Episodes

Rob: Welcome once again to Startups for the Rest of Us. I’m your host, Rob Walling. This week, we’re talking with another ambitious, bootstrap, or mostly bootstrap startup founder, in this case, it’s Craig Hewitt. He’s back on the show. You’ll remember him from season one of TinySeed Tales and he also hosts a couple of his own podcasts as well as being the founder of Castos. Today, we talk about private podcasting. We dig into Apple’s announcement around their subscription podcast offering, I’ll call it because it’s not private podcasting. It kind of is, but it’s not really. You’ll hear us dig into the differences in this episode, as well as the accelerating growth of Castos. We dig into that in the last five, six minutes. It’s really interesting to hear Craig talk about why that’s happening. With that, let’s dive in to my conversation with Craig Hewitt.
Craig Hewitt, thanks for coming back on the show.
Craig: Hey, Rob. Thanks for having me.
Rob: It’s always good to have you, man. I get positive feedback about our episodes. Folks will remember you, of course, from TinySeed Tales Season One, where we walked through your journey back in—I’m trying to think of it now. It was the bulk of 2019, I think, and a little bit of 2020. TinySeed batch one, where you run Castos, which is podcast hosting, podcast production, and now private podcast hosting.
Craig: That’s it.
Rob: I’m really interested to dig in today to start off with this private podcasting stuff because, for years, you started a productized service that was podcast editing and production. Then, you started a podcast hosting company called Castos and you piggybacked on the back of a WordPress plugin you owned. Within the last six months, nine months, Castos leaned heavily to this idea of private podcasting, so much so that the H1 on your homepage now says, “Public podcast to grow your audience & Private podcast for exclusive content”. That’s literally at the top of the page.
I would call that a positioning shift from what you’ve traditionally been. Walk me through, maybe this thought process and how this has evolved to the point where maybe nine months ago, private podcasting was—I know it was in the back of your mind because we had little conversations about it, maybe there was some code being written or something. Today, my product is doubling down on both of these things and really leaning into private podcasting.
Craig: Yeah. Just for definition purposes, public conventional podcasts like this one, you want everyone to listen, and you want as much exposure. It’s a marketing tool to grow your brand and get people into an email list and to buy things, and whatever for your brand. Private podcasting is like a membership site for your podcast. The applications for it with the maker crowd are online courses and membership sites, and communities that want to offer podcast content only to their students or members or community members, and companies that want to offer podcasts as an internal communications tool to their employees.
Think about new employee onboarding or messages from the C-Suite or sales enablement material for field sales folks, really using the concept of podcasting to drive information throughout the company. You have internal memos, emails, and webinars. We’re all tired of all of those. A lot of companies are coming to us and saying, hey, we want to connect with our team members, but we don’t want them to be stuck at the computer anymore. We want them to be able to consume this asynchronous mobile-first audio-only. Just seeing a lot of interest and a lot of new ways that people are using this as a communications tool, whether they’re a company or they’re a brand doing this with their online worlds.
Rob: Got it. Companies and folks with audiences. With those two use cases in mind, if I was the CEO of a hundred or a thousand-person company, I would offer that private podcast for free, because obviously, I’m not going to charge my employees. It’s really a communication mechanism versus if I were, let’s say we started a private MicroConf podcast or Startups for the Rest of Us started a private podcast, we’d more likely be charged for that. It would be premium content that we essentially would probably charge a monthly subscription for. Is that the idea?
Craig: Yeah. As it stands today in Castos, you can integrate either via native integration with a tool like a member space that we’re directly integrated with. You have member space that controls the membership platform, and there are privileges and charges of everything on your membership site, that then adds those people automatically to a private podcast that you host in Castos or via Zapier. Then Zapier opens up to everything and everybody—all sorts of membership tools, all sorts of LMS and course platforms—and everything where you can gate the access and the people there and make money and then bolt-on Castos to expand the way you reach out to those folks in podcast format. Then the next step for us logically is doing all of that natively within the platform, allowing our customers to charge directly for content right in our application. That’s something that we’re actively working on now.
Rob: How did this come about? Was this something customers were requesting or was it something you and your team came up with, or a third option I’m not thinking of?
Craig: Yeah. The analogies to this right in the membership and course world have always been there and have always been something that I and a lot of other people see. It’s just taken a bit of timing. We’re mostly bootstrapped. It just has taken a bit of time to get the core product to where we want it to be to where we can expand our focus to build this. It’s always been in the back of my mind because the problem that this solves is that the way that people can make money directly from podcasting without having like, if you think of Startups for the Rest of Us as a brand, you have MicroConf that this podcast serves as a marketing channel and lead gen, for now, both TinySeed and MicroConf.
I think you’re very happy to not make money directly from this podcast. There’s a lot of people out there that say, I just want to be a podcaster. I don’t want to do a fund. I don’t want to have a conference. I don’t want to have to sell a course or whatever. I just want to make really awesome podcast content and make money from it. To date, the only native podcast-only way to do that has been ads. It’s just a garbage-like monetization method for a lot of people who have audible.com, or mattresses.com, or whatever, as a person that’s sponsoring your show. Why not let people make money directly from their content? That’s where we’re going.
Rob: Got it. When I think of podcast hosting, I think of it as a commodity business. Any type of hosting becomes a commodity. Remember in 1999, web hosting, there were all these web hosting startups, and then it just consolidated. I remember when WP Engine started in 2011, 2012. It was also one of those like WordPress, focused hosting, app-based hosting, where it’s really optimized for that. Even now, there’s just a lot of low-cost WordPress hosting. I think podcast hosting in my mind is traveling the same cycle where it over time becomes more of a commodity as more people get into it. For you as a founder in the launch and private podcasting, is this a way to stay ahead of that curve and to innovate yourself into not being a commodity player?
Craig: Yeah. That’s a big one. It allows us to shift where we stand with our customers from being, say, a liability on their mental balance sheet to an asset. If we are allowing our customers to make money every month, they’re very happy to stay with us for as long as they can. We hope to participate in the upside of that in terms of things like revenue sharing or being able to charge a little bit more than we can charge for. I agree with what is a commoditized piece of software, which is hosting which is cheap and relatively easy to build. A way for us to enable our customers to make money or expand the other way that they make money online and make that more valuable is really valuable in their eyes. That’s what we’re betting on.
Rob: What’s interesting is, let’s imagine an alternate history or an alternate present. We’re in the Marvel Cinematic Universe here, where we forked timelines. Podcasting doesn’t exist, that term doesn’t exist. If you were to still come up with the idea of sending audio files to a team privately, we didn’t call them private podcasts. We called them private asynchronous audio communication. It’s a private audio broadcast.
Craig: Such a better term.
Rob: Isn’t that great? Naming is the best. While they’re both asynchronous audio, it’s really a different animal in my mind. I know the mechanism is the same because it’s an RSS feed with audio being downloaded. I guess getting jobs to be done is maybe a better way to think about it. When I think of the job to be done of Startups for the Rest of Us, it is mass consumption. As many people that can get value from this, spread the word bootstrapping, and mostly bootstrapping is a viable strategy versus venture capital.
Private podcasting, as soon as I put a wall around it, whether I charge for it or not, becomes this very almost intimate, exclusive. It’s premium if you’re paying for it or it’s intimate communication if you’re not if I’m just sending it to my company. I guess I’m imagining there are people out there who never want to record a podcast. They don’t want to be a podcaster. They don’t want to be a radio personality or something. It’s like I have no aspiration to do that, but they’re the CEO of a 150-person company, and jumping on the mic to talk to their team, I bet, is much more appealing.
They don’t have to perform. They can say, hey, this is the state of our company this week, so and so, we have a new employee in this department, this person got promoted, three more new hires coming through, this is our MRR, whatever. I can just imagine giving either weekly or monthly updates. It’s a completely different approach than what you and I think of as podcasting.
Craig: Yeah. A lot of people and even Matt Maderos on our team talks about it. It’s so much easier to create an episode for our private podcast that we have with our audience, our most engaged fans. We have a private podcast that we share with them. He says I love making those episodes because I know it’s going out to a few hundred people and not the thousands of people that our audience podcast goes out to. We absolutely see whether it’s for a company internally. They say the same things that the CEO is comfortable hopping on the mic because it’s only going internally. It’s not going to the SEC or something where they have to worry about all of the things you have to worry about with your material being out there for everyone in the world to consume and criticize.
We’re having a lot of people come in and say, I want to have a podcast for the parents of my local soccer club or something. It’s like, all you’re wanting to do is just control who has access to that content because when you record this podcast, anyone in the world can listen. If you know that only 20 people are going to listen to this podcast, your approach to it changes a lot when it comes to creating the content. The biggest hurdle for any new podcaster to get over is, what the heck is an RSS feed? How do I upload my podcast to Apple, which is not what happens?
All of the distribution stuff is, even today, like a nightmare, for people to understand. What if you just create a podcast and then put someone’s email address in, and they get it? That’s so much easier. We’re seeing a lot of people build them and say like, I don’t care how many people listen. I’m going to invite the people I want to listen to this private podcast, and they will get it. It’s just not hard. It’s really streamlined. We’re seeing it used in a lot of different ways, which is super exciting. I think we’re at the very leading edge of how people utilize this as a communication tool.
Rob: Yeah. That’s what I like about what you’re saying, it’s what I was trying to communicate, but did poorly a couple of minutes ago when I was talking about the asynchronous intimate audio or whatever. This is a completely different thing than a podcast. We’re going to call it a podcast because that’s what we’re familiar with, but I think this is an entirely new and very massive market. I can imagine communicating with my extended family. There’s a Facebook group with 20 of us, all the cousins, aunts, and uncles. We post periodically, this and that, but that could be interesting.
I can imagine communicating with my team. I can imagine communicating with TinySeed founders. What if some of these Slack groups were just replaced by people podcasting? You and I are part of a small, exclusive group of founders who have this private podcast already. While there is Slack conversation going on as well, I think the bulk of the information is conveyed via podcast. For me, it’s more time-efficient, because I can do the dishes. I can be taking the trash out or whatever and listening to it at 1.5x versus sitting there and trying to type on my phone or whatever. That does raise a question that I have about it. This private podcasting feature, is it broadcast only? Where if I set it up, maybe me and my co-founder or my CEO, COO can get that out to everyone? Can you set it up such that anyone can participate in posting audio into it? It’s almost like a group audio experience.
Craig: Today, it is you as the account holder who is the only one who can publish new content to it. In that respect, it is more like a traditional podcast, where this is your podcast. You record the content and push it out and everybody else listens. I do think there, very well, could be a day where it is more like a community, where everyone can contribute podcast content to the feed or whatever you use, and then it goes out to everybody. To be honest, the question that we have is, what’s the best way to handle that?
Rob: Yeah. That’ll be a product decision at some point because I’m sure some folks will ask for it. When I think about it, again, we come back to the example of TinySeed, and whether we’d probably do it maybe within a batch. Today, Tracy and I could set up a private podcast and we could broadcast. Hey, batch three, that’s starting next week. Here’s new info, here’s an update this week, here’s this and that. Longer-term, it could be really interesting for each company to give updates. But then they would need the ability to basically upload audio somewhere, have the permission to have it distributed to everyone.
We’ve obviously had some conversations about it. It’s funny how the lines are drawn. I listen to a bunch of podcasts. I’m like, yeah, I would do that. Anyone who just doesn’t listen to podcasts is like, that’s a terrible idea. We already have Slack. It’s always that the lines are just drawn. It’s like, you either like podcasts or you don’t. Of course, for me, I can’t get enough of them. Wrapping up this idea of a private podcast, I’ve heard you’ve talked on Seeking Scale, which is your new podcast with Andy Baldacci that started four or five months ago.
If folks haven’t heard that, I highly recommend it. You’re later-stage SaaS founders as so many of the two people talking about their bootstrap, mostly bootstrap startups are early stage, and that’s cool. You’re one of the very few podcasts where I’ll say millions of dollars in ARR are being thrown around. The two of you are just more advanced. You’re thinking about the not later stage, but you think about mid-stage stuff. The team is now 8 or 10. It’s not, how do I get my first 10 customers?
Anyway, Seeking Scale is the podcast, folks. You should check out. The reason I bring it up is, you mentioned on there that you are actually building mobile apps as well for the private podcast side because folks haven’t seen this. Once you upload an mp3, whether it’s a private or public podcast, that mp3 is there, and if someone downloads it to their phone, even if you were to say terminate that employee, they still have those mp3s. They still have essentially what could be proprietary information. If you have a mobile app, where that’s the only place they can listen through it, you can control their ongoing access. They can never get the raw mp3 out. Am I understanding that correctly?
Craig: Yeah. I mean, there are a lot of reasons that we’re developing the mobile apps, and they will be for iOS and Android. It’s the reason a react native. First and foremost, is security, because the first, and second, and third question that we get from our corporate clients is, how is this controlled and who has access? Can they download the file, and all this? We made a very conscious decision in the first iteration of this that it will be streaming only. There will be no file downloaded to the phone. It can never be taken with an employee afterward.
There is no visibility to the RSS feed at all. They can’t copy it and share it with someone else. All of that is vertically integrated from our system into these mobile apps. The other reason we did it, and actually the reason we started it is, you talked about this line in the sand of people that are podcast fans and people that are not, there are a lot of people that get added to a private podcast and they receive from us like a special unique RSS feed just for them. They copy this and they go put it in Overcast or Apple podcast or whatever for someone that’s not a podcast listener, and even people that have no idea how to do that. We said, well, what if we just have an app? The call to action is to download this app, put in your email address, you get a magic link, authenticate into that, and you automatically get all your stuff.
To a lot of people, that is an easier ask for a brand or a company to say, hey, download the Castos app, put in your email address, and voila, you’ll get all of your stuff right away. From a technical perspective, it’s just so much easier than to understand an RSS feed. Don’t click on that because it won’t open in mobile Safari, because it’s just a mess. If you do open it, it looks like a jumbled mess of code. Download the app, and you’ll get all your content once you log in. Then the obvious next step for us is like, hey, instead of just one-way communication, what about quizzes, surveys, announcements, and other things we can allow our customers to do to interact with their audience members in the app?
The downside of podcasting to a large extent is it is a one-way street. You publish this, it goes out, you have no idea what happens right after it goes out. You have no way to get feedback directly in the place where people are listening. We, having our own app only for private podcasting, are going to allow us to enable our customers to communicate and get feedback and dialogue with their listeners much more, not to mention a lot more analytics. We control the playback mechanism.
Rob: Yeah. It sounds like it’s security, it’s certainly the ease of use, usability, analytics. There are a lot of things that are going to go into that to make it a better experience. Since I’m a web person, I’m web first. I think SaaS and building apps and this and that, but when I think of building a mobile app, I think oh boy, now we have another codebase to maintain where it’s a different skill set, all this stuff. Has that been difficult for you and your team to tackle?
Craig: Yeah. It’s been wonderful. Victor from Trustshoring, he’s been to a lot of MicroConfs. He’s a friend. He runs an agency that connects companies like ours with specific dev shops, mostly in Eastern Europe connecting us with the folks who are developing our mobile app. They are amazing. They’re a react-native shop. That’s all they do. We were able to pretty easily say like, okay, this is what we want. This is what we have from our end. These are the APIs that we need to build. You guys need to go build all the front-end stuff in the player. They’re amazing.
Rob: That’s cool. I’m glad it hasn’t been this struggle that made it out to be in my head.
Craig: In hindsight, the thing we did right is we didn’t try to peel off one of our developers that is a PHP developer to go and learn react native is. We just said, hey, let’s go spend the $20,000 that this will cost and hire the specialists.
Rob: Yep. Not your core competency.
Craig: Yep.
Rob: I’m glad that you’re coming on this week. It’s a bit fortuitous. Apple made their big announcement. I know they didn’t invent podcasting because it was open standard stuff, but they effectively popularized it 15 years ago now, or whenever it was. Then they just let it languish, and then they’re like two or three years ago, yeah, we’re going to give analytics, finally. I don’t think those are that great when I log in, but it’s like they fit and start.
I’m curious to hear your thoughts. The only reason Apple cares about this at all is because the space has heated up because Spotify is now dropping $200,000,000 to acquire Joe Rogan’s podcast. Apple is like, we really dropped the ball on this. Now, they’re launching paid subscriptions on Apple podcasts, which is something that in my opinion should have launched a decade ago. I don’t know why this is a very logical next step. It’s almost like they pulled Internet Explorer, who just won the whole market, and then just stopped.
They took everybody off the IE browser, and just let it languish. That’s what Apple podcast feels like to me. They announced, okay if you’re a creator, you pay $20 a year. You’re part of the Creator program. There’s no ability for you to see who has subscribed to your premium content or to contact those subscribers except, of course, through the podcast. You can price subscriptions based on subscriber location. I believe there are monthly subscriptions. There is no RSS feed. There is no connection to your other podcast.
Apple takes a 30% cut of revenue of the first year and 15% in subsequent years, which I think is interesting, and the content has to be manually uploaded to Apple’s platform on an individual episode basis. My editor or Castos Productions, your team, would upload it into your WordPress or your Castos account, and then they have to go and upload it into Apple. I’m actually reading this all from the castos.com blog. It was a post from April 21st. It says, welcome Apple to the private podcasting movement. You have thoughts. What does this mean for you? Do you want a standalone tool? Blah, blah, blah. Walk us through how you think about this as someone who has been knee-deep in podcasting, running a podcast production and hosting company for the past several years? You’re as close to the metal on this as anyone I know.
Craig: Yeah. We always try to be really honest, Rob, going back to TinySeed Tales. I think part of me, I’m kicking myself a little bit because you and I have had conversations about this concept for years. While I am a bootstrapper at heart, and I’ve enjoyed being a bootstrapper seeing this, I say, […] what if we’d raised like $5 million three years ago and built this? We could be the standout leader in this space. We didn’t and we’re not, I think we’re at the very edge of this with what we’re doing.
But Apple offering it natively on their platform is really different from what we do. As I look back over my thoughts around this in the past, podcasting 6 ½ years, I could have done this earlier. I don’t have regrets but definitely, that is something I take away. It’s like, the next time I have a hunch like this, I probably will just jump on it because I don’t want to look back and say, oh man, I could have, should have, would have. That being said, this is not for everybody. This is for the creator who won the majority of their audience is based in North America, I would say.
Apple podcast is the most popular listening platform in North America by far, but for the younger generation and outside of the US, it’s Spotify. It’s not like this being available on the Apple podcasts is going to reach even half of your audience these days, depending on who your audience is. I think that for certain people, this is really great because they’ll take 30% just like the App Store does, and then 15% in subsequent years. But selling on Amazon versus having a Shopify store, you have no concept of who your customers are. You can’t follow up with them afterward. You can’t do nurture sequences and up sales and coupons, and all that stuff afterward.
For the person that, we use the term, you want the easy button to make some money from your podcast, this is a good first step maybe. If you have a more sophisticated brand, funnel, upsells, and cross-sells and things that you want to do with your podcasts and folks that listen to your podcast afterward, then I think this is not the thing to do, because it is just like a siloed thing. Spotify certainly will come out with their own version of this at some point and it will be the same. This is in its own walled garden. It doesn’t talk to anything else. It certainly wouldn’t integrate with your membership platform. That’s how I feel about it. It’s like, if all you want to do is make a few bucks off your podcast, this is a fair thing. If you have different goals or aspirations or plans for your brand and your content, then this is not the tool for you.
Rob: Yeah. The deal-breaker for me is that you don’t know who your subscribers are. That right there as a serial entrepreneur who has run many businesses, the long-term value is in those relationships. It’s in having access to be able to contact people. I mean, that the old internet marketing expression was, the money’s in the list. It’s like having a large email list or having a large, back in the day, it was addresses, physical mailings before the internet. Well, I don’t think of it as like the money’s in it. I think the long-term relationship and the long-term value is really knowing who your customers are.
That’s why, I think, selling my book directly versus selling on Amazon, I’ve always really struggled with this decision because I want Amazon to fulfill it, but I also really want to know who’s buying my book. It’s been the same thing. It’s not a perfect analogy, but I think of it as the difference between Vimeo and Wistia. They both host videos, and they’re both private in terms of they’re not like massive YouTube distribution because they’re all private in one way or another. Vimeo is $100 a year or something, $100 or $200. Wistia is $100 or $200 a month, it’s way more expensive. Vimeo is for filmmakers to go on there for the experience. It’s like, I’m a maker, I want the easy button, and I want to get stuff out there and it’s inexpensive.
Wistia is for, I don’t want to be more sophisticated or just more business-oriented or more people who are thinking about the business, not just about the act of creation, and maybe there’s a parallel there. Did it feel like a punch in the gut when this announcement came out? Was it pretty quickly like, our use case is that what we’re supporting at Castos is so different from this anyway that I don’t know that it’s going to have a major impact?
Craig: Yeah. Mostly the latter. Mostly currently, and even in the future with our product plans around like premium podcasting, being able to charge for your content directly in the platform, we serve a different type of customer to a large extent than folks that would really want to jump on this bandwagon with Apple. That’s definitely how we feel this is different from what we do. The really good thing is that this legitimizes a lot of what I’ve been saying for a while like hey, ads are not the only way to make money from your podcast. This concept of private podcasting or premium paid access to a private podcast is a thing. Then the biggest player in the space just made it a thing. We can go around and talk about private podcasts in email, and everyone’s going to know what we’re talking about in between that in this episode. Everyone’s going to know what we’re talking about. I think that’s a huge win for the industry.
Rob: Yeah, big time. I was waiting for Spotify to come out with this, to be honest. I don’t know, maybe they will. I guess you’ve hinted, you’re like, you think they’re going to come out with it as well, but I just thought that would beat Apple to the punch. Apple really has not innovated in the podcast space for so many years. I’m surprised.
Craig: Yeah. They’ve talked about it, but it’s not available as of today. Yeah.
Rob: Right. As we move towards wrapping up, I’m looking at your MRR graph. Most people listening know that you’re in TinySeed batch one. Of course, we have graphs of all the revenue of the companies. The last three months, bravo, man. It’s a rocket ship, very strong three months of growth in terms of just raw MRR and there’s a nice little kick upward and to the right. You already had solid growth going and then it’s accelerated. What’s happening there? There are a lot of listeners who obviously want to know, how can I grow faster? I’m curious, what learnings have you taken away that I think have helped you achieve this growth?
Craig: Yeah. It’s tough to know exactly just because there are so many moving parts to a business even our size, we’re 12 people. The one thing that I can pretty solidly point to is, we have been focusing from a product perspective over this year, the last four months, on I’d say quality, but like fine-tuning aspects of the platform, revising onboarding, UX fixes, updates to things, and spending half of our development time on that these days. It’s really all that’s changed. I have to attribute this to that shift. Anyone who knows me well is like, it’s not me. I’m just not a super detailed person.
I’m definitely not a designer like we work with an absolutely fantastic designer, who has helped us a lot with all this. I think the lesson I would take away is, my inclination is always to build more features. We have a lot more features on our platform than a lot of other hosts. It’s because I’ve just been beating this drum of like, we need transcriptions. We need YouTube republishing. We need integration with Headliner. We need video support. We need multiple users. We need WordPress integration.
We have a really complex platform compared to even a lot of market leaders for as old as the company is. We’ve been driving hard for new feature creation for a long time. We said, hey, we need to not take a step back, but focus some of our efforts on really perfecting certain aspects of the product. That’s all that’s really changed where I have to attribute the growth. It’s like, we’ve increased growth by 50% versus the other months. We’re growing about 50% faster in the last few months.
Rob: Yeah. That is an easy trap to fall into, more features because it feels like the features are the headline. The features are what you can read a blog post about. You can’t write a blog post about, we improve the usability of the screen. We improved our onboarding. No one cares. Yet, they move the needle perhaps more than the splash. When you think about the marketing or sales funnel for a SaaS app, there are a number of visitors coming to your website, then there’s how many start a trial or request a demo. Then there’s how many go from there to pay, then there’s churn.
How many sticks around? There’s the sheer volume of them coming in, and then there’s also the percentage drop off at each base. So many of us just want more at the top of the funnel. In this case, you’re basically saying, when you say you’re focused on improving, is it a lot of usability and user experience improvements?
Craig: Yeah. Just like, what I would consider edge case bugs, they don’t exist anymore.
Rob: Right. Obviously, with Drip in my experience, when Derrick and I were running a product there, it was always a balance. To be honest, Derrick and I are pretty picky and we’re a little pretentious about the products we use, I’ll just say that. When I use a product that’s half-ass, I get pissed off. I’m like, these people don’t know what they’re doing. I’m the wine expert who’s drinking Merlot or the coffee expert who says, well, Starbucks is so bad. I’m that way with the usability of apps.
I think if anything, Derrick and I tended to veer in that direction, where we would—you can be too perfectionist about it, and you can make every little piece work so amazingly well, but then you’re not moving fast enough on other fronts, perhaps, or you’re not doing enough marketing, or you’re not doing enough sales, or whatever. You neglect other areas of the business. That’s where I think it is this balance. Whether you think of it as a pendulum swinging back and forth. With one Sprint, if you do Sprints, we’re building features. In the next one, we’re fixing bugs and improving usability.
Whether you’re doing both of those at the same time, it would just be so easy as founders if you could just focus on one thing. Don’t you just want to focus on one thing and have that be the only thing? Yet, there are 10 things and they all need to be focused on at the right time, or maybe all at once. You don’t know what the incomplete information is. It’s like, […] which one do we do next? Which one moves the needle the most?
Craig: Yeah, absolutely. There are two additional data points there. One is from a metrics perspective, the thing that is improved is churn. We’ve always had very good churn, but we’re having close to 0% churn in the last two months, which makes growth really easy because we’re having customers upgrading now, which is going back to private podcasting. We have an expansion revenue built into the product now. We’re getting close to 0% churn, which is amazing. We were at 2% before.
The other thing from a team perspective is for about the last six months, we’ve gone into this practice of having one of our developers beyond what we call support rotation each week. That developer is the only contact that our support team can have when they need to escalate a ticket. That developer spends about a third of their time chatting with customers and advanced troubleshooting things, and the rest of their time fixing bugs for that week. That’s really how this focus on squashing bugs, and product and quality stuff came about. I think it’s both products and squishing those bugs and getting those things resolved within that week, but also just having everybody be more clear on what customers are saying and taking care of them better. From a process perspective, it’s been a really cool thing to see happen.
Rob: Yeah, that’s really nice. The way that we structured it at Drip, too, although we didn’t rotate. Are you rotating through your engineers?
Craig: Yep.
Rob: They take a turn. We had a dedicated—usually, it was a junior—software developer, a junior engineer that we hire, and we’d say, you are the technical support escalation. When Andy, our support guy, would dig in as much as he could. But truly he was like, it’s a bug, or I just can’t, it’s code, someone needs to look into it, then they escalate to the junior. The cool part about that junior is they would dig into the bowels of the app, of every part of it. They learned it really, really well. They learned all these little esoteric areas because they’d have to dig into API one day.
Then the next hour, they’re over in the park that sends emails or schedules. Then the next part, it’s just completely dealing with SendGrid or whatever. They became really well versed in the app. By the time they start burning out on that roll, which is about 12 months, they’re a pretty solid developer in terms of being able to get into Drip and build it into the codebase and such. We’d hire and rotate into an end. The other approach that I’ve seen is exactly what you’re talking about where each engineer takes a stint whether it’s a week or a few days, usually, it’s a week and you just rotate through it, and they have to be. That’s the week you’re getting interrupted a lot because you have to respond. You have to write code and respond to these tickets.
Craig: Yeah. I think it’s nice breaking the cadence, too. They work hard on features. We’re five developers, so four out of five weeks, and they get a week of different work. Yeah.
Rob: Makes sense. Well, sir, it’s always a pleasure having you on.
Craig: Yeah. Likewise, Rob. Thank you. Thanks for having me.
Rob: Folks who want to catch up with you—normally I say Twitter handles, but you don’t really hang out on Twitter. You’re the Craig Hewitt if folks want to ping you. Thank you for coming to the show. Really, Seeking Scale, I think would be where they can hear from you every week. Then Rogue Startups, you record with Dave Rodenbaugh a couple of times a month, it seems like.
Craig: Yep. Either of those are great places. Yeah.
Rob: Awesome, man. Thanks again.
Craig: Thanks, Rob.
Rob: Thanks again for joining me this week. If we’re not connected on Twitter, please reach out, @robwalling. If you’re a bootstrap, or mostly a bootstrap founder, and you want to be part of a community of more than 2000 other founders and aspiring founders, go to microconfconnect.com. It’s totally free. You can apply there, and we’ll let you in. It’s our Slack group, where we hang out and we talk about all the things—jobs and hiring, marketing, we talk about coffee, whiskey, and just whatever you can imagine. Whining on the Yacht I think is one of the channels in there. It’s a good group of people, really positive and supportive, and you should check it out, microconfconnect.com. Thank you again for joining me this week, and I’ll be back in your earbuds again next Tuesday morning.

Hello and welcome to this week’s episode of Startups For The Rest Of Us. I’m your host, Rob Walling. Every single Tuesday morning for more than 10 years, we’ve shown up and we’ve shipped an episode. It’s about building ambitious startups. These days, we focus on bootstrap and mostly bootstrap SaaS, but it’s always been about founders, developers, designers, and people who want to start companies, but don’t want to jump on the venture train, but they still want to build amazing businesses. They want to do things that are not only interesting for them, but be in control of their own destiny, and want to ship something into the world that people use. They want to have the freedom to work on what they want, they want to have the purpose of working on interesting problems. They also want to maintain happy and healthy relationships.

That’s what Startups For The Rest Of Us is about and that’s what we’ll continue to focus on. Even as things change, as the landscape has changed so much back again, 10, 11 years ago, we were talking about info products, iPhone apps, one-time downloadable software, and SaaS was part of that, too. Back in the day. It was all about bootstrapping because it was such this binary difference of being in control and giving it all away to venture capitalists with their crazy terms. But things shift over time, we look at problems from different angles, and we take the best information that we have and we make smart decisions from them.

The show has many different formats. Sometimes there’s a conversation between myself and a founder or subject matter experts. We have startup news roundtable episodes where we cover news related to bootstrap and mostly bootstrap founders. We have QA episodes. We have breaking news episodes. All kinds of stuff. This week, I’m flying solo on a Q&A episode, which is something I do every once in a while. We have a great backlog of listener questions. It should be fun to run through a few today.

My first question is from Joe. “Should I switch to a C-corp to take advantage of QSBS in five years?” He says, “Hi Rob, longtime listener, first-time caller. Thank you for all you do for the mostly bootstrap founder community of which I have been a quiet participant for many years. My question is around QSBS,” For the listener, that’s Qualified Small Business Stock. “I’ve been fortunate enough to have had a couple of asset sales of my former SaaS businesses. I’m working on a new SaaS business now that I think I can grow and sell in five years. I’ve been operating under an LLC for all of my apps and I’m considering switching to a C-corp to take advantage of QSBS to save on taxes if I’m able to sell it in five years. Do you advise the companies you invest in to switch to C-corps for this very reason? Thanks. Joe.”

This is a complicated topic, to be honest. No, I don’t advise anyone to switch to a C-corp for a specific reason because there are so many trade-offs with C-corps and LLCs. Einar Vollset and I actually recorded an entire episode of Startups For The Rest Of Us focused on this question and the trade-offs of the two paths. If you want to check that out, it’s episode 442 Corporate Structures and How the Choice You Make Now Can Impact You Years Down the Line.

QSBS for those who don’t know is Qualified Small Business Stock. I’m now reading from Investopedia. I’m not a lawyer, I’m not a legal adviser, but Investopedia talks about how any stock in a small business that is acquired after August 10th of 1993, the capital gains from that can be zero from federal taxes not from state taxes. This is the US only, obviously. Can be zero if, and there’s a bunch of things. The investor must not be a corporation. The investor—meaning you, the founder—must have acquired the stock at its original issue and not on the secondary market. You have to get it when the company starts.

The investor must have purchased stock with cash, property, or accepted as payment for a service, must have held it for five years at least 80% of a company’s assets must be used in the upper… blah, blah, blah. There’s a limit. I don’t remember what the limit of the company size is, but it’s high. I’m going to say it’s something like $50 million in annual revenue. If you get above that, then you’re no longer a small business. It’s something to that effect. Zero cap gains. Imagine building a SaaS app and selling it for $10 million and paying zero federal cap gains on that.

In fact, Josh Pigford, who was on this show just a few episodes ago, talked about how we sold Baremetrics. He qualified for this and he only paid state tax because he lives in Alabama and they have a tax that he wasn’t exempt from. Is it worth switching to a C-corp? If you plan to run it for five years and sell it personally, that’s not a bad idea. If you plan to pull dividends out, it’s not a good idea because C-corps have double taxation. Where whatever income you make, the company pays income tax on it, and then if you were to draw a dividend, you pay an additional dividend tax on it. Currently, that rate is 15% or it’s 18% if you pull out. I don’t know if your income is above a lot like half a million or a million a year.

If it really comes down to that, there’s no right or wrong answer here and most bootstrap startups are LLCs, sometimes S-corps and that’s because they’re pass-through entities and you can have the money flow out to you and it goes straight to your personal. You don’t have to pay double taxation, but there are many companies, I see in many companies that I have invested in, in fact, the vast majority of companies that have invested in are C-corps. That’s both my personal angel investments and TinySeed companies. But there is absolutely some portion. It’s definitely a minority portion who remain LLCs such that they can run a long-term profitable business that they draw dividends as their payout and they really don’t plan to sell it.

That’s probably how I would think about it. I hope that helps, Joe. Thanks for the question. My next question is from someone who asked to remain anonymous. He says, “Do you have any advice on what sort of offers or arrangements can work for attracting entrepreneurial employees when offering equity doesn’t make sense? For context, where a team of seven now doing north of $5 million a year before payroll and there are a few people in my network I’d love to convince to join the team who have been trying to get their own ideas off the ground for a few years while filling the gaps with contracting and stuff but never really making it. These sorts of folks would be a huge value to the team because they think like entrepreneurs and have the right values. But I don’t think they’d ever want to settle for just a regular old salary job without some other factors to scratch their entrepreneurial itch. Even if they haven’t been able to reach escape velocity with their own stuff. Offering equity feels tough because we’re not based in the US and our staff is all over the world and we don’t have any ambitions of building a big team or trying to exit. We’re just super-profitable and pay out tons of dividends to ourselves. I also kind of feel like giving people some tiny percentage of the company over three or four years still doesn’t really scratch the entrepreneurial itch. Nobody I know with that tiny equity stake in their company seems to actually act like it’s their company or takes meaningful responsibility for the company’s success. Any thoughts on what we could offer people who have dreams of running their own thing that would be attractive and feel like a good opportunity that is still somehow aligned with their goals, instead of feeling like it’s delaying their own ability to try and make their own thing work? We thought about profit sharing, four-day workweeks instead of five, so more time for side projects. But do you have any other ideas? The answer might well be nothing that I am prepared to accept. Thanks, and hope things are awesome for you.”

It’s a good question and I actually know the asker. I know of his business and it makes sense. I don’t think that they’re going to sell the company long-term. I do think they’re going to run it and run it highly profitable and have built an amazing company. Frankly my hat’s off and congratulations on all your success. I do have some thoughts on this. I think some of the options you named if properly engineered, could work. But honestly, my first thought is are you sure that you want to hire people that really just want to do their own thing?

There’s a difference between hiring entrepreneurial-minded employees who maybe think like entrepreneurs a bit, but don’t actually plan to strike out. You can hire them and they will stick around as long as they’re doing interesting work, they’re paid well, and they like who they work with. They’ll stick around for years at a company, especially an interesting start-up like this, a small team where they can have a big impact. But on the flip side, there are those truly entrepreneurial-minded people who, the whole time, they’re just thinking, I want to do my own thing. If you realize that kind of no matter what you do, those folks will go out on their own at some point.

A good example is Derrick Reimer. Derrick, when he and I met, he was 21 or 22 years old and he was hacking on these amazing little SaaS apps that he was building. He won a couple of local startup competitions. That’s where we met. I was one of the judges of these competitions. When he and I started working together, he was a contractor on HitTail, and then he was a part-time contractor on Drip. Then he was a full-time contractor on Drip, and then he was a W2 employee on Drip. At a certain point, we started talking. He was like, yeah, I’m going to go do my own thing because really, I want to be a founder of something. I want to own something.

