s got a good outcome, Isabelle’s treatment went really, really well. She’s just a normal nine year old girl now, but it was obviously a stressful time and looking back on it I don’t know how to summarize. It really is difficult.
Rob Walling:
These are these hard things that we want to perhaps summarize and I’m glad there’s happy ending. We want to summarize it in, well, it was a hard time, but I got through it, which is true, but there’s also probably scars. Look, I’ve been through with the deaths in our families and Sherry losing her brother to suicide have been through stuff that has completely decimated us, and I don’t know that I’ll ever heal from that fully. There are still battle scars and scar tissue that I think is just not going to go away for me. Did it recur after they figured it out? And I don’t want to say cure, but what is it? It goes into remission and then she’s fine. Has it been okay since then?
Nick Swan:
Yeah. And it’s funny how you say she’s lucky and you look back on it and say, “We were lucky,” because she had the most common type of leukemia from diagnosis and the most treatable type. And so although it was two years of treatment and in and out of hospital on a weekly and daily basis, once you get through the first six months, it’s called maintenance, so she has 18 months worth of small amounts of chemotherapy and stuff like that. Once the intense bit of treatment is done, the biggest risk to her was infection from other illnesses like chickenpox and septicemia and things like that, but again, thankfully she got through all that without any big issue. The funny thing was because as a family we closed in as a group and we couldn’t go anywhere to soft play or swimming, the normal things you do as a kid. I think we ended up having six months of normality and then COVID happened and it was all locked down again anyway. So when it did go back to being locked down, we were like, “Well, this is almost like normal life for us.”
Rob Walling:
What an interesting adaptive advantage, because you’re like, “We’ve already been doing this.”
Nick Swan:
And in terms of battle scars, it’s funny what you’re saying, I still have. And this is part of the reason for wanting to join TinySeed as well. I have issues with long-term planning because for such a long period of time we would make plans and I would make plans in terms of what I want to do with the product, set some goals, things we want to try and accomplish and where we wanted to get to, but then Isabelle would spike a temperature, we’d be in hospital for a week and all those plans will get thrown out the window. And so I still have an issue with thinking long term.
Nick Swan:
Joining TinySeed has been one of the reasons for doing that was to set some more lofty goals, think a bit bigger, think about perhaps where we can take the business too. But again, it was just a case of Isabelle’s finished, we can get back to a bit of normality, we booked a holiday and so on, but then COVID hits and lockdown, holidays canceled. And so I can see the things that was affecting me from Isabelle’s illness, I can imagine it’s affected other people in terms of long term planning and stuff like that. It’s interesting.
Rob Walling:
Well, obviously glad things worked out and amazing to be working with you with TinySeed to help you think more long term about stuff. I’m curious, so two and a half weeks you’re in the hospital and then when does this click happen in you where you’re like, “It’s not just the time, it’s the mental energy to I’m going to do this big rollout of pricing and charging people for this product.” How long did you wait on that?
Nick Swan:
I think it was about three months. And so after the initial two weeks had been in hospital full-time, I think I sent out an email to all the people who were using SanityCheck, as it was called then, and just said, “Look, this is what happened.” Because I’d become quite good friends with these people as well, because I know I’m them from Facebook communities and they’ve been using the tool and we’ve been emailing backwards and forwards and stuff. They’ve been emailing in over those couple of weeks and they hadn’t heard from me, so I just let everyone know what was going on. And so it was quite nice actually over that 18 months period of Isabelle’s treatment, I’d keep people updated how she was doing, which was really nice. And so in hospital I had my laptop with me, not a lot of time to use it apart from in the evenings and late at night, but there was a lot of time of doing nothing where I could think and plan.
Nick Swan:
And so there was a lot of time of planning and thinking things out on paper. And so when you sit down at your computer and you bash something out, but then you realize you’re working on the wrong thing or you’ll go back and forth between different things, I did all of that thinking away from a computer and on pen and paper and so on, so that when I did have a bit of time to work, it was like I knew exactly what I was going to do and get done. And so looking back on that time, I was probably as productive as I would’ve been in terms of if I was in front of a computer for the full time, just because I did all of my thinking away from a computer. So then when I had two hours to work, it was really focused work that I made sure I got done what I wanted to get done and had it all planned out.
Rob Walling:
That’s super interesting. So then you had all this, I think of it caulking a bow or you’re just pulling back this crossbow and getting ready to let it go and launch this, so you do, you start charging, you let people know this is the pricing. Now the first question I have is did you only charge for additional features or did you charge people for stuff they had already been getting for free for six months? And then the second question is how did it all work out?
