Episodes

Rob: Welcome to this week’s episode of Startups for the Rest of Us, I’m Rob Walling. Every week on this show, we dive deep into topics that relate to building ambitious startups. These are not startups that require us to work 90-hour weeks, sacrifice our life, our relationships, our health in order to build a great company, and a business that can change our lives, and change the lives of those around us. We focus on bootstrap and mostly bootstrapped startups, those that are highly capital efficient, but still want to be ambitious, still want to build interesting things, and we want to have an impact on the world.

This week I had a really interesting conversation with John Howard of Slingshot. He initially connected with me through MicroConf connect. That is our Slack channel. It has more than 1600 founders and aspiring founders. It’s microconfconnect.com. We connected there and he was asking me some pressing questions and I said look, I don’t do consulting, but I’d be happy to have a conversation with you if we can record it. If it’s good, we’ll put it out as a podcast episode. That’s what this conversation is. It’s John explaining how his business works and it’s not just a straight ahead SaaS, there’s some SaaS-ish elements, but he’s dealing with physical products as well. You’ll hear me just try to dive in and kind of get my head around his business and then try to explore options for him.

He was specifically wondering if he was missing anything on the pricing front. We looked at his pricing and kind of tried to analyze it and look at it from different angles, and figure out what other type of options he has. But before we dive into that conversation, I got a couple emails with feedback on episode 525 which is where I read on-air an email that I had sent about 15 years ago around the time that I acquired DotNet Invoice. It was to a friend of mine who was asking to be a cofounder.

I got a couple pieces of feedback on that episode. The first is from Ralph and he says, I really enjoyed the episode where you read your old email. I’ve listened to 124 episodes of Startups for the Rest of Us to continuously back to 415 and I’ve cherry picked some older ones. I’d already heard about your purchase of .net invoice, how you made mistakes, etcetera. However, hearing it again from the viewpoint of the ghost of startups past rather than you looking back from today, brought home the distance you’ve covered in that time and that others could do the same. I particularly liked your analysis of why you were seeking a cofounder and why the friend you approached would have been wrong.

Another piece of feedback comes from Daniel and he said I like the episode this week, but I’m in the group that would completely disagree with you about a business plan. To cut in here, in the episode I talked about how my friend suggested we should create a business plan and that wasn’t something that I wanted to do. I didn’t think it needed to be done for this little product. Back to Daniel’s email. He said, obviously you caveated that point heavily and said that they’re good for some people and not others. However, I challenge you to take that further. Just an idea, but why don’t you debate that with one of your regular guests? I’m sure one of them would take the opposite side. It could be of use for anyone starting out to hear both sides of the discussion. Best wishes and happy holidays.

Thanks for the suggestion Daniel, I may take you up on that. In fact, if you have been a guest on Startups for the Rest of Us and would like to come back on and discuss business plans with me, I’d be happy to do it. I think that this stance that I take is I believe in having a marketing plan and I believe in having a budget. A marketing plan can literally be a one page Google doc with bullets in it or a Notion doc and the budget is usually just a spreadsheet that gives me some idea of how I’m not going to run over. That is my “business plan.”

The business plans that I was seeing you create with the software just seemed like a lot of extra headache, and work, and guessing. Maybe we’re using different words for it or maybe Daniel or others feel like even for a product that’s doing $500 a month, or you think it’s going to make $1000 a month that you should actually create a full on business plan for it.

I think I’m just more of a lean thinker than that or maybe I also don’t love a lot of process and creating a lot of documents that I think don’t have a lot of value to me. That is my style and I do tend to keep stuff in my head until it needs to come out. I might write a quick document that is describing the direction we’re headed, but I know that other folks want more detail, and I do think it’s kind of an interesting way to think about it. I don’t think it’s one size fits all. Anyways, thanks for the feedback. I really appreciate it. Now, let’s dive into my pricing deep dive with John Howard of Slingshot.

John Howard, thanks so much for joining me today.

John: I appreciate it. Thanks for having me on.

Rob: Absolutely. I’m pretty excited to dig into pricing for Slingshot. You hit me up in MicroConf Connect. To folks who aren’t in there, we have more than 1600 founders and aspiring founders now in our Slack group, so microconfconnect.com. You DMed me and you said, hey, I heard you gave some pricing advice on a recent podcast. You want to chat? I was like, well, I’m busy. I got stuff going on, but if you’re interested in perhaps coming on the podcast, we can have a pretty good conversation about it. I appreciate you taking the time to do it.

John: It’s so awesome and I appreciate it.

Rob: If folks want to check out what you’re working on, it’s useslingshot.com and your H1 is, your easiest swag campaign ever. Quality branded swag, a custom merchandise store for employees and fans, and worldwide fulfillment. Where you stand now, you’re the only employee, you’re the single founder. You do have, you told me, many contractors who are doing design, or development, or fulfillment, or just filling in all the gaps that you can’t handle on the day-to-day basis as a founder. Do you want to give folks an idea of where the business stands? Whether you are willing to share revenue or just some type of size to give an idea of the stage? It is December of 2020, and you launched it in January. It’s about a year old, but I’m guessing you have worked on it for quite a bit before then.

John: Basically, 2019 is when I launched it. Actually, it was January 1st.

Rob: It’s almost two years, got it.

John: Yeah. Totally different model that was working pretty well. We had about 10 clients on that model month-to-month. It was a unique swag store that give away points and you can transfer those points and be like, hey, you did something great, or the KPI, or the birthday, or start date. I’m really fine, but we knew it was one of the things that wasn’t a requirement at a company though. We’re still trying to build that really fun product market fit for the necessities and it’s hard to do.

Then Covid hit in March. When that hit this year, every single person quit except for one. We’re still trying to build up that market and find out what that was. Since then, I’ve met a lot of smart people since then that helped me guide my way to the true product market. We now have an awesome platform that as of now we’re going to hit around $200,000 by the end of this year in revenue.

I still am the only employee and I’m wearing a billion hats as my wife knows. Other than that, I am able to really export. People that actually physically know that I pay for fulfillment in some warehouse, and I pay people for marketing, and to help me out in building new product releases, but allows me to really focus on sales, client relationships, and et cetera. We’re doing really well. It’s a totally different change but still in the same vein that we are giving away great swag to people who deserve it.

Rob: That’s the thing, your background is in design and UX, and if folks want to check you out on Dribbble you have John Howard is your username and you actually started an agency called Black Airplane which is at blackairplane.com that you exited about 4-5 years ago. You sold it to someone who could level it up. The logos on the homepage of that are Coca-Cola, McDonald’s, Home Depot, The Weather Channel. I mean those were I’m assuming many clients that you closed. Are you the double threat of an amazing designer and also an enterprise sales person?

John: That would be a little braggadocious for me, but I appreciate that. I look at things more for the user experience side and that’s what has given me an ability—I’ve always wanted to start a business. I think that was my first love. I lost my job at an agency that I worked at. They forced me into, hey, why not start an agency? You love business and you love doing design work. That was the love story there and because of that, I put all my effort into making that happen. That was Black Airplane. I did not do any development there, it was really just design. We ended up working with some really amazing clients as you mentioned some of those. Coca-Cola being one of the most recognizable here in Atlanta and because of that, I kind of handed that off.

At one point, I really wanted to go build a product company. Especially working with products all the time, people who are doing products, it just keeps you energized. I handed it off to people much more formidable to me to be building an agency in building that up and they’re just doing a tremendous job. They made it now the whole gamut of design and development. It’s really grown, there’s about 18 people now. When I left it was two people and we had eight contractors, so big change.

Rob: Good for you. That’s cool to know when to hand something off, when to let it kind of take wings and give it to someone who perhaps can take it to that next level if it’s not something you want to do. I’m curious then, so you are running this agency, the description on the homepage is we’re a digital product design and development firm in Woodstock, Georgia. We’re on a mission to make sure no digital experience gets left behind.

You obviously have the chops whether your own design skills or through the network of contractors or employees that you worked with to build full on digital products, web and mobile, whatever. Why start something with a physical component? Basically, you started a product that allows other brands to launch their own swag campaigns or swag shops versus just going and building a software product, a SaaS, or whatever because you obviously have the skill and experience to do that.

John: Yeah, I’ve done that before. If I could show my rap sheet of how many things have failed, I could give you a long list. I’ve done a lot of that work. They made minor successes here and there, but I’ve learned a lot along the way. I had just been really fascinated with the physical and marrying the digital world to a physical product. I think I’ve really been obsessed with that for a long time. What got me excited about it was at Black Airplane, we did swag. I don’t know how the swag looks now there, but it’s always been great. We never slapped our websites and names. We were about people’s swag. It gave them really great swag. Every single time, people would brag on something we had.

I used to joke that people would wear the Black Airplane swag out to the park or on a date. They wouldn’t rip the sleeves off and cut off their grass, it wasn’t one of those types of shirts that you hated, or hats, or whatever. It was really nice stuff. I saw that people got really excited about that. I just felt a relief. I’m really obsessed with your experience. I want to build this product and platform and marry that experience of getting something from an employee, or colleague, or boss, and then receiving that in your hand physically seeing that side of things as well. Both of those things got me really excited.

Rob: That makes sense. The companies that I’ve launched and pretty swag for, I always took that same tac. Especially at several of the Drip shirts, I had a professional artist, he actually is a comic book artist, to design this character called Drippy who, rest in peace, Drippy was retired after the acquisition. I remember telling the designer, I want this to be something that could appear in a store like in Urban Outfitters, or some store that someone might see. Obviously, I wanted branding, and perhaps a logo, and maybe at a tagline somewhere on it, but it’s not this big prominent thing.

John: Right. You’re not walking around here with your billboard, that’s not the point of it.

Rob: Exactly. You decided to launch this, I know we want to get into pricing, but I just have so many questions because when I look around the internet, I see this is a solved problem in my opinion as an outsider. Printfection, spreadshirt.com, printful.com, swag.com, activeimprints.com, axomo.com, I literally searched for 45 seconds and I found those. I guess the first question is, are you crazy for entering such a crowded space? The second question is, how are you different from them? Because I know you’re not crazy. From your past, I know you’re an enterprise salesperson, a designer, and a gifted business person. I know you wouldn’t enter the space and be $200,000 of annual revenue by accident.

John: Great question. I think those are fun to kind of pose. I don’t usually get those in sales calls because people are calling me for that reason. They don’t want to deal with it. I think that the question usually originally I thought, people just love giving away swag, we have the point system in place. The reason we killed that is we thought the people wanted to give away things. We thought that was the […] and we wanted to give away great swag and they wanted a platform to do that and the avenue to really reward people.

I think they still do, just nowadays, it’s just overwhelming. People ops is really the general term. There are so many that are involved. I started out with more people ops demographic I was trying to reach, but a lot of people try to get away things or something for themselves, they’re just too busy. They don’t want to do any of that.

Even the things like Printful and Printify, I recommend to people all the time, so that if their budget doesn’t get us, they want to do DIY solution, go set that up. You got to set up your website, your location, you got to generate terms, and set up your little call to action pages, and go print stuff, talk to vendors, and all that. I go on and on because I want that to feel heavy, because it is. Even with the Printify or Printful solution. You’re having to go set that up for yourself and get that running.

The quality is not there, you can’t print in multiple locations. You don’t get the same quality of shirt and hats, you can’t do things that are super custom and unique. You’re bound by two things. One is the uniqueness of the campaign and the main one is 90% of why we sell it because it’s just too much work to go to ship things out to ship stations, setting it all up to get it all running, the full gamut of the campaign.

Our differentiator now is not based on, hey, we do really great swag. That’s a given. I don’t even sell that anymore, right now it’s basically like, you don’t have time to do this. I know you love your people, we thought we’d solve that for you. Now what we’re going to do is take everything off of your hands. All you got to do is get excited about rewarding your people.

I think we keep people in that excited ethereal place when they’re working at a job which they’re pressured to perform and they want to go home and not think about this stuff. They just want to get excited about their people. When you remove all the other burden off of them, it frees them up hourly monetarily to go do a really, really great job at that. The fact that they also track campaign usage to again on Printify and Printful, you can see how many things are sold, but you can’t tell the conversion rate of people that did something because of that movement.

We actually track that. We have extremely high conversion rates on our call to action pages of people that willingly got something free and then chose to do another action for their company. That’s how we’re different. We really alleviate time and then we track the actual conversion rates on your swag campaigns.

Rob: I want to touch on a few points there. One, you mentioned people ops, for those who haven’t heard that term before, it’s the new term for HR. Human resources is becoming less and less of a term that’s used. People ops are the folks who are helping you manage your people typically at a larger organization.

The second thing you mentioned is people will get something for free and then take another action for your company. I think there’s two questions there. One, are you right now focused on let’s say larger companies? I’m in Minneapolis. I think of Target, Best Buy, General Mills, these are large Fortune 1000 maybe even 500 companies. I forget who’s in the 500 at the given time, but those are large companies and they may want to give away a bunch of swag for free to their employees.

I guess the first question is, is that more the type of client you’d be looking for versus I think producer Xander and I who work on MicroConf together, we have talked at different times about setting up a MicroConf swag shop where the swag wouldn’t be free, but we’d probably sell it at cost. We want people to wear it, but also we can’t lose $10,000 giving stuff away for free. I guess the first question is those are the two things I think of when I think of a swag shop. Are you focused on one over the other?

John: Right now, they’re all giveaway campaigns. That’s the primary sponsor revenue earlier. All of that is attributed. Actually, 95% of that right now wants to keep things outside of that or attribute it to a giveaway campaign. We did start with the internal employees. It’s people who, hey, do you want to give away things to your employees? That area is just too small and people already really focused on doing that anyway. A lot of them realize, if I gave away things to people external from here, I’m already doing that through advertisement and setting up ads. My conversion rates are usually .1%-4% on a high print ad.

Power campaigns right now that we’re tracking are converting, again, the conversions are all subjective, but converting on they got something free and then they did something with it are around 20%. It’s extremely high because you’re giving them something free and they’re going to do another action after that, but that’s where we’re at now.

We are also going to start focusing on launching a new product called […] that’s going to focus on the same. We’ll do all of this for you, we’ll save you all this time while you focus on your brand, but you can actually sell your products. We’re really working with people that know their brand very well, that know they can make money off the products they sell.

Rob: Got it. I want to dig into that action then because I’m not sure I quite understand when you say, they’re running ads to give stuff away. Again, just come back to Target or Best Buy, they wouldn’t run Facebook ads to say, get a free shirt that says Target on it or free Best Buy swag. What am I missing there?

John: For sure. Yeah, they would more run ads to give away something free like a document or a PDF and hope that you convert and give your email address or something, but you are not proactively doing anything from there. I’ll give you three examples of what we do. Basically, if Best Buy were to say, we want to run a thank campaign and spend all of our money on giving away swag. It could be small or large, it doesn’t matter, but something really unique and cool we’ve had done for Best Buy. We want to give that away free.

What happens is these people get code. Maybe they attended an online conference, maybe they went to something physical, a booth at Best Buy, but they did something. When they get this code, they go to put it on the internet which is Slingshot. We have a site setup for them. After that, we have a page where they can either cool down—basically a celebration page that says, your product is on the way, we have some information there.

What we can do is we can set up a custom call to action that happens on that page. That means, we already got them excited waiting for the free thing. They did that first. We didn’t ask them for something before they gave them something free. After that, because they’re at this high and getting excited about something, we then ask them to do a call to action. Three of those to give you an example, recently, to make it really quick, that’s one. They would’ve made a post about the beta of Illustrator. They want people to post and further talk about the beta after they got their free product, it’s just a tweet button. You basically tweet it, edit it the way you wanted to.

We also have one where you can fill in Glassdoor reviews. This is after 60 days of being an employee in certain companies. This company had the call to action where you say here’s your free item. If you love to do this, we have an optional thing as well, would you post it? Go to Glassdoor and leave a review for our company.

The third one, you want to ask two questions after you use their product. They give you something free, after you’ve been using a trial of the product. This conversion page, the call to action page after, again, it’s optional. They’re able to say, here’s a few questions I can fill in and submit this. It just helps them along. They get free stuff from that. The conversion rate is really measuring after the excitement, after they got the free item, will they fill something out or do an action.

Rob: Fascinating. This is like a whole ecosystem. This is something I really have not been exposed to. I’ve seen swag shops for conferences or companies. Back in the day, I was a Microsoft MVP in asp.net. It just means that you pass some certifications and you become an influencer in the community and then they nominate you and you get a bunch of free software.

John: New swag, yeah.

Rob: They give you I think I got $100 credit at their company store. I could software and I could get other stuff. I’ve been exposed there and I’ve obviously been exposed through MicroConf, or Drip, or the companies I’ve started to extend our brand and everything. This is a completely different thing that I have not seen before. We have trial users, give them something and then ask them a question, or we’re going to ask for Glassdoor reviews, or as you said Adobe illustrator wanting beta users to tweet about it.

John: Right. That was done really fascinatingly well. We’ve tested it and made the collection basis nicer, mobile, make sure it’s something really easy and simple they want to do. We always negotiate the complication with clients, because they want to always ask more, or do something more, and we have to say no, or put it before the form. We want to ask them this before they get something free.

We always thought that again, you want genuine responses. We measure genuine responses to getting something free, and then voluntarily choosing to take action after that. We’re truly like MailChimp you can measure mail, why can you not measure swag campaigns the same way. It was a little different there, but why can’t you do that? We kind of have been pitching that back and forth ourselves. Building something that is measurable in the same way with swag.

Rob: I often say when someone’s launching a new product, if you’re going to compete with existing competition which most of us these days are, I say, look you should own a unique position, you should own a traffic channel, or you can be cheap. Those tend to be the three things. There’s always like, be careful with the cheap, because unless you truly have a competitive pricing advantage, then you’ll just become a commodity, and blah, blah, blah.

For you again, competing with these other things that kind of do—again on the surface, it all seems to be the same for me, but as I’m digging I’m like, you actually are differentiated. Are you essentially, you’re a full service, high quality, high priced version of these things? You have the CTA aspect, the call to action aspect built-in. Is that what makes you different than other options I would look for?

John: Yeah, I think that’s really the main one. Basically it’s nice quality swag. We made everything really high quality. There’s no effort from you at all. If we say the easiest swag campaign around, it truly is. All you have to do is go, I want to give out codes today? We’ll take care of the rest. It’s that easy. I want to start a new campaign off this in the exact swag from last time because I want to extend that. You could do the same thing and then afterwards, you’re going to measure it.

It’s really that cyclical like, just getting excited about giving away things and wow, there’s an option here where I could measure that as well and it’s going to show me that. That’s where you get excited more. You’re going from people ops now to really talking to a lot of marketing people. We started out with people ops and marketing. They are super excited about it, they have so many ideas that we can force them to drill down which marketing people have these challenges, drilled down into one call to action. If you want to start a different campaign to test out like an A/B test, you can do that. But really, one call to action you can get them to do after coming off this hive and something free.

Rob: That’s what I was going to say. The call to action piece almost seems, aside from the full service which I think is great, because it raises the price point and makes it easier for people to get onboard. The call to action piece, is anyone else doing that? Tying a post swag call to action where I signed up, I selected the shirt or the hat. I love the hat that I just got from Adobe. That’s going to be now shipped to me and now of course I’m willing to tweet about it. It sounds like you have all that built into your system. Is anyone else doing that?

John: Not that we’ve seen in that way. I have seen other swag stores that have some kind of plug in that says, can I get some feedback? But it’s usually disrupting. I’m user experience centric. Everything’s got to be easy. Everything built into our platform is extremely easy. We tied in to Google. I think they naturally grab all your information. We don’t store any information, your payment information, our call to action for our stores that’s coming out for the payment stores. If you want to sell swag, it’s super easy. It’s all one click.

Everything is UX centric, so because of that user experience, I haven’t seen anybody really marry them up in the way that we have. They’re just people using plugins on wordpress stores that are very heavy, or  themes, or whatever it is. Even Printful and Printify which are our competitors in the manufacturing space, we don’t even mind that people send us their swag. They have other people that use swag from outside of here because they get it from somewhere else or they prefer a different vendor. We don’t mind it all, we just take it on. We still charge the fulfillment fee for the package and set them up on the call to action as well.

Rob: Got it. That’s the thing where you’ve innovated here from what I can see and why I now understand how you’re different. You’re going after marketing leads or folks who actually want to get to a call to action and they’re going to do it through swag. Because that’s the thing, marketers are used to spending money to get things. They’re used to paying writers for SEO, they’re used to paying SEO consultants to help with it. They’re used to paying for ads to drive people to places. Spending money on marketing to get a tweet, or to get a survey answer, or to get a Glassdoor review, that’s nothing new. You’re just providing this whole other thing as a service.

John: Right, incentivizing stuff they already do, bringing it together, that’s really what we’re doing.

Rob: Okay, we’re 20 minutes in and I have a picture. I really need to understand that, because if we start to talk about pricing from the top, I would have dug into why aren’t you $99 a month plus X of fulfillment like Printfection or Printful, but that’s not the value you’re providing.

John: We’ve been there.

Rob: Exactly. Talk me through that. I’m sure you’ve had many pricing models before. Maybe don’t go through all of them, but you could briefly touch on this is how we’ve evolved and where we are today. Then you and I can kind of bat around what’s working, what’s not, and just figure out if you’re on track.

John: For sure, we’ll talk about that. I’ll make a really brief, back when we started in January, 2019, a year ago, that was when you bought points. You pay for the points up front basically. Whenever something was done, you get a one off of print. We didn’t use Printify Print, but we used a local vendor with really high quality swag, but you could buy the points and you paid a monthly fee of $99 a month. It was really nice, it was great.

Again, all these people went away during Covid, so our new model, we started out still doing the monthly fee and every time we’re having these conversations with people that are already paying a ton of money, they’re like, why am I paying monthly if I’m going to be doing new campaign with you all the time? We ended up charging —instead of doing the monthly fee of $99 or $299 with some of our clients, we ended up staying at $99 per campaign that we set up, up in the front. That’s basically three months of what we used to charge up front, it’s built in and we know they’re going to be re-upping.

Almost every client we’re working with now has a new campaign coming out every couple months. They’re re-upping or rebuying into that campaign process. They’re paying that $99 each on a one A/B campaign page set up.

Rob: Okay, which seems inexpensive to me. You’re essentially doing enterprise sales with larger companies and we talked about Adobe, that lead time to close that deal was not 15 days. I can assure everyone listening that it was months and months. If it’s $99 to set it up then where are you making your money? Because I know that your margins are pretty good, we talk a little bit offline in advance. Where do you make your margin then?

John: To give you a back-story, Adobe for someone like that, working with those types of company, it took me almost 10 hours to get on board it, of me filling out things to make sure I was set up to even allow us to get into their system. They have to approve you with this big group of people. To get into their system that’s really hard in the first place, enterprise sales are extremely hard, but once we’re in, the lead times are not very long. We really have been setting up campaigns for a lot of the Adobe. We work with almost every Adobe team now as well.

With the Adobe team, things didn’t get set up within probably 10 days, 30 days max to get paid for that. We charge everything up front so we wait on invoices to get paid before we’ll start a campaign. That’s one way we don’t take on the scary parts, so we’re trying to bootstrap. We worked that out early on. We’re making our money based on the margins inside of the campaign itself. That’s actually for the Swag and then to fulfill that Swag. Our campaign profit margin is around 35% to 40% off of the actual amount. Basically, they’ll send us the amount, we’ll then go buy the Swag, get all that done for, you don’t have to worry about it. We make about a 35% to 40% margin there, and then it’s $350 right now per package to send those out. All that are bundled up into one package price that they pay for to start a campaign.

Rob: Got it. I’m imagining this campaign since they’re pre-buying shirts, hats, mugs or whatever. This is thousands of dollars, if not tens of thousands depending on—I mean they’re placing an order with you. They’re saying we want 100 shirts, 100 hats, 100 mugs or maybe it’s 500 each and then you say okay. That’s $8000 or $12,000. Is that the idea?

John: Yeah. What we end up doing too, it’s around $6000 on average, around $5800, we’re calculating per campaign that’s launched. That doesn’t mean you have other ones who are tiny. We work a lot with tiny companies as well. Those are probably around 20%, 80-20 rule. We do work with a lot of small companies as well that run smaller campaigns. The cool thing about that is we’re not changing how much we charge for the swag that they’re purchasing. There is a minimum entry to even jump into a branded campaign.

The cool thing is we’re really pushing people to buy five agnostic items, so sure that you’re going to have to always re-up and buy new smalls, new mediums or new larges that’s a property of the swag closet. We do still order those items and people pressure us to get those types of items. They really want it, they really want that certain item, but really we’re sneaky people to think it can be reused for new campaigns over and over again. Maybe they’ll buy something new. This year it’s going to be the sticker, the hat and the socks or whatever it is. Next year, it’s the socks and this. They can always having to campaign running with existing swags or really pulling from that at all times.

Rob: That would probably exclude MicroConf from doing it because we would be looking for a print on demand solution, such that we wouldn’t want to come up with let’s say $5800 to basically populate your—because I assume you have a warehouse and you’re doing all the fulfillment. That would make less sense for us given that we have no idea what the demand is because we’re not thinking in terms of campaigns. This isn’t as much marketing, I want a call to action for us. We truly just would want a swag store to extend our brand and run it at break even. I mean that’s accurate, right? It’s not necessarily a fit for the model that you’re looking at.

John: Yeah. Thinking of MicroConf, everybody that I know that’s in that group that I personally know as a DIY person. They’re sending everything up. They’re chaining it all together. There are no code solutions. Slingshot was built with no code, almost everything is. We’ve got some custom code in it but 90% of Slingshot is built on no code. We’re doing that, making this much with having a no code solution is play. Because of that, I think a lot of people want to chain together their own stores and their own brand and put their logo wherever they want, but you’re very limited on what you can purchase. Sometimes people don’t care. Again, if it’s brand awareness like I know MicroConf and I just want to get something from that field made by what I get from them, it doesn’t really matter.

If it’s you choosing, you being Rob, what items you want to go out to these people, the one off solutions where we restarted, it was really great. You’re hoping that people have great brand awareness. You’re hoping that they could generate that. With people giving away things, there’s always a demand. They can always give away or run a new campaign. There’s always a need to get a new call to action or return on investment for something they’re giving away. Just because the buy ins are a lot higher there, with our new store, we’re really focusing on companies that know where they’re at with their brand and want to move to a new solution where they can focus more on their brand and worry less about running everything else.

Rob: How are you finding these new marketing customers? Because it feels to me like this is almost a new—this is something I haven’t heard of before of using swag truly as not just brand awareness but as a marketing assets that I’m going to give this away in order to get the call to action, the tweet, the survey, that glass door responses. I can’t imagine anyone searching for this. If I’m in marketing at Target, I’m not searching swag to give away so that I can get someone to tweet about Target. That’s a challenging position for bootstrappers to be in because you often want to fill demand.

That’s the easiest way to do it. There’s already search demand. There’s people seeking and I can either run some ads or I can do content or SEO and I can get in the way of that traffic channel. It wouldn’t seem that you’re able to do that. How are you finding new customers and then we’ll actually talk about pricing? I promise.

John: That’s fine. The cool thing is when I even asked you for pricing is like I know where I’m at but I want to make sure I’m not in the wrong place. He might have another opinion that yours, as smart as you and just be helpful, which is the reason for that. Aside from that, like you said, it’s not easy. There’s a lot of not training I would say, but there’s a lot of people—the eye-opening moment that you had 20 minutes into the call, I have to make that happen usually within 5 minutes of the call.

I always schedule calls for 15 minutes to force that reaction, our demo is only 30 seconds to show the actual platform. When I do that it’s really like how do I plan the phone call before that, it’s really writing about it a lot, talking about some of our success. I’m not an influencer by any means, but I do work with a lot of enterprise companies who know that if John’s seeing something in this area of your experience, I’m going to at least check it out and trust it.

I have a great group of advocates on my side that help me extend my voice and reach because I’m a transparent guy. I’m open about everything. I’m always reaching out to someone as did to you. I did that to get him on this call today, but as you said I reached out. I was hoping I could get your ear up. I think of the whole thing as like I made a lot of relationships that way.

I’m not really doing traditional marketing and sales right now. We are working on setting that up. Right now, it’s very much word of mouth, through LinkedIn, talking about different ways that people are looking for things. No, they are not finding us organically searching through that, but the cool thing is everybody that filling out these calls to actions and claiming swag is coming through our domain to do so. The volume is ridiculous. If you look at our stats, our volume is just people passing through. We’ve had quite a few people come through that goes, I love this system. Can I talk to you about this?

Rob: You have a viral loop there?

John: Yeah. That is built in. I’ve been doing that for 10 years and making sure that’s in place when we launched. That’s built in so I don’t have to spend a lot on marketing right now to do that.

Rob: That’s interesting because I think as we talk about pricing, one thing in the back of my mind that’s a little disconcerting is that you’re not on subscription. If you don’t have repeat buyers, the fact that you said that Adobe—you’re working with most of the departments, probably means that you’re just getting new projects constantly and that is what’s going to make or break this business. Because if you had to find a new Adobe or just a new client every month or every week or whatever to fill your pipeline and keep your revenue, this is a grind, this is a sales business.

The beauty of SaaS or subscription or recurring revenue is that you don’t necessarily have to do that constantly and you can build this flywheel. Your flywheel is not going to be subscriptions, it’s going to be reorders in essence from these larger orgs. Has that been the case so far, most of the companies you’re working with are coming back and doing more and more campaigns?

John: Yeah. Even at Adobe, their departments or divisions or what they call them internally but a lot of people really did know someone else that works there is 21,000 I think people that work there now, latest count. A lot that I work with have heard it, I heard of Slingshot used here but I don’t know who you are. I don’t know this other person but has heard of it. A lot of the people, we are relying right now on re-ups. They are doing that because they’re seeing the value there. We were able to show them statistics.

Getting a new organization like that set up, that’s monumental. That’s why I stopped and said right now we’re working on having some new organizations that are that large that have different groups that can break out. Really tell one another without knowing who started it, tell each other about the product and service. We are reliant upon that being new campaigns and banking on that right now honestly.

Instead of the month to month, which seems to me—when I talk to people, it seems to be almost like you’re charging us month to month, but already charging us a huge amount for the campaign project. We talk about building that in so it covers us for a few months just to create somewhat, not predictable revenue, but built in revenue from that. We’ve gotten away for the month to month subscription altogether. Definitely, I thought about reintroducing—I don’t think I have the right platform to reintroduce that yet, that makes sense not to say it during a sales call.

That’s why I’ve been really stagnant on whether we should do this or not. Right now, we’re killing it, but I don’t know how long that will last without at least some kind of predictability month to month.