If you know Derrick today, you know that he’s a gifted and talented entrepreneur. He always wanted to go out and build his own thing. That was at the point where he and I decided, okay, we’d move forward the way we’re going without you having equity in the company. I had bootstrapped and done all these lifestyle businesses. I saw Drip as the next phase of that, maybe a more ambitious version of that, but I hadn’t honestly given a ton of thought to giving out equity. It just wasn’t really in the game plan for a lot of the reasons that this question asker is mentioning. I just didn’t know that it made sense.

In the end, Derrick and I did land at, obviously, an equity split. He took the title of co-founder since he had been around since the early days. But I always knew if we didn’t sell Drip at a certain point that Derrick was going to transition out. He was going to do something where he owned the whole company in essence. That was fine. That was the understanding. Back to the question, do you want to hire those people knowing that the clock will be ticking and almost no matter what you do—unless you give them ridiculous amounts of equity that I don’t think you want to do until someone has 10% of equity, it depends on the person but it doesn’t have to be 10% equity—they don’t really feel like an owner.

To your point of giving someone 0.5% or 1%, it doesn’t tend to mean that much. That’s the first thing I think about is even if someone’s skills and their attitude are a perfect fit for your company, if truly what they want to do is their own thing and you think you’ll have them for a year or two years, think about whether that’s what you want to do. Or do you have these friends who have that attitude, but you do think that with the right motivations, they could stick around for years assuming you plan to run your company for years. That’s the first step. I would give that some thought.

The second thought is I like the idea much more than equity since you’re not going to be selling. You’re not looking for liquidity events. I would really think about profit sharing. I would think since the company is so profitable—obviously, seven employees making millions of dollars, I’m guessing millions of dollars in net profit being thrown off—that’s where I would think about hefty profit sharing. There is an interesting thing of do you know what their motivations are, aside from I want to be an entrepreneur?

The ones who might stick around for the longer term, if they made a solid base salary for where they live and then had the opportunity to really make a big chunk of money through profit sharing and feel perhaps again, on a team of seven or eight people, you can feel like you have ownership. Especially with profit-sharing, not only are you thinking about growing the top line, but you can also think about, are there ways we can potentially save money for being a little extravagant with things. There’s this ownership of both the top line and the and the bottom line because that profit turns into money in my pocket.

If I were going to do any of those options, there’s profit sharing, there are bonuses, there’s equity. I actually covered this in a solo episode, episode 519, Profit Sharing Stock Options and Equity. I talked about bonuses there, too. If you want to hear my general thoughts on when I would use which, that episode is where I would go.

The other thing to think about is if someone could bring so much value that you think even if they work with this for a year and they were only three days a week or four days a week, they would still bring more value than anyone else I could find. I don’t know if that assumption is actually correct, but maybe that is. Then, that’s what I would be thinking. I’d probably start a conversation with a couple of these folks and try to figure out, is it individual motivations that some people be happy to make buckets of money, an egregious amount of money because you do have the luxury to be in that Basecamp situation where Basecamp importantly, has 55 employees because they’ve grown so slowly over so many years and they have so much net profit coming off that they pay all of their people no matter where they live. It’s like the 90th percentile of a San Francisco salary for the role. They have that luxury, most people can’t. You have that luxury, too, in theory. Again, I don’t know all your numbers. But you have the luxury to do things that are outside the conventional wisdom because your company is so profitable and you’re looking for these high achievers.

My guess is if we took four of your friends, there might be one or two of them who would stick around for an extended period of time if they literally made twice as much in salary and had a great job where they contributed, worked with you, and worked with the rest of your team. They might stick around for several years and maybe could put their side project thoughts and ambitions into your company. I know that at certain points, I did that.

I was always working on side projects and then I’d get into a really interesting contract or really interesting job and I would turn it off for a while because that creative itch was being scratched. I was working with really cool people. That allowed me to turn it off in the short term. Then the other two may be motivated by working a few hours a week and making a full-time salary or working a few hours a week and just working on interesting projects with you. I think that’s the big thing is, do I think this is possible? Yes. I almost feel like it is potentially not a blanket approach. It might depend on the individual. Obviously, without knowing the individuals, it’s hard to know. I’d be curious if you brought this up with one or two of them independently and just started the conversation on how that might pan out.

Those are my thoughts. I hope that was helpful. My next question is from Anonymous Hackerman. I’m getting a lot of anonymous questions today. You’ll see why. The subject line is actually Anonymity. He says, “Hey, I have a question regarding Anonymity. I’m currently at a large SMP 20 company and would love to begin indie hacking. But I feel like I’m at a disadvantage as I can’t exactly hack with the garage door open as I’m assuming it would not go down well with my current employer. Do you see any way out of working around this?

First, I’m not a lawyer, a standard disclaimer. The first thing I would do is I would definitely look at my employment agreement and any IP agreements I’ve signed and figure out legally, do they think or could they make a claim to own everything you do even if it’s on your personal computer and on your personal time. There are certain states where that’s allowed and there are certain states where it’s not. Even in those states, some employers still have you sign things that maybe would be inadmissible in court, but you’d have to fight it in court and on and on. But I would at least in my head know have I signed anything that essentially commits everything I own to them so that I know if that’s at least on the table.

Then if I had the means or if I had an attorney that I knew, had worked with, or I could maybe go to Google, I would try to figure out does my state enforce that. Is the state that you live or the state where the company’s headquartered—I don’t know, not a lawyer—but I would try to do some research whether that involved paying an attorney or whether that involved just using the interwebs to try to figure out, do I have a case if I were to try to go on. I‘m not saying you would ever want to fight this in court, frankly, if anything, it would probably be settled out of court as most of these things are. But at least then, you have the information. The first process is 30 minutes of reading through your docs and then the second process is a few hours of either conversation or some research to just get yourself educated on legally what it is.

Then there’s this whole other idea of it not going down well with your current employer because whether they own stuff or not, if the culture frowns upon you doing side projects or you doing any kind of side work, then that’s a whole other issue. It’s not necessarily a legal issue, but it is an issue that could cost you a promotion, a raise, or it could cause them to let you go because there’s obviously a big difference between them having a legal case against you which is a real problem. It’s something that will come up in due diligence if you ever sell. It will come up if you ever decide to raise funding or it can come up and it’s a problem.

Personally, it’s your risk tolerance. I would not mess up if I had signed something that said that someone else owned all my stuff, even done in my own computer or my own free time. I would not indie hack. I would then think to myself, I have three options. I can not work on side projects, I can find a different job, or I can risk it. Of course, I couldn’t risk it if I had signed something. But that would have to be your choice. It comes down to personal risk tolerance.

If I had not signed anything that said that they owned all the stuff that I’ve done and in fact, I will say, at the last salary job that I had, this was 15 years ago, it was right as IP agreements were becoming a thing, especially with developers. I signed all the HR paperwork. When I came to the IP agreement, I looked at it and I don’t even remember if it said they own everything. I just remember thinking, I don’t want to sign this and I never signed it and no one ever said anything. I guess HR maybe didn’t have their act together enough to realize that I hadn’t signed it because I knew I was going to be working on stuff on the side and I needed to know there couldn’t be a case, in essence, brought against me, a claim, a threat, or whatever it was.

If you haven’t signed anything, then you have the choice of being secretive about it and trying to be anonymous online as much as you can be and still launching things. Again, this is your choice. You have to assess the risk tolerance because if you get caught doing this then potentially, you could lose your job, not get a promotion, whatever. I’ll tell you, in my personal experience, I just did it on the sly on the slide. I built some tools and launched them. I acquired DotNetInvoice. I’m trying to think if I would still work there if I was contracting. I honestly don’t remember the series of events. But I was definitely hacking on things on the side. I had my blog, and then I also had software side projects that were generating at the time not a ton of income, but I was definitely coming home nights and weekends and working on them.

There’s no insight. This is such a personal decision and I think a big part of it is getting educated so that you know what you’re actually dealing with and that you’re comfortable with the risks you’re taking. I hope that was helpful, Anonymous Hackerman.

The last question for the day is from Pramad. He says, “Do you think the disruptive innovation idea by Clayton Christensen can help find a niche? Disruptive innovation is the idea that former Harvard Professor Clayton Christensen came up with where a product is targeted at the lower end of a market and which is ignored by the big players. A new company can target this market segment by creating a product that leverages new technology which may not be mature enough for the higher-end market. For example, Google Docs versus Microsoft Word. Do you think disruptive innovation can be applied by bootstrappers to find a niche??

I think this is the play of every bootstrapper, to be honest. Not necessarily a disruptive innovation where you need technology because your disruptive innovation as a bootstrapper is you move extremely fast, you’re extremely capital-efficient, and you only need $10,000 a month to quit your job. You probably only need $50,000 a month or $100,000 a month to completely change your life. You hit seven figures of ARR and if your SaaS app feasibly sells that company for $4 million, $6 million, $7 million, $8 million depending on how fast you’re growing, that’s it.

If you truly are a bootstrap or mostly bootstrap founder and you want to change your life, you don’t need to own a massive market like a venture-backed unicorn land grab startup. Those are your advantages. The way you’re disruptive is what I just outlined, you don’t need all the things that such a large company needs. Leveraging new technology is fine, too, but then that introduces product risk. There are three types of risk when you’re launching a new product. There’s the product, there’s market risk and there’s essentially marketing/execution.

Product risk is, can we build this? If you’re using new technology, the answer might be no. Building Google Maps at the time and Google Docs took a lot of work because it was Ajax technology, they called it back then. It’s just having web apps in the browser that are super interactive and don’t need to refresh every time you submit anything. There are a lot of risks there. There wasn’t a ton of risk for Google because they had a bunch of really smart engineers and billions of dollars. But for an individual trying to build those, it introduces product risk. Most SaaS apps have almost zero product risk, and that’s why you’ll hear me say don’t go build the product because there’s no risk there.

The risk usually is in the market or in the execution. What I mean by market risk is does anyone care? Will anyone buy it? Will you build something that people want? Is there a market for this thing? Can you find a product-market fit? Does it even exist for the product that you’re inventing and usually the more novel you go in, the more new, and the more innovative with those ideas the harder it is to find that. The more you stay in the lane of an existing category, like electronic signature apps, like email service providers, and marketing automation providers, like online scheduling apps, things that everyone uses, the more you need to put your own spin on it. You either need a marketing channel that you own or you need to have enough differentiation in your positioning in your feature set that a certain subset really wants it, but staying in those existing categories helps reduce that market risk.

Then again, there’s product risk, market risk. Marketing or execution risk is can you implement, can you drive leads because you can build a great product and there can be a great market for it. But if you don’t know anything about marketing or sales, building a product and expecting people to find you is just not going to happen. That’s probably the most common mistake that I see with early founders is, especially developers and designers who think that the product is everything, where in fact, it’s 25% of the things and really all the other things, the marketing and making sure you hit the market right, is the rest of the equation.

To summarize, I don’t necessarily think you need disruptive innovation per se. But I do love the idea of entering larger markets at probably a lower price point in a niche that’s ignored by bigger players. I’m going, to be honest, if this truly is your first time launching a SaaS app, then, of course, I would say go back to the stair-step approach, play high school baseball, then go to college, and then play minor leagues, major leagues before you really get to the big time. That would be the stair-step where I would try to build a smaller add-on with one-time sales.

You can hear me talk about stair-step approach on many other podcasts because entering these larger markets is awesome, but if you don’t have the experience, or you don’t have some funding, you don’t have just some prior knowledge of how to do these things, there are so many things that have to fall into place in order to build a SaaS app in order to launch it, in order to market it. It’s quite hard to do that. I think for a first-time founder, it often requires an exceptional amount of luck or an exceptional amount of hard work and skill. I tend to want to do things and recommend people to do things that are repeatable and that don’t need to be exceptional.

They don’t need to be outliers in order to succeed and that’s what I see with the stair-step approach is that you can put one foot in front of the other and you can execute and you pick a small niche. You get it to $5000 or $10,000 a month and that’s amazing. Maybe that one app gets there, maybe have to cobble a few together, then you buy out at your own time. Now you have all the experience of having supported customers, having learned which features to build, learned how to market learned, how to do some innovation, learned how to manage products, learn how to manage developers, and potentially, support people and VAs. You don’t have to tackle that all at once if you try to launch that SaaS app into a large market right at the start when you’re still pretty green on all these fronts.

Thanks for the question, Pramad. No one’s ever sent that question in before and I actually think it’s an interesting mental model for thinking about bootstrapping SaaS.

That’s going to wrap us up for today. Thanks again for joining me this week. I have a favor to ask, if you have posted on Twitter or LinkedIn about Startups For The Rest Of Us or just told a friend that you get value out of it, I’d appreciate it. We’re @startupspod on Twitter and if you feel like these episodes help keep you motivated if they’re entertaining, if they’re tactical or strategic or what have you, I’d really appreciate a shout out, and of course at @startupspod, @robwalling on Twitter. Thank you for listening and we’ll be back again in your earbuds next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. This week on the show, I had a conversation with Tracy Osborn about the value of learning 80/20 design fundamentals. We talked a little bit about her book that comes out in a couple of weeks called Hello Web Design. We dig into a few topics that I think are pretty interesting. One is Tracy’s self-published Hello Web Design, and then is now publishing it through a publisher. We talked through her thought process there. We talked about why these 80/20 design skills or design fundamentals are useful to entrepreneurs, or bootstrappers, or developers.
I weigh in quite a bit on that one because that was something 10-12 years ago as I learned just enough design fundamentals. I’m not a designer, but I learned just enough to help me in my work as an entrepreneur. Then we dig into some basic fundamentals, give an overview of a few things in the book. Let’s dive into our conversation. If you’ve been a longtime listener to the show, you’ll recognize today’s guest. This is Tracy Osborn. She’s been on several episodes of Startups for the Rest of Us. You can find out more about her at tracyosborn.com.
Today, we’re going to be talking about her new book. Actually, it’s a revised version of an older book called Hello Web Design. She self-published it originally a few years back and now, she is publishing it through No Starch Press. This is a publisher who is cranking out those hardbacks? I think I saw a photo of a pallet.
Tracy: Yes, they upgraded it from paperback to hardback which was a nice little compliment on their team’s end because they were like, we’re going to go ahead and increase the quality. There’s what we call the little binding that’s on the hardback so it can be a contrasting color. They added all sorts of little details to it which was really awesome.
Rob: That’s sweet. A lot of us, I’ve self-published a couple of books and they’re all paperbacks because hardbacks are just too cumbersome. You have to buy them in bulk. They are more expensive, blah, blah, blah. Is that legit?
Tracy: Yeah.
Rob: That kicks off the first question. There are folks in the audience, a lot of makers who are doing things other than software. A lot of folks are going to publish books. We saw Keith Perhac published in TinySeed batch 2. He published a book about marketing funnels. I think a lot of folks are doing it even when they’re SaaS founders, as not only marketing. They have that expertise and they show it. You self-published this, and now you’re going through a publisher. There are obviously a lot of pros and cons to both approaches, but talk us through that decision process.
Tracy: Yeah. I started self-publishing books, not with Hello Web Design. It was with my first book that’s called Hello Web App. It was a book to teach beginner web app development. Like a lot of other startup founders, I was a founder. I started a company called WeddingLovely. I learned a lot about the process. I taught myself how to code with my startup. When I taught myself how to code, I looked back at the experiences I had to learn to code before launching WeddingLovely. I went to school for computer science. I end up switching over to art and there’s always the horrible experiences I had.
I looked at self-publishing a book as a way for me to have a fun side project because I was burnt out in my startup, but also to teach programming the way that I thought it should be taught after I taught myself. I went to self-publishing because I read all those things about people who work with publishers. Actually, No Starch had given me, for Hello Web App, I reached out way back in the day and asked them, would you be interested in publishing this book? They said, yes. I ended up saying like, actually never mind, I’m going to self-publish this instead, because the lure of self-publishing is you get to keep 100% of your profits.
It just takes a lot more work because you don’t have someone who’s printing for you. You don’t have someone who’s helping marketing for you. I was at a point in my life of working on a startup and needing something else to occupy me. I did a whole Kickstarter, my background is in design. I did all the design myself. It was a really fun process. I self-published Hello Web App and Hello Web App is aimed at designers.
When I was looking for something else to do, Hello Web Design came about because I have this background in design. I realized I can do the same thing for the other side of the coin. I could write a book teaching design to developers, marketers, and startup founders. The same process as before, this is quite a few years back. I wrote the book. I got people to help me edit it. I put it there on Kickstarter. Kickstarter by Hello Web Design was way successful. I think I got $22,000 which was awesome and helped me do the whole printing process.
Maintaining the book over the next year was easy enough, but then I started working at TinySeed. Continuing the marketing and continuing the promotion for the self-published book became harder and harder because my time was wrapped up in TinySeed. I looked at Hello Web Design as being more of an Evergreen book as compared to Hello Web App which was a programming book. Django and Python, those things are changing so fast that a publisher wouldn’t want to upkeep that.
With an Evergreen book, I thought that there was a good opportunity that a publisher would want to see the success of what it had done so far through Kickstarter and through the sales I have done, and want to bring it into their inventory. That’s basically what happened with No Starch. I went back to No Starch. The reason I reached out to them before, was the reason I went back to them is that most authors I talked to had a really good experience with No Starch as compared to some other publishers. I said, hey, I already have this book. It’s written. It’s designed. I actually thought I was just going to sell the content to them but because I designed it, they decided to just keep everything. We did a whole round of updates to bring it into their style. But the book essentially looks exactly like what I had designed myself which was really nice seeing their confidence in the book and confidence in what I’ve done.
That’s essentially the long story short of going from self-publishing a book to publishing a book. What I learned is that, I think a lot of self-publishers out there whose content is Evergreen, but they’ve gotten to a point where they don’t have enough time to support the book, or maybe to do more marketing. Maybe they’re seeing the sales drop off. Selling the book’s content to a publisher could be the next step for them.
Rob: Right. When you do that, you get an advance, and then the publisher keeps the majority of the revenue. You basically get 10% or something. I’m making up numbers. I don’t know your contract. It’s sliding. It’s like audio, you can get more and if it sells more, there’s usually tears and all that stuff. There’s a contract, and then they essentially own the copyright at that point.
Tracy: Exactly. No Starch is upfront with the advance and the percentage that you get. I can’t remember what the exact numbers are right now but essentially, I got a few thousand dollars. I think I’m keeping 10% to 12%. It’s not that much. But again, I was just done with the book at that point. I didn’t want to go through another Kickstarter campaign or another press push especially again, I’m working at TinySeed. I’m very busy at TinySeed. I don’t want to do all that.
It was nice to have this company and be like, okay, cool. We’re going to help run the marketing. It does give me an opportunity to say, I am now a published author because before I felt that was silly. I was saying, I self-published, a lot. Now I’m like, I am actually a published author. It allows me to say, hey, this book is coming out again. I can use this to pitch conferences. I can use this to pitch to other press.
I can use it to start doing conference speaking, as COVID, hopefully, it’s going to get better and conferences start up again. I would like to do some conference speaking again and that’s why I used the book before. I did quite a few design panels and talks beforehand. It was an opportunity to bring it back into the spotlight without having to do a lot of work for it.
Rob: Right. It’s an interesting way to think about it—self-published at first, such that you get the lion’s share of the profit when you’re marketing to your own audience. That’s the low-hanging fruit as if you have your email list or Twitter following, your Insta following, or whatever. You do capture that revenue and then, as a subsequent step, you’ve gone and done this. I’ve been talking to Sherry because she just signed a book deal. It’s a book about grief. She also had a similar thought process.
She did not self-publish that first although, in her first book, The Entrepreneur’s Guide to Keeping Your […] Together, we did self-publish. Her thought process there was, a book about grief is definitely more of a horizontal book. It’s just widespread. The audience is much larger. Frankly, even across her and my followings, it’s not going to have the same amount of traction as The Entrepreneurs Guide. Going through a publisher gives her reach because the publisher already has this audience.
These audiences are the people who expect. Like No Starch already has designers and developers looking. It’s a more technical publisher and similar to Sherry, her publisher Sounds True. They publish a lot of psychology, mental health, and spirituality, and that kind of stuff. This is an intersection of a lot of that. I always struggled. I’ve only self-published books. I haven’t gone through a publisher. In fact, I did talk to several publishers in the early days when I was writing Start Small, Stay Small a decade ago.
I did start talking to a few of them about the potential of publishing. I think for me, given that I had the audience, I didn’t want to give away 90% of the profit. I was willing to do the work and I’m honestly pretty interested in doing the work like I wanted to learn what it was like to actually have a cover designed and typeset it—typesetting is not the right word—but pick the fonts and just make the book happen and buy an ISBN. I wouldn’t do that again. This time, I would hire more of that out. But it is an interesting trade-off. I used to be more black and white about it like, well, the publishers take everything. But there’s a lot more nuance to this I think than people realize.
Tracy: Yeah. Again, you can self-publish and then move onto a publisher. It’s something I never realized or never even thought about when I first self-published my books. Now, I’m just trying to share the works. I know there are so many people out there who have written really great content but don’t have the time to promote it. If that content just fades away, there are other opportunities to share and get 10% of the profits and get an advance and whatnot, not a lot of money. Not as much as if you did the whole press push again, but just enough that it can keep that content alive.
Rob: Let’s mix things up a little and switch topics because I want to talk more about the content of the book itself. It is effectively teaching fundamental design skills to entrepreneurs, or to developers, or anybody really. The first question that comes to mind is why are these design skills useful to the Startup for the Rest of Us audience? There’s a lot of developers. There are some designers. There’s a lot of mostly bootstraps and bootstrap founders. Why should they care?
Why might they want to go out and pre-order this book for example? By the way, nostarch.com/hello-web-design, and we’ll also put that in the show notes, obviously. But the book is $20 and PDF $25. Is it a hardcover?
Tracy: It is hardcover.
Rob: Yeah, that’s crazy. That’s actually relatively inexpensive.
Tracy: It is a shorter book. That’s one of the reasons why, while it’s a hardcover, it’s $25, but I think it’s going to look really great.
Rob: Yeah. Why is this important to an entrepreneur or bootstrapper?
Tracy: Right. I think a lot of my career has been around how great it is to have skills in multiple areas, having just enough skills in sales and marketing and development so that I can launch these projects. I’ve self-published these books, but I actually have a whole platform that I use to sell them on my own and called them Hello Web Books. It’s a whole selling platform and dashboard. I have my videos there. I have all the content from my books there.
People can log in to this website and buy the books, and read everything. I’ve coded all of it. Because I could do every single bit of this, I could do the design. I could do development. I can do the marketing for this platform. I’ve been able to do more faster without having to rely on people, rely on hiring contractors, and going through that whole process of working with other people. It’s been really great to just do it myself and get it out there.
When I talk about design skills—and by design, I mean not HTML, CSS, frontend development stuff—I’m talking purely about the visuals, the user interface, user experience. There are so many people out there, their bootstrap companies are working on launching a side project. They’re working on their first SaaS. The design side of it, if you don’t have a background design can be really intimidating. You know that’s what the customers are seeing. You know that’s what the customers are using. I wanted to write a book so that people can be more efficient. They can be more unicorns where they can get just enough design skills so that they feel comfortable designing these interfaces themselves, so they get their projects out faster.
Not just interfaces. This also applies to slides if you’re doing talks and whatnot. You’re doing a keynote or those other platforms. Designing your slides, designing your personal website, designing your SaaS, if you can do the design yourself, I think you can do a lot more. This book is different from other design books because I’m not teaching you to become a designer. I don’t go into this theory. I don’t go into all those little skills that you’d want to know to be a proper designer. This is just like the shortcuts, the fundamentals, and the shortcuts. They were a little dangerous.
Rob: Right, 80/20.
Tracy: Yeah, the 80/20 of it. You can feel comfortable doing it yourself. If you want to become a designer afterward, if you decide that you love design, you can use this book as a platform to then read more traditional learned design books, or you can just take this as a basic set of skills, and just so you can launch your projects and do the design faster.
Rob: Right. A couple of things, earlier, you said unicorn and you didn’t mean billion dollar evaluation. You meant you’re very unique like you’re both a designer and a developer, or designer, plus developer, plus entrepreneur, whatever. There’s a big piece of this that I want to drive home what you’ve just said. It’s that the less you have to—especially in the early days when budgets are tight, time is tight, timelines are tight—rely on someone else, like a contractor to get back to you, or even one of your team members who might have other priorities that slow things down, it either costs money or costs time.
I’m not a designer and never have proclaimed to be, but I learned enough. I wish Hello Web Design had been around at the time, but I learned enough and dug around on the internet and read a few design books such that I could download—let’s say 10 years to 15 years ago when I was super bootstrapped and super cash strapped—landing page templates that I would buy on ThemeForest or something for $10 to $15, and I would put up landing pages.
They would look good enough. It’s 80/20. They were not phenomenal. I didn’t design it myself but the concepts you talk about in this book are things like using a grid, colors typography, whitespace, layout and hierarchy, user experience, images and imagery, and all of that stuff, I know just enough that I can get a landing page up and it doesn’t look like crap. You also mentioned slides. Sometimes I have a designer help me with my slides and other times, I’m able to put them together myself.
If I’m able to put them together myself, it’s so much better because I don’t have to rely on someone else. Even blog posts and long essays that I want to add imagery to or add balance or break up walls of text, this type of thinking helps. I’ll bring up another example. Anytime I work with a designer, if they’re a phenomenal expensive designer, then I don’t really need to know much. But I’ve often worked with designers due to budget who are good but not great in every area. Like when we redesigned startupsfortherestofus.com, for example, the designer was good, but we were on a budget, obviously.
I had quite a bit of feedback that I think made the design look better. He had a good concept and a first step, but I remember looking at it being like, yeah, these things are off. Again, it’s not that I could do the design, but I could tell what was off. It’s not that I could do the design but I could tell. I have enough taste. Taste, I’m defining as just knowing a lot of these concepts, these rules of thumb of like, there should be more whitespace here or there are too many colors, or why do we have five fonts on this page.
Those weren’t actual examples that happened. But they can, if you hire an inexpensive designer, if you go to Upwork and hire someone for $15 bucks an hour, you might need to know these things in order to wind up with it with a good product.
Tracy: Yeah, exactly. There’s a whole chapter in the book, I titled it Training your Design Eye. A lot of people will say like, how do I know what’s good design? It’s knowing the principles and knowing the fundamentals that you talked about. But there’s also a part about thinking critically about other designs that help a lot of people who are not designers themselves to pick out what makes a good design.
If you get to a website, and you’re like, dang, this is a good website, take a moment and break it down. Try to think critically about what makes it a good website because the more you insert that into your brain, the more you can regurgitate it later in your own designs. It could be a phenomenal experience like the NAV is just great. Maybe it has a really nice user experience of the NAV. Maybe you notice that the illustrations that they’re using are particularly nice. There’s a lot of whitespaces.
I do some of these breakdowns. I did one quite a while ago. Maybe I’ll give it to you for your show notes where I broke down SavvyCal’s website. I listed out all the little design details on the SavvyCal website. People can notice those details and then they can better remember them when they’re doing their own design. It’s kind of like that critical thinking part when looking at good design. It’s going to help people become better designers, or at least become better at seeing and being able to critique designs that people give to them.
Rob: Right. SavvyCal is a good example because that’s obviously Derrick Reimer’s app. Most people will have heard of him as listeners of this show, or of The Art of Product Podcast. SavvyCal is such a good example because Derrick is the unicorn you mentioned earlier. He’s a full-stack developer plus designer, a really good designer, actually. Every site he has done, because I’ve worked with Derrick, gosh, for almost a decade.
We don’t work together anymore. But he helped me with HitTail then Drip, just years and years of working together. I was always struck by his designs which are very simple. They’re sparse. They are minimalist. Yet, it looks easy. He makes it look easy. I’m always like, how did you do that? I’ve sat and watched him for hours. I’ll appear over and watch his design process. I’ll watch him, look at his screen and watch him just take things away, and just keep it very simple.
I remember that SavvyCal breakdown that you did. It looks easy, but it’s not like his level of design because I’ve sat down and tried to kind of do something that’s simple and it looks simple. It doesn’t look good. It doesn’t look as sophisticated, I’ll say.
Tracy: Yeah. That relates to actually the first half of Hello Web Design. I was going to tell someone, what is the number one thing to remember if you’re saying I want to become a better designer? What do I do? I say, reduce clutter. You can reduce clutter in your content by making things shorter, tighter, easier to understand. You can reduce clutter in your colors by reducing your color palette, making things simpler. Reduce the clutter in your fonts. That’s where that rule of thumb of only two fonts per design comes from. Reduce the clutter in terms of your layout. By having a grid, you have this like an invisible skeleton to your design.
All these principles that I go through chapter by chapter in the book, all relate to just reducing clutter. Obviously, there are great designers out there that can make things that are very busy and yet work super well, but that’s because they’re awesome designers. But if you are someone learning design, and you want to just know one thing, aiming towards simple and clutter-free is going to get you. Honestly, that’s the 80/20. That is going to get you most of the way there if you just look at every piece of your design, and just try to reduce clutter.
Rob: Another chapter of the book that I liked is chapter 3.3, Prototypes. The process of sketching your ideas and making prototypes will help you play with solutions and try out different ideas faster than if you move straight to coding. Then you have some hand sketches then you talk about them, kind of iterating on those. Then you talk about wireframe tools, like Sketch and Balsamiq and UX pen. There are several I hadn’t heard of. I think that chapter alone is likely for, especially early-stage founders trying to get an MVP, have never done wireframes and all that. Talk us through a little bit of your thought process on mocking up designs and getting wireframes out.
Tracy: There are things out there like Tailwind, Adam Wathan’s design framework, that a lot of entrepreneurs use to do designs, which is awesome. The designs that come out of using this Tailwind framework look really good. I find a lot of people who want to launch their first project. They’re like, cool, the design’s taken care of for me. I can just take my content and the things I want to build and just throw on Tailwind, and then you’ll have a design site.
There’s a reason why I want to recommend a prototype in between that and starting out something which is like sketching. A lot of people who are new to design are used to being on the computer all day long, they don’t want to go off the computer and start doing hand sketches. When you can do hand sketches, don’t worry about Tailwind, don’t worry about the colors, the fonts, and everything. The first thing you should look at is just sketches out like boxes and lines, how your layout would be for the thing that you want to build.
Don’t just do one, maybe do one layout and then be like, okay, what else can I do? What if the NAV is going to be in the middle? Maybe it’s going to be a smaller column of information. Maybe this piece of my project should be in a different place. When you can work with just pen and paper and just sketch things out, you can play with more layouts faster than if you’re going into CSS and trying to switch out where the columns were, where the things are going to be.
You’re going to be a lot more constrained if you jump straight into code and you start relying on some of these frameworks. This helps a lot when it comes to content because when you’re just sketching out the lines, you can see that, oh yeah, you don’t want a giant wall of text here. You want something short so you can get to that next piece of your homepage. Maybe that feature’s block. Maybe the next thing will be people’s testimonials.
You can figure out where those things land before you move in and code. Step one is just pen and paper, just being super-fast and efficient. Step two, then, is you could go into something like Photoshop, Sketches, the Balsamiq, and whatnot and start just doing things. You can move things around a lot more easily that way, rather than just sketching something new. The whole process is, it allows you to play faster with the layout, rather than going straight into, say, a typical layout, something that you coded in CSS and you just have a column and you have the three columns below, and things can look very the same between all these websites.
Just having this little prototyping process is going to help you move things around faster. I think that’s a piece that a lot of people miss if they are just saying, I want to build this project. I’m just going to build the backend. I’m going to have the quick frontend, and I’m going to throw a framework on top of it.
Rob: Yeah. I always had a little bit of an issue with 37signals, but now it’s Basecamp. They have a book called Getting Real and a big part of that was like, don’t do mock-ups. Just start building an HTML CSS because it’s so fast. If you’re as good as they are, then go do that. But I’m not that good, apparently. Derrick and I would sit down and the rest of the product team as we expanded, we white-boarded the […] out of things. We white-boarded everything and that’s the equivalent.
That was our hand sketching. I would grab a whiteboard pen, my handwriting and my lines are all crooked and everything, but we have this pretty complex thing. We’d do it. We’d start to talk throughout stuff at work. We’d realize within seconds, that’s not it yet. Then we go and we go. Sometimes these sessions are 15 minutes and sometimes they are three hours. We would just sit in front of a whiteboard.
I think that’s one of the reasons why the software was built. It’s really good. It’s good, solid UX principles. Of course, Derrick or Brian, the designer, could have gone into the CSS and probably done a good job, but the iteration would have taken longer. I know that there are some design agencies or some maybe heavy processes that are like months and months of prototypes, and user testing, and clicking, and paper prototyping, and blah, blah, blah. We didn’t do that either.
I do think you get to the point where it’s overkill. I get that maybe 37signals or Basecamp was pushing against that at the time, which is fine, but I am definitely more in your camp of some type of sketch. I didn’t tend to use paper because I was doing it collaboratively and with a whiteboard, it was so much easier to erase. Then we just took a photo at the end. We would attach that to an issue of like, this is a new screen or series of screens. It was oftentimes whiteboard sketches, photos of them just slapped in issues with a little bit of text, and that was it.
You have to have been in that session to know all the nuances of it. But that allowed us to move very quickly. From there, doing this CSS itself was not that hard once a lot of the paradigms were ironed out in that fashion.
Tracy: Imagine an onboarding flow. You want page one to be this form and page two, as maybe you’re getting that credit card, and then page three as you get into the app, and you have these tooltips. Imagine if you take a post-it or something like that where post-it number one is page one, and post-it number two is page two. You have these little quick sketches of boxes and lines and whatnot to figure out that layout is, but then you decide, oh, wait, I need to have a step 1.5 in this onboarding flow.
You want to add extra steps. You want to feel for that user experience process, and if you’re in code, suddenly adding step 1.5, you have to go into the backend. You have to switch over where it’s point two. You have to go to that page. You have to design that page really quickly. It’s so much slower than if you’d had a post-it and you can move post-its around. You can add new post-its. You can sketch over the post-it. You’re going to replace the post-it way faster, quick, and dirty.
You don’t have to do that again, that huge design process, like you said, with those designers. But you just have something just enough that you can get that imagination going. Get those creative juices going and kind of realize that your first instinct is often not correct.
Rob: Yep, indeed. Well, @tracymakes on Twitter, tracyosborn.com.
Tracy: Tracy couldn’t get Tracy Osborn on Twitter.
Rob: That’s exactly right. If you’re listening and you’re intrigued by Hello Web Design, you should obviously, can hit the show notes, but nostarch.com/hello-web-design. It should be released within a few weeks. It’ll be released in May of 2021. This episode will go live in mid-April. Thanks so much for joining me today.
Tracy: Yeah, thanks for having me on.
Rob: Thanks again to Tracy for joining me on this week’s episode. Thank you for coming back and listening week after week. I really appreciate it. 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. I’m Rob Walling. I’m your host today, and I’m excited to have Josh Pigford back on the show. We run through listener questions covering topics like annual pay increases, should my B2B SaaS write a blog post about our price increase, whether offering discounted plans in exchange for people to have your powered by link or your branding is a good idea, finding good startup people, and all kinds of other stuff.

We actually chat about Josh’s new effort, which is called Maybe at maybe.co. I’m pretty excited for him. You’ll hear me bust his chops about getting started with something so soon.

Before we dive into our questions, Startups for the Rest of Us has 905 ratings across 47 countries. Our most recent is from DABOOM1234, the title is Gateway drug for starting a company. “This podcast inspired me to start my own company and changed my life for the better.” Awesome. Love to hear it.

If you want to give us a rating or review, log in to your podcatcher and give us five stars. Really appreciate it, and that’ll help me get to the 1000 rating mark that I am trying to achieve by some unknown date, but I definitely would appreciate it. There are very few podcasts with four figures of rating, and I think that we can get there.

With that, let’s dive in to my conversation with Josh Pigford. You may remember him from an episode within the past couple of months where we talked about him selling Baremetrics for $4.7 million and he dug through all the details of that. He had run Baremetrics for years and hired up to 12 people, so he has a lot of thoughts on these topics we’re going to talk about today. I had a great time chatting with Josh. I hope you enjoy our conversation.