Nick Swan:
There was nothing free. We went just to having a paid plan. So we went from free beta to there being a 14 day trial, and then you’d start paying after those 14 days of trialing the product out. And it went well. There was an initial surge of customers, obviously from the people that had been using it as a free beater. And then obviously after the first couple of months where you get that big surge, you get a bit of a reset and then you realize that you need to do some marketing and letting other people know about the tool, and you start the slow SAS ramp of death from that point.
Rob Walling:
I want to call something out because it sounds like from the start you had said, “This is a free beta, but we will charge for this.” It wasn’t this is a free tool and suddenly you started charging for it, because that’s a mistake I see a lot of folks make. Were you pretty intentional about communicating to everyone it’s free for now?
Nick Swan:
Yeah, we had that on the landing page, probably the registration page and so on, so I didn’t want to set people’s expectations that this was going to be a free beater forever and then do a beta and switch, whatever it’s called, and say, “Hey, you need to start charging now.” It was always going to be this is going to be a paid product at some point. It’s an interesting question as to if no one had paid for it what I’d have done then, whether I’d have switched back to a [inaudible 00:26:49] because of the thing I said about just wanting to enjoying helping people and building things that people find useful, what I’d have done then, but we were always very upfront about we’re going to charge. And it’s interesting, I keep going backwards and forth between I and we, but it was only me at that particular time, so it’s funny.
Rob Walling:
Sometimes it’s hard and now you have co-founder Phil. And so were you happy with that initial, I’ll call it a launch, in essence of paid launch, and did it get to a few thousand MRR?
Nick Swan:
It got to a couple of thousand monthly recurring revenue. It continued to grow then and it did well. We did quite well with some paid Twitter advertising. Twitter’s good in terms of a SEO community. Again, I say good, there’s lots of moaning and shouting and arguing on there, but there are lots of SEO people on Twitter, which is when people are all together in one place, it’s a good place to be able to do some advertising also on. And so we’ve got some initial traction on Twitter. Word of mouth has always been good. So people like speaking about the good tools that they’re finding to help them with their SEO work. So we’ve always had good word of mouth marketing, which I know is difficult to scale, but it’s invaluable I guess from a thing you can’t buy or pay for.
Nick Swan:
I’m not sure if that makes sense or is right, so it continued to grow slowly. It’s funny because when we were working on Microsoft SharePoint, we were building on someone else’s platform and every two or three years they’d release a new version of SharePoint that we’d need to weigh our features and things that we built, and so I always said, “I’m never going to build on someone else’s platform.” We obviously did in terms of building on Google Search Console API and so our main part of the tool at this point was the archiving of the data, because only three months of data was available in Search Console. In January after, so this would’ve been 2018, they launched 18 months worth of data for everybody. So that had an impact then in terms of plans for the tool, what we were going to do with it. We didn’t know what was going to happen in terms of people having all that data available, but it had a long term impact on our eventual plans of what we were going to do with it and so on.
Rob Walling:
With HitTail, which is the SEO tool that you mentioned earlier that used Search Console, I was using, it was an unofficial API to scrape Search Console and they would break it about every year or so, and so I’d have to go and hack the code to fix it. And so I was frustrated with that and said, “Next company I start, no platform risk.” And then you start an ESP and you’re like, “I send emails and I can use Mailgun or SendGrid or whatever I want to do, spit out my own service if I need to. No platform risk.” Well, the platform there are the black lists, the spam list, and they are run by just random people, and one person sent an email to the head of one of these lists and said, “These guys are letting people send spam,” and they blocked us with no judge jury. They were the execution.
Rob Walling:
And it’s like, “Screw you.” And they’re one of the top 10 or top five in the world. So it was all of a sudden our IPS were blocked and SendGrid’s freaking out because they’re SendGrid’s IPS at the time. And it’s just there’s platform rescue everywhere is the unfortunate reality. I think there’s different grades of it, different levels. So you start having success, the tool is called SanityCheck at the time, at a certain point you rename it to SEOTesting and you got the .com for that, which is a great domain. Talk me through that, either the thought process, if the domain suddenly appeared and you’re like, “That’s it,” or if SanityCheck you’re like, “This just isn’t it long term,” and you went out seeking it.
