Episodes

Rob: Welcome back to this Happy New Year edition of Startups for the Rest of Us. I’m Rob Walling and this is the first episode of the new year. I recorded a version of this episode two days ago while my family and I were at a resort in Jamaica. I was actually looking out over an infinity pool, looking at the Caribbean Sea, and it was an amazing respite from the cold of Minneapolis, but also just the day-to-day of life.
We were in a place where we couldn’t decide to get distracted by doing laundry, being bothered by how dirty the kitchen is, or going into the basement seeing all the clutter. We were away from it for about eight days. That episode I recorded was just not good. It was really bad. It’s funny. First I thought there would be a bunch of background noise and there wasn’t. As I listened back to it, I thought to myself, this is not helpful, it’s not generalizable to people, and it was quite rambly. I’m re-recording it today with a new kind of tighter focus on a few key points that I had covered in that version of this episode.
This is a prior year reflection on 2021. This is the point where I look back at the prior year and think about what went well? What didn’t go well? What did I not enjoy? What do I want to do less of? What do I want to do more of? Then I look ahead to 2022 and whether you are the type of person who plans, who has goals, or who just wants some high-level ideas and thoughts of what they’re going to do over the next 12 months. That was my process during this time away.
It wasn’t a typical founder retreat. If you listen to this podcast, for any length of time, we call them founder retreats. I actually took this practice from my wife, Sherry Walling, also known as Zen Founder, who has actually written an ebook called The Zen Founder Guide to Founder Retreats. You can buy it, I don’t remember if it’s $20 or $25. It’s so worth the money if you’re going to take a couple of days away and do this kind of deliberate ritual.
Whether you do it twice a year or you do it once a year, it is something that can really help shape where you’re headed long term. It pulls you out of the day-to-day so that you’re not thinking what am I going to do this week? What am I going to do next week? You start thinking, what am I going to do next quarter, next half of the year, and next year?
I know that for myself, I tend to get heads down and relentlessly execute on whatever’s in front of me. Oftentimes, I don’t pull my head up and look and say, where do I want to be one, three, and five years from now? That’s what a founder retreat can do for you. If you’ve never taken one, I highly encourage you to do it.
This one that I did in Jamaica was with my family. It wasn’t a typical I have 48 hours completely unplugged from everything where I’m just thinking through, making goals, and making plans. This was more of an intermittent hour here, two hours there sitting, looking out over the ocean with my feet in the sand with a notebook and a pen, and giving some thoughts to all the things I just said. What was good, what was bad about last year, what do I want to be doing more of, and what are some high-level things that maybe I haven’t given enough deliberate thought to as I look out over 2022?
During that process, I also asked my two kids, just briefly off the cuff, what they were looking forward to either hopes or goals that they have for 2022? I’m going to roll some of that tape here in a minute. Before I do that, I know that some folks like goals and some folks don’t. I get it.
There’s a time and a place for goals given how specific you want to make them. Sometimes they’re like, I want to be at $20,000 MRR by the end of the year. Other times it’s like I want to have written 1000 words a day by the end of the month or I want something maybe more amorphous. I want to be enjoying what I’m doing in my day-to-day work by the end of the year. All of these things have a time and a place. Sometimes you just have a year where you can’t be as specific as you want to be, or you’re going to set some goals where you just don’t know if you’re going to be able to achieve them.
What I will say is that if you’re running a startup, if you can’t estimate your growth over the next year and make that some type of goal, then either you’re too early meaning you don’t have a product-market fit. Before you have product-market fit, before you ever product, it’s so hard to estimate how long something is going to take to get there. Either you’re too early or if you’re past product-market fit and you still can’t have some type of estimate of where you want to be at the end of the year, then it’s likely you’re getting lucky and that you’re going to plateau at some point and not be able to fix it or not know how to fix it right off the bat.
Maybe you’ll figure it out. You’ll probably figure out how to fix it because you’re a smart founder, but you might stay plateaued for potentially a very long time because what I see in startups that work post-product-market fit, as you have escape velocity, is that there really is a predictability to a lot of your numbers.
A lot of your funnel is coming in, you can tell visitors to trial, you can tell trial to paid, you can tell churn, you can see how many new trials or visitors you can get over the next 12 months, blah, blah, blah. Even if you don’t dig super hard into the numbers, it’s more science than it is an art to be able to project out a quarter or a year of where you’re going to be, and you’re not always going to be accurate.
This is not the time to say we’re going to 10X in the next year and to set goals that maybe you’re not going to be able to achieve. What I’ve found is that folks who do look at it pretty realistically and say, look, at our current course, we’re going to go from 1 million to 2 million this year. At our current course, doing what we’re doing today. Who can then say, well, what would we need to do to triple, to get to 3 million? Assuming that’s something we want to do.
I’ve talked about lifestyle entrepreneurs, and if you do want to be a lifestyle bootstrapper, awesome. You do want to put it on autopilot maybe or just back off and just do the minimum amount of work and get from one to two million, that’s amazing. Power to you. That’s a great business.
If you are looking to be more ambitious with your startup and with your growth, to ask yourself this question of, well, we can get from one to two, given our current trajectory, what does it look like to get to three or four? What would we have to do?
We’d have to hire ahead. We’d have to have two marketing efforts that really clicked or one that clicked really well. There’s just all these answers and all these questions that come about if you look at this as something that you’re aspiring to do, and some people are motivated by that. In fact, as much as I don’t really love the process, planning, looking ahead, and doing a lot of stuff that’s not just working in and on the business, this high-level stuff I found to be a necessity for me over the years growing as these companies get larger.
When I look around at the founders who I see who are doing really well and getting that fast growth, some are lucky and a lot of others are planning, they’re looking at these goals, looking at these the projections, or they’re looking at the goal and then saying how can I get there? Whether they hit it or not, it matters less than if they set that, they execute on their plan, and they do their best to achieve it. With all that said, I’d love to roll the tape of my 11-year old. I asked him what are some goals or hopes that you have for 2022.
Son 1: I’m working hard in school, but I want to work harder. I want to take care of the animals we have in our home because that’s important. I want to live with screens, but in a controlled amount be healthy. I want to have fun with the family. I also want to work hard on the violin and maybe improve on that. I want to help people when they need help. I want to live a good life. I guess that’s broad, but yeah.
Rob: I asked my 15-year-old the same question. I’ll roll that tape in just a couple of minutes because something that I was quite pleased with during these moments that I was thinking about or reflecting on in 2021 was just how much that my team and I have been able to accomplish in the last year.
It gave me the sense of I think gratitude, but also pride. Just pride in the fact that we closed TinySeed Fund 2 and are on our way to closing our EMEA Fund—Europe, Middle East, and Africa that we funded two more batches. We’re almost to our 60th company, and we ran six MicroConfs, two were remote and four were in person. Just to run in-person events this year. We hadn’t run them in so long. Shipping 52 podcast episodes, doing 20-something live streams.
There’s all this stuff that you forget in the day-to-day. Until I wrote it out, it just hadn’t sunk in how much we’re actually able to accomplish in 2021. Even though the first half we didn’t have vaccines. I got my second dose in May of 2021. Before that, it was still mostly lockdown-ish depending on which state I was in. We’re back and forth between California and Minnesota.
It was just 2020 and the early part of 2021 kind of all blended together for me and I think for a lot of us because it was kind of like pre-vaccine and post-vaccine. That’s when things started to change. As I looked at this list of what we were able to accomplish as a very small team, it made me realize the potential that we have to accomplish in 2022 in terms of running even more events and being able to fund another 40–60 companies across multiple batches. We’ll have two in the Americas and one across EMEA.
I was able to celebrate those wins and get excited about the year ahead. I was also able to reflect on probably some things that I should have realized earlier—mistakes or at least miscalculations, things I could have done better. One thing that I’ve been mulling over and trying to kind of hire for five, six months is to hire a podcast and YouTube producer who can help with this podcast, the MicroConf podcast, potentially TinySeed Tales, although I do have a good producer on that already, and our MicroConf YouTube channel.
I realized over this break and upon reflection that I should have gone after this more aggressively. I probably from the start should have made it a full-time hire. First, I was trying to do freelance, part-time, and then I was like, well, I could do full-time freelance, or maybe I could get multiple people. It’s just this dilly dally. I talked to some agencies and I see that as a process that didn’t go fast enough upon reflection.
I realized now that it has been slowing producer Xander and I down to still have too much going on in the day-to-day of these things. There are people out there who can produce this content really well. When I say produce, I mean, I’m still the host of Startups for the Rest of Us and the emcee of MicroConf. There’s all of that, but there’s all the behind-the-scenes stuff that needs to get done.
I am going to be looking at hiring someone full-time to help with all the things I just mentioned—podcasts and YouTube. It’s time to do it. We put out so much content kind of on the side. It’s on the “side” and I don’t mean our main events that producer Xander is putting out, all the MicroConf stuff, but everything else has just always been a side project. I wished I had realized that sooner.
If you are someone who listens to the show, you’d probably be a perfect fit. If you are either audio or a video editor/producer, someone who can weigh in on content decisions and help us ship more stuff, I’m going to be putting a job description together. Please do reach out to me at rob@microconf.com because I’d love to have a conversation.
One of the other things that I reflected on that I would have done differently in 2021 is when we decided to schedule the MicroConfs, we clustered them together and kind of a roadshow. There are going to be four of them in four weeks. Then we had to relocate to London, so it’s going to be five in five weeks. We couldn’t have London because of Delta, so we wound up doing four in four weeks. It was a ton of work and it wasn’t something that I think we’ll do again because spacing them out is fine. No one else cares.
Attendees coming to one event don’t really care that there’s another event the next week, but it did put a ton of pressure on producer Xander, who’s trying to basically plan all these events all at one time, and then it was a lot of travel in a short time span, which is obviously hard on some of us and hard on me because of the family back home.
This wasn’t one that I feel like is—I wouldn’t say, oh, it’s a mistake. It was an experiment. So many of these things in startups are experiments. We just made the call, we got excited about it, and then when we did it, it was like, huh. Xander and I looked at each other, let’s not do that again.
What we’re looking at in 2022 is making a change and it actually gets me excited to look out and think, okay, well what if we had one event almost every month in 2022? There’ll obviously be our flagship growth events, then we’d be looking at some local, which are the one-day events, and then a couple of remote events as well. I have a couple more thoughts for you, but I want to roll the tape of my 15-year-old when I asked him what are some of your hopes or goals for 2022.
Son 2: I’m hoping 2022 is finally going to be the year that COVID ends. We drop the mask mandate and I can walk around the school again without masks, social distancing, and stuff. That’ll be nice. It’s also going to be the year that I turned 16 so I’m hoping to get my driver’s license. If I finally stop procrastinating, finish my book.
I’m also hoping to get a good gaming computer, not the one that I have now, so I can run stuff on high graphics without my CPU spontaneously combusting. I’m also going to try and expand my Warhammer 40,000 collection. I own a decent amount of stuff, but no complete armies yet. I’d like to fill those out.
Rob: By the way, if this format feels familiar, you’ve probably heard it on Zen Founder. Sherry’s the one who has actually done a lot of interviews with our kids and bringing them into the podcast episodes. I’ve never done it on Startups for the Rest of Us, and it was just so easy to do. These interviews or these short clips of the boys were actually recorded while we were in Jamaica, and that was one of the advantages of being there with a family with a microphone in hand.
I want to leave you with one final thought about the power of focus and the idea that most of us have shiny object syndrome. Most of us take on too many things and continue to work on things that aren’t working. Maybe we don’t know they aren’t working because we’re not measuring the right things. We’re not evaluating the data, or maybe we do know that they’re not working but we do them anyways out of a sense of obligation because we just don’t take the initiative to stop doing them or because there’s some kind of emotional attachment to doing these things that we feel like if we don’t ship one blog posts a week, even if we’re getting no traffic to our blog, that somehow we are failing as a founder.
In my experience, the things that we decide to stop doing or the things we decide not to do are as important as the things we decide to do. As you reflect on 2021 and 2022, or even if you’re listening to this a year or five years from now, I encourage you to think hard about what’s working, what’s not, what do you want to do more of, what do you want to do less of, and what do you want to stop doing in the new year?
Thanks so much for joining me, not only this week but this year. I know this is going live shortly after the new year, but it is technically the last episode of this show recorded in 2021. I look forward to being a part of your journey throughout this new year, whether that’s through strategies and tactics that I’m able to pull from guests or share from my own experience, from the experience of the founders that I work with, inspiration from the stories told on this show, or through the mental frameworks and almost the more philosophical topics that I sometimes cover in my solo adventures.
I just look forward to being on this journey with you. My hope is that you enter a prosperous and happy new year with you and your family and with you and your startup. It’s great to be along on your journey. As always, I’ll be back in your ears again next Tuesday morning.