Josh Pigford, thanks so much for coming back on the show.

Josh: Hey, thanks for having me, Rob.

Rob: Why is your Twitter handle not your first and then your last name, Josh Pigford? It’s Shpigford, and I’ve always wondered about that.

Josh: The handle comes from instant messenger days. I think I was just 19-year-old Josh. It was one of those things. You would have your instant messenger handle so I had Josh Pigford just a single word, but you could change the spacing. You could put spaces and capitalization and change that stuff and it wouldn’t change the name. Because it was really funny, I changed it to Jo Shpigford one day, and then the Shpigford part, people just started calling me Shpigford in real life so it kind of stuck.

Nobody’s got that handle at all. Nobody’s got Josh Pigford either, but it’s just a little bit shorter and it’s a little bit more unique than just my name.

Rob: Yeah, I was going to say, Pigford is not a common last name so I wasn’t imagining you were using […].

Josh: People are already going to butcher the spelling, so I might as well just make it more difficult.

Rob: Yeah, exactly. Well, that’s settled, and I feel better about that. It’s been bothering me. I woke up at 3:00 AM in the morning last night thinking about it for some reason.

Josh: Well that’s sweet. That’s cute that you’re thinking about me in your sleep.

Rob: I was thinking about you. I got to bust your chops, man. We’re going to answer questions, I promise. You and I on the last show, we were chatting, it was nice and calm, and I said good. If I only have one piece of advice for you, Josh, it’s take six months off. Don’t rush into anything else, and you yourself were like, man, I just don’t know. I’ve been making money in software for 15 years. I don’t know that I ever want to do it again. Then record scratch and suddenly, within a week of that episode, I see you tweeting, hey, I’m building software again. For folks who want to see it, it’s at maybe.finance or it’s company.maybe.co?

Josh: It’s maybe.co, actually. You just go to maybe.co.

Rob: Maybe.co. Maybe is modern, financial, and retirement planning. You have the best MVP ever. It is literally a notion document. What the hell is going on, dude? You said you weren’t going to do it? What happened though? I’m curious to hear this story.

Josh: I have an addiction to building things.

Rob: We all do.

Josh: We talked a little bit about this in my previous episode about a financial advisor. I can’t remember if we talked about it—if it made the episode, or if this was after the fact or something. The whole financial advisor taking X percentage of the assets that they manage. That cost me ultimately $2 million over the course of the next 40 or 50 years.

So then that jumped into me managing it myself. Then it was like, okay, the more I started reaching out to other founders who have had exits and been like, how are you managing all your money? They’d be like, man, it’s stupid—Excel spreadsheets, I try to use this thing but it’s terrible, or I just don’t even do anything with it because it’s there’s no good way for me to do this.

I was like, you know what, I’m just going to build something myself. It was one of those opportunities. It feels like there’s an opportunity from a market perspective where investing has become a lot more democratized. People want to have a better handle on their finances differently than say our parents who were optimizing for retirement. Now I would say most people are not optimizing for retirement. They’re optimizing for how can I do the things I want to do now and not wait until I’m 60 or 70.

I think that software can answer the what-if questions or the maybe. The whole name Maybe sort of revolves around you asking yourself like, hey, maybe I would like to open a coffee shop, maybe I’ll take an international trip, maybe I buy my dream house, and then we answer how that’s possible or show you how that’s possible.

Rob: Got it. I have a lot of thoughts on it because I’m concerned that you and I care about our personal finances. I’m like a nerd about it. It sounds like you kind of always have but really once you had more wealth after selling Baremetrics, you obviously have a concern about it. It doesn’t feel to me like the average person does.

Josh: I think the average person has been—culturally speaking, we’re taught, you work, put money into a retirement plan, you bust it for the next 30 years, and then you can retire. That’s the mindset, and I don’t think that that’s necessarily what everybody has to do. I think there are ways around that when you properly plan.

Maybe isn’t going to all of a sudden give you a million dollars right, but in the same way that a financial advisor can help you or would help you have a plan, Maybe is like replacing the financial advisor.

Rob: See I was hoping that you are building a tool for financial advisors because when I think about building a personal finance product and I think about selling B2B, I’m like, okay, I can get behind that. But if you’re talking about going B2C, can I just tell you please don’t? Please don’t do that.

Josh: Well, in the same way that you told me to not start anything after six months and I’m doing it anyway, same.

Rob: It’s very much on purpose.

Josh: That’s right. Part of this comes out of the fact that I was playing around with the financial advisor software that our financial advisor was using and it is truly terrible. That’s not to say that six months into this I’m like, okay, pivot, whatever. Maybe this does turn into some sort of B2B play. But I also think the whole financial advising world is also having a big overhaul. New fresh financial advisors aren’t billing in the same way that previous ones were. There are all sorts of stuff that’s happening in the finance space, I guess, or at least personal finance.

This is me getting my foot in the door and figuring out the best way to tackle that.

Rob: Yeah, I could see that. You and I’ve known each other long enough. It’s light-hearted ribbing, and I’m obviously rooting for you.

Josh: Sure. In reality, it’s a good thing to have people question what you’re doing, right?

Rob: Right. And that’s the thing is you shot the gap. With Baremetrics, you got in early in the Stripe ecosystem. It was a change that was happening where we had all these […] payment gateways and it was a […] nightmare, to be honest. Stripe fixed that and a bunch of us started using it. A bunch of us being SaaS founders. We all built custom dashboards, which is what I was doing at the time. You came in and saw that need and boom, within weeks, everything was going.

This could be that case again or it could not be. You’re trying to hit a trend that you think is happening because I think if you tried to build this (let’s say) even five years ago, I just don’t think anyone cares.

Josh: It wouldn’t happen.

Rob: Especially with millennials and folks who are younger than you and I, to be honest, they do think about finances in a different way. That’s your big risk here. You know you can build the software. You can do all the things. The risk is are you going to hit a movement as it’s happening, and that’s really the gamble here.

Josh: With Baremetrics, one of the things that I felt was this indicator that something was ripe for being built in the software space was that everybody was doing custom stuff—either actually programming their own stuff or doing it in spreadsheets. Everybody was hacking together tools. Now software has mostly just kicked that to the curb.

That’s also the case in this personal finance world where when I talk to people, well, how do you manage your investments or your finances in general? Outside of just basic budgeting, which this is not a budgeting app at all, everybody’s using spreadsheets.

Rob: Yup, Google Sheets for me.

Josh: Exactly, right? This is one of those cases where if the timing feels right and there are these clear indicators that people want something because they’re hacking together their own tools to make it happen. That’s where the timing part—instead of waiting another six months or doing this in a couple of years—timing feels right on that. That’s why I begrudgingly jumped into it.

Rob: I mean, I obviously wish you the best and I’m going to be cheering you along from the sidelines. I had two friends who sold businesses years apart and jumped back into something really quick within weeks where they were inspired. One of them wound up regret. Well, they both wound up regretting it but for different reasons. One of them burned out and he was like, I was still burned out and I didn’t recover. Because you had a few months off, right? I mean, you had four or five months off, I think.

Josh: That’s right.

Rob: I only took six months off after leaving Drip before diving—well, it wasn’t even six months actually if you want to know the truth. I mean, oops. Yes, it was definitely six months. Anyway, sir, maybe.co. If folks want to follow along, you have links to all the stuff, and I’m super excited to see what you build.

Josh: Thanks, man.

Rob: All right. Let’s dive into listener questions today. We have some really good ones. Our first one is about annual raises. This author or the question asker writes in quite a bit actually. He has to remain anonymous, but he’s doing very well. I think he sent me another email and I believe they’ve just hit a million ARR, to give you an idea of the size of his business. Mad props to the anonymous question asker.

His question is about annual raises and he says, “When we were a company of three to five people, pay raises were easy to figure out on a case-by-case basis. But as we grow, that’s getting harder. What rules should we put in place so that there are reasonable expectations on all sides?”

And this is a question that I would not have had an answer to until we got acquired because when we were eight full-time plus two contractors, it was all case by case. When we were acquired by Leadpages, which was 170 people at the time, they had all of this figured out. That is actually one of the advantages I think of seeing both sides. Basically, working in a venture-funded company, they had 38 million ventures, 170 people. I got to see way down the line of what Drip maybe was going to be 10 years from now.

I will weigh in after I hear your thoughts because at Baremetrics, how large did you guys get team-wise?

Josh: I think the largest is 12?

Rob: Okay, and how did you think about annual pay raises? Did you do it off the cuff on a case by case, or did you have some standards?

Josh: This was the thing that kept me up at night the most probably on a regular basis was I never really loved how we handled this stuff. We sold at the end of 2020. At the beginning of 2020, like Januaryish, I had just started really hashing out how we would not just raises but actually compensation. How can we standardize compensation so that (a) it doesn’t require negotiating and, (b) is repeatable and as fair as this can be?

There will always be some disagreement probably between what I think someone should get compensated and what that same person thinks as far as skill levels and whatnot, but trying to standardize that stuff.

The biggest help for me on how to figure out that stuff was Buffer’s salary formula. We didn’t use their exact formula, however, what that led me to check out was—that I had not really researched before was—Radford. They have the Radford surveys where they have compensation surveys that they run, and it costs a few thousand bucks to get access to it. But this lets you standardize base-level compensation.

Then what you do is you take the base-level compensation and then you have these different buckets for essentially how someone moves up in the company. But it’s different ways to figure out what someone’s skill level is or how they’ve improved. So you do basically biannual or annual performance reviews. Then talk directly with the employee about where do you think you are on this scale, here’s where I think you are, here’s how you can move up, et cetera, and then that is what influences your salary and not this, well, you always get a 5% raise every year or whatever.

You get a raise by becoming better at your job versus getting a raise just because you’ve existed at the company for a while.

Rob: We’ll try to find that article or we will find that article on Buffer’s site and link to it in the show notes. When we were small, I mean we were four or five people. I remember saying to a new hire, we don’t do annual reviews because I hate annual reviews or something, which is fine to say at five people. When you’re at 100 people, you can’t. It just doesn’t, you know what I mean? You can make any reviews not suck. You can make them to where it’s not so formal. I think of Microsoft, IBM—Fortune 500 company doing it, and you don’t have to do it that way.

So here’s what I saw and what I admired about what they did at Leadpages, and then of course, now at Drip now that Leadpages is no longer part of the company. The folks were hired and jobs were posted based on a market rate salary. The HR folks did salary surveys and they had paid for this expensive software. My salary surveys involved me going to Google and typing in a location and a role. Or if it’s remote, then I try to just wing it, but Glassdoor and salary.com usually come up so I have some idea of where the market rate is.

Here’s the thing, you can get people lower than the market rate if you have advantages. We used to have advantages as bootstrappers because you would say we’re a super small team and you’re going to make a big impact on the product, you’re really going to love your job, and you can be fully remote and work from anywhere. Well, that last one has been removed recently because everyone’s remote.

My hope is that it does come back because I do think some bootstrappers are having harder and harder times finding people at reasonable salaries because there are companies—now that all of Silicon Valley and most of the Fortune 5000 is hiring remote, they can pay a lot more bottom line, so it is harder.

If you’re paying below market like someone really either needs to have stock options or some other advantage that makes it worthwhile for them to do that because, over the long term, no one is going to work for your company for years for below-market-rate for no other reason.

What they did that was interesting too is every year someone worked, they would re-run the salary survey because sometimes (let’s say) you hire a senior developer in Minneapolis or a senior designer and that role is maybe $110,000. Within a year, that role may jump to $130,000. It’s possible that Target, Best Buy, General Mills, and a bunch of the other Fortune 500 companies here in town have hired a bunch of people and raised that rate.

They would actually adjust to the market, give or take, which again when you’re 5 people or 10 people, I don’t know that you have to do all this. But you probably should keep an eye on it because if you don’t, people will look at other jobs. It’s like the price of your house. You don’t always check the price of your house, but you just know how much it’s worth, we all do. I think that’s similar to salaries. I don’t have to really google what a senior software engineer makes in town if I’m a senior software engineer in town. I kind of know what my friends are making and you figure it out. That was an interesting thing they did.

Now they were venture-funded. They had the budget to do that. If you’re bootstrapped, maybe you don’t fully have the ability, but that was a thing. Then in terms of annual raises, it was 3%–5% based on performance, and if you were doing amazing, you got a 5%. That was just the cost of living raise. If you were getting 3%, you needed feedback, just like you said. You’re only getting three and here’s why. The annual review should not be breaking them this news. You should have had this conversation before that of hey, here’s where you’re not performing up to the level, or here’s where I want you to exceed this to actually get that full 5%. Any other thoughts on that?

Josh: No, I think that’s spot on. It’s not just about you figuring out, is this person performing? It’s also about they’re not going to be happy if they look back over the past year and are, oh, I haven’t actually improved. Or I’m not better at being an engineer, customer support rep, or whatever it is. That they also want to be better at their job than they were a year before, and they should be rewarded for that by getting paid more. But if they’re not, then you need to be able to tell them how to fix that.

Some people are really great at realizing, okay, I’m falling down on the job here. Here’s how I need to fix it. Other people have no clue. They have zero self-awareness. You can fix that by helping them see it, but you have to give them feedback and there has to be this set opportunity via (say) an annual review to talk about that stuff.

Rob: That’s right. The alternative to this because this sounds complicated like it’s going to keep you up at night. It is complicated and it does keep you up at night. It’s hard, and the alternative is I watch folks like Rand Fishkin who’s launched Sparktoro and they’re doing plenty of revenue to hire as many people as they want and they have no employees. They only hire contractors and consultants because they don’t want to deal with this aspect of it, and that’s your trade-off.

You might maybe pay a little more per hour, maybe people wind up taking the job, they don’t have time for you, they’re freelancers, or whatever. But going the consulting route is not a terrible way to go especially if you can afford it because it’s purely performance-based. If you want to hire a marketer full-time W-2 and they’re not performing, I feel like as the founder/CEO, the marketing manager, or whatever, it’s your job like you’re saying to bring them up to speed. Well, why aren’t you performing? Let me help you do that, let me help you with personal growth, and let me help you with business growth.

If you hire a consultant for a three-month contract or six-month contract and they don’t perform, you let them go and you find someone who will. It’s an interesting trade-off people should think about.

All right, next question. This question is from Steve McLeod, and he is the host of the bootstrapped.fm podcast. He says, “I recently made a substantial increase to the prices of my B2B SaaS. It’s called Feature Upvote. Instead of a flat $49 a month, I now have three tiers: $49, $99, and $249. Existing customers stay at the old price. I just implemented these prices without any announcement, was that a mistake or a lost opportunity? Should I have written an informational blog post about it? If so, what’s a good way to explain a large price increase?” What do you think, sir?

Josh: So to his questions, was that a mistake to not post about it? No. That’d be a really weird thing to write a blog post about. I think as the owner, developer, or whatever of your own company, you think people care and look at your pricing and see, they’ve changed their price or whatever. Nobody cares. Literally, no one cares.

If they’re using your software already and you’re not raising the price for them, again, they don’t care. And if they weren’t using your software, there’s a handful of people who may have been shopping and had seen the price, but a blog post probably won’t be seen by them nor will it help them. No, I don’t think there’s anything to say about price increases or changes at all, and the reality is you should be testing and changing prices all the time to be figuring out what’s the optimal price point, what are people willing to pay for. There’s no need to write anything every time you test out some new pricing.

Rob: I think I’m on the same page with you. There was one time where I increased pricing. We did it both on Drip, and this is when I increased pricing, not when the subsequent owner did and everything blew up. There were at least two times, probably three, where we did pricing overhauls during the time that we owned it, and then I did this with HitTail as well.

Here’s the thing, if you’re going to raise prices, people are evaluating the software, they’re doing a trial or they’re looking at it, then suddenly you raise prices one day, and they come back the next day and say, hey, your old pricing used to be this, I was about to sign up. The way I would do it is be like, cool, I’ll just honor that. I’ll give you the old pricing just because it doesn’t matter to me.

Since I’m going to do that anyway, before we raise pricing, we did send out an email to anyone on our marketing list and probably did a tweet or something. I don’t believe we did a blog post, but we sent it because that’s again that sticks on your—like you said, no one cares and it doesn’t need to stay on your site forever. But for us, it was a promotion and it was like, hey, pricing is going to go up next week, and it’s going to double or whatever it’s going to do. But if you sign up now, we will honor the old pricing. We’ll essentially grandfather folks. Not forever, we didn’t commit to that, but we did say for the foreseeable future. It did get a big rush of trials of people trying to get in under that wire.

Now, did I ever go back and analyze and figure out how many stayed around and how many didn’t? I did not, but I do remember having a good growth month. I’m not saying that you should do that all the time either though because we didn’t do it every time, and there were certain factors that we wanted to weigh in. Sometimes, like you said, we just wanted to test and play around, and we didn’t want to be so public about it because we wanted to be able to roll it back if it was a disaster. In that case, we didn’t do the big promotion.

Josh: It was probably two years ago or something where we were on our company-wide retreat for Baremetrics and one morning I was like, guys, what if we just literally doubled our prices? Did nothing except take every price and multiply it times two on the marketing site, let’s try it. So by that afternoon, we were A/B testing, doubling our prices for zero added benefit. Again, this is not for existing customers.

It would have been silly for us to write a blog post because a month later, we rolled that back where we stopped running that A/B test. You should always be testing out different prices and seeing what sticks and what doesn’t stick, and there’s no need to make a big to-do about it. Except for in your case when you can use it to your advantage like a marketing opportunity.

Rob: Right. Before I announced it, I was pretty confident that it was going to work and that we were going to stick with it and all that. That’s the thing, I agree with you. More founders should be messing with pricing constantly and testing. It’s just so scary to do so. I remember how terrifying it was to think I could just decimate my funnel. You just have to push through it.

When folks come into the Tiny Seed batches, within the first few weeks, I mean, that’s the biggest lever in SaaS is pricing. You don’t need to build new features, you don’t need to get more leads. You can double growth if you were to double pricing and keep the same conversion.

We do talk through a lot of price increases too to early founders in Tiny Seed. In fact, usually within the first couple of calls, I will do a call for hand raises and say, who on this call thinks that they’re either underpriced or they’re mispriced—their value metrics are off. Usually, it’s about 70%, 80% who have a gut feel their pricing’s off, but they don’t really know why. So then we do a bunch of deep dives, analyze, and chat them through. Pricing, it’s no fun but you got to deal with it.

All right. The next question is from Adam at paidmembersapp.com. He’s asking about free or discounted plans in exchange for branding. He says, “What do you think of a discounted tier that includes branding i.e. my customer will get my brand at the bottom of emails sent from my app to their customers. Fairly unobtrusive but still present, and they would have to upgrade to remove the branding.” I’m going to cut in right here and I’m going to say this is fairly common like Drip head, powered by Drip on the widget. Mailchimp on their free plan I think there’s a powered by Mailchimp badge at the bottom of the emails. E-signature apps like a doc sketch back to his email.

“If my main plan is $49, I was considering offering a $29 plan which shows branding, given that I am essentially offering a discount in exchange for the customer providing marketing about my SaaS. Does this seem a valuable enough trade-off to be okay with people being on the less expensive plan forever? I was going to add a higher transaction fee to move customers up to my higher plan, but then I thought maybe just having someone on a lower plan is fine if I get a lot of clicks from the branded emails, footers, or links on their website. How valuable in general is having branding like this? Is it worth the trade-off of lower MRR from the customer?” Do you have any thoughts?

Josh: Yes. I think there are a few ways to tackle this. On the base level, should I offer a lower price plan and the only difference is adding branding? No. Instead, I think of it this way. Someone who’s that price-conscious that they’re like, I’m going to save $20 so that I can remove the branding, probably isn’t going to send you anything anyways. They’re too small or too early in business or whatever for wherever they’re including a link—nobody’s going to see it so it doesn’t matter.

However, what you’ll typically see is this called white label or they’ll have a white label plan where you actually pay a lot more to remove the branding. Basically, all your lower plans—whether that’s $29, $49, $99, or whatever—have branding by default, then offer a $100, $200 a month plan that removes branding in addition to other things.

I don’t think you can do pricing just to remove branding, you’re not going to really see that big of a difference, but having that grouped into a higher paying plan I think can push people over the edge to be, okay, sure. I’ll pay the extra $50 a month so I can also remove the branding in addition to getting all this other stuff. But I think if you’re going to do the branding bit included on all your sub $100 a month plans by default and then pay a lot more to remove it.

Rob: I would agree with that. I don’t think branding should be the only difference, and in fact, back with Drip, we had a powered by Drip link in our email capture widget people could put on their site. Our lowest plan was $49 and that included the link, you couldn’t shut it off. At the $99 plan, you got whatever it was double the subscribers, some other integrations, and you could turn off the powered by Drip link.

I mean this is when we’re at 200, 300 customers versus later when we’re 10X, 20X that. In the early days, there were some people that complained about it at $49, and I believe it was so small though that we just added a little checkbox in the admin dashboard and we just added $20. Will you pay $20 to remove it? If it bothers you that much, be on the $69, and it worked. But again, it was like most people didn’t care and most people didn’t ask.

The big thing I would say to Adam who’s thinking about this is, is there a way to test this without messing around with pricing? Because what you want to test here is the viral loop, is the virality. There’s a viral coefficient—you can google this, I won’t go through it here. But basically, if every one of your customers refers another customer within one month, that’s an amazing viral loop for B2B SaaS. That would be off the charts. That’s really what you want to test is how many click-throughs do you get, how many trial signups or customers do you get.

I would sit down and think, is there a way to test this? Maybe everyone who signs up for your main $49 plan—which is your main plan you have today—as of tomorrow, the branding just shows up and see if anyone notices and if anyone complains, and measure that for the next couple of months. It’s pretty easy. You’ll see how many customers have it, how many links, and how many trials.

You’ll quickly be able to calculate, is any of this worth it? Because I do think it depends on your customer base, their reach. To your point, if they have 20 website visitors a month, it’s not going to help. If they have 500,000 website visitors a month, there’s probably going to be enough traffic to make it worth it. That’s where it is.

I remember with us, we did look at it. We put Google utm params on the powered by link and we measured it. I remember it being, it was worth having it, but it wasn’t some groundbreaking marketing channel. The business wasn’t going to grow on autopilot purely with the viral loop, but I remember it was worth it enough to keep it around. But that’s my experience. It depends on a lot of things.

Josh: If you think about now versus five-plus years ago, I think it used to be really popular—especially with analytics tools especially Mixpanel doing this—where if you put a little Mixpanel tiny little graphic in the footer of your site or whatever, they would give you an extra 100,000 sessions or whatever for their free plan. That used to be more common I think, but now, from a technology perspective, people just don’t have websites as much anymore so there’s more just app-based stuff. These things that a lot of people have read or even seen in the past 5–10 years aren’t as applicable just based on the landscape now.

Rob: Yeah, I think that’s a good point. I agree with you though. It’s complicated, but I wouldn’t overthink this is the bottom line. I don’t think it’s such a big deal that you need to spend a bunch of time on it. I would just get out and test it, see what happens.

Josh: To some extent, if anything, it’s more about being a branding play for yourself where it’s like, man, I’m seeing this little widget everywhere. What is that? I think Intercom is a big one. Their icon itself in the little chat bubble is probably what people know more than a link that they’ve seen.

I think if you’re going to do it, make it a branding play in the same way that you’d be advertising or something. Think of it more that way instead of how can I get people to pay me more. There are lots of ways to think about it, and I don’t think there’s any right or wrong answer there.

Rob: Thanks for that question. I hope that was helpful.

Our next question is a long one. I’m going to have to summarize some pieces of it, and he asked to remain anonymous. He said, “I’m the co-founder and CTO of a tool that makes workshop planning easy. We’re a mostly bootstrapped fully remote business, and since we achieved product-market fit in early 2018, we’ve had steady 7% month over month MRR growth.” Which is not bad for three years. I mean, that’s pretty good. It depends on where they started from.

He says, “Overall, we still consider the business quite stable, and we have a lot of ideas on how to improve the business, but we need more resources, we need more hands, so we want to grow our team. About a year and a half ago, we started growing the team and went from two co-founders to our current team of six. We’ve realized we need to continue the process of hiring as our backlog is ever-increasing, and here comes the core of my question. Any advice on how to find good people that are a fit for working in small startups? Meaning they’re good at managing themselves, wearing many hats, and finding and learning new ways of doing something.

There are a couple of challenges. First of all, is there a good place to find such people? Second, how do you identify the versatility of skills and the small startup fit? I have a feeling most people tend to emphasize few specialties in their resumes so they may seem more professional rather than being all over the place, but is there something specific you look for? Are these kinds of people too busy building their own startups?”

No, I don’t think they are. Josh, sir, you and I have hired many people. I’ve hired them for big companies and for small startups, and I know you’ve hired for yourself and at small companies. What do you think of this question?

Josh: You skimmed over this in his email, but there was one part where he’d said that they had hired six people. He says, “I’m sure by now our overall performance as a company has increased, but there are moments when it feels it would just be easier to do all the work myself.” I get that feeling for sure, but I think he’s probably downplaying that their overall performance as a company has increased. When it comes to finding good people, you have to find people who you know will basically free you up to do other things that you’re specialized at.

He’s correct that you want to find people who can do lots of things or wear many hats. For us, one of the big indicators to me of someone being good at wearing lots of hats were people who were self-employed before joining the company. I optimized for finding those people or at least wanting to push through the interview process a lot more. Or people who are freelancers because running your own business, even if it’s as a freelance business, you are still wearing many hats to pull that off.

That was always a very quick indicator to me was have you ever been self-employed was a question that I would ask that I thought was pretty crucial to finding if somebody is capable of self-managing, doing lots of things, and not thinking, well, I’m only the JavaScript mobile whatever. Anybody who’s hyper-focused on a specific job likely wouldn’t be a good fit in the early stage because they’re optimizing for being the very greatest at a very specific thing, and that’s not what you need in those early small team days.

Rob: Yeah, we used to put the phrase “not my job” is not something you hear anyone on our team say. That was in the job description, and it was just a way of yeah, we wear a lot of hats.

I think to address his first question is where do you find such people? I don’t think they’re all busy building their own startups. A lot of people want the experience of working on a successful one. I definitely think that back to in-person events, if you come to MicroConfs or you find whatever else type of events, meetups, and such in your city, I do think that networking is a piece of it. It’s getting to know other people. MicroConf Connect is another example. That’s an online thing with about 2000 founders and aspiring founders. There’s a jobs and hiring channel, and people have hired other people in the Connect community who are still working the day job and doing stuff on the side.

There are some pretty good job boards for this. Weworkremotely.com, which was started by Basecamp and later sold, but it’s still up and running. It is a startup-minded, small team, remote people. Authenticjobs.com is one that I used back in the day. I believe they’re still good. Dynamitejobs.com from Tropical MBA guys. Remoteok.io, those are the four that I know about.

There’s one called Parachute List, parachutelist.com, which I believe was launched right as COVID happened and there were a bunch of layoffs. I don’t know how accurate Parachute List still is, but the other four are certainly places I would be thinking about posting.

Then identifying the versatility of skills was always a big question that I had. If we were going to hire someone who was currently working at a big company, I wanted them to really, really not like working at the big company. If they enjoyed that, they were not a fit because that shows that, like you said, they probably have a very specific job role and they like all the answers. They like having an HR department you can go to for that, which isn’t going to be at a six-person company. They like to go to procurement to buy their laptop. Nope, not going to have that. All this stuff we just have to handle you just have to do it.

If it was someone at a big company who really didn’t like it, if they had a lot of prior experience at small companies, or like you said, freelancers running their own business was a thing.

There was a good fit that I found which was someone who had worked at a startup or on their own, then had gone to work for a big company and just hated it, and they were trying to get out of it and they’re trying to go back. They had experience doing both, and that showed me they thought the grass was greener because big companies typically pay more. We call that combat pay where you’re getting paid because your job sucks, you’re getting paid more.

Again, a Fortune 500 company will probably pay 20%, 30% more than my bootstrap software company can pay, but your job sucks and you don’t enjoy it. That’s the trade-off that folks have to make.

Josh: This is less applicable now, or it’s probably not as good of a filter, obviously, as a remote company we wanted people who were comfortable they were going to work remotely. But people who had already been working remotely, similar skill sets I found as someone who was a freelancer and that they had already made the decision to work from home, and so they were already very good at managing themselves. They didn’t have to be in an office managed by someone walking around, looking busy, or whatever. That’s less the case now I think.

If they’ve been working from home for a long time even if they were working for another company, chances are they’re pretty good at managing themselves to begin with.

Rob: That’s a really good point because when I was hiring (let’s say) 10 years ago, trying to find people who had work from home experience was really hard. Nowadays, let’s say barring COVID. Let’s say a year ago, pre-COVID, it was a lot easier to find folks, and so I do think that’s probably a minimum requirement. The folks I’ve seen who try to transition from working in an office to working from home usually have a pretty rough transition, and that would be (I would say) at least a yellow flag for me if they didn’t have pre-COVID work from home experience.

He added two additional questions in his P.S., and I think we’ll answer these and then wrap for the day. He said, “Any advice on full-time versus contract developers when we’re trying to ensure continuity? So far we have only hired full-time.” I’ll let you take a crack at this one first.

Josh: I get the feeling of wanting someone full-time. That person, by default, is probably a little more invested in the long-term well-being of the company. But I think there are a number of times where I’d wanted to hire full-time but then I was like let me just try contracting with this person for a couple of months and see where we go. A lot of times those would not work out, not because the person was bad at it, but because that work that I thought I was hiring them for, there wasn’t enough of it there in the way that I thought there was going to be.

This happened a lot with data science roles where I was like, we definitely somebody who can do data sciencey things. I would hire someone as a contractor and then it’d be like, well, I don’t know what else to give you to do here. Having someone who can contract for say 3–6 months, knowing that they’re available to hire full-time, to me is the best of both worlds there where you both get to try it out and make sure that there’s a good fit. But you also aren’t asking them to go quit their job somewhere to potentially come on board full-time when you don’t have enough work for them.

Rob: Yeah, I think that’s a good point. I think in the early days, I certainly was all contractors because I just didn’t have confidence in revenue to be able to hire people full-time. But the question asker is not in that situation. They have a business that’s been growing 7% for three years.

At that point, if I truly am just looking at developers, I lean towards hiring full-time. If it’s just we need another Rails developer or we need a Rail/DevOps developer. It’s someone that I know there is absolutely full-time work available for them and we can just crank out features more or get there faster. I like full-time because there’s focus, there’s two-way loyalty. I think we’ll take care of you, you want to have our back, there’s ownership. Even if it’s not actually true equity, there’s that mental ownership of I work here, this is my company, I have pride in it versus I’m a hired gun.

I lean towards that direction if you’re going to build out a dev team. I like having camaraderie among the developers because, at certain times, it does feel—I mean, when the servers go down or […] hitting the fan, it’s nice to have that team that is cohesive and has a really good way of working together and a lot of respect for each other. I feel ensuring continuity is a phrase that he used, and so I do lean towards that. But again, if I was doing $10,000 a month barely paying my bills, I wouldn’t go out and do that right away.

Josh: You mentioned developers specifically. I think it depends on the role but specifically with developers, there can be a very long on-boarding run-up to them being really productive. It’s hard to bring in someone who can just jump in. A back-end engineer, especially if you’ve got a pretty complex product, could take them three-plus months before they’re contributing something that’s making a business impact. It is hard to do that on a contract basis.

Rob: And of course, the flip side of that is something I said earlier, which is the more W-2 folks you have, the more of them you have to manage, do pay raises, do annual reviews, and check-in with them once a week, once a month, and there are complexities there. See, I’ve felt managing developers specifically—I guess maybe I’ve gotten good at it maybe being a developer. I don’t know what it is, but I don’t feel it’s that hard. Our product is software and it’s like, I want the folks building that to be on the team. But if I’m going to look at marketing, sales, operations, or any of that stuff, I would be much more likely to consider having contractors or consultants in those roles.

Last question of the day. Still from the same asker, it’s in his P.S. He says, “Using recruiters, are they actually good at finding people?” Have you used recruiters ever, Josh?

Josh: I have not. Not passed. Well, not an individual recruiter. I’ve used a few sites where it’s like put in what you want and then the site guarantees that you’ll get X number of applicants or something, but not an individual going out and doing recruiting for us, no.

Rob: I had experience with recruiters (let’s say) 15+ years ago, it was almost 20 actually, and I was still a developer. They would find me, they’re contingency recruiters. I felt they didn’t know what they were talking about. They were not good at it. They took 15% of my first year salary. They didn’t take it from me, they took it from the hiring company. My sense of recruiters at that point was very negative.

As I built Drip in the early days, I did all the hiring, which was a mistake because I spent way too much time on it and took way too much headspace. Once we were acquired, they had two full-time recruiters on staff, and I resisted allowing the recruiters to get into the process because I was like, no, I know how to do this best. I’m the founder, I’m the CEO. You know what, I was wrong. The recruiters at Leadpages and then Drip were phenomenal. They took so much headache off of my plate.

They would post the jobs, they would do the initial scan of the resumes, narrow it down based on the criteria we talked about. We would work on the job description together they posted, then they would filter, and they would do an initial phone screen—20–30 minutes. They handled negotiation, they handled so much stuff. I will never go back. There are certain things that I learned that I just won’t go back on. But they were in-house, they’re full-time W-2.

So then, after I left Drip and we had to hire for our first role, we hired Tracy who’s the program manager at Tiny Seed. I contacted a recruiter friend of mine who does recruiting as a day job. I said, could I pay you a few thousand dollars to basically do all of that stuff for me just as a side gig for you? It’s an income for you, and I know that you’re good at this. That’s what happened, and it was absolutely worth it.

That’s been my new mindset. If I’m going to hire, I want to find a recruiter who is willing to do that thing—a flat fee engagement. I’m encouraging Tiny Seed companies to do this now. Again, you don’t lose control of your hiring process, you just hand off the stuff that you don’t need to do, which is posting to all those job boards that I just said, monitoring that, and filtering from 100 down to 10 resumes, which we can all do, but you shouldn’t be doing it as the founder, as a CEO.

I obviously am not going to give out the name of the person who I’ve used because they’ll get overwhelmed and they do it on the side, but dynamitejobs.com who I’ve already mentioned from Tropical MBA folks. Dan and Ian actually do some of this and I’ve been sending some Tiny Seed founders to them. I mean, they publish the rates on their side. It’s $4500. It’s a flat fee and it will take that off your plate.

Again, if you’re a bootstrapper, you’re hiring for your first role, you may not have that much money. But if budget allows, yes, I absolutely think that finding a reputable recruiter usually—I mean this is where I would ask in MicroConf Connect or another community or a network on Twitter or whatever who has used a recruiter that charges $3000–$5000 as a flat fee and will help me find this person in any country and is knowledgeable in this and that. That’s my current advice and current thinking on that.

Josh: You mentioned having somebody who’s doing posting on the job boards and filtering things down. I did have an administrative assistant at Baremetrics who would do that kind of stuff. If you’ve got someone who can just manage the part where you’re filtering things down or doing the stuff that doesn’t require your brain who’s trying to understand culture fit, there’s a lot of people who can actually handle a lot of the administrative minutia of hiring that takes up all your time.

Rob: Yeah. Did your admin assistant do initial screening calls, do salary negotiation, and that kind of stuff?

Josh: No, she would not do that. Though we very rarely did screening calls. We didn’t have to do calls that much. I did most, as much as I could, via text anyway. She would handle all that stuff.

Rob: There you have it. Those are our questions for today. Sir, thanks for taking a few minutes and hanging out with me. I had a lot of fun on this episode.

Josh: Yeah, man. This was fun.

Rob: You’re Shpigford on Twitter, and of course, maybe.co if folks want to keep up with what you’re doing. Awesome. I look forward to having you back, man. You’ve been on the show a couple of times, but I feel like I should have you back more often.

Josh: Yeah, any time.

Rob: Awesome. Thanks so much, man.

Josh: Thanks, Rob.

Rob: Thanks again to Josh for coming on the show, and thank you for listening this week. I’ll be back in your earbuds again next Tuesday morning.

