Episodes

Rob: Welcome back to Startups For the Rest of Us. I’m Rob Walling. If you read the title of today’s episode and thought that I was getting a little clickbaity, I wasn’t. Today’s literally the story of a developer who got a job at a company. He became CTO over the course of six months and then he bought the company for $1. Later he sold it in 2019. Stick around to hear how he managed to pull that off. It’s a great conversation with Don Pottinger.

The day after this episode airs, I’ll be hosting MicroConf Local in Portland, Oregon. If you’re in the area, I’d love to see you there. Then next week, we’re in Boston, then Austin, Texas, and the week after in Dubrovnik, Croatia. If you’re coming to any of these events, please do come up and say hi. I’d love to meet you.

If you don’t have tickets yet, I believe there are still a few remaining. You can head to microconf.com and click on our events section to figure out how to buy tickets. Again, the MicroConf Locals are one-day events and they’re quite inexpensive. It makes the events really accessible. If you’re in the area, I hope to see you there. With that, let’s dive into my conversation.

Don Pottinger, thanks so much for joining me on the show today.

Don: Thanks for having me, Rob. It’s a great honor.

Rob: You have such a story. Oh, my gosh. Started as a developer, then you became director of engineering, and then the CTO within six months. This is a company you came to work for as an employee, then you later bought the company for $1, and then you grew it and exited a few years later. I don’t think I’ve ever heard a story like this. It’s going to be fun.

Could you give listeners a little bit of background about how you came to work at Kevy? Maybe what attracted you to that. Just get us started on the story because it kind of tells itself from there.

Don: Before I joined Kevy, I was an aspiring developer and aspiring entrepreneur. I had started a company with my younger brother. We both used that as a catalyst for us to learn how to code. He delved into mobile and I went headfirst into web learning Ruby, Rails, and JavaScript. At a certain point, I realized that our growth was stunted because we were self-taught.

I ended up joining a company called Big Nerd Ranch who built apps for clients—both big and small. I was able to learn on the job how to build products. I spent about a couple of years there. I learned a lot through the process. Then I felt like I was ready to make the leap into the startup world, but I wasn’t quite sure how to do it. I wanted to learn from who I considered one of the best in Atlanta at the time.

I interviewed and joined Kevy which was founded by one of the co-founders of Pardot, which was a marketing automation platform that they sold for close to $100 million. When I joined Kevy, my idea was to learn to code, and then eventually hopefully start a company under that same portfolio of companies that Kevy was under. But it went completely different from what I expected.

Rob: Yeah, it’s a good story too. I want to touch on one point that you just made, which was you were self-taught and you wanted to get better, so you got a day job coding 40+ hours a week. I did the exact same thing. I learned to code as a kid on my Apple IIe, BASIC. There was no web at the time. I’m that old, but I graduated from college with a computer engineering degree in electrical engineering and still didn’t know how to code for the web.

It was the late ‘90s and they weren’t teaching that because the academy tends to be (depending on the school) 5, 10, or 15 years behind the actual industry. I graduated and I was an electrician. I was working in construction and I would go to the library and check out books on Perl, PHP, and HTML because I was like, the web is the future, dot-com is happening. I lived in the Bay Area.

I was trying to teach myself. I was doing it nights and weekends, and I just was not making progress. The moment that changed was when I finally applied for a full time job. The same thing, I worked for an agency. We were building websites and web apps. In the first two months, I learned more than I had learned in a year of self-study.

Don: For me, that was a very similar experience. I went to Georgia Tech. I studied electrical and computer engineering there. My favorite classes were the programming classes, but it was C, C++.

Rob: Java, if you’re lucky.

Don: Yeah, Java. There weren’t things that at the time, you could easily take and build for the web. So I initially started with PHP on my own, basically taking what little code I could find on the internet and doing a hatchet job on it to make it do what I wanted it to do. But it wasn’t until I came across Rails and Michael Hartl’s Ruby on Rails course, which I’m sure many people have taken, where I built a Twitter clone.

I had no idea what I was doing at the time, but I learned a lot just by typing in the commands. Eventually, when I started building my own things, going back to that tutorial, and seeing how they recommended to do certain things. Of course, RailsCasts during that period as well were big. That really helped me get in the door at my job because I joined a company that was a Ruby boutique firm.

They were looking for junior developers. They really wanted to learn. I was able to surround myself with very talented and senior engineers that taught me how to take what I’ve been doing on nights and weekends and turn it into—I considered myself a craftsperson at the time.

Rob: That’s a great part of the story (I think) just what the web has done for learning technical skills. Because again, I graduated in 1998 from college and there was one website that had tutorials on how to program. You just couldn’t find them. So when I say I went to the library, no, I literally drove my car. I got a dead tree book. It’s so cool that you had podcasts and videocasts. You can learn incredible amounts. I think it’s done wonders for development and entrepreneurship.

Don: If you’re lucky, you have a mentor. I was lucky that I had a mentor that had been building a company. He told me, hey, stop what you’re doing, go learn Ruby on Rails and see where that takes you from there. To this day, I credit that person for starting me on a journey that I never would have imagined over 10 years ago now.

Rob: So you applied and you got a job at Kevy in December of 2014. At the time, Kevy was competing with Zapier, is that right?

Don: Yeah. These were early days. Zapier and Kevy were competitors in, what I would consider, sending data from point A to point B. I think where Kevy was focused is that they had a lot of ecommerce companies that were trying to send data from their ecommerce platform to a CRM or to their marketing automation platform. At the time, they were getting customers, but they were also losing customers. They were really concerned about the churn. I think after I joined in late 2014, they decided in early 2015 that they wanted to pivot.

Rob: Got it. How big was the team at that time?

Don: The team grew to about (I would say) 20 or 25 at that time.

Rob: And when you joined?

Don: When I joined, it was about that big and we hired several salespeople after me.

Rob: They kind of connected the Zapier approach isn’t working because churn’s too high. Talk me through the pivot, I know that was early 2015. Is the pivot what led you to go from software engineer to director of engineering to CTO within six months?

Don: Yeah. I guess if there’s one thing about startups is that things change very quickly. In this case, the pivot led to the departure of the most senior engineer at Kevy. There were a few other engineers. I was one of them. At the time, I felt very confident that I could build a Greenfield project. I could take something and start from scratch, design it, and build it.

With that opportunity of the pivot where we had to build an entirely new platform, and in this case, we were focused on the ecommerce companies that were our customers, building a platform that allowed them to market directly to their customers in one place. I felt confident that I could do that. With that, I became the director of engineering. I was doing that for a few months before there was a leadership shakeup, and I became the CTO about a few months after that.

Rob: How did that feel as someone who—I mean, you’ve been coding for a couple of years at that time professionally? That feels like a big responsibility to be a CTO to a startup earlier in your career.

Don: Yeah, it was. I made a pivot myself into software development. Coming out of college, I was a consultant. I worked at Accenture and another mid-size consulting firm for a few years. Development wasn’t the first thing I did. I was comfortable talking to teammates, potential customers. I felt like I could do sales. I felt like I was at a point where I had been building on my skills to be multifaceted in a way that really benefits you as an entrepreneur.

It felt really quick. It felt really fast, but I also felt like this is exactly why I joined Kevy in the first place was to get an opportunity to lead a company. Was I ready? Yes and no. I learned a lot through the process. It’s not great when you have to let go of teammates, or when you’re trying to sell or you’re losing new customers, and going through all that pain and trying to raise money. But it really was an experience that I wouldn’t trade for anything in the world.

Rob: The beauty and the curse of startups is that things change so quickly. There’s that upward mobility or just the mobility within an org that can happen. Obviously, those circumstances where it was not good, sometimes it’s layoffs or whatever. But if you go work for a Fortune 1000 company, the odds of you moving from a software engineer to a director to some C-level is never going to happen.

I understand that it’s different to be a C-level at Target or Best Buy than it is at Kevy when it shrinks down. There is a difference. I’m not trying to equate them. But I do recall also working at a small consulting firm that is a small startup myself and feeling like I was given all these amazing tasks instead of being a little cog in a wheel. That I was actually given a lot more responsibility to just go do it because there were five of us or whatever. Then with Kevy, with the product pivot, was there also a round of layoffs? Did it go from 20, 25 down or did you keep everybody, all the employees?

Don: We had two rounds of layoffs, unfortunately. Once we pivoted, we realized we didn’t need a large sales team because there was no product to sell. We kept a very small sales team. We’re building very quickly trying to get something that the remaining sales team could put in front of customers’ demo and get feedback and hopefully sign some deals. But it came to the point where we realized we still needed a little bit more time.

Probably the best salespeople for our product were going to be us, me as the CTO, and my co-founder the CEO as well. Once we had to make that tough decision, it was really hard to let go of teammates and people that you’ve really grown close to. That was a really hard lesson, that not everything is rosy in a startup.

Rob: Was that one of the hardest pieces for you, the interpersonal? I’m just having to let people go who you knew were doing a good job, but it was just crazy startup circumstances.

Don: Yeah. That was a really hard part. I’m grateful that I’ve maintained relationships with the vast majority of them after that experience, and also the interpersonal relationships of the people that stayed. No one really talks about how challenging that could be sometimes. There can be friction sometimes between engineering and sales where sales are wondering, can we sell something like this, and engineering is like, wait a minute, we haven’t built that yet or it’s going to take time to build that.

That friction existed, also trying to keep the people that you did have from looking at other opportunities because, in a startup, it’s hard to see the forest from the trees when your head’s down working. There can be turnover. We were working in a startup incubation space. There are other startups that are vying for really good talent as well. It’s always easy to look and say, oh, it might be better over there at the other company. That seems to be growing very quickly.

Rob: Yeah. When layoffs happen, recruiters start targeting companies for the people who are remaining. It’s a pretty common practice. It sounds like that was brutal. It wasn’t even a pivot. You literally threw out the codebase and you started essentially from scratch and built a different product, which is I think you already set up a marketing automation platform focused on ecommerce. You and I are both pretty familiar with that.

For folks who haven’t followed my story for a long time, I built Drip, which started as an email service provider. Eventually, it became a marketing automation provider, lightweight marketing automation. When I was running it, it was general-purpose really. It was SaaS, bloggers, and people with email lists. We put a lot of people from MailChimp and then Infusionsoft, and then sold the company in 2016 to Leadpages.

It wasn’t even a pivot. It was focused on ecommerce companies as well. Now competing with the likes of Klaviyo and MailChimp, as you said. MailChimp has really done just a slight focus on that. You mentioned offline that the founder moved essentially to a role as an investor advisor and then a new CEO came in. Did it happen at this point as well, the pivot? It was a massive shake-up. It was like a new company with just a handful of people. You were down to like five employees or something, right?

Don: Yeah. The new CEO was someone at the company that had been promoted into the CEO role. She was a young CEO. I was a young CTO. We were both learning on the fly. Although (I would say) we’re very ambitious and had delusions of grandeur in some respects, we were heads down both working very hard because we thought at the time, this is it, this is our opportunity.

We don’t want to let our team down. We don’t want to let our investors down. We were working nonstop. At that point, I was working—I can’t even remember how many hours, but anytime I was in front of a computer, I was probably coding. I have a family. I have one child at that point. I had two more on the way—twin girls on the way, at the time. It was a very busy period.

Rob: I assume that MRR went to zero or approximately. You must have had enough funding in the bank to float you guys for a year or more. Because I think you said you spent the next 18 months building the product, finding customers, and growing MRR again.

Don: Yeah. If I remember clearly, we got a check of about $300,000 from the investor. It’s like…

Rob: Here’s your shot.

Don: Yeah. Honestly, if you think about it, it should have been reincorporated as a new company. The cap table should have been cleared, which we can talk about the cap table later. But it was essentially a new company with the same name.

Rob: Yeah, let’s talk about the cap table because this winds up screwing you guys. You start making progress, you spend the next 18 months, you get to $250,000 ARR. You build this thing back up to $20,000 a month. You want to go raise funding and you can’t. What happened there?

Don: We would walk into investor meetings and they would be very interested in what we’re doing, the space. We get it to due diligence, and they take a look at the cap table and see that the original founder—along with several other people that were brought onto the company that had left had big chunks of the company—while the CEO and CTO (me) had a very small amount of the company. That raised a lot of questions. That caused a lot of trepidation with investors.

Especially where we were in Atlanta, they were less inclined to take a chance on a very messy cap table. We would go in and feel very optimistic. A couple of weeks later, there were crickets or it was a no because of the complexities with our cap table, not necessarily what our product was able to do, the customers, and the revenue that we’ve hit.

That was very challenging and also disheartening because it had gotten to the point where like, we’re not sure what to do. Do we go back to our original investor, ask for more funds, and get further diluted, or what? That led to another big shake-up in the company and around the Fall of 2016.

Rob: Before we get to that, I want to call out, we have had multiple companies apply to TinySeed. We get in conversations with them and we make them an offer or we want to make them an offer, but we discover that the founder or founders own a minority share of their own company. Usually, in the cases we’ve seen, they started the company and there was an investor there who put in a small amount of money. Usually, it’s sad. It’s $25,000 or $50,000 and takes 50, 60—just takes way too much of the company.

When there’s nothing there, you can see how that makes logical sense, but it keeps you from ever raising money again. You can never raise money because investors don’t want someone sitting there with the lion’s share of the equity. They want the people doing the work to have that. This is not to say, never raise investment. It’s to say, be careful about your cap table.

The founders, at an early stage company like this raising really a first or second round, pre-seed and accelerator round, a seed round, the founders should own 80%, 90% of the company, between there. If it’s one, three, five, or whatever, they should own that together. It’s something to keep in mind for folks. Especially listeners of this podcast, if you’re a bootstrapper, you’ve never had to think about cap tables because you just always had 100% of it.

The moment that if you do think about raising a small round, be really aware that most—my rule of thumb and I think the general rule of thumb is, in an investment round, you usually sell between 10% and 20% of your company depending on the amount you decide on evaluation. And then you take 10% of that or (again) 20%. It’s pretty rare. I hear someone selling, unless they’re selling their own shares on a secondary, it’s rare someone sells more than 20%. I see you smiling. Do you have more stories?

Don: No. The experience that I went through with Kevy really left a bad taste in my mouth for raising money. I went firmly into, I am going to fully bootstrap everything I do for the rest of my life for a period of time. Only now, the past couple of years to come out of that and feel like it depends. It really depends on who you are, what your goals are.

In my case with Kevy, I didn’t really stand a chance because I owned so little of the company at the time. I just know that being careful and understanding who you’re bringing on as an investor is equally as important as if you decide not to and you want to just continually have a stable business as a bootstrapper.

Rob: You’ve mentioned there was a shake-up in 2016 because you weren’t able to raise funds. What happened there?

Don: Yeah, my CEO just left. To be honest, she had been talking about it for a little while. So it wasn’t a surprise for me, but it was a surprise to our investor. I think it shocked him to the core because he felt like we were on a positive track. He didn’t see that there were any issues outside of continuing to figure out what product-market fit, being heads down on selling, and also raising money.

However, with the departure of the CEO, it left him in a crisis in terms of what to do with the company. That company had been his baby post his acquisition. But I think at that point he was ready to close up shop, let go of the entire team. Before he did that, he asked me what I wanted to do with the company. Did I want to take over the reins? I had to give it some thought, but I think I realized that I would be in a similar situation to the CEO who just left.

I proposed something completely different. I proposed that I would buy the company, the assets from him if he was going to shut it down or if he didn’t want to find a new CEO. He gave it some thought. He agreed to sell it to me for basically nothing—$1, which was just crazy.

Rob: Did this happen in real time? Were you sitting in a room looking at each other with the conversation, or was it back and forth via email that happened over several days?

Don: It was in real time. You can imagine a scene out of a movie. If it was dramatized, that’s how it felt in my mind. We were sitting across from each other. I was really trying to fight for the life of the company.

I’d said please don’t shut it down, you can find a new CEO. He wasn’t convinced. I was like, well, I want to continue working on it. I think I phrased it in a way that looking back now, I don’t know if it came off the right way. I want to do it without you and he did some kind of back of the napkin calculation in his mind of in terms of the company’s growth, what were the expenses, and trying to (I guess) decide what a good asking price would be for the company.

I think he just came to the conclusion that, hey, this is really nothing to me more than a line item in his portfolio. For me, it was life-changing. It all happened in one conversation. After that, we got the paperwork. I took $1, put it in an envelope, walked over to his desk one day, and dropped it off just to make sure that he did receive the dollar for the company.

Rob: The I’s were dotted. It’s like a scene out of an Aaron Sorkin film, man. That’s crazy. Here’s the other thing too. As an investor, he invested in a lot of companies.

Don: Yeah, he did.

Rob: He also probably (for sure) has capital gains that he could then write that off so he could get at least 30% to 40% of it back from the IRS. I’m not saying that’s a good or a bad motivation, but that is why you’ll hear some VCs write off. If you’re familiar with Baremetrics, Stripe Capital or whatever venture arm they had, they just wrote that investment off to nothing. They don’t get it all back, but you basically don’t pay the taxes on equivalent gains. It’s like having a loss in the stock market and again that offsets it.

That makes sense if you got something out of it. I imagine if he’s trying to think he’s like, how much am I going to sell this company to you for? Are you going to take out a loan to buy it? I don’t know if you’re in a cash position to be able to pay $50,000 or $100,000.

Don: I was not. I was looking for jobs at that point. It was something that I had pretty much decided I was willing to walk away from. But when the opportunity came, I decided to take it and it changed the course of my career.

Rob: Absolutely, the course of your life. What a gutsy move to say, I want to do this, but without you. Was that scary? That scares me because I’m not super confrontational and that feels like a very confrontational thing to say.

Don: I’m not confrontational at all. I work very well with others because there’s usually not anything for me to fight about. In this case, I think I felt strongly enough about the company and more so confident in my own abilities because I built it. Almost every line of code that was there was written by me, reviewed by me, or touched by me. I’d been in plenty of sales conversations. I knew how to support the customers.

Because of the revenue that we had, I felt comfortable. It felt like the most comfortable risk I could take at that point because I dreamed of running my own company myself. I de-risked a lot of that for the past 18 months by building it and having someone fund that discovery. It felt almost like a no-brainer to at least give it a shot.

Rob: It was your company in essence. I think you were calling her your co-founder, the CEO, you guys had started a new company that should have had a new cap table to the point you made earlier. I can imagine you had massive ownership over this, mental ownership of it just like, yeah, this is the thing and I can grow it. I hate it when people use the word, it’s my baby. You had spent a lot of time working on it.

Don: You can imagine too, when you go from being an employee to (on paper) being CEO and getting an agreement that says, hey, you have X amount of shares and trying to do the math on what percentage of the company that is, and then realizing that it’s 5%. You’re like, well, I’m putting all of my blood, sweat, and tears for something that I own 5% of. Using terminology like I’m a co-founder was very difficult for me. I had to have people support me and say, yes, you are a co-founder.

A lot of people don’t understand—especially when you’re young and you’re being employed—the courage and the agency it takes to be able to say, yes, you may have funded this company, but I’m building it. So I deserve to be a co-founder, I deserve to own a large enough share of the company. It took me a long time to realize that. I grew into that after the acquisition, realizing that, hey, this is my company too.

Rob: At this point, you own 100% of it. You had revenue at this point, but were you breakeven? Did you need to raise money? You told me offline that you started doing everything yourself— sales, marketing, support, development. Did you have any other team members or were you solo at this point?

Don: At this point, I was solo.

Rob: Wow.

Don: My initial idea was that I was going to just continue growing the company like we were growing previously. I ran into a wall, I ran into, oh, keeping customers is difficult. Acquiring new customers is difficult when you’re all by yourself, and developing the product simultaneously all at the same time was very difficult. I tried to continue working very hard for the first six months after the acquisition and then I hit a wall where I felt burnt out. I had to take a step back and really evaluate, why am I doing this? I have 100% of this company.

Am I trying to make it the next billion-dollar company? If that’s the case, I can’t do it by myself. Am I trying to have a high quality of life? Am I trying to be able to spend as much time as I can with my family, work from anywhere, and have the ultimate flexibility? Because the revenue was more than enough for a solo founder. The expenses were low enough that I was riding on different credits from cloud providers, so I was able to keep expenses pretty low.

Rob: You have this amazing lifestyle business’s bootstrapper’s dream at this point, except for your burnout. That was a problem. When you took that step back, I know you mentioned that you’ve been a longtime listener of Startups For the Rest of Us. I want to take a moment to talk about virtual mentorship because you said that Mike and I were chatting together, and me talking about burnout and Drip or whatever it was I was talking about somehow helped you on your journey.

Don: Rob, it was cathartic. After spending the entire day working on Kevy, I would fire up the podcast and listen to you and Mike. Mike’s journey with Bluetick felt like I was in therapy with Mike and you, and your journey with Drip and post-acquisition. I was just listening to every single detail, listening to the intonation in your voice trying to read what you couldn’t say sometimes from that. It was inspiring.

It also felt like I wasn’t alone, which as a solo founder if you’re not really into online communities, it can be challenging. Luckily, I had a support system that was local and then also podcasts that I would listen to like Startups For the Rest of Us. That really helped carry me through.

Rob: That’s great to hear. You’ve heard me say it like, we’ve done the podcast for almost 12 years now for free. That’s one of the big reasons we do it is because we wanted to find others like us and we just want to be able to—it’s not even giving back, it’s just helping other people. The amount of good I think that is put into the world is substantial. It’s so good to hear because you and I, before today, have never met.

We haven’t even barely emailed just to schedule this, and yet I was able to have that impact on you. I hope that those who are listening, we can do that in our own ways. It’s awesome, man. It’s great to hear.

Let’s get back to the story. Now you own the company, you burn out, but then you recover. Where do you go from here? Because in 2019 then, which was a couple of years later (two or three years later) you wind up selling the company. What’s the summary of that in between? Was it more of the same but were you lifestyling? Did you start hiring people? When you sold, were you solo? What are the details there?

Don: It’s a mix of, I was lifestyling almost to a fault in some ways. I think things have grown stagnant. I gravitated toward what was interesting for me to work on like products—I love building. I would let things like marketing, I’ll get to that eventually. When inbound sales would come in, I would do demos, I would follow up, close the deals, and things like that. I brought on different people at different points.

I brought on my salesperson that was working on doing demos, cold outreach, and things like that. It didn’t really work out that well. Then around the tail end, probably about a year before I sold the company, a friend of mine who’s a data scientist was working on a startup. He said, well, you’re a data scientist. I’m sitting on a lot of data right now with Kevy—ecommerce behavioral data. Maybe we can build something of value for the Kevy customers using your artificial intelligence machine learning knowledge.

We started collaborating. We started building new, exciting what we called smart features for Kevy. Things like being able to tell you how effective your email will be based on the subject line. Eventually, the plan was to give you the ability to write your entire email without having to do it yourself based on your previous emails, based on emails that have been effective in the past.

We were building and building and building that. Then I think in December of 2018, my wife shared that she’s pregnant and it’s our fourth child. Up until that point, my wife had been working enough as a nurse practitioner. She’d been working enough to provide health insurance for us so that we didn’t have to worry about (at least that part) me being an entrepreneur. It got to the point where she’s like, well, I think we need to make a change because I don’t want to work full-time anymore. I said, okay. Well, I can at least put out some fillers and see what’s out there.

A friend from Google reached out to me, and I ended up getting a job at Google and running Kevy at the same time. That was in April of 2019. There was a period of time where I decided I wanted to sell Kevy, but I was working out at Google. I got a broker and I was talking to potential acquirers. Some were serious about acquiring, but they wanted me to join as well. I had to share with them that I wasn’t on the table as part of the acquisition.

Then eventually, I found a venture studio that had a SaaS product in a similar space. They were really interested in acquiring it. They had the technical chops to be able to take over the project. They had aspirations for their sales and marketing as well. After due diligence, I ended up closing the deal. I literally signed the papers to sell Kevy in the hospital after my wife gave birth. It was a crazy period there.

Rob: Sounds insane, man. I was going to say good timing, but probably terrible timing because I imagine that was stressful coming up. The question that I usually ask here is, there’s life-changing money, which to some people oftentimes that’s a few $100,000. Then there’s, never having to work again money, sunset money, which is usually for most people (depending on where you live) at several million dollars. There are in-betweens. How would you describe your exit?

Don: It was life-changing. It’s not never have to work again. But for me letting go was hard because (like you said) it was my baby. I would work on it for the next several years. It may not go anywhere, it may not grow. In some respects, the competition (at the time) like Klaviyo, MailChimp, and other companies had exploded in growth. They had deep pockets. They’ve been working extremely hard on developing and improving their product.

I didn’t have that in me as a solo founder. It was very difficult. It was great timing, and it was also a life-changing amount of money that I earned by signing a piece of paper. It was a life-changing experience to own and run Kevy, but I think it was great to close that chapter so that I can begin a new chapter with new projects and new endeavors.

Rob: And with a new child who is a new project. Four kids, that’s another level, man. You’re a glutton for punishment like most of us. As we move towards wrapping up, I am intrigued because you’ve launched another startup, but it’s a B2C play. It’s called LanguaTalk at languatalk.com. You mentioned to me before I hit the record that it grew very quickly. You launched in January, maybe eight or nine months ago, and you’re already at mid-six-figure ARR with it. What’s the difference there?

Don: There are so many differences. One, I have a committed co-founder who has grown and built a company in this space before. During some of my lonely periods, I would roam Indie Hackers and look at posts. My co-founder, before he was my co-founder, had a post of, hey, I have a business. It pretty much runs itself, so if any other indie hackers who want some help on some marketing, just reach out. I was like, all right, sure, I’ll reach out.

I reached out. He did some work for Kevy and we stayed connected for the next couple of years. After I sold Kevy and I was bored at the day job, just dreaming about what to build next, we reconnected and I said, you know that platform that you’ve built? You’re a great marketer, you know the space very well, but I think I can help you build something that we could grow to even higher heights.

He thought about it and he’s like, are you serious? Shouldn’t you be comfortable and done? Do you have the capacity and the time to do this? I was like, no, I don’t, but I’ll do it. Let’s do it. We started building last year. It took me longer than I expected. I didn’t expect my building skills to atrophy as much, but we launched in January. Because my co-founder had been in the space before, he knew all of the knobs, the marketing, the timing, the ads, and me from the technology side, we had everything buttoned up.