Rob: It’s not just any show, it’s Startups For the Rest of Us. It’s episode 583. I’m your host, Rob Walling, and I catch up with Sam Parr. He’s the founder of The Hustle, a wildly popular email newsletter. He grew to several million subscribers, eight figures of annual revenue, and he sold it to HubSpot earlier this year. Sam is also the co-host of My First Million, which is a podcast that really dissects business ideas and looks with a pretty unique lens about areas in our economy, in specific industries, or just in the world where new business ideas and new startup ideas can take shape.
I really enjoyed today’s conversation with Sam because he’s just an interesting person to talk to. He’s thinking about so many things. He’s educating himself by reading books. He goes off on research tangents, I can tell.
I’ve heard some episodes of their podcast and you can tell that he’s just constantly thinking about how do these things work. Why do they work? Why are they maybe broken on the edges? Where are their opportunities to be found? As a result, I felt like the conversation he and I had was super interesting, and I hope you do as well. Let’s dive in.
Sam Parr, thanks for joining me on the show.
Sam: What’s up, man?
Rob: It’s good to have you on here.
Sam: I was reading your blog. I couldn’t afford to go to your event when I first started out, but I read your blog. You’ve been doing it for 10 years maybe, right? I feel like it’s been since 2012-ish.
Rob: Yeah, I started the blog in 2006, then wrote the book in 2010, and then this podcast started in 2011.
Sam: Yeah, I was reading your blog for a very long time. I’ve always wanted to go to your event and I modeled some of our events after your event. But when I first got going, I couldn’t fly somewhere. It was a big deal.
Rob: That’s so funny because you and I have never met and it’s cool to meet you for the first time. I was googling for a calendar event last night. I’m in my Gmail and I typed in your name. There’s an email from 2014 from you when I lived in Fresno. I actually want to read it.
It’s funny. You say, “Hey, Rob. I followed Justin Jackson on Twitter and he recently retweeted one of your tweets, and since then, I’ve been reading your blog a ton. Anyway, I saw that you’re into bootstrapping and live in Fresno. I’m throwing an event about bootstrapping in San Francisco on January 22nd and wanted to give you a free ticket. I would love to be able to say hi. Password for the ticket was Sam is cool,” which I thought was so great.
Then you’re like, “P.S. The pre-launch strategy case studies have really helped me for launching my own blog.” It’s a good cold email, right? I get a lot of these.
Sam: That’s awesome.
Rob: Yeah, and I replied. I was like, hey, I would love to, but it’s like a six-hour round trip and blah, blah, blah. I’m running MicroConf and all this stuff. Then we got into a thread about I was about to go on Mixergy again and we started talking about that. Then you asked me a question about time management. It’s so funny, man, how you and I run not parallel lives, but parallel industries or parallel tracks.
We do a lot of similar things with events and email marketing. It has been a big impact for both of us. My last SaaS app obviously was Drip. It is fascinating to me that we haven’t run across each other before this.
Sam: I’m happy that that email that I wrote to you was good. It’s 2014 so I was probably 24, 25 years old. I’m happy that I was professional sounding and not like a douche.
Rob: Yeah, totally. That could definitely happen. I have met a few people in person who I will find emails from years ago and I’m like, what were you thinking doing that email? But this one was definitely not like that.
Sam: That’s why you know it’s real. People say I’ve been a fan of you for a long time, you have proof.
Rob: Yeah. No, that’s so cool. But I want to talk about The Hustle. I want to talk about a lot of things today—hotdog stand, The Hustle, and selling the HubSpot. These are really interesting topics to me. You build, correct me if I’m wrong, but it’s thehustle.co. It’s a new site, but it’s an email newsletter. You build it to eight figures in revenue, is that right?
Sam: Yeah. I mean, how do we not sell? I kept working on it for a long time. There’s clearly a path to $100 million revenue, I think, with these styles of businesses.
Rob: How is that? Because I think a media company is just sponsorships and this and that. Yeah, I just love to hear how you did this.
Sam: When we first launched, I always wanted to start a media company. I admired Ted Turner. You can’t really see it, but I’ve got this wall with pictures behind me and Ted Turner’s on there and so is Felix Dennis, two guys who had media companies. One’s British, one’s American.
I always wanted to do media because I like content. I love sharing ideas. Even in 2012 and 2013, if you looked at the math, you’re like damn, to build a media company to be huge, it’s really, really challenging. This page view model sucks. Upworthy and all that stuff got a lot of traffic at the time, but it was very clear like, oh, man, this is […] content and this is not going to stand the test of time. This sucks. But good content—at least what I describe as good content is […] I liked—was hard to share and get the page views.
I’m like this model stinks, so I got to figure out how to do this. I read Mixergy. Andrew had an interview with Ben Lerer, the founder of Thrillist, and two or three other people who had email lists, and I’m like, oh, that math is pretty crazy. One writer can reach as many people in the world. I just type in an email, and if I have your email address, the likelihood that I can get you to read it is pretty good, at least higher than writing an article.
I just thought, what niche that I care about is big enough to reach millions of people? I picked business and technology and it worked. In order to build a $100 million business, you easily can get—when I say easy, I mean simple. So it’s simple but hard. You easily can get to like $40, $50 million a year in sales, through advertising sales. The way that you do that is you charge $35 to $40 per 1000 sends, you have one major list that has 3 million people, and then you have a handful of smaller lists that are in similar but different targets.
Collectively, your list should be like five million people that will get you to around 50 million in revenue. Then you have a subscription service, which we did, trends.co. When we sold, it was going to do close to eight figures in revenue. If you just did trends, but for different niches, that can get you to another $30 or $40 million in subscription revenue. Then our events were pretty thrown together. They weren’t the best thing, but they made seven figures, and that definitely could have gotten to like $10 million in revenue.
Rob: That’s incredible. A 5 million person email list is anomalous. That is not something that exists everywhere.
Sam: I think it’d be incredibly challenging to get five million on one list, but we had nearly two million on one list. It’s easy, in my opinion, to be like, well, if you give it two or three years, it definitely could get to three million, and then you could launch like 8 or 10 offshoots that could get hundreds of thousands and collectively add up to five million.
Rob: Got it. That’s how you do it. How did you grow an email list to two million?
Sam: We got between 90,000 and 150,000—I don’t remember the exact number in the first year—just through me blogging. I would blog a lot. In the first six weeks, we had maybe a million people come to the website, and of that number, 3% or 5% entered their email. I just continued doing that for a year and that added up to 100,000 people. I would just post content like crazy. Then eventually, from around 200,000 or 300,000, I forget the exact number, we started buying ads. We could buy ads on Facebook and do an arbitrage.
Rob: That’s what I was going to ask about. It sounds like it’s anything else. It’s driving a ton of traffic and having a funnel. You obviously had email capture and a certain percentage signed up.
Content marketing is something obviously a lot of SaaS founders who listen to this podcast use. But the biggest lists that I know of like the AppSumo list and The Hustle figured out a way to pay for subscribers. That’s fascinating. How did the economics of that work? Is it because we were able to charge such a high CPM or cost percent?
Sam: It’s a SaaS business. It’s not literally SaaS, but it’s the same. If you get a SaaS calculator on churn and LTV and just use our numbers. We email every day, but Saturday.
If we’re emailing every day but Saturday, that’s 26 sends a month-ish. Then you say, so it’s 26 sends a month, your churn is 4% or 3% a month, you’re charging $35-ish per 1000 sends, therefore, if you want your payback value to be like—I forget what we wanted ours to be—it was pretty tight payback time because we didn’t have a lot of money. Basically, if you could spend $3 to acquire a person, we knew for a fact that we could make like $18 off of them. So it was like, all right, just spend.
Rob: Right, so there was a lifetime value.
Sam: Yeah. It was incredibly sophisticated. We had a team of maybe six people dedicated to this, we use Periscope, and we had all these dashboards every day. We check them and we would say, we had all these sources. Let’s say it’s Facebook and then a subset of different ad sets and audiences, then Instagram and then a subset of different, and then podcasts and then which podcasts and everything and which creative.
Then we would say, all right, within eight days of that sample size, what’s their open rate? We’d categorize them as gold, silver, and bronze. We do the LTV of gold, we do the LTV of silver and bronze, and then we’d say, all right, spend more there. It was quite sophisticated.
Rob: That’s something that really high end SaaS companies—I say high end or […] sophisticated SaaS companies do as well—is they get into their funnel and they look at their retention grid. We used to look at in Drip and I could see it was, oh, by month 10, we’ve only retained 84% of people. A lot of folks shy—especially in the bootstrapping community—away from that stuff. They shy away from getting into the metrics, getting into the weeds, and they just kind of want to handwave it and build a great product.
Sam: Because it’s really hard. Technically, I don’t know how to do it. I can look at it and feel it out. But I had to hire guys who could really properly do it like scientifically do it.
Rob: You had a subscription business. You had effectively a SaaS business without the software, and then that’s where you say it’s simple but hard because SaaS is really complicated. SaaS is complicated and hard because building a product and then doing everything you’ve done—doing the marketing, doing the funnel, making the sales—is, I would say, a more complex business than a newsletter. Do you think that’s accurate?
Sam: Yeah, I think so. I think maybe there are more people who could build a SaaS business than build a business I did, maybe. But I didn’t find my business to be intellectually challenging at all. To me, it was like getting big muscles. It’s like, well, if I just lift weights, increase those weights every week, and then eat a lot, you’re going to get big muscles. It’s just going to take like four or five years.
That’s how I felt about my business. I was like, look, I’m just going to create good […], which I’m very talented at and I’m skilled at. I’m going to hire good people to do it, and I’m going to do it for five years. It was pretty straightforward on how to do that. I would say that my business was simpler, but SaaS is way more valuable for a reason.
Rob: Right, the exit multiples. You sold to HubSpot, which is really interesting to me when I heard that because I would expect you to sell to a media company being a media brand. You had a tweet about this recently. I was reading a tweet thread. But what was behind that decision to sell to a SaaS company?
Sam: When we launched, I always thought like a Salesforce or at the time, when we all thought WeWork was legit, I thought WeWork should buy us because I’m like, man, look at the math. I knew how much sales we’re driving to some of our advertisers. I’m like, if one of them just bought us, it’s far better to drive 5000 customers over the course of a year to a thing that spends $40,000 a year in subscription revenue than it is to just ad arbitrage this. It’s far better.
The issue was I didn’t think that Salesforce or another company like that would be bold enough to believe that that could be true. HubSpot hollered at us, and I was like, finally, someone is brave enough to do this. When HubSpot bought us, they were worth $16 billion. I looked at their numbers, their quarterly earnings report, and I was like, these […] guys are growing 45% a year or whatever it was, whatever they reported. They only have like 100,000 customers. I’m pretty sure literally every business in America could potentially be a HubSpot customer.
I think this has legs. So I was like, I think this could be a $100 billion company inside five years. This is a no-brainer. We have to do this because it could take off. At its peak so far—a couple of weeks ago before the sell-off—it was like $40 billion. It’s proven to be not all the way true, but close to true.
I look at a lot of the media companies’ stocks and it’s like, […], I don’t want to own BuzzFeed. I don’t want to own Vice. I don’t want that. It’s also a really crappy life. Making money off of ads, it’s kind of addicting and it’s kind of exciting, but for the employees, it’s pretty […]. For someone who wants to be a purist and a writer, it sucks that you have to—sometimes, even if you say you don’t, in the back of your mind, you don’t say certain things because of your advertisers.
I didn’t care because I’m like, I own the company. It’s not like I can get fired. But I was like, this woman, Katie, just sold all these ads. If I act like a douchebag, this advertiser is going to get canceled and she’s going to lose money. In the back of my mind, I was like, I don’t want to hurt her, therefore, I’m going to tone it down. I think that sucks. I don’t like that.
Rob: Is your model still the same or is it funded by HubSpot now and there are no ads anymore?
Sam: The way it works, we went into the year with a bunch of ads booked. This year we probably would have crushed on ads because of what’s happening. We gave it all back. We canceled all of our contracts. HubSpot’s the only advertiser.
We make money through trends. Trends is a good business, and that potentially could pay for a lot of the HubSpot media budget. The math is simple. It says, let’s just say that they have 100,000 customers, they have X amount of leads that they’re getting per year, and Y percent of those leads become customers. Their line of thinking is if we acquire The Hustle, that just gives us more leads and more customers, and they can track all of that.
Rob: Absolutely. It’s top of the funnel for them. With MicroConf or TinySeed, would I acquire an email newsletter that was aimed at SaaS people? Absolutely because I know the numbers. It doesn’t make sense, and for HubSpot at that scale, to me, when it was announced, at first I was like, wow, that’s a really interesting acquisition. Then I dug into it and I was like, oh, this is a seven-figure email list, which like I said, is an anomaly.
HubSpot knows their numbers. They’re really smart marketers. They know their funnel. I know Dharmesh. I’ve known him for years. I know how that culture must be. It makes a ton of sense why they would do it.
Sam: Also, just a few other things. For example, a lot of people in the SaaS industry are really good at just content marketing. Content marketing, if you’re a journalist—which I’m not but I hired a lot of those folks—that word content marketing is like the worst word on earth. Because they say, no, I’m not a marketer. I’m out looking for the truth, and I’m creating cool […] that people love, but I’m not marketing.
Anyway, HubSpot, I imagine they were like, we already reached this amount of people based on search, but how many people share HubSpot content just because it’s badass? Maybe they’re like, not as much as we hope. With The Hustle, we didn’t know anything about SEO. We only wrote stuff that we thought was cool and we grew entirely from people sharing. They’re like, man, if we bought this, maybe we can get some of this DNA in our company. I imagine that’s how they felt.
Rob: Yeah. When I talked to SaaS founders about B2B marketing approaches, I mentioned content and SEO separately. They’re related, but they can be done separately. You can do content marketing that is truly driven just on the virality and the pop of getting on high on Reddit, high on The Hacker News, and all these things that have no SEO value; or you can create stuff that doesn’t do any of that and is solely focused on SEO or you can create content that does both. I’ve seen all three succeed. It sounds like The Hustle originally was just the content side, and now HubSpot’s bringing that SEO expertise.
Sam: Yeah. To me, when people say content, they’re like, how do I do good content? I’m like, I don’t know, man. That’s like asking me, how do you do good art? Are we talking painting? Are we talking to make you rich? Are we talking about how to make you happy? Are we talking about music? There are a thousand different things here so we got to be more specific.
Do you just want to rank on search? Okay, let’s talk about that. Do you want to go viral through sharing through just emotions? That’s another thing. I think you can do both, but they serve different purposes and they are both important.
Rob: Right. Lars Lofgren who ran SEO for KISSmetrics, then I Will Teach You To Be Rich, and now he’s on doing his own thing focuses on—it’s all about SEO, but he needs the viral pop in the early days or wants some type of pop in the early days to build the links to then get the long tail SEO. For him, he’s like, all my content, if I’m not getting organic traffic, 6, 12, 18 months down the line, I have failed. His focus is to get that recurring flywheel going.
Sam: Yeah, and that’s really hard. It’s kind of hard, but it’s not that hard. You start seeing patterns. With content, I can tell you which type of emotion will get shared more often. I can read a headline and be like, oh, that’s going to take off. You’re not right 100% of the time at all, but it’s like a batting average. I could be right like 30% of the time and that’s really good.
Rob: Right, and you get better. It’s a skill. It’s a learned skill. So you work at HubSpot now.
Sam: Yeah, kind of. Right before we sold the company, I had recruited a guy who ran—I think I could actually say this now—Motley Fool. He was an executive there who was the head of growth. His name is Jordan, and I wanted him to be CEO of The Hustle.
We got this deal worked out and everything. Then HubSpot hollered at me and said, we want to buy you. I said, this is a good deal, I’ll take this. So I had to go to Jordan, man, I’m sorry, I have to do this. I told HubSpot, look, I had a CEO lined up because this company’s gotten too big for me. I can’t be a CEO of it. They go, all right, fine. We’ll replace you and you only do the podcasts. I go, great. Deal and they hired Jordan.
Jordan is now the boss. Jordan previously was an executive at Motley Fool. He is now the boss and my only focus is on our podcast. It’s working pretty well. I think in December we’ll hit 1.5 million downloads.
Rob: Wow, good for you guys. The podcast My First Million?
Sam: My First Million, yeah.
Rob: Which is a trip because My First Million was on my radar. I had heard about it, but I thought it was different than it is. When I listened to it I was like, oh, this is really good. But I thought it was kind of a start your business type thing, and it’s like, I’m not there anymore. I used to listen to those. But then Courtland Allen, you guys did an episode swap, I believe. Courtland and I are good friends. We go back years. I was like, all right, I’m going to listen to his episode. I was like, I really liked the show. Your format is so dynamic. Do you have a fixed format, even? I probably listened to 10 episodes and I feel like it’s just whatever you guys want to talk about?
Sam: It is. The name is really bad. Of course, my first company was called The Hustle., so clearly, I’m not good at naming things. It was called My first million because—so the hustle owned the podcast the whole time, and Sean was one of my closest buddies. He goes, I want to launch a podcast where I’m talking about people getting the first million users, the first million revenue, or whatever. That’s what he did.
For years leading up to that, every week, me and Shawn and a couple of their buddies would meet and just brainstorm. For some reason, we started doing this. Someone didn’t show up for his interview. and he goes, hey, I booked the studio but no one showed up. You guys want to come riff and just do our thing what we do? I go, yeah, all right, whatever. I showed up, we did it, and then it hit. Then it was like, all right, well, let’s just brainstorm.
We started brainstorming, and that took off. But then we’re like, let’s just talk about whatever we want to talk about and maybe people will find it interesting. That’s what we do now. When we log in, basically, we log in at 1:00 PM, we both pop up on our screen just like you and I just did before this, but we purposely don’t say a word to each other. We won’t talk to one another or if someone says, how was your weekend? We say, shut up, don’t say anything. We hit record then we have the conversation that we want to have so that way it’s far more organic. Then we don’t really edit it and we just put it out there.
This past November, so a month ago, we just started doing some growth stuff. But prior to that, if you asked me how it grew, I would be like, I don’t know, man. It just did. I have no idea. It still shocks me that people listen to it.
Rob: I guess on growth, it’s like no one I know has been able to growth hack podcasts, so I do want to ask you about that one.
Sam: No one.
Rob: Yeah, it’s always—
Sam: I know one person. Jordan Harbinger.
Rob: Okay. What did he do? What was his approach?
Sam: I’ve talked to him. Jordan has been my homie for a while, and I was like, you know, Jordan has I think 10 or 15—I forget the number, but I believe on the high end it’s like 15 million monthly downloads. I was like, Jordan, are you 15 times better than my podcast? Let’s say we’re at a million. He goes, no, if anything, I could be a little worse or even just slightly better. But I’m probably 15 times better than you at marketing. I go, what are you doing? He goes, all I do is I buy ads on podcasts. That’s all he does. He goes, that’s the only thing I’ve ever found.
So I guest on other podcasts, I buy ads on those podcasts, and that’s all I do.
Rob: You said you were going to start doing some growth stuff for your podcast, is that what you’re going to do?
Sam: Yeah. We bought a bunch in November, December, but they don’t go live until after the new year.
Rob: Wow. I guest on a lot of podcasts, I’ve never bought an ad. It’s something I need to think about. Something that I did for this show last—when was it? It was probably pre-pandemic. So I did some tests because I’m an old school marketer, right? I used to do direct response stuff. I grew HitTail on Facebook ads. I tried Facebook ads, and of course, getting someone to switch mediums doesn’t work. It’s like they’re on Facebook, they don’t want to click over and subscribe to anything. So then I started buying ads inside podcast players.
Sam: That’s what he does as well.
Rob: Yeah, Pocket Casts and there’s Downcast. I mean, there’s more than most people think there are.
Sam: Yeah, there’s Castbox, there’s Stitcher. Maybe there are 30 or 50 that could do it.
Rob: Yup. I tried a bunch of them and I actually had some luck at it, and then they got really expensive when the COVID hit. I mean, that price quintupled, I think, overnight. I don’t remember what the price went to, but it was like $4 per new user. Of a podcast, I don’t know. That’s a pretty long funnel.
Sam: You have to do the math, so it’s the same exact thing. So Jordan’s math, his show is like every day. It’s like, well, if my show is every day and I have three or four ad spots every day, it makes sense.
Rob: He directly monetizes it. This show is not directly monetized, obviously. It’s always just been the podcast of MicroConf really. That’s how MicroConf pays the bills, you know? It’s like, can I even equate a listener of this podcast to tickets sold or whatever? It’d be pretty hand-wavy.
Sam: Also, it depends on how big your target market is. We slowly got into a little bit more pop culture stuff, not entirely, but we’ll kind of go on that. People, shockingly, will say that they listen because they find it to be funny and entertaining. That’s weird to me. I can’t believe people are laughing at those stuff. But anyway, because of that, our total addressable market I think has gotten a lot larger so we can do that. Jordan, his addressable market is just anyone so it’s a little different.
Rob: I’m envious of businesses like that. I think it’s a genius to just have a wider focus. I’ve always been focused on software. First, it was software startups and now it’s SaaS. It’s just a small world. It’s not as big as a lot of people think. You had a luxury with The Hustle and now with My First Million that you have broadened that scope. I think it’s a really smart thing to do.
Sam: Yeah. Do you use TikTok?
Rob: I don’t.
Sam: You should. It’s pretty fascinating. When I was 18 and I was into business, I was considered a freak. Not a freak, but people were like, what the hell? So when I was 21 years old, I got a job offer at Airbnb. They had like 200 employees and my mom was like, what the hell is a startup? That sounds like a Ponzi scheme. This is not real.
Now it’s way more common. There are 18-year-olds on TikTok who have millions of views and all they do is talk about startups. The target market is quite huge. We did something really cool. Last week, we said on our podcast we’re going to get $5000 to maybe two or three people who take our YouTube videos, chop them up into clips, post them on whatever social media channel, and use our hashtag. We’ll give you $5000 based on some combination of do we think it’s cool, creative and does it have a lot of views.
There’s a handful of guys that have channels now on TikTok that have gotten roughly 10 million views in a week. It is crazy. The target market for business content, particularly amongst young people, is significantly larger than I thought.
Rob: All right. Well, I got to turn into TikTok now. I’ve been around long enough that each of these is like, really, another one? But I hear it. You’re not the first person to tell me this, I’ll put it that way.
Sam: I’ll share this with you. Check this out. Can I send a link here?
Rob: Yeah.
Sam: Here it is, chat. So if you click that thing I sent you, and you’ll see that #MFMclip currently has 8.6 million views. These guys are making videos based on our stuff. I don’t think you could see the view count on your computer, but if you look on your phone you’ll be able to see the view count. Some of these videos have over a million views.
Rob: Is it because they have channels?
Sam: No. They just launched these. Their channels are named after us. There are channels like MSMsnips or MFMclips.
Rob: Got it.
Sam: They just made them.
Rob: We’re doing this on YouTube and not seeing anywhere near this reach. It sounds like the blue water is TikTok. That’s what it seems like.
Sam: Yeah, but I didn’t know that. It’s all like these 18-year-olds making these clips, and it boggles my mind how they’re able to do this. It’s huge. Collectively, we’ve just reached. We’ve just gotten an additional 8.6 million. This contest, by the way, is seven days old.
Rob: Right, and it’s not costing you that much.
Sam: It’s going to cost us $15,000.
Rob: Yeah, it’s a great hack, man. One thing you guys do on your show is you bring business ideas. You’ll brainstorm business ideas and you’ll also analyze existing businesses. There were some trucking companies and you went down a rabbit hole of like, I saw this name, then I Googled it, and I found out they’re a big conglomerate.
The business idea side is fascinating to me. I think folks listening to this are always trying to come up with bootstrappable ideas that put you on the spot. What have been some recent bootstrappable business ideas that maybe you and your cohosts have discussed, have thought about, or just anything that’s on your radar that’s pretty fascinating? If it’s software, that’s cool, but if it’s not, that’s fine too.
Sam: Is that okay if I change software to internet?
Rob: Yeah.
Sam: The thing about our show is basically I am not an expert in, let’s say, email marketing software. I’ve used a lot, but I wouldn’t say I’m an expert like you. Let’s just say that that industry interested me. I would have to go and work at Drip, ConvertKit or MailChimp in order to kind of master and spot problems. It’s really hard to spot problems to solve.
With our show, what we try to do is make it so you don’t have to go work somewhere. We just show you interesting problems. One of the most fascinating problems that I’m obsessed with at the moment, I’ll tell you a couple. But the first one is the trucking industry. A lot of people say autonomous trucks. You just said I talk about trucks. That’s because I’m a little obsessed with it.
But right now, in America, there’s a huge shortage of truckers. A lot of people who work in the startup Silicon Valley-ish industry like we do, we don’t really give a […] about that because we don’t know many truckers and we don’t really think about it. We just think, oh, it’s this other group of people who just gets it done. Well, I have a legitimate fear that in the next 5 or 10 years, how are we going to be able to get […] to our house? How are we going to buy stuff without trucks?
A lot of people say like, well, driverless trucks are going to be a thing. I’m like, probably not. I don’t think it’s going to be as popular as you think and as soon as you think. A huge thing that interests me at the moment is basically just lead gen for trucking companies. I spun up a website just to see if I could do this, and I made $1000 in two days off of it. I’m very fascinated by it. Lead gen for truckers, I think that a lot of the people in the space—so basically, you get paid $50 to $100 per person who applies for a job with a commercial driver’s license.
Rob: I was thinking it was lead gen of people hiring them to haul stuff, but you’re saying it’s employees. It’s just finding new drivers? Because of the shortage.
Sam: Yeah, there’s a massive shortage and they are really struggling. What I would like to do is start with that business. I think I could scale that to seven figures in revenue and make it relatively profitable, then use that money to actually create a proper company where I could make the environment better for these guys because I think it’s messed up. I’m an investor in this company called CloudTrucks, which is doing the same thing, so I’m very fascinated by that business.
What else am I interested in? Okay, I have an interesting one. Here’s one that we just talked about. It’s so fascinating to me. There’s this company called Storyworth. Have you heard of Storyworth?
Rob: Yeah, and I had in my Trello board forever to send it to my parents. It […] an email once a week.
Sam: Dude, it’s so cool and it’s so simple. I’m a customer of theirs. and the guy who started it, I shared an office with him. It’s called Storyworth, storyworth.com. It’s the simplest […] on earth. It’s one guy running it, and it’s very easy. You spend $25 or $50 a month (I don’t remember) and it automatically sends email prompts to family members and asks them questions about when they grew up. What was your favorite memory about your father? Eventually, they write. Then after 30 weeks or something, you’ve got this practically a book, and then you could upload pictures.
Now you got this book, and you could pay an additional fee in order to get this book. I think it’s amazing, and it’s the simplest business. I think that you could launch this in a weekend. I know it’s working because these guys, Storyworth, I see them buying ads on YouTube, and I think I even saw them buying ads on TV. I’m almost positive that the company only has two or three employees. On LinkedIn, they’ve only got two or three people. I knew the guy who started it, Nick, and it was just him for a long time.
That business is incredibly fascinating. I think there’s actually space in the market for more people, and they could do it slightly differently.
Rob: Right angle it differently. Yeah. I’ve seen them advertising. I’ve seen their ads on Instagram, and I used to hear it on some personal finance podcasts I listen to. That’s super interesting. You have a recent podcast episode that it’s the company you would build if you have the energy and the time, and then starting a company based on who you want to employ. What did you dig into that?
Sam: It was energy, time, and money because that’s an interesting question. One thing that I think is kind of crazy, have you ever studied recycling?
Rob: No.
Sam: Okay. Do you have a blue bin at your house?
Rob: Yeah, two of them.
Sam: That blue bin, that’s […]. That gets thrown away in the trash and burned.
Rob: Really?
Sam: Yes. It’s a complete lie. The energy that it takes to recycle—you live in Minneapolis, right? So they’re pretty green. I bet that they have these areas that have these huge bins where you throw plastic ones, this bin plastic too, and this bin is green glass, blue, or whatever. It doesn’t work in such a way where you can just give a bucket of tons of different plastics to a company, they sort it out, and turn that and reuse it. It’s all dirty and it’s got styrofoam in it. It doesn’t really work that way.
The majority of stuff that we’re throwing away in our blue bin just goes to the trash. We created this system so we feel good about consuming more […]. It’s like, oh, I’m recycling. It’s okay. It’s not a big deal that I just bought 24 cans. It’s no big deal. It kind of is a big deal. I’ve talked to a lot of waste management companies and they’re like, we try, but it’s just impossible.
It costs more money than we make from it. It takes actually more energy than we’re actually saving. What I’m incredibly fascinated about is recycling and how we can solve that problem because I think it’s like a sin—I don’t believe in God—against humanity where I order something from Amazon and they send me all of this packaging. I’m just going to throw it away and it gets burnt. I feel horrible that I just used that much energy to get the stupid book.
I’m incredibly fascinated by what’s going to happen with different recycling businesses. I think there’s a world where you could create a better recycling business. There’s actually been a lot of people. The company Waste Management was started by a guy named Wayne Huizenga. Wayne Huizenga launched Waste Management and he bootstrapped it. I think there’s a world where you can do that. Additionally, Wayne Huizenga started Waste Management. Then from there, he started AutoNation, the world’s largest car dealership. After that, he started Blockbuster
Rob: Wow, unreal.
Sam: And then he bought the Miami Dolphins. I believe he bought the Miami Dolphins and then one more sports team. I could be getting the sports team wrong, but it’s Florida football and maybe a baseball team. This guy is amazing. I read his biography because I’m so interested in waste, and I’m like, how do we solve this problem? Recycling is a huge industry that I think is under-talked about. I think this problem is not discussed enough about the amount of waste that we have. I’m like, what do you do?
How do you rally around this? There are a few interesting things. There’s this company called the Buy Nothing Project. It’s basically started by two friends in Washington. They’re now in 44 different countries. They create a website with local groups, and they form these gift economies. It’s basically a ton of different Facebook groups where people lend stuff for free or they give stuff away for free—just stuff that they don’t want. This company now has 4.2 million participants, 44 countries, 6500 communities, and 13,000 volunteers.
It should just be like, reduce reuse, not reduce, reuse, and recycle. Just say, reduce reuse, and then just cross out that recycle. Anyway, that’s an interesting way of solving this problem. I’m kind of obsessed with that at the moment.
Rob: That’s interesting. It’s fascinating how deep you go on these things. I mean, that’s what makes your podcast, your show so interesting. It’s not surface-level cursory thinking about recycling. It’s like you’ve just told me I knew 5% of what you just […], 20 times more about it. You obviously did a bunch of research. You must have read books on that. I mean, what drives you to do that? Is it just natural curiosity, the desire to learn about these things?
Sam: I’d make a joke, I’m a manifest cowboy. I remember being a little kid and walking around a city and seeing skyscrapers. I’m like, holy […], a guy or a woman just came up with this idea and convinced all these people that we should build buildings that are 50 stories high, and they built it. That’s amazing. I cannot believe that you could do that. But I was like, but I can’t do that. Others could do that and super few heroes can do that, but not me.
Once I got a little success in business and when I had the Hustle Con and I met the founders of WeWork, the founders of Casper, folks like you and your wife, and people who are doing interesting […] I was like, oh, they’re smart. Maybe they’re smarter than me, but they’re not billions of dollars times smarter than I am. We’re in the same ballpark. We can shape the world any way we want. I’ve always been obsessed with the idea that I can bend the world to my reality.
So I loved figuring out how things work. If you read his biography about Wayne Huizenga with Waste Management, I’m like, oh, that was super easy what he did. It took a lot of work, but it was very straightforward. I could totally do that, but that’s how I wanted to spend my time.
Rob: I think that’s such a good lesson or just a way of thinking about things that I think some entrepreneurs have naturally and I think some entrepreneurs learn along the way. I think folks who are listening to this today, that’s something that you should take away from this conversation is the idea that there aren’t many outliers. Like you said, the people who sell a company for a billion dollars are just not that different from us. They’re probably about as smart as most of us. Maybe they had a leg up.
I mean, I always talk about it as hard work, luck, and skill. Maybe they got a little lucky. Maybe they worked a little harder, but we can all work hard. Developing skills is something any of us can do now. It’s not like 50 years ago where there’s no internet and you have to go to university to learn anything and maybe you don’t have the money to do it. I often say, we live in the best time in history to be an entrepreneur because I truly believe that you can build the skill, put in the hard work, and be successful almost on your own merit.
It depends. I know that if you want funding, but bootstrapping especially, I bootstrapped 10 businesses or whatever and no one knew who the hell I was. It was just me working hard and shipping stuff.
Sam: How much in revenue was your biggest company, like your run rate?
Rob: A few million. That was Drip. It’s much more than that now. But, yeah, when we exited.
Sam: I don’t know if you talked about it or not, but I imagine a $3 million SaaS business is definitely eight figures in personal wealth, or at least in that ballpark, I would imagine. I believe in luck, luck’s a thing. I’m not like this guy that says, well, I just worked really hard. Luck is real. You could say it’s just lucky that I was born at this time in America, but then you could also say it’s lucky that I was healthy.
It’s lucky that I came from a family that was emotionally supportive. I came from a family that could put me through a good high school and things like that. Luck is real, but I think that if you give yourself 15 years, you can create eight figures in wealth. Now, I do think that there are some people—like Elon or Bezos—I think that when we talk about people who are or are not better…
Rob: They’re outliers.
Sam: Yeah, they just have more horsepower. Their brains are just better than mine. Would I want to trade spots with Elon Musk? No. I’m super happy and I don’t think he’s happy. But I will acknowledge that I think he’s just smarter than me. It’s amazing that we’re both considered humans. That said, there are a significant amount of people who I’ve met or who I’ve read about that are worth hundreds of millions or billions of dollars and I say, you’re not better than me even at all. Or sometimes I’m better than you, but you stuck with it for 20, 30, 40 years. Bravo to you.
The only thing that you’re better than me is that you did it and didn’t sell.
Rob: Well said, sir. Well, thank you for joining me on the show today. If folks want to keep up with you, you are @theSamParr on Twitter. And of course, My First Million. It’s a good show.
Sam: That’s awesome, man. Thank you. This is cool. I’m happy we got to finally talk. I’ve been listening and reading forever.
Rob: Yeah. It’s great to finally meet you, man. Thanks for coming on. Thanks again to Sam for taking the time to join me on today’s episode. I hope you’re having a great end of your year. We’re almost to 2022. I know I’m excited about what the new year is going to bring and looking forward to what we can accomplish with our next 365 days. With that, I’ll be back in your ears again next Tuesday morning.