Rob: Right. It doesn’t seem to me like the subscription is going to work given this current marketing campaign. You call them campaigns because they are marketing campaigns in essence. That’s why I was confused when I looked at your home page. I’m like, why is he calling a swag store a campaign? Because again, I’m coming from the MicroConf mindset of we would just want a store that’s open year round and you could come and buy a shirt at cost or maybe if you attend MicroConf, we send you a coupon code where you get it for free. That kind of thing wouldn’t be a campaign and so that’s how you’re differentiating. You’re talking about marketing campaigns.

When I think about how marketing campaigns are thought about, they have a budget and they have an ROI that if we pay $5 per tweet or at $10 per Glassdoor review, or whatever that may be, maybe $50, then that’s a success. Back in the day, if I could pay $100 per new trial at Drip, we were minting money. When I think about writing a check for $6000 as you’re saying the average price is $5800 for a campaign, you’re right, the $99 a month seems superfluous. To get us all on the same page then, you charge this upfront fee to manufacture and a warehouse the merchandise for this campaign and then you charge a per package fulfillment charge. I think you said it was $3.50.

John: Right.

Rob: Okay, is that it? I mean that’s basically your car pricing if I were to come to you from Target, so that you’d be like, alright, how many mugs and other things you want to print? It’s $5000 or $10,000 plus this fulfillment fee, does that kind of summarize where you’re at?

John: Yeah. We want to be one packaged price. We do break it down so you’ll see things like a line item because people need that to take it back to their teams because every team works differently. It is all one package price at the end of  the day is all you’re paying.

Rob: It’s enterprise sales. I mean it reminds me a little bit of custom software back in the day or even not back in the day, you’re running Black Airplane which was custom UX. That’s what this feels like. The advantage you have right now is that no one else is doing it. Is that right? I mean it’s essentially a green field and you can price it within reason where you want it to be?

John: Yeah. There’s somebody that can always come up with something competitive. I’m not excited about that but I do look forward to beating them, it’s the competitive nature in me. Really, once they talk to us, they’re going to get that same experience at scale always. It’ll always be scalable. I think it could be our next big challenge, can we always scale the experience that the person on the other i.e. in this case you would receive every time you engage with our team?

Like you said, it’s very much like Black Airplane it was an agency world. I’m used to selling to enterprise companies that they invest in. The cool advantage I think here I know there’s other things like Printful, and Printify, etcetera. There’s a million of them that exist. You’re having to piece those together, but most people who are sending swag out to the void and they’re paying for that. They just do it like it’s natural. I got a startup, I have a company or a new niche. I’m going to buy a swag for the whole company. We’re just helping you measure that and make it meaningful.

I think that’s really the advantage that every time I talk to someone, it’s completely unique. It’s like wait I’m already doing this, but you’re going to help me actually do this, do something with it and make it mean something. I think that’s what keeps people’s eyes really wide. They’re not really paying a premium when it comes to we bought the swag, we went to the post office, we had everybody’s addresses and we shipped all the stuff out to them. We have to store it all down at our swag closet. Even in my LinkedIn, I said I’m saving you from your swag closet and save your sanity or something like that.

It’s being cute by playing on it. It’s a lot. People don’t always use the swag, they always do that for printouts, they get really great stuff but actually it’s something that people will use that you can measure against for an ROI.

Rob: Got it. When I hear your pricing, it seems to make a lot of sense. The fulfillment cost, I’m used to it. That’s what FBA, Fulfillment by Amazon does. That’s what any warehouse is going to charge you. They’re going to charge you a monthly storage fee, which it sounds like you’ve baked into the campaign costs, so it’s all one line. I know it’s line items but it’s all one big price. They charge storage and they charge fulfillment and then of course the actual payment to USPS, or UPS or FedEx or wherever you’re shipping. All that feels like it makes sense to me.

When I think about pricing, your set up fee is $99, should that either go away or should that go up, especially for the first one? I would be thinking there and I would be thinking about your margins on your large quotes or just any quote. Have you had complaints about we quoted $5000, that’s too much. Can you build an extra 10%, 20%, 30% margin in there, given that you are not a commodity at this point. That you really are something that is value add, someone would have to chain together all these other services in order to do it.

You’re already charging a premium price, can you charge a bit more? Those are probably the only two areas that I think of, is that set up fee or effectively just raising prices, building more margin into your quotes.

John: As we move and I work with great ops people. I say this, I mean, to my dearest heart, I love working with people that are super, super focused on just loving on people. That’s just the way I’ve always done business, sounds cheesy but you’ll see my point on everything, like love on people first, everything else will follow. I want to make sure that the people I’m working with are focused entirely on their people, not just their campaign, but in that vein of thought.

As we move further away from people ops and focus more in that marginal area people ops to, hey, introduce me to your marketing team leader, CMO, or whatever at whatever organization. They’re going to want more measurability on this. As we get more into measurability, which we’re doing a great job now as new pieces are coming out at the end of the year, there’s some really exciting things. They’re not going to be heavy. I don’t want the product to ever feel heavy. When they see this, it’ll be one of the things they can look at and say, you know what, there’s absolutely ROI here. It’s measurable and we can actually spend more money. That’s where I think I’ll be more comfortable even increasing margin there.

Right now, the balance is probably about 40-60, 40 being people ops, 60 marketing reps that we’re working with. I want to be careful to not just be inundated with ROI, measurability when some people just want to give away something for free and just do that, because that’s the company they are. Even in Adobe, it’s about split now, the half of people we’re working with, most of them, can you show me the measurements? It’s awesome. I wish we could see more numbers.

Somebody said the other day, more numbers it’s better for me. The more I can see, it’s better. I think we’re in the middle of figuring out what that is. I don’t think we’ll ever lose people ops, but I want to make sure the experience is top of the line, which is right now that the third page is optional. It’s completely optional if you want to measure or not. 90% of our campaigns are  measuring right now.

Rob: As I think about it, it’s like you’re in a good spot in terms of not being commoditized once someone understands what you do. I think you can go up market into larger campaigns, in which case, as you’re doing now, you’re charging a big lump sum to make it worthwhile, to do the enterprise sales process. If you go up to $20,000, $30,000, $50,000 campaigns, that all plays out. It’s more enterprise sales and it doesn’t seem to bother you. A lot of people don’t like it, but you seem to be good at it and doing it.

You are leaving room below you for someone to come in and do a print on demand version of this exact same thing at, let’s say, $99 a month price point. Obviously, they would have to build a lot of the margin into either that monthly fee or more likely the fulfillment and the production itself. They’ll charge on that on the t-shirt print or on the mug print.

I don’t necessarily think you should bother with that. You’re a single founder. You’re having success and I think where you are up is going to be amazing. I think if someone were to compete with you, they would probably start in that realm, going after the folks who maybe can’t afford the $6000 or $10,000 up front, or aren’t confident enough in it and almost want a test bed of print on demand approach to do more one of things. It’s a higher unit cost obviously but it’s a lower upfront fee.

John: I think to just pretend I was to do that and if anybody were to listen to this in the future, if I was to that, that’s where I would start as well. I would come up with let me piece together our WordPress theme and then put together something on the end that asks for some information or get a plugin or whatever in the front end, do Printful or Printify or whatever it is. Even those on demand prices, they’re on demand for a reason, talk about quality but they’re on demand for a reason.

You’re paid to get something on demand, but you’re still paying a premium when you look at the prices for those items. They would have to build in a lot of margin to make that work. Everybody I worked with, which is again, the power of negotiation—I’m not saying I’m the expert of all experts in this area, I’m not. I’ve been in a lot of great relationships over the last—I’m 37 now, but over the last 10 to 15 years and because of that I’ve been able to work my margins way down. Even when I say margins on my prop, but even larger campaigns that are running with lots of items, we work with a lot of small companies to pay pretty much the exact same amount aside from the fulfillment fees that they would, almost exactly if they were to run externally.

Now, it’s going to be, again, tough depending on who you go to, but they’re paying pretty comparably to that, unless they go to a vendor like a print shop and work with them, they’re not going to get their margins down. Even if this person we’re competing or I was competing against myself, the reason I didn’t go that route is because there are not really a lot of margin to make there either, unless you’re charging some pricing.

I actually worked with local vendors to get their prices way down, so that I can go and compete with the one off with way better quality, way better options, unlimited items you can choose from. We work with almost every company brand out there. Because of that, it is competitive but they’re going to struggle as well in trying to create margin there.

Rob: Yeah, and that’s the challenge of dealing with physical goods and especially custom physical goods is that doing one versus 100 is ridiculously expensive. In fact with Drip, we’d print 100 t-shirts at a time and I believe the cost, I went directly to this printer that I had a good relationship with and it was like high quality print, high quality shirt, $7 or $8 a piece and then we had a poly bag for $1 and then shipping was nothing. It was so inexpensive.

We went and looked at print on demand because I didn’t want to have a box of t-shirts in my garage, per what you’re saying. I believe the print on demand for comparable quality is about $21 or something in that realm. That’s what you’re saying and that’s where if you build a SaaS app, we forget that when you’re building software, unit economics really are much less relevant and obviously you’re in a position where that is perhaps the most. It is a competitive advantage given what you’ve discovered.

I appreciate you coming on the show today, John. I don’t know how helpful it was for you, but it certainly was pretty interesting to me to dig into this world and then to see that connection tie into marketing calls to action because that’s of course been my life for 15 or 20 years.

John: I love Drip. I think when I talked to you originally, I didn’t even know what startup I was doing, but I talked to you about four, five or six years, I don’t remember. You were at Drip, we talked through—I think I wrote our you on Twitter and we ended up talking for a while after that on email. It was super nice that you reached out. I was super surprised that hardly anybody does that. I’m like, I’m going to be that same person. Now, when somebody reaches out to me, I do my best. I can’t do it now but let’s go meet somewhere or talk somewhere or go sit down. Even when I sold my agency, everybody came out of the woodwork that wanted to start an agency and do the same stuff and say like, there’s not really all these secrets.

Today, when you’re telling me, this is helpful or not, it is. I think it’s easier to talk to someone else and get it out to someone else about an echo chamber of yourself when you’re a solo founder is extremely important. It’s been a privilege to even be on here and talk to you.

Rob: Yeah it’s been great and you know as a single founder, I would recommend, I’m sure you’ve heard me beating this drum for years, but mastermind group. Having two other founders who you talk to twice a month, who are in this essentially with you, even though they’re not your spouse, significant other or cofounder but they’re on that journey is something I really recommend for single founders, having been on that journey and felt the loneliness of that.

John: It was heavy in some days.

Rob: I know, I’ve been there. If folks want to keep up with you on Twitter, you are @useslingshot is your company and @howardcjohn and of course useslingshot.com, if they want to check out what you’re building. Thanks again for coming on.

John: I appreciate it. Thanks again.

Rob: Thanks again to John for coming on the show. After we recorded, he actually Slacked me. I believe it was the next day and he said, kind of random, but I was thinking about our conversation the other day and I do think a monthly fee could be at play if it adjusts their fulfillment cost. We charge $350 per item currently and if it allows them to set up unlimited events, since currently we charge $99 per event. It might be interesting to our higher volume clients. That’s the kind of thinking I was trying to get out with John, is there a benefit that you could give them in exchange to have some kind of monthly fee. I think that’s a great idea.

John, I hope you’re able to maybe test that out and certainly you can report back by writing in the questions at startupsfortherestofus.com. You can hit me directly in MicroConf Connect or maybe we’ll follow up with you in six months, bring you back on the show and see how things turned out. Thanks again for showing up this week, the last week of 2020. May 2020 soon be in our collective rear view mirrors, thanks for listening this year. I’ll talk to you next week.

Rob: Welcome back once again to Startups For the Rest of Us. This week’s episode was quite a challenge, I have to admit. The show must go on. Mike Taber and I attempted to record a live episode on MicroConf On Air’s live stream, and we got through it. But the number of technical challenges that were involved was ridiculous, failure after failure. I’m very thankful to editor Josh.  He was able to clean the episode up, that it sounds mostly seamless, although there’s differing audio quality at different times due to streaming and buffering because we were not recording in Squadcast as we normally do.

Obviously, this episode will feel a little different. It is live, and sometimes I believe my AirPods connected and then disconnected so I was on my non-podcast recording mic on and on. I hope you enjoy this episode today where Mike and I ran through our 2021 predictions.

Mike, in the original draft of Star Wars: A New Hope. What was Luke Skywalker’s last name?

Mike: Starkiller.

Rob: Nailed it. In this episode Startups For the Rest of Us, Mike and I talk about our predictions for 2021. This is Startups For the Rest of Us Episode 528.

Rob: Welcome to Startups For the Rest of Us, the podcast of developers, designers, and entrepreneurs be awesome at building launching, and growing startups, whether you’ve built your fifth startup, or are thinking about your first.

I’m Rob.

Mike: And I’m Mike.

Rob: And we’re here to share our experiences to help you avoid the mistakes we’ve made. What is the word this week, sir?

Mike: I have some big news to share. I am officially moving to Canada.

Rob: Are you really?

Mike: No. April Fools’ Day? It’s like March 3790th, but April 1st is going to be right around the corner. I figured I’d spring one on you.

Rob: Oh my gosh. I thought you were serious. I was like, congratulations, sir. All right. What’s going on now? What’s the word this week?

Mike: Not much. I’m just trying to wrap up the end of the year and get things all straightened out for next year. Mostly a lot of paperwork at this point and getting things together to have ready to send off for tax season. It’s just wrapping up last-minute implementations, and sales, and stuff like that.

Rob: Are you going to get a tax refund or are you going to pay?

Mike: I have no idea. I don’t usually find out until March, April timeframe, something like that. I have no idea.

Rob: Cool man. Let’s dive into reviewing our predictions that we made in December of 2018 for 2019. We never did make 2020 predictions, but these are basically for two years ago. You want to run through your head. We each had four predictions, and you can run through yours, and give yourself a rating of 1-5 on the accuracy, five being most accurate, and then I’ll do the same.

Mike: Sure. The first one was that a global downturn would be in full swing and I was off by one year on this. I don’t feel like I was. I don’t feel like I should get credit for it, but at the same time, it was only off by a year. It does feel 2020 is a global downturn. I’d probably only give myself maybe 2 ½ on this one. I’d probably lean towards a lower score, maybe 1 ½ or two instead, just because I was off by the year, but it’s not to say it didn’t come true.

The second one was esports leagues getting a TV channel aside from Twitch. You’d told me that apparently, that already existed so, five.

Rob: You have predicted something that had already happened.

Mike: Yes. It’s like a reverse Nostradamus. My third prediction was something bad would happen with Tesla, SpaceX, or Elon Musk. I have to say, in retrospect, looking back that there were some tweets that his behavior got more and more outrageous. Then he was essentially forced to step down as the chairman of the board by the SEC, and they fined him $20 million or something like that.

Rob: But that happened in September of 2018. We recorded this in December. This was months later. You were predicting something even more.

Mike: Oh, I don’t think that happened until the spring though. It was February of 2019.

Rob: Elon Musk stepped down as CEO and stepped down as chairman and this is September 19th, 2018 in nytimes.com, three months prior. You were predicting something more would happen. I vaguely recall.

Mike: I thought there was some other stuff that came out afterward, in the spring of the following year, where they came out, and fined him, and did a bunch of other stuff, but I could be wrong on that so that’s one.

Rob:  I don’t remember him getting fined after that. Aren’t the stock prices all up? I don’t know, man. I would think this is a mess as well. I just don’t know if anything could happen.

Mike: The article I was looking at said that he had tweeted something out, it was a picture and it said, “4000 Tesla cars loading for an SF in Europe.” He tweeted out on February 19th, 2019. After that his general council resigned and then all this other stuff. There was a bunch of stuff that happened afterward. I give myself a three on that one.

The last one was Amazon will overtake Apple in terms of market cap. I was pretty far off on that one. And that would be a one, maybe a zero. It was within the realm of possibility, but certainly, I don’t think that it happened.

Rob: All right. Let’s see if we can get through my four predictions here that I made again, back in December of 2018 for 2019. The first was that cryptocurrencies would have ups and downs, but there would be no major boom in 2019. That was still bullish long-term. Now, we’re having a big boom in 2020. I would give myself a four on that because there was no boom in 2019, and there is a boom right now. The bullish long-term thing remains to be seen, but I’ll give myself a three or four. I predicted 2019 would be the year of AR, augmented reality, and I would give myself a one or whatever the lowest score is on that. I remember being like no air is going to take off, and there’ll be a headset, and we’ll be doing it.

Like every prediction with technology, it’s probably five years early. There would be a Facebook antitrust suit brought against them. An antitrust suit brought against Facebook. I predicted that for 2019, and there would be a rise of a new social network as a result because they would either get broken up or get handicapped by it. For 2019, I get a zero but for 2020, that just happened two weeks ago for those watching in the future—Facebook antitrust suit. It’s funny how the timing works out. And then I made a bold prediction that Twitter would be acquired, which it did not happen so that is an absolute fail.

You and I have never really had good track records with these. It’s kind of tough, especially the bolder. You want to make it bold so that they’re fun to talk about. The bolder they are, the less likely they’re to happen in the next 12 months. A lot of our predictions, I bet if we went back, a lot of them happened eventually.

Mike: Sure. I don’t think people are going to be predicting things that are just not even within the realm of possibility, but eventually at some point, sure, they could all happen.

Ben: Cool. With that, sir, let’s dive in. Let’s see, we each have five predictions for 2021 and why don’t you kick us off with yours?

Mike: My first prediction is based loosely on current events, but I believe that commercial office space real estate will never recover. That’s going to be a function of these large businesses that have sent everybody home for long stretches of time. Whether initially, they thought it was only going to be a couple of weeks, and then they realized it was several months, and now it’s stretched out in some cases to six months, a year, or two years at this point. They’ve realized that they don’t need those big office spaces. They have these big buildings and places, whether they’ve either purchased it or rented it, and they’d come to find out and realize, hey, we can make this work and we don’t need these spaces. We can have all our workers at home and we can cut a lot of expenses by doing so. In some cases, they’re cutting millions of dollars by being able to do that and they’re making it work. Knowing that they’re able to survive without this office environment, is going to encourage them to continue down that path, and they’re just not going to come back. There are certainly some who are going to, but for the most part, that stuff’s gone away, there’s still going to be a lot of services—real estate for salons, phone repair, and retail, and things like that—but the actual office space stuff, that’s gone. I don’t think it will ever come back.

Rob: Bold prediction, sir. What’s funny is, as you talk and say these companies have realized they don’t need the office space, they can be remote, does it feel to you finally like catching up. What was the bootstrap, the MicroConf community has been doing for a decade? Because we didn’t have the money to hire talent. You couldn’t afford to hire talent in a major city so we always hired remote. It’s like, oh, you’re getting here too now.

Mike: I feel it’s hearkening back to my consulting days where I would go into a company and they’d say, oh, this can’t be done or we can’t do it this way. And I asked the questions, why not? But because I’m an outside person, in some cases, they would just obliterate it as no, that’s completely a non-starter, even though I’ve made it work at other companies. There are other cases where they’re like, oh, that’s a great idea. Why didn’t we think of it? It’s just like, it wasn’t you didn’t think of it or nobody’s talked to you about it. You just didn’t believe it until you actually saw it. That’s more of it than anything else.

Rob: I agree with that. My first prediction is that privacy concerns will continue to transform email marketing back to what it used to be, which was basically, spray-and-pray. Obviously, over the past 15, 20 years, if you think way back to early days of constant contact around 2000, you get some open rates and some click-through rates, but a lot of people didn’t pay attention to them and you just had this list that you sent a broadcast to, and you didn’t do any type of tagging or behavioral based email.

You didn’t write anything specific for different segment, and then over the next 10, 12 years, that became a thing. Marketing automation and the tagging, and everything became a thing as Infusionsoft, Marketo, Pardot, Drip, and then Mailchimp added them in a Weber added out of that type of stuff. But the privacy concerns with tracking pixels in essence, inside emails is becoming more and more of an issue.

This year with hey.com with the Basecamp guys putting out Hey and saying, we’re going to block all tracking pixels. I believe they’re going to shame people in the app who sends tracking pixels. There’s kind of becoming this backlash about it. While certainly I don’t think every email client will do that instantly—much like Not Provided started happening in Google, and much like SSL everywhere became a thing—there’s a movement towards essentially blocking a lot of the good metrics that an email service provider can get from email broadcasts or an email automation. Once you lose a lot of that stuff, you will start to lose the helpfulness of the tagging. It’s not that you can’t have any automations, but it’s going to set email marketing back in five or 10 years.

Mike: My second prediction is related to government regulations on big tech. There’s a couple of different things that will fall under this umbrella for my prediction. This is almost a two-parter and the first one is going to be an over attempt by the government. I’m going to lump a couple of them together like in the United States federal government, the European Union, or maybe even as I doubt a state government would have the ability to do this, but they’re going to attempt to break up at least one of the big tech companies and my money on that would be on Facebook. But Amazon, Apple, and Google are all there on the cross areas, but Facebook is probably the one that would end up being targeted if any of them won.

My second prediction under regulations is that governments are going to actively crack down on the gig economy. Essentially, people who are doing side jobs or they’re stringing together multiple side jobs in order to either make a living or make extra money on the side, those types of people, the government’s going to look at those and say, not only are they very high at risk for getting COVID or other things, but the problem that the government’s going to look at and see is that those people don’t have any healthcare, or health insurance, or have low access to it. They’re not treated well. They’re not paid well and therefore, need to be productive.

The governments are going to crack down on those things and put legislation and regulations in place, and not just talk about it. They’ve talked about it before. They’ve tried to do things like the California state government has tried to do things, but no one’s ever made a concerted effort. And that this year is going to be the year that they do that.

Rob: It’s already happening. I guess there’s a lawsuit against Facebook and Google. Lawsuits from 40 something states and the federal government. Are you piggybacking on that and saying the results of that lawsuit will be that they try to break one of these up.

Mike: Yeah. There’s a difference between suing them and then trying to get them to change their practices. We’re going to go that extra step and they’re going to say, no, what you’ve proposed is not acceptable. We want to break you up. Similar to what they did back with Microsoft, and then Microsoft did all these different things, that never actually came to happen. But they’re going to push for that hard enough that it’s going to get to that point where that’s on the table as a potential resolution, whether it happens or not is a different story but it’s going to get to that point where it is pushed and it is openly on the table and everyone’s talking about it.

Rob: It’s on the table already. The prediction to be bold would be that it will happen. People are already mentioning it. The first news article I read was, “Could they be broken up?” And that’s the first thing that folks are saying. I would also say that Facebook and Google have a suit against them and Apple doesn’t yet. My opinion is Google, Facebook, and Apple are monopolies. Amazon is not a monopoly in anything. Maybe Kindle is the only one I can think of. Can you think of another thing they’re a monopoly in? Because they don’t own enough of the ecommerce market to be a monopoly.

Mike: There are spaces in the ecommerce market where they are doing things that are more monopolistic, such that they own the platform, and they’re allowing people to sell the fulfillment by Amazon. I believe that they’re using some of that data to decide what products that they should offer as white label Amazon products, and they’re using sales data that they shouldn’t. That came out a little bit, it was at least alluded to in some of the congressional testimony this past year, but it was never concretely confirmed one way or the other. There are definitely arguments there.

Rob: I hear that. The white label stuff you’re mentioning is anti-competitive, but I don’t believe it’s monopolistic. To do an antitrust suit and to try to break up a monopoly, you need to find evidence that they are a monopoly. Now, they could be sued, I believe, for anti-competitive practices with the white label stuff, but it’s just such a different game. With Walmart, and Target, and Best Buy, and all these other retailers, Amazon has the majority of the market. They don’t have that 90 something percent penetration that Google does, or Facebook does, or whatever Apple has.

Mike: The monopoly behavior is where they have access and visibility to sales data for their competitors directly in the platform that they’re selling on. That’s where it becomes abusive, a monopoly platform.

Rob: It’s anti-competitive. Monopoly is a very specific definition. It’s where you own almost all the market and no one else can compete. Frankly, Walmart is competing. Shopify stores are competing against Amazon, but anti-competitive is not right what they’re doing, but it’s a different name.

I don’t know that you can bring an antitrust suit against them. It’s just interesting because I’m in the same book boat where Facebook, Amazon, Apple, Google. These are all huge companies, they must be monopolies but I only think three of them are. I don’t think Amazon is, and knowing Bezos, he’s a pretty smart guy to have not done that, that they’ve gotten this big without being a monopoly in any space. They have Amazon AWS and the Google app engine, and Azure are both good solid competitors of that. Again, Kindle is the one I can think of where they just own the vast majority of that market but anyway, a good prediction, sir.

My second prediction is that in 2021, in-person events will happen but adjustments will be put in place, whether it’s social distancing early in the year, or masks being warrants—just all this stuff that we’ve seen around. Then as we get towards the end of the year, less and less of that stuff will be needed.

Mike: Cool. My third prediction is related to healthcare. There’s going to be a major breakthrough in nanotechnology. Obviously, there’s been a lot of advances with the COVID vaccine but this is going to get to the point where it could be something like an implanted chipset that is intended to go mainstream. I don’t believe it would go mainstream next year but I do think that somebody is going to come out with something where the intention is to do that. It might also be something that is much more, I’ll say specialized. It could be an artificial organ, an artificial one that has not been developed yet. Maybe pieces that would augment your liver, or maybe a replacement kidney, something along those lines.

It could also just be something that’s a little bit more simplistic that is for either monitoring or diagnosing ongoing bio functions. It could be used for surgery or for postop care or something along those lines. In those cases, it obviously wouldn’t be mainstream so much as it would be specifically for hospitals or surgery centers where they can just put this in you and implant it and then use it to assist them with whatever it is that they’re doing. People will be terrified by this whole idea because they’ll be like, oh my God, Bill Gates is trying to microchip us.

Rob: Only some people will be terrified by it and there’ll be people who are totally willing to do it. I like that prediction. We got a prediction from the chat, from Ken Wallace, he says, be bold. Predict that 2021 is the year of universal basic income, UBI, Mike. I don’t think it’ll be a thing in the US. I can totally imagine some countries in Europe giving it a try in 2021.

Mike: Yeah, I definitely could as well. It’d be a long time before something like that happens in the US but Europe is definitely a lot more progressive and from that standpoint, I could see them doing them.

Rob: I’m not read up enough on UBI to have too much intelligent thought on it. But my third prediction is that funding in the startup space in general will—and especially in the bootstrapper space—will continue. It’s de-stigmatization as more founder-friendly options continue to show up and continue to expand. It’s interesting. When was it that I predicted it, but it was something about that there would be more bootstrappers raising funding. This was three years ago and it was before I started TinySeed, I’m pretty sure.

I was just seeing that Indie.vc was around and then revenue-based financing started happening with the SaaS capitals and the Ladder capitals. It just made sense that more people who maybe wouldn’t have wanted to go venture track five years ago would potentially want to do the falsity fund strapping route, or just the raise one small round to go to profitability or do revenue-based financing, or just do the non-venture track, any of those options, it’s not binary anymore. I can bootstrap, I can do one round, I can take money from TinySeed, I can take money from Indie.vc, I can do revenue-based financingc—if I get to the point where that makes sense—or I can take venture, this whole buffet of options.

What it feels to me, it hasn’t happened with everyone, but there is a de-stigmatization of funding, whereas funding used to come with a lot of strings attached—loss of control, can’t sell my company, I got kicked out as a CEO, I have to put up with these venture capitalists breathing down my neck, and this board, and blah, blah, blah—and all those things. Poof. If you want to take funding from certain people under certain circumstances, none of that exists anymore. There are different constraints but the optionality that founders have especially bootstrap SaaS founders have these days are tremendous. 2021 basically continues that the stigmatization process.

Mike: I would agree with that. That’s a good prediction. My fourth prediction has to do with movies. Specifically, the Marvel cinematic universe is going to somewhat fall off a cliff. It’ll be subtle at first and then people are just going to be like, yeah, I’m not into this. The reason specifically for that is that they’re getting into the territory of going in and pulling out some of their second-tier characters to draw them to the forefront, which I agree with that as a general strategy and thing that they should do because there are lots of characters that are probably less popular. But because they’re less popular and people haven’t heard of them, there’s going to be a lot less interest in those.

Iron Man is an obvious draw but there’s a lot of these other characters that they’re pulling out like Dr. Strange where some people like, I don’t even really know who that is, I’ve never heard of that person before, even if they’re peripherally involved or knowledgeable about comic books and things like that. I just think that a lot of those characters are not going to be nearly as big a draw and it could result in them scaling back what they’re going to be doing in the future.

I’m a little, I don’t want to say concerned, but I do think that what they’re going to find is that following is ramped-up for the longest time until the last couple of Avengers movies, and then it’s going to fall off a cliff, and they’re not going to quite know what to do with it. They released the new Star Wars solo movie and then it didn’t do as well as they had hoped it would or thought it would, and then they’re going to pull back on the reins.

Rob: That’s a bold prediction and I hope that doesn’t happen—

Mike: I hope it doesn’t either.

Rob: —but it is a prediction. That’s the thing, man. One example is Moon Knight, anyone who didn’t read the comic was like, Moon Knight? Who’s that? But he’s slated for a movie or a show or something coming up. I remember, when they did Iron Man and Captain America, Iron Man always had a comic but he really was not prominent—he was fine—but he was not that prominent the way he is today where it’s like, no, Iron Man is one of the leaders of the Avengers, and even Captain America. I remember I was like, this movie is going to be terrible, and then I saw it and I was like, I cannot believe how good that movie was. I can’t believe that they made such an amazing, compelling story from that character.

I hear you. I appreciate the boldness of your prediction. I hope it doesn’t come true. I know they’re already doing several Marvel TV shows in Essence or streaming shows on Disney+, and that’s basically what Star Wars has gone through. If you heard, they did 10 Star Wars announcements a couple of days ago, or it was last week, I guess, and I believe seven or eight of them are essentially streaming—eight seasons of streaming shows and only two of them are films, which is fascinating.

Mike: It’s fascinating, but also, them hedging their bets and in such a way where they’re not betting everything on this massive movie offering, and they’re spending hundreds of millions of dollars, and they may ultimately spend hundreds of millions of dollars on a particular storyline, but by doing it through their Disney+ platform. That’s the thing. They’ve got all these different channels and ways to distribute it where they can put it as a TV show—it’s less effort, less money, less production costs, all these other things that go into it—and then they can essentially gauge the margin market but also build interest in that storyline.

When it gets to a certain point and they can say, oh, this justifies having an actual movie, now, we’ve amassed the interest. As opposed to they come out with a new movie for this character nobody’s ever heard of—it’ll be like John Carter. They’re like, oh, wait a second. What? Who’s John Carter? What are you talking about? Unless you’ve ever read those books, you would have no idea and it’s not an interesting story.

Rob: I hear you there, sir. Speaking of that, we’ll get back to startups in a second. Are you watching Amanda Lauren?

Mike: Yeah.

Rob: Do you like it?

Mike: Yeah. That’s good so far.