It’s been really amazing to go from literally $0 in revenue to mid-six figures in ARR. It’s really exciting because it’s very early days and we’ve only launched probably about five languages. We’re planning on launching several more in the coming weeks.

Rob: Good for you guys. You don’t know if it’s being a second-time entrepreneur because that’s got to have something to do with it, all the years of struggle. It’s like the Beatles in the Cavern Club for 4 years playing 10-hour sets and stuff. No wonder they got good. You went through a gauntlet, you came out the other side, you sold your company, and now you’re doing it the second time.

I do find that I can get what used to be a day’s work for me—eight hours a day—I can often get that done in one or two now. I’m more efficient, I’m more effective, I’m better at delegating. I’m just more everything. I feel like that happens with a lot of us. Smart folks like yourself are learning.

Don: It does, and I know when to walk away. I think when I was early on in my career, I would sit there in front of the computer banging my head across like, why can’t I fix this bug or why can’t I solve this problem? Now I know that if I walk away, I go to sleep, you can solve things with a fresher mind or you solve things in your sleep as well. You learn through the pain and that muscle memory is still there iIf you decide to go back to it.

Also, I think going with the tide is important. Building a platform that helps people learn languages over tools like Zoom in the midst of a pandemic, I think that timing is important as well. You have to do the work, but I think you also have to pick the right space and also have the right timing too.

Rob: Do you have a website or Twitter that you’d like me to plug?

Don: Of course if you’re interested in learning a language, languatalk.com. My Twitter is @donpottinger, first name and last name.

Rob: Awesome, sir. Thanks so much for coming on the show. Thanks again to Don for coming on the show. Thank you for being a loyal listener and coming back every week. If you’re not already subscribed, please do hit that subscribe button. If you haven’t checked out the MicroConf YouTube channel, that’s something we continue to invest in.

We just hit 9000 subscribers. I think 300,000 views since we launched it just over a year ago. It’s pretty popular, youtube.com/microconf. Like every week, I’ll be back in your earbuds again next Tuesday morning.

Rob: Welcome back to another episode of Startups for the Rest of Us. I’m Rob Walling. This is episode 566 where I talk with Hana Mohan about her journey as a SaaS founder. She bootstrapped a company called SupportBee, which is a ticketing system for collaborative customer support.

She bootstrapped it over 9 years to 45,000 in MRR and then in 2020, sold her stake to her business partner, then started MagicBell, which is the notification inbox for web and mobile applications. Started that in 2020, went through Y Combinator winter of 2021, and they’re now sending more than a million notifications every month. She raised a seed round of $1.9 million in spring about five or six months ago.

The fun part of the conversation is Hana and I get to compare and contrast bootstrapping and being venture-backed. In fact, we explored the gamut. We started talking about how this isn’t binary. It isn’t funded or not funded, but there are in betweens like TinySeed or raising an angel round without getting on the venture track.

Hana came on our radar when (I believe) producer Xander saw her do an AMA on indie hackers, that was starting a new tech business as a transgender woman in March of 2020. She has a post on her own blog. We’ll link it up in the show notes as well as an AMA on indie hackers if you want to find out more about her journey.

Hana is speaking at MicroConf Europe in Croatia here in just a few weeks. I believe there is still a ticket or two left. There are not very many left at this point, but if you want to be in Dubrovnik, Croatia with a small group of founders this year—it’s smaller than usual due to Covid restrictions—I will be there, Hana will be there as a speaker, Laura Roeder, we have Ed Freyfogle from OpenCage, we have Pierre de Wulf from ScrapingBee, as well as a few others that we are still recruiting.

Come meet the crew. Producer Xander will be there. Tracy and Einar from TinySeed who you’ve heard on the show many times will all be there. With that, let’s dive into my conversation with Hana Mohan.

Hana Mohan, thanks so much for joining me on Startups for the Rest of Us.

Hana: Thanks for having me again. It’s great to be here.

Rob: Folks heard in the intro about your experience with SupportBee, and then having launched MagicBell. It was MagicBell.io, I almost said, but you got the .com.

Hana: We bought the .com because (I guess) that’s what you do when you raise money. You buy the .com domain.

Rob: Was it after you raised your funding round?

Hana: Yeah, it was after we raised. Honestly, I think it’s better to do it sooner than later, because I think we’ll be successful and we don’t want to up the price.

Rob: Yeah, you increase the price of your own domain. You raised $1.9 million in the spring, which was about five or six months ago. Obviously, you had a lot of experience bootstrapping SupportBee over 9 years to $40,000 a month. There’s a lot to dive into in terms of just the breadth of your experience doing these two things. I think I want to kick it off with you bootstrap SupportBee to this amazing lifestyle business.

On this podcast, that’s a great thing. Lifestyle business is not a pejorative like maybe some venture capitalists would use it. You built this amazing business, you sold your shares to your co-founder, and then you started MagicBell. You’re on this next effort. Why not bootstrap MagicBell? What made you decide to take funding?

Hana: Also, I want to mention that it’s a great business no matter what lifestyle or not. I think it’s a great milestone to achieve for anybody. Even now, when you start your journey, when you move forward, you realize what a great achievement that was. I think it’s given me more appreciation now than before.

I’d say the landscape has changed a lot. The hiring is a lot more competitive, the Google Ad clicks are a lot more competitive. Also, I think as you get older, your ambition moves forward. You know what it takes to run a software business. I think when I started SupportBee, I thought, okay, you build something and the only work is new features, but you realize there’s so much operational stuff to fight spam, to do security.

I think you just understand the cost structure a lot better, that either you invest that money on your own—which I certainly didn’t have access to, like millions of dollars to invest—or you raise some money, or you’re somehow okay facing that challenge all by yourself. I certainly wasn’t and I wanted to build a bigger business, run it better with the right people in the team from the get go, and raising some money upfront. Investing just seemed like the sensible thing to do.

Rob: You and I have talked before. We talked on MicroConf on air, and I’ve also been on both sides of the coin of the bootstrapped versus funded. As I always say, it’s much more of a continuum (I think) than people make out because it used to be raise venture capital and you’re on this venture capital track, or you bootstrap, and now there are all these in-between options. You can raise an angel round of a few hundred thousand dollars and never raise another round. That’s actually more common than people think you can raise from TinySeed and not have to get on the venture track.

There’s a lot of nuance to it, but that was probably the biggest takeaway once I was working at a company with $38 million in funding. I could hire senior people who knew how to do their job, who had massive experience doing it, instead of trying to find junior folks and training them up, or just doing everything myself, which eventually can lead to burnout.

Hana: When I started out in my 20s, I just wanted to learn everything on my own. I wanted to write the code, I wanted to talk to customers—which I still do—but there was a joy in figuring out everything on your own and continuing to do that. Then I think over time, you realize that if you take entrepreneurship like a profession, then your job really is to come up with the original idea, the funding, the vision. But a lot of the execution, you’re actually better off handing off to other people. Actually, more so because it matters a lot that it’s executed upon well.

For example, as a founder, I don’t have the skills to project manage. I have never managed a team of 30 people and run sprints tightly. I’m better off actually hiring a project manager and handing it off to them.

Rob: Who have you hired? I’m curious. You’ve had five or six months with this $2 million in the bank, so to speak. What does your team look like today?

Hana: It’s a little bit bigger. We have a designer on board, a project manager, and a back-end engineer, apart from my co-founder and I. Then we have a couple of people helping us part-time. We have a chief of staff that’s part-time helping us hire and do some of the other things that I need help with. We are still fairly small.

I have to be honest that everybody has money these days. I definitely used to think you raise money and then bam, you post one job, and then everybody will come running to you. It’s certainly not true. I have learned that the hard way now.

Rob: I’m not sure bootstrapped, or funded, or fun strapped, or mostly bootstrapped that really matters to most employees. I think there are folks who want to stay with the Fortune 500 or the Fortune 100, the Targets, and the Best Buys, and the General Mills, the real Blue Chips, so to speak.

Then (I guess) there’s your big tech companies and everyone else. There are a certain number of folks who are looking for that small team where they can have a big impact, and that landscape—for people working from salaried employees—has gotten much larger since Covid. I think it’s tougher than ever to hire. I was going to say for worse for any startup trying to hire who used to be able to use remote and location independent as the big sell. That’s not the case anymore. Have you found that to be true?

Hana: I think you’re absolutely right. Remote used to be such a big thing. It’s lesser so now because it’s almost this basic expectation. I still think that an asynchronous remote is still a rare thing. A lot of companies would only do remote in a certain time zone or would only do hybrid. You can tell they’re not truly okay with letting people manage their own time.

I think for us, talking about that has been helpful, and I believe that would continue to be an advantage for some more time. But I think you have to treat your employees almost like customers with ever rising expectations. I remember when I started out and probably you started, if you ever worked, we were just happy to receive a salary. Now, even as a remote company, you want to do events. I totally understand why. I actually want to be pampered that way. The bar is constantly going higher and higher, I think.

Rob: All right. I’ve got some questions about MagicBell, specifically. You’ve been funded for six months, but you went through Y Combinator before that. You were obviously working on it long before that. These days, what marketing purchases are you finding that are really working for you today?

Hana: What’s working well for us is still this organic content or word of mouth. I think since we only made these hires a couple of months back, I haven’t been able to switch full-time into growth and try a lot of channels. We were trying ads and they’re working, but this area of a notification inbox being the notification experience is still a bit early in the market. People aren’t necessarily searching for that exact thing. You want to have this top-of-the-funnel awareness content where people search for push notifications and that’s working pretty well for us. We obviously have to scale it up a lot more.

We are trying direct sales. We’re trying outbound sales, which is something actually, honestly, I wish I had also tried out for SupportBee. When you find out about it, you realize everybody’s doing it, but then nobody actually wants to talk about it. It’s almost like this thing that maybe it’s just a secret nobody wants to let out. I don’t know what your experience has been.

Rob: It depends on the circles. I think even the more tech developer communities that I’m in or in the tech conversations, it usually is frowned upon. Then when I talk to sales folks and I’m talking to my sales consultants, they’re like, yeah, everybody knows that there’s outbound outreach.

I got six emails yesterday or LinkedIn outreaches from people asking if we need whatever. I get outreaches. It’s like, does TinySeed need to raise venture funding? They’re acting like we’re a startup, like we’re on the wrong list. But it is an interesting point. You brought up that MagicBell is maybe a little ahead of the curve in terms of its functionality.

While I gave a brief intro of it, can you expound on this? Your H1 is the embeddable notification inbox, improve your customer’s workflow with our in-app inbox where all your product notifications live. Talk me through, one to two minutes of what it does, the jobs to be done of MagicBell.

Hana: Sure. It’s funny to hear that out loud because we are working on a new site. In my mind, the messaging has already moved forward, and sometimes I forget that our customers are still seeing the old messaging. The basic value proposition is the same that we think adding an in-app notification inbox in your product is a great way to send workflow notifications, or even announcements, or billing alerts.

I think now we’ve figured out that once it’s installed, people want to send all kinds of notifications. We’re calling it an all-in-one inbox. We’re actually building more functionality so you can send announcements, like we added this new partner or we added this new feature, as well as notifications like somebody added a comment on your post or you have a new friend request.

The jobs that people are using it to do are bringing to a user’s attention what they need to see. It acts as a way to notify users that are not currently online, in which case, we can send them an email or a text message. But also when your users come back to your application, it’s this one place where they can look and say, okay, so this is all that needs my attention.

Depending on the industry, there are different use cases. Like in logistics, it’s alerting the operations team about a delivery that needs to be rerouted or a courier that needs to be reassigned. In the case of a collaboration software, it’s just enabling a frictionless exchange of information.

Depending on the use case, it changes. I think, traditionally, people have relied upon email for all of these things. It’s almost like this kitchen sink approach that’s anything happens, send an email. Really, I think what we are competing with is this trend of email.

You probably remember 10 years back, SendGrid and Mailgun were not an obvious choice. People used to send their own emails. I feel like we’re going through the same cycle that SendGrid and Mailgun went through, just maybe 10 years later with this product.

Rob: I think that makes sense. I was talking to a founder yesterday who has an SMS product for ecommerce shops. One thing that we were chatting about was just how not real time email is anymore. As someone who obviously built an ESP, there’s still a ton of value in email. There’s a purpose for it, but SMS, Facebook Messenger, and in-app notifications, whether it’s a web app or whether it’s a mobile app push, there are all these things that really do different jobs now.

I totally hear you. I feel like this is a really evolving piece, even to the point of Intercom and Drift. Intercom had to come on the scene. They had the chat widget but they were also email. I don’t know if you would need to do that today. I don’t know that that’s a requirement to also have the email piece because I just think the job is so different.

Hana: A lot of our customers don’t use email, but then I think email is here to stay. What we want to do is over time, just send as few emails as possible, like two email deliveries but very smartly. Only for notification hasn’t been seen, or maybe batch them up and then send them out in an email. It’s almost like you want to really lead the way in decluttering your users’ inbox and you want to respect it more. It’s also good for your application just to not rely on it.

Rob: Yeah, because you want to hit them when they’re thinking about it. When they’re in their email inbox, they’re often thinking about other things. I want to get worked on. A lot of people use their inbox as their to-do-list, versus when they log in to MagicBell, they’re thinking, okay, I’m in the MagicBell mindset, oh, here’s some notifications about new updates or about something that happened in MagicBell. It’s like they’re already in that context. I think there’s a lot there.

Hana: Yeah, and also there are these users like insurance agents, customer support agents. They’re already online for eight hours. Right now, a lot of our users come to us because their users have to go back to email to check notifications and then come back again. They can build this themselves, but it takes them months with real time being hard and just multichannel. What we’re eliminating for them is like, your users already are paying you attention, but you just don’t have a way to leverage it. That’s what MagicBell offers you.

Rob: I want to switch it up a little bit and talk about something we were talking about offline right before we hit record, which was this idea of being bootstrapped versus funded. Something you said to me, I think is worth diving into. You said, there’s often this anti-funding mindset or an anti-funding rhetoric that probably came about 15 or 20 years ago when the funding landscape was not that founder-friendly. It was different.

These are my words now. In my opinion, it was Paul Graham that changed it. It was Y Combinator because before that, the docs were opaque. There was an information asymmetry where investors had all the info about terms and we didn’t as founders. Paul Graham really changed that. I know there have been arguments that Paul Graham potentially took it too far or YC has taken it too far. You don’t have to comment on this having just gone through YC.

I’ve heard some investors like Jason Calacanis say, it’s two people in a garage and they have an expected $10 million valuation or an uncapped note or something, which is so not investor-friendly that it cuts the other way. All that said, the landscape today, there is no doubt, is night and day different than 20 years ago. You want to talk me through your thoughts on that?

Hana: Absolutely. I have to be honest, I actually never raised before. Like you said, I always bootstrapped it. I also heard that it made sense to me 10 years back when DHH and all these smart people talked about just how VCs are evil. Maybe there was some truth to it, for sure.

I also hear these stories and other podcasts of some of the early companies in the Bay Area selling for 70% of their equity right off the bat for $500,000 or something. That certainly doesn’t happen anymore. The valuations have been rising. I think YC is maybe partly responsible for it, but I think it would have happened sooner or later anyway. This is so much money to be invested in.

I think Andreessen Horowitz does it and SoftBank does it. The game has changed entirely. People have seen a lot of exits at $10 billion, $40 billion, $50 billion, that I think there’s a prediction that in 10 years, there’d be a lot more $50 billion SaaS startups. I agree with it.

When you look at it from that perspective, venture capital has always been kind of a lottery, but a smart lottery in a way. When you think about just how much bigger the returns are, people are willing to place bigger and bigger bets. If anything, it only benefits the founders (I think) for the most part. The smartest founders anyway never raised at the highest valuation, I think. They always raise at a good valuation with the right folks. But it’s good that the average valuation is higher now.

I think the other big difference is a lot of people think that you raise money and then you give up control of your company. It’s not true, at least in the beginning. Before, you had to do a price round. You raise (let’s say) a million dollar series, and you spend $60,000 on just the legal fee, and you give up a board seat, now people raise $3 million, $5 million on a safe, which is simply a promise of equity. You don’t give up any control of your company. You obviously have to be in touch with the investors and you should be, but they’re not running the company for you.

I also just think that a lot of these misconceptions about what happens after you raise money. Actually, what most people will be surprised with is most of the time, once the money’s in the bank, the investors actually just move on to the next deal. That’s their job is to primarily close deals not to actually babysit you. They’re there if you need them.

To me, it just feels like a very different landscape. It would be good for more people to rethink it, because I see a lot of people working extremely hard, having customers, having tens of thousands of dollars in revenue and just never considering raising money. I just feel like they can just make their product customers and even their life so much easier, and it’s okay to do that I think.

Rob: There’s a reason this podcast is called Startups for the Rest of Us. It’s not called bootstrapping for the rest of us. It’s never been anti-funding. In the preface of my book back in 2010, I said I’m not anti-venture capital, I’m only anti everyone thinking the only way to start a software company is to raise funding. There are different options. That’s it. This podcast is always focused on freedom, purpose, and relationships.

Back in 2005, maybe you couldn’t raise funding without giving up your freedom of controlling your company. Maybe. I don’t know. I wasn’t trying to raise, although I applied to Y Combinator in 2007. I did try to raise an angel round. I just didn’t know anybody. I had no network. I was an outsider like most of us are.

That’s why most of us bootstrap. We don’t know anyone. Friends and family were a joke. I don’t have friends and family with money. I couldn’t raise a couple of $100 or something. That started changing. The moment that I heard about people raising for SaaS companies raising a couple $100,000 from angels who weren’t on the venture track and that you could make your life easier, that’s when I started realizing, oh, there’s this third option that’s building.

Some people call it Alt-VC, some people call it third wave funding. I’m trying to think of the other terms. It’s basically just funding without maybe the expectations or the strings attached that used to come with it. That’s TinySeed, that’s the point because I was writing angel checks out of my own personal net worth into SaaS companies under this model. I enjoyed it, but eventually, you just get overweight. Your asset allocation is out of whack.

That was when I was like, why don’t we just raise a fund to do this? Because there are so many folks who could use this. As to your point, who could benefit from it, and maybe have a little bit easier time growing their company.

It’s not a regret per se, but one of the things that I would have done differently looking back building Drip is I kept toying with the idea of raising a small round. A $250,000–$500,000 one time round just to do what you’re saying, which is hire that chief of staff, just be able to hire more senior people, and have the budget. I never did. I never pulled the trigger on it. I regret it because it made the journey much harder than it needed to be.

I could have raised it and sold 10% of the company. It wouldn’t have been that much. The ultimate outcome, even if we sold for the same amount, it would have just kind of all been a wash anyways. It’s not like I would have given up half the sales proceeds or something. I’m not saying everyone should, or that you should, or whatever, but this is a viable option.

Hana: Absolutely. I think it’s okay to own less of your company if the value of your company is larger. I think that concept is a little bit hard to understand unless you’ve lived through the startup life a little bit. A lot of successful bootstrap startups are unfortunate because they cannot invest and their growth is slowed down. When they do want to exit, they only can exit at 1X or 1.5X of their ARR.

There is actually a cost. This is probably the YC effect for me. I’m a lot more aware of the opportunity cost now. I think once you achieve a certain lifestyle then you start thinking about, okay, I could be doing a lot with my time. Like you said, for a lot of us there was no other way to enter this race or circuit. Sometimes, if you may read on TechCrunch, people are raising $5 million rounds at $100 million valuation pre-revenue, you will not be able to do that. Most of us actually still cannot and that’s fine. I think that’s just the price of admission.

You do what you have to do. But like you said, it’s just good to keep your mind open and know when is that moment to actually switch. That’s actually a hard one to know, especially if you’re surrounded by people who are almost treating it for bootstrapping, almost like I’m reluctant to say but almost like a religion, I would say.

Rob: And then it’s on the other side, too. When we were bootstrapped, I would go to the Bay Area and I would go to an event. We were in Fresno, California. It was like a three-hour drive to San Francisco and I would go to an event. Everyone would be like, oh, what company are you doing? Drip, it’s an email service provider. Oh, how much have you raised? I was like, we haven’t raised any, but that’s the wrong question. We’re doing a million in ARR or something. How much are you doing in revenue?

We were growing faster and had more revenue than any of these companies that I would talk to at these events who had raised more than we had in revenue. It was just this crazy, that there’s that side of it too. It’s like, let’s get away from it, it’s too far left and too far right. It’s like, let’s come back, and be centrist, and think about what is the best option at the stage that I’m at based on the business that I want to build, because I’ve had amazing little businesses that did $20,000 or $30,000 a month that was pretty much all net profit. That was life-changing for me and that was great. I shouldn’t have raised funding for that, because it just was a cool little bootstrap business that provided an amazing lifestyle.

Hana: I think sometimes you just want to take your time and that’s totally okay. I think what you and I are saying is, if you are actually working everybody ambitiously and slogging at it, then why not add some firepower?

Rob: To your point earlier, as long as you can find the right people. It’s not about maximizing valuation. That’s a mistake. That’s a noob mistake. It’s about finding people—meaning investors—who are going to come alongside you, and advise you, and give you the best counsel they can, and they’re not out for themselves, and they don’t have terms that could potentially screw you down the line.

While they’re not co-founders and that they are not working in the business day-to-day, whether they own equity or a promise of future equity, they essentially are shareholders of your business. So you do want to be careful with that.

Hana: They can definitely make your life miserable if they wanted to, let’s put it this way. I’m sure that’s how you invest. If you invest probably once in somebody, you’re hoping that that relationship will last forever and you’ll probably invest in their company subsequently, too. You really want to find such folks, I think.

Rob: I wanted to get into your chief of staff role because this is a role that came on my radar. It was about five years ago now, where there was a venture backed startup buyer, and I heard they had a chief of staff, and the CEO founder actually rolled his eyes. He was a little embarrassed and sheepish when he said, I have his chief of staff, I feel so… because he was just this humble founder who felt like it was overkill. But I started hearing that the chief of staff is the new COO.

What used to happen, for folks who don’t know, it’s 10, 15, 20 years ago, you would get investment and then the CEO is usually a 23-year-old kid out of Harvard or Stanford, and then you would bring in adult supervision as the COO. Originally, the founder would then get fired as CEO, but then with Zuckerberg and Facebook, he retained rights and then he brought in Sheryl Sandberg, who was the COO there.

That became the new pattern. There’s this COO who really knows how to operate a business and the founder continues to do what founders do. These days, I’m seeing a pattern of chief of staff at a startup instead of a COO, that the COO hires pushed way down the line, which should be you should never hire a C-level person. You need to get into a lot of millions (I’ll put) in ARR before someone has a C in front of their title unless they’re a founder, in my opinion.

This chief of staff role, Jordan Gal of CartHook has the chief of staff he’s talked about. There are several folks I know who are doing this and you do it early. Usually, you need funding, whether you’re self-funding or raise funding because it’s an expensive hire that doesn’t push revenue. This person’s not a developer, not building products, not doing sales.

You’ve hired a chief of staff, which I’m envious of, because I want that person who is doing all the things that I don’t want to do. That’s my understanding of the role, but you actually have one. Can you talk us through: (a) why you decided to do that, and (b) what this person does for you?

Hana: Sure. I think the title has come to mean so many different things now. Sometimes, it’s like the assistant to the CEO or sometimes is the chief of staff. I think in our case, I already hinted that I’m good at figuring out what to do, but I’m really terrible at sometimes running processes. Hiring is a big example of that. Hiring today is almost like selling. You actually pretty much have to run an outbound process, source people, and then nurture them. It’s insane.

For me, the primary reason was to bring in somebody who can actually really help me with these processes and hiring being the first one. We’re working on SOC 2 compliance. That’s a very tight process to run. In my case, it’s not necessarily also jobs that I don’t want to do. But even if I wanted to, I would be terrible at them. I’m good at giving directions, but I’m actually not good at running the processes.

That’s what, this woman that I hired, she helps me with. She’s not actually really senior, but she’s extremely smart. She’s very process-oriented. At least if you’re using somebody for this help, they don’t need to be super experienced. Probably if they are, it’s better. It’s almost like you would hire somebody who probably would go on to become a future founder themselves.

Rob: What type of background would you look for? Or is the background important?

Hana: Actually, in this case, it was one of the candidates that we interviewed for our founding product manager role. She has a product management background. That, I think, gives you a lot of these skill sets because running, hiring, or getting you SOC compliant, or figuring out, like she improved our onboarding process for new hires even after people joined a lot. There’s actually project management. You have to get multiple pieces together.

I think that’s worked well for us. In general, I think as long as somebody has attention to details, they can communicate well, and they are okay being with a lot of chaos, I would say, because I think one of the things that can be challenging sometimes is that people don’t realize how clumsy early days in the startup life are. You have a weak sense about everything, but you actually don’t know anything for sure.

That’s a big difference. I had built startups, but to run hiring like this or to get SOC 2 compliance in the first few months, these are the things that you probably only do when you are raising money and you’re building with a certain velocity, so you really have to figure all that out. If they’re okay with a little bit of that chaos and they are willing to put in the time, I think that should work. It worked really well for us.

Rob: As founders, we are up for the chaos. That is building an early stage startup. Most employees are not and they want more stability. It’s a good point. It’s an interesting point to think about that for this hire.

A friend of mine was advising a separate friend that I didn’t know about how to potentially get a job as a chief of staff at a startup. I was like, you know, the folks I’ve seen do it either came up as executive assistants or they came up through operations, like office manager, because this person is a utility player.

In baseball, there are folks who only play for space and they’re outfielders. Then there’s folk and the pitchers. Then there are folks who are utility players and they can just play anywhere on the field. They’re probably not as good at any individual role, but the fact that they can play 6–7 positions is truly unique. That’s how I think about founders often.

That’s how I think about a chief of staff. It’s like a founder’s shadow. Like you said, assistant to the founder, where it’s like, you’re higher level than an executive assistant. You’re not just doing admin tasks. You’re doing things that require business knowledge. There’s an added layer there. I don’t see why it wouldn’t continue to be a thing.

Hana: I think the challenges that you mentioned earlier is that it’s not a revenue role. Sometimes, it’s a little bit hard to justify in a pre product/market fit startup. Also coupled with the fact that there is this idea that, as a founder, you must be constantly under the water and barely able to surface up and breathe. I honestly don’t believe in that.