Rob: You guessed it, it’s Startups For the Rest of Us episode 582, where I answer listener questions about enterprise sales, crowdfunding, replacing yourself, and things that every B2B SaaS founder should know. Today, Einar Vollset joins me. He’s my co-founder with TinySeed. He joins me because there’s a question specifically about TinySeed and he knows a lot about enterprise sales. I was just a good fit to bring him on the show today.
I hope you’re enjoying yourself on this festive time of year and that you are able to take a little bit of time away from your business, not because we don’t love our businesses and enjoy what we do, but I think this is a good time of year to take a couple days and be with friends and family. Take that little break, that mental break that can help bring you back recharged with renewed energy wanting to invest in your business as we enter the new year. I hope you enjoy today’s episode. Thanks for joining me as always.
Einar Vollset, thanks for joining me back on the show. We got some good questions that I think are right up your alley today.
Einar: Glad to be here.
Rob: Let’s dive into our first question from Stuart at Growth Method.
Stuart: Hey, Rob. Stuart here calling from a wet and windy UK. Hope you’re well. I’ve been a listener for many years. Thanks so much for the podcast. I actually have a question about TinySeed. I recently invested a relatively small amount, $5000 in a couple of startups by Republic for the first time through the Reg CF crowdfunding offering.
I’m not an accredited investor, but obviously can invest under Reg CF. I wondered whether you’d ever considered or would consider enabling people within your community network and Startups For the Rest of Us listeners, the ability to invest in a future TinySeed fund under Reg CF. I thought it’d be a really nice way of bringing together people with very similar attitudes to bootstrapping, self-funded businesses, and sustainable profitable businesses, and enable them to invest $1000, $5000, $10,000 into a TinySeed fund. I’m really interested to get your thoughts. Thanks so much.
Rob: That’s a good question, Stuart. Einar, what are your thoughts?
Einar: Honestly, I’ve been thinking about this for a long time. There were recent regulations and the CF thing that changed. We’re still doing a million max crowdfunding campaigns. You could do $5 million max. This is all good.
As far as I’m concerned, there are some new requirements around the financials you need to release and things prior to doing a crowdfunding round. But we were originally quite excited about it, particularly when we started to see funds starting to raise in this way. The problem is—in the US, at least—you’re not actually allowed to raise crowdfunding for a fund. That’s actually illegal, which most people don’t know.
Rob: Such a bummer.
Einar: It is. It doesn’t make any sense to me, but you can do crowdfunding for an individual business. What some people have done, and I think probably most famously, is like backstage capital. They did a big crowdfunding round. They raised (I want to say) $5 million or something like that.
Rob: I believe it was that, yup.
Einar: Yeah, but that went into the actual partnership itself. They sold a piece of the whatever partnership that’s behind that. Legally, they aren’t allowed to go in and take that $5 million, put it in a fund as investment money, and invest that money. That’s actually not legal. I wish it was, but it isn’t. That’s where we are with that. Unfortunately, we can’t do it.
One of the things we’ve thought about is do we do some sort of a parallel vehicle where we come in and our fund, TinySeed invest in this company, and then alongside that the crowdfunding whatever can come in alongside into that business. Candidly, it became too much of a gray area legally, and honestly the ball ache and the compliance stuff just meant that we wouldn’t do. I think if we were to do a crowdfunding-type play, it would need to be us selling part of TinySeed, the partnership, which we haven’t actually discussed. Maybe we should do that, I don’t know.
Rob: And it’s such a bummer that regulation tends to be a real hampering to fundraising. We’ve talked about the 99 investor rule being a big pain that we’re literally lobbying congress with a bunch of other folks who run funds, and who run into this same problem in the US, and then there’s this one. There’s often tax implications of just trying to set up funds, like we’re setting up our EEMEA fund right now in Europe, Middle East, and Africa. That’s been like a month or two of your time. I forgot how to even set this up and it’s like, if this was all simpler, if this was Stripified or if it was AngelListified, but none of it is, and it’s a lot of money.
Einar: None of it is. There’s so much stuff in compliance and there’s different percentages. The cost and compliance are domicile and say TinySeed, EEMEA in Europe are just out of control compared to the US or even the Caymans. We were like, oh, let’s set up in the Caymans. But then you go to the Caymans, then you talk to European investors, and they’re like, oh, Cayman Islands, I don’t know. So there’s compliance and then this perception of it, too.
Actually, one of the things that I just started paying strong attention to, even beyond the whole investment side of things is this. Have you heard about the Platform Competition and Opportunity Act that’s making its way through?
Rob: No.
Einar: It’s got nothing to do actually what was asked, but it shows and tells you that kind of thing. There’s now a new piece of regulation coming through or going through Congress, where basically they’re trying to almost ban big companies from buying smaller competitors, which could have a pretty devastating effect on entrepreneurship in the US in general.
It showcases like, is it good that you can crowdfund into a fund? I don’t personally think so. Obviously, this is a selfish view, but is it good that apparently we’re going to ban large companies from buying smaller ones? I also don’t think that’s a good idea, so I don’t know.
Rob: It’s tough. Thanks for the question. It’s super interesting. Obviously, it’s something we can’t do.
Einar: I wish we could.
Rob: Yeah, wish we could is the answer. Our next question is from Simon Thompson.
Simon: Hi, Rob. My name is Simon. I’m the founder of podseeker.co. My question is around enterprise plans and pricing. If I have a standard SaaS product that I’m charging a monthly subscription for, approaching small to medium businesses who buy the product in a fairly standard way with a credit card, but now I’d like to offer that same product to enterprise-level companies. What are some of the things that I need to start thinking about in order to approach those companies?
For example, I know that deal breakers sometimes can be things like a single sign-on capability or the ability to buy with a purchase order. I’m wondering if you could expand on what some of those other deal breakers might be and if there’s anything else I just need to be aware of before I start to approach enterprise companies with this product.
The second part of the question is around pricing. How would you price the enterprise product differently to the standard plan, assuming it’s more or less the same product but with some of these potential deal breaker features like single sign-on, for example? Thanks very much.
Rob: Enterprise sales, sir. This is why I have you on this episode. Do you want to roll with this one? And I’ll say what he said when you’re done.
Einar: That actually often comes up in TinySeed companies. Often, people come along and they say, oh, I have this big contract and they’re stoked to have the logo or whatever. But now they’re asking for redlining my terms of service, or they’re asking for custom contracts, or all this stuff. They’re sending me a security questionnaire, what do I do? My standard answer is, you get them on the enterprise plan, you make them pay a ton more.
My rule of thumb is almost like—and it shocks people—if you have a public pricing, you should probably 20X it as your base price for the, we’ll call this enterprise-type plan. My general view also on enterprise planning is like a binary search to try to find the trade-off in terms of pain points and value and it’s probably higher than you think. The kind of things that we often see for enterprise type triggers, where basically what it boils down to is, if you want this, then you need to be on our enterprise plan.
Like I said, any kind of custom contract, if you have $100 a month SaaS business and people start sending you (like) Word docs of your terms of service, redlined by their legal, definitely this is an enterprise plan. You’re not going to want to do that. If your lawyer’s cheap, he’s $300–$400 an hour, you’re going to burn through (like) two years worth of SaaS income just having him review the red lines. So that’s a definite one for me.
Also, there’s some random stuff in there you want to be quite careful. If you don’t want to just say like, okay, fair enough, yeah, sure, redline, done, I want the big contract or in some cases, the medium-sized contract, because you end up in some scenarios where they’re putting in identification clauses, where if they get sued using your software, you’ll cover all expenses. You definitely want to avoid that.
Other things are common like payment methods. A lot of the time, people, big contracts, want to run it through procurement and then once it goes through procurement, it’ll be negotiated again because that’s what procurement does. They get paid, basically, to negotiate contracts. Any kind of like, we need to go through a different kind of payment system or you sign up for this service that we use to handle invoicing, that to me, is an enterprise trigger.
Like I said, very often, you get security questionnaires, and that’s less of a trigger. It suggests that the business is quite large. I guess it could be a trigger. Those kinds of things, I would say, I wouldn’t fill out a 300 security questionnaire if you’re selling something for $29 a month. But I think what you’ll end up with if you’re wanting to do enterprise sales, you need to come up with some sort of a solution for that. We see that over and over again. It just becomes a must-have part of enterprise customers.
You can get away around that or bypass most of the pain that comes from that with something like an SOC 2 certification or there was one in Europe they prefer as an ISO or something, but it’s basically a variation on SOC 2.
Or there are certifications like HIPAA compliance stuff. You might actually be asked to basically become “HIPAA compliant” just by saying, hey, sign this. It’s part of the HIPAA process. You have to have all your providers sign a certain agreement. Often, people won’t even ask like, hey, are you HIPAA compliant? I just say, hey, just sign this agreement. HIPAA is another one that’s common.
Some of the more esoteric stuff that you’ll see, particularly for very large clients and very large things is they want the code in escrow. It’s not unusual. They’re like, you’re a small company, most likely. They’re an enormous company. If they’re going to use you in some kind of mission-critical way, if you go under, they want to be able to get to the software and you do that stuff. The key thing there is to make sure they pay for it. If they want to pay to put your code in escrow with a third-party, then that costs money, so they should pay for it.
Then some of the other stuff that comes in is custom development work, which can be triggers for enterprise, but also can be a good way to subsidize future app development, basically. Just make sure that you get the IP and the right to resell and things that are in the changes. Then there’s some stuff that I would almost never do. In some cases, you get like, yeah, we want to do a big contract, but as part of this contract, we get a right of first refusal if you get acquired so we can buy you.
There are certain things that they might put in enterprise-type contracts, where basically you’re snickering yourself at future acquisitions that you don’t want to do almost no matter what. That’s the high-level view of that.
Rob: I’ll add a few of those. I think you may have mentioned single sign-on custom contracts, for sure. The other one, I remember back in the Drip days, is the moment someone said, all right, we want to use Drip, but we want to integrate it with Salesforce. I was like, ding. If you’re paying for Salesforce or any big expensive piece of software, that’s a trigger. Then an export or an integration with a data lake, I guess that’s just expensive software, but is it Redshift to the Amazon equivalent?
Einar: Redshift, yeah. Segment face is famous for this. Segment, we used to be like, it’s $9 a month, except if you want to hook up your data to Redshift, in which case it’s $150,000.
Rob: Right. That’s the thing. If I were a SaaS app and most of my plans were $100 a month or $200 a month, if one of these triggers happens, one or more of them, you want to learn them early when it comes about, suddenly, the price has to be $20,000, $25,000 a year or it’s not worth doing this. It’s not worth doing the process.
The moment I hear procurement, figure dozens and dozens of your hours to get through it, and a huge hassle in months potentially. We had this expression in electrical contracting when we’d bid on a job. There are no bad jobs, there are just jobs without enough money in them. There’s no procurement process is bad. There’s just procurement process where you didn’t charge enough money to make it worth your while. Or the SSL, or the redline, POS, or whatever. All that back and forth, you just have to.
That’s why enterprise software is so expensive because it’s not the software. The software’s pretty much the same as the one you charge $50 for, but it’s this. So excellent. It’s a good question. I hope that was a helpful answer, Simon.
All right, I had a tweet from Amar Ghose. It’s @itsjustamar on Twitter. He said, “If you had a company making $1–$1.5 million annually and you want to step away for your business,” then he has a few questions, “how would you go about finding a replacement? Where would you search? How would you structure an offer? What questions would you ask?”
I don’t recall specifically if he was saying it was like a SaaS company, but let’s assume it’s a startup. It’s a tech company. This is not a dry cleaner. Maybe he sells info products or maybe it’s SaaS, but I actually chimed in and responded with some tweets about it. I did like 280 characters and this deserves way more than that because it’s a complicated question.
Let’s start with the first one. Where would you look? How would you go about finding someone? I guess how would you structure and how would you evaluate them?
Einar: I’m really about structure more than anything else, like where are you fine, because I’m not a hiring genius exactly, which is effectively what you’re trying to do in many ways, shapes, or forms. The way that I think about it is, there are basically three different variations in this. One of them is just trying to find someone to hire, someone to replace you like a CEO type.
The problem with just saying, I’m going to pay this guy or girl like $150,000–$180,000 a year, is that you might not actually find anyone very good, just for the base salary. You have to figure out some way to incentivize them in some way, shape, or form. I think you could obviously do the whole standard stock options nature. For something like this, you’d probably have to give the person 10% or 15% of the company if they’re going to run it full time and you’re truly going to step back.
I think the very minimum for someone good would be that kind of equity option. Then the problem comes like, okay, what happens if this doesn’t work out, if this person is not very good at what they do? These are clawbacks, like how do you get them off the cap table if that doesn’t make sense.
Actually, one of the things to look at is how they do it with search funds. Do you know the structure that these guys use? Basically, a search fund is like, okay, if someone goes out, they look to acquire a business, they don’t have any money but they have some investors, and then they go out, they acquire the business, the investors bring in the money, and then the operator or whatever goes along. The way that that works is because obviously the operator who’s buying the business doesn’t have any capital most of the time. They can’t technically help buy the business.
The way that works usually is that there’s some sort of a preferred return to the investors, 4% 6%, 10%, whatever. Then after that, when the company sells or some sort of liquidity event, then there’s a profit split between the investors and the founder. The nice thing about that structure is basically what it says is, if you’re a terrible operator, you’re not able to grow the business, you don’t really get anything because you got a salary and that was it, but the investors get most of the return because of the preferred return hurdle.
If you’re amazing at it and you triple this business, then as the operator, you get rewarded quite handsomely because you get a good chunk of the profit at the end. That’s one way to do it. Honestly, it’s hard, particularly in this size, 1–1½ . It’s valuable enough, but is it really a big-enough opportunity for somebody? Someone who can come in and run a $1–$1½ million ARR business can also probably come in and run a $5–$10 million ARR business where the upside is much bigger. It’s a very tricky question.
Honestly, one of the things you should ask yourself if you want to step back is, why not just sell it? You could sell it and roll some equity. That means basically keeping a piece of the equity still, so you get some upside if things go well, but you get some chips off the table. I think it’s very hard, almost impossible to just base just on salary alone, find someone super competent to just take over the reins and run it because the incentives aren’t quite aligned there. I’m a great believer in incentives.
Rob: That’s how I think about it too, is incentives. I think that if someone’s going to run this business, I was thinking along the lines of, if it’s already growing at X dollars per month, then if someone does nothing that will continue—it’ll eventually plateau and go down—if someone doesn’t improve the business, it’ll keep doing that. That was going to be my mental baseline of looking back six months and saying, what’s been the average new MRR added each month? That’s the baseline.
If it does that, there’s no bonus for this person. I think they should still get equity in case of an exit, but there’s no annual or quarterly payout to them. Then I think they should get a salary and then some type of performance bonus based on how much they’re able to grow it.
Einar: I think one of the interesting things, I know that one of the people that do this actually from what I hear, they’re pretty secretive, is Constellation Software. This is a big firm out of Canada that buys a lot of businesses. They have operators in-house, they take it over. The way they do it is, I think, they do something like set very aggressive goals for growth or for top-line revenue. If you get to those top line revenues, you get a hefty chunk of that payout like, I think, 30%–40% of whatever comes in or something like that.
Rob: That makes sense. Then I think about what questions I would ask—back to your point—it’s going to be really hard to find someone to do this because the questions you want to ask are, have you done exactly this before? Almost, no one’s going to say yes because if they have, why are they working for you? It’s like an unusual size.
You’re going to have to have someone who is like, is it software that’s mostly built? Is it a SaaS that’s just one feature and you don’t need a bunch of product management, and it’s really just a growth exercise? Well, then you need to find someone who’s a good strategist and implementer there. Or does it need to be truly like a SaaS CEO? Again, I don’t know if this is a SaaS company. Yeah, so there’s a challenge there. When I heard it, I was like, I don’t know, man, take your millions off the table. I like the idea you had, though, that I wouldn’t have thought of, which is to keep a piece of it. You keep 10%–20% so that you could feasibly have some of the upside.
Awesome. Thanks for the question. Amar just asked it on Twitter, so it wasn’t like he sent it into the show. He did note at the end, he said he was asking for a friend, winky face, so I thought that was kind of fun.
Next question is from Luke Embrey. He’s the founder and CEO of bakup.io. He has a couple questions that I think I’ll just jump to his question about software demos. “What is the best way to give a demo for a SaaS product?” He gives two options, “Present a 10–15 minute PowerPoint, or go straight in with a shared screen demo of the actual product?” What do you think?
Einar: I have an opinion on what you shouldn’t be doing.
Rob: You shouldn’t be showing every feature?
Einar: Yeah. Don’t confuse a sales call or a sales demo with the training session. That’s my number one mistake I see people make. Deep in their software, they know all the stuff. They may have even done research on all the potential things that the buyer could possibly want to do with this based on their particular scenario and things, and that’s great. But if you spend half an hour, 45 minutes, an hour, just training on every possible thing the software could ever possibly do, a lot of the time, what you end up is just overwhelming the buyer who’s going to be like, you know what, I had pain that I thought this software might help me solve. Given how complicated this software is, I think this might be more painful, so maybe I don’t buy at all. That’s probably my main piece of advice there.
Rob: Yeah, and I’ve seen demos done both ways with presentations or with demos of the actual product. I think the way to make a demo, the actual product really well is it should obviously be populated with data, you should be touching on just a couple of pain points, and you should be listening more than you talk. You want to find out what the prospect’s goals are. Especially if you have a software that’s a lot of features, they may only want to use one quarter of it, and then you don’t really need to go through all of it.
You ask them, what’s your use case? What’s your job to be done? What do you need this software to do? Then answer that question throughout the demo and pause to let them ask questions. There’s some really good information on close.com’s blog. Steli Efti, he and his staff have written several ebooks on giving demos to do really well.
Also, frankly, youtube.com/microconf. We have a sales playlist. You can go through there and it is videos of talks, MicroConf talks from Steli and a few other folks who have talked about exactly this. These are literally world experts on this topic of how to do a demo.
Personally, I like to see software demoed because I’m a product person. If you show me PowerPoints, I have the thing of, well, if the product was good, you would probably show me the product, but everyone doesn’t feel that way. Everyone doesn’t feel that way. I don’t want to make my opinion the gold standard of it because I do know folks who run successful sales processes with PowerPoint demos.
All right, for our last question of the day, I actually went to Quora. We still have a couple of questions in the queue, but I don’t feel like we’re going to have a lot of back and forth on it, so I might do it solo at some time in the future. You know what’s super annoying to me, is that I typed in startups in Quora and the first 8 or 10 results are all about, how do I raise funding? What does an angel investor need to know in order to invest in me? Should I raise angel?
Why isn’t anyone talking about building businesses? This is my annoyance with the whole narrative. People want to build a slide deck instead of building a damn business. Seriously, this pisses me off. I invest in startups and this pisses me off.
Einar: And now is a good time to mention the TinySeed syndicate, Rob. New ways for bootstrap founders at a later stage to get funding.
Rob: There it is, tinyseed.com/syndicate if you want to know more. But also, tune into this podcast, and everything around MicroConf and all of our education about how to actually build a real business that sells real products to real customers for real money instead of sitting there flapping your gums all the time like these people do. It’s just like, go build a business, seriously.
Einar: I know for a fact like having a real business launch some things and then going out to raise money sometimes can be hard because then you have actual metrics to show and things.
Rob: That’s only in the Bay Area. That’s in Silicon Valley.
Einar: I think a lot of the time, people are better off just hiding their numbers or certainly don’t do projections. Like, here’s my thing about projections. I don’t know how we ended up in fundraising talk, but if you’re going to have to put a deck together and do fundraising, don’t put future pro forma financials, like future financial projections in there, because the only thing you’re going to do is disappoint your most optimistic investors.
Most people will think you’re full of […] and won’t hit it, and some people—a small number—will think you’re going to be much bigger than this and when you tell them the number, they’re just going to be disappointed on the downside.
Rob: Yeah, I still think outside the Bay Area like revenue. Is revenue traction? Especially in SaaS B2B. Here’s this question. It’s an interesting, philosophical one maybe, but what one or two things should every entrepreneur working on a B2B SaaS startup know? Maybe it’s three, maybe it’s four. Let’s not put a limit on it, but what are some fundamental things that you feel like startup founders should know and some folks who we talked to in MicroConf, TinySeed to this podcast know most of these things and other people I think don’t?
Einar: It depends. What kind of thing or how do you frame it? Like, should know. If I ask them about their business, there are certain things that I think they should know.
Rob: Right, their numbers. Know your numbers, like your MRR, your RFC.
Einar: Their number is the key. That’s what I care about. You should know your revenue churn, you should know your […] churn, you should know your ACV, you should know for different cohorts. You should know that my bigger customers churn at this rate, my smaller customers turn at that rate like that. That thing, I think you just should know that I’m not sure that’s what they meant.
Rob: No, that’s a great answer, though. I think another one for me is that thinking years, not months. Know that this can take a really long time because SaaS takes long. There’s a reason that TinySeed is a year long accelerator and no one else is. Every other accelerator I know of, there’s 90 days. We do that for a reason because SaaS is just this very long ramp in almost all cases, right?
Einar: That’s true. One of the flip sides of that, too, one of the things, I think, particularly B2B SaaS founders should know is that their businesses are sellable and valuable at an earlier stage than most other startups. I feel like sometimes I’m frustrated talking to ex-founders who have sold their business and I’m like, woah, you left 3X on the table by selling to somebody who did not take advantage of you exactly, but you didn’t fully understand the value of what you had. The fact is, you get a B2B SaaS business north of say, a million a year, it’s a super valuable asset that you shouldn’t just flip for seller discretionary earnings, multiples, or anything like that.
Rob: Yeah, that is an interesting point. I think another one is that for most SaaS companies, as you grow, if you’re growing really fast, then money will be a problem. It’s hard. I’ve been in that position where we’re growing fast and the growth didn’t backfill. We needed money, we either needed to raise money, or sell, or I needed to pull more money out of my personal growth cost money. But the second thing is that the other biggest problem for most companies—not all—is going to be finding good people and keeping them around.
I know that for developers, we don’t want to hear that because we want to build SaaS’s software. It should be automated, but building a team is crucial. Having some people you can rely on, even in the lifestyle. I often talk about this lifestyle SaaS or lifestyle startups, where truly, you’re just building an income stream and it’s a $10,000, $20,000, $30,000 a month, 90% net profit.
Then there’s the more ambitious, whatever you want to call it. It’s like the growth bootstrappers that I think about. Either of those paths, you still need a person or 10 to back you up so that you’re not constantly on support and you’re not bringing your laptop with you on vacation in case the servers go down, that you have somebody that can back you up.
Einar: I actually think this relates to what I was talking to before, in the sense that, I think sometimes the mindset needs to change a little bit once you get to a certain size. I think a lot of people think, the more I can do on the fewer people, the more valuable it is. I guess, technically speaking, it leaves you with a higher profit margin or wherever you are.
The fact of the matter is that your business isn’t more valuable if you’re doing the same level of revenue, but there’s just you and you do everything. Versus you have a team of two or three, or maybe four people in place. You’re just a lot more valuable business to most people than if you’re the key person who feels like you need to do everything and keep it on a super low budget, that sort of thing. That’s the flip side to the cash side.
Rob: Yeah, that’s a good point.
Einar: Yeah, like having a team, having someone other than just you or maybe just you and your co-founder isn’t a bad thing. It’s inevitable at a certain point. I do see some particularly bootstrap founders fall into the trap of waiting too long to start that process of trying to build out a team.
Rob: You bring up a really good point. I had this epiphany, not an epiphany. I knew it in the past, but it just hit me like, I should say this out loud at some point and it was exactly that. If you have a $2 million ARR SaaS company and it’s just you, I would pause it. It is actually harder to sell than if you had a team of 5 or 10, but made a lot less profit. Because it’s not sold on the profit, it’s that the team goes with it. That’s, I think, counterintuitive.
Einar: Yeah, and it’s a much more scalable business, some bigger business, more potential, not so dependent upon you and whatever’s in your head. It’s just an easier business to acquire. It’s an easier business to imagine how you’re going to scale further.
I actually don’t know where the cutoff is. But certainly, once you’re getting within striking distance of a million or maybe even at $500,000, I’d be like, okay, if it’s just you at that point, I’d be like, why, what’s wrong? What is wrong with your business or you? That means you can’t keep people around.
Rob: Yeah, I would be thinking about, at a minimum, hiring. The early hires are usually someone in support because just tier one support can grind a developer. Because usually, if it’s just you, then you’re the developer. So you have a backup, and can go on vacation, and they can whatever. They can do all the stuff so you’re not grinding it out.
Then of course, if you’re doing all the sales, it depends on the type of business. Some SaaS leads heavy sales and others don’t. Certainly, as a founder personally, I did some sales until the moment I could hire someone to do it because I didn’t like it. If that’s not your gifting or whatever, these are all things you could hire out.
Einar: You definitely should. By the time you go to a million, there are very few or few 2 million era businesses that sanely can be run by a single person.
Rob: I’m sure there’s one or two out there. I’m sure there’s a listener right now thinking, well, I’m doing that, but most companies are not. They can’t do that.
I think the last one that comes to mind—there’s a bunch obviously; we could throw out 10–100 different things—I feel like finding predictable repeatable growth channel requires a lot of effort, and it requires a lot more time than you probably think it will, and you’re going to be wrong a lot of the time, either with the approach itself that it’s not in alignment or that you’re not doing it right.
I think it’s harder than most people think because they see the case studies. You see a SaaS app launch, and then they do the case studies of the five things they did, and three of them caught on. It’s just not like that for most founders.
Even founders who are having success and are growing, they often (a) either don’t know what’s working, or (b) if they know what’s working, it can be a bunch of different things or it can be one. It’s often like, even when it’s working, I remember always thinking, how long is this going to work? It was fleeting to me.
I never felt like I was in the middle of a growth thing and I’m like, this is going to take us to $5 or $10 million, and I’m super confident in that, and it’s going to work the whole time. The whole time, you’re still looking for the next thing to get you to that next level.
Einar: I think it’s true. That is something that I talked to TinySeed portfolio company founders about reasonably often. It’s a mistake a lot of people make, because in some cases, they have sort of half understand where business is coming from, kind of, maybe. Or they have like one channel that works, and then they’re like, yeah, I’m probably going to put $500 on Google ads next month, and then I might go to a conference next year. I’m like, no, you’re not moving anywhere near fast enough to do this.
You should have a very strong preference for action when it comes to just iterating through these growth channels because most of the time, you won’t have a clue about what works, and you’re just going to have to do it, and you’re going to have to spend enough time and money to really explore each one. Then if it doesn’t work, move on.
I see people sticking to their hobby horses. This is obviously true for features and things, too, where founders are like, well, this is what I want to build, and their market is telling them, that’s not what I want, I want this other thing, and you just refuse to build it. It’s like, all right, well, then you’ve left money on the table for sure.
The same thing is also true for channels. People are like, I want it to be self-serve. I want it to be content market–driven. I don’t want it to be cold email, or impressive events, or sponsorships, or Google ads, or integration marketing, whatever it is. It’s hard to know, but once you do find it, it tends to be disproportionate.
It’s not like, oh, one thing is 50% better, 30% better. It’s like, one channel is holy crap, this is 20 times better than anything else. If you don’t move fast enough, you’ll probably die before you figure out which one isn’t so good.
Rob: Very good, sir. If folks want to keep up with you on Twitter, you are @einarvollset. Awesome. Thanks again, sir.
Einar: Thank you.
Rob: Thanks for joining me again today. That was actually a fun and unexpected rant that I had. I was so angry at Quora. I’m just angry at the tech press in the narrative around just funding, funding, funding. It’s like, no, we can actually spend time investing and growing our businesses and not just concentrating on this lottery ticket mentality. With all that said, I enjoyed the episode. I hope you did as well. I will be back in your ears again next Tuesday morning.

Welcome back to Startups For the Rest of Us. I’m Rob Walling. This is a show where we talk about building ambitious startups without sacrificing our freedom, our purpose, or our relationships, and where we realize that being a founder is about making hard decisions with incomplete information. Thanks so much for coming back and joining me again this week.

In just a few hours after this episode goes live, MicroConf Remote 3.0 is starting where we do a focus on No Code for SaaS founders. Whether it’s using no code with marketing, sales, or any other application that a SaaS founder might think of. If you don’t yet have your ticket, you can still register, and anything that you’ve missed we are recording. You can obviously watch those videos. If you’re like me, you’ll watch them back at 1.5 or 2x speed, and then you can catch the live stuff and all the interactions.

We have an amazing hallway track. As always, we have figured out through the magic of producer Xander and tech that became popular during COVID, a way to kind of replicate the hallway track of a real MicroConf. Check it out, microconfremote.com if you haven’t already.

Today, I’m going to be talking about a prescient topic given that the state of the economy and the state of I guess how monetary policy is impacting things, but today is about inflation for founders. I like to kick all of these off by saying, look, this is not personal finance or investment advice. I often share what I am doing and how I’m thinking about it, but no one really knows where things are going.

I believe that inflation is here. It appears that the numbers are showing we have higher inflation than we’ve had in 40 years is the headline. I think that’s a bit dramatic. I do think that inflation is unnaturally high because of all the backups at the ports and a bunch of other factors that are in play.

One of the hard parts about inflation is that the more people think there will be inflation, the more likely it is to happen because then people essentially go out and spend money instead of keeping it because they think it will be worth less in the coming weeks or months. The more people spend, the higher prices go up, the more demand there is for things.

If you can’t get a specific good, for example, I went to order an iPad Mini for one of my kids, and the delay on the Apple site to get an iPad—this was for Christmas—is over a month. It’s almost six, seven weeks, which is highly unusual. I’m ordering a very standard color and a standard storage amount. I wound up getting it on Amazon and the wait is still, I believe, three weeks for that which is again, unusual. I’m just one signal of the supply chain.

I was actually at a TinySeed retreat last week in Arizona and I went to order a medium cup of tea basically, and she said I’m going to have to give you a large because we can’t get medium cups here or straws due to supply chain stuff. It’s kind of crazy. We’ll survive, things will be okay, but we do have to realize that this is having an impact, and it may continue to have an impact moving forward.

This has been building for a little while in terms of inflation creeping up from two to three to four to six. Obviously, inflation can come from a lot of things, monetary policy, but also money creation if the government just prints a lot of money. We’ve seen countries without a strong central bank, print themselves into hyperinflation where they just devalue the currency to the point where it’s not worth anything.

Luckily, the US has never gone down that road, but obviously, there’s been a lot of printing of money during COVID to stimulate the economy. I’m not going to get into the debate of whether it’s right or wrong, or whether who’s making a good choice and who isn’t in terms of our government because this is not about politics. It’s about the realities of if inflation continues at 4% to 6% clip, how should we be thinking about both our personal finances and also a little bit about the business.

We’re in a really unique position with SaaS and our gross margins are so high—85%, 95%. That puts us in a great position to where we’re not squeezed for, let’s say, a 10% margin. I have relatives who work in the construction industry and you go and you bid on this $10 million project to do all the electrical work or all the HVAC work. You might have $1–$1.5 million in essentially net profit built into that job, which sounds like a lot except for a $10 million construction project is really big.

It’s really hard to manage. It requires a lot of office staff, it requires a lot of electricians or HVAC workers, and there’s a huge amount of risk. For that razor-thin margin, there’s a tremendous amount of risk that you’re putting on the table.

Similar if you run a grocery store. A friend of mine’s parents run a grocery store and the margins are paper-thin. In that kind of business, as inflation happens and the cost of your goods goes up, you need to raise prices because, with a 5% or 10% margin, you don’t have room to just absorb that.

In SaaS, we tend to have room to absorb that. If AWS has to raise costs because servers get a little more expensive or power gets a little more expensive and they raise prices on you, the odds of that having a huge impact on your business are pretty small because of this tremendous margin.

The businesses that do well in inflationary times, and I’m not talking about public stock valuations, but just private businesses with a profit and loss statement. The ones that survive and do well are the ones that do have the flexibility to raise prices if needed, or they have massive margins like SaaS to where they can just absorb a 5%, 10% increase.

Imagine, let’s say inflation is 6%, and if you’re a SaaS founder, can you absorb a 6% increase in your costs and still make a complete boatload of money? You can because your net margins, your gross margins, or whatever are 90% and your net margins are 50% to 70%, depending on your scale and all that. The 6% hit just doesn’t make that much of a difference. Again, back to the example of a grocery store, if you had a 5% net margin or a 7% net margin and costs are going up by 6%, that’s a real hit for you.

In terms of being a founder, there are worse things to be running than SaaS companies, but I’d also say that if for some reason you do find that your costs are going up tremendously. Most SaaS audiences, at least the B2B SaaS that we talked about on this show, have some pricing flexibility even if you have other competitors in the space.

Some spaces like you start an email service provider and there are 300, 400, 500 competitors, you have less pricing flexibility. Although, of course, if you niche down, you can get that premium to be able to charge more. In most spaces, you need to raise your rates by 5%, 10% over the course of the next year, it’s probably going to have almost zero impact.

In fact, most of you probably should be. If you’re listening to this podcast, you probably haven’t raised your prices frequently enough or raised them as high as they should be. Isn’t that the Startups for the Rest of Us and the MicroConf mantra. At almost every MicroConf someone says, raise your prices.

I don’t feel, for the most part, SaaS is going to be hugely impacted. The other thing is this inflation is also potentially caused by lack of goods, so demand is outstripping supply because of all the boats that are backed up at these ports.

My wife went to Los Angeles a couple of weeks ago and she said the stream of boats that we were outside the ports was just incredible. You can see him lined up along the coast. We have the luxury of not being tied to the supply chain, usually. If your software, you’re reliant on maybe Amazon, SendGrid, Twilio. There are definitely companies we rely on, but we usually aren’t relying on physical goods being delivered somewhere in order for us to have a business.

Unlike our friends in ecommerce, our friends in manufacturing, it would be a nightmare. I have a friend who runs a great business manufacturing games and he said that the cost of a shipping container from China to the US went from X amount to 10x. It literally 10x’d over the course of a month or two while they were doing a Kickstarter and that’s obviously a real problem. It’s a real headache. All that to say, with SaaS, we do have the luxury of being able to roll with this and watch how things unfold.

Now on the personal side, which of course is something I’m interested in. I think if you’ve listened to this podcast for long enough, you know I’m a personal finance and investing nerd. I’ve just always been into it. I think I bought my first stock when I was 14 on my dad’s account. It’s just fascinating to me the way that companies work, the economy, and owning stocks, real estate, bonds, and all that has always kind of made my mind bend. There are some high-level rules of this kind of usuals. What are the usual things, the usual moves that you make as inflation increases?

These are some things that I’ve been thinking about over the past couple of months about making some changes to our portfolio—mine and my wife’s portfolio. As inflation goes up, usually commodities are going to also go up in price because those are part of the inflation index. I guess I should stop here and say, obviously, I’m talking about the US because it’s what I’m familiar with.

I think we realized in 2008, 2009 that our economies are so tied together that when one collapses or when one has inflation, it’s going to ripple throughout. The demand will spread. That’s the effects of globalization, for better or for worse. Even if you’re not in the US, my guess is if we have inflation, you’re going to start to see that trickle out.

Anyway, I was talking about commodities and commodities increasing in price because they’re part of the Consumer Price Index. I don’t own commodities, except for metals, the precious metals—gold, silver, platinum. I’ve never been a big gold bug, they call them, someone who’s really into metals, but I have had a very small single-digit percentage of our net worth in metals because it is a good portfolio diversifier. When there’s inflation, it goes up.

There are ways you can physically own gold. You can buy it from websites and have it shipped to you. You can buy it and have it stored somewhere, or you can buy paper gold. There are ETFs that essentially will track gold, platinum, and other metals and such. That is the only one that I personally own. I’m not really into commodities.

Commodities have these really long bear and bull market cycles where you can go 20 years in a commodity bear market and it’s just awful. It’s not something that I’ve experimented with. There are commodity index funds you can buy, but they use futures. They don’t actually own the commodities, and so there’s this drag on their earnings that makes them not something that I’ve invested in. Again, not financial advice to not do it. Obviously, you can look into it, but personally, we own some precious metals, mostly paper precious metals, and have not gotten into commodities.

A big thing during inflation is to own real property and have less cash. That’s kind of the idea that your cash is being devalued and real property like real estate, whether it’s a home or whether it is commercial real estate, even owning REITs, which are Real Estate Investment Trusts. They’re like index funds in real estate. Art, collectibles, stamps, wine, I know some people who do that, or owning bare land. These are real properties and they tend to go up with inflation.

Now I did hear a podcast. I really liked the podcast Money for the Rest of Us and coincidentally named. It came after Startups for the Rest of Us, but I’ve actually talked to the host of that and he’s a really good dude.

He was saying that he looked back over those several inflationary times and that real estate actually lost value in inflationary times, which was counterintuitive to what I have understood and what I have been told. I’m not sure, to be honest, what to do with that. I think the fact that we own our home, and we own a chunk of REITs in our portfolio.

I’m certainly not going to be pulling back on those, but I’m not going to be also leaning in and increasing exposure to those at this time. My gut says that I think REITs are probably going to do okay, but it’s just it’s hard to know. We have been increasing our exposure to things like physical goods like collectibles.

The other one, which is a new one and 10 years ago wouldn’t even have been a thought, is crypto. There’s no historical data on what crypto is going to do during inflationary times, but I have been a fan for years of having a small single-digit percentage of our portfolio in all these assets so that we don’t have it all based on stocks and bonds. Having these small pockets of independence is, as David Stein from Money For the Rest of Us says, I want these pockets of independence that don’t just rely on public markets.

My gut is that crypto, if inflation happens, people are going to be putting money into that. I think we’re already seeing that. There’s been quite a boom recently in crypto. I can imagine if you’re listening to this in six months, it’ll be busting again, but that’s another place that I think is feasibly a decent hedge against inflation.

Here’s another interesting thing to think about. When we bought this home. We didn’t have jobs. It was after I left Drip and we couldn’t get a home loan, so we paid cash for the house and we didn’t have a mortgage. Rates got super, super low to the point where I don’t like having cash tied up in real estate, and I never really wanted to own real estate again, but there was a whole conversation Matt Wensing and I had on Twitter Spaces the other day about owning versus renting and how I actually believe that renting is a better thing for entrepreneurs.

I think that we don’t factor in the costs of owning a home and all of the extraneous stuff. In fact, I think we’d be better off keeping that money liquid investing in ourselves, our businesses, and other things than owning a home. Yet two years after selling our home in Fresno, we bought a home in Minneapolis. Why did we do that? Well, I don’t believe it’s the best financial decision, but we were having trouble finding really nice homes to rent. We’re having trouble finding homes that fit our family, then we could remodel or we could work on, and make our own, and that was the trade-off for us.

