/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including converting free users to paid, vesting, business ethics and more.
Items mentioned in this episode:
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about converting free users to paid, vesting, business ethics, and more listener questions. This is Startups For The Rest Of Us Episode 431.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So, where this week, Mike?
Mike: A couple of a personal milestones for January. The first one is that I have averaged over seven hours of sleep per night since I got my CPAP machine. So that is good. I’m glad to see that I’m actually getting sleep these days. The other one for January specifically, I kind of got back on the bandwagon for exercise. I have logged 12 days of exercise for January. It’s one of those small personal wins. It doesn’t really make a difference in the grand scheme of things, but it’s nice to see that things seem to be getting back on track.
Rob: That’s awesome. The seven hours, isn’t that up from—
Mike: Three-and-a-half?
Rob: Like four hours? I mean, that’s a huge difference. Obviously, sleep makes a difference in so much stuff. In fact, I showed an audiobook that I was listening to. The Power of When is what it’s called but a lot of it is about sleep. Just that like not getting enough sleep, it just shapes your whole mindset, you can get sad, depressed, you can be pessimistic. I’m all of those things if I don’t get enough sleep. But is that why? I mean, the 12 days of exercise for you, is it because you’re getting more sleep that your able to do that?
Mike: Yeah, definitely. I do not have the will power to go to the gym if I don’t get enough sleep. I just recognize that, which kind of sucks. It means that if my sleep goes off the rails, then pretty much everything else goes off the rails, too. The sleep is definitely kind of the underlying factor, but obviously the other stuff contributes in other ways. If I’m getting enough sleep but probably not enough exercise, then I could probably get by. But if I’m not getting to sleep then not exercising contributes to other negative things that happened and just completely throws me off the rails.
Rob: Yeah, I can totally imagine that. The same thing happens to me. Glad to hear it and has your mindset shifted as well?
Mike: Yeah, definitely. I’m definitely more optimistic about just about everything, to be honest. In some ways I look back at it and it’s night-and-day difference between now and a couple of months ago. It’s just partly the mindset but partly the ability to actually remember things. I remember conversations that I was in before where I would literally just forget words. I still have something lingering effects of that but I’m hoping that it gets better and eventually goes away.
I don’t know how bad things can get or how long it can affect you, the sleep deprivation. I have read horror stories and stuff about people who don’t get enough sleep for extended periods of time. It’s just like a long-term brain damage and stuff, which was kind of terrifying, but I don’t know how bad that was for me and it’s not something to find out exactly anytime soon. If I don’t remember it that it did ever happened, I don’t know.
Rob: That’s right. Can’t we just blame it on getting old, too?
Mike: You could. I’m young.
Rob: We had a pretty cool comment on episode 423 which is where we talked through our goals for 2019. You essentially looked back on 2018 and you said it was a complete bust. I’ve got ones out of five on all my goals and I was pulling some things out of you like what were some wins. Sarah chimed in on the comments and said, “Hey, Mike. I think you can think about 2018 a bit differently. You actually had a major win, which was finding out that you have sleep apnea. Without that discovery, 2019 would have been the same or even worse than 2018. Now you know the problem is, you can do something about it. As you both discussed, lack of sleep messes up absolutely everything.” I want to throw in here that knowing is half the battle after all, am I right?
Mike: Yeah, I guess.
Rob: So back to Sarah, she said, “So rather than feeling crappy about not meeting any of your 2018 goals, maybe you could reframe 2018 as a transition year or turning point. Best of luck for 2019. Hope it’s everything you want to be.”
Mike: Thanks there. I really appreciate that. Even recently, I’ve started kind of rethinking my thoughts on what last year were. I write it off as kind of more of a learning experience of like, yes this happen and it sucks but at the same time there’s literally nothing I can ever do to get that time back. So, I may as well just kind of buckle down and move on.
Rob: Yup. Sometimes, that’s what you’ve got to do. We also had another comment that I thought was poignant and it was about episode 428 where we answered some listener questions. One of them was about equity split. Rob chimed in. I don’t know his last name, it wasn’t me. He chimed in on the comments and he said, “Regarding the equity split question, you missed mentioning vesting periods and cliffs, which is super important.”
He’s correct and what’s interesting is normally I do when we talk about equity splits. Typically even if two co-founders are starting a company together, you want them to vest their equity over a period of time. The range tends to be to 2-4 years and you often had a cliff at the front, meaning you get zero equity until one year in. Then you vest that whole year at a time and then you vest the rest on a monthly schedule.
It’s not how you have to do it but it is the most common way to do it. I think it’s how Y Combinator is kind of setup and I believe the use are there either a three- or four-year festing with a one-year cliff upfront. I appreciate Rob for calling that out. What you’re trying to save yourself from is someone working on your business for six months, leaving, and then he or she owns half the company. You’re trying to avoid that so that everyone puts in their time and earns their equity in a sense. Thanks for chiming in with that Rob.
Mike: One other thing that I wanted to mention is that I’ve started adding to the email courses and stuff that I have on the Blue Tech website and based on those, I actually got an email this morning from somebody and invited me to contribute to their online publication, wanted to talk to me a little bit more about it, so I’m going to try and set up a meeting to discuss that with them next week. There’s another one that I have that is in the works as well that’s completely unrelated to the online course that I have. Both of them have publications that are catering to people who are doing email marketing, so it’s kind of exciting to see that those opportunities are starting to show up.
Rob: That is fun. Will you mention them on the show and/or link to them when the time comes?
Mike: I will as soon as at least when they get closer to going live or I know that they’re actually going to go live. I’m sure that you’re no stranger to this, but I’ve been on podcasts before, different places, written articles and stuff, where you write it and submit it or you record the episode and then for whatever reason, it just never sees the light of day. So I’ll wait a little while until I actually do that.
Rob: Yeah and I actually do more vetting now of podcasts or magazines or whatever that want to interview me. I have had enough for those happen where I spend the time I do it and then it never see the light of day. It’s kind of tough.
Today we are answering some listener questions. Our first is a question about business ethics check. I think this is kind of interesting. It’s from Paul McMahon and he says, “Hi guys. I don’t think you’ve ever done a show on business ethics. I’d be interested in hearing about some of the ethical challenges you face when running your businesses and how you’ve approached them.”
“For me personally, my biggest challenge has been deciding how to approach dealing with business I consider to be unethical. For example, as a business, Facebook has shown many times that they’re willing to make moral compromises in exchange for growth and revenue. This makes me not want to support them. At the same time, I have a positive ROI on Facebook ads. How do I balance my disdain for their business with growing my own business?”
“Another example is what you do about customers whose businesses or organizations you consider to be unethical. In my case, I run a niche job board tied to my personal identity. It’s a manual process onboard customers. I talk with every company wanting to use it. I’ve had some companies want to use it whose business I think is immoral while still legal. I’ve waffled on whether or not to accept them as customers. I wonder if you’ve ever faced similar challenge.”
“As bootstrappers, we normally don’t have a board or shareholders to answer to. This makes it hard to hide behind the idea that we should just do whatever is best for the company. The company is a direct reflection of our own goals and beliefs. Ultimately the specific ethical challenges we face depend on us personally. So, rather than looking for advice with challenges I faced, I’d be more interested in hearing about yours and how you’ve dealt with them.”
Mike: I think that’s a great question but it’s also extremely involved and nuanced based on who you are what you value. I’ve seen people commenting specifically on Facebook, for example. Paul specifically called Facebook out as one of those companies where he’s kind of making this moral compromise to exchange it for growth and revenue because it does bring business by spending money on Facebook ads, but how do you go about doing that and how do you justify that?
I can’t say that there’s one go to answer for is because it really depends on your level of comfortability with that, what it is you’re offering, and the types of people that you’re serving. Personally, I look at it as like, if you’re not getting in front of your customers, then are you doing them a disservice by not trying to help them? Obviously, you can go back-and-forth on that all day long. I think for me it depends a lot on the advertiser’s platform themselves, whether it’s something that I use or would use. If it’s something that I’m not going to use or have absolute qualms about using, then I probably wouldn’t do advertising on there.
At the same time, I have a Facebook account. So, would I do Facebook advertising? Yes. Do I have kind of a personal moral dilemma over them making money from that? Yes, to some extent, but there’s also not a lot of other options. I think that’s kind of a big deal to think about, like do you have other options? Are there ways that you can not support them and other financial ways but still get what you need out of them? They’re a big company. They don’t care.
Rob: I think that’s a good point I want to hop in here. Look at Amazon, Apple, Google, Facebook, GE, and Procter & Gamble. In all these companies, I don’t love everything they do. They all make missteps and they all do some things that either are unethical or immoral or whatever, however you want to frame it, and your point of it being nuanced and having to weigh these things, it’s interesting.
I like how you said, “From now I’m not going to do Facebook ads.” Really should delete your Facebook account, too. Some people do that, but if you haven’t done that, I don’t know that it matters to you enough if you’re still engaging with the platform.
Mike: That’s kind of what I was thinking. If you’re not so opposed to Facebook that you haven’t deleted your Facebook account yet, then you’re probably not that violently opposed to them such that supporting them through advertising on their platform really makes that much of a difference. But if you have deleted it, then you’re probably not going to create a new one just do you can do that.
I know there are some people who have deleted their Facebook accounts and then created one specifically so that they could do advertising. That’s because Facebook will not allow you to advertise unless you have a Facebook account linked to it, which kind of sucks but if your going to go down that route, then what you do about it? Your options are to not do the ads or to do them.
Rob: Yeah. What’s interesting is he’s asking basically about ethics and these terms, ethics and morals, they do relate to right or wrong conduct. But if I look up a definition of them, I always think of this is like they can be used interchangeably but ethics refer to rules provided by an external source and morals are individuals on principles. Ethics can be laws, or it can be workplace code of conduct, or can be religious principles, whereas morals are something that comes from inside you.
I do think here that they can overlap but they’re not always the same. Sometimes your morals can conflict with the ethics with laws. You don’t agree with a law that’s passed and you wholeheartedly don’t think that’s ethical. I’m not trying to muddy the water or get philosophical here, but I do think that with bigger businesses it is easier to make this ethical argument that it’s a larger body and there’s legal requirement that you do what’s best for the shareholders, whereas with smaller companies it’s not.
Have I faced moral dilemmas over the years? Yeah, I have. There was a time when I was unemployed. It was right after the dot com bust. Someone who’s going to give me a contract for $15,000, I would have kept this. This was when we were young and living pretty svelte. It was good. Then it keep us going for a couple months, probably three months or so. I went through, talked the guy through my hourly rate, did all the stuff, and he’s like, “This sounds great, let’s get started right away.” I was going to work from home, there was all this thing, and then when he started walking me through the site I was like, “This isn’t something I can support,” like, “I’m sorry but this isn’t something I can show to my kids.”
While I don’t have an issue with it and it’s not illegal, it’s just not something that I can do. It was a very hard decision for me but I’ve never looked back and thought, “Boy, I really should have sacrificed…” There was just something in me that didn’t agree with it. I’m not sure I can count any of the times where I’ve followed my moral compass, that I regret doing that.
So, if I were onboarding customers and I had an issue with what they’re up to, I guess you can piss people off by saying, “Hey, you know what? I’m sorry, we just can’t accept you.” They could get angry. Could they sue you? I suppose, but is it really worth their time and if you have something in your terms of service to cover you there, that you can cover that legal thing?
In my opinion, if you run your own business and you bootstrap, you’re doing it for a lot of reasons. One of those is so really you control your own destiny. I feel like I want to be able to get up everyday, look myself in the mirror, and believe in what I’m doing. Each of us might have a slightly different definition of that because our morals are different from person-to-person.
One part of that for me is I want to be able to tell my kids about any investment I make in any company and any company that I fund, that I advise, that I work on, I never want to have to say, “Oh yeah. Don’t tell the kids about that company.” There are certain businesses that are legal, that I am going to personally not invest in or be associated with because of that. That happens to be my moral compass but it doesn’t necessarily need to be yours as a listener.
Mike: Yeah. I think there’s a good distinction there between ethical, moral, and illegal. I definitely don’t want to be on the side of doing things that are illegal, but at the same time, I think if you take a step back from that and look at the United States, for example, there is marijuana legalization all over the place but it’s still not legal at a federal level. It becomes a very much gray area at that point. Is it legal? Is it not? It depends on which laws you’re looking at.
There are some people who are like, “I don’t care,” or, “I don’t agree with the law and I’m not going to follow it.” That’s totally your choice and maybe you’re doing something illegal at that point, but is it moral or ethical? I think that your points about the difference between those are head on. I agree with you in terms of what I would be willing to do and what I would want to be able to show to my kids. I wouldn’t want to be involved in stuff that I will have to hide from them. I’m not in the hiding things.
Rob: This is an interesting one and I think that Paul asked specifically about the ethics, but I think what he’s talking about is morals. He talked business ethics but he said, “I had some companies want to use it whose business I think is immoral,” and that is subtle, it’s nuanced, but it actually is a different thing because ethics would be, again, an external kind of force on you.
Mike: And honestly, this is something that I’ve struggled with to some extent because with Blue Tech, specifically, people can use Blue Tech for cold email outreach. I’m not a huge fan of it. I don’t do a lot of cold email outreach mainly. I will pinpoint, email certain people but I’m not going to throw them into an automated sequence if I don’t think that it’s a good chance that they’re going to be interested in. Quite frankly, I will find ways to make it a warm introduction instead of a cold email. I’m just not going to drop somebody a completely cold email because (1) I don’t think that it works very well, and (2) I think there’s better ways to provide value and get in front of people than just drop in a completely cold email out of the blue.
There are people who do feel that that’s a viable strategy and they want to do that. I do struggle to some extent with what do I do with those people and how should they be treated. I don’t treat them any different than any other customer, but at the same time I do struggle to some extent with what should I do with the business itself, how do I turn these people away, or say, “Hey, maybe there’s another piece of software the you should be going to use,” because some of them will come to me and say, “Hey, I have my own mail server and I am able to send…” I forget what it was. Some customer came to me, a prospective customer and they said they got their own mail server and they bumped it up for 32 processors and could send thousands of emails per second. This is not something I really want to be involved in. I kind of know in the back of my mind without being told what is probably going to happen there.
Rob: Right. Some of that is kind of a morality thing or kind of moral compass. The other part of it is risk mitigation of like, “This is going to end poorly and I don’t want to be associated with that,” and I think these two can overlap at times.
Mike: Oh yeah, definitely. There is that aspect of it. We talked about this at MicroConf to some extent, too. There’s certain marketing strategies that people will use and it’s not illegal, it’s not something that you can’t do, it’s just you’re not necessarily entirely comfortable with it, so you won’t do that. It’s a hard decision making and every single situation is a little bit different. It’s just hard and I don’t have a great advice for that.
Rob: I hope our thoughts are helpful, Paul. Thanks for writing in. Our next question is perhaps an easier one. It’s about converting free users to paid. Someone has a freemium product, his name is Mark, and he actually asked this question openly on Twitter about a week ago. I think it was Adrian Peter, he kind of pinged you and I and Reuben on Twitter. I said I have some quick thoughts but frankly, this deserves more than 280 characters of thought.
I ask Mark, the original poster, to write in with more details. He didn’t. I’m assuming he either got busy, just wasn’t that interested in hearing our thoughts or whatever. I still think it’s an interesting question to talk about because I think this is something that folks struggle with. He said, “I’ve just found out that my freemium product has on average 9000 users a day, access it with only 140 people paying for the advanced features. I’m looking for someone who can mentor me on how to migrate those free users to happy paying users without pissing them off.” While we’re not going to mentor him, I have some thoughts on how to think about doing this. But why don’t you kick us off with some ideas?
Mike: I think to start with is that 140 people out of 9000 is about a little over one-and-a-half percent. It’s like 1.55%. If my memory serves me, that’s actually not a terrible freemiun rate.
Rob: Yup. I believe Dropbox, in the early days, the numbers they published was like 3% from free to paid over 12 months. When they did that, they had such a high funnel volume, that that was their business model. Who knows what it is now. I agree, 1.5% is in the order of magnitude or what Dropbox had.
Mike: Right. To start off, that’s not terrible. Did he say what this product was? I don’t see that here.
Rob: No, he didn’t. That’s, again, why I asked him. I don’t know if it’s B2C. I don’t know.
Mike: My guess is that it would be B2C. It doesn’t seem like it would be anything else.
Rob: Yeah, I would think so. I’m not sure why you would do freemium with deep B2B. I shouldn’t say that because there’s MailChimp and Drip and they have free plans. There’s whole reasons for that. But flippantly on the service, if you have 9000 free users and 140 paid, I’m guessing it’s the B2C product.
Mike: Right. I think there’s a few different ways you could go about this. It looks to me he’s going down the path of analyzing who is using the product. That’s a great place to start. If he know that 9000 users a day are accessing it, something that brings that to mind, though, is that the users per day is not necessarily reflective of the total number. That 1.5% that you and I just talked about is probably substantially lower than that because he’s saying users per day are actively logging in versus how many is it over a month, or three months, or over the course of the year? How many total accounts are there versus the number of people who are using it? I’m not saying that you’re going to be able to charge all those people. It’s kind of like a benchmark for how many people have started using it and decided to keep using it versus how many people decided that it was worth it enough to pay.
That aside, take a look at seeing what features people are using. Compare them between the paid users and the free users. See if there are places where they are using certain features or using a certain amount of it. Let’s say Buffer, as an example. If you have a certain number of social profiles connected, I think it’s three or four, you’re still qualified for the freemium plan. But then, once you get above that, then you have to pay for it. See what those metrics look like and see if there are places where you can see that there are people who would probably pay for it if there was a barrier there or there was a paywall to go over that limit.
In order to convert them over from free to paid, you’re going to have to be really, really careful because if you simply take something away, let’s say that the limit was, you decided that it should be 5 and a lot of people have 10, those people who are not paying for it now are going to be really, really upset that you made them start paying for it, even though you’re providing value. You can kind of segment your list a little bit, see who signed up with a work account versus a free account.
There’s places on GitHub where you can go in and you can find a list of mail servers. They include things like Gmail, Yahoo!, AOL, and all those things, basically free email accounts. Those providers, match that up against your list, see who’s probably using a work account versus a free account, and target those people who are using a work account first as the people to try and get them to upgrade. Offer them some sort of special discount or incentives, Maybe something above and beyond what the typical package would be.
You can also do kind of a Netflix model where you grandfather them in for a certain time period, let’s say six months or a year, and say, “Look, we’re going to start charging for this but we’re not going to do it right now. We’ll do it in that timeframe.” That way, you can kind of gauge the response as opposed to just doing it and then dealing with the fallout. Those are just a bunch of things off the top of my head. Rob, I’m sure you have plenty to add.
Rob: Yup. I totally do. That’s the thing. I think there are different options here that you have to think about. If it’s B2C, the numbers are actually not that bad. The first thing I try to figure out is why are people not upgrading and I probably email or everybody who is not and say, “What are you looking for?” Just start conversations. “What in our paid plans isn’t that enticing? What do you need?” Maybe 8000 of them are just teenagers or are people who live in a country where they just don’t have the money to pay for it. None of this is worth it. It’s trying to get to not that they aren’t upgrading but why aren’t they upgrading. That would be the first thing I’d think about.
If you decide, “Oh, there’s a bunch of businesses using this and they should be paying for it more than 1.5% or whatever,” then I think you kind of have four options. You can email everybody with a one-time upgrade reward like, “Hey, get a free $20 Amazon gift card.” That’s a terrible idea but this free ebook or this free audio series or this free physical book or just some type of reward to upgrade right now to paid. Probably not going to do great but it’s one option. It’s simple. It’s quick.
Another option is to offer maybe a one-time special pricing tier and be like, “This is only available once and it’s the same price as what everyone else is getting but you get twice as much or three times as much if you upgrade now.” That keeps your price the same.
The next level up is to kind of giving a lot of stuff is offer a one-time lifetime discount and be like, “Look, the price will be half of what everyone else is the normal sign-up for the rest of the time that you’re on the product,70%, or whatever you want to do, but you have to pay for a year in advance,” and just see what kind of result you can get there.
The last option is, frankly if free plan is working for you and it is marketing which is really what free plans are supposed to be, then you don’t want to close it down. But if free plan is a lot of cost for you, whether it in support or it’s in hosting, and you want to consider closing it down, then that’s kind of your last option. Yes, you will make a few people mad but there’s always fewer people mad than you think will be.
You could close the free tier with 3-12 months of notice basically offer one of the above options that I’ve already given, and just say, “Look, due to this and that, I’m a single founder, small bootstrap company, we don’t have the resources. I’m sorry, it was an experiment, and sometimes, these things happen.” People understand that. You’ll get two responses from 8000 that will be all huffy about it. Or maybe it’s 10 but still, it will be a tiny fraction.
I have done this before. I acquired HitTail and there was this huge free tier. People were abusing the system, frankly, and I have to shut one down. I did it just like that. I did and I’ve got some emails from people who are mad, and then I’ve got a bunch of people that upgraded. It was enough to kind of co-hosting cost for each month, based on the number of people that upgraded.
Those are the options I think that really come to mind and obviously some of those overlap. […] what you said but I think there are definitely ways to be thinking about this. Free plans are tricky. I think that’s the bottom line. They’re not as clear-cut, not as easy to navigate as just straight ahead trial to paid, but that doesn’t mean you shouldn’t do them.
Mike: Yeah. I think there’s definitely an approach to basically chipping away at that number and increasing it from 140 to as high as you can get it obviously, but there’s ways to do it and it depends a lot on how much time you have or how much time you want it to take. You can just send out an email and say, “Hey, in two weeks we’re going to start charging for this and kind of shut down the free plan.” But that’s a hard line in the sand and it’s difficult to back away from versus the opposite approach which is approach them with a soft hand and try to slowly move people over and not make them too upset. You just take a much longer period of time to do it and over time you kind of ratchet that up and slowly be a little bit more tightfisted about it. I would be a little cautious with that number of people.
Rob: Yup, I agree. I got a couple of other questions. We only got a couple of more minutes but I went to Quora and I went to the startups category. I pulled a few more questions out. We’ll see how many we have to get through. Mike, I’m curious. What is the worst startup business idea that you’ve ever heard?
Mike: I have the perfect one that I’ve heard. I was talking to somebody. It was maybe 2-3 years ago. He has told me how he had this great idea for a startup and they’ve already gotten something like $300,000 worth of funding for it and have basically burned through it all. Somehow, this company is worth $8 million and the basic idea of it—this is kind of his words, I’m paraphrasing this to some extent—he kind of said it’s a combination of Facebook, Pinterest, Twitter, and he named off two or three other major online businesses like that people who listen on this show would recognize. I’m just like, “You have got to be kidding me.” I don’t want to mash them all together and create one giant platform for everybody to use.
Even after burning through $300,000 worth of investment capital, I was like, “How many paid customers do you have?” Of course, getting that out of him was like pulling teeth and he was like, “None.” Then I said, “Okay, so you haven’t made any money. How many users do you have? Like free people? Like people who are just using it?” and the answer was still none. I’m like, “Oh my God, I can’t even believe I’m entertaining this conversation.”
Rob: Yeah, and that’s a tough thing. It’s like I run into some entrepreneurs who wanted to start a startup and they don’t have any connection to the startups space. That’s okay, you don’t have to be part of the community and drink the Kool-Aid of any one person. You don’t have to be part of the MicroConf crowd or be part of the Silicon Valley crowd or the SaaS or whatever, but I do think that there are learnings and general knowledge that we all roll our eyes at, that are so fundamentally known within the circles, that if you want to start a startup, having some of that knowledge is just as helpful as some guard rails.
When you say that Facebook, Pinterest, Google, Apple combination or whatever the guy said, this is one that just breaks so many rules that you know that it’s probably a bad idea, but he didn’t know. He doesn’t know that it breaks the rules because he doesn’t know what kind of “rules” are in terms of trying to get some off the ground.
Mike: Yeah. I think even objectively though, you’re trying to build something that is that broad and it just struck me as odd. Delusional is really the word.
Rob: I don’t know the worst. It’s hard to nail the worst one. Probably some of the worst ever have been ideas that I’ve come up with myself. There is one. I was a contractor-developer years ago. It was during the dot-com boom. Of course, that’s when a lot of the worst ideas came out. One of them was—I won’t say the name of it—they had this system where you could come to the website—remember, there were no mobile phones, it wasn’t a mo-app—you could log into the website on your computer and if you have seen someone on the road that you wanted to get in contact with—I was assuming it was a dating kind of social network thing before social networks—if you’ve got their license plate number, you type it into the startup website, they would notify that person and say, “So and so wants to connect with you. Do you want to connect with them?” and it had to be a double opt-in. Then, there’s going to be a social network and people could chat back-and-forth and meet and talk. That was the idea.
I remember we’re building this and I’m like, “Wait, aren’t there privacy concerns? How are you going to get people’s emails from their license plates? What’s the network effect on this?” It’s just layers and layers of questions of like, “How will this ever work?” Again, at least we have a mobile phone or something and take a picture of their car and yours and they could see you. But if you suddenly got an email from this company that’s like, “Someone wants to connect with you. They database on your license plate,” and you’re like, “I don’t know who that person is. I didn’t see them while I was driving on the freeway.” Do you think it’s bizarre? Do you think it’s good? Do you think it’s gold?
Mike: I don’t definitely think it’s gold but I also will say flat out that it is hard to predict what the general population will do or will gravitate towards for certain types of social apps. Snapchat, for example. If you were ask me five years ago, “Oh will Snapchat ever be a thing?” I’ll be like, “No, that’s the dumbest thing I’ve ever heard.”
Rob: It was my idea and I asked you. You told me not to do it and look where that got us, Mike.
Mike: I know. But it’s hard to predict when those things come up, whether or not that’s going to go anywhere. Personally, would I ever use it? Heck, no. There’s no way. That’s like it’s got ‘stalker’ written all over it. I think that you would have a hard time getting traction with it but would nobody use it? I can see people deciding they wanted to use it if they were in a hit-and-run and somebody took off and they’re like, “I think have this license plate.” Although they’ll just give it to the cops. So, what difference does it make?
Rob: Yeah, that’s the thing. Then they’d contact him and be like, “Do you want to hear from this person about your hit-and-run?” and like, “No. Rejected” Its funny.
Last question of the day, Mike. What are the things that no one tells you about starting a startup?
Mike: I think the thing that comes to mind here is that there are there going to be days, possibly weeks and months, where you get up in the morning and you say to yourself, “I didn’t sign up for this.” It’s all going to be related to stuff that you thought you got into the business for one reason and you find out that you’re going over your books line by line because somebody made a mistake or there’s some API that’s coming in and hitting your app and you have to somehow lock it down because it’s like basically DDoSing your systems. There’s going to be things that come up where you’re like, “I didn’t sign up for this.” The reality is you kind of did but it’s too late to do anything about it. Everyone has those days. Those are the two things I would say about that.
Rob: Yeah. Those are good answers, Mike. A lot of people will tell you that it’s hard and a lot of people will tell you it take a long time and such. I’ve said that a lot. The MicroConf and bootstrapper community is both big and small. In terms of the entire world, the startup community is pretty small even though it can have some influence on those folks. But just outside our community, I don’t hear many people saying, “When you’re starting up, try to get to revenue quickly and try to do that in the first whatever, the first six months after launch.”
I think that there is so much importance put on growth of user engagement or growth of numbers and daily actives in this kind of stuff. I even think there’s SaaS founders launching with pure freemium models because they just think that the number of people coming to use their app is important or is what counts or something like that. I think that focusing on revenue early is something that I don’t think is talked about enough.
Mike: Yeah, I would say I agree with that. I think it’s something of a common fallacy. I almost want to blame Steve Jobs for this, but people think that—I’m not immune to this—if you build something great, people are going to find it or you know what the customer wants. That’s really more of a Steve Jobs than anything else. It’s like you know what the customer want and you just need to build it and put it in front of him. Then you find out afterwards that you were way off base and there’s all these other things you need to do or that they want or need, subtle things that you need to now change. Whereas if you had just talk to the customer in the beginning, you had learned that those things weren’t true.
I think that there’s this aura or halo around Steve Jobs just like Saint John saying, “I know what these people want and this is how it should work.” All the stories that go around where he just was very intuitive about it, what should be built, and people kind of think that they can do that too. I think that there’s a big distinction between a multi billionaire who has been in that position than all of the rest of us.
Rob: Right and he eventually did that, I think. I think there’s myth around it. Some of it is exaggerated, but he didn’t do that earlier in his career. When was the last time you heard someone talk about, “The Apple IIe was designed by Wozniak and it was so far ahead of its time that when it did catch on, it was amazing.” But it’s not Jobs, aside from crafting the outside of it or whatever, he didn’t invent the Apple IIe, but he came up with the Lisa, which was a failure. He really pushed the Macintosh forward, which was a failure early on and eventually caught on. Then he launched NeXT and built a computer that was a failure. He had a bunch of failures. He thought he knew what people wanted and then actually didn’t.
If you read the book Becoming Steve Jobs, it talks a lot about his transformation and it touches on all those things. That’s what people forget. It’s like you and me and the person who thinks they’re Steve Jobs, we don’t have the decades and hundreds and millions of dollars to burn through, to learn the lessons that he ultimately did. By the time he did come out and do the iMac, the iPod, the iPhone, all the stuff that he eventually had wild, amazing success with, a lot of people forget that he lost hundreds and millions of dollars of his and other people’s money on the journey there and he spent decades of his life basically learning that stuff that most of us don’t have the luxury of it.
Mike: That’s kind of my point. We forget that piece of it.
Rob: Yup.
Mike: Interesting question for sure. But if you have a question for us, you can call into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So, where this week, Mike?
Mike: A couple of a personal milestones for January. The first one is that I have averaged over seven hours of sleep per night since I got my CPAP machine. So that is good. I’m glad to see that I’m actually getting sleep these days. The other one for January specifically, I kind of got back on the bandwagon for exercise. I have logged 12 days of exercise for January. It’s one of those small personal wins. It doesn’t really make a difference in the grand scheme of things, but it’s nice to see that things seem to be getting back on track.
Rob: That’s awesome. The seven hours, isn’t that up from—
Mike: Three-and-a-half?
Rob: Like four hours? I mean, that’s a huge difference. Obviously, sleep makes a difference in so much stuff. In fact, I showed an audiobook that I was listening to. The Power of When is what it’s called but a lot of it is about sleep. Just that like not getting enough sleep, it just shapes your whole mindset, you can get sad, depressed, you can be pessimistic. I’m all of those things if I don’t get enough sleep. But is that why? I mean, the 12 days of exercise for you, is it because you’re getting more sleep that your able to do that?
Mike: Yeah, definitely. I do not have the will power to go to the gym if I don’t get enough sleep. I just recognize that, which kind of sucks. It means that if my sleep goes off the rails, then pretty much everything else goes off the rails, too. The sleep is definitely kind of the underlying factor, but obviously the other stuff contributes in other ways. If I’m getting enough sleep but probably not enough exercise, then I could probably get by. But if I’m not getting to sleep then not exercising contributes to other negative things that happened and just completely throws me off the rails.
Rob: Yeah, I can totally imagine that. The same thing happens to me. Glad to hear it and has your mindset shifted as well?
Mike: Yeah, definitely. I’m definitely more optimistic about just about everything, to be honest. In some ways I look back at it and it’s night-and-day difference between now and a couple of months ago. It’s just partly the mindset but partly the ability to actually remember things. I remember conversations that I was in before where I would literally just forget words. I still have something lingering effects of that but I’m hoping that it gets better and eventually goes away.
I don’t know how bad things can get or how long it can affect you, the sleep deprivation. I have read horror stories and stuff about people who don’t get enough sleep for extended periods of time. It’s just like a long-term brain damage and stuff, which was kind of terrifying, but I don’t know how bad that was for me and it’s not something to find out exactly anytime soon. If I don’t remember it that it did ever happened, I don’t know.
Rob: That’s right. Can’t we just blame it on getting old, too?
Mike: You could. I’m young.
Rob: We had a pretty cool comment on episode 423 which is where we talked through our goals for 2019. You essentially looked back on 2018 and you said it was a complete bust. I’ve got ones out of five on all my goals and I was pulling some things out of you like what were some wins. Sarah chimed in on the comments and said, “Hey, Mike. I think you can think about 2018 a bit differently. You actually had a major win, which was finding out that you have sleep apnea. Without that discovery, 2019 would have been the same or even worse than 2018. Now you know the problem is, you can do something about it. As you both discussed, lack of sleep messes up absolutely everything.” I want to throw in here that knowing is half the battle after all, am I right?
Mike: Yeah, I guess.
Rob: So back to Sarah, she said, “So rather than feeling crappy about not meeting any of your 2018 goals, maybe you could reframe 2018 as a transition year or turning point. Best of luck for 2019. Hope it’s everything you want to be.”
Mike: Thanks there. I really appreciate that. Even recently, I’ve started kind of rethinking my thoughts on what last year were. I write it off as kind of more of a learning experience of like, yes this happen and it sucks but at the same time there’s literally nothing I can ever do to get that time back. So, I may as well just kind of buckle down and move on.
Rob: Yup. Sometimes, that’s what you’ve got to do. We also had another comment that I thought was poignant and it was about episode 428 where we answered some listener questions. One of them was about equity split. Rob chimed in. I don’t know his last name, it wasn’t me. He chimed in on the comments and he said, “Regarding the equity split question, you missed mentioning vesting periods and cliffs, which is super important.”
He’s correct and what’s interesting is normally I do when we talk about equity splits. Typically even if two co-founders are starting a company together, you want them to vest their equity over a period of time. The range tends to be to 2-4 years and you often had a cliff at the front, meaning you get zero equity until one year in. Then you vest that whole year at a time and then you vest the rest on a monthly schedule.
It’s not how you have to do it but it is the most common way to do it. I think it’s how Y Combinator is kind of setup and I believe the use are there either a three- or four-year festing with a one-year cliff upfront. I appreciate Rob for calling that out. What you’re trying to save yourself from is someone working on your business for six months, leaving, and then he or she owns half the company. You’re trying to avoid that so that everyone puts in their time and earns their equity in a sense. Thanks for chiming in with that Rob.
Mike: One other thing that I wanted to mention is that I’ve started adding to the email courses and stuff that I have on the Blue Tech website and based on those, I actually got an email this morning from somebody and invited me to contribute to their online publication, wanted to talk to me a little bit more about it, so I’m going to try and set up a meeting to discuss that with them next week. There’s another one that I have that is in the works as well that’s completely unrelated to the online course that I have. Both of them have publications that are catering to people who are doing email marketing, so it’s kind of exciting to see that those opportunities are starting to show up.
Rob: That is fun. Will you mention them on the show and/or link to them when the time comes?
Mike: I will as soon as at least when they get closer to going live or I know that they’re actually going to go live. I’m sure that you’re no stranger to this, but I’ve been on podcasts before, different places, written articles and stuff, where you write it and submit it or you record the episode and then for whatever reason, it just never sees the light of day. So I’ll wait a little while until I actually do that.
Rob: Yeah and I actually do more vetting now of podcasts or magazines or whatever that want to interview me. I have had enough for those happen where I spend the time I do it and then it never see the light of day. It’s kind of tough.
Today we are answering some listener questions. Our first is a question about business ethics check. I think this is kind of interesting. It’s from Paul McMahon and he says, “Hi guys. I don’t think you’ve ever done a show on business ethics. I’d be interested in hearing about some of the ethical challenges you face when running your businesses and how you’ve approached them.”
“For me personally, my biggest challenge has been deciding how to approach dealing with business I consider to be unethical. For example, as a business, Facebook has shown many times that they’re willing to make moral compromises in exchange for growth and revenue. This makes me not want to support them. At the same time, I have a positive ROI on Facebook ads. How do I balance my disdain for their business with growing my own business?”
“Another example is what you do about customers whose businesses or organizations you consider to be unethical. In my case, I run a niche job board tied to my personal identity. It’s a manual process onboard customers. I talk with every company wanting to use it. I’ve had some companies want to use it whose business I think is immoral while still legal. I’ve waffled on whether or not to accept them as customers. I wonder if you’ve ever faced similar challenge.”
“As bootstrappers, we normally don’t have a board or shareholders to answer to. This makes it hard to hide behind the idea that we should just do whatever is best for the company. The company is a direct reflection of our own goals and beliefs. Ultimately the specific ethical challenges we face depend on us personally. So, rather than looking for advice with challenges I faced, I’d be more interested in hearing about yours and how you’ve dealt with them.”
Mike: I think that’s a great question but it’s also extremely involved and nuanced based on who you are what you value. I’ve seen people commenting specifically on Facebook, for example. Paul specifically called Facebook out as one of those companies where he’s kind of making this moral compromise to exchange it for growth and revenue because it does bring business by spending money on Facebook ads, but how do you go about doing that and how do you justify that?
I can’t say that there’s one go to answer for is because it really depends on your level of comfortability with that, what it is you’re offering, and the types of people that you’re serving. Personally, I look at it as like, if you’re not getting in front of your customers, then are you doing them a disservice by not trying to help them? Obviously, you can go back-and-forth on that all day long. I think for me it depends a lot on the advertiser’s platform themselves, whether it’s something that I use or would use. If it’s something that I’m not going to use or have absolute qualms about using, then I probably wouldn’t do advertising on there.
At the same time, I have a Facebook account. So, would I do Facebook advertising? Yes. Do I have kind of a personal moral dilemma over them making money from that? Yes, to some extent, but there’s also not a lot of other options. I think that’s kind of a big deal to think about, like do you have other options? Are there ways that you can not support them and other financial ways but still get what you need out of them? They’re a big company. They don’t care.
Rob: I think that’s a good point I want to hop in here. Look at Amazon, Apple, Google, Facebook, GE, and Procter & Gamble. In all these companies, I don’t love everything they do. They all make missteps and they all do some things that either are unethical or immoral or whatever, however you want to frame it, and your point of it being nuanced and having to weigh these things, it’s interesting.
I like how you said, “From now I’m not going to do Facebook ads.” Really should delete your Facebook account, too. Some people do that, but if you haven’t done that, I don’t know that it matters to you enough if you’re still engaging with the platform.
Mike: That’s kind of what I was thinking. If you’re not so opposed to Facebook that you haven’t deleted your Facebook account yet, then you’re probably not that violently opposed to them such that supporting them through advertising on their platform really makes that much of a difference. But if you have deleted it, then you’re probably not going to create a new one just do you can do that.
I know there are some people who have deleted their Facebook accounts and then created one specifically so that they could do advertising. That’s because Facebook will not allow you to advertise unless you have a Facebook account linked to it, which kind of sucks but if your going to go down that route, then what you do about it? Your options are to not do the ads or to do them.
Rob: Yeah. What’s interesting is he’s asking basically about ethics and these terms, ethics and morals, they do relate to right or wrong conduct. But if I look up a definition of them, I always think of this is like they can be used interchangeably but ethics refer to rules provided by an external source and morals are individuals on principles. Ethics can be laws, or it can be workplace code of conduct, or can be religious principles, whereas morals are something that comes from inside you.
I do think here that they can overlap but they’re not always the same. Sometimes your morals can conflict with the ethics with laws. You don’t agree with a law that’s passed and you wholeheartedly don’t think that’s ethical. I’m not trying to muddy the water or get philosophical here, but I do think that with bigger businesses it is easier to make this ethical argument that it’s a larger body and there’s legal requirement that you do what’s best for the shareholders, whereas with smaller companies it’s not.
Have I faced moral dilemmas over the years? Yeah, I have. There was a time when I was unemployed. It was right after the dot com bust. Someone who’s going to give me a contract for $15,000, I would have kept this. This was when we were young and living pretty svelte. It was good. Then it keep us going for a couple months, probably three months or so. I went through, talked the guy through my hourly rate, did all the stuff, and he’s like, “This sounds great, let’s get started right away.” I was going to work from home, there was all this thing, and then when he started walking me through the site I was like, “This isn’t something I can support,” like, “I’m sorry but this isn’t something I can show to my kids.”
While I don’t have an issue with it and it’s not illegal, it’s just not something that I can do. It was a very hard decision for me but I’ve never looked back and thought, “Boy, I really should have sacrificed…” There was just something in me that didn’t agree with it. I’m not sure I can count any of the times where I’ve followed my moral compass, that I regret doing that.
So, if I were onboarding customers and I had an issue with what they’re up to, I guess you can piss people off by saying, “Hey, you know what? I’m sorry, we just can’t accept you.” They could get angry. Could they sue you? I suppose, but is it really worth their time and if you have something in your terms of service to cover you there, that you can cover that legal thing?
In my opinion, if you run your own business and you bootstrap, you’re doing it for a lot of reasons. One of those is so really you control your own destiny. I feel like I want to be able to get up everyday, look myself in the mirror, and believe in what I’m doing. Each of us might have a slightly different definition of that because our morals are different from person-to-person.
One part of that for me is I want to be able to tell my kids about any investment I make in any company and any company that I fund, that I advise, that I work on, I never want to have to say, “Oh yeah. Don’t tell the kids about that company.” There are certain businesses that are legal, that I am going to personally not invest in or be associated with because of that. That happens to be my moral compass but it doesn’t necessarily need to be yours as a listener.
Mike: Yeah. I think there’s a good distinction there between ethical, moral, and illegal. I definitely don’t want to be on the side of doing things that are illegal, but at the same time, I think if you take a step back from that and look at the United States, for example, there is marijuana legalization all over the place but it’s still not legal at a federal level. It becomes a very much gray area at that point. Is it legal? Is it not? It depends on which laws you’re looking at.
There are some people who are like, “I don’t care,” or, “I don’t agree with the law and I’m not going to follow it.” That’s totally your choice and maybe you’re doing something illegal at that point, but is it moral or ethical? I think that your points about the difference between those are head on. I agree with you in terms of what I would be willing to do and what I would want to be able to show to my kids. I wouldn’t want to be involved in stuff that I will have to hide from them. I’m not in the hiding things.
Rob: This is an interesting one and I think that Paul asked specifically about the ethics, but I think what he’s talking about is morals. He talked business ethics but he said, “I had some companies want to use it whose business I think is immoral,” and that is subtle, it’s nuanced, but it actually is a different thing because ethics would be, again, an external kind of force on you.
Mike: And honestly, this is something that I’ve struggled with to some extent because with Blue Tech, specifically, people can use Blue Tech for cold email outreach. I’m not a huge fan of it. I don’t do a lot of cold email outreach mainly. I will pinpoint, email certain people but I’m not going to throw them into an automated sequence if I don’t think that it’s a good chance that they’re going to be interested in. Quite frankly, I will find ways to make it a warm introduction instead of a cold email. I’m just not going to drop somebody a completely cold email because (1) I don’t think that it works very well, and (2) I think there’s better ways to provide value and get in front of people than just drop in a completely cold email out of the blue.
There are people who do feel that that’s a viable strategy and they want to do that. I do struggle to some extent with what do I do with those people and how should they be treated. I don’t treat them any different than any other customer, but at the same time I do struggle to some extent with what should I do with the business itself, how do I turn these people away, or say, “Hey, maybe there’s another piece of software the you should be going to use,” because some of them will come to me and say, “Hey, I have my own mail server and I am able to send…” I forget what it was. Some customer came to me, a prospective customer and they said they got their own mail server and they bumped it up for 32 processors and could send thousands of emails per second. This is not something I really want to be involved in. I kind of know in the back of my mind without being told what is probably going to happen there.
Rob: Right. Some of that is kind of a morality thing or kind of moral compass. The other part of it is risk mitigation of like, “This is going to end poorly and I don’t want to be associated with that,” and I think these two can overlap at times.
Mike: Oh yeah, definitely. There is that aspect of it. We talked about this at MicroConf to some extent, too. There’s certain marketing strategies that people will use and it’s not illegal, it’s not something that you can’t do, it’s just you’re not necessarily entirely comfortable with it, so you won’t do that. It’s a hard decision making and every single situation is a little bit different. It’s just hard and I don’t have a great advice for that.
Rob: I hope our thoughts are helpful, Paul. Thanks for writing in. Our next question is perhaps an easier one. It’s about converting free users to paid. Someone has a freemium product, his name is Mark, and he actually asked this question openly on Twitter about a week ago. I think it was Adrian Peter, he kind of pinged you and I and Reuben on Twitter. I said I have some quick thoughts but frankly, this deserves more than 280 characters of thought.
I ask Mark, the original poster, to write in with more details. He didn’t. I’m assuming he either got busy, just wasn’t that interested in hearing our thoughts or whatever. I still think it’s an interesting question to talk about because I think this is something that folks struggle with. He said, “I’ve just found out that my freemium product has on average 9000 users a day, access it with only 140 people paying for the advanced features. I’m looking for someone who can mentor me on how to migrate those free users to happy paying users without pissing them off.” While we’re not going to mentor him, I have some thoughts on how to think about doing this. But why don’t you kick us off with some ideas?
Mike: I think to start with is that 140 people out of 9000 is about a little over one-and-a-half percent. It’s like 1.55%. If my memory serves me, that’s actually not a terrible freemiun rate.
Rob: Yup. I believe Dropbox, in the early days, the numbers they published was like 3% from free to paid over 12 months. When they did that, they had such a high funnel volume, that that was their business model. Who knows what it is now. I agree, 1.5% is in the order of magnitude or what Dropbox had.
Mike: Right. To start off, that’s not terrible. Did he say what this product was? I don’t see that here.
Rob: No, he didn’t. That’s, again, why I asked him. I don’t know if it’s B2C. I don’t know.
Mike: My guess is that it would be B2C. It doesn’t seem like it would be anything else.
Rob: Yeah, I would think so. I’m not sure why you would do freemium with deep B2B. I shouldn’t say that because there’s MailChimp and Drip and they have free plans. There’s whole reasons for that. But flippantly on the service, if you have 9000 free users and 140 paid, I’m guessing it’s the B2C product.
Mike: Right. I think there’s a few different ways you could go about this. It looks to me he’s going down the path of analyzing who is using the product. That’s a great place to start. If he know that 9000 users a day are accessing it, something that brings that to mind, though, is that the users per day is not necessarily reflective of the total number. That 1.5% that you and I just talked about is probably substantially lower than that because he’s saying users per day are actively logging in versus how many is it over a month, or three months, or over the course of the year? How many total accounts are there versus the number of people who are using it? I’m not saying that you’re going to be able to charge all those people. It’s kind of like a benchmark for how many people have started using it and decided to keep using it versus how many people decided that it was worth it enough to pay.
That aside, take a look at seeing what features people are using. Compare them between the paid users and the free users. See if there are places where they are using certain features or using a certain amount of it. Let’s say Buffer, as an example. If you have a certain number of social profiles connected, I think it’s three or four, you’re still qualified for the freemium plan. But then, once you get above that, then you have to pay for it. See what those metrics look like and see if there are places where you can see that there are people who would probably pay for it if there was a barrier there or there was a paywall to go over that limit.
In order to convert them over from free to paid, you’re going to have to be really, really careful because if you simply take something away, let’s say that the limit was, you decided that it should be 5 and a lot of people have 10, those people who are not paying for it now are going to be really, really upset that you made them start paying for it, even though you’re providing value. You can kind of segment your list a little bit, see who signed up with a work account versus a free account.
There’s places on GitHub where you can go in and you can find a list of mail servers. They include things like Gmail, Yahoo!, AOL, and all those things, basically free email accounts. Those providers, match that up against your list, see who’s probably using a work account versus a free account, and target those people who are using a work account first as the people to try and get them to upgrade. Offer them some sort of special discount or incentives, Maybe something above and beyond what the typical package would be.
You can also do kind of a Netflix model where you grandfather them in for a certain time period, let’s say six months or a year, and say, “Look, we’re going to start charging for this but we’re not going to do it right now. We’ll do it in that timeframe.” That way, you can kind of gauge the response as opposed to just doing it and then dealing with the fallout. Those are just a bunch of things off the top of my head. Rob, I’m sure you have plenty to add.
Rob: Yup. I totally do. That’s the thing. I think there are different options here that you have to think about. If it’s B2C, the numbers are actually not that bad. The first thing I try to figure out is why are people not upgrading and I probably email or everybody who is not and say, “What are you looking for?” Just start conversations. “What in our paid plans isn’t that enticing? What do you need?” Maybe 8000 of them are just teenagers or are people who live in a country where they just don’t have the money to pay for it. None of this is worth it. It’s trying to get to not that they aren’t upgrading but why aren’t they upgrading. That would be the first thing I’d think about.
If you decide, “Oh, there’s a bunch of businesses using this and they should be paying for it more than 1.5% or whatever,” then I think you kind of have four options. You can email everybody with a one-time upgrade reward like, “Hey, get a free $20 Amazon gift card.” That’s a terrible idea but this free ebook or this free audio series or this free physical book or just some type of reward to upgrade right now to paid. Probably not going to do great but it’s one option. It’s simple. It’s quick.
Another option is to offer maybe a one-time special pricing tier and be like, “This is only available once and it’s the same price as what everyone else is getting but you get twice as much or three times as much if you upgrade now.” That keeps your price the same.
The next level up is to kind of giving a lot of stuff is offer a one-time lifetime discount and be like, “Look, the price will be half of what everyone else is the normal sign-up for the rest of the time that you’re on the product,70%, or whatever you want to do, but you have to pay for a year in advance,” and just see what kind of result you can get there.
The last option is, frankly if free plan is working for you and it is marketing which is really what free plans are supposed to be, then you don’t want to close it down. But if free plan is a lot of cost for you, whether it in support or it’s in hosting, and you want to consider closing it down, then that’s kind of your last option. Yes, you will make a few people mad but there’s always fewer people mad than you think will be.
You could close the free tier with 3-12 months of notice basically offer one of the above options that I’ve already given, and just say, “Look, due to this and that, I’m a single founder, small bootstrap company, we don’t have the resources. I’m sorry, it was an experiment, and sometimes, these things happen.” People understand that. You’ll get two responses from 8000 that will be all huffy about it. Or maybe it’s 10 but still, it will be a tiny fraction.
I have done this before. I acquired HitTail and there was this huge free tier. People were abusing the system, frankly, and I have to shut one down. I did it just like that. I did and I’ve got some emails from people who are mad, and then I’ve got a bunch of people that upgraded. It was enough to kind of co-hosting cost for each month, based on the number of people that upgraded.
Those are the options I think that really come to mind and obviously some of those overlap. […] what you said but I think there are definitely ways to be thinking about this. Free plans are tricky. I think that’s the bottom line. They’re not as clear-cut, not as easy to navigate as just straight ahead trial to paid, but that doesn’t mean you shouldn’t do them.
Mike: Yeah. I think there’s definitely an approach to basically chipping away at that number and increasing it from 140 to as high as you can get it obviously, but there’s ways to do it and it depends a lot on how much time you have or how much time you want it to take. You can just send out an email and say, “Hey, in two weeks we’re going to start charging for this and kind of shut down the free plan.” But that’s a hard line in the sand and it’s difficult to back away from versus the opposite approach which is approach them with a soft hand and try to slowly move people over and not make them too upset. You just take a much longer period of time to do it and over time you kind of ratchet that up and slowly be a little bit more tightfisted about it. I would be a little cautious with that number of people.
Rob: Yup, I agree. I got a couple of other questions. We only got a couple of more minutes but I went to Quora and I went to the startups category. I pulled a few more questions out. We’ll see how many we have to get through. Mike, I’m curious. What is the worst startup business idea that you’ve ever heard?
Mike: I have the perfect one that I’ve heard. I was talking to somebody. It was maybe 2-3 years ago. He has told me how he had this great idea for a startup and they’ve already gotten something like $300,000 worth of funding for it and have basically burned through it all. Somehow, this company is worth $8 million and the basic idea of it—this is kind of his words, I’m paraphrasing this to some extent—he kind of said it’s a combination of Facebook, Pinterest, Twitter, and he named off two or three other major online businesses like that people who listen on this show would recognize. I’m just like, “You have got to be kidding me.” I don’t want to mash them all together and create one giant platform for everybody to use.
Even after burning through $300,000 worth of investment capital, I was like, “How many paid customers do you have?” Of course, getting that out of him was like pulling teeth and he was like, “None.” Then I said, “Okay, so you haven’t made any money. How many users do you have? Like free people? Like people who are just using it?” and the answer was still none. I’m like, “Oh my God, I can’t even believe I’m entertaining this conversation.”
Rob: Yeah, and that’s a tough thing. It’s like I run into some entrepreneurs who wanted to start a startup and they don’t have any connection to the startups space. That’s okay, you don’t have to be part of the community and drink the Kool-Aid of any one person. You don’t have to be part of the MicroConf crowd or be part of the Silicon Valley crowd or the SaaS or whatever, but I do think that there are learnings and general knowledge that we all roll our eyes at, that are so fundamentally known within the circles, that if you want to start a startup, having some of that knowledge is just as helpful as some guard rails.
When you say that Facebook, Pinterest, Google, Apple combination or whatever the guy said, this is one that just breaks so many rules that you know that it’s probably a bad idea, but he didn’t know. He doesn’t know that it breaks the rules because he doesn’t know what kind of “rules” are in terms of trying to get some off the ground.
Mike: Yeah. I think even objectively though, you’re trying to build something that is that broad and it just struck me as odd. Delusional is really the word.
Rob: I don’t know the worst. It’s hard to nail the worst one. Probably some of the worst ever have been ideas that I’ve come up with myself. There is one. I was a contractor-developer years ago. It was during the dot-com boom. Of course, that’s when a lot of the worst ideas came out. One of them was—I won’t say the name of it—they had this system where you could come to the website—remember, there were no mobile phones, it wasn’t a mo-app—you could log into the website on your computer and if you have seen someone on the road that you wanted to get in contact with—I was assuming it was a dating kind of social network thing before social networks—if you’ve got their license plate number, you type it into the startup website, they would notify that person and say, “So and so wants to connect with you. Do you want to connect with them?” and it had to be a double opt-in. Then, there’s going to be a social network and people could chat back-and-forth and meet and talk. That was the idea.