Rob: Here we are with another episode of Startups For The Rest of Us. I’m your host, Rob Walling, and each week on this show we cover topics related to building and growing startups using an ambitious yet sustainable approach. We are not willing to sacrifice our health or our relationships to grow a company. We want to build real businesses with real customers who pay us real money.

Welcome back. Thanks for joining me again this week. I had a great conversation with the CEO and co-founder of SquadCast. His name is Zach Moreno, and we’ll dive into that in just a few minutes. SquadCast is at squadcast.fm and they are the highest fidelity recording available in a web browser to have two, three, four people remotely meet and record high-quality audio and now video, which they just launched and we talked about it in the show.

It’s the tool that this podcast has been recorded on for, I think 18–24 months. At some point, we switched to SquadCast and we’ve never looked back. In fact, when we switched, our editor said, what did you do differently? Your audio sounds so much better this week. It records in multiple tracks, it’s just an audio editor’s dream, and of course, it is part of what increased the production value of this very show.

One fascinating part of SquadCast’s story is how they 10x their revenue from 2019 where they were doing low six figures until 2021. When shelter-in-place happened, they 10X. Zach talks about how they passed $3 million in ARR just a few months ago. They were bootstrapped until just about a year ago. They took funding from us, from TinySeed, which is obviously not a tremendous amount of money. I mean, it’s still a mostly bootstrap company, especially compared to their revenue and growth. It’s just a really fascinating story. We’ll dive into that in just a second.

Before we get there, I received an email and I have to anonymize it because he gives all types of awesome numbers. He says, “Hey, Rob, I wrote you last year asking for advice if I should take out a $20,000 loan to pursue my software application. You advised me not to. I didn’t take the loan. I took on consulting work and got my finances in order, and I slowly pushed for updates and improvements when I had time, and I just sold it for 25 times annual recurring revenue.”

I won’t go through all the numbers. He actually asked me to keep them confidential, but the amount of money that he sold for (I’ll just say) is mid-five figures given that he lives in Eastern Europe. He said it’s about two years of runway for him. It’s been truly a life-changing occurrence.

He said, “I really wanted to share this with you since I really appreciate all your insights, and I just want to let you know how many lives are impacting.” He also wrote, “I wanted to say thanks a ton, for asking those questions on episode 532 with John Warlow. That interview helped me start higher than I would have felt comfortable with my negotiation. Ultimately, I achieved a purchase price far beyond what I thought I could achieve. Thank you so much for all you do, for all of us SaaS founders.”

Bravo, sir. Thank you so much for writing, and I love hearing success stories like this because this is what it’s really about. It’s about impacting other people. It’s the freedom for each of us. Freedom for me to work on what I want, the purpose of helping other people be able to achieve what they want, and then it’s the relationships—both the super close relationships I have and then even the further away relationships.

The person who wrote in here, who I believe we never met in person, but it doesn’t matter. You can have an impact on people whether it’s through building your software product, an info product, putting yourself out in the world, starting a podcast, writing an essay, and you can have a lot of impact. Thank you so much for writing in. I really appreciate that.

If you do have a success story about how Startups For The Rest of Us, MicroConf, or myself have helped you, of course, just write in any time. I would love to share them, and I do keep them in a dial or in a label in my email because I can go back through and it reminds me just how worthwhile this work is and just how worthwhile helping other people is.

Speaking of helping other people, I hope today’s interview with Zach Moreno from SquadCast is inspiring and also can give you a few ideas, strategies, or tactics that you can use to improve your business. Let’s dive in. Zach Moreno, thank you so much for joining me on the show.

Zach: Appreciate it, Rob.

Rob: It’s great to have you here. I’m sure folks heard in the intro that you are the Co-Founder and CEO of SquadCast. You’re also the initial dev who wrote all the code. You guys are killing it. You’re doing really, really well. I think part of that we’ll dig into a little bit is the shelter-in-place order certainly encouraged folks to try to figure things out remotely that maybe they were doing in person before. But to set the stage, what are you able to share in terms of your revenue, your customer account, just to give folks an idea of how big your business is.

Zach: Thank you for saying that, by the way. A large part of that is due to TinySeed, so really grateful there. I think a few months ago, we cleared a huge milestone of $3 million annual recurring revenue. We’re, of course, a SaaS business, and I think north of 13,000 customers. That’s very humbling and an honor to help serve so many podcasters creating content remotely.

Rob: Absolutely. It’s a heck of a business to have built. I think you’ve said publicly in other shows, in other interviews that you were in the low six-figure ARR almost 18 months ago, maybe 2 years ago, and it’s a big jump. We’ll cover that in this show.

I think that the number one question that a lot of people probably have is, you entered this space, which is remote podcast recording, studio-quality. There was already an existing solution that worked relatively well at the time. It’s called Zencastr. It’s what we use to record this podcast on, and at a certain point, I switched because there were a bunch of things. There’s audio tracking and how the two tracks get out of sync because it does client-side […]. My editor kept saying, these tracks were kind of messed up.

They started having outages back in—I forget if it was 2019, but I went out to look for another solution. Which I had done originally, and back when I started using Zencastr, there were no other solutions. But when I then did a Google search or whatever, I was like, wait, SquadCast. There’s a competitor, this is amazing.

You have essentially—I mean in my opinion—growing very quickly. I see you as the visionary, I see SquadCast as the market leader in this point, in essence. How did you possibly come into a space where there was already an existing leader and essentially figure out how to get traction in that space?

Zach: It actually gave us quite a bit of pause. We had started working on SquadCast because of a pivot from a remote podcast that we wanted to do and we started building. I think a few months in, we actually found Zencastr. It actually gave us quite a bit of pause and we’re like, oh crap. I don’t want to spend or waste my time, the team’s time, or anybody’s time building something that already exists. I want to work on solving new challenges and do them in unique ways.

That actually gave us some pause, but we did our research and found that there were a ton of reliability concerns. There were the audio drift timing issues that you brought up, and it just seemed while it was state-of-the-art for a period of time, it seemed to really fail to evolve.

Podcasters that we talked to—OG podcasters, new podcasters alike—people in the community were really big on listening, it became very clear to us that nobody was very satisfied or happy with the results. It was just the only option. It was either that or Skype back then. I’ll give Zencastr credit for being better than Skype, but I think it’s a failure to evolve in a number of different ways.

SquadCast, we’ve rebuilt the thing a few different times. We’ve tried a lot of different ways of how we can deliver both quality and reliability every time. There’s a lot of unique technical challenges that go into that that may seem, on the surface, like straightforward challenges to overcome but are really technically challenging. That has led to two patents pending.

One of them for how we record and upload. We call that Progressive Upload, or you can think of that like a cloud autosave. And then the other is a solution to the audio drift that you mention. We have a process to normalize that, so we save people time in post-production. Other things like automatic backups or key differentiators were innovations.

Rob: I think that’s something for folks to take away as you’re listening to this. Entering a space with a market leader or even just a crowded space is totally doable under certain circumstances. If you raise buckets of money, you can at least take a go at it. If you’re an experienced founder, maybe you’ve had exits or successes in the past, this is where you can push into these.

Or if you find an angle, if you find that wedge, which is some things that people hate about that competitor or about the competitors in general, and that was what we did with Drip where we found out that Infusionsoft was this tool. A lot of people didn’t like it. A lot of complaints online on Twitter, in forums, in Facebook groups. We kind of pivoted into that space. We weren’t building marketing automation, we were just building basic email capture and emailing. Then we realize, wow, there’s a real opportunity here. When Derek Reimer was talking about building a competitor to Calendly that is now SavvyCal that he’s having great traction with.

Zach: Big fan.

Rob: Yeah, we use it here at TinySeed. A big part of that conversation was, what’s your angle? What’s your innovation? We know it’s not just building a better product. You have to do that and then you have to market and position and communicate it. The same with Docskecth with Ruben Gamez. Of course, any of us could clone HelloSign, in a couple of months with some engineers. But how do you then get traction beyond it, figuring out what people don’t like about it, and getting those traffic channels?

It sounds like you took a piece of that. You fixed some things that perhaps were broken with an existing solution, and then you innovate in addition to that. But beyond that, just building the product I don’t think would have done it, right? What else was there?

Zach: I think a big part of it is our branding and our position. Design is a really core competency in our team, and super proud of Alex and the design team for really establishing a high bar there when it comes to the experience for podcasters and their guests on SquadCast.

There’s a whole bunch of UX things that need to get right with all the different complexities of, if you think about a guest for a podcast, they’re essentially expected to be a podcaster for like an hour. They don’t really have the context, the background of how to do that equipment, permissions, and all that stuff. How do we make it just as easy for them while providing a really powerful set of tools for remote content production on the creative side?

The balance there was something else that I would credit as an innovation. From our beta, we had video of the conversation. You could have body language and eye contact, and there’s a whole large part of communication that is nonverbal. That was another area that some people prefer the video, some people don’t. It’s all good as a setting. We just felt we wanted to make the conversation on SquadCast as close to reality as possible.

We do that in a bunch of different ways, with kind of real-time presence so you can actually see your guest’s microphone, what equipment they’re using, their network connection—all of these little things add up to building confidence that you are going to record quality content, and that you can just kind of stop worrying about the technology not getting you to where you want to go. You’re always going to get that file at the end. That’s really I think a core to our approach here.

Rob: You do have a unique challenge that you called out there where some guests or podcasters for one hour. I have a guest or two a month, and luckily, many of mine have done podcasts before, but there are some who have not. I need to say, hey, can you get a headset or a USB microphone because we’re not recording on your onboard laptop mic.

Then when they come on, you—meaning SquadCast—has to guide them along, handhold them in a way that makes me look good. Because if SquadCast or whatever solution I’m using screws up, it reflects poorly on me, it makes me look unprofessional. That’s a big responsibility.

Zach: That wasn’t super clear to us when we first started. But we learned pretty quickly that this is a brand asset, why does quality matter? We not only need to communicate that to our customers, but if their guest is like, well, why don’t we just record this on Zoom? Some percentage of podcasters would be like, okay, let’s do that.

What we do is try to communicate to the guests and everybody, why does quality matter? It reflects on your brand, it reflects on your credibility. There’s a study from USC that directly correlates the quality of the content to the credibility of the people in the conversation. All of these things we work to communicate to the guest in a way that’s not really invasive and tries not to be too involved as they connect and record on SquadCast.

Rob: Your co-founder, Rock, told me—this is vague so maybe flush this out. But my memory was in the early days—let say 2018, 2019 as you were trying to get traction—you would attend in-person events and you were out there in “the community”. I presume that’s Facebook groups and forums, but also in-person stuff such that people kind of saw you everywhere, is that relatively accurate?

Zach: I don’t know that we quite got to everywhere status, but we sure tried, and still do (to this day) involvement in the community. I love to say that podcasters speak eloquently for a living. It’s our job to listen and be very active listeners to what it is that they need, and try to keep that feedback loop as tight as possible.

Being in the Bay Area in California is a very robust diverse community of podcasters and content creators. The narrative and podcasting are very East Coast-centric, I’m not exactly sure why that is. Oakland and San Francisco are a huge epicenter as well, as is LA. We use that to our advantage, and online to your point. There’s an active community on different Facebook groups, different in-person events, that’s some really great advice.

When we first co-founded SquadCast, I was also holding down a day job for the government. I was committed to teaching at UC Berkeley for a night class. I was getting married and had the idea for SquadCast. Part of that was, one of my students at Cal Berkeley happened to be involved with Intel’s Venture Capital Fund in the Middle East and was taking this course to kind of brush up on his technical prowess.

He really pushed us, over coffee one day, to really get out of our comfort zone, launched in beta way sooner than we were comfortable with, and really put our money where our mouth was, and go and sponsor the largest conference in the podcast community—that’s Podcast Movement. Thankfully, that was in Anaheim in LA that year. We could drive, my best friend’s mom got us a hotel room, and we just put ourselves out there. We were all very anxious. I was writing code in the car there before, during, after, all that stuff. It was barely an alpha kind of product.

We learned within the first five minutes of the event starting that somebody came up and told me, I came to this event looking to solve this problem that you all are working on. That just was amazing to me because it was a real sink or swim moment for us. I’m really grateful that that worked out.

Rob: That’s that capital efficient scrappy bootstrapper mentality of you don’t have $2 million in venture capital to throw your own launch party, so you just figure it out. You drive down somewhere—I’m sure you guys didn’t sleep much—and spent a bunch of time hustling.

Zach, Yeah, and nobody knew who we were either. We were very nervous that we didn’t have any street-cred in the podcast community, what are people going to think? The downside could have been we would just drop a couple of thousand dollars and then we were just standing in this booth with nobody talking to us for a couple of days. Thankfully that didn’t happen. We met our founding advisor Harry Duran there, we got our first customer, and our first revenue there. It was just astounding and surpassed all expectations.

Rob: It sounds like it’s some of those asymmetric risks, if you think about it, where the risk was that you wasted a weekend and obviously some money with the sponsorship, but the benefits far, far outweigh that. Those are the gambles we have to take.

Zach: I’m really grateful that our first customer, Gina, is still with us today. That’s pretty cool too.

Rob: That’s awesome, cool. You and I both mention your co-founder, Rock, quite a few times. You are the developer side of it, right? I mean you do a lot of the coding and managing of the technical side. Rock does a lot more on the sales and internal operations, that kind of stuff. I’m curious, it’s a weird question because I guess if you say, yes, you’re like throwing Rock under the bus, but you’ve only done this with a co-founder. What would it have been like to try to do it on your own? Do you think you would have made it?

Zach: I don’t think I would have started, to be frank. I had a list of one for potential co-founders, also Rock introduced me to podcasting as a listener back in high school and college. That was something where I had some degree of hope that he would agree to go on this journey and be a key part of it. But at the same time, I mean, he’s got his job, he’s got his life, all that stuff. It’s a really big ask to say, hey, let’s do this 10-year plus journey together and put it all on the line, to revolutionize content production. That’s a bit audacious for someone to ask.

I’m really grateful that Rock and I, thankfully, had a relationship, strong foundation in trust as longtime friends. I also knew that our skills complemented each other but there wasn’t a ton of overlap. He understood enough about technology, I understood enough about finance and business. Each of us had a focus in those areas. It’s this real symbiotic relationship with that foundation and trust that has led to a really, really great partnership. It’s hard for me to imagine doing this without Rock.

Rob: Again, as the developer, normally what I see is if you have a developer and a non-developer co-founder relationship, that it’s the non-developer who is CEO, and the developer usually gets titles like CTO or something else. In this case, you are the CEO. How did that come about? I’m not sure I’ve ever seen that actually.

Zach: Well, what you described was what I wanted. I’m a reluctant CEO, I’ll put it. I was essentially trying to convince Rock, trying to see if there’s another way, and the team just continued to lift me up and say, no, we think it should be you. You should be the CEO, you’re the one with the vision, and you’re the one who had this initial idea.

Also, I’ve met enough engineers in my time where I can understand how that would be a non-starter for a lot of engineers because of communication skills, putting yourself out there, getting up on stages, recording with interviews, and all this stuff. These are all things that are assumed as part of the role of the CEO. I know enough engineers to know that there’s not a lot of people who would be comfortable with that.

I’m really grateful that I have built up comfort with public speaking, writing, and all the different things that are really key soft skills to being a successful CEO, but those were learned skills. That’s not something that’s intrinsic to me. Anybody who knows me from way back, I had depression, social anxiety disorder, and was very much focused on my fine art career and all of these other things way back when. Sixteen-year-old Zach would be looking at me now like, what the hell happened?

A big part of it as well is Rock and I discussed openly that we learn pretty quickly through research and studying startups. As first-time founders, we wanted to be students of startups and really understand where things can go wrong, where things can go right. It became very clear to us that the reason leadership and startups have turnover, changes hands, or anything like that—it can happen for a number of reasons, but it seems like the biggest reason is failure to evolve with the company. The company can evolve at a rate that the leadership doesn’t. That can be a big bearer.

That’s on a day-to-day or month-to-month time horizon, that’s what Rock and I focused on. It’s just making sure that we are evolving at the pace of the company. That we’re not going too fast, that the company is not going faster than us, and trying to maintain that speed. We also make a lot of decisions together. In some sense, there’s shared roles there like some co-CEO-ing going on.

I’ve asked Rock since making this decision. You sure, do you want this? Maybe I should be the CTO as well? Because I essentially have two titles—I’m the CEO and the CTO. I just have two calendars and I schedule time for CTO, I schedule time for CEO. That is weird. That’s taken some time to get used to, but I’m also really grateful now that with the success that we’ve had that we can actually grow beyond me as the solo engineer here and empower people like Jean, our new Lead Software Engineer and new hires that were working on this year to grow the engineering team.

Rob: Yeah, what is your total team size now?

Zach: I believe we’re up to nine. A lot of other people helping around that team.

Rob: Sure. That’s a nice small team size for north of $3 million in ARR.

Zach: Yeah. It’s a bit crazy because Rock and I are always trying to keep it as efficient and lean as possible with the team size. I remember having conversations with him where he’s like, man, if Instagram sold to Facebook with 10 employees, we should be able to do it with 5 or 6 people. Here we are over that already. I’m really, really happy with the team. That’s another aspect that is something that Rock and I focus on fostering a culture internally to the SquadCast team that I think is a big part of what got us here.

Rob: Mixing things up a little bit and circling back to something I mentioned at the top of the show, there is this quote from you that my assistant producer pulled from a previous podcast, I’m guessing. But you said, “Our biggest inflection point was shelter in place.” What happened there? Do you want to walk us through it? My memory of it was, there were a couple of months where you doubled one month. You were already doing, I think, tens of thousands in monthly recurring and you doubled, and then you doubled again.

Zach: Yeah. That’s a pretty good lap around it.

Rob: Was it a fun time or terrifying?

Zach: A little of both, honestly. It’s surreal just to zoom out for a second. It’s surreal because of how many companies experience the exact polar opposite. That’s not lost on us that we had experienced any amount of success. We would have been happy standing still in an economic time of that magnitude, and to experience any amount of growth was just tremendously humbling.

It makes sense because we had always focused on this inner section of quality content production but remote-focused and remote work. Our team is remote so we didn’t really have the challenges that other organizations would have being focused on in-person. We were able to really just hit the gas pedal and keep riding the wave as hundreds of people, thousands of people a day signed up.

I had my concerns, for sure, because while we do our best to scale the technology and scale the team, there can always be bottlenecks even with that, even with that being the focus. We had certainly felt in hindsight, it doesn’t feel like this. But at the moment, it felt like the SquadCast infrastructure and technology had been, to some degree, over-engineered. But that was because we knew we were planning for this growth.

One of the weeks there I did a scalability audit and ran that by you and some of the other mentors—I think Derrick at TinySeed. We were really trying to understand at the moment, okay, what do we need to get in front of to continue this growth because we didn’t know where it was going to take us and how the scale was going to evolve.

Same with the team. My brother Vince is the head of our support team and also the head of our content production team. It became very clear, we need to grow the support team to help onboard all these people. We need to improve self-service and we identified a number of things that we quickly got into the product to continue double down on self-service. And really just trying to make sure everybody was experiencing the magic of SquadCast while all of that stuff is happening.

That’s really where the roller coaster feeling—another way to describe it is like a time machine—of startups really was the most extreme version of that that I had ever experienced. I’m so grateful that we rose to all of those challenges and really provided the experience that people expected. A lot of those customers are still with us today. Very proud of that.

Rob: It’s a good problem to have when you’re just inundated with customers. It’s still a problem. I have learned firsthand, witnessed this, and experience it for agonizing months of scaling issues. I remember when we did that scaling audit, I said something like, wow, if you are going to build this today and tell me you didn’t have any customers, I’d say you’re gold plating this. But you gold plated it and it was the right call because now, you could scale so far from where you were.

Zach: I had never done anything like that. I had never worked on an app the scale of SquadCast before. That was another thing that we’re very proud of. Just to give you a sense here, in over 130 countries, in 2020, we helped record over a decade of quality audio. I think that’s just staggering numbers that I personally as an engineer or a startup founder had never experienced.

Rob: Yeah, for sure. Obviously, the upside of that is, oh my gosh, our MRR is doubling and this amazing success. There had to have been a day, a week where it was just awful. Do you have the worst memory of that five-, six-month period?

Zach: You know, I don’t. That’s weird to say, to be frank, but I don’t really. It was more of just like, hold on, stay focused, and do the things that we can do. I remember the team having anxiety and Rock and I talking about the ways that this could go wrong or that this could kill us. People don’t talk about success as something that may kill your startup. But that’s totally something that can happen. We were mindful of that.

We were just like okay, how far is this going to take us. We have been working for this moment. We had done our homework that inflection points do happen and that we had not really had ours yet was our sense of that. And then there are other things that are crazy to me still, Rob. April 2020 was still our highest record month out of nearly five years of working on SquadCast, but there are other inflection points that can happen as well.

The demand for video throughout that whole thing was probably, to answer your question, the closest that I felt to it was like, wow, we’re focused on scaling, making sure everybody is having success with their recordings, and getting all their files and all that stuff. Yet more and more people are very passionately requesting the ability to record video as well.

That’s where I’ll say that if we have had a second inflection point, it would be January of 2021 when we launched video recording. The difference there is, one was the world happening to SquadCast. But video recording, us launching that felt like—that being our second highest record month when we launched video recording was an inflection point that was self-inflicted, self-made. That felt really cool that we had gained that ability and the skills to really ride that wave.

Rob: That’s an interesting way that you frame it where the world happened to you versus you being able to put something in the world that you’re at least in a little more control of.

Zach: I think Rock actually had that insight. I think it’s a brilliant one. And then also, we suspected that that would happen with videos. We did a lot of testing to get it ready for prime time. We knew that with the scale that we had that on day one, or to give you some real data, on month one, we helped record over 11 months of video. It was essentially still in beta at that point. We suspected that that would happen and we prepared for it.

Rob: Right, and video recording was something you worked on for quite some time. You announced it publicly, was it the fall of 2020?

Zach: Yeah, that’s really when we started talking openly this is going to happen. We’d gotten the infrastructure in place to make it happen. We had extended our intellectual property for progressive upload that I mentioned before. We had engineered that in a way that would set us up for success when it came to video recording, which we knew about back then. In some ways, that was pre-requisite work that we have been for a while up to that point. But video has its unique set of challenges in addition to audio.

A lot of companies only really get one opportunity to innovate and move the needle forward. I’m so grateful that with SquadCast, we had essentially two. We could start with audio and then once people started talking about video, it sounded like a mirror conversation of what people were telling us in 2016 about audio. Which is like, hey, we’re not happy, the quality is not good. Sure, there are some hoops we can jump through, but the experience is whack.

This would be very valuable to us. Podcasting was evolving at the same time. Audiences’ tastes are evolving at the same time. There was a real demand for that. We’re really grateful that we could play a role in helping so many people grow their show, grow their audience from the roots in audio to video from there is a really cool thing to have experienced.

Rob: I know that you wanted to get video out. You wanted to get it out as soon as possible. It felt to me, I don’t think we ever talk specifically about this, but it felt to me like it’s like shipping any big feature, it just takes longer than you want it to. I know you were doing a lot of testing. Tracy, Xander, and I hopped on one to do some video recording and check it out and stuff. But was there a moment where you were like, I hate this, I hate my life right now and you were thinking as it drags on for weeks and weeks of, I want to push this live but we just keep having to circle back on things?

Zach: Yes. That is one of the things that—it’s a terrible quote, but, “Move fast, break things,” from Mark Zuckerberg. You lose that over time as you gain customer trust, as you are more and more relied upon as the industry standard. To really throw something against the wall like that could really rock the boat and disrupt what is a reliable system for existing customers. That’s really where I was very mindful that we did not want to do that. We had worked really hard to establish this relationship and reputation of reliability and quality.

But also, there’s a lot of other elements to it that we don’t necessarily think of as video recording. But you played an instrumental role in this and as did Einar and the TinySeed mentorship is the pricing that goes along with a major product release. Before we joined TinySeed, Rock and I had already developed pricing to give credit to Rock, he is a real student of SaaS pricing. I don’t think enough founders are. That’s a bit weird to me. He has really embraced that and we had developed and designed pricing that we thought was going to work. It probably would have, to some degree.

But I remember having a conversation really early on when our batch started at TinySeed where you and Einar reviewed that pricing with us and were like, you shouldn’t do it this way. Let’s do it differently and start with a fresh sheet of paper. I’m so, so grateful that we did because it’s setting us up for success into the future—future-proofing—pricing as we grow and add more features. That’s another element that we really needed to get right when it came to a big update with V3.

Rob: Yeah. Pricing, as you said, very hard to get right, easy to screw up, and often not even know it, not even realize it. I’ve said, pricing, it’s the biggest lever. It’s the number one lever in SaaS. You don’t have to build a new feature, you don’t have to build a new marketing channel, you don’t have to add more leads. But changing your pricing can literally make a business that won’t work into a wildly profitable one.

Zach: Absolutely agree. We had experienced that a bit ourselves with some of the experiments that we had done before joining TinySeed. But to be transparent, that was one of the major reasons where we knew enough to know that we didn’t know enough. That’s really where it was like, all right, let’s lean on experts, people who have been there and seen many, many, many more SaaS founders, pricing, all that stuff to really understand how we can create this win-win situation where we have a healthy sustainable business that can grow over time. as well as provide an economical solution to content creators at any size of their show.

Rob: We’ve talked a bit about TinySeed today. I know that you received a lot of term sheets to invest in SquadCast. You had several offers and you decided to go with us. You said that you joined batch 2. I’m curious why that was because I know that you and Rock are deep thinkers, you’re very deliberate, you evaluate your options, you’re not impulsive. You do things in a very thoughtful manner. I’m curious to hear a bit more about your thought process in deciding to go with us.

Zach: I appreciate you saying that and also for accepting us. It’s been a real delight and pleasure to learn from the TinySeed community, to contribute to the work being done by all these amazing founders, to see the next batch coming in. It’s all very, very exciting that we can play a part in that. You’re right though, we are fundamentally bootstrapped. We worked day jobs for a year and a half, jumped in full time once our product was paying for itself, and experienced some really great opportunities to scale. That tends to get the attention of venture capital, seed funds, and all these things.

We also got some really great advice from one of our advisers, Scott Winston, that maybe it contributed to this (to your point) that if you ask a venture capitalist for money, they hear that all the time. We’re in the Bay Area, we’re constantly going to events that have a representation or a sponsorship by venture capital. We used that to our advantage to learn from these people who have been places that we have not and been founders already and grown amazing businesses. We didn’t want to sacrifice that knowledge. Just because we weren’t going to raise capital necessarily, we didn’t want to sacrifice the wisdom and the knowledge that often comes with that—so-called smart money, emphasis on the smart.

That is something where we leaned on our advisor. Scott recommended, when you talk to these venture capitalists, try to learn as much as you can from them. Don’t ask them for capital, ask them for advice. This weird thing will happen where they will offer you capital when you ask them for advice. That’s totally true. We have seen that happen over and over and over again, almost to a fault. It’s predictable these days, so thank you, Scott.

If you are interested in raising venture capital, I highly recommend that we were not focused on raising venture capital. We looked at this as kind of an experiment with bootstrapping where we would essentially try to bootstrap for as long as we could. Worst case scenario, we increase the value of our asset and it should get easier and easier to attract capital. At a point, we hypothesized in the beginning that we would reach a point where the venture capitalists were coming to us and offering us term sheets.

That was surreal to imagine back then, but it has totally come full circle. When it came to looking at ways to continue finding knowledge investors—it’s kind of how we look at it—that’s really what nudged us towards looking at the accelerator options. We had applied for Y Combinator, we had applied for a number of others like Launch, Earnest.

We had talked to the community around this with an emphasis on bootstrap because we know enough about self-funding and customer funding that there’s a real different set of knowledge there. There’s a lot of overlap, but at the same time, there is not. There are unique challenges that come with bootstrapping.

Because our experiment had continued and we still hadn’t raised any venture capital, for us it was more like, how can we get into an accelerator that is the exact right fit for us? I think there is only one TinySeed, just to be frank about that. That has proven true for a lot of reasons. But the other thing was that I think at a point when we were talking over the term sheet for TinySeed, we’re even entertaining the concept of no capital. We’re that focused on just the mentorship, advice, and the community that would come with that. That was the more valuable part to us.

If I can be real for a second, Rob, and hopefully Rock’s okay with me saying this, but I believe we still have that capital in our savings account. We haven’t needed to touch it. That’s the best-case scenario. We have it.

I remember walking in Santa Cruz with Einar. He just looked at me and was like, there needs to be some capital. You can’t sign this paper and not take some capital. You should take some capital even if you’re not really planning on it. It’s just like, okay, that makes some sense to me. I’m glad he leveled with us. There was a lot of leveling through the—I hesitate to even call it a negotiation—forming of our partnership.

We really look at TinySeed as a long-term commitment as well. That was our biggest concern. It was just, okay, we’re big fans of Rob Walling, we had read your books, we had listened to this podcast which is surreal that now I’m talking to you on it. We had researched Einar and the work at Discretion and all the different things. Tracy and Xander. That all came to life once we started engaging with your organization.

We suspected that you all felt like it was a long-term relationship for founders as well. Because the biggest indicator of that is the duration. The duration of the program was one year, which is longer than most accelerators. It was also a remote accelerator, in which we are a remote-first team. You are an active podcaster. All of these things and of course your heritage and background in bootstrap SaaS, we also knew that we wanted to grow as a company more towards enterprise customers.

I think we’re a bit of an outlier now having met the other founders in the batch that we’re a part of. As the majority of your focus is B2B, we are kind of B2C, B2B, prosumer so-called. That’s another area like, okay, we want to grow in this way. These are all factors for us in our consideration. But I think our biggest thing was just like, okay, what about the 2nd year, what about the 3rd year?

I want to keep learning from Rob and Einar in the community. I want to keep contributing to the MicroConf and all that stuff. That’s been very clear to us that we’ve made the right decision, and so grateful that we could be a part of it.

Rob: Yeah. I mean, it’s obviously been a real pleasure working with you guys over the past—well, it’s almost a year now. It’s like 5 weeks, 6 weeks?

Zach: Yeah. It went by so fast.

Rob: I know. The COVID year 2020 felt like it was 10 years, but some of these things like this feel like it went by fast. But to your point, you’ll be the second batch that essentially graduates and becomes alumni and not that many changes. There may not be the twice-a-month mentor calls, but I still talk to folks on a weekly basis from both batches. You’re still in the Slack group. It really is a graduation into more the same with perhaps less recurring stuff.

Zach: We had talked to founders that came out a batch one. That was another area that maybe if there had been five batches or something like that, it would have been a little bit easier for us to validate some of these things just on our own. But because TinySeed was a relatively new thing, which has got its perks too. That’s proof of innovation that this is a relatively new offering in the space, so that wasn’t necessarily seen as a negative bias. It was more just like, let’s talk to some of the founders.

Thankfully we knew Craig Hewitt, the founder of Castos was in batch one and is a member of the podcast community. We had already had some rapport with Craig, and we’re able to kind of say, is this what it seems? Is everything checked out, and kind of do a little bit of our due diligence, which I’m grateful that we did. It was super easy to find out that the answer is yes, these are real people, and they are deeply rooted in integrity and long-term thinkers.

Rob: I think that speaks to reputation—brand and reputation. That’s something that when we went to raise the first TinySeed fund and when we went to open applications for the first batch, what did we have other than marketing words on a landing page, conversations with investors, and our reputation? I mean that’s really what we went in on. The nice part now is TinySeed itself, much like MicroConf before it, much like Drip before it. It starts as this thing that no one knows about and has no reputation on its own. It has no brand.

Same with Squadcast. Four years ago you say, we’re Squadcast, and people were like, what are you? But now, it’s 13,000 customers. You have a brand and a brand is what people say about you when you’re not in the room. That’s how I like to think about it. I don’t know how to say this without sounding preachy, but it’s like if you are kind of living up to your moral standards, and the ethics of how you believe things should be. Like hey, should people be able to cancel without calling a phone number? Do I refund if they got overcharged or if maybe they didn’t use it for a month or two and they’re not being ridiculous about it?

There are just certain judgment calls you have to make in business. That’s whether you’re running a SaaS app, or whether you’re running an accelerator or a conference. And that stuff follows you around in both the good and the bad ways. If you do a lot of good things, it builds, it builds, it builds, and your reputation builds on the positive, and similarly in the negative.

Something I’ve really enjoyed already is to be able to say—because we were really almost wrapping up the selection process for batch three right now, I’m pretty stoked about it. Several founders say I’d love to talk to founders from batch one and two. Every time, I say, go to our homepage, click on any logo. Every company is on there. Click on any logo, contact any founder, and ask them what they think. I want to be able to say that forever. I want to be able to say that for 20 years. Do you know what I mean?

Maybe that’s a little too ambitious. Certainly, at some point, you wind up with a bad customer or a customer who’s a little overly demanding. But the bottom line is, that’s a big piece of this game. I think a lot of folks who get into building their own company,—whether it’s a SaaS company, whether it’s info products, whatever they’re doing—think well, I can get away with stuff. I can get away with something here and I’m going to have a short-term mindset around it. In the short term that will work, and in the long term this space is pretty small. Our world is pretty small and the word gets around.

Zach: Yeah, exactly. Another element that just occurred to me was that we also have experienced some amount of growth before we applied for TinySeed or while we were applying, more accurately. That also kind of made it seem like a moving target. It could be tempting if you’re a founder listening to this and you’re like, well, why do we need an accelerator? I’m already at like $50,000 MRR? I challenge you to think, was that something that you got to $50,000 MRR because of something amazing insight that you had and put into practice, or was that kind of the world happening to you like a mini inflection point?

When we really took a step back and looked at that, we realized that we’re still first-time founders, we still have a lot of questions, we still have a lot of growth opportunities, we want to move towards enterprise, we want to do all these things, we are experts in none of those things, and TinySeed had a lot of experts in those things. That’s the area where you may be tempted to be like, well, we don’t need it. We’re good. But that’s essentially where we were at for a day or two, and every time we talked to you or Einar, it just became clearer and clearer to us that this is the right move, whatever size we’re at. I’m so glad that we made that call.

Rob: Sir, it’s been a pleasure working with you so far. Looking forward to a continued relationship with Squadcast, and it has been a pleasure having you on the show today.

Zach: Thank you so much, Rob. You really honor me by being able to participate in TinySeed, being a guest on your show, and it’s been a lot of fun. Thank you so much.

Rob: Absolutely. If folks want to keep up with you on Twitter, you are @zach__moreno and we will link that up in the show notes.

Zach: Two underscores.

Rob: Oh, it is two underscores. Okay.

Zach: Yeah.

Rob: Thanks for pointing that out. Then is it, @SquadcastFM on Twitter?

Zach: Yes. @SquadcastFM on Twitter, squadcast.fm if you want to check out our website. We’d love to help you get started with your podcast and have really high-quality audio for your audience.

Rob: Absolutely. All right sir, thanks again.

Zach: Thank you, Rob.

Rob: Thanks again to Zach for joining me on the show today. If this is your first episode and you heard about this podcast for MicroConf Remote last week, welcome. Hope you enjoyed it and I hope you continue checking out the next few episodes. There’s a lot of variety, this is not just an interview show.

We have Q&A episodes, we have episodes where it’s just me on the microphone talking about things that are on my mind around the SaaS and bootstrap or ecosystem. We have startup and bootstrapper news round tables, all kinds of things. I hope you will stick around. I hope you enjoyed this week’s episode. Thanks again for listening. I’ll be back in your earbuds next Tuesday morning.

In this episode of Startups For the Rest of Us filled with mystery and intrigue, I fly solo. I talk through things like product myths and that famous quote from Henry Ford about building a faster horse; talk through some thoughts around how people think about selling their company, what would I do if I sold it, what is life-changing money; and I dive into a bunch of other topics in this Rob solo adventure.

But first I wanted to let you know that MicroConf Remote is happening today. MicroConf Remote v2, which is a take on the 8-bit video game theme. If you have not checked out this platform, gather.town, that’s what we’re running this version of remote on. It’s pretty amazing and I think it’s going to be good. As this comes out, I’m doing a live keynote with one of the several amazing speakers. We’re going to be covering five topics specific to early-stage SaaS and gaining traction, so it’s for folks who are pre-$10,000 MMR.

