Episodes

Rob: Welcome back to Startups for the Rest of Us, this is Episode 556. I’m Rob Walling. This week, I talked with Adam McCrea, the founder of Rails Autoscale about growing from $0 to $300,000 in ARR over the course of three years as a Heroku add-on.

For context, Rails Autoscale is an add-on that manages your dynos or your servers for you if you run Rails. It removes the guesswork and the babysitting typically involved in scaling your production web app. Frankly, everyone I know who uses Heroku and has Rails running on it, uses Rails Autoscale.

He’s built himself a great single founder business and he applied to TinySeed for our Spring 2021 batch that just started a couple of months ago, and he’s now part of the 18 companies that are in that batch. This is a great conversation.

What I enjoy about it is Adam is still a single founder with no employees. He really is in that mostly bootstrap mindset. Even though he’s part of TinySeed. He’s still thinking through how do I continue to grow this app, how to deal with the platform risk of being on Heroku, and even launching a freemium plan that he just launched last week. We cover all that and more in our conversation.

Before we dive into that, I got an email from someone I’m going to keep anonymous and he said, “Hi, Rob. We haven’t met but I turned on your podcast early on in my bootstrap life. Startups for the Rest of Us was my go-to listen on my morning works with my dog. It helped encourage me when I wasn’t sure we were moving fast enough. It helped me learn about traction and growth stages and lots of things. I love the transparency and honesty in the interviews.

I recently sold my $80,000 ARR SaaS company. That’s $80,000 annual recurring revenue for $1.6 million, split between me and my cofounder. We’re also both making a great salary and the post-acquisition journey has been a lot of fun and we still have a lot of autonomy. This journey has been truly life-changing for someone who always wanted to be an entrepreneur, but wasn’t sure it would happen.”

Then he runs through his timeframe starting in 2018, it’s only three years. “Thanks for doing what you do. This journey was something that changed my life forever and set me up in a big way for the future.” I love hearing stories like this. Thanks so much for writing in.

You can tell why I kept him anonymous, but this is why we do what we do. That’s the bottom line. Through this podcast, MicroConf, and TinySeed, and whatever other efforts that I’ve been working on for the past 15 or 20 years and whatever I’ll do for the next 10 or 20 years, these are the moments that make this all worth it. Thanks so much for writing in and thanks so much for being a listener. Let’s dive into my conversation with Adam McCrea of Rails Autoscale.

Adam, welcome to the show.

Adam: Hey, Rob. Thanks for having me.

Rob: From what I understand, you’ve listened to Startups for the Rest of Us for a few years, is that right?

Adam: Yeah, several years. I can’t remember if it was before I started building Rails Autoscale or after, but it’s been several years.

Rob: You came to MicroConf as well? So folks may have run into you in 2019, our last one in Vegas.

Adam: Yeah, 2019.

Rob: That’s cool. Thanks for coming on the show today. Folks heard in your intro that you’re the founder of Rails Autoscale. Just to give folks an idea, can you give us an idea of your team size and your MRR?

Adam: Right now, the team size is one. It’s just me. As of today, I literally hit my 500th customer and I’m just over $26,000 MRR.

Rob: Congratulations, man.

Adam: Thanks.

Rob: How does that feel because you say that out loud and we take it for what it is. It’s a SaaS app, we know a lot of them get to $26,000. When you first launched this in 2017, which is about four years ago, did you imagine you would build it to more than $300,000 a year in revenue as a single founder?

Adam: I imagined I would build it to that within a year or two. I didn’t have a very realistic vision of the future at that point.

Rob: How is that? Let me do a little bit of a timeline. You’re a Rails developer. In 2016 you’re working at a small company, they needed to move hosting providers to Heroku, and they needed something to autoscale their servers. You were looking for a side project, so how did this happen that you now own this code that you wrote in essence to help that small company?

Adam: We were a really tiny team. I led the effort for us to move to Heroku because I was tired of babysitting servers on our other hosting provider, and we were paying a ton for it as well. The move to Heroku was great. Our primary app was mostly just used during business hours, so we were paying a whole lot for server power that we didn’t need in the evenings and weekends. We tried out some of the autoscalers that were on the market at that time and just couldn’t get consistent reliable behavior. It was frustrating and they were hard to use.

It felt like something—like most developers often feel—like I could build a better version of this. I had an itch for a side project, so I asked my team and my manager, if I play with building an autoscaler as a side project, would you be cool with us trying it out? We were a really small thing, really casual, really informal, so everybody was just like, yeah sure, go for it.

Rob: That’s great, and you were able to get something in writing that in essence means you own the code?

Adam: Honestly, I didn’t take the necessary steps at that time. I was pretty naive about the whole thing. It wasn’t until a couple of years later when that company was acquired by another company that I was able to get all of that in writing. Fortunately, there were no issues at that time because luckily for me, the same people were there. They were still friends of mine, and we were able to get it all in writing at that point.

If I had to do it all over again, I would have gotten it in writing from the beginning, but I was a little naive at that time.

Rob: It’s good you’re able to do that. I’ve heard of founders who have to go back to old contractors who worked on their app and they need to get IP agreements retroactively. Usually, that goes fun, but sometimes you can’t find that person or other times that contractor will ask for money.

Adam: That sounds terrifying.

Rob: Yeah, I’ve definitely heard stories of that. Usually, this doesn’t come up unless you’re going to raise some money or you’re going to sell your company. That’s when somebody does some due diligence because if you just run it for 10 or 20 years or you shut it down, no one really notices. That’s the danger of not having that IP locked in. I’m glad they were able to do that. I know during TinySeed due diligence, that would have come up.

Adam: Yeah, and definitely during TinySeed due diligence is when I went and dug out that agreement that was signed a couple of years ago. I was just holding my breath making sure that I had all the bases covered. It was a huge sigh of relief once I realized, okay it’s all there.

Rob: That’s cool. You start working on this as a side project for the company that you work for at the day job. You launch it into the Heroku app store in 2017. But for folks who don’t know, on Heroku, they require you to have 100 beta customers before you can charge. This will wound up taking you almost a year, and it wasn’t until December 2017 when you were able to charge.

Back to your prior comment of when I asked you, did you ever think you’d get to $300,000 ARR and you said I thought I would get there in a year or two, was that year of 2017 just agonizing and taking way longer than you thought it would?

Adam: Absolutely. On Heroku, there are basically three phases of being in their marketplace. There’s the alpha phase where you’re not even listed at all, but you can invite people individually. You have to get 10 customers there before you go to beta, which is when you’re in the marketplace, but you still can’t charge. You got a beta badge on your thing, and that’s when you have to get to 100 customers before you go to general availability and can actually charge customers.

I went into alpha in January of 2017 and I didn’t get to general availability until December of 2017. It was a painful year. I did not think that it would take that long. I had this vision of it just kind of the product was so good. In my eyes, people were just going to flock to it and it was going to be amazing.

The truth is, I didn’t do much to accelerate that. I didn’t do much at all. I don’t think I did anything to market it. I waited for customers to come, and fortunately, eventually, they did. Eventually, it got to general availability.

I know some folks who have launched Heroku add-ons since then and they’ve put a little more effort behind it and gotten to that point within a couple of months, so I know that can be done. If I had to do it over again, yeah I would have reached out a little bit more to try to promote the thing.

Rob: Done some marketing, gone on podcasts, been on Twitter, done whatever, even taking out some ads. You could have gone crazy with this thing.

Adam: Yeah. This is still the area of the business that I struggle with the most. I am a developer by trade, I’m not a marketer. Even though I’ve been running this business for over four years now, the marketing side of it still feels brand new to me and I’m still figuring that out. That’s one of the reasons I really want to join TinySeed is to have some community and mentorship, specifically around that weakness of mine.

Rob: Rails Autoscale is an amazing step one business. When I think of the stair-step approach, step one is a single marketing challenge, step two is you have one or more products that you can buy out your time, and then step three is actually that recurring SaaS app that is just in the open market.

I used to say that step one was a single marketing channel, a one-time sale, but that’s no longer the case with Shopify add-ons, Heroku add-ons, and several other sales. There’s a lot of app stores now that have recurring revenue. That’s where I think of Rails Autoscale as amazing.

Again, you’re one person. You’re running a business doing $300,000 ARR, your expenses are very low. This is just a bootstrapper’s dream, in my opinion. As you and I have talked about, there are some risks. There are platform risks because you’re all on Heroku.

Theoretically, Heroku could just disable your app. You violated our terms of service, for whatever reason, or they have their own free autoscaling that we’ll talk about in a bit and they could be fed up to compete with you. There are all these risks with a step one business. I think that’s something we’ve chatted quite a bit about is how do you get this to be a step three business, which is a business that has more options, is more marketable, and potentially reduces and eliminates a lot of that platform risks. What are you thinking about that these days?

Adam: Honestly, right now I’m targeted toward a very specific and narrow niche of Rails applications on Heroku, so there’s a couple of different ways. If I wanted to continue with the same type of product, I can stay on Heroku but expand beyond Rails. I could stay focused on Rails and expand beyond Heroku.

Those are definitely both things that I’m looking into right now. I’ve been having a lot of calls with customers who have actually left Rails Autoscale because they left Heroku and most of them went to AWS. I’ve been having some conversations with them to see what they’re using now and if there’s a possibility down that road. I’m simultaneously exploring folks who have asked me, can I use this with Node? Can I use this with Python? Up until now, my answer has been no.

Those are definitely things I’m exploring and we’ll see where that goes, I’m quite not sure yet.

Rob: You have a hypothesis and then you try to prove or disprove that before you write a bunch of code. There’s not an obvious answer. There are multiple paths, and I think each of them can get you away from that risk. It’s not just platform risk, you’re very concentrated. What if over the next five years, Ruby or Rails itself becomes just less popular. It’s possible.

Every language and every platform has an adoption curve and we’ve seen all these languages that come. They have their heyday, and then eventually they don’t last. Computer languages don’t last 50 years. They last 10, 15 years, especially on the web. That’s a thing.

I think for folks who are listening to this. If you built a great business like Rails Autoscale, if you’re thinking long term, you should be thinking about these kinds of things. It’s not to say, oh my gosh, this is a terrible business. I never should have built this, because that’s not true either.

It’s that none of these businesses that we build can just go on autopilot for 5, 10, 15 years and be fine. They all have some type of, whether it’s marketing risk, competitor risks, platform risks, obsolescence risk, adoption curve risks. There are all these things that if you really plan to sell it in a few years, then you don’t need to worry about this. But if you want to run a business like this for 10 or 20 years, a lot is going to change.

Think about how the web was 20 years ago, 2001, and how different it is today. What will it be in 2041? I’m not just talking about Rails Autoscale, I’m talking to any listener out there, will your app benefit from that? How will it need to change in the meantime to be viable?

You’re a bootstrapper or mostly bootstrapped, you’ve been making a full-time living for a year of business and suddenly it gets cut off from under you. What do you do? Do you want to go get a job? Because that doesn’t sound like fun.

Adam: Joining TinySeed caused a lot of introspection and a lot of thinking about what I want out of this business long-term because it was already making good money. It had hit the point where I hadn’t yet switched to doing it full time, but I hit the point where I probably could. You could call it a lifestyle business at that point. It was making enough money to provide a decent lifestyle.

I was thinking, I don’t have aspirations to be a billionaire or anything like that, I just want to live a good life and do work that I care about. I also don’t want to live every day with the anxiety that this thing is going to be yanked out from under me and I’m going to have to go get a job, especially after being out of the job market for so many years.

I think I’m at the point where I want to build a larger business not because I want to build a large business, just larger than what it is currently. Just to have confidence that a slight downturn isn’t going to make me go looking for a job or anything like that.

Rob: That’s the balance. I experienced a lot of that with HitTail and then even with Drip. It was always like looking over my shoulder thinking what is either going to cut my MRR or what’s going to put us out of business overnight accidentally. There are all types of stuff.

I feel like it got really depressing here for a minute. Let’s pull out of that. I’m curious, you applied to TinySeed last November now, it’s like six or seven months ago. You were already making plenty of MRR to quit your job, pretty much anyone anywhere in the world could live out of. I forgot what it was. It’s maybe $16,000 or something. It was a healthy dose, single founder, almost no expenses, but it was still a side project. You had a day job. Why was that? Why did you continue working at Rails Autoscale as a side project even with that much MRR?

Adam: There were several reasons. One is that the growth kind of took me by surprise. The growth of the business was slow and steady until 2020. I started the year 2020 with less than $5000 MRR, ended it with over $15,000 MRR. The business more than tripled just in 2020 and I don’t know why. I don’t know if that’s COVID-related in any way with more things going online.

2020 took me by surprise in terms of business growth, and we were risk-averse. Honestly, I’m the only income. My wife is back in school and we weren’t prepared for the idea of completely relying on this business as our sole income.

At the end of 2020, we realized this is going to happen. It’s just a matter of when I make this leap. That’s the point where I decided, well I could wait until later in 2021, or I could apply to TinySeed and see what happens there because that will definitely be sufficient cushion to make that leap with confidence even being pretty risk-averse.

Rob: Was it challenging for you to work the day job and have the nights and weekends side project? Because I know for some people that’s really hard. For me, it was very hard all those years I did it. For other people, it’s just not that big of a deal. How was it for you?

Adam: It was hard. Honestly, I think back to when I first built Rails Autoscale in 2016, 2017 and I’m not quite sure how I did it. If I think about 2018, 2019, and 2020, I don’t feel like I was putting much into Rails Autoscale by that point. It was a product that was working. It was growing slowly just through people finding it in the Heroku marketplace.

While I had time, I tended not to have a whole lot of mental energy or creative energy after the day job. I found myself not just putting as much into Rails Autoscale, and that made me want to go full-time on it even more because I just felt like if I want to accelerate this business at all, I can’t have a day job and do it at the same time.

Rob: It’s a tough place to be. I’ve heard some developers say, I just can’t do stuff on the side. If I’m going to do it, I need to be all in and I need to quit my day job. I would have loved to have that luxury because, by the time I was really getting stuff off the ground, I was married, I had a mortgage. I guess I was doing it before we had our first kid, but frankly, it was just a couple of years.

We live in an eight-bedroom apartment with roommates, I didn’t have that option. I didn’t have money in the bank. I didn’t have rich parents. I didn’t have rich relatives to do any type of friends and family, so I needed enough income. We didn’t live lavishly by any stretch, but even just to maintain my job at that time maybe was $60,000 a year. This is my job. I graduated from college, did construction, and my first programming job was $60,000. I couldn’t make much less than that and own a home in California with a family and such.

I really wished I didn’t have to do those nights. I would stay up till 1:00 AM and then I’d go to sleep, but then I wake up and do the day job. It sucked, but to me, it was just what you had to do. If I wanted to one day have freedom, I figured that was the price that I had to pay.

Other people have to pay different prices. I’m not saying because someone else didn’t, that they had it easier or they’re not as worthy of it, it’s nothing like that. Each of us has our own starting point. Did you have nights and weekends where you were crying it out like that until midnight or one, waking up tired and doing the day job, or did you have better balance around that?

Adam: I think I had better balance around that. I feel that one of the keys that have helped me get Rails Autoscale to where it is is patience. I’m really happy with where Rails Autoscale is today, but the reality is that I started building it. The first commit was in July of 2016. It’s almost five years old.

When I initially built it, I had aspirations of it becoming my full-time thing within a year and two, but reality pretty quickly smacked me in the face there. At that point, I realized it’s okay to take it slow. I was pretty happy building something that was growing slowly more or less on its own, and it didn’t cause a whole lot of upheaval in my life.

I was able to work on it some nights and weekends, but not to the point of exhausting and causing burnout. I feel good about the way I approach that. Could I have gotten to this point sooner if I had put more into it? I absolutely think I could have. Would I have enjoyed my life as much, probably not and I maybe would have ended up throwing in the towel because I would have gotten burned out.

Rob: That’s the beauty of being an indie founder is we’re independent and you were able to make that decision. You didn’t have any type of timeline other than your own. I admire that patience, to be honest. It sounds like whether you did it intentionally or not, you viewed it as a marathon because that’s kind of what this is.

We think in terms of years, not months. I often say that in the intro of this podcast. This is years and years. At this point for me, it’s a decade and a half journey. If you think you’re going to get to $300,000 in 12 months, you’re going to be disappointed or you’re going to burn out.

Adam: I like that metaphor. I think going into it, I had not accepted that metaphor yet, but once I did accept that, I think it’s a very good metaphor thinking of it as a marathon.

Rob: I hinted at this earlier, but Heroku has a free autoscaler and yet you went and built Rails Autoscale. What was your thinking around that?

Adam: Heroku’s free autoscaler did not exist when I initially built Rails Autoscale. It came in either 2017 or 2018, and that was a scary time. That’s that platform risk right there. You build something on a platform and then they build a native version, it’s free, and you’re completely screwed. That was what was playing around in my head when that was happening.

Fortunately, for me, Heroku’s autoscaler—for one thing, it’s only available on Heroku’s higher tier plans, but even so, I didn’t want to lose all those customers. The reality is it did not impact my business in a noticeable way, and I still get about a third of my customers using those higher tier Heroku dynos.

About a third of my customers could be using Heroku’s free autoscaler but they chose Rails Autoscale instead. What they tell me is it just works better. They’ve all tried Heroku’s autoscaler and it didn’t work reliably for them. Basically, they went to the same thing that we went through back in 2016 trying to autoscale. It was clunky, it was difficult. Then they went to Rails Autoscale and they’re happy paying for it.

Rob: That’s what I’ve heard as well, I’ve talked to a couple of folks. Everyone I know who’s on Heroku and has any type of infrastructure in Rails, they use Rails Autoscale. The sentiment I’ve heard is the same thing. It’s that Heroku’s autoscaling, the built-in, they did it as a check box feature basically and it isn’t actually that good.

I can imagine that moment when you heard that they were going to build it because this was when Mailchimp added automation for Drip because that was our big thing. It’s like, hey, we’re unlike Mailchimp, we have all this automation. Then they announced they’re adding automation and I was like, oh […], this is going to get ugly.

As it turns out, their automation wasn’t that good, and they’re pretty clunky and hard to use. It did muddy the water for us for a while though. Did they just launch it or they preannounced it? Were you thinking, I guess I had a good run. Here we go, I guess we’ll be shutting this down.

Adam: I don’t think there was a preannouncement. I think they just launched it. I thought I was pretty much done. I guess not done because I knew that only a subset of Heroku customers could use Heroku autoscaling, but I definitely thought my business was at least cut in half by that point.

It was scary and if it had existed in 2016, would I have built Rails Autoscale? Would I have had the confidence that people are going to choose a paid solution over something that is free, integrated, and native to Heroku? I don’t know if I would have had that confidence.

Rob: Timing. It’s such an element of timing that you just wouldn’t think about because I would be the same way. If there is a free built-in version built by the platform, why would I build Drip and think that anyone would pay for a paid version? Something about if you had started it a year, a year and a half later, it may have never happened. It’s such a trip to think about.

Since then, even in the last couple of weeks, you launched a freemium version. Before you had a free trial of Rails Autoscale, and now there’s a freemium version where people can get a certain amount. They can hook it up and it tells them they would autoscale up and down, and it gives them 20 a month or a certain amount of autoscale events.

Adam: Exactly, yeah. Twenty autoscale per month.

Rob: That’s cool. What were you thinking there? I want to move from a free trial to freemium. For those who aren’t familiar, freemium is a perpetual plan. It works every month, it doesn’t expire after seven days, but it’s limited. When people want to get the full feature set, they’re able to upgrade and start paying.

What was your thought process with this experiment? Because I view it as an experiment. Is it something that you may undo if it doesn’t turn out well?

Adam: I call it an experiment, but it would have to blow up in my face pretty hard for me to undo it, it’s the reality. So far, it’s going great. When I initially built Rails Autoscale, it was for me a cost-saving thing. I wanted to save our company resources by auto scaling down when we didn’t need it, and I sort of made the assumption that that’s what everybody was going to use Rails Autoscale for.

Since then, I’m finding through talking to my customers that for most of them, it’s not about cost savings, it’s about peace of mind, it’s about having a safety net in place knowing that their app is not going to fall down. It’s not going to slow to a crawl, that they can handle any type of traffic spike or anything that comes their way.

I launched the free version because I want every Rails app on Heroku to be able to have that by default. I really keep pushing this idea of a safety net. That’s how I see Rails Autoscale now. It’s the safety net for your Rails app and every Rails app can have it.

I didn’t want to limit that to just a seven-day trial anymore because then, Rails developers aren’t going to think about it until their app starts scaling or they start having trouble. I want it to be more that you just have there by default and then it’s there when you need it.

Rob: On the marketing side, that’s called owning the lead. If you have freemium that if someone’s already using—I think Patrick Campbell from ProfitWell may have coined that phrase, owning the lead. But I heard it as freemium, obviously not a pricing approach, it’s a marketing approach.

When you have a freemium and someone signs up for your account, even if they’re backgrounding it because they’re not paying for it, but then they remember in six months, oh yeah, I do need that, I do want that, or I’ve noticed this, then they already have a login. It’s just a little bit of comfort and a little bit less friction.

Adam: I haven’t heard the term, but that’s exactly the idea.

Rob: You’re only a week into it, are there any indications? Do you feel good about it so far? Is it completely unknown still as to whether it’s going to work? How are you feeling about it?

Adam: My fear going into it is that I had a subset of paying customers who could maybe potentially have downgraded to free. I was worried about losing revenue there potentially, that hasn’t happened. Basically, what has happened is I’ve had a lot more free instillations. The number of paid subscriptions, the trajectory of that hasn’t changed at all. It has been the same slow and steady growth.

Too early to tell if there’s much impact, but so far I’m at least happy that there’s no negative impact and that I am getting a lot more free signups.

Rob: That’s always the fear with pricing changes, with moving from credit card to no credit card or vice versa. Any of these things is like white knuckles for weeks while you look at the numbers. The worst case is not that it doesn’t accelerate your growth, it’s that it dramatically decelerates it or cannibalizes existing MRR. Glad to hear that.

Sir, thank you so much for joining me on Startups for the Rest of Us today. It’s been great having you.

Adam: This is fun. Thanks for having me.

Rob: Absolutely. Folks who want to keep up with you, you are @adamlogic on Twitter, and of course railsautoscale.com for all the info about what you’re up to. Thanks again.

Adam: Thanks.

Rob: Thanks again to Adam for coming on the show. If you’d like to join a batch of companies much like Rails Autoscale, want to be part of TinySeed and get some funding, mentorship, and continue to grow your business, we are opening applications again here in the next couple of months for our Fall 2021 batch. Head to tinyseed.com and sign up for the email list there to get notified. Thanks again for joining me on this journey, 556 episodes so far. I’ll be back in your earbuds again next Tuesday morning.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m Rob Walling, thanks for joining me again this week. Today, I dive into listener questions with Ruben Gamez, the founder of Bidsketch and Docsketch, which is electronic signatures. He is soon renaming that so Signwell as you will hear in this episode. But today, we talk about different models of bootstrapping success, we talk about hiring W2 versus hiring contractors, we talk about how to determine if a business is an ideal fit for bootstrapping versus one that isn’t. We once again revisit enterprise pricing.

Thanks so much for joining me today. If we’re not connected on Twitter, I’m @robwalling, and Startups for the Rest of Us is @StartupsPod. With that, let’s dive into our listener’s questions.

Ruben Gamez, welcome back to Startups for the Rest of Us. Thanks for joining me, man.

Ruben: Thanks. Thanks for the invite.

Rob: Absolutely. Let’s dive straight into some listener questions. Of course, per usual, voicemails go to the top of the stack. In this episode, we are debuting our first ever video voicemail. If you’re watching this on YouTube or on Twitter, you’ll actually see a video of James Kennedy asking a question, but we’ll also obviously pull the audio in for your listening enjoyment.