I remember we’re building this and I’m like, “Wait, aren’t there privacy concerns? How are you going to get people’s emails from their license plates? What’s the network effect on this?” It’s just layers and layers of questions of like, “How will this ever work?” Again, at least we have a mobile phone or something and take a picture of their car and yours and they could see you. But if you suddenly got an email from this company that’s like, “Someone wants to connect with you. They database on your license plate,” and you’re like, “I don’t know who that person is. I didn’t see them while I was driving on the freeway.” Do you think it’s bizarre? Do you think it’s good? Do you think it’s gold?
Mike: I don’t definitely think it’s gold but I also will say flat out that it is hard to predict what the general population will do or will gravitate towards for certain types of social apps. Snapchat, for example. If you were ask me five years ago, “Oh will Snapchat ever be a thing?” I’ll be like, “No, that’s the dumbest thing I’ve ever heard.”
Rob: It was my idea and I asked you. You told me not to do it and look where that got us, Mike.
Mike: I know. But it’s hard to predict when those things come up, whether or not that’s going to go anywhere. Personally, would I ever use it? Heck, no. There’s no way. That’s like it’s got ‘stalker’ written all over it. I think that you would have a hard time getting traction with it but would nobody use it? I can see people deciding they wanted to use it if they were in a hit-and-run and somebody took off and they’re like, “I think have this license plate.” Although they’ll just give it to the cops. So, what difference does it make?
Rob: Yeah, that’s the thing. Then they’d contact him and be like, “Do you want to hear from this person about your hit-and-run?” and like, “No. Rejected” Its funny.
Last question of the day, Mike. What are the things that no one tells you about starting a startup?
Mike: I think the thing that comes to mind here is that there are there going to be days, possibly weeks and months, where you get up in the morning and you say to yourself, “I didn’t sign up for this.” It’s all going to be related to stuff that you thought you got into the business for one reason and you find out that you’re going over your books line by line because somebody made a mistake or there’s some API that’s coming in and hitting your app and you have to somehow lock it down because it’s like basically DDoSing your systems. There’s going to be things that come up where you’re like, “I didn’t sign up for this.” The reality is you kind of did but it’s too late to do anything about it. Everyone has those days. Those are the two things I would say about that.
Rob: Yeah. Those are good answers, Mike. A lot of people will tell you that it’s hard and a lot of people will tell you it take a long time and such. I’ve said that a lot. The MicroConf and bootstrapper community is both big and small. In terms of the entire world, the startup community is pretty small even though it can have some influence on those folks. But just outside our community, I don’t hear many people saying, “When you’re starting up, try to get to revenue quickly and try to do that in the first whatever, the first six months after launch.”
I think that there is so much importance put on growth of user engagement or growth of numbers and daily actives in this kind of stuff. I even think there’s SaaS founders launching with pure freemium models because they just think that the number of people coming to use their app is important or is what counts or something like that. I think that focusing on revenue early is something that I don’t think is talked about enough.
Mike: Yeah, I would say I agree with that. I think it’s something of a common fallacy. I almost want to blame Steve Jobs for this, but people think that—I’m not immune to this—if you build something great, people are going to find it or you know what the customer wants. That’s really more of a Steve Jobs than anything else. It’s like you know what the customer want and you just need to build it and put it in front of him. Then you find out afterwards that you were way off base and there’s all these other things you need to do or that they want or need, subtle things that you need to now change. Whereas if you had just talk to the customer in the beginning, you had learned that those things weren’t true.
I think that there’s this aura or halo around Steve Jobs just like Saint John saying, “I know what these people want and this is how it should work.” All the stories that go around where he just was very intuitive about it, what should be built, and people kind of think that they can do that too. I think that there’s a big distinction between a multi billionaire who has been in that position than all of the rest of us.
Rob: Right and he eventually did that, I think. I think there’s myth around it. Some of it is exaggerated, but he didn’t do that earlier in his career. When was the last time you heard someone talk about, “The Apple IIe was designed by Wozniak and it was so far ahead of its time that when it did catch on, it was amazing.” But it’s not Jobs, aside from crafting the outside of it or whatever, he didn’t invent the Apple IIe, but he came up with the Lisa, which was a failure. He really pushed the Macintosh forward, which was a failure early on and eventually caught on. Then he launched NeXT and built a computer that was a failure. He had a bunch of failures. He thought he knew what people wanted and then actually didn’t.
If you read the book Becoming Steve Jobs, it talks a lot about his transformation and it touches on all those things. That’s what people forget. It’s like you and me and the person who thinks they’re Steve Jobs, we don’t have the decades and hundreds and millions of dollars to burn through, to learn the lessons that he ultimately did. By the time he did come out and do the iMac, the iPod, the iPhone, all the stuff that he eventually had wild, amazing success with, a lot of people forget that he lost hundreds and millions of dollars of his and other people’s money on the journey there and he spent decades of his life basically learning that stuff that most of us don’t have the luxury of it.
Mike: That’s kind of my point. We forget that piece of it.
Rob: Yup.
Mike: Interesting question for sure. But if you have a question for us, you can call into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 430 | What to Look For In a Co-Founder
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about what to look for in a co-founder. They touch on different aspects of evaluating someone for the role including, honesty/integrity, skill-set vs. future skill-set, fixed mindset vs. growth and more.
Items mentioned in this episode:
- AppSumo MicroConf Giveaway
- MicroConf Starter Edition Scholarship Application
- MicroConf Growth Edition
- MicroConf Starter Edition
- Big Snow Tiny Conf
- TinySeed
- CartHook
Mike: Rob, why was Pavlov’s hair so soft?
Rob: I don’t know, Mike. Why was Pavlov’s hair so soft?
Mike: He conditioned it.
Rob: Damn. Not fair.
Mike: This is Startups For The Rest Of Us Episode 430.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I got so sick Sunday night. It was a stomach flu. My kids all had the prior week and I thought I had dodged it. I was doing all good and then it was one of the worst nights I can remember. I was up five different times during the night. I was delirious, stumbling around. It was nuts. I got up Monday and the kids are off school for a snow day. I was literally on my phone trying to just respond to email. I would write a sentence and then I would fall asleep.
Mike: Oh geez.
Rob: Yeah, it was crazy. I remember as a kid being sick a lot. I don’t know if that’s true or just my memory. Then as an adult, it’s pretty rare that I get sick now and to be that late out. When I get sick now, though, it knocks me out really good. I got a flu shot, I get one every year, all of our kids had flu shots but this year, it knocks through. I lost a bit of productivity and frankly I was dehydrated for two days after. It was crazy.
Mike: That’s rough. I remember getting sick as a kid, too. I think the difference is that you have less responsibilities as a kid. Your responsibility is just lay in bed, stay off the TV, and stuff like that. But it’s so much harder now because you’ve got all the different responsibilities, we each got businesses to run, and then you’ve got your own kids to deal. Hopefully, both parents don’t get sick at the same time.
As early as this week, my oldest got strep throat and then the past couple days, both my wife and I have been on the verge of getting sick. We’re not quite sure but neither one of us has strep throat yet. So, a little germ farm.
Rob: Yeah, that’s tough, How about you? What’s going on?
Mike: Well, I recently got back from Big Snow Tiny Conf. We can talk about that a little bit. The other thing I wanted to point out to other people is the AppSumo giveaway for MicroConf is still going on. That will end on February 11. You have about one week left from the date that this podcast episode goes live, so apply.
You’ll get a free ticket to each to the conferences, both Growth Edition and to Starter Edition, and the expenses for the trip are going to be paid by AppSumo. We’ll link that up in the show notes. You can go over there and get in on the contest. There’s a bunch of different ways you can get even more entries into it. Definitely check out the website.
You can link up your Twitter account or Facebook account, it’s all the MicroConf Twitter account and things like that. Each of those things will add to the number of entries that you get in there and you can get referrals as well. Check it out and hopefully we’ll see you there.
Rob: On my end, I’ve been working on improving this weakness I have. You know how everyone says I’m so bad with names? I don’t remember names, that’s the cliché thing. I’ve always actually struggled with that in a pretty big way. What’s interesting is that it’s not that my memory is bad. I’ve realized this over and over but it was called out to me again.
It was a couple weeks ago at a startup gathering here in Minneapolis. I talked to someone and I’m like, “Hey, I know we’ve met before,” and we’ve started talking, and I was like, “You know? I don’t remember your name name. I apologize but I remember that your startup is named X and I remembered that it launched on this date. I remember that your churn-up until this point was 2% and then I went to 1.8%.” I just rattled all the stuff and their eyes were huge. I was like, “No, this is my superpower.” I remember not just numbers but it’s the context around the concept, like in this case a startup. It all stuck in my head but I didn’t remember their first name.
It’s such an interesting model on how memory works differently in different people because my wife, Sherry, would have remembered the person’s name, their spouse’s name, and their kids names, and none of that locked-in for me. It’s such about relating to people versus relating to some other thing, concepts, or whenever.
So, I’m working on that because no matter how much, it’s an interesting parlor trick to be able to rattle off all the details of someone’s business. We had a conversation six months prior. It’s an interesting parlor trick but it still is not a good thing. I’ve been looking at […] ways to help me remember people’s names and/or to only go to events where there are name tags. I’m just kidding about the last thing.
Mike: Its funny you’ve mentioned that because I’m exactly the same way. I can remember lots of details and pinpoint exactly where we were standing at a particular event when we were talking about it, but I will just have a hard time with a person’s name. Maybe it’s just a matter of focusing on remembering the person’s name and just avoiding overemphasis of remembering all the details of the conversation. Maybe it’s just they stick in my head because those are pieces that are really interesting to me and I know that I can just look down at their name tag and see their name at any time.
Rob: Yes, probably.
Mike: I should have mentioned this a little bit earlier but the other announcement that I have is that MicroConf scholarship applications are going to start opening this week. We’ll open them up today, haven’t decided on exactly how long they will open but I’ll make sure that we put that on the application itself and we’ll link up the application in the show notes. We have a bunch of sponsors who have graciously offered to help fund these scholarships. The scholarships are all for MicroConf Starter Edition. We have at least 20 of them to give away. Last year, I think we had 14 or so and this year we have to least 20. I’m still working on a couple of different sponsors on that, so that number may go up but that’s what we have currently.
Rob: Love it. For me last update, you can back from Big Snow Tiny Conf East, which we’ll chat about in a second. I am heading to Big Snow Tiny Conf West out in Colorado. I think I’ll be there when is episode airs, actually, so this is my inaugural Big Snow Tiny Conf. Looking forward to hanging out with the people. This was your fourth or fifth, is that right?
Mike: Yes, it’s my fifth.
Rob: That’s cool. Any takeaways or thoughts having gone back that many times?
Mike: If it’s raining severely on the second day, just skip it. Just don’t even go out there. We went out on Thursday and it was just pouring. It was above freezing all the way up the mountain, it was raining, and we said, “You know what? We’re here. We’re just going to go skiing anyway.” By the third round were done and we’re just not going to ski anymore.
We’re probably about halfway down and I kind of pushed off to go down the hill. The front of my ski turned like it was supposed to and the back didn’t. Because I pushed off, my arms were basically kind of behind me because I was pushing myself forward. Of course, I just fall flat on my face and rolled down the hill little bit. I did a faceplant right into the slush. Not fun.
I hurt my shoulder a little bit, […] it about a few days later, jar right into the slush and twisted my neck a little bit. But both of those things is nothing major. A few days later I was still sore but at this point, I’m fine. Do you ski at all or do you snowboard?
Rob: I don’t, nope. Here’s the thing. I grew up 90 minutes from Tahoe in California but as kids we are always playing sports pretty intently. I played eight years of soccer and then track for nine years. Played football kind of cross country so we’re always super busy in the winter. Our coaches were like, “Do not go skiing,” because people would tear their knees up, they’d hurt their backs, they did all kinds of stuff, and we didn’t have enough money. We just didn’t have the money for ski gear and the rental and all the stuff. We’re a family of six growing up. I’m the youngest of four kids. People moved out and it just was never a thing even though it was obviously an option geographically. It’s just not something that my family prioritize.
I am going up there. Everyone else go skiing. I’m going to hang out. I’ll probably do a little bit work, I’ll probably do retreat stuff during the day. I have some things I want to get some pretty deep thought, too. I want to do that. I also like drinking hot cocoa and catching up on my reading. I’m looking forward to being up on the mountain hanging out with folks in the afternoons. I guess that’s how it plays out and then having some alone time during the day.
Mike: Yeah. The evening talks are really interesting because you get to hear in-depth details about people’s businesses. Some people come with questions and some people just come with a story. Some people just say, “Hey, this is a problem that I’m working on. Any help with it? What are your thoughts on it?” It’s pretty cool. You get a really good mix of things based on what the people’s businesses are. Some people to B2C, some people do B2B, and it’s just interesting.
Rob: Sounds good. What are we chatting about today?
Mike: Today, we’re going to be talking about what to look for in a co-founder. This came to mind because I’m specifically kind of looking around at my personal network and trying to figure out, is taking a co-founder on for BlueTech a path that I want to go down? If so, what would I be looking for in that type of person? What are the traits or capabilities? What’s their situation? How would that work for me and how will it work for them?
But I thought that it be interesting for the listeners to step back from that a little bit and more of an abstract fashion, think about what sorts of things you should look for in a co-founder and then from there, you can little down the list of potential options and how that would work. Obviously, there’s a little bit of putting the cart before the horse there because you have to decide, “Do I want one?” This is a qualification of, if you do then what would you look for?
Rob: And we recorded an episode about whether you should look for a co-founder, haven’t we?
Mike: I don’t recall. I looked back and I think that we talked about it in general. But I know as we went through and said like, “These are the things that you should actually look,” as opposed to, “Should I get one?”
Rob: There’s going to come a day when we record an episode that’s basically the exact same episode or at least the same topic as what we recorded years ago.
Mike: I know.
Rob: We’ve done that in real life. We’ve gone back and said, “Here are new thoughts on this topic,” but we’re going to do it unintentionally at some point. 430 episodes in, I don’t believe we’ve done that today, but this may be the day.
Mike: Possibly, but we’ll see. I’m sure somebody will remember it.
Rob: Let’s dive in.
Mike: The first one that came up on my list was honesty and integrity. For the person that you’re looking to bring on as a co-founder, what you want to do is be in a position where you know that the other person will always “try” to do the right thing, whatever that happens to be. What that happens to be has to boil down to what your goals in life are and generally how you address different situations or problems. Are they going to have your interest at heart or are they a little bit more selfish? I think you obviously want them to have your interests at heart whenever they’re making different decisions and then balance that against everything else.
You don’t want to sacrifice the entire business, probably, but at the same time there’s going to be certain situations where someone needs to make a decision that may not necessarily be you, and do you trust the other person to make those decisions? What you don’t want is a co-founder that essentially turns into someone you’re micro managing. You really want somebody who is on, equal footing is not quite the right way to put it, but somebody who you can at least respect enough to have a conversation about something, even if you disagree with them on it.
What I found is with contractors, for example, contractors are very loath to bring up stuff that is detrimental to the business or criticize work that you have done. They just don’t tend to give you an objective opinion about things in a way that is any way confrontational because I feel a lot of them are like, “Oh, I don’t want to rock the boat because this is my job at stake.” But at the same time, you need somebody to challenge you in different situations where you could be wrong or they perceive you to be wrong, so that you can talk through those things and say, “Is this the right decision for us and for the business?”
Rob: Yeah. I think this is a big one, being able to have the trust that your co-founder will do two things. One, that they will have your back in a way that, I think you brought up, the kind of the selfish or the self-centered, and I guess honesty and integrity is part of that. But it’s almost like they’re not always going to be thinking about themselves. We all know people who do that and people who don’t come across that way in the first meeting, can later you find out that they just really have an issue. Maybe it’s from childhood or maybe it’s part of the personality, but they really have an issue when talking about money or they have an issue when talking about time. There’s certain triggers that you need to pick up and be aware of because each of us has our own things that sets us off. I feel that’s something that is hard to evaluate in one or two conversations. It really needs to be done over an extended period of time, I think.
Then there is this integrity piece, kind of honesty, ethics, morals that your compasses align. Obviously, there are different ways of viewing the world and you don’t, as you said, want to have to manage this person’s every decision that they make and be like, “Oh, I feel like you kind of screwed that vendor with that decision,” or, “I feel like that was a disingenuous offer you made to that employee,” or, “You certainly didn’t do anything illegal and probably not unethical, but was that really morally the right thing to do?”
Those are hard conversations to have because that’s such a fundamental value that if you don’t share with someone, it’s going to be a constant conflict. Again, not something as super easy to evaluate upfront but it is nice to kind of a must-have, I think, that you do find someone where, in general and 80%-90% of the things, the two of you are going to rely in these hard decisions.
Mike: I think the point that you just brought up about this being something that you may not learn right away and I may take time to get there. I think that’s one of the things that doesn’t bug me but it strikes me as odd when I see people looking around and saying, “Oh, I’m trying to build this business and I want to get a co-founder. Does anyone know where I can find a co-founder?” It almost feels like people are looking for a co-founder in a very, very short period of time. But because of this exact thing that we’re talking about, honesty, integrity, and trust, it takes time to get there.
In some ways you can look at it and say, “Well, are there proxies that I can use for this? Are there people that I know that trust that person?” You trust their experience and then by proxy, trust this new person that you’re looking at as a co-founder. I think that’s a good way to approach it. It’s not perfect but I don’t think that there’s any perfect way to analyze that. It’s not as if you’re cloning yourself and you can’t always know what the other person is thinking.
Rob: Yeah and I think evaluating this in the short term is to know yourself and know how kind of trusting or suspicious you are of new people that you meet. You and I talked about this a little bit but that there’s this test called the Enneagram. It takes about 15 minutes to take. It gives you a number from one to nine. It’s like a Myers-Briggs personality thing. My personality is like creative, introverted, I forget like visionary or something. There’s typically two or three things that are good and two or three things that can be detriments. One of mine is just naturally suspicious of new things and new people.
I know that as a rule, I tend to say I’m a good judge of character. What I actually mean is I really don’t trust people upfront and they tend to have a really good character to get through my defenses early on. I am a very discerning person, which is both good and bad. Sometimes, it’s to my detriment and I write people off too soon. I know that about myself and I will be having internal kind of self-talk or conversations about, are they really coming off the way that I think they are or is that just in my head?
I have known people, my relatives and friends who are on the opposite side. They are too trusting, they get in friendships really quickly, and get pretty deep with people who, it’s pretty obvious that person is not going to be a good friend. That person is going to treat them poorly. Maybe this co-founder relationship is a romantic relationship or maybe it’s a friendship. It is hard for me to watch that because it might end poorly and frequently it does. Those people, I think, are too far on the other side of the spectrum. They are not suspicious enough. I think it’s knowing where you lie and just trying to do your best, frankly, to figure out what you think of someone after few meetings.
Mike: The next trait that I kind of came up with was more or less a current skill set versus ability to learn new skills. You’ve talk about this in the past that comes from like a fixed mindset versus a growth mindset. I look at it in terms of what does somebody bring to the table now versus what could they learn in the future to bring to the table later.
I think that there’s the short-term aspect and then the long-term aspect. The short-term aspect, you’re really looking for somebody who can complement your current skill set. In the long-term, you’re looking for somebody you know what it is that they want to do and it’s not necessarily or directly overlapping with the things that you want to do long-term, because you probably don’t want to have two people who both want to do sales, for example. Long-term, you probably don’t want both to be doing sales. You probably need somebody to be doing technical stuff and the person to be doing more of the business, marketing, and the sales side of things. But if you both want to be doing development long-term, that may not necessarily be a great fit because then, who’s going to be doing the sales and marketing stuff long-term?
Rob: Yeah. This is a mistake I made in the early days. I think a lot of people make this mistake when hiring and finding a co-founder is similar. It’s not the same but it’s similar to evaluating a potential hire. The thing is not to look at their skill set because things are going to change. In startup, they just change so fast.
If I were to look back at myself 10 years ago, I didn’t know 80% of what I know now. You could have looked at me and said, “Wow, this person knows how to write, and he knows SEO, and he knows how to write code. That’s an interesting skill set. What is his potential someday?” You know what? I don’t do much SEO anymore and I don’t write any code anymore. I write a lot less that I used to, actually. Everything that made me who I was 10 years ago, really has have to adapt. I’ve had to learn to build relationships better. Even just speak in public which was something that terrified me early on, and to speak on the microphone which is something that terrified me early on, all the things that you just have to get over.
I have watched other people do the same thing. You look at Derrick Reimer, my co-founder with Drip, you look at Ben Orenstein and you see how they’ve adjusted and adapted over time. And you know when you look at people who are really sharp and who are getting […] done, something you’ll notice about them is they don’t stand still for long. They don’t have the same skill set for very long. They are constantly adapting to new things.
If I’m hiring a team member, if I’m looking for a co-founder, if I’m evaluating a startup founder as I’ve been doing for the past several years but more intensely over the past 11 days since TinySeed applications have been open, a lot of this is not what do you know. It’s what can you learn, how quickly, and it’s trying to be able to evaluate how they can do that. So my question to you is, how can you evaluate that?
Mike: I think if you look at the history of what people have done, whether it’s launching small apps or working for different businesses, I feel like if you’re looking at somebody’s experience and they’ve done consulting at a bunch of different companies, that right there says that they have the ability to adapt, change, work in different environments, and presumably be productive. Otherwise you’re probably not going to get a lot of consulting gigs that way.
I have mixed feelings on somebody who’s doing consulting work for the same business for like five years or ten years or something like that. I would question how much adaptation there is there because you’re not adapting to different business environments and changing conditions. Going from one company or customer to another, it’s a very, very different experience between those two and there’s a lot of different things you have to manage. Whereas, if you stay in the same company or within that, the sandbox there, it’s not going to change a lot or dramatically.
I think in those cases, it’s a little less clear cut as to how to measure that. But I would definitely say, if somebody’s hopped around a little bit, then you can give them the benefit of a doubt in terms of their ability to learn new skills. The thing you have to be a little careful of though is, is it like entrepreneurial ADD where they just can’t focus on something and that’s why they switch so often? I think that many people suffer, I myself included, suffer from the shiny object syndrome where you hop from one project with other because something interest you and you’re not necessarily finishing things. That’s something that kind of comes into this. That’s something you have to balance that against.
Rob: I agree. That’s what you have to dig into. You touched on it exactly is was the person running away from something? Like, “Oh, this got too hard,” or, “Oh, that boss was dumb,” or, “They didn’t value me there,” or, “Oh, I got bored of that.” Or is it ambition? Ambition is not the right word because it’s this weird thing. I’m not that ambitious but I love creating new things. But I also finish what I started. I think that’s something to look at when your evaluating.
I agree that hopping from one thing to the next can actually be a good and a bad trait and it’s determining what their reasoning, logic, and motivations for doing that are, then I agree. If someone’s been working the same job or the same contract for years on end, it can be hard to gauge. You almost have to like, “I don’t know what else I would look at to figure out.” It just makes it harder to evaluate if someone hasn’t been tackling new challenges. I think that that’s kind of the thing that I’d be looking for.
I think the four axis that I look for when I think about someone as a startup founder, like skill set, I think of technology skill set, like are they developer or do they speak developer? Marketing, can I actually get stuff done, drive traffic, optimize a funnel, convert people, trial to paid? SaaS experience which is pretty unique. Most people don’t have it but do they know all the metrics and the numbers that churn the LTVs? Do they think in terms of SaaS numbers? This is one thing you can certainly learn but if someone already has that experience, whether they worked in-depth for one or whether they start at one. The fourth is kind of hiring, managing, and delegating of people.
There are certainly more more axis but those are honestly the four that, when I’m evaluating a startup founder, do I think they’re going to succeed? I look along those axis and they don’t need all four of them. Again, if they can learn stuff, you can start with one of them and branch off into the other three. But if you have two co-founders, I really don’t want two co-founders who both have a ton of tech experience and both want to write code. You want one of them who’s willing to know the marketing or to learn the marketing. Or one who’s willing to do the hiring and managing because assuming that you are going to scale up at least a little bit, you need to learn all these skill sets.
Mike: And that kind of leads directly into the next one which is difficult to measure resources. There’s certain types of resources like time and money which I think are directly measurable. But when you come into things like your personal network or your experience and your skill set, I feel like those are a little bit more difficult to measure in terms of what it brings to the table and what it means for the future. I think every situation is different. Those things are going to mean different things for different businesses.
Let’s say somebody brings a lot of domain knowledge and expertise to a particular problem that you’re working on and you want to involve them. The stuff that they know and that they have experience is going to be valuable. Is it stuff that you could learn on your own? Yes. The other side of that is perhaps and perhaps not. You have to take those things into account some way because they do make that relationship a little bit more valuable.
It also depends a lot on how long it’s going to take you to acquire that knowledge, like have they already tried to do a startup in that space and they either succeeded or failed? Those things can make a huge difference in terms of whether or not want to add that your team.
Rob: And then there are the measurable resources that each co-founder might bring. How much time does a person have? Obviously, a lot of us start by our products by working on them part time. What I’ve found in my experience is that people have a lot less time on the side than they think they do. A lot of times I have hired contractors—this probably happened six or seven times to me—where I’ve gone through a full interview process, done video interviews with 6-7 people, narrow, narrow, narrow, get somebody it’s like, “You’re sharp. Cool. You have a day job as a marketer and you want to run Facebook ads for me on the side. Love it. How many hours a week? Okay, you’ve got 15 hours, 20 hours. That’s great.” Then we’ll start and they’ll work four or five in a week. I’m going to, “Hey, what happened?” “Yeah, I just have a lot less time that I thought I did.”
This is something that I think you really need to dig into. If someone tells you they have 20 hours a week to work, I honestly think you should try to get a schedule and say, “Carve that time out because if you have kids, you probably put them to bed at seven or eight or whatever. So you’re working three hours a night during the week and then some on the weekend. If you don’t have kids, what does that look like?” Again, everybody seems to overestimate the amount of time that they have. I think it’s kind of human nature.
The other thing to think about in terms of a measurable resource is money. Does having some money help you get to escape velocity quicker? How much money does each person have to contribute? If you have an even amount, then cool. You can be 50/50 partners. If one person has more, that probably should buy them more equity, I think, unless time is out of whack. There is a bunch of things to think about but certainly someone bringing money to the table can be a bonus. I would say with caution, money is a very short-term thing.
In the early days of a startup you can think, “Oh my gosh. This person is bringing $20,000 to the table but they don’t have much time so they should get this huge chunk of it.” That makes sense for about six months. It makes sense until you get to the point where you launch and suddenly you start growing and $20,000 just isn’t that much money anymore. There’s the balance here because money in the early days is more risky. It is a big deal for someone to bring $20,000, $30,000, $40,000 into a startup that may never work. I would say consider all of these other factors. I would probably put above the value of just pure dollars invested.
Mike: Yeah. I think time and money tied together to some extent as well because if somebody has money set aside and the business isn’t quite making enough to pay the founders of reasonable income, can somebody extend the runway to some extent by living off of less? You may be able to command a salary $150,000 a year but do you have to? If the business can’t support that, then obviously you can’t pay yourselves that. How is that going to work? Is somebody essentially taking a massive pay cut in order to be able to contribute time? Do they have other sources of income?
That’s kind of really what I was getting at in terms of the measurable resources. Not so much can they dump a bunch of money on it but are they able to be somewhat self-sustaining and still contribute to the business while it’s getting further along? Nights and weekend project is a very different story. I think you brought up a lot of great examples and points about the fact that people have probably a lot less time available to them than they think they do. Some of that comes into motivation and as you commented earlier, whether they’re running towards something or away from something.
Rob: I think another big thing to think about is, talking about long-term goals a big deal because startup had a lot of connotations. Startup may mean you just want to start a really nice lifestyle business. It’s going to get you collectively $200,000-$300,000 that you guys split and that’s a good goal to have as long as you both agree on it. But if one person wants to raise venture funding or they want to go seven or eight figures and stay bootstrap, these are all different paths and it’s going to impact a lot of things along the way.
This is something that I would at least have a conversation. You may not need 100% everything ironed-out upfront, but to say, “What really is your goal here? Is your goal to work as little as possible and for both of us to make six figures? Okay, let me think if that’s what I want to do.” If you don’t, there’s going to be this constant tension as you’re growing your product.
Mike: And sometimes, these things don’t always work out and you may think upfront that your goals overlap. Those goals may change over time. I read an article from the guys over at Buffer where there’s three co-founders and initially, everybody was kind of on the same page. They all wanted to do the same things. Over the past couple years—I forget the exact timeline of that—they ended up kind of going in different ways. Two of the co-founders left the company and there’s one still there that’s running everything.
It was interesting to see that they laid out the different types of conversations they had and how it took a long time for them to get there. There are ways out of the situation if long-term you find out that your goals have diverged. But I think it’s important to keep in mind that if you have that conversation early and they don’t overlap right then, it’s possible they could kind of come in alignment but it’s probably not a good place to be starting from.
I think one of the last important things that you should be looking in a co-founder is, do they work well with others? Specifically, by others I mean you. But in general, are they easy to work with? Are they, not necessarily focused and driven, but can you hold a conversation with them and not get angry with them about how they’re doing things? Or vice-versa. Are they going to critique your work all the time and if so, is that something you can deal with?
There’s only so many ways that you can figure this stuff out. I think probably the best way to do it is just work together for a little while. I think you’ll very quickly see whether or not you’re going to be able to work with them long-term or not. There’s soon going to be some things that jump out of you very quickly and then some things that you’re going to learn six months, two years down the road that you didn’t necessarily pick up on right away.
It’s not necessarily good or bad but I think that hammering out what those things are that really irk you or the things that you do that irk them, if you know those upfront you can at least have the conversations and talk about it, and figure out whether it’s something that you can both live with or not. If you don’t do that then you could head for trouble.
I haven’t found any other good ways of doing that other than actually working with somebody. You can ask friends or colleagues or people who have worked both with you and that other person but sometimes those recommendations are: (1) hard to come by, and (2) people don’t really want to throw other people under the bus. It’s difficult to get that information from a third party.
Rob: That’s right and when I’ve done these reference checks, I tend to say, “Tell me about the hardest part about them. Tell me their biggest weakness. Tell me where did their plans […] are like.” I try to dig into this stuff. I try to just prove my theory that they are someone that I should work with. Or even not even just prove it but just to know. I can work with blind spots as long as I know what they are, like this person tends to give a very direct feedback, so be prepared for blunt feedback. It’s like, “Okay, that’s not a deal-breaker for me,” but when this person says something that shocks or offends me, it just be like, “Cool. That how they roll.” That’s also a big plus for a number of other other reasons.
I think a good story of this is like Jordan Gal with Ben Fisher and the founding of CartHook. They say they dated as founders and they really tried it out for quite a while. A couple months, I believe. They went and co-worked in one location and then another because they lived across country from each other. But they really got to know each other. I’ll even say with Einar Vollset and I, co-founders of TinySeed. I asked some folks who knew him better than I did. I know him through MicroConf but he and I never worked together. I asked a few folks, “Hey, you know him better than I do. Tell me about him.”
Then we started just working on a deck and that’s all it was. He said, “I don’t know. What you think? Should we do a deck?” “Cool.” Then I get to see not very much skin in the game. He and I are both saying, “Well, we’re not sure we’re going to do this.” I knew we’re going to do it but it was both of us kind of sizing each other up and saying, “Is this person going to be fun and complement my skills and are they going to work well with others?”
That was the big thing to just sit and hammer something out, to agree on certain things, disagree on other things, be convinced by the other person because you’re like, “Wow, this guy’s smart.” That’s the thing that I think you want to get to. So, even doing one or two smaller projects together before you do a full commit, I think can really be helpful.
Mike: In the beginning of this episode, you and I have chatted briefly about whether or not we’ve actually covered this particular topic before. I went back and looked in episode 408, evaluating whether or not you should take on a co-founder. That’s where we talked about that. This is more about what to look for in a co-founder.
Rob: And that was only 22 episodes ago and we had already forgotten? That is like six months.
Mike: We we were pretty sure. We knew we’ve talked something about it. We just didn’t remember the specifics.
Rob: I total did. It was vaguely. I knew we’ve talked about co-founders a number times. I just don’t know what the specific episodes have been.
Mike: That’s okay. We’ll let it go this time.
Rob: All right. If you feel like you’d like to add something to this list of what to look for in a co-founder, including how to evaluate that, you can either post at Startups For The Rest Of Us episode 430. You can post a comment there, or you can email us at questions@startupsfortherestofus.com, or call into our voicemail number and 888-801-9690. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Rob: I don’t know, Mike. Why was Pavlov’s hair so soft?
Mike: He conditioned it.
Rob: Damn. Not fair.
Mike: This is Startups For The Rest Of Us Episode 430.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I got so sick Sunday night. It was a stomach flu. My kids all had the prior week and I thought I had dodged it. I was doing all good and then it was one of the worst nights I can remember. I was up five different times during the night. I was delirious, stumbling around. It was nuts. I got up Monday and the kids are off school for a snow day. I was literally on my phone trying to just respond to email. I would write a sentence and then I would fall asleep.
Mike: Oh geez.
Rob: Yeah, it was crazy. I remember as a kid being sick a lot. I don’t know if that’s true or just my memory. Then as an adult, it’s pretty rare that I get sick now and to be that late out. When I get sick now, though, it knocks me out really good. I got a flu shot, I get one every year, all of our kids had flu shots but this year, it knocks through. I lost a bit of productivity and frankly I was dehydrated for two days after. It was crazy.
Mike: That’s rough. I remember getting sick as a kid, too. I think the difference is that you have less responsibilities as a kid. Your responsibility is just lay in bed, stay off the TV, and stuff like that. But it’s so much harder now because you’ve got all the different responsibilities, we each got businesses to run, and then you’ve got your own kids to deal. Hopefully, both parents don’t get sick at the same time.
As early as this week, my oldest got strep throat and then the past couple days, both my wife and I have been on the verge of getting sick. We’re not quite sure but neither one of us has strep throat yet. So, a little germ farm.
Rob: Yeah, that’s tough, How about you? What’s going on?
Mike: Well, I recently got back from Big Snow Tiny Conf. We can talk about that a little bit. The other thing I wanted to point out to other people is the AppSumo giveaway for MicroConf is still going on. That will end on February 11. You have about one week left from the date that this podcast episode goes live, so apply.
You’ll get a free ticket to each to the conferences, both Growth Edition and to Starter Edition, and the expenses for the trip are going to be paid by AppSumo. We’ll link that up in the show notes. You can go over there and get in on the contest. There’s a bunch of different ways you can get even more entries into it. Definitely check out the website.
You can link up your Twitter account or Facebook account, it’s all the MicroConf Twitter account and things like that. Each of those things will add to the number of entries that you get in there and you can get referrals as well. Check it out and hopefully we’ll see you there.
Rob: On my end, I’ve been working on improving this weakness I have. You know how everyone says I’m so bad with names? I don’t remember names, that’s the cliché thing. I’ve always actually struggled with that in a pretty big way. What’s interesting is that it’s not that my memory is bad. I’ve realized this over and over but it was called out to me again.
It was a couple weeks ago at a startup gathering here in Minneapolis. I talked to someone and I’m like, “Hey, I know we’ve met before,” and we’ve started talking, and I was like, “You know? I don’t remember your name name. I apologize but I remember that your startup is named X and I remembered that it launched on this date. I remember that your churn-up until this point was 2% and then I went to 1.8%.” I just rattled all the stuff and their eyes were huge. I was like, “No, this is my superpower.” I remember not just numbers but it’s the context around the concept, like in this case a startup. It all stuck in my head but I didn’t remember their first name.
It’s such an interesting model on how memory works differently in different people because my wife, Sherry, would have remembered the person’s name, their spouse’s name, and their kids names, and none of that locked-in for me. It’s such about relating to people versus relating to some other thing, concepts, or whenever.
So, I’m working on that because no matter how much, it’s an interesting parlor trick to be able to rattle off all the details of someone’s business. We had a conversation six months prior. It’s an interesting parlor trick but it still is not a good thing. I’ve been looking at […] ways to help me remember people’s names and/or to only go to events where there are name tags. I’m just kidding about the last thing.
Mike: Its funny you’ve mentioned that because I’m exactly the same way. I can remember lots of details and pinpoint exactly where we were standing at a particular event when we were talking about it, but I will just have a hard time with a person’s name. Maybe it’s just a matter of focusing on remembering the person’s name and just avoiding overemphasis of remembering all the details of the conversation. Maybe it’s just they stick in my head because those are pieces that are really interesting to me and I know that I can just look down at their name tag and see their name at any time.
Rob: Yes, probably.
Mike: I should have mentioned this a little bit earlier but the other announcement that I have is that MicroConf scholarship applications are going to start opening this week. We’ll open them up today, haven’t decided on exactly how long they will open but I’ll make sure that we put that on the application itself and we’ll link up the application in the show notes. We have a bunch of sponsors who have graciously offered to help fund these scholarships. The scholarships are all for MicroConf Starter Edition. We have at least 20 of them to give away. Last year, I think we had 14 or so and this year we have to least 20. I’m still working on a couple of different sponsors on that, so that number may go up but that’s what we have currently.
Rob: Love it. For me last update, you can back from Big Snow Tiny Conf East, which we’ll chat about in a second. I am heading to Big Snow Tiny Conf West out in Colorado. I think I’ll be there when is episode airs, actually, so this is my inaugural Big Snow Tiny Conf. Looking forward to hanging out with the people. This was your fourth or fifth, is that right?
Mike: Yes, it’s my fifth.
Rob: That’s cool. Any takeaways or thoughts having gone back that many times?
Mike: If it’s raining severely on the second day, just skip it. Just don’t even go out there. We went out on Thursday and it was just pouring. It was above freezing all the way up the mountain, it was raining, and we said, “You know what? We’re here. We’re just going to go skiing anyway.” By the third round were done and we’re just not going to ski anymore.
We’re probably about halfway down and I kind of pushed off to go down the hill. The front of my ski turned like it was supposed to and the back didn’t. Because I pushed off, my arms were basically kind of behind me because I was pushing myself forward. Of course, I just fall flat on my face and rolled down the hill little bit. I did a faceplant right into the slush. Not fun.
I hurt my shoulder a little bit, […] it about a few days later, jar right into the slush and twisted my neck a little bit. But both of those things is nothing major. A few days later I was still sore but at this point, I’m fine. Do you ski at all or do you snowboard?
Rob: I don’t, nope. Here’s the thing. I grew up 90 minutes from Tahoe in California but as kids we are always playing sports pretty intently. I played eight years of soccer and then track for nine years. Played football kind of cross country so we’re always super busy in the winter. Our coaches were like, “Do not go skiing,” because people would tear their knees up, they’d hurt their backs, they did all kinds of stuff, and we didn’t have enough money. We just didn’t have the money for ski gear and the rental and all the stuff. We’re a family of six growing up. I’m the youngest of four kids. People moved out and it just was never a thing even though it was obviously an option geographically. It’s just not something that my family prioritize.
I am going up there. Everyone else go skiing. I’m going to hang out. I’ll probably do a little bit work, I’ll probably do retreat stuff during the day. I have some things I want to get some pretty deep thought, too. I want to do that. I also like drinking hot cocoa and catching up on my reading. I’m looking forward to being up on the mountain hanging out with folks in the afternoons. I guess that’s how it plays out and then having some alone time during the day.
Mike: Yeah. The evening talks are really interesting because you get to hear in-depth details about people’s businesses. Some people come with questions and some people just come with a story. Some people just say, “Hey, this is a problem that I’m working on. Any help with it? What are your thoughts on it?” It’s pretty cool. You get a really good mix of things based on what the people’s businesses are. Some people to B2C, some people do B2B, and it’s just interesting.
Rob: Sounds good. What are we chatting about today?
Mike: Today, we’re going to be talking about what to look for in a co-founder. This came to mind because I’m specifically kind of looking around at my personal network and trying to figure out, is taking a co-founder on for BlueTech a path that I want to go down? If so, what would I be looking for in that type of person? What are the traits or capabilities? What’s their situation? How would that work for me and how will it work for them?
But I thought that it be interesting for the listeners to step back from that a little bit and more of an abstract fashion, think about what sorts of things you should look for in a co-founder and then from there, you can little down the list of potential options and how that would work. Obviously, there’s a little bit of putting the cart before the horse there because you have to decide, “Do I want one?” This is a qualification of, if you do then what would you look for?
Rob: And we recorded an episode about whether you should look for a co-founder, haven’t we?
Mike: I don’t recall. I looked back and I think that we talked about it in general. But I know as we went through and said like, “These are the things that you should actually look,” as opposed to, “Should I get one?”
Rob: There’s going to come a day when we record an episode that’s basically the exact same episode or at least the same topic as what we recorded years ago.
Mike: I know.
Rob: We’ve done that in real life. We’ve gone back and said, “Here are new thoughts on this topic,” but we’re going to do it unintentionally at some point. 430 episodes in, I don’t believe we’ve done that today, but this may be the day.
Mike: Possibly, but we’ll see. I’m sure somebody will remember it.
Rob: Let’s dive in.
Mike: The first one that came up on my list was honesty and integrity. For the person that you’re looking to bring on as a co-founder, what you want to do is be in a position where you know that the other person will always “try” to do the right thing, whatever that happens to be. What that happens to be has to boil down to what your goals in life are and generally how you address different situations or problems. Are they going to have your interest at heart or are they a little bit more selfish? I think you obviously want them to have your interests at heart whenever they’re making different decisions and then balance that against everything else.
You don’t want to sacrifice the entire business, probably, but at the same time there’s going to be certain situations where someone needs to make a decision that may not necessarily be you, and do you trust the other person to make those decisions? What you don’t want is a co-founder that essentially turns into someone you’re micro managing. You really want somebody who is on, equal footing is not quite the right way to put it, but somebody who you can at least respect enough to have a conversation about something, even if you disagree with them on it.
What I found is with contractors, for example, contractors are very loath to bring up stuff that is detrimental to the business or criticize work that you have done. They just don’t tend to give you an objective opinion about things in a way that is any way confrontational because I feel a lot of them are like, “Oh, I don’t want to rock the boat because this is my job at stake.” But at the same time, you need somebody to challenge you in different situations where you could be wrong or they perceive you to be wrong, so that you can talk through those things and say, “Is this the right decision for us and for the business?”
Rob: Yeah. I think this is a big one, being able to have the trust that your co-founder will do two things. One, that they will have your back in a way that, I think you brought up, the kind of the selfish or the self-centered, and I guess honesty and integrity is part of that. But it’s almost like they’re not always going to be thinking about themselves. We all know people who do that and people who don’t come across that way in the first meeting, can later you find out that they just really have an issue. Maybe it’s from childhood or maybe it’s part of the personality, but they really have an issue when talking about money or they have an issue when talking about time. There’s certain triggers that you need to pick up and be aware of because each of us has our own things that sets us off. I feel that’s something that is hard to evaluate in one or two conversations. It really needs to be done over an extended period of time, I think.
Then there is this integrity piece, kind of honesty, ethics, morals that your compasses align. Obviously, there are different ways of viewing the world and you don’t, as you said, want to have to manage this person’s every decision that they make and be like, “Oh, I feel like you kind of screwed that vendor with that decision,” or, “I feel like that was a disingenuous offer you made to that employee,” or, “You certainly didn’t do anything illegal and probably not unethical, but was that really morally the right thing to do?”
Those are hard conversations to have because that’s such a fundamental value that if you don’t share with someone, it’s going to be a constant conflict. Again, not something as super easy to evaluate upfront but it is nice to kind of a must-have, I think, that you do find someone where, in general and 80%-90% of the things, the two of you are going to rely in these hard decisions.
Mike: I think the point that you just brought up about this being something that you may not learn right away and I may take time to get there. I think that’s one of the things that doesn’t bug me but it strikes me as odd when I see people looking around and saying, “Oh, I’m trying to build this business and I want to get a co-founder. Does anyone know where I can find a co-founder?” It almost feels like people are looking for a co-founder in a very, very short period of time. But because of this exact thing that we’re talking about, honesty, integrity, and trust, it takes time to get there.
In some ways you can look at it and say, “Well, are there proxies that I can use for this? Are there people that I know that trust that person?” You trust their experience and then by proxy, trust this new person that you’re looking at as a co-founder. I think that’s a good way to approach it. It’s not perfect but I don’t think that there’s any perfect way to analyze that. It’s not as if you’re cloning yourself and you can’t always know what the other person is thinking.
Rob: Yeah and I think evaluating this in the short term is to know yourself and know how kind of trusting or suspicious you are of new people that you meet. You and I talked about this a little bit but that there’s this test called the Enneagram. It takes about 15 minutes to take. It gives you a number from one to nine. It’s like a Myers-Briggs personality thing. My personality is like creative, introverted, I forget like visionary or something. There’s typically two or three things that are good and two or three things that can be detriments. One of mine is just naturally suspicious of new things and new people.
I know that as a rule, I tend to say I’m a good judge of character. What I actually mean is I really don’t trust people upfront and they tend to have a really good character to get through my defenses early on. I am a very discerning person, which is both good and bad. Sometimes, it’s to my detriment and I write people off too soon. I know that about myself and I will be having internal kind of self-talk or conversations about, are they really coming off the way that I think they are or is that just in my head?
I have known people, my relatives and friends who are on the opposite side. They are too trusting, they get in friendships really quickly, and get pretty deep with people who, it’s pretty obvious that person is not going to be a good friend. That person is going to treat them poorly. Maybe this co-founder relationship is a romantic relationship or maybe it’s a friendship. It is hard for me to watch that because it might end poorly and frequently it does. Those people, I think, are too far on the other side of the spectrum. They are not suspicious enough. I think it’s knowing where you lie and just trying to do your best, frankly, to figure out what you think of someone after few meetings.
Mike: The next trait that I kind of came up with was more or less a current skill set versus ability to learn new skills. You’ve talk about this in the past that comes from like a fixed mindset versus a growth mindset. I look at it in terms of what does somebody bring to the table now versus what could they learn in the future to bring to the table later.
I think that there’s the short-term aspect and then the long-term aspect. The short-term aspect, you’re really looking for somebody who can complement your current skill set. In the long-term, you’re looking for somebody you know what it is that they want to do and it’s not necessarily or directly overlapping with the things that you want to do long-term, because you probably don’t want to have two people who both want to do sales, for example. Long-term, you probably don’t want both to be doing sales. You probably need somebody to be doing technical stuff and the person to be doing more of the business, marketing, and the sales side of things. But if you both want to be doing development long-term, that may not necessarily be a great fit because then, who’s going to be doing the sales and marketing stuff long-term?
Rob: Yeah. This is a mistake I made in the early days. I think a lot of people make this mistake when hiring and finding a co-founder is similar. It’s not the same but it’s similar to evaluating a potential hire. The thing is not to look at their skill set because things are going to change. In startup, they just change so fast.
If I were to look back at myself 10 years ago, I didn’t know 80% of what I know now. You could have looked at me and said, “Wow, this person knows how to write, and he knows SEO, and he knows how to write code. That’s an interesting skill set. What is his potential someday?” You know what? I don’t do much SEO anymore and I don’t write any code anymore. I write a lot less that I used to, actually. Everything that made me who I was 10 years ago, really has have to adapt. I’ve had to learn to build relationships better. Even just speak in public which was something that terrified me early on, and to speak on the microphone which is something that terrified me early on, all the things that you just have to get over.
I have watched other people do the same thing. You look at Derrick Reimer, my co-founder with Drip, you look at Ben Orenstein and you see how they’ve adjusted and adapted over time. And you know when you look at people who are really sharp and who are getting […] done, something you’ll notice about them is they don’t stand still for long. They don’t have the same skill set for very long. They are constantly adapting to new things.
If I’m hiring a team member, if I’m looking for a co-founder, if I’m evaluating a startup founder as I’ve been doing for the past several years but more intensely over the past 11 days since TinySeed applications have been open, a lot of this is not what do you know. It’s what can you learn, how quickly, and it’s trying to be able to evaluate how they can do that. So my question to you is, how can you evaluate that?
Mike: I think if you look at the history of what people have done, whether it’s launching small apps or working for different businesses, I feel like if you’re looking at somebody’s experience and they’ve done consulting at a bunch of different companies, that right there says that they have the ability to adapt, change, work in different environments, and presumably be productive. Otherwise you’re probably not going to get a lot of consulting gigs that way.
I have mixed feelings on somebody who’s doing consulting work for the same business for like five years or ten years or something like that. I would question how much adaptation there is there because you’re not adapting to different business environments and changing conditions. Going from one company or customer to another, it’s a very, very different experience between those two and there’s a lot of different things you have to manage. Whereas, if you stay in the same company or within that, the sandbox there, it’s not going to change a lot or dramatically.
I think in those cases, it’s a little less clear cut as to how to measure that. But I would definitely say, if somebody’s hopped around a little bit, then you can give them the benefit of a doubt in terms of their ability to learn new skills. The thing you have to be a little careful of though is, is it like entrepreneurial ADD where they just can’t focus on something and that’s why they switch so often? I think that many people suffer, I myself included, suffer from the shiny object syndrome where you hop from one project with other because something interest you and you’re not necessarily finishing things. That’s something that kind of comes into this. That’s something you have to balance that against.
Rob: I agree. That’s what you have to dig into. You touched on it exactly is was the person running away from something? Like, “Oh, this got too hard,” or, “Oh, that boss was dumb,” or, “They didn’t value me there,” or, “Oh, I got bored of that.” Or is it ambition? Ambition is not the right word because it’s this weird thing. I’m not that ambitious but I love creating new things. But I also finish what I started. I think that’s something to look at when your evaluating.
I agree that hopping from one thing to the next can actually be a good and a bad trait and it’s determining what their reasoning, logic, and motivations for doing that are, then I agree. If someone’s been working the same job or the same contract for years on end, it can be hard to gauge. You almost have to like, “I don’t know what else I would look at to figure out.” It just makes it harder to evaluate if someone hasn’t been tackling new challenges. I think that that’s kind of the thing that I’d be looking for.
I think the four axis that I look for when I think about someone as a startup founder, like skill set, I think of technology skill set, like are they developer or do they speak developer? Marketing, can I actually get stuff done, drive traffic, optimize a funnel, convert people, trial to paid? SaaS experience which is pretty unique. Most people don’t have it but do they know all the metrics and the numbers that churn the LTVs? Do they think in terms of SaaS numbers? This is one thing you can certainly learn but if someone already has that experience, whether they worked in-depth for one or whether they start at one. The fourth is kind of hiring, managing, and delegating of people.
There are certainly more more axis but those are honestly the four that, when I’m evaluating a startup founder, do I think they’re going to succeed? I look along those axis and they don’t need all four of them. Again, if they can learn stuff, you can start with one of them and branch off into the other three. But if you have two co-founders, I really don’t want two co-founders who both have a ton of tech experience and both want to write code. You want one of them who’s willing to know the marketing or to learn the marketing. Or one who’s willing to do the hiring and managing because assuming that you are going to scale up at least a little bit, you need to learn all these skill sets.
Mike: And that kind of leads directly into the next one which is difficult to measure resources. There’s certain types of resources like time and money which I think are directly measurable. But when you come into things like your personal network or your experience and your skill set, I feel like those are a little bit more difficult to measure in terms of what it brings to the table and what it means for the future. I think every situation is different. Those things are going to mean different things for different businesses.
Let’s say somebody brings a lot of domain knowledge and expertise to a particular problem that you’re working on and you want to involve them. The stuff that they know and that they have experience is going to be valuable. Is it stuff that you could learn on your own? Yes. The other side of that is perhaps and perhaps not. You have to take those things into account some way because they do make that relationship a little bit more valuable.
It also depends a lot on how long it’s going to take you to acquire that knowledge, like have they already tried to do a startup in that space and they either succeeded or failed? Those things can make a huge difference in terms of whether or not want to add that your team.
Rob: And then there are the measurable resources that each co-founder might bring. How much time does a person have? Obviously, a lot of us start by our products by working on them part time. What I’ve found in my experience is that people have a lot less time on the side than they think they do. A lot of times I have hired contractors—this probably happened six or seven times to me—where I’ve gone through a full interview process, done video interviews with 6-7 people, narrow, narrow, narrow, get somebody it’s like, “You’re sharp. Cool. You have a day job as a marketer and you want to run Facebook ads for me on the side. Love it. How many hours a week? Okay, you’ve got 15 hours, 20 hours. That’s great.” Then we’ll start and they’ll work four or five in a week. I’m going to, “Hey, what happened?” “Yeah, I just have a lot less time that I thought I did.”
This is something that I think you really need to dig into. If someone tells you they have 20 hours a week to work, I honestly think you should try to get a schedule and say, “Carve that time out because if you have kids, you probably put them to bed at seven or eight or whatever. So you’re working three hours a night during the week and then some on the weekend. If you don’t have kids, what does that look like?” Again, everybody seems to overestimate the amount of time that they have. I think it’s kind of human nature.
The other thing to think about in terms of a measurable resource is money. Does having some money help you get to escape velocity quicker? How much money does each person have to contribute? If you have an even amount, then cool. You can be 50/50 partners. If one person has more, that probably should buy them more equity, I think, unless time is out of whack. There is a bunch of things to think about but certainly someone bringing money to the table can be a bonus. I would say with caution, money is a very short-term thing.
In the early days of a startup you can think, “Oh my gosh. This person is bringing $20,000 to the table but they don’t have much time so they should get this huge chunk of it.” That makes sense for about six months. It makes sense until you get to the point where you launch and suddenly you start growing and $20,000 just isn’t that much money anymore. There’s the balance here because money in the early days is more risky. It is a big deal for someone to bring $20,000, $30,000, $40,000 into a startup that may never work. I would say consider all of these other factors. I would probably put above the value of just pure dollars invested.
Mike: Yeah. I think time and money tied together to some extent as well because if somebody has money set aside and the business isn’t quite making enough to pay the founders of reasonable income, can somebody extend the runway to some extent by living off of less? You may be able to command a salary $150,000 a year but do you have to? If the business can’t support that, then obviously you can’t pay yourselves that. How is that going to work? Is somebody essentially taking a massive pay cut in order to be able to contribute time? Do they have other sources of income?