I feel like I don’t really want to run tired all the time. I think depending on that, the role makes a lot of sense. Sometimes I feel it’s a good role for people who—how there is this community of people—will structure all their research really well. There are things that you don’t often think of as work. Let’s say you want to run sales, and now you want to try out three different sales software. That’s a lot of work.

You can spend your time doing it as a founder or if you can find somebody on whose research you can rely, you can let them run that process. There’s actually a lot of these crucial decisions you are making that arguably aren’t that important. You really want to find somebody who’s research skills you trust a bit as well, I think.

Rob: Hana Mohan, thank you so much for joining me on the show today. You are @unamashana on Twitter. Of course, magicbell.com, if folks want to see what you’re working on. Thanks again for joining me.

Hana: Thank you so much.

Rob: Thank you for joining me again this week. I hope these episodes continue to provide you with strategies, tactics, motivations, new ideas, new experiences that help push your business forward in the coming week. I’ll be back in your ears again next Tuesday morning.

Rob: I think there are two tracks that people wind up on. There is the lifestyle track where the idea is to maximize revenue with minimum work, and then there’s the growth track which is to build something that you’re willing to work and invest in, maybe only work 40 hours a week; that’s perfectly fine. I’m not saying you have to work crazy hours, but you’re trying to build something worth millions or tens of millions of dollars.
Just between you and me, this is Startups For the Rest of Us. It’s episode 565 where I’m going to answer some listener questions. I’m going to be honest. I had a guest lined up to answer the questions with me. They had to cancel for a very legitimate reason.
I was going to try to rebook someone, but my editor’s going out of town for a couple of days. In order to get this to you on Tuesday morning—like we have every week for going on 12 years—I have to record another solo episode.
This is going to be a listener question episode, which is good because we are way backed up as I said on the last one, and of course, you can send in a voicemail by email to questions@startupsfortherestofus.com. You could put a Google Drive or Dropbox link, or you can head to startupsfortherestofus.com. There is a ask a question link in the top nav and we have video ask set up now directly from your phone or your computer. You can record voicemail or just record a video that gets sent directly to me.
Before I dive into the questions, I wanted to let you know that there are still tickets available for MicroConf local in Portland, Austin, and in Boston. I’m going to be at those three events and then in Croatia the week after. We’d love to see you there. The local tickets are about I think $130 now, so it’s an easy way to come to a MicroConf. It’s only a six-hour event and we’re making these one-day local events and trying to bring more MicroConf to more people.
The other thing I wanted to talk about is a tweet that I sent out today as I’m recording this, and this is regarding a podcast I was listening to last week. To quote my tweet, “I heard a podcast host talking about successful people throughout history. One sentiment was that those folks didn’t eat very often. It’s an interesting fact—may be true, maybe not—but do you think that has anything to do with their success?”
Then I go on in a subsequent tweet, “Using the same brand of typewriter Hemingway used will not make you a great writer. Based on the successful people I know, my assertion is that their quirks or their quirks, but the secrets to their success usually come down to a combination of hard work, luck, and skill.”
Then later on in the conversation, I think I actually pointed out that some people ascribe Steve Jobs’ success to his ability to build great products, his ability to stare at people with his eyes open, wear black turtlenecks, be barefoot, and vegan.
I don’t know. This is the cargo cult thing. If you have never heard that phrase, you should google it because it’s a fascinating story of how that phrase came about, but cargo cult is when you see results, and you assume the inputs are something but they’re actually not. There’s no causation even though there might be a correlation between the two.
There’s a really good article that Manuel Figero posted in the response thread, it looks like he wrote it back in 2018. The title is One Simple Rule to Figure Out Which Advice You Should Follow, How to Separate Correlation From Causation. It’s basically a couple of thousand word essay just walking through that humans are hardwired to seek causation. Like you’re not Elon Musk, how not to be stupid goes to that quote from Charlie Munger and Warren Buffett where they say, “It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
It’s a good article and I think just as a reminder, I have tended to see this—not always—in kind of the hustle culture where people are trying to over-optimize (I would say) their inputs, over-optimize their routine because Tim Ferriss does XYZ and he drinks this brand of coffee, this is someone who gets up at 5:00 AM and they do this routine, Seth Godin writes using this word processing software.
Those things are interesting tidbits. They’re interesting facts. They’re fun to learn. If you’re doing it for entertainment, do it for entertainment. But if you really want to know what makes people successful, usually it’s the fact that they work their ass off, that they build up skills over time, that they push a snowball up a hill until it gets big and rolls down the other side. It’s that they invest years and years, and some get a little lucky. It comes down to hard work, luck, and skill as these fundamental attributes.
We don’t want to hear that. It’s like when I say, oh, I’m getting fat, and someone says, oh, you need to work out and eat less sugar. I don’t actually want to hear that. What I want to hear is some secret tidbit about how this person lost weight eating the ice cream diet.
I think we fool ourselves oftentimes into thinking well, I can be as successful as that person whether it’s looking back at industrialists and tycoons from last century, whether it’s looking at tech magnates from the past 20 or 30 years, or whether it’s looking at real personalities like Tim Ferriss or Seth Godin (whom I’ve already mentioned), trying to look at the little quirks they have or the little things they do and trying to correlate that or make it in our mind, make it a cause of their success, when in fact my assertion is it’s not. That’s both, I think a reminder to myself but also to you as a listener.
Let’s dive into listener questions today. First question is a video from John Doherty.
John: John Doherty, founder, and CEO of Credo here, where we help companies find and hire the right pre-vetted digital marketing agency for their needs at getcredo.com. My question for you, Rob is about focus. Credo has done well. Over the course of the pandemic, we’ve doubled revenue. We have a team of about six core people, not everyone full-time but working on the business every single week.
I have a business partner in the business and he also owns another company. He got involved with credo around the time, about half of where we were currently are in revenue. His business is currently about there and I’m starting to get involved in that.
He and I do have a parent company that we’re 50-50 partners in as well. We’ve worked together for about four years now. My question is really about focus and when you counsel founders that just to focus down on one core thing, or kind of the idea of working on multiple products at the same time. Instead of one business becoming a $2 million a year business, have four businesses that between them become that, or two, or three, or whatever, just not one. I’m curious as to what you would kind of counsel someone in our position to do there.
Also, if I can stick in one other quick question. I own an affiliate site in a completely unrelated industry—I’m in the outdoor gear space—and it’s just completely outside of what I normally do—two side businesses which I’m good at starting and growing, et cetera. It does about $1000–$2000 a year in revenue and I’ve been thinking about selling that. I’m curious as to your kind of thinking, kind of going in with the multi-product strategy, would you recommend selling that? If you were me, how would you think of that?
Thank you, Rob. As always, love the show. Thank you for MicroConf and appreciate your advice.
Rob: Thanks for those questions, John. John and I have been in person at a few MicroConfs. He’s at getcredo.com if you want to find out what he’s up to.
The first question is about focus. To be honest, I think there are two tracks that people wind up on. There is the lifestyle track where the idea is to maximize revenue with minimum work, and then there’s the growth track which is to build something that you’re willing to work and invest in, maybe only work 40 hours a week; that’s perfectly fine. I’m not saying you have to work crazy hours, but you’re trying to build something worth millions, or tens of millions of dollars, or hundreds of millions, frankly.
I’m just talking in the kind of bootstrapped and mostly bootstrap space. We can get into the idea of taking over the world with our software and building Facebook or Google, but I’m not even going to address that here because it’s not relevant to any of us.
Of course, there’s more nuance than I’m giving it here, but realizing that being on the four-hour workweek track is where I was from 2000. Well, I was aspiring to be that from 2006. I achieved it right around 2008–2009, and then I got off that track when I decided to build Drip in 2012. I loved it while it lasted.
There were multiple years when I worked 10–12 hours a week and made $150,000 a year, some years $200,000, some years it was $100,000, but it was certainly enough to support our family, make our house payment, and live in, at the time it was Boston and then Fresno, California.
Those are great days, I have fond memories of them, but I do remember personally for me, I was getting bored, I was getting restless, and I wanted to do something bigger. After 3–4 years of working part-time, I kept saying to myself, what’s next? Because I’m an ambitious person. That’s where the ambitious bootstrap startup comes from at the beginning of a lot of these episodes when I talk about that.
All that to say, with those kinds of two frames in mind of going from making (let’s say) a few $100,000 a year, or maybe making half a million, maybe even making a million a year and most of its profit. You’re not working that much, that’s a great life.
I also think that is akin to retiring, which for many people, if you don’t fill your time with something else, then you either get bored, or you just wind up watching a bunch of TV or doing something else. If you can fill it with family or other things, that’s great. I do know some entrepreneurs who have done that for an extended period of time and I think that’s great. I think it depends on your personality a lot.
For others, the growth trajectory of hey, I want to build a business. I want to do as quickly as possible. I want to build something to $1 million, $5 million, $ 10 million in annual recurring revenue that is then worth $6 million, $30 million, $50 million, maybe I sell it, maybe I don’t, maybe I’ll just make it profitable, or maybe I have a life-changing exit and then realize well now I can make even bigger bets.
Again, those I think are the two paths. I think if you want to go down that growth path and you want to build something big and that’s your desire, then in my opinion you need to focus, but there are honestly ways around that a little bit.
If you can hire senior people that are expensive, meaning they have high salaries, and they kind of run the company for you, in which case, you’ve almost step back and become an investor or an advisor. If you’re working day-to-day or week to week in a business setting direction, setting strategy, and even getting involved to push things forward, in my opinion, if you want to grow, you should focus your energy in one place.
As someone might ask me, well, Rob, you have a podcast, you have MicroConf, and you have TinySeed, that seems like a lack of focus. I would say two things to that. Number one is, we have really good people, very senior people who basically head up MicroConf and TinySeed. You’ve heard them both on this podcast. You’ve met them at MicroConfs. Producer Xander and Tracy Osborn, essentially, are the folks driving those two businesses forward.
While I’m obviously more of an advisor. I’m more involved than someone who was just on the outside. Those three things that I work on are essentially in the same ecosystem. MicroConf is a community that sprang out of this podcast. It’s the same audience, same focus, and they feed. People come to the podcast, and then find out about MicroConf. People come to the MicroConf and then find out about the podcast and people come to MicroConf, learn about TinySeed.
TinySeed is essentially the fund we launched out of MicroConf, seeing the need for bootstrappers wanting to raise a small amount of funding, who didn’t want to go the venture route. Really, if you think about it, it really is one company with one mission, but there are just separate parts to it that I’m involved in.
I would actually say my focus these days is more on a single goal and mission than it ever has been in the past. Back when I was running Drip, had a blog, had HitTail at the time, had MicroConf, and the podcast, switching context from running Drip as kind of CEO, hiring, driving things for building a SaaS product, back to the MicroConf mindset of building a community and talking to other entrepreneurs was difficult. These days, I don’t have that.
All that to say, John, if your goal is to build something into the millions that more of that growth path, I would say the focus is critical, but you can also build if you’re on that lifestyle spot, and you want to get to $2 million in ARR across three companies, or four companies, and they’re kind of on autopilot.
I guess that’s the other thing I’ll say is, I see folks that think that they can grow multiple companies or multiple products at once. I’ve never been able to do that. I’ve been able to grow one and then autopilot it in the sense of, hey, it’s SEO, it’s a flywheel. The funnel’s in place. It’s self-serve to do $23,000 a month, and I don’t really have to do much work on it.
That is the point where I can then shift my focus and work on something else because my focus at that point is all really on one thing. It’s on the new thing. What happens is you can’t have autopilot businesses that are autopilot forever because eventually Google’s max you down, you get some competitors, you have server outages, code needs to be rewritten. Something happens every I’ll say 6-18 months that derails it. Someone quits, maybe you have a team of two or three that are running it, one of them quits and now you’re pulled back into that when your focus is on this new thing. That’s the trap of thinking that you can have multiple businesses. It’s like spinning plates, one of them’s going to fall eventually, and are you in a position at that point to turn your focus back?
Case in point, HitTail was doing close to $400,000 a year in annual recurring revenue with very little expense. All of it was going essentially to my bottom line and I was using that to fund Drip. Drip starts growing, starts growing, it becomes successful, it was also stressful, and a lot of work. Then Google changed some API that basically broke HitTail.
I had to shift my focus back and try to repair it. It took a ton of time and effort. That was the moment—it was in early 2015, I believe—where I said I’m done with this, and I need to sell this app. I have to get it off my plate. I think to your point, John, you have an app doing, I think he said it was $2000 a year. Whether it’s a month or a year, both of those are relatively small numbers in the scheme of things.
In your shoes if it’s a hobby, if it’s something you want to do on the weekend, if it’s a little site that you’re content for, maybe you’re hooked into an API, and you do stuff, and it’s fun, and you really want to do it. You’d rather spend that time, than watching Netflix, or going paddleboarding, or hanging out with your family if you have one, then cool, it’s a hobby.
But if you have this thing that’s making a little bit of money, and it’s going to take your focus away from your other bigger drivers where I think you have more leverage. Personally, I would sell that. At that small revenue amount, I believe you’re going to have to probably find a buyer privately through, like MicroConf Connect would be an example, or through a site like MicroAcquire. The founder Andrew Gazdecki was on this podcast just a few weeks ago. If it’s only doing $2000 a year, I don’t know of a broker who would be able to help you with it. If it’s $2000 a month then someone Quiet Light Brokerage would be (I think) your best bet there.
Good questions, John. These are questions I have asked myself and I’ve seen a lot of entrepreneurs ask themselves over the years, so thanks for that.
Our next question is from Davis Bher and it’s about sharing your revenue with new employees.
Davis: Hey Rob. My co-founder and I are probably going to be hiring someone in the near future. It’s going to be our first hire. I was just wondering when you hired in the past, would you share financial metrics like MRR with employees or would you keep that just between you and your co-founder? I’m just curious to hear what other people do in this situation.
Rob: That’s a good question, Davis. I think the way I would do it is the way that I did it with Drip. To be honest, it felt weird to me to not share MRR. MRR was our KPI. It was the key performance indicator that drove the business and if MRR was growing, then the business was successful, I’ll say.
That was the number one, and of course everything flows out of MRR. I want to be clear, obviously happy customers, happy employees. There’s a bunch of stakeholders, but if you were to boil it down to one number, to me it is MRR. It tells so much about your market share, about your enterprise value, if you were to sell the company about how much profit you could potentially have all these things. Everything flows from MRR, then it’s like the lower your churn, the faster MRR is going to grow. Without telling, let’s say, my marketers, or my customer success people, or even my developers where we were, it would have felt weird.
I think people will likely, if they’re working for you, and they don’t know your MRR, they’ll probably think it’s a lot more than it is and that can sometimes lead to issues in terms of why am I not getting paid more? Why are we so stingy with our Amazon hosting? Or why are we not paying more for XYZ service? Why don’t we have better benefits or whatever versus if they start and it’s like, yeah, we make $30,000 a month.
You can do the math here. There are four of us. We’re pretty much at breakeven, which is in essence, what I would tell every employee I would hire at Drip, obviously, before we were acquired because once we were acquired, we venture-backed in essence. I would tell them, you’re going to learn what our monthly recurring revenue is. I’m going let you know that we spend all of that every month, sometimes more to grow this company.
What I was trying to do was level set. You see that number that’s $40,000, $60,000, $100,000 whatever a month, that is not going into my personal bank account. This business is, in essence, a growth business, and growth costs money.
Fast-growing businesses are rarely if ever profitable. In my opinion, I think since MRR and MRR growth is that pinnacle KPI and everything else feeds from that in terms of number of trials, trial-to-paid conversion rate, average revenue per user churn, just everything flows from that. In my opinion, it’d be tough to have a company where the revenue is not communicated.
We had an admin dashboard built into the Rails app that showed all of our numbers in real-time, in essence. It was not just showing the revenue, but it was showing how many trials were in the pipeline, what the current, I think it was the last week or last 30 days trial-to-paid conversion rate had been. It was all this stuff, it was our pulse on what the business was doing, and if we had (again) hide some of those, I think it would be just kind of odd.
Then post-acquisition, when the company grew from the 10 we were at during acquisition up to 100–120, by the time that I left, we had a monitor with all our key performance indicators of the company. That was a much larger team, it was a venture-backed team, and there was a monitor in the office that showed all these metrics.
Some of them were metrics like number of emails sent, total number of customers, number of trials, whatever, but the revenue was visible for everyone to see because again, that was such a Northstar metric.
Those are my thoughts on that. Thanks for the question, Davis. I hope that’s helpful.
Our next question is from Matthew and this one is a voicemail, but still goes to the top of the stack, and then if we have time, I will dig into some text questions after that.
Matthew: Hi, Rob. You may not be the right person to ask because you seem so driven, but I’m wondering if you have any advice for folks who struggle with motivation and consistency? I’m a bit of an all-rounder when it comes to UX design and fullstack web development. I have several ideas for apps to serve the industry I’ve been a part of for the past 11 years.
I think my biggest problem is consistency. I have a long history of enthusiastically starting projects, making good early progress, learning lots, and then losing interest before actually […]. I’ve tried various strategies to overcome these tendencies, including shrinking the scope, trying to know a little bit every day, or making public commitments. So far, nothing has worked and each time I feel like even more of a failure.
I’m starting to wonder if it would be healthier for me to let go of the dream of building a small sustainable software business and instead find a team I’m happy to be part of. I’d love to hear your thoughts.
Rob: I think almost without exception, everyone suffers from this at some point or another. Some of us struggle with it more often and more consistently. There are probably some people out there, maybe Elon Musk, who never struggles with this, but I think most of us do.
I absolutely have and do I have unfinished projects sitting on my hard drive like the book I started talking about 9 or 10 months ago. I’m at the exact same boat as you are, Matt, where I have gotten to a certain point and just got stalled. It’s not a lack of interest. It’s a lack of focus. There are some hard parts to be written, there are excuses. It comes down to procrastination, at least in my case.
You and I are obviously in different places in our career. You’re trying to launch your first app. I imagine there’s a lot of doubt as to whether something can even work, if this thing is for you, if you have what it takes. These are the thoughts that I had when I was in your shoes, so I want to speak to your situation rather than going into how I’m thinking about the day-to-day, or how I will eventually get over the hump with these projects I’m working on.
In your shoes, I think you need a win. I think you need to launch something and get that positive feedback loop. That something maybe is a free course, or it’s a free email newsletter, or maybe it’s a paid course that’s quick to produce and doesn’t cost a lot. Maybe it’s an ebook that you write. What are your areas of expertise that you could potentially spend 8, 15, 25 hours on and have something that is shippable.
Again, maybe you charge for it, maybe it’s free, but you get something out in public and you get past the terror of firsts. This concept of the first time you do anything, it’s going to scare the […] out of you. First time you publish a blog post, the hairs are going to stand up on the back of your neck. The 10th time, you’re going to be over it.
First time you record a podcast, it’s going to be terrifying, and the 565th episode you record, you’re just going to be talking very naturally to the camera like you’re talking to your best friend. First time you speak on stage. First time you ship a product into the wild. First time you push a landing page, marketing something live. The first time you make it to the top of Hacker News.
All these things are super scary and exhilarating the first time they happen. The more positive feedback you receive from those, where you make it to the top of product time, you sell $500 worth of a course, you get a thousand downloads of that free ebook that you put out and people email you saying this is amazing, thank you so much, I’d love to see your next ebook. That positive feedback loop is what you can then build on. That’s the snowball that you add on to over time, and you compound it. And that motivation builds.
But if you’re trying to build something huge, and it’s hundreds of hours sitting in a basement, or nights and weekends coding a SaaS app, I think there’s an easier way.  Whether you follow the stair step approach to bootstrapping directly, where you are launching a pretty simple product with one marketing channel, maybe it’s a Shopify plug in, maybe it’s an ebook like I said, maybe it’s a course maybe to WordPress plugin, an add on to some ecosystem, or whether just in your head, you’re trying to get something out into the wild, doing things in public creates opportunity.
What I think you’ll find is the more things that you ship, the more high quality things you ship, the more people will take notice. To be honest, the worst part of shipping something, well, there are a couple of worst parts. One is it’s scary, but the worst result is not that someone doesn’t like it, it’s that no one cares. That’s honestly the most likely occurrence.
The first several things I ever launched into the world, first several essays, the pieces of software, the websites, no one cared, and it was frustrating because it felt like a waste of time. I had major imposter syndrome of, is this even possible? Because back in 2002 when I started launching these, there was no model for this. There was no model.  You took venture funding, if you want to do anything on the web and I didn’t know of anyone who was just trying to write software, sell it, and just build a real business selling a real product to real customers.
At least you know, that part’s not true. It is possible. You see it. You see it with guests on this podcast. You’ve seen it with what I’ve done. You’ve seen it with the MicroConf videos. You see it if you’ve been in MicroConf Connect or if you’re just paying attention to the bootstrapped and mostly bootstrap community. You know this is possible.
Then the next question is, can you do it? My guess is you can, because I see a lot of people with a lot of different skill sets come at this a lot of different ways and achieve success. This is a really good question, Matt, and I think a lot of people likely struggle with it. Again, I struggle with it from time to time on specific things.
Before I wrap this question up, there are other ways around this and it’s to have accountability like to be in a mastermind. It’s to have a co-founder, it’s to have some external force that you have to report to on a daily or weekly basis that drives you to keep going. Maybe that works for you, maybe it doesn’t. I know some people, accountability just doesn’t matter to me.
If you kind of know yourself in terms of whether that’s going to motivate you’re not, but I definitely know folks who don’t work out when they’re on their own, and when they go to a gym they work definitely hard because there’s that social interaction. I know founders who have a tough time shipping until they’re in a mastermind group, or until they have a co-founder, and then they’re pushed and motivated by that.
Thanks so much for that question, Matt. I hope it’s helpful.
That’s it for this week’s episode. We didn’t get to the written questions, but will definitely circle back here in the next month or so and I will do my best to have a guest on to share their insights as well.
There are just some really good questions and questions that I don’t think have ever been asked on this podcast before. I appreciate everyone who sent theirs in. Again, you can email questions@startupsfortherestofus.com. Put a Dropbox or Google Drive file in there, or add to our video ask form, startupsfortherestofus.com. Look for the ask a question link in the top nav.
Hope this week is treating you well on your entrepreneurial journey and I’ll be back in your ears again next Tuesday morning.

Rob: You guessed it. It’s another episode of Startups For the Rest of Us. I’m Rob Walling, and this week I’m talking with Sol Orwell about growing his website, examine.com, to millions of views per month. He’s ten years into it. We talk about why he built it, talk about changing revenue models, and how today it’s a subscription business. While it’s not Software as a Service per se, it is Information as a Service, and he’s built up one of the most reputable nutrition information websites on the web. That’s examine.com.

I also asked him why when you google ‘who is the most attractive man in Toronto,’ his web page ranks first for that. He does some fun SEO stunts like that.

I just find Sol super interesting. I came across him because Sherry and he met at an event. Since then, obviously me being in the B2B SaaS world and solving in the online marketing/nutrition information world, he and I would not normally cross paths. But it does come down to digital entrepreneurship. It’s about being an online entrepreneur.

When I look at his path, working with domains and becoming essentially a digital nomad then a self-made digital entrepreneur, there are more commonalities between what he and I do than not.

Obviously, this episode is a little different in that it’s not straight SaaS, but we also touch on his subscription numbers, how he reduced churn, and some other things that I actually find pretty fascinating.

Before we dive into our conversation, there are just a couple more weeks left to get MicroConf local and MicroConf Europe Growth tickets. We’re hosting our locals in Portland Oregon, Boston Massachusetts, and Austin Texas, here in September—just a few weeks out—and then in Croatia for MicroConf Growth Europe.

Tickets are going quickly, and I believe we’re going to sell out at least a couple of those events here in the next week or two. So microconf.com, look for in-person events. If you’re interested in hanging out, I’ll be at all four of these events and I’d love to see you there. With that, let’s dive into my conversation with Sol Orwell.

Pleasure to have you on. We were talking offline a bit. You are the co-founder of examine.com, which, first of all is a kickass domain name. Your H1 is “Nutrition information you can trust. We have no conflicts of interest. Our team is composed of scientists, all we do all day every day is to analyze studies on nutrition and supplementation to answer your questions.”

Someone listening to the show—a lot of SaaS founders—software folks might be thinking, how is this relevant? How is someone who built a health information site useful to SaaS founders? We’re going to get into all that because you’ve done a huge amount of stuff.

I am really curious about Examine. It’s a huge site with a lot of reach. Can you give us an idea of how large it is? Maybe daily visits or monthly, or whatever you share publicly?

Sol: Yes. The content itself is, I think collectively now on the website, we have eight or nine million words that we’ve written. We’ve been around for 10½ years, so obviously, we’ve had a lot of time. I think our research team, which is just basically everyone who actually does the research, analyzes the research, and writes about it, itself is up to 14 people. I think we have four or five copy editors and a bunch of reviewers and whatnot.

Collectively, I think we’re at 2½–3 million visitors a month. I got to be honest. I don’t look at it too much, especially with the kerfuffles we’ve had with Google and whatnot. But one of the things (I think) that is relevant to the SaaS founders is we have roughly 10,000 paying subscribers for content. Even though we don’t offer a product or solution, we actually have a lot of health professionals that rely on us for analysis. There are a lot of analogous situations like decreasing churn, onboarding, and all that kind of stuff that we’ve learned that would be also relevant to other people in the SaaS industry.

Rob: That makes a lot of sense. I was going to ask you more about your revenue model. I had clicked around the site. I’m not super familiar with it. I just haven’t been a user of it, but I was clicking around seeing you have a $29 a month plan. You can prepay annually for $17 a month. Then there’s lifetime access for $800. That is very similar in cost to lower-end SaaS or a lot of WordPress plugins.

You’re 10½ years into building this. I do want to talk about subscriptions, pricing and stuff, but I first want to hear, what was the impetus for you starting this? Did you and your co-founder start at the same time, or did he join you later?

Sol: The impetus was actually that I used to be very overweight, like you don’t go to […] or that kind of stuff. When you’re starting to lose weight, we can’t help but—we’re humans—we always look for the shortcut. I think I literally bought 35 different supplements. There’s a picture of it where it’s just every single one imaginable.