We dig-in to Ruben Gomez’s AppSumo deal that he did, complete with numbers and advice, and how he thought about it, do’s and don’t, pros and cons, all that. We look at Derrick Reimer’s product […] launch that happened a few months ago. We look at some content marketing. We look at several topics that if you’re not in there you should head to mircoconfremote.com, you can still buy tickets. Whether you just watch the keynotes or just watch the videos, whether you participate in the hallway track in the gather.town environment, it’s really a unique event. Props again to producer, Xander, for putting it all together. Hope to see you there.

Finally, before I dive into today’s episode, Startups For the Rest of Us has 899 worldwide ratings, and I’m trying to get to 1000. It would be amazing if you could give us a five-star review in Apple Podcasts, Stitcher, Spotify, wherever creator podcasts are sold. Our most recent review, and it’s different in a rating. A rating if you just click five stars, I’m forever indebted to you. A review is when people write in text. These are the things that I read late at night when I’m close to crying myself to sleep. I use these to keep me happy, motivated, and focus on pushing this forward.

The subject line that this review is fundamental. “I’ve enjoyed listening to this podcast for a few years now without running a SaaS. It’ll still take a while, but I know that after we’ve launched, I think back to this podcast together with MicroConf as providing the fundamentals for getting started. I really appreciate the mix between tactics, strategy, and combined with humour.” Really? You’re the one that thinks this podcast is funny. “Combined with humor,” I appreciate that, “this is a go-to podcast for me.” The humor is included in the podcast. He specifically calls it out, this is great. Thank you John Erling from Sweden. Thank you so much John Erling. If you have not left us a rating or review, I really appreciate it.

Now, let me dive-in to the first topic that I want to cover today. I’m calling this product myths. I’ve always been annoyed with the quotes from the Steve Jobs’s and the Henry Fords, where it’s like, whether it’s focus groups, if I’d ask people what they wanted, they would have wanted a faster horse and instead I’ve built them a car. Here’s why I hated those quotes.

Number one, it’s unlikely you have the resources that Steve Jobs and Henry Ford did. But the time Steve Jobs was, I think he was 20, he was worth $1 million. By the time he was 21 he was worth $10 million. By the time he was 22 he was worth $100 million. A lot of that was on the back of this incredible once-in-a-generation invention that Steve Wozniak had designed. It was called the Apple I. That’s what made them have all these amazingness.

After that Steve Jobs then proceeded to launch failure after failure, from the Lisa to the original Macintosh, which eventually became successful but it was a trainwreck when it launched; to the Apple Newton, fail, fail, fail. He was running the company so poorly that he got kicked out. The board voted him out, and he went off. If you read the book, I think it’s called Becoming Steve Jobs, it’s a lot about the interim years and how he matured during that time. Then he did figure himself out when he went back to Apple in the late 90s. He was amazing not only as a business person but as a product person.

Before that, yes, he was a good marketer. Yes, he could talk. Yes, he could stare at people and convince them to do things that they maybe they shouldn’t do or they were scared to do. You would say it’s either persuasion, intimidation, or something. But he was not a great product person in the early days. It was Wozniak and, obviously, Jobs learned this and did become that overtime.

All that said, these luminaires are quoted and I feel like it’s this myth of should you listen to your customers or not. There’s an in-between because when Henry Ford says, that “people would have asked for a faster horse,” that’s like saying, I ask my customers what they wanted and they said that they want a button in my interface to download a CSV, and then make changes, and reupload it. Are you’re going to give them exactly what they want, or you’re going to put your product hat on—maybe your vision hat, your founder gut feel hat—and say, that’s a dumb idea, there’s a way easier way to do that. Why don’t I just build a lightweight kind of Excel manipulation widget within my app? This is just an example, I’m not saying that’s the better or worst way to do it.

If you’re a product person, you’ll never take customer suggestions and build what they want because you wind up with crap software. You wind up a million settings, you wind up terrible UX, you wind up with terrible UI because customers are not product people. They’re not experts for the most part in general. When Henry Ford says they were asking for a faster horse, I put on my visionary, my product hat, and I think what’s the job to be done? They want something that moves faster than a horse, what can do that? Well, trains can do that these days. Locomotives. When was this—1905, 1910. Locomotives can do that. Can we build a locomotive that runs at something that’s not on rails?

That’s the type of innovation that Ford put into place. To take his quote and to act, like don’t listen to customers at all, I think is a grave misuse of that as product people. Instead of taking exactly verbatim, literally what a customer said in building that in your app, there’s a balance there. It’s that product vision that you have. Where do I want my product to go? How do I want it to feel? How do I want it to be used? What do I want to build and not build in it? What do I want it to become and not become?

I tell you, in the early days of Drip, people wanted us to build affiliate management software into it because a competitor had it, they wanted us to build shopping carts into landing pages where all these things that other competitors had built, and we’re opinionated enough that we said our opinion is that we should integrate with the best of breed. So we had 35 tier 1 integrations.

By the time we’re 1½–2 years into Drip, and that was the approach we took. That was our opinionated stance on whether we’re going to make this thing an all-in-one, I’ll say monstrosity. Not that all all-in-ones are monstrosities, but that’s what it felt like, is that we would be a worst in class and we’d have five tools built into one, or we could be best in class marketing automation and integrate with the other best in class. That’s my stance on this whole Henry Ford quote.

I’d love to hear your thoughts, maybe I’ll tweet this out too to get a conversation going because it kills me every time someone says it. It rubs me the wrong way that it’s touted as it is. This big grandiose thing of, I’m such an innovator, look at me. Yes, you did invent it and you did innovate in the way that you solved customer problems, but then don’t go back and say, I didn’t do anything customers were asking for, because they were actually asking for a car. They just didn’t know it.

My next topic is post-exit thoughts. I seem to be talking with a lot of founders these days who are considering selling their company, are in the process of selling their company, have sold their company, and are thinking through what they would do next or what to do next, and what this all means.

I’m not honestly sure why this is happening, if it’s truly a wave or if it’s just my experience of it right now. I know that I’ve talked about it maybe six episodes ago. I said, hey, if you’re thinking about selling your company, just book a time on my calendar because I’m always happy to talk for 30 minutes.

This is a life-changing moment, for better or worse. It’s a pretty much undoable decision, and this is something I’m happy to talk to people. I probably talk to 4–5 people over the next few weeks, but even the prior year I get us an email or two per month of a founder who says, I’m in this boat, and I’m either thinking about it, or in the process, or I’ve done it. What’s next?

In addition, obviously, a lot of my angel investments have matured to the point where they are starting to have inbound acquisition, interest, and TinySeed companies, as well, definitely received kind of, you get accepted into accelerator, you get some funding from a venture capitalists, and you’re certainly get offer for more funding, and often start to have offers to be acquired. There’s been something on my mind.

I’ve always been up to the stance that, look, if you bootstrap or mostly bootstrap your company, you’re in control. If you want to run it forever, amazing, and if you want to throw off profits, amazing. A lot of people do that, a lot of people do it for a few years, and then eventually they decide, well, I want my next act, or they decide, if I sell it now, I can actually make 15 years of net profit. Instantly, that goes into my bank account, and what can I do with that? How does that change my life?

You do see founders. Back in the day, I thought Josh from Baremetrics would run Baremetrics forever, and I thought Adii Pienaar might run Conversio forever. There are certain people that you watch, and they do exit. They move on and do really interesting things after that.

I don’t take a stance that you should sell or shouldn’t. It’s not always or never, it really does come down to this situation you find yourself. Honestly, if you get an amazing offer it very well maybe once in a lifetime. That’s the point where I find some founders where they’re getting an offer for 10 or 15 times revenue, and that’s like, I’m not saying that it’ll never happen again, but you really to grow this company and keep growing it, and ride it over the top to ever see that dollar amount offered to you again.

With that said, Dan Norris and I talked a couple of episodes ago about selling. He and I actually have a difference of opinion on this, which I think is good. I don’t think either of us are incorrect on this. I just think there’s a lot of nuance into it. There were some thoughts around these two topics. The first is, what would I do if I sold my company? There’s that question.

Back in the day, I remember Basecamp, Jason Fried saying, why would I ever sell? I don’t know what I would do next. This is my life’s work. That’s great, that’s great for them, that’s their opinion. I would just say don’t necessarily take that opinion as yours unless you really thought about it.

The most interesting people I know—or I say a lot of the most people I know—have a lot of creativity in them. They have the next thing. Even if you call back to my conversation with Josh from Baremetrics a few weeks ago, he’s laser etching tweets on wood right now, and is that going to turn into his next company? Probably not. But is that something interesting for him to do for a while until he does figure out what that next thing is? Yeah.

In fact, I believe yesterday I saw a tweet from Josh already. I chatted with him a month ago, maybe. He said, I don’t have anything. I’m not going to do software. I’ve been doing software for 15 years. I’m looking to do something else. I saw a tweet from him yesterday, I’m building another software product. He’s building a personal finance or investing thing because he’s kind of running into issues managing, not managing his money, but he has a substantial amount of wealth now and becomes complicated to manage, and Google Docs doesn’t always work.

What I found is that fear of what would I do if I sold my company? I wouldn’t have anything to do. I might just sit around, play golf, and drink all day. I might just curl up and die. Just knowing you, knowing the founders that I know, in MicroConf, in MicroConf Connect, listeners of this podcast, people in TinySeed, the founders that I’ve run into with that conversation over the years? What would you do? You’ll probably do something really interesting, you probably will. I feel like I don’t really necessarily want to equate it to a fixed mindset vs growth mindset because I do think it’s pretty binary.

If you have read that book by Carol Dweck called Mindset, it’s about having the ability to see or learning the ability to see change, to become more comfortable with change, and to learn that I can change. Just because I can’t do math today doesn’t mean I can’t learn it. Just because I don’t have an idea today doesn’t mean I can’t come up with one. Just because I don’t have the ability to be a great public speaker or a great writer today doesn’t mean I can’t work and change that. I think there is, again, it’s not exact, but I do think it’s a little bit of that, it is fear, I guess what I see.

I grew up in a family where the lot of decisions were made based on fear. My dad had and has clinical OCD, not that joke OCD of I need everything to be on a table or I wash my hands. He had OCD so bad he didn’t leave his bedroom for 7 months when I was a senior in high school. He lost 80 lbs because he couldn’t eat, because of the compulsions. It was not a good show. It was severe, severe mental illness, and the doctors who saw him said you should be hospitalized, this is so bad. You can imagine how that shaped my upbringing.

There’s a lot of fear involved, and it’s like an anxiety disorder OCD, so there’s a lot of fear involved in OCD. That then became a mindset around everything. I was like, the unknown is scary and therefore you shouldn’t do it because there are negative repercussions, bad things can happen, blah-blah-blah. I guess that that’s how I feel a little bit about this. When I see fear as a mindset for any decision, I have to question if that’s a good way to think about it.

I’ll caveat that. Of course, there are some things that truly are scary. You can die climbing Mount Everest, or there are situations you can get yourself in where fear is good, they’re dangerous. Let’s take these career decisions and founder decisions as not those things that are going to endanger my life.

In thinking about what would I do if I sold my company, I almost think if you’re a creative, driven, motivated person who has built a company or multiple companies, or been launching things for a long time, of course, there’s a lot involved. There’s hard work, luck, and skill involved with building this company, and maybe you do want to run it forever. But run it forever because you want to, not because you’re scared of what you’ll do if you sell the company.

If you still have work to do, you still have work to do in your space, or in your app, or you’re not done yet, by all means to do that. It really does feel like, if you’re gonna just avoid potential change or potential uncertainty, I’m just not sure that’s the best way to live your life.

Again, there are many reasons not to sell a company. I think what would I do if I sold it is not a great reason. Now granted this comes from me who, every company I’ve sold, I’ve always had MicroConf going on. I have had this podcast going on. I knew that when I sold HitTail—I was working on Drip and I sold that, and before that I was writing a book, I built a membership site, I did all the stuff—then when we sold Drip, I knew there was MicroConf and this podcast, figured I write another book, which I’m working on now—robwalling.com, by the way, if you want to learn more about what I’m up to there—I knew that there would be something.

I started hacking PHP again. Right after I sold Drip, I started tying into stock trading APIs and crypto APIs. I never did anything with it, but I told around and it was fun. I hadn’t written code in years, and I found things to do with my time. Now, there’s TinySeed. What would it be like if I said, what would I do if I sold Drip? I’d still be running it, we wouldn’t have sold it.

My guess is Derrick being super ambitious and wanting to do new interesting things, he would have moved on and I wouldn’t begrudge him that. I feel like I made the right choice. I’m not saying because I made the right choice for this end of what happened and now I’m super happy with what I’ve built, means that everyone should. My thought holds that using the thought of what would I do if I sold my company has a reason not to do it, in my mind is a mistake.

Let’s cover another topic relating to selling. It’s really less about selling, I guess. It’s more about this term life-changing money. Something that I realized and felt but had not heard words put to it until I interviewed Will Schroter back six or eight months ago. He’s the founder of startups.com. Something I felt, I remember the first time I had, honestly, even like $20,000 in my bank account, it was so much more money than I’d ever seen in a bank account. It was more money than, I’m sure my parents had that money at some point, but I just remember drinking powdered milk as a kid, I always had food to eat but there was always this issue of we can’t do this because of the money, or I can’t do things that I want to basically.

That’s why I started being an entrepreneur, to be honest, selling candy at a markup, selling comic books at school in order to get the things that I wanted. I remember the first time I had $20,000 or $50,000 or $100,000 in the bank it was this feeling of, wow, I have some safety now. I can take time off if the world economy crashes, if a lot of bad things can happen and I’ll still be okay.

To me that changed my life and it changed the way I was willing to take risks, because when I have $1000 in the bank and my rent was $700 a month, I couldn’t take many financial risks. But when I had $50,000 in the bank, could I spend $11,000 dollars to buy DotNetInvoice back in 2006 or 2007, whenever that happened? Could I do that?

Yes, I could take that risk because I knew I could replenish it, I knew it wouldn’t bankrupt us, I knew I wasn’t taking out a loan. It allowed me to then take a risk that I then built up to, let’s say, $40,000 in the bank, and then could I spend $30,000 to buy HitTail? It’s a pretty big risk, but my life was changed by each of these moments. My life was changed both in the security of it and also in my risk tolerance increased to the point where I could make bigger bets and have a bigger impact.

Will sure to put this into words and he said, I tell people that $250,000 in the bank is life-changing money, when you didn’t grow up rich grow up rich. I mean, I would even posit that $100,000 in the bank is enough for most people to take a year off, or multiple years, it depends on where you live in the world. When I say life-changing, I don’t mean I go out and buy a Maserati or buy some ridiculous house. I just mean that it changes the way you think about your life and the risks you can take.

Another way my life has changed is generosity. My wife and I’ve always done our best to use our resources for people. I’ve had friends whose grandparent was dying when Sherry was in grad school. They weren’t able to afford to go see him and we’re like, here’s $600 for a plane ticket. That was the last time they saw the grandparent alive. We’ve actually done that multiple times to be honest. That’s one of those things where a few hundred dollars is just priceless in that instance if you can do that.

In fact, we had a friend who came back years later. I didn’t even remember doing it, but they said that was a life-changing moment for them because not only did they get to see the grandparent, but it occurred to them the generosity involved there. It wasn’t the amount of money. They were kind of like, I should be more generous, too. It’s just a fascinating thing. Life-changing money for us has allowed us to be more generous in more ways to more people in bigger ways. I guess all that to say that life-changing money can be different things to different people.

If you grew up in an awesome middle class suburban, middle or upper class, or whatever then maybe you didn’t have the fears that I have of going broke or of not making your rent. Life-changing money can mean different things to different people. If your upbringing was great and you have a fallback, your parents will bail you out or whatever, or you have friends and family money which is this whole other expression—maybe I’ll have time to go into it today or maybe another—then maybe $50,000 in the bank isn’t that big of a deal to you.

But to me and I think to most people, there does hit a point where your ability to be generous, your ability to solve problems and make them go away, your ability to take bigger risks really ramps up the more money you have. I’m not saying it’s a quest for money so you can do all these things, but there are certain notches. I do tend to disagree with the survey you hear around like, hey, if you make more than $70,000 a year, then it’s really incremental how much better, how much you enjoy your life, or how much happier you are. That hasn’t been the case for me, nothing gives me more joy than to have the resources to then be able to put into these startups.

If you think about it, startups and these small companies, even these 1-, 10-, 30-person companies are what really drives the American economy. That’s where the majority of the hiring comes from. I can see that, it has been a future, and I continue to see it as a future, especially as companies get bigger and bigger and bigger, they’re less fun to work for, and that freelancer economy, the gig economy, and startups are just up into the right. I’m all in on that right.

For me, my life has changed at every step along the way. At the time when I had $2000 of side income from a software product while I was working consulting the day job. Then boom, I quit that day job and it made full product income in 2008 or 2009. When was that? Thirteen years ago, to that moment when HitTail which was the product that then made two or three times in a month more than I had ever made in a month before. Now that was a life-changing moment. On and on and on, each of these things have been such incredible steps along the way.

Dan Norris and I talked about the arrival fallacy. I never arrived in terms of, oh, I’m here, and now I’m going to be happy forever, but that’s not what I’m here for. What makes me happy forever is being creative and being able to work on what I want when I want to. Having that control is something I wouldn’t have had 20 years ago when I was coding, as a W-2 employee and as a consultant.

Even once when I was working on my own products, there was this fear. I had control, but there is this fear of which of these is going to be squashed. Frankly, most of them eventually did, whether it was after I sold them or while I was running them. A lot of them got squashed by Google or got squashed by a competitor. AdWords stopped working. While I had it, there was, I needed that next step, the next step, that was the drive.

I don’t mind the arrival fallacy. I don’t kid myself anymore to think, oh, I have arrived, I’m gonna be happy forever. But I do think this is great. It feels great to be here and what’s next? Maybe I’d take a month off, maybe I take six months off like I did after I left Drip, between Drip and launching or announcing TinySeed was six months. I’ll be honest. It was on that two or three months until Einar and I started talking and kind of mapping it out and all that.

All that said, none of that would have been possible without that life-changing money. Again, whether life-changing is $20,000, $50,000, or whether it’s a million, your life is different at each of those milestones.

My next topic is something I’ve talked about in passing on the podcast usually with a guest. Just want to put it down for you here to think about and it’s about funnels. There are obviously low- to no-touch funnels, there are high-touch funnels. Something I’m seeing that’s fascinating in the really quick growth that I’m seeing in a lot of my investments and companies that I advise are these dual funnels. It’s where you have that really wide funnel—low-touch, no-touch—so you can imagine, say, Castos which is podcast hosting, or you can imagine Docsketch which is esignatures, competes with DocuSign. It’s a very wide market and it’s a very large funnel. You get a lot of leads in and it’s lower priced. Docsketch is $10 per user, and Castos (I believe) is $19 for their lowest plan.

On the flip side, you might have an app that is high-touch. David Heller’s Reimbi, for example, is—I don’t know what the pricing is—$500 a month, I believe. This is a high-touch funnel, midmarket to enterprise sales, as we would call it. The companies that I’m seeing that are really crushing it have both. It’s really interesting because the wide funnel with a lower in price point allows a lot of people to use it, allows it to spread via word of mouth, and it gives you a brand because when you have a 1000 versus 5000 versus 10,000 people who are using and paying for an app, you’re just kind of everywhere, and that’s amazing.

Then if on top of that, you then also have that high-touch, high-price funnel where enterprises are coming to you saying, I need an enterprise version of that. You’ve heard it if you’ve listened to either Craig’s podcast called Seeking Scale, that I really enjoy, that he does with Andy Baldacci, and then there’s Rogue Startups, but he’s talking about how there’s a higher-end funnel in private podcasting. If you go to castos.com right now, you’ll see they talk about podcast hosting and private podcasting. Those are in the marquee, they’re in the H1. You can imagine that this funnel is really powerful because of exactly what I’ve said, is the way these two play into each other.

Similar with an e-signature app, you can imagine this, I’ve already talked about the low-touch end of it, but well aren’t there enterprises out there? What if you’re a mortgage broker, or realty, or do a lot of sales or whatever, you need 5000 docs a month or 10,000 docs a month. That would be that high-touch, high-end, expensive, top part of the dual funnel.

The takeaway here is dual funnels are really interesting. We had it with Drip, not to this extent. We obviously have the really wide funnel on the lower end starting at $49. I think even better, if we had been able to have like a $19 plan, that would’ve been cool. Then we had folks in the $500 to, I forgot the top end was by the time I left, but it was definitely in the low 4 figures per month. It wasn’t to the extent, some of these dual funnels I’m seeing in terms of the top end, but we had it. I just didn’t necessarily recognize it and I didn’t realize how powerful it was.

Realistically, what often happens in this case is that when you get this dual funnel, in the early days the low-touch or no-touch funnel winds up being the majority of the revenue, as you’re getting because you don’t have the logos and you don’t have the user base. But as you start getting the higher-end users in, the more expensive enterprise folks, they become more and more and more higher percentage of your revenue base. That, of course, is when you’re growing on both fronts and you have that brand, that’s when growth is accelerated dramatically.

That’s it for this week’s solo episode. I hope you enjoyed it. You can certainly let me know in the comments or you can tweet me @robwalling if we’re not connected on Twitter, let’s do it. As always you can find detailed show notes at startupsfortherestofus.com. This is episode 541.

If you want even more detailed show notes, sign-up for the mailing list. startupsfortherestofus.com enter your email. We send out a weekly email where my assistant producer, Aaron, does a fantastic job of doing time stamps with topics and bullets. It’s even more in-depth than what we release to the public on the web site.

As always, thank you for joining me this week and I’ll be back in your earbuds next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. I’m Rob Walling, and we’re going to be hanging out today, talking about some bootstrapper news, news that is relevant to those of us who are bootstrapping, or mostly bootstrapping SaaS companies. Today, we’re going to Twitter Spaces, the closing of Indie.vc, some Shopify App Store drama, and a few other topics.

I have Tracy Osborn and Einar Vollset on the show again today. Those are my two teammates with TinySeed, they’ve been on many episodes in the past. As you know, Tracy was the founder of WeddingLovely and is now the program manager for TinySeed.

Einar Vollset is my co-founder with TinySeed. He has a ton of experience in SaaS, M&A as well as enterprise sales, cold email, along with his CS in Computer Science that I like to say I won’t hold against him.

Before we dive into that, I want to remind you that MicroConf Remote is coming up next Tuesday. If you have not purchased your ticket, microconfremote.com. I highly recommend it, it’s for earlier-stage folks, I’d say pre-5 or 10K MRR. But if you’re anywhere from idea up to about 10K, we’re going to be diving into four in-depth case studies of early-stage marketing approaches that folks have used to get traction and it will either be founders or subject-matter experts who can share numbers, thoughts, ideas, best practices, as well as some really cool opportunities to interact with fellow founders.

Producer Xander has really outdone himself on this one, and there is an entire video game aspect to it where you’re an avatar and you can walk around, you can walk into the venue itself, the auditorium. You see this visually in your browser, and then you’re seeing the livestream and it’s going to be me talking with these founders and going through keynote-type stuff.

And then you can leave and go explore a bunch of other rooms that are going to have content and other attendees, so replicating the hallway track where you can walk up to someone and just have a video chat with them between talks, as well as head to different rooms that emphasize different things whether it’s education or marketing tips.

It’s all kinds of stuff. It’s all kinds of fun and again, in true MicroConf fashion, we don’t want to run an event that’s just like everyone else. If you recall last year’s MicroConf Remote, we had segments like founders in cars getting coffee or not getting coffee in that case. I had a talk show host desk setup, we were between two large potted plants, just all these different sets. It’s because we want this to be entertaining.

We know that sitting at home is not what we’d rather be doing, we’d rather be in a room together chatting, so we’re putting our creativity into these types of events to make them more interesting, more compelling, and hopefully more useful to you, that the content sticks and resonates more as you’re about to both absorb it and talk to other folks who are doing this. Again, microconfremote.com, grab your ticket and I hope to see you there.

With that, let’s dive into our bootstrapper news roundtable. Tracy Osborn and Einer Vollset, thanks so much for joining me again on the show.

Tracy: Happy to be here.

Einar: Thanks for having me, Rob.

Rob: I gave the two of you a little introduction before I hit record here, so let’s just dive into our first story which is about Twitter Spaces. In essence, for those who have been under a rock, Twitter Spaces is a beta or an early-access, limited access feature in Twitter that is essentially—you guys correct me if I’m wrong—a ClubHouse, but it’s in Twitter instead.

Einar: Yeah, it’s a rip-off of ClubHouse.

Rob: Well, rip-off is one way of saying it. I mean, if they rolled it out last week, my guess is it was probably in development potentially even before ClubHouse came about. I don’t know how long ClubHouse has been around. It’s synchronous audio, so imagine taking all the benefit of a podcast and removing all the good things about it.

You need to sit there live, there’s no recording, and obviously there are some benefits. People come in the audience, you can just bring them in and have a chat and such. I don’t have access to it yet. Do either of you?

Einar: I don’t, no.

Tracy: I do not.

Rob: Have either of you attending a Twitter Space or a ClubHouse?

Einar: No.

Tracy: I find this frustrating. I understand why these companies are making these spaces. A certain group of people have access to something like verification or only a small amount of people can use ClubHouse, or only a certain amount of people can use Twitter Spaces, so it drives up this need here. You see other people using it, and all the other people like us are going, what’s going on over there? I don’t have access to this, I can’t host these things. There’s a marketing need for it, but it frustrates me.

Rob: Does it feel like fake FOMO?

Tracy: Yeah, I feel like I’m supposed to have FOMO about it, and I just get mad and then I don’t want to use it. But I don’t think I’m also the typical tech user, or maybe I am.

Einar: I don’t know. We actually made this mistake over a decade ago. We did reMail, which is an email startup. We just let everyone in. They were like, all right great come on in. We got mentioned on Tech Crunch and it just completely melted our servers and everything. It was a horrible experience for everybody, so I’m a little bit more sympathetic to the staged, let in some people, see how it goes, add a bit of FOMO, that sort of thing.

I actually think it’s been done reasonably well. I get what you mean, though. Sometimes it’s a bit much, but having been on the other side of it from an engineering perspective, I do have some sympathy.

Rob: But I feel like Twitter has the resources to not do that. I guess since they are so big, maybe if they let everyone in?

Tracy: Yeah. I see it as Twitter being the owner of this. I should have looked up how long ClubHouse has been around, so maybe that’s a scaling issue on their end, but Twitter has been around for what, 10 years now?

Rob: Longer, since 2007.

Tracy: I feel like they’re looking at ClubHouse locking it down, and being like, ooh we can lock it down too.

Rob: Yeah, I see that. My thing with ClubHouse is I think they want to avoid having to deal with so much spam right off the bat, and if we do it by referral only, that can help you in the early days but until you have the momentum to then go in the back-end, build all the bots and the AI needed to help solve that. Because if they just open it up to the world right now, even if their servers didn’t melt, it would be brutal. The spam and all that would be a major issue for them.

Tracy: Sorry for interrupting, but also I would actually say it’s not just for keeping out spam, but it’s more of a higher-tier of conversations by limiting it to only a certain amount of valuable voices. That can ensure that when people join they’re like, ooh look at all these great conversations going on rather than a lot of mediocre conversations with all the hoi polloi inside of it.

Rob: Right. I have not been in Twitter Spaces—there have been a few—but one started yesterday and it’s like, I have work to do. And that’s the thing. If they were an RSS feed of certain conversations, would I subscribe? Probably. Maybe I’d at least try it out, but I can’t stop in the middle of my work day. I’m not going to stop and sit there and go talk about bootstrapping or whatever.

Einar: If only there was some sort of technology where you could have a feed of things with audio, and then you could listen to it as you wanted.

Rob: XML would be a really good approach for that. That’s the joke I’ve been making with friends. Like really? Are we going backwards here? This is terrestrial radio, it’s just smaller, it’s just more niche. I guess I’m not a big fan of it.

However, I will say producer Xander and I have talked extensively once I have access doing some MicroConf stuff, and doing potentially a livestream audio event, whether it’s just like a MicroConf on air that we do audio only, because the chance for participation, I do see some of the benefits where I can call someone from the audience.

I’m sure there are other benefits that I don’t know about but that’s really the only one. We already do MicroConf on air as a livestream. It happens to be a video livestream because that’s just the norm for real-time content, because to do an audio livestream is unusual, I’ll say, so we do that every few weeks, we get people engaged, we get questions, and that’s cool.

Again, the only difference I see is the ability to see someone in the audience and say, they can contribute on this topic too, I recognize their name, and pull them in spontaneously, so to speak. Do either of you see any other benefits that I’m missing from either of these platforms?

Einar: Yeah, I think certainly just having a livestream and then it being like, yeah it’s on some website somewhere is one thing. Certainly with ClubHouse and definitely with Twitter, you have more the network effect, the fact that it’s inside these networks of things. In relation to ClubHouse, I keep seeing people on Twitter who I know have 5000 followers or something, and they come along and they’re like, look I’m on ClubHouse and now I have 150,000 followers.

They’re clearly very aggressively trying to build out by suggesting people and building that network, and I do think that’s a big part of the appeal. You could always do livestreams on the internet, that isn’t new. It’s just the more building the network and the social network and engagement around it, I think is the innovation.

Tracy: I feel like we’re pushed as consumers being that we’ve watched Twitter grow, and they’re watching all these other social networks like Instagram grow. A lot of people are realizing the power of being in early, building that initial network, and having that payout over time, if they can get in early enough. Now when social networks start, people are like, maybe this one will go big so I’m going to try to get in big early. And then they fizzle, which makes me sad.

As with Twitter alternatives, I think people have done that too. I’m not sure if that was really Mastodon, but I did know some people who were thinking that Mastodon would be the big competitor to Twitter, and therefore…Mastodon?

Einar: Masa-what? I’ve never heard of Mastodon. What is Mastodon?

Tracy: Yeah, exactly. It died, I think. It may be still alive. I do know of some people who looked at that and were like, this could be it. They spent a lot of time trying to build up that network just in case, and I feel like that could be happening a little bit with ClubHouse.

Rob: Yeah, the network effect will win. That’s the thing. With ClubHouse now a feature of Twitter, and Twitter already has the network, so my prediction is ClubHouse will be done. I know they have this amazing valuation right now—and I say amazing, what is it, billions of dollars—but for me it’s this typical silicon valley FOMO investor thing and everybody wants a piece of it now because it got popular.

Twitter has the network. If Facebook were to do this, they would have the network. ClubHouse is building it from scratch. I’m on Twitter, I have 21,000 followers. When I go to ClubHouse, I believe I have like 42. For me, I’m not going to invest my time on ClubHouse. I’m literally waiting to have access to Twitter Spaces. By the way, if you work at Twitter and you’re listening to this, I would love to have access to start doing a little Space now and again. Hit me up.

Tracy: Use the power you have.

Rob: It’d be great. I’d bring an audience with me, so I think it would be beneficial. I’m not some clown who’s going to show up and gather four people to do it.

Einar: Rob, are you verified on Twitter? Is that a thing?

Tracy: Oh my gosh.

Rob: It’s a thing. I’m not, no.

Einar: Okay. Tracy, did you used to be verified on Twitter?

Tracy: Yeah. Einar knows that I was just complaining before we jumped on the call and started recording this. I used to be verified but I changed my username from @limedarling to @tracymakes and lost verification. I’ve been in the, as I said earlier, the hoi polloi ever since.

Rob: That was like giving Tracy a papercut and pouring lemon juice in it. That’s what she just said.

Tracy: It’s like Einar’s favorite pastime.

Rob: Yeah, it’s the verified thing. So, prediction—Einar, is Clubhouse in business or swallowed up within 18 months?

Einar: Eighteen months, that’s a lifetime. I still think they’re around. They raised so much money. Didn’t they raise $100 million or something insane? I still think they’ll be around, I do. I used to think Snapchat was just a flash in the pan which it clearly wasn’t, so I’m a little bit more bullish (I guess) than you guys.

Rob: Tracy?

Tracy: I’m bearish because if I look at the social networks that made it big like Twitter, Instagram, Facebook—they outscale depending on the time. You can spend hours on each of these social networks, or you can just check in every five minutes, every now and then, and just catch up really quickly and close the app.

ClubHouse doesn’t really have that time scaling. I feel like it’s all or nothing. When the newness wears off, I feel like it’s more likely to not be as engaging anymore and that participation will drop off to a point where ClubHouse might have some issues.

Rob: I agree with you there. I think longer-term, Twitter Spaces will probably stick around. Maybe they’ll add video, and it becomes another avenue to do livestreams.

Tracy: Wait, do you think ClubHouse will bring in a Twitter-like alternative so they do have that time scaling?

Rob: No. What do you mean bring in a Twitter alternative?

Tracy: If we go with my analogy…

Rob: Ohh, I see what you mean. Add Twitter functionality?

Tracy: Yeah, exactly. So then you have the way of catching up really quickly but you don’t have that huge time effort. Do you think that ClubHouse will move into that direction?

Rob: With $100 million they can do whatever they want, but that seems like an odd place to go down at that point. I just think Twitter Spaces will stick around. I want less synchronous things in my life, period.

This is why we use Voxer. Voxer, for those who don’t know, is an asynchronous way to send audio communication. I push to talk, I can leave a five-minute Voxer, and then Tracy or Einar—it’s a private message—they get it, they can listen to it at their leisure and they can 2X or 3X me—3X is the speed—and then they can respond back.

We still do calls when we need to, but it cuts down the need to have a bunch of back and forth in Slack, or just go everything’s like let’s jump on a 30-minute call to discuss this. Oftentimes you can just go back and forth with little audio, and that’s how I want my life to be—more async.

Tracy: Voxer is essentially calls but without the call part, just like voicemail.

Rob: It really is. When I’m off a call or I’m just making dinner with my kids, before I sit down, brrt, you know? I’ll say, hey Tracy I was thinking about this one thing, what do you think? Blah-blah-blah.

In any case, let’s move on to our next story. Really interesting news this week—shocking news to be honest—that Indie.vc is shutting down. Bryce Roberts posted to Medium, a post titled The End of Indie. He doesn’t give a ton of background other than to say it looks like LPs weren’t as interested in this fund. For those who don’t know, Bryce runs two funds. One is the O’Reilly AlphaTech Ventures, oatv.com. In fact, when I emailed Bryce, that’s the domain name of his email address. That’s a very large fund, traditional venture capital, quite successful from what I understand. I don’t have inside information there.

Indie.vc is, again my understanding is it’s a much smaller fund and it was investing in alternative VC. Their terms are (let’s say) more bootstrapper-friendly and you can buy back equity and pay things back. Here’s a screenshot of an email from an LP-alluded partner, a potential investor in Indie.vc. The screenshot says, “Hey Bryce, we are out. The shift in strategy for the fund over time for your good intentional reasons has moved further away from the kinds of companies we are looking to have exposure to.”

And so he says, “Without the institutional support to scale the Indie economy we envision, it’s time to take our learnings and refocus to other strategies within the portfolio to deploy our capital. To our friends, founders, scouts, and supporters, thank you. It’s been an honor to write this chapter. Maybe we’ll get the band back together, take another run at the Indie opportunity down the road.”

This came completely out of nowhere, and I tweeted about it that I was surprised and also frankly saddened that the experiment didn’t work in a sense. They funded 40 companies, you can’t say nothing good came out of it, but the fact that it’s shutting down only six years after it started is a bummer.

Being lumped in—TinySeed has been lumped in with Indie.vc—as this bootstrapper-friendly funding and the mission I think is overlapping, but obviously TinySeed is very different in that we run the year-long accelerator, that our terms are quite different. They’re not custom terms, they were really just straightforward equity, and our focus is B2B SaaS. There are a lot of differences between the two, but I feel like I’ve talked a bit about this. Tracy, do you have other thoughts to add on Indie closing down?

Tracy: Yeah, I actually wasn’t thinking this before the call, but when you said the name of their blog post, The End of Indie, it’s interesting that it says that rather than End of Indie.vc. It’s a little bit saddening because Indie.vc and why TinySeed gets lumped in with them is that we are aiming for more of that independent bootstrapped type of world. Those types of entrepreneurs are looking for a path other than VC or just bootstrapping.