That’s kind of really what I was getting at in terms of the measurable resources. Not so much can they dump a bunch of money on it but are they able to be somewhat self-sustaining and still contribute to the business while it’s getting further along? Nights and weekend project is a very different story. I think you brought up a lot of great examples and points about the fact that people have probably a lot less time available to them than they think they do. Some of that comes into motivation and as you commented earlier, whether they’re running towards something or away from something.
Rob: I think another big thing to think about is, talking about long-term goals a big deal because startup had a lot of connotations. Startup may mean you just want to start a really nice lifestyle business. It’s going to get you collectively $200,000-$300,000 that you guys split and that’s a good goal to have as long as you both agree on it. But if one person wants to raise venture funding or they want to go seven or eight figures and stay bootstrap, these are all different paths and it’s going to impact a lot of things along the way.
This is something that I would at least have a conversation. You may not need 100% everything ironed-out upfront, but to say, “What really is your goal here? Is your goal to work as little as possible and for both of us to make six figures? Okay, let me think if that’s what I want to do.” If you don’t, there’s going to be this constant tension as you’re growing your product.
Mike: And sometimes, these things don’t always work out and you may think upfront that your goals overlap. Those goals may change over time. I read an article from the guys over at Buffer where there’s three co-founders and initially, everybody was kind of on the same page. They all wanted to do the same things. Over the past couple years—I forget the exact timeline of that—they ended up kind of going in different ways. Two of the co-founders left the company and there’s one still there that’s running everything.
It was interesting to see that they laid out the different types of conversations they had and how it took a long time for them to get there. There are ways out of the situation if long-term you find out that your goals have diverged. But I think it’s important to keep in mind that if you have that conversation early and they don’t overlap right then, it’s possible they could kind of come in alignment but it’s probably not a good place to be starting from.
I think one of the last important things that you should be looking in a co-founder is, do they work well with others? Specifically, by others I mean you. But in general, are they easy to work with? Are they, not necessarily focused and driven, but can you hold a conversation with them and not get angry with them about how they’re doing things? Or vice-versa. Are they going to critique your work all the time and if so, is that something you can deal with?
There’s only so many ways that you can figure this stuff out. I think probably the best way to do it is just work together for a little while. I think you’ll very quickly see whether or not you’re going to be able to work with them long-term or not. There’s soon going to be some things that jump out of you very quickly and then some things that you’re going to learn six months, two years down the road that you didn’t necessarily pick up on right away.
It’s not necessarily good or bad but I think that hammering out what those things are that really irk you or the things that you do that irk them, if you know those upfront you can at least have the conversations and talk about it, and figure out whether it’s something that you can both live with or not. If you don’t do that then you could head for trouble.
I haven’t found any other good ways of doing that other than actually working with somebody. You can ask friends or colleagues or people who have worked both with you and that other person but sometimes those recommendations are: (1) hard to come by, and (2) people don’t really want to throw other people under the bus. It’s difficult to get that information from a third party.
Rob: That’s right and when I’ve done these reference checks, I tend to say, “Tell me about the hardest part about them. Tell me their biggest weakness. Tell me where did their plans […] are like.” I try to dig into this stuff. I try to just prove my theory that they are someone that I should work with. Or even not even just prove it but just to know. I can work with blind spots as long as I know what they are, like this person tends to give a very direct feedback, so be prepared for blunt feedback. It’s like, “Okay, that’s not a deal-breaker for me,” but when this person says something that shocks or offends me, it just be like, “Cool. That how they roll.” That’s also a big plus for a number of other other reasons.
I think a good story of this is like Jordan Gal with Ben Fisher and the founding of CartHook. They say they dated as founders and they really tried it out for quite a while. A couple months, I believe. They went and co-worked in one location and then another because they lived across country from each other. But they really got to know each other. I’ll even say with Einar Vollset and I, co-founders of TinySeed. I asked some folks who knew him better than I did. I know him through MicroConf but he and I never worked together. I asked a few folks, “Hey, you know him better than I do. Tell me about him.”
Then we started just working on a deck and that’s all it was. He said, “I don’t know. What you think? Should we do a deck?” “Cool.” Then I get to see not very much skin in the game. He and I are both saying, “Well, we’re not sure we’re going to do this.” I knew we’re going to do it but it was both of us kind of sizing each other up and saying, “Is this person going to be fun and complement my skills and are they going to work well with others?”
That was the big thing to just sit and hammer something out, to agree on certain things, disagree on other things, be convinced by the other person because you’re like, “Wow, this guy’s smart.” That’s the thing that I think you want to get to. So, even doing one or two smaller projects together before you do a full commit, I think can really be helpful.
Mike: In the beginning of this episode, you and I have chatted briefly about whether or not we’ve actually covered this particular topic before. I went back and looked in episode 408, evaluating whether or not you should take on a co-founder. That’s where we talked about that. This is more about what to look for in a co-founder.
Rob: And that was only 22 episodes ago and we had already forgotten? That is like six months.
Mike: We we were pretty sure. We knew we’ve talked something about it. We just didn’t remember the specifics.
Rob: I total did. It was vaguely. I knew we’ve talked about co-founders a number times. I just don’t know what the specific episodes have been.
Mike: That’s okay. We’ll let it go this time.
Rob: All right. If you feel like you’d like to add something to this list of what to look for in a co-founder, including how to evaluate that, you can either post at Startups For The Rest Of Us episode 430. You can post a comment there, or you can email us at questions@startupsfortherestofus.com, or call into our voicemail number and 888-801-9690. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 429 | Building a Launch List of 5,900 and Grinding Out Customer Development
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Derrick Reimer about his new product Level. They go through the development timeline as Derrick gives insights on the early access phase, alpha testing, taking pre-orders, and going live with the MVP.
Items mentioned in this episode:
- AppSumo MicroConf Giveaway
- MicroConf Growth Edition
- MicroConf Starter Edition
- Level.app
- The Art of Product
Rob: In this episode of Startups for the Rest of Us, Derrick Reimer and I talk about how we built a launch list of 5900 people and how he’s been grinding out customer development on his new effort Level. This is Startups for the Rest of Us episode 429.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
Derrick: And I’m Derrick.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So where this week, Derrick?
Derrick: Just in the startup trenches doing some customer onboarding calls.
Rob: How many calls have you done this week?
Derrick: So far, I’ve done seven. I have 11 or 12 booked right now.
Rob: Very nice.
Derrick: I reached a milestone this week. It feels good to finally be in the realm of getting the product into the hands of potential customers and having those awkward conversations about, “When do you want to start paying for this thing?” but it feels good to be in this realm.
Rob: Yeah, it’s cool. You’ve been working on Level now for 9 or 10 months. It’s a long road to get to this place even for those like yourself who’ve done it a few times before.
Derrick: Yeah, it’s kind of unbelievable when I look back at the timeline. Depending on how you look at it, some would say that’s a really short amount of time to just go from nothing to a product that is potentially viable, but on the same token I’m ever impatient and feel like, “Man, it’s been an eternity.”
Rob: Right, and you’ve been able to work full time on it which is a luxury a lot of people don’t have. I can imagine doing this nights and weekends trying get here. I know you’ve been there, so you remember how it was.
Derrick: Totally.
Rob: We’re going to dive in today to your story. We’re actually going to catch folks up because last time you were on the show was in July, it was episode 399. We talked about how you were validating the idea of Level and how you started having people reserve their handles to build your pre launch list. Today, we’re going to continue that story. We’re going to talk about where you’ve been since then, tell the story of the major milestones you’ve hit through the rest of 2018, and pull out the learnings from those. Folks listening can see how an experienced founder like yourself has taken on this challenge of building essentially a competitor to Slack, which is an app that has a lot of momentum, and trying to thread a usability needle and have a different use case that works better for your development teams.
But before we dive in, I want to talk about an AppSumo contest that’s happening, where AppSumo is going to pay for an all-expense paid trip to both MicroConf Starter Edition and Growth in late March. We’ll link that up in the show notes, but they’ve graciously sponsored this podcast and are going to be giving somebody a trip to both of those. You could be a lucky winner Derrick.
Derrick: Yeah, I know, because it’s open to anyone even if people have purchased a ticket, right?
Rob: Exactly. We’ll refund your ticket if you win. I don’t think it’s open to me, but I’m tempted to apply.
Derrick: I was going to say I’d definitely jump on that. If there was a call to action in that email, I’m sure I clicked it. I’m not sure how that would look if I won it, but here’s to hoping.
Rob: I know. I just know that I am totally not involved in the selection process. I have no idea what’s going on. That giveaway ends on February 11th, which is another week or two after this goes live. Check it out if you haven’t.
You were here in July. You and I were talking before the show, kind of laying out some milestones that happened since then. I know you were heads down, you’re in pretty hardcore design mode of trying to figure out what are the screens going to look like, how am I going to architect the inbox, how do you compete with Slack in a way that is less invasive, less interruptive. I mean, that’s the promise of Level. For folks who want to a good explanation of it, go to level.app and it’s your headline there, ‘Team communication optimized for deep work.’
In September, you were telling me you came to a fork in the road in terms of this. You’re writing some code I believe, but you were trying to decide the hardest part of this app to design really is probably the inbox. From a usability perspective, you just have to get it right. Talk to us about where you were in September.
Derrick: Up until that point, it’s funny now looking back like why did it take me so long to get to where I am today? I think a big part of that was, I spent a few months at the frontend just focusing mostly on getting familiar, comfortable with the Tech Stack, this is an application that has a lot of real time stuff. It will eventually need offline support, web sockets, just a very different type of application from the ones I’ve built before.
I spent a lot of time getting familiar with Tech Stack, and also I had a general vision in my head of how the product should work, like just kind of picture how it would feel. It’s interesting how once you get from the phase of, I have the vision for this thing, and how it should function, and how it should not interrupt people like Slack does, to actually getting down to the implementation.
There’s a big gap there. In theory I know how it should work, but it’s actually a really hard problem to solve to strike just the right balance. I think we were sitting on your rooftop, September, I was sipping some scotch and I was like, “Rob, what am I going to do?” What should I do? Should I spend time doing another round of calls with potential customers, try to put together some wireframes and some mockups, show it to them, cast a vision for how it’s going to work, and potentially get responses like, “Yeah, looks cool”? Or do I take the route of just spending some time writing some code, and implementing what I feel is my best guess at how it should function according to my own experience, and what I’ve heard from others?
To me, at the time it felt risky because I know that that big trap that a lot of people fall into is going to the basement, code for months, emerge, and potentially be missing the mark. I’ve been very careful and almost a little bit paranoid not to fall into that trap, even though it’s still really hard even after having a few apps under your belt. That’s kind of the crossroads.
Rob: Yeah and it’s never clear cut. You and I sat and tried to look at what are the options here and what are the drawbacks because you don’t want to fall into exactly that trap. Like the conventional wisdom says, “Do more customer development upfront, have a lot of conversations, don’t waste time writing a bunch of code, get it all settled out of front.” But it seems like your gut feel and mind in essence, too, was by the time we get to the end of the conversation it’s like your intuition of what it should be, since you’re trying to invent something new or at least innovate enough in a medium that’s chat, but you’re trying to do it differently, and it’s like, “I’m not sure that having conversations with people about mockups is going to get you there.” It wasn’t like you should absolutely do A or B. We both by the end leaned towards, “Go build something,” because until someone touches it and clicks a button, and even if it’s a fake simulated chat with an invisible person, with a bot, or whatever, at least they’ll get an idea of like, “Oh, that doesn’t make sense at all,” or, “Oh, it does,” in a way that I don’t know, you can’t get your hands on mockups the way that you can with some code.
Derrick: Yeah. If Steve Jobs would have taken some wireframes of the iPhone and showed it to people, would people have caught the magic? I don’t think so. It would look like an interesting concept, “Oh, it’s a phone that you can web browse on, and have all these apps, and these games. Interesting.” It’s hard to represent the user experience aspect of it, which I think for Level is a really big thing. It just has to feel right to people. As opposed to some other apps where it has this very specific utilitarian purpose, and as long as it can deliver on this purpose, then it will be good. Level is not necessarily good even if it delivers on the purpose, it also has to feel right.
Rob: I want to touch on the thing you said about Steve Jobs. I feel like some people will throw that around. He’s also an exception. Henry Ford talks about the model T being a faster horse or whatever, which I think is actually apocryphal. I’m not sure that he ever said that, but the idea is that I’m an innovator and I know better, I’m never going to show such to customers, and that’s what has gotten people into the two years of coding in your basement thing.
One I think is knowing your strengths. You happen to have really solid strength in app usability and design. I think both you and I were like, “You’re probably going to do a better job of this than most people would know, so take a flyer on it,” and two, I think it’s a gut feel. It’s like how strongly do you feel that you know what’s better in this space? Are you like, “I don’t really know the solution and I truly do need the input of 10 or 20 potential customers,” then think I’ll do that. It didn’t seem like you needed that. That’s what we were pulling out. You had enough of an image in your head of what you wanted to do that we thought it was worth the gamble. That’s how it felt, right?
Derrick: Yeah. I think that this is also one of the other things that complicates getting that type of feedback from wireframes for Level. It’s the type of product where if someone came and asked me, “Here’s what I’m thinking for a new tool that solves this problem, what do you think?” I would be like, “I don’t know if I could answer that very accurately either,” because I’d be like, “Well, it just depends on if I use it for two weeks, go through my day, and a bunch of stuff isn’t falling through the cracks, or do I truly feel like I am able to retain focus better, or am I constantly drawn to go check it?” There’s a whole story that has to come together. I don’t know if I’m imaginative enough to be able to answer with confidence like, “Yeah, I think you nailed it.”
Rob: All startups have some type of risk, whether it’s a market risk or technology risk. It’s almost [UX 00:10:14] risk, or threading the needle of being that’s the riskiest thing. We know you can build the app and you’re probably going to market it pretty well. I think there is some market risk in terms of, is the market of people who don’t like being interrupted by Slack, how large is that market? That’s an open question, but that’s one that’s very hard to answer until you build something cool right now. At that point, you made the decision to not have more conversations, and not build mockups, and you got to code in September.
Derrick: Yeah.
Rob: And then October, you did your early access phase. It was like pre-early access or something, right?
Derrick: Yeah. I’ve already been building foundations leading up to that point. So then it was just locking in some decisions around how the inbox works and some of the other elements in the product. I was only a few weeks away from being able to show it to people. At that phase, now looking back, it was very early and it would have been a pretty big ask to have any teams really switch off of their existing tooling and use this. There are just elements that people had come to expect in a communication tool that were just not present in Level.
I got good feedback, a good amount of like, “Hey, this feels a little bit off. This kind of thing works junky when I use it. It might be a bug.” It was valuable in a lot of ways, but it didn’t provide all the value that I hoped it would. I kind of, at one point, hoped that some people would actually switch off their existing tools and then it became clear that it just wasn’t there yet. There was still more that needed to be built.
Rob: That’s interesting. You showed it to customers, you got some feedback, but you felt like it maybe wasn’t worth it. You didn’t get enough feedback to warrant all the time at that point.
Derrick: Yeah. It goes back to that analogy of what is an MVP? Is it up a half-built product or is it just a simplified version of a product that will eventually grow into a more full-featured thing? I think at that phase, it was a bicycle missing a wheel.
Rob: Rather than a scooter or something, right?
Derrick: Yeah.
Rob: That’s interesting. We jumped ahead in November and that was when you decided to set a public launch date. It was a public launch date but it was essentially of a minimum viable product that you thought teams could use. You set that date for January 21st which is a few days ago now. What made you decide to put a stake in the ground in November and set a date?
Derrick: There were a few things leading to that. One is I was becoming really impatient with it not moving to that next phase. Part of it was for my own psychology. I wanted to have this date set. I actually was kind of inspired. We were interviewing Paul Jarvis who just released a book in January.
Rob: Company of One.
Derrick: Company of One, really good read. He was doing his press tour for that promotion and stuff. I remember seeing everywhere that he was showing up, he was talking about, “The book is coming on January 15th,” or whatever it was. I’m sure that’s kind of an artifact. They’re just weird publishing schedules, and working with traditional publishers and stuff. But it kind of inspired me like it would be kind of nice if I could be talking about Level and have a date. There’s a date that is coming, and so start building momentum up to that, partially for myself, partially for people who are following the story, and getting excited about it. I was ready to give something a little bit more into the public conversation. That was a big piece of it.
I’ve been toying with the idea of doing presales for the product. Some people are more aggressive with this than others, some people as soon as they have the idea, they’re asking for money right away. I feel like that’s just something you have to take on a case-by-case, founder-by-founder, what you’re comfortable with, what market you’re in, and so on. For me, I felt like to be most comfortable asking for money, I wanted to have a date that I could use and say, “If you put down a deposit today for Level, you will get access guaranteed by the this date,” that was another big piece of motivation.
Rob: I can see that. In retrospect, do you think it was a good decision to set that date?
Derrick: Yeah, I think it was great. No regrets on that. I actually probably could have pushed it earlier. There were definitely things that always happens with launches a few days before. I’m like, “Oh, it would be nice to get that in.” I was working around the clock a few days leading up to Monday, slipping in things that were just like, “I would really love to have this. When I’m demoing the product, I want this part to really shine.” I definitely procrastinated a little bit but I think I could have probably pushed it even a little bit earlier. Being close to the holidays and stuff, I just wasn’t sure how hosed my work schedule would be over that period of time. The value of having a public deadline, there’s many benefits to it. No regrets.
Rob: What did it do for you? Did it just motivate you like, “I have to get this done so I’m going to work more cut scope”?
Derrick: Yeah. I think it’s a really good forcing function for bringing clarity. I fall into this trap all the time. I pay close attention to detail about stuff and I’m very particular about UX. I could easily just keep iterating on small pieces and burn hours on that. I definitely have done my fair share of that. Even still with all these pressures I put on myself to keep focused on the most important things. I think deadline is even more forcing function than just me telling myself to stay focused.
Rob: Yeah, that makes sense. I feel like one of the purposes of deadlines in our space is that, people who build great products almost without exception are perfectionists. They never think it’s good enough because their taste in products is so high. That’s how they know when it’s good, because their taste is good. If your taste is good, you don’t want to put something crappy out. To you, crappy is like things that everyone else looks and says, “Oh, that’s so amazing and gorgeous,” and it’s like, “No, it’s one pixel off of this and that,” at a certain point, you set a date, and you just force yourself to do it.
We’ve done this a couple times already with Tiny Seed where we just go up and decided to announce in October, and we’ve set a forcing function of getting this first batch picked out before MicroConf which is end of March, and that feels incredibly ambitious. I stress about that every day, but it’s good. It’s made me motivated. It hasn’t made me work more hours, but it’s making me be way more focused on the important things. Anything that’s not getting me closer, getting us closer to that objective, I’m just putting on the side. I think it’s good.
Derrick: That’s why I like the concept of healthy stress which has been well studied. There is a certain amount of stress that’s good. I think it’s kind of like that Basecamp mentality. They talk a lot about how they work and how they set these six-week cycles. At first, when I heard Basecamp has deadlines, that seems opposite of how they work. I thought they were calmly, and work at a natural cadence, and not overly stressed, but once you dig into their philosophy around that, it’s like, “No, we set deadlines. No, we cut scope around those deadlines. We don’t burn ourselves out, or make people toxically stressed, and pack in a bunch of work that’s unrealistic. We just pull the other levers to make it happen.” That’s what I found. I’m either going to work around the clock, obsess about every single detail, and try to pack in a bunch of features, or I’m just going to set aside my compulsion to perfect everything, and just focus on the most important stuff.
Rob: Cool. In November also, you mentioned you did a presale in essence. What was the purpose behind that?
Derrick: Yeah. I’ve wanted to do that for awhile and then kind of setting this deadline in my mind, made it kind of feasible to propose this to the public. My rationale was I wanted to figure out, at that point it was probably close to 4,000 people on the launch list who reserved a handle on Level. That’s a lot of people. There’s a lot of people who are supportive. I’m doing a lot of working in public, on Twitter and stuff, sharing my work.
There’s quite a few people who seem to really be following along with the story and glad that it’s happening. That still doesn’t necessarily translate to who’s actually feeling the pain enough to hand over their hard earned dollars for a solution. For me, this was like getting that set of people who are most feeling the pain, most willing to pay, and those are the ones that I want to be getting into the product first, hearing their feedback, and kind of building off of that.
Rob: It’s a good filter in essence is what you’re saying. You just picked out a number out of the air if I recall. It was $48 which is six times your Percy pricing. It’s $8 a seat, right?
Derrick: Yeah, right.
Rob: How many preorders did you get? What was your total preorder amount? I’m curious.
Derrick: I think it was around $2500. I’m not good at mental arithmetic. I think it was 55 or 56 people who went to buying the preorder.
Rob: Were you happy with that? Did you have a number in your head in advance?
Derrick: I didn’t really know how to declare success or failure on that. I felt happy with it. If I got 20 people, I was going to be happy. That felt good to me.
Rob: Cool. Let’s jump forward. It sounds like the holidays, December was a lot of coding. Even early January you were heads down, you’re just trying to get stuff done and meet this deadline. Here we are, we’re recording the week of the 21st, even though it’s going to go live next week. You talked about doing seven calls so far and you have another half dozen or so scheduled. How is it feeling? Do you feel like the product’s at that point where it’s a good time to do it? Are you getting a lot of value out of this or is it still too early to tell?
Derrick: I’m feeling overall positive about it. I think I had to temper my expectations, because the switching costs for a lot of organizations is pretty high. For better or worse, Slack starts out as just a place for humans to talk to each other within their organization. Gradually, some organizations decide to kind of turn it into this place that runs a bunch of their internal workflows, maybe the sales team relies on it for leads to come through into a specific Slack channel which then they can follow up with.
For some people I’ve talked to, it’s proven that this is going to be a longer process. Overall, the response has been positive. Even from those who have more complicated set up, it’s still like, “This product looks really interesting. I’m intrigued.” But the gap between me being intrigued as the champion in my organization, and us actually switching over to it, for some, the gap is pretty big. I think it’s a reminder to me that I need to be patient and just set my expectations properly.
Another artifact of this is that Level is going to be most impactful for teams that are a little bit larger. Really small teams just don’t feel a lot of the pain that teams that are growing start to feel when Slack really becomes unwieldy. That’s another thing that I’m keeping at the back of my mind, set those expectations properly. I’m really feeling positive about this model of staying in the zone of vetting people who come into the funnel, that alternately make it into a demo with me, who ultimately get into the product to try it out, as opposed to doing the big splash public launch, let in a bunch of people, get a big spike of interest, and then a majority of them turn out, and probably send in feedback along the way that I don’t really know if I can trust because I don’t know if they’re a good fit in the first place.
Rob: It’s going more after the super human model, right?
Derrick: Yeah, exactly.
Rob: Derrick, do you remember a day maybe 5-10 years ago where you dreamt of just building a self-service software product that paid your bills. Is that why you got into this?
Derrick: I think so, yeah. My very first product that I remember throwing something together and then I literally Googled, “How do I get customers?” I just thought they would come.
Rob: Yeah. Now here you are, doing heavy hand-holding, onboarding, and conversations It’s good stuff. It’s just crazy how it changes especially as your goals change too, I think. You want to build something great and you want to build something that I’ll say is a decent sized company, whatever that means to people. I just don’t know if you can do that anymore, trying to go no touch. It’s really hard. I shouldn’t say you can’t, but it’s really going to be one in a million or something to just thread that needle and have the Cinderella story. You’re putting in the work. This is what it’s about.
Derrick: Yeah. I feel the no touch phase will come once the product market fit is extremely tight. I feel everything I am doing now—of course I didn’t come up with any of this, these are things that people talk about—going through this phase of intense hand-holding, keeping the filters on really strong, for this round of folks, of the people who put in a preorder, I sent them a questionnaire, asked a bunch of questions about what are the current problems in more detail with chat, what tools are they using, how big is their team, are these for project management, what does email look like in their company. Just a bunch of things I felt like would be good inputs into me understanding their use case, and being able to cater my demo to them, and set my own expectations on what I expect from them. Not everyone has submitted that questionnaire. Not everyone got a Calendly link to get on my calendar to then get into the product yet.
I’ll keep nudging to other people who have preordered and haven’t done that yet. I want to keep the filters really tight because what that does is ensures that I’m getting the best quality feedback that I can possibly get, to then hopefully lead to more of these folks coming through the pipeline, and getting just tighter product market fit.
Rob: You put in the kind of grinding out customer development now so that later on, you have that fit and you know that you can market it and self service it. It’s a good way to think about it. If you think about it, it mirrors very closely what we did in the early days of Drip. You were off coding and I was doing what you’re doing. I was either having calls, or doing videos, so that you could keep moving full speed. In this case, you have to do both because you’re a single founder. I’m pretty proud of what we built with Drip. It had product market fit. Once we nailed that, growth really kicked in. It’s a good kind of analogy or parallel thought there.
One of the things that you’ve done well is, you’ve built up this launch list of almost 5900 email addresses. It’s people who wanted to reserve their handle, and they probably want to follow along, and might want to use Level. There’s all the reasons but I’m curious, for listeners out there who haven’t built a lunch list yet, the first question is what’s the value of that launch list? It’s probably pretty obvious, but I talked through that a little bit and then how did you do that?
I know you have a podcast Art of Product, we should plug it here. Folks want to hear two software founders who were getting it done and building interesting products. They talk every week, you and your co-host Ben that’s artofproductpodcast.com. You have a podcast but that didn’t get your 5900 handles. Talk to us about the value you see in it, and why you spent the time to build it, and then talk through a couple things you’ve done to do that.
Derrick: I think the benefits of having that email list, it talked about a bunch. You’re going to have a certain conversion rate on your list, ultimately. The larger you can grow that list, hopefully the more customers you’ll have come out the other end. When it’s really early, I don’t know how well qualified everyone is on that list, but I know that right now I wanted that to be a very wide top of funnel, just get people onto a list so that they can have a chance of hearing about what I’m up to, and hopefully converting if they’re kind of in the camp of a good, ideal fit.
What really cranked up the number of people submitting the form was adding that scarcity piece, that reserving a handle. When I did that, it obviously has to fit with the kind of application that you have. If you don’t have something where there will be a user name, then it wouldn’t make sense to do that. I think introducing some element of scarcity is just enough to push a lot of people over to, “Well, I don’t really know, but I’ll at least drop my email in this,” they’re getting some kind of perceived value in addition to just getting email updates.
I actually don’t have great historical metrics on conversion rate of hitting the homepage to submitting, but my traffic is not that huge right now. It’s a pretty high percentage of people who land on the homepage will submit that form. It’s not like I have a huge amount of traffic coming to the website, but if I look into my analytics, I think a majority of people are either coming from Twitter, links on Twitter to Level which is where I’m predominantly talking about in the open what I’m working on day-to-day, and just direct. People who either hear about it on the podcast, or hear about it from someone else in person, or whatever, just typing in level.app and coming directly there.
I think I’m kind of playing a long ball with this, but from the get go decided I was going to be as open and transparent with the development process as possible. The thinking behind that is just, people are interested in following a journey. Starting out the Level journey with the manifesto, I think that resonated with a lot of people. It gets people curious about how this is going to all come together, and then in the process of sharing openly what I’m working on, also trying to just be useful to other people. It’s something that Adam Wathan and Steve Schoger are really good at with their newly launched Refactoring UI.
A core part of their strategy was to provide hot tips on Twitter and just be insanely valuable. Giving away a bunch of free knowledge and just stuff that is part of their day-to-day work that they can just package up and share in a way that provides value to other people. That was insanely effective for them. I’m following that same similar strategy of just trying to share a lot. I think it’s built up a decent amount of people who are just genuinely interested in the story. That leads people to when they sign up for a handle, they are more likely to tweet about it and tell it to their friends. That leads to more people signing up. It’s just kind of a nice little flywheel there.
Rob: Yeah, that’s nice. One concern that I have with that approach, especially with SaaS, it’s different than what Adam and Steve are doing, is that SaaS is a tool and people pay for it on a monthly basis, whereas Adam and Steve sell info products. They sell books and courses on the topics that they’re tweeting. There’s a tighter alignment there. I think their conversion rate will be very high and I think yours will be less. It was that way when we were doing Drip as well.
I don’t know if you remember but the first 500 people on our email launch list were mostly for me talking about it on this podcast and a couple other places. The conversion rate on those was far less than the ones that I got from other avenues. It’s not a bad approach, but it might give you a false sense of security. I don’t think you’re kidding yourself in thinking that everyone who wants to follow your story is going to sign up for Level. I want folks at home, if you’re listening to this, realize that there’s difference here.
I still think it’s a viable approach, and it’s something I would be doing the same, but you have to have it in the back of your head that these people are probably not going to convert as well as if you’re running a targeted ad campaign to only the demographic that gets value out of it. If they give you their email and they’re more of a cold lead, they almost might have a better chance if that’s a real pain point for them, versus someone who’s listening and is just like, “I want to follow along and see how Derrick is marketing,” right?
Derrick: Yeah. That’s a really good point. One thing that is in my favor that is not universally in people’s favor when they’re working out in public and sharing their story is that, the people who are potentially good candidates to become Level customers are developers, designers, founders, and that’s the people that are in my tribe on Twitter. The community that I have some degree of access to that are interested in the story, they’re interested in the meta story, they’re interested in the startup journey because there are other startup people, and this just happens to be a tool that is being sold to other startups and founders and stuff like that. If you’re building countertop installer software, sharing your story to other developers on Twitter isn’t necessarily going to move the needle at all.
Rob: Exactly. I’m curious, you had to buckle down at some point, put a stake in the ground, and make some hard choices, and decisions about the inbox. This is as you said, it’s the most critical part of the app because if it works, it’s magical, and angels sing down from the heavens. If it doesn’t, then it’s just a big point of your app that really needs to go well. How did you finally decide to buckle down and just say, “I got to make a call on this,” because I know that you’ve thought about it a lot and it was a long process there.
Derrick: I think I don’t have any other choice. I have to do this. I have to just follow my gut instinct and know that I may have to change this. It may not be a perfect implementation and it’s something that I have to fight against because now that I’ve been through Drip, Codetree, and all these experiences, I am very aware of the cost of legacy code and technical debt. Part of me was like, I don’t want to write any code unless I’m sure that it’s going to not have to change in a significant way.
I had to get past that a little bit and know that there’s always going to be a tension between writing well-crafted, well-tested code that you’re going to invest a lot of time into making it really rock solid and know that you’re potentially going to have to change a bunch of that, and rework data models, and rip out database tables, and do launch data migration, or whatever it may be. I ultimately just had to make the call that I’ve got to do this, I’ve got to get it in the hands of people, and then hopefully the mutations are relatively small, and I can just dial it in with smaller refinements, but also know that maybe it is larger shifts that need to happen.
Rob: How about the experience this time around? In essence it’s your third app, but you had two or three before that. It’s like the fifth or sixth project. You’ve had a lot of experience doing this, so reflecting on it as someone who has launched and grown things in the past. The last nine or ten months when you look back, did it take longer than you thought? Less time than you thought?
Derrick: Yeah, I think my big takeaway is this stuff, regardless of your experience, never gets easy. It gets easier in some ways, but there are fundamental truths about custom software development that still hold regardless of how experienced you are and knowing that there are some of those pitfalls that arise once you have some battle scars. The first time around in earlier apps, I was probably less concerned about scaling challenges for example, because figuring that rightly so that will tackle those problems when we get there.
Now, coming out of an experience with Drip where there were a ton of scaling challenges, I think it’s been a difficult thing that I’ve tried to stay aware of not prematurely optimizing things, or planning to much in advance for scale that I don’t really know what scaling challenges will look like, so try not to invest too much into over-architecting stuff. It gets easier in some ways but then also gets harder in other ways once you have more experience under your belt.
Rob: Yeah. I made a mistake or just a judgment error after HitTail as we started Drip. I thought that it would go faster because I knew more, I had more experience, and more knowledge, and it didn’t. I remember being very frustrated by that for a year. Your mindset and your expectations can really negatively impact your experience of an event.
Derrick: Yeah.
Rob: That’s what you’re saying, don’t get overconfident. Parts of it get easier and you do get better at it, but I don’t think you get faster at it. There is a difference. Look at David Cancel, who’s on his fifth or sixth, all have been successful and exited. Right out of the gate he raised $5 million, or $10 million, or $15 million, it was a huge number, right out of the gate as they were starting. He’s been grinding on Drip for years now, and yes they have traction now, but the first one or two years, it was not getting the traction that I would have expected from a founder of his experience and caliber. Even Jason Cohen with WP Engine. WP Engine is huge now. Remember him bootstrapping and toiling away for a year-and-a-half or two years before anyone had heard of it? It’s crazy.
Derrick: Yeah. When I look at the product, I’m trying to keep Level very simple and elegant. I looked at the product today and I’ve been spending a lot of time in it obviously using it myself. The mechanics of this feels very simple. On the one hand I think, why did it take me so long to arrive at something that feels so simple? It feels like given all this time and all this effort, it should be something that has thousands of dials and tweaks to it, and just like this very complicated system. Just looking at a product that looks simple on the surface doesn’t mean that there weren’t thousands of hours of thinking, and laying on the floor, staring at the ceiling, trying to figure out the most elegant way to execute this. It’s even hard for me sometimes looking at my own product to say, “Why did this take so long?” but it just does, because these are hard problems to solve.
Rob: For sure. Well sir, I think we’re at time. Thanks so much for coming back on the show.
Derrick: Cool. Thanks for having me.
Rob: If folks want to keep up with Level, that’s at level.app, and if they want to hear you talk about it every week, it’s artofproductpodcast.com, or they can head to iTunes, Stitcher, wherever fine podcasts are sold. Have you gotten into Spotify yet?
Derrick: We are in Spotify. Actually, that just happened. We use Fireside for hosting our podcast and they just did it one day. I just went in and I’m like, “Oh, I guess we’re in Spotify.”
Rob: Yeah, that’s cool. Good for you. Folks have been requesting that we get in Spotify and I was like, “How do we do that?” [00:37:57] research [00:37:58] and appear that because we self host on a shared hosting thing with a CDN over it, we don’t use any of the fancy big hosts that kind of do it all for you. It looked like we were going to have to move hosting, copy all the files, and do 301s, and I was like, “I’m not sure this is worth it,” but as it turns out, we missed a link to the first look around. So when I submit our RSS feed 15 minutes later, we were in Spotify. I was like, “Yes. [00:38:22]. It’s great.” Well, thanks again sir for coming on the show.
Derrick: Thanks for having me Rob.
If you have a question for us call our voicemail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
Derrick: And I’m Derrick.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So where this week, Derrick?
Derrick: Just in the startup trenches doing some customer onboarding calls.
Rob: How many calls have you done this week?
Derrick: So far, I’ve done seven. I have 11 or 12 booked right now.
Rob: Very nice.
Derrick: I reached a milestone this week. It feels good to finally be in the realm of getting the product into the hands of potential customers and having those awkward conversations about, “When do you want to start paying for this thing?” but it feels good to be in this realm.
Rob: Yeah, it’s cool. You’ve been working on Level now for 9 or 10 months. It’s a long road to get to this place even for those like yourself who’ve done it a few times before.
Derrick: Yeah, it’s kind of unbelievable when I look back at the timeline. Depending on how you look at it, some would say that’s a really short amount of time to just go from nothing to a product that is potentially viable, but on the same token I’m ever impatient and feel like, “Man, it’s been an eternity.”
Rob: Right, and you’ve been able to work full time on it which is a luxury a lot of people don’t have. I can imagine doing this nights and weekends trying get here. I know you’ve been there, so you remember how it was.
Derrick: Totally.
Rob: We’re going to dive in today to your story. We’re actually going to catch folks up because last time you were on the show was in July, it was episode 399. We talked about how you were validating the idea of Level and how you started having people reserve their handles to build your pre launch list. Today, we’re going to continue that story. We’re going to talk about where you’ve been since then, tell the story of the major milestones you’ve hit through the rest of 2018, and pull out the learnings from those. Folks listening can see how an experienced founder like yourself has taken on this challenge of building essentially a competitor to Slack, which is an app that has a lot of momentum, and trying to thread a usability needle and have a different use case that works better for your development teams.
But before we dive in, I want to talk about an AppSumo contest that’s happening, where AppSumo is going to pay for an all-expense paid trip to both MicroConf Starter Edition and Growth in late March. We’ll link that up in the show notes, but they’ve graciously sponsored this podcast and are going to be giving somebody a trip to both of those. You could be a lucky winner Derrick.
Derrick: Yeah, I know, because it’s open to anyone even if people have purchased a ticket, right?
Rob: Exactly. We’ll refund your ticket if you win. I don’t think it’s open to me, but I’m tempted to apply.
Derrick: I was going to say I’d definitely jump on that. If there was a call to action in that email, I’m sure I clicked it. I’m not sure how that would look if I won it, but here’s to hoping.
Rob: I know. I just know that I am totally not involved in the selection process. I have no idea what’s going on. That giveaway ends on February 11th, which is another week or two after this goes live. Check it out if you haven’t.
You were here in July. You and I were talking before the show, kind of laying out some milestones that happened since then. I know you were heads down, you’re in pretty hardcore design mode of trying to figure out what are the screens going to look like, how am I going to architect the inbox, how do you compete with Slack in a way that is less invasive, less interruptive. I mean, that’s the promise of Level. For folks who want to a good explanation of it, go to level.app and it’s your headline there, ‘Team communication optimized for deep work.’
In September, you were telling me you came to a fork in the road in terms of this. You’re writing some code I believe, but you were trying to decide the hardest part of this app to design really is probably the inbox. From a usability perspective, you just have to get it right. Talk to us about where you were in September.
Derrick: Up until that point, it’s funny now looking back like why did it take me so long to get to where I am today? I think a big part of that was, I spent a few months at the frontend just focusing mostly on getting familiar, comfortable with the Tech Stack, this is an application that has a lot of real time stuff. It will eventually need offline support, web sockets, just a very different type of application from the ones I’ve built before.
I spent a lot of time getting familiar with Tech Stack, and also I had a general vision in my head of how the product should work, like just kind of picture how it would feel. It’s interesting how once you get from the phase of, I have the vision for this thing, and how it should function, and how it should not interrupt people like Slack does, to actually getting down to the implementation.
There’s a big gap there. In theory I know how it should work, but it’s actually a really hard problem to solve to strike just the right balance. I think we were sitting on your rooftop, September, I was sipping some scotch and I was like, “Rob, what am I going to do?” What should I do? Should I spend time doing another round of calls with potential customers, try to put together some wireframes and some mockups, show it to them, cast a vision for how it’s going to work, and potentially get responses like, “Yeah, looks cool”? Or do I take the route of just spending some time writing some code, and implementing what I feel is my best guess at how it should function according to my own experience, and what I’ve heard from others?
To me, at the time it felt risky because I know that that big trap that a lot of people fall into is going to the basement, code for months, emerge, and potentially be missing the mark. I’ve been very careful and almost a little bit paranoid not to fall into that trap, even though it’s still really hard even after having a few apps under your belt. That’s kind of the crossroads.
Rob: Yeah and it’s never clear cut. You and I sat and tried to look at what are the options here and what are the drawbacks because you don’t want to fall into exactly that trap. Like the conventional wisdom says, “Do more customer development upfront, have a lot of conversations, don’t waste time writing a bunch of code, get it all settled out of front.” But it seems like your gut feel and mind in essence, too, was by the time we get to the end of the conversation it’s like your intuition of what it should be, since you’re trying to invent something new or at least innovate enough in a medium that’s chat, but you’re trying to do it differently, and it’s like, “I’m not sure that having conversations with people about mockups is going to get you there.” It wasn’t like you should absolutely do A or B. We both by the end leaned towards, “Go build something,” because until someone touches it and clicks a button, and even if it’s a fake simulated chat with an invisible person, with a bot, or whatever, at least they’ll get an idea of like, “Oh, that doesn’t make sense at all,” or, “Oh, it does,” in a way that I don’t know, you can’t get your hands on mockups the way that you can with some code.
Derrick: Yeah. If Steve Jobs would have taken some wireframes of the iPhone and showed it to people, would people have caught the magic? I don’t think so. It would look like an interesting concept, “Oh, it’s a phone that you can web browse on, and have all these apps, and these games. Interesting.” It’s hard to represent the user experience aspect of it, which I think for Level is a really big thing. It just has to feel right to people. As opposed to some other apps where it has this very specific utilitarian purpose, and as long as it can deliver on this purpose, then it will be good. Level is not necessarily good even if it delivers on the purpose, it also has to feel right.
Rob: I want to touch on the thing you said about Steve Jobs. I feel like some people will throw that around. He’s also an exception. Henry Ford talks about the model T being a faster horse or whatever, which I think is actually apocryphal. I’m not sure that he ever said that, but the idea is that I’m an innovator and I know better, I’m never going to show such to customers, and that’s what has gotten people into the two years of coding in your basement thing.
One I think is knowing your strengths. You happen to have really solid strength in app usability and design. I think both you and I were like, “You’re probably going to do a better job of this than most people would know, so take a flyer on it,” and two, I think it’s a gut feel. It’s like how strongly do you feel that you know what’s better in this space? Are you like, “I don’t really know the solution and I truly do need the input of 10 or 20 potential customers,” then think I’ll do that. It didn’t seem like you needed that. That’s what we were pulling out. You had enough of an image in your head of what you wanted to do that we thought it was worth the gamble. That’s how it felt, right?
Derrick: Yeah. I think that this is also one of the other things that complicates getting that type of feedback from wireframes for Level. It’s the type of product where if someone came and asked me, “Here’s what I’m thinking for a new tool that solves this problem, what do you think?” I would be like, “I don’t know if I could answer that very accurately either,” because I’d be like, “Well, it just depends on if I use it for two weeks, go through my day, and a bunch of stuff isn’t falling through the cracks, or do I truly feel like I am able to retain focus better, or am I constantly drawn to go check it?” There’s a whole story that has to come together. I don’t know if I’m imaginative enough to be able to answer with confidence like, “Yeah, I think you nailed it.”
Rob: All startups have some type of risk, whether it’s a market risk or technology risk. It’s almost [UX 00:10:14] risk, or threading the needle of being that’s the riskiest thing. We know you can build the app and you’re probably going to market it pretty well. I think there is some market risk in terms of, is the market of people who don’t like being interrupted by Slack, how large is that market? That’s an open question, but that’s one that’s very hard to answer until you build something cool right now. At that point, you made the decision to not have more conversations, and not build mockups, and you got to code in September.
Derrick: Yeah.
Rob: And then October, you did your early access phase. It was like pre-early access or something, right?
Derrick: Yeah. I’ve already been building foundations leading up to that point. So then it was just locking in some decisions around how the inbox works and some of the other elements in the product. I was only a few weeks away from being able to show it to people. At that phase, now looking back, it was very early and it would have been a pretty big ask to have any teams really switch off of their existing tooling and use this. There are just elements that people had come to expect in a communication tool that were just not present in Level.
I got good feedback, a good amount of like, “Hey, this feels a little bit off. This kind of thing works junky when I use it. It might be a bug.” It was valuable in a lot of ways, but it didn’t provide all the value that I hoped it would. I kind of, at one point, hoped that some people would actually switch off their existing tools and then it became clear that it just wasn’t there yet. There was still more that needed to be built.
Rob: That’s interesting. You showed it to customers, you got some feedback, but you felt like it maybe wasn’t worth it. You didn’t get enough feedback to warrant all the time at that point.
Derrick: Yeah. It goes back to that analogy of what is an MVP? Is it up a half-built product or is it just a simplified version of a product that will eventually grow into a more full-featured thing? I think at that phase, it was a bicycle missing a wheel.
Rob: Rather than a scooter or something, right?
Derrick: Yeah.
Rob: That’s interesting. We jumped ahead in November and that was when you decided to set a public launch date. It was a public launch date but it was essentially of a minimum viable product that you thought teams could use. You set that date for January 21st which is a few days ago now. What made you decide to put a stake in the ground in November and set a date?
Derrick: There were a few things leading to that. One is I was becoming really impatient with it not moving to that next phase. Part of it was for my own psychology. I wanted to have this date set. I actually was kind of inspired. We were interviewing Paul Jarvis who just released a book in January.
Rob: Company of One.
Derrick: Company of One, really good read. He was doing his press tour for that promotion and stuff. I remember seeing everywhere that he was showing up, he was talking about, “The book is coming on January 15th,” or whatever it was. I’m sure that’s kind of an artifact. They’re just weird publishing schedules, and working with traditional publishers and stuff. But it kind of inspired me like it would be kind of nice if I could be talking about Level and have a date. There’s a date that is coming, and so start building momentum up to that, partially for myself, partially for people who are following the story, and getting excited about it. I was ready to give something a little bit more into the public conversation. That was a big piece of it.
I’ve been toying with the idea of doing presales for the product. Some people are more aggressive with this than others, some people as soon as they have the idea, they’re asking for money right away. I feel like that’s just something you have to take on a case-by-case, founder-by-founder, what you’re comfortable with, what market you’re in, and so on. For me, I felt like to be most comfortable asking for money, I wanted to have a date that I could use and say, “If you put down a deposit today for Level, you will get access guaranteed by the this date,” that was another big piece of motivation.
Rob: I can see that. In retrospect, do you think it was a good decision to set that date?
Derrick: Yeah, I think it was great. No regrets on that. I actually probably could have pushed it earlier. There were definitely things that always happens with launches a few days before. I’m like, “Oh, it would be nice to get that in.” I was working around the clock a few days leading up to Monday, slipping in things that were just like, “I would really love to have this. When I’m demoing the product, I want this part to really shine.” I definitely procrastinated a little bit but I think I could have probably pushed it even a little bit earlier. Being close to the holidays and stuff, I just wasn’t sure how hosed my work schedule would be over that period of time. The value of having a public deadline, there’s many benefits to it. No regrets.
Rob: What did it do for you? Did it just motivate you like, “I have to get this done so I’m going to work more cut scope”?
Derrick: Yeah. I think it’s a really good forcing function for bringing clarity. I fall into this trap all the time. I pay close attention to detail about stuff and I’m very particular about UX. I could easily just keep iterating on small pieces and burn hours on that. I definitely have done my fair share of that. Even still with all these pressures I put on myself to keep focused on the most important things. I think deadline is even more forcing function than just me telling myself to stay focused.
Rob: Yeah, that makes sense. I feel like one of the purposes of deadlines in our space is that, people who build great products almost without exception are perfectionists. They never think it’s good enough because their taste in products is so high. That’s how they know when it’s good, because their taste is good. If your taste is good, you don’t want to put something crappy out. To you, crappy is like things that everyone else looks and says, “Oh, that’s so amazing and gorgeous,” and it’s like, “No, it’s one pixel off of this and that,” at a certain point, you set a date, and you just force yourself to do it.
We’ve done this a couple times already with Tiny Seed where we just go up and decided to announce in October, and we’ve set a forcing function of getting this first batch picked out before MicroConf which is end of March, and that feels incredibly ambitious. I stress about that every day, but it’s good. It’s made me motivated. It hasn’t made me work more hours, but it’s making me be way more focused on the important things. Anything that’s not getting me closer, getting us closer to that objective, I’m just putting on the side. I think it’s good.
Derrick: That’s why I like the concept of healthy stress which has been well studied. There is a certain amount of stress that’s good. I think it’s kind of like that Basecamp mentality. They talk a lot about how they work and how they set these six-week cycles. At first, when I heard Basecamp has deadlines, that seems opposite of how they work. I thought they were calmly, and work at a natural cadence, and not overly stressed, but once you dig into their philosophy around that, it’s like, “No, we set deadlines. No, we cut scope around those deadlines. We don’t burn ourselves out, or make people toxically stressed, and pack in a bunch of work that’s unrealistic. We just pull the other levers to make it happen.” That’s what I found. I’m either going to work around the clock, obsess about every single detail, and try to pack in a bunch of features, or I’m just going to set aside my compulsion to perfect everything, and just focus on the most important stuff.
Rob: Cool. In November also, you mentioned you did a presale in essence. What was the purpose behind that?
Derrick: Yeah. I’ve wanted to do that for awhile and then kind of setting this deadline in my mind, made it kind of feasible to propose this to the public. My rationale was I wanted to figure out, at that point it was probably close to 4,000 people on the launch list who reserved a handle on Level. That’s a lot of people. There’s a lot of people who are supportive. I’m doing a lot of working in public, on Twitter and stuff, sharing my work.
There’s quite a few people who seem to really be following along with the story and glad that it’s happening. That still doesn’t necessarily translate to who’s actually feeling the pain enough to hand over their hard earned dollars for a solution. For me, this was like getting that set of people who are most feeling the pain, most willing to pay, and those are the ones that I want to be getting into the product first, hearing their feedback, and kind of building off of that.
Rob: It’s a good filter in essence is what you’re saying. You just picked out a number out of the air if I recall. It was $48 which is six times your Percy pricing. It’s $8 a seat, right?
Derrick: Yeah, right.
Rob: How many preorders did you get? What was your total preorder amount? I’m curious.
Derrick: I think it was around $2500. I’m not good at mental arithmetic. I think it was 55 or 56 people who went to buying the preorder.
Rob: Were you happy with that? Did you have a number in your head in advance?
Derrick: I didn’t really know how to declare success or failure on that. I felt happy with it. If I got 20 people, I was going to be happy. That felt good to me.
Rob: Cool. Let’s jump forward. It sounds like the holidays, December was a lot of coding. Even early January you were heads down, you’re just trying to get stuff done and meet this deadline. Here we are, we’re recording the week of the 21st, even though it’s going to go live next week. You talked about doing seven calls so far and you have another half dozen or so scheduled. How is it feeling? Do you feel like the product’s at that point where it’s a good time to do it? Are you getting a lot of value out of this or is it still too early to tell?
Derrick: I’m feeling overall positive about it. I think I had to temper my expectations, because the switching costs for a lot of organizations is pretty high. For better or worse, Slack starts out as just a place for humans to talk to each other within their organization. Gradually, some organizations decide to kind of turn it into this place that runs a bunch of their internal workflows, maybe the sales team relies on it for leads to come through into a specific Slack channel which then they can follow up with.
For some people I’ve talked to, it’s proven that this is going to be a longer process. Overall, the response has been positive. Even from those who have more complicated set up, it’s still like, “This product looks really interesting. I’m intrigued.” But the gap between me being intrigued as the champion in my organization, and us actually switching over to it, for some, the gap is pretty big. I think it’s a reminder to me that I need to be patient and just set my expectations properly.
Another artifact of this is that Level is going to be most impactful for teams that are a little bit larger. Really small teams just don’t feel a lot of the pain that teams that are growing start to feel when Slack really becomes unwieldy. That’s another thing that I’m keeping at the back of my mind, set those expectations properly. I’m really feeling positive about this model of staying in the zone of vetting people who come into the funnel, that alternately make it into a demo with me, who ultimately get into the product to try it out, as opposed to doing the big splash public launch, let in a bunch of people, get a big spike of interest, and then a majority of them turn out, and probably send in feedback along the way that I don’t really know if I can trust because I don’t know if they’re a good fit in the first place.
Rob: It’s going more after the super human model, right?
Derrick: Yeah, exactly.
Rob: Derrick, do you remember a day maybe 5-10 years ago where you dreamt of just building a self-service software product that paid your bills. Is that why you got into this?
Derrick: I think so, yeah. My very first product that I remember throwing something together and then I literally Googled, “How do I get customers?” I just thought they would come.
Rob: Yeah. Now here you are, doing heavy hand-holding, onboarding, and conversations It’s good stuff. It’s just crazy how it changes especially as your goals change too, I think. You want to build something great and you want to build something that I’ll say is a decent sized company, whatever that means to people. I just don’t know if you can do that anymore, trying to go no touch. It’s really hard. I shouldn’t say you can’t, but it’s really going to be one in a million or something to just thread that needle and have the Cinderella story. You’re putting in the work. This is what it’s about.
Derrick: Yeah. I feel the no touch phase will come once the product market fit is extremely tight. I feel everything I am doing now—of course I didn’t come up with any of this, these are things that people talk about—going through this phase of intense hand-holding, keeping the filters on really strong, for this round of folks, of the people who put in a preorder, I sent them a questionnaire, asked a bunch of questions about what are the current problems in more detail with chat, what tools are they using, how big is their team, are these for project management, what does email look like in their company. Just a bunch of things I felt like would be good inputs into me understanding their use case, and being able to cater my demo to them, and set my own expectations on what I expect from them. Not everyone has submitted that questionnaire. Not everyone got a Calendly link to get on my calendar to then get into the product yet.
I’ll keep nudging to other people who have preordered and haven’t done that yet. I want to keep the filters really tight because what that does is ensures that I’m getting the best quality feedback that I can possibly get, to then hopefully lead to more of these folks coming through the pipeline, and getting just tighter product market fit.
Rob: You put in the kind of grinding out customer development now so that later on, you have that fit and you know that you can market it and self service it. It’s a good way to think about it. If you think about it, it mirrors very closely what we did in the early days of Drip. You were off coding and I was doing what you’re doing. I was either having calls, or doing videos, so that you could keep moving full speed. In this case, you have to do both because you’re a single founder. I’m pretty proud of what we built with Drip. It had product market fit. Once we nailed that, growth really kicked in. It’s a good kind of analogy or parallel thought there.
One of the things that you’ve done well is, you’ve built up this launch list of almost 5900 email addresses. It’s people who wanted to reserve their handle, and they probably want to follow along, and might want to use Level. There’s all the reasons but I’m curious, for listeners out there who haven’t built a lunch list yet, the first question is what’s the value of that launch list? It’s probably pretty obvious, but I talked through that a little bit and then how did you do that?
I know you have a podcast Art of Product, we should plug it here. Folks want to hear two software founders who were getting it done and building interesting products. They talk every week, you and your co-host Ben that’s artofproductpodcast.com. You have a podcast but that didn’t get your 5900 handles. Talk to us about the value you see in it, and why you spent the time to build it, and then talk through a couple things you’ve done to do that.