While I am not a gung ho proponent of owning homes from a pure financial position, I definitely have seen firsthand that it can be hard to meet your own personal life goals if you don’t own your home. If you want that feeling of not being able to be kicked out with 30 days notice, being able to paint, remodel, own it, and being able to pick whatever house you want, in essence, that you can afford rather than having to stick to certain areas, certain neighborhoods, or even just certain homes that happen to be for rent at that time.

For me, it’s kind of the personal side, personal desires, and happiness to the family versus purely a financial decision. All that said, we didn’t have a mortgage on the house and we took one out. We borrowed money against a home that we owned fully. One, to get liquidity because I hated having that money tied up that I could be investing in anything else. All the stuff I have going on and I have it sitting in residential real estate is not exciting to me.

The other reason is because during inflationary times, if you take out a loan that you’re going to pay back over 20, 30 years, you’re paying that back in the future with inflated currency. If your money’s worth X% less each year and your house payment stay the same, you’re actually paying less and less and less over time for that.

It’s kind of an interesting hack that if you haven’t thought about, it is really a benefit, I’ll say of inflation. There are a lot of drawbacks to inflation, but one of the benefits is if you take out a loan and the loan payment is fixed that you’re actually taking advantage of the other side of it.

A couple of final things, obviously, I believe in having an emergency fund of cash that you can access quickly. In inflationary times, it’s not ideal to have a big bucket of cash sitting around because that’s going deflate, but I keep it within reason. It’s not like I’m going to go down to zero cash or something like that because that’s just not a prudent financial decision.

Certainly, we’ve decided to have less cash sitting around than maybe would have six months or a year ago. I’ve often believed in having dry powder, having cash in an account to take advantage of opportunities that come along, whether it’s oh, this business is for sale, this amazing piece of art, or this silver age, golden age comic book has come up. It only comes up once every few years. It’s expensive and cash is king and queen, basically.

Cash allows people to move quickly and get things done. We tend to keep more cash than I think just an emergency fund would dictate so that we can take advantage of financial opportunities that come along. There’s a big dip in crypto, there’s a big dip in something else and we can kind of swoop in and buy the dip, so to speak. If you don’t have any cash, you can’t do that, but in these times, we definitely are keeping it a little less.

Then there are bonds. There are bonds and stocks, which I think I’m going to round us out with. Bonds are tough because bonds don’t do well and inflationary times. We do own some bonds, I have a lot less bonds than I think some advisors would have you do an 80–20 split. For me, given us as young as we are in our investment timeline is so far out, I cannot imagine having 20% of our net worth tied up in bonds. All that said, I am nearing the trigger to basically sell most of our bonds. I haven’t made up my mind on it yet and I do need to look at it.

It’s December right now and I need to look at if we sell, do we have capital gains? Can we offset it with other losses, or should we just wait another basically three weeks to get us to January one meaning that we won’t have that gain until the following April? It buys us 16 months before we have to pay any tax on that. I’m noodling on it.

I know there are some folks who I’ve talked to and I’ve written in saying absolutely basically liquidating all my bonds because I believe inflation is going to do this and get worse. I’ve honestly talked to a few friends who I think are pretty smart, who have said no, I’m not selling my bonds, and here’s why. I’m on the fence on it still, but definitely thinking about it. That’s something that you may want to research yourself.

Lastly, on the stock front, certainly, dividend stocks and stocks that can raise prices that do have pricing power, those companies tend to do well during inflationary times. What’s a trip is that growth stocks do not. Growth stocks are tech stocks where they’re probably not generating as much cash or net profit today as they are betting on. They’re priced for future earnings. They’re priced at 50x or 100x earnings when realistically, maybe the stock market is priced on average at what 5, 10 times earnings and it depends on the type of stock and all that.

If something is priced at 50x or 100x earnings, people are saying, oh, in the future, this company is going to get really big. When Facebook first went public, its valuation was astronomical and people were betting that Facebook would grow into that valuation. Well, that’s not great when inflation is happening because those companies are betting on future profits, future revenue, future profits, and so growth stocks tend to get hit because of the sell-off as people move to stocks that are paying dividends or stocks that have large profit pools today because today’s money is worth more than tomorrow’s or next year’s money.

For me, our portfolio is not the majority in public stocks, and we don’t own individual stocks. We own a lot of index funds and we are balanced pretty far across all the metrics that you could imagine in terms of the US markets and non-US markets, emerging markets, and established ones.

There’s growth and there’s value, and we have a slight bent towards value. Realistically, I am not personally going to be messing with our stock allocations because we don’t have a bunch of fiddly bits in our stock portfolio. If you do and you have growth stocks individually, you have some dividend, and just revenue-generating stocks, it’s probably time to at least think about maybe making an adjustment.

Now here’s the thing, this is not timing the market, and I don’t believe that we can time the market. I don’t believe I’m smart enough to time the market because you have to be right twice. You have to be right when you sell and you have to be right when you buy, otherwise, you miss it. Often the market is so unpredictable that trying to time it, to me, is a fool’s errand and I wouldn’t do it.

I’m talking about any of these changes that we are making in our portfolios, I’m doing them very gently. It’s moving assets from here to there. Maybe it’s moving a chunk of them, maybe if I want to move 10% from one thing to the other, I do it 2% at a time over a few weeks. It’s like dollar-cost averaging across. Sometimes I do rip the band-aid off, I’m going to be honest, but I like to kind of lean into it, get a feel for it, and not make quick decisions that feel like I’m trying to time some big thing. Stocks are overvalued, I’m going to sell all my stocks. I’ve never done that and I don’t think we ever will.

Even in 2008, 2009, we sold some because it got a little scary, which was a mistake because we should have rode it down and rode it back up, but I think a lot of people did the same thing. I don’t believe in market timing, and I don’t believe in selling all your stocks and buying all commodities, gold, real estate, and crypto. That to me is you’ve under diversified yourself for the case where the stock market, especially in the US, but everywhere has just continued to increase in value for years and years and years.

I know a person who said the market’s way overvalued—this is like five years ago—sold all their stock and were waiting for the downturn. Well, they’ve missed out on tremendous amounts of money, tremendous amounts of portfolio growth. Anyway, that’s my take on it. I believe that, as James Altucher says, there are three skills in terms of money. There’s making money, keeping money, and growing money.

Making money is you’re working your salary job or you have companies/businesses that are generating money or you sell them and you make big buckets of money. Keeping money is then not pissing that money away, not making stupid decisions, buying penny stocks, betting it all on something that goes to zero, or just wasting it on Lamborghinis and expensive bottles of champagne.

Then growing money is how to guard that asset that you’ve created. You sell your company for millions of dollars, you don’t put it in cash, you don’t put it under a mattress because inflation will kill that fortune that you’ve created. How do you grow money sensibly while protecting the principal? That’s really what I’m talking about here is not making these big bets. I’m talking about inflation for founders and obviously a little bit of personal finance and investing stuff.

What I’m not talking about is speculation. I can talk about speculation all day. If you want to talk to me about betting on crypto, betting on collectibles, and betting on high risk things, I’m into that and I actually really enjoy it, but that’s not what I’m talking about here today.

I’m talking about being sensible and making sensible adjustments as inflation and other economic changes occur. I hope my discussion of it today maybe have given you some thoughts or ideas, whether you want to stay the course or whether you want to make some small adjustments as things move forward.

I got good feedback on the investing for founders episode I did a couple of months ago, and given the fact that I just got back from a TinySeed retreat and it’s basically three days before the episode goes live. I knew I was doing a solo episode because I couldn’t get someone to record with me over a weekend. This idea of inflation and just given how much I’m hearing about it, both in the news and in the podcast I listened to, I felt like I wanted to lay down some thoughts.

Thank you so much again for joining me this week. I really appreciate you coming back every week. If you’re not subscribed, obviously, hit that subscribe button. As a reminder, MicroConf Remote 3.0 started this morning, but if you head to microconfremote.com, you can still get tickets and we’ll have the videos recorded that you can listen to and then you can do the live attendance and be part of the hallway track.

Thanks again for joining me this week and I’ll be back in your ears again next Tuesday morning.

Rob: It’s Startups For the Rest of Us. I’m Rob Walling. So good to have you back. This week, we do almost a throwback education episode where I have Ross Hudgens, who’s an SEO expert and been doing it for a very long time, and runs an SEO and content agency with 110 employees.

He comes on and we talk through, essentially, seven of the most common do’s and don’ts, common mistakes, common things you should be doing as a SaaS founder. It’s not a 101 look at setting your H1, then build links, and blah blah blah. But it’s things that he sees people messing up or doing really well with, and we run through him.

Before we dive into that, I want to remind you that if you haven’t subscribed to receive the two exclusive hidden episodes, you should head to startupsfortherestofus.com. I have two never publicly released podcast episodes and accompanying PDF guides. First one is called 8 Things You Must Know When Launching Your SaaS. It’s pretty prescriptive.

The second one is 10 Things You Should Know As You Scale Your SaaS. Less prescriptive, of course, because as you get further in, maybe there are different paths. So enter your name and email, and you’ll get both those delivered to your inbox. We don’t send a ton of email to the Startups For the Rest of Us list, but we actually do send a really good email that our assistant producer Aaron puts together, which is show notes. It’s some additional information about each episode every week, and just a deeper dive into these episodes.

If you haven’t checked that out, if you’re not on the mailing list—honestly, there’s some mailing list you sign up to and you’re like, I need to get off this thing. Of course, if you decide that that’s us, it’s an easy one-click unsubscribe. But what I find is that our retention rate is very high once people do start getting the emails. I get them myself, I look through them, and I enjoy the walk-through of these episodes. With that, let’s dig into seven SEO tips every SaaS can use with Ross Hudgens.

Ross Hudgens, thanks so much for joining me on the show.

Ross: Thanks for having me, Rob. Glad to be here.

Rob: For folks who don’t know you, you’re the founder and CEO of Siege Media, a 110-person SEO-focused content marketing agency. You have clients like Asana, QuickBooks, and Norton. I chuckled when I said 110 people because that’s a big ass agency, man. Congratulations.

Ross: Yeah, thanks. Thankfully, we’ve done it slowly over nine years so you don’t feel the anxiety, but randomly, I’m on a walk and I’m like, wow, there’s 110 people in this company. It gives you a little nervous breakdown on occasion.

Rob: Yeah, because I know a bunch of agency owners wherever because of MicroConf, the podcasts, or whatever. I feel like a lot of agencies are in that 10- to 25-person range, but it’s pretty rare I meet someone in triple-digit employees. I will say, in my experience, there are a lot more SaaS companies that make it there sometimes just because they’re funded and they hire like crazy, but also because the recurring revenue allows them to last that long. Whereas agencies can be more spiky, right?

Ross: Yeah, we’re lucky. We’re in a space where our space makes sense for predictability like reoccurring content marketing, search, this is something you don’t really stop. I think that has helped with retention and predictability. We have one service line, effectively. That helps scalability a little bit better.

Rob: I also imagine results have something to do with it. You don’t make 110-person by delivering a crappy quality.

Ross: You’d be surprised, but most of the time, yeah.

Rob: Fair enough. Awesome, man. Thanks for coming on the show. You and I have known each other for a couple of years now, I believe, since TinySeed kicked off. You’ve been one of the most helpful mentors in terms of just practical, tactical tips and advice directly to founders.

There’s a handful of mentors who just provide an outsized amount of give back or value, I would say. You and I started talking about you coming to the show and what to cover. Do we cover your startup story? There are all these different options we could do. But really, seven SEO tips for every SaaS company, I think, is a pretty cool way to kick it off.

This goes back to more of the old-school Startups For the Rest of Us. We used to do more tactical teaching stuff, we haven’t in a long time. Whether you’re thinking about SEO or not, most of your tips are not very time-consuming. I get the feeling that you pulled some of these from—it could almost be renamed like seven SEO Mistakes most SaaS companies make if they don’t know what they’re doing.

Ross: That’s a good point.

Rob: That’s how I think about it. It’s almost like, if you’re going to go on a big SEO campaign, these are absolutely critical. If you’re not, these are still good things to look at and be like, oh, if I move that from a subdomain to a subfolder, I can get a bunch of benefits. Let’s dive in. That actually kicks us off. The first SEO tip you have is to put your blog in a subfolder, not a subdomain.

Ross: Yeah. That’s one of the ones, to your point, I see most commonly as a mistake. People will put their site or blog on a subdomain, most often for security issues or maybe just convenience. You’re more technical than I am. You probably know that answer better than I do, but you see that a lot.

Unfortunately, Google is not so great at breaking out that that’s the same website. The mistake is that they differentiate it. So you have all these links and authority that go to your main site, and all the content that’s hosted on those subdomains effectively doesn’t get valued the same.

In our results and what we’ve seen, you can see up to 20–30% lift simply by moving a subdomain to a subfolder. Ideally, it would be website.com/blog/learn, as compared to blog.website.com. That’s mainly so Google can see that these are the same thing very clearly. Because it goes back to the days of Blogspot and things like that where you would have your own subdomain. I think that’s one reason Google did it that way.

We’ve seen that. I would also suggest looking on Twitter. Ran has a great thread, which maybe we can put in the show notes, of just tons of different case studies. If you search subfolder versus subdomain, all the math is just very clearly subfolder.

Rob: This one was surprising to me because I know that this used to be the case. If I went back 10 years, 2011, I knew for sure that subdomain was not good. I thought that around five or six-ish years ago, people were saying that Google was smarter than that now and that they could figure it out. It sounds like Google’s not quite as smart as we thought they were.

Ross: Yeah, effectively. It’s been as recent as a year or two. Consistently, I have never really seen anything saying the opposite. I think you can be okay on a subdomain. It’s not a critical error, but if it’s somehow feasible for you and it’s not a major, major headache, it’s worth doing.

HubSpot is the cautionary tale where you look at their site and they’re so prominent. They’re on blog.hubspot.com. They do quite fine, but that might be the exception rather than the rule. You can still be successful, but everything we see seems to point to subfolders doing better.

Rob: Got it, and that is the reverse proxy maneuver we used to do because certainly, a lot of blogs are going to be on WordPress, not all. But if you put it on WordPress, you don’t want to go on your production rails server or whatever. So you have to then do a reverse proxy and loop it through. Google that, folks, if you haven’t seen it.

Second SEO tip is when creating keyword-focused content, make the URL exactly the main keyword. You want to talk us through that?

Ross: Yeah. Just to give Google confidence that the article is about something, the more you focus on that thing in the URL structure, the more optimized and clear it’ll be to Google. An example of how someone could go a different direction is, say, you’re trying to rank for podcasting tips. You would want to make that exactly the URL with a hyphen in between those two words.

What people commonly would do is say, podcasting-tips-for-SaaS-companies or something like that. Every single thing you add after the keyword could potentially dilute the meaning to Google. It focuses on the topic. So by really making exactly that main keyword, you uber focus it. From our experience, I’ve just seen better results doing that on a consistent basis.

Rob: Got it. If I was trying to rank for podcasting tips but my article title was a lot longer than that, you’re saying make the slug, that’s a URL slug, make that the keyword.

Ross: Exactly. The title itself can be a little more fluffy, definitely add, click-through rate elements and brand voice. You can even put something in front of the keyword. I generally would suggest putting the keyword as close to the front as possible, which is a more obvious tip. The URL just doesn’t need that in the same way. So that’s a place where you can just get exact, and then do the brand voice and click-through rate type stuff in the title itself.

Rob: It’s funny you say putting it towards the front of the title. A little-known fact. You may have heard this on this podcast or may not have, but when Mike and I originally started this podcast, we were wondering, what do we name this thing? Because we’re not going to talk about venture capital.

SaaS wasn’t as prominent as it was today. It really wasn’t a big thing, and so we weren’t going to call it the SaaS podcast or anything. What we’re saying is we want people to find it in search, in iTunes search, what’s now Apple Podcasts. The search algorithm is not very sophisticated. It wasn’t sophisticated then and it’s probably not much more today.

So we wanted startups in the title and we realized, I think we want startups right at the start. We were racking our brains for what do we call it. Startups what? Startups today? Startups this week? Normally, if you have startups, a lot of the startup podcasts have startup later in the title, but we wanted it earlier on.

It turns out, Mike owned this domain already. It was in his GoDaddy account, Startups For the Rest of Us. He registered it. It just stumbled in. I don’t know. I don’t have much evidence on whether that helped us in search or not because there’s no analytics. But I do know if you type in startups, we used to rank at the top three for years in iTunes. I don’t know if that was from reviews or from the title.

Ross: Probably a combination.

Rob: A little of both? It always is, the on-page and the off-page. Tip number three is that almost every feature page that you have on your SaaS marketing site should aim to target keyword software, even if it has certainly low search volume. Talk us through this and maybe give some examples so people will understand what you’re saying.

Ross: Something I’ve seen in some SaaS companies, especially just starting out, is a common architecture. You have your homepage as the generalized view of what your software does, and then you have the sub-feature pages. I don’t always see the sub-feature pages targeting keywords, but there’s an opportunity there even if the search volume is relatively low to do that. Also, it speaks to should that even be a feature page because someone has enough want to demand for this that they’ve done a search for it.

An example of that might be podcasting software. It might be the homepage, and then you’d have a sub-feature page on podcast analytics. That could hypothetically be podcast analytics software. Some mistakes I see is someone might just say, podcast analytics when a lot of time, people do add software as a refining term.

So by having that maybe in your main H1 and also your title tag closer to the front, as we talked about, and always searching that for each feature page, you should be able to at least optimize for potentially some long-tail search volume. If you’re going upmarket and enterprise, that could be a very valuable longtail search that gets you a qualified audience.

Rob: I’m going to be honest, this might be my favorite tip of the seven. That if I were a SaaS founder today and didn’t have this, this would add a minimum go on my to-research and think about more to figure out what level of effort this would require to do. Because I am super intrigued by this idea of just having a few more elements of content. What you’re saying is even if the keyword volume is crazy low, you just have this really high likelihood of ranking very high for them, is that right?

Ross: Correct. There’s product research in there too. If you’re doing long tail on podcast analytics, they might add refining terms that should give you some hints about maybe what your product should have or hypothetically, at least they want, that could be elements you include on the landing page that drive conversion, all good things that can help you rank. The lower competition they are, often, the easier you’ll rank for it.

Rob: Yeah, and I’ve seen some sites do this. I believe veed.io. One of the co-founders spoke at MicroConf Europe a few weeks ago. I had gone to their site just to check it out as I do because I wasn’t familiar with the tool. They have a bunch in their top nav. They have basically what you’re saying, or at least similar. They have a lot of actions like add image to video, add music to video.

I guess they don’t have the software element of it, but, yeah—screen recorder, software, webcam recorder, right.  Okay. They have it in there pretty well. Do you think veed.io is doing what you’re saying? I suppose it is a question for you.

Ross: Yes. That’s a good refinement, probably a qualifier. Maybe the better way to phrase it is that everything should have some search volume thoughtfulness to it. Not everything might actually make sense to include software, but everything should have some kind of significance.

They have transcription services. That might not make sense like convert audio to text just because of what they do. Probably it doesn’t make sense to add software at the end, but a lot of their pages do, to your point. Maybe that’s the clarity on it. Just look up what makes sense for each of those.

Rob: Your fourth tip is it’s really hard to rank for “best X software”. Try to do that indirectly instead of ranking directly. What do you mean by ranking? Let’s say I’m a podcasting software like best podcasting software. If I try to rank number one for that, very difficult. So how do I rank indirectly for that?

Ross: Yeah, the indirect fashion is thinking, not that I’m trying to get my own website to show up for that, but rather, how do I get on all the sites already showing up for that? So open up that query, look at all the sites that are ranking, and reach out to each of them, set up a profile, and then go and get reviews on those sites.

How those best queries operate is users most often want an unbiased third-party to tell them what the best software is. That’s where being a first party actual provider of the software technically invalidates what people are trying to find with that search. It still happens. The very authoritative sites occasionally pull it off where they rank for that.

My general suggestion would be to try to rank for, say, podcasting software without best. They’re not necessarily looking for that third-party validation always with that search. Then, on the best terms, get that review site listing and try to build on the ones that you think will be there for the long-term. Very often, Capterra, Software Advice, those sites stood the test of time and probably are showing up on your results as well.

Rob: Which is interesting. You say they stood the test of time. It’s interesting because usually, I’ve seen Google in its vast knowledge and constant evolution. Every two or three years, it decides to de-emphasize something and re-emphasize something else, and an entire site like Capterra just gets wiped out. I think of Mahalo with Jason Calacanis. What was that one, it was the do it?

Ross: EHow?

Rob: EHow, eHow was one, wikiHow, there were a bunch that used to rank all and they’re just gone from the SERPs. I have to imagine, they lost 80%, 90% of their traffic, but that has not happened to Capterra. Do you know why that is?

Ross: That’s a good point. You made me google this to reconfirm that. I actually think they have lost a decent amount of headway, not a huge amount, but they’re not ranking as dominantly as they had before. To your point, I think it’s all about what value you’re bringing. Like eHow, they’re not truly a credible source for a lot of things like how to plan a wedding. You’d rather go to The Knot, brides.com, or something compared to eHow.

Software Advice was good, but I think there’s also, for sure, it was pay to play there. It still is, I think, on both of those, so that’s probably something Google does not like. That’s effectively an arbitrage sale and maybe trying to find a solve for that.

Rob: Tip number five is use on-page content marketing best practices and you link out to a blog post. You want to talk us through a couple of those? We’ll obviously link this blog post up in the show notes. Let me know what are the four or five sub-points there.

Ross: These are definitely good to visualize, but at a high level, have large fonts. So 16 pixels plus is ideal. I generally recommend 18 pixels plus. That just makes it very readable and easy to track to each line. I see gray on white fonts a lot. You want black on white, most often. It should be easy, again, to read. It shouldn’t be difficult to do that.

Rob: Why does Google care? Why would Google care if it’s gray?

Ross: Because they care what users think. That’s user. This is more user experience that backs into rankings kind of thing. So we’re trying to build pleasurable experiences, and these are just the surface level characteristics of that.

Rob: Got it. Cool. So that was the second one, black on white, not gray and white.

Ross: Or otherwise stated, very easy to read text. Sometimes designers will do gray on white because it maybe looks okay, but then you can’t actually functionally read that very well. Another example is some people will have very wide column widths. So it’s hard to track as a reader to the next line consistently if it’s a wide column width.

If you’re around 50–60 characters per line, if your font size is larger, it makes it easier to do that tracking, maybe even thinking about that with your own column width. But this sometimes happens on feature pages. I’ll see, on these pages, people will put the text completely full width and it’s just not a great reading experience. But even on blogs, it’s hard to do that tracking. It causes people to bounce, lower engagement signals, which costs you rankings.

Other things are just generally low file size on images. Increasingly, Google is getting smarter and trying to surface sites with really fast site speed. So getting all images under 200 kilobytes, I think, makes sense. You can get even lower than that. Whatever the lowest file size is that still retains the image quality, would be a suggestion for your site, and then just make it scannable. So you should have line breaks, don’t have huge paragraphs, make it easy to read, bullet points, call out sections, blockquotes that look nice. All those things should connect to a nice-to-read experience.

Rob: I like what you’re saying about the images being under 200 KB. It reminds me of our site that we host on Squarespace where the page speed is like 18% or 10%. When I go and I look at all the Squarespace sites that we know of, their loading speed is garbage.

I was asking on Twitter, is this a Squarespace thing or is this fixable? Can I hire someone? I’m willing to throw money at this because migrating off of Squarespace, I think we have five sites and they’re all well designed and there’s tons of content. Migrating is literally tens of thousands of dollars and months of work.

In asking around, most of the responses were, yes, come move to my platform or move to this other platform. That’s an answer, but that’s not really an answer. That’s not the question I was asking. This ties into page speed. That’s what you’re saying with the image size.

Ross: Exactly. For content marketing, especially making content visual is another side of product recommendation. By nature, you should have images. One way people mess that up is bigger images and then you have a slow, unwieldy website as you spoke too.

Rob: It’s hard to quantify these things. I realize a big black box with hundreds of signals that Google’s looking at, but do you have an idea of how much page speed matters? Is it a lot or a little?

Ross: It’s in the context of the users you have. If you have an audience who might be in the middle of nowhere with the worst internet speeds, that could be a bigger factor. Also, we were speaking to the wedding market. If you’re in a space that maybe is very highly visual, you might have to, by nature, build a very heavy page to give people inspiration for wedding ideas.

You would probably have a much worse experience if you weren’t thoughtful about that than someone who was. But if you’re just doing a text-based page on podcast listening numbers, maybe it’s not the make or break of a great experience in the same way. I don’t think they necessarily say, this site is fast and this one’s slow, so rank it worse. But that thoughtfulness of what makes sense doesn’t make sense for this topic, and where and who our users are and their internet speeds probably is where it can be bigger or larger depending.

Rob: Your sixth tip is to build passive link assets around keyword sets like “keywords statistics” and “keyword trends”. You want to talk us through that with an example?

Ross: Yeah. Link building is still a very important piece of the SEO equation. I’m guessing it’s hard for people that are listening to this to do that. So some low hanging fruit I’d recommend for most people is to think about these passive link assets. What are the things that people will naturally Google just to link to on their own websites?

This is a very low lift way to generate links to your website, and some common frameworks where people do that are statistics, trends, or pretty much any specific data point that someone would Google to grab and reference in your industry. We’re using podcasting consistently, that could be podcasting statistics, podcasting trends. Also, specific refinements of that are podcast listening numbers.

Those data points are things that bloggers, reporters, will just Google and then go to that top result, grab that, or just link to that page, and that will build authority and rankings for you. Sometimes thousands of links to these pages that can power the rest of your software page rankings and traction without necessarily having to do that manual outreach each time.

Rob: This feels like one of those that’s like reverse engineering, something someone stumbled upon accidentally. Some site somewhere, whether it’s Time Magazine, whether it’s TechCrunch, or whoever had some statistics and some trends. I bet you, as an SEO, have seen enough ahrefs and were like, how did they get this much domain authority? How is there so much page authority on this page? It’s like, wait a minute, these are ranking high. Is that effectively what happens?

Ross: Exactly. It’s just pattern matching that all these look this way and you dig into it. They’re generally low search volume, so that’s the good news. More podcasts and things like this that people talk about is getting more competitive. But if it’s relevant for you, I would suggest that very cautiously.

Make it make sense for you. Don’t do every statistics post under the sun. But if you’re a podcasting software, yeah, you should have these podcasting topics on your site.

Rob: Our seventh and final tip is, to answer keyword questions immediately right after the H1 with things like keyword is or answer in a way that is super visible to readers. You’re definitely going to need an example for this one and then let’s explain why this works.

Ross: Yeah. A kind of thematic thing to think about with search is low time to value. You want to have the lowest time to value possible with your content. Most times when someone is asking a question such as, what is UX research or what is the Amazon affiliate commission rate, they want to get that specific answer immediately.

A mistake people make, they’ll make to post that, and then they’ll decide they need this multi-thousand-word guide when most often, someone just wants that definition. This is one reason why you see now those answer boxes when you Google things, most often definitions, where Google is showing text above the fold. That I think is the hint that they know users want these things.

In a perfect world, you’d love someone to read all 3000 words, but the reality is we just have to deal with what we have and what users want. I think that’s solving the answer immediately. An example here is if your post title was what is UX research, most often, our recommendation would be to answer that immediately.

You would say right after the post title, UX research is blank. That will help Google understand. If you think about how a robot would think about this, that would give them confidence that this is a definition for that term. It’s very visible even better because that’s good for users also.

I’ve seen people do this in subheaders where the post title might be, what is UX research, the complete guide, and then a subheader, they’ll define it, then they’ll go into more depth under that. So make it visible, immediately answer it, structure it in a way that a robot could understand it, and you’ll benefit both in rankings and potentially getting those quick answers as well.

Rob: The quick answers are when they embed the answer at the top of the page, above the first SERP.

Ross: Correct. Us as SEOs and site owners never were huge fans of that, but it’s kind of nature of the beast and got to play to win. So we got to do what they are telling us to do.

Rob: As we wrap up, I’m curious, you’ve obviously been doing SEO for a long time. You see a big swath of companies of all types. SaaS is just one of the many types of companies that are trying to do this. You’ve worked with our first three batches of TinySeed—I’m always trying to do mental math—the 59th company, 40 plus TinySeed companies you’ve, in essence, talk through because you do some mentor calls and then I know you do some one-on-one stuff.

Are there things specific to SaaS that, I guess, they’re different than maybe for doing a D2C or whatever else? I think you’ve called out a couple of those already here for having all the feature pages. That would really only be SaaS, but any other stuff that you see commonly come up for those companies?