Eventually, when you start actually getting into it, you realize the supplements don’t really do much. There are certain targeted specific situations, like a lot of us are deficient in vitamin D, or zinc, or magnesium. At this point in time, finally, as I started losing weight and figuring it out, I realized that a lot of supplement companies are ripping us off, and doing what most anyone else would do, I started complaining about it.

I was in a different position. I had already started online in 1999, so I’ve been building websites. I remember learning Perl and PHP3 way back in the day. I’ve been around for a while. I was in Colombia with two of my friends who were both postdocs. She’s Colombian. I was complaining about this. They’re scientists and just got fed up with me.

You know when you just keep hearing someone complain about somebody, just go do something about it. That’s what they said to me. That’s what I did. I emailed someone I’d known from Reddit. I’ve been on Reddit now for 15 years, way too long. I emailed someone there and that’s how we got started.

Eventually, it’s always been bootstrapped. I’ve never taken the external funding, but it was just meant to be something small. We’ll bring in some people who will answer some questions. We’ll talk about all the supplements and stuff like that.

Eventually, we realized there’s a real demand for information you can trust, especially when you can look at social media, the algorithms always trend towards extremism. Having someone that’s not as simple and there’s a lot of nuance, there’s a lot of context. We eventually realized there was a huge opportunity there for us. That’s when we properly incorporated, the co-founder fully came on board, and built out the team. That’s where we started, it was just a lark.

You’ll hear from a lot of entrepreneurs that are like this. They just did something for themselves. They realized there was an opportunity and ran with it. That was kind of the same for us.

Now, our vision has expanded. Originally, it was just fitness and bodybuilding supplements. Actually, we weren’t creating that kind of stuff. Now, we’re more in the nutrition space, but I think that’s just part of the smart evolution of any company, figure out what people want and go from there. That was our original random start.

Rob: It’s so interesting because when I first visited examine.com—I don’t remember when this was, but someone mentioned it to me and I came through—I thought, this is nutrition and health information. There are a bazillion sites in my uneducated mind. I’m not super into health or nutrition. I eat well, but I don’t do a lot of this stuff. I was thinking this is just like all the others. That’s what it felt like. So I can imagine you getting started thinking you want to be different. I guess it’s just a much less biased and a more scientific approach. Is that the idea?

Sol: Yeah. Originally, the idea was that the baseline was always that anything we will state will be based on research. If you ever really gone to the gym, or if you know anyone who has, there’s that broscience phrase which is just dudes will spot out things that make no sense. It’s like the gospel that’s been passed on, the 10 commandments from the last God knows how long.

The original idea was we’re just going to analyze and research, and we’re going to put it together. Part of what happens is you might see a headline like, this supplement does this for weight loss. But it turns out it’s for overweight women who are suffering from menopause. I don’t think you or I are suffering from it. We’re not experiencing menopause, so that stuff doesn’t really apply to us. That was the original genesis of making something that’s research-based.

That has been a huge challenge for us and a lot of other health sites. We might get into the entire YMYL update that Google did a few years ago, unless you are well, well-established (billion-dollar-companies) like Health Line, WebMD, Everyday Health.

It’s been a bit of a slog. How do we differentiate ourselves? A lot of the energy that we spent originally was on building up social trust, building relationships one-on-one, showing them that we’re very, very serious about what we do, because a lot happens with nutrition. There’s always a dogma, and it’s not even just nutrition. It’s now pretty much everything online. I’ve got this view, and everything I see will either agree with me or there’s some shoddy, they’re going to pick up the smallest nitpick details out.

We’ve always tried to also take a very Switzerland approach. To me that’s a very long-term thing. We’ve never made it about personality. It’s been like this. The research says like it or not, we don’t really care. Honestly, you can go away. It makes no difference to us. It’s been a slog, but eventually people recognize excellence here. They also recognize context and nuance, which unfortunately, is becoming a little bit more rare these days.

Rob: And to build something like that because you’re talking about trust, and trust is heavily related to brand. Your brand makes people trust or not trust you. In this case, I can imagine you had a tremendous amount of trust the first day you launched or the first month you launched, but 2, 5, 10 years in, now it’s a staple to have, you said 10,000 people including health professionals are subscribed?

Sol: Yeah. Health providers are subscribed, but trust is interesting. When we started off, we kind of spun off Reddit. What really happened was we were very active in Reddit fitness, which back in the day had 5000 people. I think it’s now at 5 million, so it’s grown just a little bit. We were well-known commodities, but prior to what happened was newbies would come—including me, originally, how I ran across Reddit fitness—and then ask the same questions again. Is creatine okay? So I take vitamin D?

Eventually, you just get tired. This is before Reddit introduced like Wikis and FAQ functionality. We just got so frustrated. We’re like, hey, we’re just going to build this website that answers these questions.

We had a bit of a leg up on Reddit, or at least in our little subreddit, we were known commodities. We were obviously irritable and […] because that’s the internet—you’re always just a jerk online—but we were known to be a little bit at least obsessive about this.

The hard part, of course, was how do you branch outside of Reddit. How do you break out of that? There are steps you can take. So we were inspired by a charity called GiveWell. They do a our mistakes report. I think they do it much more structured like every quarter or something like that.

So we introduced something like that where like, these are the mistakes we recognize internally, and now we’re talking about it publicly. These are the ones that we’ve taken steps for. These are the ones that we’re still failing.

It’s very cliche to talk about transparency. But I’ll be honest. Being transparent sucks. You’re basically saying like, this is everything I’ve screwed up and this is everything I’ve deprioritized. Other people will always disagree. That’s generally okay, but no matter what you do, people will come across like, hey, why are these jerks not doing this instead of focusing on this? This is obviously more important.

We went through this process. We had legitimate complaints that we didn’t have enough women’s health information, like PCOS, menstrual cups, all that kind of stuff. But partly, we didn’t have that because we didn’t have many female researchers. It’s not that male researchers can’t look at something. There’s also a level of experience and empathy, and being able to understand some of the nuances.

That was in our transparency report. We fail in being diverse enough for our team. Then people attack you, especially nowadays. What do you mean by diversity? Of course, it’s funny, because both my co-founder and I are ethnically South Asians. What happened was when people would actually read the description of why we said this is a failure. Every single person was like, oh, okay, that makes sense. Okay, I understand where you’re coming from.

It’s a slog, it sucks. People talk about being vulnerable online, like real vulnerability. It’s uncomfortable. But if you do it right, it builds so much trust that one of the things we […] internally a lot is responsibility. Like we can say MSG is the devil and tens of thousands of people would believe us. We can say MSG is the greatest thing in the world, and same thing. So there’s the downside.

We have to be very careful of what we talk about, but it took a while to get there. You can’t just maintain it easily. We have to constantly be on top of things. But I think it’s worth it because now for us, with our customer base, our subscriptions, and our trust that our users have with us, we get more leeway. If we make a mistake and we own up to which we do, people forgive us because these guys are being honest, they’re not being disingenuous.

So it’s a slog to get to it, but if you can achieve it you can empathize. You have trust with a lot of people and you can be honest about your mistakes. People are like, cool. Rob fessed up, he owned up. I’ll give him another chance. It wasn’t fun, but it was worth it in the long run.

Rob: Two things come to mind as you’re going through that, I think of it as a trust bank, or we’ve heard that phrase of, it’s like a credit score where it takes a long time to build up, and it’s pretty easy to drop quickly. You make a couple of mistakes that you don’t own up to where you’re trying to cover up or whatever, and suddenly that trust is gone. We see this with scandals at companies. There are all types of examples of people who we all love and trust, then they do some crappy stuff, and suddenly the trust is gone.

The other thing I think about is, you mentioned transparency. Transparency is something big enough to start up in the SaaS space, but I find that most of it is […] transparency. It’s fake transparency for marketing purposes. We’re being transparent, but they’re actually not. We’re being transparent by telling all the good things. Oh, it was so hard and look at how it turned out. I said, wait a minute. They’re not telling the real story.

I feel like you’re touching on more about telling the real story. I know that you have a blog, it’s at sjo.com, which I assume are your initials?

Sol: They’re not, actually.

Rob: They’re not?

Sol: No. I used to be in the domain industry. So that’s partly why we got examine.com because people remember it. I just got SJO because I thought it was very easy to remember and that was literally the only reason.

Rob: Wow, okay. Anyway, your blog is on hiatus because you’re busy focused on Examine, but folks can go back through and read. There’s a lot of stuff you talk about. You talked about, like you just said, your dramatic weight loss. You talked about some we’ll get into soon, just google ‘smacking the crap out of Examine in 2019.’ You talked about all types of stuff that I find refreshing and I feel it’s a pretty honest take on things.

I want to switch things up a little bit, dig into Examine, and talk about these 10,000 subscribers. That is a lot of paying subscribers, man. I mean, there are very few SaaS apps in the world that have that many. I want to find out what you said earlier. You had these subscribers and you have worked on onboarding, about churn, about reducing that and then I want to jump to the Google smackdown because I have to imagine that you get a ton of traffic from organic search, and that Google doing anything as they update their algorithms every few months, that’s going to hurt.

You have all these subscribers, which you’ve built up over 10½ years. Did you have a big learning or two that you learned about ‘our onboarding was crap and everyone was leaving,’ versus ‘we did a few things and this changed the game for us’?

Sol: I have two really good friends of mine that bootstrapped a company called Precision Nutrition. They started in 2001 and they sold 80% of it three years ago for $205 million, so a chunk of change. They both live in Toronto and we’re good friends. I would talk to them about this kind of stuff all the time.

They have three things they think are critical for their success, and one of them was something called Jobs To Be Done. Jobs To Be Done, you might have heard of, is also known as Appreciative Customer Inquiry.

Rob: Our audience will be familiar with it. We’re very familiar with it. That’s totally in our wheelhouse.

Sol: Perfect. I think honestly, that was one of the most fundamental things. What happened was 2017–2019 were the three roughest years of Examine. We were almost bankrupt. I had to put it in my own cash to keep it going. I’ve never been shy about admitting this. It’s also funny. People are like, aren’t you afraid people are going to think you’re a failure? I’m like, who? They’re not even in my life. I never see them, so who cares?

Anyway, it was bad times. What had happened was we started creating guides around popular topics. The ketogenic diet was very hot. We did a ketogenic diet and it’s a little spike in revenue. We launched and we got excited. But long-term, that’s not why people were coming to us. They were coming to us for research analysis.

I’m sure most of you have heard of the PMF (product/market fit) survey. The biggest thing that was important for us was doing these interviews properly. Far too many people when they do these interviews, they do them more like a UI/UX investigation, like how was this? Were you confused or excited over support? Which is important. But I don’t feel like enough people actually dig into what the hell are people actually trying to do.

Obviously, we have a lot of people with chronic health conditions who come to us, but there’s a lot of people who just like appearing smart to their friends and family. They’ll never admit it, they’ll never be like, yes, I just wish to feed my ego and seem so smart. No, they’re not going to say that. It took us a while to figure out they want to share this information and feel smart.

So really, they’re not coming to us for a guide. They do want nuance, they don’t want this long thing. They want, here’s all the research across all the categories. We have 25 Health categories and we do five to 10 new studies every month, we summarize them. So instead of you spending 10 hours learning about the latest cannabis research, anxiety research, immunology, or whatever, we analyze it and we summarize it for you. That was one of the most fundamental things that we really changed.

Just as a reminder, if someone hasn’t heard of Jobs To Be Done, really the quick 30-second version is you want to understand the timeline. Someone went from passively to actively, to deciding and then consuming. And everyone focused on the consuming part. That’s like the PMF survey. But most people ignore the first three parts. How do they actually decide? How do they figure out what matters? That would be my one little thing that I thought was fundamental.

I have a stack of 100 interviews I’ve done. We spend maybe 45 minutes, on average, talking to the person and there are usually four people listening. Then we spend maybe an hour-and-a-half afterwards breaking down everything we did.

Yesterday, actually, we had an hour-long session just breaking down eight studies or eight interviews. We had emotional energies. Was it a functional energy? Was it social? Or was it emotional? So function is the actual thing they want, emotional is how they feel, and social is how they see others perceive them as. We spent an hour-and-a-half just discussing eight interviews.

So I have a stack of 100. I’ve spent 100+ hours on this kind of stuff. I think that was fundamental. We bring everyone to the team. Random researchers join, customer research team, whoever they join in on these calls because now we really understand not only what the customers are looking for, but what is the language they use.

It’s important. Surveys are important. You get language from surveys, but getting to dig in and be like, what does that mean? What does successful mean? Or what does being a type of research mean to you? What does it look like? I think that would be the single most important thing that a lot of SaaS founders missed out on.

The nice thing about it is—again, we go to PMF surveys; all that you need is a large enough sample size—with interviews, just with five interviews, you will glean so much about what they’re looking for. Each interview generates (I would say) an average of 4–6 different things we can do better on the website. That would be my one major recommendation is talk to the customer, and don’t just talk to them in a perfunctory manner.

One of the side things (by the way) that’s super easy to do is you can sign up for a million other services. Even like Duolingo and whatever. Often, they will contact you because they want to talk to you. I love doing those interviews because you find out how other people are doing and you’re like, oh, that’s genius. Then half of the time, what the hell are these people doing? They’re not getting anything from me.

The other final story bit is people will try to help you. You have to remember that whenever you interview them, they’re going to try to give you the answers you want to hear, or they think you want to hear. Your job as an interviewer is to break that down and to really understand what’s driving them. What do you mean by that or can you explain that more? Can you elaborate on why use this word or whatever? I think that would be super important for any SaaS founder to really experience themselves.

Rob: We did a similar thing for MicroConf about 18 months, 2 years ago, and it was crazy enlightening. Just all the terms that we pulled out of that, we were trying to figure out really what our brand was about and what people thought about it. I had my own gut feeling as the co-founder of it, but it helped us realize some other adjectives, the way people talk about MicroConf from the trust and community. We’re these big things—belonging, relationship.

So yeah, Jobs To Be Done. Andrew did those. We went on Amazon for some books, we asked a couple of friends who had done them, then we had some recordings of some, and listened to how people push and push. Like you said, you dig and you dig and you dig, and you get there. I found them extremely valuable.

Sol: I was just going to recommend one guy, Bob Moesta. He’s OG and has been around since the 70s. He’s usually the go-to I refer to whenever someone wants to dig a little bit further into it.

Rob: Very cool. So I want to switch over to this article that you wrote on examine.com. It says Google and examine.com. It’s in your site news category. “Google is waging war on the peddling of magical pills and miracle cures by questionable health sites, and examine.com seems to have been caught in the crossfire.” This is July of 2019 and was last updated about a year ago.

It sounds to me and you have a graph of your Google Analytics chart that looks like over the past 2½ years, Google has decreased traffic to examine.com by roughly 90% which had to have just been excruciating and hit you pretty hard. Can you talk me through after building all of that? You’re 8–9 years into building this company with this huge flywheel of traffic, and then it starts doing that. What was the reaction? How did you pull out of it?

Sol: It was definitely a little bit shocking because it’s a cliff. It wasn’t even like a slow descent. We just got annihilated. The one thing I don’t think we mentioned was we basically hit our baseline because we were getting still 4000 or 5000 visitors a day from Google, and almost everyone was searching for Examine to find us. It wasn’t even that they were still sending us traffic. It was because our brand name was so damn strong that it’s like Examine protein, Examine actually done it, creatine what Examine says, blah-blah-blah. That was literally about as low as we can go.

I got to be honest. It kicked our ass. We never regained it. Funnily enough, I have a little support group of other—I’m going to call it mid-sized in terms of traffic—mid-sized health sites that have all been killed by Google. One of them, for example, has a podcast with NPR. One of them has won multiple non-profit awards for going after pharmaceutical companies. I get it. It sucks.

For people who don’t know, basically Google went after YMYL (Your Money or Your Life), so finance and health websites because of the insane amount of misinformation and disinformation, like vitamin D cures everything, and obviously financial, crypto, and all that kind of stuff caused a lot of pain for a lot of people. They basically were like, hey, unless we can really trust you, we’re going to not really trust you.

Health Line, which is a billion-dollar company, WebMD, which is a billion-dollar company and Everyday Health, which is a billion-dollar company, basically started dominating. What’s so genius about what they did (and mad respect to them) is they then started going out buying old, well-established health websites, and applying the same SEO they did on their main domain to others like Med News Today, Psychology Compass, and Psychology Today. All these other websites that are now owned by, WebMD haven’t really bought anything but Health Line and the other one.

This coincided with the ass kicking I talked about that we had in 2017–2019. So many people can vouch for this from other experiences, you kind of get addicted to the free traffic that Google is just shoveling down your throat, You’re like, hey, I don’t have to worry about my optimizations because we’re getting so much traffic. In some ways it was good because it made us do more stuff like JTBD interviews and understand what we’re trying to do, which pushed us heavily into the subscription area.

I will say we never really regained our rankings. Obviously, I’m biased. I still think we’re better than pretty much anyone above us. Not to specifically besmirch them, but like Health Line, we have 19 articles on creatine and kidney and it’s just the same regurgitated stuff.

This is simply the reality we have to work with. We doubled or maybe tripled the amount of traffic that Google was giving us from the ordeal we suffered from, but it’s the reality of life. We’ve talked to so many people from all facets of Google. They talk about E-A-T and all that kind of stuff, and we have E-A-T up the wazoo.

When COVID first hit last year, the New York Times came to us and asked us what supplements could possibly help? And we’re like, you know what? Nothing. But it’s the reality and you have to live with it. People can complain, and I don’t blame them if they do, but I understand we were effectively collateral damage and in a horrific way I understand because the harm that other companies were causing in health, I totally get it from an end-user perspective. I would rather they not see that and not see us, then see us in that kind of garbage.

This is the life of an entrepreneur. You need to keep a level of Zen Stoicism. We can’t change it. We can’t go, Google, why didn’t you listen? We’re doing better. Unfortunately, I never have a nice, clean answer. You just kind of got to deal with it. Thankfully, we actually weren’t that heavily on subscription before, like subscriptions will maybe be 5% of revenue, so we started heavily focusing on it. Long-term I think it’ll be fine, but definitely very unpleasant in the short-term.

Rob: I know a ton of SaaS founders who’ve experienced the exact same thing, who rely on SEO for a lot of their trials, a lot of their leads. Going all the way back to Panda and Penguin, or whether it’s just any update that comes out every quarter or every six months, it’s always a danger. SEO, like you said, is an amazing organic traffic. It’s such an amazing lever. But there’s a little bit of diversification that I always encourage people to embark on.

Sol: Absolutely. It’s all about the distribution. I’ll be honest, I started doing SEO in 2001 when Google was still relatively new. The monthly updates that will be named after a Google guy on WebmasterWorld. I’ve been around long enough to have seen the highs and the lows. I have a website that I started in 2003 that I haven’t really touched in 2009. In the last 11 years, it’s literally gone 10X up and 10X down, and I’ve done nothing. It’s just sitting there. Still it’s gone back up in the last couple of years, not nearly as high as it was, but that’s simply Google to me. I always tell everyone it’s extra. Never, ever, ever, ever rely on it. That’s what it is. It’s just a free bonus. It’s bonus traffic. That’s it.

Rob: I want to ask you before we wrap up, about these pages that you have on the internet that I call stunt pages, or just the stunts that you pull that I think are pretty cool. I say that with a bit of admiration because I want to find out your motivation behind them.

Basically, if people go to sjo.com and then go to your about page, you show that if you go to Google and you type in your name Sol Orwell, then Google autocomplete says, Sol Orwell net worth, Sol Orwell weight loss, Sol Orwell wife, all this stuff. It’s the same thing for my name.

I’ve never paid attention to it, but you went and built pages. Because since your site ranks so well, it ranks number one for your name anyway, you built out all those pages because they didn’t really exist, or they were on crap sites, Yahoo Answers or something. Each of them, you basically just make […] up. It’s like the net worth says, “By utilizing sources such as his multiple Forbes articles, his rugged beard, his odd love for cookies, and combining it with pixie dust, we can ascertain that Sol Orwell’s net worth is roughly $31.4159 million.” Which of course, as I saw that I’m like, 3.14159 as the first six digits of Pi. Then at the bottom, you’re like, nope, I’m just making it up. This is being cheeky, blah-blah-blah.

I just think it’s clever. It’s funny. I don’t know if I do it today, if it still works, but if I go to Google and type in ‘most handsome man in Toronto,’ I believe it links to you or at least a picture of it on your Facebook page. You’ve just ranked. You know how to rank. You’re an SEO and a domainer. You know how to rank for these things. So it’s funny, it’s cool, but why do that? What’s the motivation?

Sol: Honestly, I don’t even have a good answer. So I’ve always joked about internet fame. I mentioned this. I started off in 1999. Most people have no idea I exist. Most people think my co-founder is the only one who owns Examine. Even on our About page, I’m the 20th or 30th name mentioned way down. I’m below my EA, I’m down there.

I’ve never been about internet fame. Part of what happened was I would always make fun of e-fame. I’ve mentioned internet fame is a completely ephemeral thing. One of the things that we started making fun of is people would start googling me and be like, I was searching for your name. People are looking up your real name. What does that mean? I’m like, oh, yeah, I legally changed my name. Oh, what’s going on there? It’s not a serious thing to me.

Really what it was (I think) was a combination of you know you’re internet-famous, or D- internet celebrity, when people are searching for your net worth and your significant other. It’s always wife or husband, or net worth, which is absurd. How are you going to find out my net worth? I’m not in any listing. I’m not that rich, not even close. It goes back to entrepreneurs being very miserable. To me, it was just a funny joke.

I remember, I was throwing some stuff to a friend in Japan that I go see almost once a year, and I just wrote all this off WiFi. I just made these pages because I’ve got nothing better to do. I can’t go to sleep right now. Why don’t we have fun with it?

I got to be honest, you talk about meeting other entrepreneurs. Like one of my best friends, his business was every time there’ll be a national emergency, he would go there by Facebook ads and hook up local contractors with people looking for fire support or whatever. I’ve always loved these kinds of random edge cases, which make no sense. They’re not really meant to do anything other than explore the fringes.

One random last example I’ll give you. Back in the days of Google SEO, having a DMOZ listing was huge, being listed in the ODP (Open Directory Project). What I did one summer just in 2003, I bought a bunch of databases, put all this information online, and I had one high school kid who did nothing but submit every single page he could to DMOZ. We ended up with 300-some listings and we sold the website for $40,000 or $50,000.

It was just something to do. I feel like we get so lost and just doing the work that we lose, having fun, and basically fooling around. So the pages were just me having fun.

The entire ‘who’s the most handsome thing’ was I have another friend who lost more weight, who’s very attractive, so I always make fun of him. But I’m like, you know? In Toronto, you’re not as handsome as me. That’s what it was. It was just to poke him. I made this page if you google, it still says, “Research says that the most handsome guy in Toronto is Sol Orwell. There’s absolutely no doubt about it.”

It really was […] after the one box. The funny part of it is, most people don’t realize one box is just some random snippet. You can go to random strangers—not that I do this—like if I met a friend and they don’t google that internet site, it’s like hey, look at the Internet. Google says I’m the most handsome man in Toronto. They don’t understand it, literally says sjo.com underneath it. So really, it was just me trying to be like a muckraker or a dumb ass. Really that was it.

We spend so much time being serious online and Examine is a very serious endeavor. We’re relatively very uncheeky in it, because it’s science and research. This (I guess) was more just an outlet for me to have fun, so the cookies and all that. All of that is just like, hey man, we can have fun. And if not, it’s okay. I’m just trying to live my version of a best life.

Rob: Yeah, I think it’s funny. A similar story, my kids will troll people if they have an Amazon Echo, an Alexa. If you say, Alexa, tell me about (insert person’s name), she will usually say, I don’t know anything. But if you have a Wikipedia page, she will read the first two sentences while I’m on Wikipedia. So they’ll go […], Alexa, tell me about Rob Walling, and she’ll say Rob Walling is an investor, entrepreneur, and author, blah-blah-blah. And people are like, what? You’re famous? So it’s a similar thing. No, I’m not famous. It’s just people don’t know where Alexa is pulling from. Well, how does Alexa know about you? So I get it.

Sol: I got to be honest. I think 90% of what I do is to mess with my mom because she’s obviously very internet unsavvy, and she thinks I’m this huge deal online, when really, it’s just me being an idiot and like having the savvy to screw around with it.

Rob: Very nice, sir. Thanks so much again for joining me on the show today. If folks want to keep up with you, you are at @sol_orwell on Twitter. And of course, examine.com if they want to see what you’re focused on these days. Thanks again for joining me.

Sol: Thanks for having me, Rob. It was my pleasure.

Rob: Hope you enjoyed that conversation between Sol and I. Obviously a little bit different than some of the other episodes that we’ve released over the years but frankly, I like to expose myself and hopefully expose you to new thoughts, new ideas, and just different paths. The world is larger than mostly bootstrap B2B SaaS. I think there are a lot of disciplines that are orthogonal to ours that we can learn from. And I think there’s a lot of value in having conversations with folks who maybe aren’t in the same bubble and the same little ecosystem that we exist in. So thank you again for joining me this week, and I’ll be back in your earbuds again next Tuesday morning.

Rob: Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling, this is episode 563 where I’m going to run through several listener questions. It’s actually been a bit too long since I’ve done one of these episodes. I believe we have north of 20 questions backed up. We won’t be able to get through all of them today.

If you hear a question today that sparks in you to ask your own question, send an email to questions@startupsfortherestofus.com and I’ll get that answered just as soon as I can. Hopefully the next Q&A episode I will have a guest on to answer with me. Of course, voice mails and video questions go to the top of the stack. If you want to record something on your phone and send me a Dropbox link or a Google Drive link to questions@startupsfortherestofus.com, that works.

You can also go to startupsfortherestofus.com, there’s an ask a question link and we have video ask in place so you can just click a button on your phone or from your laptop and just record right there in the browser and upload it.

With that, let’s dive into our first question from Victor Wang. “Hi Rob, it’s Victor here. Thank you very much for your podcast. Can you recommend any resources for drafting operating agreements for the startup co-founders so we know what to do when certain circumstances occur? I.e., one of the co-founders wants to exit the business. Thank you again for your and your guests for producing Startups For the Rest of Us.”