Rob: It’s really good and I’m stoked on it. Alright, my next prediction. My fourth prediction is that VR will become mainstream.

Mike: You just ripped that off from one of the listeners.

Rob: I got an Oculus Quest 2 about three weeks ago and it is a consumer level, it’s about a $300 headset, you don’t need a computer to run it. It just connects to your wifi, and then you get on your mobile phone or your iPad. It is amazing. The kids love it. It $300 and it just works. You just plug it in and it works. I mean, you don’t have to plug it in, it’s completely wireless, and it’s such a leap and a bound from, oh, I need to go out and get a windows PC that’s all beefy.

Frankly, we bought one about a month ago, and within two weeks Cherry’s like, oh, we should have two because you can do a bunch of cooperative games with them and stuff. I can easily see us just picking one up every quarter next year because a lot of the co-op games go up to four people, and I’m not saying Oculus—it’s the only one I’ve owned. I’m not comparing it to other things. I’m just saying if they can build a headset this good for $300 and sell it for $300, where are we headed next? Where is the $199, $99 headset? The experience of it is amazing. It truly is game-changing. Certainly, if you’ve never done VR, it’s a trip, and even if you have done it to sit and be able to play it for 60, 90 minutes and go into the VR world is, it’s like we’ve seen in the movies for 30 or 40 years, but 2021 is the year.

Mike: Tube-related anecdotes ones. I remember seeing a VR headset from 20 years ago. It had this like little hockey puck thing that you had to hold, and you could move your head up, and you can see everything. It was like these little LCD screens in front of you, but this was back—it was literally 1996, something like that. It was ridiculously early, not nearly as good as what they have today.

But the other somewhat related anecdote is when I was a kid, I actually wanted to be a science fiction writer. One of the ideas that I’d come up with for a storyline was in the future, there’s a future where people are not fighting wars anymore. They’re basically fighting with these virtual reality simulators where they’re almost in this giant robot or something like that, and they’re battling each other for control of different territories, but they are augmented in such a way that it becomes real. When you shoot at somebody, it’s not just a laser blast. There are physical sensors and stuff built into the suits stuff that the people had to wear, and you could literally take physical damage from somebody shooting you inside of the “simulation”. Then there are backstories where people do nefarious things and sabotage other people’s suits and stuff like that. I never really fully published anything or came out with it but that was the idea I had a long time ago.

Rob: I like that kind of stuff. Alright. Oh, that was the VR Oculus, so we’re on to your fifth and final prediction for 2021. While we do that, it looks like we have a little more in the chat. Ken Wallace said, my Mandalorian prediction, Grogu goes to the dark side. Oh, is this a spoiler? Grogu goes to the dark side but comes back after destroying the Darksaber. Zander’s note, I still refuse to call him by his name.

We have a prediction, he says, next JS GraphQL and Tailwind CSS will become extremely popular. I think that’s already happened, hasn’t it? They all seem super popular to me. I keep hearing about them, but I guess it depends on what we mean by super popular.

Mike: If they get websites, we know they’re going to hold.

Rob: Right. Cool. Can I have in here your fifth and final?

Mike: Yeah. My fifth and final prediction here is that we will discover definitive proof of extraterrestrial life. I don’t know what exact form that’s going to take, whether it’s going to be Mars or some comet, or an asteroid going by, but that’s the prediction here. There’s a lot of scientific discovery going on right now where people are trying to pull back that information from outer space. They’ve even recently sent a rocket out to an asteroid that was going by planet Earth and brought some of the materials back. It took three or four years or something like that to get it. I don’t know if they’ve analyzed it yet or not but they do have other ongoing things going on. We’re going to get something.

Now, does that mean that we’re going to see proof of little green men? No, that’s not necessarily the case. It could very well just be single-celled things. But the idea there is, it’s not just particles from Earth that ended up in outer space because they were on a rocket or something like that or a spacecraft, and then we find them elsewhere, it’s that they are actually extraterrestrial in origin, so off of anywhere, whether it’s Mars or the moon, something like that,

Rob: That is a bold prediction, sir. I like that.

Mike: I had to go with one that was off the wall. I felt like if you’re going to do predictions, you may as well go all in at some point.

Rob: It’s Babe Ruth colonist shot. My fifth and final prediction is that in terms of the world and COVID, everyone’s predicting, oh, it’s the middle of the year, and then not to the end of the year. I’ve heard people say like, it’s going to be five years until everyone feels back to normal, or the end of 2022 until things are back. We’re going to get back to normal a lot faster than we think, at least within our home countries. I know traveling internationally is going to be different because different countries are handling things. But as vaccines roll out, as we get herd immunity, I think the cases are going to drop faster. I also think people’s comfort level and a lot of people’s desire just to not be cooped up and to go out and go to in-person events or go to movies or go to concerts.

The desire to go to those things is there, and there’s pent-up demand now. The moment—I know several people—the moment they get cleared, when they have that second vaccination, they want to go and do all the things. I’m probably one of them. I’m not an extrovert and yet I want to go work at coffee shops again. Minnesota opened up for a while and we’re back closed again, but we were doing those things, but I still really miss just being able to get out. It’s going to happen fast. I’m an eternal optimist on this front, actually.

Mike: You’re doing a lot of projection there because I’m on the other side of the spectrum, I almost got a t-shirt that literally said when this is over, I still don’t want to see some of you.

Rob: I have that 2020, 0 out of 10, would not recommend a shirt with the zero star.

Mike: I read the 2020 Dumpster Fire t-shirt.

Rob: Yeah. I have a few of them. Well, man, those are our predictions. Can we get to revisit those in just about a year?

Mike: And see if any of us gets above three, four?

Rob: Yeah. If we get more than one, three, that’s probably the goal for next time. The theme music that we couldn’t play today, but it was edited in post, is an excerpt from We’re Outta Control by MoOt, and that’s used under Creative Commons. Obviously, you can search for Startups in any podcatcher and subscribe to us, and always head to startupsfortherestofus.com for a full transcript of each episode. After this is cleaned up, it’s going to be nice and tight. Thank you so much for listening. Mike and I will see you next time.

Mike: Take it easy.

Rob: Welcome to this week’s episode of ‎Startups For the Rest of Us. I’m your host, Rob Walling. It’s Episode 527, where Courtland Allen from Indie Hackers joins me. We talk about moving from agency to SaaS. We talk about equity splits. We talk about the best cities for bootstrappers and more.

Before we dive into that conversation, ‎Startups For the Rest of Us has 890 worldwide ratings across 48 countries. Our most recent review is titled Inspirational. “Longtime listener, I run a portfolio of SaaS apps, three built from scratch, and one acquired recently. I learned a ton from this podcast. Very grateful.” That’s Danielle0412 from the UK. Thanks so much for that review, Danielle. If you haven’t left us a review or even just a rating, would appreciate a five-star rating. I’d love to push past that 900 worldwide rating mark on our way to 1000 in 2021.

Thanks again for joining me. Let’s dive into our listener questions that I answer with Courtland Allen. If you haven’t heard of Courtland, you should check out indiehackers.com. It’s a great online community for people building online businesses in order to improve their life. There’s a range of SaaS and info products and all types of things, indiehackers.com, as well as the Indie Hackers podcast, Courtland is the host of that. It’s an excellent interview and topical new show that many of us listen to every week. I’m a fan. Let’s dive right into our first listener question.

Courtland Allen, welcome back to ‎Startups For the Rest of Us.

Courtland: Rob, thanks for having me.

Rob: It’s always great to have you, Sir. I’m excited to talk through some listener questions today. We have a nice stable of things ranging from splitting branding, to business structure, to co-founder equity, stair-stepping, all that stuff. Are you ready to dive in?

Courtland: Yea, I’m ready to. Sounds like a lot of good stuff.

Rob: As usual, we always start with voicemails at the top of the stack. We’ll roll our first question from Dustin Overbeck, here.

Dustin: Hey Rob, my name is Dustin Overbeck and I run a web design agency called Town Web. We are a web design and hosting agency for municipalities all across the United States. I’ve been running this for 13 years. We have more than 550 customers, and we’re in about 35 different States. I’m getting ready to build a SaaS app that would be sold specifically to the same customers that I currently have for the web design and hosting part of things, but also to other municipalities who are not currently web design customers of ours.

I’m curious to know if you have any input on other web design agencies that entered the SaaS space because my question is more about branding and business structure. When I’m looking at the numbers for the SaaS app and the price points that we could sell to in the market that we can go after, I feel that this SaaS business could be 10-15 times bigger than what we currently have for the web design and the hosting side of things. I’m leaning towards, yes, we should have a separate brand for the SaaS product. I’m curious if you know of other agencies who have done that same thing, or if they entered the market with the same name as their agency. Although we do have a good brand known in the municipal web design industry, the brand that we can come out with for the SaaS app could actually be more exciting and maybe even more memorable to those potential clients that we can go after.

The other question is about business structure. If it’s going to be as a separate brand, should it be a completely separate business? I know there are inherent costs when you have two separate businesses because you’re now keeping track of two different books, two different tax filings. But if the second business could be 10-15 times bigger than the first business, is it worthwhile to have separate businesses? Thank you for any input.

Rob: Thanks for that question, Dustin. Courtland, you have thoughts?

Courtland: I do. I’m looking at his website now, Town Web. This is pretty cool. This whole idea of having an agency to build websites for the super-specific niche of municipal websites. This question really is about branding and this way he phrased it—should we start a new brand or go with their old brand. I would separate your identity from your brand. Their name and their logo are what I would classify as their identity. It’s Town Web, this cool American eagle looking thing going on next to it. But then your brand is more so your reputation with your customers. What do your customers actually think about you? You can’t change your reputation except slowly over time, but you can’t get rid of it either. You can get rid of your identity and then people can’t connect your identity to your reputation, and that’s bad if you have a good reputation.

When I look at this, on one hand, you could change your identity. You could have a completely different logo and name, but preserve your reputation by simply contacting your customers through sales. I presume when they do this new SaaS tool, they have 550 customers for their previous agency. They could just email these people from their previous identity, using their old email address, and say, hey, this is so-and-so from Town Web, the agency you’ve come to know and love. Then boom, your reputation is cemented because it’s already there. They already know you. You can say, we’re working on this new thing, what do you think, blah, blah, blah. Do you want to hop on a call? You’ve got your reputation preserved, which is your brand, and you can transfer that to your new identity with these few customers that you start with.

Even if his new business ends up being 10-15 times bigger than his old business, which is a pretty bold prediction, you’re still going to start probably by doing things that don’t scale. You’re still going to start with these sales calls and these cold emails probably, and they’re probably going to be towards your old customers. It’s worth preserving a reputation there and just making sure they know who you are and getting a good start there.

Rob: I like the way you’re thinking about it. The way I think about it is 37signals in Basecamp, that’s probably the best example. 37signals was their design agency, it was the company name because Signal v. Noise was their blog name, and then Basecamp was the product. And you knew that 37signals built Basecamp, and you trusted 37signals because you’d read their blog, or their books, or whatever.

That’s how I think about it, which is what you’re saying here is you have Town Web, it has a brand, it has an identity. Personally, in their shoes, I would not name the SaaS app Town Web. I would have them be very separate. He didn’t specify what it was going to be, but it’s XYZ Tool by Town Web. You can easily have that which is where you can borrow your brand equity. It’s much like the state of independence State of Independence Saas report by MicroConf.

We lend MicroConf branding to this new thing, but it still is able to have its own identity. Because to your point, you’re going to start with older, existing customers, and so having that brand is important, having the relationship. When you get up to new customers, I agree with Dustin when he says, we could do something more exciting. We could come up with a cool name and a cool logo and even develop its own identity.

Personally, if I were doing this, maybe you launch 1, 2, 3 SaaS apps. Now, you need three different SaaS apps over the course of 10 or 20 years. You don’t want them tied to the agency. If it becomes literally 10-15 times the size, since SaaS apps by nature are more profitable than agencies, my guess is much 37signals did, much like Mailchimp did—because they were an agency before they launched email marketing software—they wound up shutting theirs down. I’m sure that’s not Dustin’s plan right now. And I’m sure he wouldn’t go into it saying, I’m going to shut it down. Shut down, or sell it, or somehow walk away from it. Because if you get a SaaS app doing millions of dollars a year, suddenly things are really annoyances. I’ve been there. I’ve had many businesses and when one gets big it’s, oh, this is what I should be focusing on. With that in mind, I would hate for the two to be coupled to the point where you lose optionality.

Courtland: Another business that comes to mind here is Wildbit, which also started as an agency, and now they’ve got a host of different products. Go to wildbit.com and see, here’s the company that owns the different products. But you can also go directly to those products. Each of which has its own unique brand, it could get very confusing. Town Web, it is an agency, but then they also have a product called Town Web. Now it’s two different things. Now they’re stuck in the situation where they have one website that’s trying to cater to two different customers—one case of product and one case of service. Then, you’re also right, what if they want to launch more SaaS businesses in the future, it’s just going to be confusing. I like the idea of having separate brands and you can just manually transfer the reputation from your first brand to your next brand by getting in contact with your existing customers.

Rob: Exactly. Likewise, his second question was about business entities and whether you should separate them. Look, if you were not a super legitimate web agency that had the budget to do it, in the early days you could say maybe we keep them under the same corporate umbrella, and maybe just save on the $500 or $1000 a year, maybe it’s $2000 a year of bookkeeping and tax filings. But given that you are a legitimate business from the start, if I were in Dustin’s shoes, it would absolutely be a separate entity.

Whether the SaaS product, whether that’s an LLC or an S corp, C corp, whatever you want to do, I would form this thing, I would keep separate books, I would put a trunk of money into it, essentially angel investing. Whether Town Web puts that money in, or you put that money in personally, give it enough budget that you can build and support it. You can always fund it more later, but you maintain that because that is essential if it goes under, you can then have losses against it, which you should be able to write off. If you ever decide to sell it someday, I know that’s the last thing you’re probably thinking about, it should be separate. Because if it’s tied in expenses, and credit cards and bank accounts are all tied into an agency, it’s just a mess.

While it feels maybe a little overkill in the early days—I got to have a second tax filing and yes, you do have to probably go through Stripe Atlas to get a separate entity—there are some duplicate things I just don’t think you’re going to regret. You could always merge them later. It’s easier to merge things than it is to pull them apart. In fact, I went down this road. I had an umbrella company now called Start Small, LLC and it owned several small products that I owned and I would just slowly pile them on.

It owned my half of MicroConf and my portion of all these things, and then Drip initially launched under there. As Drip got bigger and bigger and started employing all of us and becoming just a more legitimate company, I was like, this should be its own Corp. I eventually did have to fork it out basically and pull it out of this LLC that owned all this other stuff. It was painful. It wasn’t totally undoable, it turns out it was the right decision because within a year we got the acquisition offer. We sold it. It would have been an absolute nightmare to try to go through a sale with shared books, shared expenses, because an acquirer wants a clean break. They want to know that this Corp owns all the IP and that everything is clean. Thank you for the question, Dustin. I really appreciate that.

Our next question is from an anonymous question asker. It’s about co-founding an app, what percent equity split he should think about. He says, “My business coach came to me with an idea for a SaaS app that he would like me to build and handle the technical side. He would handle the marketing side of things. We would be bootstrapping so no initial investments. I offered that I would build the app, handle the features, maintenance, upgrades, and support for 40% of profits and 40% of any future sale of the web app. Is this a fair number? Bouncing this off a friend, they said it might be too much and they were thinking it should be more like 10%.

I usually recommend co-founders split things 50/50 when I’m asked this question, but my business coach brought the idea to me and he’s approaching retirement, so I reduced it to 40%. I’m not sure I would want to spend the time to develop it for less than 40% equity since I could use the same time to work on my own SaaS that I’m currently building. My business coach has no experience with SaaS or web apps so I expect to bring a lot of knowledge on the product side, on the technical side, and that will even cover some of the marketing optimization, SEO, building an email list, et cetera. In my opinion, this has a pretty good chance of success. The business coach knows the founder of a similar SaaS in another niche that has 200 plus users at $50, a month and is still growing.” So that’s like $10,000 MRR. “Thanks for all the great content over the years.”

Courtland, what do you think?

Courtland: Tricky topic. I’ve had some bad co-founder fights in my past, over equity actually. I think a lot of it really comes down to not exactly the number that you named, but the process that you use to get to that number, and how much you and your co-founder on the same page about that. It can be easy to throw a number out, it can be easy to say, oh, let’s be 50/50 now. But if you haven’t thought about why you’re choosing that and you haven’t specifically agreed with your co-founders on why you’re choosing that, later on, it opens up just a lot of space for unhappiness, disputes, and misunderstanding. If it comes down to that, you want to be able to say, look, this is what we decided on and here’s exactly why we’re changing this now.

The first thing I would do rather than just say it needs to be 50/50, maybe a small discount because it’s the other person’s idea, I would say the way you split your equity should be based less on equality and everybody getting the same and more on contribution. If your level of contribution later on is different, it might arouse some resentment and some tough conversations down the road. Some of the factors that are important to me like your level of experience and effectiveness, and how much time you plan to spend on this, it sounds like the question asked to who has another SaaS business that they’re going to be splitting their time between. Does their partner also have another thing going on? Are they going to be full-time on this? That’s a huge factor.

Joining later means taking on a little bit less risk, which means that can affect your equity. The more risks you’re taking on, the more equity you should probably get. Contributing to the idea means you’re at more risk because it’s your idea and you can’t go to someone else. Writing code is a pretty effective major thing to do. You should think about what is the other person going to do in their role, and how’s that going to shift over time? These are things that are difficult to predict.

What I would do is I would start by sitting down with my potential co-founder and saying let’s come up with some framework that takes as many of these factors into account as we can possibly predict, and then agree on that framework. And then have a completely separate conversation after that, where you plug in the values and the numbers into this framework and you see what that spits out.

Rob: You want to know their contributions in a number of different ways before you talk about equity.

Courtland: Exactly. Because there’s so many different ways that things can change over time. Some of that is protected by vesting your equity but a lot of it isn’t. If somebody decides that they’re going to start working only half time instead of full time, that’s something that happens quite often due to life circumstances. How do you want to play that in terms of equity, if your equity was decided with the assumption that you would both be full-time on this thing, plus a range of other different activities? It’s good to just be open-minded and open-eyed about this stuff and try to, as best as you can, look into the future and predict what might go wrong and how we can pre-handle it so that when it actually happens, it’s not this big surprise, and we don’t have to figure out what we’re going to do from scratch.

Rob: I like that you brought up vesting, for sure. I think that’s the number one thing I would have is that both of you should be vesting such that if one person walks away, they don’t take their equity. I liked your point about full-time that if you are both going to be full-time, which doesn’t sound like you are, but if you’re planning to be 40 hours a week each, if someone drops to 30 or 20 hours, if you’re working at a startup and you have stock options, typically you stop vesting when you go part-time. That’s something to think about.

The biggest question I have is you’re bringing the technical side and you’re bringing marketing, SEO, building an email list—a bunch of the marketing side. What is your co-founder bringing aside from an idea? If he’s approaching retirement, as you say, how hard is he going to work on this and for how long? There are maybe yellow flags in my mind, are you both committed? That goes back to your questions, Courtland, of have you talked this through? Have you sat down and said, you’re going to retire in two years, are you going to work on this after this? Or is your plan that you want to build this up and sell it in two years? In that case, what should our vesting schedule look like? Should I maybe take on more of it? Maybe this is more of a side project for you, or is it a side project for me? Everything you’ve raised, it fits into that.

He had a sentence early on that says, I would do maintenance, upgrades, and support for 40% of profits and 40% of future sales, the future sale of the web app. We should just be doing equity. Why wouldn’t you just take equity, which in essence would be profits and sales? You can have phantom equity and all that but if you were giving this much to it, I’m just not sure if that’s the right approach. But later on, he does mention equity, which is easier to vest than phantom equity that may be an aside. But you’re right, there’s a lot of details here that make it an it-depends scenario.

Courtland: When you’re working with a co-founder, this shouldn’t be a super tough conversation to have. If things go poorly, there are things that are stressful later on, there’s going to be a lot of other harder conversations to have when things are on the line. At this point, if you only have an idea, and you haven’t gotten started, really nothing’s on the line. No one’s sacrificed a lot. Ideally, when you work with a co-founder, it’s somebody you’ve worked together with, how you deal with conflict resolution, you have shared values, and you want to test that stuff as early as possible. Presumably, this person hasn’t worked with a co-founder before, but having this conversation upfront and just being straightforward about it, it’s a good test because if this conversation goes poorly when there’s nothing on the line, maybe this isn’t someone you want to work with.

Rob: As the developer, your work is front-loaded. It’s easy for the two of you to have a conversation and for you to go spend four, five, or six months building a product only to come back and find your co-founder has lost interest. Or your co-founder maybe can’t deliver on what they promised. Maybe they don’t have the connections and maybe they can’t do sales. What is he bringing to the table? And what can he be doing hour for hour, if you want an even split or close to it, while you’re writing code? Because we know there’s a lot of things you can do. You can be out having validation conversations, customer development, you can have input on the product, you can be taking pre-sales, you can be writing articles, you can do marketing, landing pages. I know you said you have most of that knowledge, but having an idea and being a subject matter expert in a space is fine, but that’s not even table stakes to me for an even split if you’re going to go spend hundreds of hours building and marketing a product.

Courtland: Agreed. It’s one of those things where early on having the idea seems very important because there’s literally nothing else. You might think, oh, this person should get 60%. But the more sweat equity you put into things, the longer you sit there and toil, and write code, and work as the months and years pass, the value of the work that you’re doing increases relative to the value of that idea. If this person isn’t actually contributing a lot in that domain, which so far isn’t necessarily proven that they have, or even can, whereas it’s probably pretty proven that you are a developer who can build things, you were just taking on a lot of risk as a developer in that situation.

Rob: Thanks again for the question. I hope our thoughts were helpful. The next question is from Franco and he’s talking about the stair-step approach, the first step. He says, “Thank you for all your awesome content. It helps motivate me and helps me power through even at the beginnings of a path to a software centered business/life.

My question for you is where should I look when trying to take the first step to make something the world can use and appreciate. Thankfully, the SaaS sector has been growing and gaining traction, but for those of us who are beginning from scratch in the industry, it’s become increasingly hard to take that first step, mainly in my own experience because every niche has been saturated and the expertise needed to start something has increased as well. Hopefully I’m wrong and you can tell me or anyone who is in the same place, where or how we should approach this problem. Thanks for the podcast. I’ve been listening for about half a year and I even enjoy the old episodes from years ago.”

Thanks for the question, Franco. I’ll just add one sentence here. I don’t think every niche is saturated. I do think the smaller and smaller you go, there are opportunities. I wrote an entire book on this. Courtland, what are your thoughts for Franco?

Courtland: I liked that you said that because the entire idea of there being a staircase and Rob, you’re the expert on this, is that the first step is the smallest step. It’s the easiest step. You should always be thinking, what is the smallest thing that I can do to get started, to get my momentum going, to get a couple of wins under my belt, and then parlay those wins and the advantages you accrue to take the next step. When you’re looking at it from that point of view, it doesn’t matter if a space is saturated because if you’re looking at it that way, you’re looking at the tenth or the eleventh step on the staircase. You’re trying to be focusing on the first step where you pick such a tiny niche, or such a very specific problem, or something that’s so straightforward that it doesn’t really matter that there are other bigger players in the space later on.

In my opinion, if you were in a particular situation or you’re not even sure what industry you want to go into, what problem you’re going to solve, one of the best steps you can take is just to do some research. Take a look at what’s out there, what problems people have. I, myself, favor an approach where you look at the intersection of things that you’re interested in and things where people have valuable problems to solve as evidenced by the fact that people are spending a lot of money there.

I have a friend who started a business in the recruiting space. She was very passionate about applying for jobs to become a software engineer, and how terrible that was, and how fake the process was. Something that was recently on her mind and she cared a lot about, and she thought she could do a much better job. It was an industry where companies spent a lot of money on recruiters, on hiring software engineers, on all sorts of different activities there. It satisfied both requirements. It took her a month of just looking around at different things to even just figure out that’s the problem that she cared about, and that’s where she started. She started off by writing.

Writing isn’t that competitive, lots of people are writing. But it doesn’t matter how saturated the writing space is, people will still share your blog posts on Twitter if they’re well-written. They can still be indexed on Google. I would look toward picking a problem first. Then I would look toward maybe even doing something very lightweight, maybe info-related or content-related, where it doesn’t matter what the competitors are doing, and where you can have some real quick wins before I worry too much about jumping straight towards building a SaaS in a competitive space.

Rob: Yes. This is where I invoke the ‎Startups For the Rest of Us drinking game. We all do a shot because I say a stair-step approach to bootstrapping, which Franco brought up. He raised the issue of where I should look. Obviously, these one-time sale products with a single sales channel—like a WordPress Plugin, or a mobile app, or Shopify add-on, or an info product, as you said, or any type of app store, makes it ThemeForest—any of these things make it pretty easy to get started with not a ton of marketing knowledge needed. Imagine if you launch a WordPress theme on ThemeForest, or you do adopt a WordPress plugin, or you already launched something, every niche is not saturated.

Saturated is even a strong word because you can always compete, but maybe when you’re still playing high school ball right now, and the miners in the majors, people are just better at what they’re doing. They have more experience, they have more budget, and they have more history doing it.

I do think that you want to take more of the Start Small, Stay Small approach, which is to look at smaller niches that are underserved and just cut your teeth at those, and you build up experience, you build up a little bit of revenue, you build up your skill set, you build that tool belt, and then you can go essentially build off from there. I do think a lot of people make the mistake of wanting to build a SaaS app which is awesome then we all aspire to do that, but trying to do that as your first step is a real challenge.

Frankly, if you know a programming language, if you’re a mobile developer, I would probably start thinking about launching something in mobile. But if you’re PHP or Pro, I’d probably lean towards WordPress. When you look at all the B2B app stores and just do a Google search for them—there’s Salesforce, and Shopify, and I don’t know, there’s got to be dozens of others, I know there are Photoshop add-ons—you can do just on and on and on. It’s just finding something and picking it and taking a shot.

Courtland: I like some of the stories that have inspired me recently from just founders that I’ve talked to on Indie Hackers. I talked to Tara Reed who is in the education space. She’s been teaching founders to build businesses without code. Her path for getting started was really simple. She gave a talk somewhere where she talked about how an app that she was building didn’t use any code. People are interested and they’re like, how does she do it? She said, oh, I’ll teach you, just pay me $900 and I’ll let you know. She got 10 students who paid her, and she taught them, and then put out the call, hey, it went really well. I could teach more people. And she had 50 or 60 students sign up for that one. Then after that, she grew by reaching out to influencers in the space and doing Instagram takeover ads of their Instagram pages, or Twitter takeovers. You’re just going to pay them to advertise to their audiences.

Again, she just started very small. She wasn’t like, I need to go up against Lambda School or any other code school, day one with a slick website. It was just one-on-one sales, a very small number of students. Almost any education business can start that way if you’re willing to charge enough for what you’re teaching.

Maybe one other example would be Kristy Lawrence, who did start with a SaaS app called Plan. She spent eight or nine months developing relationships with influencers on Instagram—talking to them, getting to know what their challenges were, getting to know what their problems were, getting to know what would be valuable for them in the space, commiserating because she was an influencer herself, and sharing tips and tricks.

By the time she had her SaaS built, she had a pretty long list of people who not only would be her users, but who could promote it to their followers, and their audiences, and could help sell it. She ended up making $10,000 or $20,000 in the first week of her SaaS business existing. But that’s because she didn’t start by just starting to code. She started by talking to lots of people one-on-one, which is something you can always do regardless of how saturated the space is.

Rob: I love it. And just between you and I, since no one else is listening, I’ve started work on another book. Have you ever written a book? It is so painful.

Courtland: I haven’t, but Stripe keeps trying to get me to write one with Stripe Press.

Rob: It never gets easier. This is the fourth book I’m writing. Sherry and I had a bunch of podcasts. Essentially, she took an inroad into the second so it’s 3 ½ books, but it’s still not getting easier. The point of that is, though I obviously have a whole section on finding an idea. It’s looking for your advantages and it’s solving a problem, which is what you’ve just said. I have this huge list of things, which is to scratch your own niche. That’s what most people quote and it’s become famous because Basecamp said it for years. But then that went away because we all scratched our own niches. It’s not that it doesn’t exist, but it’s how many bug tracking tools, how many project management tools do we need.

I have all these other startups that I’ve seen, whether it’s through TinySeed, or MicroConf, or hearing on Indie Hackers, or an interview on this show. People encounter a problem with their day job. People see a problem of a spouse, or a relative, or a colleague. People have a poor customer experience and realize they want to build an app that makes it better. People find a problem online by going to a core thread or being in Facebook groups, you can translate an existing idea to a new niche.

There’s proposal software, but there’s no proposal software for designers, or there’s no proposal software for this or that, so just niche something down. You can find a large space with a hated competitor like Drifted with Infusionsoft and Xero did with QuickBooks. You can build on your, if you have an audience reputation, build on that. If you have a good network build on that, so on and on. Any of these is almost individually a thought experiment.

Each of those things, I just rattled off. Again, those will be in a book out sometime next year, maybe, but there are so many ways. Each of them, there’s no path. There’s no blueprint for this part. There’s no one, two, three-step. Once you get to product-market fit, and you have customers, and you start having channels at work, it is extremely repeatable. Usually, there is a pretty solid blueprint of how to go from there up, how to go from there, to a million, to 10 million, or whatever.

There are all these paths and everything. But in these early days, it’s much more you have a compass, not a map, and so you’re just kind of wandering and trying to take in thoughts and see what resonates with you and see there’s a product founder fit and there are all these things. But there are a lot of ways to get there. Don’t expect that anyone else’s approach will definitely work for you. Look at a lot of different approaches.

Courtland, I like that you brought up the folks that you interviewed on Indie Hackers because those are just two examples of people who kind of found their way. Maybe it sounds like they almost did it accidentally, maybe they didn’t. They just kind of took it one step at a time in these very small increments and built it into something pretty impressive.

Courtland: I’m a big fan of being very deliberate about ideation. It’s a very tall order to sit around and wait for inspiration to strike you in the shower. But if you’re going through the world, and you’re deliberately looking for problems, and you get your antenna up. Whenever you see somebody complain about something, wherever you see somebody pay for something, whenever you see somebody asking for something, you evaluate that problem. You’re just going to get a lot more sort of shots on goal. Most of those problems won’t be something that really resonates with you.

But if you’re just absentmindedly, hoping a problem comes to mind, almost none of them will turn into anything. Often, if you just start with something that’s not great, building that you’ll encounter lots of other problems that are burning, that may be you need solved or you see other people need to be solved, that can get you to where you want to go. There is no tried-and-true blueprint or roadmap, but there are a lot of things you can do to massively increase your chances of having a good idea to start with.