Ross: Yeah. Some of these are definitely those things with the software queries trying to rank for the first-party versions. Some things are on the blogs I see consistently. You probably know some of this as well. It might be more of a content marketing, best practice, but say, having a sticky NAV that follows you on the blog with a contrasting button in the top right that’s like sign up or get a demo, et cetera, that is generally conversion rate best practice to have that there.

That’s something we increasingly are recommending to specifically our SaaS clients, although sometimes worse than D2C as well. Versus topics, alternative topics are huge for search and SaaS. Search volume will be low, but we have clients who have 200 searches over three months and generate $200,000 in sales from a versus article. Those you should do every day, every time.

Rob: Yeah, we do see a lot of our companies come in without them, and that’s the recommendation folks make and I think there is value. It’s that weird low volume, super high converting stuff that I think people sometimes ignore, right?

Ross: Exactly.

Rob: Cool. Ross, thanks so much for coming on the show today. If folks want to keep up with you on Twitter, you’re @rosshudgens. You’re also on LinkedIn. Of course, Siege Media is the agency you run and siegemedia.com. Pretty easy to reach you there. Thanks again for joining us.

Ross: Yeah, thanks for having me, Rob. It’s been great.

Rob: Thanks again for joining me this week. It’s great to be in your earbuds. I’m so enjoying this podcast, putting the content together, and having varied episode types and varied content types. I’m glad you’re joining me every week. If you’re not already subscribed, please do.

If you haven’t mentioned @startupspod, thank @startupspod on Twitter, I’d really appreciate it. It helps spread the word. Me and my team here are spending a lot of time and effort to put these episodes together, and to try to provide value for you, all the other bootstrapped, and mostly bootstrap founders in the world.

So anything you could do to get back, I’d really appreciate it. With that, I’ll let you go this week. I’ll be back in your ears again next Tuesday morning.

Rob: Welcome back to Startups For the Rest of Us. I’m your host, Rob Walling. Every week on the show since 2010, we’ve covered topics related to building and growing startups using an ambitious yet a sustainable approach. We’re not willing to sacrifice our health, relationships to grow our company. We want to build real businesses with real customers who pay us real money. Actually, it’s kind of surprising that most of the world doesn’t think of startups that way.

Today, I have my co-founder of TinySeed, Einar Vollset, joining me on the show. We’re going to talk through not only the announcement of the TinySeed Investment Syndicate—if you don’t know what that is, we’ll define that in a bit—but we’re also going to talk a bit about the investment landscape for B2B SaaS, because frankly, it’s kind of opaque to most bootstrap founders.

We think that whether you’re raising money or not, if you ever plan to sell your company, or even sell a minority stake in your company, or there’s a chance that longer term you might want to raise a small amount of money (or might want to raise a large amount of money), knowing some of these details, is just good hygiene. I think it’s good hygiene as a founder to understand the dynamics of a market. What do you think, Einar?

Einar: I think that makes total sense and thanks for having me on.

Rob: Absolutely. Thanks for joining me. Before we define what a syndicate is and talk about the TinySeed syndicate—why we’re launching it, what it looks like, how it applies if you’re an investor and you want to invest in companies, if you are a founder and you potentially might want to get funding—let’s dive into this investment landscape for B2B SaaS.

Einar: Sure. Before we even get into the bootstrapped, what I think most of the audience here is doing, I’m just being very specific about the fact that here I’m excluding the VC track. This is a whole different Series—Series A, B, C, D, E, whatever IPO. This is the kind of thing where you need to have certain metrics like if you’re sub–$10 million in ARR, you probably need to be doing 200%–300% year over year growth.

Actually, there are a bunch of metrics. An interesting report that came out from Bessemer actually, it’s called scaling to $100 million like this and it basically has benchmarks for where you need to be growth-wise to be on the venture track. It means 110% net retention, 3X every year, and keep going in order to get there. This is more like what it is for bootstrapped or mostly bootstrapped B2B SaaS founders.

This is part of the reason why we started TinySeed. There was a hole in the market at the earlier stages. For TinySeed, what we do is typically invest in companies that are super early. They’re doing $3000–$15,000 typically MRR, although the range is much wider than that.

Rob: We’ve invested as low as $500–$1000 and upwards of $100,000 MRR. Obviously, we don’t exclude people, but I think you’re right. I think the cluster is in that $3000–$20,000 is kind of what I would ballpark.

Einar: Pretty much. We started TinySeed because there was definitely a hole in the market there. It’s a very specific niche that we operate in. We do a 12-month accelerator, we’d run them in batches, we invest in $1–$3 million pre-valuation. However, there’s obviously in the space of bootstrap SaaS or mostly bootstrap SaaS, or other sized companies that look for different kinds of funding.

I think it’s worth mentioning and this is partly because I think if you’ve run a B2B SaaS business, even quite a small one for more than six months, and certainly once you start listing on Capterra, you get nonstop email from people who want to get to know you. They’re from XYZ Capital or so-and-so investors.

I think it’s worth understanding who these are (the people who are reaching out to you) and what kind of funding options are available at the stage. Just to be clear, I think most of the time, what we’re talking about here revenue-wise, once you’re at least $500,000 ARR, but more likely north of a million ARR.

Just to summarize real quick about what kinds of funding options are out there, there are basically two different kinds. The first one is the traditional primary investments, and these are typically what a VC investment is. This would be money that goes into the company for future growth, or hiring, or whatever. They usually issue new stock, it dilutes everybody, and the founder who raises $10 million doesn’t get to put $10 million in his back pocket, probably unfortunately.

That being said, once you get into this north of a million ARR, there is this other concept and this does happen a little bit more now in traditional VC, but it’s this notion of secondary. What secondary is it’s basically a way for a founder who’s gotten to a certain state to de-risk their personal finances, so take some money off the table.

This would be, okay, I’m a founder, I got a business that’s doing a million or $2 million. I’m going to sell some of my own stock to another investor and that money then does go into the founder’s pocket.

Traditionally, that’s almost been the difference between VC funding and more like private equity kind of funding. VCs historically have been very negative to secondary. They feel like you’re not all in unless you need to get to become a unicorn. Why would you take any money off the table? This will be worth 10X in five months versus private equity has often been a little bit more flexible in that regard.

Rob: And it derisks it for the founder. I am pro secondary and if you’re super, super early, it doesn’t make sense. You’re raising $10,000 ARR or something. You haven’t built enough of a business, but if you’re doing seven figures of ARR and your business is literally worth $5 million, $10 million, $20 million and you have zero diversification as a founder, that was a huge concern of mine when we were running Drip. It’s just like I’m a multimillionaire, but I can’t sell any of this. I didn’t know that secondary existed or it would be available to me back in the 2015 timeframe.

Einar: I don’t think times have changed a little bit, too. I think it’s more common now than it used to be and is less stigmatized, but it’s definitely a thing. The way to think about it for me is, secondary is not a bad thing for an investor because I think a lot of the time a founder will come along and they’ll be worried. They might even sell a little bit too soon or go for a smaller subscale exit if they have all their eggs in that one particular basket.

If they can take some money off the table, $500,000, something like that, then they’re much more able to say, okay, screw it. Let’s just go for a $50 million or $100 million exit, or $20 million, or whatever. I think it’s a good thing. It’s actually now more common to see sort of a combination of it. If you’re raising this sort of type from these kinds of people, then typically, there are some primary and some secondary.

The other piece of it is, typically, who are the people reaching out to you on email? I’m sure a lot of you know what I’m talking about. You’re getting an email from Slocum Capital, from so and so, who says he’s an associate or an investor. It’s like hey, we’ve done a little bit of research on you, fascinating space, would love to connect to give you our view of the market or see whether we can help blah-blah-blah.

The one thing to realize is these are typically not venture capitalists. They are typically software-focused private equity funds. There are a number of different kinds of these. Some of these people are looking for companies to buy, either sort of standalone investments or tuck-ins to their portfolio, but the ones that we’re talking about mostly now in terms of people wanting to do investments are what you would call growth investors. These are private equity, people who are out there looking to buy a minority or a majority of your company once you get to a certain size.

Typically, these kinds of investors, these kinds of funds are a bit quite large. Some of the software-focused private equity funds have billions of dollars under management, but they’re also several hundred funds that have tens and hundreds of millions of dollars to spend. Usually, they’re looking to write checks of $2–$3 million up to over $100 million per investment. The thing to be aware of—and this is why I’m saying it’s not VC, it’s a different model—typically the way these guys think about things is like they’re looking to 3X–5X their investment in 3–5 years.

If you take investments—definitely majority—then these kinds of investors often in some cases are very hands-off, but quite often are pretty hands-on in terms of they have a playbook, in some cases they have a certain set of expertise they bring to the table. That can be good or bad.

In some cases, I talked to founders and they’re actually looking for that. They’re looking for either a CEO type to take it to the next level, or somebody who has a fund, that has expertise in scaling sales or any kind of go-to market–type strategy.

Those are the kinds of investors that we’re often dealing with when we’re looking at B2B SaaS investments north of a million ARR.

Rob: That’s what the founders like you said, if you’ve built a SaaS company to even half a million in ARR, you’ve been running it for more than a year, and you aren’t on any list of any kind, you’re going to start getting emails from these types of folks. Some of them will be junior partners or not even partners, just junior associates at venture firms. Some of them will be private equity. There’s a difference between those two, as you’ve already defined. The venture is investing in the company for growth and they invest at higher valuations typically, whereas private equity will want to buy some of the company but are also more open to secondary.

Einar: I think also there are funds that do both. They have a venture arm, they have a […] arm. It’s not that clear cut, but that’s a useful rule of thumb.

Rob: Right. That’s kind of the SaaS funding landscape. Then TinySeed, we launched it because there was really no option for people who kind of didn’t want to go down one of those routes. We’ve run four batches. We’re in the middle of our fourth batch. We’ve raised two funds and are raising our third, funded 59 founders. We are perhaps in-between or the third option between truly bootstrapping and going after venture, or selling a piece to private equity.

I think that begs the question. We’re launching a syndicate. What is that? Why should it be interesting if someone is an accredited investor listening to this, or if they’re founder where maybe the accelerator model that TinySeed offers isn’t a fit?

Einar: Basically, the goal with the TinySeed Syndicate, and we promise, we’ll get to the point where we explain what a syndicate is if you don’t know, because we’re TinySeed, we’re knee-deep into B2B SaaS every day. We do see a lot of founders who reach out and say, we want the kind of investors TinySeed likes, and we definitely hear from investors who are into that’s the kind of investments we want to be making. Typically, they’re angel investors. They’re not looking to write $50 million checks into a single company. They’re looking to write smaller checks and get more exposure later on.

Rob: If you’re listening to this, you may or may not have heard of what a syndicate is because it’s definitely a more well-known term in the venture space. You go to AngelList, type in AngelList Syndicate, it’s a vehicle that allows accredited investors—unfortunately, I would love it if it allowed non accredited investors—to essentially invest as a group.

The syndicate is led by someone. Usually, you have a syndicate lead who is essentially getting deals selecting deals. A company would approach us, we would select, vet that deal, and then offer it to this list of pre-vetted, pre-verified accredited investors. It’s an email list of investors, in essence. Then they are allowed to invest all in a single entity.

I don’t wanna get too technical, but it’s a Special Purpose Vehicle or an SPV. It’s a single little one-time use fund (almost) that puts the investors in the syndicate who want to opt-in, put their money into it. It is a one line item on the founders cap table. If you have 50 investors in a syndicate, each putting in $5000, that’s $250,000. You don’t have 50 line items on your cap table because that becomes a mess. That’s the idea.

Syndicates are like just-in-time funds, is almost how I think about them. They spring up, the accredited investors in the syndicate are notified about a deal, and they can opt-in or opt-out. There’s no money upfront and then they can say, I want to put a couple of thousand dollars into this one or I want to put $20,000, depending on how much is available. This SPV, the syndicate springs up, money goes in, money goes to the company, a single item on the cap table and that allows you to have these lower minimums.

Typical Angel raises are $25,000 minimum. Typical venture fund raises are $100,000–$250,000 and up. They go way up because of this stupid 99 investor rule we’ve talked about on this show before.

Einar: That’s true. The only question that remains is why are we doing this syndicate if you already have funds? Really the answer is that our TinySeed funds are only for a certain kind of investment. That’s what it does. It just does very early-stage B2B SaaS and we keep hearing from people that they want exposure to this kind of deal flow. We keep hearing from founders that yeah, I’m doing $500,000, I’m doing a million, I want to get access to this. This is effectively our vehicle to make that happen.

Rob: To clarify, the TinySeed accelerator and the funds that we are raising for that, we’re going to continue to do those and we’re full steam ahead on those. But the syndicate is an additional arm of TinySeed, in essence, and it’s an additional way that we can bring some deals to investors who may not currently be TinySeed LPs, TinySeed investors in our funds. It’s also a way for (like you said) some founders, some companies who may not exactly fit the accelerator model to come through the syndicate and be able to get TinySeed to ask funding from a group of MicroConf-friendly, Startups For the Rest of Us–friendly, TinySeed-friendly investors.

In addition to that, a non-trivial number of TinySeed accelerator companies, portfolio companies who have been funded by us—we funded almost 60 by now—about 20%-ish have gone on to raise additional funding rounds. Usually it’s an angel round or preseed round, and that’s been up to them. That’s totally their choice of whether to do it, but we support and assist them in that process if they want to. Usually they have a bit of their own network bring in some funding, and then we communicate their raise to our investors (our LPS as I keep saying, the limited partners), and they can decide to invest in the round or not.

This syndicate is now another layer. It’s another group of investors that could potentially write small checks into TinySeed accelerator companies who want to go on to raise a subsequent round or two. It’s a nice bonus if you think about an extra option for any company that goes through the TinySeed accelerator.

Obviously, just like a venture fund, there are two sides to a syndicate. There are the investors who essentially opt-in to hear about it and opt-in to hear about deals as they come, and then there are the founders. Let’s start with how this might work for an accredited investor who’s listening to this who might want to apply to be a part of the TinySeed syndicate?

Einar: It’s reasonably straightforward. Basically, you just apply to be part of the syndicate and we’ll run it through AngelList. There’ll be a bunch of accredited investor things, KYC, AML-type things. Once you’re approved, you basically get on the list. Whenever there’s a deal that we’ve selected, vetted, and done our diligence on that we think is a deal that fits in sort of the TinySeed mold, then you will get an email that says, here’s the deal, here are the terms, this is the valuation and how much is available, and the minimum.

Like you said, the nice thing about being able to do a syndicate is that you can have a lowish minimum, like $1000–$5000, I don’t think is unreasonable. Then if you decide to invest and if there are enough people and enough interest, we put together what’s called the SPV. We invest through that and we charge pretty minimal fees. There’s a one time $10,000 fee, which is shared pro rata among the investors. TinySeed itself takes a carry, which actually existing TinySeed investors get a pretty hefty discount.

Rob: And that carry is how TinySeed will make money from the syndicate. Basically if a company were to exit, the money first goes to pay the investors back. It’s called a 1X Hurdle and it (in essence) pays the investors back their initial investment. Any profits over that, TinySeed gets 20% of them; that’s called the carry. And as you said, existing TinySeed investors receive a big discount on that carry, as well as getting an early look at deals.  LPs in our funds, those are the folks that kind of get the best deal.

I’d imagine over time, there will be folks who participate in the syndicate who decide that due to the quality of the deals and just the interactions that they will want to become TinySeed LPs. That’s kind of the gist. Anything else to say to folks?

Einar: I think it is worth mentioning. If this is interesting to you either as a founder or as an investor, then just get in touch. If you’re an investor, you should go to tinyseed.com/invest. If you’re a founder and you’re interested in exploring this—I think you’d probably need to be like $500,000 or at least a million in ARR. I think the sweet spot for this kind of funding is anywhere really from about $1–$10 million ARR—then go to tinyseed.com/apply. You can fill in forms there and I probably will be the one who reaches out to sort of clarify. Actually, if you have any questions or you’re uncertain this is a good fit, what does this look like, feel free to just email me at einar@tinyseed.com.

Rob: As we wrap up, here’s what I love about this idea of a syndicate, also just the ability to launch TinySeed in this day and age is that up until now, up until a couple of years ago, there were just so few options. It was bootstrapping, it was venture, and there just weren’t these in-between vehicles. When we launched TinySeed, remember it was a crappy landing page that we threw together in a few weeks. It was a tweet and an email and right away we knew investors are interested, and this is an asset class, but founders are also really interested in.

What I didn’t know was our bootstrapped founders were interested in taking a small amount of money with (I would say) a lot fewer expectations and fewer strings attached is a strong phrase, but just fewer complexities than trying to get on the venture path. I had a hunch. I would have done it and I had a hunch. I could see Jordan Gall doing it. I could see Customer.io did it, Churn Buster did it because I invested in them. I knew there were founders out there, but I didn’t know across the broader landscape of the tens of thousands of those types of founders, how many would be interested. Turns out a lot. We’ve had thousands of applicants at TinySeed.

Einar: Yeah, I think so. I think, actually, there might be more investor interest, too, because there’s a reason why all these software private equity companies and growth investors are hiring all these fresh MBAs to cold email everyone with a heartbeat and the SaaS app. It’s because it’s a very nice investment. Being able to bridge that between investors that aren’t necessarily joined private equity funds and between founders who have built something amazing but maybe want a little bit more for growth and take a little bit off the table, I think that’ll be interesting to see.

Rob: Yeah. I want to be clear, Startups For the Rest of Us and MicroConf have been about building ambitious software companies since the start. And there wasn’t even SaaS. I mean, they existed, but it was not the focus in 2010. I think a bootstrap SaaS, there were a handful of people doing it.

We have evolved with the time, but what we’ve not done is just turned our back on anything. I think SaaS is an amazing business model. I think bootstrapping is an amazing approach. And this podcast and MicroConf will continue to support those folks who are doing that, because 80% plus of the MicroConf community probably won’t raise funding. When we talk about this kind of stuff on the podcast, I don’t want our listener to think oh, my gosh, Startups For the Rest of Us is now all about raising funding, because it’s not. It’s just another option. Startups For the Rest of Us is about giving you the options and the tools to make the best decisions. We’ve done that for 11 years, in 500 and almost 80 episodes. That’s my pledge to you as a listener.

Einar, thanks for joining me. Obviously, if folks want to keep up with you you’re @einarvollset on Twitter and einar@tinyseed.com if they want to email you directly.

Einar: Thank you for having me.

Rob: Absolutely. And thank you so much for joining me again this week. As we said earlier, tinyseed.com/apply or tinyseed.com/invest if you’re interested in learning more about what we’re up to. We’ll be back with another regularly-scheduled program again next Tuesday morning.

Rob: Welcome back to Startups For the Rest of Us. I’m your host, Rob Walling. Every week for more than 11 years, we’ve turned out episodes of this podcast. In fact, for the first 448 episodes, I had a co-host named Mike Taber. Now, every three to six months, Mike makes it back on the show. He comes back. He updates us on his progress with his startup Bluetick.io. It’s been almost 2 ½ years since he stepped back from his co-hosting duties. He’s had several ups and downs during that time, and frankly, has had some challenges making progress with his product.

Recently, in the last couple of episodes where we talked about it, he was looking into merging Bluetick with another company. Today, we find out about the results of that, whether that merger was successful or not. If you’re interested in learning more about Mike, maybe you haven’t heard the prior episodes, just search for Mike Taber on the website and it will show you the last four or five episodes he has appeared on. You can get more background.

The bottom line is Bluetick is a SaaS product that is not supporting Mike full time, and he wants it to. He’s trying to push it forward, but he has struggled to make the progress that he would like to see with Bluetick.

If you listened to last week’s episode, you know that I mentioned that I was excited about an announcement coming this week. It’s actually going to be a special episode that comes out tomorrow where you’ll hear about this thing that I’m so excited about. I said I think it’s the biggest announcement that we have made since we launched TinySeed more than three years ago. I hope you’ll check it out. It’ll be in the feed tomorrow.

With that, let’s dive into my conversation with Mike Taber. Mike, you’re back. It’s been a while.

Mike: Yeah. How are you doing?

Rob: I’m doing all right, man. We saw each other about six weeks ago at MicroConf Europe in Croatia. The last time we spoke before that was on this very podcast. It was episode 552, June 1st of 2021, which is five and a half months ago since people have heard from you.

Mike: It feels like 18 months ago, given the pandemic and everything else. It’s so hard, not just staying in touch, but staying on top of what’s going on, what the calendar looks like, or when was the last time you talked to somebody. It was brutal.

Rob: I agree. There’s kind of a reason for that for the delay and bringing it back on, but also kind of not. I mean, basically, a bunch of stuff happened, right? There were four MicroConfs in four weeks. There were TinySeed applications that I was working on. Then the batch started and all that stuff. I wanted to have you come back on when there was a conclusion to the story that we had been talking about for the past 15 months, which is about your potential merger/partnership. I call it a merger because I think that was the goal.

I know everything was on the table. That was the quote we had many times, but it just felt like something where the two of you wanted to merge your companies or start a company, be co-founders in essence. That resolved itself and in August or September, we talked a little bit about it at MicroConf, and I figured it was a good time to bring you back on to chat through some stuff.

Mike: Yeah, so things worked their way through at the end of the summer. Things ultimately did not work out. You’re right. It was, I think, intentionally or intended to be a merger of sorts between the two companies and businesses because there were a lot of complementary aspects to them, and a fair amount of overlap in terms of use cases between that company’s customers and BlueTick’s customers. At the end of the day, it didn’t work out. I feel like there were probably miscommunications on both sides. Things just went south at the end of the summer.

Rob: Yeah, which is a real bummer. This is something that I was concerned about as we had talked about. I think we had recorded two episodes, maybe three, but I think it was two during this time that it was happening. I had some concerns. In fact, I have some quotes here from the transcript from those episodes. One of my quotes was, and I think this was from five or six months ago.

I said, you’ve been working on stuff for a while now, like you said, eight to ten months, or somewhere in there. Then you’re talking about now, working for another three months. What if you get to a point where either one of you or both is like this isn’t going to work? Do you feel like you’ve wasted that time? It’s kind of wasted last year. How are you thinking about that? I had asked you.

And in a different episode I said, I have concerns about you working on this without something in place. I’m concerned there might be mismatched expectations, if you haven’t gotten down to brass tacks to say, let’s merge these two apps, let’s both focus on one, and here’s the equity split.

Then I talked about how I had in the past merged apps, and we put a partnership agreement together. What’s the delay with that? Because you’ve been working on this for over a year now. So that was the one after that. I guess I want to get your thinking in retrospect. Obviously, I expressed my concerns about, is this wasted time? I think one time I said, I’m concerned you have a day job with no equity, and I don’t think that’s what you want, right? How are you thinking about that now, in hindsight?

Mike: In hindsight, I guess, a day job without equity was probably a more accurate description than I would have expected or thought it would have been. I’m disappointed at how things ended up coming to a conclusion. I think that he is as well, but it’s hard to know those things in advance. There were a lot of things that were going on on his side that were just taking up a huge amount of time and effort. That’s why things dragged along for so long. We didn’t really get to start working together side by side until the last several months of the partnership attempt, the merger attempt.

That’s probably the biggest problem. There was no way for us to really pull that together much sooner than we did, just because of the extenuating circumstances around it. I understood that when I was getting into it. I hadn’t expected it to take nearly as long as it did. Initially, we thought that it would be resolved, basically around June or July of last year. That just never happened. It ended up dragging out for a full year longer than it really should have.

But at the same time, at the end of the day, what am I going to do? We were already on the path. I suppose you could say that, oh, well, it’s sunk cost. Don’t worry about it. At the same time, we were still trying to work towards something and we just didn’t have a resolution yet. It was just a tough situation, I guess.

Rob: Yeah. What could you have done differently? Do you feel like if you had communicated earlier on or made a proposal for equity, or should you have walked away when you got four or five, six months in and nothing was moving forward? Again, with 2020 hindsight, would that have been better to just be like, this is just taking too long, I need to go away, do other stuff, and work on my business. Let’s revisit this once you have the time to dig into it.

Mike: That’s a good question, and I think the answer is complicated because it’s a question of who is better for me, him, or the business itself? The business was in serious trouble at the time when I came in. That was more because of all the technical stack problems. There was just a ton of technical debt that had been gathering up over the course of the last 8 or 10 years. Nobody had ever really been technical enough to dive into that stuff, look at it, try and figure out what was wrong, and get it fixed. I was in the middle of a lot of that stuff.

If I had just basically walked away, my inclination is to believe that the business may not even exist right now if I hadn’t done that. I feel that I would have had a hard time just walking away because of that because I know the person and wanted to maintain a relationship. But would it have been better for me? Probably. Would it have been better for him or his business? No, probably not. I just don’t know what the repercussions would have been had I walked away. My suspicion is they would have been bad.

Rob: That’s the thing, man. The way I think about it—now that we’re here on the other side of it—is you’re back to square one where you were almost. I mean, it’s 2 ½ years ago.

Mike: Eighteen months is really what it is.

Rob: Eighteen months there. You and I had a conversation the first time you came back on the podcast, after stepping away for a few months. It was August 2019. It’s more than two years ago. You and I talked through, hey, you’re doubling down on Bluetick. I think that was the name of the episode, Doubling Down on Bluetick, right? Because I said, go away and figure out, are you going to get a job? Do you just want to shut Bluetick down? I said all these things.

You said, I want to double down on Bluetick. You said, I have some marketing ideas. I want to write some code. I want to do this and that. I guess, as I think about it right now, you’re kind of still in that boat of I want to double down on Bluetick again, like you lost a couple of years.

Mike: Yeah. I won’t say that there were zero benefits to essentially having a job for that time period because a) it was steady income, and b) it was keeping the lights on. I’ve also had some fairly serious health issues that have come up over the past year and a half. I’ve been working through those and trying to make sure that I’m still being productive, and some days are better than others. It’s the basic problem with entrepreneurship. When you’re meandering, you don’t have this hockey stick growth, but things aren’t trending downwards either.

I’ll say that makes it easier to just let things ride for a little while, but the downside of that is that you don’t have a clear resolution on anything either. It makes the decision of, should I shut this down and move on to something else a lot harder just because there’s revenue, there are customers, there are servers, all infrastructure, and all this other stuff. You can just turn it all off, but at the same time, you don’t want to completely screw your customers either. It’s a question of what to do there.

Rob: Yeah. If you were to start something else, I wouldn’t shut Bluetick down. It’s a small revenue service. For folks who don’t recall, it’s never supported you full time and it still isn’t, but there’s revenue there. I don’t get the feeling there’s a tremendous amount of maintenance or anything involved with it. I wouldn’t think you’d have to screw anybody in order to start working on something new. We can get into it later.

I’m not saying you should or shouldn’t do something new because each of us, as entrepreneurs, travels our own path. I guess it’s a bummer for me to be having this conversation that feels reminiscent of the one we had in August 2019, then a few months later, and a few months later. You know what I mean? It’s like you haven’t been able to push the business forward because you were—

Mike: Not working on it.

Rob: You were not working on it, yeah. You were focused on this other business. It’s not like you were working for free. You are not working for your full rate of what you would be able to make as a salaried employee. You were working for enough money that, as you said, it was a steady income, and it made it worth your while at this point. I think that’s something that is one positive thing to take away. It sounds like maybe it didn’t make sense, given personal circumstances to do it. I just hate to see the lost opportunity costs of 18 months-ish.

Mike: Yeah, that’s probably the biggest thing that I see is that lost opportunity costs. Because had I known going into it that it was going to be 18 months, I don’t think that I would have even started. That’s the whole hindsight of 2020. But what am I going to do? You don’t know those things in advance. Sometimes they’re very difficult to even foresee.

I didn’t foresee things ending the way that they did. It was all rather sudden. Like I said, we can chalk it up to miscommunications on both sides. At the end of the day, fast forward 18 months, I’ve basically got nothing to show for. In the meantime, I’ve let those other things slide and just not do anything. They just meandered. Whether it’s Bluetick or FounderCafe, either one, I just put those things on the back burner.

Rob: Right, and you were optimistic when we were talking about it. This is a quote from you, I think something will sort itself out, I have a good feeling about that. You thought that this was going to happen. I don’t think you had the same misgivings that I did about the situation. You were cautiously optimistic, it sounds like that.

Mike: Yeah, I was, right up until the end of the summer. At the end of the day, what do you do? It would have been much more difficult to walk away in that first six months or so just because of how bad things were with the app basically falling over on itself. You fast forward another six to eight months after that, things change quite a bit. Things were relatively stable. They weren’t perfect. They still aren’t. They probably would take another year, year and a half to finish cleaning it up. But at this point, it’s not my problem.