Great question, Victor, and a very common one. First of all, the pat answer and really the right answer if you have the resources is to hire an attorney. Usually, the best attorneys I get are through referrals from someone else who I know who has used himself. If you’re in a mastermind group, I would ask for referrals there. If you’re in MicroConf Connect, I would ask in there. I believe there is a legal channel or an operating channel, one of those.

If you’re not on MicroConf Connect, why not? Because it’s free for founders and aspiring founders. Go to microconfconnect.com, get in there, and ask for advice. Referrals are the way that I found the best folks.

If that’s not a route you can go, in the US, there are some inexpensive services that can work and they work on the short-term. In the long-term, they may cause problems because they are a discount. It’s discount legal. Rocket Lawyer and LegalZoom are those two and later on if and when you hire an attorney for your company, they will often roll their eyes at the operating agreement that you got from there because there are just no specifics to your situation is usually what you end up with.

But it is a discounted option. In my opinion, those are better than writing your own, which I did once. It did not come back to bite me, but frankly, it probably should have. Please don’t write this on your own. If anything, you can draft up the bullets and draft up the understanding between the two of you and then you hand that to a lawyer and allow them to integrate it into an operating agreement.

UpCounsel, they acquired and shut down and now I think they’re back because I’m on upcounsel.com and I can see that they are the modern way to get legal work done. That is another area that I would check out. That’s usually where you actually hire an attorney. That would be a way to go and look. It’s kind of an attorney marketplace.

If you’re in Latin America, lexgo.cl. They’re a TinySeed batch three company. They are ‘legal made simple’ for your business and they are not only a SaaS app, but they have vetted attorneys in all the Latin American countries. They’re great service. We wouldn’t have invested in them if they weren’t. Certainly in Latin America I would do that and then in the US, thinking about the other options I outlined.

I did want to address part of your questions that you were asking directly. It’s the idea of what happens if a founder leaves after a certain amount of time before we’re done with the products, in other words. The way you handle that is with vesting. Usually the most standard vesting is 4 years with a 1 year cliff meaning no one gets any equity for the first 12 months and then the last 3 years, you then vest the last 75% of your equity.

If there are two founders working on, then you have 50-50 each. You would get 0 equity until month 12. Then you get a quarter of your 50%. That will be 12.25% and then you vest monthly on the remaining, you can change that if you want. You can say, hey, maybe it’s four years and every month we get 1/48th of our equity. You can make however you want to. But that’s the safeguard against someone doing just that, which is working on a project for six months and then walking away with all of their equity.

It’s a huge mistake some startups make and to be honest, it can decimate the company. It can mean that you can’t raise future funding, that you can’t take on future co-founder level people. It really messes up your cap table. On that specific issue, I just wanted to call it out because any startup I see forming without founder vesting, that’s a big red flag.

I hope that helps, Victor, and thanks for the question. Victor just recently asked this question. In fact, after a lot of the folks who send in written questions. But since he was a video question, we did move him on the top of the stack.

My next question is a voicemail from Brian Kid. “Hi Rob. This is Brian with haulersoftware.com. This app is in the waste management industry. My co-founder owned a business in waste management and built version 1 in a no-code platform because he just couldn’t find a good solution out there. He’s currently doing about $1000 a month. He reached out through his network, needed a technical co-founder, and he and I connected. Part of my buy-in is just to build version 2 as a standard web application and just get it up to par with version 1 can do now.

We see this as a side project. It will be a 50-50 partnership. I just wanted to ask, is there anything we should be thinking about as partners that’s specific to a SaaS app? Types of things we’ve asked so far are, what if one of us wants to move on to something else? What if one of us doesn’t want to spend as much time on the project? And just wanted to know if there’s anything we should be thinking about co-founding this SaaS product as a 50-50 partnership? Really a big fan and appreciate you answering this question.”

Funny that we had two such highly-related questions. Basically it’s vesting. That’s how you have to think about it. If you’re not working full time on it, you still (I think) would have to put in a minimum amount of hours perhaps each week or each month that folks that should be working. It’s really just a matter of discussing it in concrete terms and getting it in writing to determine what the vesting looks like.

Other than that, in terms of a SaaS company, specifically, there aren’t really any founder operating agreement terms that I think that wouldn’t be applicable to most tech startups, in essence, most startups that are going to be doing any kind of software. Or even I talked to a founder the other day—he’s actually a friend of a friend—and he is starting essentially a company to manufacture guitars and he’s going to do it on his own at first. He has equipment, he’s been doing it, selling the guitars. Then he wants to move into his garage so he needs some capital for equipment there. Even the operating agreement of a company like that should be similar.

There’s a shocking amount of similarity between a company like that and the kinds of mostly bootstrap SaaS that we would be thinking about. Once you get into a venture, if you’re going to raise a lot of money, you’re going to have a board. Things will start looking a lot different there. There are a lot of terms that get put in by investors, et cetera.

My advice would be not to find a small-town local attorney to do this, though, even if they have written operating agreements for the dry cleaner down the street, the car wash, or whatever. I would always look for an attorney whether it is on Lexgo, UpCounsel, or through Rocket Lawyer. An attorney that has experience with tech startups, whether they be venture-funded or not.

I really struggled when I found an attorney in Fresno who had helped form a lot of businesses, but it was a lot of consulting firms and a lot of local mom and pop businesses. While the operating agreement was good and everything turned out well, the biggest issue was just convincing him of the terms that we were thinking about. I felt like an uphill battle educating him really on what we were and what we did. I don’t think he understood the business very well, which is fine. Again, the actual agreement turned out great and it’s the one we use all the way until we were acquired a few years later.

For some reason, I need to find a local attorney in my town. I don’t know why I thought of that because given the whole interwebs these days, and I said earlier, referrals would be the place I would go in MicroConf Connect or whatever mastermind or community you’re in. But beyond that, I would look for someone with high ratings who has a lot of experience working with tech or software companies.

Hope that helps Brian. Thanks for sending in that question. Feel free to follow up if you have any more.

My next question is from Permad Biligiri. He says, “Which cloud and hosting providers do bootstrap SaaS founders generally use? Are there any patterns you’ve noticed in the choice of hosting and cloud solutions among bootstrappers?”

Yeah, there’s really only a handful that I see most people using. If you just want to get started, nice and easy, Heroku is a really nice, multi-language hosting platform. It’s a Platform as a Service, in essence. While it’s more expensive than something like AWS or Google Cloud, it is a lot easier and simpler to get started on. And then when the cost gets too high, I see a lot of folks move from there to AWS or to Google Cloud.

Some people don’t start on Heroku and they do want the control of having their own servers. That’s great, too. You don’t have to use Heroku. It’s all a trade off of the amount of time that you want to put in versus if you have $100 a month or whatever to pay to make that problem go away is the idea. I’ve certainly heard of a lot of folks hosting on DigitalOcean. Microsoft Azure, of course, if you’re in the Microsoft ecosystem.

By far, I’d say the one in two that I’ve seen are AWS (Amazon Web Services) and Google Cloud. There’s Heroku, DigitalOcean and Azure that I see as a second tier. Of course, there are a bazillion offers out there, but you asked for which patterns I’m seeing and that’s what I tend to see. Thanks for the question.

In the subject line of the next question is Struggling. It’s from Julian and he says, “Good evening Mr. Walling. Please excuse the rant. I’m a 20-year-old from Washington trying to build a startup out of my bedroom. I’ve worked on a few things here and there, but never really stuck with one plan and made clear progress. A few months ago, an organic startup idea came to me and I’ve been obsessed ever since. I, for one, feel motivated to work on something and see it through to the end.

I’ve started learning more about startup culture and the overall process. I discovered your podcast, started browsing Crunchbase, following people on Twitter, reading books and watching talks, interviews, et cetera. But I have one major thing holding me back—my job. I work an unfulfilling job in IT for $15 an hour, no benefits, three-hour commute,” holy moly, “and I’m too poor to take a couple of days a month off work. I’d love to get home and grind away and be productive, but I’m so defeated and exhausted at the end of the day. I can’t muster up enough energy to get anything done.

Unfortunately, all my startup work is reserved for the weekend at the moment. I love to work for a startup. I’ve contacted a few. I had to drop out of college for various reasons a few years back, so finding a proper job somewhere is difficult, if not impossible.” I really question that assumption, actually. “I’m willing to relocate anywhere if I receive an offer. There’s just so much talent out there I feel like I can’t compete. Have you known someone who’s been in a situation like this? What tips do you have for someone like me? Thanks for the great content and the motivation.”

This is tough, Julian. I’m sorry to hear this. Have I known people in situations like this? Absolutely. Have I been in a situation like this? Absolutely. When I graduated from college, I went to work as an electrician. It was kind of the family path. My dad had worked it for 42 years, my brother is now our project manager and an electrical contractor, and he was a field electrician for a while. I did it for a couple of years. I had a two-hour commute. It was one hour each way. I was exhausted. I had to wake up at 5:00 AM every morning, which does not work with my body clock. I was tired all the time. I was really unhappy.

I remember thinking, how can I get myself out of this? I did start to think about startup ideas and that kind of stuff. But you know what I did instead is I realized that there was a quicker path out for me. It took years for me to learn, build, and get to the point where I was able to quit my day job and have my own products. The intermediate step I took was to go get a job, as you hinted at, working for companies who were doing interesting product things.

I went to the library. I checked out books on Pearl. This is 21 years ago. It was Pearl, HTML, ASP (Active Server Pages). I didn’t know any of those languages. I had written code as a kid, but I was not up-to-speed on any of the web languages. I learned that at night. I was tired, I was exhausted. I don’t remember what I was making, but it was something like $15 an hour. It was in that realm, $15–20 an hour. I didn’t have enough money.

It was in the Bay Area. That’s where rents at the time for a one-bedroom apartment were worth $2500. I literally could not afford it. I was living with my parents in the bedroom that I grew up in and I was asking myself, what the hell am I doing? What am I doing with my life because I sure am not having fun doing what I’m doing today.

I started teaching myself that and I applied for jobs and I wound up getting a job as a developer. It was in Sacramento. I moved from the Bay Area. Sherry and I had just gotten married. We moved out of town to a place where the rent was less than a third of the Bay Area. I was making more—because I was writing code—than I had as an electrician. That was a major shift for me. It was a major mental shift. It was a major happiness shift going from being tired all the time and working construction, which I didn’t particularly enjoy. It’s hard work and I’m able and willing to do that, but I didn’t feel like I was going anywhere. There was no upward mobility for me. And then once I started writing code, it was a huge shift.

That’s my story. Did I have to work nights and weekends, and make a big mental leap to relocate away from my family, my whole extended family had lived there? I moved away from them, basically, to make the shift. It was hard—I’m not going to lie—but that’s the decision I made.

I’m not trying to project on you and say you need to do everything that I did. I guess I’ll say: (a) there is certainly hope, and (b) there is not so much talent out there. We live in an incredible age, and in fact in an age that I didn’t live in 21 years ago where you can now go onto Codecademy, Coursera, and Udemy. You can go to Lambda school, which is a remote coding school in the Bay Area. You learn the code and you only have to pay them, if you get a job making more than $50,000 a year or $70,000 a year, coding for someone.

There are resources today that we couldn’t have dreamt of having to learn how to become a software developer back then. I’m not saying you have to become a software developer. I’m just saying if you’re already in IT, what are the avenues that you can explore that allow you to potentially work remotely? Because certainly remote work is a thing, that I like to say the bootstrappers found it 10–15 years ago and now the rest of the world is catching up. But remote work is more viable than ever.

There are just so many options. I really hope that you’re able to get around this thought that you don’t have the skills to go out and compete in the job space. It might feel like that but I would take an assessment of you’re in IT. You’re doing something, whether you’re a help desk. What are your skills and how can those be applied to a startup to where you can get out of this three hour commute, where you can get benefits, where you can work for a company and learn the ropes.

Hopefully, over time you’ll learn marketing, you’ll learn a little bit about sales, you’ll learn a little bit about product. Maybe you want to become a developer, maybe you can teach yourself that on the side, maybe you can learn and transition in the same company. There’s just so much opportunity if you’re working in the space.

If you want to build a SaaS app, get a job for a SaaS company. There are a lot of them and they’re hiring. There are entry levels and junior roles, apprenticeship roles, internships. It’s a matter of hustle. As I always say, it’s hard work, luck, and skill to have success as a founder, but it’s hard work, luck, and skill to create your next break for yourself.

I do think you’re going to have to work hard, I do think you’re going to have a little bit of luck. I guess build up your skills over time. As I said, I went to the library. That’s literally because there just weren’t that many resources. I think there was Code Monkey or something like that online. That was the place where I could learn Pearl and ASP. But now, you have so many more options. Whether it’s for free, whether it’s these three-month, six-month code bootcamps.

I know you can’t do those, the ones that happen during the day because obviously you’re working a full time job. You’re not trapped and there are absolutely opportunities out there for you. I appreciate you writing in, Julian. I hate to hear that you’re having a rough go of it, and I really hope you’re able to carve a way forward that provides you with not only some of the freedom you’re looking for, but with the purpose. The purpose that you’re looking for because it sounds like you’re missing out on both of those these days. Thanks again for writing in, Julian. Hope that helps.

My next question is from Nathan Brawn, and the subject is Call to Action for an Info Product Post Launch. “Hey Rob, I recently launched a niche info product, a book on learning Python and data science with baseball stats. The URL is codebaseball.com. Learn to Code with Baseball. Python. Pandas. Web Scraping. Databases. SQL. Machine Learning. APIs. All applied to Baseball Statistics.” Man, this is cool. I would’ve loved this 20 years ago when I was trying to learn how to code for the web.

“Pre-launch, I was collecting emails similar to how you describe in your blogpost, Why You Should Start Marketing the Day You Start Coding.” That’s with a landing page, obviously, that’s touting the value and touting what it’s going to bring. “Now that I’ve launched, I’m wondering whether my main goal should be selling the book right away—what I’ve done so far—or whether I should still be trying to collect people’s emails, perhaps I’m mailing them with a free chapter. Maybe I should be doing both.

I know in Start Small, Stay Small, you recommended not trying to sell customers right away. I turn browsers into prospects, but not sure whether that applies for relatively inexpensive information products like this. Looking at startupbook.net, which is now at startsmall.com,” which is our first Start Small, Stay Small, “I do see you just link to the sales page/offer a free sample of the content without trying to get emails. Perhaps that’s what you’d recommend. Cheers, Nate.”

Yeah, it’s an interesting question. Here is what I would do in your shoes, Nate. I would offer the ability to purchase from the site, of course, and I would do exactly what you’re doing, which is at the top, send me a free sample chapter. Someone enters their email and you’re basically offering them a chance to do both, to do either one. To get the free sample chapter, then you can ping them later, and ask them what they thought of the chapter. Obviously, there should be an offer at the end of that sample chapter to purchase the book and you can get in touch with them.

I would say what I’m doing at startsmall.com is actually sub-optimal. You’re right. I’m not asking for an email address before giving them the sample chapter. I do have a pitch in the end that says, “If you’re interested to read the remaining six chapters, I encourage you to go here and purchase the book.” But really to optimize, I should be asking for an email address, then they get to the download, then I follow up with them a week later, and then a few weeks later.

It’s a sales funnel, in essence. I would probably sell more books if I did that. When we put up this site—it was a couple of years ago—I was already wrapping up with TinySeed and frankly just didn’t carve out the time. Given that this book is 11 years old now—Start Small, Stay Small—it wasn’t a project for that one to take on and focus on at the time. In this instance, Nate, I think you got it dialed in and certainly wish you the best of luck with the book.

Our next question is from Fronz. His question is about virtual assistants. He says, “I’m a long time listener. One of my favorite episodes was The Wives episode.” That was, I believe, episode 200, where my wife, Sherry, came on the show with Mike’s wife, Alli, and they got to talk about us behind our backs. That was great. Anyway, back to the email.

“My friend’s career got hit hard by COVID this year. She’s a dancer and her gigs have been greatly diminished because of that. She now teaches online dance classes as well, but it’s hard. I told her to try to be a virtual assistant to supplement her needs. I remember you used to talk about VAs a lot. Where do you go to get your VAs? I want her to start looking for gigs there. Thanks, Fronz.”

If I were to be looking to get started as a VA, I would use UpWork. That’s the big place. You go there and you have a lower hourly rate to start to get some opportunities. Basically, you have to build out your ratings and your reliability, and to get that social proof, that people can think they can rely on you. There are several agencies that vet VAs. Maybe the struggle there is if she doesn’t have experience. they’re just going to send her away.

It used to be like bestjobs.ph. I found this email address, it’s in the Philippines. I’m assuming his friend is in the Philippines as well. Another one that hires in the Philippines is Virtual Staff Finder. But again, they vet pretty hard and if she had zero experience, she’s going to need to figure out a way to get some.

Here’s what I would do. I’d probably go to Virtual Staff Finder and apply and say, I am entry level, do you have a spot for me? I would also Google ‘entry-level VA staffing firms’ and see if there’s anybody who does. There are folks looking to train new VAs and then offer them as staff. And then on the side, I would definitely be applying to UpWork jobs and have my profile on there just to be […] out, to get the experience, and figure out if it’s actually a path that she wants to take.

It’s tough to be a VA in UpWork or really a VA anywhere because there are a lot of folks doing it and trying to do it. You kind of are a commodity until you prove otherwise. Frankly, proving otherwise usually involves doing really good work for people, surprising and impressing them, and then having them refer you out. Hope that helped, Fronz.

And my last question for the day, I believe came from Twitter. It’s funny. I have a screenshot of a conversation. I don’t remember who asked it and they asked, “Hey Rob. Currently listening to your podcast episode with Colin Gray. At the beginning of the episode, you mentioned getting a revenue multiple valuation rather than a profit multiple, if you were doing over $1 million in annual recurring revenue. We’re currently around $40,000 monthly, so $480,000 annual.

It’s just me and my co-founder, expenses are pretty low. Selling is something on our radar, but probably not for at least another year. Do you think it would make more sense to wait until hitting $83,000 MRR to maximize our valuation? I think we’ll hit that within two years at our current growth rate. Really appreciate all you do for the bootstrap SaaS community.”

Short answer is yes. It’s not like a light switch. It’s not at $83,333, suddenly it’s at revenue multiple. There’s a lot of different factors that come into play. In terms of growth, if you’re $75,000 and you’re growing, you can go to market with that and say we’re going to be at a million in the next month or whatever.

The further you get away from there, these days, if you’re at $2 million, your multiple is going to be even better than if you’re at $1 million. Not just the purchase price, but the actual exit multiple. Yes, in your shoes, I would absolutely be waiting to get north of a million. This is advice that I’ve given to other founders as well. It is just such a different game at that point because of the level of buyers and the number of buyers who have that bottom hand.

The bottom hand used to be no acquisitions below $50 million ARR. Then it was $25 million, and then it was $20 (million). By people, I mean private equity and the strategics really have that thirst to acquire SaaS companies because they’re such great businesses. $15 million, $10 million, $5 million, and it just has come down and down and down.

At a certain point, it’s not worth their time and effort to acquire businesses doing a couple hundred thousand a year. A lot of companies won’t do that. There are some micro private equity folks that will do it, but right around that $1 million mark is what I would be looking to do personally if I were in your shoes at a minimum.

If I were there and I were still growing, the longer you hold off, the higher your purchase price. No doubt. I say no doubt as long as your growth doesn’t plateau. There are things that can cause it not to do that, but as long as your growth is continuing you’re only going to get more. I do not see SaaS valuations and SaaS multiples going down any time soon. The bottom line is the level of the buyers that you’ll be able to talk with and run a process with changes north of a million.

If you read John Warrillow’s book, The Art of Selling Your Business—he came on back in January of this year—one of the big things that he talked about was getting multiple buyers. That is a big piece of advice that I give to founders as well. You’re going to get inbound interest, if you haven’t already, and selling to a single acquirer if you’re north of a million is not the way to go these days given the climate and the appetite for seven figure and higher SaaS apps.

If you’re going to do it, and I talked with John Warrillow about this, too, he and I both were saying, you need to get an advisor. Whether it’s a broker or an M&A advisor to represent you on that side. There are few folks out there, obviously, I’m familiar with Discretion Capital. Einar Vollset, my co-founder with TinySeed, was a founding partner there. They are a sell-side SaaS M&A advisors, where they don’t represent buyers, they only represent sellers of SaaS companies.

It’s a specialization, highly specialized, and it’s a million and up in ARR. They have the big list of all these private equity firms and strategics, depending on where you are. It’s a massive amount of effort. Hundreds and hundreds of person hours to look at your company and figure out who the most likely folks would be to put together the deck to get your financials in order, to get everything due diligence ready.

Basically, it’s like an enterprise sales process. There’s cold or warm outbound outreach of hey, this is happening, this process is happening, here’s the date, we want all the LOIs (letters of intent), which is when someone says hey, I want to try to acquire you and you try to get as many of those as possible and you get a new competitive bidding scenario. That’s the way. You run an auction for your company. That’s the way to maximize your multiple. You’ll hear it from John Warrillow, you’ll hear it from anyone who knows what they’re talking about when they talk about selling a company.

Anyway, that’s the long and short of it. There are certainly other advisors and I’d imagine investment banks. Most investment banks won’t come down below $100 or $50 million ARR. The deals are too small for them. I hope that helps, anonymous question asker. Sorry, I somewhat cut your name off of this conversation and I don’t even know what medium it happened, but I really do appreciate the question.

That wraps us up for this week. Thank you so much for joining me once again. I will be back in your earbuds again next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. Today I talked with one of the co-founders of Postaga about launching on Product Hunt, having it done-for-you service in addition to a DIY self-service SaaS app, growing to a team of six people, having a free plan, and doing a ton of customer development in the early days. Postaga is an outreach tool that helps you build links, get on podcasts, and do all types of things. It’s a pretty interesting app. You should check it out, postaga.com.

But before we dive into that, I want to let you know that MicroConf tickets are on sale. You should head to microconf.com. Assuming we haven’t sold out by the time this goes live, we have five events in five weeks in September and early October, ranging in locations from Croatia to London, to Boston, to Portland and Austin, Texas. We’re super excited. I’m super excited to get back to these events in person. I hope to connect with you if you make it out to one, microconf.com to check that out.

With that, let’s dive into my conversation with Andy Cabasso of Postaga. Andy, thanks so much for joining me today.

Andy: Thanks, Rob.

Rob: Yeah, it’s great having you. Folks already heard in your intro a little bit about Postaga. There’s a lot of interesting parts to your story, so this is an easy story to tell. One of the interesting things is that you and your co-founder Sam were roommates—freshmen year in college—then you wind up starting an agency and he had done freelance work in the past. You started this agency really intelligently in the sense that you asked for a recurring revenue. You asked retainers and it made it a sellable asset. You sold that in 2016, you stuck around for a few years with an earn out but in essence, selling that agency gave you the revenue to live on as you guys started building Postaga in 2019.

Andy: That’s right. The recurring model for an agency came about because my co-founder Sam was doing freelancing. When we talked about working together and building an agency, one of the big challenges about growing an agency is the fact that for a lot of web design projects, you do them as one-offs. There’s no recurring revenue component to it, which means that every month you have to constantly look for new clients. If you take a vacation, take a break, you might not have cash flow, you may not have more revenue coming in.

Every client that we are taking on has to have a recurring revenue component to it for, at the very least, some support in hosting and maintenance, or having a marketing service like paid search or SEO to it. That allowed us, with every single client that we added to our book, that increase in our recurring revenue, so we could have a month (potentially) where we didn’t make any sales and we’d still be able to pay our bills, pay ourselves, pay our team, and help us grow. That helped us also have a business that was worth something that we could sell in the end.

Rob: That’s one of the downsides of consulting, usually. I ran a micro agency myself. I was both a freelancer and a consultant, and I had some other contractors helping me. On the first of the month, if I don’t have any projects, suddenly I have zero revenue. As I got into software and I built one time sale software, that was also the same thing. We made $5000 or $10,000 this month and in the next month your recurring revenue was zero, in essence, so you had to start over.

That’s actually a component of Postaga today. We’ll dive into that later, but you have both the do-it-yourself self-service SaaS aspect of Postaga and then you have the done-for-you aspect, which is in essence a productized service that you bundled up pretty ingeniously, I think. On your homepage, your H1 is ‘Postaga, A Better Way to Build Links.’ Then the H2 so to speak is, ‘Are you still doing manual outreach? Postaga’s AI Outreach Assistant will change the way you build traffic to your site.’

I remember the very first time I came across your site. It was when you applied for TinySeed. I clicked through and I was trying to figure out what this tool does? For folks who are trying to figure out how to explain a product that I think could go in a lot of different directions and explain something that’s relatively complicated, your features pages are pretty well done. You break it down into just a handful of things.

There’s opportunity finders, a content analyzer, contact finder, automatically personalized emails, outreach assistant. You drop it in and each of them is a little animated GIF of you actually scrolling through the product. It shows a lot in not a lot of time or space, frankly.

Talk to me, who’s behind this features page? Did you model it after something or did you just come up with it?

Andy: It was definitely an iterative process. I will give all the credit to Sam for that because in explaining Postaga, the best way to describe it is it’s an all-in-one platform that combines the concept of several different tools that people often use for doing link building or cold outreach. It helps you prospect to find relevant websites, bloggers, or podcasters to connect with, then it finds their contact information, their emails, and verifies those email addresses, then builds and sends personalized email sequences to them.

That’s a lot to convey but also not just conveying the feature aspect of it but the benefit of how this saves you time over your traditional process and other tools that you are using. I feel like six months from now, even a few months from now, our homepage and our website is going to look different from where it is today as we’re honing in more on what the most popular use cases are. Making sure that if you have no idea what we’re doing that in a few seconds you get it.

Rob: Yeah, that’s the idea of it. What SaaS stuff does change so quickly as you add features, that you can actually become a different product. I think back in the days of Drip where first we were an email capture widget and that was really it. We were autoresponders. And then it’s like we’re full blown ESP. Eight months later, we’re a full marketing automation provider. They weren’t pivots, it was just a progression as we added more functionality.

I was pretty bad at this in terms of revisiting what my positioning is. What does my headline say? What does my feature page say? Am I really communicating this properly? To give folks an idea of your stage or your size, some founders give MRR, some founders give team size. What can you share with us?