Derrick: I think the benefits of having that email list, it talked about a bunch. You’re going to have a certain conversion rate on your list, ultimately. The larger you can grow that list, hopefully the more customers you’ll have come out the other end. When it’s really early, I don’t know how well qualified everyone is on that list, but I know that right now I wanted that to be a very wide top of funnel, just get people onto a list so that they can have a chance of hearing about what I’m up to, and hopefully converting if they’re kind of in the camp of a good, ideal fit.
What really cranked up the number of people submitting the form was adding that scarcity piece, that reserving a handle. When I did that, it obviously has to fit with the kind of application that you have. If you don’t have something where there will be a user name, then it wouldn’t make sense to do that. I think introducing some element of scarcity is just enough to push a lot of people over to, “Well, I don’t really know, but I’ll at least drop my email in this,” they’re getting some kind of perceived value in addition to just getting email updates.
I actually don’t have great historical metrics on conversion rate of hitting the homepage to submitting, but my traffic is not that huge right now. It’s a pretty high percentage of people who land on the homepage will submit that form. It’s not like I have a huge amount of traffic coming to the website, but if I look into my analytics, I think a majority of people are either coming from Twitter, links on Twitter to Level which is where I’m predominantly talking about in the open what I’m working on day-to-day, and just direct. People who either hear about it on the podcast, or hear about it from someone else in person, or whatever, just typing in level.app and coming directly there.
I think I’m kind of playing a long ball with this, but from the get go decided I was going to be as open and transparent with the development process as possible. The thinking behind that is just, people are interested in following a journey. Starting out the Level journey with the manifesto, I think that resonated with a lot of people. It gets people curious about how this is going to all come together, and then in the process of sharing openly what I’m working on, also trying to just be useful to other people. It’s something that Adam Wathan and Steve Schoger are really good at with their newly launched Refactoring UI.
A core part of their strategy was to provide hot tips on Twitter and just be insanely valuable. Giving away a bunch of free knowledge and just stuff that is part of their day-to-day work that they can just package up and share in a way that provides value to other people. That was insanely effective for them. I’m following that same similar strategy of just trying to share a lot. I think it’s built up a decent amount of people who are just genuinely interested in the story. That leads people to when they sign up for a handle, they are more likely to tweet about it and tell it to their friends. That leads to more people signing up. It’s just kind of a nice little flywheel there.
Rob: Yeah, that’s nice. One concern that I have with that approach, especially with SaaS, it’s different than what Adam and Steve are doing, is that SaaS is a tool and people pay for it on a monthly basis, whereas Adam and Steve sell info products. They sell books and courses on the topics that they’re tweeting. There’s a tighter alignment there. I think their conversion rate will be very high and I think yours will be less. It was that way when we were doing Drip as well.
I don’t know if you remember but the first 500 people on our email launch list were mostly for me talking about it on this podcast and a couple other places. The conversion rate on those was far less than the ones that I got from other avenues. It’s not a bad approach, but it might give you a false sense of security. I don’t think you’re kidding yourself in thinking that everyone who wants to follow your story is going to sign up for Level. I want folks at home, if you’re listening to this, realize that there’s difference here.
I still think it’s a viable approach, and it’s something I would be doing the same, but you have to have it in the back of your head that these people are probably not going to convert as well as if you’re running a targeted ad campaign to only the demographic that gets value out of it. If they give you their email and they’re more of a cold lead, they almost might have a better chance if that’s a real pain point for them, versus someone who’s listening and is just like, “I want to follow along and see how Derrick is marketing,” right?
Derrick: Yeah. That’s a really good point. One thing that is in my favor that is not universally in people’s favor when they’re working out in public and sharing their story is that, the people who are potentially good candidates to become Level customers are developers, designers, founders, and that’s the people that are in my tribe on Twitter. The community that I have some degree of access to that are interested in the story, they’re interested in the meta story, they’re interested in the startup journey because there are other startup people, and this just happens to be a tool that is being sold to other startups and founders and stuff like that. If you’re building countertop installer software, sharing your story to other developers on Twitter isn’t necessarily going to move the needle at all.
Rob: Exactly. I’m curious, you had to buckle down at some point, put a stake in the ground, and make some hard choices, and decisions about the inbox. This is as you said, it’s the most critical part of the app because if it works, it’s magical, and angels sing down from the heavens. If it doesn’t, then it’s just a big point of your app that really needs to go well. How did you finally decide to buckle down and just say, “I got to make a call on this,” because I know that you’ve thought about it a lot and it was a long process there.
Derrick: I think I don’t have any other choice. I have to do this. I have to just follow my gut instinct and know that I may have to change this. It may not be a perfect implementation and it’s something that I have to fight against because now that I’ve been through Drip, Codetree, and all these experiences, I am very aware of the cost of legacy code and technical debt. Part of me was like, I don’t want to write any code unless I’m sure that it’s going to not have to change in a significant way.
I had to get past that a little bit and know that there’s always going to be a tension between writing well-crafted, well-tested code that you’re going to invest a lot of time into making it really rock solid and know that you’re potentially going to have to change a bunch of that, and rework data models, and rip out database tables, and do launch data migration, or whatever it may be. I ultimately just had to make the call that I’ve got to do this, I’ve got to get it in the hands of people, and then hopefully the mutations are relatively small, and I can just dial it in with smaller refinements, but also know that maybe it is larger shifts that need to happen.
Rob: How about the experience this time around? In essence it’s your third app, but you had two or three before that. It’s like the fifth or sixth project. You’ve had a lot of experience doing this, so reflecting on it as someone who has launched and grown things in the past. The last nine or ten months when you look back, did it take longer than you thought? Less time than you thought?
Derrick: Yeah, I think my big takeaway is this stuff, regardless of your experience, never gets easy. It gets easier in some ways, but there are fundamental truths about custom software development that still hold regardless of how experienced you are and knowing that there are some of those pitfalls that arise once you have some battle scars. The first time around in earlier apps, I was probably less concerned about scaling challenges for example, because figuring that rightly so that will tackle those problems when we get there.
Now, coming out of an experience with Drip where there were a ton of scaling challenges, I think it’s been a difficult thing that I’ve tried to stay aware of not prematurely optimizing things, or planning to much in advance for scale that I don’t really know what scaling challenges will look like, so try not to invest too much into over-architecting stuff. It gets easier in some ways but then also gets harder in other ways once you have more experience under your belt.
Rob: Yeah. I made a mistake or just a judgment error after HitTail as we started Drip. I thought that it would go faster because I knew more, I had more experience, and more knowledge, and it didn’t. I remember being very frustrated by that for a year. Your mindset and your expectations can really negatively impact your experience of an event.
Derrick: Yeah.
Rob: That’s what you’re saying, don’t get overconfident. Parts of it get easier and you do get better at it, but I don’t think you get faster at it. There is a difference. Look at David Cancel, who’s on his fifth or sixth, all have been successful and exited. Right out of the gate he raised $5 million, or $10 million, or $15 million, it was a huge number, right out of the gate as they were starting. He’s been grinding on Drip for years now, and yes they have traction now, but the first one or two years, it was not getting the traction that I would have expected from a founder of his experience and caliber. Even Jason Cohen with WP Engine. WP Engine is huge now. Remember him bootstrapping and toiling away for a year-and-a-half or two years before anyone had heard of it? It’s crazy.
Derrick: Yeah. When I look at the product, I’m trying to keep Level very simple and elegant. I looked at the product today and I’ve been spending a lot of time in it obviously using it myself. The mechanics of this feels very simple. On the one hand I think, why did it take me so long to arrive at something that feels so simple? It feels like given all this time and all this effort, it should be something that has thousands of dials and tweaks to it, and just like this very complicated system. Just looking at a product that looks simple on the surface doesn’t mean that there weren’t thousands of hours of thinking, and laying on the floor, staring at the ceiling, trying to figure out the most elegant way to execute this. It’s even hard for me sometimes looking at my own product to say, “Why did this take so long?” but it just does, because these are hard problems to solve.
Rob: For sure. Well sir, I think we’re at time. Thanks so much for coming back on the show.
Derrick: Cool. Thanks for having me.
Rob: If folks want to keep up with Level, that’s at level.app, and if they want to hear you talk about it every week, it’s artofproductpodcast.com, or they can head to iTunes, Stitcher, wherever fine podcasts are sold. Have you gotten into Spotify yet?
Derrick: We are in Spotify. Actually, that just happened. We use Fireside for hosting our podcast and they just did it one day. I just went in and I’m like, “Oh, I guess we’re in Spotify.”
Rob: Yeah, that’s cool. Good for you. Folks have been requesting that we get in Spotify and I was like, “How do we do that?” [00:37:57] research [00:37:58] and appear that because we self host on a shared hosting thing with a CDN over it, we don’t use any of the fancy big hosts that kind of do it all for you. It looked like we were going to have to move hosting, copy all the files, and do 301s, and I was like, “I’m not sure this is worth it,” but as it turns out, we missed a link to the first look around. So when I submit our RSS feed 15 minutes later, we were in Spotify. I was like, “Yes. [00:38:22]. It’s great.” Well, thanks again sir for coming on the show.
Derrick: Thanks for having me Rob.
If you have a question for us call our voicemail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 428 | Building Relationships with Agency Partners, Determining Equity Splits, and More Listener Questions
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including building relationships with agency partners, selling across different currencies, determining equity splits, and more.
Items mentioned in this episode:
- AppSumo MicroConf Giveaway Contest
- MicroConf Growth Edition
- MicroConf Starter Edition
- OpenCage Geocoder
- FE International
- Quiet Light Brokerage
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about building relationships with agency partners, determining equity splits, and more listener questions. This is Startups For The Rest Of Us Episode 428.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Qué es la palabra este semana, Miguel?
Mike: Uh…
Rob: “What is the word this week, sir?” “What is the word this week, Mike?” actually is what it says. What’s going on with your computer?
Mike: I was trying to fix a random crash that I ran into, and of course as part of doing that, I had to restart the machine in order to debug some of the stuff that was coming up and test some drivers. I think as a result of that, my computer is now blue-screening and I can’t get it back into Windows.
I spent the last couple of hours trying to figure out like, “Okay, well go to the new crash dump, take a look at that and see if I can get access to it.” Then I’m troubleshooting certain things and looking them up from my phone. It’s just awful.
Rob: Right. Well, the good news is you don’t have other work that you should be doing.
Mike: Sure, yeah.
Rob: You don’t have anything else that’s pressing.
Mike: I have nothing else to do.
Rob: Hey, I think I know the solution, actually. Step one, uninstall Windows. Step two, install Linux. Boom, boom. Sorry, I think that’s a MicroConf joke, right?
Mike: That probably is. It’s that bad.
Rob: Yeah, it’s that bad. Don’t you have a Mac laptop? Just go [00:01:46] Mac all the time, baby.
Mike: Uh, I… no.
Rob: You’re still considering it?
Mike: No. I can’t stand the trackpad. That’s the thing that bugs me the most. I can’t stand using it. All my development stuff is all in Windows, anyway.
Rob: That’s the hard part, yup. I use the trackpad. I think it’s fine but I use an external mouse when I’m at my desk. I put the laptop up. You know, Mike, it is 2018. You know you can pair mice with Bluetooth or even USB to a laptop, did you know that?
Mike: I did know that.
Rob: I’m giving you a lot of crap today, huh?
Mike: I know.
Rob: I’m just kicking you while you’re down. Oh man, I’m sorry. I remember those days and I would lose a day or two productivity and it would just kill me. It’s infuriating.
Mike: Yup, and that’s really the point I’m mad at it. I’m just annoyed at this point. The worst part is that I’m still running Windows 7 and I’ve known for a while that I should migrate over to Windows 10 at some point. There’s still some software that I literally can’t use right now because I’m not running a more recent version of Windows but I know that there’s also so much stuff installed and it’s configured in just the right way so that my builds, works, and everything is configured just right. I know I’m going to burn at least a couple of days reformatting my machine and reinstalling everything and I just didn’t want to do it. Now, I’m at the point where it’s like, “You know what? I may just absolutely have to.”
Fortunately a couple of days ago, I had looked and said, “Okay, if I were going to do this, what software would I need?” I made a complete list of it, I took screenshots, and I was smart enough to put it all in a Google Doc rather than on my hard drive.
Rob: Oh nice. Geeze. That’s tough. Again, I don’t miss those days. I’ve never been the Windows basher because I’ve used Windows for 12 years or something and then switched to Mac. I remember being like, “Oh, this is better in some ways and not in others.” To be honest, I never thought that Mac was so far superior to Windows. Now that I’ve been on it for years, though, I haven’t had another one of those days.
I used to have those every few years. Especially when you’re a developer, you’re just doing aggressive things with your machine. You’re not surfing the web, looking at Facebook, and doing Google Docs. You’re in screwing around with registry stuff and you’re installing things you probably shouldn’t. You install and uninstall a lot of things and you run builds. I don’t know.
I just remember screwing my machine up every couple of years. I also remember the upgrade process was hard and cumbersome. I think that’s something that Apple has done a much better job. As an example, I upgraded to Mojave last week, which is the next version of the OS, and it has so many features and stuff but it’s an incremental version. They release those every 60-90 days it seems like and knock on wood, the upgrades always go fine. I’ve not had an issue. I’m sure it’s possible to have an issue but I hadn’t have an issue. Now it has new stuff and I haven’t had another moment like that since I switched to using a Mac, which I believe is probably six years now. Five or six years. I don’t know. It’s hard when that happens and you lose that much productivity.
Mike: Yeah and I’m thankful that it’s just going to be the productivity because I have backup software on my machine, so it’s not like I’m losing data or anything. I’ve got a local NAS device that I store a lot of stuff on and then I’ve got Dropbox where I’ve got all the other important stuff. It’s not like my hard drive is dead and even if it was, I can still get everything back. It’s just the time of reinstalling and reconfiguring everything and then trying to make sure that I still have all the software licenses, the right versions, and everything else.
I forget who it was. I think it was PDF Architect or something like that. They’re like, “Oh, there’s a new update. Click here for the update.” Then I clicked on it, it was like, “Oh, okay,” and then it installed, and then it’s like, “Oh, you don’t have the latest versions or latest license, so we’re not going to let you use it.” Like, “Wait a second, you just gave me this thing. You pushed this upgrade on me.” It’s like, “Come on.”
Rob: Yeah. I had that happened before. Yeah, it’s not cool.
Mike: Ugh. Onward, I guess. For the listeners, again, don’t forget about the AppSumo contest that’s running. We’ll link that up in the show notes so you can go check it out. But as with last week, There’s a contest that’s running right now in partnership with AppSumo. The winner is going to receive an all-expense paid trip to MicroConf, tickets included. As I said, we’ll link it up in the show notes and definitely check it out.
Rob: And if you are interested in having us answer a question, I believe we’re getting towards the bottom of the mail bag. Send us a voicemail if you can. You can call our voice mail number 888-801-9690. We like hearing your voice and frankly the listeners do, too. It makes people feel like it’s not just you and I making up emails, sending emails to ourselves and reading them on the show. No, that’s not really why we’re doing it but it’s just fun to have voicemails. But certainly if you can’t, send us an email at questions@startupsfortherestofus.com. We’re going to be answering several listener questions on the show today.
The first one is about building relationships with agency partners and it’s from PJ. He says, “I love your podcast, especially how you give us a short update at the start about your own businesses. My question is around building a partner circle at the beginning of a business especially when services are a necessary angle for the product.” I’m assuming he means consultant agencies. “What type of engagement model would you recommend thinking about, especially when aligning with a global services company? Especially when they ask for exclusivity. Thanks.”
I’m going to start by saying this is an example of a question that should be more specific. Do you feel like we need more info? Because I’m not exactly sure what he’s asking.
Mike: I’ve been in these types of circles before so I have kind of an idea. But I agree, it does need a little bit more context.
Rob: I think we can answer it in some vague terms quickly but I think we really dig into this. We just need more information about what niche or market you’re in and really, if you’re going to ask a question, please include more information because it helps us understand it. I think we can [00:07:51] more value to you as well as the listeners. But with that in mind, he explained us [00:07:56] in your words what he’s asking so we can talk this through.
Mike: My understanding of what he’s asking is that he wants to create a partnership program where other businesses will bring them in to either deliver services or they will bring their partners and to deliver services. By what he said about, “…when aligning with a global services company,” it seems to me the global services company, think of them as like IBM, or Dell, or HP, or something like that. They have a services organization but they don’t necessarily provide all the services themselves.
I’m kind of thinking back to my consulting days where I did exactly this and work for companies like that. What they will do is they have basically sales reps that are kind of all over the place and working with enterprise companies. When they sell services, it’s on their paper, and then they turn around and then they outsource it to somebody else. Typically, when they have exclusivity at that point, really what they’re doing is they’re saying, “We will subcontract you but you are not allowed to subcontract to somebody else.”
The part about exclusivity throws me a little bit because aside from that situation, I can’t see something where a global company like that would come and say, “We want you exclusively to deliver this,” and they want exclusive access to you. They don’t want anybody else to hire you. That seems odd.
Rob: Yeah, I would agree with that because you’re not just a consultant. You’re not a contractor unless he’s talking about starting a consulting firm because he doesn’t specifically say he’s building a software product. That’s why I think we probably need more info to answer that. But with all that, what type of engagement models would you recommend thinking about? What does he mean by that? Hourly rate or versus weekly retainer versus monthly stipend or per project?
Mike: Engagement models would be like how are you going to structure the contract for the services? Is it going to be on your paper or is it going to be on somebody else’s? Because whoever paper’s on is typically going to be the manager of that relationship and if it’s Dell’s outsourcing to you, it’s going to be on their paper, it’s going to have all their terms and conditions, and at the end of the day, that customer is Dell’s not yours.
If, let’s say, that you reverse it a little bit and you are a large software company and you bring in Dell to perform the services, they’re still going to want on their paper but you could turn that on its head if you have enough leverage to say, “No, it’s going to be on ours. This is our customer because we found them and we sold them the software.”
But at that point, Dell is not going to have a huge number of reps or technical services people on staff that are going to be knowledgeable enough about your software to be able to go and do consulting engagements. It’s possible they may do that but you have to be fairly large in order for that to happen. I’ve seen it with even extremely large pieces of software. They just don’t have the technical staff because they can’t pay them. And they don’t want to pay them, either, because those people are consultants and if every minute of their sitting on the bench, the company is not making money.
Most of those sales types of organizations—Dell, HP, IBM—they have a sales organization to sell services but they don’t have a delivery services organization with the consultants on the bench because they have to keep them at capacity like 100% at least 85% of the time. They have to be booked almost nonstop throughout the course of the year in order to even turn a profit on it.
Rob: That’s business, man. This is why we do products, am I right?
Mike: Yes because products are so much easier.
Rob: Yeah, exactly. Good one, Mike, I like that. Anyway, PJ thanks for the question. Hopefully, that’s some help to you. If you want to write in with more details, we can try to tackle it again in a future episode, but if not, I hope that was helpful.
Mike, interesting coincidence. We’ve got two questions about selling across different currencies. First question is from Paul and he says, “I’m enjoying you podcast a lot. I feel like I’ve got endless insights because your back catalog is huge. I’m a software developer who just started thinking about what it would take to start a SaaS.” He has two questions but I’ll read this one about pressing now. He says, “In a SaaS, the target’s regular, everyday consumers, how do you account for currency exchange differences in your pricing? Charging US$50 per month may seem fine in the US but in a less wealthy country, that could be a significant portion of someone’s income.”
My first piece of advice is, don’t build a SaaS for consumers but aside from that, you have thoughts on this, Mike?
Mike: I think I would probably follow the advice of Ed Freyfogle who spoke at MicroConf a couple of years ago and his general advice for situations like this is ignore the currency exchange piece of it where you’re quibbling over nickels and dimes for the exchange rate as it fluctuates. If you decide on, let’s say, $50 a month but US dollars, what is the equivalent in pounds, for example? What is the equivalent in Euros? And then, on your page, display the pricing using browser location data to figure out where in the world they are and you can display the page in local currency for whatever that is.
As they said, you wouldn’t want to, say, something like if it’s $50 a month and we’ll call the exchange rate, we’ll say that it’s even for Euros, you wouldn’t want to say €40.32, for example, and then fluctuate it as the currency exchange. You probably just want to say €40. Then if it goes up a little bit, that’s fine, just eat it, until they get close enough where it really makes sense for you to start changing those numbers to say €42 or €45. I wouldn’t even worry about that stuff. But you can just display the page in the local currency. That should be enough to get you through for the most part.
Rob: Yeah, and Ed runs opencagedata.com if you want to look at his API for figuring out where in the world folks are. I think that’s good advice. I would also say to focus on a single market to start with. If you haven’t written a line of code then pick a market. If it’s going to be the US, that’s fine. Charge in US dollars and worry later about, “Oh, we’re going to expand into India or we’re going to expand into Eastern Europe or other less wealthy countries.” If you’re going to start in the US, then the next place you would probably expand is to Canada and then to Western Europe. In those places, while you do have different currencies, they’re kind of on par in terms of what you would charge. I would probably just do like you said, just do a conversion and charge that. I would be less concerned about this.
Once you get into less wealthy countries, they can’t afford that. Just start it out in a single country, build up a business, and then by the time you get there, you’ll know what to do. Thinking about it in theory, about something that’s a year or two out, I think is just not helpful at this stage. Thanks for the question.
We have another one about selling across currencies, probably a similar answer. It’s from Scott Barton. He says, “I’m a recent listener on a back of Rob and Einar’s TinySeed announcement a couple of months ago. After being a longtime listener to swing-for-the-fences types of startups podcasts, it’s nice to find a community that I’m more in tune with. I listened to last week’s discussion about pricing. I wondered if you have any thoughts about pricing the same product offering across currencies, particularly to customers in countries where their currency maybe weaker?”
This is a similar question but I think it’s couched a little bit differently. He says, “For example, would you price a B2B product that’s selling for £249 per month in the UK as a US$249 product or would you adjust it for the exchange rate?” Currently, that would be US$309, based on when he wrote this email. So, similar question, similar answer, Mike, or what do you think?
Mike: I would think that it’s in many ways similar but I think there’s also a little flexibility you have here from the marketing standpoint where if you’re going to price it US$249, going to $309, $309’s coming in like an odd number. I might do $299.
Rob: Yeah, I would, too.
Mike: Or $324 or something like that. $309 is just a weird number. I would try to stay away from those.
Rob: Right.
Mike: That was a witty discussion.
Rob: Yeah, I know. All right. Our next question is about how much to have in place before starting to sell. He says, “I’m building a tool/service for myself that other people are willing to pay for. Is there a checklist to follow to take this from a hobby to a real thing? Do I need an LLC, terms of use, privacy policy, a lawyer, et cetera before I accept any payments or can I literally just set up a payment system and go?” Let’s make the assumption that he’s in the US because he has a separate question where he talked about US dollars. What do you think, Mike? Is the answer, “It’s depends”?
Mike: No. I think he can just literally set up a payment system and go. If it’s still brand new, you probably don’t have a whole pack of luck to worry about. If you don’t have a terms of use or privacy policy and stuff like that, until somebody complains and says, “That’s the reason they’re not buying it,” I don’t know if I’d spend a lot of time on it.
Rob: Yeah. I mean, is there a small amount of risk in doing that? Yes, there is. So, consult an attorney, think about it, whatever, but realistically, this is what you and I have both done with. Brand new products that are just starting. I did a sole proprietorship which just goes on your schedule, see on your taxes.
I did not have an LLC for, I believe it was seven years I was operating. I had software products, I had info products, I was consulting, and that was just all without an LLC, without a terms of use. At some point, I think eventually I had put a privacy policy in for some products and stuff but it’s a little bit of risk tolerance but really, the risk is probably really low. I always try to take the simple approach. The simple approach to basically get to selling.
You made an assumption there where you said, “I’m building something that I need but other people are also willing to pay for.” I would ask, “How have you validated that?” Don’t assume that that’s true. Go out and spend more time validating that before you sit in a hypothetical basement and code that out for six months because I think a lot of us had made that mistake. Thanks for the question. I hope that was helpful.
Our next one is about determining an equitable equity split. I’m going to leave him anonymous in case the person he’s talking to also listens to the podcast. He says, “Hey guys. A friend of mine came to me with an idea for an app and I’m considering going ahead with it. I’m a developer and I’ll be doing all the dev work, the support, et cetera. My friend will be doing the outbound sales, marketing, et cetera.”
“Instead of creating another company and all the overhead that entails, because I already have a corporation, I’d like to own the software and pay him a cut of the sales. How would you go about determining the split? On one hand, the development will be a lot of upfront cost for me. But when we get to market, he will be doing the bulk of the work, with mine leveling off a bit with additional development and support.”
“I really think he’ll be integral to the success of this, as I’m not an outgoing person. He’s a radio personality and good at the kind of [00:18:56] skills that I lack. I guess I’m asking if it’s crazy to split 50/50 or should I be asking for a larger cut? Thanks for any help or direction you can provide.” Interesting question.
Mike: And I think the top 10 lies developers tell themselves is that when the product gets to market, my workload is going to drop down quite a bit. I think that that’s an unrealistic assumption. The workload for a software product is absolutely not going to drop off once the product hits the market. You’re not going to have enough features in it that you want to put in it.
The other assumption I think here is that there’s not going to be very much marketing work or sales work that needs to be done until the product is done. I think that that’s a bad assumption to make as well. I feel like there should be a lot of it upfront because it helps to cut down on the risk that you’re building something for six months or a year that nobody’s going to pay for or you can’t get it in front of enough people.
Rob: Yeah, I would agree with you. It’s going to be in a rare, rare, rare case that you don’t have more work to do once the product launch. So, something to think about. The other thing I would say is, in advance, I would not go off and build this for six months while your partner does nothing because he should be starting marketing, starting to generate traffic on the internet, starting to do cold-calling or cold-emailing or getting leads and making pre-sales. Getting people’s screenshots or mock-ups or just customer validation, like, “Has your partner found 10 people or companies willing to pay X dollars for this product?” Then I would stop development.
In almost all cases, I wouldn’t do it until you have 10 or 20 or 30. Whatever the number is that you feel comfortable with. There’s upfront work that can be done to validate this more and reduce risk that has nothing to do with writing software. That’s another thing that I would consider. Even the entire time you’re building the software, he could be pounding the pavement and beating the bush, so to speak.
Let me take another dumb metaphor for this but I just think there’s more work to be done than him kind of hanging out until every bit is in place and then, “Okay, now we start the marketing engine.” I talked about this before but my second book was called Start Marketing The Day You Start Coding and frankly, these days I think you should start doing that actually before you start coding.
And with that, we didn’t actually answer his equity split question. It’s not even equity. It’s revenue share. The whole idea of not actually splitting the ownership is interesting because it seems to me it’s screws his co-founder because he has no ownership in the thing.
Mike: That was my first thought as well. I don’t know whether that’s a mental direction he was going or whether it was just the fact that he’s already got a company and he’s going to be using existing resources, he doesn’t really want to open up a second company to do it. Therefore, it would make sense in that case to have the software owned by something and if he’s not giving up equity in his own company to do that, then it still needs to be owned by somebody.
I would say that I think that you could have an agreement between two people and it could be written down that just says like, “This is going to be under this umbrella for the time being and at some point in the future, we’re going to branch it off into a different company just to make paperwork easier for the time being.” I think that that’s a perfectly reasonable thing to do, especially if you’re just trying to avoid legal cost because the product has no customers yet and no revenue and you’re going to be sinking a sizable chunk of effort into it.
The other thing this particular case that does for him is that it allows him to write off a lot of those cost because he can write it off on his tax and say, “Oh, well we’ve spent X amount of time doing this and we bought this particular product,” or, “We’re writing off a portion of this service that we’re using.”
Rob: Yeah, I agree. I think that’s how I think about it, too. I feel it might be unfair to your co-founder if you have it under the same corporate thing. I would perhaps try not to do that.
Mike: He does say later on, he’s asking if it’s crazy to ask for a 50/50 split or he should be asking for a large… I don’t think that it’s crazy-ass for 50/50 but I would have a hard time if you feel like the contribution of the other person is equal in weight to your own, then I would have a hard time asking for more than 50%.
Rob: That’s how I feel, too. If you would have come to me and say, “Look, I’m the developer and I may do support, and then this other person handles all the other stuff.” It’s typical kind of CEO/CTO role either the sales or marketing and developer role. I think that’s a good split and I think if you’re both all in on it and you’re going to be cranking on it, that’s 50/50. Makes the most sense to me.
It’s the other thing surround this, though, that this is more complicated than most situations I think, which is why we’re kind of digging into his points one by one because it’s just a unique way that he’s approaching and that I think we’ve kind of voiced some concerns or just thoughts on how we might do it differently.
Our last question for the day is about business appraisal services. I’m going to keep him anonymous as well because he’s asking about potentially selling his company and I just want to be mindful and stuff like that. His name’s Paul and he says, “Hey, Rob and Mike. I’ve been a long-time listener to the podcast. Thanks for creating such a great resource. I have a question about business valuation in preparation to selling a company. I’m having discussions with potential acquirers but I want to have some official documentation to defend the valuation I want for my company. I know there are many ways to value a SaaS business like mine but I think I’ll have more credibility if I hired someone to do proper valuation. Can you recommend any resources for this type of appraisal? Do you think it’s even worth it? Thank you and keep up the great podcast.”
What do you think?
Mike: I think there’s a couple of different businesses out there that would do an appraisal for you. FE International, they’re a MicroConf sponsor, they come to pass, as far as I can remember. Rob, I think you said you knew another one off the top of your head that does appraisal?
Rob: Quiet Light Brokerage, yeah.
Mike: You can reach out to either one of those but the thing that I would keep in mind here is that if you do go out and get an independent third party appraisal, just because you’re getting that to try and justify your position does not mean that it’s going to come back the way that you want. I see kind of like selling a house. You may decide that you want more money for it or it’s worth maybe a million dollars or something like that but they may come back and say it’s only worth $800,000. Then you have to decide, are you going to take less, or potentially be disappointed about it, or are you going to hang on to it and think about that in advance of getting that appraisal as to what your inclination is before you go do it? I don’t think you want to be surprised if it comes up and all of a sudden now you have to rethink your position on those things.
Rob: Yeah. I don’t know if it’s worth having an appraisal or not. I actually feel like an appraisal is a theoretical way to value a business typically based on a multiple, either of net profit or of your revenue. If you’re going to sell to a financial buyer, you typically sell over the multiple of net profit. If you’re going to sell to either a strategic or these days if you’re SaaS and you’re selling to private equity, you get a multiple of revenue. You get a much higher price for that.
Paul, I don’t know if you have a SaaS app, I would try to find someone who is willing to talk to you about revenue-based multiples. In that case, if you did get an appraisal from FE or Quiet Light, they’re going to be talking more about the net profit stuff because they deal more with financial buyers. I do think they have connections with some private equity but I’m just not sure about the details of that.
I think an appraisal might be a nice-to-have in the back of your mind just to be like, “Well, that’s what I can get it if I were to sell it through those channels.” I don’t know of someone who will come in and appraise other than that, other than through their buying network because it’s really what you can get for. It’s a market price. The appraisal is what, you get a bunch of bids and you can figure out what you’ll ultimately get for it.
As a side note, I do have a contact who could help you with that. I don’t want to call him out on the podcast without his permission. Paul, if you do want to reach out directly to me, you can frankly email questions@startupsfortherestofus.com and that’ll come to me anyway. I can connect you with him assuming that you have a SaaS app we can kind of talk about. It’s in a certain range and he can get really good multiples for it.
Anyway, I’m kind of rambling at this point. But I feel an appraisal, why not do it? I don’t know how much value I would put on that and I don’t know if I would use it during negotiations unless multiple buyers are trying to pay you under that appraised price. Then, you could always whip it out but then, I guess that’s the price you’re going to get for it. I’m struggling a little bit with this, with the idea of trying to sell it based on an appraised value rather than just running a market kind of an auction type. I think you’ll get a better price there.
Mike: Yeah. I think the way he phrase this question was that, having discussions with potential acquirers and I want to have some official documentation to defend the valuation I want. It’s not that they have come to him and said, “Here’s what we think it’s worth,” or it doesn’t seem like they’ve gotten to that point. It’s just I think you’d feel more comfortable if he had something in hand to be able to help justify his position. I don’t know if you really need that if you’re trying to play multiple acquirers off of one another. You can just say, “I’ve got an offer over here for more.” At that point, it’s really just about how much you can get them to push their offers up.
Rob: Right. It’s like how badly do they want the business. But good luck on that process, Paul. It’s obviously, can be both fun and stressful too to sell your business and do wish you the best of luck as you move forward.
Mike: I think we’re about out of time for today. If you have a question for us, you can call into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Qué es la palabra este semana, Miguel?
Mike: Uh…
Rob: “What is the word this week, sir?” “What is the word this week, Mike?” actually is what it says. What’s going on with your computer?
Mike: I was trying to fix a random crash that I ran into, and of course as part of doing that, I had to restart the machine in order to debug some of the stuff that was coming up and test some drivers. I think as a result of that, my computer is now blue-screening and I can’t get it back into Windows.
I spent the last couple of hours trying to figure out like, “Okay, well go to the new crash dump, take a look at that and see if I can get access to it.” Then I’m troubleshooting certain things and looking them up from my phone. It’s just awful.
Rob: Right. Well, the good news is you don’t have other work that you should be doing.
Mike: Sure, yeah.
Rob: You don’t have anything else that’s pressing.
Mike: I have nothing else to do.
Rob: Hey, I think I know the solution, actually. Step one, uninstall Windows. Step two, install Linux. Boom, boom. Sorry, I think that’s a MicroConf joke, right?
Mike: That probably is. It’s that bad.
Rob: Yeah, it’s that bad. Don’t you have a Mac laptop? Just go [00:01:46] Mac all the time, baby.
Mike: Uh, I… no.
Rob: You’re still considering it?
Mike: No. I can’t stand the trackpad. That’s the thing that bugs me the most. I can’t stand using it. All my development stuff is all in Windows, anyway.
Rob: That’s the hard part, yup. I use the trackpad. I think it’s fine but I use an external mouse when I’m at my desk. I put the laptop up. You know, Mike, it is 2018. You know you can pair mice with Bluetooth or even USB to a laptop, did you know that?
Mike: I did know that.
Rob: I’m giving you a lot of crap today, huh?
Mike: I know.
Rob: I’m just kicking you while you’re down. Oh man, I’m sorry. I remember those days and I would lose a day or two productivity and it would just kill me. It’s infuriating.
Mike: Yup, and that’s really the point I’m mad at it. I’m just annoyed at this point. The worst part is that I’m still running Windows 7 and I’ve known for a while that I should migrate over to Windows 10 at some point. There’s still some software that I literally can’t use right now because I’m not running a more recent version of Windows but I know that there’s also so much stuff installed and it’s configured in just the right way so that my builds, works, and everything is configured just right. I know I’m going to burn at least a couple of days reformatting my machine and reinstalling everything and I just didn’t want to do it. Now, I’m at the point where it’s like, “You know what? I may just absolutely have to.”
Fortunately a couple of days ago, I had looked and said, “Okay, if I were going to do this, what software would I need?” I made a complete list of it, I took screenshots, and I was smart enough to put it all in a Google Doc rather than on my hard drive.
Rob: Oh nice. Geeze. That’s tough. Again, I don’t miss those days. I’ve never been the Windows basher because I’ve used Windows for 12 years or something and then switched to Mac. I remember being like, “Oh, this is better in some ways and not in others.” To be honest, I never thought that Mac was so far superior to Windows. Now that I’ve been on it for years, though, I haven’t had another one of those days.
I used to have those every few years. Especially when you’re a developer, you’re just doing aggressive things with your machine. You’re not surfing the web, looking at Facebook, and doing Google Docs. You’re in screwing around with registry stuff and you’re installing things you probably shouldn’t. You install and uninstall a lot of things and you run builds. I don’t know.
I just remember screwing my machine up every couple of years. I also remember the upgrade process was hard and cumbersome. I think that’s something that Apple has done a much better job. As an example, I upgraded to Mojave last week, which is the next version of the OS, and it has so many features and stuff but it’s an incremental version. They release those every 60-90 days it seems like and knock on wood, the upgrades always go fine. I’ve not had an issue. I’m sure it’s possible to have an issue but I hadn’t have an issue. Now it has new stuff and I haven’t had another moment like that since I switched to using a Mac, which I believe is probably six years now. Five or six years. I don’t know. It’s hard when that happens and you lose that much productivity.
Mike: Yeah and I’m thankful that it’s just going to be the productivity because I have backup software on my machine, so it’s not like I’m losing data or anything. I’ve got a local NAS device that I store a lot of stuff on and then I’ve got Dropbox where I’ve got all the other important stuff. It’s not like my hard drive is dead and even if it was, I can still get everything back. It’s just the time of reinstalling and reconfiguring everything and then trying to make sure that I still have all the software licenses, the right versions, and everything else.
I forget who it was. I think it was PDF Architect or something like that. They’re like, “Oh, there’s a new update. Click here for the update.” Then I clicked on it, it was like, “Oh, okay,” and then it installed, and then it’s like, “Oh, you don’t have the latest versions or latest license, so we’re not going to let you use it.” Like, “Wait a second, you just gave me this thing. You pushed this upgrade on me.” It’s like, “Come on.”
Rob: Yeah. I had that happened before. Yeah, it’s not cool.
Mike: Ugh. Onward, I guess. For the listeners, again, don’t forget about the AppSumo contest that’s running. We’ll link that up in the show notes so you can go check it out. But as with last week, There’s a contest that’s running right now in partnership with AppSumo. The winner is going to receive an all-expense paid trip to MicroConf, tickets included. As I said, we’ll link it up in the show notes and definitely check it out.
Rob: And if you are interested in having us answer a question, I believe we’re getting towards the bottom of the mail bag. Send us a voicemail if you can. You can call our voice mail number 888-801-9690. We like hearing your voice and frankly the listeners do, too. It makes people feel like it’s not just you and I making up emails, sending emails to ourselves and reading them on the show. No, that’s not really why we’re doing it but it’s just fun to have voicemails. But certainly if you can’t, send us an email at questions@startupsfortherestofus.com. We’re going to be answering several listener questions on the show today.
The first one is about building relationships with agency partners and it’s from PJ. He says, “I love your podcast, especially how you give us a short update at the start about your own businesses. My question is around building a partner circle at the beginning of a business especially when services are a necessary angle for the product.” I’m assuming he means consultant agencies. “What type of engagement model would you recommend thinking about, especially when aligning with a global services company? Especially when they ask for exclusivity. Thanks.”
I’m going to start by saying this is an example of a question that should be more specific. Do you feel like we need more info? Because I’m not exactly sure what he’s asking.
Mike: I’ve been in these types of circles before so I have kind of an idea. But I agree, it does need a little bit more context.
Rob: I think we can answer it in some vague terms quickly but I think we really dig into this. We just need more information about what niche or market you’re in and really, if you’re going to ask a question, please include more information because it helps us understand it. I think we can [00:07:51] more value to you as well as the listeners. But with that in mind, he explained us [00:07:56] in your words what he’s asking so we can talk this through.
Mike: My understanding of what he’s asking is that he wants to create a partnership program where other businesses will bring them in to either deliver services or they will bring their partners and to deliver services. By what he said about, “…when aligning with a global services company,” it seems to me the global services company, think of them as like IBM, or Dell, or HP, or something like that. They have a services organization but they don’t necessarily provide all the services themselves.
I’m kind of thinking back to my consulting days where I did exactly this and work for companies like that. What they will do is they have basically sales reps that are kind of all over the place and working with enterprise companies. When they sell services, it’s on their paper, and then they turn around and then they outsource it to somebody else. Typically, when they have exclusivity at that point, really what they’re doing is they’re saying, “We will subcontract you but you are not allowed to subcontract to somebody else.”
The part about exclusivity throws me a little bit because aside from that situation, I can’t see something where a global company like that would come and say, “We want you exclusively to deliver this,” and they want exclusive access to you. They don’t want anybody else to hire you. That seems odd.
Rob: Yeah, I would agree with that because you’re not just a consultant. You’re not a contractor unless he’s talking about starting a consulting firm because he doesn’t specifically say he’s building a software product. That’s why I think we probably need more info to answer that. But with all that, what type of engagement models would you recommend thinking about? What does he mean by that? Hourly rate or versus weekly retainer versus monthly stipend or per project?
Mike: Engagement models would be like how are you going to structure the contract for the services? Is it going to be on your paper or is it going to be on somebody else’s? Because whoever paper’s on is typically going to be the manager of that relationship and if it’s Dell’s outsourcing to you, it’s going to be on their paper, it’s going to have all their terms and conditions, and at the end of the day, that customer is Dell’s not yours.
If, let’s say, that you reverse it a little bit and you are a large software company and you bring in Dell to perform the services, they’re still going to want on their paper but you could turn that on its head if you have enough leverage to say, “No, it’s going to be on ours. This is our customer because we found them and we sold them the software.”
But at that point, Dell is not going to have a huge number of reps or technical services people on staff that are going to be knowledgeable enough about your software to be able to go and do consulting engagements. It’s possible they may do that but you have to be fairly large in order for that to happen. I’ve seen it with even extremely large pieces of software. They just don’t have the technical staff because they can’t pay them. And they don’t want to pay them, either, because those people are consultants and if every minute of their sitting on the bench, the company is not making money.
Most of those sales types of organizations—Dell, HP, IBM—they have a sales organization to sell services but they don’t have a delivery services organization with the consultants on the bench because they have to keep them at capacity like 100% at least 85% of the time. They have to be booked almost nonstop throughout the course of the year in order to even turn a profit on it.
Rob: That’s business, man. This is why we do products, am I right?
Mike: Yes because products are so much easier.
Rob: Yeah, exactly. Good one, Mike, I like that. Anyway, PJ thanks for the question. Hopefully, that’s some help to you. If you want to write in with more details, we can try to tackle it again in a future episode, but if not, I hope that was helpful.
Mike, interesting coincidence. We’ve got two questions about selling across different currencies. First question is from Paul and he says, “I’m enjoying you podcast a lot. I feel like I’ve got endless insights because your back catalog is huge. I’m a software developer who just started thinking about what it would take to start a SaaS.” He has two questions but I’ll read this one about pressing now. He says, “In a SaaS, the target’s regular, everyday consumers, how do you account for currency exchange differences in your pricing? Charging US$50 per month may seem fine in the US but in a less wealthy country, that could be a significant portion of someone’s income.”
My first piece of advice is, don’t build a SaaS for consumers but aside from that, you have thoughts on this, Mike?
Mike: I think I would probably follow the advice of Ed Freyfogle who spoke at MicroConf a couple of years ago and his general advice for situations like this is ignore the currency exchange piece of it where you’re quibbling over nickels and dimes for the exchange rate as it fluctuates. If you decide on, let’s say, $50 a month but US dollars, what is the equivalent in pounds, for example? What is the equivalent in Euros? And then, on your page, display the pricing using browser location data to figure out where in the world they are and you can display the page in local currency for whatever that is.
As they said, you wouldn’t want to, say, something like if it’s $50 a month and we’ll call the exchange rate, we’ll say that it’s even for Euros, you wouldn’t want to say €40.32, for example, and then fluctuate it as the currency exchange. You probably just want to say €40. Then if it goes up a little bit, that’s fine, just eat it, until they get close enough where it really makes sense for you to start changing those numbers to say €42 or €45. I wouldn’t even worry about that stuff. But you can just display the page in the local currency. That should be enough to get you through for the most part.
Rob: Yeah, and Ed runs opencagedata.com if you want to look at his API for figuring out where in the world folks are. I think that’s good advice. I would also say to focus on a single market to start with. If you haven’t written a line of code then pick a market. If it’s going to be the US, that’s fine. Charge in US dollars and worry later about, “Oh, we’re going to expand into India or we’re going to expand into Eastern Europe or other less wealthy countries.” If you’re going to start in the US, then the next place you would probably expand is to Canada and then to Western Europe. In those places, while you do have different currencies, they’re kind of on par in terms of what you would charge. I would probably just do like you said, just do a conversion and charge that. I would be less concerned about this.
Once you get into less wealthy countries, they can’t afford that. Just start it out in a single country, build up a business, and then by the time you get there, you’ll know what to do. Thinking about it in theory, about something that’s a year or two out, I think is just not helpful at this stage. Thanks for the question.
We have another one about selling across currencies, probably a similar answer. It’s from Scott Barton. He says, “I’m a recent listener on a back of Rob and Einar’s TinySeed announcement a couple of months ago. After being a longtime listener to swing-for-the-fences types of startups podcasts, it’s nice to find a community that I’m more in tune with. I listened to last week’s discussion about pricing. I wondered if you have any thoughts about pricing the same product offering across currencies, particularly to customers in countries where their currency maybe weaker?”
This is a similar question but I think it’s couched a little bit differently. He says, “For example, would you price a B2B product that’s selling for £249 per month in the UK as a US$249 product or would you adjust it for the exchange rate?” Currently, that would be US$309, based on when he wrote this email. So, similar question, similar answer, Mike, or what do you think?
Mike: I would think that it’s in many ways similar but I think there’s also a little flexibility you have here from the marketing standpoint where if you’re going to price it US$249, going to $309, $309’s coming in like an odd number. I might do $299.
Rob: Yeah, I would, too.
Mike: Or $324 or something like that. $309 is just a weird number. I would try to stay away from those.
Rob: Right.
Mike: That was a witty discussion.
Rob: Yeah, I know. All right. Our next question is about how much to have in place before starting to sell. He says, “I’m building a tool/service for myself that other people are willing to pay for. Is there a checklist to follow to take this from a hobby to a real thing? Do I need an LLC, terms of use, privacy policy, a lawyer, et cetera before I accept any payments or can I literally just set up a payment system and go?” Let’s make the assumption that he’s in the US because he has a separate question where he talked about US dollars. What do you think, Mike? Is the answer, “It’s depends”?
Mike: No. I think he can just literally set up a payment system and go. If it’s still brand new, you probably don’t have a whole pack of luck to worry about. If you don’t have a terms of use or privacy policy and stuff like that, until somebody complains and says, “That’s the reason they’re not buying it,” I don’t know if I’d spend a lot of time on it.
Rob: Yeah. I mean, is there a small amount of risk in doing that? Yes, there is. So, consult an attorney, think about it, whatever, but realistically, this is what you and I have both done with. Brand new products that are just starting. I did a sole proprietorship which just goes on your schedule, see on your taxes.
I did not have an LLC for, I believe it was seven years I was operating. I had software products, I had info products, I was consulting, and that was just all without an LLC, without a terms of use. At some point, I think eventually I had put a privacy policy in for some products and stuff but it’s a little bit of risk tolerance but really, the risk is probably really low. I always try to take the simple approach. The simple approach to basically get to selling.
You made an assumption there where you said, “I’m building something that I need but other people are also willing to pay for.” I would ask, “How have you validated that?” Don’t assume that that’s true. Go out and spend more time validating that before you sit in a hypothetical basement and code that out for six months because I think a lot of us had made that mistake. Thanks for the question. I hope that was helpful.
Our next one is about determining an equitable equity split. I’m going to leave him anonymous in case the person he’s talking to also listens to the podcast. He says, “Hey guys. A friend of mine came to me with an idea for an app and I’m considering going ahead with it. I’m a developer and I’ll be doing all the dev work, the support, et cetera. My friend will be doing the outbound sales, marketing, et cetera.”
“Instead of creating another company and all the overhead that entails, because I already have a corporation, I’d like to own the software and pay him a cut of the sales. How would you go about determining the split? On one hand, the development will be a lot of upfront cost for me. But when we get to market, he will be doing the bulk of the work, with mine leveling off a bit with additional development and support.”
“I really think he’ll be integral to the success of this, as I’m not an outgoing person. He’s a radio personality and good at the kind of [00:18:56] skills that I lack. I guess I’m asking if it’s crazy to split 50/50 or should I be asking for a larger cut? Thanks for any help or direction you can provide.” Interesting question.
Mike: And I think the top 10 lies developers tell themselves is that when the product gets to market, my workload is going to drop down quite a bit. I think that that’s an unrealistic assumption. The workload for a software product is absolutely not going to drop off once the product hits the market. You’re not going to have enough features in it that you want to put in it.
The other assumption I think here is that there’s not going to be very much marketing work or sales work that needs to be done until the product is done. I think that that’s a bad assumption to make as well. I feel like there should be a lot of it upfront because it helps to cut down on the risk that you’re building something for six months or a year that nobody’s going to pay for or you can’t get it in front of enough people.
Rob: Yeah, I would agree with you. It’s going to be in a rare, rare, rare case that you don’t have more work to do once the product launch. So, something to think about. The other thing I would say is, in advance, I would not go off and build this for six months while your partner does nothing because he should be starting marketing, starting to generate traffic on the internet, starting to do cold-calling or cold-emailing or getting leads and making pre-sales. Getting people’s screenshots or mock-ups or just customer validation, like, “Has your partner found 10 people or companies willing to pay X dollars for this product?” Then I would stop development.
In almost all cases, I wouldn’t do it until you have 10 or 20 or 30. Whatever the number is that you feel comfortable with. There’s upfront work that can be done to validate this more and reduce risk that has nothing to do with writing software. That’s another thing that I would consider. Even the entire time you’re building the software, he could be pounding the pavement and beating the bush, so to speak.
Let me take another dumb metaphor for this but I just think there’s more work to be done than him kind of hanging out until every bit is in place and then, “Okay, now we start the marketing engine.” I talked about this before but my second book was called Start Marketing The Day You Start Coding and frankly, these days I think you should start doing that actually before you start coding.
And with that, we didn’t actually answer his equity split question. It’s not even equity. It’s revenue share. The whole idea of not actually splitting the ownership is interesting because it seems to me it’s screws his co-founder because he has no ownership in the thing.
Mike: That was my first thought as well. I don’t know whether that’s a mental direction he was going or whether it was just the fact that he’s already got a company and he’s going to be using existing resources, he doesn’t really want to open up a second company to do it. Therefore, it would make sense in that case to have the software owned by something and if he’s not giving up equity in his own company to do that, then it still needs to be owned by somebody.
I would say that I think that you could have an agreement between two people and it could be written down that just says like, “This is going to be under this umbrella for the time being and at some point in the future, we’re going to branch it off into a different company just to make paperwork easier for the time being.” I think that that’s a perfectly reasonable thing to do, especially if you’re just trying to avoid legal cost because the product has no customers yet and no revenue and you’re going to be sinking a sizable chunk of effort into it.
The other thing this particular case that does for him is that it allows him to write off a lot of those cost because he can write it off on his tax and say, “Oh, well we’ve spent X amount of time doing this and we bought this particular product,” or, “We’re writing off a portion of this service that we’re using.”
Rob: Yeah, I agree. I think that’s how I think about it, too. I feel it might be unfair to your co-founder if you have it under the same corporate thing. I would perhaps try not to do that.
Mike: He does say later on, he’s asking if it’s crazy to ask for a 50/50 split or he should be asking for a large… I don’t think that it’s crazy-ass for 50/50 but I would have a hard time if you feel like the contribution of the other person is equal in weight to your own, then I would have a hard time asking for more than 50%.
Rob: That’s how I feel, too. If you would have come to me and say, “Look, I’m the developer and I may do support, and then this other person handles all the other stuff.” It’s typical kind of CEO/CTO role either the sales or marketing and developer role. I think that’s a good split and I think if you’re both all in on it and you’re going to be cranking on it, that’s 50/50. Makes the most sense to me.
It’s the other thing surround this, though, that this is more complicated than most situations I think, which is why we’re kind of digging into his points one by one because it’s just a unique way that he’s approaching and that I think we’ve kind of voiced some concerns or just thoughts on how we might do it differently.
Our last question for the day is about business appraisal services. I’m going to keep him anonymous as well because he’s asking about potentially selling his company and I just want to be mindful and stuff like that. His name’s Paul and he says, “Hey, Rob and Mike. I’ve been a long-time listener to the podcast. Thanks for creating such a great resource. I have a question about business valuation in preparation to selling a company. I’m having discussions with potential acquirers but I want to have some official documentation to defend the valuation I want for my company. I know there are many ways to value a SaaS business like mine but I think I’ll have more credibility if I hired someone to do proper valuation. Can you recommend any resources for this type of appraisal? Do you think it’s even worth it? Thank you and keep up the great podcast.”
What do you think?
Mike: I think there’s a couple of different businesses out there that would do an appraisal for you. FE International, they’re a MicroConf sponsor, they come to pass, as far as I can remember. Rob, I think you said you knew another one off the top of your head that does appraisal?
Rob: Quiet Light Brokerage, yeah.
Mike: You can reach out to either one of those but the thing that I would keep in mind here is that if you do go out and get an independent third party appraisal, just because you’re getting that to try and justify your position does not mean that it’s going to come back the way that you want. I see kind of like selling a house. You may decide that you want more money for it or it’s worth maybe a million dollars or something like that but they may come back and say it’s only worth $800,000. Then you have to decide, are you going to take less, or potentially be disappointed about it, or are you going to hang on to it and think about that in advance of getting that appraisal as to what your inclination is before you go do it? I don’t think you want to be surprised if it comes up and all of a sudden now you have to rethink your position on those things.
Rob: Yeah. I don’t know if it’s worth having an appraisal or not. I actually feel like an appraisal is a theoretical way to value a business typically based on a multiple, either of net profit or of your revenue. If you’re going to sell to a financial buyer, you typically sell over the multiple of net profit. If you’re going to sell to either a strategic or these days if you’re SaaS and you’re selling to private equity, you get a multiple of revenue. You get a much higher price for that.
Paul, I don’t know if you have a SaaS app, I would try to find someone who is willing to talk to you about revenue-based multiples. In that case, if you did get an appraisal from FE or Quiet Light, they’re going to be talking more about the net profit stuff because they deal more with financial buyers. I do think they have connections with some private equity but I’m just not sure about the details of that.
I think an appraisal might be a nice-to-have in the back of your mind just to be like, “Well, that’s what I can get it if I were to sell it through those channels.” I don’t know of someone who will come in and appraise other than that, other than through their buying network because it’s really what you can get for. It’s a market price. The appraisal is what, you get a bunch of bids and you can figure out what you’ll ultimately get for it.