James: Hey, this new ask a question feature on Startups for the Rest of Us website is cool so I couldn’t resist but submit a question. Rob or guest, there’s been many ways that people in the bootstrap community have been winning in the last 10 years. I think of Rob and his exit. I think of Ruben with his many successes and seemingly increasing success, and Peldi, there’s the rock stars, who we consider to be the rock stars of the community.

I was wondering, who are your five top templates for success that you’ve seen as bootstrappers? Maybe for different reasons, maybe some have exited, maybe some are holding on, maybe some have gone big, maybe some are staying small. I’d be interested to see who you admire most within the bootstrapping community. Keep up the great work.

Thanks for the question, James, and for trying out our new video ask. You can go to startupsfortherestofus.com, and there’s an ask a question link at the top and you can do audio or video asks just right there on the website or from your phone. With that, he asked about who we admire most as bootstrappers. I think we can just throw out a few folks who I think we respect, who are doing good work pushing things forward.

Bootstrapping is such a trip because—I’d say bootstrapping and mostly bootstrapping. Let’s be clear, if you’ve raised a small amount of funding, a non-venture track. We’re not going to be purist about it. There are some people who are really ambitious bootstrappers.

They want to build a $5 million, $10 million bootstrap company and sell that for a lot of money or maybe they want to pull a bunch of profit on it. There are people who are building awesome, amazing lifestyles. Businesses are like, hey, we’re doing $50,000 a month, and it’s me or two people. We’re just raking in profit on that. Those are two models. Maybe there’s a third you have in mind, but who are some folks that you see in our space, who you respect and you feel like you’re doing good work?

Ruben: That’s right. Besides just trying to be super profitable, having larger teams and the ones that are a lot more efficient with the people that they have on the team and the revenue that they’re basically optimizing for revenue in some cases, there are two names that come to mind or three names that come to mind.

First, I would say Ted and Harry from Moraware. They’ve been bootstrapping for a long time. They’ve been building their business and they didn’t have this crazy growth right from the beginning. It took them a while, but they have a great business right now. They’re super profitable. They like to optimize for revenue per employee, which is interesting. I’ve always liked that way of thinking, and I just like how they run their business. I always have.

Rob: I agree with you. It’s moraware.com. It’s the best. It’s 15, 16 years they’ve been working on it, and they’ve gone through a lot of MicroConfs and it’s countertop software. It’s SaaS for countertop installers, people that design granite or cutting, to schedule things. It’s a whole suite. It’s a crazy cool niche.

Ruben: Yeah, it’s a niche product. There’s also Jordan Gal, which has had CartHook. He’s doing something new now with Rally. It wouldn’t be considered bootstrapping at this point, but that’s a really interesting story there as well. With CartHook, he’s just been—I probably put them in the more aggressive category.

He seeks more aggressive growth. He’s good with building larger teams. He’s also optimizing for revenue, but he doesn’t think twice about spending money if it’s going to lead to growth. It’s not necessarily about optimizing revenue per employee, the way that Harry and Ted do.

Rob: Right. Yet I still have a lot of respect for him as an operator and as someone who mostly bootstrapped.

Ruben: Right. He does what is needed to grow a really great business. He’s done it the first time, he’s doing it again this time.

Rob: That is such a fascinating difference between those two examples. When you say aggressive, you don’t mean personally for Jordan, you mean he’s just aggressive about growing a business, that he is willing to hire a team of 30 people and to, hey, I’m going to raise more funding to do this within reason, not going to be this crazy venture backed story, necessarily. Although you guys were talking about Rally. I know he’s working at a different level now, but I actually have them on my list as well.

A couple other folks I thought about include Peldi from Balsamiq, one of the OGs. He wanted to be a solo and then just hire individuals as needed, and obviously, doing very well in terms of profit. I think he runs it more like Moraware. I don’t know that he looks at profit per employee or revenue per employee, but I do know that he thinks of it like this is a long term business. I can imagine Peldi running Balsalmiq in 15, 20 years versus folks who are ambitious about growth tend to be moving towards an exit.

I’m not saying everyone but that is the pattern that I see. Peldi is not like growth, growth, growth, I’m going to do it. It’s like, no, serve our customers, show up, not saying he would never sell. Another example is Matt, Joelle, and Ken at Churn Buster. They acquired Churn Buster from Andrew Culver a few years ago, but they’re doing really well.

I’m an Angel investor so I know the ins and outs of that. They’re a pretty cool balance, actually, because they want growth, but they’re not like—it’s certainly not growth at all costs or even as aggressive or ambitious as pushing like Jordan, and yet they have success in their own way because it’s a very profitable business. They’re looking at taking out profit distributions to investors, which I think is something a lot of people talk about as a goal, and very, very few bootstrappers, who are not solo who actually take investment wind up doing that. A lot of them that I see wind up exiting instead of doing that. That’s a fun one.

I’ll name two more. I think what Rand Fishkin is doing with SparkToro is pretty cool. He raised his round. I don’t know if he’s public. Again, I’m an investor there. I don’t know if he’s public about revenue, but I believe he said it’s tens of thousands of dollars a month. It’s just him and Casey, and they have some contractors. They’re doing fine.

Ruben: I like that one. It’s very interesting to see the difference between what he’s doing with SparkToro and what he did with Moz. Based on everything that you learn from what happened at Moz, how he’s just changing his approach, that’s a cool one.

Rob: Then Michele and Mathias Hansen with Geocodio. I think they’re a good example of folks who have built—as far as I know, it’s just the two of them. If I were to guess it’s doing $10,000, $20,000, $30,000, some number that will throw up a lot of profit for two people. Fund is a lifestyle and I don’t get the feeling that they have the intention of crowing it big. I don’t get the feeling that they want to sell it, but they are living in that corner.

That’s another perhaps contrasting with the Jordan Gal approach, or even your and my approach of, hey, I want this thing to get big, I’m going to compete in a big space. The idea of exiting for a lot of money is intriguing. I don’t think that that’s something they want to do.

Ruben: How would you have described your approach when you were doing Drip?

Rob: It’s interesting, it switched. The idea was like, oh, this will be another lifestyle business, this will be great. Because Hittail before was doing $25,000, $30,000 a month. It was just me and a few contractors. It was amazing, like a cash machine. It was the most profitable and the most money that I had ever pulled out of a business.

Drip, I was thinking, could it be bigger than that, still profitable, but really just be me or a couple people? I didn’t want to grow a team. That’s how it started. By the time we pivoted into becoming full blown ESP and then marketing automation, I was like, this is not, we can’t do that, we have to hire. When we got to, obviously, 10 people when we were acquired, my approach by that time had become this is an opportunity that I don’t think I should fumble, because how big the space was, and how much traction we were getting, and the mini brand that we had built, it felt like I would have been doing myself a disservice in my life to not take advantage of that and try to build it.

I didn’t suddenly become I’m going to build it and sell it, but I did see the path to many seven figures and frankly, probably would be—at this point, if I was still running it, it would be in eight figures, which obviously it is now with the new owners.

That was that. How would you describe your approach? Because see, folks know you. You’re the founder of BidSketch, now the founder of Signwell. BidSketch is proposal software, SaaS, and Signwell is electronic signature, which is a much, much larger and much more competitive space. Would you say those two are similar, or BidSketch is maybe the lifestyle portion, and Signwell is like, this thing can get really, really big?

Ruben: I think that’s right. With BidSketch, I just quit my job to do that full time. It was just to take out as much cash as I could out of the business and have as much free time as I possibly could while doing it. Growing the business, but not being necessarily super aggressive. At times, being more aggressive than others about growth, but for Docsketch, it’s definitely a different beast.

From the start, it was more of a longer term approach versus—with BidSketch, I had to optimize a little bit more on the revenue side, because I wanted to do that full time and then it was the only thing paying for the bills. Once I started Docsketch, I had BidSketch that I could leverage to pay some of the bills, and I could take a different approach to try and build something much bigger, longer term. Sometimes when you overly optimize for revenue early on, you damage your chances for creating something much bigger later on. That’s sort of how I’m thinking about the differences between the two.

Rob: That makes a lot of sense. If you weren’t on the show today, my top two or three would have been Peldi, Ruben, and Jordan in terms of folks that I think are pushing things forward and just have a cool outlook on it. In case folks missed it, you called it Docsketch, I called it Signwell, because you’re renaming it in the coming weeks. You have publicly announced that to your user base. It’s not like breaking news, but just so folks understand that.

BidSketch and Docsketch, but now Docsketch is becoming Signwell. Very cool. That’s it. It’s an interesting topic. I don’t think we’ve ever really chatted about that in the past.

I’ve got another question from James Kennedy. This one is an audio and we will roll that here.

James: Hey, good morning from the beautiful beach, Dublin Bay. It’s James Kennedy here listening to you talking about full time versus W-2 versus contractors. Another topic that’s interesting is outlook and view. If you use working people—people who are used to remote working contractors, they have a different outlook, which can be for good or for ill. Oftentimes contractors who are working on Upwork or other remote places, they actually do want stability of a long-term gig so you can hire, give them 40 hours a week.

Then the other side of it is forgetting the W-2 side of it is sure, just paperwork. Probably the bigger part is the emotional commitment. It’s a different mindset. If you’re hiring for a full-time position at all levels, really, they just have a different mindset. You have a higher bar to meet to meet their expectations, which I’m not saying is good or bad, but it’s harder to meet their expectations.

We didn’t get James’s full question. I’m not sure if there was an issue on his end or in the video ask end, but in general, I think what he’s saying is there are pros and cons to hiring contractors versus, in the US would call it W-2. Usually, 1099 versus W-2 is the US designation, but really, it’s like, I’m paying you as a contractor, versus you’re really a full-time employee with full benefits. I think that it’s truly part of the team.

He’s saying there are pros and cons on both sides. It’s like full-time W-2 employees often have expectations of mentorship and a raise every year, and a budget to do this, and whatever else, progression. Progression of their career, versus oftentimes contractors or consultants, you’re hiring them for a result. If they don’t perform, you can let them go quickly versus W-2 folks, it’s harder. It’s harder to fire someone, just mentally and even legally, I’d say in a lot of places. What’s your thinking? You have hired a lot of people over the years for your companies. When do you look at hiring contract versus W-2?

Ruben: Would you put somebody who’s full-time but a contractor, like in the category of contractor? Because we know several people that talk about their job as like my client. They say to my client, that’s all they do. They don’t have any other clients. I’ve always thought of it as like, it’s got to be somebody that has other clients or potentially can have other clients. I don’t know. What do you think about that?

Rob: I think a good point to bring up is you can hire a contractor for 40 hours a week, and in essence, they’re like a W-2 employee. I think that’s about communication. It’s about when you’re hiring, being like, look, we have to pay you as a contractor because X, Y, Z reason. Usually, it’s you living in another country and trying to hire you through the IRS and your country’s thing. It’s just way easier to do it as a contractor, but you are part of the team, and we want you to feel like this is your full-time job.

We have the loyalty to you that it’s a full-time job, and we will give you raises, evaluations, and progression. What we need from you is I don’t want you to take on other contract work. That’s the expectation. It’s about communication there. If you leave it open, I don’t know. It depends, you’re right. We have a lot of folks who have a 40 hour week contract gig, and they treat it as a client. They don’t have that connection. I think it can go either way, just based on conversation.

Okay, got you. The main thing that I think about, and I’ve been working with both, I have for years, is whether or not it’s core to what you have to do. If you have a software company, generally, that’s core building the software, improving it. It’s the product, it’s part of the offer. Development is generally going to be full time. In some cases, the budget may not be there to where you can afford—in the early days for BidSketch, it was a couple of developers that were part-time developers that were contractors.

If you can afford it, then I would say that’s full-time. That doesn’t mean you don’t enhance that team with contractors from time to time or anything like that. I like the way that Rand was talking about it last time, where it can make sense for marketing, certain types of roles to where performance is going to be really clear. Sometimes it’s just better to have even an agency where you have a team of people bringing you results, and working together to create really high quality work. It’s hard to just hire one person that can compete with that. If they’re not performing, then you find another contractor or an agency  that can get you the results that you want.

Rob: Right. You and I chatted about content marketing health that I’m looking for with TinySeed. We’ve put some content pieces out that have done very well like tinyseed.com/thesis, and we had a blog post about the software industry iceberg. It just took a tremendous amount of time for us to do. We have data, we have thoughts, but to actually write it, edit it, produce it, and promote it was dozens and dozens of hours from our team. Frankly, we’re busy mentoring founders, and running application processes, and running an accelerator in essence.

I was bouncing ideas off folks, and I was like, I’m going to hire a content marketer. I’m going to hire someone to help us do this thought leadership stuff to produce some of this. When you and I chatted, I was like, I have a lead on someone who’s W-2 who could be a full-time and you’re like, don’t do it, man. Because if one person in content marketing is nowhere near as good as an agency of three or four people who have different skill sets, there’s the strategists, and then there’s the writer, and then there’s the editor, and then there’s often a designer who then puts polish on it.

Ruben: I think one of the mistakes that people might make in that situation is say, like, oh, then hire a contractor part-time or lower the budget or something like that, the comparison should really be almost at the same budget.

Rob: The thing you did ask is content marketing core to operating TinySeed, and it’s not. We have been operating it without a ton of content marketing for the past year. We put out a few things, but it is not a core competency versus running the accelerator like Tracy does or fundraising like Einar and I are doing. Those are core competencies. As you’re saying, a software company, it’s your developers, it’s your product people.

I would say it’s marketing. I would not tend to outsource marketing and sales to contractors in general. I think all things being equal, if you’re going to outsource, if we were to say, okay, you have enough budget to hire agencies to do certain things like content marketing, like B2B, SaaS, content marketing, I can see that. A lot of it comes down to budget, right?

Ruben: Right. If paid acquisition is working for you, that’s often a really good use case for going with an agency or somebody who does it all the time because it changes so fast and so much, versus…

Rob: Learning it yourself.

Ruben: Or hiring a new employee whose only job is that.

Rob: That’s a tough sell.

Ruben: What’s your take on the thing that we’ve seen a little bit more often with Sahil at Gumroad with basically all part-time contractors filling in for core roles?

Rob: That’s not something I would personally do. I don’t know how Gumroad is structured or how it works. Usually I think of, if I am going to truly hire a role that is going to be part-time, I’m going to tend to make them contractors. In general, I do like having dedicated resources to my staff, whether that is an agency that I can afford, or it is someone who is in on what we need.

Back in the day when I was bootstrapped, I didn’t have the budget for it, and everybody was contracting. Most people started as part-time but I tried to get them to full-time as soon as I could, because I noticed there was a difference in their focus, and a difference in their willingness. They didn’t just show up and get the job done, it comes back to that task level-thinker, project level-thinker, owner level-thinker, and strategic thinker.

You can absolutely hire contractors to do task level stuff. It’s harder to find folks who do project stuff, but you can find project level. I don’t know contractors who are like that owner level strategic-thinkers, but I do know folks who will come on full-time with you and be on that journey with you.

Rob: That makes sense. In the local slack over here in Portland with a few friends, we were discussing that. Somebody was considering taking that approach, because they’ve seen a little bit more and more. It’s similar to yours. I’m not a big fan of it, especially when you end up having their trade-offs and a part of it is not having the overhead of a W-2 employee for, oh, you don’t have to do these one-on-ones, you don’t have to do a lot of the HR stuff, you don’t have to do some of the paperwork.

The trade-off is that you get somebody who’s really not as committed, and you get overhead in a different way. Now you’re dealing with more people than before. Instead of a team of 10—I’m not sure how many people—on working for Gumroad, 10, 15 people, you end up with 30 people maybe. That’s a totally different thing. That makes things a lot more difficult in a different way. I don’t like that trade-off, especially for core stuff. Then often, all those people are filling their time with other client projects, and that affects timelines and things like that. I’m generally not a fan of it.

Rob: My thinking on it has changed because I used to be all part-time contractors, and then I was some full-time contractors, and then once I experienced the buy in and the ownership of having full-time to be two people. I was like, oh, okay, this is—if I’m going to build that kind of business, I want my core stuff covered. If I want to build an amazing lifestyle—again, coming back to the lifestyle, that’s not a pejorative term for me. Lifestyle business is a cash cow, it’s a great business. If I want to build a business where I can just take out maximum profits and I’m willing to project manage, and have a lot of resources like you’re saying, two or three times the number of people and they’re all part-time, that’s an approach.

I don’t think it’s an approach that I would take anymore. That’s just not the kind of business that I want to build. Thanks for the questions, James. That was super helpful. Again, video and voicemail questions, they go to the top of the stack, startupsfortherestofus.com. You can hit the ask-a-question button at the top.

Our next question came from Twitter, and it’s from Jeff Swenson. His Twitter handle is @jsswenson. He was just asking me a question directly. He said, do you have any content that addresses how to determine if an idea is fit for bootstrapping versus one that isn’t? The first thing I will say is, I don’t think there’s a direct dichotomy of bootstrapping or not. There’s often like a bootstrap to honor a small amount of funding, or do you want to venture track?

I would say there’s a continuum, but those are at least three different options. My response to him was, I haven’t specifically created content on this, but in general, I believe you can bootstrap almost any software company. But if you’re dealing with manufacturing, or real estate like we work, then probably not. It’s going to be really, really hard. You’re going to want to raise money, and then there’s businesses that only work at scale, like Facebook, where if you build a SaaS, and you have one client, they get value out of it and they pay you.

If you have 10 clients, they get value out of it and they pay you. Facebook with 1, 10, 100 people is worthless. That’s the kind of business that needs to be at scale, not only to provide value to the group through the network effect, but to then have enough scale that you can monetize it with ads, which is how those consumer type businesses tend to be not funded, but the way they tend to monetize. I thought this was a really interesting question, because I hadn’t exactly thought it through to that extent before or as replying to him.

The one other thing is, two-sided marketplaces are possible to bootstrap, but I think you need an audience, not need, it’s not the right word. I think you’re almost destined to fail if you do not already have an audience with one side of that network, that you’re not trying to build a bootstrap—two-sided marketplace and get both markets at once or both sides of it at once. I think that’d be the other one that I would throw out. What do you think about this question, bootstrappable versus not?

Ruben: I totally, completely agree with what you said. If you need money, if it’s just super expensive, because of some technology or something like that, then those are really difficult. Or if it’s, you need money for different reasons, because you have to and for some reason delay the revenue side, those are also tough. It’s something that needs to be free for you to capture certain—this is super related to what you were just talking about, parts of the market for making the business work.

That can look like all sorts of different businesses., but those are the ones that just jumped out at me. Other than that, you can even—if you’re thinking about—because in the past, people have said, well, project management or these big categories, you really shouldn’t bootstrap these businesses. I think if you go into some of those categories, it’s best if you probably pick a segment and go after that segment instead of just being really horizontal. If you don’t have any connections, you don’t have a way to make that work, then that can be really tough if you’re just bootstrapping.

Rob: That would say the same thing about building an ESP, Email Service Provider, and then Drip and ConvertKit bootstrap. I think of Derrick Reimer going against calendly with SavvyCal, where you could say, he raised TinySeed money, but he didn’t need that money. That just extended his runway. He had his Drip money to essentially bootstrap himself.

Ruben: There’s a big difference between raising money at that level versus like a VC.

Rob: Oh, yeah. $120,000 versus $5 million, it’s just night and day.

Ruben: There’s no comparison.

Rob: Yeah. Again, it was Customer.io. It was when he called and said, fundstrapping. The first time I heard that was 2013 or 2014. I hadn’t realized that there was this third path. From then on, I started thinking, wow, I wanted to start funding businesses like that right away.

That became all the rest of my Angel investments and eventually led to starting TinySeed that was a big part of it. It’s night and day raising, again, $120,000, $180,000 versus several million dollars. A lot of people don’t know that. The moment you say, oh, I raised some funding, they think, oh, you’re just on this lightning track and you’re owned by the VCs. It’s like, no, there really isn’t that way anymore.

Ruben: It’s pretty funny, though. On the VC side, I’ve seen some VCs like Andrew Chen and others say, and have discussions with other people, like, no, they’re bootstrapped. They only raised a million. Anything under a million is bootstrapped, but they just consider it so different.

Rob: Yep. Because you still have to be capital efficient. You raise a few $100,000 and you’re going after a big opportunity. A million is a lot. To me, that still sounds like a lot because I don’t play, they’re playing in completely different waters. When I think of someone raising half a million dollars or less, which is most of my Angel investments and the TinySeed investments—a few have gone on to raise more than that, but you still have to think like a capital efficient person, because that’s just not enough money to hire. You can’t hire a team of 20 and try to just hyper growth out of that. You can hire a couple people and your burn rate gets high real quick, when you do it that way.

Ruben: You can try it, but it’s not going to work out that well.

Rob: That’s right. It’s easy to burn through it. Anyways, that’s a good question. Thanks for sending that over, Jeff.

Last question of the day. This question is from Steve at skillsdbpro.com and the subject line is pricing again. He says, hey, Rob, big fan. Your work thoughts and guests offer beyond valuable insights that are actionable as well as motivational on a daily basis. Thank you.

Our out of the box pricing is $1 a seat per month. Our average size client is 500 seats, and normally are either a division of a large fortune 5000 company or a smaller 300 person company that uses us as their sole talent and learning solution. I have a question about pricing that can best be shown in this email I got from a lead today, and this was seven months ago. Sorry for that. We have a lot of questions in the backlog.

The lead wrote, thanks again for the demo yesterday. It was great to see the potential use case. I’d be interested in setting up another demo with more people in my org. Let’s find a time that works. Also, if you could fit together a very enticing proposal based on up to 8000 users, that would be helpful as they could potentially be interested in setting something up before the end of the calendar year.

Now switching back to Steve’s email. He says, in addition to emails like this, we recently had a request from an existing client to bid out 60,000 seats. They were currently using 1000 seats in a division and they wanted to expand it. We did not get this deal because we can’t seem to get the pricing right on these larger volumes. They said we were too expensive even at a hefty double digit discount, yet they had no problem paying full price for the division.

I’m terrified of under bidding larger projects and end up bearing myself with both work and money. I’m sure you’ve had this problem at Drip or whether your guests have run into this. I’m just out of my league figuring out how to price large clients, and they are coming our way more often. Thanks for any thoughts you have on this. What do you think, sir?

Ruben: First, I love this business. It’s got 500 seats, 6000, 60,000. It’s great. The way that I would approach it, we’re at the lower end of the market for Signwell right now, but we’re releasing an onboarding—the API product, which is mid market and more towards enterprise. We’re also now HIPAA compliant and SOC 2. Those are much bigger deals, and the pricing is just completely different.

One of the things that I’ve been doing is just spending a lot of time doing research on how these products were priced in our category. I think that’s really important, because you’re not basically—usually for a lot of these bigger deals, especially—you’re not competing in a vacuum. They’re getting bids, and they’re talking to other vendors. First thing is just find out how some of your competitors are pricing these larger deals, because if you’re not getting these deals, somebody else is.

I would figure that part out first, and then think about how you’re going to be positioned in this market. If you’re newer and you’re trying to break in, you’re probably going to—depending on your positioning and brand, can be maybe on the lower end, compared to the alternatives in there. It’s really just hard to make up your own pricing and experiment. Definitely, you have to do some experimentation with this stuff, but it helps a lot if you basically understand what the customers are looking at. You can see it from their perspective.

Rob: That’s a big deal. If none of your competitors publish their pricing online, then you have to dig in and figure that out, because if you’re in the dark, I think you’ll keep losing these. My initial thought, I’m 100%—what you said is what I would do. Without any of that information, I have heard of these big enterprise deals. You have 1000 seats and then you have 60,000 seats, that’s a big difference. A 40% discount of 60,000 seats, is still in my opinion, probably not enough.