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So that leaves you looking at Bluetick, right? I presume you’re going to continue. You and I didn’t even talk about this offline. Is the plan to double down again on Bluetick and try to build it out? If you’ve lost two years, I remember saying two years ago, how are you going to be differentiated? Why are people signing up? Why are they sticking around? You either need differentiation in the product, or you need these proprietary traffic channels.

You don’t have either of those. I’m concerned you don’t have enough differentiation, basically. It’s hard to grow a business with that. You’re now even further behind because differentiation sometimes you can do with positioning, but usually, it’s with some type of features or feature set, and you haven’t been working on it for the past. Like we’ve said, barely working on it, not pushing it forward for a while. Where does that leave you?

Mike: I had a personal retreat a couple of weeks ago, which was great because it’s the first one I’ve had in probably two years. Probably even before the last time we actually had that first podcast episode where we were talking about it where I was doubling down on or what the intent was to double down on Bluetick. I went down and looked through a bunch of my old notes and started writing down new thoughts and ideas. A lot of the ones that I came up with were evaluating or thinking about, were essentially rehashes of the ones that I’d had back then.

I realized that what had essentially happened is I went on a personal retreat, had a lot of great ideas, wrote them down, and then promptly didn’t do anything with them. There’s a variety of reasons for that. This merger and partnership attempt is probably the biggest one. I look at that and say, well, those are the things that just need to get done. I spent probably about a week or so, a week and a half writing down and consolidating a bunch of my notes from various documents that I put together, and essentially got a marketing plan that I’m going to go through.

My mastermind group is going to be holding me accountable for those things on probably a weekly basis. I’m basically putting together this 90-day plan, and it’s an arbitrary start date, I’ll say, because I haven’t actually pulled the trigger and started the clock on it. It’s got goals associated with it, targets, and concrete things to do and accomplish over the course of those 90 days. We’ll see what happens.

I feel like at the end of that 90 days, if things don’t look like they’re going in the correct direction or they’re still meandering, then maybe I’ll do something else. Maybe I’ll build something else, set this on the back burner, and just set it on autopilot for a while.

Rob: I’m glad you said the 90-day plan because given how long this has been going on, not just the last couple years, but just Bluetick in general, when did you start building it? Do you remember?

Mike: Technically speaking, I had the idea in 2013, but I didn’t do anything with it until probably 2016. I didn’t even pull the sign-up process that you had to go through in order to talk to me. It was still kind of more like in beta until 2017.

Rob: So for four or five years, give or take. If someone wrote into this podcast and told us this story, what would we say? I want you to have a timeline. Look, it’s your life. I’m not even your accountability partner. We’re ex-podcast co-hosts or whatever. I want you to succeed, but it also has to be your choice. From the outside, it’s tough to think of what’s going to be different this time is really the question in my mind. How can you make everything into a speed bump, not a roadblock? No excuses.

I know health has been an issue. There’s a lot of distractions, but that’s always been the case. I think for different people who have those issues, they overcome. I think if you give it a specific timeframe, like a 90-day thing, I think you should start it today or tomorrow. That’s one thing that I think you’ve struggled with in the past is making the decision and going for it. You think about things for a while.

You thought about freemium. You thought about AppSumo for months and months. I think we were four or five months apart on the podcast and you were still thinking about them, two podcasts apart. That’s too long in the startup world.

When I was the CEO of Drip after I sold it, he was my successor. It wasn’t Clay. It was John who took over, but he would say, in the startup world, a week is a month and a month is a quarter. Everything has to move way faster than at larger companies. To think about decisions and deliberate on them even for a month or two is a really long time, and you lose ground. Why not start the 90 days tomorrow?

Mike: There isn’t probably a great reason for it. You’re right. I could easily start it today. I’ve got a mastermind call later today. I can tell them, hey, the clock is starting as of today. Here’s 90 days. This is what it’s going to look like. So, yeah, we’ll see how that shakes out. Maybe we can talk again in 95 days or 99 days or something like that.

I hear what you’re saying and I don’t disagree with you. If somebody were to write in or call the podcast and leave a message and say, hey, this is the situation, this is the product, and this is what it’s been doing. I’m in 100% agreement with you and be like, yeah, pull the plug on this thing, bail, and find something else to do because it’s just not working. Nothing you’ve done so far has really moved the needle.

I did come to that conclusion when I was on my retreat a few weeks ago. The fact is that I have let things go on for too long. I’d say part of the issue is that there isn’t necessarily a forcing function for me. Money is not necessarily a huge driver for me. Everybody has their own internal motivations. Some of them are intrinsic, some of them are extrinsic. I have a hard time sometimes figuring out exactly what mine is.

Rob: Yeah, we talked about that in the past.

Mike: Yeah. If you think about it, just in general, you take a step back from life in general. What is it that gets you out of bed in the morning? What excites you? What is it that you want to do? I have a hard time pointing out anything. I really do.

Rob: I remember we’ve had this conversation in the past, remember? I said, take the ENIAC or something, then we talked through all that stuff. When we talked about it last time, and this is a year and a half, two years ago, I said, maybe you shouldn’t be an entrepreneur then. Maybe you should get a job, and that’s okay.

You’re a super senior engineer, you could get a really well-paid job. Then you don’t need intrinsic motivation because it’s hard. We know this game is hard. That conversation turned into you quoting a Dilbert comic to me about the pointy-haired boss, and I said, did you just justify not getting a job based on a Dilbert comic?

We don’t need to rehash all that, but I think that is something that each of us has to find. Some of us as entrepreneurs are seeking freedom. I was always looking for freedom. That was my big thing. That was my intrinsic motivation was I do not want to work for other people. I want it so bad that I’m willing to work a full-time job during the week and willing to work 20 plus hours nights and weekends to not have to work a full-time job. I actually struggled when I first had enough products that I didn’t need to work a full-time job.

I was like, oh […], what next? I hadn’t thought past that. That’s when the purpose and relationship stuff started. I can go down a whole rabbit hole there. Other people really want to have an impact. Other people really want to work on interesting problems. There are all these other things. I do think without that, you’re right, it’s tough to do the grind every day. Not even the grind because I think the grind can be fun sometimes, but to force yourself to do it on the days you don’t want to do it. If you don’t have that, I’m not sure where you go from there.

Mike: Sure. I think your point about having freedom is probably well placed with me as well. That’s one of the things that I want. You just now said that you basically had that once you got your products and you had them to a certain point. The reality is I don’t have to work a lot. I don’t have to make a lot of money. I’m kind of at that point now.

The challenge at that point is, well, if I don’t have to, if I could get up at 10:00 AM every day, blow off work half the week, and things are still fine, what difference does it make? That’s the position I’m sort of in, but at the same time, would having more money would be nice? Sure. Do I need millions of dollars? No, I absolutely don’t.

That’s something I feel like I’ve struggled with a lot. That was the primary motivation for me to put down, this is a 90-day plan. If not done in that timeframe, then cut bait and move on or find something else that is a little bit more interesting to me, I’ll say. I do have some ideas of other stuff that I can potentially go do, but nothing I want to talk about yet or nothing that I don’t even want to write a single line of code or even make an attempt because it’s just going to be a distraction.

Rob: Yeah. I think there’s a difference between you and I. It’s that I live perpetually in the future. This is actually a strength and a weakness of mine. That I’m always looking ahead, whether it’s a couple of hours or whether it’s a couple of years. Once I quit the day job and once I had products that were bringing in a full-time income ($120,000, $150,00 a year), it was great. I worked 10 hours a week, it was amazing. Some of the best memories of my life.

I got bored then because I don’t have any purpose. I need to actually do something interesting. But I was always thinking, what about next year or the year after? What if these businesses don’t work out? It wasn’t that I wanted more money. It’s that I wanted more stability. I wanted to ensure that the freedom that I had, I never wanted to get a job again because I was perpetually living in the future and a fear of losing what I had worked a […] decade for.

Look, for sure not everyone thinks like I do. It is a weakness in a lot of respects because I have trouble being in the present often. Sherry lives very much more in the present. I think that’s a benefit for certain things and not for others, so different personality types. Some people live in the past, right? I hear that you don’t have to get up, and that’s tough. I definitely struggle with that sometimes. Some days, I don’t feel motivated to do any of this. It just happens naturally.

I either take the day off personally, I do the minimum then take the rest of the time off, or I grind it out. I drink or whatever. I have my things. I drink caffeine, I listen to loud music, and then I just get in the zone and I do it. But for you, I guess you can decide how to do those day-to-day of whether you need to do it, whether you need external pressure, or whether the pressure of hey, I can live like this for a while. But I don’t think you can live like this for 10 years, 5 years, or 3 years.

Mike: No, probably not.

Rob: Right. It’s not like you can retire.

Mike: Sure, but that’s also part of why I put the 90 days on it because that is an external pressure. Another external pressure that I found over the years has not been helpful is coming on the podcast, sharing exactly what I’m working on, and talking about it. Because there are those days, even weeks, or sometimes a month or two goes by where I’m just not making progress or not moving things along. I just sometimes didn’t feel like it. I think that’s been a struggle is that I feel kind of disappointing the listeners, and which in turn disappoints me.

Rob: It feels crappy.

Mike: It does.

Rob: I know how that feels. I just really haven’t been motivated. Yeah, especially coming on every week or every two weeks. I don’t want to keep talking about this because sometimes these things take more time. Sometimes I want to move slower because that’s just where I’m at in my life right now. Maybe that’s just the pace I want to go. We bootstrapped businesses for a reason, right? So that we can dictate if we want to move slower, make an amazing lifestyle business, or move faster and be more ambitious with the growth.

So what is the plan then, man? What is the 90-day thing? I mean, you don’t have to go into all the details. Is it getting your marketing in order? Is it figuring out product differentiation? What is the story there?

Mike: It is probably 95% marketing stuff. There’s a couple of ideas I have for features that would differentiate Bluetick pretty dramatically from other things out there, but they would take time to implement. I don’t think that I could do a lot of those marketing activities and implement the features in such a way that I’d be able to do them within 90 days.

The plan or the intent is to see how those 90 days go and evaluate at the end of it whether or not things are on that upward trajectory that I’m looking for. If they’re not, then that’s when I’m going to have to find something else. I’ll put it on the backburner. I’ll keep it running and keep everything operational. I’m just not going to dedicate a ton of time and effort to it anymore.

Rob: I don’t think anyone will begrudge you that.

Mike: Sure. That said, it’s been largely on autopilot for the last 18 months. It’s not like I get very many support calls, emails, or anything like that for it. It’s a fairly stable product that works great. I really just need more people to see it and use it is really what it comes down to. That’s all marketing. It has nothing to do with features at all.

I’m cautiously optimistic about the fact that putting 95% of my efforts and energy into the marketing side of things, as opposed to building features or anything, is really what’s going to hopefully push the business forward. I’ve got several pages worth of stuff that I’ve written down and various channels and got them essentially ordered. Within each of those channels, what I would do, what needs to be done, how to do it, that kind of stuff.

Rob: Well, I’m excited. How do you feel about it? Are you excited? You don’t seem super excited?

Mike: I don’t know. I think the problem is it’s hard to be excited when it’s dragged on for as long as it has. I guess maybe I should be excited about the fact that I know that there’s a light at the end of the tunnel. At the end of the 90 days, I’ll have an answer one way or the other. I guess maybe that’s something to be excited about, but I don’t know. I mean, I don’t have a good sense of whether or not the things I’m going to do are going to make any difference. I’m not really going to know until after I start doing them.

Rob: Thanks again, man. You’re @singlefounder on Twitter if folks want to keep up with you.

Mike: Sounds good. Well, thanks for having me again. Appreciate it.

Rob: Absolutely. Take it easy, man. Thank you so much for joining me for that conversation. I’d love to hear from you. If you like these episodes when Mike comes back and gives us updates, you can hit me up on Twitter. You can send an email to questions@startupsfortherestofus.com. Those go directly to me.

If you feel that they’re not helpful or not interesting, I’d love to hear that too. Just want to hear your thoughts and opinions. Thanks for joining me again this week. I’ll be back in your ears tomorrow morning with a special bonus episode.

Thanks to our sponsor, SoftwarePromotions. SoftwarePromotions has been managing Google ads and Google SEO for clients for 22 years, if you can believe it. They’ve worked with more than 600 businesses. They’re no-nonsense, lots of transparency, and one of the co-founders Dave Collins has spoken seven times at MicroConf. You’ve likely seen his videos if you’ve checked out our YouTube channel. He’s also spoken at Business of Software and countless other conferences around the world.

If you’re looking for someone to help you with your Google ads, whether you’re just getting started, whether you want an expert eye, whether you want someone to manage that for you, as well as SEO from audits to getting down and dirty with organic search, Dave and Aaron know what they’re talking about. Those are the co-founders of SoftwarePromotions. You can head to bit.ly/tamegoogle to learn more about SoftwarePromotions, or head to softwarepromotions.com and let them know you heard about them at Startups For the Rest of Us. Thanks to Dave and Aaron for sponsoring the show.

Rob: Welcome back to Startups for the Rest of Us. I’m Rob Walling and this is the podcast that we ship every week. We have since 2010. That’s more than 11 years. This is the podcast about building real businesses for real customers who pay us real money and while we’re doing that, we’re seeking freedom, purpose, and relationships. That’s what Startups for the Rest of Us is all about. It’s a lens through which we view startups. Thanks so much for joining me today.

Really interesting conversation today with the author of a book, as you know I don’t have many authors on this podcast. It’s not a big interview with a guest about the next big concept or whatever, but this guest, his name is Jim Kalbach. He wrote a book on Jobs To Be Done.

If you haven’t heard of Jobs to be Done or you’ve heard too much about it and you feel like I don’t want to learn more about it, I think this interview might change your mind. I would give it a chance because we dig into some super practical points, specifically what if I’m pre-product or pre-idea, how can I interview people, ask questions, and figure out problems that are worth solving? What if I’m at 3000, 5000, 30,000 a month and I’m kind of plateauing where the product should go next, I don’t know what features to build next?

You can do this thing called switch interviews which are in the Jobs to be Done parlance. We’ll dig into those. Then we actually, in the end, did a roleplay. Jim did a great job. He totally humored me where I talked about a recent switch decision that I had made with MicroConf—switching from one software to the other. Normally, these interviews are 30–60 mins where you dig way, way deep and we spent about five minutes doing it. But I think it’s a great example if you haven’t been exposed to Jobs to be Done of the things you can learn from these frameworks.

I think if you’re a founder and you’re like me, you tend to roll your eyes at frameworks, at things that come out of Harvard Business Review, not that they’re not legitimate, not that they’re not real, but just that they don’t often keep small startups in mind. They expect that you are a middle manager at Procter & Gamble, you’re getting your team on board, and your budget is only $10 million this year. So many business books I can’t deal with because of that, and that’s what Jim was able to avoid. He was able to talk to us, the single founder, the mostly bootstrap SaaS companies.

I do have one announcement to make, but I’m going to keep you in suspense. Next Tuesday morning’s episode is going to have an announcement that I am really excited about. It’s probably the biggest announcement that we’ve made since launching TinySeed three years ago. Stay tuned, it’ll come up in your feed as usual. In the next episode, we’ll have information on that.

At that, let’s dive into my conversation about finding the right problems to solve whether you’re pre-products, or whether you’re plateauing and you’re just trying to figure out where to head next.

Jim Kalbach, thanks for joining me on the show.

Jim: Yeah, thanks for having me. Great to be here.

Rob: Absolutely. I got a Twitter tip. On Twitter, someone mentioned you and they said you have this amazing book, it’s called The Jobs To Be Done Playbook: Align Your Markets, Organization, and Strategy Around Customer Needs. Basically said, I forgot who it is, I’m going to have to go back and look later, maybe I’ll link up in the show notes, but he said, you should really interview him on the Startups for the Rest of us. I appreciate you taking the time to come out.

Jim: Love the topic. Happy to share my insight and thoughts on Jobs to be Done.

Rob: Awesome. The first thing I want to ask is can you loosely define what Jobs to be Done is in a way that is practical for early stage startup founders?

Jim: Sure. I characterize Jobs to be Done as a framework, a set of techniques around innovation. It allows you to talk about the problems that people are trying to solve, people that you care about in your target market, without talking first about solutions, products, or brands. Ultimately, it’s really about product-market fit, but looking at it from the market standpoint. Very often when we talk about product-market fit, you create a product, and then hold it up to the market and say, do you like this? And they say no and then you build, measure, learn and do that again.

What Jobs to be Done does is it says no, no, we can actually understand market needs by looking at the market in and of itself and work back towards the product. It dovetails with lean techniques, but theoretically, what it helps you do is predict adoption, which is the same thing as product-market fit.

As an innovator, as a startup, I want to have some sense, maybe not specifically, but at least directionally where should I be pointing and where should I be aiming at. Jobs to be Done gives you a language and techniques to help point your business in the right direction to the problems that you should solve that are going to have the biggest impact in the market.

Rob: What’s interesting is Jobs to be Done has been quite popular in the Startups for the Rest of Us, in MicroConf circles, and mostly bootstrap SaaS founders. Typically every MicroConf we host, we have at least one speaker, who mentioned Jobs to be Done whether it’s the focus of the talk, or whether it’s just an offhand like oh, we did these Jobs to be Done interviews and we found out this.

I think it’s permeated our group, our community in a good way. I still think there are a lot of folks who haven’t experienced it or haven’t experienced the magic of it. I did some Jobs to be Done interviews, probably not correctly about five or six years ago with a software product, and then more recently, we did some with MicroConf which is the community and events that we throw. We did those about two years ago.

I’m a believer and I know folks like Asia Orangio with DemandMaven does them. I know that Claire Suellentrop Forget The Funnel. If you’re listening to this as a founder and you’re thinking, why should I consider doing this? It’s really smart people who I trust their judgment on finding these things are using them. These are tools.

I think with that kind of couched, when I think of Jobs to be Done, there’s a lot of terminology of hiring. There are words or phrases that are used in certain ways. Without the phrases, the jargon, or the words used, are we trying to find what problem a customer is trying to solve and how they’re trying to solve it irrespective of my offering?

Jim: That’s it. That’s how I actually described it and I call that job thinking. Jobs to be Done brings a way of seeing things to the table. Instead of looking at the people that you serve through the lens of your own solution, whether it’s real or imagined, you’re seeing them in a certain way. You’re seeing them as possible consumers of your solution, and that clouds your judgment.

By taking yourself and your offering out of the equation, potentially—there’s no guarantee of this—you can actually find opportunities that you wouldn’t see otherwise. Instead of looking at them as hey, these can be consumers of my products, users, or adopters of my solution, you’re looking at them as free-will gold-seeking actors in the world trying to solve a problem. I’m glad you use that phrase because I use it as a synonym for Job to be Done are problems to be solved. What’s the problem that you’re trying to solve?

Rob: To piggyback on that, something out of your book, I read through the book and I want to quote you here. You say, “Jobs are stable over time even as technology changes. The jobs people are trying to get done are not only solution agnostic, but they also don’t change with technology advancements.”

Jim: Correct. I described Jobs to be Done as a language or Jobs to be Done techniques come with a language for describing the problems that people are trying to solve independent of any solution, product, or technology. What that does is it gives longevity to that view of the people you’re trying to serve because you’re not describing what they’re trying to get done in terms of today’s technology.

If you take a very high-level job like listening to music, a hundred years ago, people used to crank up a phonograph and listen to music. Then we had record players, 8-tracks, tapes, then CDs, and then Spotify. In the future, we’re going to have, I don’t know, VR listening rooms or a chip implanted in our brain. I don’t know what the technology is going to be. But from a Jobs to be Done standpoint, there are stable aspects of listening to music. If that’s the domain we’re interested in, listening to music is listening to music is listening to music. By removing technology and solutions from your language, you actually help future proof your thinking.

Rob: Got it. I think of another example, there’s a TinySeed company called Builder Prime which is a CRM software for home improvement contractors. If I go back to 1985, I bet their CRM software, their solution was paper, and then I bet by ’95, it was an Excel spreadsheet maybe, an email, or something. Then I bet by 2005, maybe if they’re lucky it’s a Google Sheet because now it’s in the Cloud. Then by 2015, 2020, some percentage of those folks have now adopted Builder Prime and other software like it, am I following a similar path?

Jim: That’s absolutely correct. In fact, one of the test questions that I teach students and talk about is to ask yourself, what did they do 10 years ago? What did they do 20 years ago? What did they do 30 years ago? When you’re operationalizing the jobs to be done language and you need to formulate it in a way, every statement, every step in your job map, or whatever technique you’re using, you need to formulate it in a way so that it would be true when people did that CRM with spreadsheets and Rolodexes because the step is fundamentally the same.

Record contact information, for instance. You don’t say click a button and create a record in the database because that’s what they did today. When they were using Rolodex, they recorded the client information. You would write it very generically like that. That helps you future proof your thinking because we might have some AR solution or AI solution, but guess what? You’re going to record the client information. That’s part of CRM. If you record things in a way that explicitly expunges technology from your language, you’re building this longevity into your thinking.

Rob: That’s really interesting. I hadn’t thought about it that way in terms of the language actually being different. Something I’ve said on this podcast many times is that the precursor to a lot of SaaS is a Google Sheet or an Excel Spreadsheet. Anywhere you see that, that awesome and winds up becoming a SaaS in a vertical or horizontal. I’m linking that to Jobs to be Done as we’re talking, of course, because that spreadsheet is doing a job and that job might be better done by a more complex or more focused piece of software.

Jim: Correct, and that’s what Jobs to be Done in advance of having a product or solution on the market. It tries to find that problem that’s going to be most important for people to solve. They were using a Google Spreadsheet, but what problem were they trying to solve? If I can describe that independent of that Google Spreadsheet, it flips my perspective and I start seeing opportunities from a different light. Then you say, oh, if I’m going to create software, I need to solve that problem.

It’s a way of being solution agnostic to open up the doors for new opportunities. You literally see things in a different light there. Again, there’s no guarantees in the Jobs to be Done in language, but it helps you find opportunities that you might have otherwise overlooked. If you are talking about your own software, even a brand, even startups, you’re starting to think about the brand, price point, or business models, sometimes that clouds the conversation. There’s red herrings in the room. Who’s going to pay for this, how are we going to brand this, and stuff like that? That doesn’t matter right now. Just what problem are we trying to solve? Let’s really, really understand that problem at a deep level before we layer on our own solution.

Rob: I think for our conversation’s purposes, I’d love to dig into maybe two kinds of stages that a startup founder might be at. One is pre-product, I’ll even say pre-solution where someone says, I want to serve this vertical, maybe I want to build stuff for designers or developers. We can just pick a vertical, maybe it’s home improvement contractors, and then have you walk me through a thought process. Maybe even some questions that you might ask like how would a startup founder who is seeking problems to solve, in essence, how might they go about it?

Then the second stage is what are called Switch interviews, which I read about in your book. I’ve read about them elsewhere, which is where you have a product, sometimes it’s early stage, but it can be much later stage too. You could be a big company into it or Salesforce, but you can also be a startup founder who has a product doing $3000, $5000 a month, you’ve plateaued, and you have enough customers that you can dig in like why did you switch to me?

I have a couple of friends who’ve done Switch interviews and learned a ton about it, and it actually changed the direction of the product. It changed the features in such a way that they wanted it to build. Those are the two things I want to dig in with you today to get pretty practical nuts and bolts.

Let’s start with the pre-product or pre-idea. I know you do workshops on this, you’ve written a whole book. What would you advise a founder to do? What would you do if you’re thinking to yourself I’m a developer, I want to build a SaaS product? How do you start?

Jim: The first thing I would do would be to scope the domain in which I want to innovate. I think there are two fundamental questions there. The first is, who do you want to innovate for? The other one is, where do you want to innovate or what’s the problem area that you want to solve for? Both of those come with multiple answers.

On the first one, the who, what I recommend people do is think about the domain that you’re interested in and just list all of the actors and the stakeholders that are involved. You have a stakeholder map and ask yourself, who’s going to be the ultimate consumer of the value that I create? Try to hone in on who. There might be multiple, but you want to focus yourself. Jobs to be Done come with a lot of focus and decisions. It’s a strategic decision, who you are going to innovate for, and the same on the problem space side.

If you’re looking at CRM, tax, or whatever domain you’re in, there’s lots of problems that people are trying to solve. List them all out and try to get it down to three, maybe just one. We’re going to try to solve that problem so then you have a who and you have a what that scopes your innovation domain. That scopes your innovation domain.

Now what I can do with jobs to be done, as I described in the book, is I can build up a model or build up an understanding of that problem for that person. How do I understand that job that they’re trying to get done in the context in which they’re trying to get it done and I can do something called, for instance, create a job map, that’s a play that I have in my playbook.

The playbook is a collection of techniques, but one of the first best things I think you can do after you decide who and what is to create is a job map. A job map is a simple series of steps that talks about what’s the fundamental process of getting that job done.

It might be listening to music, we just talked about that, or managing contacts and it’s in a CRM, you wouldn’t say the word CRM but managing contacts. You can understand that as having a beginning, middle, and end. How do people get started solving that problem? What’s the middle of it? Jobs to be Done give you a language and the techniques that actually map that out.

Now you have an artifact you can bring back to your team and say, where are we going to play? Let’s put our finger on that moment where the rubber hits the road for us and you can get even more specific there. That’s just an example of without a product on the market, how you would use Jobs to be Done to kind of work your way into what’s our opportunity.

Rob: Got it. I like that for focusing for sure of saying who and what. A few examples sprang to mind, but let’s dive into one. There’s a TinySeed company called Summit. It’s usesummit.com. In essence, it’s forecasting software for startups. I think it works really well for SaaS, but I think any startup, especially bootstrapped or funded, allows you to build pretty complicated models easily. To easily build these models that can forecast out and say, when do I have the budget to hire a developer? What happens if I run ads and it gives us this return? What is the cash flow? All that stuff.

You can imagine the precursor to this is absolutely Excel, there’s just no doubt about it because there isn’t another tool that does it like this. The founder, Matt Wensing, has been working on it. He’s now on the second or third version of it because he built it, people used it, and I don’t know if they hit the edges of it and then he said, okay we need to rework it, we need to rework it. It’s obvious in your parlance that he figured out early on he wanted to cater to startup founders, CEOs, maybe CFOs if they’re at the level that they have that, and what is forecasting or it’s like financial?

Jim: I was thinking about that, actually, as you were talking because Jobs to be Done is a language, and the words that you use really, really matter. Sometimes it takes a while, semantically, literally visiting a thesaurus. It’s something around forecasting. Planning though is the first thing that came—I’m not sure what they’re actually planning. Plan a product rollout, plan a company, I’m not quite sure what they’re planning, but some of the job would be somewhere around planning or forecasting.

Then I would say the who is an entrepreneur actually. I can just describe it generically. Generically, entrepreneurs are trying to plan out their company or plan out their business, and I can take those things and then dive deeper into each of those things.

Rob: It’s funny that you said planning because I haven’t looked at his homepage in a couple of months. I just pulled it up and his H1 is, “Build trust in your plans. Express your financial operations on a flexible canvas.” It sounds like you got there fast.

Jim: One of the things when I work with companies, I’ll go out to their website because through the Jobs to be Done lens, I can kind of see through the gloss of their marketing. There’s a job where that’s a nice job. I look for verbs, plan and build. You might start the main job with the word build. I have to play around with it. What we would do is we would try out a couple of different versions, kind of scope it, where’s our center of gravity, and what’s the best language to describe that? It’d be something around entrepreneurs and then the main job would be something around building a business.

Rob: Got it. If we rolled the calendar back, let’s say, two or three years, maybe before he’d even written a line of code, and he was trying to do some Jobs to be Done interviews to figure out, I know the who and the what is, we’ve just described them. He knows 20 startup founders, easy. Go to MicroConf. You can talk to 20 startup founders in two and a half days. What types of questions? What are the questions that he would have asked? There’s obviously a thread. I’m an interviewer, I know there’s a story, there’s a thread you follow. Practically, what does this look like?

Jim: There are three things that I would be looking for, three types of things. One would be around the process. I’d be asking questions like, how did you get started? What did you do before that? What do you do after that? I would want to uncover that process. Because one of the things that I would want to do is create a job map, which would show building a business or however we define that target job. I would want to show that as a sequence of steps. By the way, the steps are not tasks, they’re more like the sub goals like what are the goals in the process there?

The other thing that I’m looking for are what are the outcomes that people are looking for? These CEOs that you mentioned, the entrepreneurs. I would want to understand their pain points. What do they struggle with? What’s the hardest thing for them to get done? These are the types of questions that I would ask him.

So steps in the process, the outcomes that they’re looking for, and then the third thing I’d be looking for are the circumstances, as I call them. Under what conditions is this easier and harder? Or under what conditions does getting the job done change for you? When it’s a tech business versus manufacturing. When you have a little bit of money versus a lot of money. There might be certain circumstances—factors I call them also—that influence how the job is getting done. The interviews are open interviews, but you would be probing along those three lines, what’s the process? What are the outcomes they’re seeking? What are the circumstances that matter?