As a side note, I do have a contact who could help you with that. I don’t want to call him out on the podcast without his permission. Paul, if you do want to reach out directly to me, you can frankly email questions@startupsfortherestofus.com and that’ll come to me anyway. I can connect you with him assuming that you have a SaaS app we can kind of talk about. It’s in a certain range and he can get really good multiples for it.
Anyway, I’m kind of rambling at this point. But I feel an appraisal, why not do it? I don’t know how much value I would put on that and I don’t know if I would use it during negotiations unless multiple buyers are trying to pay you under that appraised price. Then, you could always whip it out but then, I guess that’s the price you’re going to get for it. I’m struggling a little bit with this, with the idea of trying to sell it based on an appraised value rather than just running a market kind of an auction type. I think you’ll get a better price there.
Mike: Yeah. I think the way he phrase this question was that, having discussions with potential acquirers and I want to have some official documentation to defend the valuation I want. It’s not that they have come to him and said, “Here’s what we think it’s worth,” or it doesn’t seem like they’ve gotten to that point. It’s just I think you’d feel more comfortable if he had something in hand to be able to help justify his position. I don’t know if you really need that if you’re trying to play multiple acquirers off of one another. You can just say, “I’ve got an offer over here for more.” At that point, it’s really just about how much you can get them to push their offers up.
Rob: Right. It’s like how badly do they want the business. But good luck on that process, Paul. It’s obviously, can be both fun and stressful too to sell your business and do wish you the best of luck as you move forward.
Mike: I think we’re about out of time for today. If you have a question for us, you can call into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 427 | Scaling a Software Product, Raising Prices, When to Consider CRM, and More Listener Questions
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions, the topics include scaling a software product, raising prices, and when to use a CRM.
Items mentioned in this episode:
- AppSumo-MicroConf Giveaway
- MicroConf Growth Edition
- MicroConf Starter Edition
- AppSumo
- Segment
- Stripe
- Zendesk
Rob:In this episode of Startups for the Rest of Us, Mike and I talk about scaling a software product, raising prices, when to consider CRM and more listener questions. This is Startups for the Rest of Us Episode 427.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it, I’m Rob. We’re here to share our experiences to help you avoid the same mistakes we made. What’s the word this week, sir?
Mike: I’m going to need some Advil for that one. I’ve got some exciting news to share with the listeners this week. In the past, we’ve talked about having some podcast sponsors on and I wanted to talk about one that I arranged with AppSumo very recently. AppSumo is offering an all-expense paid trip to MicroConf this year, and it’s not just one or the other; it’s to both. We’re in a contest in cooperation with them. It’s going to be starting as the date of this podcast episode comes out.
You can apply to that. We’ll link to it up in the show notes. You go over the webpage, enter in your email address and you’ll be entered into that contest. There’s ways you can get additional entries into the contest by sharing on social media and getting other people to submit their email addresses. For each person who enters based on your promo code that you give them, then you will get an additional entry into the contest. As I said, we’ll link that up in the show notes, but I think it’s a really awesome way for AppSumo to help support the community and the podcast but also to just help bootstrapped entrepreneurs get to MicroConf and network with other entrepreneurs.
Rob:Is it one person that wins tickets to both or is it two separate giveaways?
Mike: It’s one person who’s going to win tickets to both and then they have some money that they’re setting aside to also help cover the travel costs for it.
Rob:They’ll cover airfare and hotel then, for folks, within reason? There’s some cap on it. You can’t fly first-class from Australia or something.
Mike: No, as nice as that might be.
Rob:That’s super cool, man. I’d imagine someone listening might think, “I already bought my ticket to MicroConf,” or, “I might buy my ticket in the next week but I’m going to hold off for this giveaway.” What would you say to those folks?
Mike: That actually is covered, so if you have already purchased your ticket or you purchased one between now and the other contest, the contest is going to until, I think, February 11th. That’s basically four weeks from today’s episode. If you are selected as the winner, then you will be refunded whatever you’ve paid for your ticket so far. If you’ve bought one ticket or you’ve bought a ticket to both of them, then both of them get refunded. I would assume that if you’ve already booked your airfare and stuff, there’d just be a reimbursement that goes along with that.
Rob:Sure. Super cool. This is our first podcast sponsorship.
Mike: Yeah, definitely. I just want to say thanks to the people who are at AppSumo, and we’ll link it up in the show notes. You can go up there and enter into the contest. Hopefully, we’ll see you in Vegas.
Rob:Sounds good. On my end, Tiny Seed Applications open on January 18th. We announced that this week. Tiny Seed is, of course, the first startup accelerator designed for people who would traditionally bootstrap, and it’s my next act after Drip. I’ve already been talking to some founders, either who I know personally or who introduced themselves to me, but we’re definitely going to open the floodgates for about six weeks, starting January 18th. That should be an interesting process. tinyseed.com, if you have questions about that, if you have an idea or an app that’s already launched. We’d love to hear from you.
Mike: That’s cool. You’re going to do applications for six weeks, and then how long do you think it’s going to take to go through those applications? Do you think it’s going to be a week or five weeks?
Rob:We’ll start right away. This is my full-time thing that I’m diving into. The moment we start getting applications, I will start sifting through them. It won’t be a full six weeks of applications that we’ll have to go through at the end because I’m not the sole person making decisions. I don’t know. I think I probably need to think more about an exact timeframe, but it’s not as if we have to announce or we don’t have to offer everyone a spot the same day.
This is not Y Combinator where they have classes of 150 or something. It’ll be a small class of 10 to 15, and I envision it as, “Hey, if you’re fit, we want to invite you to be part of it,” and then people accept or don’t, and then we move onto the next one. I think we’ll be doing onesie-twosies throughout that time, but I’d love to have everybody nailed down certainly before MicroConf, which is ambitious, because that’s only two and a half months away now, but it would just be a nice milestone to hit.
Mike: That’s awesome. Anything else?
Rob:Have you updated your Mac OS to whatever the latest one is called but it has dark mode?
Mike: I have not. I’ve heard of that. Isn’t there something like a Mac app called f.lux or something like that, but it also darkens your screen? Is it similar to that?
Rob:It’s different than that. I just looked and it’s Mojave. It’s 10.14.2. It’s different than f.lux. F.lux would detect your time zone and then, as it got later into the evening, it would remove the blue light from your screen so that it would try not to affect your sleep. That actually sounds–that would be a great name for a great function of dark mode, but dark mode is just a dark theme for the entire OS, like the messages, the iOS messenger thing, the text message app. It’s all dark. It’s all greys and blacks, and the sidebars, and the top and the background are all dark.
It’s interesting. I’m using it, and I think that I like it better. I grew up programming on an Apple IIe, which is black background and green text. When I used to code all the time, I would flip my background of my editor. Sometimes, I’d go white, but, more often than not, probably 70% to 80% of the time, I would just have a black background all the time. That’s like Adam. The default background is black with white text on it because it’s just easier on your eyes.
It’s so far so good. I’m only two days into dark mode, but if you haven’t checked it out, I’d recommend giving it a whirl. I also imagine it would help folks with migraines. I know that some folks, the light from the screen, if you have a lot of white, it can give you migraines. Drip Workflows has night mode, and that was because one of our designers gets migraines, and he just decided to have this. It’s a dark mode for the Workflow Builder.
Mike: Interesting. Yeah, I’ve never really been a fan of those inverted dark modes or inverted theme colors and things like that, but I’ve never really tried it a whole lot either. Maybe if I give it a couple of days to settle in, I could get used to it, but I don’t know.
Rob:That’s the thing, yeah. It definitely takes getting used to because if you’ve used a computer with a white background for 40 to 50 years like you have…
Mike: Hey, you are older than me.
Rob:I know I am.
Mike: I’m just going to point that out.
Rob:Cool. Are you ready to dive into some questions?
Mike: Yeah, absolutely.
Rob:All right. Our first question is a voice mail. Voice mails always rise to the top of the stack. I think, actually, our first two questions are voice mails today, but let’s roll into this one.
Beckham: Hi, Rob and Mike. My name’s Beckham. I’m contacting you from Sligo in the northwest of Ireland. I’m from a company called Campus Connect. We’re avid listeners. We really enjoy the podcast, and you have an uncanny ability to cover stuff that’s happening at the time so keep up the good work. Campus Connect is a mobile app service for universities. What we do is we create an instance of the service for the university recruitment team that pushes it out to their incoming students.
It’s an onboarding service so the students can register. They can connect with their peers and they can connect with somebody on campus. We’re three years trading and we’ve grown to approximately 12,000 MRR, and things have been going reasonably well. A question that we’ve had–I guess an issue that we’ve been having is really around scale although we’ve managed to get at this point to struggle to really build on this.
Creating a new instance feed to university, obviously, is quite resource-intensive, and when we create each instances, often, in customization, they’re looking for different fields, different branding, different upselling and so on, and other few managing services. The universities we work with, they’re also using it for their students that are going out, going abroad, so it’s really for incoming and outgoing students at the moment. We feel there’s an opportunity to develop that into a universal platform and to move all our existing clients onto one central platform where we can connect them up.
At the moment, it’s quite siloed and it’s obviously difficult to scale. We have management. We’ve spoken to our clients about it. They’re interested in the idea but, obviously, the next steps are quite challenging. I’d love to get your guys’ thoughts on this. What do you think, how you would approach it? That’d be great. Keep up the good work. Thanks.
Rob:That’s a tough question, huh, Mike? They’ve made it to 12K MRR, which is nothing to sneeze at, but certainly a big challenge ahead of them. What are your thoughts on this? Do you get what he’s saying, like they do almost on-premise for each instance and then they even do some customizations to some of them, it sounds like, and they want to centralize and basically go with a more true SaaS model or a centralized cloud-based solution, it sounds like.
Mike: Yeah, that was actually a part that I missed. I didn’t realize that they do on-premise for them. I thought that they hosted each individual version of it, and that was mainly because they do customizations to each of them and the platform itself doesn’t really support customizations or a multi-tenant model, so to speak. I wasn’t sure whether that was the direction that they wanted to go or maybe you have a little insight on specifics there. Did I miss something?
Rob:I just listened back to his piece, and all he said is they create new instance for each one. I think you’re right in that it’s not on-premise; it is hosted on Campus Connect’s servers–let’s go with that assumption–but that they copy a new whole instance of it, make some customizations, probably has independent databases, I’d imagine, for each one. There’s the multi-tenancy thing that they’ll have to solve if they haven’t built that in already, which is just the ability to host multiple customers in a single database.
That’s a solved problem. That’s pretty much plug-and-chug. There’s not much risk with that, I’ll say, in terms of implementation, but there obviously are some other things that I think are going to be more difficult than just making multi-tenant.
Mike: Yeah. Taking an application from single-tenant to multi-tenant in and of itself is kind of a pain in the neck. It’s a hard problem, but I would say it’s generally solved, like there’s a lot of guidance out there that you could find fairly easily that would tell you the things to look out for and the things to do in that case. I think that, from a scalability standpoint, I don’t know if you’d want to go towards a model where it is completely multi-tenant with everybody all in one instance.
Part of that is just, one, for scalability because there’s going to be times where certain schools are repping up and directing a lot of people to the site, and then there’s other times where it’s going to be slow and, hopefully, they won’t all overlap. If they did, you wouldn’t want everybody all on one instance of it so that you could slice it across. Let’s say maybe you have 10 instances of it and 10 customers on each, for example. That’s a lot easier to manage than 100 different instances of it, and that’s probably the way that I would go in that particular case just to at least allow you a little bit more flexibility in terms of the redundancy of the whole system.
Rob:I want to break in right there just because I think this is an interesting topic. See, I wouldn’t do that because, to me, that’s pretty mature sharding. Sharding is where you can shard across single tables or database instances. There’s a bunch of different ways to do it, but what you’re talking about is basically putting Customers #1 through #10 on this database and Customers #11 through #20 on this database.
Long, long, long-term if you’re Facebook or if you scale–there was a certain point where we were considering sharding Drip because we hit scale, but that was way, way down the line. I think the added complexity of trying to manage that infrastructure, unless these are really high-intensity, a lot of computing power where you do think you’re going to need to separate them, unless you think that’s going to be that case and that you’re going to need to do that, I would consider that a premature optimization.
Mike: I see what you’re saying in terms of the performance aspect of it. I’m looking at it more from a durability standpoint, like you don’t want having to reboot one server, for example. I don’t know anything about the backend infrastructure and how they do that stuff today, but you don’t want to have to reboot every single customer all at the same time if there’s a problem with one particular customer. That’s more it than anything else. The performance, I think, comes into it to some extent but, from my standpoint, I would be a little concerned about having everything all on one system where if you don’t have an automatic failover or something like that, that would probably be an issue at some point just because of the number of people that could be hitting that site.
Rob:Again, I think that that’s solvable in a different way. You basically have your main database where everyone’s on, you have a hot-swap backup that’s sitting there, constantly replicating, and then you have redundancy in every other server up the chain. If you have a queue server, then you have two of them. If you have Redis, you have two of them. Again, this is just architecture we did at Drip to make it redundant so we could reboot any server.
I don’t even remember how many frontend. By the time I left Drip, we had 20 or 30 frontend web servers and 10-15 API servers just accepting requests and then down, and down, and down. Any of them could be recycled at any time and not affect anyone. The only thing that would actually take the system down, so to speak–and even then, I believe we would still queue up incoming requests–was the database because it’s write and it’s not read. We even had a bunch of reads moved to a separate database that would stay up for that. Anyways, that’s just an architecture thing, and sharding is one way to handle that. I just don’t know how relevant that is here.
Mike: What I was thinking about was how would you migrate people to have them on a multi-tenant server? Essentially, what you’re doing is you’re taking the machines. You’re saying, “Okay, well, let’s take Customer #1 and Customer #2 and put them on the same server.” You’re going to have to do some sort of migration probably for both of them because you’re going to want to spin up a new instance in the database, for example, just so that it’s clean and you don’t have to worry about any additional croft that’s in there.
Again, that could be a mistake based on how complex the database is or how easy it is to move that stuff onto a new server because if you’re just adding tables and stuff to help support multi-tenant, then maybe you just start with one of them and you move the second customer’s data onto the first customer’s database, but it depends on what the hardware there is, too. Maybe you just take the first customer’s database and put it onto a brand-new database server and you start with that.
At some point, you may need to start making decisions about how you’re going to manage that and how you’re going to be adding more customer data onto that database server, and is a migration–are you dumping the data out and then doing a full import? How are you going to manage that replication process to get them started and how far do you go with it? As I said, maybe you do shard the database. Maybe you do have several instances. I don’t know that and I don’t think that they’re going to know that either until they get there.
Rob:When I bought HitTail, it had two shards and it had two separate databases. Yeah, I believe it was two completely separate database instances on the same SQL server. I had to merge them, or I didn’t have to, but I wanted to because it was way complex. It was keeping things in-sync. It sucked. I merged them and I had to do some gymnastics because primary keys–some of them had the same primary keys so I had to update primary keys, which then I have to update them all over the place.
Again, that migration itself is just something you need to think through, be meticulous about and do it. There is risk there, but it’s technical risk. If you get someone smart who knows what they’re doing and you plan it out, that will work. The thing that I’m much more concerned about–let me say off the bat. If Declan can make this happen and turn it into more of a centralized multi-tenant SaaS, I absolutely think that that’s the way to go.
I think that’s how they scale this business long term because having these separate instances for each customer is just going to get hard. It’s going to be a lot to manage. It’s a lot of overhead and server costs. There’s a bunch of labor that’s going to with it. Long term, that’s not how I would prefer to do it. I do think that them trying to centralize is a good move. I think the hardest part of this is going to be talking to all of the universities, getting them all on-board with it, and figuring out which customizations that they allow or disallow. The wildcard, I think, is going to be the customers who have potentially extensive customizations that you may or may not import into the centralized version of the app.
Mike: The other thing that I would think could be a huge thing is data protection and privacy and making sure you’re that separating the data between them because I don’t know for sure how much of the stuff is installed at the customer’s site versus how much they’re hosting in their instances. Are there things that the customer really can customize on the frontend or do they give them virtual machines that they install in their environment and then direct people to there with some of the customizations on?
I don’t know how that is really set up, but I know that they’re probably going to be concerned about, “If we’re migrating the data out of our environment into yours, how do we know it’s secure? How do we know that it’s not going to go back and forth between other customers? How do we know that, if you get hacked, we’re not going to suffer some major loss?” or something like that.
Rob:Yeah, I agree. I think the hard part is doing it retroactively because you could screw things up because, again, that is a solved problem. There are a lot of–how many thousands of SaaS apps have exactly the same issue of keeping data separate? They do it.
Mike: I don’t think that having it separate is the issue; I think that convincing them that they’ve already purchased and bought into one model of having it deployed and then changing how that is done is the issue. For the IT department, they may need to go through some infrastructure review through a risk analysis or something like that, and some of them may say no.
Rob:Right, and that makes sense. That’s, I think, going to be the challenge here more than anything. It’s a big undertaking, but I would encourage them to at least evaluate how many person hours and how difficult it will actually be because I feel like–do you agree that this is probably the right choice for them? I guess the better question is–we don’t have all the details, but if you were in their shoes, based on what we know about their business, would you try to centralize to a multi-tenant scenario?
Mike: Assuming that they are deploying a completely new infrastructure for each customer, I would absolutely centralize it.
Rob:Yeah, just because of the management of all that stuff is so challenging and expensive.
Mike: Right, and just having the different instances themselves. You want to centralize it as much as you can with an obvious eye towards the performance, downtime and stuff like that. Again, it’s also something you’re going to want to take slow. You’re not going to want to dump everybody all under a new set of servers all at once or even three or four. You’ll want to start with two and that’s it, and then slowly consolidate them over time.
Rob:Another thing that occurred to me is I think this will be a cost savings for Campus Connect, and so it would be quite cool if they could keep their prices the same and consolidate because I do think that their cost for providing this service will be less, but they will also have the leeway with some of them to offer discounts if needed because I’d imagine, again, that just their cost to provide this service will be cheaper if they have 10 or 20 of these universities on the same infrastructure. I think that’s another added benefit to this. I’m sure Declan’s thought of all this, but it’s just a fun thought experiment to think through. Our next question is another voicemail and it’s about how to raise your prices when you have a lack of control.
Ben: Hey, guys. I’m Ben, the founder of Code 49 from Germany, selling apps in the Atlassian Marketplace. Thanks for your great episode about Charge More. We also love to charge more–and who wouldn’t–but we are not sure how to proceed. We can only raise prices for everyone at once, and our existing customers only get exposed to the new prices after 30 to 60 days. On top of that, we can only change prices every 30 days and rarely get any feedback when a customer cancels our subscription. The question is how would you raise prices in this scenario? Which metrics would you measure to determine if the raised prices lead to more value? Thanks for your help.
Mike: I feel like this is a really tough spot because if you can only raise prices for everyone all at once and you’re not going to get any sort of results for 30 days, that sucks. If you don’t have direct access to the customers, that makes it harder to do something like this. I wonder if there’s a way to publish it as a new app inside of the Atlassian Marketplace and see if there’s a way that you could test with new customers instead of your existing ones, and then you grandfather the existing customers into your existing pricing.
I don’t know how amenable Atlassian would be to having two apps that are in there that are basically the same kind of thing. The other thing you could do is you can talk to them and say how would they go about this because it would feel to me like you can’t possibly be the only company that has run into this particular program. What does Atlassian have to say about it?
Rob:That’s exactly what I would do, is ask them. This is a crazy limitation. This reminds me of Apple App Store stuff. This is where being in App Store cuts both ways, being in the Envato Marketplace or whatever, the Google Play Store. It gives you distribution. It’s easy distribution. It’s a nice stair step, but I would never build my full-time business on these ecosystems because of these limitations that are just so painful. You can’t split-test. You don’t get your customer’s email addresses. There’s all these limitations.
I don’t know that I have a silver bullet aside from talking to Atlassian. I think his question of, “How would you raise prices in this scenario?” Very, very carefully. I would probably inch them up 10% and just see what happens. The metrics I’d look at is are you getting less new customers in that 7 or 30-day span? Did you churn higher than the previous 7 or 30 days? It’s a very blunt instrument that’s not a true split-test–a poor man’s split-test, I’ve heard this called–but I don’t really see another easy way around it when you just don’t have the control over distribution. Thanks for the question, Ben. I hope our thoughts were helpful.
Our next question is from Rohit Shetty. He asks, “At what stage of a bootstrapped company should one consider using a CRM? I have a desktop app that’s not SaaS. It’s for the data networking industry. It’s cross-platform with binaries for Windows, Mac and various Linux distributions. I use Gumroad for ecommerce, Mailchimp for email, Google Forms for surveys. Email support and follow-up is using Gmail with stars or snoozing to remind to follow up.”
“All this means is that customer data is quite fragmented and spread around. Wondering if having a CRM to bring all of this data together would be useful, or is it the organizational freak in me just wanting to have everything together, and it’s not really going to help me grow my product? If you think CRM is useful in this situation, could you suggest some? My average monthly revenue is around $1200 and has been at that level for more than a year now despite my attempts to grow it. This is a nights-and-weekends project.” Thanks, Rohit. What do you think, Mike? I don’t think CRM is what he needs. Do you?
Mike: No, I don’t think so either. It sounds like if you were having trouble with lots of customers falling through the cracks and support issues because people feel like they’re not being paid attention to, or their needs aren’t met, or you’re losing sales opportunities because you forget to follow up with them or check in with them or send them invoices and stuff like that, then I would say yes, but it doesn’t sound to me like that’s the case. It sounds to me like the data is just in a bunch of different places, and it’s kind of annoying that you don’t have a centralized location for it because it doesn’t seem to me like the MRR really justifies that as the top problem that you have.
Rob:I would agree to that. Also, CRM is really more for moving people through a process. It’s like sales-based. I don’t think of it as a repository for a software company like you. To be honest, we either use our own database. If I was running a SaaS app, it would be the multi-tenant database houses the data that you need. That’s aside from automation and Google Forms and stuff, but it would house all the financial stuff, or I used to do and still do use Drip as a central repository for a lot of data.
I would think about whether or not you want to pipe everything into Mailchimp as custom fields since you use Mailchimp for that purpose or if you want to try to get everything into segment. You could pipe data via Zapier and stuff, but, all that said, I don’t see what having this all in one place is really going to do for you. I just don’t know how that grows your business. I’m with Mike at $1200 monthly revenue, I think you have a lot of bigger fish to fry in terms of either keeping more customers, finding new ones, growing your top-of-the-funnel, whatever. I would the time into that instead of trying to consolidate what data you have.
Every business is like this. I’ll give an example. We used to use Stripe for charging for Drip, and we use Drip for the email automation, and we did use Google Forms or Typeform for some surveys, and we used Help Scout and, later, Zendesk for support. Stuff was fragmented, I’ll say, but it’s just the nature of the beast. Take a deep breath, and just do the best you can, and focus on growing your top one.
Mike: I think that’s about all the time we have for today. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it, I’m Rob. We’re here to share our experiences to help you avoid the same mistakes we made. What’s the word this week, sir?
Mike: I’m going to need some Advil for that one. I’ve got some exciting news to share with the listeners this week. In the past, we’ve talked about having some podcast sponsors on and I wanted to talk about one that I arranged with AppSumo very recently. AppSumo is offering an all-expense paid trip to MicroConf this year, and it’s not just one or the other; it’s to both. We’re in a contest in cooperation with them. It’s going to be starting as the date of this podcast episode comes out.
You can apply to that. We’ll link to it up in the show notes. You go over the webpage, enter in your email address and you’ll be entered into that contest. There’s ways you can get additional entries into the contest by sharing on social media and getting other people to submit their email addresses. For each person who enters based on your promo code that you give them, then you will get an additional entry into the contest. As I said, we’ll link that up in the show notes, but I think it’s a really awesome way for AppSumo to help support the community and the podcast but also to just help bootstrapped entrepreneurs get to MicroConf and network with other entrepreneurs.
Rob:Is it one person that wins tickets to both or is it two separate giveaways?
Mike: It’s one person who’s going to win tickets to both and then they have some money that they’re setting aside to also help cover the travel costs for it.
Rob:They’ll cover airfare and hotel then, for folks, within reason? There’s some cap on it. You can’t fly first-class from Australia or something.
Mike: No, as nice as that might be.
Rob:That’s super cool, man. I’d imagine someone listening might think, “I already bought my ticket to MicroConf,” or, “I might buy my ticket in the next week but I’m going to hold off for this giveaway.” What would you say to those folks?
Mike: That actually is covered, so if you have already purchased your ticket or you purchased one between now and the other contest, the contest is going to until, I think, February 11th. That’s basically four weeks from today’s episode. If you are selected as the winner, then you will be refunded whatever you’ve paid for your ticket so far. If you’ve bought one ticket or you’ve bought a ticket to both of them, then both of them get refunded. I would assume that if you’ve already booked your airfare and stuff, there’d just be a reimbursement that goes along with that.
Rob:Sure. Super cool. This is our first podcast sponsorship.
Mike: Yeah, definitely. I just want to say thanks to the people who are at AppSumo, and we’ll link it up in the show notes. You can go up there and enter into the contest. Hopefully, we’ll see you in Vegas.
Rob:Sounds good. On my end, Tiny Seed Applications open on January 18th. We announced that this week. Tiny Seed is, of course, the first startup accelerator designed for people who would traditionally bootstrap, and it’s my next act after Drip. I’ve already been talking to some founders, either who I know personally or who introduced themselves to me, but we’re definitely going to open the floodgates for about six weeks, starting January 18th. That should be an interesting process. tinyseed.com, if you have questions about that, if you have an idea or an app that’s already launched. We’d love to hear from you.
Mike: That’s cool. You’re going to do applications for six weeks, and then how long do you think it’s going to take to go through those applications? Do you think it’s going to be a week or five weeks?
Rob:We’ll start right away. This is my full-time thing that I’m diving into. The moment we start getting applications, I will start sifting through them. It won’t be a full six weeks of applications that we’ll have to go through at the end because I’m not the sole person making decisions. I don’t know. I think I probably need to think more about an exact timeframe, but it’s not as if we have to announce or we don’t have to offer everyone a spot the same day.
This is not Y Combinator where they have classes of 150 or something. It’ll be a small class of 10 to 15, and I envision it as, “Hey, if you’re fit, we want to invite you to be part of it,” and then people accept or don’t, and then we move onto the next one. I think we’ll be doing onesie-twosies throughout that time, but I’d love to have everybody nailed down certainly before MicroConf, which is ambitious, because that’s only two and a half months away now, but it would just be a nice milestone to hit.
Mike: That’s awesome. Anything else?
Rob:Have you updated your Mac OS to whatever the latest one is called but it has dark mode?
Mike: I have not. I’ve heard of that. Isn’t there something like a Mac app called f.lux or something like that, but it also darkens your screen? Is it similar to that?
Rob:It’s different than that. I just looked and it’s Mojave. It’s 10.14.2. It’s different than f.lux. F.lux would detect your time zone and then, as it got later into the evening, it would remove the blue light from your screen so that it would try not to affect your sleep. That actually sounds–that would be a great name for a great function of dark mode, but dark mode is just a dark theme for the entire OS, like the messages, the iOS messenger thing, the text message app. It’s all dark. It’s all greys and blacks, and the sidebars, and the top and the background are all dark.
It’s interesting. I’m using it, and I think that I like it better. I grew up programming on an Apple IIe, which is black background and green text. When I used to code all the time, I would flip my background of my editor. Sometimes, I’d go white, but, more often than not, probably 70% to 80% of the time, I would just have a black background all the time. That’s like Adam. The default background is black with white text on it because it’s just easier on your eyes.
It’s so far so good. I’m only two days into dark mode, but if you haven’t checked it out, I’d recommend giving it a whirl. I also imagine it would help folks with migraines. I know that some folks, the light from the screen, if you have a lot of white, it can give you migraines. Drip Workflows has night mode, and that was because one of our designers gets migraines, and he just decided to have this. It’s a dark mode for the Workflow Builder.
Mike: Interesting. Yeah, I’ve never really been a fan of those inverted dark modes or inverted theme colors and things like that, but I’ve never really tried it a whole lot either. Maybe if I give it a couple of days to settle in, I could get used to it, but I don’t know.
Rob:That’s the thing, yeah. It definitely takes getting used to because if you’ve used a computer with a white background for 40 to 50 years like you have…
Mike: Hey, you are older than me.
Rob:I know I am.
Mike: I’m just going to point that out.
Rob:Cool. Are you ready to dive into some questions?
Mike: Yeah, absolutely.
Rob:All right. Our first question is a voice mail. Voice mails always rise to the top of the stack. I think, actually, our first two questions are voice mails today, but let’s roll into this one.
Beckham: Hi, Rob and Mike. My name’s Beckham. I’m contacting you from Sligo in the northwest of Ireland. I’m from a company called Campus Connect. We’re avid listeners. We really enjoy the podcast, and you have an uncanny ability to cover stuff that’s happening at the time so keep up the good work. Campus Connect is a mobile app service for universities. What we do is we create an instance of the service for the university recruitment team that pushes it out to their incoming students.
It’s an onboarding service so the students can register. They can connect with their peers and they can connect with somebody on campus. We’re three years trading and we’ve grown to approximately 12,000 MRR, and things have been going reasonably well. A question that we’ve had–I guess an issue that we’ve been having is really around scale although we’ve managed to get at this point to struggle to really build on this.
Creating a new instance feed to university, obviously, is quite resource-intensive, and when we create each instances, often, in customization, they’re looking for different fields, different branding, different upselling and so on, and other few managing services. The universities we work with, they’re also using it for their students that are going out, going abroad, so it’s really for incoming and outgoing students at the moment. We feel there’s an opportunity to develop that into a universal platform and to move all our existing clients onto one central platform where we can connect them up.
At the moment, it’s quite siloed and it’s obviously difficult to scale. We have management. We’ve spoken to our clients about it. They’re interested in the idea but, obviously, the next steps are quite challenging. I’d love to get your guys’ thoughts on this. What do you think, how you would approach it? That’d be great. Keep up the good work. Thanks.
Rob:That’s a tough question, huh, Mike? They’ve made it to 12K MRR, which is nothing to sneeze at, but certainly a big challenge ahead of them. What are your thoughts on this? Do you get what he’s saying, like they do almost on-premise for each instance and then they even do some customizations to some of them, it sounds like, and they want to centralize and basically go with a more true SaaS model or a centralized cloud-based solution, it sounds like.
Mike: Yeah, that was actually a part that I missed. I didn’t realize that they do on-premise for them. I thought that they hosted each individual version of it, and that was mainly because they do customizations to each of them and the platform itself doesn’t really support customizations or a multi-tenant model, so to speak. I wasn’t sure whether that was the direction that they wanted to go or maybe you have a little insight on specifics there. Did I miss something?
Rob:I just listened back to his piece, and all he said is they create new instance for each one. I think you’re right in that it’s not on-premise; it is hosted on Campus Connect’s servers–let’s go with that assumption–but that they copy a new whole instance of it, make some customizations, probably has independent databases, I’d imagine, for each one. There’s the multi-tenancy thing that they’ll have to solve if they haven’t built that in already, which is just the ability to host multiple customers in a single database.
That’s a solved problem. That’s pretty much plug-and-chug. There’s not much risk with that, I’ll say, in terms of implementation, but there obviously are some other things that I think are going to be more difficult than just making multi-tenant.
Mike: Yeah. Taking an application from single-tenant to multi-tenant in and of itself is kind of a pain in the neck. It’s a hard problem, but I would say it’s generally solved, like there’s a lot of guidance out there that you could find fairly easily that would tell you the things to look out for and the things to do in that case. I think that, from a scalability standpoint, I don’t know if you’d want to go towards a model where it is completely multi-tenant with everybody all in one instance.
Part of that is just, one, for scalability because there’s going to be times where certain schools are repping up and directing a lot of people to the site, and then there’s other times where it’s going to be slow and, hopefully, they won’t all overlap. If they did, you wouldn’t want everybody all on one instance of it so that you could slice it across. Let’s say maybe you have 10 instances of it and 10 customers on each, for example. That’s a lot easier to manage than 100 different instances of it, and that’s probably the way that I would go in that particular case just to at least allow you a little bit more flexibility in terms of the redundancy of the whole system.
Rob:I want to break in right there just because I think this is an interesting topic. See, I wouldn’t do that because, to me, that’s pretty mature sharding. Sharding is where you can shard across single tables or database instances. There’s a bunch of different ways to do it, but what you’re talking about is basically putting Customers #1 through #10 on this database and Customers #11 through #20 on this database.
Long, long, long-term if you’re Facebook or if you scale–there was a certain point where we were considering sharding Drip because we hit scale, but that was way, way down the line. I think the added complexity of trying to manage that infrastructure, unless these are really high-intensity, a lot of computing power where you do think you’re going to need to separate them, unless you think that’s going to be that case and that you’re going to need to do that, I would consider that a premature optimization.
Mike: I see what you’re saying in terms of the performance aspect of it. I’m looking at it more from a durability standpoint, like you don’t want having to reboot one server, for example. I don’t know anything about the backend infrastructure and how they do that stuff today, but you don’t want to have to reboot every single customer all at the same time if there’s a problem with one particular customer. That’s more it than anything else. The performance, I think, comes into it to some extent but, from my standpoint, I would be a little concerned about having everything all on one system where if you don’t have an automatic failover or something like that, that would probably be an issue at some point just because of the number of people that could be hitting that site.
Rob:Again, I think that that’s solvable in a different way. You basically have your main database where everyone’s on, you have a hot-swap backup that’s sitting there, constantly replicating, and then you have redundancy in every other server up the chain. If you have a queue server, then you have two of them. If you have Redis, you have two of them. Again, this is just architecture we did at Drip to make it redundant so we could reboot any server.
I don’t even remember how many frontend. By the time I left Drip, we had 20 or 30 frontend web servers and 10-15 API servers just accepting requests and then down, and down, and down. Any of them could be recycled at any time and not affect anyone. The only thing that would actually take the system down, so to speak–and even then, I believe we would still queue up incoming requests–was the database because it’s write and it’s not read. We even had a bunch of reads moved to a separate database that would stay up for that. Anyways, that’s just an architecture thing, and sharding is one way to handle that. I just don’t know how relevant that is here.
Mike: What I was thinking about was how would you migrate people to have them on a multi-tenant server? Essentially, what you’re doing is you’re taking the machines. You’re saying, “Okay, well, let’s take Customer #1 and Customer #2 and put them on the same server.” You’re going to have to do some sort of migration probably for both of them because you’re going to want to spin up a new instance in the database, for example, just so that it’s clean and you don’t have to worry about any additional croft that’s in there.
Again, that could be a mistake based on how complex the database is or how easy it is to move that stuff onto a new server because if you’re just adding tables and stuff to help support multi-tenant, then maybe you just start with one of them and you move the second customer’s data onto the first customer’s database, but it depends on what the hardware there is, too. Maybe you just take the first customer’s database and put it onto a brand-new database server and you start with that.
At some point, you may need to start making decisions about how you’re going to manage that and how you’re going to be adding more customer data onto that database server, and is a migration–are you dumping the data out and then doing a full import? How are you going to manage that replication process to get them started and how far do you go with it? As I said, maybe you do shard the database. Maybe you do have several instances. I don’t know that and I don’t think that they’re going to know that either until they get there.
Rob:When I bought HitTail, it had two shards and it had two separate databases. Yeah, I believe it was two completely separate database instances on the same SQL server. I had to merge them, or I didn’t have to, but I wanted to because it was way complex. It was keeping things in-sync. It sucked. I merged them and I had to do some gymnastics because primary keys–some of them had the same primary keys so I had to update primary keys, which then I have to update them all over the place.
Again, that migration itself is just something you need to think through, be meticulous about and do it. There is risk there, but it’s technical risk. If you get someone smart who knows what they’re doing and you plan it out, that will work. The thing that I’m much more concerned about–let me say off the bat. If Declan can make this happen and turn it into more of a centralized multi-tenant SaaS, I absolutely think that that’s the way to go.
I think that’s how they scale this business long term because having these separate instances for each customer is just going to get hard. It’s going to be a lot to manage. It’s a lot of overhead and server costs. There’s a bunch of labor that’s going to with it. Long term, that’s not how I would prefer to do it. I do think that them trying to centralize is a good move. I think the hardest part of this is going to be talking to all of the universities, getting them all on-board with it, and figuring out which customizations that they allow or disallow. The wildcard, I think, is going to be the customers who have potentially extensive customizations that you may or may not import into the centralized version of the app.
Mike: The other thing that I would think could be a huge thing is data protection and privacy and making sure you’re that separating the data between them because I don’t know for sure how much of the stuff is installed at the customer’s site versus how much they’re hosting in their instances. Are there things that the customer really can customize on the frontend or do they give them virtual machines that they install in their environment and then direct people to there with some of the customizations on?
I don’t know how that is really set up, but I know that they’re probably going to be concerned about, “If we’re migrating the data out of our environment into yours, how do we know it’s secure? How do we know that it’s not going to go back and forth between other customers? How do we know that, if you get hacked, we’re not going to suffer some major loss?” or something like that.
Rob:Yeah, I agree. I think the hard part is doing it retroactively because you could screw things up because, again, that is a solved problem. There are a lot of–how many thousands of SaaS apps have exactly the same issue of keeping data separate? They do it.
Mike: I don’t think that having it separate is the issue; I think that convincing them that they’ve already purchased and bought into one model of having it deployed and then changing how that is done is the issue. For the IT department, they may need to go through some infrastructure review through a risk analysis or something like that, and some of them may say no.
Rob:Right, and that makes sense. That’s, I think, going to be the challenge here more than anything. It’s a big undertaking, but I would encourage them to at least evaluate how many person hours and how difficult it will actually be because I feel like–do you agree that this is probably the right choice for them? I guess the better question is–we don’t have all the details, but if you were in their shoes, based on what we know about their business, would you try to centralize to a multi-tenant scenario?
Mike: Assuming that they are deploying a completely new infrastructure for each customer, I would absolutely centralize it.
Rob:Yeah, just because of the management of all that stuff is so challenging and expensive.
Mike: Right, and just having the different instances themselves. You want to centralize it as much as you can with an obvious eye towards the performance, downtime and stuff like that. Again, it’s also something you’re going to want to take slow. You’re not going to want to dump everybody all under a new set of servers all at once or even three or four. You’ll want to start with two and that’s it, and then slowly consolidate them over time.
Rob:Another thing that occurred to me is I think this will be a cost savings for Campus Connect, and so it would be quite cool if they could keep their prices the same and consolidate because I do think that their cost for providing this service will be less, but they will also have the leeway with some of them to offer discounts if needed because I’d imagine, again, that just their cost to provide this service will be cheaper if they have 10 or 20 of these universities on the same infrastructure. I think that’s another added benefit to this. I’m sure Declan’s thought of all this, but it’s just a fun thought experiment to think through. Our next question is another voicemail and it’s about how to raise your prices when you have a lack of control.
Ben: Hey, guys. I’m Ben, the founder of Code 49 from Germany, selling apps in the Atlassian Marketplace. Thanks for your great episode about Charge More. We also love to charge more–and who wouldn’t–but we are not sure how to proceed. We can only raise prices for everyone at once, and our existing customers only get exposed to the new prices after 30 to 60 days. On top of that, we can only change prices every 30 days and rarely get any feedback when a customer cancels our subscription. The question is how would you raise prices in this scenario? Which metrics would you measure to determine if the raised prices lead to more value? Thanks for your help.
Mike: I feel like this is a really tough spot because if you can only raise prices for everyone all at once and you’re not going to get any sort of results for 30 days, that sucks. If you don’t have direct access to the customers, that makes it harder to do something like this. I wonder if there’s a way to publish it as a new app inside of the Atlassian Marketplace and see if there’s a way that you could test with new customers instead of your existing ones, and then you grandfather the existing customers into your existing pricing.
I don’t know how amenable Atlassian would be to having two apps that are in there that are basically the same kind of thing. The other thing you could do is you can talk to them and say how would they go about this because it would feel to me like you can’t possibly be the only company that has run into this particular program. What does Atlassian have to say about it?
Rob:That’s exactly what I would do, is ask them. This is a crazy limitation. This reminds me of Apple App Store stuff. This is where being in App Store cuts both ways, being in the Envato Marketplace or whatever, the Google Play Store. It gives you distribution. It’s easy distribution. It’s a nice stair step, but I would never build my full-time business on these ecosystems because of these limitations that are just so painful. You can’t split-test. You don’t get your customer’s email addresses. There’s all these limitations.
I don’t know that I have a silver bullet aside from talking to Atlassian. I think his question of, “How would you raise prices in this scenario?” Very, very carefully. I would probably inch them up 10% and just see what happens. The metrics I’d look at is are you getting less new customers in that 7 or 30-day span? Did you churn higher than the previous 7 or 30 days? It’s a very blunt instrument that’s not a true split-test–a poor man’s split-test, I’ve heard this called–but I don’t really see another easy way around it when you just don’t have the control over distribution. Thanks for the question, Ben. I hope our thoughts were helpful.
Our next question is from Rohit Shetty. He asks, “At what stage of a bootstrapped company should one consider using a CRM? I have a desktop app that’s not SaaS. It’s for the data networking industry. It’s cross-platform with binaries for Windows, Mac and various Linux distributions. I use Gumroad for ecommerce, Mailchimp for email, Google Forms for surveys. Email support and follow-up is using Gmail with stars or snoozing to remind to follow up.”
“All this means is that customer data is quite fragmented and spread around. Wondering if having a CRM to bring all of this data together would be useful, or is it the organizational freak in me just wanting to have everything together, and it’s not really going to help me grow my product? If you think CRM is useful in this situation, could you suggest some? My average monthly revenue is around $1200 and has been at that level for more than a year now despite my attempts to grow it. This is a nights-and-weekends project.” Thanks, Rohit. What do you think, Mike? I don’t think CRM is what he needs. Do you?
Mike: No, I don’t think so either. It sounds like if you were having trouble with lots of customers falling through the cracks and support issues because people feel like they’re not being paid attention to, or their needs aren’t met, or you’re losing sales opportunities because you forget to follow up with them or check in with them or send them invoices and stuff like that, then I would say yes, but it doesn’t sound to me like that’s the case. It sounds to me like the data is just in a bunch of different places, and it’s kind of annoying that you don’t have a centralized location for it because it doesn’t seem to me like the MRR really justifies that as the top problem that you have.
Rob:I would agree to that. Also, CRM is really more for moving people through a process. It’s like sales-based. I don’t think of it as a repository for a software company like you. To be honest, we either use our own database. If I was running a SaaS app, it would be the multi-tenant database houses the data that you need. That’s aside from automation and Google Forms and stuff, but it would house all the financial stuff, or I used to do and still do use Drip as a central repository for a lot of data.
I would think about whether or not you want to pipe everything into Mailchimp as custom fields since you use Mailchimp for that purpose or if you want to try to get everything into segment. You could pipe data via Zapier and stuff, but, all that said, I don’t see what having this all in one place is really going to do for you. I just don’t know how that grows your business. I’m with Mike at $1200 monthly revenue, I think you have a lot of bigger fish to fry in terms of either keeping more customers, finding new ones, growing your top-of-the-funnel, whatever. I would the time into that instead of trying to consolidate what data you have.
Every business is like this. I’ll give an example. We used to use Stripe for charging for Drip, and we use Drip for the email automation, and we did use Google Forms or Typeform for some surveys, and we used Help Scout and, later, Zendesk for support. Stuff was fragmented, I’ll say, but it’s just the nature of the beast. Take a deep breath, and just do the best you can, and focus on growing your top one.
Mike: I think that’s about all the time we have for today. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 426 | Getting Started with Event Tracking
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about getting started with event tracking. They share some tips and tricks, 3 Core Lifecycle Events, and the purpose/importance for tracking each event.
Items mentioned in this episode:
Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about getting started with event tracking. This is Startups for the Rest of Us Episode 426.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it, I’m Mike.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How’s it going this week, Rob?
Rob: I always struggle getting back to work after taking time off. I was off for about a week over the Christmas break and then obviously New Years was Monday and Tuesday. Getting up Wednesday and getting back in the email. I certainly checked and responded to email over the break, but you don’t dig in and do a lot of the little stuff. I think my Kryptonite is breaks. As much as I love breaks and as much as they make me feel re-energized, I really struggle to reenter the work mindset. Do you feel the same way?
Mike: Yeah, definitely. I’ve actually had that struggle for the past couple of weeks. December is obviously kind of slow just in general. After about the 15th or so, nothing was really happening. I decided to back off of my schedule a little bit and use the time to recuperate a little bit. I try to do some things here and there but I also realized that it was vacation, I’m not going to work my tail off. I just got to a point where I’m like, “I’m just not getting anything done.” I just said, “The heck with it,” at one point and I’m trying to get back into things at this point. It’s been a progression of about a week or so trying to get back into things.
Rob: Yeah, that’s crazy, and you know that it’s best for you to completely unplug, but I almost feel like when I completely unplug it’s even worse to try to get back into it because you come back and you have 500 emails or something. At least when I came back I only had, I don’t know, maybe 80 or 100 emails to respond to but I had taken care of a bunch of short responses in the meantime. I didn’t spend six or eight hours. I’ve had times when I’ve completely unplugged and I’ll come back and basically spent eight hours just in email because it stacks up so quickly.
Mike: Yeah, I’ve done that too. It’s hard especially that first week or so back because you got this backlog of email that you know you should go through. They’re at least semi important, you’ve got to probably do something with them. But at the same time, you don’t want to spend the entire day doing that because it’s kind of depressing to sit down and do email all day.
Rob: I agree, and there’s that struggle of just sitting in email. Sometimes it’s completely unproductive and sometimes it is really productive. Sometime it does push your business forward if that’s the phase that you’re at where you’re connecting with people and making intros and responding to things is moving things forward. There has been a chunk of my career where not being in email is detrimental to whatever I’m doing, and the more I am in email–as long as I’m efficient with it–it does move the business forward.
That’s the struggle. You get a few hundred emails and you’re kind of staring them in the face and it’s like, “How do I get the low priority ones out of here and not deal with them and only look at and respond to and organize the high priority ones?” I actually of course have a system for that. I talked about–a couple episodes ago–on the Zen founder podcast and it involves email and Trello and a label that I have called “This week,” where I dump everything in and then I circle back once a week and I go through all that lower priority stuff.
It works well for me but there’s nothing that can take 500 emails and make it a 60-minute task because it’s not just replying “Yes,” or replying “No,” some of them are like really hard decisions, or some of them takes more research and more thought. You can have an email that might take you 30 or 40 minutes just to put together whatever it is, “I need to run these numbers. I need to put a graph together. I need to put a spreadsheet together,” or whatever. That’s the fun of getting back to it.
I have had some folks I worked with who don’t experience that. It’s not everyone that has a tough time getting back and into work. Some people come back super recharged and excited, they wake up in the morning and they’re like, “Oh, I’m going to hit the ground running because I haven’t worked for two weeks,” and for some reason, I’m the exact opposite. I’m like a momentum player where while I’m working, I don’t want to stop working, and while I’m not working, I don’t want to start. It sounds like you might be the same.
Mike: Yeah, pretty much. I kept a pretty good handle on my email for the most part. I’ve got 60 in my mailbox right there. Some of them, I have to deal with them. It’s not like I can just delete them. One of them was on Google’s […] policies that are changing in a couple of weeks. I have to do something with it. I can’t just let it go. It’s not only time sensitive but it’s also in my mailbox. It’s hard to figure out what to do with some of them because a lot of them I just can’t delegate, at least not yet.
I was printing books and stuff for the Single Founder handbook through CreateSpace and then they changed everything over as of January 1st. It’s just like, “Oh great. Now, I’ve got to go figure out how this happens,” because somebody placed an order for the book and I can’t even print it. I literally can’t do anything.
Rob: I do the same thing for my book and my kid’s books. CreateSpace has existed since 2006, Amazon bought them, didn’t change anything and now they rolled it into the Kindle thing. The KDP which is like the Kindle Direct Publishing. You have to go through a bunch of configuration and then you get it set up, but they remove functionality.
I used to be able to–in CreateSpace–just send one copy to a person. Now in order to do that, you have to enter their email address in your Amazon account. Now, it’s in your Amazon account. You got to go back and delete it if you don’t want it after.
I actually debated between two options there which was to either completely give up fulfillment myself. I used to have a VA that would punch it through CreateSpace and she’s like, “This isn’t working anymore.” I either was going to completely just link off to Amazon and Audible and just walk away with my hands in the air slinked back into the hedge and just be like, “Yeah, I’m just going to let people buy from there,” but I wound up ordering 20 copies, sent them to her and she is now doing one off fulfillment.
Start small, stay small. It might sell 20 physical copies in a month through the site. It sells more than that through Amazon. That’s what I do. I’m kind of thinking to wait and see how it goes and if it works out this way, then fine. But I don’t know, I hate it when software changes like that. Why did they need to update the software, Mike? Why don’t we just use the same version that we’ve been using for 20 years?
Mike: Yeah. I find it interesting that you decided or at least contemplated the idea of just walking away from all the fulfillment that you were going to do on your side and then instead decided to have your VA send out some of the books. I’ve still got a bunch of books here. I’ll probably use those for fulfillment for right now. I’m seriously contemplating going in that direction myself. Throwing my hands up and saying, “I’m done. I’m just not even going to deal with it,” but obviously, there’s lots of other implications and things to think about there.
The only other thing I have on my side is that I got a paint set for Christmas from my wife and I think that it was actually a secret ploy because she wanted to paint some of the D&D mini figures that I ended up buying. On New Year’s Eve, we decided to spend a couple of hours with some of the kids off to an overnight sleepaway camp that was $70 for each camp down in Connecticut. Her and I sat there and painted D&D mini figures for probably two or three hours or something like that and watched a movie and went to bed. That was the extent of our New Year’s festivities.
For the listeners, Rob apparently has a power blackout right now. I’m going to be doing the rest of the episode solo. Today’s episode is going to be on getting started with event tracking. I’m looking at this just because I’m reworking some parts of my sales funnel for Bluetick and wanted to look around and see what other people were doing.
I’ve revisited this a couple times in the past but it seems like I never really do a great job of documenting the entire system. I looked around to see if there were some examples of what other people were doing and came across a couple of articles over on the Segment.com blog and we’ll link those up in the show notes including a Google spreadsheet that they have that they’ve published which is essentially a guide to how they have documented their event tracking; what it is that they track and why they track it.
I’ve been reading that and a bunch of other things and various blog posts on the internet. There’s a couple of different tips and tricks that you have for event tracking. The first thing to keep in mind is that events can happen across multiple tools. For example, when somebody makes a payment, it goes in Stripe, Stripe can trigger an event. If somebody signs up for your app, that’s an event as well and that can happen inside your app; it’s completely disconnected from Stripe. Although you can integrate it into Stripe, both of those systems have their own sets of events.
Within a Segment, obviously you can send all of your events to Segment from all the different tools, but you’re not using Segment, then you still have this problem of having events in multiple systems. If you’re going to try and track those, it makes it very difficult. The idea here is that if you have events in different systems and you’re trying to tie them together, what you want to do is you want to document them.
Before you start implementing events and trying to track them, or trying to implement sort of analytics around them, what you need to do is sit down and document them. What this does is it makes revisiting them in the future a lot easier. It also makes it easier for your new hires or contractors to see at a glance what events already exist and why those different events exist and where they are.
The other thing that I found is that usually what I’ll do is I’ll go look at my events and I will go and take a look at them. I might work with them for a couple of days or a week or two and then I don’t revisit them for several months because there are other things that I need to track. I get into other things and come back to it and I’m kind of lost. I’m like, “Where is everything? What is it that I’m tracking?” and kind of forget all those things.
Documenting these is extremely helpful. The first part of that is to define what your events are. Segment recommends defining three core life cycle events. Anything more than that is probably going to be overwhelming. The idea is: what exactly is a core lifecycle event?
A life cycle event is essentially something that your customer needs to do inside of your app so that it will start providing value to them. We’ll kind of refocus this a little bit to event tracking inside of your app or the ancillary stuff associated with it, explicitly for your app and not necessarily in other tools because you don’t necessarily have a lot of control over what those things are named or how they’re put together but you may still want to document what some of those are.
Some of the things you need to look at is whether or not the app is providing value to them and what are the different events that have to happen before they get there. The first one might be that they signed up for an account. Obviously, that’s one of the first things that you probably want to track. Once they signed up for an account, there may be other things that you have to track. For example in Bluetick, once they’ve signed up for an account, they’ve gotten in there, they need to connect their mailbox. If they don’t connect their mailbox, they can’t get value out of the product.
There’s other things that they need to do as well. They need to set up a sequence. If they haven’t set up a sequence, they’re obviously not going to get any value out of the product because it’s not going to be sending out emails on their behalf. Think about the exact things that the customer needs to do before your app is going to provide value and focus on those as your events.
Next step is to name each of your events. I would highly recommend using some sort of a naming convention. Segment recommends that you use past tense verbs to describe them. Instead of saying, “Signing up,” you say, “Signed up.” If it’s sending data, you say, “Sent project data.” If they started a subscription, you say, “Started subscription.” You don’t say, “Subscription started,” that’s more of a description of what it is as opposed to the past tense description of it. You’re using it as a past tense verb as opposed to nouns.
The next part of your naming convention is make sure you’re using capitalized letters for these. Again, these are just recommendations, they’re not set in stone. If you decide that you’re going to do it differently, that’s totally okay. Just make sure that you’re consistent across all of the events when you do this. If you write these down and you are consistent across, it just makes it easier to eyeball something and say, “That’s an event,” versus, “That’s a property.”
Next thing, obviously that leads into properties. For each event that you have, which properties are going to be supplied as part of that event and what are the property values being supplied? By property values, I don’t necessarily mean is it an integer or is it a string. That kind of goes into it, but you really want to document what the name of that property is and what its purpose is. For example, customer ID, you can describe it and say it is an integer describing the unique customer ID inside of my local database. You might also say that it’s a customer ID that’s a string representation that’s the public facing version of that. You may track both of them. It depends on kind of where you’re tracking those events and seeing them and sending them.