Rob: For me, one of those is having a notebook and taking notes, as you said, every time an idea comes around or someone mentions a pain-point and just adapting that over time. My best ideas never come in flurries, they never come instantly. They almost always come and are refined over weeks, if not months. I have a list and list of ideas that I’ve had since probably 2008 or 2009 in notebooks. Now, a bunch of them have been built and I can check them off the list. I don’t need to do those, but the new ideas, the idea for Drip came over weeks and it wasn’t just a simple thing. They evolve.

Cortland: I’ll say one more thing on that, which is the cool thing about taking notes, the way that you’re doing it is it helps you escape this recency bias. Whenever we get a new idea, we just get super excited about it, it’s the best thing ever. A lot of that excitement is because it’s new. If you let your ideas simmer for a while, like four to six weeks, four to six months, sometimes ideas that you are really excited about it turns out that you’re not that excited about. Some of these ideas that you’ve written down, you’ll be excited about for years. Those are the ideas that actually have legs, that actually resonate with what you want to build, and that might have some merit like on a structural strategic level as well. Keeping a running log like that is so great because it can help you make better decisions instead of just impulsively choosing what the product of the day, whatever got you excited about this week.

Rob: Yeah. I have a 48-hour cooling-off period on registering domain names. We’ve talked about this, how many domain names do I have. Ian has shown from Tropical MBA, calls it the Boulevard of Broken Dreams. That’s his GoDaddy account because I used to register a domain. Look, great idea, register the domain. Now, it’s like two days and then if I still like it, I’ll register the domain.  I’ve written up entire SaaS apps or business ideas and come back to them a week or two later. And I was just like, what was I thinking? This is a terrible idea. That’s good, it’s good to see it with fresh eyes.

So thanks for the question, Franco. I hope that was helpful. Our next question is from Kevin. He’s asking about the best city for bootstrappers. He says, “What do you think are the top cities for bootstrappers? I’ve heard San Francisco and New York City are too expensive. I’ve heard cities like Raleigh, North Carolina, Denver, Austin, Salt Lake City, Minneapolis, and Atlanta are good choices. Do you have any thoughts on this and how much does it matter? Thanks in advance. Kevin.”

Courtland, you’re actually currently moving about the country. What do you think about this?

Courtland: I did the SF thing for 10 years. I bootstrapped a business in SF and I can say you’re 100% spot on. It is too expensive. My burn rate was absolutely insane trying to bootstrap a business from SF, which was fine for me because I probably needed a little bit of pressure, something to light a fire under my ass and get me coding. But I then embarked on a six-week road trip earlier this summer. Now, I’m in Seattle, which is also expensive but much less expensive than SF.

My take on this entire question is that it does matter where you live. But in terms of business, it matters less and less, especially as the world becomes more remote, which we’ve seen happen in a drastic fashion with the pandemic. There’s more to life than just business and the city that you’re living in decreasingly matters to your business and increasingly matters to your life outside of your business. These two things are related actually because it’s easier to continue with your bootstrap business if your life outside of your business is happy. There’s a lot here to paying attention to the universal things that we know contribute to happiness and not trying to innovate too much here.

Health. Do you live in a place where it’s easy for you to exercise, it’s easy for you to eat well? For me, like in Seattle, I picked a place where I’m about half a mile from the nearest Whole Foods, which is one of my favorite grocery stores. I pretty much walk there, walk a mile every day to get groceries and cook. Just having that habit in my life is super easy. If I had to drive to go to the grocery store, I would just be less healthy.

Relationships. If you live near friends and family, that’s huge. In Seattle, I have four of my closest friends in the world who live here and they all know each other. We’ve been going on lots of hikes and doing lots of stuff together. It’s just been so great just for me personally. I’m just having more fun in life living next to them than I would if I moved somewhere where I didn’t have friends or family. That’s a big thing to take into account.

Obviously, financial security. Living places where you can afford, especially if you’re bootstrapping. You want to keep that burn rate low. Maybe the one caveat here is, I will say, that there are places where the people there can give you energy and actually be motivating. It does help to be near people who are actually getting stuff done because they will inspire you. A lot of the cities that you listed—Raleigh, Denver, Atlanta—there are burgeoning tech scenes and it’s not impossible to find somebody who’s doing something that you’re doing. People aren’t going to look at you like you have two heads when you tell them you’re bootstrapping a tech business.

If you can get all of those, I would try to check all those boxes. But if you don’t check a few, I would check the ones that align with your personal happiness and health over trying to be somewhere where there’s some weird business advantage because that just matters less and less.

Rob: Those are great insights. What he asked, what you echoed, and what I will also echo is that if you’re bootstrapping, stay away from expensive cities unless you have a lot of money. One of the advantages of bootstrapping Drip in Fresno, California is that we could hire developers for about a third of the price as the Bay area. It was about a three-hour drive to the Bay area. We could live in California, but not deal with the high rents and high salaries. You have to weigh those to a certain extent.

What you touched on, which is what city resonates with you, there is a Paul Graham essay called Cities and Ambition. Basically, what he says is certain cities that he’s lived in, they have an ambition. The people around you have an ambition. He had lived in Boston, and Paris, and New York, and a couple of other places. He said, in Boston, the ambition is to be more intelligent. There are more universities per capita than any other city in the country. In Paris, it was something about art. It was either to enjoy beauty or enjoy art. In New York, it was about money. The Bay Area was about power. Seattle is outdoors. That doesn’t mean you have to be that.

In LA, I lived there, it was about looking good. There’s a lot of physical attractiveness and some people are shallow, but some people are also just really into being fit and that’s okay. But if you really don’t want to have to be cool, LA can grind on you. If you don’t want to own the new sunglasses and you don’t want to dress in the new fashion and you don’t want to be really in shape, it can wear on you. The same thing, if you’re not into outdoorsy stuff and the rain bothers you, maybe Seattle is not a fit.

Trying to find a city, trying to live in a lot of different cities, and figure out which one’s ambition fits you is what you’re saying and it lines up. Cities and Ambition—I highly recommend. Folks, check that out. For me, if I were to just pick some cities and it’s based on travel and a lot based on listening to the Tropical MBA podcast because they talk a lot about location. If you think about ‎Startups For the Rest of Us, it’s about SaaS, and startups and software versus TMBA is about all different business types. But the unifying factor there, it started as digital nomadism, the ability to travel while you start companies.

In the US, if I were to just pick cities, for me personally, it would be Seattle, Portland, or Austin, and Minneapolis is one, too. Although the winters here are tough but man, the quality of life here is amazing. If you can get over the winters, those are some great cities. If I was in Europe, I’d probably live in Barcelona, there’s an entrepreneur community there, it’s a beautiful city. South America, Medellin is a big hotbed of TMBA folks. In Asia, it’s Chiang Mai and Saigon, those are places that I hear there being entrepreneurial activity.

To your point, Courtland, it’s not that my business should be based there. It doesn’t matter where my business is based. I named those cities because there are enough other entrepreneurs around to keep you motivated and that you can meet up. I have a friend who’s extremely successful now and lives in a city where he has entrepreneur friends and stuff, but he lived in Miami for years, or somewhere in Florida. He said just no one here is starting companies. And he’s like, I have to get out of this place, even though he had a business and it was successful. He’s like, I can’t stand to be here because nobody thinks as I do, and everyone’s retired, or they’re partying. This is not fun for me.

You have to know yourself. Are you cool with just not having anyone with anything really in common with you? Well then, maybe go live on the beach in Florida because I’m sure that’s an amazing life from a climate perspective and from enjoyment and a partying perspective to nightlife. But if you want to have some type of face-to-face community, then you need to think about there are a lot of cities in the country that just won’t have that.

For you to try to determine this, I would look at Tropical MBA. I would look at the locations of Indie Hackers meetups, I know they’re not happening right now because of COVID, but they’ll come back. I would look at places that we hold MicroConfs because we are probably going to have seven, eight, nine MicroConfs in 2021. We’re picking cities that have a lot of entrepreneurial activity. And, you can go to meetup.com and search for a startup founder, entrepreneur stuff.

As I was moving around, because Sherry and I, we moved 10 times in 10 years when we got married and she was in grad school. When we were going to go to that next city, I would always go on bait up and try to figure out is this going to be a place where I basically have no entrepreneurial friends or do I think I can meet some people?

Courtland: I think that’s such a great point. Paul Graham asked a point that basically, we’re very tribal creatures and every city has its own tribe. People value different things, have different cultural norms, and different tribes. I lived in Boston as well, and I met at least 5 or 10 people in Boston who imitated John Nash from that movie A Beautiful Mind, they just wanted to be the crazy genius because that’s what Boston elevated—academic excellence and genius. I’ve lived in SF for 10 years and I met at least 5 or 10 people who emulated Steve Jobs. They wanted to be like the crazy, super successful startup founder. Even if you are a contrarian person, a lot of your energy comes internally, yeah, but a lot of your energy as a human being comes from your tribe and your surroundings.

If you’re in Miami and everybody’s partying all the time, you’re just going to feel bad about staying in to do any work. If you’re in Seattle, everyone’s hiking, you’re going to feel bad if you don’t go on a hike every now and then. I want to second that idea of understanding what tribe are you gonna be moving into and make sure it’s one where the things that people value or going to push you the direction that you want to go

Rob: To close us out on this question, there’s an interesting point around venture-funded versus bootstrapped and mostly bootstrapped companies. Venture funded companies have traditionally been very densely packed in a handful of cities. I don’t remember what the exact number was, but as of 5 or 10 years ago, 80% of entrepreneur companies were in two or three cities. It was really, really low. Maybe even been 90%, it was incredible. Well, when we did the state of independent SaaS survey and then the report last year, we had 340 different cities of bootstrappers and bootstrap and mostly bootstrap founders.

The interesting thing is the number one city—at least according to this report, which had just under 1600 responses from around the world—the number one city is London with 4% of the respondents. The second city is remote with 3%, meaning they just had no headquarters. And then the third city, which may be skewed because I’m here, it was Minneapolis. I’m actually surprised that it’s that high, but it’s 2.5%. From there, 2% is Austin, New York, San Francisco, Toronto. We have 1.7% in Denver, Portland, Boston, Chicago. It’s just all these cities and then it goes to Australia. It is all over, it really is. You can live anywhere. It’s just a matter of balancing all of these things—balancing the ambition, then the desire of the place itself, of the community. And then, are there entrepreneurs around to kind of have camaraderie with.

Courtland: A lot of the cities you just listed were at the top of the list of Indie Hackers’ meetups cities, where you could go to those cities. They have great meetups in Toronto, London, Dublin, and Denver. One continent that we missed was Africa. I’ve been to Cape Town twice and just met a ton of bootstrap founders living the life. That’s one of the most beautiful cities in the world. It’s extremely cheap, extremely affordable, and people that are very motivated. I love this idea of the fact that these bootstrap companies are spread out. There is no like one base for bootstrappers. It’s all over the world.

Rob: Courtland Allen, thank you so much for joining me today, sir. I had a blast.

Courtland: Same here. Thanks for inviting me on

Rob: Folks who want to keep up with you, you are @csallen on Twitter, as well as @indiehackers. I assume you’re one of the mischief-makers behind that account.

Courtland: Yeah. I occasionally get behind the Twitter account.

Rob: That and then indiehackers.com, of course, if they want to see what you’re working on every day. Thanks again for joining me, man.

Courtland: Thanks for having me, Rob.

Rob: Thank you for joining us this week, I hope you enjoyed that. We have several listener questions left in the coffers. But as always, voicemails go to the top of the stack. If you want to send us a Dropbox link to questions@startupsfortherestofus.com. Google Drive links work, too. You can also send text questions. We don’t have such a huge backlog, we could use some additional questions on any of these topics or any questions you are facing. You can remain anonymous or you can plug your project that you’re working on if you want. Feel free to send your emails to questions@startupsfortherestofus.com.

Thanks again for joining me and I will talk to you again next Tuesday morning.

Rob: Welcome to this week’s episode of Startups for the Rest Of Us, it’s episode 526. I’m your host, Rob Walling. This week, I had a conversation with Justin Vincent. You might recognize his name from the TechZing Podcast or from his project Nugget at nugget.one.

He’s launched apps. He’s had successes. He’s had failures. He’s done a lot of learning. Now, he’s doing some teaching at this website which started as an idea generation factory where he would basically sell new startup ideas. I still love the big corpus of ideas that he has there. Then, he launched education because he realized people were taking ideas and they weren’t being successful with them. He was trying to teach them how to bootstrap.

Before we dive into that, you should check out saaspodcastawards.com. We have all of our nominees and the voting has begun. If you head over there, you can vote for your favorite podcast in each of four categories. In addition, I’ve had a couple of emails with comments about recent changes to the podcast.

The first comment is about our news roundtable episode. Stephen wrote in, he says, “I’m a longtime listener. The podcast always jumps to the top of my queue on Tuesdays. The most recent news roundtable format was my favorite episode of the show. Not only was it riveting, but you all so effectively advocated for specific changes to help bootstrap companies. The only way these things will change is if people are aware of the issues.”

Thanks, Stephen, for writing in. I love doing those Startup Roundtable episodes about every 2-3 months as they become enough interesting stories that build up that I can bring a few people on and we can discuss them.

Another comment was about removing the intro song. I thought this one was kind of funny. An anonymous listener wrote in, he says, “I still can’t get over the fact that you killed the intro for Startups for the Rest of Us, i.e. the scripted intro with the song, We’re Out of Control, in the background. When you first started TinySeed Tales, I realized by listening to both how impactful the intro music is to the vibe of the podcast. Then, you got rid of the intro for Startups for the Rest of Us and I’m sure you have a good reason. I’m just curious as to what it is. I feel like it’s been gone for around a year now. I do love the show and it has absolutely helped me on my entrepreneurial journey.”

Thanks so much for writing in. That was a shift. It was about a year and a half ago, I believe. I asked on Twitter if people cared if it was there or not. I think at this point, it’s a really nice throwback. It’s something I want to bring in now and again, for nostalgia’s sake. I don’t know. I don’t necessarily feel like I need an intro song for the podcast anymore.

If you feel otherwise or if you agree, I would love to hear from you at questions@startupsfortherestofus.com. Or, you can reach out to me at @robwalling on Twitter. With that, let’s dive into our conversation.

Sir, thank you so much for joining me on Startups for the Rest of Us.

Justin: Thank you. Thank you so much, Rob.

Rob: Folks may recognize your voice from the TechZing Podcast, techzinglive.com, if they want to check that out. You guys have been running that for almost as long as we have, right? Did you start it in 2010?

Justin: Yeah. You were first to the post, then we recorded initially a lot more shows and we got up to 250. Then, we went down to a show every three months. Now, you are well beyond us.

Rob: You’re a quarterly podcast at this point.

Justin: Well, this year, it’s even looking less than that. We’ll see.

Rob: Wow. It’s a longer form show. It tends to be, what? About an hour and a half? You and Jason Roberts get on and then you talk about tech, you talk about entrepreneurship. Sometimes you talk about The Walking Dead. You’ve talked about just kind of anything. I know Jason is doing a lot of body hacking, like working out, and stuff. It’s kind of a variety show of sorts.

Justin: We’ve also interviewed a lot of people. We have a good track record of interviewing people who then go on to build unicorns. Travis Kalanick and also Patrick Collison. If you go back to the back catalog, that’s a lot of good stuff as well.

Rob: That’s right. I’d forgotten. You interviewed Gabriel Weinberg. You interviewed them all pretty early. It was in my memory. Cool.

You’re on the show today to talk about a bunch of stuff, talk about your entrepreneurial experience, and then to talk about this project you run called Nugget. It’s at nugget.one.

I want to start by talking through a successful SaaS app you launched called Pluggio. The way I’ve explained it to a few people, I want to hear your story of why you built it and what it was like. I remember you kind of built Buffer before Buffer.

Justin: That’s right. Except, I made a mistake. This is a learning that I had, unfortunately, too late, which is I sort of built too many features. The main feature of Pluggio, which was Buffer, was sort of like a subsetting screen. It also did a lot of other stuff. It was a Twitter client, it was an RSS Feed Reader, it was a lot of things.

Really, what I should have done is just keep it small and simple right from the get go. Unfortunately, there was too much surface area—a lot of customer support, a lot of code to maintain. Also, I wasn’t spending enough time marketing it. If you look at the Buffer story, Joel basically built a very small app and then spent the rest of his time marketing. I built a very big app and spent most of my time dealing with customer support and a very small amount of time marketing.

Rob: Right. That’s the trap of being a developer. I’ve done the same thing where we just think the product solves everything. A new feature solves everything.

You built it and launched it in 2009. The thing that I think we should also call out is building a small product, going, and marketing it wouldn’t work if you were trying to build an email service provider, CRM, or that stuff today because it’s too competitive and you have to have a lot of features to compete.

Building a social media scheduling app, in essence, in 2009, you were so early to the space. Again, you built Buffer before Buffer that could actually work as evidenced by Buffer. I don’t want people listening to think, oh, I can just build a single or two features, just market, and that’ll be it. You might get lucky, but you kind of have to do it in a nascent space where there’s not already a lot of competition.

Justin: I think something that’s also worth talking about is what are your revenue goals. If your revenue goals are small, let’s say it’s just a couple of $1000 a month, even $5000 a month. If you go into a huge market, there’s nothing to say that you can’t take out a tiny part of that market. I mean, I’m just talking like .1% of a massive market.

Rob: Yeah, I wouldn’t disagree with that. I think someone’s goals have to play into that. Do you want to tell us a little bit about the origin story of Pluggio? I know that you built it to basically scratch your own itch.

Justin: Well, yeah, because we started doing the podcast and the idea was a tech startup podcast. From my perspective, the only real thing I was thinking about wasn’t bootstrapping, it was funded startups and that was the context. Then, the more we got into it, the more we started meeting people who were bootstrappers. That brought me into the bootstrapping world.

I basically just created some scripts—automated scripts—to post the show when it was released and to promote the show on Twitter. Those scripts subsequently turned into software. Then, I sort of spoke to people on Twitter and said, would you like to try out the software? That’s how it really turned into a SaaS app.

Rob: You spent a couple of years growing that—I think two or three years. Did it peak around $4000 MRR?

Justin: It peaked around $4000 MRR. If you listen to the 300 episodes of our show, it’s possible to go, download them all, and listen to them. The interesting thing is that I was never super into the product. I think that was another reason why it might have not been successful, because I didn’t personally like it that much. I liked it a bit, but I was sort of ambling along with it.

We’d have a lot of guests on and there’d be a lot of heart to hearts with those guests. They’d basically say, look, man, you need to do this with plugins. Okay, yeah, I’ll do that, yeah. That was sort of the journey of it.

Rob: Yeah. It’s hard, man. I’ve owned a lot of products over the past 20 years. I have absolutely had most of them, especially in the early days, where I just didn’t really care about the market, I didn’t care about the app.

That was okay because a lot of them were relatively on autopilot. They had SEO traffic or paid ads that I was just setting and forgetting. They didn’t require a ton of support and they grew to their natural plateau of $2000 a month, $5000 a month, $10,000 a month. grand. They were all pretty small and that was okay.

If I personally am going to spend years building Drip, seven figure and eight figure apps, I do believe that you have to care about that problem, care about that solution, or care about that customer base. There has to be something drawing you in more than money. For most people, maybe there’s an exception out there of like, I just want the money. I don’t care. I think you’re just going to be unhappy if you do that.

Justin: Well, I love your term enthusiasm half-life. That’s really what it’s all about. That to say, Pluggio was a success. Here’s the thing, in spite of that, it still was a success and I was able to exit from it. I think overall, I made about $250,000 from that project.

Rob: Yeah, which is obviously pretty nice for a bootstrapper who’s working a day job and doing something on the side. When you said enthusiasm half-life, is that my term? Did I coin that?

Justin: I seem to remember being on a TechZing show with you and you talking about it.

Rob: Okay.

Justin: I was thinking at the time, yeah, that’s a really good point, especially with the work on Pluggio.

Rob: Yeah, totally. I have to go back and listen. Of course, you say so many things for so many years, you kind of forget the stuff that you coin. I do remember talking about the domain name waiting period where I said, I don’t register domains without a 48-hour cooling down time.

I have, at one point, 80 domains and I was only using 50 or something. We talked a lot about that. A little known fact. You actually spoke at the very first MicroConf at the Riviera in Las Vegas in 2011. You told the story of growing Pluggio, although you hadn’t sold it yet. You were still working on it?

Justin: I was still working on it. That was such a great experience for both of us. We love what you’ve done with market confidence. Just the way that it’s grown has been fantastic.

Rob: Yeah. Both of us? You mean Jason Roberts?

Justin: Jason Roberts, yeah.

Rob: That was so cool having you guys out there meeting in person, I believe for the first time. It was quite an event. When we first came up with the idea for MicroConf, Mike and I were like, it’s going to be 225-250 people. It’s a great hotel.

By the time we got done, it was like 102 people. We had to give away 20 tickets to fill the room. It was that bootstrappers’ story of these things are a lot harder than you think they’re going to be, right?

Justin: Yeah, always. Yeah. You have to be small and scrappy at that time.

Rob: Then, much like most SaaS apps, if you keep that momentum, it becomes easier over time. Same thing with MicroConf.

After you exited Pluggio, then you started another app called Light. I remember when you were talking about on the podcast, I believe you described it as mobile-on-demand delivery via bike messenger. Was it via bike?

Justin: Well, that was just because it was just easier to do that. It would have been through a car or anything else. Just in the first place, I hired a couple of couriers to basically ride bikes around you.

Rob: When you were saying, hey, I’m bootstrapping this, I was like no way, you can’t bootstrap this. This is too big. It’s a network effect. It’s got a high cost. It’s got physical things—all of that. You want to tell us, did it succeed? Did it fail? How long did you work on it? What’s the story of Light?

Justin: The reason why I did Light, why I attempted something that big, is because I felt pretty cocky because of the success of Pluggio. I’d had an exit and I had been a conference speaker. Surely, the next thing I should do is something really big. I built out Light. I basically created the brand, built the mobile app, dispatch system, sort of slipped in different menus from Starbucks and Burger King with pictures and stuff, and it got onto the app store.

Then, I delivered 10,000 cards through Pasadena, had careers, and started selling stuff. It was making money. It was working. I mean, that was the point that it got to where we had revenue and it was working.

Then, something happened. The problem was I found out I didn’t actually like it. This has been a consistent problem for me I would say for 20 years—picking the right project for me. I’m one of those one man wrecking crew kind of people where I can do the development, I can do the marketing, I’m proven at sales, and I can pretty much do whatever you throw at me. The problem is, is it actually what I want to do? That’s the problem. A lot of the time since then has been solving that problem which I do believe I’ve solved now.

Rob: Do you feel like it’s finding something that you like/love or do you feel like you were really interested in Pluggio at one time? You were really interested at Light and you kind of got tired of it because after nine months or a year, you just got bored of it?

Justin: I think that is a great question, like shiny object syndrome. I think that’s definitely something that plays for me. A lot of founders that I’ve spoken to have that same issue. That’s a really good reason to pick something small, to work in very small iterative steps and chunks, and just keep getting that sense of just wanting to do it.

Rob: Right, to keep pushing the idea forward. Almost like you’re dipping your toe in the next water to figure out how excited you are about it.

Justin: I found the biggest problem comes when you’re trying to take a step that’s too big. When you try and take a step that’s too big, that is really the time when it puts you off and it’s like, oh, man, this is just too much stress. You’ve got to work out your next steps, your path, quite carefully. You know what I’m saying?

Rob: I do. I think a big part of this is knowing yourself. I think if you know that you tend to not love ideas, whether it’s you getting tired of them or whether you just really need to love the ideas you’re working on, I think you do have to be really careful. It’s an iterative process, right? We talk about building an MVP, we talk about iterating in software, we talk about iterating in marketing approaches, and experimenting. You’re kind of saying we should be experimenting, someone like you, certain people, or whatever should be experimenting with the actual apps they’re launching to figure out, hey, do I enjoy this? Do I enjoy the customer?

Justin: Well, experimenting with your own self, like exploring the market, exploring everything about the idea, sort of like trying it on like a coat. What’s it going to be like to wear this?

Once I’d finished Light, for all intents and purposes, it was a success, but I’d realized that it wasn’t the right coat for me. I realized I really want to be good at understanding what is the right coat for me to put on, what is the right idea for me to do.

Jason and myself, we were talking about it at the time, an interesting mental model, which I termed hyper-iteration. It comes from the story of this guy, Paul MacCready. He’s the first guy to create a human powered flight. He did this by reframing the problem. Instead of focusing on testing out one flight idea at a time. He basically built a type of modular Lego kit for planes, something that would enable him to test out different ideas every day.

While other teams who are attempting to do the same thing, working on one idea over six months, he was basically testing out an idea every couple of days, over six months. He tested out 50 or 100 ideas. I wanted to do that same thing with startup ideas. That’s the reason why I came up with the idea to submit a mechanical Turk to get a lot of ideas from a lot of different people.

I created a Mechanical Turk on Amazon. I created an HIT on Amazon’s Mechanical Turk system and basically just asked two really simple questions: what is a big pain point in your daily work that is not yet solved by software? And, how could software help you?

I paid $.50 to ask that question and I couldn’t believe it. Within a couple of hours of posting it, I got back literally 50-100 ideas. I was just going through these ideas, trying them on, and thought that was just super interesting. Really quickly, it sort of dawned on me, wait a sec. I think other entrepreneurs might be interested in these ideas.

That was when I moved on to the next phase of what I was doing with my side projects, which was to basically create a subscription service to just send out one idea a day.

Rob: Yeah, and I’m fascinated by this. I love the creativity. I’ve never heard of anyone doing that. That’s like the founder mind and you in the developer mind, if there’s a problem, I’m just going to experiment and I’m going to try something crazy like submitting it to Mechanical Turk.

I think something else you’re touching on is there’s a ton of ways to find startup ideas, right? You can find a problem. Sometimes that problem is your own—scratch your own itch. Sometimes that problem is at your day job. Sometimes it’s your spouse or a colleague. Sometimes you have a crappy experience as a customer and you realize, hey, that software isn’t good. Other times, you’re maybe building on an audience, a network you have, you see crappy enterprise software, and you want to build a less expensive one.

There’s always mental models and frameworks. I’ve actually listed them out. I may write another book someday, I’m starting to think about it. I have that as a whole chapter of thinking about idea generation methods, but not just idea generation, because that’s often b*******. Actual, realistic startup vetting of, hey, here’s an idea that’s not terrible because it comes from some type of pain or some type of something that implies that it should be a startup idea.

The fact that you got these, you said you got 50-100 ideas when you went through them, were they relatively high-quality? As you launch this subscription service for this, which, again, I don’t think is going to be a multimillion dollar business, but I love the ingenuity of it as a kind of a Micro-SaaS or a micro subscription idea. As you started getting subscribers for that. What was the initial response? Were people over the moon with it? That is such a problem in the 0-1 crowd. The people who are pre-revenue, pre-product, the most common question is always: how do you come up with ideas and how do you get them?

Justin: Well, people were over the moon with it. The ideas were basically very high-quality because of the question. The question was just: what is your biggest pain point in your daily work that’s not yet being solved by software?

Literally at this point, I’ve got 4000 very high-quality ideas. This brings up a very interesting point. What I’ve truly learned after going through 4000 ideas and working with hundreds of entrepreneurs, because I shifted to teaching entrepreneurs rather than giving them ideas—we’ll talk about that in a sec—is that ideas are both the most important thing and also the least important thing. It’s very, very interesting.

At the beginning part when you haven’t started the business yet, they are the least important thing. That’s when people place too much importance on an idea. They sort of think, oh, wow, this idea is really important and they really double down on it. They really work on it. What they should really be doing is iterating through hundreds of ideas, looking at lots of different markets, and lots of different concepts until they find just a few that begin to crystallize.

Then, when you actually hone in on that one idea from hundreds, that is when the idea becomes the most important thing, because you’ve just done a lot of digging, sifting through, and then you found something that’s good. Ultimately, the idea is the most important thing, because it’s the idea that actually people buy. Is it something that people want? You need to create something that people want and that ultimately comes back to, well, what’s the idea?

Rob: Yeah, so nugget.one, if folks want to see the website and how that started, I remember, as a subscription service for ideas, but you quickly realized that people were taking ideas and not being successful. You want to talk us through that? Then, you basically started teaching from there saying, hey, you’re not being successful because you don’t know how to do it. Here’s essentially a curriculum to do that.

Justin: Yeah, that was that was the problem. It’s not a good feeling to have people paying you and not succeeding. I had a lot of people who were using these ideas, but through conversation with them, I didn’t see anyone succeeding. I was like, okay, what is actually going on here? I got on the phone with a lot of entrepreneurs, had a lot of different conversations. Ultimately, what I realized was founders didn’t really need ideas, they needed education. That was why I sort of pivoted there.

Rob: Yeah, and that’s a common story, right? I think that there are a lot more pre-idea or pre-revenue founders than there are founders who are at $1 million MRR or who are at $10,000 MRR. We see it in MicroConf, we see it in the podcast listenership, we see it in the TinySeed applications. I see it in the State of Independent SaaS.

You can just look from left to right in the State of Independent SaaS Report. The lower revenue is on the left. The $1 million and more per month is on the right. It is tall on the left and it just goes straight down, linear to the right, because that’s just how the distribution works.

If you go pre-revenue, it’s even larger. It’s aspiring founders in essence. It’s a big market. That’s why there’s so much room for this kind of thing. You can look at what I was doing back in the day. We start small, stay small. Even this podcast years ago was much more focused on early stage thinking and idea generation.

Patrick McKenzie did some teaching. Justin Jackson has talked about this. There are a lot of people moving from developer to entrepreneur type. It’s how to level up from there. That’s essentially what this Nugget Academy is. You built this curriculum and you’ve been selling that. Is it a subscription or is it like a one time fee?

Justin: Yes. Basically, I built the Nugget Startup Academy which is the first content piece that I built. It’s more than just content. It’s because of my background. I’ve built learning platforms and the Nuggets Startup Academy is in fact the fourth complete learning platform that I’ve built. I customized it very specially for the experience. It sort of feels like a little virtual incubator. It’s not just the content.

Also I worked with a friend of mine who’s got a masters as an instructional designer. I’d originally written it all out as just content to read but she showed me how much more powerful it was to have people interact with each other and then to do exercises as they go along. The whole thing’s created that way. That’s why we’ve gotten over a 50% completion rate for the product. I think the industry standard is less than 5% completion rate.

Rob: Yeah, that’s pretty impressive because the completion rate or even the consumption rate, so many information products for courses is very, very low.

Justin: You also asked about if it is a subscription or is it a revenue. This is a really interesting thing. Going through the different pricing models, what I realized about creating content versus creating something like Pluggio, which is a SaaS service, a subscription service, is that you just really get your revenue upfront.