Rob: Got it. Okay, that’s a really good framework. That’s in your book, isn’t it?

Jim: It is.

Rob: Once again, that is The Jobs To Be Done Playbook: Align Your Markets, Organization, and Strategy Around Customer Needs. It’s Jim Kalbach if you want to find that on Amazon. I’ve never done Jobs to be Done interviews before having a product or idea, to be honest. I’ve always said, not always, but for about the past 15 years of doing startups, if you’re not solving a problem for a business, you probably shouldn’t build a SaaS company. That’s kind of become the mantra.

I’ve always believed in solving problems, but have never gone about finding them in this way, which I think is really interesting. Obviously, you can save a lot of time. As you said, you don’t have to build an MVP. Eventually, you do because you have to test it out, but at least, this is kind of your customer development/almost market research in a sense.

Jim: I think it’s customer development and it’s about product market fit, but looking at the market independent of the product, which you still might have to go into a couple of MVPs and cycles. But theoretically, what Jobs to be Done does is it gets you closer from the start. You’re going to have fewer cycles of your MVP testing and things like that because you’ve already constrained the direction that you’re heading at. In other words, which part of the problem are you addressing? You’ve already gotten closer there than you might have had if you just threw a dart at the board.

Rob: Now let’s switch it up. That was the kind of pre-product, pre-idea, but then there’s these Switch interviews, which I’ll give you an example. Another TinySeed company, they’re called Churnkey, churnkey.co. Their H1 is, “Personalized cancel flows for a healthier subscription business.” You can imagine, they target SaaS companies and probably loot crate type companies. Widget appears when you click I want to cancel my SaaS account, and then there’s different flows you can build of, do you want to discount, do you want to pause? It’s just a super configurable thing.

As I said, they’re a TinySeed company so they have traction, but they’re not a kajillion dollar company yet. They’re on their way there. They have enough customers. I’m making up numbers, let’s say they have 100 customers right now, and they want to find out what direction they should take their product or what’s working and what’s not. Is that what Switch interviews would be for?

Jim: Yeah, that’s actually a really good place to use Switch interviews because you have a market that you’re serving, granted small, but there are people that have switched over to your solution, even if the solution was paper-based or Excel-based before. It doesn’t have to be a direct competitor. In other words, there’s a switch that happened and they said, okay, we’re going to try this solution.

What you can then do is take those people and reverse engineer their experience to coming to your solution to try to uncover that fundamental job that they were trying to get done independent of your product brand or solution. What Jobs to be Done then it says, okay, great, you’re using our product and you have a current experience with our product, what brought you to our product? It works backwards in a series of moments.

There’s a first moment, a first thought, that’s actually the last thought because you’re working backwards before they came to you. Then you want to go abstract back further, okay, well, what were you trying to do that led you to that thought? Okay, I’m trying to prevent churn. Then you try to go back to what they call the first thought. You’re reverse engineering their experience coming to your solution to try to get back to that problem. What’s the problem in and of itself independent of coming to your solution?

You’re not trying to understand the customer journey. You don’t want to understand their awareness and purchase decision of your solution. You want to know what they were trying to solve, and the switch interview gives you a technique to do that. Once I know that fundamental job, then I can start understanding the problem in and of itself.

Rob: Got it. Let’s say with Churnkey, I did 10 or 20 interviews and I found out the job is that the customer wants fewer people to churn, that they want to save more accounts. Do I take that and figure out what features to build, or do I then do another round of interviews?

Jim: You reverse engineer. I would forward engineer. I know that’s not a word, but I would then use some Jobs to be Done techniques to say okay, what’s the process of doing that thing and use some of the techniques that we talked about in my previous answer around what’s the job map, or what are the biggest pain points there. Have that conversation independent of your solution because you don’t want to cloud your bias by oh, we tried that already, that’s going to be hard to implement, and all these things that are kind of innovation killers. You want to really understand that.

I reverse engineer with switch and then forward engineer before you get to okay, what is the solution going to be to think about that problem independent of your solution for a moment. Here’s the thing about Jobs to be Done, you’re always going to talk about your brand, your solution, and your product. That’s not not going to happen in your organization.

What Jobs to be Done says is let’s temporarily suspend our own biases of the world and think about the problem independently. It’s a moment in time. Obviously, you’re going to think about how you’re going to go to market and what you’re going to build, but it’s a moment in time. Again, what the theory says is that you can see things from a different way and spot opportunities that you might have otherwise overlooked.

Rob: Okay. What I’d love to do is a quick, almost a roleplay, just a couple of minutes of a switch interview. I want to use a decision that me and my team had to make in the past few months. What we were looking for was a simple inexpensive marketing dashboard. All we want to see is how many YouTube subscribers MicroConf has. How many Twitter followers it has, not only today, but like a graph of that. How many people are in MicroConf Connect, which is our Slack channel? How many people are in our Drip email account? It’s just basic marketing things. How many website visitors, that kind of stuff.

We were on a previous solution called Dasheroo and they shut down. They basically were just like peace out. Then I went to Google and I started looking and settled on a solution. I’m not 100% sure we’re going to use them, but we at least have loaded our stuff in and we’re kind of trying it out. It’s called dashthis.com. Anyway, let’s say DashThis or you’re trying to figure out why I switch? What would you walk me through?

Jim: Sure. Since there is a solution at hand, what I would do is talk about you, your role, and your current experience with the product. Rob, tell me about the current experience that you’re having with this new product?

Rob: DashThis does seem to do what we need it to do. It has dashboards, it’s at the right price point. I think a lot of dashboards that I’ve looked at are $200 a month or more, and it’s just not worth that much to us. It’s not that important because we have a Google sheet right now, and that frankly does a good enough job. I think DashThis is $30 or $50 a month and that’s totally reasonable.

Jim: The DashThis, let’s talk about compared to that Google Sheet. What does that do that the Google Sheet can’t do?

Rob: Yeah, that’s a good question. DashThis pulls the numbers automatically. You […] into your YouTube account, Twitter account, or whatever, and it will pull them out versus the Google Sheet. Most of that is a manual process that someone on my team does a couple of times a week. In addition, DashThis is just like a more configurable dashboard and the graphs look nice. Google Sheet graphs are not the best.

Jim: What’s the problem with that person on your team updating the Google Sheet a couple of times a week?

Rob: It just feels inefficient and it’s just grunt work. It’s work that should be automated, it feels to me like.

Jim: Okay. Tell me a little bit more about the automation. It sounds like you’re saving time. Is there anything else that the automation does for you?

Rob: Yeah, number one, it saves time. Number two, it should be 99.9% accurate all the time. Unless there’s a bug, it’s accurate versus someone who can mistype, miscopy paste. I think there are errors that could potentially come up and it’s updated. With Google Sheet, it’s once a week or twice a week. DashThis will be updated in real-time all the time.

Jim: How does that make you feel then when you’re looking at the automated dashboard?

Rob: More confident knowing that it’s up to date and I don’t have to worry about why is there an anomaly here. That there’s a copy-paste error there or something.

Jim: It sounds like there’s almost a trust or confidence issue there too. Is there something also about it being updated that provides more insight than you might not have otherwise gained?

Rob: I’m not sure.

Jim: Are you seeing things in a different way? Are you spotting details in a different way?

Rob: What’s interesting is the graphs are larger, and so I can actually see trends better and I can zoom in. Again, Google Sheet graphs are limited in functionality versus DashThis has more clickability, configuring, zooming in, and all that. I do think there’s an advantage to that visually.

Jim: It sounds like if we can maybe wrap this up, what I would do as a researcher, I would kind of come back and start retracing those steps. We started with a product that you had to get, but then I started to compare that actually with the Google spreadsheet, then we got to confidence, and automation. Then the last topic you were talking about is the inability to pinpoint things quicker as well too.

I would start uncovering that and through multiple interviews, if I talk to the next person, and they say yeah, I have more confidence and the next person more confidence. It’s actually a confidence problem that you’re trying to solve. Now, let’s understand that independent of any solution and forward engineer from that standpoint.

Rob: That’s awesome. Thanks so much for doing that with me. I think that will be really helpful for folks.

Jim: No worries.

Rob: Jim, thank you so much for joining me. If folks want to follow you on Twitter, you’re @JimKalbach. As I’ve mentioned a couple of times, Amazon, Barnes and Noble, wherever greater books are sold, The Jobs To Be Done Playbook: Align Your Markets, Organization, and Strategy Around Customer Needs. Jim, is there anything else you’d like folks to check out?

Jim: Yeah, sure. We have this great online resource called The Jobs To Be Done Toolkit. It’s jtbdtoolkit.com. We have some online video courses, also live training. We do a free webinar every month. Then there’s a library of resources. We have some free downloads there as well too.

Rob: Thanks again, Jim.

Jim: Thanks for having me.

Rob: Thanks so much for joining me again this week. If we’re not linked up on Twitter, I’m @robwalling, let’s connect. As a reminder, next week’s episode is going to have a fun announcement that I’m quite excited about, so I hope you’ll tune into that. Be back in your ears again next Tuesday morning.

Welcome back to Startups for the Rest of Us. I’m Rob Walling. Every week for more than 11 years, I’ve been putting out content on this podcast feed to help software entrepreneurs. These days, it’s a focus on SaaS, but frankly, it’s anyone who’s trying to build an ambitious startup, an ambitious software product to change their lives or the lives of those around them.

Something I’ve said in some of the intros of this show is that you should be building your business instead of your slide deck, and that revenue is the best slide deck, that if your revenue tells a good story, you don’t need a slide deck if you did want to go raise money, and frankly, revenue solves all problems.

Today, I’m doing a solo episode, a Rob solo adventure as I tend to call them, and I’m going to be covering three topics today. The first is permissionless entrepreneurship. The second is why you probably shouldn’t become a media company if you’re starting a SaaS. If you already have an audience, great, but if you don’t, one of my most popular tweets ever is about not building an audience first if you don’t already have one. There are so many other and better ways to drive customers for your SaaS. Then the last one is just a fun little anecdote about don’t build what your customers are asking you for. Build what they actually need.

The first topic, the permissionless entrepreneurship, is something I’ve been thinking a lot about. I think it’s because I went to my older brother’s wedding last week in California. I was reminded just how different my life is now than it was growing up. I was the second person in my family to ever go to college. First person was my brother who’s four years older than me and it’s an extended family.

When I got out of college, I was making $15–$17 an hour at a job. I was an electrician and didn’t enjoy the work. I wanted freedom, purpose, and relationships, and it was hard to do a construction job. It was a long commute job that wasn’t fulfilling to me, wasn’t that interesting, and it was a grind. I remember really not liking it.

As I got back into my old hobbies, one of the things that I had learned to do in (I think it was) junior high was to BASIC, write code. I learned a programming language. It was fun to create things and I had made games, just simple text-based games.

What I realized is that it was actually a valuable skill that I could manage to capitalize on. But of course, what I had learned wouldn’t get me a job. I would drive to the library, I would check out books on what I thought and what turned out to be some technologies that were being used. There was Perl, PHP, and HTML. I didn’t know any of that. I wasn’t taught any of that in school.

Then I started writing code and hacked my way into being an entry-level developer, basically nights and weekends. Then I got a job as a developer. That got me out of construction and suddenly, I felt like I had more freedom to be creative. I was working for other people, in essence—it was either salaried or contract—but it was a path for me to escape what otherwise was a not a very happy existence day-to-day. Worked a lot of hours in construction and didn’t enjoy it. It was not fulfilling. It brought me no purpose.

Going back to my brother’s wedding, I was reminded that most people in my family are still there. We all came from that. It was striking some of the conversations, just hearing, like I’m in my 50s or early 60s and I just don’t like my job. I’ve kind of moved from one service job or one construction job to the next. My boss is this and that, and I dread Sunday nights. It’s just such a different world.

I’m not there anymore. The reason I’m not is because I didn’t have to ask someone permission to basically become an entrepreneur. My life changed when I started launching products, most of which failed early on, until that first success after years and years of doing it nights and weekends. My life has been changed much like so many people who listen to this podcast or in our community, especially bootstrapping, I think.

That’s something that I’ve struggled with a lot. I was under the impression for so many years—I think a lot of the world is—that this script and the narrative is that if you want to be an author, then you need to ask a publisher for permission. You need to get on the radar so the publisher will publish your book. If you want to be a filmmaker, you need to ask these movie studios permission for them to make your film and to give you a budget to do it. If you want to be an entrepreneur, you have to ask permission from someone with funding from a venture capitalist or from angels to do it.

That’s just not true anymore. That’s why I believe, like today, we live in the best time ever in history to be creative, to be a maker, to be an entrepreneur. It’s changing lives. Hopefully, that’s why you’re listening to podcasts like this one and anyone else who’s talking about entrepreneurship and actually showing you a real path, because this is possible and you don’t need anyone’s permission to do it.

That’s what I love about bootstrapping, is that anyone who wants to do it, and who decides they want to do it, and they’re exposed to it, you can do it. I had businesses doing $5000 or $10,000 a month and no one paying for those products (or basically making revenue that went into my pocket), knew if I was a man, if I was a woman. They didn’t know my ethnicity. They didn’t know anything about me other than I had this service that they wanted to pay for. It was transactional but in a good way. Transactional in a way that it just mattered if I solved a problem that was worth paying for.

That’s the beauty of entrepreneurship. That’s the beauty, especially of being able to bootstrap and get these things off the ground, really, without asking anyone else’s permission, especially these days. You look back 40 years and if you were to try to start a company, do you have to beg the bank for a loan if you don’t have the money? Do you ask, again, permission from venture capitalists or angel investors, and then it’s only if it’s a high-growth startup. There were just no single founder startup companies in the 70s, in the 80s. It just wasn’t really a thing.

I mean single founders who just kind of built great lifestyle businesses because the cost of distribution was you had to get into a big box store, or even just a software store. You had all this upfront cost to print discs, CD ROMs, and the artwork. That’s where Microsoft, Intuit, Oracle, and all these companies got really big because they had a stranglehold on that, and the Internet really democratized that for the rest of us.

I think I just want to leave you with a thought that we exist at the best time ever in history to be an entrepreneur, specifically a tech or a software entrepreneur, and that I feel like I have a newfound gratitude for the way it has changed my life. Because of these interactions with families, people who I love, and who I grew up with, but realizing that that’s where I was, I’m in a different place, and it’s purely because of this.

My hope is that you, whether you’ve had a modicum of success, whether you still aspire to be successful, whether you’ve had incredible wealth or lifestyle generation, freedom, purpose, and relationships, if it’s brought all that to you, I think we should all be a little more grateful.

That practice of gratitude is not only just a better way to live day to day, it’s a better way to live me to stay mentally healthy and all that, but I also think it’s a way to put positivity into the world and to just continue to make this community of mostly bootstrap founders, community of makers and creators to continue pushing that forward in a positive way. This community is outrageously positive, outrageously supportive of one another. That’s amazing and I want to keep it that way. Those are my thoughts on permissionless entrepreneurship.

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The next topic I want to talk about is that all startups these days should become media companies or that they are becoming media companies. I’ve heard this in some podcast interviews. I listened to put it online. There’s been some forums, kind of marketing forums that I’m involved in, some private Slack and that kind of stuff.

I would caution you against following this advice, thinking that it is the right way to do it for a kind of startups of our size—SaaS apps wanting to become a million-dollar- or a $10-million-company—instead of the companies that we see are doing this, like the multi-billion-dollar companies like HubSpot, for example. HubSpot has acquired a couple media properties. Didn’t they acquire the Hustle? That’s right.

It can seem like they know what they’re doing and boy, that sounds fun. I’m a podcaster, I want to run a media company. I want that to be our main marketing channel and not have to do the really hard work of cold outbound email, or SEO, or that kind of the tried and true approaches.

I just want to caution you against blindly following a tactic or strategy that multi-billion-dollar companies are doing, HubSpot is an example. Drift does some things really well, but they’ve raised a gajillion dollars. I don’t know what their current valuation is, but it’s got to be in the 9 figures, if not 10. Whiskey has done a bunch of media stuff. Moz did back in the day. Even Jordan Gall with Rally is kind of doing a media arm, but he has raised, I believe it’s a public number, it’s many millions of dollars in funding.

That’s what I’m seeing, is that the companies who are doing this and actually making it work are way further down the line, or they have millions or tens of millions, if not more money in the bank. It’s such a long-term play. Building a media brand is very, very expensive and it’s a several year timeframe, because you start a podcast, a YouTube channel, or whatever else building a media brand seems to you, whatever it means to you. And it’s really good and catches on super quick. That’s like 6–12 months before you have any type of meaningful audience, and then 1% of those people will actually convert to customers.

If I were building a SaaS app these days, I wouldn’t be starting a podcast. If we were in the first couple years of Drip, there is no way I’d be starting a YouTube channel or a podcast at that point. There are harder ways, but better ways to get customers.

Here’s the problem, they’re less fun. They’re hard, but they’re not fun. It’s the business development partnerships integrations, it’s PayPerClick advertising, it’s content marketing, it’s SEO, it’s cold outreach, it’s the SaaS marketing playbook. It’s all the approaches that I could list that when you hear you’re like, oh, those are a grind. Those don’t sound fun, because I just want to make a great product, and I want it to sell itself, and I want it to be viral. I want to be able to just hop on a podcast and have people come suddenly in droves. The podcasts are so popular that it drives people to come and use my app.

It’s easy to convince yourself that the approaches I just mentioned aren’t fun. I don’t want to do them or even here’s the other way, the kind of nefarious way we sabotage ourselves as entrepreneurs is, those don’t work in my space. Those don’t work in my industry or with my product. My product is this unique snowflake and any of the things that I mentioned SEO, content marketing, pay-per-click, integration marketing, cold outreach, those things aren’t going to work.

I find that that’s usually said by founders who don’t want to do the grind. They want to go and do the fun stuff, which look, I like doing the fun stuff. I like podcasting. I like live streaming. I like interviewing people, doing conference talks. That’s all media brand stuff. I’m in a different spot. I’m not building a SaaS app these days, a tool that solves a specific problem and then trying to cast this huge wide media net. I’m in a completely different ballgame running Startups for the Rest of Us, MicroConf, and TinySeed.

Yes, the media brand thing does sound fun. I think it’s a great mistake if you don’t have millions in the bank and a many year time horizon before you need that to pay off.

I’ve talked about in the past, just freemium work, or doesn’t it? It’s not a does it work or doesn’t it, and neither is a media brand, does it work or doesn’t it. These things have very long time frames, they’re very hard to get right, and usually unless you the founder are going to do the media work yourself and you’re gifted at it, it’s usually a very expensive proposition to do it.

The bottom line is like you and I both see it. There are so many crappy podcasts, video series, and YouTube channels that just come out from businesses. They’re kind of doing content marketing or they’re trying to build that media brand, and frankly, no one’s listening to those. I think if you already have an audience or a brand right now, and you’re going to use that to kickstart your SaaS, of course you should do that. You should leverage every advantage that you have, but to sit here and think well, my big go-to market strategy is to build a media brand and then drive customers to a B2B SaaS app that solves a very specific problem. Again, will it work? Yes, it’s possible.

I think a lot of people waste a lot of time because it’s easy to do it poorly. If you don’t have millions in the bank, a many year timeframe to build it up, or the ability like HubSpot to just acquire a media brand that’s already there, then nurture that—I mean, they’re building a whole podcast network—it’s tough. I will say there are ways to kind of bring things that larger companies are doing, downsize or microsize them to where they might be able to work at our scale, but I wouldn’t put that at the top of my list of things to do if I were at $5000 MRR, $20,000 MRR.

There are, I would say, more critical, more important, more proven things in the marketing playbook to drive new leads to SaaS that can either work faster or more reliably, and more repeatedly than going out and starting a podcast or a YouTube channel.

The next topic I want to talk about is just a funny old anecdote that I remembered in the early days of building Drip. The lesson from here is to find out what your customers need, not what they asked for. Customers used to write in and say, I want an integration with Google Analytics. I want Drip to integrate with Google Analytics. I remember sitting down with Derek and saying, what does this mean? They want us to hit the Google Analytics API and pull out data and crosscheck? What are they saying?

We would ask folks like, what do you mean by that? It’s like, well, I want my Google Analytics data to update and it was kind of like people almost didn’t know what they meant. They just wanted there to be more stuff, but didn’t really know how to describe it. Then at some point, someone said—a customer—I want to be able to see when someone clicks through a link in a Drip email that it shows up in Google Analytics when someone converts, when they hit the site, and when they do things.

I was like, okay, so that’s just UTM parameters? And they said, yes. I said, do you realize you can just add UTM parameters to any link at any time by putting a question mark, and then UTM_, and the name of the parameters? I don’t remember if they said they didn’t know and that helped them. I think that was a temporary fix.

What we realized was that, since it wasn’t surfaced in the UI as this field of like enter UTM params here, check this box to make UTM params available, maybe have global UTM params that by default are set, and then you can override them, these kinds of concepts, none of those were in the UI at this point. This is early, early on. This is 2014 even before we had product/market fit.

Later on, we built it. It was not like a super top high priority, I’ll admit. Once we found product/market fit, I remember starting to add these things into the UI and people being so happy that we had integrated with Google Analytics. I would never call that an integration. An integration is when you hit an API, whether it’s a legitimate API, or you’re scraping, and you’re pulling or you’re pushing data in, this was just adding query string parameters. But that’s the words that our customers were using.

We had to dig in and interpret, not what they were asking for because at one point, they’re looking at the Google Analytics API and saying, what can we push in and pull out? That would have been wrong without the extra information.

Moral of that story, something I’ve said many, many times on this show before, but it’s when customers ask for something, they often will ask for a checkbox to do a specific thing, but when you dig in, they don’t want the checkbox. They probably want your app to do that automatically. Or they asked for a really complicated, convoluted way to get to some very specific thing, and you realize, oh, if I built a generalized version of this, that will solve all of their problems.

That wraps us up for today. Again, today, I talked about permissionless entrepreneurship, about why—if you’re early stage or bootstrap SaaS—you probably shouldn’t become a media company, and then wrapped it up with the story about integrating with Google Analytics. Thanks again for joining me again this week and I’ll be back in your ears again next Tuesday morning.

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You can head to bit.ly/tamegoogle to learn more about Software Promotions, or head to softwarepromotions.com and let them know you heard about them on Startups for the Rest of Us. Thanks to Dave and Aaron for sponsoring the show.

Rob: You better believe it. It’s Startups for the Rest of Us episode 575, where Derrick Reimer joins me to give a quick update on SavvyCal and what he’s been up to lately. He’s actually thinking through a hiring decision, and then we dive into listener questions. We talk about shipping code as a bootstrapper versus a large team, talk about pivoting and a zoom-in pivot—talk about what that means—and we answer more listener questions. Hope you stick around and join us.

Before we dive in, MicroConf Remote 3.0 is happening November 30th, December 1st, and 2nd. This is our third MicroConf Remote which is a virtual event. It’s the No-Code guide for B2B SaaS founders. We’re going to take a look at the ever-evolving world of No-Code, its implication for SaaS founders, and the best ways you can incorporate No-Code across your stack from marketing, to sales, to SEO automation, and more.

Once again, we will be using a really cool community platform that simulates the hallway track. It’s not just people talking at you. We usually have 20 minute conversations or talks, followed by 10 minutes of Q&A. Then we roll into hallway track time. You can walk around in a virtual world and meet other folks to simulate that.

It’s not a replacement for an in-person event, but we found a lot of folks who attended the remote events were folks who had never attended a MicroConf before because the stakes are so much lower here. The tickets are really inexpensive. It’s a few hours of your time over a couple of days and so it’s a great way to dip your toe in the water if you have enjoyed the previous remotes or if you’ve never been to a MicroConf.

Head to microconfremote.com if you want to get notified when tickets go on sale. With that, let’s dive into my conversation with Derrick Reimer, where I get an update on SavvyCal, and then we dive into listener questions.

Derrick, the last episode you were on was 532. This is episode 575, it’s been 10 months. You were back in January of 2021 and here we are in November. You want to update folks on SavvyCal and what’s been happening? I know that folks probably heard about your product launch back in January and you actually did a talk about that at MicroConf Remote, but you’ve been public about an MRR milestone you hit.

Derrick: Yeah, we’ve just recently crossed $20,000.

Rob: Congratulations, man.

Derrick: Thank you.

Rob: How’s that feel?

Derrick: It feels kind of surreal, honestly, because it’s one of those milestone markers that you always kind of envision in your mind when you’re thinking about building a SaaS. I mean, the first one’s $10,000 and then the second one is naturally $20,000. To me, $10,000 is you can pay yourself a pretty good salary and as long as you keep things pretty tight on other expenses, you can be profitable.

Then $20,000 to me is like okay, I can pay myself probably closer to a full salary and still have revenue to cover growth expenses, it’s really starting to get interesting. It’s pretty surreal to be honest.

Rob: Yeah, and you have no employees so your costs are very low. I know your server costs are relatively low and you have a couple of contractors and stuff, but that’s a nice place to be in. TinySeed salary […] quarter a million. You can ratchet that up as much as you want.

Derrick: Yeah.

Rob: It does bring up an interesting point. For those keeping track at home, $20,833 is a quarter million a year. It’s a quarter million ARR. What’s funny is aside from a million, I’ve rarely thought about ARR multiples. For some reason to me, it was always the MRR, right? The $20,000, $25,000, $30,000, $35,000. Is that your mental model as well? Are you focused on MRR?

Derrick: Yeah, pretty much. Although I’m kind of obsessive about checking my profit graphs and seeing where we are at currently, what’s the projected based on the way churns operating, conversion rates, and everything, and that’s constantly surfacing ARR in front of me. I’m probably a little more aware of it just because my metrics dashboard has it on it, but yeah, I’m always thinking MRR.

Rob: A lot of sales multiples are based on ARR. If you were to exit—I know you’re not planning to do that—it’s good to keep that in mind. It’s a trip because you’ve made it this far with no employees. I referenced this already and you’ve done something, in fact, that if a founder came to me and said, I want to be a sole developer and I want to hire out my marketing strategy to a consultant, contractor, and I want to outsource support as well, I would say, not sure you should do that. These are kind of core competencies of a SaaS app, but you’ve pulled them off. You both have been successful. How did you do it?

Derrick: I was just tweeting about this earlier because admittedly my end is one here. I don’t know how repeatable this is or how generalized this advice is to say this works all the time. On the marketing front, it was sort of serendipity finding someone like Cory Haynes. He’s a unique type of person where he has a lot of experience on this front. He’s ambitious, he’s building his own stuff, but was in a phase of looking for consulting work to bridge the gap.

He’s able to operate at the owner-level thinking and operating, that I think is probably pretty rare to find in a part-time contract person. I’ve been able to benefit from that and I don’t know where you find those types of people.

I’ve been asked before, I want to find a Cory and it’s like I don’t know how to tell you where exactly other than hanging out in MicroConf Connect, in the circles, and spotting someone who’s working on their stuff and looking for something to bridge, I guess.

Rob: People call it a unicorn and not in terms of the billion dollar outcome, in terms of someone who is so unique. A developer who can also market, or product person who’s really good at UX, and also back end development like yourself who can go all the way from front to back, that’s it, unicorn.

There are only a handful of Cory Hayneses that I know, of people at that caliber who can do marketing strategy, which is that owner-level thinking you’re saying, because from my understanding is he came in and you’re like, cool. What should we do? He was like, well, I have all these ideas of things we could do, and you’re like, great. Can you go do them? Which is marketing tactics or marketing implementation.

Those are two different levels and they’re usually two different roles at a company, and to find one person like […] is another one who can do that. Back in the day, that was a role that I did. I wasn’t as nearly as good as the two people I just mentioned, but it was something that I felt like I had to do because I couldn’t find anyone to do it and didn’t have the money to hire two or three people to do it. That’s often why people raise funding. It’s to be able to hire these roles.

Derrick: Yeah. I like to think that I’ve been trying to build up my skills in this area. I have some generalist founder skills in the area of marketing, but still not as specialized as the type of stuff that Cory has been steeped in for so long.

We talked about the product launch and I was like, yeah, we should do that. It may or may not work, we’ll see. Then he proceeded to layout a doc and architect a strategy that’s multiple pages long of, we’ll time emails at this point, we’ll reach out to some people at this point, and send an email to the list like this, and we’ll make sure to focus on this part.

It was just very meticulous and well-planned. I think part of it is luck and part of it is execution on the results that we saw from product time. If I were just my many hats wearing founder person doing the product launch, I probably wouldn’t have put nearly the amount of time into it just because it spread so thin already and maybe wouldn’t have seen the same results. It’s been good to have someone like that on the team.