Nick Swan:
There were a few things really. So because we were archiving lots of Search Console data, the database was getting quite big and I’m a developer or database administrator, so at some point I knew this was going to become an issue and I was going to have some sleepless nights about it. So there was a thought process of, well, now there’s 18 months worth of data available in Search Console anyway, do I need to be archiving all this data? That was one part of the thought process. The second thing was we’d plateaued in monthly recurring revenue and it started to get harder and harder in terms of getting new customers, so I got to the point where I did a bunch of customer interviews, I looked at some data, so what good customers or successful customers were using the tool for, and it all came back to the SEO testing functionality within the tool.
Nick Swan:
They didn’t really care about the archiving of data anymore. 18 months worth of data was more than enough for a lot of people. And SEO and Google changed so much that data from 18 months plus ago anyway isn’t worth that much. It’s not as valuable as it used to be because of the changes in the search result pages that are going on. So having that data from the customer interviews positioning was a big thing at the time as it still is now. I think April Dunford’s book had just come out, so I’d read that. I actually arranged a call with Asia Arangio, so from her agency she was doing free 30 minute consultation calls. So I got a call booked with her, jumped on a cal, and I said what I was thinking of doing about I’m focusing on the SEO testing bit of functionality.
Nick Swan:
I also said as well to her, and we had been getting this feedback from customers, because we had added ad hoc reports that people were requesting, people were seeing it as a general SEO tool or were thinking it was a general SEO tool. And so they were asking how does this compare to Ahrefs, how does it compare to SEMrefs? And I don’t want to compete with those companies. One’s a public listed company. One’s a massive company. And I’m a customer of Ahrefs as well, so I use their back-link data in bits and pieces. We were never going to go into that space that they occupy, but people were comparing us against those. So I said to Asia, “I’m thinking a positioning myself as an SEO testing tool to move myself away from being compared to those as the bigger tools.”
Nick Swan:
And she said, “That’s a great idea. Positioning yourself away from competitors is a thing to do.” And so she gave it a thumbs up as an idea. The idea was then to focus on the SEO testing functionality. You then, I say you as in you would probably think of doing the same thing, you just start checking domain names. And so I just checked SEOTesting randomly, and I think it was for sale on one of the domain name marketplaces, so I made an offer, quite a low offer, I think to start with and they came back and said, “It’s too low, but here’s a counter offer of, I think, it was $2,500,” which I thought was good value for money.
Rob Walling:
That’s a steal.
Nick Swan:
And so he was quite open, he said, “Look, I’m an IT person as well. I’m a marketer. I think you’ll do some interesting stuff with it. I just want to see the domain name put to use.” Which is from a people that own domain names and market and then sell them is you don’t usually get that take from people. So I was very grateful we bought it off in and that made the decision to go to the SEO testing route cemented it. I then decided to rebuild the app from scratch, which was we can go back and forth on whether that was a wise decision or not, but I needed to remove a big part of the archiving functionality that was in SanityCheck and work directly with just the Search Console API. So it made sense to rebuild it from scratch, but throughout those four months of rebuilding, I was like, “Is this the right decision?” From a positioning point of view, as much as should I be rewriting it from scratch point of view.
Rob Walling:
That’s a big risk. In retrospect it seems to me like it was the right decision, you agree?
Nick Swan:
Totally. Yeah. You’ve got the question about product market fit and my answer is I don’t feel with SanityCheck we ever got to product market fit, but with SEOTesting from launching paid plans on that, because I did a small free beater on that as well, because COVID hit exactly the week that we were launching SEOTesting, so I was at a point again where I was going to launch paid plans for a tool and then something big happened that I had to change those plans, but from the point of SEOTesting launching paid plans within nine months we got to the same monthly recurring revenue point that SanityCheck had got to in two and a half years. And so although a lot of the functionality was the same within the tools, just the naming and the positioning of the tool just made it a lot clearer to people what it was we were doing and it made more sense to them.
Rob Walling:
And that does lead me to our Startups For the Rest of Us segment. Nick, when did you know you had product market fit? And when I say when, by the way, just for the record, when is not just, well, April 2020, because that’s not actually helpful, but it’s when and how. What were the signs where you felt like this is really working, I have built something people want and are willing to pay for. And folks who listen to this podcast know that I asked this question a little tongue in cheek because product market fit I don’t believe it’s a binary, it is a continuum, and so it’s almost like when did you believe you started having stronger product market fit? We could say there’s one to 10 and when did you hit a six or seven or whatever, but it’s just in terms of when did things really feel like they were clicking and it’s like, “We are solving a problem for a lot of people, people are willing to pay for it, and now it’s more how do we get in front of more people.”?