Next one, document exactly why is this data being tracked. Why is it important to you? What is it going to do for you and what are you going to do with that data? If you’re tracking an event just to track it, it’s not very valuable. What you really want to do is focus in on those events that you’re going to take some sort of an action on. In the case of when somebody signs up, the signed up event triggers, at that point then what?
You’re probably analyzing the people who signed up and trying to figure out whether or not they’ve started a subscription. All the different things that go along in the middle, whatever that funnel looks like, you’re going to want to track people along the way to see where the drop off is. That’s why you track signed up because that’s kind of a starting point. You also track the started subscription because that’s the end of their trial period. What you want to do is make sure that you’re only tracking the events for which you’re going to take an action on. If you’re not doing that, you’ve got all these different events that you’re looking at and it’s really just going to be confusing.
The next thing to take a look at and make sure that you document is where is this event coming from? Whether you document this as a URL, or a set of URLs, or wild cards or something like that, there’s a lot of different ways to do it. You may even say that this particular event comes from Stripe or gets fed in from Zapier, or some other tool and then put it into your system. You really want to know where it comes from and what is triggering it. Because otherwise, it’s going to take you awhile to figure out how events lead into one another.
For example, if you have a Stripe event and it happens, it says, “They started a subscription,” because the billing got triggered, how is that done? Is it done natively from a Stripe subscription, or is it something that you initialize inside of your app, you send it over to Stripe, and then it comes back, and then Stripe does it. Depending on which of those two things is true, you’re going to have to document that differently because what you don’t want to have is you don’t want to have this event that says, “Started subscription,” and then not be able to find where that event gets triggered.
Otherwise, you can try and modify what your sales funnel looks like because you’re trying to optimize some things and then suddenly these new events keep popping up. You thought you removed the code for it but you didn’t remove all of it because there were other codes in different locations, either on the app or in some other tool that gets fed in. You want to make sure that you document not just the tool that it comes from, but how it’s triggered and how that data gets back into whatever your essential repository is.
Like I said, whether it’s Segment, or your own app, or your own database, or mixed panels, something along those lines. You need to know the entire path because if you don’t have the entire path, lots of things can go haywire and it’s really hard to deal with those pieces of data. Especially when those events are triggering other things because essentially it’s a cascading system and it’s so hard to remove some of those events or prevent things from happening if they are triggered by things.
Next, you’re going to want to take a look at exactly the code that is in place and document exactly what that is supposed to be inside of whatever your document is. Again, Segment uses a Google sheet to document it. We’ll link that up in the show notes. I really think that it’s a good idea to go take a look at that and see what they do and how they do it because they have the exact snippets of code that are in there. All the stuff that I’m talking about today is all documented in there.
Once you got that code documented in there, just at a glance, you’re going to be able to say, “Well, is this JavaScript, is it going to be sitting on a webpage?” You’ll see that based on all the other information that you’re putting into this Google Sheet. You’ll see is it JavaScript, is it Ruby, is it C Sharp. You’ll get a sense of that when you take a look at that code, or there may even be something in there that says, “This is externally generated and we don’t have anything.” For example, one of their events says that it comes from a Zendesk webhook. Obviously, there’s no code for that. It’s just configured directly inside of Zendesk.
Next is take a look at the status of those events. The status fields are actually pretty important. This isn’t something I had thought about until I took a look at their documentation. They have three different fields for this. They have ready, installed, and tested. They have a yes/no for each of those. It may be installed but it hasn’t been fully tested. They may have put it together and it’s maybe ready to be deployed, but it hasn’t actually been installed on to the website or into the app,, or anything like that. They also may not have tested it.
The other thing that you can keep in mind here is that you could add another field here, or you could even just reuse the install field to keep track of this. You may decide to deprecate certain events because as I said before, once an event is in your system or has been in place somewhere inside of your app or as part of your app’s life cycle and it’s been used to track your customers, it’s impossible to basically rip that out because it’s a historical event. You can’t delete it and say this never happened, because it actually did. You just have to make sure that if you decide that you’re no longer going to be tracking a particular event, that you change the status in there so that if you go start looking at customers that are six months, or a year, or three years old and you start seeing these weird events in there, you can look at the documentation and say, “This used to be used for this at that point and now it’s no longer used which is why all the new customers don’t have that anymore.”
Then the last thing to keep track of–and this is kind of a notes field–it just allows you to put whatever other information you need to put in there to discuss this particular event, maybe you say, “This was deprecated on such and such date,” or, “We created this on such and such date,” those could be their own unique column inside the spreadsheet. But in any case, it allows you to put some notes in there.
Now that we’ve kind of talked about the documentation itself for these particular events, one thing to think about is why use events at all? If you look at a bunch of different marketing platforms, you’ll see things like some of them use tags, some of them use events, some of them have both. The key question here is what’s really the difference? Why would use one versus the other? The thing to keep in mind with a tag versus an event is a tag is essentially a status field, there’s a categorization. Does this need such and such criteria or does it not? Have they achieved this particular goal or have they not? That’s a little different from an event where an event also has a date and time that something happened.
With the tag, it just says is it yes or no. Whereas with an event, it may have that information, but in addition to that, it also has a date and time with it. It could happen more than once. You may decide if this happens twice within a week for example, let’s send out a particular email, or let’s act on that in a certain way.
For example, in one of the things I have in Bluetick is that when somebody’s subscription is canceled and then a new subscription is created, that is essentially an aggregate the says, “Okay, do not trigger an event for this,” because it’s not a cancellation. I treat it that way because inside of Stripe, I can’t just say, “Translate or convert this subscription from this level,” I can’t do that. Instead, what I do is I say, “Well, if this event happens and then this other event happens within a certain timeframe, then treat it in one way. Otherwise, treat it a different way.” If an event comes in and says, “Subscription cancelled,” and then there is not a corresponding subscription created within maybe four to six hours or something like that. If those two things don’t go together, then treat it as a cancellation and it triggers that cancellation event.
That’s in my system, it’s not Stripe’s. Stripe is obviously going to say, “Okay, well this is a cancellation and then here’s a new subscription,” but to me in my own marketing sales funnel, it is not a cancellation. It is, for Stripe, but in my events system, it is not. Those are the types of things that you want to make sure that you differentiate between how you’re tracking your events, versus how other people are.
The nice thing about this is that, when you’re using an event, it’s a lot better than just the fact that something happened in the past. It’s because you’ve got that time and date associated with it. Think of for example if there’s something in your app and somebody runs into a particular error, and you have the error surface back into the backend of your system. Maybe it’s a frontend client side JavaScript error, maybe it’s a backend inside of your Ruby code or something like that. That stuff can bubble up into your event system, and your event system can take a look at that and say, “Well, this particular customer ran into this problem,” and we’ve got all the documentation around that the says, “Here’s the stack trace,” or “Here’s the line of code that they ran into through this particular error,” and you can dig into it and figure out why.
But when you’re trying to prioritize things, you may look at that and say, “Well, do I need to prioritize this higher? Did they run into it 30 times or 50 times in an hour? And then they went over to the help desk or the documentation and started looking there. Then they came back and they ran into it more.” That’s a lot more information that you’d be able to see from an event than if you were to see from a tag. A tag will just tell you, “Well, they ran into an error,” but the events, the series of events, you’re going to be able to see that and see exactly what that person did along the way.
Now, to kind of step a little bit back from that, I’m not saying that you would go in there and you would necessarily create all of those things as events in your system that you would be tracking on a regular basis and trying to use to match up to your KPIs for the system, for your application, and try and move the business forward, or tweak different things to make that possible. What you might do is you might want to say are people running into errors with a particular piece of the application before they reach one of those goals along the way in order to activate them into a customer after they’ve signed up, but before their subscription is created and you have charged them.
That’s the type of thing that you want to think about. How do these events chain together and what do they mean to you? What are you going to do with that information afterwards? Because if you’re just tracking events to track events, it’s not very helpful.
A key example of this I think in most cases is page views. If you are looking at anonymous visitors coming to your website and trying to figure out what is the path that they go through on your website. In some cases, that’s very important. In a lot of cases, it’s not, though. All these events that can be triggered you can say, okay, here’s a page view for example, that’s the event that gets triggered. Then for the properties you may say page name and you send that into your analytics software or whatever it happens to be. As I said, whether it’s Google Analytics, or mixed panel, or Segment or what have you. You’ve got that information, but what does it really do for you? Are you going to tweak the layout of your website? Are you going to make changes to the web pages? Are you going to modify the navigation a little bit?
If those are the types of things that you’re looking to do, then yes, you should absolutely be tracking those. But if you’re just tracking them to track them with no purpose in mind, then they’re worthless. The one caveat I would say with that is that you start tracking those events in order to get a general idea of what’s going on. For example, how do you know how many people visited your about page? That’s one of those key things that a lot of people don’t spend very much time on their about page. It actually is a page the most people’s websites gets a fair amount of traffic and these people want to know about the businesses that they’re buying things from.
If you need to know how many people are coming there, most people will look at their Google Analytics but that’s a situation where you could say, “I’m sending this information into my analytics software and I’m tracking that because I want to get a general idea of how many people are going there.” Once you have that, you can start narrowing it down because you’re associating each of those events with a visitor or with a unique user, that gives you the ability to say how many unique visits is this getting versus the total number of visits.
The same person visiting that 10 or 15 times sends a very different signal than 10 different people who visited that page once. With all that, I think I’m going to wrap up today’s episode. Again, we’ll link up both the article itself to the Segment blog and a link directly to the Google spreadsheet that they have directly in the show notes for this episode.
If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it, I’m Mike.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How’s it going this week, Rob?
Rob: I always struggle getting back to work after taking time off. I was off for about a week over the Christmas break and then obviously New Years was Monday and Tuesday. Getting up Wednesday and getting back in the email. I certainly checked and responded to email over the break, but you don’t dig in and do a lot of the little stuff. I think my Kryptonite is breaks. As much as I love breaks and as much as they make me feel re-energized, I really struggle to reenter the work mindset. Do you feel the same way?
Mike: Yeah, definitely. I’ve actually had that struggle for the past couple of weeks. December is obviously kind of slow just in general. After about the 15th or so, nothing was really happening. I decided to back off of my schedule a little bit and use the time to recuperate a little bit. I try to do some things here and there but I also realized that it was vacation, I’m not going to work my tail off. I just got to a point where I’m like, “I’m just not getting anything done.” I just said, “The heck with it,” at one point and I’m trying to get back into things at this point. It’s been a progression of about a week or so trying to get back into things.
Rob: Yeah, that’s crazy, and you know that it’s best for you to completely unplug, but I almost feel like when I completely unplug it’s even worse to try to get back into it because you come back and you have 500 emails or something. At least when I came back I only had, I don’t know, maybe 80 or 100 emails to respond to but I had taken care of a bunch of short responses in the meantime. I didn’t spend six or eight hours. I’ve had times when I’ve completely unplugged and I’ll come back and basically spent eight hours just in email because it stacks up so quickly.
Mike: Yeah, I’ve done that too. It’s hard especially that first week or so back because you got this backlog of email that you know you should go through. They’re at least semi important, you’ve got to probably do something with them. But at the same time, you don’t want to spend the entire day doing that because it’s kind of depressing to sit down and do email all day.
Rob: I agree, and there’s that struggle of just sitting in email. Sometimes it’s completely unproductive and sometimes it is really productive. Sometime it does push your business forward if that’s the phase that you’re at where you’re connecting with people and making intros and responding to things is moving things forward. There has been a chunk of my career where not being in email is detrimental to whatever I’m doing, and the more I am in email–as long as I’m efficient with it–it does move the business forward.
That’s the struggle. You get a few hundred emails and you’re kind of staring them in the face and it’s like, “How do I get the low priority ones out of here and not deal with them and only look at and respond to and organize the high priority ones?” I actually of course have a system for that. I talked about–a couple episodes ago–on the Zen founder podcast and it involves email and Trello and a label that I have called “This week,” where I dump everything in and then I circle back once a week and I go through all that lower priority stuff.
It works well for me but there’s nothing that can take 500 emails and make it a 60-minute task because it’s not just replying “Yes,” or replying “No,” some of them are like really hard decisions, or some of them takes more research and more thought. You can have an email that might take you 30 or 40 minutes just to put together whatever it is, “I need to run these numbers. I need to put a graph together. I need to put a spreadsheet together,” or whatever. That’s the fun of getting back to it.
I have had some folks I worked with who don’t experience that. It’s not everyone that has a tough time getting back and into work. Some people come back super recharged and excited, they wake up in the morning and they’re like, “Oh, I’m going to hit the ground running because I haven’t worked for two weeks,” and for some reason, I’m the exact opposite. I’m like a momentum player where while I’m working, I don’t want to stop working, and while I’m not working, I don’t want to start. It sounds like you might be the same.
Mike: Yeah, pretty much. I kept a pretty good handle on my email for the most part. I’ve got 60 in my mailbox right there. Some of them, I have to deal with them. It’s not like I can just delete them. One of them was on Google’s […] policies that are changing in a couple of weeks. I have to do something with it. I can’t just let it go. It’s not only time sensitive but it’s also in my mailbox. It’s hard to figure out what to do with some of them because a lot of them I just can’t delegate, at least not yet.
I was printing books and stuff for the Single Founder handbook through CreateSpace and then they changed everything over as of January 1st. It’s just like, “Oh great. Now, I’ve got to go figure out how this happens,” because somebody placed an order for the book and I can’t even print it. I literally can’t do anything.
Rob: I do the same thing for my book and my kid’s books. CreateSpace has existed since 2006, Amazon bought them, didn’t change anything and now they rolled it into the Kindle thing. The KDP which is like the Kindle Direct Publishing. You have to go through a bunch of configuration and then you get it set up, but they remove functionality.
I used to be able to–in CreateSpace–just send one copy to a person. Now in order to do that, you have to enter their email address in your Amazon account. Now, it’s in your Amazon account. You got to go back and delete it if you don’t want it after.
I actually debated between two options there which was to either completely give up fulfillment myself. I used to have a VA that would punch it through CreateSpace and she’s like, “This isn’t working anymore.” I either was going to completely just link off to Amazon and Audible and just walk away with my hands in the air slinked back into the hedge and just be like, “Yeah, I’m just going to let people buy from there,” but I wound up ordering 20 copies, sent them to her and she is now doing one off fulfillment.
Start small, stay small. It might sell 20 physical copies in a month through the site. It sells more than that through Amazon. That’s what I do. I’m kind of thinking to wait and see how it goes and if it works out this way, then fine. But I don’t know, I hate it when software changes like that. Why did they need to update the software, Mike? Why don’t we just use the same version that we’ve been using for 20 years?
Mike: Yeah. I find it interesting that you decided or at least contemplated the idea of just walking away from all the fulfillment that you were going to do on your side and then instead decided to have your VA send out some of the books. I’ve still got a bunch of books here. I’ll probably use those for fulfillment for right now. I’m seriously contemplating going in that direction myself. Throwing my hands up and saying, “I’m done. I’m just not even going to deal with it,” but obviously, there’s lots of other implications and things to think about there.
The only other thing I have on my side is that I got a paint set for Christmas from my wife and I think that it was actually a secret ploy because she wanted to paint some of the D&D mini figures that I ended up buying. On New Year’s Eve, we decided to spend a couple of hours with some of the kids off to an overnight sleepaway camp that was $70 for each camp down in Connecticut. Her and I sat there and painted D&D mini figures for probably two or three hours or something like that and watched a movie and went to bed. That was the extent of our New Year’s festivities.
For the listeners, Rob apparently has a power blackout right now. I’m going to be doing the rest of the episode solo. Today’s episode is going to be on getting started with event tracking. I’m looking at this just because I’m reworking some parts of my sales funnel for Bluetick and wanted to look around and see what other people were doing.
I’ve revisited this a couple times in the past but it seems like I never really do a great job of documenting the entire system. I looked around to see if there were some examples of what other people were doing and came across a couple of articles over on the Segment.com blog and we’ll link those up in the show notes including a Google spreadsheet that they have that they’ve published which is essentially a guide to how they have documented their event tracking; what it is that they track and why they track it.
I’ve been reading that and a bunch of other things and various blog posts on the internet. There’s a couple of different tips and tricks that you have for event tracking. The first thing to keep in mind is that events can happen across multiple tools. For example, when somebody makes a payment, it goes in Stripe, Stripe can trigger an event. If somebody signs up for your app, that’s an event as well and that can happen inside your app; it’s completely disconnected from Stripe. Although you can integrate it into Stripe, both of those systems have their own sets of events.
Within a Segment, obviously you can send all of your events to Segment from all the different tools, but you’re not using Segment, then you still have this problem of having events in multiple systems. If you’re going to try and track those, it makes it very difficult. The idea here is that if you have events in different systems and you’re trying to tie them together, what you want to do is you want to document them.
Before you start implementing events and trying to track them, or trying to implement sort of analytics around them, what you need to do is sit down and document them. What this does is it makes revisiting them in the future a lot easier. It also makes it easier for your new hires or contractors to see at a glance what events already exist and why those different events exist and where they are.
The other thing that I found is that usually what I’ll do is I’ll go look at my events and I will go and take a look at them. I might work with them for a couple of days or a week or two and then I don’t revisit them for several months because there are other things that I need to track. I get into other things and come back to it and I’m kind of lost. I’m like, “Where is everything? What is it that I’m tracking?” and kind of forget all those things.
Documenting these is extremely helpful. The first part of that is to define what your events are. Segment recommends defining three core life cycle events. Anything more than that is probably going to be overwhelming. The idea is: what exactly is a core lifecycle event?
A life cycle event is essentially something that your customer needs to do inside of your app so that it will start providing value to them. We’ll kind of refocus this a little bit to event tracking inside of your app or the ancillary stuff associated with it, explicitly for your app and not necessarily in other tools because you don’t necessarily have a lot of control over what those things are named or how they’re put together but you may still want to document what some of those are.
Some of the things you need to look at is whether or not the app is providing value to them and what are the different events that have to happen before they get there. The first one might be that they signed up for an account. Obviously, that’s one of the first things that you probably want to track. Once they signed up for an account, there may be other things that you have to track. For example in Bluetick, once they’ve signed up for an account, they’ve gotten in there, they need to connect their mailbox. If they don’t connect their mailbox, they can’t get value out of the product.
There’s other things that they need to do as well. They need to set up a sequence. If they haven’t set up a sequence, they’re obviously not going to get any value out of the product because it’s not going to be sending out emails on their behalf. Think about the exact things that the customer needs to do before your app is going to provide value and focus on those as your events.
Next step is to name each of your events. I would highly recommend using some sort of a naming convention. Segment recommends that you use past tense verbs to describe them. Instead of saying, “Signing up,” you say, “Signed up.” If it’s sending data, you say, “Sent project data.” If they started a subscription, you say, “Started subscription.” You don’t say, “Subscription started,” that’s more of a description of what it is as opposed to the past tense description of it. You’re using it as a past tense verb as opposed to nouns.
The next part of your naming convention is make sure you’re using capitalized letters for these. Again, these are just recommendations, they’re not set in stone. If you decide that you’re going to do it differently, that’s totally okay. Just make sure that you’re consistent across all of the events when you do this. If you write these down and you are consistent across, it just makes it easier to eyeball something and say, “That’s an event,” versus, “That’s a property.”
Next thing, obviously that leads into properties. For each event that you have, which properties are going to be supplied as part of that event and what are the property values being supplied? By property values, I don’t necessarily mean is it an integer or is it a string. That kind of goes into it, but you really want to document what the name of that property is and what its purpose is. For example, customer ID, you can describe it and say it is an integer describing the unique customer ID inside of my local database. You might also say that it’s a customer ID that’s a string representation that’s the public facing version of that. You may track both of them. It depends on kind of where you’re tracking those events and seeing them and sending them.
Next one, document exactly why is this data being tracked. Why is it important to you? What is it going to do for you and what are you going to do with that data? If you’re tracking an event just to track it, it’s not very valuable. What you really want to do is focus in on those events that you’re going to take some sort of an action on. In the case of when somebody signs up, the signed up event triggers, at that point then what?
You’re probably analyzing the people who signed up and trying to figure out whether or not they’ve started a subscription. All the different things that go along in the middle, whatever that funnel looks like, you’re going to want to track people along the way to see where the drop off is. That’s why you track signed up because that’s kind of a starting point. You also track the started subscription because that’s the end of their trial period. What you want to do is make sure that you’re only tracking the events for which you’re going to take an action on. If you’re not doing that, you’ve got all these different events that you’re looking at and it’s really just going to be confusing.
The next thing to take a look at and make sure that you document is where is this event coming from? Whether you document this as a URL, or a set of URLs, or wild cards or something like that, there’s a lot of different ways to do it. You may even say that this particular event comes from Stripe or gets fed in from Zapier, or some other tool and then put it into your system. You really want to know where it comes from and what is triggering it. Because otherwise, it’s going to take you awhile to figure out how events lead into one another.
For example, if you have a Stripe event and it happens, it says, “They started a subscription,” because the billing got triggered, how is that done? Is it done natively from a Stripe subscription, or is it something that you initialize inside of your app, you send it over to Stripe, and then it comes back, and then Stripe does it. Depending on which of those two things is true, you’re going to have to document that differently because what you don’t want to have is you don’t want to have this event that says, “Started subscription,” and then not be able to find where that event gets triggered.
Otherwise, you can try and modify what your sales funnel looks like because you’re trying to optimize some things and then suddenly these new events keep popping up. You thought you removed the code for it but you didn’t remove all of it because there were other codes in different locations, either on the app or in some other tool that gets fed in. You want to make sure that you document not just the tool that it comes from, but how it’s triggered and how that data gets back into whatever your essential repository is.
Like I said, whether it’s Segment, or your own app, or your own database, or mixed panels, something along those lines. You need to know the entire path because if you don’t have the entire path, lots of things can go haywire and it’s really hard to deal with those pieces of data. Especially when those events are triggering other things because essentially it’s a cascading system and it’s so hard to remove some of those events or prevent things from happening if they are triggered by things.
Next, you’re going to want to take a look at exactly the code that is in place and document exactly what that is supposed to be inside of whatever your document is. Again, Segment uses a Google sheet to document it. We’ll link that up in the show notes. I really think that it’s a good idea to go take a look at that and see what they do and how they do it because they have the exact snippets of code that are in there. All the stuff that I’m talking about today is all documented in there.
Once you got that code documented in there, just at a glance, you’re going to be able to say, “Well, is this JavaScript, is it going to be sitting on a webpage?” You’ll see that based on all the other information that you’re putting into this Google Sheet. You’ll see is it JavaScript, is it Ruby, is it C Sharp. You’ll get a sense of that when you take a look at that code, or there may even be something in there that says, “This is externally generated and we don’t have anything.” For example, one of their events says that it comes from a Zendesk webhook. Obviously, there’s no code for that. It’s just configured directly inside of Zendesk.
Next is take a look at the status of those events. The status fields are actually pretty important. This isn’t something I had thought about until I took a look at their documentation. They have three different fields for this. They have ready, installed, and tested. They have a yes/no for each of those. It may be installed but it hasn’t been fully tested. They may have put it together and it’s maybe ready to be deployed, but it hasn’t actually been installed on to the website or into the app,, or anything like that. They also may not have tested it.
The other thing that you can keep in mind here is that you could add another field here, or you could even just reuse the install field to keep track of this. You may decide to deprecate certain events because as I said before, once an event is in your system or has been in place somewhere inside of your app or as part of your app’s life cycle and it’s been used to track your customers, it’s impossible to basically rip that out because it’s a historical event. You can’t delete it and say this never happened, because it actually did. You just have to make sure that if you decide that you’re no longer going to be tracking a particular event, that you change the status in there so that if you go start looking at customers that are six months, or a year, or three years old and you start seeing these weird events in there, you can look at the documentation and say, “This used to be used for this at that point and now it’s no longer used which is why all the new customers don’t have that anymore.”
Then the last thing to keep track of–and this is kind of a notes field–it just allows you to put whatever other information you need to put in there to discuss this particular event, maybe you say, “This was deprecated on such and such date,” or, “We created this on such and such date,” those could be their own unique column inside the spreadsheet. But in any case, it allows you to put some notes in there.
Now that we’ve kind of talked about the documentation itself for these particular events, one thing to think about is why use events at all? If you look at a bunch of different marketing platforms, you’ll see things like some of them use tags, some of them use events, some of them have both. The key question here is what’s really the difference? Why would use one versus the other? The thing to keep in mind with a tag versus an event is a tag is essentially a status field, there’s a categorization. Does this need such and such criteria or does it not? Have they achieved this particular goal or have they not? That’s a little different from an event where an event also has a date and time that something happened.
With the tag, it just says is it yes or no. Whereas with an event, it may have that information, but in addition to that, it also has a date and time with it. It could happen more than once. You may decide if this happens twice within a week for example, let’s send out a particular email, or let’s act on that in a certain way.
For example, in one of the things I have in Bluetick is that when somebody’s subscription is canceled and then a new subscription is created, that is essentially an aggregate the says, “Okay, do not trigger an event for this,” because it’s not a cancellation. I treat it that way because inside of Stripe, I can’t just say, “Translate or convert this subscription from this level,” I can’t do that. Instead, what I do is I say, “Well, if this event happens and then this other event happens within a certain timeframe, then treat it in one way. Otherwise, treat it a different way.” If an event comes in and says, “Subscription cancelled,” and then there is not a corresponding subscription created within maybe four to six hours or something like that. If those two things don’t go together, then treat it as a cancellation and it triggers that cancellation event.
That’s in my system, it’s not Stripe’s. Stripe is obviously going to say, “Okay, well this is a cancellation and then here’s a new subscription,” but to me in my own marketing sales funnel, it is not a cancellation. It is, for Stripe, but in my events system, it is not. Those are the types of things that you want to make sure that you differentiate between how you’re tracking your events, versus how other people are.
The nice thing about this is that, when you’re using an event, it’s a lot better than just the fact that something happened in the past. It’s because you’ve got that time and date associated with it. Think of for example if there’s something in your app and somebody runs into a particular error, and you have the error surface back into the backend of your system. Maybe it’s a frontend client side JavaScript error, maybe it’s a backend inside of your Ruby code or something like that. That stuff can bubble up into your event system, and your event system can take a look at that and say, “Well, this particular customer ran into this problem,” and we’ve got all the documentation around that the says, “Here’s the stack trace,” or “Here’s the line of code that they ran into through this particular error,” and you can dig into it and figure out why.
But when you’re trying to prioritize things, you may look at that and say, “Well, do I need to prioritize this higher? Did they run into it 30 times or 50 times in an hour? And then they went over to the help desk or the documentation and started looking there. Then they came back and they ran into it more.” That’s a lot more information that you’d be able to see from an event than if you were to see from a tag. A tag will just tell you, “Well, they ran into an error,” but the events, the series of events, you’re going to be able to see that and see exactly what that person did along the way.
Now, to kind of step a little bit back from that, I’m not saying that you would go in there and you would necessarily create all of those things as events in your system that you would be tracking on a regular basis and trying to use to match up to your KPIs for the system, for your application, and try and move the business forward, or tweak different things to make that possible. What you might do is you might want to say are people running into errors with a particular piece of the application before they reach one of those goals along the way in order to activate them into a customer after they’ve signed up, but before their subscription is created and you have charged them.
That’s the type of thing that you want to think about. How do these events chain together and what do they mean to you? What are you going to do with that information afterwards? Because if you’re just tracking events to track events, it’s not very helpful.
A key example of this I think in most cases is page views. If you are looking at anonymous visitors coming to your website and trying to figure out what is the path that they go through on your website. In some cases, that’s very important. In a lot of cases, it’s not, though. All these events that can be triggered you can say, okay, here’s a page view for example, that’s the event that gets triggered. Then for the properties you may say page name and you send that into your analytics software or whatever it happens to be. As I said, whether it’s Google Analytics, or mixed panel, or Segment or what have you. You’ve got that information, but what does it really do for you? Are you going to tweak the layout of your website? Are you going to make changes to the web pages? Are you going to modify the navigation a little bit?
If those are the types of things that you’re looking to do, then yes, you should absolutely be tracking those. But if you’re just tracking them to track them with no purpose in mind, then they’re worthless. The one caveat I would say with that is that you start tracking those events in order to get a general idea of what’s going on. For example, how do you know how many people visited your about page? That’s one of those key things that a lot of people don’t spend very much time on their about page. It actually is a page the most people’s websites gets a fair amount of traffic and these people want to know about the businesses that they’re buying things from.
If you need to know how many people are coming there, most people will look at their Google Analytics but that’s a situation where you could say, “I’m sending this information into my analytics software and I’m tracking that because I want to get a general idea of how many people are going there.” Once you have that, you can start narrowing it down because you’re associating each of those events with a visitor or with a unique user, that gives you the ability to say how many unique visits is this getting versus the total number of visits.
The same person visiting that 10 or 15 times sends a very different signal than 10 different people who visited that page once. With all that, I think I’m going to wrap up today’s episode. Again, we’ll link up both the article itself to the Segment blog and a link directly to the Google spreadsheet that they have directly in the show notes for this episode.
If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 425 | How to Launch a Product Into a Mature Market
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to launch a product into a mature market. They give a definition of what a mature market is, list some examples of established players in different markets, discuss how to tell if you should enter a particular market and how to execute on it.
Items mentioned in this episode:
Rob: In this episode of Startups For the Rest of Us, Mike and I discuss how to launch a product into a mature market. This is Startups For the Rest of Us episode 425. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs to be awesome at building, launching, and growing software products. Weather you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: It’s the end of the year, so I’m just doing a lot of end-of-year paperwork that’s—mostly required government filings and getting ready for taxes and stuff like that. I had to submit, I think it was a affidavit of eligibility for my health insurance and it had to be done before the end of this year for my health insurance to be able to be renewed in April or something like that. It’s like, come on, you have to be kidding me. This far and advance and at the end of the year they’re requesting it but whatever you have to do it.
Rob: Yeah, that’s fascinating. The end-of-year stuff is always a pain in the butt. Because I’m always taking this time off. I take a week off, sometimes a week and a half off but it’s not fully off. I’m recording podcasts and doing a few calls here and there but a lot of thinking and planning scheming for the next year, and so it’s a bummer to have to think about government filings and that kind of stuff during this time.
Mike: How about you? What’s new with you?
Rob: Well, you probably hear I’m a little sick right now. Happy New Year everyone. This episode goes live on New Year’s Day. I hope your hangover is treating you well, and that Mike and I can be there for you. And for me, it’s another year, man. My birthday is December 28. So I turned 34 this year.
Mike: Did you say 34?
Rob: Yeah, I’m glad you caught that. Good. So listeners may or may not know how old I am. But everyone knows now that I’m definitely not 34.
Mike: I’m surprised you didn’t try to shoot for like 29.
Rob: Yeah, now that would have been good. I still get carded here in Minneapolis. So they’re funny. In California, they don’t card you very much at bars once you look old enough, but they still card everyone here. So it’s kind of not. It’s something you say, like, “Oh, I still get carded.” But it’s like, everyone kind of gets carded here.
Mike: Yeah, certain places I’ve seen where, like it’s just as a general rule. They’re like, hey, it doesn’t matter. Like, you have to card everybody. And depending on where you are, certain states or jurisdictions, they’ll say that if you have a violation of any kind, like you immediately lose your liquor license, and then, like, your entire business is gone. So I think that’s the case of the next town over here in Massachusetts, and they’re like, they’re not willing to take the risk. So there’s like, “Yup, we card everybody and if you don’t have ID, too bad.”
Rob: Yeah, that’s funny, you know, I found a retreat in California, and I walked into a bar and they carded me and when I walked an interval said they didn’t card him and was just laughing and laughing because they were like, “You look so old dude,” and he went with it but I think that’s funny when one person in a group gets carded and it’s kind of obvious you’re all the same age and I believe he’s like a few years younger than me as well.
So we have three new iTunes reviews. Three Mike, three in December. This one is from MJ SFS, says best Startup podcast. I’m on my fourth software, venture to battlemaps.co, and this podcast has been invaluable. Keep up the great work guys.
Another reviewer says a podcasting masterpiece filled with actionable product focused insights. It’s never moved from the top of my podcast list. Robin Mike are always full of enthusiasm, insights and great knowledge acquired from years of actually building products.
Thanks so much for those five star reviews. If you have not left startups for the rest of us a five star review. I would invite you to log into Stitcher or iTunes and help us get a few more listeners help us stay motivated and help us on those long, lonely winter nights when we’re sad and considering crying ourselves to sleep, and instead, we actually read our iTunes reviews to make ourselves feel better.
Mike: Because we’re not actually 34.
Rob: That’s because we’re not actually 34. So this week’s topic is interesting. I was going through our listener questions and there was a question that I felt like almost warranted an entire episode. So, I started just hammering out a quick outline. It turns out, it’s at least an entire episode and could probably be a book chapter. But the question asked, his name is Eric Roberts and he’s asking about how to launch into a mature market. He says, I know from listening to you guys, the competition in place is a good thing. But what about an overly mature market? How can you tell if a market is primed for a new solution to an old problem? And I think there’s a lot of nuance to this. I mean, there’s the idea of, what is a mature market, then how can you tell when you should or should not enter one, and how do you execute on that those are kind of the three angles that I was thinking it through. And so, that’s what we’re going to talk about today.
Mike: Cool. So where do you start?
Rob: Let’s talk about, what is a mature market, a give a little definition and some examples. So when I think of a mature market, I think of a market that has established players that are well known. So, think of examples in CRM, it’s definitely mature market, there is Salesforce, there’s HubSpot, there’s Base, there’s Pipedrive, there’s a long list Trigger, CRM, long list of folks there.
In addition, I think in a mature market, there tends to be maybe two or three really obvious choices. So if I say CRM, a lot of people think of Salesforce, HubSpot, maybe Highrise maybe Base or Pipedrive, in email marketing, in ESPs, people think of MailChimp, they think of AWeber, they think of Infusionsoft. I mean, there’s this kind of short list, it’s the opposite of the long tail, it’s the fat head, it’s called where there’s a cluster of companies, be it one, two, or three that have the vast majority of the market and kind of sit at the top of the market share. In addition, I think the third piece of that is that there are these product norms that have developed.
So if you think about CRM, there’s this nomenclature of leads, and deals and contacts. And if you think of ESPs, there’s this, these norms that are developed, like lists and subscribers and forms. And so, while this may not be an exhaustive list of everything that defines a mature market, those are the three pieces that I think of, in my mind, that kind of defined it, that’s having established players, it’s having two or three obvious choices, and then having kind of norms or nomenclature that have developed through those products – and then in the other products that are also entering the space.
Mike: I think the easiest way to recognize whether or not something is a mature market is if you go out to a handful of people and say, “Hey, do you know of any companies that are in this particular software vertical, whether it’s you know, CRMs or mailing lists,” like if the people that you know, or who are in your circles who have any familiarity with that can name at least two or three or four different companies that are in that space then it’s probably a mature market, obviously, like if they’re if it’s a not well-known industry, for example, let’s say like virtual tabletop software. If you talk to a bunch of people who are in that particular industry, they’re going to know very well like who the players are. But it doesn’t necessarily mean that it’s a mature market.
Rob: Yeah, I think that’s a good point. I mean, anytime you see a forum post that’s like, what do you use for CRM, you know, and then you’ll get dozens of responses and almost everyone’s using a different one, or what do you use for your to do lists? And, you know, there’s, there’s dozens and bug tracking and issue tracking and all these things. So what’s interesting is, I don’t think, you know, a mature market doesn’t necessarily mean it’s a big market.
Mike: I was just thinking that.
Rob: Yeah, because to even think about like more aware software where they have a mature product in a market that has been around now for more than a decade. They build a SaaS app for countertop installers. People who install the actual physical tile that goes in a kitchen or bathroom and that’s not a huge market, right? That’s not a $100 million market. And yet if you were to try to enter that now they are so far ahead, the market has matured because they launched in, I don’t remember what it was like 2006 or 2007. And they’ve just kept adding things in and maturing the market during that time.
Mike: Well, I guess it makes – tt begs the question like, is it considered a mature market? Or is it like mature players in that market? How do you differentiate between those two things like CRM, lots of people use it so by definition you could call that a mature market but for table countertop installers, they are more aware as is very mature player in that market. But the market itself is small. So do you consider it a mature market? Because it’s not like there’s a lot of competition or a lot of people in that market? So like, is that a mature market. Do you consider that?
Rob: Well, I guess by my definition, I have three points or is there an established player or players in the countertop installer market? Yes, because there’s more aware. Is there one, or two, or three obvious choices? Yes, there’s more aware and I think they own most of the market, but there’s obviously at least one other competitor and have they developed product norms that may not have existed before software into the space. I don’t know their space well enough, but I’m guessing that there’s nomenclature in things in their product that they came up with that that didn’t exist before then.
So I would say yeah, I would say even a small market I understand your differentiation of mature product versus a mature market but I feel like once there is a mature product or two in a market the market becomes mature at that point yeah.
Mike: I was just kind of thinking about the product norms piece of it because if there aren’t a large number of products in that market and obviously like there’s room for that software to grow and for the products who are already in place to grow that’s fine but do the majority of countertop installers know about them? How many of them are actually using software of any kind or how many of them are looking for it? Do you see kind of the direction I’m going with that because like if there’s 100,000 countertop installers, but only 500 of them are using software of any kind. Does that establish a product norm, because that’s only five percent.
Rob: That’s a good point, yes, and imagine if they’d been around for, you know, if you’ve been around for 10 years. So you’d say, “Hey, this is a pretty mature product. There’s a lot of features, it’s stable,” all those things, but you only have five percent market penetration. Is that a mature market? I don’t know. I don’t know that I have a good answer to that, other than that either means that they’re not marketing very well. And we’ve now removed from more of our software that we’re doing a hypothetical at this point. But in that hypothetical where this company has been around for 10 years, they only have five percent market penetration, and there’s really no one else, it’s only five percent of market is even using software, then either that’s a really tough market. It’s a market that is highly resistant to technology, or that company is not marketing themselves very well, right? They’re not penetrating the market past five percent.
So I would then ask myself – If I wanted to enter that market, which of those is it, because if they’re not marketing very well, we’ll come in and out market them. But if the industry is just highly resistant to it, then that’s probably not a good market to throw yourself into.
Mike: And I would say that that’s probably a general rule. If it’s hard to get into them, then it’s because they’re resistant to change and resistant to adopting technology, then I would probably would avoid them in general. But it’s a very different story if they’re not marketing themselves very well. And you just trying to make a name for yourself there.
Rob: Right. And I think, that’s a good point. Because the kind of the second point that I wanted to cover, this question I want to answer is, how can you tell when you should or should not enter a mature market? I think we’ve just touched on one.
If you determine that, boy, this market is mature and really no one else wants to use software in it and I’m just going to have to be pulling from the existing competitor who only has five percent of the entire space that would give me pause, that tells me about the customer type and about the how they don’t want to change, right. So then that means that even getting them to switch from a competitor is going to be really difficult. I think also entering a mature market, I personally would not do that as a first time founder without money. One example that I kept coming back to of course is the one that I lived, entering a mature market with the drip, becoming an ESP and then becoming a marketing automation provider.
If I had not had the experience and the past successes that I had and did not have the self-fundability, you know, I was pulling money off of hit tail and other apps that I had, I don’t know that we could have made it. I don’t know that Drip would have survived because the market had so many mature players. Again, MailChimp, AWeber, Infusionsoft, and others – and it cuts both ways because, obviously, that’s what made it possible to grow Drip so quickly is that the market was – it did have opportunity. But if you’re a first time founder and you’re not going to raise funding, I would seriously reconsider trying to enter a mature market because these are the ones we can get a lot of success but these markets are very, very hard to penetrate, if you don’t have the right tool set.
Mike: I just have a quick search for, something kind of running through my brain is where we’re talking about what constitutes a mature market and there’s terms like total addressable market and then serviceable available market, which to me it seems like going back to the example of, if there’s a total of 100,000 countertop installers but only 500 of them are actually using that type of software then maybe your serviceable market is only about 1000 or maybe it’s 750 or something like that versus the total market which is 100,000. And you can look at that and say, well, if the established players have 50% or 75% of the serviceable market, which again is only 750 or 1000, then that’s a fairly significant chunk of those people. And it’s because those types of people are resistant to adopting technology or adopting software solutions for that. And maybe the delineation there is like, are they established players? Do they have most of the addressable market or the serviceable market?
Rob: Yeah, I think that’s a good differentiation there. As I think through this, when I think of mature markets, where there is a lot of adoption. So let’s flip back to the ESP or the CRM or markets where total addressable and serviceable are approximately equivalent, or at least 80%, 70% of the total addressable is already using some type of software and is able and willing to pay for this, I don’t know that I can think of a really good reason not to try to disrupt one of these markets if that’s your ambition.
Like, disrupting an existing market is where that hyper growth comes from and hypergrowth for us bootstrappers might be getting to seven figures in two years and hypergrowth for AirBnb and Stripe, maybe was getting to seven figures in six months, you know, past the point of product market fit. Because you think about AirBnb, did they invent a new market? No, they really essentially disrupted the hotel market. It was an existing place where people were already spending money on these things and they figured out a different way to implement it.
Stripe is the same one, I have them as an example later in this episode. Did invent a whole new market? Did payment processing exist before them? No, of course not. There was Off.net, there was PayPal Web Payments Pro. There were all these gateways and all these services that were really a pain in the ass to use. And Stripe came in and just made it a heck of a lot easier. And even, Drip is the same thing, I think about – there were already ESPs, there were already marketing automation providers. But that made it that much easier to basically pull existing people away who were unhappy with the current state of affairs.
That’s what I think you have to find, is if everyone in the market is using a product and loves it, then maybe you shouldn’t enter that market. But I don’t know of a mature market where people aren’t disgruntled and you think of QuickBooks. Everybody hates QuickBooks, but everybody uses it. So is that right for disruption, you think of Slack, everybody uses Slack but now we see level.app from Derek Reimer, there’s a couple other apps in that space as well.
The more I think about—if that’s your ambition, and you’re willing to really go to the mattresses because it’s going to be a hard fight. I don’t know that there’s a good reason not to try to disrupt. Honestly, if you want to build a little niche lifestyle business and generate that low six-figure income and have it on autopilot and be able to work five or 10 hours a week, then don’t go into a mature market. That’s where I would say, think twice about it, because I’ve had apps like that and they don’t have the great single channel of traffic, and they made whatever it is maybe $1000 a month, and maybe it was 10 grand a month. But there were these awesome little niche products. I mean, they were not—they were in these very nascent markets in these very tight niches and you could autopilot them, but they would never grow past that.
And so, I think that’s the thing to think about, your personal preference. Does it sound interesting, fun to do the hard work and the stress of going after these mature markets? Because I think my hypothesis is that, like, most mature markets right now are ripe for disruption in one way or another.
Mike: Now, one question I have about everything that you just said there is that, it feels to me like a lot of what you talked about relates to the product itself and not necessarily the channels at which those markets are accessible. And something that really comes to mind is enterprise sales for certain types of software, so anything that’s installed across the entire organization, whether it’s 500, or 1000, or 50,000 endpoints in that environment, it feels to me like those are cases where it’s probably a mature market already. You probably can’t start there on day one, you’re going to have a really hard time going into those and being able to offer something that is going to compete with existing solutions. One, because they’re so far ahead of you, but two, also to be able to have the resources to walk in the door and do that at 10, 50, 100 different potential customers, because you don’t necessarily have the time. So, I feel like the channel that you use, that you’re going to get in front of these customers has to come into play here.
Rob: Yeah, no, it absolutely does. That’s where bootstrapping versus raising funding comes into play. If you’re going to bootstrap then your point is dead on. Don’t go after enterprise sales and a mature market because you’re just not going to have the cloud, you’re not going to have the logos, you’re not going to have the time to execute on that.
I have a good friend here in Minneapolis, who has worked for two different companies over the past few years. Both of them were heavily, heavily venture funded and both were going after these massive and mature markets. One was like data storage and the other one, I don’t even really know exactly what it is. But it’s deep-tech stuff. It’s stuff that kind of competes with like parts of AWS, or it competes with stuff that HP or HPE has, or launches or whatever. And yes, they were upstarts but they had to raise buckets of funding in order to do that and build out a team in advance of having any real revenue. And if it works, then they’ll take part of this huge deck of billion dollar market, but that’s the gamble. If it doesn’t work, then they’ll burn through their funding. If they have enough traction after 18 months, they won’t be able to raise the next round.
Obviously, we tend to talk to more to bootstrappers and folks who are listening to this podcast or probably on that side, but it is possible it’s just a whole different playbook if you’re going to do that.
One other exception I can think of when I would give it a second thought as to whether or not I wanted to enter a mature market is if there are other startups also entering that same space who are getting traction. To me, I’m more scared of other startups than I am the big, lumbering, 800-pound gorillas in the space, right? I’m less scared of sales or competing with Salesforce and I’d be more concerned of competing with Pipedrive or one of the other like, smaller, more agile CRMs that I see kind of innovating and things.
Mike: Yeah, I would agree with that. Although there are certain times where if your features start to show up in Gmail or something like that, like you probably want to be a little concerned.
Rob: Yeah, I agree. That’s just Gmail or Salesforce is going to move so much slower that it’s almost by coincidence. I feel like, if you build a feature and one of them, build it within a few months, they’ve probably been working on that for six or eight months. They don’t move fast enough to copy a little upstarts, until you become not a little upstart.
Mike: Yeah, for sure.
Rob: The other thing I would think about perhaps not entering a space, is if you find a space that doesn’t have early adopters. So you find a market – because that’s what you’re going to need, right? You’re going to need, you’re going to need early adopters to basically jump ship on existing solutions who are willing to switch. If you found a space where there are no early adopters—we could go back to that example where we had the company who only had five percent market penetration, and it took them 10 years to get that, it’s pretty obvious no one wants to change. And so, there really aren’t going to be, early adopters.
I can’t think of another good example. I mean, maybe I think of like, the legal space. I know that, when I was a consultant, I worked for a guy who launched a product and legal space. I remember, he just had a really tough time getting traction, because there were not many early adopters in that space. So that could be, I don’t know, that space today and maybe there are more early adopters, but it’s spaces like that that I think are going to be hard to compete with where, the person’s motto is, “Well, I never got fired for choosing IBM,” or “I never got fired for choosing Salesforce.” If that’s really the mantra of everyone, then it’s going to be hard to penetrate.
Mike: I think the other consideration there is whether or not you have to essentially build something that is going to completely replace an existing solution, or you’re just solving an extreme pain point that an existing solution doesn’t solve adequately. And if people are angry about it and looking for a solution to that and they’re willing to plug your product, in addition to whatever it is that they already have as kind of a stopgap measure because it’s so painful versus you have to—it’s the difference between implementing two or three features versus implementing 250 because you have to completely rip and replace that entire product.
I think you have a lot easier time if you only have to implement a couple of things. And if you execute on them really well, people are willing to spend a little bit of extra money to get your solution in there because they’re in such a huge amount of pain.
Rob: So the third part that I want to cover is if you decide to do this, how do you execute on it? I think the thing that – maybe the common wisdom is you have to be 10x better in order to get people to switch. I would say yes and no to that. I don’t know that you need to directly build a 10x better product. I think you do need to build a better product. But I think there’s other things that you can improve upon that are not just product basis, not just a feature race or usability race. So I want to talk about three or four ways that I feel like you could be two-x better in each and perhaps they multiply together to give you more than more than 10x and this really comes out. I mean, the more I wrote this down, this just came out of the Drip playbook. It’s the playbook that I executed as we as we built Drip up and it was these four places where we innovate.
There may be more but this is what comes to mind. The first is, price and if you’re in a mature market and you have a huge player, they often have pricing power where they their brand name and they can charge a lot more than everyone else and you won’t be able to without that brand name. And not only can you not charge that much but you can use that strength of that player against them. And if your product—It’s easier to use and you’re cheaper, you can get these early adopters to start switching
Now, you and I’ve talked a lot about Don’t be the low cost provider. The point is not to be the low cost provider forever. It’s long term to raise your prices. But in the early days trying to price match a large competitor with a brand name, when you don’t have the feature set that they do, it’s going to be difficult.
And so, either price innovation, where you’re innovating on the pricing model itself, that’s risky, but you can think about it or just being cheaper. Again, it cuts in multiple directions. It can bring people who turn or who are more price sensitive in all honesty with drip. I mean, we were priced against Infusionsoft, and Infusionsoft was $300 a month to start and it had a $2000 sign-up fee that you paid right at the beginning.
And that was easy to be cheaper than them and still turn a heck of a profit, right. But we could start at $50 or $100 a month and still not have people who were super price sensitive because if you’re paying $50 or $100 a month, you still have buy-ins, it’s not like we’re going down to $20 a month or something. And so, that’s the kind of pressing I’m talking about, right? Or Salesforce, I believe, is $125 per seat per month, if I recall.
Think about being able to innovate on that and charge $20 or $30 a month per seat, that’s still a nice revenue stream as you’re getting started, and you’re not bottom of the barrel, you’re not a B2C pricing, but it is and can be a competitive advantage, especially in the early days.
Mike: Yeah, I think what you’re kind of referring to there is not using the price as just the sole way to get in the door and be cheaper like because, obviously, you don’t want to do that long term, but it’s really to unlock that the unwillingness to move by having the cheaper price and get them to take that step. You reduce the friction enough by lowering the price to be able to get them to say, “Well, you know what, I’ll give it a shot,” versus if you are priced exactly the same and you have an identical feature set or they have a much better feature set because you’re just not there and they’re mature in the market, then it makes it easier for them to justify giving it a shot. Or even just like saying, “Okay, you know what, I can’t buy into all that stuff because I can’t afford it right now.” Or I’m not even using 90% of it.
I’ve seen a lot of mature solutions out there where they will throw every feature under the sun into the product. And eventually it just becomes this model with that is difficult for some people to adopt. Because they know that they’re not going to use 80% of it. They’re like, “Well, why am I paying this much money for something, I’m only using 10% or 20% off.”
Rob: Second place, I feel like you can innovate and outmaneuver your bigger competitors with the sales model. Oftentimes, you’re competing against enterprise-ish sales models where they have high-tech sales process. You can’t sign up on the site, you have to see a demo. There’s often setup fees to pay the hefty commissions they’re paying to the sales processes. And so, if you bring them and make them, either no touch, or low touch, or even medium touch, you can innovate on that process.
Again, coming back to Salesforce, it’s very hard to go to their site. I don’t believe you can just go to their site and sign up for an account. You have to go through this long process. Whereas with Pipedrive, you can go and sign up for it. Same thing with with Infusionsoft versus Drip, that was always a differentiator, is that you could come and try Drip out, there was a free trial. Infusionsoft, you didn’t even get to see the product unless you were on a demo. They didn’t want to in there playing around with it. So that can be another way to, basically, bring your innovations to the masses and outmaneuver folks and it’s not a product, it’s not just a feature, usability, it’s actually implementing a different sales model that can be more conducive to bring on early adopters.
Mike: I would say that this cuts the other way as well. Because if there are products out there that don’t offer like the ability to get on to a demo because they’re trying to be mass market and they’re trying to have a low-touch sales process. If you go the other direction, then you can have a lot of success there because you can get those people who have given those solutions to try and they got confused or lost and they just said, “Well, how do I get on a demo or have somebody show me something.” And if that company doesn’t offer it and you do, then you can get them on a call and you can – I won’t say gloss over the things that your product can’t do but you can essentially offer to do those things for them and do that high touch onboarding process and thereby justify a higher price tag for your software.
Rob: The third area where I feel like you can outmaneuver the big competition is in product and this one I it’s really hard to do. But it’s pretty straightforward to describe it. You make it way easier to use, which doesn’t tend to be that hard when you’re dealing with larger clumsier companies with 10 or 12-year-old code bases, you ship faster—so you have a better shipping velocity of new features. And it feels like products are constantly improving versus there are once or twice a year launch cycles and you build a unique feature, or two, or three that no one else has for now. You try to figure out a way to go back to first principles and innovate on something that is really hard for them to do.
So, adding automation into your ESP, when it takes everybody else a year to do it. Because the code base and they’re already at scale is one way to do that, or adding a lot of integrations that you know, that the early adopters will use that your competitors have not added. Because again, they just move slower than you do. So, you know, you look around and you say, “Oh, there’s this whole new ecosystem around Stripe.” And there’s there, Baremetrics, and there’s ProfitWell, and there’s Termbusters, and there’s Stunning, and there’s all this stuff, it’s like, you know, Infusionsoft or Salesforce, they’re not going to integrate with those tools yet, because they’re just not on their radar. But if you integrate with all of them, you could scoop up this early adopter, you know, the bootstrapper crowd the, the online business folks, because they use those tools. Gumroad is another one, but I want to, underscore that having those features is a short-term thing, because if they are successful, other folks will implement whether other upstarts or you know big competitors will implement them. But that’s how I think about, product innovation.
Again, easier said than done. But that is the playbook that I see working as, as startups try to attack these more mature markets.
Mike: Something else, I think that kind of falls under this bucket is just making your product look better. I mean, there’s products out there – I’ll specifically look at things like paychecks or ADP where, to log into them, you’ve got to have this weird looking JavaScript plugin on your website, that you load into the browser or some download that it looks terrible. It looks like it was built in the 80s because it actually was and they’ve never changed it. They’ve never updated it. And you end up with companies like Gusto that came out, which used to be ZenPayroll, and they just looked fantastic and just the look alone makes it feel like it’s in a more modern application.
Of course it is because it was just recently built, but the look and feel of it can go a long way towards making people feel like you’re responsive to the needs of the customers and you actually care about how your product looks and is presented.