I’ve heard of enterprise deals that have 80% discounts at massive scale. They really bring it down. Now you have to figure out, does your cost structure work with that? Is that really where it needs to go? Unless you have some inkling as to what your competitors are doing, you really are just guessing at that point. It’s tough and it can be stressful, or at least complicated and take a lot of time, every time you have to fill out one of these proposals.

I’ve sat in front of proposals, where I was selling my own consulting work when I was a micro agency, or we had some really big Drip contracts, where I just sat in front of it and I was like, okay, it’s $2,000 a month, now it’s $2500, now it’s $3000. I was literally just making it up thinking, I really do want this, this will move our needle, but I also don’t want to underbid. How do you get there? I had the luxury of knowing, they’re looking at MailChimp and Active Campaign and you could just go to their website and get the pricing. At least I had an idea of, I am going to price myself higher, and then pitch them on, here’s why we’re worth that, or I’m going to price myself in the middle, or I’m going to be the cheapest, and it’s still a profitable bid for us.

Ruben: That’s a good point. If you’re discounting that heavily, it might just not be something that you want to compete in. That’s also a decision that you need to make. Like, where can you win? Where do you want to compete right now? It doesn’t mean that it’s always going to be that way. But it can save you a lot of time and hassle.

Rob: Yeah, I agree. I also think if you’re a commodity, and I don’t know, this goes DB Pro is or isn’t. But if you’re generally a commodity and generally the same product, and they’re just comparing apples to apples, it’s tough to not compete on price, because otherwise, it’s the same. So then I start thinking, well, how do I get SOC2 compliance? How do I get a single sign on or get a feature or feature set that other people don’t have? Or how do I get HIPAA compliant?

How can I get these things? Again, maybe all your competitors have all those things too and maybe it just is a mature space and it’s really hard to keep differentiate, but that’s where unique positioning and differentiated features, I include HIPAA and SOC 2 as features, differentiation allows you to have pricing power. This is like economics 101 or 102. If you’re commoditized, it’s mostly on price. Differentiation allows you to do something other than that and then make a higher profit.

Thanks for the question, Steve. Appreciate you writing in again. It was a fun thing to think through.

Ruben Gamez, you are @earthlingworks on Twitter, where you—you’re an elder statesman of bootstrapping and of the MicroComp community. It’s like you go on Twitter and you say wise things. Whenever I see you respond on Twitter, I’m like, this guy knows what he’s talking about.

If you’re not following @earthlingworks, you should go out and do that, and obviously, docsketch.com when this goes live, but soon it will be signwell.com. In fact, I should have you back on the show, both to give updates on what’s going on with your business because a bunch has happened, but to talk us through that thought process of renaming your company, because there have to be some people out there who were thinking of the same thing. Much like I told you, I’m going to tell them, don’t do it. But in this case, I think it’s the right call. That’d be a fun story to walk through at some point once you’re on the other side of it.

Ruben: Yeah, that’d be fun. Cool.

Rob: Awesome, man. Thanks again. Thanks for coming on the show. Thanks again to Ruben for joining me this week. Thank you for joining me once again. I’m going to wrap this episode without further ado, I’ll be back in your beds again next Tuesday morning.

Rob: Dr. Sherry Walling; clinical psychologist, founder, and CEO, consultant, and coach. Thanks so much for joining me on the show today.

Sherry: My pleasure. I know I’m like a hard ticket for you to get. Thanks for working with my scheduling team.

Rob: This was great—I had to talk to three of your assistants, use your SavvyCal link, do all the things. It’s great to have you here in the SquadCast room and just be able to chat it up. Been a long time since we talked.

Sherry: Yeah, like a good 10 minutes or so.

Rob: That’s right. It has been a long time since you’ve been on Startups for the Rest of Us.

Sherry: It’s been a long time. I was starting to get my feelings hurt.

Rob: Oh, I’m sorry to hear that.

Sherry: I need to set a calendar reminder is what I should do and bring you on the show every so often, because I think you’ve become such a staple in the broader startup space at this point, but especially in the MicroConf bootstrapper space people. I think you were, if I recall, the first one to get on MicroConf stage and not talk about marketing and growth, and to talk about feelings, burnout, and how to stay sane.

Sherry: The human side of the startup.

Rob: That’s right. I want to run through a few things today with you. I mean, there’s so much we could cover, and actually I want to have you back on because you are in the process of publishing a book through a publisher, and that will be out in a matter of months.

Sherry: Let’s try about a year.

Rob: So that’s how publishers work.

Sherry: April-ish.

Rob: Okay. So I’d love to have you back on to just go deep on that—both the publisher process because we self-published your first book—The Entrepreneurs Guide to Keeping Your Sh*t Together.

Sherry: Our first book.

Rob: That’s what I said.

Sherry: You get some of the blame. I heard you, I just want to rope you in.

Rob: Yeah, totally. I’m the with. It says Dr. Sherwin with Rob Walling. I’m on the side there. I contributed some content. Yeah, self-published that, and now you’re going through a publisher, which I think is super interesting. That book is about grief and your journey of the past several years actually, you lost your dad to cancer, lost your brother to suicide, you’ve obviously been public about this on your own podcast and other interviews. As we get to the point of the book, I’d love to have you back on and dive deep into that.

I have heard you say something that’s intriguing to me. What you told me was kind of an off the cuff comment, but you said something about grief is part of entrepreneurship that so much of what we do as founders and entrepreneurs involves grief in one form or another. I don’t remember if we’re talking about firing an employee, co-founder breakup, or selling a company.

Sherry: All of those things.

Rob: Exactly, plus some, like you work with so many founders—you see them go through hard things, as well as have amazing victories—you see all of that. So, talk to me a little bit about what you meant when you said grief is such an important part of entrepreneurship. Frankly, it sounds like if we’re going to be an entrepreneur, we need to learn to deal with, handle, and healthily process grief.

Sherry: If we think about grief as the emotional reaction to loss—often, we talk about it in the context of death. Of course, there’s a big grief process that goes along with the loss of life, but there’s all of these other little griefs, all of these other moments of having an emotional reaction to something that’s lost.

I think it’s such a particularly important conversation among entrepreneurship, because number one; we’re taking lots of risks, we’re trying lots of things, and we’re often operating just at the edge of our capacity. We’re learning, we’re trying new features, we’re exploring, experimenting, and a lot of those things aren’t going to work. We talk about that in the context of failure—which is good, that’s an appropriate term for that—but I think there’s also a little emotional reaction every time we hope for something that doesn’t work out, or we build something that we then lose.

There’s lots of little grief here. You named some—an employee that we’re excited about that doesn’t take the position, or leaves, a set of customers that we want to work with that we aren’t able to reach, or they no longer favor our offering.

I think one of the really surprising and really big griefs that goes along with entrepreneurship is when a company sells. I work a lot with entrepreneurs who are in transition—I’m helping people go through the process of deciding to sell, how to sell, and how to go through that process—sort of from the inside from their own mental health process. There is so much grief that goes along with that, even if it’s a great payday, even if it’s the thing that they worked for, and they wanted, it’s still this major shift, and there are lots of losses.

A big part of I think going through a healthy kind of life cycle of an entrepreneur is having a lot of moments of grief. Hopefully there’s no big grief at the end when you have a big exit.

Rob: I think most of us aren’t naturally good at dealing with loss and at dealing with grief. How can a founder get better at that?

Sherry: I think it’s important to pause. If nothing else, I think grief is an invitation to pause, to notice this thing that’s lost, to give it a little bit of emotional attention, maybe to name it out loud, maybe to memorialize it in some way. You think of an employee who’s leaving, just the time to take and get a thoughtful gift, the time to say thank you, the time to say, hey, I’m really going to miss you around here. Those are small things, but they are grief processes. They’re an acknowledgement of the emotional reaction, and they’re ways that we extend appreciation and sort of honor the role that that person played in our life.

Rob: How about going through an exit? What have you seen some founders do really well? How have you seen some founders not handle it as well?

Sherry: We both know this, there’s so many logistical processes that go along with an exit—the paperwork, the negotiation, just the conversations with the lawyers—all of those things kind of eclipse the emotional part of like, oh, my gosh, I’ve been working on this company for 3, 5, 37 years, and now it’s not going to be part of me anymore.

When there’s no space or time to think about that is when people kind of get into some trouble. They don’t recognize this real metamorphosis that they’re going through. They do the paperwork, they go through the logistics, they turn in their keys, they sort of ‘not coming back to work on Monday’, but don’t really honor this huge change that’s going on in their lives.

Those are the folks who come into my office three, six, or nine months later, who are like, I’m lost, I don’t know what I’m doing, I don’t know what direction is my life, I had this big exit, I thought I had everything I wanted, lo and behold, I’m really miserable. The healthier alternative is to be very mindful and intentional about the external goodbyes that you’re saying, all the ways that you are leaving other humans, that you are disengaging or detaching from a brand or a business that you’ve built to outlast you to have a life after you.

I know where you sit in your office behind you is a picture of the Drip logo, and it’s framed, it looks very lovely, it was given to you by the staff at Drip. It sits there in your office as a reminder of this is a thing that I built, this is part of me, it’s a piece of me, and I’ve let it go. I have a new relationship, my relationship with this company now is one of memory, is one of reflection. It’s not my active business anymore. That sense of memorializing and being able to say I fondly remember this, but I’m no longer so intimately tied to it as I was before, is a little snippet of what healthy grieving looks like.

Rob: That’s really insightful. I hadn’t thought about that. In the video snippets folks will see of this podcast on social media, you’ll see the logo behind me with the original Drippy, the robot, and his head. After we sold it, he was subsequently discontinued and replaced.

Sherry: Sad. Drippy!

Rob: Bye, bye, Drippy! I still have the shirt with Drippy on it. You’re right, I look fondly at that logo now. It’s a good reminder.

Sherry: It’s symbolic.

Rob: Yeah, and I think symbols are really important. I mean, this is a tangent.

Sherry: Drip is also tattooed on your arm.

Rob: Yeah, an image of the original logo—it doesn’t look like a logo, it’s just a water droplet. There was a very deliberate reason that I did that—it was five and a half years of my life, it is the longest aside from this podcast and MicroConf. It is the thing in my professional life that I’ve worked on the longest. It has been the biggest part of my career so far.

It’s good to remember it. It is like memoriam even though it still exists. I mean, I can drive to the Drip offices, they’re like 15 minutes that way. I still keep in touch with a couple of people who work there now. I still use the tool every day. I’m in it, but definitely don’t have that connection I used to.

Sherry: One of the things that I was invited to do during the pandemic was to help a founder think through how to hold a funeral for his company. The company didn’t make it through the pandemic, so they needed to close down. We talked a lot about what ritual, what symbol helps people be able to grieve, sort of process like, man, this company is not going to make it.

You think about a memorial service, there’s someone who facilitates it, they share memories, they share pictures, and often there’s a time for people to exchange memories. Different employees were then invited to talk through the things that they learned and the things that they will remember about being part of that company. Then, everybody went away with a mug of the logo of the company on it. It was a Zoom meeting, but it was the symbolism of like, this is ending, and we need a way to say goodbye.

To acknowledge that a company is kind of like a person in a lot of ways. We have a relationship with a company. There’s a lot of creative ways to think about grief in the entrepreneurial space that helps us honor the feelings that we do have about these entities that we call companies.

Rob: I like that you’re talking about an exit as perhaps an element of grief. Normally you think of an exit as a big celebration—you have a liquidity event—there’s just a lot of emotion and struggle around it. But I do think in the end, most of us consider oh my gosh, I just sold my company for millions of dollars. That’s a celebration, and to not also acknowledge the loss of that is a mistake.

Sherry: Well, it’s both. This category of emotional nuance that I’d love to bring into our conversations within businesses a little bit more. It can be a fantastic celebration, like good on you, you sold your company, amazing, but also there’s some other loss that goes along with a great thing.

Rob: This dovetails nicely into another topic I want to talk about with you. You and I have a lot of conversations around founders, entrepreneurship, and thought processes in your business as an entrepreneur, in my business, and in a lot of folks that we speak with through the podcast, through TinySeed and all that. Something that I’ve been having a lot of conversations about, and it seems to be accelerating, to be honest, is around selling your companies, around having an exit, and deciding when to sell.

This started happening organically, then I made an announcement on this podcast, like this is such a life changing thing to think through. If you’re going to sell your company, ping me and I will do a 30-minute chat with you. I just made kind of an open offer. Sure enough, people took me up on it. It was fantastic to hear from founders deciding, hey, I got an offer for a million dollars for this thing, and someone says I got an offer for $10 million for this thing and I don’t think it’s worth that, what are my downsides should I do this and fascinating conversations.

One thing that I have told several of these founders is just because you got an offer, it’s not a good reason to sell your company. It almost feels like some folks, hey since someone’s courting me, I should sell. Usually I’ve told them, that’s not a good reason.

Here are some good reasons to sell, you’ve gotten a huge offer that is perhaps above market or above where it should be, and it may be years before you get an offer that big again, and this is a good fit for you to sell. Like that, in my opinion, is a good reason to sell. Another one is if you feel like there’s some calamity that perhaps you could ride this business over the top, that it could plateau. Maybe you have platform risk, and you built you’re reliant on scraping Amazon or scraping Google and every day you wake up, and you think, man, they’re going to shut me down. If you think this whole industry is going to plateau, or my app is going to plateau or whatever, there are things mentally that you can get around there.

One of the other things I’ve told folks is, or if you’re just done with it. If you’re mentally done, you’re exhausted with it, maybe you’re burned out, but maybe you’re just like I’m so over this thing, and I don’t want to work on it anymore. I had said that in conversation with you when we were going back and forth, and you said, I don’t necessarily agree with that third one, because I think that’s fixable. I really like that perspective because I don’t like being backed into a corner and having to sell because I can’t handle this thing.

Walk me through your thought process there. What do you think about those reasons? I come at it from the founder perspective and now an investor advisor perspective, but you come to it from a coach, consultant, and a psychologist perspective.

Sherry: We want to be careful about making really big decisions when we’re tired, grumpy, burnt out, and dealing with some depression, because those are temporary states. I know burnout can feel absolutely overwhelming—I in no way mean to minimize its power—but it’s because it is such a powerful distortion of all typical neurological capacity, in that burnout literally makes our brains less flexible and less fluid. It’s not the best state of mind in which to make a really significant decision.

If burnout is the driver, if I’m just done with this, I think it’s at least worth exploring some other options. If you’re done, you’re done. You can sell your company wherever you want, but if it really is the sense of like, I don’t have the energy for this anymore. I think it’s probably worth taking a sabbatical. I think it’s worth bringing in a CEO or someone else to run the company, even on a short term basis. I think there are some other options that are at least worth exploring, so that you can clear your head enough to have that long term perspective of what I really want.

Rob: It’s perspective. The way to think about it, when you’re too close to something, or as you said, you’re upset, you’re in your own head, such a bad time to make a permanent decision. There are a lot of decisions we make day to day and 98% of them you can reverse—selling your company is not one of them. You have to be sure about this.

You’ve talked with people through burnout and helped them work through it. I was talking to someone who’s like, I think I’m burned out, and I need to take a week or two off. I was like, I think it’s longer than that. So when you detect someone is burned out, or whether they’re telling you that or you see the signs, what’s your go-to plan to get someone back in the state of mind that isn’t just exhausted.

Sherry: One thing that’s tricky about the terminology here is it’s not binary. You’re not sort of in a category of burnout or not, that burnout exists on a continuum. One of the things that I’m always assessing when I’m talking with someone is how burnt out they are. When we talk about burnout, from a clinical perspective, from a technical perspective, there are three kinds of clusters of symptoms or three components that we look at.

One is physical and emotional exhaustion, that’s probably the thing that feels most obvious to us like, oh, I’m just tired, I don’t have any energy for this. The second is a sense of cynicism and detachment—we just don’t care the way that we used to—there’s something sort of hardened in our heart or in our mind, toward our company, or toward the people that we work with. The last component is a sense of no longer seeing your own effectiveness. Really can be very distorted, can be totally contrary to any objective evidence—I’m working so hard and accomplishing nothing, it’s not moving anything forward, none of this matters.

The three of those together is obviously a really crappy way to feel like you’re working really hard, you don’t have any energy, it feels like it’s for nothing, and you don’t like anybody anyway—not a place anybody wants to linger for a long time. One of the things that does happen in burnout, we do see neurological changes in the brain, we can see it on a brain scan, we see certain parts of the brain being more active, certain parts of the brain, we see less neurons, fewer neuron attachments, neuronal attachments.

So we start to see changes in the brain that can become this kind of self-fulfilling prophecy or a cycle that keeps us in burnout. When we’re talking about true burnout—somebody who’s really quite fried—we have to take a long enough break to let the cells in the brain rebuild. That’s why often you are talking about probably a six-week break. Nobody loves to hear that, but it is on a biological level kind of what we’re looking for when we are hoping to see those brain areas rebuild the circuitry that is necessary for us to be creative, engaged in problem-solving, have energy, patience, and perspective.

Rob: Six weeks is a long time.

Sherry: It’s a really long time, and it’s really hard for founders. A lot of what I do is try to figure out how to make that work, but then also try to do a staged approach where maybe it’s a two-week vacation, and then we see how someone is. Did you really rest? Were you able to really detach from your business, is it okay to go back, maybe in some limited capacity? There are ways to get creative with it. Obviously, people figure it out. People do recover from burnout. I think the thing that is required is for people to take it seriously and understand that it’s not just a feeling, it does exist in your brain—the organ of your brain.

All that to say, like if you’re talking about making a huge decision, like choose to go home with when you’re super drunk, like you’re just like your brain needs to be healthy to make good choices. Your brain on burnout is not a super healthy brain, which is why we need to get back to a healthy brain before you really want to make a choice about selling your company or not. Sometimes the numbers just work out—you’re burnt out, and you got a great offer—cool, do that, but if burnout is the primary driver of a sale, I think it’s really worth some reflection first.

Rob: Easy to make a bad choice in that mindset.

To wrap us up for today, I want to dig into one other topic that you had brought up that I thought was interesting and pertinent for this time of year. You talked about changing up your work schedule for summer, potentially working shorter days, spending more time with family, picking up a hobby. We have two kids, our kids are on break for the next 10 weeks, and they have some camps, and then they have weeks with no camps. You, I, and the kids are going away for two weeks over the next couple of months—we have stuff planned. How do you imagine how our summer will be different, and how do you think founders and folks who maybe have some control of their schedule can and should look at the next few months of summer?

Sherry: I think there are two components to this conversation. One is the sense in which our time with our families is really precious. I know, it’s really easy to say that, but to really think about how to put that in action, to recognize that you have only 18 summers with your children when they’re at home with you. My friends Jim and Jamie Shiels wrote a book called The 18 Summers in which they kind of outline this case for really diving into that summer season–especially if your kids are in a traditional school schedule—to let it be this time of really connecting, making memories, building traditions, like all of the really fun, juicy parts of being in a family.

Obviously, as entrepreneurs, most of us are really busy, and our businesses don’t stop just because school’s out. But there are some creative ways to redo the schedule or plan those trips, plan those movie marathons, even the things that become family lore, and shared family experience. Summer is a really good time to just take more pauses—as families, as people in any kind of relationships—to really enjoy the ability to be together in a different way and to prioritize that in your business. Even for the people that work for you, to make that more possible for them. That’s one of the reasons, sort of the relational reason, that I think summer is a really good time to really consider changing up the schedule as a founder.

The second reason—we have a lot of wonderful research around how healthy and good it is for brains to have diverse exposure and diverse experiences—so like you and I, we spent the pandemic in front of our computers in our home offices, kind of not leaving the house, not even leaving the room that we’re in very often. Now that that is easing, the weather in Minnesota is lovely, what a treat for our brains to have them be exposed to a variety of different settings and activities. This is a great time to jump on a hobby, to learn something new, to go on a canoe trip, to just do something different with your body, and your attention to solve different kinds of problems, to be in different kinds of spaces.

I won’t go into a deep dive lecture on this, but there is so much evidence that is incredibly helpful to your business, because, again, a brain that’s exposed to a diverse variety of stimuli, is healthier, has richer connections, is better able to solve problems, be creative, and do all of the wonderful things that help us to be great entrepreneurs. Your brain wants a little vacation time, a little hobby time, and a little fun.

Rob: As entrepreneurs, it’s funny, a lot of us have the ability to make things happen and the motivation to go out and do things really well with our business. What I found for myself and I think some other founders do is that I really don’t have a lot of motivation or get up and go to go out and do a kayaking trip or to drive an hour each way to a water park on a Friday. Yet, when I’m forced to do those things, or are invited to, as I usually am, I really enjoy them.

Once I’m out there on the canoe or once I am at the water park, I think to myself, this is so cool, this different environment and these three hours off of work that I would otherwise be sitting at that same desk are really rejuvenating. I think that’s the key, to be able to take that break, take that first step, and force yourself out the door. Whether you have a family member who is able and willing to do that, or whether you have to essentially through sheer force of will or discipline or whatever it is, get yourself out the door to go do those things. It’s important.

Sherry: It’s also why most of us do this, we have chosen a path that allows for a lot of freedom—theoretically, if it’s going well, a lot of freedom. Many folks don’t enjoy it, don’t exercise that freedom. I mean, nothing makes me want to sort of reach through the computer screen and whack someone gently on the head than them having a conversation about how they feel too busy to go out and ride their bike in the middle of the day.

It’s like, you don’t have a boss, you don’t have to check in check out, you can schedule your meetings around a one-hour bike ride once a week—make your life work the way that you want it to. I think that should probably include a lot more play than most of us give ourselves time and space for. I will also make the case that it’s good for your business.

Rob: Dr. Walling, thanks so much for joining me on the show. Once again, I want to have you back here when your book is ready, and we can do a deep dive into that. If folks want to hear you talk about the mental side of entrepreneurship and how to stay mentally healthy while doing these hard things, they can check out the ZenFounder podcast, as well as sherrywalling.com.

Thank you for joining me on the show this week. As always, it’s been a pleasure talking to you. It’s great to have Sherry on, it really has been too long, like we live in the same house. I didn’t do that in the intro, but I’m figuring since our last names are the same that you picked up on that. I really enjoyed our conversation today. I hope you did as well.

I will see you on Twitter, we are @startupspod, come follow us there, and I’m @RobWalling, and if you want to follow Sherry, she’s @ZenFounder. Thanks so much for joining me again this week, and I’ll be back in your earbuds again next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. I’m your host, Rob Walling. Every week on this show we cover topics related to building and growing ambitious yet sane startups. We look at building companies, not as a vanity project, a way to get power and status in the world. But we think about it as a way to improve our lives to bring us freedom and purpose and allow us to maintain healthy relationships.

It’s not about being a total bootstrapper, it’s not about raising buckets of venture funding. It’s about being capital efficient and building a company that serves perhaps multiple purposes, rather than just being an IPO in 10 years, but that actually changes our lives and those around us.

Welcome back to the show. Thank you so much for joining me again today. We’re going to be covering bootstrapper news today with Tracy Osborn. I’m excited to talk about it. We have some pretty interesting stories, actually. Stack Overflow was acquired for $1.8 billion. It came as a total surprise to me. Just a few minutes prior to recording this, Moz was acquired. We talked about people quitting instead of giving up remote work. We wrap up the episode by talking about remote work and remote retreats, and if you are a remote team, how often you think about getting together.

We also talk about a few highlights from our 2020 batch of founders and talk about what we feel went well with that. That dovetails into the whole remote conversation of not being able to get together for retreats during this batch here, and how we feel that impacted us and perhaps the cohesion of the batch itself.