Rob: I think so. You hear me say it ad nauseum, hard work, luck, and skill. I think you finding Cory, there was some luck involved in that. Also, you put in the hard work of having a podcast and building a personal brand to the point where it’s probably pretty appealing for Cory to work with you and work on SavvyCal because he knows that you’re not a schlub, the products good, the odds of it succeeding are good if he brings his chops.

Derrick: Right, yup.

Rob: Very cool. Anything upcoming that is super interesting or happening right now that you want to mention?

Derrick: Things are feeling like they’re starting to kick in. To summarize the last year, it’s been a lot of investing in different things, podcast sponsorships, PayPerClick ads, affiliate programs, and SEO. We’re trying all the tactics and trying to invest in them appropriately, and it feels like things are starting to really kick in. We just had our best growth month in the month of October since February, since right after the product launch, so that’s been exciting.

I think coming up, I am always flirting with when is the right time to expand my direct team, the product and engineering side of things. I’m still basically doing all of that work. I’m actually having a couple of conversations that I’m pretty excited about with some potential first engineering hires, so that’s pretty exciting. It feels like a big step and one that I’ve been kind of tiptoeing towards because I know it changes things significantly, but hopefully for the better to bring someone in on that side.

Rob: Especially if you’re bringing the right person, right? Someone who really, really elevates it. I feel like a good piece of this is like you’ve already been through this with Drip. It was just you for a while and I know that I did a lot of the initial interviewing and stuff, but then we co-interviewed and kind of went like I don’t know, should we hide this person? Yes. You know what this feels like.

Derrick: Yeah, it’s been demystified a little bit.

Rob: Exactly. While we were still bootstrap before the acquisition, we went from one to what was it, three engineers? I think we were three, then got acquired, and then by the time you and I left, were we 16 engineers, 18 engineers? You’ve seen it grow.

I had joined some companies early, before all of this when I was still working a day job. I had joined maybe a four-person engineering team, I think was the smallest that was ever on, aside from consulting firms where oftentimes it was just two of us, but we’d gone from 4 to 24, and I knew that I didn’t like the larger teams, but I had never been a sole engineer and grown it like that like we did with drip. You kind of know some of the mistakes that we’ve probably made and you’ll do it differently this time, right?

Derrick: I think last time with Drip, we were sort of trying to be very scrappy, we’re kind of funded by HitTail. Like how can we get some help without it hurting the bank account balance too badly. Thankfully, with the help of TinySeed funding right now, we have the resources to go after a more senior level hire, which is going to be pretty exciting. Once we got to the post acquisition phase and we were kind of building the team with senior engineers, it was very nice to bring in someone who could really slot in quickly.

I’m all for hiring juniors and training them. I think there’s a lot of value in doing that, but I feel like at the stage I’m at right now, the company will really benefit from having a senior level person right now. Then we can work on training juniors when we’re a little bit more mature.

Rob: Yup, and why is your first hire an engineer versus any other role you could hire in a SaaS company?

Derrick: Part of it is I see myself holding back on certain opportunities to move the business forward as kind of the founder and business person because I’m so focused on product. I have a very long roadmap. There are lots to build. I can kind of peek into the future when I do some exercises of trying to just set a vision for where we can take things, and I just know there’s a ton to build.

If I’m focusing all my effort on that, then I’m probably missing out on other opportunities to kind of oversee the overall vision of the company. Getting some help on that front so that I can free up some mental headspace is going to be really important.

Rob: It’s interesting we’re on this topic, because our first listener question of the day is pretty much about how should a bootstrapper approach software development tasks differently compared to executing a project at a company.

Derrick: Great segue.

Rob: Yeah, it really is. I apologize to the question asker, Pramad. He sent this back in April, so it’s been a few months. I’m sorry, sir. Haven’t done as many listener question episodes, and also voicemails and video questions go to the top of the stack. If you have a question you want answered on the show, you can email it directly to questions@startupsfortherestofus.com, or head to the website, and you can click a button. There’s ask a question at the top and we use video ask, and you can just click and submit an audio snippet from your phone, or your laptop, or a video as well.

Pramad asks, “It seems to me that the early stages of developing a product as a bootstrapper need a different approach compared to executing a project at a large company. Practices like writing detailed design docs, unit testing, and code quality don’t help as much.” I’m cringing a little bit when I see code quality and unit testing, that matters much but I’m going to get through this, detailed design docs I agree with. “The ambiguity is a lot more and so are the constraints on how you can execute. Have you noticed such differences in how a bootstrapper approaches day-to-day software development compared to executing a project at a larger company?” What do you think, sir?

Derrick: I’ve thought many thoughts around this. It is a tricky balance to strike so I don’t know what stage our asker is at on his particular product. I think things shift a little bit, if you’re building an MVP versus building a product that you’re pretty set on continuing to build out.

I can kind of speak to both phases. The MVP phase is the hardest one to strike this balance, I think, because on the one hand, you risk over engineering things. You spent too much time on bulletproof code and then if you’re using truly as an MVP, and you’re testing in the market, and you determine it’s not actually viable, well, now you’ve wasted all this time building a really good version of something that’s never going to see the light of day.

The flip side is that you end up building something that’s really really brittle, really buggy, and maybe you validate it, and you start to get some traction. Then suddenly you have to grind to a halt because it’s time to rewrite and build the real product from the ground-up and then you miss out on all the momentum that comes from getting it into market.

I’ve seen startups do both. My instinct is to lean on building something like a code base that if the MVP proves to be viable, that you can continue on that code base and not have to stop and rewrite.

For me, I’ve kind of gone through different phases in my feeling very adamant about lots of tests. When I was a newer developer, I was sort of steeped in the Ruby on Rails culture of test, test, test, test everything and it’s definitely really important. I think there is sometimes a tendency to over test.

Sometimes you just write tests around things that don’t really need to be tested like little granular unit tests that don’t necessarily provide much value and even make it harder to build out and mutate your codebase over time.

You do some of those things for important little bits of logic that have to be right, but in general, I would focus more on kind of integration tests like testing the entire system, focusing on your really core functionality, and what tests help you do? Yes, it helps ensure correctness, but they also help you architect better code and that’s kind of the hidden secret about writing tests is your code quality comes out better by nature of running that process.

That’s what I think on testing. I wouldn’t want to skip the test. I’ve definitely probably written fewer tests for SavvyCal than I did for past products in the name of moving fast, but I’m definitely testing that core functionality heavily to make sure it’s correct.

I have other thoughts, too. I say err on the side of writing monolithic code bases. You see larger teams building microservices and separating their front-end from their back-end and building API layers in between. That stuff that teams do in order to kind of have independent teams have to take responsibility for different parts and that’s only going to slow you down and over complicate things when you’re building your product.

I’m a big fan of the monolith code base where everything kind of deploys together, lives together, and you can lean on tooling. Ruby on Rails has fantastic tooling for building server side views that spit out HTML, then you can layer on React if you need that, but I’ve kind of stuck with this sort of hybrid model of if a page can just be server side–rendered HTML, then just do it that way. If it needs something more complex, then you can pull in something like React for that page.

Rob: Yes, that’s my tactic as well. It’s a little old school, but it is just simple. I think Drip, which is quite a complicated app. Most apps people build, not putting as much data through. They don’t have the billions of rows. They don’t have the tens or hundreds of millions of queue jobs that are being processed every day. It was intense.

I think we were doing close to $10 million ARR and it was purely still a monolith. Eventually, they had to break out for performance and because once you get 16–18 engineers, having a monolith is a problem. To your point, you can make it to life-changing levels, especially if your app is even simpler, but you can make it further. This is kind of what I’m saying. Keep going. You’re on a roll there.

Derrick: Yeah, I think it goes without saying, go light on the process. I was thinking back when we were building the drip MVP, we had the spreadsheet. We just made a list of features and we put our estimates on them, which I think helped us to wrap our minds around how much time is this actually going to take? Do we need to cut scope if we want to come in at the time that we were hoping to meet? What’s that function called in Google Sheets? It’s like work days or work hours or something?

Rob: Work days, I think.

Derrick: Yeah. It was kind of a scrappy solution, but it was actually pretty interesting to track that and see are we falling behind on what we’re aiming to achieve? Or do we need to cut some things? Or can we afford to add in some things? I think the most important thing there is that it was very, very lightweight. We didn’t implement JIRA from day one and over process this thing. This is the approach I’ve taken, I’ve gradually layered on more processes.

One thing I have done, though, is I set up continuous integration early from the get go. Every time I push code to GitHub, it’s running through CI, running the test suite even though the test suite is tiny. You have those parts there in place that kind of reinforce your best practices.

I’ve been doing GitHub workflow from day one, even though I’m just one developer, I’m still pushing code on branches, cutting pull requests, I will kind of self-review code and just give it a sanity check before merging it. That’s a good muscle to build up to as opposed to just pushing everything on master all the time and sort of just build bad habits. I think there’s a lot of benefit to still pretending like you have a small team with you so that you’re kind of ready when you bring on your first hire.

Rob: Right, but also not writing a three page Word doc to describe a feature. In fact, if I was writing the code, I wouldn’t write anything about the feature unless I needed to think it out. If I had it in my head, I would build it.

If you need docs, you can write docs later. Nobody will go back and look at the design docs. They’re going to look at the code. The only thing that I would document is if you make a decision and you know this is either counter-intuitive, or it’s something I really want to remember why I decided to do this, then document that somewhere. Is it a gist you do it in GitHub?

Derrick: Yeah, that’s one place you can do it. It’s basically like a lightweight document that lives at a URL. That’s a good way to do it. I feel like that is honestly my guiding principle on when I put code comments in. Code should be pretty self-explanatory, but when there’s an odd decision that was made, or something that’s kind of unique, or special about that decision, that’s the place to drop a comment, in my opinion.

Rob: If you’re working solo, it’s one thing. If you had 20 developers, then you have all this process that Pramad is asking about. Let’s say you had one or two developers. There’s an in-between where you have to have some processes. At that point, Derrick, let’s say you’re running product, in essence, and also coding, then you have two developers. You’d be developer-heavy, but for the sake of argument that’s what you have. You would have to put something into it. It could be a Trello board, it could be Notion board, it could be GitHub issues.

To say build this fee, add this setting on this page, this is what it should do. If it hits this controller, does this thing in the database, you can use an existing field. I’m mixing product and technical design here, but that’s a luxury you have. You can do both. You don’t need two people, right?

Derrick: Yeah. I think it’s knowing you achieve a certain level of understanding and context by onboarding the new engineer. You probably should be spending time with them. Probably a two-ple or something like that, pair programming, and getting them up to speed on the code base. Then at a certain point, it’s like, all right, how much information do I actually have to spell out about this next feature?

Certain things are going to be obvious, and then there are certain non-obvious things. That’s what I always spend my time focusing on, pointing out the parts that are non-obvious and foregoing being complete and comprehensive at that stage, because it’s going to slow you down quite a bit and probably not provide much value if it’s just a couple of you.

Rob: Yup, as little process as possible because it allows you to move faster. Your biggest advantage at this stage is that you can move so fast compared to larger companies because they do have a need for so much more process.

Derrick: Indeed.

Rob: Thanks for the question, Pramad. Hope that helps.

Next question is from Victor, who was just from a month ago. How did that happen? Well, I’m glad we’re able to get to this so soon, Victor. He says, “Hi, Rob. I’m a longtime listener, a huge fan. After listening to the podcast for more than two years, I created my startup six months ago. Now, I’m considering a zoom-in pivot, but there is another startup offering the same service and they have been recently acquired. The market is far from overcrowded, but I wonder would you pivot and enter the market, if there was a startup offering the same service with potential access to a huge amount of money?”

For those following along, zoom-in pivot is where you build a product, then you either realize that there’s a specific vertical that you want to zoom in on, or I believe, you can zoom in on a specific feature. Like, we’re going to get rid of half the app. This one piece is what everyone loves. We’re just going to ditch the rest. I think that’s my interpretation of a zoom-in pivot. What are your thoughts on this, Derrick?

Derrick: I would say, just because there’s a well-funded competitor in the space doesn’t mean that it’s necessarily a bad idea to go in there. That’s what I’m doing myself. I’m entering in the scheduling space. There are 800-pound gorillas galore in that space, and I’ve managed to carve out a little slice that I’m working on building. It’s definitely doable.

I think I would be thinking about, do you have any particular unfair advantages in that space? I think it’s much harder to enter a space like that. If you don’t have a deep context about the market, know the pain points, maybe have connections or a network in that space that you can use to initially get your product launched in the market. Are you insanely skilled in an area where the big competitor is lacking? If customers value UX in that space and the large well-funded come in and just don’t have that in their DNA, that’s your opportunity to seize.

I’ve heard people say, like, well, they can just hire people and get better at UX. But that’s a lot easier said than done. Companies that don’t have something like that in their DNA, as an example, do have a very hard time getting really good at that. Something like that, that you can leverage to your advantage to make you stand apart. I think that the important thing is figuring out what your key differentiator is going to be, then honing in on that really strong. If you’re thinking about zooming in, that sounds like you might have a hypothesis about something that you have a unique take on or will really speak to a burning pain point that maybe a subset of the market has.

I think that’s the other piece. I’m competing with well-funded competitors. By nature, a lot of these competitors have positioned themselves very broadly. Calendly is easily scheduling ahead. That’s their H1. It’s not speaking to any specific pain around scheduling. It’s just like we make it easy, because they’re speaking to a really, really broad market segment. That gives me an opportunity to speak a little bit more narrowly to something more specific that people are experiencing.

Rob: I think that’s really good advice. I think the only thing I have to add is not only are they a well-funded competitor, but they’ve already been acquired. Once a company is acquired, the founders are usually not going to stick around 10 years to drive it like they have. There’s a clock ticking for them to leave. If they had just raised a huge funding round, then it’s like they’re trying to get to exit or that get to the next round.

I’m not saying every founder who sells checks out or anything like that, but some do. Also, the odds of these founders being around in two, three, or four years are small because they got their payday. That’s even more reason that I think that you could probably make up some ground on this startup. I wouldn’t be concerned by this very much at all.

All right. Our next question from Lorenzo is about whether to use a progressive web app—we’re going to abbreviate it as PWA—or a native app for a SaaS startup. He says, “Hey, Rob. This is Lorenzo from Italy. I’m working on a concept for a new SaaS startup and I’m thinking of bootstrapping. My next concern is how to keep costs under control, manage complexity at a reasonable level, and create a platform that is future proof.

Among my doubts, there’s one related to the technology to be chosen upfront to build such service. I would expect it would be used 70% from mobile and 30% from desktop, would you suggest I develop the platform as a progressive web app (PWA), or two native separate apps, one for iOS and other for Android?

I’m inclined to do a PWA but I have doubts, given that only Google seems heavily committed towards this format. It seems to me Apple still prefers native apps on which they can have a cut of the monetization within the app store. What do you think?”

Derrick: I think it’s extremely difficult to pull off implementing multiple platform versions of your same product. We’ve seen many examples of this from the history of startups. Facebook being a big one. Historically, they had native apps only and they pivoted over to being a web app. I think they’ve gone through different iterations.

They have React Native now, which could be an option of taking web code and compiling it down into a form of native code. There’s certainly one way to achieve this on desktop apps, like Slack for example. It’s still an Electron app, still a web app running in a shell.

We’ve also seen another example from the community. Twist (I think) is a Slack alternative. They were for the longest time committed to building native versions of their apps, trying to optimize for a very fast, snappy, and native feeling experience. I think they recently pivoted away from that as well, because the burden of doing that is just extremely high.

Every single feature you add into the one UI, you now have to go and write code to implement it over there. You end up with things naturally drifting apart, synchronizing engineering schedules, not to mention the cost of doing that is pretty immense. I would strongly recommend unifying it under one code base, and just opting for either using a web wrapper technology like Electron, or something like React Native that might let you reuse the same parts and compile it down into native.

Rob: Usually, I have a bunch of things to add on to these answers. But really, I was basically going to say, yeah, don’t do it. These big companies try it and it’s like Napoleon invading Russia. They run in, like it’s cold, it’s cold, and they run out. It’s like that over and over. It’s happening, right? Was that the 1800s? The joke was not a good one, was it? It’s actually a reference to an Eddie Izzard comedy sketch. Go check that out if you haven’t seen it.

Is white labeling an option for getting started? That’s our next question from Devin Tracy. He says, “I’m not technical, and I’ve never owned a SaaS. So when I started listening to your show, everything was just entertainment for me.” That’s funny. Entertainment, this show. “But now, I have white-labeled a SaaS that I’m starting to try and market and sell as my own. Suddenly everything you say has relevance beyond the entertainment.” That’s cool. That’s once you start doing things. That’s usually what happens.

“I’m curious about your thoughts on the white labeling approach I’m taking. I do hope to have my own SaaS one day, perhaps learn coding, more likely be a non-technical founder. I’m hoping this can be a good route to help me get my feet wet, maybe even build some revenue. I love all you do and appreciate the podcast. Much gratitude, Devin” What do you think of this?

Derrick: I was actually trying to understand how the model is working when he’s saying white labeling. It sounds like there’s a product that he has licensed to become a reseller of it sort of thing?

Rob: Pretty much. You can imagine, let’s say that there was an email service provider. Whether he’s paying them X amount per month as a flat fee or per year, or he’s paying 30% of his revenue that he generates to them, but then he has his own website, own domain, own logo. Usually, this is like a white label is to go into a vertical. There’s an ESP selling to everyone and then you want to build this ESP for realtors. You just pre-populate it with content for realtors, you market it to realtors, and you call it realtyesp.com or whatever. That’s a terrible name, don’t use that, but that’s the idea. He didn’t say that, but let’s assume that’s the example.

Derrick: In that case, it seems like this could be a good stair-step. I think especially if you’re looking to level up your chops on the non-technical side of things, on marketing and selling. If you’re looking to experiment with figuring out how to do SEO, do a content strategy, do pay per click or partnerships, sponsorships, all those things, I feel like you could practice those skills and deploy them with this off-the-shelf product that you’re bringing into a new market.

If you’re looking at another big part of operating your own SaaS, is developing the skills on how to interview customers, iterate on product-based on their feedback, set your roadmap, managing development cycles, all those things. It depends on what skills you’re trying to develop. I see no issue with using this. This sounds like his goals are to bring in some revenue, and to level some skills in a particular area that will apply to someday running his own SaaS. To me, it seems like this could fit that bill nicely.

Rob: I feel similarly to this, because the whole point of the stair-step approach is that it’s really hard to learn everything all at once. It’s like there’s product, there’s engineering, and there are all the things around marketing. When marketing itself has 20 different things, you have to learn to be any good at it. Then there’s sales, then there’s support, then there’s operations, on and on and on. Learning all those things at once is really tough. That’s why a step one business eliminates a bunch of that. Usually it’s in a marketplace or something. So you don’t have to learn all the marketing. Maybe you’re just doing the coding, some promotion or whatever, some ranking, but then it’s support.

This approach of white labeling is similar. As you said, he’s trying to limit the number of things he has to know, all at once. Then he can learn other things, the innovation, or the product management, taking in customer requests, and actually going and building stuff. You could learn that later. There are obviously risks here. You have platform risk that is crazy because you are beholden to someone who, I don’t know, can they revoke your license? Could they just shut the whole thing down and stop supporting it? There’s risk there.

For me, I wouldn’t be like, I’m going to build this $5–$10 million business and exit. I would be concerned about trying to do that. But I could see building a cool lifestyle business on this, that $10,000, $20,000, $30,000 a month with just you. You don’t need developers because you know that you’re paying this other company, essentially, to develop it or to maintain it or whatever. You just have to handle support and marketing. Really? I’m intrigued with that, especially as a non-developer founder. I’m curious. I mean, Devin, I hope you update us because I haven’t heard anyone do this before.

My initial take is similar to Derrick’s. I don’t see why not. If I wasn’t a developer and wanted to do a SaaS app, I think it’s an interesting approach. Aside from the platform risk where you just have to go into a vertical, because there’s no innovation happening here.You’re not able to make the decisions of what gets built.

If you go into a space where it’s a constant feature race, you’re going to get out-featured. If you were in the scheduling link field, or if you are an ESP that’s not niched down to a small vertical space, I think you’re going to get crushed because you’re just not going to have anything unique to offer the market. That’s probably a word of caution. I would look ahead into spaces where it’s not that feature race and the constant need for innovation.

Derrick: That’s good advice. Also, a big part of making progress towards having your own software product is making sure that you are tackling a worthwhile problem. I feel like this could be an interesting way to discover. I don’t know if this is a field you would want to continue staying in, but you could potentially build up something here as you build this business that would help you towards your next endeavor. You don’t feel like you’re going to have customers in this space, contacts, partners, whatever.

You may discover this product is not cutting it anymore, this white labeled one, but maybe you have an angle on solving problems for this particular group of people that then you can start head down your path of partnering with a technical founder or whatever. I think it could be a good way to learn some deep insights that will inform what your next product could look like.

Rob: Indeed. Thanks for the question, Devin. I hope that was helpful. Our last question for today is from Nicholas. He says, “Broker or no broker when selling a single-founder business?” Nicholas says, “I was wondering your thoughts on when selling a bootstrapped single founder business with no employees whether to use a reputable broker to facilitate the entire process, someone like Quiet Light Brokerage or to use a marketplace like MicroAcquire or Flippa. When is using a broker worth their cut of the deal?”

Obviously, there are other brokers. There’s FE International. I’m trying to think of who else, like Empire Flippers and such. I believe the commissions on those are usually 10%–15%. You and I both had experiences selling businesses through brokerage, so what are your thoughts on this?

Derrick: I think it depends on the size. I’ve had a few projects that I have sold on my own very, very casually, lightweight. I built a product called StaticKit. It had just a little bit of MRR, but wasn’t really in growth mode at all. I wanted to rehome that app and find a place for those customers who were using it to find safe ground somewhere else. I managed to reach out to a competitor and said, hey, I’m looking to exit the industry. We just lightweight negotiated a price and sold that. I also sold the IP for the level.app domain when I shut that project down. I didn’t use a broker for those.

I have had a SaaS app called Codetree that was around $4000 MRR, sort of flat on growth. At that time, it was a side project and I was building Drip. I couldn’t imagine trying to shop that around, find potential buyers, then go through the negotiations. It just would have been an immense distraction. At that phase, it made perfect sense to do it. I think even with our Drip experience, we obviously had professional help on that front.

That deal took a year to close. We needed to focus on continuing to grow and run the business. The guy who was helping us did so much legwork. It’s a full-time job for a deal of that scale. I definitely wouldn’t have tried to do that on my own.

Rob: And that’s the thing. I do think it depends on how comfortable you feel with your own skill set. Some people are good at negotiating and are naturals or they’re comfortable, and other people really don’t want to. In which case a broker is going to help you and advise you. Some people feel like they can put their business up on a MicroAcquire or Flippa.

These days, I think certainly if you have a SaaS app or a software product, I would be on MicroAcquire if I was going to pick a marketplace. They’re the leading one. I had the founder here a few months ago.

It depends a bit on your skill set and experience. The tricky part is, you say, well, I’m going to give a broker 10%. That’s a lot of money. You can also make a single mistake that costs you 20%. It’s not hard to do that, so that’s that balance. I would say if you’re running a SaaS app that’s doing north of a million dollars, I can’t imagine trying to sell that or really any business. It would be a challenge.

Now, you and I have a mutual friend. We’re in a Slack group with a small founder group. He sold his business on MicroAcquire for a good chunk of money. He did it all himself. He has a ton of experience doing that related stuff, not in software, but negotiating, cutting deals, figuring things out. Deals are a thing he’s done a lot of.

A lot of us, especially software developers, have not. We’ll do a handful of deals in our whole life. I would say again, if you’re north of a million dollars of SaaS, not only what I want to a broker I would talk to so there are people who specialize in this. Discretion Capital is a sell-side, M&A advisory, and they help SaaS companies who are north of a million dollars sell their companies and run a whole process. That’s one. Quiet Light, for sure. It has just been around and helped a lot of folks doing that.

I think you have to think about what value does the broker bring? What gaps do they fill especially the higher it gets? The other interesting thing is the higher the purchase price, the commission’s usually come down. Broker isn’t going to come and consult on a $20 million sale and take 10%. They don’t take $2 million in commission. The number actually comes down the bigger your sale gets. I think your point of the size is important to consider your experience.

I don’t know. The marketplace versus the broker thing, I guess that it’s similar. It’s like if you’re in these marketplaces, it’s a lot more. You’re on your own. They don’t have advisors. Are you willing to take the risk and make the mistake, potentially, maybe not having an optimal exit because you don’t know what standard or what you should ask for when you’re doing it for the first time?

Derrick: Yeah. I recall when I was selling Codetree. First of all, the broker had people that he knew that were interested already. He was able to bring potential buyers throughout the listing but also did some direct outreach. The people who ultimately bought it were on that shortlist of people that he knew were already looking. There was a little bit of that shortcutting the process already. He knew how to manage the leverage properly. I think he did a very, very good job.

Actually, the buyers wrote up a very honest blog post about the whole process and talked about how they reached a point where they were sort of stuck. He was just very good at doing the negotiation, definitely not the skills I would have had. As soon as we got a serious offer in the door, he was making sure to continue to look for backup offers and run that rigorous process to make sure that we had the right amount of leverage on our side.

I don’t know how much of that comes baked into some of these marketplaces, or it’s just like you receive offers and you can negotiate with them back and forth, but it’s you to potentially look for a backup and make sure you can use that as leverage.

Rob: That’s the thing, if this is your only business and you have a bunch of time to do it, and you want to get the commission, then to your earlier point, well then do it on your own. I think if you’re onto another thing, like you building Drip, you cannot manage. It was stressful enough as it was. It was enough time because I did the same thing.

I sold HitTail maybe six months before you sold Codetree. I was going through the same thing, obviously went through a broker because we were busy building this incredible business. I wanted to get rid of this. Not to get rid of it, but I want it to be off my books.There was no way I would have managed that process. So that’s the thing.

Here’s what I think, dude. I am so happy that our mostly bootstrap space has evolved to what it is, where it is easier to buy and to sell apps, because the first app I ever bought was in 2006, 15 years ago. It was a […] show. I didn’t know what I was doing. There was no material on it. There were no brokers. No one would touch this stuff. There were domainers at that point. I got taken advantage of and it eventually worked out. It was done. It was hard.

It was my first one that really caught and got $2,000, $3,000, $4,000, $5000 a month, depending on the month. It was not SaaS, so it was really, really spiky. The multiples were crazy low. I used to buy stuff between 12 and 18 months of net profit. I used to buy at Flippa. A lot of the reason I was able to quit the day job was because it was just cheap. On the buyer’s side, that’s great. But these days, the stuff we build to build Codetree to $4000 a month, that’s a great little bootstrap business, lifestyle business. You weren’t going to live off it, but it was nice side income.

To sell it for $120,000—that number is public, I’m not just disclosing anything—that was a great win for you and that kind of multiple. Even these days, I think it’s like four to six. If you’re under a million, usually it’s like SDE net profit is about four to six-ish. If you’re over a million, it’s like four to six of your revenue, not of your profit. These are ballpark numbers, can’t quote me. Yes, of course, some sell for 9 or 10. If you’re declining, you sell for less.

That’s great for us, because we’re makers and builders. It means even if our project doesn’t turn into everything we want, there’s still value there. I think they’re still going up, too, by the way. There are a lot of buyers, there’s a lot of money floating around, and there are only so many of us. There are only so many people making these things, doing a good job and even getting to $5000 even, the funnel narrows.

There is a dearth of those types of businesses, which means the supply and demand is a seller’s market in a sense. That is why these prices keep going up, which I think is good. I think it’s good for the ecosystem. I’m glad it’s made a little more official. It’s like brokers made it a little more official.

Yes, they take a cut and yeah, they have a big buyer list. Are they on the buyer side or the seller side? I hear all these arguments. I hear you but we are better off today than we were 10 years ago. Certainly more than 15 years ago.

Derrick: Well said.

Rob: All right, sir. Folks want to keep up with you. You are @derrickreimer on Twitter and of course, savvycal.com. If they want to see one of the nicest SaaS homepages on the internet, how do you do it? Every time you do it, I’m like this guy is unreal. We’ve known each other a long time and you never cease to amaze me with this whole design stuff, dude.

Derrick: I appreciate it.

Rob: All right, man. Thanks for coming on.

Derrick: Thanks for having me.

Rob: Thanks for listening again this week. Thanks for coming back every week. I’m trying to be really mindful of putting out content that I think is varied. That hopefully keeps you entertained and interested in wanting to hear the next episode. So until I’m back in your ears again next Tuesday morning, hope you have a great week pushing your business forward.