I did do an interesting hack that I think other people might be interested in. What I did was I’ve tried various different price points. The happiest one that I landed on at that, let’s say this time last year, you can pay $997 right now to become a lifetime alumni or you can pay over time and it will add up to $2000. I basically gave them a big incentive to take the current price or pay a much bigger price over time. Interestingly, 50% of people chose the upfront.

Rob: Sure. You’re marketing to mostly technical people, I’m imagining, who have the high paying jobs and $1000. It’s not nothing, but they certainly are not missing car payments or missing their rent payments.

Justin: Right, exactly. Which I wouldn’t want to do. I say that as part of my sales copy. Like, if this is in any way bad for you financially, then please don’t do it.

Rob: Right, because you’re not promising success. You’re not doing that info marketer back in the day where, hey, become a gazillionaire. This is sure to succeed—all that stuff. It is much more of a realistic, I think, of the indie hackers website, which is a lot about the reality of doing it. I think of startups.com, which is about early stage. It’s also about the 0-1 of getting to a product with revenue.

I think of Nugget, certainly MicroConf Starter, and there’s a lot of folks in MicroConf Connect, our Slack group, that are still in that phase. That’s why there is room for many communities because there are so many people trying to do this and tackling it from different angles.

You built this academy and you have hundreds of people run through it, did you mention?

Justin: I’ve had over a hundred people run through it, yeah.

Rob: Then, you realize you were telling me offline that you had all this great content. I have felt this pain before. You had all this great content. It’s all behind a paywall. You’re in a conversation, you’re emailing with someone, and they’re like, oh, tell me about that. You’re like, oh, man, I need to now go turn stuff into PDF.

Justin: Yes, I’ve got to break my own paywall to get this information that I want to give to you for free, because I just want to help you. Ultimately, the goal for me from Nugget is not about making money. It’s ultimately about helping people. I do need to make money. Otherwise, my wife will be a bit mad at me, but the main goal is to actually help people.

Rob: Right. You pulled out seven of the lessons and turned it into what you’re calling the Bootcamp.

Justin: Yeah. It essentially is the sort of key, most important information from Nugget. Refactored is a great way to say it. Refactored into seven lessons, seven success factors, I call them.

Rob: Got it. I believe you quoted and linked to me in several places.

Justin: Oh, I did. Sir, you have been very, very fundamental and instructional for my whole bootstrapping career. You’ve written a lot of seminal thought pieces.

Of course, as I’m writing out the pages, it’s hard to remember exactly where you draw all your ideas from, but there’s certain points where I’m like, oh, yeah, Rob wrote something about this and it completely backs up what I’m saying right now. Then, I put it as recommended reading in the course. Yeah.

Rob: Of these seven lessons you walk through context, customers, market, product, price, competition, and longevity. In context, you say level up within your founder context. I have a note here that you link to my blog post, The Stair Step Approach to Bootstrapping. You want to talk us through what that context means when you say your founder’s context and how it integrates with the stair step approach, realizing that if folks listen to this podcast, they know what the stair step approach is?

Justin: Yes. I think that one of the main things that I’ve really learned is that at least 50% of this whole thing is about you, about who you are. That’s what I really wanted to get across as the major first lesson.

Really, the whole bootcamp is wrapped up in this concept. Even the second lesson is learn what your ideal customer will pay for. The third lesson is pick a market that you can reach and prove it. We’ll get into that later.

Just to answer your question, basically, I wanted to create a predictable model for success. I wanted to create something like a Ruby on Rails framework in this bootcamp so that it could just work for anyone.

The first problem that I’ve seen with most founders is that they’re working way ahead of where they should be. The further away you work from what you already know how to do, the less predictable the results.

I’ll give an example. What I mean by that, let’s say you’re walking up some stairs. If you take one step at a time, that’s a predictable result. You’re going to achieve that one step and you’ll get to the top of the stairs. Let’s say you decided, okay, I’m going to take five steps at a time. That actually does become a bit difficult because five steps are kind of hard for anyone to walk.

If your context was you were an NBA All-Star trying to walk upstairs five steps at a time, you can do it because you’re really tall and that’s really easy for you to do. It’s a pretty easy feat for an NBA All-Star to do that.

I’m imagining that whoever’s listening to this, you’re probably a coder or a designer. If you took that same NBA All-Star, put them in your context, and asked them to do your job, they would have to go one stair at a time.

This is the problem. A lot of 0-1 founders go straight for a SaaS app. You know what I’m saying? That is like stair number five. I think you need to learn the fundamental stuff first. Even you’ve written about this. One of the first things you should do is learn how to get some traffic. That’s just like a basic how you play the indie founder level up game step one. That makes sense?

Rob: Absolutely. Gosh, I’ve been preaching this since, maybe 2006 or 2007, when I really started pivoting my blog into talking about entrepreneurship. The first thing I realized was building the product—this is going to sound so boring to anyone who’s listening to the show—it’s so fundamental. How many times a day on Hacker News, or how many emails do I get, or how many questions to the podcast, or on indie hackers do you see a post of I built this product, now how do I market it? It’s like, no, I understand. I made the same mistake. I want to market, but I just want everyone to know that. That’s essentially what you’re saying. It is like, nothing happens until someone visits the website and considers buying something.

Justin: In the context lesson, I basically linked it to the mental model of level up games. There’s three types of level up games that we play. We play the indie founder level up game where we level up our career. We play the product level up game where we level up a product. We play the skill level up game where we just get good at stuff.

If you look at the indie founder level game, the first thing you need to do, as we just said, is level one, how do I get some traffic? You could write a blog post, you could do some SEO. There’s a lot of different things. Then, level two and this is sort of my level. You can jump in, Rob, if you think something’s wrong here. Level two, I think, is just a very simple thing, like a template, a plugin, or a course.

Rob: That’s step one of the stair step approach.

Justin: Okay, yes. I guess I’m just sort of separating out the steps like step one, as I’m saying, build a bit of traffic. Step two, which is your step one, is just build a tiny thing. Then I’m saying, okay, so now you’ve built a tiny thing. Let’s learn how to maybe grow that through a few different channels, maybe do a second one.

Basically, you’re what I call a grower. The first one is a noob, level two is a seller, level three is a grower, and then level four is a builder, which is what I’m saying this is where you start to validate and sell a more complex product like a membership site or a SaaS. Don’t even go there until you’ve mastered the early level stuff.

Rob: Yeah, I like it. It is right in line with what I’ve been talking about. Something I have realized is there are certain people who don’t want to do that. All I say is, that’s cool, you’re just going to have a harder time. You’re just going to have a lower chance of succeeding if you haven’t built these skills. If you don’t know how to do copywriting, If you don’t know how to run PPC ads, you don’t know how to do SEO, you don’t know how to do customer support, you don’t know at all how to build a product, there is a chance you will succeed.

Through survivor bias, you and I hear stories about it all the time on these podcasts. I’ll say, some strikes against you is a little more challenging way to do it, but that doesn’t mean you can’t go and do it. It doesn’t mean that you can’t succeed if you don’t go through these steps. This is just the more repeatable, the more blueprinted way that I see people doing it.

Justin: If you just want to be someone who doesn’t want to interact with people, because that’s really what it comes down to, it’s like you’ve got to learn how to interact with people, how to market stuff, how to speak to people. If you don’t want to do that, then just focus on the automated SEO approach.

I have seen founders be very successful at that. One guy I like to talk about, Michael Lynch, who’s got a site called, Is It Keto? You just Google, Is It Keto? This was a great example of a site that he built that I think has 60,000 uniques a month. He’s monetizing via ads.

I know another guy who has built other different services where he gets a million uniques a month. It’s very possible to do that if you just want to do that as an engineer. Even then, it’s kind of hard to monetize.

Michael moved away from Is It Keto? because he found it difficult to monetize beyond $1000 a month type of thing. Ultimately, he ended up moving back to a regular thing. He now creates a product called TinyPilot which is a little USB that you plug into your laptop and it lets you remotely manage the laptop.

Rob: That’s fascinating. That is something I like about getting Is It Keto? out there, getting it up to $1000 a month. What did he learn? He learned how to generate traffic, probably how to rank in SEO, as you’re saying. He learned just how to have stuff in production, how to deal with potential. There’s all this stuff that he learned, even though it’s like, oh, I only got it to $1000 a month. There’s success in learning if you can parlay it to the next level.

Justin: I recommend people check out his website, mtlynch.io because it’s a great example. He does retrospectives and he talks through everything he’s thinking. He is the reason why I reached out to him in the first place. I was so impressed to see that level of self-introspection as he was working through the process.

Yeah, he talks about his whole journey from the get-go and the learnings. It’s, again, the reason why it’s so good, in my opinion, to start at level one, really understanding, okay, what is traffic? How do I get people?

Think of it this way. If you have a seed and a plant pot and you throw that seed in the pot, there’s no soil. It’s not going to grow. You need to learn where to get soil from. You need to learn where to get the soil because a seed will not grow without soil.

Rob: Indeed. Do you have any other success stories or folks who have built interesting things out of the academy?

Justin: Well, I’d say my best example is a guy called Mateo Mosca. He’s in the product of hyper-iteration validation. We’ve gone through a lot of ideas to get to the point where he’s sort of—I don’t know what you call it, where you are testing three main ideas. I guess it’s A/B testing.

Basically, he’s got three landing pages. One of them is heyhi.io, the other one is replayhero.io, and the other one is pitchwall.io. He’s got those three things out. I’m pretty sure that he is going to get somewhere very soon. He’s already made sales for the HeyHi one but that has other issues.

Rob: Well, very cool, sir. Again, are the nugget ideas now free or those behind a paywall?

Justin: They are free.

Rob: The ideas are free and the bootcamp is free?

Justin: Yes. So if you go to nugget.one and you just sign up for an account, you instantly get access to those 4000 ideas and you’ve instantly got access to the bootcamp. At the end, if you do complete the bootcamp, at the end of the boot camp is when you will get the option to join the actual full Startup Academy that will be presented to you. I believe that I’ve got a 50% discount there so you can get in for about $500 right now.

Rob: Oh, wow, that’s crazy. Folks, if they do the other free stuff, there’s no hard pitch? You’re not going to call them over the phone?

Justin: No, not at all. Not on the slightest.

Rob: Yeah. That’s why I wanted to have you on here. Some folks might be thinking, why am I having someone on here that is essentially selling a course which I don’t really do. A, you and I have known each other a long time and I know the content you put together is good. B, you are giving away a tremendous amount of value for free.

If folks want the ideas or the bootcamp, it’s free. There really are no strings attached. I’ve actually been inside Nugget which is a custom piece of software. You built the curriculum, but also the software around it. It’s really well done.

Justin: Oh, thank you, sir. Of course, don’t forget, you will also see links out to a lot of Rob’s stuff as well. You may discover some posts that you haven’t read as his. That’s another good reason to check it out.

Rob: Very cool. If folks want to keep up with you, obviously, nugget.one, they can check it out. You are @justinvincent on Twitter.

Justin: That is correct. Oh, can I just say the best place to look at my best profile page—it’s probably a good thing to say—is if you go to nugget.one/jv for Justin Vincent. That just lists all my different projects, how much revenue I’ve earned just doing side projects, all the different podcasts that I’m part of, and stuff like that.

Rob: They can check out your Roblox app you’re working on.

Justin: Yeah. Dude, I just want to say thank you so much for everything that you do for founders like me and for all other founders. It wouldn’t talk about giving a lot away for free and paying it forward, you have done that for so long. I just want to say a huge thank you. Seriously, you have been a major, major influence on me. I really do appreciate that.

Rob: Thanks for saying that. That means a lot, sir. Thanks again for joining me.

Justin: All right. Thank you.

Rob: Thanks again to Justin Vincent for coming on the show. You can hear him over on the TechZing Podcast.

If you’re enjoying these episodes of Startups for the Rest of Us, I really would appreciate it if you would mention it on Twitter. You can just mention @robwalling or @startupspod and share a little love if it’s something that you feel like you get value out of and then other folks might get value out of, too, as they are starting, building, and growing their SaaS products.

Thanks again for listening. I’ll see you again next week.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This week, I talk with Michele and Mathias Hansen. They are the married co-founders of Geocodio, which is hassle-free geocoding. We’re going to talk about bootstrapping into a commoditized space and how they’ve grown their SaaS app, first on the side and later both going full-time, over the past 6 ½ years. It’s a great conversation. Before I dive into that, I wanted to make a quick mention. Brad Touesnard contacted me, he is @bradt on Twitter. He said, “Hey, I’m in Atlantic Canada and COVID is not terrible up here so I’m thinking of gathering just a few people up for an in-person tech founder MicroConf founder type meetup in the late spring or early summer.” If you are a tech founder in Atlantic Canada, DM him on Twitter, @bradt. Another reminder that today is the last day to get your nominations in for the SaaS Podcast Awards, that’s saaspodcastawards.com. We are trying to recognize the bootstrapped and mostly bootstrapped SaaS founders that are getting on the mic and educating us every week, helping share their story and their inspirations. Please head to saaspodcastawards.com, nominate your favorites. With that, let’s dive into my conversation with Michele and Mathias Hansen. Michele and Mathias, thank you so much for joining me in the show.

Michele: Thank you for having us. Mathias: Thank you.

Rob: You are the co-founders of Geocodio. Your h1 reads, hassle-free geocoding, straightforward and easy-to-use geocoding, reverse geocoding, and data matching for US and Canadian addresses. For folks who don’t know, you can enter an address or you can enter a latitude-longitude and it’ll give you back the opposite one. I’m guessing that’s probably how the service started way back in the day but at this point, you guys have added integrations to where you correct misspellings, you have US and Canadian census data, Congressional districts, state legislative districts, school districts, time zones, all that kind of stuff. I’m imagining that didn’t come on day one and you’ve built that all out over the years.

Michele: Yeah, that’s been added slowly. How we often describe it is that a computer doesn’t understand an address, it only understands the coordinates or geocodes. What we do at a very basic level is converting an address into coordinates so a computer can understand it, and coordinates into an address so a human can understand it. Our niche in the market is there’s a lot of data that is only unlocked by having the coordinates. As you mentioned time zones for example, you can only get that data if you have the coordinates. You may be using coordinates to make a map online for example, but you may not even care about maps and you may just want to know the time zone for a particular location.

Rob: That makes a lot of sense. A service like Geocodio is something that my co-founder Derrick and I when we were running Drip, we had an author who was going to go on a book tour and he was going to go to San Francisco, LA, and these various cities. He asked us, is there a way I can go into Drip and query which of my email subscribers are within 60 miles or 100-mile radius of San Francisco? Of course we would have needed either their address, or you can obviously turn an IP address into a “location”, not exact but it would probably be good enough for this purpose. We did actually look into services like this. We never want to build in that feature out but that gives folks—if you’re listening to this—one particular use case of why you may want to use a geocoding service. You guys launched it 6 ½ years ago in January of 2014 as a side project essentially on Hacker News is what I see. My assistant producer found the original Hacker News thread which was generally positive. I mean, sometimes those things go really sideways. There was a comment or two—because you were saying, hey, Geocodio, it’s aimed at developers and it’s a less expensive way to do this. Someone came in, little bit know-it-all comment of like, oh, if you use—I don’t remember what the service was—it ‘ll be this inexpensive blah-blah-blah. Pretty quickly, both of you chimed in with factual data and references of like, no, actually, we are less expensive, we don’t have restrictions on your data and you don’t have to use their maps, you can do it as you want. I thought it was a pretty elegant interaction. I’m curious, did you guys come away from that launch feeling pretty good about the reception? Mathias: There’s definitely a lot of constructive feedback in that thread but also as you said, a lot of positive comments. I think the biggest takeaway we had was, woah, we aren’t really the only people with this problem that we wanted to get solved. We didn’t realize how big the potential market would be. This really showed us that there is a potential here.

Michele: I remember we got hundreds of emails from people after that thread. I remember that day just being absolutely wild. I think that’s what everybody does when you put something in Hacker News, you send it to your friends and you’re like, hey, upvote this. Then if it gets five upvotes and you get 10 people visiting your product, you feel pretty good about it. Seeing that sit on the front page all day, it was just unbelievable. We got so much feedback from people about everything from things they wish we did to complaints about our competitors and how they were so glad to see something like this. We even had the M&A team from a major product reach out to us because they were unhappy with their geocoding. Of course, when we launched our product, it wasn’t that great. Mathias: That’s true. Full context, it was a really, really terrible product when we launched it. It was barely something we could actually use ourselves. We only use it ourselves because we just couldn’t afford anything else. It was not a very good product. The data was not high quality, high equity, things like that. We’ve had a long, long way since then but it was just so cool to see that despite a crappy prototype, there is still so much interest in this.

Michele: As you said Rob, some of those commenters pointed out that with geocoding, the accuracy of the locations is important but what really differentiates us from many other services is that people can use the data without restrictions. They’re allowed to store it in their database. There aren’t these overly cumbersome caching limitations and requirements about using it with a particular brand of map, public phasing only, more expensive pricing, if it’s private phasing only, and all of these things. Us developers ourselves, we’re like that’s annoying and nobody wants to deal with that. We don’t want to deal with that. That perspective of being the customers ourselves is something that we have carried with us the entire time.

Rob: That’s a good perspective. Obviously, if you launched into a space like that that is crowded and is commoditized, to hear that there’s that much of a reception, that you really touched on a pain point is such a good way to get out of the gate. I’m actually surprised to read then—again, I have notes from my assistant producer—that you only made $31 in your first month at the gate. I would expect with a reception like that that you would have had more people using it. Mathias: No, exactly. It was a very success in our heads actually. Our expectations were so low that our success criteria was basically if we can pay for the virtual service to run the servers, if we can pay for that, that’s a success, that’s the ideal. The fact that we made around $31 was enough to cover our $5 a month DigitalOcean instances and there was even testing. It also goes to show being on Hacker News in the frontpage for 24 hours doesn’t mean you’re on overnight success. We had a lot of work in front of us but we had so much fire power, so much enthusiasm to continue working on this. We knew that there was this something here that we can continue trading on.

Michele: Right. We were so surprised that anyone wanted to pay us that when we launched it, we had integrated Stripe. We said we would charge on the first of the following month for pay-as-you-go usage so people can just pay for whatever they needed and we would just charge them once a month. We’d integrated Stripe from the beginning but we were so surprised that anyone wanted to pay us that actually, February 1st came and we looked at each other like, oh, we didn’t actually write any of the code to charge people. We were genuinely shocked that people wanted to pay us.

Rob: I’ve been there with not having billing code, that’s such a great MVP way to do it. Four years later then, the two of you in 2018 both went full-time on the product and were able to financially afford to do that. You mentioned back in 2018 that you have passed $1 million in all-time revenue. That would have been about 4–4 ½ years span. Michele, recently on your podcast Software Social, you mentioned that top-line revenue growth to July of this year was 59% growth compared to last year. Obviously, really, really solid growth is happening. To give folks an idea of scale, you have thousands of customers and I was looking at your homepage. I’ve seen big, big customers here, Amazon, Deloitte, Cushman & Wakefield, Comcast, all that kind of stuff. So fascinating that in a space, I have already said it once but I think commoditized is the word that comes to mind when I think of geocoding data. I don’t necessarily care if I were looking for geocoding data when we worked for Drip. I cared that the company stayed in business, and that the data was accurate, and the price was reasonable, and API was easy to work with, but that was it. I didn’t care about, brand, I didn’t care about a lot of other things that one might care about when searching for a product. Given that geocoding is a volume business and it is harder to differentiate. It does not necessarily lend itself to a defensible mode. I think you guys have mentioned that you’ve done a lot of innovation. You can correct me if I’m wrong, but you’ve done most of your innovation on pricing and integrations. You want to talk a little about that?

Michele: Yeah, we sometimes say that geocoding is sort of selling wood into the software market. Everybody needs it, which creates this really wide market. Our customers are one person companies and freelance developers to huge companies and pretty much every industry. In that commodity market with limited opportunity for most, no opportunity for pricing power, it sounds like a great business to be in, doesn’t it? Where we have kind of carved out our space is really focusing on making it easy for people and that’s where the data integrations come into play where we had past experiences here, for example, if you needed to know someone’s congressional district. Let’s say that you had a Drip customer that was a charity that wanted their supporters to contact Congress about an issue that is important to them. Before Geocodio, in order to figure out which congressperson each volunteer or supporter had, first, you’d have to hit one API to get the coordinates, then you have to hit another one to get the congressional district, and then you have to hit another one to get their actual contact information. You may even have to hit another one to first get the Congressperson’s name, and then another one to get their contact email or whatever their contact form link is, and then you go off and integrate that. You’re hitting three or four different places there and that creates a lot of complications in terms of just managing the data, gathering all of that data. It’s all coming to you in different formats. They may have different terms, different pricing, different restrictions on storing the data, on using the data. Where we have found our success is in trying to eliminate steps in the process for people and making it easy to get lots of related data that’s down the line all in one place. You only have to hit one API to not only parse and standardize the addresses, but you can also add the average household income for an area, or the school districts, or other types of data that you might need for everything from real estate to insurance to simply showing a map.

Rob: That makes a lot of sense and it sounds like it’s much more useful for a customer who would want that information. I’m curious, do they have to pay more for access to it? Because I’m imagining do you have to pay for that data or are you actually going out and actively scraping to get that data? Because it seems like if there’s a cost to you, that you would almost have to pass that onto your customer. I’m thinking like feature gating, right? It’s like if you just want addresses, it’s X amount per month, but if you want congressional districts, is it an add or per check or are you able to offer it just as a one big bundle. Mathias: Yes. For additional data points, we do indeed charge additionally for those. And the biggest thing is additional data storage costs and processing costs.

Michele: With the data, one of the most important parts of our service, the cornerstones is the lack of restrictions on how people use the data. We don’t want to be standing over our customers shoulders telling them how they can and can’t use the data. What that means is that we only integrate publicly available data sources. We’ve actually had quite a few people over the years come to us wanting us to resell their data and we simply have to decline those because one of the most important pieces of our service is that you can do whatever you want with the data and that’s one of the great things about using publicly available data. Now, it may seem counterintuitive that you can charge for that, but a lot of that data is in extremely difficult to use formats that are only available if you have other sort of doorways to the data in addition to the coordinates. How we charge for that, the basic level is that we call everything a look up. For example, one address to coordinate conversion is a lookup. But then if you want to add the time zone, that’s an additional lookup. If you want to add the census identifier. For example, in your Drip example from earlier where the customer wanted to know who was in or around San Francisco and who was around Minneapolis, they could add the census identifiers, which that category of data append at something called the Metropolitan Statistical Area, which is basically the broader metro area and does that radius thing for you. All of those things count as an additional lookup. For example, if someone had a hundred addresses and they wanted five different data appends for them, that will actually increase the number of lookups, that’s actually 600 lookups.

Rob: Which is nice because you’re adding value to your customers, but you also are charging for that value. You have now differentiated yourself from other geocoding services while also essentially charging more, which is a great goal of every SaaS.

Michele: Yeah and the great thing about it is, yes, we can charge for that and also we can charge nothing for it. We have a freemium model and that means that if students or people who simply don’t have a lot of data that they’re working with, they can get that data that they might need as long as they only have 500 addresses or whatnot, they don’t actually have to pay for it. But if it’s a huge company that needs, let’s say for example household income and demographics and other pieces of data, about 300 million addresses in the country, then they will be paying a lot more.

Rob: I feel like I know the answer to this next question, but I want to ask it anyway. How did you know to do all these integrations? What prompted you to integrate time zones, school districts, state legislative congressional, legislative. Were these customer requests, or was there some other way that you figured out your product roadmap?

Michele: Yeah, we talked to our customers.

Rob: Were you proactive by going out to them? Was it a mix of people writing in requests or were you also reaching out saying what we should build next?

Michele: It was a combination. You mentioned that first hacker news thread. There is a ton of feedback on that, some of it negative, mostly positive, and we got tons of emails from people saying hey, it would be awesome if you guys could do this, or you could do that? That kind of planted the seed of talking to people and the value of talking to customers. We were also learning about the space ourselves. Neither one of us did our undergrad in geographic information systems. We very much come at this from a developer’s perspective rather than a geographers perspective. When our customers came to us early on with asks, we would always ask them oh, why do you need that? Because we genuinely didn’t know, and we also had experiences from our own work showing us the value of reducing the number of API calls or places you have to get data from. I think as I grew as a product manager myself and as we worked more in the business, really started deeply talking to customers, not just waiting for them to come to us with requests, but sitting down with them, understanding their complete process, knowing every single point along the way and what those frustrations were, and where they were spending a lot of time or a lot of money, or they had to use a vendor and they didn’t like them for some reason. All of those things contributed to an ever evolving roadmap that is informed by our customers.

Rob: Is that how you decided to build your HIPAA compliant tier or you’re pricing your HIPAA product, I guess. I bring it up because on your software social podcast, you had a really good episode talking about kind of telling the story of how you built it and then I believe no one signed up for it. But the costs of keeping it running were relatively substantial, not inconsequential, I’ll say and you kind of mothballed it for a while and then suddenly a bunch of people out of nowhere wanted to to use it. Mathias: Yeah, exactly, we kept hearing over and over again is your service HIPAA compliant? Can we use this for patient data and things like that? I remember seeing it for the first time. I was like, I don’t even know what HIPAA means, or covers, or anything like that. After hearing this one too many times and also Michele’s doing a lot of custom interviews and hearing this over and over again from customers, we decided to sit down and build out this HIPAA product. It’s probably the biggest undertaking at that time. We had to really rethink our whole product from scratch and make sure everything was secure to much higher standards than we originally built geocodio for. We really pour a lot of time and money into this and we launch it and then poof, nothing. Exactly what you fear and also kind of what you expect sometimes. Indeed since we had to set this up completely separately with separate infrastructure, there’s a lot of upfront cost to us, not just the development costs, but also the infrastructure costs of keeping this running. We basically did not have a single sign up for I don’t even know how long, and we ended up almost completely shutting down this product. But for some reason, we somehow decided to keep it alive, probably just because of all the effort we put into this. It was hard to kill it completely so we decided to keep it on for a little bit longer. Seemingly out of nowhere, we have been seeing a lot of growth on this product this year in particular, really happy that we kept it alive and we actually do a lot of things now to give it a lot of love and attention that it deserves at this point.

Michele: That launch was so hard. Mathias: Yeah.

Michele: The number one rule of bootstrapping is to always make money. We don’t have the luxury of launching something and running in the red for six months or a year. I think it was maybe only a month after we launched and we learned the hard way that the sales cycle is so much longer when you’re dealing with companies that have robust legal departments, which is the case for pretty much any organization dealing with sensitive data like that. We basically had to shut off the pay as you go version of the products, and only it sort of kept it alive on our unlimited tier, which basically we only incur the cost when we actually have a customer. We had the landing page up only for I don’t know how many months. Our sole marketing and sales channel is SEO, we don’t do any outbound sales. We continued working on the landing page a little bit. I think we were a little bit dispirited, quite frankly, though for a while. And then eventually we very, very slowly started getting customers. But I don’t think we actually really believed in it being a significant part of our business or the capability to be a significant part of our business until maybe the middle of last year and then this year really took off. Mathias: I think the big gotcha with launching that product, something we perhaps hadn’t fully understood until after we launched was Geocodio was originally a super classic, sort of low touch SaaS product, self sign up and stuff like that as Michele I mentioned we jumped into all this stuff with long sales cycles. Eventually things started picking up and we suddenly had to do enterprise sales, super high touch, which is, first of all, it’s not very scalable for us to go through the process. It’s not something that was something we were used to or have a little experience with and things like that. That was definitely an uphill battle to start with.

Michele: Yeah. For an example, earlier this year or this summer, we signed a Fortune 100 customer for that product and I started talking to them in May of last year.

Rob: That’s the thing that so many founders don’t realize is the moment you start talking procurement or POs and manual invoicing in terms of net 15 or net 30, you are talking months and months of sales cycle and you’re talking you should be charging between 10 and 100 times what you charge everyone else purely to put up with the hassle or the time and potentially legal costs because they often want custom terms that you have to sign and that instantly becomes this enterprise tier that should be way, way, way more expensive. We talk about this a lot in TinySeed in the first month or two. Most SaaS apps from people who don’t really have this experience dealing with these larger companies. Most assets are underpriced and so if you have tiers that are in, as a random app, if you have $50, $200, to $300 as most of your tiers, if a Fortune 500 or Fortune 1000 company comes in, there are going to put you through the procurement wringer. You should be charging between $30,000-$100,000 a year. It really needs to be there and you should be often charging upfront. They want to pay annual, which is a great cash influx for a bootstrapped company. In addition, a lot of the companies I see that are getting really strong traction, they have what I call this dual funnel. A low touch funnel is much like probably what geocodio was when you first launched it where you come to this low price point, people can sign up with a credit card. You don’t have to talk to them and they just go. The high touch funnel, of course, is your HIPAA tier, but having both of those is like a superpower with SaaS growth because you can get a lot of people using it on the low end and you can get that constant influx and constant kind of, I’d say slower growth perhaps if we’re landing lower priced people. But when the enterprises come through, that’s when you see the really big months of growth hit because you’re again, you should be signing this $20,000 to $30,000 to $100,000 year contract and that gives you this big bump. But if you rely solely on the large ones, of course, there are great businesses built on the enterprise sales. If you rely solely on them, then you tend to have a lot of time invested doing stuff that most of us don’t want to do. I’ll say as makers, as founders, as customer researchers, that’s not our strong suit. It’s not necessarily what we want to be doing is spending time talking to procurement and legal anyway. Those two things add together to give really nice growth. I want to come back to something that Mathias said. He said, out of nowhere, all of a sudden, you started getting these HIPAA customers. Where are they coming from? Because nobody comes out of nowhere, is it just as simple as Google search and search engines or have you been doing other marketing to promote Geocodio?

Michele: We basically don’t do a lot of other marketing. We occasionally sponsor conferences, but mostly those are just conferences that our friends run. It’s very SEO driven. To what you were saying about low touch and high SaaS in combination, it’s been really fascinating for us to see how those interplay and how they feed one another. We will very often find that somebody on a team within a large company will be googling for geocoding or whatnot. They start using us on the free tier or they get their bosses free card and they do a little bit of usage and then anywhere from a day to a month to a year later, they might say hey, we want to get an annual contract. What’s so amazing, especially about having freemium SaaS is that they can try out the product and see if it’s a fit for them before you ever even talk to them. You don’t have to spend all of this time with a huge sales team, doing demos, doing cold calling, cold emailing, all those things. We don’t do any of that because customers can figure out for themselves whether the product is right for them and then they simply tell us when they want to switch to annual. I also find that doing those negotiations where they always want to customize things in the contracts, and there are sometimes difficult scenarios in those negotiations. But I find that having a point of contact at those companies that have already been using our product, is already totally sold on it, and is a huge advocate for the product within the company can make those conversations with legal or with compliance or whatnot a lot easier because they’re doing some of that negotiation for us. They’re advocating for us and time and time again, that’s helpful. It’s always so fascinating to me, seeing the interplay of them. In Slack, we have a feed whenever someone cancels or deletes their account and wants to talk about our product as if someone has an organizational account, they have to delete their old account to be re-added because we never thought about that from the beginning. It’s so interesting to see the comments in that and so often it’s oh, my company got an account, so I’m just deleting this one so I can re-associate it.