Today, I’m talking about these topics with Tracy Osborn. She’s @tracymakes on Twitter. Of course, she is the Managing Director of TinySeed and the author of Hello Web Design. Within the first few minutes of us chatting, you’ll get to see that book hot off the presses. She self-published it and then later went through a publisher and has a nice hardcover copy. So with that, let’s dive into today’s show. Tracy Osborn, thanks for joining me.

Tracy: Yeah, happy to be back.

Rob: Last time you were on you were talking about your book, Hello Web Design. Before that, we did a bootstrapper news episode. You’re getting the book out. Is that a physical hard copy, hardcover of your book?

Tracy: Yeah, it is a hardcover. The publishing company wanted to up the quality of it. Apologies to anyone who’s listening to the audio format. Just imagine a book that’s hardcover. It used to be a paperback. It looks really nice now. Gosh, I don’t know the exact date it’s coming out, but it’s going to be this month. I know some people have already gotten their book.

Rob: That’s cool.

Tracy: Listen to the last episode where I talked about my design book. You’ll get the link to buy my book that teaches web design. Sorry, I have to put a pitch in there. This is the perfect opportunity.

Rob: Nostarchpress.com/hello-web-design. Before that, you and Einar Vollset were on the show to talk about bootstrapper news. We’ve had all kinds of conversations around this. Einar is out of the office today. He’s taking a day off, and so it winds up being you and I here recording. Thanks for doing it last minute. I found myself at the end of the week saying, I have no episode next week. So it’s great.

Tracy: I like how you just admitted that. I wasn’t going to say anything. But, yes, I’m very happy to be the person you go to when you are in a pinch.

Rob: Scrambling. That was a thing. It doesn’t happen very often. I mean, I often record at least a couple of weeks ahead or I get stuff done Tuesday, Wednesday for the following week. But, I don’t know, this week there was a lot going on and a lot of email. But we are really talking through news and other topics. We even have a listener question I might throw in depending on how time works out. This is stuff that’s related to developers, designers, founders, bootstrappers, and such—the folks who would listen to this podcast.

The first story, what’s funny is I hadn’t heard about it. It wasn’t until I was digging through a bunch of social news sites for news over the past couple of weeks that I read that Stack Overflow sold to a tech giant that I’ve never heard of called Prosus for $1.8 billion. It says that it’s Prosus’s biggest investment in online learning and comes weeks after it’s sold a chunk from its massive Tencent holding.

Stack Overflow, this site. I listened to Joel and Jeff when they were launching Stack Overflow. They had a podcast around it. I’m an early account, I don’t think I ever answered a question. This is like a mainstay for our communities. What’s your take on this?

Tracy: I haven’t answered a question ever either. I’ve gotten so much out of Stack Overflow, whatever I’m programming. Like any programmer I’m using it on the minute, every minute, it seems like when I’m trying to debug something. This is interesting to me. I mean, one of the reasons why I work at TinySeed is that I’m a big fan of smaller companies. I try to enable a lot of people on the internet to launch small things, and I love small teams. This goes into real life for me. I do small businesses, not big conglomerates and whatnot.

It’s been interesting to see the trends we have in (I want to say) the physical world of consolidation, of businesses like news industries. Seeing that move into online industries, and you can see that here with Prosus, which I had never heard of either. For being such a tech giant—I guess it’s South African—I’ve never heard of them.

When I was researching a little bit for this story, looking at all the different acquisitions and properties they have, they’re all around online learning. It looks like they have this plan to go through all these online learning websites, supposedly, keeping them independent and they’re still running on their own, but they’re still consolidating all these online learning websites.

It leads me to wonder about what it’s going to look like in five or so years as these companies are getting acquired and consolidated. Are we going to have these mega-corporations that are pushing for a certain way of learning when it comes to online learning. Pushing for certain ways of learning or being more (I want to say) anti-democratic. You know what I mean when a big company comes in and takes over these small companies, and then all of a sudden, they all start looking the same. They all kind of had the same processes and whatnot.

On one hand, it’s more efficient, on the other hand, I mourn for the freedom of these small businesses. I might be going way too broad here, but it made me think about news corporations and consolidation there, and seeing this happen in the tech world. I told you earlier, I kind of miss the ‘90s, where it seemed like everyone was just individuals running websites. And now we have these mega-corporations that are running things that I use actively. It makes me wonder how it’s going to look in the short future.

Rob: I wonder if you’re the only person that misses the ‘90s because, man, the fashion was terrible/ I guess the music was pretty good, but no, I’m joking. Very fond memories of the ‘90s.

Tracy: Frame websites. We’d have friends and development nonsense. I just built it with frames.

Rob: Yeah.

Tracy: Sorry, go ahead.

Rob: The thing is with any industry, there’s always a bunch of players and the consolidation has been inevitable. Where it’s like there were a hundred car manufacturers in the US, and now there are three. There were a hundred airplane manufacturers, and now there are a handful around the world. There were a bazillion TV stations, and then it became just three, maybe that one’s not true. But radio? Each of these things has consolidated. TV is the one where it got distribution, cable, and it actually expanded. But then there’s only a handful of companies now that own them.

There’s NBC, CBS, and AMC, or whatever, but they’re only owned by a handful of companies. I hear you on wanting the days back where it’s small players. Again, Joel Spolsky started a little software company called Fog Creek Software in 1999 or 2000, started blogging, and then start Stack Overflow. He was the CEO until 2019, I found out, and then he became the chairman. At that point, when one of the founders steps away from being CEO, I feel like the clock is ticking for an exit.

This type of thing where they did raise venture funding, I think, a lot of us were surprised because Joel was one of the few bootstrappers. He was the first person I’d ever heard who started a software company without raising venture funding. As shocking as that sounds today, in 2001 I was like, you can do that? That’s a thing? I literally didn’t know that was possible. Just every model I had seen was someone raising funding.

When they raised for Stack Overflow, I remember being super surprised and Joel was like, look, certain types of businesses, if you want to do some certain types of outcomes, you need buckets of money. To do Stack Overflow the way they wanted to do it with all the stack exchanges and all the stuff, that was what they wanted to do. Once you raise that level of money that they did—through venture, not TinySeed money, not angel money—the clock starts ticking. You have to have a liquidity event. So they needed to IPO or they needed to sell at a certain point.

I look at it as I think it’s cool for Joel, Jeff Atwood, and the founders (whoever had equity in this) that they built something amazing and that they now walk away with boatloads of money to be able to invest in and fund future entrepreneurs. Of course, I’m concerned about Stack Overflow itself. I don’t use it at all anymore unless I’m helping my son troubleshoot a 3D printer driver or something. I don’t know if Prosus is private equity, or venture equity, or what they are exactly. I guess I could have actually done some research. But basically, they’re some type of big conglomerate investment that’s rolling things up.

But I’m excited about the opportunities. There’s always the opportunity for scrappy entrepreneurs to come in. If Stack Overflow is not going to be good, should we all start a new Stack Overflow that would be a competitor? That would be crazy. You wouldn’t have done that while Joel was running it because they would win. I guess there’s just a lot more money in the startup ecosystem with Jeff Atwood, Joel, and the other founders having this money to reinvest.

Backing startups, I think that’s something that they will do. They will do interesting things with the money. They’re not going to go retire on a beach somewhere. They’re going to start their next company or they’re going to help other entrepreneurs. But I’m a silver lining person when it comes to this stuff because there’s definitely (as you’re saying) both sides of it. There’s a real negative take I think that is very real. It’s a real possibility.

Tracy: Yeah, I just looked it up actually. Prosus has stakes in companies. It still has a stake in Tencent. But they also have other education companies like Brainly, Codecademy, Udemy, Remitly, PayU—some things I haven’t heard of and some things I have. It gives you an idea in terms of their ecosystem there.

When I say something about consolidation and mourning it, when I think about radio stations, you see the radio stations consolidating to get more plans, boring, and vanilla because there are no local radio stations. It’s harder, I think, for individuals for radio to start up their own thing.

But with tech, that’s the thing that makes me optimistic about what we can do on the internet. What we can do as tech entrepreneurs is that if Stack Overflow does go in a direction that people don’t want, then it’s easier to start something new and pull out those features, pull out anything that doesn’t work anymore—Stack Overflow, as they make changes. If they make changes and that the internet evolved pretty quickly to fill in that gap as compared to say some of these more (say) physical businesses.

That brings me a little bit of comfort. Obviously, I don’t want Stack Overflow to change. I mean, I’ve never given back, which is not necessarily a good thing. But I appreciate all the people out there who have spent the time and unpaid work to answer people’s questions. I hope that that kind of community sticks around post-acquisition.

Rob: That’s a good point because starting a new car company today would be very, very difficult. As we’ve seen with Elon Musk on Tesla—even with all the money, all the influence, and network he had—it’s been a real uphill battle for him. Versus starting a competitor Stack Overflow, the network effect will be really hard, like you said, the marketplace aspect of it. But way more possible than starting a car company. It’s interesting. We have another story we need to cover in-depth, but literally 33 minutes ago, the story broke that Moz was acquired by iContact.

I got a text from Einar and I’m like, wow. You know it’s gonna happen, but I’m always surprised when it does. And really, why should I be surprised? Again, it’s a venture-backed business that was doing, I think, $70 million a year last year, it’s SaaS App, it’s worth a lot of money. The founder left a few years ago to start SparkToro. It’s probably natural that the new CEO they brought in was to groom it and get in line for an exit.

We don’t have any details about price, outcome, or anything, but this is another thing. I think this is the critique of venture capitalists is that they don’t build businesses for the long-term because there does have to be this liquidity event, usually a sale. But what’s interesting is I’ve realized over the past couple of years, an IPO obviously is also a liquidity event, and an IPO is just really just raising funding from the public. Do you know what I mean?

A lot of people will say like, oh, they IPO and they sold out, or they sold everything. And it’s like, no, they just sold another 10% or 20% just like a funding round. Oftentimes, the founders or the current CEO will stick around for that.

Tracy: I didn’t get that for a long time either. IPOs felt like this big—I mean it is still a giant event and whatnot. But still, like you said, it’s the same thing. Taking a bit of your company, instead of going to private investors and going public.

In the Moz thing, I am looking forward to seeing what news comes out of this. I hopefully will hear from Rand soon. I hope that it worked out well for him. But iContact is another company where it’s like, oh, they’re acquiring Moz to form a suite of leading SEO, email, and digital marketing solutions for small- and mid-sized businesses. It’s another example of this consolidation. A bigger company being like, okay, we need another company in our portfolio, so we have this full portfolio, this full ecosystem of different tools. I guess we’ll just see what happens with Moz too.

Rob: Yeah, and that’s it. The plus of this is hopefully Rand, whoever else had equity, and the investors walk away with enough money that they now are reinvested back in the ecosystem. I mean, Rand himself, even before this exit, is an investor in TinySeed. He’s a mentor. He’s giving back to the entrepreneurial community in ways that his means have allowed, and if Rand has more means he will, I think, give back more. That’s the plus side of this.

And of course, the negative side is if you’re a Moz customer, things are going to change. They’re pretty likely to. That’s where it’s good that we do have competitors—Semrush, Ahrefs. There are other tools out there that do similar things. It’s just a bummer if you’ve been using a tool for 10 years, it gets sold, you’re waiting for the inevitable changes. The playbook, as you said earlier. These things, they start to be run the same. It’s the playbook. The private equity or the strategic playbook.

Tracy: Got to bring the people in to make sure everything is efficient, that efficiency is reflected across every one of their properties, and then everything looks the same.

Rob: Yep. Don’t do this, but if you read The Hacker News comments for any of this or even just the comments on anything, you’re going to see things like the founders sold out. You hear this phrase. It’s almost like, no one should ever sell their company. And you know what, that’s just not realistic because people don’t want to run the same company for 40 years, (a) it gets boring, (b) there’s a lot of risks.

You can have tens of millions of dollars in net worth tied up in an asset that you have no liquidity. So it just doesn’t make sense. It’s usually said by someone who’s never built a company worth tens of millions of dollars a year who is saying these things. Of course, do you think sometimes it gets worse after a company is sold? Of course. But there’s a flipside. Are there silver linings to this as well?

Tracy: Yeah. I mean, the service is more stable because there’s more tech support within the company, more A-team, or more personnel. Are they able to add more features quickly? The consolidation with other parts of the suite. I think of Microsoft. Microsoft has a whole suite of applications. A lot of these applications, they’ll talk to each other, so there’s a lot of benefits there as well when you opt in to some of these conglomerates.

Rob: Yeah. It is still disconcerting though, I’ll admit.

Tracy: Right.

Rob: Next story. We’re going to link up all these stories. This is on bloomberg.com and it says, “Employees are quitting instead of giving up working from home. The drive to get people back into offices is clashing with workers who’ve embraced remote work as the new normal.” And it talks about someone who is called into the office for a six-minute in-person meeting or something, and she’s like, that’s it. I’m quitting.

My brother lives in the Bay Area, most of my family is actually. He said that he is friends with some folks who work at Apple, and they lived near him. When the remote work started, they moved like a two-hour drive away because the houses are so much cheaper, and you can get a view on all this stuff. Maybe it was even two and a half hours.

He’s like, they think they’re going to be remote forever and I think they’re not. I don’t think Apple’s going remote with the big flying saucer campus there. What are they going to do when they come back or when that happens? We were chatting about that, and I said, boy, if they’re developers or they have skills, they can just work remote for someone else, probably. What’s your take on this?

Tracy: I mean, ignoring COVID, this is just what happened with Yahoo because they had a remote policy, Marissa Mayer came in, and then it was like, oh, we’re canceling the remote policy. Everyone has to come back into the office because there’s still this pervasive idea, that productivity is tied to butts-in-seats. I was like, oh look, we’re taking this company, or we’re making it more productive in bringing people to the office. We’re going to have all those “benefits” of having butts-in-seats. That was pre-COVID.

Yahoo is its own thing. Who knows what’s going on with Yahoo now. But I remember that happening in the Bay Area, and COVD happened. That forced all these companies to adopt a remote policy. It’s the same thing, COVID’s lessening, the pandemic is lessening. It’s allowing people to get fully vaccinated, have the possibility of people going back to the office.

Company is ill-advised, the pursuit of efficiency and managers who have maybe not a lot of confidence in their teams or they are insecure managers (I want to say) going to pursue bringing people back in the office so that they can not have that question over their head of are my workers being as efficient as possible?

So it’s not something I agree with. We’ve always been 100% remote. I love working remote. I just look at Yahoo, I look at what’s going on right now, and this is like duh. Watching these companies force people to come back to the office, people are going to quit because now they realize there are more opportunities out there.

I expected the companies to do this. What is different now is that so many companies are going to be adopting more remote work than these companies that have, say, insecure managers, and insecure C-suite teams that want to move people into the office, now, they have more competition. Now their workforce is aware of remote work.

I watch the industry, people are going to be trying to adopt these policies. People are going to be quitting. Other opportunities are going to show up that are fully remote. Again, five or so years from now, there is going to be a major shift in the industry that started now because of COVID.

I’m not surprised but I expect that this is going to be, hopefully, a long-term change. These companies that have insecurities around productivity, I expect them to have this reaction, but hopefully, they’ll change.

Rob: It’s interesting because I’m much less black and white on remote being the end all be all. Every company I’ve ever run has been remote or half remote. In Fresno, we were partially.

Tracy: Yeah, I didn’t mention that. I’m not black and white either, and I didn’t really go into that. I actually think, TinySeed, I wish we were half remote. I would love to work with you two days out of the week.

Rob: Yep. That’s my ideal.

Tracy: I think that is the ideal for these companies as well. I think the black and white thing is like whether fully remote versus fully in the office. There’s a lot of gray there. Sorry, continue.

Rob: That’s the tough part is every time I talk about remote, I talk about the best setup I ever had and it was in Fresno. There were five of us or six of us—I forget how many were in. It was two and a half days a week for me. Some people showed up three. I think Einar worked there five days a week in the office because she liked it better. She was alone half the time anyway because none of us were there, but we were able to whiteboard.

Our staff meeting was lunch, and we’d go out on Thursday. I mean, that was the best. And then I could go home, put the headphones on, and not worry about having to drive in those days. It’s really hard to do that. Not for Apple, I guess. It’s hard to do that if you’re a small company or a bootstrapper because if you’re going to pay for an office anyway, that’s a cost if you’re only using it half the time.

In addition, then it does restrict you to I can only hire within a 30–45 minute drive. You live in Canada, Einar’s in California, I’m in Minneapolis, Producer Xander with MicroConf is in Hawaii. If I had to hire everyone in Minneapolis, we wouldn’t have the team we have. It instantly breaks that. I really struggle with it.

Tracy: It’s the same thing if you were like okay, TinySeed, COVID is over. We’re going to pursue being in person in Minneapolis. I would have to quit. It was like the same thing. I don’t want to, but I have to because I’m here. I feel like that’s going to happen a lot to these companies where, like you said, the example of someone who moved out of the Bay Area—two hours out so they have a lower cost of living—is going to be very unwilling to come back into that high cost of living area. That’s maybe where this change is going to happen. There are companies that can make this work.

My first job out of university was at a tech company. That’s my example of an insecure manager. Over the four and a half years I was there, they kept adding more and more policies that make us more efficient. So (a) we were all in the office, (b) we started clocking in and clocking out, (c) bonuses were tied to us working nine hours a day, rather than eight. If you only work eight hours a day, you’re not eligible for any bonuses. These policies kept adding up, adding up because they’re like, we wanted to extract all the productivity. Curious how they’re doing now with COVID. I eventually quit because of that.

Rob: Absolutely. Hours do not equal productivity. That’s the thing is my kind of shades of grey, or my spectrum view of this is not because I think, oh, I’m going to get more productivity out of people, or I can make sure they’re in their seats those two or three days a week. It is purely for social interaction. A lot of the companies that say, we’re fully remote—Basecamp’s a typical example, they’re all remote. From what I’ve heard, they hired a bunch of introverts, and everyone in the world is not an introvert. The extroverts I know don’t love working out.

I have worked remote for 20 years, literally two decades of working remote. I had a couple of stints in there where I had jobs for a year or two. But in general, I’ve had a home office. Sometimes that was a desk in my living room when we had a small house, or in my bedroom during COVID when I didn’t have room. I generally prefer remote, but I also miss a lot of the social. It purely is social and the ability to sit in front of a whiteboard or to hash things out. It’s that water cooler conversation that just doesn’t happen because you’re not hanging out all day.

You just have other wild thoughts that you drop on someone and that spark something, then there’s a brainstorm, and then there’s a hey, can you… That’s what I miss rather than being a hardcore manager.

I think of Apple with thousands of people, that would be tough for me. There have to be people that are just totally abusing it at that scale. On our scale, there’s four of us, or at the Drip-scale there were 10 of us. That was pretty easy for me to see who was shipping, what we were getting done, and to know that everybody was in on it. But if we were a hundred or a thousand…

I mean, I’ll say, once we were exorbitant to Leadpages, which is about 180 people total, it was three days in the office, two days work from home. There were absolutely people that were slacking off. That’s tough. I don’t know how to handle that, other than to require people to be in the office.

Tracy: Yeah. I mean, that happens if you’re in the office all the time too.

Rob: Yeah, that’s true.

Tracy: I mean, not to defend myself, but I got really irritated by that one company constantly tracking hours. One other thing they did was I wasn’t allowed to have my phone out because then I could potentially be looking at my email during work hours. It’s just crazy. I wish I could name and shame them, but I’m not going to.

Rob: I know, I can’t even… this is crazy.

Tracy: I’ll tell you stories later. What I did, I just stared at the corner. I would just take breaks, stare at the corner of the wall, and let myself drift off because there was no way they could stop me because I was just so mad at their policies. That’s going off track, but it’s a funny story.

What I want to say is that it still happens. There are still going to be workers out there that are maybe not performing as well as they could have. Maybe they’re a worker that the company might want to hire a person to replace that person. I don’t like tying everything to productivity, but you know what I mean. The person is not necessarily a good fit for the company.

That doesn’t matter whether they’re remote or all in-person. What it means is that companies need to have better ways of tracking the quality of work. Instead of just being hours in the office, like that company that I originally worked at. We were doing all we could, the person’s here all the time, this is as efficient as we could be. Look at other metrics and then those metrics can apply to whether someone is in the office or out of the office.

Hopefully this forces these companies to remove butts-in-seats and find other ways of tracking quality of work, productivity, and whatnot. If those things apply to in-person or out of person, I think that overall, it’s going to be better for the company anyway.

Rob: I love that you just said in-person or out of person. That makes me feel like I’m leaving my body. I’m floating guys, I’m seeing myself.

Tracy: Oh, gosh. That’s what my brain does. I’m thinking two sentences ahead and forgetting what I’m currently talking about.

Rob: It’s all good. Our next story is a Twitter thread I’m going to be posting next week. Maybe I’ll post it the day before the day that this episode goes live. It is about TinySeed and the end of our second batch, which is our 2020 batch. I want to be careful. Audience, listener who’s sitting here listening, this is not going to be a big hooray for us or hooray for TinySeed, but I did want to visit some milestones that some batch two folks achieved. As well as reflect on things that we did well and some things that maybe we need to work on. As well as just the structure.

Someone asked me in the last couple of weeks how do you run a fully remote accelerator, and why were you running a remote accelerator before anyone else? Because we were running that pre-COVID. Now, all accelerators have been remote for the last year. We orchestrated and architected this to work that way.

Tracy: Actually, this ties into our previous conversation. We were talking about tracking performance and quality and not necessarily being butts-in-seats. For us, some context around this is that, before the first batch, we were able to talk to the founders and the accelerator in person at MicroConf. We’re able to say, how was this year for you? And kind of get the down low. Of course, fully remote we weren’t able to do that.

We have anonymous surveys because we want to know how well the accelerator is doing, which is especially important being that most of the people—actually, I’ve met a few people in batch two, our 2020 batch of MicroConf—I’ve never met in person. This is the only way we have a gut feel for how the year went, but how does this look from the founder’s side of things? How well did this year ago, being that we had no in-person events and we had to do everything remotely?

Rob: That’s right. Because if you think that hiring someone remote is difficult, imagine running someone a $120,000 or $180,000 check remote having never met them and only being able to talk to them via Zoom and email.

A couple of numbers. Our first batch, our 2019 batch was 10 founders. 2020 batch, that just ended was 13. And our spring 2021 batch is 18. But the 13 companies in our 2020 batch grew an average of 413% during the accelerator year. While fundraising is not an implied goal of TinySeed, we had—I guess there’s one company who secured their pre-seed round and two others who are basically about to wrap it up.

We had our first acquisition, which was SeekWell. The founder of SeekWell was on this very podcast probably about six months ago. ThoughSpot acquired them. We had some great milestones.

ScrapingBee is great because they are very public with their revenues. We can actually say exactly, not just percentage stuff, but Scrapingbee was at $40,000 ARR when they applied. I don’t know if it’s when they applied or the batch started, but now, they’re at north of $500,000 ARR. The founders there told us that TinySeed played a huge part in that.

And then SegMetrics. Many of you know Keith Perhac, he’s a long-time MicroConf-er and has been on this podcast. SegMetrics grew 10 times in the last 12 months and they’re on track to hit mid-seven figures ARR by the end of this year.

A lot of cool milestones. Pretty stoked about it. It was a big bummer that we couldn’t meet a person. It’s not a regret because you can’t do anything else, but the fact that we weren’t, as you said, able to make that connection I think was a pretty big struggle.

Tracy: We always knew it was going to be remote. We wanted to help companies and these founders grow their businesses, help them reach (what you say) escape velocity, which I think some of those stats we were successful in helping those companies reach those milestones. But a huge thing is also just community between founders, especially for solo founders. We talked to a lot of our solo founders. It gives them a sounding board, people to talk to. And all these things that we can do remotely fairly well, but there’s something about getting in-person and having this group of people all together in-person.