Andy: As of recently, we are six full-time team members. A few team members working on our service offering, a few team members working on marketing including myself, and my co-founder, Sam, is focusing on product.

Rob: Cool, so a team of six with a small amount of burn (I think) is how I’d phrase it. Obviously, you took funding from us at TinySeed during the current batch, spring 2021. Let’s roll back and talk about your beta. You start working on it in 2019 after you leave the agency. You went into what you called beta in January of 2020 right before Covid hit us, just about 18 months ago.

You started using your own software to reach out because part of Postaga is it’ll scan through your own content, figure out who you’ve mentioned, like you said pull up their emails, validate them and then you can use it to send these campaigns. It can look through RSS feeds. It’ll look through all kinds of stuff. You can go to the site if you want to see it, but there’s a bunch of ways to get people who are likely to link to you, and then it gets their information then it allows you to contact them through the tools basically.

Andy: What we were doing when we were testing out to make sure it worked but also to get us our earliest users is I was using it in a way that maybe that was not one of our original intentions. I was basically using one of the features of it, which is this more broad search functionality to search for marketing agencies and people in digital marketing all around the world, finding their info, and hitting them up with a cold email, more of a sales pitch than anything else saying, is your digital agency trying to build links to improve your rankings or do that for clients? I have a piece of software that could maybe help you out. We’re in beta and. We’re happy to let you use it for free if you can give us some feedback.

That got us our earliest users. We got a lot of feedback on our onboarding process, which in the beginning in hindsight was very cumbersome, but that early feedback in the interim really helped us improve our product, helped us figure out our direction. It helped to build our audience before we did our big launch on Product Hunt in May of that year.

Rob: I like it when a company can use its own product. I remember when Drip got enough functionality that we were able to move off of MailChimp and start using it. I have respect for MailChimp, but it was a super cool feeling to be like we have everything we need now and it’s our own product. I love the idea of not only that you’re able to use it in your beta but taking this idea. Especially, developer types don’t want to do cold outreach. They don’t want to do any type of outreach. They just want the product. They want to build a great product and have it sell itself, which just never happens. It’s just a pipe dream.

Andy: If you know anyone who that works for, please let me know. I have many questions, mainly just how? What is it that you’re doing that sets you apart from every other founder I know that’s constantly trying? Like, I built a product. I think it’s great. The people who are using it, who know about it, think it’s great. How do I find more people?

Rob: That’s a big thing. What did you learn? You launched on Product Hunt in May, between January and May, you’re doing cold outreach. You have this product. No one’s paying for it. You have zero revenue. Again, you had the agency, still had payouts coming from that sale to keep you guys afloat. What did you learn in those five months that then was like, now, we’re ready to launch.

Andy: We had a lot of assumptions going in that were tested from our earliest users, like what they are using Postaga for? What it’s most popular features were? Also just the workflow and the onboarding process in particular. A bunch of our earliest users’ feedback was getting signed up as a whole thing. Even though it’s free, there are a lot of hurdles to it. We had to get users to connect their email addresses and email accounts via either SMTP or via setting up DNS records. No one wants to set up DNS records to be able to use a product. We had to really handhold people to get them set up so they could see what the product could do.

We changed our onboarding tour and setup so that people could get a glimpse of what it could provide for the user to get them to move forward and sign up and activate their accounts basically. But beyond that, we did a lot of interviews with our earliest users to find out how they were using it. How their workflows before Postaga compared with Postaga.

We found that a lot of evangelists who loved us and would promote us to everyone they knew. But there were some agencies we were hoping would switch from whatever the process was to Postaga even if they had a more manual time and labor-intensive process. We realize some of these agencies, even though processes are inefficient, if you’re a larger agency—like for any enterprise company; there’s an early good lesson—there can be a lot of inertia. With enterprise companies, you have to get a lot of people’s buy-in to move it forward. That was a good lesson also in terms of helping us figure out our positioning.

Rob: That’s interesting. It sounds like amazing learning, especially around onboarding and realizing if you had not done that and you had instead just launched on Product Hunt or done a bunch of marketing, you would have just bled a bunch of people out and it would’ve been wasted effort. How did you know to do that? It sounds like you went about it pretty methodically and pretty intelligently, but why did you and Sam decide to do that five-month beta and do interviews with that many customers? Because a lot of people who are launching a SaaS company don’t do that.

Andy: Actually at first, we were planning this in hindsight and talking to you now, it sounds a lot more methodical than it was. The real story is that we were originally planning for a launch in January, but we encountered an issue where we realized if we did very well on Product Hunt, it would crash our entire platform. And that’s no good.

Sam was working on plugging that up and making sure that we would be able to scale the platform as we would have more and more simultaneous users. While he was working on that, I was focusing on getting more and more feedback from the beta users so that we could, in the meantime, figure out what else we can be improving upon before this launch.

At this point, I know that our lunch can be a few months away. What is the best use of our time and my time in the meantime? It turns out I think that was the right call.

Rob: And it sounds like a really good partnership between the two of you to have a developer, technical co-founder, and then it sounds like you’re doing marketing, sales, and everything else.

Andy: Everything else, yeah.

Rob: That’s it. It’s a great division of labor if you can swing it. Okay, so we flashed to May of 2020, you wound up being the number one product of the day and the number two product of that week. You got 1279 upvotes. Listeners have to be wondering how you pulled that off.

Andy: This was very intentional in terms of our approach. We knew that Product Hunt was going to be the platform that we launched on. I could focus on content marketing and other marketing channels to hopefully steadily grow our user base and our audience, but we want to have a really big kick-off to get us in front of as many people as possible in a very short amount of time to help us get this momentum.

We studied Product Hunt. I looked at what apps were the top ones of the day, top ones of the week. What was their approach and how did that differ from some of the other products? What did they do that help them stand out? For example, when you go to the Product Hunt home page, you’ll see a variety of different products and apps and things like that. They all have tag lines and a lot of them have GIFs.

We’re like, we need maybe an eye-catching gif, a good tagline hook, and on our actual interior page, really good sales-y copy that we workshopped and workshopped, share with people and get feedback on, but also having a video that is an explainer that’s less than a minute. Images and screenshots that are not screenshot, they’re annotated images so you can get a sense and really understand what the product does very quickly.

We also spoke with a bunch of people who had successful Product Hunt launches. I just cold reached out to a bunch of people and ask for introductions when I knew someone who knew someone to get their feedback and learn about what it was that they think that they did right. That gave us a whole lot of intel to figure out what we would need to do a successful launch.

Things like making sure that you launch at 12:01 AM Pacific Time when the new day on Product Hunt starts. Really trying to drive to your audience and people that you know to up-vote you as early on as possible because before things shake out and the leaderboard for the day is established, it’s a free-for-all, basically.

If you have one of the most up-votes or the most up-votes, you’ll show up on the leader board when it all sorts out a few hours into the day. But by virtue of you being on one of the top ones of the day, you’re going to be also more likely to get more up-votes because you’re going to be one of the first things that people see, they’re going to check you out, and maybe they’ll up-vou.

It was an all-hands-on-deck situation with me and Sam to make sure that this launch would be as successful as it could be. I know some people who don’t give that much attention are like, all right, I’ll launch at Product Hunt. I’ll see how it goes. I don’t care if it’s not successful. But being that it was going to be one of our core marketing endeavors for helping us launch, we spent a lot of time investing into it.

Rob: Yeah, and someone listening to this, I want you to realize you have to spend a ton of time. Once again, I’d use the word methodical and pretty disciplined about it. Not just expecting, build a great product and it’ll work. I’m going to go have all these conversations. I’m going to go study Product Hunt. I’m going to rally my friends and colleagues around it. Sometimes, it’ll work and just as easily you could have done this and not have the amazing success that you did of being the number one and number two for the week.

But the folks who I’ve seen make Product Hunt work like you did. They do the right things. They usually don’t stumble into it. It’s that hard work, luck, and skill thing I always say. There’s some luck involved, but it sounds like you built some skill up by asking people and then you put in the hard work to do it well.

Similarly, Derek Reimer with SavvyCal did a Product Hunt launch just about six or seven months ago now. He did a lot of the same tactics you did and also had success with it. I guess my question for you then is was it worth it? You did get all these up-votes, you obviously got a lot of eyes on your product, and you only had a free plan at the time. We should be specific. This was May. You didn’t start charging until August. You had a free plan. Was the Product Hunt launch from your perspective worth doing?

Andy: Absolutely. From that Product Hunt launch, it really helped us just build an audience right off the bat. People that were super interested in following our journey also gave us a bunch of feedback early on, to compound on the feedback that we already had and help us really figure out the direction of the product. We got a few people to reach out about investing in Postaga, which was cool. When we’re in beta mode and just having a lot of one-to-one conversations with people who are not paying for our product but giving us feedback, we’re at the stage of like I hope this works. We think there’s a market for it. We’ve done some research. We’ve done our market research and we think we have people who are going to be interested in paying for it.

But, as a startup founder, early stage, there’s always a little bit of doubt. I hope that I’m building something that people want to buy and are willing to pay for. That feedback that we got from Product Hunt was definitely a high point on the emotional roller coaster of running a startup. That really helped us get a bunch of feedback, gave us a push that we needed and helped us move towards some features that we were looking for. Also, got us to take the next time investment for me and my co-founder to monetize it.

Rob: I tweeted something a few weeks ago that venture-funded companies fail or shut down when they run out of money, but bootstrapped companies shut down when they run out of motivation. Managing your own motivation as a bootstrapped or mostly bootstrapped founder is a big thing. It’s your psychology. It’s keeping that interest and keeping the energy and just keeping the desire to move forward. It sounds like Product Hunt was a big moment for you guys to keep going which is interesting because if I were going to do it, if I could pick it, I would want to be able to charge by the time I did that. What was around that decision?

Andy: In hindsight, I absolutely wished we would have had our e-commerce functionality ready by then. It would have pushed our launch back further. It was from when we did our launch in mid-May to us having our paid tiers in mid-August, that was time that Sam had spent developing and adding that functionality. It took some time. Our thinking was let’s do this launch on Product Hunt. Let’s make sure that we are making the right call here, and this is something that we think can have some traction and can be worth our future, time and effort, and investment into.

In hindsight, though, knowing everything that we know now, I really wish we would have had e-commerce set up because we had this big interest in May. We kept everyone that signed up on our email list and on our newsletter and in our market automation software. By the time we hit people up to get them to upgrade to a paid plan in August, the numbers that we did were not as high as I was hoping they would be—in full transparency—probably because some of that enthusiasm slowed down in the months in between.

Rob: When you say e-commerce functionality, you mean billing, paid tier, having a paid tier that you can charge through Stripe, presumably. It took you a couple months. I was going to ask that by the time he got billing in place, did you convert as many as you’d hope? Did you convert a lot of people? It sounds like you did okay, but not great.

Andy: I think okay but definitely was less than I was hoping for. Another part of that founder emotional roller coaster there.

Rob: I’m curious what you think would have happened, pure conjecture? You spent this time building it. You spent this time researching Products Hunt. You did all “the right things.” What if the Product Hunt launch had flopped? What do you think you would have done next?

Andy: It would have probably been a tough conversation between me and my co-founder, like I can’t believe he invested all this time in this product and it’s just not getting the traction that we’re hoping for. Either something fundamentally has to change with how we’ve built this and how we’re marketing it. Maybe it’s time to roll it up and pivot and focus on something else. That would have definitely been a tough conversation to have.

Rob: You had the free plan then and you still have a free plan today, correct?

Andy: Yes.

Rob: Folks, today, you have a $99 pricing tier, you have an agency plan that’s $299 a month and then you have the done-for-you service with contact us. That’s where you’re actually doing outreach for people. What is the free plan doing for you these days that you keep around?

Andy: The free plan exists partly as a lead magnet so that people sign up, they have a free trial and there is a free plan so they can test out Postaga more at their pace, be able to build some outreach campaigns, get some results and hopefully see that it’s worth it that we’ve got some responses. Now we’ve gotten some good opportunities. We’ve got some either links or guest post opportunities or podcast guest spots. But I want to be able to do more of that. That’s where upgrading your paid plan comes in. When people sign up, we have email automation sequences designed to get people to upgrade.

One thing that we are looking into and testing and AB testing is that the best option, I don’t have the answer for you today, we’re testing out different things and seeing what works, and maybe in a future episode I can give you a full rundown of these different variants that we’ve tried and how they performed. There’s a credit card trial best. There’s a free trial with a freemium best. There’s no trial but like a money back guarantee best, we’re going to be really trying out all these things.

Rob: When I hear you talk about the free plan it makes a lot of sense with your tool because Ruben Gomez has his rules of when to have a free plan and when not. He said number one, if your product is a relatively low cost to support each customer, there’s no incremental cost of them sending emails or them doing whatever, low cost to support, easy onboarding, self-onboarding basically, and it’s quick to get value from, you think about some products. You sign up for SalesForce. You’re not going to get value the first few days. It’s going to take you months to integrate and do this and all that. Then a viral component can be a big part of that. Does Postaga have a viral loop?

Andy: Yes and you would know that because you have been on the receiving end.

Rob: That’s right, I have.

Andy: For everyone listening, in Postaga’s free plan, there is a footer in your email signature that says PS sent with Postaga. Some people have pitched Rob to be guests on this podcast using Postaga.

Rob: That’s true. It’s so cool to see it in a while. Once you apply it and the name sinks and we decide to find you, I started noticing that and it’s pretty cool.

Andy: Yeah. We’ve noticed that some people sign up clicking that email signature, so that’s a win. That’s another channel for us that helps spread the word more.

Rob: Last month, I won’t go into specifics but you had an amazing month of growth last month. What’s working for you? What caused that?

Andy: I’m going to put that entirely on the TinySeed program.

Rob: Wow. This was not a plan for ladies and gentlemen listening to the show. That’s super cool. What specifically?

Andy: TinySeed has been great so far. We’ve been speaking with a ton of mentors over the last few months. People who are much more experienced than I am in different facets of running a business and scaling it. For example, having spoken with Einar and yourself to get feedback on pricing and churn, we’ve been able to make tweaks to things that have helped us grow faster. There are a few levers, as you’ve told us, that help with growth. Increasing pricing, reducing churn, and finding more customers. We’ve been really honing in on each of these levers to optimize and improve them as much as possible.

Beyond that, I’ve been trying to speak to as many of the mentors in the TinySeed program as possible, getting feedback on everything from our copy, to our UX, to our onboarding flow. One thing that some other people in our cohort have suggested just speak with as many mentors as possible because you’re going to get a ton of value out of it, In the first month, I probably didn’t speak with so many mentors but in the last two months, in particular—we’re almost at the end of our third month here—I’ve just been trying to speak with as many mentors as possible because there’s been so much value that we’ve gotten out of it.

As anyone building their own startup and trying to grow it, you go through a lot of iterations, AB testing, and trying to figure out what are the right channels for us. To some extent, we’re doing that now. But we’re getting a lot of great feedback from people who have done these experiments before, who have been through these things, who can give us just straight up feedback telling us, don’t do this. This is a bad idea. Here’s what you should be focusing on. Here is the most important thing that you should be focusing on. Here’s how to execute on that. That’s been just so incredibly valuable.

Rib: That’s awesome. I mean, thanks for saying that. That’s how it’s supposed to work. That’s the point of having mentors. That’s point A for us because at one point, Einar and I said let’s just raise a fund and invest in early stage startups. We saw the value in having a batch that could interact with one another, have the community, and then have the mentor program and all the advice that we can get. If that’s what it’s doing for you, then it’s working like we wanted to and that’s great.

But I think someone listening to this who may not want to join an accelerator or whatever, they can still take value away from being in a mastermind or being in a community like MicroConf Connect, or in the Dynamite Circle, or part of IndieHackers where there are other people around you who are going to that same journey and you can learn from them. You’re going to make a lot of mistakes anyway. You have to make every mistake on your own. You can learn from other people’s mistakes which is a much less expensive way to do it, both monetarily and time wise.

Andy: Absolutely. Masterminds have been something that I’ve been involved with since maybe 2014 or so and I really saw the value of those because like you’re saying, I could talk to other founders that are either similarly situated or hopefully further along than I am to just give advice and help us avoid some of the pitfalls so we can get further along faster. Having masterminds has been just super helpful.

It’s an easy thing that you could do. I’ve had masterminds through MicroConf, other programs also in years past I was doing. But there’s been something really helpful about speaking with people who in particular are much further along than you, who can give you advice of here are the things that I would do if I were in your situation. You’ve got a problem, you have a problem with hiring, or you have a problem with employee retention, or with growth, here are the things that I would do and here are my suggestions for you. That’s been just so incredibly helpful over the years. Helping me get unstuck without having to try out different things and see how they fix things.

Rob: That’s something that I learned when I used to work a day job, 15 years ago-ish, I didn’t like a lot of my coworkers. I was trying to push things forward and there would be roadblocks and bureaucracy. I remember just saying like I don’t want to work with people ever again. I’m going to be a solo founder and micropreneur. I’m going to go be on my own and I’m going to do it on my own and I did

It was not as good as the later on when I realized I actually want people to be in a mastermind. I want colleagues. I want to work with other people. It’s not that I don’t like working with other people. I don’t like working with other people that I can’t hand pick and choose who I get to work with, who I get to be managed by, or who I get to manage. There’s so much value in community. That was the other thing, try to do it on your own.

I’m belaboring the point at this point but there is a reason MicroConf exists, MicroConf Connect exists, this podcast exists, and TinySeed exists. There’s a reason for all of them and it’s because they bring people together in one way, shape, or form that it just upstarts all of our games. It’s how I view it. It’s a rising tide that raises all of the boats involved. To me that’s just a win all around.

As we start to wrap up, I do have one more question for you. You are in a unique position because you’ve built a SaaS app, $100–$300 a month. It’s a great business. It’s growing and that’s the do-it-yourself side. It’s the people who can sign up and do the link outreach and make that all work. You also have a done-for-you service.

I can imagine someone listening thinking they might want to do that as well. Because obviously it has a much higher price point. You can grow MRR quicker. Or someone might be thinking I really don’t want to do that. I don’t want that service side of the business.

As someone who has not only run an agency with your recurring revenue, now runs a SaaS app with recurring revenue, and also a productized service essentially attached to it, talk to me about why the two of you have decided to have the done-for-you side, and maybe the pros and cons of that.

Andy: I guess it’s funny in a fatalistic way that I sell an agency, build a SaaS app because it’s going to be completely self-service—people can sign up—and we just increase our MRR by not speaking with people necessarily to adding a service component that is very handhold-y, where there is a bigger labor component to it that we’re providing. The reason that we offer it was because we were getting interest in it from our users.

Some of our users are saying to us, I very much like the idea of Postaga but I am the solo founder of this business. Even with all the time-saving that I’m getting from Postaga, I don’t have the time for it. Do you know anyone, a consultant or someone who could basically use Postaga for us, to help us get more opportunities and links for our business?

Besides that, we were having churn and one of our responses that we are getting in one of our cancellation questionnaire things was, I just don’t have the time to get into Postaga. We realized if this is one thing that’s contributing to our churn, what can we do to save that? We are contemplating whether to outsource completely, to just refer people to people that we knew that do link building, or either have an agency that was using Postaga that we could refer to, or bring it in-house.

I don’t know what the future holds if we’re going to be doing this done-for-you forever, but there were a few things that we saw as a benefit to it. One, we would get hands-on experience with doing outreach for a variety of business types with a variety of founders, and doing right outreach campaigns for other businesses to see what’s working well for them, what responses are we getting. Because mostly we’ve been doing outreach on behalf of Postaga. I’ve been doing outreach to help us build our own links, to get me guest spots on podcasts, and help us do press outreach.

But being able to do it for other clients would give us a bunch of insights to help us also improve the product further by having that variety of experience there. We thought there’s a plus there. If we add the service component, obviously we’re going to also get more revenue—that’s a win there—and having the service component also would help us internally get more feedback and see what improvements can be made to the product, and what we can do to help other people using the do-it-yourself option as well.

There was just a lot of upside that we saw to it. We ran a pilot program so that I can build out the processes. We started with one company who wanted to get more press coverage and visibility in their industry in their space. We did outreach for them to get them podcast guest spots and get other blogs to review their product. The campaigns that we did end up doing very well. It was something that I had no familiarity with that kind of product or space beforehand. But from that pilot program, I built out SOPs and documentations, so it could be a repeatable process that I could do with clients moving forward.

Then we built up an additional page on our website for the done-for-you service. Today, we really haven’t been advertising it heavily—that might change in the future—but people have been reaching out to us about it through that page, and also just reaching out to us just on their own to say I like the product, but do you have anyone you can recommend that I could either bring on or can help me do that. It was a great addition to our product.

Rob: As we wrap up, if folks want to keep up with you, you are Andy Cabasso on Twitter, and of course postaga.com is what you’re working on. Thanks again for joining me.

Andy: Thanks, Rob. It’s been fun.

Rob: Thank you for joining me once again this week. We’ll be back in your ear buds again next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. This is episode 560 where we’re going to dig in to bootstrapper news. It’s news that relates to you as a bootstrap founder, mostly bootstrap founder. We’re going to talk about things like deciding when it’s time to hire someone, how to think about which role to hire next, talking about location and how it can force productivity. I chuckle because this is just a long time hack of mine and one of my guests today, Tracy Osborn, had a tweet a couple of weeks ago talking about being on a plane and how productive it makes her.

Today, I’m welcoming Tracy Osborn, the Program Director of TinySeed and Einar Vollset, the General Partner of TinySeed and my cofounder in this amazing epic adventure, this journey that we are on. The two of you have been on so many of these episodes now. I almost wonder, how should I reintroduce any of you, what is new, what do the people need to know.

Einar: Or maybe you shouldn’t. Maybe you should just be like, yeah, I’m once again with Tracy and Einar, the end.

Tracy: Don’t call attention to it.

Rob: There it is. Einar is in the UK. He’s actually just an hour outside London. I think I mentioned this in the outro of last week’s episode, but we’re getting started on raising our European TinySeed fund. If you are an accredited investor and interested in potentially investing in EU companies that TinySeed would be investing in over the next couple of years, you should hit them up, tinyseed.com/invest.

Einar: Because it’s an EU fund, I actually don’t know if the same accreditation rules apply. You may be able to give us money without being an accredited investor.

Rob: We’re in the early stages, you can tell. This is still being researched. In other news, before we dive into the topics, I want to let you know that MicroConf is back in person. MicroConfs are starting in September. Right now we have five scheduled in five weeks. That was a bit of an effect of the pandemic that we had to condense that, but we have one day local events in Portland, Oregon, Austin, Texas, Boston, Massachusetts, and London,

Then we have a two and a half day growth event in Croatia. It’s our third and final year in Croatia, that will be the first week of October. I think they’re going to sell out fast based on pent up demand and what I’m hearing from folks. So microconf.com if you want to get on that list and have a chance at tickets. Who else is excited for in-person events?

Tracy: Oh my golly, so excited. Get me out of here. Get me travelling.

Einar: Super excited. I can’t wait. I need to go. I’m just sad that due to the capacity constraints on the places, there can only be so many people. I’m like, come one, let’s do more people.

Rob: Yup, I totally agree. That’s what we’re looking at right now. We’re at half capacity in Croatia, but we almost expect the way things are going, probably open up a bit more and we can sell more tickets later, but I’m excited to do it.

Let’s dive into our first story, which is really just TinySeed making our first hire in over a year and a half? Because the […] started in September. This is the first time. We’re a small team, we don’t grow very quickly on purpose. It’s like a forcing function to do great work and to figure out when it is we need to make that next hire. We’ll link the job posting up in the show notes.

We’re hiring a remote community manager who’s going to spend time in the MicroConf community and also in the TinySeed community. The reason I wanted to call this out is we went into a whole process to decide, should we hire someone now and which role we should hire? It’s not always obvious like, we need another developer right now, we need a project manager, or we need a customer success person.

Tracy, you are part of this process obviously, what were some of the things that we did along the way to figure out that this is the role we actually need to hire?

Tracy: We got a lot done as a small team being that we have just four people across MicroConf and TinySeed. That worked really well for a while, but I started feeling like balls are not being dropped but I knew that if I didn’t have as much capacity as I used to. Then it was like, why do I not have capacity? What are the things I’m doing? What task could potentially be offloaded or what I’d like to be offloaded in order to increase capacity? That’s where it started with me.

I wasn’t thinking about hiring per se, I just started creating a list. And as I was going through my daily, weekly activities, as things popped in, I was watching out for things, oh, that’s potentially outsourceable. That’s something I could teach someone else to do. I just basically built this whole list and then I talked to you. It’s like, hey, Rob. Guess what? I’m feeling a little overwhelmed right now, but I’ve already created this list. Take a look at it. I think Xander was kind of doing the same thing on his end, right?

Rob: Yeah, that was the thing. Xander came to me and said, hey, MicroConf is coming up, starting to plan them. I have a bunch of stuff I’m doing over and over. I think that was the commonality between you and Xander. There are some admin tasks so we can hire a VA to do, but there is also some higher-level stuff where it’s like we need someone who’s a step up form of VA in essence in terms of skills set and focus.

You are keeping a list, I asked Xander to keep a list, and when I compared the two, it wasn’t a one-to-one mapping but we can start to fit it together. There’s still a bunch of stuff that a community manager probably wouldn’t be able to do that’s on that list that we’ll have to keep doing for a while.

The way I think about it is as we started TinySeed and continue with MicroConf, you make a lot of it up as you’re going and just figure out the process. By the time that you do the process, second, third, fourth time, it’s like, wait a minute, someone else could be doing this and I could be working more on ambitious things, more creative things that kind of drive it forward.

Einar, do you have thoughts on obviously both in terms of this process, but also advising all the TinySeed companies? People come to us a lot and say, who should I hire next? How do you advise founders when they come to you?

Einar: I think very often, particularly bootstrap founders end up hiring too late. It ends up in a situation where they’re like, oh, I’m overwhelmed, and then only when they’re super overwhelmed do they realize they have no choice but to hire somebody. I think often people should hire sooner than that.

We were talking to one of the founders two, three months ago and finally, they were like, should I hire? I don’t know. I’ve become so busy. I was asking, what kind of thing were they doing? And in this case, they were doing customer support 40% of their time.