When the blogpost says End of Indie, and then talks about the LPs not wanting to invest in the space, what I’m hoping is that it doesn’t tell people that being an independent Indie entrepreneur—rather than say VC track entrepreneur I think is the way to look at it—they don’t think that that’s also the end of that, like people aren’t going to invest in this field, because we have investors.

We just raised our second fund and we’ve been really successful in getting people on board our mission and I just hope that blogpost doesn’t read as this mission of supporting independent entrepreneurs doesn’t work anymore.

Einar: I agree. Certainly, Bryce in Indie was a pioneer in this space. I certainly think we share the mission in terms of, I feel like in the last 10 years at least—I think this is what triggered Indie.vc to get formed—the name of the game in terms of funding has become chase after unicorns. It used to be, if you don’t think it’s going to become a billion-dollar business don’t invest.

A couple of years ago, it was forget about a billion dollars. If it can’t be $10 Billion then let’s just not invest. And then last I heard a week or two ago, people were talking about hectacorns or something crazy which is $100 billion.

Fundamentally, a key part of thesis for TinySeed is there is value creation and there is value in supporting founders who want to create businesses that are successful and ambitious but aren’t necessarily wanting to be $100 billion, super famous, the face of Fortune magazine, or whatever, where maybe a win is you sell for $20, $100, $5, or $10 million, that’s a win for everybody, including investors. I’m sad about it.

We at TinySeed took quite a different approach. We get lumped in with them and similar funds reasonably often, but in a way I actually think of Idie.vc and those kinds of funds more similar to revenue-based financing on debt funds, versus certainly what we think—or at least what I think—is given how early we invest—Indie usually invested later than us—you just need to be an equity investor and you need to basically not allow founders to buy back equity.

As you guys know, we sometimes get pushback on this. Why can’t I just buy back my equity? Why won’t you be happy with 5X or 10X your money back? For us, the reason is that the math just doesn’t work out that way. We think that the companies that we build, what we’re trying to do is to support a large number of founders and companies.

Some of them won’t do so well, and some will do well and sell for or just get to $5 or $10 million. Some will do really, really well. That whole mix of things needs to be in place in order for founders to be successful, but also in order for investors to be successful.

As you see with Indie, if you can’t convince investors or LPs to keep investing, then you’re dead in the water. The most founder-friendly terms in the world are just to give cash for no equity and no nothing to founders, but that doesn’t provide a suitable return for investors.

That’s been the challenge for us from day one. How do you find that balance between founder-friendliness and suitable investor returns, given that everybody has other options to what to do with their money? You can put it in crypto or S&P 500 Index funds, or you can YOLO into GME options.

There are a lot of things people can do with their money, and I think you need to find what that balance is. I think we’ve found it, and certainly I hope so at least, I guess time will tell, but I think that balance is hard to strike. For whatever reason, it doesn’t seem like Indie found it.

Rob: Yeah. You and I spent at least six months working on the TinySeed terms. We looked at Indie’s terms and came up with our own terms. I believe we had five, maybe six versions of different terms. There were straight equity—

Einar: Some were terrible.

Rob: Really bad, and some were way too founder-friendly in the sense of, hey investor give us $100,000 and we’ll give you $120,000 back in 10 years. That doesn’t work. We had some where the fund made out like a bandit and what founder or whatever in their right mind would accept that, right? That’s what we had to find, the balance where the Venn diagram intersects that founders will take it and it’s a good deal for them.

Einar: In some cases they were maybe a decent trade-off in some situations, but they ended up that they would preclude or stop the founder from doing certain things. We think a lot of the companies that we back will be successful without further funding after us, but we did want to come up with terms which meant that if they do decide, this is a bigger opportunity that I thought I want to go after the more traditional venture track, then they should be free to do that.

Some of the terms variations we thought of really snookered founders. In some cases they were complicated to the point where it wasn’t obvious. I’m not sure that most founders would have understood them until it was too late. Five years later they’re like, oh crap I can’t do this now. We see that just in general venture terms and stuff. You end up in a scenario where whatever terms that an early-stage investor put in is so weird that it ends up blowing up the cap table and ruining the company at least for further financing.

Rob: Yeah, and that was a big reason that we did land on equity, that it’s been around for centuries, it is understood, we invest the money, and we get a percentage. Really that’s the simplest way. All the other terms we had were a bunch of if-then-else statements in a contract in essence. If this happens, then this happens at this point, and it made us feel a little less comfortable. If you ever do decide to look into funding, whether it’s angel, whether it’s TinySeed bootstrapper-friendly, and whether it’s a venture, you really need to look into these edge cases.

To wrap up this topic, the sad news is that Indie has closed up shop and that’s a bummer. The good news is, before Indie, before TinySeed, we were bootstrapping. You can still build companies without any funding. You can. Is it probably a little harder? I think so. Will it take you longer? Probably.

This is what MicroConf, this podcast, my books, and everything I’ve been saying since 2005 is about. Don’t ask for permission to build your company. Build your company, not your slide deck. Go out and build it. Revenue is the best slide deck. That is another thing I’ve said at several talks. If you really do decide that you want to raise funding at some point, then the more traction you have the better off you do. So get in the trenches, get some revenue, get someone paying you—real customers, real product, real money—and that’s the way to do it, and it’s still totally possible.

If you need help along the way, it is good that there are funds like ours and other ones I’m sure will come along that can help folks who maybe don’t want to necessarily hop on the venture track, may want to, down the line.

Let’s move on to our next story. This was one I found on Hacker News, and we will link this up in the show notes. “Shopify says remove Stripe billing or get booted from their app store. We’re a SaaS business currently listed on the Shopify app store. Today, we got a stern email from Shopify’s partner governance team. TLDR: Don’t even have Stripe as an option for Shopify users or we’ll boot you. Also, back pay since January 2019.”

I’m not going to read this entire email—it’s several paragraphs long—but in essence, if you’re in the Shopify app store, even if you have a separate SaaS app, if you have any Shopify users coming through your SaaS app—imagine if you have your own domain, drip.com for example—and Shopify users are using it, then they’re saying that you have to go through Shopify’s billing.

I want to start by saying this is no surprise to me. While it sucks, that’s what Shopify is, a monopoly in essence. Back in the days as Drip pivoted into ecommerce, this was shortly before I left, we started talking to Shopify about getting in their app store and this was one of the big concerns I had. All of our billing engine and everything, refunds, annual prorating, just all the complexity, is a custom billing engine built on Stripe and it works really well. We have a credit system, overages, on and on and on. Some folks wanted to be in the Shopify app store, and that means suddenly you hand over all of that.

Our customer support people no longer have the ability to just provide someone with a refund. That was a pretty major yellow flag for me during integration so I’m not surprised by this. Yes it’s a bummer. What do you think about this Tracy?

Tracy: About the same. The hard part was because you shared the Hacker News page with me and of course I had to go through and read the comments…

Rob: Oh, don’t do that.

Tracy: Yeah, I shouldn’t do that. Now my thinking is warped by all these comments, but the top comment does make an interesting point which was, people have been talking about Apple taking a 30% cut of folks who are doing payments through their Apple apps, and the Shopify CEO was I think rightfully complaining about that—the loss of the open web—while also having this within Shopify. I just think that’s a little disappointing, I agree with that assessment.

I wish we could have an open environment both with Apple as basecamp and everyone has been talking about as well, but also with Shopify. But that said, I’m a pessimist when it comes to this kind of thing. It does not surprise me whatsoever that it’s this way.

Rob: These are big platforms, this is what they do eventually. This is why amazing step one businesses are these Shopify apps. It used to be mobile, but I’m not necessarily a fan of being at this point since everything’s sold for 99 cents it seems. There are the Shopify apps wherein the Salesforce app store and wherever else we can think of the online ecosystems and you can get in. Heroku is another one. It’s amazing to get to $5000, $10,000, $20,000 a month relatively quickly if you rank for terms that people want to search for if the ecosystem’s big enough.

Longer term, these are not great million-dollar, multimillion-dollar businesses if that’s your aspiration. This is your step one. Use that to then buy out your time and then either pivot this into hey, I’m going to build another business that’s very similar that isn’t in the Shopify App Store, or go and build that other app because platform risk is a big deal. Basically, you have to do what they say. They’re going in asking the original poster for 20% of revenue dating back to January 2019. That’s two years of revenue. That’s insane.

Tracy: Yeah, that’s wild.

Rob: Yeah. What do you think Einar?

Einar: I’m sort of the same. It’s not surprising that they’re doing this, but it’s hypocritical of them (Tobi) to be ragging on Apple when they’re doing the same thing if not worse. I think it was Tobi, who’s the CEO of Shopify, who said last quarter or the quarter before, we’re expecting to see a company IPO that’s built on the Shopify platform. I’m like, that’s tricky when you do things like this. I guess it’s happened on some platforms before, but not a lot.

There are some companies that maybe have done that on mobile, maybe some gaming things have done okay, but on a single platform? No. As an investor, we know this. We’re slightly wary of backing things if you’re only running on Shopify or a specific platform, because it is a risk. They can easily decide the next day, we’re doing exactly what you’re offering and it’s going to be free and now you’re screwed.

You can have a significant business that can be killed overnight by running on someone else’s platform and I think that’s a risk that everyone should take into consideration. Like I said, I somehow doubt that a Shopify plugin will become, well IPO, as a billion-dollar business.

Rob: One of the early questions we ask folks who apply for TinySeed if they are on a single platform is, what are you thinking to get around your platform risk, basically? Usually the approach is to look at the other platforms, to build out into a broader ecommerce thing. I have second-hand—through one of the investments that I have, an angel investment from long ago—have seen platform risk blow up and have seen a large platform just throw their weight around and be able to pretty much, extortion maybe is too strong a word, certainly dictate, that’s a good way to say it.

I know what can happen, and it doesn’t happen when you’re at $500,000 ARR. It happens when you’re at $5 million ARR. It happens when you get to that point that you get on their radar and they see, wow why is this company making all this money on our back? We want a big piece of that, and that’s usually what happens.

Einar, with your experience helping SaaS founders exit—SaaS founders that are doing basically anywhere north of $1 million, seven or eight-figure SaaS companies—have you seen acquirers be wary of platform risk in this sense? Even if, let’s say, someone did have a Shopify app that was doing $5 million or a collection of them, would a potential acquirer be willing to pay the same multiple as they would if there was no platform risk?

Einar: No. Certainly not. No.

Rob: That clear, huh?

Einar: Oh yeah, 100% because they’re aware of the risk; it’s obvious. There are ways to mitigate it. To give you an idea, in some cases there are things that you sort of know are platform risks but they’re not really the same sort. For example, for at least the last year or two, it’s been the case that a B2B SaaS business was usually selling for some sort of an ARR multiple gets discounted if it’s a business that serves WordPress clients exclusively.

That’s much less of a platform risk than Shopify or Apple because it’s an open-source thing and yeah, I guess WordPress can stop you or Dotcom can stop you from being in the plugin directory or whatever, but certainly the risk there is much lower. Those guys are taking a discount if they were not serving that market. There are just many, many buyers who are willing to punt on an asset or certainly pay a premium for an asset that’s running on the app store or whatever platform we’re talking about.

Rob: Our next story is another Twitter story, which is unusual. I don’t feel like Twitter ships many new features. In the past three years have they shipped two major features? But here we go. Space is at the top, Super Follow is a way for Twitter users to charge for their tweets. It’s like a subscription. I could say hey, I’m going to have my public Twitter feed but if you want the juicy details—I don’t know, more honesty, more transparency, whatever it is it’s the super secret sauce—then you can pay $5–$10 a month to get this separate private feed for Rob Walling.

Tracy, I’m curious if you would be willing to pay. Is the price set at $10? I should have read this, but can you set your own price or is it $10? They’re showing it as $4.99 so they haven’t clarified this, but would you pay to read anyone’s tweets? Is there anyone that comes to mind where you’re like, yes I would do this?

Tracy: People are making this Substack comparison. I also think it’s like Patreon, and I feel like there are people on Patreon—definitely not the majority—that are using it as a thought platform. Oh gosh, I always get bullish and bearish wrong. I would say I am bullish on this, actually. I don’t like it. I think I would pay for people’s tweets. It’s a smart move by Twitter.

With the trends between Patreon and Substack, and Twitter reaching the point where it has nearly everybody (it seems) has a Twitter account now, it feels that’s a natural evolution and a better way of monetizing the platform than just doing all the ridiculous advertising stuff that they were doing, all the weird Twitter ad stuff.

I wouldn’t want to pay for someone, I would probably say I’d prefer to read their tweets for free. I can see the business case for it, and I could see myself being won over by super amazing thought leaders, like if Barack Obama was doing a lot of thought leadership on Twitter and then decided…

Einar: He needed some money to charge $4.99?

Tracy: I don’t know, maybe the book sales aren’t going as well as he thought and he has to move over to Twitter. I could see myself being like fine, take my $5 a month so I can have access to what you’re saying.

Rob: Einar?

Einar: Before the thing I didn’t actually realize they had released it. I think it’s a good move for them. I certainly think it opens up some new use cases and I can see myself paying some stuff. I guess it’s been mostly used for porn, but isn’t this what superfans or onlyfans or whatever it’s called does? It’s sort of like that, so I think in general it’s fine. Why not? I’m just happy to see some sort of a product innovation from Twitter. It’s been a long time.

Rob: Me too. I’m waiting to see what some creative folks do with this. When I think about it in general, I think this isn’t that interesting. It’s like, okay you put up a pay wall in front of some tweets, but when Patreon first came out I felt the same way. But now I see how it’s used and I support probably 10 creators on Patreon. So would I support creators on Twitter where it’s almost a donation model? Yes, because I do that on Patreon where I pay people just to podcast.

Einar: Do you think I should set up a Super Follow just to do my YOLO GME bet tweets on there? Would you pay for that?

Rob: It could be there. I wouldn’t, but there are people out there who would. I agree with you. On a product front, this is a good move. People are comparing it to Substack, but Substack is email newsletters, so I don’t see how. This is a walled garden and Substack is email, unless I’m misunderstanding it.

Einar: I don’t think it’s the same. I have to be honest. I’m quite surprised at how successful Substack has been. I have to admit, that’s more surprising to me than anything else.

Rob: I know, that’s another one where I’m like, how? Why? You could just do this with MailChimp. Like, why? I know they have some other features and such. It’s really a tightly-niched product (almost) and I wonder what the reach of that can be if it can be venture scale. Obviously email marketing can be, but that’s a really different use case than just creators.

All right, our next story is actually comparing Google Cloud onboarding versus AWS onboarding, and it’s a blogpost on kevinslin.com. Obviously, we’ll link it up in the show notes. He says at the beginning, “Disclaimer: I used to work at AWS and have both conscious and unconscious biases towards my former employer.”

In essence, he received credits for AWS and Google Cloud, and he had to get onboarded essentially from scratch in order to redeem this offer and then get access to the stuff. In the end, his comparison is that the AWS process was completed in under a week, got all the credits and the perks right away, and access to first-party support from AWS. The Google Process was still ongoing after three weeks, he got credits in chunks, and he’s not sure what the terms are and when they renew. The first point of contact was a sales rep, not talking to a third-party partner.

To me, this is a bit of Amazon does tend to be… their customer service is not terrible. I tend to have decent interactions with customer service, and they do have human beings working in Amazon. With Google, anytime I’ve needed something, it’s pretty terrible in terms of going to forums and such. I would hope that Google Cloud would just be organized differently and again, he obviously has his own bias. I have not gone through this process, but Tracy I’m curious what your thoughts were after reading this post.

Tracy: Again, there was a Hacker News post for this and again, I looked at the comments.

Rob: Don’t do that.

Tracy: I am affected by the comments that are there, but some of them made a point that it’s actually more about instead of just Google Cloud versus AWS onboarding for people, it’s actually a comparison for YC companies. We kind of see this at TinySeed. When you set up a perk for an accelerator, some of the people that we get perks for will have a dedicated rep that you can just email immediately and they give you all the answers that you need.

And then there are other companies that say, we offer a perk but we’re not going to also offer the infrastructure to support all of that. Both of them are successful, it sounds like—as someone made a point—AWS has a better rep for this YC perk. I feel like a lot of it is just beating the horse about how Google support is terrible and AWS is great. I would argue that AWS’ rep for the YCombinator would be better than normal support for AWS.

Rob: What do you think, Einar?

Einar: I’m not sure what I think, actually, but I certainly think that’s right. One of the most frustrating things about this that we see with TinySeed, too, is that at least AWS has been around for a long time. That’s part of what’s shining through here, and they tend to be consistent with their stuff. They’re like, if we’re going to offer you 150,000 in credits then that’s what we’re going to do.

We had the experience with one of the perks that we offer with TinySeed where it was $100,000 and then I got busy, I got a bunch of emails all of a sudden, and then I read one of the emails from this. Like yeah, we’ve decided to change the program a bit. Usually those things are like, we changed our privacy policy. And he’s like, no we’re going to do now it’s $1500 per…

Tracy: $500.

Einar: $500? Even worse. I was like, you mean you reduced it from 100,000 to 500? That’s just an email in a change? That’s a bigger deal to me than how much pain it is. Although, with that being said, I like AWS a lot. I got the YC. AWS used to have a YC alumni credit, too, which is nice. I accidentally blew that. It was quite substantial, I think it was 100,000 or something. I accidentally blew that by having a cluster of huge instances, databases that I forgot to shut down.

I didn’t notice because it was just eating through my credits, and all of a sudden two or three months later I got an email that says, hey you owe us $13,000 in credits. I was like, you guys can clearly tell that I haven’t used this at all, this is a mistake, could you please set my bill to zero? And they did do that, AWS did which I’m not sure that everyone would have done the same, so I’m inclined to be pro-AWS just for that reason alone.

Rob: I’ve only used AWS, so I don’t know that I want to weigh in on the pros and cons. I’ve had people use Google Cloud and love it, too, so it’s an interesting datapoint.

As we wrap up, our last story is about the LinkedIn gig marketplace. In essence, they are developing a freelance work marketplace that could rival fast-growing gig sites like Fiverr and Upwork.

I hadn’t realized that LinkedIn acquired the assets of UpCounsel back in 2019. UpCounsel was the go-to two-sided marketplace I used to recommend people head to if they needed to find a lawyer, because it was actually pretty vetted—the lawyers—and I had found at least one, maybe two that I worked with back in the 2015–2016 timeframe.

I’m a little bummed that that isn’t around anymore, but I guess they acquired the assets. The founder, Matt Faustman, stuck around with LinkedIn and now they’re using him to essentially build this similar marketplace, although it’s not focused on legal, it’s more about gig workers.

Obviously, LinkedIn has both sides of this marketplace. They definitely have folks who are looking for work who may be interested in freelance work. They have company pages, but I’ve always thought of them as a little eye-rolley. It’s like you need to have one so people can say that they work for you. That’s the purpose, right? I don’t see a lot of companies on there beefing out their pages and in this case, maybe they would need to. I’m curious—this time I’ll start with you, Einar. What are your thoughts on the LinkedIn gig marketplace?

Einar: My main thought is what happened to LinkedIn and Twitter? For the first time in years and years, they’re doing something new. I was surprised to see this. I don’t really expect to get anything new from LinkedIn other than a crapton of email which seems impossible to unsubscribe from in every way, shape, or form. It depends on the kind of gig, I think. That’s my thing, I haven’t really looked at it. Are we talking Fiverr-type gigs here or are we talking more like lawyers?

Rob: I think it’s going to be more similar to Upwork because Fiverr is what? It’s $5 and it’s super small things, but Upwork is more like, I’m going to hire a freelancer maybe for this entire design project. Maybe I’ll hire someone for years to be an executive assistant, a VA, or whatever. If I were LinkedIn, that’s the direction I would certainly be going.

Einar: That makes sense because one of the issues with Upwork and whatever is if someone is terrible—they could be great for a little bit and then they could be terrible—if they’re really bad, you can burn their ratings, but they could just start up a new one and do the same thing over and over again, versus with LinkedIn, it’s harder to just disappear and then respawn as five different people.

I certainly think there’s a reputational thing that comes with the fact that LinkedIn has become this de facto online CV, resume-type service that I think is helpful in terms of reputation management. I could see them being reasonably successful.

Rob: I am happy to see a competitor to Upwork come about because there really isn’t another big player in the game. I do like what Dan and Ian are up to. They’re from the Tropical MBA and they’re working on dynamitejobs.com, which is Upwork with a twist. I love the way the boots are on the ground, we have a small community, we see a need, and they have both sides of the market in their podcast listenership and their Dynamite circle community. I think they can get traction.

It’ll take years and years to get big, but LinkedIn can start obviously very big because they’re at scale already and they already have tens of millions, hundreds of millions of profiles. I don’t even know what the numbers are, but it’s a lot of folks. What are your thoughts here Tracy?

Tracy: My biggest criticism of LinkedIn has been due to my experience of being a freelancer and a contractor for many years. Going onto LinkedIn and having it be so company-focused, and where did you work? I would always say I’m working for myself. I was trying to list out the projects I was working on and it was a terrible experience. I wish that LinkedIn would have a better emphasis on the projects you’ve worked on, whether that was at an employer or your own projects.

What I’m hoping with this news that they’re building a gig marketplace is that there is going to be some changes to the platform that allows for better emphasis on the things that people work on. And this is a big focus that they’re working on and better showcase the things that they’ve worked on. I’m optimistic. I like this news. I hate LinkedIn, honestly. I don’t use it very often regardless of the messaging.

I hope that this will help improve the LinkedIn platform because they’ve had, in my opinion, a lot of issues in terms of the way the work is displayed that’s leading to those other startups trying to fill that need. I feel like this is a good idea for LinkedIn to build into it because they’re definitely lacking in this area.

Rob: I hope they give that founder of UpCounsel a lot of say in how it’s built, because LinkedIn to me feels like an older, clunky product. I don’t want to throw stones, but it’s owned by Microsoft now and back in the day that’s how Microsoft felt compared to Apple.

If he has more say in how it gets built, because UpCounsel felt like a startup in a good way, it had good design, and at least my memory of it was that it was a well-functioning product. So if he’s tied into the legacy of LinkedIn, I think it’ll be a problem. But if he can make choices and build something truly from first principles or from scratch, he’ll be better off.

Tracy Osborn, thanks so much for joining me today. You are @tracymakes on Twitter.

Einar: Not verified.

Tracy: Yup, not verified. I almost got there before Einar, I knew he was going to do that.

Rob: And Einar Vollset, you are @einarvollset on Twitter. We have done a first close, as Tracy mentioned earlier. We did a first close on TinySeed’s second fund, but if you’re out there and you’re thinking, with all these crypto-winnings and the stock market going haywire, I would love to diversify—I’m a credit investor—into a broad swathe of early-stage, B2B, capital-efficient SaaS companies.

Head to tinyseed.com/thesis to find out more about our whole investment thesis and what’s unique about it, and the unique angles that we’ve taken. And, tinyseed.com/invest if you just want to hit up Einar directly. There’s a short form where you fill out a few things, but then you can get on his calendar and talk to him more about what we’re doing. Tracy and Einar, thanks so much for joining me.

Einar: Thank you.

Tracy: Yeah, this is super fun.

Rob: Thanks again to Tracy and Einar for joining me. If you have your own thoughts on these news stories, head to @startupspod on Twitter. Every week, we have a tweet or two, a whole thread that goes out, talks about the episode, shares a little audiogram, and you can feel free to weigh in there.

Respond, comment. I’m always monitoring that and can interact there as well. I would love to hear your thoughts. I’m glad you joined me again this week, I’ll be back in your earbuds again next Tuesday morning. Thanks so much again for joining me on the show.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. Thanks again for joining me this week. This is the show where we look at ambitious yet sane approaches to building startups. It’s not the Silicon Valley approach of raising buckets of money, not having any customers. It can be bootstrapped or mostly bootstrapped. But these are capital, efficient businesses that may not change the entire world, but they’re likely to change our little corner of it.

I’m your host, Rob Walling and today I have the pleasure of speaking with Dan Norris. This was such a good conversation. I let it run a lot longer than most Startups for the Rest of Us episodes. Dan and I have known each other, I don’t even know now. Probably a decade is a little long, but eight or nine years.

He and I have only met in person once, but I have followed his journey. He’s written several books. You’ll hear me talk about a few of them in our conversation, and he went from having a couple of failed SaaS efforts to then starting a productized service that grew quickly and he sold to GoDaddy. Now he runs a brewery, a very successful brewery doing north of $10 million a year in revenue down in Australia.

Dan and I talked through success, exits, and what changed in his and my life after we sold our companies. Dan actually turns the table on me towards the end of the interview, probably about 40 or 50 minutes in, and starts asking me questions about selling Drip and my thoughts on all kinds of things that I think will be interesting for you to hear. I gave a lot of thoughts that maybe I haven’t said in public before. I appreciated that Dan was willing to come on the show and spend over an hour with me.

Before we dive into this conversation, you should go to microconfremote.com if you’re an early-stage SaaS founder. MicroConf Remote is happening in just a couple of weeks towards the end of March. We are digging into five early-stage marketing approaches for SaaS. Each keynote is going to be a case study with numbers from a founder who has done this approach. We’re going to be approaches like an AppSumo deal or a Product Hunt launch. Again, we have actual founders, real-life SaaS founders who have done this within the past few years, have had success at it. They’re going to share their numbers and their thoughts on what they did right, what they did wrong.

I’m really excited about this approach. It’s almost going to be a bunch of mini-workshops. I think it’ll be very, very valuable for you, especially if you’re, let’s say, pre $5000 or $10,000 of MRR. All the way from the idea up to $5000 or $10,000. It’s for that earlier stage where you’re trying to get traction and you need maybe a one-off marketing approach to help you start to get some revenue and kick start your customer account. Microconfremote.com, if you’re interested. With that, let’s dive in to my conversation with Dan.

Mr. Dan Norris, thanks for joining me today.

Dan: Thanks for having me mate. It’s been a while since we talked, I’m looking forward to it.

Rob: Yeah. It’s been at least a couple of years. I was looking back. You were on this podcast episode 183, Five Startup Rules to Live By with Dan Norris. I think we were about your book The 7 Day Startup. To give people context, today’s episode 539, so it’s been a minute, sir. The last time you and I met in person was really the only time I think we had, DCBKK in 2014 if you believe it. Back when we used to do in-person events, remember those days?

Dan: Yeah. That was fun. I think they did one in the last couple of years, but I went to most of them. They’re always good. I meant to say congratulations on the podcast. It blows my mind, people who do that many podcasts. I had a podcast early on. I think I got to 100 and I was like no. I just lost energy for it. It’s such a difficult thing to just keep doing and doing, so well done with that.

Rob: Thanks. Mike and I did it for about 450 episodes and then he stepped back to focus on his other stuff, so I’ve been doing it for about the last 100. I think for me, (a) I do enjoy it and I think if I didn’t enjoy it, I just wouldn’t do it. But (b) it also became that streak where literally every week for 10 years, a new episode has come out. That’s the point of I think both of pride, but also a point of commitment for me that I wanted to be out every week.

Also frankly, the feedback. The fact that there are people listening and that I get emails, tweets, and comments that are like hey, this is good, this is not, great job here, whatever. That helps me realize this is having an impact. If people are listening but no one cared, that would also probably make me stop doing it.

Dan: Yeah, that’s right. I always loved that about podcasts. We do one for the brewery, which again, I’ve dropped the ball on because I just find it difficult to keep doing them, but we’re going to do another series of them. When we go to beer events in person, people always are talking about the podcast, even though out of the content we do, it’s got by far the smallest audience.

Rob: Yeah. But I’ve found that it tends to be more engaged than written content because people hear you in their earbuds, it’s very personal. I’m going to say you’re complimenting me on the podcast, congrats and I’m super jealous of you, six books. You’ve written six books and we will talk about your sixth book today called Compound Marketing. I want to talk a little bit about you selling your company before we get in there, but if folks haven’t read The 7 Day Startup, which I think was your first or second book. I would recommend they go check that out now as well as Compound Marketing.

They can buy those on Amazon or wherever good books are sold. I actually wrote the foreword to The 7 Day Startup, didn’t I?

Dan: Yeah. I don’t think I’ve ever been congratulated on or told people were jealous for writing six books. I don’t think anyone else really wants to write six books. Normally, when people say they’re jealous because I get to work in a brewery and drink beer all day, not that I got to write six books.

Rob: Right. Six books, no doubt. I mean, I was telling you before we hit record that I’m working on my third book and it’s just tough. It’s really hard. Every day I show up and either write something and I feel like this isn’t good enough, that wasn’t enough, or I don’t write anything, and then I feel like crap that I didn’t move the ball forward. I just can’t imagine having written six books. It doesn’t seem to be that hard for you, or is it just that you don’t care that it’s that hard and you push through?

Dan: No, it’s not that hard for me, but I think I always say cheat a little bit. I don’t read a lot of books. I don’t research a lot. I don’t dig into other companies too much. In most of my books, if I feel like I’ve got something interesting to say about what I’m working on and how that can affect other founders then I’ll do something. If I don’t then I won’t write something. It just so happens that I’ve had six different topics that popped into my head that felt that I’ve got enough interesting things in there to write about.

With Compound Marketing, I did look at other companies more so than I normally do because I felt like it would improve the book overall if I didn’t just talk about myself the whole time. It was a fair bit more work than other books. It’s also longer than the other books. The other books are pretty short, but it does come easily. It’s getting harder and harder, but some of the books—I think 7 Day Startup, I wrote like a week and a half. There were chunks of that brewery books and the content machine that I wrote on the fly.

I write 10,000 words in one six-hour stint. There were things like that that I’ve been able to do to make it a lot easier for me than normal people. But it’s still not super easy to write books.

Rob: Well, congrats on that. I’d love to talk a little bit, kick us off with some conversation before we dive into Compound Marketing about your sale of WP Curve. WP Curve subscription WordPress support service, a fixed monthly price for unlimited jobs. I believe, if memory serves me, that was the first business of that model that I had ever seen. Now, there’s Design Pickle and there’s this model for a bunch of consulting-ish stuff that used to hire freelancers for. Did you come up with the idea of this fixed monthly price for unlimited jobs?

Dan: Yeah, I think so. As far as I’m aware, the idea of the recurring business wasn’t something I came up with, but there was a lot of talk at the time about recurring software businesses. That’s what I wanted. I used to listen to your podcast all the time. All I wanted was to start a software company. I had an agency that was just a terrible business. I tried and tried to do software and I just couldn’t make it work. I just found it so hard. I just couldn’t come up with the right idea. I’m also not a developer. I just think it’s just not a good idea to start a software business if you’re not a developer. So many reasons I couldn’t do it.

I was looking for a way to just selfishly start a business that was more like a startup than anything I’d done before. It wasn’t like I‘d gone out and done a whole bunch of customer interviews and being like this is what people want, this is a gap in the market. It wasn’t like that at all.

I had a developer. I want to keep working with him. I was a few weeks away from needing to get back and get a job after seven years as an entrepreneur. I didn’t want to do that. I just said what if I combine the two together because I’ve got someone who can do the work. If I made it recurring, it’ll be growth, it’ll keep me motivated, it’ll be more like a startup, and ultimately, it will be worth more.

That’s what I did and it worked pretty well. A lot of other people followed, which is great. I encourage everyone else to follow as well in my writing the book and giving people a framework for doing and all that stuff. It was a good time.

Rob: You wound up selling that. You had a co-founder and you guys wound up selling that to GoDaddy. It was about four or five years ago?

Dan: Yeah, it was 2015 or 2016, something like that.

Rob: Was it that long ago? Yeah, five years ago. Now, talk to me a little bit about that. I know that you can’t talk about the exact same price, but was it more of—there are the acquihires where it’s like they absorb your team and it’s a lower purchase price point, or was it a strategic acquisition that really fit into this desperate need that GoDaddy had? Can you give us an idea of what that acquisition looks like?

Dan: It was a weird time. I was thinking about this because I thought you’d ask me about it, and I haven’t been asked about it since then. My life now has nothing to do with this world. I had to reflect on it. Basically, what happened was me and my co-founder, we never worked together. We’re on opposite sides of the world. We didn’t know each other before I started this business. I started it by myself and then brought him in via my blog randomly, very early on because I realized I couldn’t run a business that ran 24/7.

We did a pretty good job making that all work, but the business was almost too easy in the sense. We had people do the work and I did content from time to time, but there was no real work. There wasn’t a huge amount of work in managing the business like there is with my current business. Alex did a lot of that stuff, but neither of us really worked full time on the business. We both had other things going on.

We started thinking about the idea of selling. We had conversations with the guys from Envato. They reached out to us and they were like we’re interested in doing something. We gave more information. I had calls with them and all that. After that, you know what? I’m not game. I kind of forgot about all that, but I was listening to your episode with Josh Pigford I was like, that’s right. That exact same thing happened to us.

When that happened, Alex had reached out to GoDaddy at one point and just had a contact who happened to work in the M&A section or something. I can’t remember exactly how it happened. After the Envato thing fell through, we were like you know what, we were kind of getting excited about the idea of selling this. We proactively went back to GoDaddy and said we were just about to sell this. It’s fallen through. Are you guys interested in talking? They said, yeah, we’re interested in talking.

I flew over to California, we met with them. Alex handled most of it. I’m still unclear about why. The meetings were so strange to me. I was in this mode of working for myself in Australia then we got to the back of this massive meeting room where I used to live in the corporate world. It was just weird. I don’t really know why they were buying it. I don’t know if it turned out well for them. I don’t think it exists anymore. I think that’s pretty common.

They said they wanted to get into this recurring service, they wanted a team and all that kind of stuff. But this is a gigantic company. I’m sure they could have gone and hired a bunch of people in the Philippines. In the end, I think they got rid of their Philippines team anyway, which was one of what WP Curve was. I don’t know exactly why. I think at the time, it was one person there who decided they wanted to buy it and we decided we wanted to sell it. I don’t know how much more complicated it was than that.

Rob: What did that do for you in terms of finances? You sold to GoDaddy, so obviously it was probably some life-changing money. Oftentimes, I’ll say look, $250,000 in a sale is life-changing money if you’ve never had more than $10,000 or $20,000 in a bank account. For you, is it enough money that you didn’t have to work again? Was it like I can take a lot of years off and really figure out what my next thing is?

Dan: Well, yeah. We can’t talk about it because of NDA. It has been so long. I think it probably is very unlikely to get sued.

Rob: Sure.

Dan: I wouldn’t describe it as life-changing money, I mean, it’s more than $250,000. I wouldn’t describe it as life-changing. It was good for me because I was ready to leave. It took me a while to work out my next move, but in hindsight, I was already working on my next move. The day I met with GoDaddy was the day we opened the brewery. I just thought it was a small thing, but it eventually turned into a much bigger thing. I was on a path. I didn’t want to move to America. There’s no way I was going to keep working.

I wanted to get out of the business. I wasn’t going to do a thing where I stayed there for five years. It’s perfect for me. I just got a bunch of cash and literally left the next day. But I mean in terms of life-changing, at the time I was renting a unit around the corner from where I am now. It was costing me $540 a week to rent it.

Then when I got this money from the sale, I bought a house just around the corner from where I was renting. I didn’t quite have enough. I basically put all of it into the house. I didn’t do anything else with it. I didn’t quite have enough to buy all of it. I had to get a mortgage for about $300,000. The repayments on the mortgage end up being exactly $540 a week.

For me, it was literally not life-changing at all. I just moved up the street. Instead of renting my house, I was owning my house. I mean live in an amazing location. I never would’ve been able to buy a house in this spot. I’m 50 meters to the beach in one of the best suburbs in Queensland. It’s amazing. I never would’ve been able to do that without the money. But I still would be living here. It would be how much are you paying to rent, I think.

Rob: That’s funny how that works.

Dan: It turns out that also when I bought this place, I thought I was buying at the top of the market. I bought it for what they’re asking. I didn’t try to bargain. I just thought if I don’t buy it now, this money’s going to lose its value. The property is going to go up and I’m not going to get in. I bought it for what I thought was a lot of money. Since then it’s gone absolutely nuts and that’s a fluke, but it’s worth a lot more now.

Rob: That’s kind of how it goes. I was telling someone the other day after I sold Drip, I had a lot of money coming to the bank account and it gave me the luxury to dabble in some small things that I probably wouldn’t have the time or really wouldn’t have had enough money to dabble in before or to make it worthwhile.