Nick Swan:
It was definitely when we matched the SanityCheck monthly recurring revenue within nine months, but also I’d say, this isn’t a quantifiable thing, but it was just a feeling. It was just people understood the product more, they knew what they were signing up for, it was just an easier sell, and so pretty quickly within terms of launching SEOTesting I knew it was the right decision in terms of a positioning thing, but then also in terms of a product market fit, it was definitely the right decision.
Rob Walling:
And as we move towards wrapping up, I want to cover one topic that I think will be interesting to folks. And it’s you took on a co-founder, Phil, who you’ve mentioned a couple times, but a late co-founder because you started building in 2015, 16 and Phil came on in 2020, 2021?
Nick Swan:
Yes, that’s right.
Rob Walling:
And so what was your decision making process there of bringing another individual who has enough equity in a company that you refer to him as your co-founder?
Nick Swan:
When I started building the first version of SEOTesting, my previous software company, we’d got up to 20 people. The affiliate marketing website, we had 15 people. I just had enough of managing people and doing HR type things, and so with SanityCheck I decided, as an experiment, I was just going to run it as a one person software company just to see how big I could grow it as one person. So I did make use of contractors and freelancers to help out with various design tasks and things like that, but we got to a reasonable moment of monthly recurring revenue just as me, but a lot of people will think this is the dream in terms of waking up and deciding what you want to work on, but that is good for so long and then you need a bit of direction. So I made the decision the summer of last year to grow a team. I was just tired, bored, whichever way you want to put it, of working by myself.
Nick Swan:
I wanted people to brainstorm with, to celebrate the victories with, all that kind of stuff, and so I made the decision that I was going to build a team and I, first of all, looked at who I know already and who I’ve enjoyed working with in the past, and Phil was one of those people. He was building his own SAS tool, but he hadn’t quite got any traction on it yet. So I said to him, “You fancy doing some contracting on some specific bits of functionality we want built?” So he started doing it on that basis to start with, and we got along so well I was like, “Look, do you want to come on board full time? You can take technical co-founder status. There’s a chance of going through this TinySeed route, which will be good for you from SEO testing perspective, but also in what you want to do in the future in terms of building your own SAS tool as well.”
Nick Swan:
And so we’ve gone on from that point and it’s going well. To the point, I’ve got to say actually last Monday I committed to not writing any code anymore.
Rob Walling:
That’s a big step for a developer who’s been writing for a decade or two. How does that feel?
Nick Swan:
Actually it feels really good. I know when we got together in London for the TinySeed get together, this was one of my concerns around I should be spending more time marketing, but I enjoy coding. And I’ve actually got to the point now where I want to stop coding and I want to spend more time on marketing, which I think is a nice place to be in.
Rob Walling:
And I went through the same process and people would ask me for years and years, “What do you do?” I’m a developer. And suddenly I was like, “I still say I’m a developer, but I’m not actually writing code anymore.” And so I think it can be part of our identity and leaving that behind can be challenging, but I know that you’d been thinking about it for a long time. I don’t think this is something that suddenly came out of the blue.
Nick Swan:
No. To prepare for this interview, interestingly, I went through the past two years of journals, so I write a journal every couple of times a week or so on with thoughts about what’s going on and so on, and the past year was this is a marketing week, I need to focus on marketing, I need to get some marketing done, and that was a reoccurring theme. And I can see that although that was my aim for that week, I didn’t get much marketing work done. So having read through those journals, I felt a real sense of frustration and dropping the code is something I need to do for us to make progress, because it’s not just me now. There’s a team around SEOTesting and we’ve taken a commitment to TinySeed in terms of taking some investment and growing the business, so it feels like the right time for me and the right thing to do as well.
Rob Walling:
Nick, thanks so much for joining me on the show today. If folks want to keep up with you on Twitter, you are Nick Swan, spelled just like it sounds. And of course SEOTesting.com if they want to see what you’re working on. Thanks again for joining me.
Nick Swan:
Thanks, Rob.
Rob Walling:
Thanks for listening and subscribing to this podcast. It’s amazing being able to put myself into a creative endeavor like this and have so many folks tuning in and getting value and inspiration strategies and tactics from the work that we’re doing here. So thanks for listening all these months or years, however long you’ve been around. I hope you’re enjoying TinySeed Tales season three. We have another couple episodes of that season before we wrap it. I’ll be back in your ears again same time, same place next week. This is Rob Walling signing off from episode 626.