I’m sorry, but if you are the founder then it’s valuable for you to do customer support, sure. You want to be closer to your customers, but it’s not valuable to the point where you’re spending almost half of your time doing customer support when it’s something that’s super repetitive, something that you can definitely hire someone at a reasonable price to do.

I think it comes with that bootstrapper mindset that you want to be frugal and things, but I also think you only have so much time. If you’re spending your time on suboptimal stuff, that’s not a good thing to be doing.

Rob: I would agree with that and that’s usually the first thing I recommend people hire for. It’s usually not outsourced but hired for is that support role. Even though yes, as a founder you can probably give better support in the early days, but as it becomes repetitive, I find that founders don’t give better support than someone who’s really good at it because you get tired, you get bored, and it’s not as creative.

Still handling the exceptions, the one-offs that get escalated to you I think is the way to go there. The other thing I was talking to a company yesterday and they’ve hired two support people, they’re all dialed in there, and the next hire is a developer. Because right now, one founder is doing all the code. When they go on vacation he has to take a laptop because if the site goes down, it’s getting the buzz factor out of there.

Tracy: This also applies to design. I was talking to the founders yesterday as well and doing your own design and all of that work for front end, user experience, and getting your onboarding flows and whatnot is also something I find founders hold onto as long as possible. It’s good for them to have a good understanding of how things work, but that’s also something that’s very easily outsourced and probably should be outsourced to someone who has more of an eye or specialty in that area to work on those very important front end experiences that users have.

Einar: On the flip side, I think when somebody sometimes just wants to hire for too soon tends to be sales. There’s a lot of times founders (particularly technical founders) are like, I’m not good at sales. I know we should do more sales, I just want to hire salespeople. The flipside of that is until you have a founder driven, if the founder hasn’t already done some sales that they can then train people up on, then sometimes that’s too soon.

Rob: I like to think of it as the moment it becomes pretty repeatable and rote, and this is whether it’s sales, customer success, support, or product development. In the early days when you’re going commando on a product, it’s like all over the place. My code would be everywhere, and then eventually I’ll refactor it, I’ll get all the deployment in place. Then it’s like, wait a minute, I can bring another developer here.

That’s the point of each of those where I start to think about whether I want to help bring someone in and then it’s just a matter of budget. As a bootstrapper, mostly bootstrap, you don’t have the budget to hire on all of those roles, so it’s figuring out which is going to leave me doing the most high-value tasks.

All right. Obviously, if you’re interested in working with Einar, Tracy, Xander, and I, head over to the link. It’s at dynamitejobs.com and you can check out the role for a community manager. Love to hear from you.

The second topic today is one I alluded to in the intro. We have a tweet from @tracymakes on Twitter, that’s Tracy Osborn. This is about a week ago, she says, “Can I be thrown on a plane every time I need to be productive. Geez, I’m working at like 10x speed.” Do you want to expand on that first and then Einar and I will weigh in because I have so many thoughts on this?

Tracy: Yeah. This was my first trip outside of Canada. Obviously, due to the pandemic, I went over to California to go see (that’s where I grew up) my family and all that. It’s my first time on a plane in a year and a half. I’ve been on planes a lot and I think it’s such a good hack. It’s so nice.

My husband kind of disagrees with me. He’ll be the kind of person who wants to play games on the plane. For me, it’s all about paying for the really expensive wifi, but then I’m trapped in a tube where the wifi is kind of crappy. I can’t really do much with it other than go through all the emails that I’m backed up and do all the little tasks I have on my to-do list for so long. I can’t leave my seat, I can’t go get a snack, I can’t go play with my pets, and for some reason, the focus goes through the roof.

Also, having the limited time period knowing that I’m going to be on the plane, there’s going to be wifi availability for a max of three hours helps me timebox everything I need to do and get to be more efficient. As compared to when I’m home especially, I don’t have an office anymore and I’m working from home, it’s just like my time is free form. I can go get a snack whenever I want. I can take as much time as I want for a project unless there’s a deadline. I’m so happy to be back on planes, and it’s kind of a ridiculous way. But I think a lot of people agree with me and that productivity can vastly increase on a plane.

Rob: Einar, you have a tale of your own, whether it’s working on a plane or a location hack that you’ve used?

Einar: What I would not recommend to try to be productive is fly to London and be super jet-lagged as the heatwave hits where there’s no AC when your kids are not around in quarantine. That’s not particularly productive.

Rob: Hey, wait. That’s what you’re doing right now.

Einar: Exactly. This is the most productive I’ve been for a week. I think timeboxing things does make sense to me though. It depends on the kind of task, check on a bunch of different things I think works well. I still set aside (at least until very recently) two hours every Monday in the afternoon where just crappy things that need to get done just like checklist things like signing these things, finish this bit off, pay this bill, or respond to that email.

I do tend to feel super productive when I’m doing that because I’m not trying to do something super, super creative. I find that kind of thing sometimes, I can’t do it on planes. But just plowing through emails, paying a bunch of bills, just clearing the decks planning things tend to work pretty well for me too.

Rob: One hack I’ve used (and this is pre-pandemic, it was two or three days a week), I would spend half the day (usually the morning) somewhere that wasn’t my house or wasn’t my home office. Sometimes, if my kids were home, I would be in the basement at a standing desk. I didn’t have a coworking space, but I would go to a coffee shop and get super caffeinated.

A new environment actually for me causes a whole different mindset of creativity and thought. Again, I was doing that a couple of days a week, not super cheap because I was eating out, buying coffee, and stuff. I haven’t resumed that since the pandemic.

One of the biggest hacks that I’ve completely stumbled into accidentally is during the winter—so obviously in Minnesota, the very cold—we would sign our kids up for jujitsu at an indoor dojo. I hated it because it’s dark already—it’s dark by 4:00 PM or 5:00 PM. It’s sometimes 10 below, so it’s super cold. You’re loaded up with the kids and the face mask. It takes everybody 20 minutes to get ready.

You hop in the car, you drive in the dark, the roads are slippery, it’s twice a week. I would dread this thing, but I knew it was good for the kids. We got there, they got their energy out, it was a great thing.

I started bringing my iPad Pro with the keyboard. It doesn’t have Slack on it, it’s like a separate laptop that doesn’t have interruptions. This would be 6:00 MM 7:00 PM and I would open it up and the Gmail app, which is like the iOS Gmail app. I could get through a week’s worth of email. Something that would take me five days, I can do it in 55 minutes because it was forced—it was like Tracy said—it was timeboxed. I couldn’t do anything else, and I would just boom, boom, boom, hammer through it much like in an airplane.

This was cool because it was once or twice a week and I started looking forward to it secretly, even though I hated the drive and the cold. It was the worst posture. I was literally sitting on a linoleum floor with my back hunched over. You can’t do that for very long, but I could do it just long enough to get this work done.

Tracy: That’s one thing I wish we had in an office because of the experience of saying if you’re working with people in the office and everyone can grab their laptops, go into one of the rooms, just sit down, and work together on one task. Even if you’re not talking together or collaborating. Say going to a coffee shop, grabbing some friends. I’ll go into a coffee shop, sit around a table, and work together. You get these people around, everyone’s working, everyone’s being productive energy.

Rob: That’s awesome. Our next story is from Engadget. The headline is, Delta pilot sues the airline for allegedly stealing an app he designed. He’s suing for $1 billion accusing it of trade secrets theft. He basically paid $100,000 of his money to a software development crew to have a mobile app that would easily communicate disruptive fights, I think, to each other maybe, so some type of messaging tool. He contacted Delta CEO, or at least according to this article, he apparently contacted Delta CEO in 2016 after the computer system meltdown.

You remember this when all the flights were put on hold. It cost the company $150 million. He told the CEO, hey, I have a solution for that. He had several meetings with executives, and according to this, “who gave him verbal assurance that they were going to acquire his app.”

According to Alexander, the pilot’s complaint, Delta ended up telling him that his technology didn’t fit its need and ultimately launched its own Flight Family Communication app in 2018 and he called it a carbon copy knock-off of the role-based text messaging components of “his” proprietary QrewLive communication platform. Now he’s seeking a billion dollars, which feels like a lot. Anyway, I want to kick it over to you first, Einar. What are your thoughts on this situation?

Einar: My first thought is how does he even know? Depending on where he is, his contract might mean that if he was working for Delta at that time, Delta owns the app in the first place anyway. That was my number one thing. What are the IP assignments for all this stuff? Who actually even owned it in the first place, that’s probably my number one insight there.

The second thing is things change and it must feel sucky, but this I don’t think is super unusual. Who knows exactly why they decided to do it or not do it at that time. I have some sympathy but only limited sympathy. I don’t know if it’s worth a billion dollars. That seems like what he’s trying to do is to settle out of court for a reasonable amount rather than thinking he’ll actually get a billion dollars. A billion dollars seems a lot for an internal communications app.

Rob: Yeah, I agree. It’s interesting because when I read the story, I thought to myself, legally I don’t think he has much of a leg to stand on, unless he can prove they stole patented trades. He built software and you can replicate other people’s software, there’s no law against that. There’s the legal side of it.

Then there’s also the maker in me who feels like this sucks and that’s […] that they did that, but then also this only quotes from his complaint or his suit, so it’s his side of the story. I’m curious to see, I’ve seen some of these things that are written up on TechCrunch where I know both sides of it and I’m like, you didn’t represent this very well.

I wonder what was happening on Delta’s side. Maybe the app was […]. There are all kinds of reasons why they wouldn’t just want to use his version of it or not want to buy it, none of which are raised in this article.

Tracy: Yeah, and $100,000 of his own money is a really interesting number I think. For an app that would only work sounds like this piloting system, so he has to have Delta as a buyer in the first place, $100,000 of his own money before pitching the app over sucks. I feel like a lot of people in this industry kind of know that that’s not the way you’re supposed to do it, but I don’t think that’s widely known.

I can just see someone being very enthusiastic, getting his idea in their head, I can sell it to this company that I already have connections with. I’m going to put a bunch of money into it, but I will get a bunch of money back. Then not go through the diligence, spending too much money to develop an app.

On Delta’s side, they have a team of developers. They have their own app developers, they have their own app and what not. I don’t know if there’s an NDA or anything, or if that even matters. But to show this app that could or could not work very well, it’s very easy for Delta to be like, well, that is a good idea. We already have our developers in-house. Let’s just build this. It just sucks. This reads like someone who is really enthusiastic but didn’t do a lot of homework in terms of how these kinds of deals can go down.

Rob: Yeah, I think that’s a good point. As a founder listening to this who could potentially wind up in the same spot, I think it’s dotting your edge, crossing your T’s. Like you said, having NDAs, making sure your IP is locked down.

Tracy: Patents, that’s the whole reason why patents exist, I guess. I’m not sure if you can patent something like this.

Rob: Yeah, but it’s a messaging app. That’s the thing and that’s what I struggle with. It’s not the software, we always say that. It’s the marketing, it’s the brand. You either have to have something super unique or you need to have proprietary marketing channels that you can own, or sales channels because anyone can go replicate your software.

In fact, we did have people who basically copycat. I’ve had people who copycat pretty much most of the apps I’ve ever built, but at that point, it then became a question of brand and marketing. Could I secure the leads?

Tracy: Yeah, and he built something that he couldn’t market on his own because he built it for just one buyer and that one buyer said, no, we’re happy to do this on our own. I can imagine there’s another situation where he built something that he can sell to multiple airlines, drive competition, or something like that. Developing for just one buyer in mind feels like a mistake.

Rob: I don’t know that it was only developed for Delta. I wonder if it could work for any airline, but then it’s like, okay, cool. Go sell it to the other airlines then. That would be the next step to approve it.

The next story is a tweet that I sent out about a month ago and it seemed to resonate. It got a bunch of retweets, likes, and stuff so I just wanted to talk about it really quickly because it’s pretty founder-focused. The tweet is, “In the early days, you’re building a product. Once you’ve built something people are willing to pay for which is no easy task, you work on building a business. Once that flywheel is going, you move on to building a company. Very few founders excel at or even enjoy all three stages. It’s product, business, and company.”

I got some follow-up questions to that in the conversation, obviously, we’ll link it up, but I was defining the difference between a business and a company. A business is once you start looking at profit loss, you have enough revenue, you can start hiring, and it’s still early stages. A company is really when you’re starting to scale up. It’s like you’re starting to hit and escape velocity and really build out an org.

The reason I tweeted this is that it just continues to be a theme. I hear it on podcasts, I hear it in conversations with folks. I watch founders leave their companies. They grow it to $20 million and then they step down as CEO, and people say, why would you do that? It’s because I love building products, and frankly, I overstayed my welcome. Or I love building products and business which I’m defining as an earlier stage thing, but building out a company, building out an org is a different skillset. It really, really is.

That’s why 20 years ago, the venture capitalist would bring in “adult supervision”. The founder would go out and would bring in a seasoned CEO, COO, or whatever it is. Einar, what are your thoughts on this?

Einar: I agree with this. I think there are very few people who are very good at both of them. I think in some cases, you see data that says founder-driven companies are more valuable and grow faster than professional CEO-led companies. I do wonder if that’s just because founders of companies that are growing really fast are less likely to want to step away from it than companies that aren’t growing so fast.

I think in general it’s very true. I think once you get to a certain size, your job almost becomes HR. It becomes hiring. How do you source enough quality people to come on board, to work for you, and believe in the mission and all that stuff? I think a lot of people, particularly technical founders, don’t enjoy that. They don’t enjoy the organization building that you’ll need to do once you get past a certain size.

Tracy: I feel like you have to change where’s your dopamine rush? Is your dopamine rush from building that product and seeing people use the product that you built by hand or you had a large part in building? Then you have to switch that dopamine rush to watching other people do that process. Are you able to take that joy from seeing other people succeed and other people build a product and switch where your joy comes from the business? From enabling people and seeing the big picture thing. I feel like there’s a lot of people who are unable or unwilling to switch over where they get their joy.

There are people who make good managers and people who don’t make good managers. I think good managers—when they’re managing people—take the joy of just enabling people to do things. I feel like that broadly can be extended to building a company.

Rob: I really like that point. I think that’s accurate.

Einar: It’s true. At a certain size, it also becomes a question of instead of hiring a new professional CEO, that might be the point where you decide I’m going to sell this business because I don’t enjoy this stage anymore, and there are other people who can do better.

Rob: We’ve seen an example of that—Jason Cohen with WP Engine. He built it up and then I believe (I don’t know this for sure at this point) no one reports to him. He still works at the company full time, but he’s like an advisor and does pet projects (that probably diminishes what he’s doing), but he’s just doing projects he wants to do that he feels are valuable to the company.

Dharmesh Shah did the same thing at HubSpot. I remember asking him because he and I met 13 or 14 years ago. We were bloggers and then I moved into Boston. We were chatting at one point and I’m like, you’re going to go public someday soon, but you’re a maker. You’re a developer. He said, yeah, no one reports to me and I could work on what I want. I write company culture docs. I think what’s the next interesting problem that I need to solve for this company and I go do it. And I don’t have to manage people. It’s like at a certain scale you can do that.

I just named two massive multi-billion companies in essence. It’s harder to do that when you’re making $20,000 a month. But the point is that you hit a certain point in your company’s maturity where you do have to make that decision of am I the right person for this job anymore? Because in the early days, the CEO’s job is to make sales and make products, whether you’re doing it yourself, working with a cofounder, or you have an early hire. Then in the middle days, a lot of it is hiring, making sure there’s enough money in the bank, and it’s managing staff.

To Einar’s point, once you’re company building, it’s so much HR, maybe it’s fundraising, maybe you start getting into things where legal becomes a bigger issue. There are either incoming lawsuits or just managing GDPR. All the stuff that you don’t want to do when you just want to build a product to make $10,000 a month becomes a full-time job, plus, plus entire teams of people doing them.

Tracy: I want to go back to my point though. I think it’s funny because yesterday in TinySeed, we brought on your wife, Dr. Sherry Walling to talk to us about psychological issues. She made a point about—I forgot exactly how she phrased it, but it’s like being mindful of the joys and then finding things that you’re not taking joy in that you should be taking joy in.

I feel like if things like legal, those things aren’t really fun. But being mindful of this thing is not fun. I don’t like this part of the business, but I’m going to view it as a full ecosystem of the business. This legal work, this fundraising work, what is this enabling to do? And then thinking thoroughly about is this a good thing. Then if it’s a good thing, hopefully, it brings you some amount of joy, so therefore it becomes a little bit enjoyable.

If you don’t find some of these tasks enjoyable, maybe that practice will help you. It doesn’t mean that you have to then outsource it or hire someone or whatnot. I think there’s a little bit of balance there that people can do in order to make some of these lesser love tasks more fun.

Rob: Yeah, I agree. At the same time, you can get caught in a trap where you’re doing things that you don’t like for too long and that becomes burnout.

Tracy: Yeah, it’s a balance.

Rob: It’s like you can do it for three months, six months, and nine months and tell yourself I have to do this. Eventually like in my experience, you have to hire someone to do that. You have to hire it, you have to outsource it, you have to figure out a way not to do it if you really don’t enjoy doing it.

Tracy: You have to build a business and company, not just build a product.

Rob: And fire yourself. As a CEO you have to fire yourself from all the jobs over time, and it’s just picking what’s the next job I’m going to fire myself from.

The next story is about Facebook. It’s from bloomberg.com. Facebook Users Said No to Tracking. Now Advertisers are Panicking. IOS now asks for permission of whether you want Facebook or any app to be able to track you between apps. I’m opting out of all that, by the way. I get the prompt every time I open whatever, Instagram, or Facebook, and I say no. I only allow it in this app.

I guess only 25% of people are allowing themselves to be tracked across apps. How does this relate to the listeners of this podcast? I think that if you are making Facebook ads, Instagram ads, or really any ads that need cross-pollination. Obviously, this is mobile-only. So if you’re making web work, that’s less relevant. But I think the effectiveness of the tracking and basically the cost per click or cost per lead is inevitably going to go up because of this. Einar, do you have thoughts on that?

Einar: Yeah. I’m not surprised this was coming with the war between the business model that Apple has and the business model that Facebook and advertisers have. Apple doesn’t make a lot of its money from advertising, so they’re always going to err on the side of how can they sell more phones? And part of that is people are starting to get concerned about being tracked, people retargeting, and things like that. Apple is always going to be, I think, a company that errs on that side.

I think it ends up being tricky for advertisers in the end particularly when you’re trying to do things like retargeting, figuring out conversion, what adverts work, and where did this client come from. Even for a smaller bootstrapper, it’s going to start to become a problem if you have less and less data about what are your acquisition channels that actually are effective. If this becomes more and more of a trend, then I can see it really impacting people’s ability to optimize their marketing. You’ll end up spending more money, but less efficiently.

On the flip side, on the consumer too, you’ll end up in a situation where I know people who prefer targeted advertising because that means the stuff they see is more likely to be relevant as opposed to diapers for a 55-year-old man. I think there’s a balance there, but I can definitely see it being an issue.

Tracy: People have been saying for a long time that if you’re not paying for a product, then you are the product. This change through Apple is finally Apple saying, hey, you’re the product. They’re telling people directly you’re a product and I think that saying was well known between web-y people but wasn’t really known by the general public. Now that awareness is going out to the general public, oh yeah, Facebook is free.

Rob: “Free.”

Tracy: Yeah, exactly. They’re thinking, oh, that’s why it’s free. I do agree with Einar. It comes across so negatively, do you want to be tracked? And no one really wants to be tracked. I think that these ad networks, I think I’ve seen these on some places where it says, hey, we can give you more personalized ads. I think that those warnings, those better ways of spinning how things are going and why the tracking is there. Does Apple block it?

Rob: Apple did Facebook no favors on this because I believe it’s an Apple-generated message. You feel like they were digging it in.

Tracy: By the way, this is tracking you.

Rob: Yup, they stuck the knife and then twisted it on that one.

Tracy: You’re in the bathroom, it’s tracking you. You’re doing all these things and its’ tracking you. It’s very scary. Everyone is going to opt out of course. Instagram is a dumb thing. There’s an article recently talking about how Instagram is the new SkyMall and I totally agree with that.

The products on Instagram are nuts, but it’s kind of impressive when I’m on Instagram and how targeted those ads are to me. I would say that I wasn’t normally a person that would buy off of ads. Maybe I’m a little bit of a brat and I see ads on Facebook or Reddit, I deliberately don’t click on it because I’m being a butt.

For some reason, Instagram—because it is so targeted—actually has worked so many times. I have bought so many things off of Instagram ads. I can see overall, hopefully, this direction going towards more targeted ads in that way and these prompts maybe will have an evolution over time. But right now, I think we’re in a really weird period where people are realizing that they are the product finally.

Rob: The last story of the day is from Square. It’s not a story, it’s a release of their business banking, which is at squareup.com/banking. Square Banking, your payments, banking, and cash flow working as one. I love this. I don’t use Square, but I love the fact because banking is so last century. Everything I do with any bank is a disaster. The mobile apps are terrible, the process. Are you […] kidding me that we have a 2:00 PM wire cutoff to send money the next day in this day? Are you kidding me? That’s what we’re dealing with, right?

Given that we have crypto that I can send you in the next 15 seconds for pennies. That’s my banking rant. Given that we have Brex credit cards, which I really like using. I love their mobile app. Mercury Bank, Square Bank—these tech-enabled startup banks that are actually getting traction. I’m surprised Stripe hasn’t entered this. I can’t imagine they are not also entering this space given they wanted to increase the GDP of the internet. I’m super bullish on tech-enabled modern banks.

Remember when the web first came out, in the late ‘90s, they had these banks come out. It was like WebBank or bank.com and they didn’t have branches. You’d mail them a cheque to deposit because there were no mobile phones to deposit. It was a bit of a clunky experience.

I feel like the tech has caught up and that we are going to see actual really solid banking products that make our lives easier, much the way we used to use taxis and then Uber and Lyft came along. It’s a net win for us as consumers. I don’t want to go on the flipside of that, but I feel like banking is going to hit that, especially for business banking, which has historically sucked. Tracy, do you have thoughts?

Tracy: I wish I was as enthusiastic as you are. I’m very enthusiastic about these products. I feel very pessimistic about this because I feel like there have been such innovations in banking that I’ve been seeing pop up since the beginning of the internet. Is it because big banks have so much lobbying to change the regulations that are in the US? I can’t remember anyone that has popped up before.

I know there are several banking apps, credit cards, and things that popped up because it was like, oh, look at all the things we can do. It’s a new world. We can have all these fancy tech products, then they die and disappear because there are all these regulations, lobbyists, and everything that’s going on. I hope I’m wrong, but I look at these things kind of pessimistically.

I will continue to use them because I want them to succeed, but I’m also looking at them as there’s a very good real chance that these things are not going to need to payout. For example, Wealthsimple in Canada. They were launching a new savings account and investing thing, and they’re like, boom, we’re going to have debit cards you can use as a bank.

As soon as they announced it, I signed up for it. A year ago, I still didn’t have a debit card. I still can’t use those features, I finally moved my money out of that side of business because I don’t know […]. They’ve obviously run into problems trying to finish building out this whole banking platform. I will continue to use them, but I see so many problems happening that I’m looking at it being aware that it can just go away.

Rob: Einar, what do you think? Are you bullish or bearish?

Einar: I’m bullish. One of my good friends runs Mercury, so I can’t really be bearish.

Tracy: He’s going to call you up and be like.

Einar: I think banking has very low churn. Basically, people leave a bank when they die most of the time. I think there’s sort of inertia there with, well, it’s my money so I care a lot about my money. Do I really want to take the risk of going to some new fangle thing that hasn’t been around as long or I’m going to stick with the horrible mess that is the Bank of America, their 1992 websites, and all their stupid fees.

I think that’s the main challenge for some of these things. I actually think that’s why going into business banking first, at least, makes more sense because when you start a new business or a startup then you need a bank account, then that’s when you’re evaluating potential new things. It’s not exactly tied into your own personal flows of money that have been going on to the same places for years and years. I’m a bit more bullish than I think Tracy is.

Tracy: I usually pop up in here being the optimistic confident person and I feel like this is the one time I’ve disagreed with you both.

Rob: It’s all good. That’s why there are three of us on here to have that conversation. My take is that with Square behind it, they have more of a chance than a brand new startup. You see folks like Kickstart, a brand new credit card, blah, blah, blah. It’s like, yeah, I just don’t think you’re going to do it to your point Tracy.

Once there’s Square or Stripe, again I’ve got no knowledge that Stripe is doing this. If I were in their shoes I would certainly be thinking about this because of business banking. It’s like what you’re saying, Einar.

Einar: I think Stripe should buy Mercury, that’s what I think, not because I just don’t know the founder. I think that will be a good acquisition.

Rob: Yeah, to merge it in. Anyway, I’m excited about this. Again, not just because business banking sucks today, but I just think there’s so much more innovation to be had including transferring money without a 2:00 PM deadline. There’s so much that I think we’re going to see hopefully in the next 5–10 years as long as (to Tracy’s point) the lobbyists don’t get in the way here in the US.

That is our show for today. Tracy Osborn, you are @traceymakes on Twitter. And if folks want to see what you’re up to aside from that, tinyseed.com/latest. That’s our news feed.

Tracy: Yeah, our applications are opening on August 9th, making sure I had the right date there. Applications are opening. We’re doing two batches a year starting this year. This is for our fall 2021 batch. August 9th, we’ll be open for two weeks.

Rob: And Einar Vollset, @einarvollset on Twitter. You are in the UK. If folks want to reach you, of course, they should reach out to you, tinyseed.com/invest.

Einar: That’s right. We’re all sort of ramping up fundraising for our European fund. I’m going to talk to anyone who’s interested in investing in this space.

Rob: Awesome, thanks again for joining me.

Einar: Thank you.

Tracy: Hey, happy to be here.

Rob: Thank you for joining me again this week. It’s always great to have you back. Next week I have a pretty interesting interview, or maybe I’ll do a solo episode next week. I’m going to be in Cancun at the end of the month so I have to-pre record a couple of them. I hope you join me as those roll out. I’ll be back in your earbuds again next Tuesday morning.