Rob: I think that’s a great example. I think Gusto is another example of a company that entered a very mature market and through—I mean honestly, if you look at these points I hadn’t—so here’s a great example, because I was thinking about Drip, and Stripe, and others, when I wrote these four points of price, sales model product and marketing, which we’ll get into next. But gusto came in their price was cheaper than paychecks. I think I was using paychecks before at Gusto and Gusto was cheaper, Gusto’s sales model was so much better, it was all self served. I didn’t have to talk to people, it was a lot easier for me the product itself was easier to use. It was a better looking as you said, and they file, I don’t know, all my stuff. I guess Paychecks did some of that too, but the experience of Gusto in the communication is all via email, like click and do things like it is so much of a better thing and then their marketing, I would say that I really heard about it from word of mouth and the other three price sales model and product really drove that for me, but obviously their marketing to get into the hands of early adopters like us, I think was a pretty deliberate decision.
Mike: Yeah, I think the word of mouth marketing, if you have a good enough product that, I won’t say, it sells itself. But like if the customers that you have love it so much over the other things that they’ve tried then that word of mouth is really going to drive a lot of revenue for your new customers. And I don’t know how easy it is to recognize that that’s what’s actually going on. But I have seen that happen. And, there’s certain products that I’ve recommended where you look around and you don’t see a lot of marketing for them, but you’ve recommended them a lot to other people or other people have recommended those products to you. It’s just easy to see when those things are actually working.
Yeah. When you’re in a mature market, and the number one player is big, but everybody hates using it. That’s when word of mouth is huge. Because you will be you will become the thing that we’re all talking about, on our podcasts, at conferences on our blogs. I mean, think of Gusto or, again, ZenPayroll when it came out. Think of when Stripe came up, a ton of it was word of mouth.
Zenefits, it’s basically likes Gusto but for health insurance and other benefits. Drip had a really strong word of mouth in the early days. You know, there’s others. I’ll give another example, ready to wrap up, but we’re working on something that’s really hard to generate in general, and it can be a cap out, when people don’t know how they actually grew. I’ll often hear founders say – Oh just word of mouth, and it’s like, Yeah, I don’t think it really was word of mouth. You know, you just don’t really know, you don’t track your metrics. But in this case, like a mature market where you have this reviled number one player, I think getting in there, building a better product, better pricing, better sales model can really lead to word of mouth and some good stuff.
I think the other thing that they don’t mention about marketing in a space like this is you can take the approach of being the underdog, right? It’s easy to market against big guys when you can basically talk about being the anti them. So Salesforce had their – especially in the early days, no software, right. They had the circle with the red line through it and it said software in it because they were saying, no on-premise software, no massive installation and server footprints and stuff – we are just this thing in the cloud.
They were anti software. Less accounting was kind of the anti QuickBooks. I don’t know that they mentioned QuickBooks by name but I remember one of their headlines was about all accounting software sucks or sucks less. I mean, it was it was a good—It was a really interesting approach to it. Drip was the not Infusionsoft, what was my headline – lightweight marketing automation that doesn’t suck and I was implying that most marketing automation software sucks and listed the Marketos and Eloquas and the Infusionsofts that are just not fun to use and they’re not fun to be sold because the sales model sucks and they’re really expensive and here’s all the reasons that you don’t like them and here’s why we’re the opposite of all of that.
So, if you’re going to enter this market embrace market leaders’ strength and turn it into their weaknesses. I think it’s Jiu-jitsu, where if your opponent is really strong and he or she swings you do a parry and you let their momentum carry them through and that’s a big part of marketing against these really big players in established markets – is what is their biggest strength can be turned against them as the biggest weakness.
I feel like we’ve covered this topic pretty well. I think the one last thing I’ll say is we’ve given a ton of examples of people doing this, talked about Stripe, Gusto, Zenefits, Drip, and a few others. The one other example, I think, that’s doing a good job of it today is Superhuman and it’s that email client that—they’ve changed the sales model, they’ve actually gone from no touch the opposite direction, there’s onboarding, every person individually. Their product, from what I’ve heard, is easier to use and it’s amazing. Their marketing is, obviously – they’re doing a good job with it. Now, their price is interesting because they’re more expensive than any other ESPs. So that’s a whole that’s a whole other thing from extremely experienced founders that they’ve, basically, made a gamble to say we think we can build something truly 10x better and we’re going to charge for it.
I think they charge $30 a month, which if you think about it, compare Gmail to Superhuman, Gmail is essentially free. Although, I pay for it now because of how much storage I use, but, very different pricing model there. So they’re one example that’s doing it successfully today. And they’re not following, you know, the exact playbook that we’ve laid out here. But I they also have buckets of money. They’re three and four-time founders. So that’s where you can, in my opinion, you can start breaking rules because you know which rules to break.
Mike: Yeah, and that’s really a matter of like, certain types of people are in so much pain, that they are willing to be the early adopters and they’re willing to pay more money for it because it just makes their lives that much easier. And whereas no knock against Gmail because I use it as well but there’s certain things about Gmail that I wish were just a little bit easier and I’ve heard the guy who runs Superhuman spoke before and he’s talked about like, how the experience is really what they focus on and I’ve seen him commenting on Twitter here and there and showing pictures of all the different things that they’re testing. Somebody said, “Oh, why don’t you support this products on,” such and such. And he showed them a picture of like eight different laptops, where they were testing different variations of like the browser client, and he’s like, “We’re working on it but this is what we’ve got so far.”
It’s incredible because it partly tells a story, but it also explains or demonstrates how much pain certain people are in to be requesting that stuff and still willing to wait for it.
Rob: Yeah, and they worked on Superhuman, I believe, for 18 months to two years. It was a small team of developers before they launched. So they broke they broke a lot of “rules”. And again, it’s because they did have a lot of funding, they had prior exits. I mean, the guy had started Reportive and sold it to LinkedIn. And then, he had even another one before that.
When you get to that level, you’re just at the point where you can make some difficult calls and pivot out of the risk because of your experience in funding. Frankly, which is something I talked about earlier in this episode.
Mike: I’m sure Data had something to do with it.
Rob: Indeed.
Mike: Well, I think that about wraps us up for the day. Thanks to Eric Roberts for sending us that question. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribes to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: It’s the end of the year, so I’m just doing a lot of end-of-year paperwork that’s—mostly required government filings and getting ready for taxes and stuff like that. I had to submit, I think it was a affidavit of eligibility for my health insurance and it had to be done before the end of this year for my health insurance to be able to be renewed in April or something like that. It’s like, come on, you have to be kidding me. This far and advance and at the end of the year they’re requesting it but whatever you have to do it.
Rob: Yeah, that’s fascinating. The end-of-year stuff is always a pain in the butt. Because I’m always taking this time off. I take a week off, sometimes a week and a half off but it’s not fully off. I’m recording podcasts and doing a few calls here and there but a lot of thinking and planning scheming for the next year, and so it’s a bummer to have to think about government filings and that kind of stuff during this time.
Mike: How about you? What’s new with you?
Rob: Well, you probably hear I’m a little sick right now. Happy New Year everyone. This episode goes live on New Year’s Day. I hope your hangover is treating you well, and that Mike and I can be there for you. And for me, it’s another year, man. My birthday is December 28. So I turned 34 this year.
Mike: Did you say 34?
Rob: Yeah, I’m glad you caught that. Good. So listeners may or may not know how old I am. But everyone knows now that I’m definitely not 34.
Mike: I’m surprised you didn’t try to shoot for like 29.
Rob: Yeah, now that would have been good. I still get carded here in Minneapolis. So they’re funny. In California, they don’t card you very much at bars once you look old enough, but they still card everyone here. So it’s kind of not. It’s something you say, like, “Oh, I still get carded.” But it’s like, everyone kind of gets carded here.
Mike: Yeah, certain places I’ve seen where, like it’s just as a general rule. They’re like, hey, it doesn’t matter. Like, you have to card everybody. And depending on where you are, certain states or jurisdictions, they’ll say that if you have a violation of any kind, like you immediately lose your liquor license, and then, like, your entire business is gone. So I think that’s the case of the next town over here in Massachusetts, and they’re like, they’re not willing to take the risk. So there’s like, “Yup, we card everybody and if you don’t have ID, too bad.”
Rob: Yeah, that’s funny, you know, I found a retreat in California, and I walked into a bar and they carded me and when I walked an interval said they didn’t card him and was just laughing and laughing because they were like, “You look so old dude,” and he went with it but I think that’s funny when one person in a group gets carded and it’s kind of obvious you’re all the same age and I believe he’s like a few years younger than me as well.
So we have three new iTunes reviews. Three Mike, three in December. This one is from MJ SFS, says best Startup podcast. I’m on my fourth software, venture to battlemaps.co, and this podcast has been invaluable. Keep up the great work guys.
Another reviewer says a podcasting masterpiece filled with actionable product focused insights. It’s never moved from the top of my podcast list. Robin Mike are always full of enthusiasm, insights and great knowledge acquired from years of actually building products.
Thanks so much for those five star reviews. If you have not left startups for the rest of us a five star review. I would invite you to log into Stitcher or iTunes and help us get a few more listeners help us stay motivated and help us on those long, lonely winter nights when we’re sad and considering crying ourselves to sleep, and instead, we actually read our iTunes reviews to make ourselves feel better.
Mike: Because we’re not actually 34.
Rob: That’s because we’re not actually 34. So this week’s topic is interesting. I was going through our listener questions and there was a question that I felt like almost warranted an entire episode. So, I started just hammering out a quick outline. It turns out, it’s at least an entire episode and could probably be a book chapter. But the question asked, his name is Eric Roberts and he’s asking about how to launch into a mature market. He says, I know from listening to you guys, the competition in place is a good thing. But what about an overly mature market? How can you tell if a market is primed for a new solution to an old problem? And I think there’s a lot of nuance to this. I mean, there’s the idea of, what is a mature market, then how can you tell when you should or should not enter one, and how do you execute on that those are kind of the three angles that I was thinking it through. And so, that’s what we’re going to talk about today.
Mike: Cool. So where do you start?
Rob: Let’s talk about, what is a mature market, a give a little definition and some examples. So when I think of a mature market, I think of a market that has established players that are well known. So, think of examples in CRM, it’s definitely mature market, there is Salesforce, there’s HubSpot, there’s Base, there’s Pipedrive, there’s a long list Trigger, CRM, long list of folks there.
In addition, I think in a mature market, there tends to be maybe two or three really obvious choices. So if I say CRM, a lot of people think of Salesforce, HubSpot, maybe Highrise maybe Base or Pipedrive, in email marketing, in ESPs, people think of MailChimp, they think of AWeber, they think of Infusionsoft. I mean, there’s this kind of short list, it’s the opposite of the long tail, it’s the fat head, it’s called where there’s a cluster of companies, be it one, two, or three that have the vast majority of the market and kind of sit at the top of the market share. In addition, I think the third piece of that is that there are these product norms that have developed.
So if you think about CRM, there’s this nomenclature of leads, and deals and contacts. And if you think of ESPs, there’s this, these norms that are developed, like lists and subscribers and forms. And so, while this may not be an exhaustive list of everything that defines a mature market, those are the three pieces that I think of, in my mind, that kind of defined it, that’s having established players, it’s having two or three obvious choices, and then having kind of norms or nomenclature that have developed through those products – and then in the other products that are also entering the space.
Mike: I think the easiest way to recognize whether or not something is a mature market is if you go out to a handful of people and say, “Hey, do you know of any companies that are in this particular software vertical, whether it’s you know, CRMs or mailing lists,” like if the people that you know, or who are in your circles who have any familiarity with that can name at least two or three or four different companies that are in that space then it’s probably a mature market, obviously, like if they’re if it’s a not well-known industry, for example, let’s say like virtual tabletop software. If you talk to a bunch of people who are in that particular industry, they’re going to know very well like who the players are. But it doesn’t necessarily mean that it’s a mature market.
Rob: Yeah, I think that’s a good point. I mean, anytime you see a forum post that’s like, what do you use for CRM, you know, and then you’ll get dozens of responses and almost everyone’s using a different one, or what do you use for your to do lists? And, you know, there’s, there’s dozens and bug tracking and issue tracking and all these things. So what’s interesting is, I don’t think, you know, a mature market doesn’t necessarily mean it’s a big market.
Mike: I was just thinking that.
Rob: Yeah, because to even think about like more aware software where they have a mature product in a market that has been around now for more than a decade. They build a SaaS app for countertop installers. People who install the actual physical tile that goes in a kitchen or bathroom and that’s not a huge market, right? That’s not a $100 million market. And yet if you were to try to enter that now they are so far ahead, the market has matured because they launched in, I don’t remember what it was like 2006 or 2007. And they’ve just kept adding things in and maturing the market during that time.
Mike: Well, I guess it makes – tt begs the question like, is it considered a mature market? Or is it like mature players in that market? How do you differentiate between those two things like CRM, lots of people use it so by definition you could call that a mature market but for table countertop installers, they are more aware as is very mature player in that market. But the market itself is small. So do you consider it a mature market? Because it’s not like there’s a lot of competition or a lot of people in that market? So like, is that a mature market. Do you consider that?
Rob: Well, I guess by my definition, I have three points or is there an established player or players in the countertop installer market? Yes, because there’s more aware. Is there one, or two, or three obvious choices? Yes, there’s more aware and I think they own most of the market, but there’s obviously at least one other competitor and have they developed product norms that may not have existed before software into the space. I don’t know their space well enough, but I’m guessing that there’s nomenclature in things in their product that they came up with that that didn’t exist before then.
So I would say yeah, I would say even a small market I understand your differentiation of mature product versus a mature market but I feel like once there is a mature product or two in a market the market becomes mature at that point yeah.
Mike: I was just kind of thinking about the product norms piece of it because if there aren’t a large number of products in that market and obviously like there’s room for that software to grow and for the products who are already in place to grow that’s fine but do the majority of countertop installers know about them? How many of them are actually using software of any kind or how many of them are looking for it? Do you see kind of the direction I’m going with that because like if there’s 100,000 countertop installers, but only 500 of them are using software of any kind. Does that establish a product norm, because that’s only five percent.
Rob: That’s a good point, yes, and imagine if they’d been around for, you know, if you’ve been around for 10 years. So you’d say, “Hey, this is a pretty mature product. There’s a lot of features, it’s stable,” all those things, but you only have five percent market penetration. Is that a mature market? I don’t know. I don’t know that I have a good answer to that, other than that either means that they’re not marketing very well. And we’ve now removed from more of our software that we’re doing a hypothetical at this point. But in that hypothetical where this company has been around for 10 years, they only have five percent market penetration, and there’s really no one else, it’s only five percent of market is even using software, then either that’s a really tough market. It’s a market that is highly resistant to technology, or that company is not marketing themselves very well, right? They’re not penetrating the market past five percent.
So I would then ask myself – If I wanted to enter that market, which of those is it, because if they’re not marketing very well, we’ll come in and out market them. But if the industry is just highly resistant to it, then that’s probably not a good market to throw yourself into.
Mike: And I would say that that’s probably a general rule. If it’s hard to get into them, then it’s because they’re resistant to change and resistant to adopting technology, then I would probably would avoid them in general. But it’s a very different story if they’re not marketing themselves very well. And you just trying to make a name for yourself there.
Rob: Right. And I think, that’s a good point. Because the kind of the second point that I wanted to cover, this question I want to answer is, how can you tell when you should or should not enter a mature market? I think we’ve just touched on one.
If you determine that, boy, this market is mature and really no one else wants to use software in it and I’m just going to have to be pulling from the existing competitor who only has five percent of the entire space that would give me pause, that tells me about the customer type and about the how they don’t want to change, right. So then that means that even getting them to switch from a competitor is going to be really difficult. I think also entering a mature market, I personally would not do that as a first time founder without money. One example that I kept coming back to of course is the one that I lived, entering a mature market with the drip, becoming an ESP and then becoming a marketing automation provider.
If I had not had the experience and the past successes that I had and did not have the self-fundability, you know, I was pulling money off of hit tail and other apps that I had, I don’t know that we could have made it. I don’t know that Drip would have survived because the market had so many mature players. Again, MailChimp, AWeber, Infusionsoft, and others – and it cuts both ways because, obviously, that’s what made it possible to grow Drip so quickly is that the market was – it did have opportunity. But if you’re a first time founder and you’re not going to raise funding, I would seriously reconsider trying to enter a mature market because these are the ones we can get a lot of success but these markets are very, very hard to penetrate, if you don’t have the right tool set.
Mike: I just have a quick search for, something kind of running through my brain is where we’re talking about what constitutes a mature market and there’s terms like total addressable market and then serviceable available market, which to me it seems like going back to the example of, if there’s a total of 100,000 countertop installers but only 500 of them are actually using that type of software then maybe your serviceable market is only about 1000 or maybe it’s 750 or something like that versus the total market which is 100,000. And you can look at that and say, well, if the established players have 50% or 75% of the serviceable market, which again is only 750 or 1000, then that’s a fairly significant chunk of those people. And it’s because those types of people are resistant to adopting technology or adopting software solutions for that. And maybe the delineation there is like, are they established players? Do they have most of the addressable market or the serviceable market?
Rob: Yeah, I think that’s a good differentiation there. As I think through this, when I think of mature markets, where there is a lot of adoption. So let’s flip back to the ESP or the CRM or markets where total addressable and serviceable are approximately equivalent, or at least 80%, 70% of the total addressable is already using some type of software and is able and willing to pay for this, I don’t know that I can think of a really good reason not to try to disrupt one of these markets if that’s your ambition.
Like, disrupting an existing market is where that hyper growth comes from and hypergrowth for us bootstrappers might be getting to seven figures in two years and hypergrowth for AirBnb and Stripe, maybe was getting to seven figures in six months, you know, past the point of product market fit. Because you think about AirBnb, did they invent a new market? No, they really essentially disrupted the hotel market. It was an existing place where people were already spending money on these things and they figured out a different way to implement it.
Stripe is the same one, I have them as an example later in this episode. Did invent a whole new market? Did payment processing exist before them? No, of course not. There was Off.net, there was PayPal Web Payments Pro. There were all these gateways and all these services that were really a pain in the ass to use. And Stripe came in and just made it a heck of a lot easier. And even, Drip is the same thing, I think about – there were already ESPs, there were already marketing automation providers. But that made it that much easier to basically pull existing people away who were unhappy with the current state of affairs.
That’s what I think you have to find, is if everyone in the market is using a product and loves it, then maybe you shouldn’t enter that market. But I don’t know of a mature market where people aren’t disgruntled and you think of QuickBooks. Everybody hates QuickBooks, but everybody uses it. So is that right for disruption, you think of Slack, everybody uses Slack but now we see level.app from Derek Reimer, there’s a couple other apps in that space as well.
The more I think about—if that’s your ambition, and you’re willing to really go to the mattresses because it’s going to be a hard fight. I don’t know that there’s a good reason not to try to disrupt. Honestly, if you want to build a little niche lifestyle business and generate that low six-figure income and have it on autopilot and be able to work five or 10 hours a week, then don’t go into a mature market. That’s where I would say, think twice about it, because I’ve had apps like that and they don’t have the great single channel of traffic, and they made whatever it is maybe $1000 a month, and maybe it was 10 grand a month. But there were these awesome little niche products. I mean, they were not—they were in these very nascent markets in these very tight niches and you could autopilot them, but they would never grow past that.
And so, I think that’s the thing to think about, your personal preference. Does it sound interesting, fun to do the hard work and the stress of going after these mature markets? Because I think my hypothesis is that, like, most mature markets right now are ripe for disruption in one way or another.
Mike: Now, one question I have about everything that you just said there is that, it feels to me like a lot of what you talked about relates to the product itself and not necessarily the channels at which those markets are accessible. And something that really comes to mind is enterprise sales for certain types of software, so anything that’s installed across the entire organization, whether it’s 500, or 1000, or 50,000 endpoints in that environment, it feels to me like those are cases where it’s probably a mature market already. You probably can’t start there on day one, you’re going to have a really hard time going into those and being able to offer something that is going to compete with existing solutions. One, because they’re so far ahead of you, but two, also to be able to have the resources to walk in the door and do that at 10, 50, 100 different potential customers, because you don’t necessarily have the time. So, I feel like the channel that you use, that you’re going to get in front of these customers has to come into play here.
Rob: Yeah, no, it absolutely does. That’s where bootstrapping versus raising funding comes into play. If you’re going to bootstrap then your point is dead on. Don’t go after enterprise sales and a mature market because you’re just not going to have the cloud, you’re not going to have the logos, you’re not going to have the time to execute on that.
I have a good friend here in Minneapolis, who has worked for two different companies over the past few years. Both of them were heavily, heavily venture funded and both were going after these massive and mature markets. One was like data storage and the other one, I don’t even really know exactly what it is. But it’s deep-tech stuff. It’s stuff that kind of competes with like parts of AWS, or it competes with stuff that HP or HPE has, or launches or whatever. And yes, they were upstarts but they had to raise buckets of funding in order to do that and build out a team in advance of having any real revenue. And if it works, then they’ll take part of this huge deck of billion dollar market, but that’s the gamble. If it doesn’t work, then they’ll burn through their funding. If they have enough traction after 18 months, they won’t be able to raise the next round.
Obviously, we tend to talk to more to bootstrappers and folks who are listening to this podcast or probably on that side, but it is possible it’s just a whole different playbook if you’re going to do that.
One other exception I can think of when I would give it a second thought as to whether or not I wanted to enter a mature market is if there are other startups also entering that same space who are getting traction. To me, I’m more scared of other startups than I am the big, lumbering, 800-pound gorillas in the space, right? I’m less scared of sales or competing with Salesforce and I’d be more concerned of competing with Pipedrive or one of the other like, smaller, more agile CRMs that I see kind of innovating and things.
Mike: Yeah, I would agree with that. Although there are certain times where if your features start to show up in Gmail or something like that, like you probably want to be a little concerned.
Rob: Yeah, I agree. That’s just Gmail or Salesforce is going to move so much slower that it’s almost by coincidence. I feel like, if you build a feature and one of them, build it within a few months, they’ve probably been working on that for six or eight months. They don’t move fast enough to copy a little upstarts, until you become not a little upstart.
Mike: Yeah, for sure.
Rob: The other thing I would think about perhaps not entering a space, is if you find a space that doesn’t have early adopters. So you find a market – because that’s what you’re going to need, right? You’re going to need, you’re going to need early adopters to basically jump ship on existing solutions who are willing to switch. If you found a space where there are no early adopters—we could go back to that example where we had the company who only had five percent market penetration, and it took them 10 years to get that, it’s pretty obvious no one wants to change. And so, there really aren’t going to be, early adopters.
I can’t think of another good example. I mean, maybe I think of like, the legal space. I know that, when I was a consultant, I worked for a guy who launched a product and legal space. I remember, he just had a really tough time getting traction, because there were not many early adopters in that space. So that could be, I don’t know, that space today and maybe there are more early adopters, but it’s spaces like that that I think are going to be hard to compete with where, the person’s motto is, “Well, I never got fired for choosing IBM,” or “I never got fired for choosing Salesforce.” If that’s really the mantra of everyone, then it’s going to be hard to penetrate.
Mike: I think the other consideration there is whether or not you have to essentially build something that is going to completely replace an existing solution, or you’re just solving an extreme pain point that an existing solution doesn’t solve adequately. And if people are angry about it and looking for a solution to that and they’re willing to plug your product, in addition to whatever it is that they already have as kind of a stopgap measure because it’s so painful versus you have to—it’s the difference between implementing two or three features versus implementing 250 because you have to completely rip and replace that entire product.
I think you have a lot easier time if you only have to implement a couple of things. And if you execute on them really well, people are willing to spend a little bit of extra money to get your solution in there because they’re in such a huge amount of pain.
Rob: So the third part that I want to cover is if you decide to do this, how do you execute on it? I think the thing that – maybe the common wisdom is you have to be 10x better in order to get people to switch. I would say yes and no to that. I don’t know that you need to directly build a 10x better product. I think you do need to build a better product. But I think there’s other things that you can improve upon that are not just product basis, not just a feature race or usability race. So I want to talk about three or four ways that I feel like you could be two-x better in each and perhaps they multiply together to give you more than more than 10x and this really comes out. I mean, the more I wrote this down, this just came out of the Drip playbook. It’s the playbook that I executed as we as we built Drip up and it was these four places where we innovate.
There may be more but this is what comes to mind. The first is, price and if you’re in a mature market and you have a huge player, they often have pricing power where they their brand name and they can charge a lot more than everyone else and you won’t be able to without that brand name. And not only can you not charge that much but you can use that strength of that player against them. And if your product—It’s easier to use and you’re cheaper, you can get these early adopters to start switching
Now, you and I’ve talked a lot about Don’t be the low cost provider. The point is not to be the low cost provider forever. It’s long term to raise your prices. But in the early days trying to price match a large competitor with a brand name, when you don’t have the feature set that they do, it’s going to be difficult.
And so, either price innovation, where you’re innovating on the pricing model itself, that’s risky, but you can think about it or just being cheaper. Again, it cuts in multiple directions. It can bring people who turn or who are more price sensitive in all honesty with drip. I mean, we were priced against Infusionsoft, and Infusionsoft was $300 a month to start and it had a $2000 sign-up fee that you paid right at the beginning.
And that was easy to be cheaper than them and still turn a heck of a profit, right. But we could start at $50 or $100 a month and still not have people who were super price sensitive because if you’re paying $50 or $100 a month, you still have buy-ins, it’s not like we’re going down to $20 a month or something. And so, that’s the kind of pressing I’m talking about, right? Or Salesforce, I believe, is $125 per seat per month, if I recall.
Think about being able to innovate on that and charge $20 or $30 a month per seat, that’s still a nice revenue stream as you’re getting started, and you’re not bottom of the barrel, you’re not a B2C pricing, but it is and can be a competitive advantage, especially in the early days.
Mike: Yeah, I think what you’re kind of referring to there is not using the price as just the sole way to get in the door and be cheaper like because, obviously, you don’t want to do that long term, but it’s really to unlock that the unwillingness to move by having the cheaper price and get them to take that step. You reduce the friction enough by lowering the price to be able to get them to say, “Well, you know what, I’ll give it a shot,” versus if you are priced exactly the same and you have an identical feature set or they have a much better feature set because you’re just not there and they’re mature in the market, then it makes it easier for them to justify giving it a shot. Or even just like saying, “Okay, you know what, I can’t buy into all that stuff because I can’t afford it right now.” Or I’m not even using 90% of it.
I’ve seen a lot of mature solutions out there where they will throw every feature under the sun into the product. And eventually it just becomes this model with that is difficult for some people to adopt. Because they know that they’re not going to use 80% of it. They’re like, “Well, why am I paying this much money for something, I’m only using 10% or 20% off.”
Rob: Second place, I feel like you can innovate and outmaneuver your bigger competitors with the sales model. Oftentimes, you’re competing against enterprise-ish sales models where they have high-tech sales process. You can’t sign up on the site, you have to see a demo. There’s often setup fees to pay the hefty commissions they’re paying to the sales processes. And so, if you bring them and make them, either no touch, or low touch, or even medium touch, you can innovate on that process.
Again, coming back to Salesforce, it’s very hard to go to their site. I don’t believe you can just go to their site and sign up for an account. You have to go through this long process. Whereas with Pipedrive, you can go and sign up for it. Same thing with with Infusionsoft versus Drip, that was always a differentiator, is that you could come and try Drip out, there was a free trial. Infusionsoft, you didn’t even get to see the product unless you were on a demo. They didn’t want to in there playing around with it. So that can be another way to, basically, bring your innovations to the masses and outmaneuver folks and it’s not a product, it’s not just a feature, usability, it’s actually implementing a different sales model that can be more conducive to bring on early adopters.
Mike: I would say that this cuts the other way as well. Because if there are products out there that don’t offer like the ability to get on to a demo because they’re trying to be mass market and they’re trying to have a low-touch sales process. If you go the other direction, then you can have a lot of success there because you can get those people who have given those solutions to try and they got confused or lost and they just said, “Well, how do I get on a demo or have somebody show me something.” And if that company doesn’t offer it and you do, then you can get them on a call and you can – I won’t say gloss over the things that your product can’t do but you can essentially offer to do those things for them and do that high touch onboarding process and thereby justify a higher price tag for your software.
Rob: The third area where I feel like you can outmaneuver the big competition is in product and this one I it’s really hard to do. But it’s pretty straightforward to describe it. You make it way easier to use, which doesn’t tend to be that hard when you’re dealing with larger clumsier companies with 10 or 12-year-old code bases, you ship faster—so you have a better shipping velocity of new features. And it feels like products are constantly improving versus there are once or twice a year launch cycles and you build a unique feature, or two, or three that no one else has for now. You try to figure out a way to go back to first principles and innovate on something that is really hard for them to do.
So, adding automation into your ESP, when it takes everybody else a year to do it. Because the code base and they’re already at scale is one way to do that, or adding a lot of integrations that you know, that the early adopters will use that your competitors have not added. Because again, they just move slower than you do. So, you know, you look around and you say, “Oh, there’s this whole new ecosystem around Stripe.” And there’s there, Baremetrics, and there’s ProfitWell, and there’s Termbusters, and there’s Stunning, and there’s all this stuff, it’s like, you know, Infusionsoft or Salesforce, they’re not going to integrate with those tools yet, because they’re just not on their radar. But if you integrate with all of them, you could scoop up this early adopter, you know, the bootstrapper crowd the, the online business folks, because they use those tools. Gumroad is another one, but I want to, underscore that having those features is a short-term thing, because if they are successful, other folks will implement whether other upstarts or you know big competitors will implement them. But that’s how I think about, product innovation.
Again, easier said than done. But that is the playbook that I see working as, as startups try to attack these more mature markets.
Mike: Something else, I think that kind of falls under this bucket is just making your product look better. I mean, there’s products out there – I’ll specifically look at things like paychecks or ADP where, to log into them, you’ve got to have this weird looking JavaScript plugin on your website, that you load into the browser or some download that it looks terrible. It looks like it was built in the 80s because it actually was and they’ve never changed it. They’ve never updated it. And you end up with companies like Gusto that came out, which used to be ZenPayroll, and they just looked fantastic and just the look alone makes it feel like it’s in a more modern application.
Of course it is because it was just recently built, but the look and feel of it can go a long way towards making people feel like you’re responsive to the needs of the customers and you actually care about how your product looks and is presented.
Rob: I think that’s a great example. I think Gusto is another example of a company that entered a very mature market and through—I mean honestly, if you look at these points I hadn’t—so here’s a great example, because I was thinking about Drip, and Stripe, and others, when I wrote these four points of price, sales model product and marketing, which we’ll get into next. But gusto came in their price was cheaper than paychecks. I think I was using paychecks before at Gusto and Gusto was cheaper, Gusto’s sales model was so much better, it was all self served. I didn’t have to talk to people, it was a lot easier for me the product itself was easier to use. It was a better looking as you said, and they file, I don’t know, all my stuff. I guess Paychecks did some of that too, but the experience of Gusto in the communication is all via email, like click and do things like it is so much of a better thing and then their marketing, I would say that I really heard about it from word of mouth and the other three price sales model and product really drove that for me, but obviously their marketing to get into the hands of early adopters like us, I think was a pretty deliberate decision.
Mike: Yeah, I think the word of mouth marketing, if you have a good enough product that, I won’t say, it sells itself. But like if the customers that you have love it so much over the other things that they’ve tried then that word of mouth is really going to drive a lot of revenue for your new customers. And I don’t know how easy it is to recognize that that’s what’s actually going on. But I have seen that happen. And, there’s certain products that I’ve recommended where you look around and you don’t see a lot of marketing for them, but you’ve recommended them a lot to other people or other people have recommended those products to you. It’s just easy to see when those things are actually working.
Yeah. When you’re in a mature market, and the number one player is big, but everybody hates using it. That’s when word of mouth is huge. Because you will be you will become the thing that we’re all talking about, on our podcasts, at conferences on our blogs. I mean, think of Gusto or, again, ZenPayroll when it came out. Think of when Stripe came up, a ton of it was word of mouth.
Zenefits, it’s basically likes Gusto but for health insurance and other benefits. Drip had a really strong word of mouth in the early days. You know, there’s others. I’ll give another example, ready to wrap up, but we’re working on something that’s really hard to generate in general, and it can be a cap out, when people don’t know how they actually grew. I’ll often hear founders say – Oh just word of mouth, and it’s like, Yeah, I don’t think it really was word of mouth. You know, you just don’t really know, you don’t track your metrics. But in this case, like a mature market where you have this reviled number one player, I think getting in there, building a better product, better pricing, better sales model can really lead to word of mouth and some good stuff.
I think the other thing that they don’t mention about marketing in a space like this is you can take the approach of being the underdog, right? It’s easy to market against big guys when you can basically talk about being the anti them. So Salesforce had their – especially in the early days, no software, right. They had the circle with the red line through it and it said software in it because they were saying, no on-premise software, no massive installation and server footprints and stuff – we are just this thing in the cloud.
They were anti software. Less accounting was kind of the anti QuickBooks. I don’t know that they mentioned QuickBooks by name but I remember one of their headlines was about all accounting software sucks or sucks less. I mean, it was it was a good—It was a really interesting approach to it. Drip was the not Infusionsoft, what was my headline – lightweight marketing automation that doesn’t suck and I was implying that most marketing automation software sucks and listed the Marketos and Eloquas and the Infusionsofts that are just not fun to use and they’re not fun to be sold because the sales model sucks and they’re really expensive and here’s all the reasons that you don’t like them and here’s why we’re the opposite of all of that.
So, if you’re going to enter this market embrace market leaders’ strength and turn it into their weaknesses. I think it’s Jiu-jitsu, where if your opponent is really strong and he or she swings you do a parry and you let their momentum carry them through and that’s a big part of marketing against these really big players in established markets – is what is their biggest strength can be turned against them as the biggest weakness.
I feel like we’ve covered this topic pretty well. I think the one last thing I’ll say is we’ve given a ton of examples of people doing this, talked about Stripe, Gusto, Zenefits, Drip, and a few others. The one other example, I think, that’s doing a good job of it today is Superhuman and it’s that email client that—they’ve changed the sales model, they’ve actually gone from no touch the opposite direction, there’s onboarding, every person individually. Their product, from what I’ve heard, is easier to use and it’s amazing. Their marketing is, obviously – they’re doing a good job with it. Now, their price is interesting because they’re more expensive than any other ESPs. So that’s a whole that’s a whole other thing from extremely experienced founders that they’ve, basically, made a gamble to say we think we can build something truly 10x better and we’re going to charge for it.
I think they charge $30 a month, which if you think about it, compare Gmail to Superhuman, Gmail is essentially free. Although, I pay for it now because of how much storage I use, but, very different pricing model there. So they’re one example that’s doing it successfully today. And they’re not following, you know, the exact playbook that we’ve laid out here. But I they also have buckets of money. They’re three and four-time founders. So that’s where you can, in my opinion, you can start breaking rules because you know which rules to break.
Mike: Yeah, and that’s really a matter of like, certain types of people are in so much pain, that they are willing to be the early adopters and they’re willing to pay more money for it because it just makes their lives that much easier. And whereas no knock against Gmail because I use it as well but there’s certain things about Gmail that I wish were just a little bit easier and I’ve heard the guy who runs Superhuman spoke before and he’s talked about like, how the experience is really what they focus on and I’ve seen him commenting on Twitter here and there and showing pictures of all the different things that they’re testing. Somebody said, “Oh, why don’t you support this products on,” such and such. And he showed them a picture of like eight different laptops, where they were testing different variations of like the browser client, and he’s like, “We’re working on it but this is what we’ve got so far.”
It’s incredible because it partly tells a story, but it also explains or demonstrates how much pain certain people are in to be requesting that stuff and still willing to wait for it.
Rob: Yeah, and they worked on Superhuman, I believe, for 18 months to two years. It was a small team of developers before they launched. So they broke they broke a lot of “rules”. And again, it’s because they did have a lot of funding, they had prior exits. I mean, the guy had started Reportive and sold it to LinkedIn. And then, he had even another one before that.
When you get to that level, you’re just at the point where you can make some difficult calls and pivot out of the risk because of your experience in funding. Frankly, which is something I talked about earlier in this episode.
Mike: I’m sure Data had something to do with it.
Rob: Indeed.
Mike: Well, I think that about wraps us up for the day. Thanks to Eric Roberts for sending us that question. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribes to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 424 | Our Predictions for 2019
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2019. They also look back at their 2018 predictions and rate how they did.
Items mentioned in this episode:
Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about our predictions for 2019. This is Startups For The Rest Of Us Episode 424.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I’m kind of stoked that my first book Start Small, Stay Small is now out live on Audible, only eight short years after I originally recorded it and have been selling the audiobooks. What happened is back when I published the book and I recorded an audio version within a few months of releasing it, Audible wouldn’t let individuals post audiobooks. I couldn’t, there was no user ability, and I emailed then and said, “Hey, I self-published a book, it’s popular, it’s getting traction and such, and I have a podcast. There’s a lot of people who want to hear the audio version but how do I get this in there?” “Yeah, we don’t really offer that. You have to go through a publisher.”
I just never did and I’ve been selling basically the audio version from the website startupbook.net is where kind of Start Small, Stay Small lives but within a few years, I think they did release the ability to do that and then it was just wasn’t a priority when I’m building and growing companies and running conferences. It’s kind of the last thing on the list. I’ve had the last several months off, as you know, and I had the audio files. They had to be re-engineered and remastered. It’s still the same reading but it had to be re-rendered at a certain resolution or whatever and luckily, I still had the original source files from 2010 because the MP3s I had been selling are not at the bitrate that they need for Audible these days.
I literally pulled them off of DVD-ROMs from our old editor for whoever is editing this in 2010. I pulled WAV files or something off of DVDs and put then in Dropbox, which is just amazing, because back then it would have been on DVDs because there was nowhere else to store them. That was my long-term storage for these things. Our editor, Josh, for this podcast, he did a nice edit job on them and it’s now live.
We’ll link it up in the show notes. It’s for posterity. I just actually just purchased it and I’m downloading it because I haven’t listened to the audio book in forever because it’s not easily accessible. When it’s not in my Audible app, I just don’t really listen to audiobooks. Do you? If someone sent you an audio book of 12 MP3 files, you can’t to exit, it’s not easy to open it in an app. It’s a little bit clunky.
Mike: Yeah I probably would not. I think I used to throw things like that in iTunes and I’d be able to listen there but unless it was quick to grab, probably not. I actually didn’t think about taking my book and put it out on Audible. It’s one of those things that’s been such a low priority for me to even look at. Now that you mentioned the bit rate, I went back and I’ve looked and I was like, “Yeah, I’m pretty sure that what I’ve got is not enough.”
Rob: Yeah, The nice part is we do have Josh as a resource. As long as you have the pre-MP3 or whatever, if it’s M4As or I guess it’s AIFFs or the lossless and WAVs, then you could send those to him and he can re-render them in a way that Audible will accept.
Mike: Yeah, I’m not sure if I do.
Rob: But it’s still a project. It’s still a project and you have to get cover art. It wasn’t 20 minutes of my time. It was a few hours of my time and at that point, is it worth doing is a question that should probably be on your mind.
Mike: Yeah and that’s part of why I haven’t done it is because just hasn’t been worth my time to do that.
Rob: That makes sense and one of the things I’m thinking about, if you go to startupbook.net, I sell bundles and I sell an EPUB version plus a paperback version plus an audio version and you can buy in different combos. In 2010 that made a lot of sense and it’s literally fulfillment through PayPal, I built the fulfillment thing because there was no Gumroad. It was barely Kindle Books at that point. I built a bunch of stuff myself and as I’m looking at it, I still get sales of this book.
I’m thinking to myself, I don’t even know that I want that anymore. I kind of just want to link out. If you want the audio, go to Audible. If you want the electronic or the paperback, go to Amazon and everything is handled. Obviously, I make a little bit less money per copy because they take their commission but it just eliminates that thing that I had to maintain.
Mike: Yeah. And that means just simplifying things on your end from just because a process that makes things easier. It becomes the distribution channel for you and then you only have to deal with that versus all the other things that you’ve kind of hacked together over the years. I have the same thing with my book. Everything’s done through Gumroad and I just haven’t changed it because it be a pain-in-the-neck change.
Rob: So, how about you? What’s up with you this week?
Mike: Well, I’ve been planning out some of my Blue Tech marketing efforts that I want to start in January and been looking at things like putting together a set of webinars. I’ve been expanding the number of emails that are into some of my various email campaigns. Just that those are a little bit longer and they lead directly back to Blue Tech a little bit better. Putting in some automations there and just kind of thinking of more about how the different pieces connect to one another and how I can help move people through the sales funnel a little bit better than I have in past.
Rob: That sounds like a good project to be starting after the new year and to be thinking about it and planning it now so you can hit the ground running right after the holidays. I was thinking it is January 5th is the date in my head and that’s probably a Sunday this year. But between January 5th and January 7th is where we would resume big pushes of marketing.
Mike: Yeah. I’m really just planning out what needs to get done because nothing is really going to happen between now and the end of the month. There’s stuff that needs to get done and preparation would take longer even if I wanted to try and launch it. Next week just doesn’t matter so I’m planning the things out, going to do the work between now and the end of the year. Once the calendar flips over, release are pushing on some of those things. By that point, I should be ready to go live with them.
Rob: Sounds good. What are we talking about this week?
Mike: Well, we are going to go into our predictions for 2019 this week. But before we do that, we’re going to go back to episode 370, talk about our 2018 predictions, and see how well we did.
Rob: Dive into your first one. We’ll do a 1-5 scale on these.
Mike: Sure. The first one, I had said there was going to be an economic downturn and I said that things looked pretty good last year about that time, that there’s a lot of uncertainty. It felt to me there were some economic problems that were starting to build up and there weren’t any easy solutions. I kind of pointed to the health care. I don’t want to call crisis but health care problems for small businesses in the US are pretty bad. It’s just awful trying to figure out how to deal with that.
Also looking at the idea that there might be a rise in unemployment, I didn’t think that the housing market was going to go down very much but it felt like was going to relatively flat and I also thought that the stock market was going to level off but not go down. Most of those I would say, it’s hard to judge somebody because it’s not like there’s a standard or number that you can point you for most of them with the exception of the stock market.
Rob: I would say unemployment is well. Unemployment has not risen. Unemployment is at historic low. That one, I think that piece I don’t think you’ve got. I think stock market, it’s leveled off and gone down.
Mike: Well, if you look at from January 2nd to today, it is down by 300 points. It’s pretty close. I mean, that’s real close and in terms of unemployment, I think the actual number has gone down but I also think the number of people looking, who are actively looking, or has stopped has gone up. That’s hard to measure.
Rob: Yeah, I know. I agree but the other two I don’t know. Small service businesses will go out of business. I don’t know that that’s really happening yet. You’re kind of talking about a recession at that point and we’re not in a recession. Housing market won’t go down very much. It will relatively flat.
Mike: I think I was wrong on this one. I think it’s gone up a little.
Rob: Yeah, I think so. I would say such. I mean, real estate’s local but there can certainly be national things. What score do you give yourself on this? It’s not a one but it’s not a five, either.
Mike: Yeah. I’d say three on this one because of those four things that I listed, the stock market will level off but not go down. I would say within 500 points either direction is still leveling off because they could swing by 500 points in a day. I would give that a five but in terms of the housing market won’t go down very much, I thought that it was going to go down and it did not. I would say that’s a one.
I think if you would average all these things together and going to the other one like small service business going out of business due to their taxes and healthcare, I don’t think that happened. The unemployment rise, I would say, according to the numbers, that says no as well, but I think if you were to dig deeper, then there’s a lot of people who stopped looking for work. I’d give that maybe a four and the other one a one. Average is probably around three, something like that, maybe a little bit less but pretty close.
Rob: My first prediction for 2018 was that 2018 will be the year of non-institutional startup funding: angels, crowdfunding, and ICOs. If I were to rephrase this, I would not say non-institutional. I would say non-traditional or it will be the year of alternative startup funding. In hindsight now looking back, it’s like I have this inkling of something.
When new ICOs were happening, the opposite cooled off at this point but I do know that they’re still in play. I think crowdfunding has been so-so and I’ve seen a few like Hacker Noon is crowdfunding. But really the Tiny Seed model that I’m thinking about where it’s a way to get money that doesn’t look like traditional institutional venture capital, where it feels more like an angel investment but it is technically institutional money. It’s these alternative funding sources for people who would normally bootstrap frankly. There’s a whole revenue-based debt financing, like Lighter Capital, Bigfoot Capital. There’s a few others in that space and then there’s more than […], the Tiny Seed thing, that area that I see percolating and starting to happen.
Well, obviously Tiny Seed is just getting started now. Really 2018 was the year it announced but it’s not really going to be in full swing until 2019. That’s not completely accurate. I certainly would not give myself a five on this. I will say that I’ll probably give myself a three. It’s either a three or a four and I tend to want to be a harsh critic of my own stuff. I will say that it’s about a three but I actually think this is worth the beginning of a wave above all these non-traditional options.
That is why I am devoting the next several years of my life to basically starting a company and then fund an accelerator in this space because I think it’s going to be big. This prediction is I think it’s correct. I just think it’s perhaps a tiny bit too early.
Mike: I think you cheat on these things sometimes.
Rob: Why? Tell me.
Mike: Look, because you make a prediction and then you’re like, “Oh, if this isn’t going to come true, I’m going to do it and that will make it true.”
Rob: That’s how entrepreneurs cheat, huh? That’s so funny.
Mike: I mean, I surely call you out of that.
Rob: Yeah, Mike, appreciate that. I think if we have the power to do that, then we probably should. If we have the power to change something that we think should exist, that’s funny. I haven’t thought of it that way but it’s a good point.
Mike: Let me know how that works out for you in Vegas this year.
Rob: Yeah, totally. How about you? What’s your second prediction.
Mike: My second one was that we would not see a US-based legislation around in-app purchases and classification of loot crates as gambling. I don’t know that we ever actually saw that.
Rob: I think it died down.
Mike: Yeah. There was a lot of talk about it initially, and then after that, it just kind of went away because the game makers decided, “Oh, we’re going to change how these things are done,” and it just kind of silently died.
Rob: Yup. My second prediction was that artificial intelligence and machine learning would continue to be marketed as the next big thing but would not deliver again in 2018. Specifically, I think I was talking about how every marketing SaaS app says, especially the venture phone that wants, “Oh, we’re going to be AI for email or AI for you landing pages or machine learning for your data sets to do blah-blah-blah.”
Everybody’s marketing and really most people don’t have the data sets that are big enough to actually use machine learning. A lot of the machine learning winds up just saying, “Oh, it’s noise anyway.” It’s really hard to do this right and my prediction was kind of people would continue to over-promise, use it as a buzzword to raise funding and make promises that would kind of come true maybe a little bit but that it was not going to be of this thing of like, “Holy crap. Someone really finally made this happen.”
My personal opinion was this is a five. I definitely continue to see AI and ML in both startup pitches and on marketing websites, and I have yet to see something that has been a ground-breaking shift in specifically a MarTech app or really any kind of SaaS app that I’m looking at.
Mike: My third prediction was that Uber is not going to regain the ground that they’ve lost and that was kind of based on a lot of the scandals that were plaguing the company. I did a little bit of research on this and one article I found pointed to the second quarter of this year where they lost almost $900 million and then there was another article I found where they were just kind of graphing the Uber-versus-Lyft market share. Lyft is continuing to go up and Uber is continuing to go down.
I don’t know how much of that I would attribute to the fact that now there’s a second entrant, but at the same time if Lyft is eating into Uber’s market share, then it’s because they’re growing and they’re growing faster than Uber is. I have a hard time on figuring out whether or not that means that Uber is not regaining the lost ground.
Rob: I think that you are correct on this. I think this is a five based on market share. That’s what I would’ve thought when you said regain the ground they’ve lost, where losing money is nothing new for them. They’ve lost hundreds of millions, if not a billion dollars every quarter, I think, for years, which is why they had to risk so, so much money.
To the part, I’m not concerned but you wrote this prediction around the time where there was the big kerfuffle where Travis the CEO got kicked out, and there was the big article written about or several articles written about the toxic culture and the bro culture, and then he became kind of the poster child of “what’s wrong with Silicon Valley companies.” It’s not in quotes because its not real but it’s just the thing that happened at the end of 2017 was that a lot of this stuff started coming out.
I have not seen a graph of market share but if you saw a graph where Lyft is going up and they’re going down, I think very much that, that was partially caused by—not entirely caused by—that whole kerfuffle that went down. I always now look for Lyfts first and I used to always look looked for Ubers first. When this all happened, I switched. I know a ton of people who deleted their Uber app altogether. A lot of people don’t want to support a company that acting that way toward its own employees.
Mike: Yeah, definitely. The reason I was a little confused about the graph was just because it’s a trend line that basically shows that and it doesn’t really change. Uber’s market shares continue to go down and Lyft’s is continuing to go up, but it’s showing that back as early as 2016. Is that directly caused by that? I don’t think that it is. I think that it’s just that Lyft is doing better in general than Uber is and it’s kind of eating them alive at this point.
I do think of those other things that we’ve just talked about kind of play into that. I don’t think that I see them recovering from this anytime in the near future and I don’t think that it’s just because of the PR things or the things are going on internally. I think that it’s just they don’t have a good sense of how to basically break ground against Lyft.
Rob: Right. You’re saying it’s like Lyft kind of is doing a better job of executing or whenever. I don’t disagree with that, that it’s just a competition that Lyft has hit their stride and that Uber had enough stumbles that they’re getting ground made up on them. I still think Uber is an amazingly wildly successful company, it’s still worth a ton of money, and I do think they’ll be fine.
Both of them have filed for IPOs. Both Uber and Lyft should have an IPO in the next, I don’t even know, two, three, found months. There’s going to be massive liquidity and there’s going to be deck of millionaires and millionaires coming out of both of those. It’s interesting to think long term. Will there be a two of them? Will they ever consolidate? I don’t know. I mean, they’re both still pretty healthy. Even as hard as Uber got hit, it’s still, I think, quite a successful company. Obviously it’s losing money and there’s this argument to be made. Could it withstand a recession or whatever? But I just think they just pulled back growth. They are actually making profit.
My next prediction for 2018 was that there will be an enormous crash in Bitcoin’s valuation but the long-term I’m still bullish. What do you think? You think I called this one right?
Mike: I think you hacked somebody’s servers and made this crash happen, because you’re an entrepreneur, right dude? You make things happen.
Rob: I did not do that and I give myself a six on this one. It was just an inclination, just the volatility of this whole space. Sometimes I say these things because yes, I own many different cryptocurrencies. I was saying this to my head of there going to be a crash so that I’m prepared for when it happens. It’s kind of the worst case scenario but I definitely thought that there would be some volatility. Got lucky on this one.
Mike: Yeah, especially when you saw that coming and in the middle of that run up, too, like you have to be very aware of the fact that it is run up and how much longer is this going to last before it pulls back and how hard is it going to pull back. Yeah, you were definitely right on this. I give you a six on it, too.
Rob: Yeah, I mean Bitcoin went from $1200 to $18,000 in 18 months or something? Maybe is it even 12 months? It’s insane. Yes, at the time there was irrational exuberance of people where like, “It’s going to $100,000. It’s going to $200,000,” and I was just kind of like, “I don’t think this has the staying power in the short term,” but again, I set out long term. I’m still bullish and I have another prediction this year about it.
My fourth prediction for 2018 was that cryptocurrencies will be regulated by several large governments and this has happened. I think it’s been quite a bit of a regulation in different countries around the world and I think what’s interesting is the longer cryptocurrencies are around, there’s less of a question of, “Oh, it’s this new thing. Is it going to stick around?” It’s more like, “Yes, it’s going to stick around. How do we classify it? How do we regulate it? How do we measure it? How do we tax it?”
Maybe the crash helped it. It’s like become this thing that’s just there that’s just hanging around. I think it’s going to become more and more of a ubiquitous part of kind of what we’re doing to it today.
Mike: You want to kick us off for 2019? What’s your first 2019 prediction? You said you’ve got something for this year.
Rob: Indeed. My first 2019 is a crypto prediction. I think there will continue to be ups and downs in 2019, just continued volatility across all the cryptocurrencies but there will be no major boom in 2019. There will not be a run up like we saw last year. But I am still bullish long-term, I want to be clear. I still own cryptocurrencies but I don’t think we’re going to get the 200%, 300%, 500% bump up that we saw on 2018. I think it will either be just a gradual thing over the course of the year or it will just bump along up and down and I thinking in the future year, we’ll once again see a run-up like we saw.
Mike: Do you think it’s kind of done being highly volatile because even just in the past several weeks, it’s lost half its value. That’s a lot or at least the reports specifically talking about Bitcoin because obviously each cryptocurrency is different but most of them tend to track on Bitcoin’s progress.
Rob: I think it will continue to be volatile and it’s just the nature of it for now while it’s this unknown entity. This is asset class that people aren’t exactly sure what to do with it. I think there’s still going to be people manipulating it, which causes some of the volatility. I think there’s still going to be people speculating it, which causes volatility. That’s my gut feeling.
Mike: Yeah. I look at Bitcoin and the cryptocurrencies. They are one of those things where I wish there was more regulation around it but I also understand why there’s not going to be any time in the very near future. Obviously, governments are making an effort to do that kind of stuff but until there’s federal backing and an insurance on it, there’s going to be a lot of stuff that happens. The exchange gets cracked open and they’d lose all the Bitcoins, everything. That stuff’s going to happen. There’s not much you can do to prevent it. That’s going to help cause that volatility.
Rob: How about you? What’s your first prediction for the year?
Mike: This was a little bit of a tag on the last year and I think that there’s going to start to emerge a global downturn that’s going to be in full swing and it’s going to be obvious. I think before, we were seeing signs of it. I’d say last year’s prediction was probably half-right-half-wrong and I think that’s going to continue, not me being half-right-half-wrong but the downturn, so to speak.
I think we’re going to start seeing more signs of it. I’m hoping I’m wrong but I see these little things happening here and there and it just makes me wonder because it kind of goes back to 10 years ago or so. I don’t think we’re going to hit a global economic recession that causes some massive crisis like we did last time back in 2008 but I do think that it’s going to be noticeable.
Rob: I think either you or I make that prediction every year and has for three or four years. I hope you’re wrong but I’m thinking that you’re probably going to be accurate on that one.