Rob: That’s fascinating. This really lines up with what several of the B2B SaaS companies that are growing like a B2C companies, they have superpower growth are companies like Slack where they have the bottom up approach. That’s been a big thing where a small team of three or four starts using it and then another team of ten and then a team of 20 and suddenly the IT department’s like wait, we need single sign on. We want to manage it. We want an annual contract. We want a paid version, and they want to bring it under the corporate umbrella. That’s in essence what is working for them. A big part of that is a really inexpensive or a free tier, frankly, because that allows people to use it. Once they’re in it, you have the champion, much like you’re saying. I was looking at an app, I have no idea what it was but it was a SaaS app. They had a free tier and then their pricing started at a thousand dollars a month and up. It was like they know their customers because they know that people want to try for free, get used to it. If it’s valuable, it was worth $1000 a month. It was some type of enterprise type tool that, again, I don’t recall what it was, but that’s when you know that someone has thought it through and not just said well, I’m going to have free. Isn’t it usual that you do like a $50, $100, and $200 dollar plan? It’s kind of the basics. Someone has really refined and honed it and that is an obvious advantage both for companies like Slack and even for bootstrapped assets like yourself. Mathias: Yeah, I say from a pure economics and finance perspective, I think a lot of things we do will be a lot simpler, but it’s a bunch of plans we can so predict MRR things like that. Having this pay as you go tier means that basically the revenue from each customer can vary like crazy depending on their usage. But I feel like that’s also a cornerstone of the foundational part of the company and how we started out. We really, truly believe that anybody should be able to afford this. One of the reasons why we founded this company was because we had this issue where using another very public geocode provider, you code 2500 addresses per day and if you needed, say, 3000 addresses per day, we had to do like an annual $50,000 a year contract or something crazy like that. There was nothing in between. Having this pay as you go tier for us means that, you can just pay an extra $5 a month or whatever for the additional data and not have to lock yourself into a high priced tier. That is just so important and something real. We promised everybody who’s asking, no, we’ll never give it up, we can’t. It’s just so important that there’s room for the little guys and the big ones, too, right?

Michele: It’s funny sometimes when I’m talking to people, I’m surprised by how often I’ll hear someone say oh, we’re only using you guys for $20 a month. I feel so bad. Is there a way we can pay you more? Which is always kind of a funny thing. Or my boss is really cheap, and I’m like that’s fine, it’s totally fine. Some people only need $20 a month worth of usage, but maybe they’ll go on to a company someday where they actually need $1000 a month of usage or they need it for free. You just never know and it’s not just a relationship with a company, it’s a relationship with a customer and with a person. We just so strongly believe that if you meet them where they are, that will be beneficial for everyone, and may not be always financially, and we’re totally okay with that.

Rob: That’s the beauty of bootstrapping or frankly, just being in control of your company and not having to optimize for growth to the extent that you can’t have that attitude. If that’s what makes you happy as a founder, and you’re happy with your growth, and you’re happy with the way you run your business, that’s why we start companies, so we can be in control of how we treat our vendors, our customers, our investors if we have them, and our team members as well. I think a control thing that I think a lot of folks don’t remember or perhaps they forget as they do it. Well, guys, we are hitting time here. I want to really thank you guys for taking time to chat with me today about Geocodio and your story and all the things you’ve been up to. If folks want to keep up with you, Michele, you release every week on this Software Social Podcast with Colleen Schnettler and on Twitter, you are a prolific tweeter at @mjwhansen and Mathias, you’re @MathiasHansen, but we’re going to put both those in the show notes because spelling Mathias is not perhaps as phonetic as one might think. Thank you guys again for coming on up to Startups for the Rest of Us.

Michele: Thanks so much. Mathias: Thank you so much for having us.

Rob: Thanks again to Michelle and Mathias. Really appreciate them taking the time to have that conversation with me. I hope you.got a lot of value, maybe a little bit of inspiration, some strategies, tactics for yourself.

Thanks for joining me this week on Startups For the Rest of Us. I am your host, Rob Walling, and this is Episode 523 where I answer a bunch of listener questions, have a rapid fire lightning round of listener questions. This episode is from MicroConf On Air a few weeks back and there were so many good questions. I spent about 30, 35 minutes answering them. It felt almost a natural Startups For the Rest of Us episode.

Once we dive in, you will hear a little bit of the intro music and hear me intro MicroConf On Air, which is a live stream that we do every Wednesday at 1:00 PM Eastern, 10:00 AM Pacific. If you haven’t checked it out, head to microconfonair.com and you can check out an episode. Sometimes I do live Q&A, taking questions from the chat in MicroConf Connect and in the YouTube comments. Other times, I have a conversation with a successful entrepreneur or an early stage founder. It’s a good time.

You can hear those MicroConf On Air episodes in a podcast feed at microconfpodcast.com if you’re curious to check them out in audio each week. Before we dive into that, I want to remind you that through MicroConf, we are putting on the first of its kind SaaS podcast awards. You can head to saaspodcastawards.com to nominate your favorite SaaS, or bootstrap, or podcast in one of four categories if you haven’t already gone and nominated. Or if you just want to nominate a couple of different shows, please head over to saaspodcastawards.com.

With that, let’s dive into this all listener question episode of Startups For the Rest of Us/MicroConf On Air, where I answer questions like how do you feel about entrepreneurship being taught to children? If you had a slow growing B2B SaaS app, what questions would you be asking yourself to break through the plateau? How do you prepare financially and otherwise for your retirement? What are things you notice that bootstrappers commonly overlook that are preventing them from achieving their goals? And how do I keep my hair looking good during the pandemic? It’s a real question. I probably should have given more of a joke answer. Somehow, I was in the flow of answering questions and I talked about that. With that, let’s dive in.

We are live and welcome to today’s episode of MicroConf On Air. I’m your host, Rob Walling, live streaming direct from my bunker library here in Minneapolis, Minnesota. Every Wednesday at 1:00 PM Eastern and producers, Andrew and I stream for 30 minutes and we cover topics related to building and growing ambitious SaaS startups that bring us freedom and purpose and allow us to value and maintain healthy relationships. We believe that showing up every day and shipping that next feature, that next piece of marketing copy closing that next sale is the way to build a sustainable company.

Thanks so much for joining me today. Today is an all ask-Rob episode. We’re going to be doing live Q&A. We have some good questions coming in on Twitter and in the MicroConf On Air channel in MicroConf Connect. If you’re not part of MicroConf Connect already, you should head into microsoftconnect.com. We have more than, I believe it’s over 1600 founders, bootstrappers, and mostly bootstrapped founders in there hanging out and having conversations like this every day. What I love is when I get into Connect and there’s a solid thread where I see a question and—I know the answer to this, or I have a thought on this, and I go in—and there’s already five amazing answers from other experienced founders who have done exactly this. I don’t even need to weigh in because the answers are good and they’re all legit. I am checking out some questions.

Today, I normally introduce my guest here, but you’ll know me as co-founder of Drip, and MicroConf, and TinySeed, Startups For the Rest of Us host and author of Start Small, Stay Small. I’m going to be answering a bunch of questions today, and it’s a good audience. It’s a great group of creators that are here in MicroConf Connect and participating on Twitter, and just into this MicroConf averse. I did an interview last week. If you haven’t checked this out on Indie Hackers, Courtland Allen and I had a conversation for about 1 hour and 10 minutes, solid, good questions from Courtland, good thoughts from him. I was just weighing, and we were just talking about frameworks, and advantages, and opportunities for launching SaaS in October of 2020. It was very specific to now. Not 5 years ago. Not 10 years ago. That’s spring on a few of the questions that we have today.

I’m going to dive in there. But first I’ve had a request already for a tell-a-joke. In true MicroConf dad joke tradition, this Fibonacci joke I’m going to tell you, it’s as bad as the last two you’ve heard combined. Normally at MicroConf, there’s all these groans. There’s groans, and laughs, and some people clap—slow clapping, golf clapping me—but without that, it loses a little bit.

My first question and today is from Noah Bragg. Thank you, producer Sander. It’s about 20 seconds late. Noah Bragg from MicroConf Connect asks, “If you were starting a business today—I’m going to assume it’s a SaaS company—and you were earlier in your career, would you try multiple business ideas at once, or go all-in on one?” This is a good question.

All-in is a deceptive phrase because I wouldn’t just dive in and say, oh, I have this idea. Oh, I’ve done some validation. Now, I’m going to spend the next six months going all-in on this idea. That’s not what I would do, but I would focus on launching and validating one idea at a time. Personally, I have a huge belief in focus. I’m not saying you can’t own multiple products at a time because I was the King of these micro portfolios back in the day, where I had 10 different products generating revenue for me. But I didn’t launch and grow 10 at once. I launched or acquired and grew one at a time, and then I figured out a way to make it sustainable, and more autopilots, a misnomer. But mostly an autopilot for now is how I’ll phrase it.

It’s on autopilot for 3-6 months. Until something happens, we’ll have to circle back. But focusing on one thing, you get into the headspace of it. All the information and content that you’re consuming, you can adapt or think through how you can apply it to that one thing. I would be doing a ton of validation at every step. When I first come up with an idea, I always think 90% this thing’s going to work. Then by 24 to 48-hour cooling off period before I register any domain, which is what I do these days, I wind up falling down to 10% or 20% certainty that this thing’s going to work.

Then typically I say, okay, what’s my next step to validate, how can I get myself to 25% or 30%? Oftentimes, it’s sending a few emails to people I know. It’s putting something on Twitter, asking opinions. It’s having face-to-face or in this case, these days, Zoom conversations. I might be putting up a landing page, driving traffic to it—whether it’s from my podcast, whether it’s from Twitter, whether it’s from running cold ads, which I did back in the day when we were validating Drip. I would just try to get that validation one step further, one step further.

That’s if I’m going to build maybe a larger, more novel product that doesn’t exist in the space today, and I’m trying to validate the idea itself. What if I know that there’s a gap in the WordPress plugin market, or that all the plugins that do polls on WordPress is just an example that they aren’t very good, or that I know that I can rank. It’s not that hard to rank high in the WordPress repository. There’s just a little bit of WordPress SEO. The algorithm is not as complex as Google. It’s not that smart.

Maybe I don’t want to validate that everybody needs a polling plugin. Maybe I want to validate that I can just rank higher. I get something in there or I email the top 10 poll plugins, especially the ones that haven’t been updated in two or three years, and I say, can I adopt your plugin or can I buy your plugin? These are ways that I would be going about. You don’t always have to build the thing from scratch, but the question of multiple or one, which should you focus on, in my opinion, unless you’re stair-stepping, and even with stair-stepping, I would focus on that. I was going to do an info product at the bottom end, or I would do that WordPress plugin or something as step one, and then I would build on it from there.

“How do you get your hair looking so good during a pandemic?” From Pat Foley. Thank you, sir. I did wear a mask and I get haircuts. That’s the honest answer. I had pandemic hair for the first four months because everything was shut down here, but we are still in—I don’t even know what—stage one lockdown where you can go to places. I went to the gym the other day. We wore a lot of face masks, but knock on wood, Minneapolis is not doing as poorly as many of the states around us. I appreciate the joking question, but that is the honest answer.

Question number two, also from Noah Bragg and MicroConf Connect. He’s following up on the above question. He says, ”If building your first tiny product like a WordPress plugin—” Hey, that was my example. I often say info products to WordPress plugin. There are Shopify ad-ons, there are Photoshop add-ons, there is a Google app store, Google Chrome store, things you can build. There’s a myriad of them. There are Magento ad-ons, we can go on and on. Anytime there’s an app store. Anytime there’s an ecosystem that has something that you’re not just battling to rank in Google for, these are the types of step one ideas I would encourage people to look at.

“If you’re building a first tiny product like a WordPress plugin, what level of customer research should you do? Is it more you see a problem and ship something? Or should you take a more cautious approach and try to validate further before shipping? I appreciate someone handing over money is the only real validation, but I’m trying to get an idea of how quickly you should move and whether it’s a case of trying lots of small bets. I hope that makes sense.” It does make sense. I would tend to act pretty quickly. I wouldn’t tend to do a bunch of customer validation calls or a bunch of customer development calls if I was going to do a small step one thing. I would validate almost in the Start Small, Stay Small approach. You go to startsmall.com, it’s my first book.

While the exact tools and exact numbers that I use there may not be accurate today because it’s 10 years old, the tactic there was you find a small niche or you find even not a small niche, but with an underserved corner that you can somehow measure the interest, whether that’s looking at a WordPress plugin and the repo and saying, oh, it has this many downloads. It must be a popular search term. Or you go to the Google keyword tool or you go to Ahrefs, or SEMrush, or Moz today and you say, oh, there are 5000 searches a month for this thing, and there are a couple of tools, but they’re not that great, or they’ve been abandoned.

There’s ways to validate just using free or lightly paid keyword tools and trying to find gaps in these markets. Even these days, there’s fewer gaps, but it’s places where people have launched and abandoned, or they’re not doing a good job and you see an angle. Then I would try to write some code quickly and move there.

Having a few customer development conversations or trying to figure out, hey, where do these people hang out that would use a plugin like this? Oh, they’re on Facebook. They’re in a couple of Facebook groups. Become a part of those Facebook groups and participate in them. They’re in these Slack groups. They’re in these forums. These discourse or discuss groups. There are ways to get this up to, I would say 20%, 30%, 40% validation, and to be able to write code and ship something in two weeks, three weeks.

For my bet, for my money, I’m probably going to write a little bit of code and get it out there. The learning starts with every bit of validation and frankly, getting something out there quickly in this—small niche is not the right word—but if it is a micro idea, I would lean towards action more than trying to validate for months and months.

Next question from Rami, he is King Ram Star on Twitter, “What advice would you give to someone entering a somewhat competitive market? Let’s say 5-10 direct competitors, which sounds ugly, but it’s less ugly than CRM, project management software, ESPs, marketing automation providers, where there are hundreds of players. Five to ten direct competitors, while that’s a thing, not the end of the world. More specifically, what would you do to out-muscle the competition when the resources are fairly equal, but the competition has social proof and social capital?”

I would not try to out-muscle the competition if I did not have a lot of money, or social capital, or social proof. You’re not going to muscle them. There’s this move in Jiu-Jitsu, or just the whole premise of Jiu-Jitsu is if someone has a bigger opponent than you, you don’t go head on with them and try to out strength them or out-muscle them because they will win. What you do is that you try to take their momentum when they punch you, when they lunge at you, and you peri and you use their momentum against them to get them on the ground, and then you grapple.

Similarly, I would use my opponent’s strengths against them. An example is you have 5-10 direct competitors. They have social proof and social capital. What are they doing wrong? Are you in their forums or their private Facebook groups? What are their customers complaining about? Where are they dropping the ball? Because companies that get to $1 million in ARR, $10 million in ARR, they tend to be leaving out sections of the market that they just have to ignore. They may be disappointing a certain subset of their customer-base or of their prospect-base.

It’s even better if you get big competitors because these are way easier to compete against. Companies like QuickBooks and PayPal. Think of Stripe launching at PayPal. Think of Xero launching at QuickBooks. Think of Drip launching against Marketo, Pardot, and Infusionsoft. They’re these big lumbering companies that aren’t shipping very often. They don’t have the amazing UX that you can build from the ground up. They aren’t just doing hand holding with their customers, they aren’t building the features that a subset or a vertical of the customer set might want.

I would start at the grassroots and I would start by trying to find 5 or 10 unhappy customers that I could interact with and say, what are you unhappy with? If you’ll get someone on the phone and they’ll just complain about everything—oh, the app’s impossible to use, and it’s too expensive, and no one listens to my phone calls, and I send them 10 emails a week and they don’t respond. That’s a toxic customer, they’re angry with everything all the time, they’re going to be unhappy with you too, goodbye.

But then you’ll get people who are, they’re pretty reasonable. They have ignored this corner of the market where photographers have special—I’m making this up. But photographers have special bookkeeping needs and their tax is calculated differently, and QuickBooks has just not listened. Suddenly it’s, oh, really? Who else could support photographers tax, bookkeeping, accounting needs? What other things have you tried to fix this? I’ve looked and there’s not an app that does this. Well, then it’s okay. Can I find 10 more photographers, or salon owners, or whoever it may be startup founders. That’s where I would start is, how do you find that subset if you have all this competition that is being left out.

The other thing I would think about, if you’re already in the space, you try to look for the hated competitor and become the opposite of them. If you can’t figure out a unique positioning—we’re the opposite of QuickBooks because we suck less, or we like QuickBooks but we’re for this particular vertical.

Think of SavvyCal. There’s Calendly and there’s all these big competitors. But look at what Derrick Reimer’s doing with SavvyCal. You go to savvycal.com to check it out. He’s basically saying it’s for busy startup founders and executives who have some pretty specific needs, and want to maybe guard maker time, and want to eliminate the awkwardness of sending a calendar invite. He’s taken a pretty specific tack there. He’s taking a unique position in the space. That’s one way. Another way in these competitive spaces is to have a unique traffic channel. That is, you look at what someone, maybe Ruben Gamez, is doing with Docsketch, which is e-signature, docsketch.com. It’s a terribly crowded space with literally billions and billions of dollars in market cap are in that space, and yet he has figured out a way to do amazing content marketing, amazing SEO, and just channel some of that traffic to where he is being highly successful in a competitive space.

To summarize, if I was going to go into a competitive space like this, I would look for a hated competitor. I would look for areas where that competitor is dropping the ball with either a specific audience or a specific group of people. I would look to position myself uniquely, or I would look for a unique traffic channel. With Drip, we had three of those four. Every one of those you have is better. If you only have one, you can still make it work, it’s just more of an uphill battle. Thanks for the question, Rami. I hope that was helpful.

The next question is from Garrett Lancaster, from MicroConf Connect. He said, “If you had a slow-growing $12,000 MRR, self-funded, B2B SaaS,” I love the specificity of this. “Doing about $150,000 a year, self-funded B2B SaaS, what questions would you be asking yourself?” I think he’s implying it’s slow-growing. What questions would you be asking yourself to get it growing faster? “How much do you think about retention versus conversion in this position?”

If my retention was not high, I have a problem. I’m going to use this phrase that is its product-market fit. I know that’s just a big, muddy, amorphous thing, but all it means is are people sticking around? Do people love your product? Do they stick around? Is your churn below 6%, 7%, your aggregate churn below that number? It depends on the price point, it depends on a bunch of stuff, but if you’re below 5%, then I would not be worried about retention now. I would be looking at increasing traffic and increasing conversion. The big question to ask is where’s the metrics gap? If you’re churning out 10%, 12%, 15% a month, that’s the number one problem. That’s what you have to fix before you do anything else.

That’s where I found myself when we were building Drip. We were a few months after launch and we had grown to $8000-$10,000 a month and we’re churning everybody out. That was a big retention problem. You can watch my MicroConf Talk, The Inside Story of Self-Funded SaaS Growth, I believe it’s called. It’s from, whatever, 2014, 2015.

If your retention is fine and people get on and then churn goes low for people, then, of course, it’s how much traffic, which your visitor-to-trial sign-up rate or visitor-to-trial should be, I’d like around 1%, if I’m asking for a credit card. I’d like about 15%, give or take, maybe 20%, if I’m not asking for a credit card. If I’m substantially below those, you have a trial conversion problem.

If I’m asking for a credit card upfront—trial to paid, I want to be between 40% and 60%. If I’m below 40%, I have a problem. You can look in the state of independent SaaS from 2020 and look at what other conversion rates are, or you can look at Craig Hewitt’s talk from MicroConf Europe in—was it just last year? It feels like 5 years ago. It was just last October. It’s something about viewing your metrics, maybe producers and they’re composed of that in the MicroConf Connect Slack. But he basically walks through rules of thumb and then says, these are the things to pay attention to if you’re below these rules of thumb. Otherwise, move on to the next thing.

At a certain point, my whole funnel is actually pretty solid. Now I’m just going to drive more traffic. I need to spend money on ads. I need to spend money on content. I need to do integrations. I need to go on podcasts, whatever it is, then let’s just see it. As you get more traffic, your conversion rates almost inevitably drop. Then you have to figure out how to then cater to those new folks.

The next question is still from Garrett. He says, “How would you go about offloading tier 1 customer support,” meaning frontline. Let’s say, it’s intercom chat, or it is usually just messaging or it’s email. “How would you go about offloading it when quality support/training is an integral part of your business model?” Everyone who asks this question says when quality support/training is an integral part of your business model—it’s an integral part of every early startup’s business model.

Much if I’m a developer, I write the best code in the world, I always feel like I can give the best support. In many cases, that’s relatively accurate. But how would you go about it? You find someone who’s really […] good. That’s what you do. You don’t settle for someone who isn’t going to learn your tool and who isn’t going to be ravenous about wanting to make people happy and learning your tool.

I had a non-technical, non-developer support guy that I worked with from, it was about 2011, 2012, all the way through when we were acquired. Then he worked with Drip through 2018, 2019. He was not a developer, but he figured out how to view source. He would go dig into people’s JavaScript and hack around in it. Obviously, on his client-side, he wouldn’t hack their website. I taught him how to use FTP. He learned how to edit HTML. He was just teaching himself this stuff.

He would sometimes ask me for a Loom, a quick screencast about stuff. For the most part, he went out and educated himself. In the early days, was he the fastest responder to tickets ever? Well, no because he was teaching himself stuff. But by the time he was working on Drip for a year or two, he knew the product. He knew how to answer support way better than any of us— way better than me, way better than the developers—and that’s the kind of person you’re looking for.

How did I find him? I went on Upwork and I went through two or three support people until I found a guy who was really good. He was working for a bunch of companies at once. He was doing 3 hours for me and 5 hours a week, then 10. Eventually, I said, I just want to hire you full-time, I was good to work with. We got along. We never did video chat, we never actually met in person. He lived in Mexico and that was it.

Many of you, if you emailed Drip, Andy responded to every support request for the first 3 ½ years of Drip’s life. I think it was 3 ½, maybe it’s 2 ½. Every single frontline support was just one guy, Andy. That’s what you do. That’s what I would do today. Hire good people.

The next question from Pablo in MicroConf Connect, “How do you feel about entrepreneurship being taught to children? Do you think it should be taught? Have you witnessed good execution of teaching children entrepreneurship?” I feel good about it with a caveat. My son had a course in eighth grade or maybe it was freshman in high school. It was teaching him stuff about intellectual property. It was trademarks and it was logos and he had to design a logo. We’re they teaching him everything we learned in MicroConf? Of course not. But did he learn some basics that he didn’t know the difference between trademark, and copyright, and some basic fundamentals? I thought that was good.

All of us in high school/college should learn something about entrepreneurship, something about how businesses work, something about personal finance, to be honest. Why is that not taught in school? Why do none of us know how the stock market works? You have to go do educate yourself. You have to go seek that out. How to just simply find a budget and stick to it. To me, it’s a real problem that is not taught to—whether it’s our children or probably our high schoolers.

We have Civics and Economics where we learn about the economy and nobody pays attention about the three branches of government. I’m only joking. Of course, people pay attention. But personal finance and something about entrepreneurship, they should be exposed to it to know this is what entrepreneurship might look like.

There are examples of people who are making caramels or cookies in a local kitchen and you could do a tech startup and raise funding or not. Do you think just being exposed to that would be super helpful for children? Yes, I do think it should be taught. I can’t think of an amazing example of anyone who’s done it.

I will give a spoiler that—I don’t know if she’s announced this—but Dr. Sherry Walling, my wife is writing a book called, Raising Entrepreneurial Children or something like to that effect. That’s the working title. Go to zenfounder.com and sign up for her email list if you want to hear about it. Of course, I’ll be talking about in the future. I may even contribute a chapter or two. Sherry and I had a ZenFounder episode a while back. Zenfinder episode in the first maybe 30 episodes that was all about raising entrepreneurial kids, if you want to check that out.

Next question, “What are things you notice that bootstrappers commonly overlook that are preventing them from achieving their goals?” A lot of bootstrappers overlook the fact that you have to market, that it’s not about building products. Bootstrappers don’t pay enough attention to their metrics, their analytics, or their metrics. They don’t even know what’s working. You ask someone a question and they say, what’s working is word of mouth. Word of mouth is usually the wrong answer.

There’s a lot of mistakes that people make. MicroConf talks point this out. I would say listening to Startups For the Rest of Us, even nugget.one, which is a pretty interesting website, Justin Vincent has a pretty interesting course there. There are definitely the common mistakes before finding an audience building before validating—not an audience—but a customer base building before validating. These are a lot of things that people do. People give up too easily. They build something, it goes to a plateau, and they give up instead of actually doing the hard work, it’s a lot more hard work than people realize.

Another question. This is from Vijay Goel from Chefalytics. He says, “What are some of the biggest takeaways you can see across your portfolio of early-stage SaaS companies? Is it one or two winners generating most returns? VC style? Is it steady progress by most? Will the majority be default alive businesses?” The answer is yes. The vast majority are already default alive businesses.

Every one of the 13 companies of batch 2 is default alive, pretty sure. If I were to put a number to 70% of batch 1, maybe 80% are default alive. So yes, default alive, all of them are making steady progress. Of 23 companies, there’s maybe two or three that are still not growing— two, three, four—it’s a small number. Maybe 10%, 15% are still trying to find that repeatable channel, still trying to find that repeatable customer base, but it is definitely steady progress. I don’t think it’s going to be winner-take-all. But, to be honest, I shouldn’t say I don’t think it will.

Einar did analysis of a bunch of SaaS apps. He got a bunch of anonymized data and he looked backwards over the last five years. If you do look at returns, it was not winner-take-all, but it was definitely a power law. Power law just means there is a small number who get 10 or 100 times larger than the others. In that case, yes, that era in that sense, yes, we may get there. I’ve been doing this for 15 years. There’s a reason MicroConf, and Startups for the Rest of Us, and my books, and TinySeed exist. It’s not to help the winner-take-all. It’s to help everyone. I want to raise the tide so all the boats go up. Yes, even if the returns are generated in that VC style winner-take-all, I will still be around and still be here to help everyone involved.

The question from Patrick Foley, “Have you ever built a business that got a fairly large portion of its revenue from services instead of products, but not just you consulting?” Yes. One I can think of, it’s called CMS Themer. It was a productized service before that term existed. It was at www.cmsthemer.com. I don’t even know if there’s a website there anymore. I ran it for about 18 months to 2 years. I acquired it from someone who wanted to shut it down. I knew how to rank it in Google. I got it to the top first page of Google for WordPress theming and some other things were present, Drupal and Joomla. Then I just had an agency—I believe they were in India—it was somewhere that I could outsource to for cheap. I marked them up 100%. I would charge $500 for you to send me a PSD, I would send it to my agency in India, they’d charge me $250 to turn it into a theme. I would send it back and make $500. It wasn’t a productized subscription service, but it was these one-off themes.

As custom stuff happened, we would increase the price. If you needed something more responsive back in 2009, it was obviously more money. Yeah, I have. It was fine. It was a little, quite a bit of hassle. I had that along with a bunch of software products and ecommerce and stuff. I’m trying to think if there are any takeaways I have from that. Productized services are a great way to get started quick these days, especially subscription services. You look at Audience Ops from Brian Casel, or you look at Podcast Motor from Craig Hewitt and there are other examples.

They get up to whatever $20,000, $30,000, $40,000 a month in no time. And then yes, you have to have a process in place, you have to have people to manage. It’s not a software product, but you learn a lot. It’s probably 70%, 80% the same as building a SaaS. Then Craig Hewitt levered it up to then acquire WordPress plugin to then build Castos and now, everything’s combined into one. It’s like a match made in heaven and it’s like a chef’s kiss to the stair-step approach in a way is building these businesses and building on top of each other.

And now one more question from Christoph Engelhardt, “How do you prepare financially or otherwise, for your retirement?” It’s a good question. I like personal finance. I’m a bit of a nerd with this stuff. Before I had sold Drip, I was contributing to retirement for most years—for both Sherry and I—putting them in the US. There are IRAs or 401(k)s.

I did stop. I will admit at the worst times of Drip, when it was growing fast and we had cash crunches, I stopped contributing to retirement. My bet was that Drip would make enough money in the end, whether through an acquisition or whether through throwing off cash, that it would make up for that. The bet worked out for me. It’s not going to work out for everyone. But by the time we sold Drip, I believed between Sherry and my retirement accounts, we had about $300,000, which I was in my late thirties. Is that right? I might’ve been in my early forties. I would prefer to have more by then, but when I looked at compounding and how it was growing, we would have had I’d say a couple million when we retired. But I also counted on having a lot more earnings and being able to put money in.

For me, it’s about saving early. I started contributing right out of college. In fact, if you can do anything for your kids, or nephews, or whatever—I’ll comment on the US because I know the retirement system here—but if there is a RHYTTAC-shielded retirement account, an individual retirement account called an IRA here, as soon as your kids get any income, match what they make, give and put the money. You can put up to $5500 as of this taping into a retirement account.

If you can put it in when they’re 15 or 16, compound interest is the eighth wonder of the world. I believe Albert Einstein said that. The earlier you get, if you invest at 15 versus 30, you get two more doublings of that, if you invest in the stock market. Put it all in high-risk stuff. I would be 100% in stocks. If you’re making 8% per year, then it’s going to double every 9 years. If you make 9% per year, it’s going double every 8 years. From 15% to 30%, you get almost two doubles of that. If you put in $5000, it becomes $10,000, then $20,000 by the time they’re 30. If they don’t contribute until 30, they have to contribute $20,000 to have the same impact that you do when they’re that young.

I started putting money in when I was 22, and just a little bit. I didn’t have much money. I wasn’t making much. I make $15, $17 out of college per hour. But I started putting $50, $100 a month away as early as I possibly could.

Thanks so much for joining me today. That is going to wrap us up. Thanks for hanging out with me a little longer. Last joke, can you imagine if one day MicroConf acquired Microsoft? Ooh, that was a misspoke. Can you imagine if one day Microsoft acquired WIWORK and named it Microsoft Office?