I mean, it’s the same thing as a company. Working remotely is fine with you, me, Xander, and Einar, but it’s a different feel when you do have those like in-person meetings, in-person events, and whatnot. It’s a bummer that we weren’t. We were able to have a lot of community. There’s a difference in feeling between the 2019 and 2020 batches. I think it has to do with the fact that there weren’t any in-person events. Hopefully, as things open up this fall, we are planning to have some sort of in-person event like a makeup retreat for the 2020 batch. Hopefully to add that into the end and solidify all those relationships we were able to do remotely.

I will say that I do feel like there was a different feel, and it was interesting to have that experience I guess. I think when we did that anonymous survey, thankfully it seems like people still got a lot of the program without those in-person events. I am looking forward to bringing them back in though and re-establishing that side of TinySeed.

Rob: It’s a big deal. It makes a huge difference. I think when we originally started TinySeed we said, let’s have four in-person retreats per year. That means that every four months you essentially get together. The founders told us, this is too often. I’m busy and I don’t want to travel every four months. So then we made it six months apart, which means you have three retreats.

Tracy: Beginning of the program, end of the program, and middle of the program, to be clear.

Rob: Yep. Every six months. We haven’t had a chance to do that yet, but I feel like that’s going to be perhaps our optimum cadence. And the reason I’m calling this out is let’s say we were a team of 20 people, would six months be the optimum cadence? Or would we want to meet more frequently like every three or four months? Because I know that there are certain companies that only have one—I think Zapier has like one retreat a year. There’s a lot of people working there. They spent a quarter-million dollars or more to get them together. It’s not something they could probably want to do every quarter.

But what do you think would be the optimal? Because working with founders is one thing. They’re busy, they’re doing their thing, we get together, and we mastermind. But we are not managing them as teammates, as employees versus an actual team that’s working together in a startup. What’s your take on optimum cadence, face-to-face?

Tracy: One of the reasons why it went from four to three was because we talked to the founders in the first batch, four retreats per year meant more time away with their family, more time away from their company. It’s different when it comes to say a team because maybe four retreats per year or whatever you choose, it’s not technically time away from your company. You’re still working on your company while you’re at those retreats. That’s the biggest difference between retreats for founders who work in a company versus a TinySeed if TinySeed was 80 people.

I think it’s really important for companies to have those in-person experiences, and those are the kind of things that don’t necessarily take away from work. Instead of working on the nitty-gritty day-to-day, it gives you that time you should be doing as a company anyway to think high-level, what’s the next three, six, whatnot months? That’s something that depends on the company and how remote they are. If you are very international, every three months would suck. Every year I think is doable.

Rob: If you’re going to get your team together, we’re talking about founder stuff, but if you have a team at a start-up and you’re going to get them together, I found a really nice cadence is to have about half the time be work and half the time be not. It’s even like 2/3 not work where you have a work session in the morning maybe through lunch or early afternoon, then you have an afternoon fun hang-out, and then you have a fun dinner hang-out.

Usually, if you can, have a fun dinner hang out the night before because everyone gets in and it’s like, oh man, I haven’t seen you in a while. You’re a lot taller than I thought you’d be. You have all that weird stuff and you’re chatting. And then by the time you get to the work session the next morning, you have some type of agenda.

We do masterminds but that wouldn’t make sense if you’re a team of 5, 10, 50 people. But you do have an agenda of these are the things we’re going to hammer through, and then there is space for other things to crop up. Then again, after you leave that in the early afternoon, usually that’s then a bunch of time to continue that conversation and let it go wherever. That’s where it goes naturally. That’s the best part.

Tracy: The spontaneity, the little things that you don’t expect.

Rob: Tracy Osborn, thank you so much for joining me today. You are @tracymakes on Twitter and tracyosborn.com if folks want to keep up with what you’re up to.

Tracy: Yeah, and if you are looking to pick up some design skills, I have a beginner design book that is being published through No Starch called Hello Web Design. If you google for that, you’ll probably find it on the internet. It’s a republished book. I originally self-published it, it was successful. I was able to sell it to a publisher. That’s how you know there’s a stamp of approval, it is good work. If you’re looking to add design skills on top of your current stock, check out my book.

Rob: Awesome. Thanks again for joining me.

Tracy: Thank you, nice being here.

Rob: Thanks again for joining me today. I got a five star review. “One of the best podcasts for SaaS founders.” It’s from onlyoneda. “Thank you, Rob. Loving the podcast. It’s motivating me to keep going.” We have 906 worldwide ratings, 397 worldwide reviews across 47 countries. If you haven’t left us a rating, that would be awesome. I’m on a drive to get to a thousand. I want four figures of five star reviews.

I really appreciate you listening all these years every week since 2010. We’ve been talking about mostly bootstrapping, building ambitious yet capital efficient companies that change our lives. I hope you join me again next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. This week, Mike Taber joins me to update us on the status, so we can hear about his decision making around whether to launch a freemium plan, whether to do an AppSumo deal, how his potential partnership/merger is panning out and what would a Mike Taber episode be without a discussion about Google audits.

For those who are newer to the show, Mike Taber co-hosted this podcast with me for the first 448 episodes, and now he is known as the co-host emeritus. He is doing a lot of work on his startup Bluetick at Bluetick.io, which is a SaaS app that does personal outreach at scale for all your follow-up emails.

We’ve established in prior episodes that Bluetick is not supporting Mike full-time. It hasn’t been growing for the past year or so, as he has switched his focus to focus on this potential partnership/business deal/merger with another SaaS app that is further along. With that, let’s dive into my conversation with Mike.

Mike Taber, thank you for joining me again.

Mike: Hey, how’s it going?

Rob: Pretty good, man. Listeners, it’s only been two months since you were on the show, episode 543. I still am getting tweets and emails about it. It was the April Fool’s episode. Two days ago, so it’s like, I just caught up and I’m listening to the April Fool’s episode. Spider-Man, Spider-Man would have won. Then he sent me a picture of a graded Secret Wars 8 with a black costume. That was fun. Did you have fun recording that?

Mike: I did. It was a good time.

Rob: After we stopped recording on that one you said, I could have gone for a lot longer. I was like, dang it, I didn’t know that. You were like, I had Wikipedia articles I was going to quote. You really prepared, man.

Mike: I did. That’s probably unfortunate for you because I knew what we’re going to talk about, so I did prepare. I probably hustled you a little on that one.

Rob: Yeah. It’s all fair. It made for some good radio. The last time we heard an update from you was in February, which was about 3 ½ months ago and that was episode 535. In that episode, we ran through for the first time you let folks know that you were evaluating a pretty deep integration/partnership/potential merging of Bluetick with this other Saas app. I think the quote that I took away from that was, “Everything’s on the table.”

You guys are exploring all types of strategic partnerships and such. You also were evaluating, potentially launching freemium with Bluetick, potential AppSumo deal, we talked a little bit about a Google security audit, and everyone’s taking their shots right now. That was about it. Those are things I think we can circle back on. I must call out since we’re on video today that you have a Dungeons and Dragons fifth edition player’s handbook over your left shoulder, and then you have the lanyard from every conference you have ever attended up on a bulletin board.

Mike: Yeah. It’s funny because every single one of those lanyards is from MicroConf.

Rob: Is it?

Mike: Those are the ones that I kept. You probably can’t see, there’s a whole stack of D&D books over there, and in the background, there’s a small handful of miniatures and stuff like that. I ran it out of the Abyss campaign. I naturally went out and bought the giant mini-figures that are probably 4–6 inches tall, painted them, and pulled them out on the table when they were not expecting to get into trouble, and they did.

Rob: Roll for initiative. We’re going to search for traps, roll for initiative. The best part is that if this episode gets boring, we’re just going to do an actual play. You’re just going to get mini’s out, I have my dice right here, we can roll it.

Mike: Cool.

Rob: Before we dive into our actual play, which we’re not going to do, that’s a joke. I don’t want anyone to be disappointed, to get to the end of the episode and be like, you didn’t do it.

Mike: They’re going looking for that after-show episode with us playing D&D.

Rob: Yeah, we got to do that at some point, right?

Mike: Now you just committed us. I’m blaming you for that, I said it.

Rob: As long as your DM, I’m all about it. The lead is this partnership. I expressed some concern last episode about how you had been working together with this founder of an app that is doing ten times the revenue of Blueticks. It’s a much larger app that’s been around longer, it’s further established.

I think the concern I expressed was—you’re essentially working on it. You’re running the engineering team, I believe running product as well, making a lot of product decisions. My concern was how long do you want to do that without having something formal in place? Without knowing where this is headed. Where do you stand with that today?

Mike: Yeah. Still nothing overly formal in place. Everything’s kind of, I’ll say head nod, head shakes mode at the moment. I’ve known the founder for five or six years now. It’s not like we don’t know each other. There is a certain amount of trust there for that. I’m not really worried about getting screwed over or anything.

In terms of everything being on the table though, I would say there have been some conclusions for some of that. Like for freemium, for example, I’ve kind of pushed that to the back burner, probably not going to be a major thing that I’m exploring right now too much. There’s just a bunch of other stuff going on.

Rob: There are costs. The freemium thing was a big concern, and I get that because again when we were still bootstrapped doing freemium with Drip—Bluetick is a complex app, there are costs to it. There are server costs, there’s scaling, and there are things that make freemium maybe not a no-brainer if you don’t have buckets of money in the bank. If you really wanted to do it and try it out, I would say, cool. And not wanting to do it, that’s fine. I think there are other opportunities that are probably better there.

Mike: Right. Along with that, I decided against doing an AppSumo deal.

Rob: Did you?

Mike: Yeah. And I kind of came to that conclusion based on the same things that I looked at for freemium because with AppSumo, I’m going to get some level of money but then I’m going to have to support these customers forever. I had probably half a dozen different conversations with people who have done AppSumo deals. It was just a recurring theme over and over again that (a) it was difficult to get them to upgrade once they purchased the AppSumo deal, and (b) supporting them was just an ongoing cost, and not even just a little bit of support.

One of the founders I talked to, he’s like, yeah 80% of my support calls come from this group of AppSumo users and they’re contributing 0 moving forward. This was three, four years later. He still got 80% of support volume from those AppSumo users. I’m just like, that’s terrible.

Rob: That’s really surprising because normally users need a lot of support up front. Three or four years later they know the app and they don’t need it. That’s interesting. That’s the first I’ve heard someone run into that.

Mike: Yeah. I would say that’s more of an extreme example, but certainly not the only person who said I’m still answering support emails from that group of users. Their expectations are wildly out of whack with what they paid. Not one person I talked to really said, hey, this was exactly the target market that I wanted to get it. It added users, added visibility, but at the end of the day, that stuff only goes so far if it’s not paying the bills.

Rob: Yeah. I think AppSumo deals are good. I think there’s a time and a place to do them. In fact, I sat down a couple of months ago now with Ruben Gomez, who obviously did it for a doc sketch. It was a successful thing, he has no regrets, both the money and the users. But he has some pretty specific criteria of when to think about doing a lifetime deal like that. It was at MicroConf Remote. That was just a couple of months ago. If folks want to check that out, then go to microconfremote.com. I think the videos are still available for sale there.

That’s interesting then because I think the reason you were even thinking about freemium is because you were saying if I’m going to have effectively free users, which is kind of what AppSumo is. You get your $20,000, $30,000, $40,000, or whatever it is upfront, but then they’re effectively free users after that. You were saying I’m thinking about freemium from there. My memory was, I was probably a little discouraging of like, I don’t know that I would do freemium with Bluetick. I don’t know if that’s the way to go.

The AppSumo deal I see potentially more reason to do it just because it will get you users. You don’t have momentum right now. You don’t have growth if I’m understanding correctly where it’s at. I mean, Bluetick’s revenue is still where it was maybe a year ago because you’ve been focused on working on this other app, the partner app. Which again, you’re essentially running an engineering team. It’s a day job.

Whether you do the AppSumo thing or not is fine. I could see going either way on it. It’s a risk. I was actually just talking to a TinySeed founder a couple of weeks ago who’s also evaluating AppSumo. He was right on the fence with it, and he also decided not to do it. For a lot of the same reasons you’re saying—just the risk of it and the lifetime nature of it just didn’t make sense for him.

How are you feeling then? Because again, I struggle with you working a day job in a sense and not having equity in it. That’s not true. Actually, if you came and you said, hey Rob, I’m going to get a day job. That’s the decision because it’s simple, it’s easy, and I get a W-2 at the end of the year. I clock out at 5:00 PM, can you imagine that? But if you said that and that was the decision I’d be like, cool, that’s your choice, and you know what you’re getting into.

Mike: It’s funny that you put it that way because over the past couple of months, I’ve been trying to refinance my mortgage, not because of the interest rate per se, but because we want to basically overhaul our kitchen. We have contractors already assigned to it and everything. We’re like, oh well, we have a ton of equity in our house, not very much money left on it. We’ve got like seven years left on the mortgage. We can refinance, go to like a 15-year mortgage or even a 10, still.

Basically (because of the way the interest rates are) we could just add it on. We’re adding a couple of years, our payments don’t change—no-brainer. It turns out that if I were a W-2 employee this would be so much easier, but instead, I’ve had to go through the wringer for three months now. I’ve learned so much about the mortgage industry in the past three months that I hate that.

Rob: None of it that you wanted to know. You didn’t want to learn any of it but you know it.

Mike: None of it that I wanted to know. Surprisingly they say that I have a negative income, which is bizarre.

Rob: Really?

Mike: Oh yeah. My tax return very clearly says that I have positive income and they’re like, oh yeah, I won’t name the numbers, but it was over six figures. They’re like, oh yeah, this counts for zero. I’m like, what? And of course, they won’t take a profit. They just use a profit and loss statement to baseline, but they won’t use it. It’s like counting for anything. I’m just like, you’ve got to be kidding me.

Rob: Yeah, it’s tough. The mortgage world doesn’t understand 1099. They often don’t understand startups. Even investors, there was chat in the TinySeed Slack and a couple of founders, someone had their mortgage lender back out on them 20 minutes before their close. He had to go to Silicon Valley Bank because they understand founders. They know what 1099 income is, and they know all this stuff. They will say, have you raised funding? That’s actually something they’ll pay attention to at least you have a viable situation.

Mike: Anyway, over the past week or two, I’m just like, man, I would kill for a W-2 employee status right now, even if it’s just for a month. I mean, I would go so far as to pay somebody to put me on W-2 for like a month. I don’t care.

Rob: I totally get it. You only need a couple of months of pay stubs. That’s actually early on, when Derrick was working on Drip, he was a part-time contractor, and then he was a full-time contractor. At a certain point, he’s like, I’m going to buy a house. Could you make me W-2? I was like, sure, let’s do that. That was it, he needed like one or two pay stubs. Then it was instant. It was so easy to get approved, but without that, they wanted two years of history and all this stuff. At that point, he was young and didn’t have it.

Similar to me, when we went to buy this house that we bought three years ago, I had left Drip and Sherry had her consulting and all that, but I didn’t have a job. We went to all these lenders and they were like, yeah, you don’t have a job, bro. You don’t have the income to lend against. I was like, oh, eye-roll.

Mike: Exactly.

Rob: Cool. That was a good tangent. Where I’m coming from is, look, I know the person who runs the other SaaS app, the partner too. I mean, you guys are not going to screw each other. I don’t think that’s going to be the case. But is there a concern? Or 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, hey, let’s merge these two apps, or let’s both focus on this one, and here’s the equity split.

Because I’ve done this before where I have an app and I bring someone on and we discuss equity, we put a partnership agreement together. These days, I would use a lawyer and I’ll say, 12 years ago, I wrote my own agreements, which is like the worst idea ever, but I was too cheap and didn’t really have the money to do it. What is the delay with that? Because you’ve been working on this for over a year now.

Mike: I mean the delay until after December and probably even after that until February was over. He had this other business that he had to sell. The pandemic pushed that off and he finally closed on it at the end of December, but it still took like a couple of months of offloading because it’s a non-trivial sale. He had several hundred employees, multiple locations for this brick and mortar business, and just wanted to get out of it.

It took a couple of months even after the close for him to kind of offload a lot of the work and the hand-off. It wasn’t like, here are the keys and I’m out the door the next day. Selling a business, it’s really not like that. You are essentially committed to sticking around through a transition period.

Then once that transition period has kind of gone, we’ve been having weekly meetings on Monday mornings for a month or two at this point. I think those are helping because they put us on firmer ground in terms of what our expectations are, how we’re going to blend to move things forward, and what we want to see out of the “partnership” or how we’re working together.

We have gone back and forth on do we work on Bluetick, or do we work on this other app? Do we collaborate on something completely different? All those things have kind of come up and been discussed to some extent.

Right now we’re working on a program for a done-for-you service for Bluetick and pitching it to their existing customers. Which I think has a lot of potential. That’s something that had originally been something we were going to do about a year ago, but because everything else was going on.

Rob: Just COVID and the sale.

Mike: Yeah, it just never really got to the forefront. Plus, we’re having a billion technology problems, which I think for the most part are more or less resolved. I mean, there’s always technical debt to take care of. But we’re in a position now where we can actually start doing that stuff. Now he has the time to start working on that stuff too. I think that that’s got a lot of potential, and it is something we’re going to be actively working on. We’re just in the very early stages of that right now.

Rob: Yeah. If the done-for-you service works because this other app has a customer base of a sizable, substantial—I don’t know what the term is for it, but there are enough customers that it could make sense and generate real revenue pretty quickly for a done-for-you service. If that works, that’ll be interesting. Because a done-for-you service is not cheap, right? I mean it’s basically a productized service. I would guess single-digit thousands per month to do it. You don’t need that many clients to get to $20,000, $30,000, $40,000 a month. Obviously, you then have the issue of hiring people to run outbound and all that. But these are solved problems.

We’ve seen Craig Hewitt do it with Podcast Motor, now Castos productions. We watch Brian Casel do it with Audience Ops and anyone else who’s in a productized service. If that works, I’m intrigued by it. If that doesn’t work, I got to be honest, I want to give you my opinion and I want to hear your take on it. What do you think? I feel like both of you should go all-in on the other app and shut Bluetick down.

Autopilot it, whatever, put it on the side and not focus on it. The reason I think that is because the other app is doing 10 times the revenue. The other app has traction. With the two of you working on it—you are development, product, and engineering. He is sales and marketing, and operations, I presume. I know he knows quite a bit about sales and marketing stuff. I mean, that’s a hot take for me. What do you think about that idea?

Mike: I think it’s interesting because you came to the exact opposite conclusion that he and I came to.

Rob: That’s funny.

Mike: The reason for that is that the growth for that business is stagnant, and it’s been stagnant for a while. There could be any number of reasons for that, but it just hasn’t grown. Right now there’s a struggle to try and find what channel or channels to tap into in order to get it to grow any further. We actually both came to the conclusion, probably separately, and together in our discussion that Bluetick probably has better growth potential than that product. Even though there is a wide discrepancy in the revenue, that doesn’t mean that couldn’t be addressed through a good solid sales and marketing effort.

That’s what I would say to it. I don’t think there’s a right or wrong answer to it, but that’s the conclusion that we had come to. I don’t know where to go from there. But I think we need to give it a little bit of time just trying to figure out how things work out.

We do have one customer who was basically (I’ll say) beta testing the done-for-you service, so we’re going through that process right now. They’re already onboarded. We’ve got the emails set up. They’re written to basically be plugged into Bluetick. The founder of that company is out this week and he’ll come back next. There’s one small feature that I have to implement in order to get things working for them. But other than that, next week we should be able to get started with it.

Rob: Got it. Just as a reminder, I realized in the last episode that you are on, we mentioned the other app we keep saying is a CRM for field sales reps. We can call it the CRM instead of the other app, the partnership app, or whatever since you’re being all coy about it. But that’s interesting. Both of them are stagnant. In my mind, neither of them is growing. I keep saying it’s 10 times. I think it’s more like 15 times. It’s substantially bigger. It has a team working on it including you and more customers.

I mean, they both seem like CRM for field sales reps. That’s a big space. It’s a space you should be able to get some type of traction. Just because you have marketing channels working now, (we talked a little bit offline) but it’s like there’s outbound linked in and email. There is a G2 crowd and Capterra. There’s content, there’s […], all these things to do. You’ve spent the last year-plus fixing a bunch of technical debt.

That app is in pretty good shape to do it, it’s full-featured, and has (again) a substantial customer base. A sizable customer base enough to be generating a good amount of revenue. That just feels like the basis from which you can really build on versus Bluetick that still feels pretty nascent, I think.

The question I used to ask you was, do you have product-market fit? How are you different from the other 5 or 10 apps that kind of do the same thing the Bluetick does? If you get a done-for-you service working and you are pulling from the CRM’s customer base—not pulling, but you are selling to them—what happens when you get through all those customers and you convert 10% of […], 20%, or whatever? So then Bluetick has more revenue, but now it’s stagnant again because you still haven’t figured out how to market, sell, and grow Bluetick.

Mike: Sure. There are two things I’d probably bring up. The first one is your point about the revenue difference between them I think is probably closer to 15X. That is accurate, but at the same time revenue—you know as well as I do revenue and profit are not the same things. And if you’re talking about profit, I think profit-wise, Bluetick actually has more profit, which is a hard pill to swallow. I think that’s kind of a big contributing factor. There are just a lot of moving parts, there are hundreds of thousands of lines of code. There are hundreds of customers.

The types of support issues that we get are things like (I told you this offline) somebody said, hey, your app isn’t working you need to reload it. It’s like, okay, well, clearly you’re not a developer so we’ll just let that slide. Can you send us a screenshot of what you’re seeing?

They sent us a screenshot, and in the background, you can see the app, in the foreground you see the Chrome waiting for web browser window where it basically shows that message when it’s locked up. The message we got with the screenshot was, it’s been like this for three days. What gives? It’s just reloading your browser man.

Rob: Yeah. Command + r.

Mike: Yeah, exactly. Something along those lines. The person just didn’t reload their browser because they’re like, oh, I’m just waiting for this web page. It’ll eventually get there. They have no concept of time-outs or trying again.

Rob: Right. It’s customer pain, I’ve talked about this. Competitor pain versus customer pain. That makes sense. I mean, you and the founder of the CRM are much closer to this than I am and have spent more time thinking about it. That’s my hot take or my assumption that if I had these two apps and knowing what I know about them, I would double down on the one that’s larger that has had that. But we don’t need to definitively agree on anything on this call.

I think that the thing I’ll ask you before we get into the Google security audit discussion is do you have a timeline in mind? The next time we talk will be a month, two, three months down the line. Do you feel like things will be settled by then?

Mike: I think we’ll have some sort of a definitive idea of where we’re going because I mean really, it’s only been about like the past two months or so where we’ve really started to dive in. And honestly, I’ve been somewhat distracted because of my mortgage debacle and several other things. There’s that, there are taxes, there’s all this other stuff.

I feel like I’ve jumped from one major fire or fiasco to another over the past six months. It seems like it’s nonstop, I don’t know why. I’ve mentioned it in FounderCafe. I put in this long thread the other day about the part of why I’ve been absent for the past couple of months. I just listed them all out.

I think things are starting to close out on some of that stuff. We’ll see how it goes. I really think that he and I will come to some sort of conclusion about what the direction is from here moving forward over the next month or two. I think that partly because we are meeting every single week, we are having pretty in-depth discussions, we have a couple of different calls each week with the team. There’s a marketing call and a couple of other things we do. We’re in constant communication.

I think something will sort itself out. I don’t know what that is. I have a good feeling that that’s going to at least move forward in some way, shape, or form. I just don’t know what the outcome looks like.

Rob: I wish you and he the best of luck in figuring that out for sure, and I’m curious to hear an update once that’s all settled. Google security audit.

Mike: One painful topic to another, man.