Dan: But were they valuable things? For me, when I dabble in small things, it always a lot of the time ends up being a waste of time.

Rob: No. I mean I had not bought any cryptocurrency before 2016. When I sold Drip I was like, I have some money to play around with. I don’t buy individual stocks. I buy assets. I buy index funds and stuff. I’m going to throw 2%, maybe 3% of our net worth into crypto. That was 2% or 3% at that point after selling a company like that was not an inconsequential amount of money.

I kept saying it’s either going to go to zero or it’s going to 100X, right? It’s like an angel investment and that was where I felt like I had the luxury to do that. Of course, that has panned out well. I feel like it’s similar to you because you’re like, well, I wouldn’t have the money I’d be renting, so you would be living in the same place, but you wouldn’t have almost stumbled into making—you’ve made a bunch of money on your house now in equity. I feel like there’s a weird luxury you have.

Dan: A house is a weird thing to make money on. It’s the best thing to make money on because you don’t have to pay taxes on it in Australia. I don’t know what it’s like over there, but with houses, if you live in it here, you don’t have to pay taxes on capital gains.

Rob: That’s amazing.

Dan: At the moment, the market’s going nuts around here. But if I sell my house here, I’m just going to have to buy another one somewhere else. The real estate lawyers are going to get rich. It doesn’t feel like my life is changing, but obviously, it would be wrong to say I’m not in a different position than I was. I think in terms of how much we sold it for, I was really happy with what we sold it for. It was in line with—I’ve heard you talk about smaller software companies and the multiples they sell for.

It was in line with that, which was my thinking the whole time was if I had an agency that was turning over $1 million a year and making $300,000 in core profit for the founders, that’s basically what it was. We were turning over about $1 million a year. Founders were earning about $150,000 each and there wasn’t much left. If I was to sell an agency like that, I’d be lucky to sell it for a small profit multiple.

I always thought if I create a business that is more like a startup, it should be worth a small revenue multiple, and that’s ultimately what we got. I think that’s pretty good when you talk to other people with services businesses that are reasonably unusual. I think the model was good, the team was good, but the brand I always just come back to the brand because same as our current business, there are breweries that do more volume than us that are worth almost zero and there are ones that worth $100 million-plus that don’t do much more volume but just have an amazing brand. It’s just such an important thing that you just can’t ignore.

Rob: That actually is a great segue into your book Compound Marketing because you used a lot of the elements in this book to build WP Curve and to build Black Hops Brewing. The four things you touch on in Compound Marketing are brand, storytelling, content, and community. When you put that in a sentence, you say build a brand and tell a story via content to your community.

I know the story of WP Curve, and I sat and watched you build it. Your story being transparent in the entrepreneurial community and the word spread. Then people said WP Curve is cool. Obviously, you got enough subscriptions that you were turning over $1 million a year like you were saying. How did you apply this to Black Hops?

Dan: It’s funny because I’ve written the book now. It seems quite simple to follow that sentence and do that. There were things I did realize. One thing I realized was in the online space, this way of building companies was happening a lot. You had Josh from Baremetrics, there was Nathan Barry. You were doing it. There were so many people—Pat Flynn with the Income Report. There were many people doing this kind of stuff in the online world that wasn’t unusual anymore, it was quite normal. But in physical businesses like breweries, this was very rare.

I knew that coming into it because we had the problem of needing to build a brewery, not having any idea how to do it. We got on Google to have a look at what was around and just couldn’t find anything. It was hard to get any information. To me, that was a really good opportunity. I’d always thought, in the online world when you do it, there’s just so much noise and so much competition, even if you’re reasonably good at it. I wouldn’t describe myself was particularly great at doing any form of content.

You look at some of the guys who do this really well, people are really, really good at this in the online entrepreneur space. But a little bit less competition in the physical business area and I thought we would really stand out. I just applied all of that to Black Hops. We had a podcast, a blog. I wrote a book for Black Hops. We started releasing all of our recipes. We’ve done homebrew confs where we actually release our beer for people to brew it home. We’ve revealed our finances. We’ve done equity crowdfunding where we reveal all of our back-end information, just everything. Calls with investors we publish.

We just applied all the stuff that is not weed in the online world to the offline world. I thought that would be personally rewarding for me, and I thought it would be good for the business. It was because it gave us a bit of a point of difference. At the time, I wasn’t like I’m going to do these four things. It was just like, well we’ve got a cool story. I know we need to build a good brand because I learned that with WP Curve and how important that was. I sort of began to fall in love with the design after many years of doing it for other people.

The content was just in my nature. It was just something I enjoyed doing, and so I just did it naturally. On the community building side, again, it was taking that income report idea to this offline business where we’ve got all these different opportunities to build these little communities. Whether it be Facebook groups, social media, or in person at the taprooms and really just combine all of these things together.

I didn’t do it consciously from a point of view of having the four platforms. But reflecting on it, I just did the same thing I’d always done. It just has worked particularly well now and made sense to put it into a list of four things and write a book about it.

Rob: When you talked about creating content, the way you describe it just now is a lot about transparency like this is how we’re building the business. I think that can work but also you’re building a brewery and although I will drink beer, I don’t particularly care about how to build a brewery because I’m not going to build one, for me personally.

Do you find that when you create content about how you’re building the brewery with transparency that it applies to other brewers and other people that want to start a brewery business? It’s not all about transparency. There have to be other types of content. What type of continue is creating with Black Hops today that is applying more to your end-users?

Dan: The end-users, the thing they love the most is just every single beer we put out. I consider that to be content in a way—we put a lot of effort into the names, the designs, all of that stuff to do with launching a beer. Our community, our Facebook group, and online social media stuff are all about launching new beers. We’ll go to extreme lengths to make sure we put out something that people are going to like. We do a lot of that. You’d be surprised how many people who are really core craft beer lovers are actually interested in behind the scenes side of things as well.

Because we’ve done the equity crowd-funding, we’ve also got 600 investors. The 600 people investors and the 3000 people in our Facebook group are super interested in what’s going on. In fact, we just talked about the podcast before. I had a guy post in the group just a couple of days ago—a super fan, one of the investors, one of our early crowdfunding people in the group. I guess you would call him an influencer in the craft beer world. He brought a thread in the group saying, can you guys get back on the podcast. You’re doing this new project. I’d love to hear about it.

A lot of people do you like hearing about that sort of thing. But there’s a lot more we can do. Two weeks ago I did a photo competition, and I did that not in our own group but in a beer photographers’ group. This was a photographers’ group who are often sent free beer by people to take photos, and we never do that because we don’t really send out free beers to influencers, that kind of thing. We just want to make a good product for people to pay for it. I thought I’d do a competition in that group because I really like seeing the photos I was seeing there.

I thought it’d be cool if they took some photos of our beers. This competition went really, really well. It was a new audience. There were 50 people who signed up for it. There were over 50 photos submitted, a lot of which we can use on our own social media and help out our own social media. But it’s also helping that part of craft beer communities that are really passionate enough to spend hours and hours taking a photo of one beer.

For us, it’s really good content. We’ll keep sharing it over the next couple of months. It becomes a cool story. That kind of stuff that you’re doing for the really core people ends up resulting in a brand that other people enjoy for reasons that they might not understand. There’s a lot of love out there for our brand. The average drinker who finds out beer in a big retailer may not listen to the podcast, but we do get to benefit from them loving the brand because there’s a lot for it that comes up through this grassroots community.

Rob: A founder who’s listening to this, maybe a SaaS founder might be thinking, well, I’m more of a direct response marketer. I’m going to do ads, SEO. I’m going to convert people through a funnel, in essence, which is totally valid as well. It’s a different type of approach. What I’ve found is that coupling those two things—they’re multiplicative. When I look back at the businesses I built pre-Drip, they were all very direct responses. I like to call them left-brain engineer-y type stuff. I’m going to SEO this, I’m going to drive traffic and go through a funnel.

I started building Drip the same way originally but quickly realized that actually having a brand, telling a story, and having a community built around it—and of course, I was already part of the MicroConf community and had a voice through the podcast. But that gave us faster growth. I guess, maybe there’s some empathy, people like what you’re doing, and they like your product. I think that’s a big part of building a brand.

Then moving forward now, I’m working of course on MicroConf, TinySeed, and this podcast. All three of those are all about content, community, and of course, there are storytelling elements. I see people try to launch a conference event, an accelerator, a podcast, or even a SaaS app (for the most part), but I see folks try to do that without thinking about the brand, without connecting with a community. It’s really an uphill battle at that point because you’re just scratching and clawing. You’re more of a commodity player.

Does that ring true to you? I mean I interviewed a couple of founders maybe three months ago who do have a geolocation service API, and it is more of a commodity business. I’m not saying that’s a bad thing, but I do think that it puts a ceiling on your growth or on the level you can get to. For some people, that’s fine. Building a $300,000 […] SaaS Company that throws off $250,000 of net profit is a great business.

But in my shoes, I’m ambitious. I want to build 7-8 figure businesses. I think some folks out there want to too. I think it’s very, very hard to build something into the seven-figure run rate without some type of brand and community. What are your thoughts on all that?

Dan: I definitely agree with your last statement. I don’t tend to think there’s one way to do things. It doesn’t really ring true to me that combining the two worlds only because I’ve never really been able to the paid ads, direct response, and all that stuff. It’s just never been something I’ve been good at. I haven’t had any success with it. I’ve taken this other approach.

If you can do both then I think that’s probably good. I think that stuff can distract people a lot as well. I supposed you could say the same about content. Before WP Curve, I used to have a site that ranked number one in Google, and I bought it from a guy who was just mad about SEO. There was not content there. It was like a one-page website, just quite a while ago. It used to rank number one in Australia for website design, web developer, and all these terms. I bought it off him thinking this is going to really change my business.

At the time, I was paying for Adwords. I had a local consultancy, and I was paying $5 a click for some of these words that this guy was ranking number one in the free listings. It didn’t really change my business that much. I got a whole bunch of […] leads.

I tried to change the website so the brand was better on there. We have appealed to a higher-level audience, but it just didn’t really work. On paper, it looked pretty good, and it wasn’t a bad website for me to have bought, but it didn’t really realize what I thought its value would be because the quality of what was coming through there was just nowhere near what I was getting through my natural organic channels.

At that time, I think I wrote a post. A lot of the posts I wrote back in that time have all been removed because the WP Curve site is not there anymore, and neither was my old personal site. I got rid of it all. I wrote a post at the time about SEO, which was basically called Content Driven SEO, My Approach to Content Driven SEO, or something like that.

I basically just completely gave up on this idea of SEO. You mentioned Travis when we’re talking before. I was talking to Travis. I was doing the kind of stuff he used to do with all of the active legitimate SEO-type things that used to be what SEO people did. I just ditched all of that and just went all-in on content. That was my approach with WP Curve, and that’s my approach with the current business.

My business now is ranking better. It ranks for all kinds of weird words that you never would expect a small brewery to rank for. If you type in stout in Australia, stout in […] brewery, or local […] brewery—any of these terms, we rank first for. It’s not because we’ve done any SEO. We haven’t done anything analytically. It’s just doing the content. For me, that’s a better approach. I think if you can do both, it can be very powerful.

But there’s also no one way to do something either. I’ve always just been a fan of doing what works. If you’re listening to this and you are doing direct response stuff, you’re doing paid ads, and you’re crushing it, I wouldn’t change anything. I would just keep doing that. The only thing I would say in the defense of what the way we build our business is—and this is going to change over time. I think we’re going to do some more paid things because I think if you never do it, when you do, do it, you probably get a fair bit of benefit. But I think if you do it all the time, it kind of waters that down.

To date, we haven’t really done any paid ads at all. Our industry is one where, on average, companies are spending about 11% of their top-level turnover on marketing. For us, that’s over well over $1 million and we’re finding almost zero. In a business where the margins are just so tight, if we were to spend $1 million a year on marketing, we would go from a company that’s comfortably profitable to one that’s break-even, and it’s not something I want to do. It is an enormous advantage to figure out a way to market a business where it doesn’t cost you 10% of your turnover.

Rob: That makes sense. You’ve really taken some high-leverage, capital-efficient marketing approaches that you’ve learned from the startup world (I would say) and brought them into this industry where that’s not really the way it’s done.

Dan: It’s changing too. It’s really changing the way that people do things. It’s actually a really good industry to craft beer. There’s a hell of a lot of innovations, a lot of smart people, a lot of really creative people. A lot of other people are doing what we do now which is great. It’s really helpful for other people getting into the industry.

If we can help other people, it grows the industry as a whole, and that grows our business as well so that’s been really good. But then you see other businesses just take a completely different approach that works equally well for them as well which is cool, and with a lot of creativity and applying some things from other worlds. There’s another brewery down here where the guy used to work at Billabong in the surf world. He’s brought a lot of that stuff across the branding, video content, and those sort of things. They are absolutely crushing it as well. I think all of that is great.

Rob: Through TinySeed, we’re invested in one business that is a lot of SEO. They have 425,000 uniques a month that is pretty targeted. If a founder doesn’t want to create content and build a community, he wants to do SEO and he’s really good at it. He’s in a space where that works.

For you, for someone who’s written six books, used to run a Facebook community, has been really transparent with businesses he’s building, that’s your superpower because that’s hard to do. You and I take that for granted, but a lot of people either don’t know how or don’t feel comfortable doing that. They don’t feel comfortable sharing it. It feels weird to them or they’re not very good at it. It’s hard to create compelling content. You’ve really learned to do that well.

Dan: I’m glad you said I’ve learned to do that well because everything’s hard and people can learn to do it, that’s for sure. It might be easier for me to write a 2000-word blog post than it is for the next person. But if you’re going to be a founder, you’re going to have to figure out some way of marketing your business that works. You’re probably going to end up trying 1000 things like me and choosing 1 that works.

The one thing with content that I like, when I used to do the SEO stuff—way back in the day, I had a Twitter account. Remember Tweet Adder? That way, you do like to add or follow and you do like paying for links, this kind of link farms—this is all just not good for anybody. It’s just pointless and it doesn’t make you feel good. There’s a more organic approach.

If you’re going to do a lot of content that helps other people, the worst thing that’s going to happen is you’re going to use up a bit of your time, but as a founder, you got to spend your time on something. Something’s going to be hit-and-miss.

That time, I don’t really count too much, but you’re going to help someone else. Even if the marketing doesn’t work at all, even if it’s a complete disaster, which you probably want to be because if it helps someone else, ultimately will come back to your brand. Let’s say it’s not particularly good for you, it’s going to help someone else, so it’s a good way to spend your time.

Rob: I want to switch up the conversation. You tweeted a few days ago when you booked this time that we can get together you said, “Just booked in for a chat with the Oracle @robwalling – what should we talk about?” Why are you calling me an oracle?

We got some responses to that. I just wanted to talk through a few things, see where the conversation goes. Dustin Overbeck said, “Talk about what life is like post-exit for each of you, and what you’d have done differently knowing what you know now.” What are your thoughts on that?

Dan: I’ll talk about that. The reason I call you the oracle was because when I used to want to be a software startup founder—I do still currently secretly want to be a software startup founder—when I really wanted to be back in the day, I would just listen to all of your stuff and be like, Rob knows everything. That’s why I started calling you the oracle.

One thing I would do because this comes up with current business, ours is the kind of business that it’s really, really rare. I suppose you said the same about software where it’s really rare, very difficult to build it past a certain size without selling it.

There are not many companies that have been able to build breweries in Australia that are bigger than ours that are independent. There’s one family-owned one that’s been around for 150 years, so let’s not count that because that’s a really different story. There’s another big one that I can think of that’s had a few good investors. All the other ones that I can think of have got VC money or they’re sold. It’s just a difficult thing to do. It costs so much money. It’s hard to get the money together unless you reach the start with which we want.

The idea of exits comes up all the time. I don’t want to sell this kind of business mainly because I enjoy doing it, but also because I just really worry about what I would do if I wasn’t doing this. I felt it when I sold my agency between an agency and WP Curve. That year, I was so lost. I didn’t know what I was doing. I started so many different things. It was just scary.

A lot of people probably look at a founder that had success and be like, oh, they’re just going to do the same thing again. I just don’t believe that. I just think that we have an enormous amount of luck with the current business. We had really, really good timing. It’s going incredibly well. I just want to keep doing it and I do worry about what I would do if I wasn’t doing it.

I had the same thing with WP Curve. It was really, really lucky that I had Black Hops. It turned into a business that could support me and loads and loads of other stuff. At that time, I thought it was just going to be a fun little, local bar thing, and I wasn’t even working in the business at all.

I started doing all kinds of other things. I have tried to buy into an accountancy business. I started these explainer videos. I thought maybe I’d do my personal content, which ultimately, I didn’t feel like I really enjoyed that much when I didn’t have anything to talk about because I wasn’t working on anything. I was lost there for six months.

Listening to Josh on your show the other day reminded me again—without being offensive to him—it just seems like that should be working on stuff. I just feel like you sell something and you’re just going to be lost until you stumble across something else.

I’m super nervous about that, so I probably wouldn’t want to sell and the money wouldn’t change anything. I really think the money would not change anything. I got my enjoyment out of working on these projects, going into work every day, working with people, doing fun new things, and that kind of stuff. I’m not going to go, buy a big yacht, and spend all down a yacht. That’s not going to make me happy.

What I would change or what I would consider if you were looking at it would be I guess the two points. One is this idea of life-changing money. I’d call you out on that a little bit because I don’t think a quarter-million dollars is really going to change your life, depending on who you are. If it’s $1 million, $2 million, $3 million, I don’t really believe that’s going to massively change your life. If it’s tens of millions, maybe it will, but then I worry about what you’re going to do you don’t have anything productive to work on. I’ll be thinking about those two things.

Rob. Yeah. That’s good advice. For me, when I used the life-changing term, someone who grew up solidly working-class, not enough money to do a lot of stuff we wanted to do as kids. Money has always been a big concern. The first time I ever had $10,000 in the bank, that was a huge sigh of relief. The first time I ever had $100,000 in the bank, it was life-changing to me.

It wasn’t in the sense that I went out and bought a car. It was that I looked and I said, I could live for a really long time on that. I’m becoming less and less beholden to anyone else. At the moment, I have enough money in the bank, sold Drip. I have enough money in the bank. I don’t have to work again. For me, that was a life-long goal. It sounds like that wasn’t your life-long goal, but for me, I wanted to know that I could work on whatever I wanted whenever.

Dan: I don’t trust myself enough for that to be a good idea.

Rob: Yeah. I’m relatively Type-A. I am pretty motivated. I’ve always worked on things, on side projects, or main projects since I was a kid. I wrote booklets when I was a kid and sold them. I’m that weirdo.

When I think about selling a company and being like, I never have to work again, I always plan to work. I knew I’d do something else I just didn’t know what it would be. But whatever I did, I knew it could be risky and more ambitious because I had the backstop. That’s what I mean.

TinySeed will not pay off for years and years. My first investment was in 2011 I believe in WP Engine. We got all cashed out in a big private equity round. I believe it was 2018, maybe 2019. I think it was seven years. I’m just seeing the first dividend check from a startup that I wrote a check for in 2013. That was seven or eight years. But now that it’s happening, a lot of it is happening all at once. There’s a lot of them selling and there’s a lot of them starting to kick off dividends—the ones that decide to do that.

When I look at TinySeed, I literally took a stipend. Einar and I both did for the past 2 ½ years. It was not something I could have done if I didn’t have money in the bank. I couldn’t have started TinySeed, or I would have needed to be single-living in an apartment. I couldn’t live with my family in the house that we have in Minneapolis without the money.

For me, it’s made a difference, I got to be honest. If you talk to anyone who knows me, I don’t buy stupid stuff. I don’t buy expensive crap. I have a nice car now, but I bought it used. I buy $200 watches even though I want the $2000 watches.

Dan: You find it tells the time, right?

Rob: Exactly, but I like watches because it’s the only thing I can accessorize.

Dan: It sounds like whatever you sold Drip for was a lot more than I sold WP Curve for. That aside, the second part of the equation where you’ve got something else to move onto sounds like that fell into place for you very nicely, whether that was by design or by the fact that you were in the position that you’ve very happy doing this new thing with your time. That’s perfect.

For me, if I wasn’t doing this and my fallback option was writing books and doing the entrepreneurial community—that’s what I thought I would do after WP Curve. But then when I did it, I was like, I don’t enjoy this. I’m just one guy out of a sea of millions doing this stuff. It’s not really for me. I don’t really like it. I enjoyed telling stories about stuff I was working on, not just becoming a full-time business coach guy. I hated that.

The money itself is interesting. I didn’t grow up with a lot of money either. I just thought about this the other day. When I went on my honeymoon—I think I wrote this in one of my books—I read that Think and Grow Rich book. It said, write down, state your goal. I wrote down $100,000. I wanted to turn over $100,000. This was when I got married. I’ve been unmarried since then, so I’ve forgotten the day. It is no longer important as it once was. It was probably 2010 or something like that. It was a while ago. Maybe 2008, 2009.

The number I wrote down was $100,000. This was, to me, a very, very big number. If I could have my business turn over $100,000, that would be the end-of-the-book goal where you state this goal that sounds impossible that you achieve and it changes your life.

Our business last year turned over over $10 million and I didn’t even notice. I’m doing a presentation for investors now because we’re raising more money and I went back through the finance because we do the financial year. We don’t do calendar year. But I went back through the calendar year finances, and we passed the milestone of $10 million. I was just reflecting and I was like, my God, I used to be excited about $100,000. Now, I’ve passed $10 million in revenue and I don’t even notice. It’s crazy.

You just get used to whatever the number is and you get used to whatever the thing is. I might be living in an awesome suburb now but I’m just used to it. I don’t know if I’m any happier.

Rob: There are two things. There’s the arrival fallacy which is thinking, I will have arrived once I have $100,000, $1 million, once I’ve launched this company, or once I make it right. It’s a fallacy because you do get there. Then if you’re ambitious, you want to end up for the next thing. I’ve come to grips with that, and I feel fine with it now.

When I was younger, it rattled me more like, why am I never happy? You are happy for a month or two and then know that you’re going to do the next thing. Don’t kid yourself that you’ll actually have arrived because you’ll arrive for a month or two and then want to do something else.

Dan: It’s hard to just not fall into the trap of being like, oh, what’s the point of achieving something if you’re going to get there and not actually arrive?

Rob: Yeah. It’s different for everybody. For some people, it is that safety. I’ll give my career as an example because I’m an expert on it, I lived through it. I remember being like, I just want to have a job writing software that supports me. Boy, if I had that, that would be amazing because I just want to write code all the time.

I got that job. Do you know what? It was really cool for about six months, then I was kind of bored. Now, I wanted a job where I could work from home. This was in 2001 before work from home was a thing. Sure enough, I was able to work from home, and then it was like, well now, I want a software product revenue. That took five or six years to get to. It was enough that I could quit my job, and on and on and on. Then enough that I never have to work again. These were the milestones.

Early on, I would achieve them and think, man, then I’m going to be happy forever. What I realized, later on, is I’m not going to be happy forever but, (a) I will be happy for the short term and (b) I’m making progress along the way. It’s doing something that helps improve our life as a family. It helps improve the lives of those around us if you start a company and employ people. Otherwise, it’s like, why should I even start a company then? If I’m never going to be happy or I’m never going to arrive.

But there are reasons to start companies, right? To give back to the community, to create value for people, to create wealth for investors. I think everybody has their reasons. Legacy is another thing. I’ve started talking about that recently. I’m getting up there in the years here. I do look ahead and think, hey, someday I’m going to die, what do I want the world or the startup’s space to think about me? What do I want people to say when I’m gone? What do I want to leave people with? What is the legacy that I’m creating?

It’s way too early looking back at my 29-year-old self. It’s like, slow down. Just figure out how to make enough revenue that you could quit the day job that you hate so much. Just because I didn’t arrive at these steps doesn’t mean that it didn’t leave me better off and happier personally. I have been happier longer-term at each of these steps than if I was still working that same W-2 full-time job back in 2000.

Dan: Yeah. I guess happier in between if you know that you’re not going to get this big burst of happiness at a certain point.

Rob: Yeah.

Dan: I want to ask you not so much legacy. Legacy isn’t really something I really ever think about, but when I’ve heard you talk about the sale of Drip—and I’ve been through this as well—it sounded like there were just nights where you just stay awake and not just think man, you’re leaving so much money on the table. You could’ve been in a position that had multiple millions of dollars, now you’re in a position where you’ve got zero, and you’re just not going to be able to live with that. Is that accurate? That was part of the thinking?

Rob: There was thinking, which I regret a little bit.

Dan: That was going to be my question because the downside is you see the people who pushed through that and ended up building up to something way bigger than that they could’ve imagined. Do you look at that and be like, maybe I should’ve pushed through that?

Rob: Here’s the thing. I have never, never regretted selling Drip. I’ve never woken up a day and thought, oh my gosh, I wish I was still running that. I wish that was still my company because it was just a moment in my life and it was stressful. I didn’t sell because of the stress, that was a part of it. There were all these components.

The moment was like, I never have to work again, huh. Again, I never have to work again in my parlance is, I can work on whatever I want because that’s really what I want to do. There was a stress component. There was that component.

When you ask me about what I wished I’d done differently or what I regret, I think I stressed out too much. I was a little bit of a sky-is-falling person mentally. I’m not that way anymore but I would wake up and say, this could go to zero. All my entire life that I’ve put into this thing will go to nothing. But that’s really, really unrealistic that that would’ve happened. Even if there was a massive recession. Even if competitors continued to crank on us. Even if we got on the blacklist, which we did now and again. It wasn’t going to go to zero. It may be slowed down.

The bigger concern was that at the pace it was growing, it was worth a healthy multiple. A lot of entrepreneurs write it over the top. If you flatline, or you’re growing it 10% a year or something, the business just isn’t worth that much anymore. That was a concern for me, but frankly, it really wasn’t very healthy nor helpful for my mental health for me to be thinking about that all the time. It just wasn’t.

Dan: Sorry to bring this up. I feel like you’re getting grilled, but I am curious because you hear these entrepreneurs who go through the struggles really early on. Almost any big company you can think about like Facebook, the biggest. I think there was a point where they could’ve sold for $1 billion?

Rob: Yeah, something like that.

Dan: At the time, no one could foresee that it was going to be as big as it is now. The size of this thing just blows your mind how much attention it has gotten. Surely, Mark Zuckerberg couldn’t even see how big it is now.

What you were doing building emails, email is still so relevant. With the stuff that’s going on, they just seem more relevant than ever. These email companies seem to be going better and better. Do you ever reflect on how big these things could’ve gotten?

Rob: What’s interesting is I’ve watched for a year and a half when I worked there how big it got. With the venture injection of lead pages, it had raised $38 million. It started growing even faster than when I was running it. I don’t know the revenue today, but obviously, when I was working there I did. I saw that business triple the next year and triple again or whatever it was. It was fast growth.

It’s an interesting question, but dude, I don’t really want to run a big company. I don’t want to manage 50 people or 100 people. I had no desire to be the CEO of a 100 person company. I’m very much more a starter.

If you look at all these years with MicroConf, Producer Xander has helped us for seven years now. He got interviewed on a podcast. The host said, wow, you’re going to do seven or eight events this year. You do this in person. How big is your staff? Xander’s like, it’s just me and the founders. That’s it. That’s how I like it.

We hire some contractors […] same thing. The TinySeed team is just Tracy, Einar, and myself. Obviously, we will hire. We will get more people and stuff, but to me, I’m invigorated by building not by being on a large team. It’s that much of a detriment.

One could argue, okay, maybe you needed to grow more and then hire someone to manage everybody. Then you could just be the founder who’s doing stuff and no one reports to you. I have heard of founders. I think Dharmesh Shah did that with HelpSpot. I think maybe Jason Cohen was in that situation with WP Engine.

Dan: Your interview with Rand Fishkin was like that but almost like the downside of that approach.

Rob: Yeah, exactly. That’s what I’ve heard. I hear you. Would it have been interesting to take it further? Yeah. Do I feel like I made a mistake selling? No because I’m so happy with what has happened since then in my life. I would be stagnant right now. I wouldn’t have progressed, circled back, and doubled down so much on this podcast that I didn’t have the time to focus on that, on MicroConf, and then to launch TinySeed.

I got to be honest, Drip and all the apps before it was things that I enjoyed doing. They were definitely a means to building a better life for myself and my family. MicroConf, TinySeed, and this podcast really are so much more than that for me. They’re my life’s work if you think about it.

I’ve been doing them for more than a decade. The podcast has always been free even when we didn’t have a conference, we didn’t have any way to make money off of it. We’re just doing it because I enjoyed it so much. Same with MicroConf. We basically broke even the first few years we’re doing it. I was essentially working for free on it. We have to charge to pay for stuff.

That’s a long answer but that’s how I think about it. If I had stuck around another couple of years and sold it for 10 times more, I would like that more money, of course, but if there’s no difference between doing that and regretting it, I don’t regret that I didn’t do that.

Dan: Right. You feel like you got the balance right where you’ve gotten out at a time where it’s a life-changing amount. You’ve been able to do other things. It’s worth it.

Rob: That’s how it feels anyway. It’s hard to know.

Dan: It is hard to know. It’s something I think about because this business that we’ve got is difficult. It can be really difficult. We’ve been doing it for six years. It’s been a long time. It’s big now. We got 60 staff, we got 3 sites, about to be 4. It’s not a small thing, very complicated to run a physical products business. There’s always so much going on.

When COVID hit, we just got to the point where things were going well. We literally just sat around with me and my two co-founders and we’re like, I don’t know what to do. We had these things on our agenda to talk about. We tried to talk about some of them, but literally, our three top rooms and all of our customers’ businesses were shut down overnight.

It was like there’s nothing we can talk about that’s going to help at all. We’d probably get out of business at this point. We’re going to lose the money of our 600 investors. We’re going to lose all of the money we’ve put in. All of this is going to get a zero.

The crazy thing is that in the 12 months of 2020, we grew by 100%, which we’d done every year in the previous 6 years. We’ve maintained our really high growth, which is tough for the physical products business. We became profitable and very comfortably profitable. Our brand went to a whole new level.

It ended up being the best year we’d ever had by a mile, which we obviously couldn’t predict at the time. I felt like at least I’ve been to the brink where it’s like, I know what this feels like if I’m about to lose everything.

I also think that selling, to me, is in a way a bit of a failure as well. I want to just talk about breweries because I got a question for you as well. With the breweries that I think of, there are success stories where the breweries had become profitable, listed on the stock for hundreds and millions of dollars, and then sold. That’s a great success story as far I’m concerned.

But the ones that sold—these breweries started as independent breweries because they want to compete against the major multinational corporations. The independent breweries don’t feel like the majors are doing a good job. They don’t feel like they’re making really good beer. They don’t think they’re community-friendly. All that stuff. They’re fighting against them.

What almost always happens is they end up selling to them and then at the end of that say, oh, it’s been a good run. This company is the right fit for us. It’s like, that’s […]. You’re selling to them either to get rich which, to me, I don’t think is the normal reason. I think the normal reason is you’ve just gotten to the point where you can’t do this anymore financially or maybe psychologically. Probably 50-50 in that. To me, that’s a failure.

My question to you is, I’ve always wanted to be a software startup entrepreneur and the dream really is to start a business, it’d be profitable, it’d not be so stressful that you have to sell it, just make money and create software. There must be tens of thousands of people or more who listen to this podcast who want to do exactly that. Is that even a realistic dream for people?

Rob: To build a business to sell it?

Dan: That to not sell it.

Rob: Oh, to not sell it. Absolutely. I will say, for the record, I don’t view building a business and selling it as a failure. I think you and I don’t view that the same way. I think that building a business for the long-term, especially a software company, absolutely. Most people don’t. What’s interesting is most people don’t. They see the example of Basecamp or, let’s say, Mailchimp and they say, you can bootstrap a business and I’m going to do it forever. That’s cool.

Dan: That’s the thing. Basecamp is so often brought up as an example of how to do this, but they’re just such a random example. They were literally the first people to do it. Is it even something you can do? With your decision to sell, how much of that was motivated by the fact that there’s so much competition out there, there’s so much pressure on the process, and all of that?

Could you even keep doing this without getting VC money, which introduces a whole new level of complication? I meant much of those things. Could you have just kept running it and been comfortable, happy, profitable, and just done that forever?

Rob: Yeah, we could have if I did not have aspirations beyond it, for sure. One of the other things that if I have any regrets or I would have done differently is I think we were a little undercapitalized. I should have raised an angel round. I would not have raised venture capital. I have no desire to go on that treadmill, but I probably could’ve raised $300,000–$500,000 pretty early on at a good valuation. That would have made things so much less stressful.

I saw, once we got acquired, how much money actually helps make you less stressed because you can just pay for problems to go away. That was one thing I would have done. Absolutely. Drip was growing. It was bootstrapped, growing, and profitable. There is no doubt.

There was competition. I don’t even remember what our growth rate was when we sold but it was 10%, 15% a month. It was a healthy growth still. Are there plateaus? Yeah. You can look at anybody on that Baremetrics public metrics thing where you got to demo.baremetrics.com. Is Baremetrics actual metrics? But convert is on there.

You can see their plateaus, but you can build a great SaaS business, and they’re highly profitable. Growth is expensive. The faster you grow, usually, the less profitable you are, but once you start to slow that growth down, that’s when a SaaS company—even at scale, with 20, 50, 100 employees—can throw off 30%–50% net profit, gross margins 80%–90%, and net profit can be that.

If you built a business to $10 million, do we know examples of it? Absolutely. Come to MicroConf.

Dan: Do you know examples of it? The other piece of that is the funding piece. I remember when I used to listen to your podcast and other podcasts in this world, I didn’t know anything about raising money. I still never ever raised money until we started Black Hops because we just couldn’t afford to build a brewery ourselves. Could you do this without raising money?

There are probably a lot of people who are listening to this who don’t even know where to start and don’t want to get into that world at all.

Rob: Absolutely. Most people don’t. We do a State of Independent SaaS Survey through MicroConf and we just put the report out. Of all the people in that survey running SaaS companies with revenue, I believe 12%, 13% had raised some type of funding. The other 87% had not.

Yes, I absolutely know people doing seven and low eight figures who have bootstrapped and who are shockingly profitable. Again, 40%, 50% net margins. You can move faster with funding. The way that you do it if you don’t raise funding? You just move a little slower. You have to be happy with that.

That was something I always struggled with is, I was in so much of a hurry. I wanted to get big, get faster. Not at VC pace because I didn’t want to do it recklessly. It was still organic, but I was like, I want to be $1 million, I want to be $2 million, I want to be $5 million. I was a little more impatient. I don’t know if it was healthy or not. Yeah, absolutely.

Dan: I’m the same with that. I’m fearful of no growth because that actually happened to us with WP Curve. We didn’t really have any plateaus at all until we got to about $1 million in recurring annual revenue. Mostly recurring, we had some one-off stuff but it was almost all recurring. Then we didn’t really grow from that point on. That’s scary.

In that case, it was a profitable business. It was comfortable. We didn’t have to do a lot of work to keep it going. It was great. Slowing growth maybe is not as scary, but the idea of a business stops growing to me is super scary.

Rob: It is because it affects a lot of things. To put a pin on it because we’re running long, when I think about can you build a SaaS company, bootstrap it to profitability, and then run it for 10 or 20 years? Absolutely. There’s no doubt and I know a bunch.

Again, if you come to MicroConf, get in MicroConf Connect—for folks listening if you want to meet other folks doing that. The interesting thing though is if you want to do that, great. That’s actually one of the reasons we started TinySeed so that you can take TinySeed money. You’re still mostly bootstrapped. Taking $120,000 doesn’t change most businesses.

You’re doing $20,000–$40,000 a month and you take $120,000, it just doesn’t actually change your business that much. The money doesn’t change it, but we’ve supported companies both that want to run it for the long term and pull dividends out or companies that do eventually want to sell.

A lot of founders think they want to run it long-term. That’s cool and you can do that. Let’s say you’re running this business and it’s doing $2 million a year and a SaaS company. It’s throwing off a 33% net margin. What is that? About $678,000 a year in net profit. That’s awesome. It’s a great business.