We do have some special podcasting stuff coming up soon. We’re going to have some voting and some nominations. I’m teasing that, so keep your eye out at microconf.com and thank you as always to Hey and Stripe for supporting MicroConf Headlines partners for the year. We love working with them. Thanks for joining me. I’ll see you next week.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. I am your host, Rob Walling, here for episode 522. Every week on this show, I cover topics related to building and growing startups using an ambitious yet sustainable, sane approach. I know that you’re not willing to sacrifice your health or your relationships to grow your company, and yet we aspire to build an ambitious startup. Thanks for joining me again this week. I have a many time guest back on the show, Craig Hewitt, who has come on for Q&A episodes. He’s come on for a startup news roundtable. He’s told the story of his startup Castos, which went through TinySeed batch one. You could hear that complete story and detail across the first season of TinySeed Tales where we recorded eight episodes over the course of eight or nine months. You’ll hear this nice longitudinal look at his and his team’s journey as they focused on and grew the company during 2019. I wanted to have him back on today because someone wrote in and said, “I want a ‘where are they now’ episode of Startups for the Rest of Us that looks back and catches up from where Craig left off.” Coincidentally, almost to the day, it was one year since we had recorded the season finale of season one. I hope you enjoy the conversation we have today. Before we dig into that, I want to let you know about the SaaS Podcast Awards that MicroConf is holding right now. You can nominate your favorite podcast that has some affiliation or relationship to SaaS, whether it’s two SaaS founders talking about it or whether it’s people doing interviews. There are four categories of podcasts that we’re going to be looking at and highlighting. If you head to saaspodcastawards.com, you can enter your nominees for each category. In a few weeks, we will have finalists, voting, and eventually, we will present awards to the winners. This is the first of its kind. We’re really excited to be able to gather people together and hear what the people’s choice is for the top podcast and podcasts because it’ll be nice to have finalists to look at across each of these categories. Head over to saaspodcastawards.com to nominate a podcast. With that, let’s dive into my conversation with Craig Hewitt, the founder of Castos. Castos is podcast hosting and production plus private podcasting. It’s actually where this podcast you’re listening to is hosted, as well as TinySeed Tales and the MicroConf podcast. I hope you enjoy our conversation as we look back at the last year and hear where Craig and Castos are now. Craig Hewitt, thanks so much for coming back on the show.
Craig: My pleasure. Thanks for having me, Rob.
Rob: People will know you from Rogue Startups with Dave Rodenbaugh, your podcast, the founder of Castos and PodcastMotor, as well as the subject, the victim of TinySeed Tales season one. We recorded eight episodes back in 2019, got a lot of really good reviews and positive comments about that season just about our conversations, how open you were about sharing your victories, struggles, the journey of being a founder, and growing your company. You’ve also been on Startups for the Rest of Us at least two or three times. You’ve answered questions, I interviewed you about starting Castos and all that stuff. I feel like folks should have a decent idea of who you are and what you’re up to, but for those that don’t, Castos is the startup that you’re focused on. Obviously, you went through batch one of TinySeed. We’re talking offline that before season one of TinySeed Tales, as we started recording it, you were at four full-time employees and now you’re at eight. You tripled in revenue, you’re already in the five figures of monthly revenue when the season started. Over the course of that—I don’t remember how long we recorded, it was about eight or nine months—basically, you tripled on revenue and you haven’t raised any additional funding. You took funding from TinySeed and used that to truly catapult forward. You hired a growth marketer named Denise, who I know has worked out really well. Recently, you hired Matt Medeiros who folks may know from the Matt Report, and he’s your Director of Podcaster Success. A ton has gone on. The last time we spoke to record the final episode of season one of TinySeed Tales was almost one year ago today. It was October 30th of 2019 and as we’re recording today, it’s November 4th. With all of that, welcome to the show. Thanks for coming back on. I’m really excited to dive into what’s been going on over the past year.
Craig: First of all, I can’t believe that we only recorded eight of those episodes. They were intense emotionally—for folks listening to follow that story—because we had a lot of ups and a lot of downs. Hearing that that was only eight episodes makes me feel old and makes me have more gray hair from that, but that was a lot of fun.
Rob: It feels that way to me too. I know 8 aired but it feels like we recorded 16 and I don’t know why that is. I think it’s just tough times.
Craig: It’s just an intense time we’re in, right?
Rob: It was. It was pre-COVID and everything. The death of George Floyd hadn’t happened yet. COVID and this very stressful US presidential election that is happening right now, that wasn’t happening. It really was a lot of business stress on you and a pivotal point in the business.
Craig: Absolutely.
Rob: The way I want to do today is I want to revisit a couple of things that we talked about in the final episode of that season, and then talk about some secret audio. You and I recorded about 10–15 minutes where you were talking about some top-secret future plans you were going to do, but you didn’t want to air that because it’ll give away your strategic move. We’re going to pull some snippets out of that to air because now that it’s been a year; you’ve already done those things. And just talk about some recent developments, basically, with Castos, what worked and what hasn’t. Just do a ‘where are they now.’ I want to kick it off with, during the season of TinySeed Tales, you took a big gamble. We took a couple of big gambles, actually. One, you hired a growth marketer. You went all-in on getting someone to hand off marketing to. That was a challenge for you because you had been the only marketer. You had basically written all the copy and just been in-charge of the strategy and all that. You made a difficult transition during the season of starting to hand this over to her. In the end, it was a resolution of yes, that worked, that was smart, and it was working at that time. A year later, I’m curious to hear your reflections on how that’s been going.
Craig: A year later, it was a fantastic decision. We hired the right person for sure. Denise is wonderful at her job. She is very skilled, very detail-oriented, and is becoming a really strategic thinker from a marketing perspective, which I think is the thing that has changed the most. She would probably be the first one to tell you that she came in without any kind of SaaS marketing experience and now is very savvy in that respect. All the way, up and down the stack or the funnel if you will. We talked about this being the goal. It allows you to move your energy and focus on the business and where you operate. We have a weekly marketing meeting and we chat. Now it’s Denise, Matt, and I because Matt, even though he’s tied as a Director of Podcaster Success, he comes from a sales marketing background. He’s a lot of product and podcasting domain expertise so he’s definitely involved in a lot of the marketing stuff that we do now. I go to that meeting and we talk a lot of really high-level strategy stuff. The two of them go and execute almost all of it now. It’s great because what it does is just put you on a different trajectory than if you do it all yourself. It really is what we wanted. Denise wakes up and thinks about how to grow Castos every day. I do, too, but I think about a whole bunch of other stuff. I think the more that we can let someone focus on doing a single thing—and we’re only eight people so nobody can do just one thing—the more we can get to that, the more successful they are at their jobs. That moves the needle for us, the business.
Rob: That’s good to hear. Of course, we know you update us with what’s going on. I knew that was the story but it has been so fun for me to listen back to the season and hear you put out the job description. You had a process for hiring. There’s always uncertainty, there’s always like, I think this person’s right, will it work? It’s nice when it works out that well. We hired the right person because there can be that paradigm shift or that one plus one equals three or whatever cliche you want to use. It just levels you up so much more than you probably even expect.
Craig: Even more, the other path there could be let’s hire a content marketer just to write, let’s hire an agency to run Facebook ads, let’s hire a copywriter to do this landing page, but I’ll be the glue to hold it all together or the person to coordinate it, and that just still requires a ton of your mental energy. Whereas you can say, hey, Denise, you own this part, this outcome of the business. I am here to support you and the company’s here to support you, but I need you to be the one that thinks about this all the time. It’s just a very different kind of way to work.
Rob: Absolutely. I’ve been struggling to find a name for all three of these but I talked a lot about how in the early days, I had a lot of task-based people. It was usually VAs who could do a specific task. That’s like hiring a copywriter, go do this, you’re really good at this, but now, I’m managing it. So, task-based people, project-based people, and owners. Originally, I was thinking of founders, but really I should say it as task-mindset, project-mindset, owner-mindset. That fits who can really own this whole area—maybe even delegates and projects—but be thinking about where a task-based person might think ahead of the next week, a project-based person thinks ahead for the next month, and as an owner thinking 6–12 months out or maybe even two years. They don’t have to technically own. It’s not about equity and business, but I think it’s about owning the key results, really planning, presenting, and certainly taking input. As an owner, you don’t just do everything yourself. Finding those types of people is hard but it’s what you need to really level up a business, especially at your size. With eight full-time employees, everyone has to be really good or else it’s a huge drag on the company.
Craig: Somewhere that we’re just getting into with maybe that next step of ownership is that the leaders of each group of our organization are involved in hiring. That is super cool to see. We hired a full-stack developer recently. Jonathan, our lead developer, was the final say on who we hire basically. We’re hiring support personnel, and Matt on our team is going to be the final say on who we hire there as that last interview. That’s super cool to see. In respect, it takes some of the burdens off of me because I basically get a couple of people through the process and say, I’m happy with any of them. you go pick. Also, because they feel super empowered to be making that decision, and they know they have to live with it afterward. That’s a really good thing. That’s not a negative thing. We’re just getting into that. We’re just in the second iteration of that step but it’s really cool to see.
Rob: Something else you did during the season was you had a credit card upfront in order to get a 14-day free trial of Castos. During that, this season, you removed it. That just sends all your metrics all over the place. I remember it was a little bit mixed in the end where you said, yeah, it’s better but not enough that it totally makes sense. That was my memory of it. Is that still how you feel about it? You’re still not asking for credit cards. Obviously, it’s a better way to go, you’re getting more leads. Do you feel like that was a huge win? Was it awash? What are your thoughts looking back?
Craig: I think it has been a good thing. It’s tough to tell over. I haven’t gone back and looked at our month-over-month metrics from a strictly growth perspective to say whether in that kind of shorter-term it was a really good thing, but from a user perspective, especially in something like podcasting—Rob, even though you’ve been doing this forever—it’s hard to get started. You might need more than two weeks to really get your show off the ground. What we found is that people come in, they give it a try, we give them a chance to extend their trial even if they want to right at the end. From a compatibility with the user behavior perspective, not asking for a credit card upfront is definitely the way to go. We have no plans of changing it at this point. For users, it’s the right thing to do.
Rob: Something you talked about in the final episode as we wrapped was I said, what’s next and you said, we’re looking at offering a freemium tier, basically a pricing tier that has a max usage-based freemium. I think it was what I referred to it as. From what I know, that never happened. When did you make that decision, and what was the thought there of not introducing that free tier?
Craig: Most of it came down to engineering resources. I hate to say this. If it was just a flip of a switch in Stripe or something, I probably would have tried it but it would’ve required a bit of work on the back-end to get that implemented. We just had other things we wanted to do, features to build, UI to improve, and things like that so I just didn’t feel like it would move the needle in a significant way. Maybe looking back on it now, that’s because the no credit card trial thing didn’t move a needle a ton so I thought that a usage-limited trial might just give the same type of result. Coincidentally, we may be looking at it again but for different reasons.
Rob: It’s always hard to spend a lot of engineering time or a lot of your time making a change like removing a credit card and have it be. Maybe that was worth it. I definitely understand why you’d be hesitant to go freemium knowing that you could get something else built in that time that you’re pretty confident will move the needle, and Freemium is just such an experiment. It’s such an experiment and it’s not a few weeks of work. Even if the engineering time is only 3–4 weeks, you get to the point where, okay now we’ve done it and now we need to watch it for months because freemium doesn’t convert in 30 or 60 days. You have months and months. If you have other things that are working, it can be a tough sell to justify that. The last thing that you talked about in that episode was you were thinking about whether you should move a little more into enterprise-type offerings, that the average revenue per user of a podcast host is not great. It tends to be a commodity thing. If you look at all the podcast hosts, they’re not priced that high. You were noodling on whether or not you wanted to get into that space, start selling to enterprises, and have some offerings that really made sense to be higher priced. After the episode, you and I recorded that little secret audio that we can cut to right now, and had a little bit of conversation about something you were thinking about to raise your average revenue per customer. During the TinySeed retreat at MicroConf Europe in Dubrovnik, we did a hot-seat format. That’s typically how we do it, right? We go around and each founder gets 30 minutes to think through a pretty challenging difficult issue to get feedback from the batch, as well as myself, Tracy, and Einar. Something came out of your hot seat that could potentially change the trajectory of Castos. Do you want to talk a little bit about that?
Craig: Yeah. It’s funny, my talk at my MicroConf Europe was about SaaS metrics. All along, ever since you and I started talking about this business, the metric around Castos that has been the worst, that’s tough to a fact just like our average revenue per user. We’re just not a hundred dollar a month kind of app. I don’t know that we would ever be for the majority of our customers. We started thinking about what people would pay $100 or $200 for. Pretty quickly, the answer came to be audio editing either as a service or a software tool. The value in a software tool is incremental. We’re talking in a previous episode about incremental steps versus big major steps that would double or triple the size of the business. Building software to help people edit their podcast is cool but not that cool—doing it for them is really cool. I happen to have a lot of experience in this from another business in the space. The idea is can we take that other business called PodcastMotor and roll that service level into the Castos platform, or make it super easily accessible to all the Castos customers? It was a really interesting thought exercise. I think that everybody who’s running a business should say, how can you double your business tomorrow, and just come up with crazy ways to do it. At first, this seemed really crazy. About an hour and a half later, I was like, yeah, that’s totally the way to go because it’s a natural progression for a lot of our customers. They come in and start a podcast. They have some degree of success with it. They want to keep going with it. They say, wow, editing all this audio sucks, and it takes me two or three hours every episode, I would love to pay somebody a little bit of money to do that for me.
Rob: For folks who don’t know what PodcastMotor is or how it works, could you give just a few sentences on how good of a fit it actually is for exactly what you want to do here?
Craig: PodcastMotor is a productized service that I’ve been running for 4½, almost 5 years. All we do is podcast editing, we do show note writing, we have a transcriptionist team. The idea really is a show like this records their episodes, sticks the files in Dropbox, and then we do all the work from there. We do audio editing. We do show note writing. Then, we publish to a website media-hosting platform. We could build a fair amount of automation around that part of it, about the publishing part of it, but certainly, it takes all of the onus of the post-production side of the world off of podcaster’s plate, to let them focus on other more important stuff like marketing and growing their business.
Rob: You have this unique experience that likely no other podcast host has. This is where you started with this productized consulting. One of the things during the hot seat is, as we were talking about it, I said, you could just make it your highest tier. You have a $19 plan, a $39 plan, and then just have a $1000 plan—I had just thrown out that number, made the numbers up—and that one includes full-service production, editing, and such. We were mulling that over and it was like, wow, this has been really interesting. One thing I said was, yeah, but the problem then is if you get a bunch of new customers, you have to scale. Now you have to hire editors and you have to hire transcriptionists. You looked me in the eye and you said that’s not that hard. To me that is hard, but to you, it’s not. You’ve been doing it now for years, and you have an amazing process to accomplish that.
Craig: The place this really makes sense is in the scalability of it. Because we have been running this business for a while, we know how to hire and vet people, bring them into our process, onboard customers, and things like that. At the scale, we would hopefully be talking about within Castos or expose to the whole Castos user base, new trial customers, and things like that. They would need to be a little better because we have 50 customers on the PodcastMotor side of things now. We could probably have 500 as part of this combined business. It’s nothing if one of our competitors decided today that they wanted to start a PodcastMotor-type of business tomorrow. They would have the years of headaches that I’ve had so far before they could get to where we are.
Rob: It’s a fascinating competitive advantage. I’m surprised that none of us thought about this sooner. I’m including myself in there, you, Einar, and just anyone in the batch that we never thought about enough to think about combining these. Why do you think that is?
Craig: A little backstory, I guess. The first version of our hosting platform was still under the Seriously Simple Podcasting brand. It was on the seriouslysimplepodcasting.com site and all this kind of stuff. We went through a rebranding exercise to become Castos. Part of that rebranding consideration was, why don’t we just call it PodcastMotor? For a lot of reasons—this is one of the decisions we have to make now—it gets difficult to discern between the editing service and the hosting platform if they’re all under the same roof. We’re going to move forward with this integration to bring the two companies together, but they might still have separate websites. They might just be an integration partner that ultimately all the money still goes in the same bank account. That’s the reason we didn’t put the hosting platform under the podcastmotor.com brand before. We had some concerns about what do people who know PodcastMotor as an editing service come in and see this hosting stuff, what are they going to think? I had definitely thought about combining the brands before, and then made a decision to treat them as separate entities. One because of branding, messaging, and things like that. The other is, like Thomas Smail says, one day you’re going to sell your business, or you’re going to end your business. I wanted to have some optionality and keep them separate so that I could do different things with each of the businesses. I didn’t then think that the combined entity together of both facets of the business was as strong together as it is. That’s probably the thing that I got most out of our discussion, with talking with you, Tracy, Einar, and everyone else. The valuation of this combined company is still really, really strong, whereas the valuation of just a service business maybe isn’t as strong. And the value proposition of, hey, you can come in and we can provide now, the two big huge things that a lot of podcasters need. We’re going to check three of the four or five big boxes in podcasting all in one house.
Rob: You were basically talking about merging PodcastMotor into Castos. Or at least, you were talking about offering editing through Castos because there’s a higher price point, higher average revenue per customer. You talked a lot about not merging the brands potentially, and not merging the websites. It seemed like you were uneasy about that. Talk to me about what’s happened over the last year with PodcastMotor and Castos.
Craig: In the spring of 2020, maybe in the fall of last year, we introduced Castos Productions which was, at that time, a white label version of the PodcastMotor service from within the Castos dashboard. You upload your raw recording files or you send us your Squadcast links like we would do for this episode, then the PodcastMotor team on the backend does the editing, show notes, writing, and production work. That went over well. We had a good reception from clients and from our advisors. People just kick in the tires and say, yup, it makes all the sense in the world to put that all in the same place. I’m happy to do that. So July of this year, we formally merged the companies and started the process of migrating those existing PodcastMotor customers over to using the Castos Productions workflow, to manage all of their podcast stuff in the Castos app, both the production work, hosting, distribution, and analytics all in one place. Then, we took the really big leap which was to merge the brands—naming and the websites—just maybe six weeks ago. If you go to podcastmotor.com today, you’ll go to the Castos productions page on castos.com. Overall, it’s been really successful. Rob, you and I talked offline about the decision to do this. For a lot of reasons, managing just one brand generally is a lot easier from an SEO perspective. It definitely is better to have all of your links juice pointing to one place. There will be people that say, yeah but if you were two brands you could have multiple listings on the first page of Google for a term. That’s the case, but generally, we think we can rank for more terms as a single site, so that’s what we’ve done. Generally, the only thing that we knew we would have to do and I think we’ve done a good job is to manage that legacy PodcastMotor name for people that know us or were customers of ours before and want to come back to do another season or something. On that page, on that Castos Productions page, we reference PodcastMotor. We have a banner at the top of the page announcing that PodcastMotor is now Castos Productions and links to an internal blog post that we have about it. I think that’s the thing that I was the most scared of is what is like a really nice brand? The PodcastMotor brand and the job we do there was really great, so how to transfer as much of that over to Castos Productions as possible? The thing that you and I talked a lot about was the thing that gave me pause before and that we’re keeping a very close eye on now that that move is taking place.
Rob: This is one of those decisions that I think is the right decision the way you did it. Correct me if I’m wrong, but I believe I gently nudged you in that direction of my gut based on things I’ve seen, and where you are is that you should fully merge. There’s more power in it, there are more SEO powers, and there’s more brand power and all that. I’m not like it’s 100%. You absolutely have to do this. It’s the only way to do it. I do think there are nuances as you said, but I feel like it is the right decision and has been the right decision from my outsider’s perspective. You’re six weeks post doing it, so obviously you only have so much perspective at this point. Do you feel so far that it was the right choice? Do you have any regrets about merging those two brands?
Craig: It’s definitely been the right choice. I don’t have any regrets. I think the reason is if you look at the potential plus and minus of it, the plus is that everything is in one place. It’s one brand. Messaging should all be really clear around this. The downside is that last part maybe, with two separate brands, you can be more clear and opinionated about what that messaging is. When they’re all in one place, it can get a little more muddled and a little more difficult to be really explicit about what a brand is. Now, Castos is podcast hosting and production, whereas before it was just one thing. I think the positive of having it all in one place. Having these professional services in front of all of our customers is just way above that potential difficulty and messaging.
Rob: Right and it’s such a differentiator because no one else is doing this. Where else can you go to get hosting, to get editing and production, all the transcripts, the YouTube stuff, and just all the things you do? It is a unique space in the market. I’m excited to see where that takes you moving forward. How hard did it wind up being? It’s funny we talked about a year ago and you said you got done with it six weeks ago, surely you weren’t working on it for ten-and-a-half months. It must’ve been starts and stops.
Craig: It was a lot of starts and stops. I probably just forgot about it or it wasn’t a huge priority for a while. I think we really saw some good traction with Castos Productions when it was just a white label version of PodcastMotor. We really thought, time to get more serious about it because at that point we really had three brands. That was too much. I decided to bring it all together. It’s a fair gamble because we talked about reversible decisions. I don’t think that’s a reversible decision. We’re down this path. That’s a 301 redirect like that stuff to take back. We tested the waters with it too. I felt like we had some data well before we did all the stuff in July.
Rob: That’s the thing. I have a question here. Has it moved the needle yet? I’m not totally sure what I mean by that, but I guess I’m thinking you bring over this brand and this new service, and you would hope that new customers or existing customers would adopt it in a way that maybe they wouldn’t have if you kept those two apps separate.
Craig: It’s definitely moved the needle. First, all of our revenue code goes into one place, that’s great. That’s just easier to keep track of and everything. The thing that it does is that it simplifies our messaging a lot because instead of me being on sales calls for Castos Productions and for PodcastMotor, I’m on one side of sales calls. We have one set of pricing, we have one set of offerings, and in that respect, it’s definitely improved our positioning. But it’s still an ongoing thing. It’s still something that we are continuing to refine the experience, the actual user experience, positioning, the pricing, and all of this, which is cool. It’s another lever we can turn and that’s fun to have.
Rob: Yeah. What I love about it is this concept of a dual funnel that I keep bringing up of having this wide, lower-cost funnel. We have a lot of people coming in. Maybe it’s freemium, maybe it’s a credit card or whatever but when you’re getting hundreds of trial sign-ups or even into the low four figures of trial sign-ups in a month, that’s a very wide low touch, low-cost funnel usually with low average revenue per customer. You can build a good business on that. You want to raise average revenue over time. That’s a low touch funnel. Then, there are high touch funnels where you’re selling for $500 or $1000 or $5000 a month and more enterprise stuff, long sales cycles. You can build a business out of there. The dual funnel, when you have a SaaS that has both of those, that’s amazing. Those are the apps that I’m seeing grow the fastest right now. I think back to even in the Drip days of our starting price of $49 and eventually, we had a $1 plan and then a free plan. We had people coming in and saying I’m going to pay $1000 a month or $1500 or $2000 a month. That’s a nice dual funnel. You do have this amazing brand, you have the reach, and your word of mouth because you can have thousands or tens of thousands of paying customers on the low end. Even if you only have 50 or 100 or 200 larger customers, it can become the point where the vast majority of revenue actually comes from those because they pay you such an overwhelming amount of money. A lot more apps out there are like this than people realize. A lot of the apps we use that are inexpensive actually make a ton of money. Slack’s another good example or Zoom where they have this free plan. They have a wide funnel. Everybody knows who they are and if you’re a small company, you pay Slack $6 or $8 a month per employee. My team is a team of five. I’m paying them $30. That’s not a great average revenue per customer for a company that wants a multibillion evaluation. But IBM, Microsoft, or whoever—I guess Microsoft has their own product—insert Fortune 500 company here who doesn’t have a competing product, are likely paying Slack $10,000, $20,000, $30,000 a month. That is the dual funnel that allows them to grow incredibly fast. That’s what you’ve introduced here. You essentially still have this great product with this great low-end price point. Great for consumers, not for your average revenue per customer but great for your customers, and you do have a mini brand with thousands of people that use it. Now, you also have this high-end enterprise offering and that brings that average revenue per customer up pretty substantially.
Craig: Yeah. We’re now getting into the third leg of that stool which is really cool. It has its own messaging challenges but we are having conventional podcasting, podcast editing as a service, and then private podcasting that is in some ways a whole other animal, a whole other product and whole other type of customer but is very interesting both from a revenue perspective and from a business and product and where we are on the market perspective. It’s cool and challenging at the same time.
Rob: I’m really interested to dig into this because when you talked about building private podcasting, the first thing I asked was is anybody else doing this? Why would you do it? I’m not sure I understand it but you guys are essentially on the leading edge of this. You’re stepping out. This is a novel, new entry into the market. That’s the thing. I was thinking, I’m sure it’s aimed at (I can imagine) any Fortune 5000 company might want a private podcast for their sales staff or for their employees in this day and age of working remote, but I could also see Startups For the Rest of Us having a private podcast that people pay a Patreon or a subscription for. I can see MicroConf having a private podcast for people who go to this event or for the Connect Slack Channel with only them. Or how about a TinySeed private podcast only for investors or only for mentors? Am I making this up or is that where it’s headed?
Craig: It’s literally anything you can imagine. We have mental health professionals having private podcasts for each of their patients. We have Fortune 100 companies that we’re working with having internal private podcasts for their sales team or for their HR groups. We also have enormous health and fitness brands having private podcasts as an extension of their membership site or their course. That’s tens of thousands of people coming in. They have a course or they have a membership site. They have content there and they want to add podcasting as another way to connect with their tribe or their members. We are really uniquely positioned. One, from our WordPress integration, that a lot of people do this membership type stuff in WordPress, so we’re a natural fit there. We also have some native integration with membership platforms like MemberSpace to where new members start paying you for access to membership sites. That person automatically gets added to a private podcast in Castos. All totally automatic that you as membership site administrator don’t have to do anything and you’re able to offer this to your members, which is a huge value. I think it’s just such a natural fit. Now that we’re here I think of course, why didn’t we do this a few years ago? Rob, it might be like what you saw with Drip where you weren’t ready, the market maybe wasn’t ready. Now—knock on wood—I feel like we’re at the right place at the right time with this because it’s a huge opportunity and people come to us and they are absolutely thrilled that we do this the way we do. That makes me feel really good.
Rob: It’s easy to think like a product person. The next feature I launch is going to be the one that changes it. Most times it’s not, most times you try to market it and it’s ho-hum. But this one seems to have really resonated in a way that I’m not sure I anticipated when you were talking about it. I’d hope that it would bring in the Fortune 1000 or 5000. You can charge a lot more for this because it is a premium feature, but the conversation you’re having with people on the interest of this, it sounds like has been really strong. Did you expect that or were you a little bit questioning or tentative about it? I know you were all in on building the future but did you expect it to have this level of interest?
Craig: I would be lying if I said of course I knew that this was going to happen. Of course, I was very hopeful, but I think you don’t know when you’re expanding the edge of what people expect from an ecosystem and a platform, and the behavior that they have with something like podcasting or email marketing. It is when you say you can charge money for a podcast directly or you can only offer this podcast to certain people. Even today, folks are saying that’s not a thing and you explain it to them. They go, of course, that totally makes sense. I can imagine doing this for X. When we started to have some of those initial discussions, then we had more confidence in it. We did a fair bit of collecting email addresses and chatting with folks. We had some people on the platform from day one that was duct-taping this together with Zapier and the membership platform and stuff like that but didn’t have that last piece of individualized private RSS feeds from the hosting provider. That’s what we are providing.
Rob: Right, so you can revoke access in essence when it happens. Congrats on getting that life and certainly stoked to hear about the interest. Obviously, as an investor through TinySeed, it’s nice to see when things go right and I get to live vicariously through your victories, which is fun to be along for the ride. I do want to congratulate you as we move to wrapping up. I want to congratulate you on hiring Matt Medeiros as your Director of Podcaster Success. If folks have not listened to the Audience Podcast and if you are interested in starting your own podcast, or growing your audience, or learning how to monetize, or all the tech stuff around podcasting, search for Audience in your podcatcher. I listen to every episode that comes out. It’s a really high-quality show. I can tell that Matt has pulled a burden off of you because I know that you were putting that out every week and I know it was a ton of work for you.
Craig: Yeah. It’s funny. Just before recording this, Matt and I recorded an episode and talked a lot about this, him coming on board, he is a better podcaster than I am and has been doing it for longer and it’s been awesome to bring in a total A player to own that part of the business. As an entity of the podcast, it’s much better off primarily in his hands. It’s been cool.
Rob: That’s a double win when they can do it perhaps a little bit better than you can and that you get the time back. You don’t have the mental burden of, what am I doing because producing content like this is fun, but it does take that good glucose. It takes that creative energy that you can’t put into writing copy or doing other harder things. As we wrap up, I want to hear what you’re excited about right now. What’s new with Castos? Whatever this week or this month? What’s kind of the big thing that gets you excited?
Craig: We have like two real initiatives that were driving hard on. One is doing everything we can to be the obvious choice for people who want to create a podcast and use WordPress as their website. Specifically what that means is we’re launching an integration with Elementor by the time this goes live. This will be out so you can manage all of your podcasts, design, contents, player, everything from the Elementor editor. Elementor is the most popular page builder for WordPress, so we’ll fit directly into the Elementor editor and all of your podcast stuff happens right from Elementor. That is super cool and hopefully opens up a chance to do some co-marketing and brand exposure between organizations. We’re doing more things in that kind of vein of the businesses, just doing cool things and offering good free tools for people on WordPress to make that experience even better. The other one is private podcasting. It takes a lot of different forms. I talked about courses and membership sites but also for internal company podcasts and working with real enterprises and what that looks like. The question mark still—we might have talked about this last year—is Castos directly being able to be the payment processor via Stripe, a way for you to charge money for your podcast directly. That’s still a bit of a question mark. I think it’s a question mark from a strategic perspective because I think about podcasting as a hobbyist and an aspirational thing, I can imagine a lot of people coming into a tool like this, like Substack. I imagine Substack has an enormous number of people that don’t make any money from their newsletter. If you think that what we’re talking about building with premium podcasting is the same kind of thing, you’re going to have a bunch of people coming in, making content, charging money for it, and not making any money. That’s just how it goes. It’s tough to build a community and a following online. It’s even harder to get those people to pay you money having the micropreneur academy, FounderCafe. We’ve taken the approach so far of let’s help people that already have a significant following, and integrating with their course platform, their membership site, or their community, and offering podcasting as something that they add-on at an additional way to that. From a project strategy perspective, I don’t know if going directly to people that want to charge money is the way to go. I’m sure we’ll do it but I think we’ve made the right decision so far to say let’s use the audience we already have and the membership tools that they’re already using to manage those members and payments and things like that and us be the podcasting tool that adds on to those, as opposed to having to—from a product perspective—create the whole stack and maybe have people come in that, think they can build a community, and charge people money for it because I think it’s just really, really hard. We’ll see.
Rob: The aspirational people will come but I think you can get around that with pricing. I’m just going to throw up pricing. If it’s $99 a month plus whatever for downloads or something then you’re not going to get as many aspirational because they’re going to say that’s too expensive. If I had MicroConf as an example or Startups for the Rest of Us, $99 a month is a no brainer for us. Certainly for whoever, Target, General Mills, and Best Buy, these are just Fortune 500 companies that are here in Minneapolis that I was thinking of. For them, it should be even higher. I guess Best Buy, Target, and General Mills are not going to charge their people. That would only be for someone more like Startups for the Rest of Us or MicroConf if we did decide to make that a paid thing. Again, if you just keep that minimum price at a certain point, because you’re not a commodity right now. You’re such a unique offering that if people want it, they need to come to Castos. Once the feature is going to get cloned, you get copy cats, they probably won’t build it as well as you guys have. Eventually, it will get to that point and you have to make that decision of, do we want that lower-end of the market, the aspirational people, but I guess you can make that decision when you get there. Is it something you feel like you could solve with pricing by just having that higher minimum per month?
Craig: I think so, but I think that all that does is it doesn’t attract the aspirational folks that don’t already have that audience or don’t think they could get that audience. The thing that I’m most concerned about is this resource allocation of it’s a month’s worth of work for a developer at least to build all this stuff, could we go do something better with that?
Rob: I want to see it that you have ample leads coming in on that higher-end that want to charge for it. If you’ve only had a handful come in then I don’t know. If you haven’t lost a deal because you don’t have it built-in and it’s a month of work, that’s tough. Given how fast you have to move and how much you’re building, it’s a tough decision to make.
Craig: That’s definitely a question mark. It would be super interesting but I’m not sure.
Rob: Well, awesome man. Thanks again for taking an hour and hanging out with me here again on Startups for the Rest of Us. On Twitter, you are @TheCraigHewitt and obviously castos.com if folks want to see what you’re up to. Thanks so much for joining me again this week. I hope you enjoyed that conversation with Craig. I’ll definitely have him back again in the future. He always has interesting insights, is moving so fast, and doing so many interesting things that it’s pretty easy to bring out essentially good conversation and good content for here on the show.