Rob: I mean, these are the things that we talked about last time. I’m just touching base. Is that all done? I mean, I think everyone in the audience is like me. They both like hearing about it and really don’t like hearing about the security audit. But it was the second time and you had to have done it already. Was it a lot easier? I know they weren’t going to charge you more for the second year, which makes no sense because it’s way less work to do. And you were negotiating back and forth, I believe at the time. I don’t even think you started any of the technical stuff, but catch us up there.

Mike: How much dirty laundry do I want to air on this one?

Rob: I don’t know.

Mike: You want me to just throw it all out there?

Rob: It’s up to you. It’s your call man.

Mike: Sure. I did not do it. After getting the price quotes, looking at everything, and evaluating whether it made sense to do it or not—based on what Google was telling me was going to be the outcome of that—I decided against doing it. Right now, if you log into Bluetick and you go to add your email account and it’s a Gmail-based or G Suite-based, you have to go and see your G Suite account and you have to whitelist Bluetick.

You just go in, I’ve got documentation on how to do it. You just search for it, plug in Bluetick, save, authorize, whitelist, and you’re done. Then you can add your email accounts in and everything’s fine—nothing changes. The only thing that not having the audit does for me or counts against me is if you have an actual gmail.com account, you have to use IMAP authentication, you have to enable that in your account, and you have to create an app password. It’s a little bit more complicated.

Rob: I’ve had to do that before.

Mike: Yeah. But Bluetick really isn’t aimed like gmail.com users. It’s aimed at business users who use their business accounts for sending out those emails. The conclusion I came to was that it didn’t seem to be worth the money for (I’ll say) the paper-thin-veil of security that is supposedly offered.

Because last year I went through it and they came back with some pretty ridiculous things. They’re like, oh, (I’m going to misremember the details on this, but it was something like) you should protect this port, make it HTTPS instead of HTTP. I’m like, that’s not even my server. It was a Dreamhost server for something, I forget what. They’re like, well, you have this listed in one of your DNS entries. I’m like, that makes no difference, whatsoever, it’s not connected to anything. They put up a fuss about it.

I pulled it out just to appease them and get the documentation, but they’re looking at some really stupid things. Given the background that I actually have in security, I can point at those things and say, yeah, this is a dumb thing that you’re looking at and it doesn’t make sense. But they’re like a bank, and if they have their own policies around certain stuff, then they’re going to say, hey, this is enforceable and you have to do it.

The other thing I found, and this is where the dirty laundry gets in, I’m going to start throwing people under the bus. The first piece is that when Google said that they were going to do this, essentially all of the existing accounts would still work as they were supposed to, nothing was going to change there. I did proactively go out to my customers and say, hey, you go whitelist Bluetick, and a bunch of them did.

I did not notice any accounts that have gotten disconnected since the deadline passed and Google emailed me and said, hey, you are in violation of such-and-such terms. You are no longer going to be authorized to do this. But everything else seems to still be working properly the way that it’s supposed to do. Nothing made a difference at all. Hasn’t impacted sales, hasn’t impacted anything else.

At the end of the day, was it really necessary? I don’t think the answer in my case is yes. If I were running something where people were authorizing the Gmail accounts and we’re using that, then it would be a problem because then I literally couldn’t do what I’m supposed to do for them.

The other piece when I was talking to the three different companies, one of them, basically let slip that Google came to them and said, you are required to charge at least this much money. Apparently, they get copies of the invoices, which to me seems like a violation of the NDA that I had previously signed, but apparently, Google gets copies of those invoices.

Rob: Seems monopolistic too. Was it—what’s that thing?

Mike: Anti-monopolistic. Anti-competitive behavior, racketeering is the charge. If you search for racketeering on Google of all places it basically says you’re organizing to extract money from somebody for your own personal gain. The only reason that this whole thing doesn’t fall under that umbrella is that I have to pay a third-party company in order to get this audit done.

But because Google is dictating what that is and they’re saying you have to charge at least this much money or you couldn’t possibly have done the audit, which I disagree with, but that’s an aside. They’re forcing it.

Rob: Yeah, I didn’t understand. It didn’t make sense to me why they would enforce a minimum. You just corrected that in my head. If they say, you have to charge at least this much, then somehow Google has the confidence that they spent enough time, that it was worth that much or something? They’re doing it so that they think that a real audit was done so that I can’t come out with Rob’s security audits and come and try to charge you a $100 and say, oh, I audited them.

Mike: Well, you can’t do that anyway because these are the only three companies that are authorized to do that.

Rob: Three companies.

Mike: I see what they’re trying to do. What they’re trying to do is say, well, we don’t want those three companies to be bidding against each other and then lower the amount of services that they’re offering to the point that they’re basically skipping all these things that they really should be doing.

The problem with that stance in that argument is that Google is outsourcing this specifically because (a) you would want to avoid a federal racketeering charge, and (b) Google’s not a security company, these other companies are. Why are you dictating to them what constitutes a security audit instead of letting them decide? Because they’re the ones who have to sign off on it. They’re the ones who do all the tests and everything else.

Something feels really shady, it really, really does. I’m sure I’m going to get emails from somebody who works at Google at this point. I’ve thought about taking all the information and data that I have, all the notes, and just putting them in a zip file and sending it to the state attorney general and say, you deal with this because I’m done.

Rob: The opinions expressed by Mike Taber are not the opinions of Rob Walling or this podcast.

Mike: Exactly. I mean, you could look at it in a bunch of different ways like, oh, this is just one more thing that Mike Taber’s ran into. I’ve had to stress about this for a long time, and it sucks. It sucks that I have to deal with this.

Rob: Yeah, we know. We’ve lived through with you, Mike. Was it all for nothing? Do you regret doing it last year? Was it just a waste of time and money?

Mike: I think so. Yeah.

Rob: That sucks.

Mike: Yeah, it really is. I mean, I blew five-plus figures easy getting this stupid audit done, and it murdered my profitability. Then they doubled the price the following year and I’m like, forget it, I’m just not going to bother. I’ve had zero problems since then. Not to say that somebody from Google isn’t going to hear this and then go invalidate all the tokens. But that just comes down to retaliations like, oh we did something terrible, and we’re going to cover for it. We’re going to drive your business into the ground. Could that happen? Sure. It hopefully won’t happen.

Rob: But the idea that you can work around it by whitelisting because you’re right, if I have a Gmail account, I’m not the optimal fit for Bluetick. I’m going to have a G Suite. You support G Suite, Microsoft Office, Outlook, or whatever.

Mike: Honestly, anything that supports an IMAP connection.

Rob: IMAP, okay. You’re on all the platforms, and Google has been the most painful one.

Mike: They’re the jerk hippo in the rooms, that’s what that is.

Rob: I don’t know that reference.

Mike: I guess the elephant, whatever. Elephant, hippo.

Rob: The jerk elephant in the room, I see. I both feel bad for you hearing that, but I also feel good that you didn’t do it. I’m happy that you made the decision not to and that it hasn’t had adverse effects. Now, going forward, you’re just kind of shoulder shrug. I mean, are most of your customers using Google inboxes, is it the majority?

Mike: It is, yeah.

Rob: Okay, interesting. I guess it is one of those super popular—I mean, G Suite is so popular especially with startups.

Mike: It’s very easy to get on and very easy to start. Once you’re there, you’re probably not going to switch my email providers anytime soon. I mean, it makes sense to have that stuff. I really feel like the way Google has gone about this whole thing has been extremely poorly implemented.

Their communication is terrible. You can’t get answers. You can’t talk to anybody. Their policies were extremely heavy-handed, and they don’t make exceptions for anything, really. Then when the one place where you could feasibly get around this whole audit, they kind of really downplay that whole option for doing it.

Because had I known that, I wouldn’t have paid the money in the first year. I would have just avoided it. Hey, if I could just have people whitelisted and get around it, then why would I bother? Why would I pay all that money? After going through the audit, they found almost nothing. The few things that they did find were extremely ridiculous. Some more requirements, okay, I get this, I understand that.

I would say the things that they came back with, there were maybe two, possibly three that it was actually an issue that I looked at and said, yeah, I really should fix this and I fixed it. But otherwise, there was a handful of stuff that they’re just like, you should do this and that. It’s like, no, that doesn’t make any sense.

Rob: And right here, I want to play an audio clip from the last episode where Mike was angry about the Google security audit. We can hear his rant. I want to compare the two rants to figure out if you used similar verbiage or whatever.

Mike: Similar swear words, profanity.

Rob: Similar swear words. We haven’t had to bleep you this episode yet. Well, sir, that’s the end of my list for today. Is there anything else you feel like we should chat about that’s been going on the past few months?

Mike: I don’t think so.

Rob: Very good. If people want to keep up with you, you are a prolific tweeter, @SingleFounder. I think your last tweet was about the time the last podcast episode went live three months ago. But no, if they want to keep up with what you’re doing Bluetick.io, that’s it.

Mike: That’s probably it. I don’t really pay attention too much on Twitter anymore. I don’t even remember the last time I actually logged in. Occasionally, I will find things where it’s like click on this and you go see the tweet or whatever.

Rob: It’s not a bad thing.

Mike: Yeah. Mostly, I’ll just post random stuff my kids say on Facebook and that’s about it. I don’t even read it for the most part.

Rob: That’s not a bad way to do it. Cool, man. Well, thanks again for taking some time to join me today. I know folks like hearing from you, and I like catching up as well. Until next time.

Mike: All right, take it easy.

Rob: Hope you enjoyed that conversation as much as I did. I always enjoy having Mike back on the show. It’s just easy chatting because we’ve known each other for so many years and spent so many guests, literally hundreds of hours talking about this kind of stuff. It’s good to have him back on the show. I’ll be sure to have him back again in the next couple of months.

What I do with Mike is I’ll text him and say, hey, do you have anything to report? Is there anything interesting to update folks on since last time? Last year in 2020, there was a seven-month gap where just nothing really was happening that he was able to talk about on the microphone. This time it was about three months. We’ll see how quickly things sort themselves out, and I’ll get him back on the show just as soon as I can.

Thank you so much for being a loyal listener and a subscriber. As always, I’ll be back again in your earbuds next Tuesday morning.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. Jordan Gal, founder of CartHook, now working on his next SaaS effort joins me today and we run through listener questions. Jordan’s been on the podcast many times, and he’s done at least one Q&A question in the past.

We run through things about starting an ecommerce SaaS and whether you need compliance to do that or whether there are laws and regulations around it. We talk about managing enterprise perceptions of risk toward bootstrap startups. We answer questions about bootstrapping and enterprise SaaS, about growth, about hiring versus outsourcing. It’s all kinds of tasty goodness, and without further ado, let’s dive into the questions.

Jordan Gal, welcome back to the program man.

Jordan: Rob, it’s great to be here. The last time I was here I spoke so much we had to break it up into two episodes.

Rob: That’s right. No, it wasn’t you. That was one of the all-time best episodes people keep coming back, 499 and 499.5. We walked through the six stages of SaaS growth I believe. You and I were comparing notes, Drip to CarrHook, and people just kept writing in on that like, oh my gosh, do more things like that. It was a fun one.

Jordan: It was a fun one. It was a great chance to look back.

Rob: Indeed.

Jordan: This one’s a little different, what are we doing today?

Rob: Thanks for coming back. We’re answering some questions, man. We always have listener questions coming in from folks. Today, I got about a half dozen picked out, we’ll see how many we were able to work through. All right, man. Let’s dive into our first listener question. It’s from Salman Ahmed, and appropriately enough, it’s about ecommerce compliance. For folks who heard in your intro or who have heard of you in the past, CartHook is an ecommerce SaaS, as well as your prior effort, was actually an ecommerce site that you ran with your family. Have you talked about your current effort, your company about being an ecom or not?

Jordan: Not in detail. It is an ecom for sure, but we haven’t talked about it fully. Soon, the website will be launched next week and then I’ll be much more open about it, but we are enjoying a little bit of stealthiness.

Rob: Yup. In the early days. You have ecom site experience as well as ecom SaaS experience now, two times. Totally appropriate and a cool question for you today.

Question from Salman is, “Hi, Rob. If a solo founder was to create an application like Shopify, would this be possible, or are there certain regulatory requirements that would make this impossible? Example, to accept credit cards and store customer Stripe IDs/merchant credentials in order to make transactions on behalf of their accounts. Would this require a certain level of auditing that a single founder operation could not pass?”

Interesting question. I’m a little confused by it because I think he’s a developer just thinking about building something and wondering if there are regulatory requirements or whatever, but what are your thoughts on this?

Jordan: The word that comes to mind for me is resourcefulness. In the early stages, you need to answer these questions. My general assumption is that the web is now developed enough that there’s a way, that there’s always a way. Many of us who are familiar with Stripe know actually there are no requirements around auditing, and you can offload all of that to the payment providers these days because the credit cards never touch your servers.

At CartHook, we built a business that processed $2 billion and we were never PCI compliant because we didn’t need to be because modern web and payment processing technology allow you to do that.

Now, sure it’s important to know that, but the real thing is to be able to figure that out. To go look, do the research, dig around, and figure out what services do I need to stitch together to make the solution that I have in mind possible. So the question sounds to me more like a mental blocker than an actual blocker because you could figure it out and your job is to figure it out and to build minimally in order to get to the value that you’re trying to accomplish.

Technically, yes you can do it, but the more important thing is regardless of what area you’re in, if it’s ecom or not, your job as the founder is to just explore and figure it out.

Rob: Yeah, and that’s a great summary of it. I think a nice google of this asking Stripe. I mean, other folks have built apps like this in the past, and it feels like if you’re bootstrapping it, you’ve got to think a lot about security, hashing, and storage. My experience with Stripe IDs is that, like you said, you don’t need to be PCI compliant to do it. But I haven’t built an app like this right, so this would be research and conversations with folks whether in MicroConf Connect, on Twitter, or whatever you can.

And then this is one of those things where if you’re storing Stripe IDs and your bootstrap, that’s probably the way to do it, assuming you can. I’m not giving you the advice to do it or not. But this is also the reason that some companies raise money. If you look back at Gumroad’s story, they originally I think were going to use other payment processors, or maybe they even did tie it into other payment processors, but they wanted to become their own payment processor.

I remember talking to someone on the inside, it wasn’t Sahil, it was someone else at Gumroad. I said, you guys raised a lot of money. It raised like $7 million after bootstrapping for a while. He said, yeah, in order to go to banks and get permission to become a payment processor, we needed to raise buckets of money. I think that’s probably true. It lends some credentials of, we have $7 million in the bank and we’re backed by XYZ brand name venture capitalist. Right or wrong, fair or not fair, that lends you a certain amount of credibility and flexibility to then do some things like becoming your own payment processor.

Jordan: The complexity of what has been built in tooling around payments, even that is challenged because now there’s a company called Finix Payments that do all of that for you and allows you to become a payment facilitator by partnering with them. Maybe it still costs a few hundred thousand, but not a few million.

I think, generally, a bias toward this is possible. We’re going to just figure out what services are out there to make it possible in the way we need it to be. As opposed to a bias toward, I guess I can’t do it because I’m so low and I don’t have the resources. I think that’s the general approach for me. It’s developed enough that you can do it.

Rob: I hadn’t heard of Finix. That’s crazy. Everything is becoming productized. Like Stripe with Atlas, it’s like, okay, you want to start an LLC or a C-Corp? You push some buttons, you enter some things, and it’s like I have a bank account, I have a Stripe account, I have the operating agreement, I have an IP Agreement. It’s incredible.

Jordan: Yeah, every little gap.

Rob: Cool. Well, those are our thoughts. I hope those are helpful for you, Salman.

Our next question is about managing enterprise perception of risk towards bootstrappers. A little bit related, I guess, tangentially to the last one. This question is from Noah Stahl.

He says, “Long-time listener, first-time caller. I’ve been working for a year as a solo founder of a private school operations platform, in other words, what schools use to track enrollments, bill parents, et cetera. As a key differentiator, I set out to build an enterprise-capable product in a market where existing solutions focus on small businesses. I’m approaching launch and have started initial demos and talks with my former employer, which is a large school operator where I worked and found this gap and hence the startup idea.

All signs are positive around the product itself. Their main hesitation seems to be the risk of committing to a new platform run by a bootstrap solo founder. My pitch has been that there’s a great opportunity to have them as my first customer, which would allow immediate ability to mature the product in a tight feedback loop where their needs could guide their early roadmap, and I know it’ll be awesome. But their question of risk is valid. With that preamble, the question is, what successful strategies have been used by bootstrap SaaS founders to help mitigate actual or perceived risk when selling to early customers, especially enterprises?”

And then he gives some other thoughts. It’s a longer email, so I’m trying to summarize. But we’ve all dealt with this I think unless you’re running a low touch sales process where you’re charging $40 a month. I mean, even in the early days of Drip, the first customer who’s going to pay us $200 or $250, which is nowhere near enterprise. I know bootstrappers call that enterprise, but enterprise is like Fortune 1000, right? These are big companies versus someone paying you $1000 a month or something. That’s just a bigger customer in mid-market or whatever. But we’ve all experienced this. I know you have two. What are your thoughts on this?

Jordan: This is something that everyone faces early on. If you’re bootstrapping, if you’re a small team, you worry about that credibility gap. This is the conundrum of do you say we are working on it or I’m working on it. It’s even more difficult as the price goes up and as the customer size goes up.

The way I look at this is at CartHook, one of the things we learned was that there were more complicated metrics of fit for customers. We used to look at it as one metric. If you’re doing enough revenue, you’re a good fit. As we got more sophisticated in that, we started to understand that there are multiple types of fit—there’s financial fit, there’s strategic fit, there’s cultural fit, there’s technical fit, all these different types.

I think what the person writing in is referring to is a risk tolerance fit. There are people out there that are down to take that risk. They like being early, they like being a beta customer, and they want to take a chance on you, support you, and be part of that. If you’re talking to a company that is extremely hesitant on that, it’s not that you’re building the wrong thing, it’s not that you can’t do it, it’s not that there’s a mismatch between the type of companies that you’re working, you want to work on, and the size of your team. It might just be that there’s a mismatch between that particular prospect not being one of those people that want to take a risk.

It’s tough to overcome and you can make assurances. You can talk about more collections of money upfront. You could talk about your track record. You could talk about your plans. You could talk about your war chest, whatever you want to do, but you also want to make sure that you’re talking to the right person who wants to be a beta customer.

Rob: Early adopters, right? That’s the name in our industry for folks who are willing to take a chance on a new entrant into a market because the early adopters often see an advantage to using new software, something innovative. Maybe it’ll reduce their training costs. Maybe they’re paying a lot of money and you’re going to be cheaper. Maybe it’ll be more powerful and they’re willing to take those risks.

The early adopters, this is from Geoffrey Moore’s book, Crossing the Chasm. There are five or six of them and the last one is the laggards. These are the people that maybe you’re talking to a laggard and you’re at the opposite end of the spectrum.

I have heard this conversation happen many times, especially in Slack channels that I’m in like MicroConf Connect and some other founder channels. I mean, there’s someone who’s running a four-person, five-person bootstrap SaaS company and they are doing let’s say half-million or a million a year. I mean, large for bootstrap size, but relatively small on the scheme of companies.

He gets this question frequently once a month, twice a month of wow, you seem really small. How big is your team? How much revenue do you do? How many customers? He gets these types of questions and he basically handles it by being pretty honest frankly and saying, well, here’s our team. We’ve been in business for seven years—they’ve been around a long time. We’ve been in business for seven years. We have this many—they have more than a thousand customers or something paying us. We have a lot of long-term contracts. Financially, we’re very viable. The software has been stable. You figure out which of these things you can rely on.

Now, all the things I just said, Noah (who’s asking this question) can’t rely on any of those because he doesn’t even really have anything yet. That hard problem is if you don’t have a product yet, it comes back to what you said, which is just figuring out which things this prospect really wants out of it. If they’re so concerned, if they’re so hung up on their risk of being an early adopter, then they are probably—unfortunately, even though you have a relationship with them—not a good customer for you yet.

Jordan: Yup. I always give the advice to skew toward transparency because then you don’t need to keep up the charade about behaving as a customer support person, then a success person, and using different names. I mean, I’ve heard some crazy things from people. You just don’t need to keep up that charade. You could be honest and then your customer or prospect will just get the real view on things, then they’ll get bought in.

Rob: Yup. It’s interesting, one idea he threw out in the email he says, “One idea to reduce this risk might be to allow significant prepayment upfront as a way for them (meaning the school) to provide capital that makes their commitment safer.” Which I’m almost like, wait a minute, that sounds like… Doesn’t it sound like the opposite because they’re giving you a bunch of money? I mean, certainly, if you can convince them to do that, why wouldn’t you? That’s like customer funding, right? That’s what that’s referred to. I just don’t think that someone who’s risk-averse is going to volunteer to pay you for three years of the software without anything.

Jordan: Yes, but it is also a good indicator of demand. When we had our first really big merchant approach us—really big for our situation—at CartHook, we almost used it as a test. We explained to them exactly who we were, that we were learning, and the things were starting to go well but it wasn’t all good. And then we put the price to them.

Our product at that point was $300 a month plus the transaction fee. We said to them, if you can commit to us for a year at $10,000 a month, then we will make all these changes that are necessary for you and change the infrastructure and all that. They said yes, and that was a really important indicator for us to understand, okay, so now we can think about pricing differently, we think about our value differently, we can build out our infrastructure differently.

It was helpful in that way to find an early adopter that was willing to commit to the money because they knew that that was going to help fund us and help fund the infrastructure. It’s kind of a two-way street.

Rob: Yeah, I like that. I like it a lot, actually. The other thing I would say when I think of Noah’s situation is you have an idea to build an enterprise version of the software that is focused on small businesses, and you are talking to the school that you used to work at. My biggest concern is even if they say yes, you spend six months or a year building this, you sell it to them, what then? What next? Does anyone else care about enterprise software in this space? Is this a thing? What other validation?

I would be doing more validation before I tried to sell one company on it because what you may find is that you’ve built yourself a consulting agreement where you’re not actually getting paid for all of it. You’re getting a monthly fee for a product that you have one customer for and the market size is one.

And he says P.S. love what you and the team are up to at Tiny Seed. I look forward to applying once I get out of the gate with some initial traction. Good luck with that, Noah. I hope you keep us updated.

Hey, this is Rob dropping in from a separate time and space to talk to you about Rewardful. Everyone knows it’s hard to grow an online business, especially in the early days. People are becoming desensitized to content marketing and paid advertisements. Instead, they’re turning to product recommendations from people they trust. So how do you cut through the noise and grow through word of mouth?

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The next question is related. Bootstrapping in enterprise SaaS is from Declan Sweeney who has written into the podcast many times. He says, “Hey, Rob. Declan here from CampusConnect. We sell to universities and the higher-ed market. Our service helps boost applicant conversion by enabling applicants to connect with peers prior to enrollment, big KPI for recruitment, and enrollment folks in universities.

Our current clients are super happy and we’ve done well in terms of revenue expansion within the current customer base, which is a great testament to the value they receive. Word of mouth and referral has enabled much of the expansion revenue. But as universities are mostly in competition, it doesn’t support referrals to new sites.

My question relates to market penetration in a slow-moving B2B enterprise market. As a totally bootstrapped startup, it’s exceptionally difficult to get in front of the right folks. And it seems those with mega marketing budgets can do so and win.” I would actually question that item, marketing? Anyway, well, I’ll keep reading and then I’ll let you weigh-in, but I question some of the assumptions in this email, for the record.

He said, “Even though they have inferior products when they have so much money for marketing budgets, that they can get inside these big orgs. Are some markets just not feasible for a bootstrapped approach? Thanks for the guidance as always.” What do you think, sir? You’ve sold to big ecom companies. What are your thoughts?