Rob: It’s Startups for the Rest of Us, episode 559. Welcome back. I’m Rob Walling. This week, I speak with Andrew Gazdecki. He’s the founder of MicroAcquire. Talked a lot about bootstrapping a two-sided market place in a competitive industry. Andrew talks about the future plans for MicroAcquire.

I didn’t know much about Andrew before chatting with him today, but it turns out he grew a SaaS app—essentially bootstrap—that he raised only $100,000, and he grew it to $10 million in annual recurring revenue. It’s an app called BiznessApps, biznessapps.com. Started building it in College, sold it in 2018, and he described it to me as Weebly or Wix for mobile apps. It’s still operating and serving customers but pretty impressed with that as background. That gives some credibility for someone to be able to build an app to that level then exit.

We don’t spend too much time talking about that part of the story. We focus on MicroAcquire, which is a website that helps match buyers and sellers of smaller software and ecommerce startups. You’ll hear a little bit of that story of him thinking of then and launching MicroAcquire, then bootstrapping that two-sided marketplace, getting both sides of the marketplace and thinking about what is the value that he’s trying to offer that’s different than all of the other offerings already available in the markets, to help smaller, early-stage, mostly bootstrap founders exit their businesses.

Before we dive into our conversation, I just want to let you know that applications for our next batch of TinySeed open up on August 9th. If you’re interested in joining our Fall 2021 batch—it will be between 15 and 20 ambitious B2B SaaS companies—head over to tinyseed.com. Enter your email if you’re looking for a bit of funding, a lot of mentorship, a lot of guidance, and what has become an amazing community of SaaS founders helping one another out. tinyseed.com, enter your email to hear about that once applications are open.

One other topic to cover before we dive into the show, I got a really thoughtful email that I wanted to share on the show. It’s about two episodes ago—investing for founders—where I talked about how to save for retirement, thinking through index funds. This email is from Matt Paulson. He’s the founder of MarketBeat, which is a very large and successful financial tracking website. You can track stocks. You can do all types of stuff. You can check it out if you’re interested.

I take Matt’s recommendations and thoughts on financial stuff, especially the stock market very highly because he is knee-deep in it and has been for, I don’t know, the better part of a decade. I’m going to read just some brief excerpts from this, which again, I really appreciate and take with a lot of weight.

He says, “Hey, Rob, I just finished listening to the latest Startups for the Rest of Us podcast. I wanted to pass along a couple of notes that I’ve had good luck with that weren’t explicitly mentioned in the show. Maybe you’ve thought about these things already but I wanted to share them in case any of it is new information.

Number one, you mentioned you have some money sitting around in traditional IRAs. Have you considered paying taxes now and doing a conversion to a Roth? If you do the conversion, you have the ability to do a backdoor Roth IRA, which allows you to do annual contributions to an IRA even though you ensure you’re probably over the income limits.”

This is more advanced. This is next level stuff in investing for founders. I was trying to do just the 101 basics. But backdoor Roth IRAs, you should google them if you don’t know about it. If your CPA tells you you’re over income limits, absolutely talk to them about doing a backdoor Roth. It is something that I’ve been aware of for several years and it’s certainly beneficial to those people making more than the income limits for Roth IRA contributions.

“Number two, if you’re running payroll for yourself through an entity, you can contribute around $57,000 per year—tax deferred—through a 401(k) plan.” This is great, solo 401(k)s are amazing for getting a lot more money and then just whatever it is, $5000 or $6000 you can put into an IRA. This is all US, but there are simple IRAs, there are Sep IRAs which are business-oriented, and then there are 401(k)s which I believe allows you to maximize it.

As long as you have a provider who can take up the burden off of you of running and operating that. If you are running payroll for yourself, and you want to get more money tax-advantaged (or tax-sheltered in this case), which is a first world problem but it becomes a problem further into your career you get and you start getting returns on things whether you’ve done real estate investments, whether you’ve invested in your own startups, whether you’ve invested in other people’s startups, you get a big influx of cash and now you have something that it’s going to grow and you’re just going to be eaten up by the taxes on it. Getting it into these government-sanctioned, I mean this is all within the rules of everything is something to really be thinking about.

“Point number three, health savings accounts. You can stick to $7200 per year in an HSA for your family. You have to be on a specific type of health plan—it’s a high-deductible plan—that allows an HSA, but you have to look into that depending on your state, your plan, and all that stuff.” Yes, I actually know about all three of these things but I really am at more advanced next level approaches to getting more stuff tax advantage, and I appreciated Matt writing in.

To wrap up his email. He says, “I also wanted to let you know that you are right on: (a) most people doing Vanguard index funds for most people’s exposure to the market, (b) doing term life insurance, and (c) dollar cost averaging into crypto.” Great advice there. Thank you so much, Matt, for weighing in. This is what I love about this community of Startups to the Rest of Us, MicroConf. There are a lot of smart people, and a lot of smart people with very niche focus and very deep expertise in these different areas.

If you hear an episode of Startups for the Rest of Us, and you feel like this is an area that you’d want to weigh in on, please always feel free to reach out, questions@startupsfortherestofus.com. With that, let’s dive into my conversation with Andrew Gazdecki and his experience building and growing MicroAcquire over the last 18 months.

Andrew Gazdecki thanks so much for joining me.

Andrew: Thanks so much for having me on the show, Rob. I’m excited.

Rob: I am, too. Folks heard in your intro that you basically mostly bootstrapped business apps to $10 million ARR. You raised only $100,000. Why did you decide to sell it? Was it three years ago, 2018?

Andrew: Yeah, I get Facebook updates, and obviously I announced, so saw my friends on Facebook and family. It was three years ago in May. The reason is clear, I was tired. The story behind that startup, I started it in college, zero experience. I’m not technical, my previous job was at Sears, and I got fired from a graphic design job before that. I had just run the business for such a long period and candidly just got an offer that was hard to refuse.

When you raise capital, even those $100,000, you still have a fiduciary duty to your investors. It was a win for my team, a win for my investors, a win for me personally, and also the customers at BiznessApps. If you go to biznessapps.com it’s still up. You can still make apps, really like the firm.

Short version is I was exhausted. They say you’re in a startup is like cat years. I sold it when I was 29 and I wanted to move on to something new. I wanted to do another startup, but I was tired and I felt I took the startup as far as I could take it. I didn’t have any plans to hand it down to my children or anything like that. Candidly, the business was built with getting acquired in mind and when that opportunity came, that happened.

Rob: That’s great and that kind of gives you the luxury after having that first exit of being able to start crazy ambitious, not that Bizness Apps wasn’t ambitious, but crazy ambitious offerings like MicroAcquire, which is what I want to dig into a lot today. When did you launch MicroAcquire? Actually, before we do that, can you tell folks what it is in your words?

Andrew: MicroAcquire is a marketplace to help founders get acquired. If you’re a startup founder, you can list your company on MicroAcquire completely free. There are no commissions, there are no fees, there’s no exclusivity, and we allow founders to connect directly with buyers.

Really the idea behind it was based on my situation on Bizness Apps where there were times where I just wanted to potentially sell the company. I was exhausted. Meeting buyers, especially when you have a smaller business can be not as easy when you get to higher revenue marks PE firms and other strategic acquirers reach out. But for smaller businesses, that’s not the case. I saw a large opportunity to help entrepreneurs to get acquired and that’s what we do. Short version, it’s a marketplace to buy and sell startups.

Rob: What year did you start it?

Andrew: I had the idea for it, maybe like two years ago. I officially launched it in January 2020 on product time.

Rob: Right before COVID.

Andrew: Yeah, right before COVID. Actually, a lot of people don’t know this, but I hear a lot of excuses from people about how hard it is to start a company especially if you have a job, you have a family, blah-blah-blah. I became a dad in October. I have a wonderful son coming up on two years, so I just became a dad. He also has colic, too, so if you have a kid who has colic…

Rob: That’s tough.

Andrew: Yeah, so I wasn’t sleeping. I also share a company called Spiff where I was leading their sales and marketing team. I just sold my second company, Altcoin, and I was in the top 100 Madden players. I was like this is super unhealthy, I needed something to do. I wasn’t sure if I wanted to be a CEO again, so I was looking for a number two role.

Took over their sales and marketing team. They had raised about $6 million, revenue was around zero when I joined, and helped them grow to about $2 million in annual recurring revenue. Then they secured a $15 million Series A from Norwest Venture Partners. At that point, I was running MicroAcquire in the background the whole time. I just became a dad, was managing a sales team, also taking over marketing because no one was handling that, and running MicroAcquire completely on the side for free just because I loved it.

I love startups, I love helping entrepreneurs. Once the Series A was closed, I felt my job’s done, I hope they find a replacement for myself, and then I started focusing on my career full time.

Rob: Got it. I guess I’ll ask one question. You said you focus on helping smaller companies, founders, a smaller company. What do you think is your sweet spot? I’m presuming there’s a revenue range where MicroAcquire is perhaps ideal in your mind.

Andrew: The largest transaction to my knowledge is about over $5 million. There are definitely buyers in there that can transact in the hundreds of millions, for sure. It just depends on the business. We see a lot of businesses that range from low seven figures profitable, mid six figures profitable, that’s kind of the sweet spot. Over time, we want to move up to serve larger businesses with other third-party services that you kind of need when you’re selling a larger business.

Right now, the six- to seven-figure revenue mark is where our sweet spot is. Mostly bootstrap profitable companies. Lots of really cool niches, like marketing automation platforms for dentists that’s making a million a year; I love seeing those businesses. That’s where we are now. We’re going to be looking to be going up market to $2 million, $5 million, $10 million, potentially $20 million revenue companies.

Rob: That’s interesting. I would have thought the range would be lower because I feel like that six- to seven-figure, low seven-figure range is covered well by a lot of the brokers in this space. How do you see yourselves as being different from them?

Andrew: What we’re doing at MicroAcquire is we’re consolidating the industry. We want to work with brokers. There’s always going to be a free option to sell on MicroAcquire as a founder. You can list your startup, we’ll get it listed in minutes. That work that a broker does typically takes three months. We get you up and live on MicroAcquired and introduced to buyers within a day.

Think of it as like an Upwork sell directory, where you can hire proper legal counsel, you can hire a M&A advisor, you can hire a business broker. We’re going to be aggregating the entire industry into one single marketplace. Rather than just being a one boutique brokerage firm, we’re bringing in all the best M&A advisors, all the best business brokers that are specifically focused on SaaS, ecommerce, or direct-to-consumer mobile apps, crypto, or whatever your business may be.

That’s the plan, and that makes sense for businesses. If you’re going through (let’s say) a life-changing acquisition, or you have no idea how to sell, like you don’t want to sell, that’s really the main benefit of working with a broker is you don’t have to handle everything. They run the process for you. We’re going to have the ability for you to hire those people but at a much lower rate than you typically would at a regular brokerage firm.

Rob: That was going to be my question. You go up market, even in a multimillion dollar sale, oftentimes, the seller needs a substantial amount of hand-holding. Maybe their books are in bad shape, maybe they just need moral support, or they’re kind of freaking out and they don’t want to sell, or they don’t like the terms and they try to range-quit the thing.

Brokers aren’t just matching buyers and sellers. Brokers offer additional service beyond that, the hand-holding aspect. Is that what you’re saying? Is that longer term, you think that you will have (basically) a marketplace of brokers to help people? It’s a higher touch sale. As soon as you get into a few million, or if you do a $20 million sale, there’s definitely a high touch on both sides. I’ve seen and heard of MBAs sitting there taking weeks to put together financials and arguing with the consultant on the other side who says these financials are […] and you’re wrong, and they’re auditing them, and this and that. At the dollar amount, that becomes an issue.

Andrew: Yeah. When I sold Bizness Apps—this would probably be a good use case—I had light advice from a friend that was an investment banker. I’d asked him questions like is this normal for due diligence? He’d say no or yes. I’d say, should I send this email? He’d say, no, go to bed.

It’s an emotional process, especially if it’s going to potentially change your life. We’re going to be building a directory that not only provides services that an M&A adviser or a broker would provide, but also due diligence or even wealth planning after you sell your company.

For me at Bizness Apps, my law firm was referred to me by an angel investor. I just said, okay, cool, we use them. The guidance that I got from the investment banker, and he did it for free just as a friend, which was super helpful. You just address the mental emotional part of it because you want this deal to close. Sometimes, we had a couple false starts. We had circle closing dates, and then they needed a little bit more information. It can be a roller coaster. If you’re selling a business for more than $10 million or $5 million, it makes sense to get some help.

When you go to broker websites you typically see the same thing. It’s like, hey, we got a 95% success rate, blah-blah-blah, but we’re going to be providing almost a yoke-style directory where you can see real reviews from entrepreneurs. What were they really like to work with? What were the acquisitions that they closed? Statement law firms, like what was their process?

I’m really building this for entrepreneurs. Obviously, there are a lot of really, really great brokerages in the industry today, but we feel this market is much bigger than just two or three big players. There are a lot of really, really great boutique M&A firms. We want to work with them, involve them in the community, and really just build this for entrepreneurs.

If you want to sell your company using Bizness Apps, as an example, I can go on to MicroAcquire. I can connect all my metrics where if I don’t have a VP of Finance, I can connect Stripe or Chatr Mobile, or whatever I’m using for billing, my Google Analytics or traffic. If I need help with the valuations, I can get that. All the resources that you would possibly need, and then immediately start meeting buyers and then transact on the platform without ever leaving.

Rob: I’ve bought and sold businesses, websites, SaaS, all the way from Flippa to forums that don’t exist anymore. I’ve had investment bankers giving me advice. I’ve worked with the main brokers in the space. What I’ve seen is that the smaller purchase price, smaller transactions are the ones that tend to be simpler. Once you get into the millions, again, I’ve seen MBAs who have to go through the books to make sure that everything is intact, and that you can hook Stripe up, but there might be anomalies there or maybe you have invoices that were paid via cheque.

There are all these exceptions that come up in these complex transactions. What’s your sense of can that be automated? Or is that where you have to get someone involved, whether it’s through the marketplace or looking to build or whether it’s just bringing in outside help much like a realtor. I think of Redfin and Zillow. They’re these big marketplaces. Then I think of a realtor. Realtors can come in and help you say, this is what you need, like this is direct one-on-one advice to help you improve the value of the house. We’re going to stake it, you need to get rid of all this stuff. You need to put this coat of paint on here and there.

How do you see MicroAcquire fitting into that? Are you more like Redfin, Zillow? Where are you going to be, because we’re talking about the future now. We’re not talking about today.

Andrew: You nailed it. We’re building the Zillow of M&A. That’s kind of been what we’ve been saying internally where, what is your startup really worth? We’re going to have data-driven valuations based on what we’re seeing in the marketplace. You can connect your financials, give you a range based on what we’re really seeing in the market.

What you’re describing is due diligence. Lots of those parts really can’t be automated. Maybe they can, we’re going to try, but yeah, you need someone to really get books in order sometimes.

When I sold Bizness Apps, half of the conversations were with my CFO. Do you have these financial documents in order? How many support tickets are you taking per day and how fast do you answer them? Even just doing technical due diligence and that sort of stuff, so getting help on all fronts. More importantly, just educating entrepreneurs on this.

A big selling point of brokers is, we’re going to educate you on how to sell your business. With MicroAcquire, our customer is not the buyer. We appreciate buyers, but we’re not going to be the marketplace where, hey, come here and you can get SaaS companies, add profit times three to four week. We smashed down the price so we can sell as quickly.

We’re allowing founders to really empower themselves. So when they go to the table with buyers, they’re at an advantage because right now they’re at a disadvantage, both from an educational standpoint and experience standpoint. We really want to help entrepreneurs get the highest price for their company from the best possible pool of potential buyers. Then if they do need those additional resources, even just light advice, you’ll be able to hire M&A advisors for 10 hours of guidance. If you don’t want to pay a 15% commission, you can hire someone for 10 hours, $5000, just a few questions.

If you want someone to run your whole process, manage all your negotiations, depending on the size of the transaction, you’ll be able to do that too. I hear what you’re saying. When you get into due diligence, requests are made, and those things are hard to automate. You can’t just have like, hey, this company is absolutely perfect. Even if you do automate it, I would want to verify it. I would probably hire someone to help me with due diligence on that.

Other things we’re looking at is escrow. We think there’s room to improve that as well. We’re bringing legal counsel in-house just to provide legal counsel for entrepreneurs as well as looking to sell, looking for a bit of advice or just packaged services. Got a lot of work to do. I mean, that’s probably a short story.

Rob: Today, you launched in January 2020, which is about 18 months ago. What metrics or numbers can you share in terms of how many companies have sold through MicroAcquire, dollar amounts, just whatever it is you’re sharing in public?

Andrew: Over 300 acquisitions, over $100 million in closed deal volume. We have about 70,000 registered buyers, adding about 300 plus daily. We’re in the top 4000 and visited websites in the world. We surpass Flippa, I believe. Don’t quote me on that; it might change. I love Flippa, too. I think they’re a great marketplace and they serve millions of entrepreneurs.

Another thing I’d like to add, too, is we do have competitors in this industry, but really, we’re just building another option for entrepreneurs to sell their business. We see acquisitions almost every other day. I get emails saying like, hey, I bought a company for $100,000, $50,000, $1 million, $2 million. It’s been really rewarding just being able to help entrepreneurs in that way because when those acquisitions happen, that’s how weddings get paid, that’s how down payments on houses get paid, that’s how debt gets paid. The exit is such an important part of the founder’s journey. There’s never been a modern marketplace for M&A, and that’s where we’re looking to build at MicroAcquire.

Rob: Yeah, that’s a trip. I mean 300 is a lot in 18 months. I’m actually surprised that it’s that high. I’m going to take a step back. When I first heard about MicroAcquire, it was sometime last year. I don’t remember when it was, but I remember thinking this isn’t going to work—I’m a perpetual skeptic—this has already been done. Flippa is out there. There are all these other things that do this. How can he possibly get a two-sided marketplace to work in a space where there’s already a lot of competition?

How did you kickstart this? How did you get enough businesses on the site to make any buyers want to sign up? How did you then get buyers to come? You are to date, aside from the funding, we’re about to mention that you raised in the past couple weeks there, but you had effectively bootstrapped it or self-funded it yourself, as far as I know. How did you possibly get both sides of that marketplace to get to critical mass?

Andrew: The first thing I did was open a pretty large cold […] email campaign, just to seed the marketplace, just to educate both buyers and sellers. Then just go on the phone with a lot of seed investors, angel investors, VC funds to see the buyer side, and then also corporate dev teams just to get their feedback. Then also reach out to a ton of different startups seeing if they would be interested in potentially listing and selling.

That was the initial seed. Once we launched on MicroAcquire, it just exploded from there. We saw thousands of users based off of that and it’s kind of just been up into the right ever since. I’m sure we’ll go through some bad times. This isn’t my first startup so I understand, things are going well right now, but we still have so much work to do, so many things that we want to do, so many things that we want to innovate on, and so many problems that we want to solve.

I should also add everyone I hired for MicroAcquire was with me for the acquisition of Bizness App. My VP of product, my VP of engineering, my CFO, my VP of Marketing, my old creative designer starting next week, and she’s awesome. We’re basically building the platform we wish we had when we went to sell Bizness App. Initially, seeding the market, a short answer there was a ton of hustle just basically getting on the phone with people. This is something that I think a lot of founders are scared to do, actually talk to people, actually get feedback. In the early days, it’s the most critical thing you can do.

I’m still on live chat, not nearly as much. I only come in if it’s like a question, but I answered every single email. I took every single call. I answered every single live chat. I sat on that thing sometimes until 10 just to really figure out product/market fit, like what metrics do you need as a buyer to feel comfortable, potentially being interested in acquiring this business? How can we make this marketplace better? How can we build this for the startup community?

I would say that was probably the main thing, is just speaking with people who are already in the startup ecosystem and we’re already actively either looking to sell, or have previously acquired companies, or previously sold companies. I talked to them about all the current players in the market today. What do they like about them? What do they not like about them? I took all that in and built the marketplace around that.

Rob: What I want listeners to take away is I get emails, I get conversations, private emails, been public emails to the questions at Startups for the Rest of Us line here, about starting to set up marketplaces. What most people don’t realize is the sheer amount of hustle that it takes to get that kick started. That it’s not about, I’m going to do some SEO here, I’m going to launch on Product Hunt and Reddit, or Hacker News, or whatever and build that marketplace .

You have to have enough of both sides in place already that it makes sense to then launch on Product Hunt which is what you did. The cold emailing, the cold calling, the dozens if not hundreds of conversations is often what it takes to get a business that once you build that flywheel, as you said it sounds like it’s just started to spin. Product Hunt got it spinning, then more and more people hear about it. It becomes a virtuous cycle, but when you’re starting out there’s no cycle to it, there’s no movement.

Congratulations on your fundraising. This is completely coincidental, but I’ve been trying to get you on the show for a while and finally our schedules made up. Last week I saw MicroAcquire raise $2.8 million, $22 million post money valuation. You’re going big with this thing and I can tell by your vision, the way you’ve been talking about it.

My question here is, how is this a venture scale business if you’re not taking a percentage of the sale? Because when I think you’re at a $22 million post, so for investors to be happy, you’re selling for at least $100 million. I’m guessing at that point, they’re not going to be happy. It says only 5X return. I don’t know much about the firm that’s investing. Usually, they want at least a 10X and probably want to shoot for half a billion to a billion dollars. To get to that amount, you’re going to need to get to a 5th or a 10th of that in revenue.

You’re looking to get to $50–$100 million in revenue. I’m just ballparking. You have not told me this. I don’t know any insight, but this is just how the venture world works. Right now, I believe your only revenue stream is that you charge buyers $290 a year to be on the premium list? Where else is money going to come from? The buyer list pool in the world just isn’t big enough at $290 a year to get to $50 million or $100 million in revenue. Where else is that revenue going to come from as you scale?

Andrew: Great question. I completely agree we’re not going to build under their $500 million business off of premium buyer subscriptions. But the goal is, we have an M&A directory that we’re releasing. These M&A advisors are going to be charging for their services, whether that’s a 5% success fee, 7%, maybe it’s $500 an hour, whatever it may be. We’re going to take a commission off of their commission.

We’re going to be focusing on bringing in as much supply because most business brokers, again, I’m a big proponent of talking to customers before you build this out. What I learned was most business brokers spend half their time on sales marketing. We have thousands of startups on MicroAcquire right now that could potentially opt in and hire them for their services. For that referral, we’re going to take commission off of that. Once you add that up, especially as deal sizes increase, the numbers get pretty interesting.

Then we have other items that we’re lining up in terms of revenue streams. One is if you’re an M&A advisor or broker, you’re going to be able to list on MicroAcquire. We don’t know the fee structure on that yet. These are just ideas, but not only can we help, we want to help brokers succeed as well.

There are thousands of boutique M&A advisors, business brokers managing just a handful deals. They’re not a big firm where you just get a junior associate you’re working directly with, basically a badass who just handles deals very selectively. You’ll be able to hire that person and whatever their rate is, you’ll pay that and then we’ll take a referral commission based off of that.

On top of that, we’re looking to bring in as many brokers and M&A advisors as possible to allow them to list their deals on MicroAcquire to increase supply even further. Again, don’t know what that model looks like, but that’s the two new revenue streams that we’re going to be introducing, and that also applies to legal services as well.

All the additional third party services, all optional. Again, you could still sign up on MicroAcquire, serve your company completely free, never hire a broker, handle the process entirely yourself. We’re still going to innovate on things like valuations, escrow. Being able to transfer the assets is a huge headache. How can we improve upon that? We’re thinking big on all those items.

Another revenue stream is lending. I can’t say who, but we secured a partnership with a startup that’s recently raised (I think) $300 million and they’re looking to finance SaaS acquisitions with over a million in revenue. That’s another line item of potential revenue where we can help entrepreneurs expand the buyer pool. More buyers who now afford businesses because they have financing available and then we take a commission off of that referral as well.

Those are just three, but we’re going to be thinking of more, just how can we add so much value to entrepreneurs, when selling their company. They’ll happily pay for these services. They’re not released yet, but that’s kind of in the works. Short summary is third party services and by referring those third party services, we’re going to be taking a referral fee from those.

Rob: Got it. As we move towards wrapping up, I have one final question for you. You’ve been building this business now for 18 months through a pandemic, built a two-sided marketplace essentially from scratch. What’s been the hardest thing about doing that for you personally?

Andrew: Big fan of bootstrapping, big fan of really capital-efficient businesses, but it’s hard. I was working from 4:00 AM to 11:00 PM at night, family responsibilities included. I take out the trash and pick up dog poop every Thursday, do the dishes, those are my chores around the house. I believed in this and so that was probably the hardest part, was just this sheer amount of work to get this off the ground. I think that’s a lot of things.

That’s a big thing that I think a lot of entrepreneurs don’t understand. It takes a lot of work to get a startup going, so I put in that work and I’m fortunate to have a team to help me work more on the business rather than in the business, but the short answer is working in the business, blessing and a curse. That really allowed me to really figure out a model that allows us to move up market to really aggregate this industry, providing more value to entrepreneurs looking to sell their companies.

It was a ton of work. I would say just working in the business was definitely the hardest thing and I still do quite a bit. That’s my big goal. Literally, before this podcast, I was talking to my team, I was like, guys, I’m overwhelmed. I tweeted something out like a CEO should not be working more than 100 hours a week. Delegate, fire yourself from everything, enable your team to succeed. That’s been the hardest part. Probably within a month or two, that’ll be lessened but long story short, working in the business, doing everything for marketing, product management, customer support, sales, like everything, that was hard.

Rob: Yup, you got to wear a lot of hats in the early days. It’s a ton of hard work. Well, sir, thanks so much for coming on the show. If folks want to keep up with you, you are @agazdecki on Twitter, and of course microacquire.com if they want to see what you’re up to. Thanks again for joining me.

Andrew: Yeah, Rob. Thanks for having me. I appreciate it.

Rob: Thanks again for joining me today. If you want to connect on Twitter, I’m @robwalling and this podcast is @startupspod. Every week we actually tweet a cool little video clip of the guest and I, usually it’s 60–90 seconds taken from the episode. You can check that out. If you would like it or share it, I would always appreciate it. I’m definitely looking to get the word out about Startups for the Rest of Us and any help you can lend is always appreciated. Thanks again for joining me this week, and I’ll be back in your earbuds again next Tuesday morning.