Rob: Welcome to this week’s episode of Startups For The Rest Of Us. This is episode 520 in which I have a lovely conversation with Keith Perhac, the founder of SegMetrics. SegMetrics allows you to get 100% clarity on where your leads come from, how they act, and how much your marketing is really worth. We dive into exactly the difference between SegMetrics and other options for attributing sales and revenue to traffic channels, advertising channels, and all that.

We’ll go through Keith’s background. You may have heard of him. He’s done at least one MicroConf attendee talk. He’s done a MicoConf mainstage talk. He used to host a podcast with Pat. Keith and I cover some really interesting ground today as he talks about why he shut down his million dollar marketing agency to build and double down on his SaaS.

Before we dive into that, I wanted to ask you a favor. If you’ve been listening to the TinySeed Tales episodes that are coming out on Thursday mornings, you have heard through episode seven that came out last week, there are two episodes left. Obviously, this Thursday and next Thursday. I’m curious to get your feedback on season two and frankly, just the whole concept of TinySeed Tales. Feel free to email me directly at questions@startupsfortherestofus.com. You can DM me on Twitter or you can mention me at @robwalling on Twitter.

Given the amount of time and money that they cost to produce, I’m curious to hear if you like the storytelling approach. Obviously, it’s a more produced form than really exists in our space. I enjoy doing them but I also want to make sure that they’re providing some type of value to you; whether it’s entertainment, motivation, inspiration, tactics—just anything that you’re getting out of it. I would appreciate hearing from you. Drop me a line and let me know what you think.

With that, let’s dive right into our conversation. Keith Perhac, thank you so much for joining me on the show today.

Keith: Thanks so much for having me, Rob.

Rob: Today, we’re here to talk about why a multi-million dollar agency owner decided to quit it all and move to SaaS. It’s a great topic.

Keith: It is. It sounds a lot more impressive when you say it.

Rob: Why in the world would you do that, sir? Now, we’re going to dig into that today. Just so folks have some context, you’re a software developer turned marketer—the dangerous combination. I love that combination whether it’s a marketer who learns how to code or a developer who learns how to market.

Keith: It’s like a superpower.

Rob: It really, really is. I don’t think people understand that enough. A lot of us developers, you do it for five years, you do it for seven years. You become senior and you’re like, man, I can do a lot of things. Then, you start over with marketing and it’s a grind. You don’t know any of it, you think it’s fluff. You get three, four, or five years into that and you pile those two on, it’s ridiculous. It’s like an epic, highlevel, multiclass in Dungeons and Dragons.

Keith: Yeah. Just to be able to understand how the internet and all that technology works makes you such a better marketer. People come to us and they’re like, why aren’t these things tracking right? Because you have no idea of how the internet works, why the scripts aren’t firing, and how URLs even work.

Once you understand that, it’s a superpower to get everything. That’s not even touching the automation you can do, it’s crazy.

Rob: Yeah. You were running a seven figure marketing agency. It was called Develop Your Marketing, focused on conversion rate optimization and building out funnels. You had marquee clients, big name clients folks I’ve likely heard of like Ramit Sethi and Eben Pagan.

You decided to build a SaaS on the side. I think you were using the same resources. You were kind of using the agency team to start building that out. That SaaS is called SegMetrics, segmetrics.io. I’m going to read a little bit about it so folks have a context of what you build, then we’re going to go back and kind of talk through your decision to build it, the highs and lows, the launching—just the whole story so folks can both be inspired by it and also feel the agony and the pain of what you felt in the early days. As well as takeaway some actionable stuff. Obviously, your story as a marketer and a developer, I think there’s going to be a lot of folks that can takeaway.

SegMetrics, your h1 is, “Get clarity on your true lead value in every step of the way.” The subtitle there is, “Get 100% clarity on where your leads come from, how they act, and how much your marketing is really worth. Get a handle on the Key Performance Indicators that matter most for your marketing funnels. Built by marketers, for marketers.”

When I think of analytics or attribution, I think of, okay, I have Google Analytics as this anonymous analytics and aggregated. I have a Mixpanel. There’s obviously those types of competitors for individual funnels and people walking through. Of course, I have Facebook Pixels, Google Pixels, and other things for conversions and dollar amounts. I think Mixpanel does that too. Where does SegMetrics fit into that mix?

Keith: The idea is kind of similar to Mixpanel in a way, which is we want to be able to see everything that anyone does in a customer journey. From what ad they landed on to how many times they viewed a page, to if they attended a webinar, to be able to understand who are the most valuable people who are going through your marketing funnel.

The problem with Mixpanel is that it has no native integration. It has no idea of revenue out of the box. It has a garbage in and garbage out problem. Unless you were really diligent about what data you’re sending into Mixpanel, you’re not going to get anything valuable out of it.

What SegMetrics does is we take that idea of like, okay, we want to see every event in an entire customer journey. Marketers are never going to be able to hook this up. What we need to do is integrate directly with all these tools to pull the data out of Google Analytics, out of Google Ads, Facebook Ads, your ESP, your CRM, your Stripe, your payment gateways—everything—and create an individual persona that we can then say this is this person from all this different sources brought together. This is their full customer journey.

Then, what we’re able to do is say, all right, we know that Facebook Ads, our lead value is $50 for each lead we bring in from Facebook. Within that, do we have actions that make people worth more money? Worth less money? Are there certain demographics that can make people more valuable? Is this idea of finding these segments of actions, or demographics, or people that are more valuable so you can then go after them more, be able to market to them better, and understand your audience better.

Rob: Yeah. That makes a lot of sense. It was certainly an issue that I’ve had marketing SaaS, as we were doing ad spend or even getting organic traffic of I had this aggregate numbers of, hey, this is what our churn is, for example. I couldn’t slice it based on demographics or oftentimes, even based on source unless I really have to finagle some stuff.

Keith: That’s why we built it. As a conversion rate optimization agency, that’s what we’re doing. We exported all of this data from all these tools, created a bunch of pivot tables. Five hours later, we had information.

Rob: Yeah. Inside SegMetrics, you can slice and dice it. You could look at churn. You could look at lifetime value based on all this stuff, right?

Keith: Exactly.

Rob: Okay, for me that paints a crystal clear picture. I think most SaaS founders who’ve gotten this far, who are doing $5000 or $10,000 a month or more, are trying to attribute stuff, know the limitations of having to build it custom.

We may have already answered my first question, then. My first question is why build a SaaS company if you’re running a seven figure agency? It’s obvious that over and over and over, you probably have to cobble this together with duct tape and baling wire.

Keith: Yeah. Essentially, we were working with an analytics agency—a friend—who did a lot of our analytics. We had a lot of our analytics done inhouse. We just spend so much time on it. We were spending probably 20%, 30%, of our week just pulling the numbers. That doesn’t even mean the analysis of what they’re doing but just pulling these numbers.

Okay, we have this webinar. What is the lead value of someone who attended the webinar? We pull all that data from whatever system we have then we pull it from all the tags. Then, we pull the revenue. Then, we match them together. Awesome. Then, we write up the report, the PDF, and everything. We take it to the client and they’re like, what about the people who came from organic versus paid? What’s that breakdown look like? I’m like, give us five more hours. We got to go through that whole thing all over again with these new things.

The analytics guy we were talking to and the guy on my team, we were talking about this, and he’s like, it’s just a database. It’s just a spreadsheet. Why can we not just slurp this data in and do this automatically? That’s where it kind of starts. Okay, could we do this? Could we scratch our own itch? Yeah, that’s where it kind of started from.

Rob: Today, you are a team of 10. As you said offline, “Growing very quickly.” Of course, I have your revenue graph here. You’re in batch two of TinySeed, I have access to your numbers. I will confirm that. Doing very well. In fact, your growth has accelerated. It really looks like at April, May, it starts kicking up which coincidentally—

Keith: I wonder what happened in April and May of this year? I have no idea.

Rob: I have no idea. Don’t think batch two started. We’ll get into that later on the interview. I want to do something chronological. You started working on this five years ago, back in 2015. You told me that you built it in two weeks, 2-3 weeks. That you had a customer the first week of launch. That sounds amazing. That is crazy, crazy fast—to build this whole that fast. Second, to get your first customer the first week of launch. Both of those things, how did those happen?

Keith: This is actually the second SaaS I built. The first one was Summit Evergreen which was a membership site platform for marketers. We had made some mistakes that time. We thought we knew what the customers wanted based on the consulting we have done. We built a very large, very complicated app that had a lot of features that turned out no one actually needed. It took us many months to get to market. Once we got to market, it was slow to get people in. It was very difficult.

With this, we built it to scratch our own itch. At the same time, we’re like, this is something that everyone needs. We’re not going to make the same mistake. What we did was we did a very hands-on, iterative process with our customers. We picked two or three customers—clients—that we were working with. We said, hey, we’re building this thing. Here’s the numbers that were looking to get this value. They would respond. We would say, awesome.

We did a raw dump of their data. We plugged in the engine. There’s no UI. There’s nothing at this point. There’s just me doing some math in a PHP file on the backend based off of the CSV. We get that in and we spit that out. We show it to the clients and we say, hey, for this webinar you just ran last week, this is the lead value. They’re like, oh my god, this is amazing. We’re like, okay, this probably has space.

Then, the team had a little bit of downtime. I think this was early February or late January. Right after a big launch. We knew we had two weeks of almost no client work. We decided, let’s put a challenge to ourselves. Let’s get the team together and we’re going to work on this fulltime for two weeks. We’re not going to do any client work because we don’t have much scheduled. We’re going to see how much of this we can build.

In two weeks, we pretty much had version one done. The engine was already built but the UI, the signup, everything around it, the creation of the reports, the spitting out the reports, the graphs, the everything we built around two weeks. Finally, we launched and it was the product of the day when we launched. Super excited about that.

Then, I found out that there was a space in our Stripe public key when I copy-pasted it into the site, no one was able to purchase. That was rough. It didn’t deter us. I think within a month, we were up to $1000 MRR.

Rob: Wow, that’s great. A lot of learnings from that. I think people think of an MVP as a limited version of a product. You really tripled down on that definition.

Keith: It was a text file. I actually have screenshots of me and Slack. Or not Slack, it was Skype. I just had a text file with six lines. I copy-pasted that. Again, is this valuable? I’m like, yes. That was it.

Rob: Yeah. I love that approach. I often talk about, in my first book, human automation of having VAs just do something on the backends and spit out a report. That’s really, in essence, kind of what you did there.

First customer in the first week of launch, you obviously solve a problem. 1000 MRR in the first month; were you getting those leads from clients, or were you actually doing marketing?

Keith: I don’t remember, to be honest. I know we had two clients that had decided to sign up as customers. A number of our clients we kept as just kind of free users. They weren’t interested in the numbers, but we needed it for our work so we did it internally. Then, the rest were people who found us either through Product Hunt or promotions that we did, tweets. That was five years ago. I don’t really remember who they were and where they came from.

Rob: Right. You mentioned to me as we were talking before the interview that you were at about $1000 MRR after the first six months. Is that right? Did growth plateau that much?

Keith: Yes. We didn’t hit $2000 until August of 2016.

Rob: That was more than a year later, because this was early 2015. What happened then? You basically rocketed to $1000 MRR, you solved the problem that people are obviously in a dire pain point. You flatlined, in essence, for a year. What happened there?

Keith: More than a year. More than a year, Rob.

Rob: You remember every minute of that. 15 months.

Keith: What happened was I had a day job. Not a day job like I was working for someone else, but we had the agency. The agency is pulling, like you said, $1 million+ a year. It’s really hard to take the team off of client work and put them on something that’s making $1000. We didn’t have any customers or any clients that paid us $1000, just $1000. That was inconceivable. I think our lowest contract was $10,000 a month.

It was very difficult for us to put the time into it. I think we language there—I’m looking at the graph—until mid-2018. Wow, you can actually see the spike. Mid-2018, I had decided that we were going to focus on SegMetrics. We always said, hey, we’re always the bride’s maid, never the bride. We’re helping our clients run these million dollar launches—multi-million dollar launches. We’re making good money but we want something that we control in our product, in our stuff. We had always thought this. We had SegMetrics there but we haven’t put any love and any energy into it.

That summer, I remember, I spent some time. We rewrote the UI. I said, we’re going to focus on this. Over the next six months, we’re going to transition out of consulting work, out of the agency work, and we’re going to start moving towards SegMetrics and something that we own.

I know it’s going to be slow because we make a lot from the agency and we need to wind that down slowly. That’s our goal. I was just so tired. I think the team was just tired of having this great resource that no one was using. We didn’t spend the time to make it worth it, to put it out there.

Rob: I remember having that same issue before I went full time in products. I was consulting. I had, basically, a micro-agency where it was either me or a few contractors that I markedup and billed out. It was software development. I remember billling $125 an hour, $150 an hour, somewhere in that range, for every hour. I was booked more than full time. 40+ hours a week I could work. I had these products on the side that were doing exactly that. I had a beach towel website that was doing $1000 a month. Net profit was $150 a month. I had DotNetInvoice which was doing a couple of grand a month, most of that profit.

When you compare those numbers, it’s like, I can make a couple grand in two days of work. It was such a struggle. I heard people call it an addiction. The cash agency work or consulting is this cash addiction. It’s amazing when you want to get to full time income or higher quickly but it’s really hard to move away from. As you said, the focus is constantly towards your high value, instant cash infusion, which of course, is working for clients.

It sounds like you got tired of it. You got fed up with it and you wanted to double down on something that you have built. You fired your whole team in order to do this in late December 2018. That must have been brutal.

Keith: It was rough. It was honestly rough. It wasn’t, hey, I decided to work on SegMetrics and I’m letting everyone go. The original plan was to bring everyone over and we’re going to slowly shift over. The team’s going to stay. There were a number of issues with that.

One of them was that same mental model that the company has of, hey, I can do work for clients and make a lot of money. Or, I can spend time and make no money with the SaaS, was also there with the employees, with my team. We actually had a number of conversations over six months. Essentially, what it came down to is, it was too hard of a mental shift to go from the client is asking something right now. I could spend an hour on that and the company makes X hundred dollars. Or, I can spend six hours working on SegMetrics and the company makes… There’s not a one-to-one translation.

At this point, I think we had done the agency for six years. Eight years, maybe? That was the challenge. We have an hour for dollar, time for money exchange with our clients right now. We do not have that for SegMetrics. We have time for literally nothing exchange. It was very hard for not only myself, but my team to prioritize that.

There are also other issues like when you only have less than 100 customers, you don’t need an account manager. Where do we take the account manager? We kept trying to find roles that didn’t fit for people. It was just very difficult. What I ended up doing at the end of 2018 was saying, hey, guys. You guys are incharge of SegMetrics. You guys work on SegMetrics. I’m going to handle all the client stuff so it gets it all of your plate.

The mistake I made was thinking that they understood SegMetrics as well as I do. I’ve been living it for a year at that point, mentally. Trying to think of, what are we doing next? What are we doing next? It was a mistake on my part. It was just a shift that couldn’t happen.

What happened in January, I said, guys, we can’t do this anymore. I helped find them new work, introduce them to clients. Honestly, it was heartbreaking. I worked with these guys for 6-7 years. It’s really rough. The good side of it—kind of the windside of it—is that because SegMetrics has been growing and because there’s very little of the agency side left, I’ve actually brought them back on in the last few months. I’ve brought the team back together and they’re now working in roles that I think run to their strength instead of the things I was trying to force them into, which is really wonderful. I love working with them and I’m glad that they’re back on the team.

Rob: That’s such a cool ending to that story. When you’re in the midst of that, it probably feels devastating. Yet, to circle back two years later and be like, hey, we have a product now that can afford all of us, that makes the salaries. It’s an incredible story. That’s cool.

As you’ve contacted people, I’m assuming you’re bringing them on one at a time, you email them like, hey, want to come back and work on SegMetrics? Are they stoked? Are they over the moon to do it?

Keith: I don’t know. Yes, they were. I was always very nervous about the whole thing because I let them go. I felt like I had failed them, in some way. It was very nerve-racking for me to reachout, to talk about that, and bring them back on. We had talked in the interim. It’s not like I had cut them out of my life completely. I hope there’s no ill will. I enjoy having them back on. Mentally and emotionally, it was a very rough time, I guess.

Rob: I imagine, it seems to me, if I were in your shoes, it would almost be a mix. You have to let these folks go, even working with them. At the same time, once that’s done, you were then full time on SegMetrics—focused, right? By January of 2019, this was a month or two later, you were, essentially, for the first time since you launched it, you’re all in on it. That had to feel good.

Keith: It felt good. It felt very good. It did come with some challenges, though. When there’s other people around, there’s blame to go around. I see this a lot with my family as well. It’s like, it’s noisy here, I can’t concentrate. Or, the kids kept me up last night. I can’t get my work done.

Then, when it’s just you, all those excuses go out the window. You’re like, crap. The reason I’m not being productive, the reason I’m not focusing on what I should be doing is not some external force on me. It’s because I’m an […]. I need to get in gear, get my mental state insync so that I can do my work, and focus on the things that are important.

Rob: Yeah, that’s such an interesting thing. You mentioned to me offline that your family actually left for six weeks and you weren’t able to go with them. They went to Japan, where you guys used to live. You were left alone at the house. Probably, your inner monologue is, finally, all the interruptions are going to stop. It’s going to be so quiet. I’m going to get so much done. That’s not what happened.

Keith: No. The first two days were great. After that, I just had to start wrestling with my own existence at that point. I’m like, why am I not being productive? I remember back when I was younger, I could pull those 14 hour days, it was great and I felt energized by that. Now, I’m almost 40, I’m going to be 40 this year. I don’t have that same energy. There’s a lot of mental stuff that went around that. I had to understand what are the things that make me productive, what are the things that don’t make me productive, and how can I get rid of the things that don’t make me productive.

Rob: Yeah. There’s so much about learning your own psychology, managing that, and learning yourself. Same thing for me, when I was in my 20s, I could do 12 hours a day plus, sometimes, 14 hours a day. That was the point where Sherry went to Africa for a month, I believe. During that time, I would come home from the day job and then I would kick on a season of Friends. I make dinner, just sit on the couch, and code. I was coding side projects. This was 18 years ago or something.

Man, I got so much done. I would basically work from 5-6 at night until 1 or 2 in the morning. I’d get up the next day and go to the day job. It was kind of exhilarating because I was building my own thing. Within a month, she came back and I had launched a product. I believe that was FeedChat, it was a really early one that I did that crashed and burned.

During that time, she came back and I started talking about Ross and Rachel as if they were my friends. I was like, oh, yeah, Ross was saying… She was like, you know they’re not real, right? You know that they’re not real people, right? That’s always been a funny joke.

It’s learning about your own psychology. Obviously, in my 30s and now early 40s, you have to know more about yourself, I think. Atleast, I have to learn more about myself, my ability to make myself focused, and make myself get stuff done. It sounds like you’ve gone through the same thing.

At the beginning of 2020, eight or nine months ago, you hired a project manager to manage you—to basically bust your chops. Tell me about that. It’s pretty smart. I know some people get executive coaches or business coaches who they meet once a week or twice a month or something. You hired someone who’s more in the business and almost they’re like driving tasks. They’re keeping you accountable.

Keith: Yeah. Even before I really had the team back, we were creating quarterly goals. We were creating, okay, this is what we’re going to be working on this month. It gave me two things. One, it kept me on task. If I went off rails too many times, sure, you’ve got something come up with whatever, she kept me on. Like, hey, if you don’t start on this stuff, we’re not going to finish it by the end of the month. We’re not going to finish it by the end of the quarter. Usually, the things that you said were important.

That was one thing that was highly valuable to me because I default the coding. I don’t default to launching or to marketing or to any of that. I default to sitting and building out new features because that’s what I enjoy doing. That’s not going to move the product. She was very good at keeping me on what needed to be done for the business.

The second part of that, which I thought was just as valuable, was that at the end of the month or at the end of the quarter, she’s like, here’s all the things you got done. It was mind blowing. I’m one of those people who no matter how much I get done, it never shows that I got anything done. I feel like I’m constantly busy but I’m not getting enough done in the time. To have her come and we go back over the last month or the last quarter and say, we got 80% of the key tasks you said that you’re going to get done. You got all these other small things that came up during the month that, maybe, didn’t get done. The key things you said needed to get done this month, got done. That was amazing. It was empowering to me.

Rob: Yeah. The accountability alone—to end that, it’s knowing yourself, right? Some folks I know, they can go to the gym, they want to do it on their own, or they get equipment at home and want to workout in their own garage and prefer not to be in the social setting. Other folks want a trainer so that they have to show up this many days a week and get their chops busted. I think that’s kind of a cool hack. Again, I’ve heard other folks hiring CEOs, coaches, or executive coaches but this was a little different take on that. I thought it was interesting.

Keith: It was actually Ramit Sethi who hired someone off Craigslist to slap him each time that he looked at Reddit or anything like that.

Rob: Oh, geez.

Keith: He did a whole blogpost about this. Essentially, he hired someone to sit next to him. Everytime he goofed off, looked at Facebook or something, she just slapped him.

Rob: That’s like a reality TV stunt.

Keith: That’s the value that having my project manager gives me. She’s not physically slapping me but that’s the value that I’m getting out of it. Like, hey, stay on task. You’ve got stuff to do.

Rob: Right. It sounds like you’ve kind of hacked your own psychology a bit with this project manager and fixed that weakness, I guess, for now. Switching gears a little bit, you talked about—I saw it in the TinySeed Slack—that one of the low points of your year was earlier this year. It was a technical snafoo with the database. I’m going to make you relive this. We’ve all been there, you’ve just got to tell the story, man. It’s going to be painful. Do it once. We’ll get it on tape.

Keith: Databases, they are my kryptonite, I guess. What happened was that there’s something in Maestro 57 or whatever you’re using that made the database fillup in about an hour. We went from 30% full to completely full in an hour. Of course, if it’s full, it’s not going to write new data. We’re f-up there. Trying to figure this out, freaking out, and there’s no way to compact it down. I think it’s like a 12-year bug in mySQL.

I finally gave up and said, okay, we’re just going to export the database, create a brand new one, and do it over. We did it. All right, we’re safe. Cool. Two weeks later, the exact same thing happened. This has taken a week of my life at this point. Just to migrate this thing, do it, and make sure everything’s done in this whole thing. Then, we have to do it again. I finally say, I can’t do this anymore.

We moved to a managed hosted solution through DigitalOcean who’s our providers. They have a hosted database setup. We migrate everything over there. Finally, we’re good. All the tests were perfect.

I go to sleep. I wake up to my phone buzzing again. I’m like, oh my god, what now? Apparently, there are some setting differences between how they have it setup and normal mySQL that was causing a bunch of imports to fail. All of our tests ran. I think it was four weeks or maybe six weeks of just screaming constantly about this database issue, throughput issues, and speed issues. It’s just miserable. Just absolutely miserable.

I don’t know what people are supposed to take out of this because it was just painful. The thing that I took out of this was that the reason I was running the local database in the first place, not to manage one, is because it was a fourth of the cost. I was like, I can do this better, I can have it customized, and I’m going to be paying a lot less. That was great until the database exploded. Then, exploded again. I lost 4-6 weeks of productivity because I didn’t want to pay, I don’t know how much. Maybe $100, $300, $200, extra per month for managed solutions.

Rob: Man, as a bootstrap, I would have done the same thing. It can be obvious, in retrospect, like, oh, I just paid a few hundred dollars because it made sense. There’s so many decisions you have to make as you’re growing. You can’t always do the Mercedes.

Keith: You can’t throw money at all. There’s just too many.

Rob: That was a big difference once we sold Drip to Leadpages. You could just throw money at it. They had raised $38 million in venture. I remember having strategic conversations with the senior leadership. I’d be like, man, that’s going to be tough. They’re like, what is the requirement? I’m like, we can just throw a bunch of servers at it. It’s going to be expensive. How expensive? For this event, $5000. Then, they laughed. I was like, bro, this is not even worth the conversation. We just wasted that much in dollars.

It was a nice luxury of having. Obviously, we weren’t flipping with money. You shouldn’t be and all that stuff. Frugality has its own reward. In the sense of having your database managed, I think there’s a lot of value there if you can swing it.

Keith: Yeah. It’s the core things of your business. If this goes down, what is the impact to the business? What’s the chance of it going down if someone else is managing it versus yourself? I don’t think doing a managed server from the beginning was the right move. Once we started having issues, we should have really looked at it instead of trying to do multiple migrations to other self-hosted stuff.

Rob: Yeah, I think that makes sense. As we transition to closing, as we’re getting to time, I did want to dig in, we teased it at the top of the show that your growth has really accelerated since April of this year. Just over the past five months, there’s a real noticeable uptick in your revenue graph. Of course, I’d attribute that to you starting TinySeed. I am curious, what have you done differently? Obviously, in TinySeed, one of the earliest things to talk about is pricing. A lot of the SaaS founders just don’t have pricing dialed in with the value metrics, whether it’s too low. You tweaked with your pricing. I’m curious if that had an impact or what else?

Keith: I think that there were two main events in SegMetrics’ five-year life that moved the needle. One was focusing on it full time. There’s a big jump in revenue starting when I decided to focus on it. The second one was TinySeed. The jump for TinySeed was much bigger than the first one.

The way we changed pricing, I think, had a lot to do with it. What we had originally with our pricing model was essentially large buckets. You were in the starter bucket until you hit 50,000 contacts. As soon as you had 50,001, you had to pay $100 extra. It was difficult because people try to keep their contacts low. People would always email us. Like, hey, I’m only one over. Can I have it cheaper for now? I was like, yeah, sure. Fine. Just one.

People, they upgrade processes with manuals. There’s always stress around it. It’s this whole thing. The pricing is actually pretty similar. I think for the majority of people, they’re paying around the same amount. What we changed was that pricing is now increasing based on the number of contacts you have but only $5 at a time.

The big difference is now not that you are going to hit a wall and suddenly be paying twice as much. It’s like boiling a frog, you’re slowly going up as you get more profitable. As you succeed in your business, you’re going to pay us just a little bit more. That, I think, has made it much easier for people to do that upgrade because people don’t really care about the extra $5 a month. They do care as soon as they hit that threshold of, okay, now, your bill has doubled.

Rob: That’s the thing with pricing. You didn’t really change your pricing. You kind of changed how it auto adjusts. That’s one of these things that is a challenge to foresee if it’s going to make a difference. I think there’s a lesson folks can takeaway. If you do have these big gaps, maybe have smaller tires in between the published tiers. We did this as well with Drip back in the day, where we would go based on subscriber count and have it go up every 1000 subscribers or every 2000 subscribers versus every 10 or 20, like we originally did. It did make a difference for us.

It’s almost closer to metered pricing. True metered would be like $0.5 per subscriber. For you, it would be absolutely per contact. You’re not doing that. It’s still in small tiers but I do think that there’s value in thinking about that.

Keith: Yeah. The other part of it, I think that’s the biggest one. Also, just deciding what integrations, kind of the Zapier model of, okay, if you’re using HubSpot, you’re not going to be a hobby user. Your base price is going to be higher. You have to start out in a higher tier if you are higher level. They require more support, they require more effort. We’re dealing with bigger companies. That, I think, also helped a lot. Before, it was just contact-based. Now, it’s contact plus features.

Rob: Sir, thanks again for joining me on the show. If folks want to keep up with SegMetrics on Twitter, it’s @segmetrics. Obviously, segmetrics.io. You, let me see if I can pronounce it right this time. Is it harisenbon?

Keith: That’s close enough.

Rob: How would you pronounce your Twitter handle?

Keith: Ha-ri-sen-bon.

Rob: Harisenbon, @harisenbon79. We’ll link it up because it’s kind of hard to spell.

Keith: I’m so bad at naming. I can’t believe I ever got into programming. It’s really what it comes down to.

Rob: The two hardest problems in programming are naming cache invalidation and off by one errors. Yeah. You’ve heard me tell that on MicroConf.

Keith: I love that joke.

Rob: Sir, thanks again for joining me on the show. I hope you had fun today.

Keith: I did, Rob. Thanks so much for having me.

Rob: Absolutely. Thank you so much for joining me today. I hope you enjoyed my conversation with Keith Perhac. If you have not headed to startupsfortherestofus.com and entered your email address to receive the two exclusive episodes and PDF guides, I would encourage you to do that. The first one is called 8 Things You Must Know When Launching Your SaaS. Second is 10 Things You Should Know As You Scale Your SaaS. These are two podcast episodes. They’re Rob solo adventures where I run through 8 things and 10 things respectively, that I think you should know as you launch, then as you scale a SaaS app. These are things that I have not released on the podcast. They’re not on my blog and really not available anywhere else.

Check it out, startupsfortherestofus.com. You can checkout the right message popup in the lower right or really go to any page and opt-in the right handside to join thousands of other startup founders who are bootstrapping and mostly bootstrapping ambitious SaaS apps.

That’s it for this week. I will talk to you again on Thursday morning on TinySeed Tales season two, episode eight. I will be here in your earbuds again, next Tuesday morning.