Jordan: I too question some of the assumptions, that referrals would be discouraged by your customers. Oh, man, for me it’s I go to tough love on this question. It’s not fair that your competitors have more money, that they’ve raised more, that you don’t, and nobody cares. You’re dealing with an unfair situation. You can cry about it, or you can work with it. It does sound like a tough situation to sell to universities, and at the same time, maybe that’s your advantage. That does not mean that you have to go out and raise the same money, and it also doesn’t mean that you have to go and die, not at all.

If you have existing customers that are happy and paying, then you have the kernel of truth. That means you can get more of them, and so I would hang on to that and have confidence in that and find others like them. I’d ignore what your competitors are doing as much as you can.

I had some really good advice over Twitter DM once when I saw one of our competitors raise one of those preposterous, makes no sense rounds. How? What? Why? I don’t understand. We’re so much better, that kind of like pity thing. I pinged a VC that I’m familiar with and I know he’s familiar with the deal. What he said to me was hugely impactful for me.

He said look, they have no choice but to raise a ton of money and to get a ton of attention because the only way they win is by winning the market. They have to be the leader or they lose. They will run out of money, it won’t work out for them. You have built a real business, you have paying customers, and you don’t need to win in order to personally succeed, so ignore it.

You guys are playing two different games. You should be happy. You should be proud of what you’ve built, get more customers just like that, and let them go big. Sure, it’s annoying to watch, but you’re playing two different games, you don’t need to beat them. You just need to do your thing and win. That’s the approach I would take.

Rob: I think that’s a great perspective. Every time that I was bootstrapping a SaaS and someone came in and raised a big bucket of money, I used to turn to Derrick and say, well, set the clock for 18 months. I want to acquire their assets when they can’t raise their next round. And it was a little bit of a jerk thing to say, more often than not it wound up they weren’t that good.

You’re right, it’s unfair in certain aspects. But also, unless they know how to execute unless they’re really good at it, money doesn’t do it. Money allows them to hire and move fast, and if they’re really good operators, then yes, you do have a problem. But in most cases, I would say people don’t actually know what they’re doing. That’s the reality of it.

Jordan: Yeah, money can accelerate in the wrong direction also, which is something that we’re seeing at my new company. We have competitors that are raising a ton of money. Some that are good at what they do, and some that the money has twisted up their approach because it’s almost like they’re spending before they really understand the customer. Where does that lead you?

You have this great thing right now where you understand the customer, you have paying customers. Yes, it’s annoying, but I would look at whatever channels are working for you that might just be the word of mouth, your individual networking efforts, or whatever it is, and keep focusing on them. If you have a big market like universities and you figured out how to sell to them, you just keep going and it turns into a longevity thing.

The founders that are bootstrapped, that are successful—the ones that I know that are most successful—have just been persevering. They’ve just been doing it a while, then it compounds, and you get to the place you want.

Rob: Especially in these really, the—I would call them—tough markets where it’s customer pain, where just the sales process alone is a year or more. I can imagine it’s like selling to the government, selling to universities, selling to electrical contractors. I mean, these are just people that are just very slow-moving—selling into legal. There’s just a lot of spaces that are tougher to sell to than bootstrap SaaS founders, designers, or developers, you know what I mean? It’s like you can build interesting things for those people. They’re online, they’re easy to reach, and that’s just not the case. The fact that you’re in a space like universities and trying to sell to them at all means you’re definitely doing that part of it on hard mode.

Now, on the flip side, your contract value should be enormous. This is the mistake I see some folks making is selling into these really hard markets where it’s a 6-month or 12-month sales cycle and you’re charging a tenth of what you should be charging, right? I don’t know what exactly a product is, but these should be $50,000, $100,000 a year contract values, or else it doesn’t support the effort you have to put into sales.

You have a few choices here. You could also go out and raise a bunch of money. I mean, that is a choice, right? I mean, Jordan, you and I, outsiders. I knew zero people with money, I knew zero entrepreneurs, I knew zero venture capitalists when I started bootstrapping stuff 15, 16 years ago. As far as I know, you had a couple of friends from college who are traders on a stock, they’re in finance, but they’re bankers. You didn’t know any venture capitalists.

It’s funny, someone may have heard you five minutes ago say, yeah, I DMd a venture capitalist who I know. Do you know how you know that person? Not because your dad introduced you and you went to Harvard with him, no. You hustled, you went to conferences, you met people, you built your network over the last decade or more, right? That’s what this takes.

I’m not saying that Declan should or should not raise money, but it is a choice. It is a choice. If you really think that’s the way to get there, then do it. If you really want to be bootstrapped, that’s cool. And then it’s back to your comment, Jordan, now you have to figure out what are your advantages as a bootstrapper and how do you combat this unfair situation where someone does just have buckets of money. Those are our thoughts, Declan. Hope they’re helpful.

Our next question is from Russ and it’s about growth. He says, “Love your podcast. I’ve been following it for a couple of years now. Our product was developed in our agency,” so he runs an agency and it’s a time tracking tool, a direct competitor to Hubstaff, Time Doctor, and Clockify.

“We have a good online presence when we get traffic from SEO, and we’re currently at $200,000 dollars of annual recurring revenue. We’re growing but not fast enough. We’re self-serve and do not currently have a sales team. We’ve tried working with several marketing people, but it never worked out for us and we never saw results. Maybe we’re just not good at articulating our needs. Basically, the main metric that we’re looking at is growing MRR.

How do we find a person who has experience growing SaaS companies? It sounds to me like people who know how to do it well are either building their own products or not interested in working with smaller marketing budgets. Also, what kind of comp would you offer if we found such a person?” What do you think, man? This is the perpetual question.

Jordan: This is really hard and I talk about this regularly with my peers. That it feels like B2B marketing is in a pretty weird spot right now, and no one really knows what works. It used to be you build a funnel, you nurture, and then you close. Maybe, in one way or another, that is still what you’re doing, but that funnel is no longer clearly defined. Where you send traffic, you have a lead magnet, you educate, you build trust, and then you make an ask. It’s just not straightforward like that anymore.

This is a question a lot of people are wrestling with. People are having a lot of difficulty making paid marketing work for B2B, and obviously, everything I’m saying is with a caveat. Hopefully, there are people out there that are doing fantastically well with it. But it is a genuine problem. No one really knows what to do right now to ramp up marketing without just doing direct sales, which is what people with money do.

Rob: Like cold outreach and just SDR and BDR it. I will say that it is still working in less competitive markets. But in markets like ecommerce, ESBs, and CRMs where there are 200 players or whatever, I think you’re mostly right that there’s still a funnel but it’s a lot different than it used to be. It is more amorphous.

Jordan: Yeah, and that’s a big market—time tracking. There are a lot of potential customers. That’s good. You do have some leaders that have momentum, money, and name recognition. You just have to deal with that, that’s fine.

I guess in that environment where I would be looking is some type of a unique angle on the product. I know they’re currently self-serve. I don’t know if that’s the ideal. Hiring for marketing, I wouldn’t negotiate against myself off the bat by saying all the good ones are taken and people don’t want to work with small budgets. That’s not necessarily true. Just because you may not find that type of a thing right for you doesn’t mean other people—so anyway, I wouldn’t make any of those assumptions.

You can find people to do the right work in a way that makes them fulfilled and is right for your company. But before doing that, I would try to decide on what the right approach is. Is it content? Content is tough these days. Is it outreach? Is it partnerships? Is it channels? What are you doing before you bring the person on, ideally? If you want to bring on someone to explore, that is a high risk, high reward play.

Rob: Yup. These days, if I was going to do it because finding someone to run experiments and figure out what’s going to work is really hard and really risky. Even as a founder, if today I had a SaaS app, it might take me six months or nine months to find it. It might take you, Jordan, six or nine months and we’ve done this before and we’re pretty good at it at this point.

I would actually be looking if I wanted that role because that is kind of a unicorn I’ll say. You can find them, but I’d be looking more to an agency or contract relationship where I’m looking at an Asia Orangio right who runs DemandMaven and does this kind of stuff for SaaS startups.

Look at Derrick Reimer, founder of SavvyCal. He hired Corey Haines who used to do marketing at Baremetrics, and Corey is a contractor. Corey is really good at certain types of marketing, he has his tool belt, and he could run through those things and figure out which of those work. And then if some of them are sustainable, then now, when you find that employee if you want to hire someone full-time who can then maintain that and augment it and everything.

Jordan: It’s tough because it’s a risky bet no matter what. But if you want to grow faster than you’re currently growing, you probably have to put a few bets down.

Where we are at my new company, we’ve been focused on product and engineering. Now we’re turning towards sales marketing as we get closer to launching into beta, and we’re taking a stab at it. We’re saying our hypothesis is X. If that is what we think will attract merchants, then this is what we need. We need a content creator and someone to do demos or something like that. That’s our guess, and we’re going to put our bet down in hiring toward that guess.

If it doesn’t work out, it’s bad for us and probably bad for the people that we hire, but at least we’re choosing a direction first and then filling roles for that direction. As opposed to hiring a CMO and saying you figure it out, that feels too risky.

Rob: Yeah. That’d be a big risk. You’ll also find that if someone is truly a CMO, then they don’t actually do things. They manage people who do things, and you don’t have the budget to hire a CMO and five individual contributors, right?

Jordan: Yes. If you have the budget to hire that leader in management and thought process, then what you can expect is that they’re going to hire a team below them. It’s a bigger bet.

Rob: We’re talking about strategy versus tactics versus individual contributors who are executing on something. I mean, to be honest, this is why I—as a developer who used to build or acquire products—learned to market. I’m not that good at it, but I’m good enough.

Learning marketing was just a necessity if I wanted to quit the day job. If I wanted to grow a company to seven figures in revenue, I was in this place that rests in like I don’t know how to hire someone to do this and so I’m just going to do it myself. I’m not saying that’s the right way to do it, but that is what I did. I just learned it and then executed on it well enough to be able to make it out. It’s always challenging.

I mean, hang out. Again, I know I’ve mentioned MicroConf Connect I think once or twice already, but that community is over 2000 founders and aspiring founders who are wrestling with this kind of stuff. There are people in there who say, hey, I’m a marketer and I need a technical cofounder, or I’m a technical co-founder and I’d love to have… If they were in-person MicroConfs, I would also say go to a MicroConf and just ask around and try to find out who these people are. It’s working your network. You’ve had co-founders in the past and you met them through an introduction or you met them through, a lot of times, just talking to people.

Jordan: Yeah. $200,000 is a real attraction. It’s starting to get somewhere. You probably don’t need to come up with the most ingenious thing as the next step. To go from $200,000 to a million ARR sounds like finding one or two things that work and then being consistent about it. I like looking for characteristics that are analogous.

Who else is in a big market that has big leaders that you’re not going to go challenge them but you need to find your own spot in this big market? Who else is in that situation, and go talk to them see what works for them.

Rob: I like it. Hopefully, that was helpful for you, Russ.

The next question is about hiring full-time versus outsourcing. This is from Filip Kis of SessionLab, and he says, “I had a question for you. In several episodes now, I can vividly recall only the one with Rand Fishkin. There were either examples of people outsourcing work,” and when he says outsourcing, usually that means hiring contractors, consultants, or agencies. It’s not a non-full-time employee.

He says, “Are other examples of people outsourcing work or hiring full-time employees? And as there are two extremes—hiring full-time versus outsourcing—maybe an episode could be devoted,” in this case we’ll just use it as a single question, “to pitting the two against each other and talking about the pros and cons.”

This is an interesting question because, in traditional, we’ll go to a venture capital because they’ve been doing companies for what 30 years-ish. I mean, it’s been longer because Apple was in the late ‘70s and there were others—Intel and such. But let’s just say like SaaS stuff for maybe the past 15, 20 years. If you were to raise money to do a software company, they would basically say you need an office, you need to be down the road from us. You’re on Sand Hill Road. I know a lot of this, some of this is changing. And you need to hire all full-time employees, basically. Especially for your core competencies, but also even outside of that.

And then I think over time this has evolved where remote work is a little more accepted now. Maybe having some contractors offshore to do some stuff that’s not in your core competency may be more accepted. I think in the bootstrap and mostly bootstrap space, the capital-efficient companies that we’ve run in, it’s been a necessity to have remote work and often to hire a contractor because it’s like I can only afford five hours a week for someone to do support. I can’t hire a full-time W-2, or I need this marketing task done. I can only hire a copywriter for a few hours this month and then I’m done. There are a lot of pros and cons to this, but with that preamble, what are your thoughts on it?

Jordan: I think this is a bit ideological in the way people approach things, but a lot of it is also practical. Look, W-2 is a big hurdle. Health insurance, all the stuff that goes with it—the additional 30% or so on top of the salary and the commitment, right? You’re making a commitment to someone. It’s not like, well, I’ll hire you as a W-2 employee or a full-time player for three months and then turn that off quickly. So, it is complicated and it is dangerous also.

When we started at CartHook, we raised just a little bit of money from friends and family like $250,000. We went full time because we thought, okay, that’s what you’re supposed to do. And then within two months, I just looked at the numbers and said, well, this is nice. We’re all full-time. We’re going to run out of money. So we fired ourselves—all of us—went back to contractor status ourselves with the company, and then only rehired later on like a year later. So it is dangerous, I hear you.

The good thing is that like remote work, there are a lot of options these days. The way we operate right now is we have full-time W-2 employees in the US, and then we have full-time contractors elsewhere, mostly in Europe. We have this hybrid where I think the ideal is full-time. There’s something that happens when someone makes the company that big a part of their life and commits to it for the long term. The dedication, the thought cycle spent on it.

Rob: Camaraderie.

Jordan: Yeah, and the connection overall is really different. In the EU, it’s full-time, but they get benefits from their country. So we hire them as full-time contractors, then they get the benefits from their state, their nation, and then it works out. In the US we do W-2.

The way we look at it is those positions that we absolutely need we’re going to hire full-time. Whether it’s W-2 or contractor, it’s still going to be full-time. And then when we want to augment, that’s when we look elsewhere. That’s our situation, and I think it’s easier when you raise a few million bucks off the bat.

At CartHook, we had to claw and convince people. The way I always presented it to people was you joining makes it much more likely that I can hire you full-time. If you’re buying into what we’re doing, then join in and I’m going to behave as if you’re staying, and you can behave as if you’re staying. Let’s make it work together, and six months from today we can hire you full time. That was my partnership approach.

I know speaking of Sahil at Gumroad, he’s taking a contractor approach. There are no rules anymore. You can do whatever you want, but there are trade-offs all over the place.

Rob: Yup. There’s a lot of factors. If you’ve raised a lot of money, you have more options. If you haven’t or you just have a little bit of profit, you have fewer. That’s the reality of it. Again, not fair, but the reality.

What Rand had talked about specifically was really interesting because I think he’s been public. It’s like tens of thousands a month in MRR with SparkToro. Plenty of money, they could hire people full-time. But they’ve done all contractors and mostly consultants even. I view the difference as usually a contractor, you have to tell them what to do, a consultant tells you what to do, right? The consultant is at a higher level. I don’t know if everyone used that definition, but that’s the one I always have.

They hire a lot of consultants and agencies. What he said is he loves it. It’s probably overall more expensive because agencies are more expensive. They have markup, margin, and all that, but he said he loves it. It’s performance-based, and that if they’re not cutting it, he has no qualms about letting them go, in essence. There’s simplicity, and he doesn’t have to manage anyone. The actual HR, the day-to-day of having a team of 10 versus having 3 or 4 agencies you’re working with to satisfy. There’s a certain nice luxury in that, right?

But he’s not venture-backed. He wants to build a really capital-efficient, profitable, MicroConf, TinySeed, Startup for the Rest of Us-type company. If I were going to raise venture and try to go big, I would probably hire more W-2 because talent is so hard to get anyways, and keeping that knowledge in-house, especially for your core competency. But even beyond that, I think there’s a benefit to it.

Look at TinySeed and MicroConf, right? These are two companies I think about every day. What is our core competency with MicroConf? It’s running events and building community. So I spend time on it, and Zander is full-time. I don’t want to hire a bunch of full-time employees beyond that. We may wind up and that decision will come to it, but I like small teams, personally.

And then if you think about TinySeed, Tracy runs the day-to-day of the Accelerator, and that is a core competency. I would never have a consultant do that. But if we’re going to do marketing, let’s say we’re going to do a bunch of content marketing, let’s say we’re going to do some other thing. Is that a core competency of TinySeed, or is it just something that we can maybe pay for someone to do on a performance basis, right? Back to the point of how hard it is to find marketers who can produce results. Agencies have to or you let him go.

Jordan: It’s pros and cons. This is one of those things that no one can tell you what’s right for you, and you really should ignore what’s out there and make your own rules. What Rand is doing sounds to me like he knows what he’s after and what success looks like. Whether that’s simplicity, low stress, or avoiding some of the scars of his previous experiences, he knows what he wants. It sounds like he’s sticking to that and building it in a certain way knowing what the trade-offs are.  You having the ability to let people go much more easily than if they were full-time also means they can walk away more easily. So as long as you go into it with open eyes, then you can make it work.

My point of view on it is just mine. I want to build a bigger company that people love to work at. So for me, I’m going toward the W-2. This morning we had all-hands, and the feeling I get from having those groups of people at an all-hands and everyone working in the same direction, that’s what I personally want.

You got to ask yourself. Again, there are no rules anymore. You can make this stuff up. We’ve all seen this business software allow us to be possible. Five-person companies are doing millions of dollars a year in revenue, and then there are another 10 or 15 contractors but you keep the core team small. You can do that too. You can do whatever you want, and Rand’s doing his own thing. That doesn’t go by any existing preconception of what a company should be.

Rob: Right. I’ve done both. If we go back nine or ten years, I had HitTail and I had several other apps. Everyone who worked for me was a contractor/consultant because I didn’t want the overhead, not just the financial, but the mental overhead of having employees and managing all that, managing payroll. I think at that point, I wasn’t even on payroll. I think I had an LLC straight pass through and I just pulled the money. It was just easy, it was simple.

As we got Drip going, I realized right away, to your point, it’ll be fun to have a team, to have the buy-in, the camaraderie, and the community. But also, I think this is going to be big and I want to all be in this together. I don’t want one day for the contractors to walk out or I don’t want people to not care. On the weekends, if the site goes down, and it’s like, I’m a contractor, I’m off. There are certain levels of commitment I think that you want with that. We live in crazy times, but it’s cool to have the flexibility. A lot of creativity is available. I hope that was helpful, Filip.

Jordan Gal, thanks for taking the time, man. Come back on the show. You are @JordanGal on Twitter and @CartHook. Is that right, @CartHook on Twitter, isn’t it?

Jordan: Yeah, that’s the company. I’m no longer running that company. We have a great CEO in place, Emily. She’s running it and dealing with all the things that that involves.

It was great to be on. Thanks for having me on. I’ve been real quiet on Twitter, but you’ll hear some more out of me over the next week as we launch the site.

Rob: Awesome. I’m excited to see it, man. They should follow you there so they can hear what the news is. Cool. All right, take it easy. Thanks for coming on.

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Thanks again for joining me this week. It’s always a pleasure to have Jordan on. I hope you enjoyed our conversation. If you have listener questions, send them to questions@startupsfortherestofus.com. I prefer voicemails or videos if you have them. If you can record a video on your phone and send it in, that’s great. If you just want to do a voicemail, that’s great. Those go to the top of the stack, but I’ll still take written questions as well. I believe we have just a one- or two-episode backlog of those right now. We will get to them soon, and I’ll be back in your earbuds again next Tuesday morning.

Rob: I’m back with another episode of Startups For the Rest of Us. This is episode 548. We’re about to hit the 550-episode mark. As you know, the show is about building ambitious startups, bootstrapped and mostly bootstrapped, but without sacrificing our freedom, our purpose, and our relationships to do so.

I have a great conversation today with the co-founder of Aurelius, Zack Naylor. Aurelius is a SaaS app for UX researchers. It’s for them to organize, tag, and search all of their research notes, both audio that gets transcribed as well as text that you enter in. You can imagine doing jobs-to-be-done interviews, or doing any type of UX research and interaction research, needing to filter that, and search through it later.

The two of them are working on it full-time. They’re what I’d consider a mostly bootstrapped company, having bootstrapped it for the last five years and through many versions. You’ll actually hear us tell the harrowing tale of re-versioning and having to re-platform it. It’s a hard story in the sense that they were getting some traction, but not enough to quit their day jobs. They realized there was one section of the app that people really love. They just had to rebuild it with new technology and really focus on this one piece of it. It’s a fascinating story. I hope you enjoy it.

Before we dive into that, if you haven’t downloaded our two exclusive episodes along with the PDF guide, you should head to startupsfortherestofus.com and enter your email address. The first guide is 8 Things You Must Know When Launching Your SaaS. The second is 10 Things You Should Know As You Scale Your SaaS. These are essentially solo podcast episodes where I dug into 8 things and 10 things respectively that I feel like everyone should keep in mind as they’re doing this. These are takeaways from 20 years of entrepreneurship and 16 years of thinking about, talking to, and advising entrepreneurs. Startupsfortherestofus.com, sign up for the email list to get those. With that, let’s dive into our conversation.

Zack Naylor, thank you so much for joining me on the show.

Zack: Definitely. I’m really honored to be on. I’m actually pretty humbled that you asked. I’m happy to be here.

Rob: Yeah. It’s great to have you on, man. We’ve known each other for a few years. You live here in Minneapolis where I do. You and I had some bourbons now and again, you might say. It’s been a while though due to COVID.

Zack: Yeah, unfortunately. You might say and I will say.

Rob: Indeed. I’m fascinated to have you on today to talk about a few elements of your journey with Aurelius. Your H1 is, Your research is solid. But it only matters if you can get from data to insights to influence, faster. Prove what you know with the more powerful research repository and insights platform. It’s aimed at UX researchers. Is that right?

Zack: It’s really anybody who’s doing regular research with their customers. That tends to be, for us, primarily UX research teams. It also then means general UX teams. That could be designers.

If you’re in a company doing UX but you don’t have a dedicated research team yet—maybe because you’re not big enough or they haven’t recognized the need, whatever, you’re still doing that. Maybe you’re in product management. You’re doing customer research all the time either with UX or not. Those are the folks we tend to find the most value out of Aurelius.

Rob: Got it. To give people an idea, UX research is a fairly new thing, at least in my experience. When you first told me about Aurelius—was it three years ago or four years ago when we met—you were explaining it to me and I was like, I’m not sure I really understand what it is or what it does. But these days, you have enough traction that you and your co-founder, Joseph, are full-time on the product. You’ve been accepted into TinySeed batch three. Congratulations. You have traction here.

To give folks an idea of what the product does because again, I almost come at it. Of course, have I done job-to-be-done interviews? Yes. Have I done light UX research myself? Of course. As a founder, I had to do all of this stuff but I am not a professional at it. I’m definitely an amateur who’s trying to do it. To get my head around it, I’m looking down through what the product does from a nuts-and-bolts level, not the benefits, but the literal features.

It looks like you can take all of your research notes, whether you’re doing a job-to-be-done or whether you’re doing just a conversation. You’re taking a bunch of notes. If you have interviews that are audio, you can upload them and you’ll transcribe them. The idea is to get all this stuff into text. Then you tag things so you can highlight this sentence, do #featurerequest, #error, and then, later on, you can filter and you can search by those hashtags. It’s taking these volumes of notes and other textual data and being able to apply a taxonomy to it that’s later, searchable and filterable. Am I explaining that relatively well?

Zack: Yeah, you are. I obviously think about this a lot. I would just add to that or maybe even try to distill it further and say the biggest question you get is what do we know about our customers who need X, Y, and Z? When you think about that, how do you get that today? It’s everywhere. It’s email, spreadsheets, Post-it notes, everywhere. But really, it’s the place that people refer to as a central repository where you can search, share, and reuse that stuff all in one spot. Absolutely.