If you were growing, you could sell that business in the realm of $10 million, $8 million–$12 million I would say. $12 million may be high but let’s say $8 million–$10 million. If you really want to run it and that’s your thing, then obviously do that. But it’ll take you 15 years to make that much money off that business as it stands.

Obviously, it’ll probably grow some more. You’ll make more money than that over time so it won’t really be 15 years. That’s the point where a lot of SaaS founders find themselves and then they realize, oh, I thought I wanted to run this forever. Either you get tired of it, it’s stressful, there’s competition, you don’t have the passion for it anymore, or maybe it’s just like, man, my husband or wife really wants me to take six months off, spend more time with my family.

That’s the decision point that some founders find themselves in. It’s a hard decision. It depends on who you are and what your goals are. That’s how I think about it.

Dan: That’s a good point. Wanting to do something different is just a huge thing. If you are an entrepreneur or a founder, you’re attracted to the idea of doing new things. That’s something I’ve always struggled with.

After I do something, sometimes it could be weeks, it could be months, it could be years, but eventually, I just get sick of it. Thankfully, it hasn’t happened. I have ups and downs of motivation with my current business, but it hasn’t really happened with this business. Maybe as you get older a little bit, you lose a little bit of that hustle. Maybe that’s what’s going on.

Rob: There’s hustle but I also think maybe you get wiser and you start doing things that you think will make you happier long term rather than doing them perhaps for short-term gain, for monetary gain, for it’s just a great business idea so I’m going to do it. Then you get in, two years in and you’re like, it was a great business idea but now I don’t care about the business anymore.

You didn’t start a brewery for that. You started it because you’re passionate about it. It feels like you’re living a pretty good life, man. I’m super happy for you just having watched you on this journey for all these years.

Dan: Thanks. I feel incredibly grateful. Really, really amazing. I miss this online startup world a little bit, but you’ve given me some hope because one day, when I sell my brewery or get someone else to run it, I can get back into my dreams of being a software startup founder and I’ll come to MicroConf.

Rob: That’s awesome. You are @thedannorris on Twitter. Folks can check out your new book, Compound Marketing, as well as The 7 Day Startup if they haven’t read that. I’ve read both and really enjoyed it.

If folks want to drink some beer, Black Hops Brewing. Is Black Hops only available in Australia, or do you sell in other countries as well?

Dan: Yeah. Just Australia. We got a very, very healthy local market of beer drinkers in Australia so there’s no need to get outside of Australia.

Rob: Totally. Thanks again, man, for coming on the show. I really appreciate it.

Dan: I enjoyed it. Thanks, mate. Good to talk to you.

Rob: Thank you again to Dan Norris for coming on the show. I really enjoyed that conversation. I hope you did as well. It’s about time to wrap this one up. I’ll be back in your earbuds again next Tuesday morning.

Rob: Welcome once again to The Startups For The Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing ambitious software startups. That’s a throwback intro. If you’ve been listening for more than a couple of years, you might remember that phrase from the prior intro.

Thanks for joining me today. I’m your host, Rob Walling. This is episode 538, where I welcome Einar Vollset back on the show. He’s my co-founder with TinySeed and we talk about listener questions today. We zip through (I think) maybe 6–7 questions, about when to sunset a product, filling out enterprise security assessments, acquiring a company where the previous owner had sold lifetime deals and not disclosed it.

Before we dive into that conversation, I wanted to let you know that our next MicroConf Remote is coming up at the end of March. You can head to microconfremote.com for info about that. We’re diving into early-stage marketing tactics. We’re going to have five sessions where each one is a case study with numbers looking at a specific early-stage SaaS marketing tactic.

If you’re at the place where you’re scratching and clawing for first users or first customers, I’d say, if you’re maybe a sub-10,000 MRR this MicroConf Remote is designed for you. Microconferemote.com to check it out and get your ticket. With that, let’s dive into listener questions with Einar Vollset.

Einar Vollset, welcome back on the show, sir.

Einar: Thanks for having me.

Rob: Absolutely. You may be hitting that Steve Martin on Saturday Night Live mark, where you perhaps are the most frequent guest.

Einar: I don’t know. I think I’ve been like three, maybe four, or maybe it’s more than that. I don’t remember now.

Rob: I think it is.

Einar: It could be.

Rob: Yeah, because you were on at least one of the startup news roundtables, then QA, and then we talked about company types, remember? LLCs versus C-Corp and all that.

Einar: Oh yeah, and then we did one on the PPP-type thing, didn’t we?

Rob: Yeah, I think so. There’s a lot. It’s good to have you back, but for folks who are less familiar with what you’ve been up to, your experience, you have a PhD in Computer Science, but I won’t hold that against you. You actually taught at Cornell for a couple of years, you were in Why You Did Startup, you were in YCombinator in the 2009 class. You have a lot of experience with enterprise sales, with cold outreach, cold outbound email. Live experience in M&A, specifically the sales side of SaaS. You founded a company called Discretion Capital, that is basically the  kind of the go-to that I refer people to if they’re like, hey, I run a SaaS app doing 7–8 figures. I’ve been approached by private equity or by a strategic, and they’ve made me an offer. There are people who do this for a living and you are one of those people with a lot of expertise in it. Obviously, there are other folks working there because you and I are focused and working hard on TinySeed.

Einar: Correct

Rob: We just closed Fund II.

Einar: Our first closed. Let’s call it the first closed. Come on, give me some more time to fill this sucker up.

Rob: I keep saying closed, and what I mean is first closed, so doing well with that. Then obviously batch three applications are in and we’re working through those. While we don’t have enough going on, I figured I’d pull you on the mic, and we’ll answer some listener questions today.

Einar: Why not?

Rob: All right. With that, let’s dive into our first question. It’s a voicemail from Phil at itscircletime.com.

Phil: Hey, this is Phil from itscircletime.com. We provide online classes for kids across the United States of America and Canada. We match them with high quality teachers that will help them socialize and continue their education. When we launched the company earlier this summer, we started with the preschool-targeted audience, bringing the Circle Time experience online, meeting up to 10 other kids of their similar age, 3–6.

Since then, we started a new course called Kinder Prep. It’s targeted towards 4–6 year olds who are entering kindergarten or are struggling and maybe they’re distance learning. This has blown up well beyond we could ever have hoped for, which is awesome. Now our run track for $450,000 a year and the run rate in only about four months of our history.

However, now our new service offering is dwarfing our original in revenue. I’m curious, when would you consider possibly sunsetting or winding down something? Even though it’s only making $8,000 of our monthly revenue, that’s about a third of what the other product makes, and the new one is growing leaps and bounds. Anyway, just want to pick your brain and see what you thought. Thank you.

Rob: Thanks for that question, Phil. Phil sent this voicemail in about a month ago. We are able to get to it already because voicemails always go to the top of the stack. If you’re going to send us questions, send it to questions@startupsfortherestofus.com. You want an answer quickly—at least within a month or so if that’s quickly—send in voicemails.

Some of the other written questions we’re answering here are from October of last year. I’m sorry. It’s been a little bit of a backup, Phil gave a little more context in writing and he basically broke it down, like we had this offering, it grew to $8000 or $9000 a month, then we added a second offering and that far outpaced it, and it’s three times the revenue. Pretty close one, it’s 75% of the revenue is the new course.

He said the original service is only doing $8000 or $9000. It’s a lot more complex, it has three membership plans versus the new direction with a single plan. His question in the end, he says, “I guess my core question is what factors would you look at when trying to determine when or if it is a good time to sunset a product or service? I’m in between a rock and a hard place with this issue and I’d love to hear your advice.” So many thoughts. What do you think, sir?

Einar: I’m a great believer in focus through degrees. It depends a little on how much time is being taken up and efforts being taken by the original product. But from what we’re hearing, this is something that’s three times as large in a much shorter time. Anything that detracts from that growth I would be wary, even if a bunch of time has been sunk into the prior product.

Rob: I’m up in the same boat. He said that the new product that is taken off is also three times the price of the previous one. That instantly makes me think, could you triple the price of the first one and have similar numbers? My inclination is usually entrepreneurs want to do too many things. We have shiny object syndrome and, as you’re saying, focus is (I think) a core value that we both share in that respect.

I would wrestle with the idea that either the new one just has better product/market fit and you go all in on that. I just cannot imagine having something that is making three times the money and it’s three times the price, meaning you have far fewer customers. Or I guess you have the same amount of customers doing three times the revenue. I cannot imagine not sunsetting the original one or at least tweaking the original one, like I said, by tripling the price for new people. Or messing around with it to see, can I get the same profitability or the same level of effort out of this?

He also said there were three membership plans. This is more complicated with the old one, so do away with those and go to a single plan. Maybe you ran for other people for now who are already in it and just try it with new folks, or maybe you don’t. That’s the hard part about this. There’s a lot of details to it and my gut feeling is you’re going to sunset the previous one, unless you can figure out tweaks to make it as profitable and as easy to run. If not, there’s no reason to spend equal time on two parts of your business if one business is making three times the money.

Einar: I agree. Once you found something that’s growing three times as fast, I don’t know if it’s still going three times as fast, but certainly at least that, by the looks of things, you would be silly to divert your focus onto something that isn’t doing as well. That’s my view.

Rob: I think you brought up the sunk cost fallacy, which is a good thing to think about. A lot of us get attached to our first idea or we get attached to something that’s working. It’s hard to think about all the hours we put into it. You don’t want to do that in this case. Thanks for the question Phil. Hope that was helpful.

Our next question is from Matthew. The subject line is Split Personality Marketing. He says, “Hi Rob. While listening to TinySeed Tales Season Two, I was listening to Brian and Scottie talk about their move up market with Gather.” I’ll cut in here, Gather, TinySeed, batch one company and they have SaaS for interior designers. Back to the email. He says, “I got to wondering if it’s possible to target a whole new audience as you grow by spinning out a ‘new’ product or even a ‘new’ company that’s just a white label version of the original product, probably with different default settings, different features enabled, and different marketing/support channels.

In some ways it would be a bit like turning the enterprise plan into the enterprise product. I’m guessing it could be dangerous to split your focus, but if you know anyone who’s tried it and succeeded, or tried and failed, I’d be fascinated to hear their take. Intuitively, it sounds like a terrible but seductive idea trying to have it all, but I can’t help feeling empathy for the smaller fish, Brian and Scottie mentioned who are still arriving at the Gather site, but being turned off or turned away by their move up market.” What do you think, sir?

Einar: I’m not sure about this one, I have to admit. My gut feeling is, why isn’t there room in the existing brand to have a wide range of price? We’re talking about price differences. Presumably, that’s what’s going on here. I’m a little unsure exactly what he means by white labeling and making a new company or a new plan. Presumably it’s a price and positioning thing, and presumably mainly a price thing. My question then is, why isn’t there room in the existing brand to have a very wide range of prices?

I think a lot of people are almost anchored to their own price in a weird way, like people say, oh, I have a $19 a month, a $49 a month plan, and a $99 a month plan. But we have some bigger customers or if you position slightly differently, maybe we can charge $1000 a month or $2000 a month. That’s probably true. It’s probably more often true that not if you’re selling to the enterprises.

I still think the easier solution is just lean into an enterprise plan and have it be a call us–type situation, where maybe you thought about the things that make it an enterprise plan, whether that’s single sign-on, or custom contracts, or whatever it is that makes it a whole different price point for enterprises.

That would probably be my main question. If it’s the same product, it’s just a different branding and the different price, then why not build that into the existing product? Unless it’s specifically positioned as the cheaper alternative in the market, which then you have a problem. But then, you have other problems, in my view.

Rob: I think he’s talking about, remember when Brian had first started TinySeed, their lowest priced plan was between $29 or $39, I forget. By the time they were 6–8 months in, I believe those prices were like $200–$250 now. That’s what he’s talking about. They did at the enterprise but they just left out the bottom of the market.

Einar: But I think in some cases like that, there just isn’t a bottom of the market. Particularly for B2B SaaS stuff, if you’re meeting somebody particularly with something like what Scottie and Brian have, this is a software used full time. A lot of the time you’re using the software if you’re in this industry. Who are the people who are spending that much time in on some software, and it’s critical to their business, but they’re not willing to spend $200 a month? Does that really exist or are these sort of wannabe businesses almost? I would buy it if it was $39 a month. Would you really though? Would you use it? I don’t know.

Rob: To Matthew’s question of forking off this higher price plan and making it its own entity, I think that is an absolutely catastrophic idea. I hate it. I hate it with the heat of a thousand burning suns. The one thing that we have as entrepreneurs is our time and our focus. I guess that’s two things, but that’s the most important thing.

Can you imagine? Okay, I’m going to go register another domain name, because it’s not the code, it’s not the product. That’s the problem. My guess is Matthew is a product person or an engineer. We think, oh, if we have this code, why can’t we just have two of them. You need two sales teams or two sales people, you need two support email inboxes, you need two people supporting it, you need a domain name.

Now, how do I get drive traffic? Well, SEO. SEO is hard enough on one site. Now, we’re going to split our focus? We’re going to create content, on and on and on. It’s all the things you don’t think about. Sure, copying the code and flipping a few bits to the defaults are different. That’s fine, that’s done, but it’s everything that’s not the product, that is like you’re running two companies now. Frankly, you’ll grow twice as fast, if not faster if you just focus on one of them. This is like trying to make a decision and avoid loss. So many decisions involve some type of loss.

Einar: It’s a trade off.  I think it’s one of those things. To me it sounds like if I were to guess, I think he’s just sort of scared of having a higher price plan or having an enterprise call us–type plan and ask for 20 times as much for the enterprise plan. That’s what it smells like to me. Then it’s like, okay, I’m going to make this whole different brand and it’s the high-end brand. Unless you’re a Toyota and Lexus, I don’t think it is a good idea.

Rob: That’s the thing I’ve been talking about a lot on the podcast lately. There’s low-touch funnels or no-touch funnels. People come, they sign up, they self serve. Usually it’s $50 or below-ish. Those are great little businesses. Frankly, if you have a super high volume, it can be a great medium-sized business. You can get into the definitely six figures and often low seven figures.

Then there’s the high-touch businesses which are going to be more enterprise-y. And then there are dual funnels where you have a low-touch funnel and a high-touch funnel. Imagine we are recording right now on software called Squadcast. You can imagine Squadcast has people recording fly fishing, very almost hobbyists, not almost, but they are hobbyists who are paying whatever their lowest price plan is on Squadcast, $9 a month to record the podcast.

You can imagine a Squadcast gets approached by a large podcast network and they should be paying or are willing to pay thousands of dollars a month. That is an amazing, amazing funnel to have both of those.

We have other TinySeed companies who are in that position. You heard Craig Hewitt talking about it on his podcast, obviously the lowest price, Castos. Once again, we are hosting on Castos. The lowest price plan there is (I believe) maybe $19 a month. But then, they also have this private podcasting. They’re catering to these enterprises and (I think) people with big personal brands, Those are much larger deals.

If you have the dual funneling and you can make that work, that to me is the golden ticket of SaaS. Again, you can totally make it with low-touch, you can totally make it with high-touch. We see companies succeeding with only one, but the idea of having both but splitting them into two separate products to me gives me some heart palpitations here thinking about it.

Einar: Shopify has the same thing. They have their low-cost, self-serve, start dropshipping thing, and it’s easy. Then they have Shopify Plus or Pro, or whatever it’s called, where it’s $2000–$3000 a month to get a Shopify Pro account. The fact of the matter is, I think a lot of the Shopify Pro—I think it’s called Plus—customers started out on the lower stuff and then they graduate. They grow to trust the brand and then they step off to the Pro Plan or whatever.

If you were to separate it and it’s like, Shopify is only the low-end stuff, then you might actually put off some of the larger shops, where all the medium-sized shops were like, well, let’s not go Shopify because they don’t have a top-level plan or the enterprise version that we might eventually need. So yeah, I agree. I don’t think it’s a good idea.

Rob: Yeah, and I think for Matthew, part of his question was he almost felt bad for the individual interior designers who are hitting their site and being shell-shocked, the price raised, the $200–$250 price point. Like you said earlier, if they’re serious and they’re in this software all the time, it’s that important then they should be willing to do it. Maybe if they really do want to pay $40 a month for something, then you just refer them out to your cheaper competitor who is staying down market0 That’s the other option.

We used to refer to Drip. Some people come to us, they say, oh well, I only have a 1500-person list and we’re a non-profit. Oftentimes it was like, well we can either give you a discount or go to MailChimp. They’re free. It’s free up to 2000. We were not in it to make $50 a month from everybody that came through. Sometimes they were just better options. I hope that was helpful Matthew.

Our next question comes from Olivier and he has a success story plus questions. This one’s actually funny. He said, “Hey Rob. I just wanted to thank you for taking a long shot in episode 515 at the 28th minute mark when answering a listener question. The question was from Martin and it was about where to look to find a co-founder for his startup activity messenger. You said he might want to look at his first couple of clients, and here I am one of his early clients who is now officially co-founder of Activity Messenger.” Rob Walling, founder matchmaker. Am I right?

Einar: Nice.

Rob: That’s super cool. I love to hear stuff like that. He says, “I’ve been running a kids sports business for the last 10 years with another partner that has been mostly running by itself for the last 2 years.” As a reminder to listeners, Activity Messenger is aimed at kids sports businesses. It’s a product built for people like him. He was using it as a customer and now he is involved as a co-founder. He said, “I have two questions for you. The first is any tips on how I can use it to my advantage of the fact that I am a client as well as a co-founder in marketing sales or during on-boarding calls?” What do you think about that, Einar?

Einar: I would lean into that. I’ll be like, yeah, all these boffin software guys. They don’t truly understand the industry like I do because I’ve been there and done that. Certainly, I think that makes sense. And the content stuff, all that stuff, I would certainly lean into that. People like to see, oh, people like me are using this stuff. In general, that’s why you have customer testimonials and things that say, oh, companies like ours use this. But if you have a co-founder or someone in the business who’s been in the industry, sort of can speak the lingo, and be that side of things, I do think that’s helpful.

Rob: Yeah, I think that’s hit the nail on the head with. I was in this situation with my sports business. This is how it served my needs. I mean you can do that as examples and you have credibility. The other thing that I used to do because I don’t like sales, I don’t like sales calls, but I’ve done them when I need to, especially in the early days of Drip. I did some for HitTail too. Especially in the early days of Drip, I would get on the call and I’d say, hey, I’m a co-founder. I’m not a salesperson. I’m actually a developer-turned-software entrepreneur. I’m not gonna do the sales thing to you. I’m going to talk to you about the product, ask me questions.

It instantly disarms people, whether it’s right or wrong. There’s a stigma with salespeople of, they’re gonna try to talk me into blah-blah-blah, but I was like, look, I weigh in every day on what features should be built and I’m a user of that. We built this to solve our own problems with this other SaaS app. There was instantly some credibility and a bit of (I believe) I got the benefit of the doubt on a lot of those calls because I was not only a client but a co-founder as well.

Einar: Yeah, and I think you should lean into that. That’s probably a good case for that industry as well.

Rob: His second question, I’m not sure if how much I have to say about this one but he said, “I’ve had extensive success in marketing and sales in the sports and leisure industry, selling an in-person service in the B2C world. Any tips on how to translate those skills into SaaS in the B2B world?” I have some fleeting thoughts but no major connections for me moving from one to the other.

Einar: No. Marketing and sales. I guess maybe marketing is more similar than sales. I’ve never done B2C sales. I’m not really familiar with it, but the way that I think about B2B stuff—particularly high-end B2B sales—is that it tends to be almost like an outsource consultant. That’s what you are. Your stance should almost be like, we have this solution. If you use this solution then you’ll be better off. I’m the one who understands enough about the problems you’re facing to be a trusted advisor and choosing what software to go with. I don’t know if that translates from the B2C world […] to sports and leisure, I’m afraid.

Rob: And he wraps up his email. He says, “I’m also a father of two young kids and I love how your podcast is geared towards people who don’t have 80 hours a week for their startup. I really appreciate the episode you mentioned recently about raising entrepreneurial kids on the ZenFounder podcast. It’s one of the most popular episodes. I’d love more of those. Thanks for taking the time.”

Yeah and congrats, sir. It’s super cool to hear the success story of you guys pairing up. I would love to hear updates. You can email them in or send them as voicemails whenever good things happen and let us know your progress. I’m sure people like to follow that story.

Our next one is a good one. I think you might have feelings on this one. What’s funny is these all come in via email and I actually responded to him via email because I was so worked up about this. I’ll let you answer and then I get to tell you what I emailed. It’s from Dan and he says, “Hey Rob. We recently acquired a SaaS that’s making about $4500 a month,” so $4500 MRR. “We’ve since discovered that there is a significant number of lifetime users in the app. The previous owner sold them a lifetime plan for a one-off fee 2–3 years before the business changed hands. Now we’re wondering what to do with these users. Can we offer them a deal and ask them to pay something on a recurring basis or do we just eat the cost. I wonder what you would do. Grateful for your advice and everything you do.” What do you think?

Einar: Yeah.

Rob: My first two sentences in my response to him is that the seller screwed you. This is a […] move to not disclose. And depending on what contracts you signed, this could be seen as a breach of contract or fraud for not disclosing.

Einar: Lifetime is funny. You do the M&A stuff then there’s this concept of working capital and how you account for things. Do you do cash accounting, do you do accrual accounting, all of these stuff. Then, not as extreme in case of this, if you’re selling on January 1st (say) and on December 30th the year before, you hold a big annual sale and you sell $1 million worth of software, if you then sell the business on January 1st or 2nd, then the buyer, very sensibly would argue that okay, you have to leave the vast majority of the cash for the sale that you just did in the business because we are the one who have to service this. We have to provide the service that’s being used.

This is the kind of thing that at least $4500 MRR is not, probably, I don’t know. This depends how the deal was done, but usually, these kinds of things are in place. But for a bigger deal, like $2–$5 million ARR, $10 million ARR, certainly these are things that would be taken against reps and warranties, like how clawback closes to say if you found this out afterwards, you could go after the seller and say, hey, you didn’t disclose that 20% of your customers aren’t paying us and we were supposed to service them for life. That’s a pretty big piece of information to leave out in the sales process for sure.

Rob: Yeah. As I said, I’m pretty bummed about it. I actually asked him for some clarifications and I said how many are there, do you get support requests from them. And he basically said, “We do get customer support requests from them. We’re paying for an agent to answer from everyone and those are included.” I was asking what the actual costs or is this negligible. He basically said, “We have 197 active subscribers in Stripe who are paying customers, then we have 122 lifetime customers paid a one-time fee.” It’s hard to tell how many of these are active on a regular basis, but like I said in my previous point it looks like quite a few are active judging by the volume of customer support requests.

I feel the same way. The seller screwed you. I said, “I don’t know your purchase price, but depending on how you feel about this, it might be worth freaking out to the seller and basically saying, you owe us some money back, like you breached the contract.” Basically talk to a lawyer. If you paid $30,000 for this, then it’s probably not worth any of that, but if you paid $150,000, $200,000 for this then it starts to become a thing where getting a lawyer to write a letter is an issue.

Einar: It depends how you did it. A lot of the time, these templatized deals for the smaller stuff, there is some stuff in there that’s, like did they make reps and warranties in the asset sale or whatever that they now have breached? It could be that there are certain things in there that says, yeah, we disclosed all XYZ. There could be some remedies there. Purely tactically going forward, the question is yeah, I agree. I think the seller at least was a little coy about the truth.

Rob: Disingenuous? Yeah.

Einar: But I think going forward, it’s like, okay, what would I do with those customers. It’s not the customers fault. They paid for a lifetime thing. Should they be punished because the company has changed hands? My gut feelings says no.

Rob: Me too.

Einar: It depends. Is there something you can do to not keep upgrading those people? If you’re adding features, then just don’t add it to these guys’ plans. Eventually, some of those people will be like, hey, I want this feature. In which case you’re like, great, now you need to upgrade out of your lifetime plan or whatever. That’s probably the approach I would take.

Rob: Yeah. One other piece of advice I gave him was, “In your shoes, I would try to assess the actual damage so if you have a last login date in the database, you look through the 122 customers to see how many have actually logged in.” My guess is it’s not as many as you think because churn. It’s just simple churn. Even when you’re paying for things, often people stop using it. If you only have 5% of those people churned per month and somewhere sold 4 years ago. That’s 2017, over three years.

There’s a strong possibility that maybe it’s only 30 people. Thirty of these lifetime, 50 of these lifetime are still using it. I wrote this whole email and then I said, “My gut is that this is not worth pursuing, and if the company made a lifetime deal…”

Einar: Not from the legal side, yeah.

Rob: Like you said, get the existing customers to pay more. I think your time is better spent marketing and sales rather than looking backwards. This is a one-time thing, it’s a big shock, but if you start adding 10–20 new customers a month, which maybe you should, 10, 20, 30 a month, then this will become inconsequential. Again, not knowing every detail and there’s a principle to it. This is where that emotional side comes in. The principle is holy […] in my pants off right now.

Einar: I’d be pissed will be my principle.

Rob: But is it worth the time, effort, and the energy to go back into it. That’s where I would try to determine how many are actually using it. All right, hopefully that was helpful, Dan. Super bummed for you man. Don’t sell lifetime deals if you’re in SaaS. AppSumo is probably the one exception I would say and if you’re going to sell, then you disclose when you exit. That hey, we do have these users and you can give reports of this is how much they used on whatever basis. And also know that if you do an AppSumo deal or you sell lifetime deals, there’ll be some type of ding against you. You may have to give something back to the seller as you’re going through. Hope that was helpful.

Next question is about something that we hear about quite a bit. It’s how to do enterprise security assessments. It’s from Philippe. He says, “Hey Rob. First of all, thank you for the amazing show. I’m a new listener but already in love with your show and consider it the best podcast for running a business. I’ve discovered so far and I’ve tried a lot. I have a specific question on enterprise security assessments.

I run a SaaS app. We’re a small startup, started as a hobby, we’re now 6 people, $25,000 MRR, we’re averaging 7% month over month growth for the past 2 years. Every now and again, we get some individual users from big enterprises and they usually send us a big information security self assessment questionnaire with 150 questions or more that if we passed, it gets us on their internal list of approved vendors.

Unfortunately, most of these questions are clearly targeted for bigger companies that have a lot more resources and we need to answer it negatively as we just don’t have the time or human resources to have all these complicated procedures and policies they ask for.

So far we’ve had mixed success in answering these assessments. Sometimes, we have passed but sometimes we have not, basically failed or have been rejected. One time, we actually got a simplified list of requirements to work against. But every single time, this was a ton of work for us, which is not justified by the single or few licenses that the individual and these companies need.”

That is the key statement, that entire thing out there. I’m going to let you answer this one first. But let me finish it. “On the other hand, we always feel we need to do it as this is our step in and once we’re in, we can expand much more easily. Though even that is not always true, as it turns out different departments in the same company have different procedures and so on.

My question is do you have experience with this, is there a way around it for small businesses like ours. We’re thinking of preparing our own document that answers the main questions we find relevant and offering that to them instead, but we’re not sure if that would work. Any thoughts are helpful.” You get the first crack at this one.

Einar: We see it all the time.

Rob: Yup.

Einar: A super, super common thing. I think you’re right. The key thing is here, yeah, this is inevitable if you’re going to sell to large enterprises. Inevitable. In some cases, it’s because they have their own internal policies that they might be doing certain things that they’re promising to the public markets that they have to be able to do in terms of compliance, following some legal requirements on the national or supranational level. There’s a bunch of reasons why these guys will never say like, oh, you’re a small company. That’s totally fine, don’t worry about it. I think that’s the start of this.

The second piece is how do you get around it? Certainly, once you have seen a bunch of these, there’s an option to have your own answers to most of the questions most of the time–type of thing and hope that that works. But honestly, what we’re seeing with TinySeed is most of the time is that they need some sort of a certification.

A lot of the time, particularly if you’re pricing right and selling the right sized plan to these businesses—which is the key thing—then it’s probably worth doing something like SLC2 Certification or something like that. If you’re certified for these kinds of things—the SLC2 is probably the ones we see most often—then in some cases, they’re like, oh, that’s okay, we don’t need this questionnaire then if you’ve checked the box.

A lot of the time, on the enterprise side it’s like are they ISO so-and-so certified or SLC2 certified? If not, answer this giant list of questions. In many cases, it’s easier just to get certified beneath that cost because—this I think is the key thing you are leading to—if you’re going to jump through the hoops of answering 150 questions and things, why would you even offer to sell an individual plan or something?

For most of these people, they don’t care. If they’re having you jump through the hoops of doing this kind of security assessment, then price is immaterial to them for all intents and purposes. If you’re at the end of that, sell them something that’s $29 or $79 a month, then you’re probably leaving probably a couple of thousand dollars a month on the table for no reason whatsoever.

Rob: Yeah. That was going to be my kicker is, if you’re going to do this, minimum annual contract value $25,000.

Einar: I think so.

Rob: That just becomes what it is. Maybe it’s not that hard, but maybe it’s $18,000 or $20,000 or something. It has to be worth your time. The offer of we’ll do this and we’ll buy a few licenses and then you’ll be in the company. Nope. Sorry, can’t do it. Can’t beat it. We don’t do RFPs and leave without a minimum contract value of X amount. Again, somewhere between $20,000 and $40,000 is probably where I would put that.

You’re right. The SLC2 is like the silver bullet for this. The struggle is, isn’t it $30,000 up front? I believe it’s very expensive.

Einar: Yeah. What he is saying in terms of the size of his business and the growth that he has, I think it’d  be worth it for him. I think it’s a pricing thing. I’m guessing you haven’t got your enterprise, Philippe. You don’t have your enterprise pricing right, that’s why you’re concerned about this. You’re either selling the wrong kind of plan or you don’t have an enterprise plan that captures all the value that you’re providing to these businesses. Once you solve that, you’ll be like, oh okay, yeah, we’ll do SLC2.

That could be the only difference. You literally could be like, maybe the large enterprise, the Fortune 500 or whatever are perfectly able to get by within the constraints of your mid-price plan or whatever, but if they need this security assessment, or they need single-sign-on, or they need some other custom contracts red lining your terms of service or something, that’s what kicks them in on the enterprise plan and now it’s 20 times more expensive.

That sounds insane, particularly most developer-type entrepreneurs, but it really isn’t. They’re used to it. They’re just like, oh yeah, sure. We just need this, and it doesn’t matter to us whether it costs $49 a month or $500 a month. It’s immaterial, but it’s obviously not immaterial to you.

Rob: Like you said, it doesn’t make sense from a distant pure logic perspective, but that doesn’t matter. That’s how it is. We see this over and over. This is some of the most common advice that we give and some of the most common mistakes we see with new companies. In MicroConf and people who write in here, and then in the TinySeed batches, the pricing is too low especially on the enterprise.

A couple other suggestions, Philippe, is episode 463 of this very show. I sat down with David Heller of Reimbi and we spent the whole episode, Troubleshooting Enterprise Sales. That’s the name of that episode. Part of that was this question of the security handouts. We had similar conversation, but it was basically build your own handout to be like, hey, this answers most of yours. He developed a lot of templates or templated answers, shortcut things that he could use to fill in because the questions are common but they’re not all identical. You can’t have a whole doc that answers them all but you can probably get 80% of the way there with just putting a bunch of stuff in Word docs and then pulling from there.

As Einar said, the real way around it is to get this SLC2. It’s just expensive and then you have annual maintenance, and it’s overhead of all the stuff. You have a million of these documents and procedures and such. If you’re not there yet, then yeah, you just got to struggle through and make it worth your while in the meantime. Thanks for the question, Philippe.

I think we have time for one more today. It’s from Alan. He says, “Hello. First of all, I really love the podcast and everything you do. Keep it up. I’m a full-time employee at a software company. I’m in a senior role and I’ve been here for over five years. I’ve come up with a SaaS product idea after finding a problem in my company’s engineering process. I’ve started creating a product to mitigate this problem. It solves a niche problem in general software development. So it isn’t related to my company’s product. It’s not competitive with them.

I’d love to use this product in my current company, but they help me manage the technical issues and to help validate and grow the idea. Should I have any concerns with what I’m doing? Can my company claim my idea as its own? What should I do now to protect myself? Any other things I should consider? Does it make sense to validate a new side hustle idea out of a company while working full-time at said company? Thanks for everything. Who knows, maybe I’ll be in TinySeed batch three.”

This was sent last October. The application process is over, but maybe batch four. Applications are open for that in July. Thanks for the question Alan. Einar, aside from looking at your employment agreement as the number one piece of advice because it’s in writing.

Einar: Number one piece of advice, yeah. Reading this, it’s like, yeah it’s finding a problem in my company’s engineering process. Immediately, that to me is a big red flag, okay. Started creating a product, solves a niche problem. It’s not related to my company’s product. Okay, well yeah, but there’s all these things around, did you do them in their time? Did you use their laptop when you were working on this?

I think it does depend on where you actually are, both which state in the US or which country and depending on how the laws are there. I would be concerned about this. Like he says, it’s not related to my company product, but he did come up with it because of a problem that he found at work.

You almost need a letter from the employer saying that hey, yeah, we’re fine with this. We don’t want to claim the IP. I can imagine if he did come to us and applied, we would be concerned with the IP that […] I think with the existing company, being this is our IP. He doesn’t have a right to spend it out. What do you think?

Rob: I would certainly look at the employment agreement. I think building something to solve a problem at your current company without having pretty explicit permission—by that I mean something at writing—is not a good recipe. Just building something on the side to solve other problems outside of your company, that’s different because it’s so much more clean cut, you can look at your IP, everyone in your employment agreement, and you can go to HR, the CEO, or your boss, whatever the structure is, and basically you disclose. That’s what you do.

You say, I’m working on a site project. It’s not competitive. This is the name of it. They have a form that you fill out and you say, I’m working on an XYZ project and I want to retain ownership. I’m not using company hardware and I’m not doing it during work hours. Some companies now have a policy that I’ve heard—I don’t know how enforceable it is in which states—that anything you build even in your off hours, on your own stuff they own—not to me, that’s […], but whatever; that’s over reaching—if it’s legally enforceable, then that’s a tough position that you find yourself in.

Definitely look at what you’ve signed and then consider your options. Once Drip and Leadpages merged, I knew two people who started side projects. Neither of them reported to me, but they went to HR and basically got explicit permission because they didn’t want the IP issue. They didn’t want there to ever be a question if they wanted to raise funds or sell or whatever. You need to have clean IP.

The thing that concerns me is the build it and manage the technical issues at my own company. It’s really gray and I don’t like gray when it comes to law. I don’t like gray areas when it comes to IP.

Einar: It’s like, well, it’s the utility tool that you built and used at work, do you think your work would value it? That’s what I would think.

Rob: Yeah. Thanks for the question Alan. I hope that was helpful.

If you have a question for the show, email questions@startupsfortherestofus.com. Best if you attach an audio file; it’ll go straight to the top of the stack. Otherwise at this point, it looks like we have about 12 or 14 questions in the backlog and I will get to those, again, as soon as possible.

Einar Vollset, you are on Twitter, @einarvollset and of course, people can go to tinyseed.com/thesis if they want to look at the amazing document you put together about TinySeed’s investment thesis. It’s pretty impressive, honestly. If you haven’t read this, even if you’re not going to invest in TinySeeds, it’s pretty cool. Just the idea of you did data analysis because you’re a data nerd.

Einar: Thank you.

Rob: I say that with all the love. But just look at how things pan out and just that trying to take a more of an indexing approach into early-stage SaaS is really the way to go. That’s what allowed us and a big reason to raise this second fund that’s going so well. I’m excited about it.

Einar: Me too.

Rob: Thanks for coming on the show today.

Einar: Thanks for having me.

Rob: Thanks again to Einar for joining me on the show. If you like these shows, I would really appreciate a five-star review and wherever you listen to your podcast, whether that’s Spotify, Apple Podcast, Google Podcast. Is that what it’s called these days? Google Music? Who knows. Just click for a start button and try to hit the five. Really appreciate it. I believe we’re approaching a thousand worldwide podcast ratings.

You don’t even have to do a full review with the sentences, verbage, and compliments and things like that. If you hit the five star and you submit that, I appreciate it. I’ve been trying to move towards that 1000 rating mark.

Thanks for joining me this week. And I will be in your earbuds again next Tuesday morning.