You’re talking about job-to-be-done interviews. You take all those notes. You’re actually a perfect example. You said you’re not a UX researcher, but you play one on TV kind of thing. You do all these interviews and you go, how do I make sense of all of that?

There is a lot of stuff in Aurelius that helps you do that. We actually do automatic keyword analysis to help you find patterns, themes, and frequency to make you analyze and make sense of this. Then, when you say, what did you learn from all the interviews, that’s when you capture these key insights. You can filter and sort off those themes and tags, and say, these are the things we learned. But then, that becomes one central bank of knowledge where you can get a lot more mileage to that where next time when you’re going to figure out what you learned from research, you don’t have to do new research and waste time on resources which nobody likes. You can actually get a lot more mileage out of the research you did.

Rob: Right. That’s the thing. Again, we go back three or four years. You told me about this idea. I remember thinking isn’t this solved with Google Docs or with Evernote? There are all of these tools to do note-taking. I’m sure there are ways to taxonomize, hashtag, and organize it, but it sounds like there isn’t a tool like this aimed at UX folks or I guess researchers in general.

That’s the thing you were mentioning offline where you’re saying market researchers or something, that they were using some crappy tool or Evernote, that they saw what you had, and were like, wow, we could use this in our field.

Zack: That’s a really good observation. I think because we are in such a nascent area of the industry, the solutions are Google Docs, Confluence, Spreadsheets, and stuff like that because those were just the tools that were given to us. We think that those are free. That’s a whole other conversation. Oh, these tools are free. They’re not. You’re always paying for them in some way, but right, they’re not actually built for the purpose. The things that you want to do with these notes, with being able to capture these insights, with being able to share them with people actually requires stitching together multiple tools. To have it in one place not only use efficiency boost but also a lot of other features that don’t exist in something like Evernote.

Rob: You know the old adage—I love to say this—anytime someone is using a spreadsheet, that’s a SaaS company in the making. Eventually, it can and/or will be replaced by that. I think Anaar may have said that. I’ve heard a few people say it, but it’s a great takeaway.

I don’t want to spend too much time on the product itself but I really wanted folks to understand what it is because it essentially is a verticalized tool. It’s for researchers. If you don’t do much research, as myself coming to it, I was like, why would I need this? Why does this solve a problem that people will be willing to pay for? With that in mind, you started the company six years ago, 2015, with your co-founder. In 2016, you launched an alpha and you started testing it with folks. The product wasn’t very different from what it is today. In fact, you’re telling me on the side, including that alpha version, you’ve literally had four versions of this product.

That’s just painful to hear because I know that each of those times, you had to make a decision to scrap the version and start a new one. That could not have been easy. It probably was a pretty big blow to your ego, but also just a blow to your motivation of, oh […] do we really have to do this again?

Can you talk us through maybe the first one or two of those? Did you scrap the code and started over? Was it just UX? What got you there? There have to be people listening to this podcast right now who are in that space of like, we built something but people don’t want it. They don’t want all of it. What was that process for you as a professional UX researcher and product person? How did you go about going down this path in the early days?

Zack: Okay. Where do we want to start here? In 2015, we officially formed the company. Sometime in 2016—I want to say it was March-ish but don’t hold me to that—we launched the alpha. You weren’t paying for it yet. This was a pure sign-up on our website. Let’s collect the emails. Let’s get you in an alpha or beta program. In fact, I was even doing this manually, personal connections because I worked in the industry. I would like you to come in and check this out. You use this for free, yadda yadda yadda. That version was actually a product strategy platform. It was a classic start mistake. We built too much too soon. We were way too broad.

As I was talking with you a little bit about this, what happened during that point in time was out of 100 people that came to us, 10 were like, I’ve never seen anything like this. I want it. This is the way it worked. We’ve been looking for something like this. The 90 were like, I wish we could work that way. This is really cool, but tell me a little bit more about this research and insights piece you’ve got.

At that time, we were doing research and insights but it was also connecting to product decisions, trying to connect the analytics, and then tracking that back to goals. It was a very ambitious platform, let’s just say, for a couple of pirate bootstrappers. But people just were not ready to work that way, that scale. We had enough interest to where we eventually the actual live version of that and we’re getting some paying customers. Nothing to really write home about. Then, this feedback continued to roll in. It’s just like, yeah, this is really cool but we just really need a way to organize all these insights and research that we’re doing with customers.

It just became apparent to me particularly, as somebody who’s been working in the industry for over 15 years now. I was like, yeah, it’s actually always been about that. The idea was, okay, we’re going to take the research and insights piece, pull that out, build it in its own app, basically inject it with steroids, and integrate the two. Sounds reasonable enough. Sell them to separate products and you can plug and play.

We launched the beta version of just the research and insights app and even our paying customers were using the beta version of that more than the old one. That was a clear signal, sunset the old product. At this point, we’re head-first into the research and insights piece and we’re building that.

Fast forward to—I don’t even remember the exact year—2017, 2018, somewhere around there. The old codebase wasn’t working for us. We want to really put the pedal down on the research and insights piece. Completely redesigned, completely re-platformed, new codebase, and everything. Yes, it was painful but it was necessary. It served us pretty well.

The thing was back then, I think it was mostly Angular and also Riot.js—not easy to find developers, not easy to run people up, slower development time. We go, we’re going to change that. We did that. Okay, fine. Then, we finally go, well, there have been a lot of advances in technology that we had. The initial database was actually a Neo4j because we were doing some things with making recommendations and stuff like that which suited us well for that.

But then it just made sense to move off of that, do the Mongo, and then re-do the front-end and React because way much faster to have time being a team that is bootstrapped. Speed to development is huge. That was version three which actually launched “version three” of using codes of what you see today in Aurelius which launched in September.

Every single one of those times, yeah, it was absolutely painful. Every single one of those times, we had that conversation. I’m sitting here like you already said it. Do we really have to do this again? But we were able to accelerate every time after that. You just basically crawl through glass uphill and then you’re able to go down the other side of the hill.

Rob: Right. I have a saying that I say all the time which is so much of being an entrepreneur is making hard decisions with incomplete information to where you can never get to 100% certainty. There is no data that tells you although there has to be a God element. I say that with product validation when people do customer development, trying to do a lean startup, you put up a landing page, whatever. It never gets you to 100%. Maybe it gets you to 50%, maybe 60%. I found that these massive, pretty undoable decisions are often like that.

How did you feel? How did you and Joseph reconcile that each time? Was it like, well, this is what our gut tells us and enough of the data is pointing in this direction? Did you lose many nights of sleep as you were trying to make the decision? How did that happen?

Zack: That’s a really fair question. The first time around, it was really moving away from the database and being Neo4j. When we first built it, it made a ton of sense because we were trying to help automate, create recommendations, connect decisions, and stuff. Again, very ambitious.

It worked, which is cool but then we moved away from that. Then in creating different connections within the data, Neo4j just did not serve us well. Painful, but we didn’t lose any sleep. It was a clear necessity. Incomplete but still we’re clear set. We aren’t going to do what we wanted to do with that.

I would say in the more recent world, when we looked at the front-end technology and how things were built, we just looked at it and thought—here are the questions I asked—if we were to build the X feature we’re working on right now, which we’re now on React TypeScript, how much time would we save?

Joseph was giving me some answers on that and I’m just doing the calculations. I’m like, we’re basically launching features that would take us probably all of next year, and essentially, six months is the estimate. We’re never right on that but to me, that was such a huge deal because every single one of our competitors is venture-backed. They’ve got a team of people sitting around working on stuff. It’s me and Joseph. It was just a clear decision. It wasn’t easy to make. I’m not trying to trivialize it like, oh, yeah, it was a no-brainer, because it sucks. You’re re-platforming the whole thing which is stopping essentially new feature development and stuff, but it was just so necessary looking at the time to develop it in the future knowing that that was something we’d never be able to keep up if we didn’t do it.

Rob: That’s tough. It’s tough to make these whole sale changes whether it’s code-based or whether it’s positioning any of these changes. I definitely feel the pain there. You’ve made these hard decisions to re-platform. You have an alpha. You have a V1. You have a V2. You and Joseph are working your day jobs. Joseph’s the developer and you’re everything else I’m assuming, product, marketing, sales. It’s all that. You’re on the operation side. Just trying to keep stuff off is his plate.

I’ve been there. It’s like, we need features so I’m going to do everything else. The two of you are working day jobs. You’re working on Aurelius on the side and COVID hits. There was a big shift that happened to you guys there. Talk me through what happened.

Zack: It was business as usual as it was at that time. It was the end of March, the beginning of April, around that time. I had actually been placed on furlough. None of us knew how long this was going to take. That was fine. I was placed in furlough and just worked from home, but then I thought, well, no problem. I’ve got a company I’m trying to build. I will just focus on that during my day, which is what we wanted to do anyway. Then, Joseph also got laid off from his job. We just looked at each other and said, okay, we can look at this as a challenge and freak out or we can use this as an opportunity.

We decided to use this as an opportunity and we just focused on Aurelius. We had a target in mind. We said, look if we can get to this revenue number—because again, we had no funding—that gives us this runway. We both agree that we’ll go full-time. The pandemic, as terrible as it was and actually still is in many ways, was both a gift and a curse to us. It forced us to do that, also allowed us to get really focused, and reach that goal. We did and part of that was when we launched version three which did not come without its speed bumps on the road to getting there. It was a huge deal because after that, everything, just as the saying goes, went up into the right.

Rob: Getting furloughed or laid off is painful. There are no two ways about that, but it sounds like the realization quickly set in like, wait a minute, I have this side thing. That’s one of the basics of being an entrepreneur. You always have a plan B and often a plan C, D, and E, whether it’s a side project or whether it’s just being an entrepreneur forces you to be pretty creative as a problem-solver.

Were you stressed? When you’re furloughed/laid off, were you ever like, oh, my gosh. This is terrible. Or was it pretty instantly like, now I have time to work to focus on this?

Zack: I don’t think that there is one or the other. They were some of both. Although funny enough, initially, it was more of a fine. I’m going to go heads down on the thing that I’ve wanted to go completely heads down on for years now anyway. That was great.

Some of where the mega stress came in was definitely as we got later in the summer and version three was a real slog for us to get off the door for various reasons. At that point, things start creeping into your mind. I’ve got a family. I’ve got a seven-year-old and a two-year-old, married, house, and stuff like that. I’m the primary income. My wife is a stay-at-home. You got things that start creeping in your mind like, how am I going to feed my kids if this doesn’t work? I know that I’m certainly not alone in the entrepreneur world of people who think about that. Things cross their minds. As gutsy as a lot of us can be and a lot of bravadoes a lot of us might have, that stuff still comes in.

They just got to this point where we were working so hard in getting this version out that I knew was going to bring us success. It was almost like I could just predict the future. Honestly, I can’t describe it any other way. But it was such a pain to get there. I’m not going to lie to you, June, July, August of last year was definitely and literally the hardest time in my life. Absolutely, without question, and I’ve done a lot of hard stuff in my life purposely. I tend to seek out really difficult challenges. Without question, the most stressful or the most difficult time in my life.

Rob: What was going on there? I feel your pain because I’ve obviously built many software products whether I was a developer or someone else was. It always took longer than we wanted it to. I felt stressed, but I wouldn’t say for me that those times were the worst in my life. Was it the confluence of I need money, I need this to work? Otherwise, I’m going to have to get a day job in the middle of COVID plus the delays?

Zack: It was absolutely the convergence of all of those things. It’s funny. I don’t mean to trivialize it because there’s nothing easy about getting your company certainly as a bootstrap, but that was the easy part. It was doing it under conditions of everything that was going on. We got two young kids at home and one that is like, oh, I’m going to go back to school except you can’t go to school. We haven’t really figured out how to homeschool because nobody’s ever done this before. Then, on top of that, you can’t go anywhere and there’s literally no release.

It wasn’t just building the company and doing those stressful things. It was doing it under an additionally exponentially stressful environment. You know what I mean. Then, of course, the things in the back of your mind. It’s like if this doesn’t work, basically how much time do I have to figure out if I need to get another job so I can just keep my family living well?

Rob: Yeah. That’s the thing with uncertainty, man. It is no joke. I don’t think people stay up at night or wake up at 3:00 AM in the morning worrying about things they’re certain about. It’s always the what-if, what’s going to happen. You feel like you can think your way into certainty but in fact, if you talk to any psychologist, a good psychologist, they will say ruminating on the same problem without new information, if you’re stressing about it, is not helpful.

Trying to solve mentally a puzzle that you’re not stressed about—I often do that in the shower, while I’m washing dishes, while I’m walking around—I just think over and over, how can we solve this? I’m not like, oh, my God, I’m worried. I’m trying to come up with a solution to it. That is helpful. But it’s thinking about something for days and perseverating on it, that is just brutal. It’ll eat you up. I totally get what that feels like.

I didn’t have it last year in COVID but I had it. For me, it was 2014 where there was some mismanaged cash flow. I was transitioning away from HitTail, and Drip was just getting going. It wasn’t growing as fast as it needed to be. Then, the big tax bill came through for the prior year. I was like, oh, my gosh, I don’t have enough cash to pay for it. I remember feeling that and feeling the weight of, I don’t know if I can get myself out of this.

We talked earlier about the bravado, the entrepreneurs taking big risks, or whatever but I’ve often found, especially in our circles, bootstrapped SaaS founders that I would say were maybe more risk-averse than a lot of the Silicon Valley founders would have us believe. The folks I know usually don’t take out $30,000, $40,000, $50,000 in credit card debt like you might hear on some fancy podcast about some multimillionaire or sleep in their cars to get this done.

While we take on more risks than our friends who are developers at Target or BestBuy, we still go about this pretty sensibly and methodically. We want something that has a pretty high chance of success. Would you describe yourself that way? In terms of entrepreneurs, do you think you’re a big risk-taker or are you more risk-averse?

Zack: I would say I probably conform more to the description you gave of most bootstrappers. I think that that’s actually why it was particularly stressful because, at the business end of things, there are certain calculated risks that I know I’m willing to take. Joseph and I are actually extremely on the same page. That wasn’t the issue. It was doing that in a completely uncertain world as well.

It’s fine dealing with a certain amount of uncertainty and risk in one area of your life, but then to also not know when are we going to get to have our kids go back to school again, play with friends, or ever see family, it was just literally nothing but uncertainty and risks honestly, physical and otherwise.

In every area of my life, it’s just like, you can’t be serious right now. It was unprecedented. That’s why I say almost the business side of things was relatively easy except at that point because V3 was taking so much longer to get out the door. It was like, we can’t actually start growing until that happens. I was certain of that. Not having at least some semblance of certainty when that’s going to happen—you know what I mean—everything exponentially grows in that case given those circumstances.

Rob: I had a friend that I used to work with. He said I can handle a large amount of uncertainty in my work life as long as my home life or personal life is stable. If my work life is super stable and chill, I can handle uncertainty in my personal life. But I can’t do both. That’s where it tips me over. You’re basically describing a lot of us, especially those of us with kids. A lot of us felt it last year with the danger from COVID. You have uncertainty at your day job. You’re home all the time. If you had kids that mix of, oh, wow, now I have two kids that are at home, whether you’re homeschooling them or not, if they’re of that age, it’s not an easy scene.

Zack: Yeah. It was completely mental. As I said, it’s just an entirely tumultuous time. To add to that, the fact that you mentioned, we both live in Minneapolis. It cannot go without saying there were a lot of socially relevant events happening around that time, too, that again, just added an incredible amount of additional stress and emotional heaviness with what happened with George Floyd. The aftermath of that. It was just a really heavy-duty time in my life.

Rob: Yeah. I remember that as well. The summer is super stressful. You’re just counting the days in essence until you can ship this. It’s taking longer than you and Joseph want. Waiting, waiting, waiting.

In September, you’re able to launch it. It sounds like things literally went up another right from there. What’s funny is usually, as a founder, we’re so certain that this next feature this, next rewrite this, next whatever is going to be the difference. Usually, it isn’t but sometimes, it is. It sounds like for you, this V3, which is actually if you include your alpha as the fourth version, was really what broke it wide open for you.

Zack: Yeah, it absolutely was. Again, I think that’s what added the stress to all of this for me because I was so certain of that. I was so certain that things go up to the right with version three because I do research with our customers all the time. I’m the one that does all the demos. I’m the one that hears all the feedback. I’m the one that’s literally involved in the communities that we serve. I hear what people say. I’m like, I know what we’ve got to do. We need to get this thing out the door. You’re talking about demos. That was a perfect example. It was the first time I demoed V3. We would get pretty good reactions to the stuff that we built in what we were doing even in version two. Not only our design but also the way in which we were doing some things were hit or miss. You either really loved it or it was like, oh, these are the tools to do this differently and we prefer that.

Okay, version three, most of them are grand slams. I’m not trying to be arrogant or boastful, but it really is. The reaction, by and large, is a rare occasion where people are like, oh, I don’t know if this is what I’m looking for. We got to where we needed to get to. I was very confident of that because funny enough, in a very meta-moment, we do a bunch of research. We’re not talking guesses at what we should build. We’re understanding the needs of our customer base really well. These were all things that touched on so many important points that we weren’t touching on at that time.

Rob: It sounds like V3 was a technology re-platforming where you rewrote it mostly from scratch. In addition, you added a bunch of features. Is that right?

Zack: And total redesign, visual UI redesign.

Rob: Holy Moly. That’s a lot of moving.

Zack: Absolutely. It was a massive move. I wouldn’t say that we came to that decision lightly. We first started talking about this. We should definitely change the design. There’s a number of things that we know we can do that would give us a big lift like the redesign. That’s front-end code, CSS for the most part. No problem.

Then, as we started talking about this more and things that we wanted to do as part of that, what was essential to making this decision was how you were able to take notes in Aurelius. Table stakes. You got to be able to take notes and it’s got to be a pretty nice tool to do that. If you consider what is setting expectations of people on a note-taking tool on the Internet, it’s a pretty high bar that can’t suck.

There was a lot of work as you can imagine. It is definitely the most complicated area of our app and we had to rewrite that whole thing. The thing is you start peeling back layers to this and you go, well, if we’re going to do that, then we might as well do this. If we’re going to do that and that, then we might as well do this, too. We just said all right, we’re redoing the whole thing. It’s going to serve us better and we’re going to move a lot faster. Since 2021, we have literally launched—I can look at the list right here—13 new features or enhancements since January. That would’ve never been true on the old platform.

Rob: Because of the tech. The velocity is so much higher. This is one of those things that’s so tough. Joel Spolsky has written a saying about it 20 years ago of never to rewrite your codebase. It’s the biggest mistake in the history of things, but there are slim exceptions where, if you’re early enough this is something we should point out here.

It’s not like you had 5000 customers and $1 billion in ARR and you were going to rewrite it. You were still early enough and it wasn’t resonating. Your V2 or your early versions weren’t resonating as much as you knew that this one could. You knew this from user research. There seem to be a lot of customer conversations.

Zack: A hundred percent. Everything we do, I use this saying all the time, we eat our own dog food. I’m not just some sales guy who’s like, I think I have a great tool for you to use. I used Aurelius for our customer research. I have worked in the industry for 15 years. That’s how we make decisions on what to build. This isn’t made up or it’s not something we just think is cool. Absolutely.

Rob: With that in mind, I’m obviously a believer in talking to customers but I’m also a big believer in founder gut feeling, vision, and there being some element of that because oftentimes, users will just tell you to replicate all of the features of Evernote or all of the features of Mailchimp.

In the early days of Drip, it was just like, I want a mobile app. Mailchimp does this. We were like, yeah, that’s not what we’re building. There was this element of, we wanted to listen to our users but we also had that founder gut feel. As someone who does a lot of UX, does product direction, does user research, how do you think about that?

Zack: That’s really easy to answer actually because funny enough, we just launched a podcast episode with somebody who I have, for years, had an insane amount of respect for their work. A guy by the name of John Coco. He’s one of the people who I would absolutely consider experts on exactly that question of how do you make sense of what you hear from customers and the research you do?

One of the things he said—I’m just going to paraphrase him—is that your world view, your global perspective, applied to what you hear is where the magic happens. We hear this all the time. There’s a difference between what customers say they want and what they actually need. The thing is—and this is also a very meta-moment of something—what Aurelius helps you do is figure out frequencies, patterns, and what you’re hearing in research but being able to capture what that means.

It’s one thing to say, 6 out of 10 people who answered the survey said they want a mobile app. Yes, but why? You say founder gut. I can interpret that a little easier. I have an advantage because I’ve worked in the field but if I hear something, it’s like, well, we need integrations. You don’t actually need integrations. You need an easier way to get the research that you’ve got into a tool. This is why we actually do have integrations in Aurelius.

But that was never a big play of ours because funny enough, we asked people, for example, okay, why do you need integrations? Then, you learn. Well, we have all this research in all these little places. We want to get them into the same tool. That integration doesn’t necessarily solve that. Building tools in your platform that help you facilitate that is what solves that problem, just stuff like that.

Then, I was able to interpret that knowing that a lot of these teams aren’t necessarily using all the tools. For example, to use that example to integrate stuff, they have access to all this other data they want to bring together and analyze together. Does that make sense?

Rob: It does. Did you hear my rant? It’s just probably four or five episodes ago about the Henry Ford quote. If they told me what my customers wanted, I would have built a faster horse. It’s like, yeah if you’re a dumb ass, don’t do that. If you’re a product person, you don’t do what they tell you. You say, what are they saying? They’re saying they want something faster. Okay, don’t build a horse, but build something faster. You don’t take your customers literally. You put your own limbs on it and you figure it out. To your point, it’s what they need rather than what they say they need.

Zack: It’s 100% what it is. Your lived experience applied or filtered through what you hear from customers is actually really valuable. I think that people want to shy away from that. There are some peers who do research. It’s all about what you hear from them and analyzing that. I don’t agree with that. That’s not true. Your lived experience and your interpretation of that are a really valuable addition to it. It just can’t be the dominating voice.

Rob: There’s also an element of innovation that has to happen. Has to is a strong word, but I think that the best companies borrow from what customers want but they borrow from, usually, a pain that the founders discover, whether it’s their own pain or the pain of someone around them. Then, there are innovative pieces that start to creep in that are unique. There’s a certain magic to a lot of startups that if you just make the whole thing innovative, then, it’s too noble and no one uses it. If you mix all those three things together, that’s really your golden ticket for building a great product.

Zack: A hundred percent. One of our most popular early features was an example of exactly that. We knew that people were looking for ways to get research notes, data, and stuff into our app faster. One of the things that I found myself wanting to do is I was like, you know, I can actually describe the situation and how we built this.

This is a really fun, early hacker story. Joseph and I were working together in person. We were actually in my basement. I said, dude, you know what would be really cool? It’s if I could just copy these notes or copy these data into Aurelius. It took every line break and it made a new note automatically that I could tag that individually. I could analyze it individually.

He was like, I’m pretty sure I can do that. We built what is now called our bulk input feature. If you copy and paste any sort of text or data, if it’s a column from a spreadsheet, each cell will create its own new note individually or text file every line break or character turn. It creates its own new note. It was very much a hacker thing. We built it in a night. It’s been in our product ever since. We were getting paying customers. It was one of the earliest most favorite features from our customers.

Rob: That’s super cool. I love stuff like where there’s some scratch-drawn itch. There’s some let’s see if this works. That is the fun of building a product, one of the fun things.

Zack Naylor, congratulations on all your success. I’m super stoked for you guys to be cranking away on Aurelius full-time as well as to be working with you in TinySeed batch three.

If folks want to keep up with you, you are @zacknaylor on Twitter, and of course, @AureliusLab on Twitter as well, and aureliuslab.com. Thanks so much for joining me, man.

Zack: Yeah, for sure. I really appreciate it.

Rob: Thank you for joining me again this week. I’ll be back in your earbuds next Tuesday morning.