Mike: Is that like predicting it’s going to rain eventually—
Rob: Eventually. It’s kind of. I think that’s kind of what we’re doing here.
Mike: Okay.
Rob: My second prediction is, in 2019—this is a bold one—will be the year of augmented reality. Really deep down, I question if it will but I wanted to make one at least one prediction that I was super unsure about. It’s kind of a big proclamation. I kind of want AR or VR to catch on. I want it to be cool and accessible and I want to do stuff with it, but every time I tried VR, it’s like, “Meh. It’s not there yet.”
I think that AR is probably a more viable thing because you’re not sitting there with a big old mask on your face, you can’t see anything else in the room, whereas AR, there just so many real applications of it that I think can take hold. Whether 2019 will actually be the year of it or whether it will take longer is another thing but my prediction is it going to be this year, Mike, in the next 13 months.
Mike: Now, when you say there’s a whole mess of applications that it could be used for, are you thinking more consumer or you thinking more like industrial- and factory-type things? It seems to me like that would be the place where I would start and then eventually would move over into mainstream consumer because I don’t see anything out there where augmented reality is really something that people would buy into just yet. I definitely see the industrial applications of it but not like practical things that people would use on a regular basis.
Rob: Yeah. I like the way you’re thinking. I mean, that’s what I’m thinking about as well. When I say practical applications, I do mean kind of B2B stuff which means people will pay money for it. If you’re on a factory floor, you can you look over and whatever, see the instructions, how to do things, or you can see the inventory levels. If you’re surgeon, when you look down at a patient and there’s an overlay of what should be there and where you should cut or whatever. It’s incredible for pilots, for all kinds of applications where this could work.
Now I also think that even on our phones, you can imagine having Yelp augment reality around. You hold your phone up, kind of like have you ever done the ones where the apps where you can look at the stars?
Mike: Yeah. I’ve seen—
Rob: You hold them up and that’s essentially augmented reality. Those are cool and those are fun but what are the consumer applications of this? Could you hold your phone up as cars are coming through? You hold your Uber app or your Lyft app up and it will just have a big sign over your Uber? Especially when you’re at a crowded airport, it’s often hard to find things out. They’re trying to do it right now with these lights that sit on the dashboard but what if you’re able to hold that up and just see? That’s maybe a clunky example of it.
I think once we get some contact lenses or some better version of like a Google Glass type thing, that would be even better because then you don’t have to hold your phone up and it’s just kind of projected into your eyes so that you can see things that are augmented, which is not going to happen in 2019. But those are the kinds of, I think, consumer applications that could do it but I think you’re probably right. I think B2B may be the place that makes it work and makes it more affordable.
Mike: You answer my question throughout even though I didn’t directly ask it because what I was really interested in was how do you see it working and what it sounded me like you’re saying is it’s not wearable but it’s kind of on all time. You’re carrying your device around and then you can use it in certain situations when you recommend a situation to augment the data that you receive and it would show you, “Hey, this is what you should be exactly looking at.” It’s a difference between something like Google Glass that you wear all the time versus you pull out your phone and then see the additional stuff.
Rob: Right. That would be the idea. I don’t think that you’re going to wear this stuff all the time. Most people aren’t going to do that unless you’re on factory floor and you might need to, then you do put on safety goggles and maybe it projects under your eye. If you’re surgeon or dentist, they often wear the glasses anyway that have a magnifying something or other, have augmentation there. It just makes a lot of sense and they don’t wear those all the time but they wear when they’re doing surgery o when they’re doing a procedure. Same thing perhaps for pilots. I don’t know if it would be and they already have heads up displays in certain aircrafts but that’s where it just makes more sense and you don’t have to do extreme behavior changes for people to do start adopting this.
Mike: Yeah and you don’t have to worry about the social context or social problems that are associated with that stuff. When I think about some of this stuff, it kind of reminds me of a project that I worked on at Wegmans back in I think it’s 2000-2001 where they had this voice recognition unit and I had to program things to integrate into the wireless system for the warehouse.
I got to a spot and there’s all these people wandering around the warehouse with these power lift jacks. They had to grab things at a warehouse so they could put on the trucks and they would just talk to this thing and it would tell them what it is that they needed. Fast forward 15 years and now tablets exist and you can do that kind of stuff now in a visual format that whereas before it was just text only, speech-to-text recognition.
My second prediction for 2019 is that esports leagues will get a dedicated TV channel and having done the research on this after the fact, I realize now that there is already one in existence.
Rob: I was going to say I think this exists that’s not Twitch.
Mike: Yeah, I didn’t realize it. That’s the thing is that it was not going to be Twitch. Obviously, there’s streaming systems out there, obviously. People stream out on YouTube. My kids watch that stuff constantly. Whenever they get a chance, they want to watch other people playing video games. I had this discussion with my half brother. His comments on it was, “You will watch a football game or a baseball game. How is watching somebody play video games any different than that? You’re not involved, you’re not directly playing, you’re just being entertained by the fact that somebody else is playing.”
It’s a good point to make and I think that it especially applies to people who grow up around this technology and are able to watch other people play those types of things versus back when I was a kid, you either went to a ball game some place or you watch it on TV. Now, there’s other things that people are finding interesting like esports leagues and video games. They want to watch that stuff as well and they have their own personal heroes and people that they follow.
Rob: Right and I feel the same way as you do about it. It makes no sense to me which truly proves that we are old and that people should get off our lawn but my kids, at least my oldest is really likes it. Something that I realized is it’s not just that he is watching someone else play video games. It’s that this someone else is way better than most people, who’s way better than him at it, and has witty banter, is saying funny things so they’re entertained along the way.
It’s not just like when we used to go to an arcade and when your buddy was playing Donkey Kong, you are bored because (a) your buddy wasn’t saying witty things and (b) your buddy wasn’t that good at it. He wasn’t any better than you are at it but if you put those two things, if you would sat and watch someone live on a stand-up arcade machine who is making these hilarious quips, doing well on level 50 when you can only make it to level 5, that actually is intriguing when I started thinking about what’s actually going on there.
I’m personally not a fan of esports in terms of I don’t watch any of them but I think I’ve seen the appeal and how it could appeal to folks who are into it.
Mike: Yup. I’m going to cross this one off just because it’s not applicable but I came up with that and I was just like, “Oh, I think that this could be a thing.” Oh well.
Rob: Yeah. That makes sense. Cool. My third prediction is that Facebook will face antitrust issues and due to that, whether it’s negative press, they are not having a great couple months right now. I think it’s going to get worse for them and I think that it’s going to open up a possibility of there being a new social network that comes about in 2019. I don’t mean the next Facebook but much you would say Instagram is a social network or you’d say these messenger apps like WhatsApp and Snapchat that are called social network.
These aren’t things that just replicate or replace Facebook, but they are new forms of it and a new takes on social networking and I think that door will open even wider based on perhaps, I don’t know if I’m going so far as to say that the declining used to Facebook, but that at least I’m imagining growth is going to slow down pretty precipitously for them.
Mike: Wouldn’t the growth slow down just do a market saturation as well?
Rob: I’m going to get a five on this, Mike, just because. You just gave away my secret. No. It might. I haven’t honestly look at that. I mean, to be honest the prediction is not that growth is going to slow down. My prediction is that Facebook’s going to continue to face antitrust issues or start facing antitrust issues if they’re not already and that, that will make way for the rise of another social network to come. Frankly, maybe Facebook buys them, too. It’s not I have a question. They bought Instagram and it was a good call for them to do that. I think there’s a two-part prediction basically.
Mike: Got it. I just wanted to clarify that last piece. I’ll call this my second prediction here. I think that there’s going to be something “bad” that happens involving Tesla, SpaceX, or Elon Musk, possibly at least two out of the three. Looking at it, I don’t know how to define something bad. I don’t think anything is going to specifically happened to Elon Musk like he gets in a car crash and dies—but that’s certainly obviously a possibility—but I think it’s going to be more likely that he starts making some bad decisions.
I mean he’s already had to step down from his CEO position at Tesla because of some of things that he said on Twitter that influenced the stock price. The SEC came after him and basically he had to pay these massive fines, step down for three years, and I feel something along those lines is going to progress and maybe he has to step away, maybe they push him away from Tesla because maybe he can’t keep his mouth shut or something along those lines. I don’t know what but I just kind of have a feeling about that based on what I’ve seen in his behavior. Seems very erratic.
Rob: Is this a prediction or it kind of a continuation of what’s already going on? Like you said, something bad has already happened. He’s been, basically, asked by the SEC to leave. He had to settle with them because they were going to sue him—I don’t know if that’s the right word—they were going to do really bad things.
Mike: They fined him, I think it was $20 million and they made him step down as CEO for a period of three years.
Rob: Yeah, for three years. That’s something bad has already happened to him. You’re just saying something else bad—
Mike: I’m saying something else, which is going to be in addition to the stuff that has already happened. Maybe he does something else and the board says, “Look, you’re out,” or SpaceX gets some contract and instead of putting something into space, that thing blows up on the way up or it’s trying to land it and the thing just gets destroyed. It’s not going to be one of their tests. It’s going to be something actually important. I think something like that is just going to bite them. I don’t know what.
Rob: Oh, Mike, this is such a morose prediction, man. Geeze. I hope—
Mike: I don’t want it to happen.
Rob: You’re like the shorts, the people who bet against the stock market. They’re right sometimes but nobody likes the shorts because they’re negative. They’re basically against the marks. You’re kind of betting against these companies. I’m not saying that no one should like you. I was just pointing out that there is a similarity. That was a weird thing to go down.
One of the predictions I’m most proud of actually, Mike, one that I remember is, I don’t remember if it was 2017 or 2016 but I predicted that, I was contemplating that Twitter would have major issues, that they would see their growth decline because they were growing super fast and they were just one of the many social networks.
Obviously, Twitter has continued to have a slide. I’m actually proud of that one. I picked the year, stumbled upon the right year that they did start to decline. My prediction for this year 2019 is that Twitter gets acquired by someone. I don’t even have a guess as to who. There are public companies. They have to be obviously—
Mike: They got acquired by Tiny Seed. I’m calling bull…
Rob: There it is. Nice. Making stuff come true, am I right?
Mike: Yes.
Rob: That’s good.
Mike: Yup. I mean it’s certainly possible. I don’t know. Isn’t Jack Dorsey the founder, right?
Rob: He’s one of the – I mean, Ev Williams was the founder, yeah.
Mike: Yes, one of the co-founders. He’s the CEO right now and he’s also the CEO of Square, isn’t he?
Rob: Yeah.
Mike: Got it.
Rob: Which is got to be interesting. It’s got to be a challenge.
Mike: Right. I don’t know. It seems like he’s got, I don’t want to a stranglehold on it but it seems like he’s trying really hard to manage all the problems that are coming up inside of Twitter, with people harassment, and things like. I don’t feel like he’s doing a particularly great job but at the same time not tracking every single thing that they’re doing and how they’re handling stuff. I definitely see situations where it’s just handled really, really poorly and everyone seems to think that except him, but I don’t know. It’s an interesting prediction.
Rob: Yeah. That’s been a criticism of Twitter for the past year or two, is that they’re just not doing enough to send the harassment. They don’t have verified accounts anymore or they have them but you can’t get verified anymore and they say, “Hey, we’re going to come out with a new verified process.” That was ages ago and there’s no new process. What are they doing in there that they can’t get the stuff done has been a criticism.
I don’t care that much in all honesty. I’m not a captain. I’m on Twitter all the time. I’m on now and again but it’s not something that’s part of my daily or even weekly regiment but I think that they are going to be ripe for an acquisition. I don’t know if their acquire will be able to turn this stuff around or not but that’s probably what the intent will be.
Mike: Yeah. I’m trying to think of who would even acquire them and I don’t know who that would be.
Rob: Facebook, Microsoft. No, I don’t know. I’m just kidding.
Mike: My last prediction is that Amazon is going to overtake Apple in terms of net worth.
Rob: Market cap?
Mike: Market cap, yes. I know it’s sort of close but I think that they are going to not only overtake them but in a solid and definitive way. I think they’re both somewhere in the $800 million range or something like that and I think Amazon is going to surpass them. They may even be the first to hit $1 trillion or did Apple hit that at one point then drop?
Rob: Apple hit it. Yup, they already hit it.
Mike: But anyway, I think Amazon is going to be solidly in front of Apple and the only way I see that not happening is it if they take AWS and spin it out as its own subcompany and it’s independently operated, which is also a possibility, I think.
Rob: Yeah, I do, too. I think that’s an interesting prediction especially given you’re talking about this global downturn, which would imply that stocks will continue to slide and they’re both, in theory, going to go down. You’re predicting that Apple is going to go down more than Amazon, if you tie those two predictions together.
Mike: Yeah, I guess so. I don’t know. It’s hard to say whether or not both of those would actually go down. I do think that Apple is probably headed for a downturn. I think that they’ve saturated the market so much at this point with their phones and that recently they started increasing the prices and they said that they’re not going to continue releasing sales numbers for units. I think that’s what it was.
Essentially, what they’re doing is they’re kind of hiding what their actual sales are in terms of what the revenue. They’re going to provide revenue but they won’t provide actual unit sales. You won’t be able to tell independently whether or not they sold more or less based on those numbers long because everything’s kind of aggregated. They just make it harder to tell whether they sold more from one year to the next.
Rob: Yeah, and who knows? I mean, Amazon has done that with their Kindle and Apple’s doen that with different device categories that they just keep in in other devices like Apple TV. That’s one point they were not releasing any numbers for that. I think when something gets successful, they break it out. Not uncommon for them to do that but it definitely is interesting.
I feel this is a good prediction, actually. I just think unless Apple comes out with a breakthrough something in the next year or two, they are just incremental improvements on good technology—I like their hardware—but there’s been nothing groundbreaking that’s really capture the market, whereas Amazon continues to innovate and continues to just kind of have cool stuff.
I mean, you think about AWS, multi-billion dollar business, Amazon Alexa they’re way ahead of everyone else in terms of the smart home stuff. They’re just pushing things forward and I have become a fan of Amazon’s products. Even that Kindle Paperwhite, first one was super clunky and then they just get better and better. Amazon is certaining doing a good job executing. I think you’re going to be right on this one I guess is what I’m saying.
Mike: Yeah. Well you’re point on Apple just making incremental improvements, I still have an iPhone 6s+ I think—I see there 6+ or 6s+ I forget which—it’s several years old and I have no compelling reason to upgrade, like none whatsoever. My wife got one just because her old one was an iPhone 5. There were certain things that just would not run. She kind of needed to upgrade.
It kind of made sense, but I don’t see Apple coming out with anything. The watch was nice but it’s not a game changer for them in terms of revenue and with AWS, that’s the biggest cloud platform on the planet and only Microsoft is behind them with Azure. But that’s still a $40-$50 billion a year industry for them.
Rob: Yup, and there’s Google app engine as well. That would be the other one.
Mike: Yup, that’s number three. I’ve looked at an article here that says Amazon’s revenue, it says $44 billion for AWS, $19 billion for Azure and then $17 billion for Google. Yup. Crazy, crazy numbers.
Rob: Crazy. Well, sir, we should probably wrap this up.
Mike: Sounds good.
Rob: We will see how we do about 12 months from now. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I’m kind of stoked that my first book Start Small, Stay Small is now out live on Audible, only eight short years after I originally recorded it and have been selling the audiobooks. What happened is back when I published the book and I recorded an audio version within a few months of releasing it, Audible wouldn’t let individuals post audiobooks. I couldn’t, there was no user ability, and I emailed then and said, “Hey, I self-published a book, it’s popular, it’s getting traction and such, and I have a podcast. There’s a lot of people who want to hear the audio version but how do I get this in there?” “Yeah, we don’t really offer that. You have to go through a publisher.”
I just never did and I’ve been selling basically the audio version from the website startupbook.net is where kind of Start Small, Stay Small lives but within a few years, I think they did release the ability to do that and then it was just wasn’t a priority when I’m building and growing companies and running conferences. It’s kind of the last thing on the list. I’ve had the last several months off, as you know, and I had the audio files. They had to be re-engineered and remastered. It’s still the same reading but it had to be re-rendered at a certain resolution or whatever and luckily, I still had the original source files from 2010 because the MP3s I had been selling are not at the bitrate that they need for Audible these days.
I literally pulled them off of DVD-ROMs from our old editor for whoever is editing this in 2010. I pulled WAV files or something off of DVDs and put then in Dropbox, which is just amazing, because back then it would have been on DVDs because there was nowhere else to store them. That was my long-term storage for these things. Our editor, Josh, for this podcast, he did a nice edit job on them and it’s now live.
We’ll link it up in the show notes. It’s for posterity. I just actually just purchased it and I’m downloading it because I haven’t listened to the audio book in forever because it’s not easily accessible. When it’s not in my Audible app, I just don’t really listen to audiobooks. Do you? If someone sent you an audio book of 12 MP3 files, you can’t to exit, it’s not easy to open it in an app. It’s a little bit clunky.
Mike: Yeah I probably would not. I think I used to throw things like that in iTunes and I’d be able to listen there but unless it was quick to grab, probably not. I actually didn’t think about taking my book and put it out on Audible. It’s one of those things that’s been such a low priority for me to even look at. Now that you mentioned the bit rate, I went back and I’ve looked and I was like, “Yeah, I’m pretty sure that what I’ve got is not enough.”
Rob: Yeah, The nice part is we do have Josh as a resource. As long as you have the pre-MP3 or whatever, if it’s M4As or I guess it’s AIFFs or the lossless and WAVs, then you could send those to him and he can re-render them in a way that Audible will accept.
Mike: Yeah, I’m not sure if I do.
Rob: But it’s still a project. It’s still a project and you have to get cover art. It wasn’t 20 minutes of my time. It was a few hours of my time and at that point, is it worth doing is a question that should probably be on your mind.
Mike: Yeah and that’s part of why I haven’t done it is because just hasn’t been worth my time to do that.
Rob: That makes sense and one of the things I’m thinking about, if you go to startupbook.net, I sell bundles and I sell an EPUB version plus a paperback version plus an audio version and you can buy in different combos. In 2010 that made a lot of sense and it’s literally fulfillment through PayPal, I built the fulfillment thing because there was no Gumroad. It was barely Kindle Books at that point. I built a bunch of stuff myself and as I’m looking at it, I still get sales of this book.
I’m thinking to myself, I don’t even know that I want that anymore. I kind of just want to link out. If you want the audio, go to Audible. If you want the electronic or the paperback, go to Amazon and everything is handled. Obviously, I make a little bit less money per copy because they take their commission but it just eliminates that thing that I had to maintain.
Mike: Yeah. And that means just simplifying things on your end from just because a process that makes things easier. It becomes the distribution channel for you and then you only have to deal with that versus all the other things that you’ve kind of hacked together over the years. I have the same thing with my book. Everything’s done through Gumroad and I just haven’t changed it because it be a pain-in-the-neck change.
Rob: So, how about you? What’s up with you this week?
Mike: Well, I’ve been planning out some of my Blue Tech marketing efforts that I want to start in January and been looking at things like putting together a set of webinars. I’ve been expanding the number of emails that are into some of my various email campaigns. Just that those are a little bit longer and they lead directly back to Blue Tech a little bit better. Putting in some automations there and just kind of thinking of more about how the different pieces connect to one another and how I can help move people through the sales funnel a little bit better than I have in past.
Rob: That sounds like a good project to be starting after the new year and to be thinking about it and planning it now so you can hit the ground running right after the holidays. I was thinking it is January 5th is the date in my head and that’s probably a Sunday this year. But between January 5th and January 7th is where we would resume big pushes of marketing.
Mike: Yeah. I’m really just planning out what needs to get done because nothing is really going to happen between now and the end of the month. There’s stuff that needs to get done and preparation would take longer even if I wanted to try and launch it. Next week just doesn’t matter so I’m planning the things out, going to do the work between now and the end of the year. Once the calendar flips over, release are pushing on some of those things. By that point, I should be ready to go live with them.
Rob: Sounds good. What are we talking about this week?
Mike: Well, we are going to go into our predictions for 2019 this week. But before we do that, we’re going to go back to episode 370, talk about our 2018 predictions, and see how well we did.
Rob: Dive into your first one. We’ll do a 1-5 scale on these.
Mike: Sure. The first one, I had said there was going to be an economic downturn and I said that things looked pretty good last year about that time, that there’s a lot of uncertainty. It felt to me there were some economic problems that were starting to build up and there weren’t any easy solutions. I kind of pointed to the health care. I don’t want to call crisis but health care problems for small businesses in the US are pretty bad. It’s just awful trying to figure out how to deal with that.
Also looking at the idea that there might be a rise in unemployment, I didn’t think that the housing market was going to go down very much but it felt like was going to relatively flat and I also thought that the stock market was going to level off but not go down. Most of those I would say, it’s hard to judge somebody because it’s not like there’s a standard or number that you can point you for most of them with the exception of the stock market.
Rob: I would say unemployment is well. Unemployment has not risen. Unemployment is at historic low. That one, I think that piece I don’t think you’ve got. I think stock market, it’s leveled off and gone down.
Mike: Well, if you look at from January 2nd to today, it is down by 300 points. It’s pretty close. I mean, that’s real close and in terms of unemployment, I think the actual number has gone down but I also think the number of people looking, who are actively looking, or has stopped has gone up. That’s hard to measure.
Rob: Yeah, I know. I agree but the other two I don’t know. Small service businesses will go out of business. I don’t know that that’s really happening yet. You’re kind of talking about a recession at that point and we’re not in a recession. Housing market won’t go down very much. It will relatively flat.
Mike: I think I was wrong on this one. I think it’s gone up a little.
Rob: Yeah, I think so. I would say such. I mean, real estate’s local but there can certainly be national things. What score do you give yourself on this? It’s not a one but it’s not a five, either.
Mike: Yeah. I’d say three on this one because of those four things that I listed, the stock market will level off but not go down. I would say within 500 points either direction is still leveling off because they could swing by 500 points in a day. I would give that a five but in terms of the housing market won’t go down very much, I thought that it was going to go down and it did not. I would say that’s a one.
I think if you would average all these things together and going to the other one like small service business going out of business due to their taxes and healthcare, I don’t think that happened. The unemployment rise, I would say, according to the numbers, that says no as well, but I think if you were to dig deeper, then there’s a lot of people who stopped looking for work. I’d give that maybe a four and the other one a one. Average is probably around three, something like that, maybe a little bit less but pretty close.
Rob: My first prediction for 2018 was that 2018 will be the year of non-institutional startup funding: angels, crowdfunding, and ICOs. If I were to rephrase this, I would not say non-institutional. I would say non-traditional or it will be the year of alternative startup funding. In hindsight now looking back, it’s like I have this inkling of something.
When new ICOs were happening, the opposite cooled off at this point but I do know that they’re still in play. I think crowdfunding has been so-so and I’ve seen a few like Hacker Noon is crowdfunding. But really the Tiny Seed model that I’m thinking about where it’s a way to get money that doesn’t look like traditional institutional venture capital, where it feels more like an angel investment but it is technically institutional money. It’s these alternative funding sources for people who would normally bootstrap frankly. There’s a whole revenue-based debt financing, like Lighter Capital, Bigfoot Capital. There’s a few others in that space and then there’s more than […], the Tiny Seed thing, that area that I see percolating and starting to happen.
Well, obviously Tiny Seed is just getting started now. Really 2018 was the year it announced but it’s not really going to be in full swing until 2019. That’s not completely accurate. I certainly would not give myself a five on this. I will say that I’ll probably give myself a three. It’s either a three or a four and I tend to want to be a harsh critic of my own stuff. I will say that it’s about a three but I actually think this is worth the beginning of a wave above all these non-traditional options.
That is why I am devoting the next several years of my life to basically starting a company and then fund an accelerator in this space because I think it’s going to be big. This prediction is I think it’s correct. I just think it’s perhaps a tiny bit too early.
Mike: I think you cheat on these things sometimes.
Rob: Why? Tell me.
Mike: Look, because you make a prediction and then you’re like, “Oh, if this isn’t going to come true, I’m going to do it and that will make it true.”
Rob: That’s how entrepreneurs cheat, huh? That’s so funny.
Mike: I mean, I surely call you out of that.
Rob: Yeah, Mike, appreciate that. I think if we have the power to do that, then we probably should. If we have the power to change something that we think should exist, that’s funny. I haven’t thought of it that way but it’s a good point.
Mike: Let me know how that works out for you in Vegas this year.
Rob: Yeah, totally. How about you? What’s your second prediction.
Mike: My second one was that we would not see a US-based legislation around in-app purchases and classification of loot crates as gambling. I don’t know that we ever actually saw that.
Rob: I think it died down.
Mike: Yeah. There was a lot of talk about it initially, and then after that, it just kind of went away because the game makers decided, “Oh, we’re going to change how these things are done,” and it just kind of silently died.
Rob: Yup. My second prediction was that artificial intelligence and machine learning would continue to be marketed as the next big thing but would not deliver again in 2018. Specifically, I think I was talking about how every marketing SaaS app says, especially the venture phone that wants, “Oh, we’re going to be AI for email or AI for you landing pages or machine learning for your data sets to do blah-blah-blah.”
Everybody’s marketing and really most people don’t have the data sets that are big enough to actually use machine learning. A lot of the machine learning winds up just saying, “Oh, it’s noise anyway.” It’s really hard to do this right and my prediction was kind of people would continue to over-promise, use it as a buzzword to raise funding and make promises that would kind of come true maybe a little bit but that it was not going to be of this thing of like, “Holy crap. Someone really finally made this happen.”
My personal opinion was this is a five. I definitely continue to see AI and ML in both startup pitches and on marketing websites, and I have yet to see something that has been a ground-breaking shift in specifically a MarTech app or really any kind of SaaS app that I’m looking at.
Mike: My third prediction was that Uber is not going to regain the ground that they’ve lost and that was kind of based on a lot of the scandals that were plaguing the company. I did a little bit of research on this and one article I found pointed to the second quarter of this year where they lost almost $900 million and then there was another article I found where they were just kind of graphing the Uber-versus-Lyft market share. Lyft is continuing to go up and Uber is continuing to go down.
I don’t know how much of that I would attribute to the fact that now there’s a second entrant, but at the same time if Lyft is eating into Uber’s market share, then it’s because they’re growing and they’re growing faster than Uber is. I have a hard time on figuring out whether or not that means that Uber is not regaining the lost ground.
Rob: I think that you are correct on this. I think this is a five based on market share. That’s what I would’ve thought when you said regain the ground they’ve lost, where losing money is nothing new for them. They’ve lost hundreds of millions, if not a billion dollars every quarter, I think, for years, which is why they had to risk so, so much money.
To the part, I’m not concerned but you wrote this prediction around the time where there was the big kerfuffle where Travis the CEO got kicked out, and there was the big article written about or several articles written about the toxic culture and the bro culture, and then he became kind of the poster child of “what’s wrong with Silicon Valley companies.” It’s not in quotes because its not real but it’s just the thing that happened at the end of 2017 was that a lot of this stuff started coming out.
I have not seen a graph of market share but if you saw a graph where Lyft is going up and they’re going down, I think very much that, that was partially caused by—not entirely caused by—that whole kerfuffle that went down. I always now look for Lyfts first and I used to always look looked for Ubers first. When this all happened, I switched. I know a ton of people who deleted their Uber app altogether. A lot of people don’t want to support a company that acting that way toward its own employees.
Mike: Yeah, definitely. The reason I was a little confused about the graph was just because it’s a trend line that basically shows that and it doesn’t really change. Uber’s market shares continue to go down and Lyft’s is continuing to go up, but it’s showing that back as early as 2016. Is that directly caused by that? I don’t think that it is. I think that it’s just that Lyft is doing better in general than Uber is and it’s kind of eating them alive at this point.
I do think of those other things that we’ve just talked about kind of play into that. I don’t think that I see them recovering from this anytime in the near future and I don’t think that it’s just because of the PR things or the things are going on internally. I think that it’s just they don’t have a good sense of how to basically break ground against Lyft.
Rob: Right. You’re saying it’s like Lyft kind of is doing a better job of executing or whenever. I don’t disagree with that, that it’s just a competition that Lyft has hit their stride and that Uber had enough stumbles that they’re getting ground made up on them. I still think Uber is an amazingly wildly successful company, it’s still worth a ton of money, and I do think they’ll be fine.
Both of them have filed for IPOs. Both Uber and Lyft should have an IPO in the next, I don’t even know, two, three, found months. There’s going to be massive liquidity and there’s going to be deck of millionaires and millionaires coming out of both of those. It’s interesting to think long term. Will there be a two of them? Will they ever consolidate? I don’t know. I mean, they’re both still pretty healthy. Even as hard as Uber got hit, it’s still, I think, quite a successful company. Obviously it’s losing money and there’s this argument to be made. Could it withstand a recession or whatever? But I just think they just pulled back growth. They are actually making profit.
My next prediction for 2018 was that there will be an enormous crash in Bitcoin’s valuation but the long-term I’m still bullish. What do you think? You think I called this one right?
Mike: I think you hacked somebody’s servers and made this crash happen, because you’re an entrepreneur, right dude? You make things happen.
Rob: I did not do that and I give myself a six on this one. It was just an inclination, just the volatility of this whole space. Sometimes I say these things because yes, I own many different cryptocurrencies. I was saying this to my head of there going to be a crash so that I’m prepared for when it happens. It’s kind of the worst case scenario but I definitely thought that there would be some volatility. Got lucky on this one.
Mike: Yeah, especially when you saw that coming and in the middle of that run up, too, like you have to be very aware of the fact that it is run up and how much longer is this going to last before it pulls back and how hard is it going to pull back. Yeah, you were definitely right on this. I give you a six on it, too.
Rob: Yeah, I mean Bitcoin went from $1200 to $18,000 in 18 months or something? Maybe is it even 12 months? It’s insane. Yes, at the time there was irrational exuberance of people where like, “It’s going to $100,000. It’s going to $200,000,” and I was just kind of like, “I don’t think this has the staying power in the short term,” but again, I set out long term. I’m still bullish and I have another prediction this year about it.
My fourth prediction for 2018 was that cryptocurrencies will be regulated by several large governments and this has happened. I think it’s been quite a bit of a regulation in different countries around the world and I think what’s interesting is the longer cryptocurrencies are around, there’s less of a question of, “Oh, it’s this new thing. Is it going to stick around?” It’s more like, “Yes, it’s going to stick around. How do we classify it? How do we regulate it? How do we measure it? How do we tax it?”
Maybe the crash helped it. It’s like become this thing that’s just there that’s just hanging around. I think it’s going to become more and more of a ubiquitous part of kind of what we’re doing to it today.
Mike: You want to kick us off for 2019? What’s your first 2019 prediction? You said you’ve got something for this year.
Rob: Indeed. My first 2019 is a crypto prediction. I think there will continue to be ups and downs in 2019, just continued volatility across all the cryptocurrencies but there will be no major boom in 2019. There will not be a run up like we saw last year. But I am still bullish long-term, I want to be clear. I still own cryptocurrencies but I don’t think we’re going to get the 200%, 300%, 500% bump up that we saw on 2018. I think it will either be just a gradual thing over the course of the year or it will just bump along up and down and I thinking in the future year, we’ll once again see a run-up like we saw.
Mike: Do you think it’s kind of done being highly volatile because even just in the past several weeks, it’s lost half its value. That’s a lot or at least the reports specifically talking about Bitcoin because obviously each cryptocurrency is different but most of them tend to track on Bitcoin’s progress.
Rob: I think it will continue to be volatile and it’s just the nature of it for now while it’s this unknown entity. This is asset class that people aren’t exactly sure what to do with it. I think there’s still going to be people manipulating it, which causes some of the volatility. I think there’s still going to be people speculating it, which causes volatility. That’s my gut feeling.
Mike: Yeah. I look at Bitcoin and the cryptocurrencies. They are one of those things where I wish there was more regulation around it but I also understand why there’s not going to be any time in the very near future. Obviously, governments are making an effort to do that kind of stuff but until there’s federal backing and an insurance on it, there’s going to be a lot of stuff that happens. The exchange gets cracked open and they’d lose all the Bitcoins, everything. That stuff’s going to happen. There’s not much you can do to prevent it. That’s going to help cause that volatility.
Rob: How about you? What’s your first prediction for the year?
Mike: This was a little bit of a tag on the last year and I think that there’s going to start to emerge a global downturn that’s going to be in full swing and it’s going to be obvious. I think before, we were seeing signs of it. I’d say last year’s prediction was probably half-right-half-wrong and I think that’s going to continue, not me being half-right-half-wrong but the downturn, so to speak.
I think we’re going to start seeing more signs of it. I’m hoping I’m wrong but I see these little things happening here and there and it just makes me wonder because it kind of goes back to 10 years ago or so. I don’t think we’re going to hit a global economic recession that causes some massive crisis like we did last time back in 2008 but I do think that it’s going to be noticeable.
Rob: I think either you or I make that prediction every year and has for three or four years. I hope you’re wrong but I’m thinking that you’re probably going to be accurate on that one.
Mike: Is that like predicting it’s going to rain eventually—
Rob: Eventually. It’s kind of. I think that’s kind of what we’re doing here.
Mike: Okay.
Rob: My second prediction is, in 2019—this is a bold one—will be the year of augmented reality. Really deep down, I question if it will but I wanted to make one at least one prediction that I was super unsure about. It’s kind of a big proclamation. I kind of want AR or VR to catch on. I want it to be cool and accessible and I want to do stuff with it, but every time I tried VR, it’s like, “Meh. It’s not there yet.”
I think that AR is probably a more viable thing because you’re not sitting there with a big old mask on your face, you can’t see anything else in the room, whereas AR, there just so many real applications of it that I think can take hold. Whether 2019 will actually be the year of it or whether it will take longer is another thing but my prediction is it going to be this year, Mike, in the next 13 months.
Mike: Now, when you say there’s a whole mess of applications that it could be used for, are you thinking more consumer or you thinking more like industrial- and factory-type things? It seems to me like that would be the place where I would start and then eventually would move over into mainstream consumer because I don’t see anything out there where augmented reality is really something that people would buy into just yet. I definitely see the industrial applications of it but not like practical things that people would use on a regular basis.
Rob: Yeah. I like the way you’re thinking. I mean, that’s what I’m thinking about as well. When I say practical applications, I do mean kind of B2B stuff which means people will pay money for it. If you’re on a factory floor, you can you look over and whatever, see the instructions, how to do things, or you can see the inventory levels. If you’re surgeon, when you look down at a patient and there’s an overlay of what should be there and where you should cut or whatever. It’s incredible for pilots, for all kinds of applications where this could work.
Now I also think that even on our phones, you can imagine having Yelp augment reality around. You hold your phone up, kind of like have you ever done the ones where the apps where you can look at the stars?
Mike: Yeah. I’ve seen—
Rob: You hold them up and that’s essentially augmented reality. Those are cool and those are fun but what are the consumer applications of this? Could you hold your phone up as cars are coming through? You hold your Uber app or your Lyft app up and it will just have a big sign over your Uber? Especially when you’re at a crowded airport, it’s often hard to find things out. They’re trying to do it right now with these lights that sit on the dashboard but what if you’re able to hold that up and just see? That’s maybe a clunky example of it.
I think once we get some contact lenses or some better version of like a Google Glass type thing, that would be even better because then you don’t have to hold your phone up and it’s just kind of projected into your eyes so that you can see things that are augmented, which is not going to happen in 2019. But those are the kinds of, I think, consumer applications that could do it but I think you’re probably right. I think B2B may be the place that makes it work and makes it more affordable.
Mike: You answer my question throughout even though I didn’t directly ask it because what I was really interested in was how do you see it working and what it sounded me like you’re saying is it’s not wearable but it’s kind of on all time. You’re carrying your device around and then you can use it in certain situations when you recommend a situation to augment the data that you receive and it would show you, “Hey, this is what you should be exactly looking at.” It’s a difference between something like Google Glass that you wear all the time versus you pull out your phone and then see the additional stuff.
Rob: Right. That would be the idea. I don’t think that you’re going to wear this stuff all the time. Most people aren’t going to do that unless you’re on factory floor and you might need to, then you do put on safety goggles and maybe it projects under your eye. If you’re surgeon or dentist, they often wear the glasses anyway that have a magnifying something or other, have augmentation there. It just makes a lot of sense and they don’t wear those all the time but they wear when they’re doing surgery o when they’re doing a procedure. Same thing perhaps for pilots. I don’t know if it would be and they already have heads up displays in certain aircrafts but that’s where it just makes more sense and you don’t have to do extreme behavior changes for people to do start adopting this.
Mike: Yeah and you don’t have to worry about the social context or social problems that are associated with that stuff. When I think about some of this stuff, it kind of reminds me of a project that I worked on at Wegmans back in I think it’s 2000-2001 where they had this voice recognition unit and I had to program things to integrate into the wireless system for the warehouse.
I got to a spot and there’s all these people wandering around the warehouse with these power lift jacks. They had to grab things at a warehouse so they could put on the trucks and they would just talk to this thing and it would tell them what it is that they needed. Fast forward 15 years and now tablets exist and you can do that kind of stuff now in a visual format that whereas before it was just text only, speech-to-text recognition.
My second prediction for 2019 is that esports leagues will get a dedicated TV channel and having done the research on this after the fact, I realize now that there is already one in existence.
Rob: I was going to say I think this exists that’s not Twitch.
Mike: Yeah, I didn’t realize it. That’s the thing is that it was not going to be Twitch. Obviously, there’s streaming systems out there, obviously. People stream out on YouTube. My kids watch that stuff constantly. Whenever they get a chance, they want to watch other people playing video games. I had this discussion with my half brother. His comments on it was, “You will watch a football game or a baseball game. How is watching somebody play video games any different than that? You’re not involved, you’re not directly playing, you’re just being entertained by the fact that somebody else is playing.”
It’s a good point to make and I think that it especially applies to people who grow up around this technology and are able to watch other people play those types of things versus back when I was a kid, you either went to a ball game some place or you watch it on TV. Now, there’s other things that people are finding interesting like esports leagues and video games. They want to watch that stuff as well and they have their own personal heroes and people that they follow.
Rob: Right and I feel the same way as you do about it. It makes no sense to me which truly proves that we are old and that people should get off our lawn but my kids, at least my oldest is really likes it. Something that I realized is it’s not just that he is watching someone else play video games. It’s that this someone else is way better than most people, who’s way better than him at it, and has witty banter, is saying funny things so they’re entertained along the way.
It’s not just like when we used to go to an arcade and when your buddy was playing Donkey Kong, you are bored because (a) your buddy wasn’t saying witty things and (b) your buddy wasn’t that good at it. He wasn’t any better than you are at it but if you put those two things, if you would sat and watch someone live on a stand-up arcade machine who is making these hilarious quips, doing well on level 50 when you can only make it to level 5, that actually is intriguing when I started thinking about what’s actually going on there.
I’m personally not a fan of esports in terms of I don’t watch any of them but I think I’ve seen the appeal and how it could appeal to folks who are into it.
Mike: Yup. I’m going to cross this one off just because it’s not applicable but I came up with that and I was just like, “Oh, I think that this could be a thing.” Oh well.
Rob: Yeah. That makes sense. Cool. My third prediction is that Facebook will face antitrust issues and due to that, whether it’s negative press, they are not having a great couple months right now. I think it’s going to get worse for them and I think that it’s going to open up a possibility of there being a new social network that comes about in 2019. I don’t mean the next Facebook but much you would say Instagram is a social network or you’d say these messenger apps like WhatsApp and Snapchat that are called social network.
These aren’t things that just replicate or replace Facebook, but they are new forms of it and a new takes on social networking and I think that door will open even wider based on perhaps, I don’t know if I’m going so far as to say that the declining used to Facebook, but that at least I’m imagining growth is going to slow down pretty precipitously for them.
Mike: Wouldn’t the growth slow down just do a market saturation as well?
Rob: I’m going to get a five on this, Mike, just because. You just gave away my secret. No. It might. I haven’t honestly look at that. I mean, to be honest the prediction is not that growth is going to slow down. My prediction is that Facebook’s going to continue to face antitrust issues or start facing antitrust issues if they’re not already and that, that will make way for the rise of another social network to come. Frankly, maybe Facebook buys them, too. It’s not I have a question. They bought Instagram and it was a good call for them to do that. I think there’s a two-part prediction basically.
Mike: Got it. I just wanted to clarify that last piece. I’ll call this my second prediction here. I think that there’s going to be something “bad” that happens involving Tesla, SpaceX, or Elon Musk, possibly at least two out of the three. Looking at it, I don’t know how to define something bad. I don’t think anything is going to specifically happened to Elon Musk like he gets in a car crash and dies—but that’s certainly obviously a possibility—but I think it’s going to be more likely that he starts making some bad decisions.
I mean he’s already had to step down from his CEO position at Tesla because of some of things that he said on Twitter that influenced the stock price. The SEC came after him and basically he had to pay these massive fines, step down for three years, and I feel something along those lines is going to progress and maybe he has to step away, maybe they push him away from Tesla because maybe he can’t keep his mouth shut or something along those lines. I don’t know what but I just kind of have a feeling about that based on what I’ve seen in his behavior. Seems very erratic.
Rob: Is this a prediction or it kind of a continuation of what’s already going on? Like you said, something bad has already happened. He’s been, basically, asked by the SEC to leave. He had to settle with them because they were going to sue him—I don’t know if that’s the right word—they were going to do really bad things.
Mike: They fined him, I think it was $20 million and they made him step down as CEO for a period of three years.
Rob: Yeah, for three years. That’s something bad has already happened to him. You’re just saying something else bad—
Mike: I’m saying something else, which is going to be in addition to the stuff that has already happened. Maybe he does something else and the board says, “Look, you’re out,” or SpaceX gets some contract and instead of putting something into space, that thing blows up on the way up or it’s trying to land it and the thing just gets destroyed. It’s not going to be one of their tests. It’s going to be something actually important. I think something like that is just going to bite them. I don’t know what.
Rob: Oh, Mike, this is such a morose prediction, man. Geeze. I hope—
Mike: I don’t want it to happen.
Rob: You’re like the shorts, the people who bet against the stock market. They’re right sometimes but nobody likes the shorts because they’re negative. They’re basically against the marks. You’re kind of betting against these companies. I’m not saying that no one should like you. I was just pointing out that there is a similarity. That was a weird thing to go down.
One of the predictions I’m most proud of actually, Mike, one that I remember is, I don’t remember if it was 2017 or 2016 but I predicted that, I was contemplating that Twitter would have major issues, that they would see their growth decline because they were growing super fast and they were just one of the many social networks.
Obviously, Twitter has continued to have a slide. I’m actually proud of that one. I picked the year, stumbled upon the right year that they did start to decline. My prediction for this year 2019 is that Twitter gets acquired by someone. I don’t even have a guess as to who. There are public companies. They have to be obviously—
Mike: They got acquired by Tiny Seed. I’m calling bull…
Rob: There it is. Nice. Making stuff come true, am I right?
Mike: Yes.
Rob: That’s good.
Mike: Yup. I mean it’s certainly possible. I don’t know. Isn’t Jack Dorsey the founder, right?
Rob: He’s one of the – I mean, Ev Williams was the founder, yeah.
Mike: Yes, one of the co-founders. He’s the CEO right now and he’s also the CEO of Square, isn’t he?
Rob: Yeah.
Mike: Got it.
Rob: Which is got to be interesting. It’s got to be a challenge.
Mike: Right. I don’t know. It seems like he’s got, I don’t want to a stranglehold on it but it seems like he’s trying really hard to manage all the problems that are coming up inside of Twitter, with people harassment, and things like. I don’t feel like he’s doing a particularly great job but at the same time not tracking every single thing that they’re doing and how they’re handling stuff. I definitely see situations where it’s just handled really, really poorly and everyone seems to think that except him, but I don’t know. It’s an interesting prediction.
Rob: Yeah. That’s been a criticism of Twitter for the past year or two, is that they’re just not doing enough to send the harassment. They don’t have verified accounts anymore or they have them but you can’t get verified anymore and they say, “Hey, we’re going to come out with a new verified process.” That was ages ago and there’s no new process. What are they doing in there that they can’t get the stuff done has been a criticism.
I don’t care that much in all honesty. I’m not a captain. I’m on Twitter all the time. I’m on now and again but it’s not something that’s part of my daily or even weekly regiment but I think that they are going to be ripe for an acquisition. I don’t know if their acquire will be able to turn this stuff around or not but that’s probably what the intent will be.
Mike: Yeah. I’m trying to think of who would even acquire them and I don’t know who that would be.
Rob: Facebook, Microsoft. No, I don’t know. I’m just kidding.
Mike: My last prediction is that Amazon is going to overtake Apple in terms of net worth.
Rob: Market cap?
Mike: Market cap, yes. I know it’s sort of close but I think that they are going to not only overtake them but in a solid and definitive way. I think they’re both somewhere in the $800 million range or something like that and I think Amazon is going to surpass them. They may even be the first to hit $1 trillion or did Apple hit that at one point then drop?
Rob: Apple hit it. Yup, they already hit it.
Mike: But anyway, I think Amazon is going to be solidly in front of Apple and the only way I see that not happening is it if they take AWS and spin it out as its own subcompany and it’s independently operated, which is also a possibility, I think.
Rob: Yeah, I do, too. I think that’s an interesting prediction especially given you’re talking about this global downturn, which would imply that stocks will continue to slide and they’re both, in theory, going to go down. You’re predicting that Apple is going to go down more than Amazon, if you tie those two predictions together.
Mike: Yeah, I guess so. I don’t know. It’s hard to say whether or not both of those would actually go down. I do think that Apple is probably headed for a downturn. I think that they’ve saturated the market so much at this point with their phones and that recently they started increasing the prices and they said that they’re not going to continue releasing sales numbers for units. I think that’s what it was.
Essentially, what they’re doing is they’re kind of hiding what their actual sales are in terms of what the revenue. They’re going to provide revenue but they won’t provide actual unit sales. You won’t be able to tell independently whether or not they sold more or less based on those numbers long because everything’s kind of aggregated. They just make it harder to tell whether they sold more from one year to the next.
Rob: Yeah, and who knows? I mean, Amazon has done that with their Kindle and Apple’s doen that with different device categories that they just keep in in other devices like Apple TV. That’s one point they were not releasing any numbers for that. I think when something gets successful, they break it out. Not uncommon for them to do that but it definitely is interesting.
I feel this is a good prediction, actually. I just think unless Apple comes out with a breakthrough something in the next year or two, they are just incremental improvements on good technology—I like their hardware—but there’s been nothing groundbreaking that’s really capture the market, whereas Amazon continues to innovate and continues to just kind of have cool stuff.
I mean, you think about AWS, multi-billion dollar business, Amazon Alexa they’re way ahead of everyone else in terms of the smart home stuff. They’re just pushing things forward and I have become a fan of Amazon’s products. Even that Kindle Paperwhite, first one was super clunky and then they just get better and better. Amazon is certaining doing a good job executing. I think you’re going to be right on this one I guess is what I’m saying.
Mike: Yeah. Well you’re point on Apple just making incremental improvements, I still have an iPhone 6s+ I think—I see there 6+ or 6s+ I forget which—it’s several years old and I have no compelling reason to upgrade, like none whatsoever. My wife got one just because her old one was an iPhone 5. There were certain things that just would not run. She kind of needed to upgrade.
It kind of made sense, but I don’t see Apple coming out with anything. The watch was nice but it’s not a game changer for them in terms of revenue and with AWS, that’s the biggest cloud platform on the planet and only Microsoft is behind them with Azure. But that’s still a $40-$50 billion a year industry for them.
Rob: Yup, and there’s Google app engine as well. That would be the other one.
Mike: Yup, that’s number three. I’ve looked at an article here that says Amazon’s revenue, it says $44 billion for AWS, $19 billion for Azure and then $17 billion for Google. Yup. Crazy, crazy numbers.
Rob: Crazy. Well, sir, we should probably wrap this up.
Mike: Sounds good.
Rob: We will see how we do about 12 months from now. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 423 | Our Goals for 2019
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike set their goals for 2019 as well check in and rate how they did for their 2018 goals.
Items mentioned in this episode:
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about our goals for 2019. We also look back at our goals for 2018 and evaluate how well we did. This is Startups For The Rest Of Us Episode 423.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. What of this week, sir?
Mike: Well, it’s the middle of December so I’m just kind of working on MicroConf sponsorships and scholarships at the moment. I was just having various conversations with people about different options with things that are a little bit different for a sponsorship option for MicroConf. There’s a few different options that are on there that also include the scholarships.
Last year we kind of quietly and under the radar offered 14 scholarships to people for Starter Edition. I’m looking to expand that this year and talking to various people about it. I’ve already got some people who’ve committed funds and already actually put the money in and started sponsoring those. That’s good to see and we’ll just kind of see where things shake out at the end of it. I kind of have a mental goal in mind but I don’t want to shoot myself in the foot by sharing it.
Rob: Sure and if someone was interested in either sponsoring either the conferences or offering a scholarship ticket to Starter, how do they get in touch with you?
Mike: They can reach me at mike@micropeneur.com or I think sponsors@microconf.com also works. Either one of those and if you’re interested in just sponsoring one individual scholarship option, there’s a link for that right on the sales page for the MicroConf Sales or you can go to microconf.com, click on the link to buy a ticket, and there’s an option there to just purchase an individual ticket. The terms of the sponsorships, there’s kind of a mechanism for purchasing more than just one or two tickets. I think it starts at four and goes up from there.
Rob: Yeah and I knew part of the scholarships. I mean, this is something you really spearheaded and you kind of came under the radar a couple of years ago, and then you really started pushing on this program last year. But it helps folks get to Starter who otherwise can’t afford to or they don’t have an expendable cash to get out there and it can really make a difference for someone. I know that we interviewed some folks with the kind of video interviews after the fact or during the conference to share with the person or company who would sponsor them. You and I looked through those and they were pretty meaningful and people were really impacted by the conference. I think it was a transformative experience for them. It’s nice to be able to offer something like that.
Mike: Yeah, definitely. What’s up with you this week?
Rob: Well, I’ve long had an LLC in California, obviously because that’s where I’ve been running my businesses and I just entered a process, I believe it’s going to get finalized this week, of transferring that LLC to Minnesota. There’s a bunch of reasons for doing this: (a) it’s cheaper to do business here, but (b) I had to have basically a kind of a PO Box or an accountant or whatever, you have to have an address in California that they could send stuff to. I don’t need to file tax returns in California anymore. Even just that, it’s like an extra tax return my accountant charges me several hundred bucks for.
It feels kind of a nice piece of closure for me and it’s also an opportunity to rename the thing because I can name it whatever I wanted. The name that I picked in 2007 does not resonate with me. I picked a name that was so broad and esoteric that I could put whatever I wanted under it. At first, it was like a consulting firm so it had the name ‘Group’ in it. It’s called The Numa Group. It was a consulting firm but then I just put a bunch of software products under it and put my part of MicroConf under it. I don’t particularly love the name anymore and the domain name I have for it is clunky. So I just kind of consolidate the thing. I renamed it to Start Small LLC.
Mike: Oh nice.
Rob: Yeah. It took me a while. I’m not good at naming stuff and I was like, “What is something that for me is timeless? That in 10 years, I’m going to think back and say that was a good call?” and it’s not just because it’s the title of my book, or part of the title but I just feel like it fits into so much. It tells my story in two words and it fits in with the MicroConf ethos. It just said so many things.
Anyway, that’s been kind of a fun, cathartic process of just moving everything here, like The Numa Group redirects to my robwalling.com site which I had redone. I’m just kind of getting rid of a bunch of cruft. The Numa Group site was a landing page that was outdated and I just kept saying, “Oh, I’m going to get back to that,” but why it even have a landing page? Why even have that anymore? The company is not important. Frankly, at this point, it’s kind of about robwalling.com and then about Tiny Seed. It’s my personal site and the business site and everything else in MicroConf, of course. Anyway, that’s kind of been the process.
Mike: Yeah, I can imagine that’s a real pain in the neck and it’s something you probably want to get taken cared of before December 31st because if you don’t, you’ll have a file taxes again in California the following year.
Rob: That’s exactly what I’m doing. The only other thing is I’ve been coming out of the woodwork a little more and doing some interviews and even wrote a Q&A piece for a software execute magazine. That will be out in a couple of months and I’ll probably mentioned that again when it comes out. Have you heard of Hacker Noon?
Mike: Yeah.
Rob: Dave, the guy emailed me from there and did a little-written interview with me. It was kinda fun. It took a lot of work. I forget how easy voice interviews are compared to written interviews. I know that you know this because of the Indie Hacker one you did last year or earlier this year and you’re like, “Yeah, I spent two days on it.” So much effort.
Mike: Yeah. It was way more effort to do those. I think people’s expectations are different as well if you’re talking versus if it’s written, it seems like it should be carefully crafted, say exactly what you mean, and not anything else. When people are listening to you, you have a lot more leeway, I think, because people understand that you’re talking off-the-cuff and it’s not heavily scripted thing when you’ve memorized ever question and every answer.
Rob: Yeah, that’s right, and it feels less prepared whereas writing, it feels like you need to rewrite it, reread it, edit it, and do all that, which is exactly what I did. It took me 2-3 hours to answer the questions. What was cool was some of the questions at Hacker Noon interview, ones that I’ve really never been asked, which is always fun to think through but it’s also time-consuming, and it’s peaked.
It’s kind of peaked productivity stuff. I had to do it in the morning. I couldn’t in the afternoon there. I would just been too tired to really hammer something out. Then I came back to revised it, updated it, and stuff. I feel like it turned into a really good interview. I haven’t done a written interview in probably five years just because of the time that it takes. I just turn them down. But I kind of wanted to do this one. We’ll be sure to link that up in the show notes.
This week, we are diving into our goals for 2019. But first, Mike, the walk of shame. We get to look back at our 2018 goals. Episode 372, just a short 50 or so, 51 episodes ago, it looks like. We talked about our 2018 goals. Why don’t you roll into your first one? Are we going to do a 1-5 scale of one we completely flubbed the goal and five is we completely nailed it?
Mike: Oh I figure we talking about 1-5 is like my goals versus your goals.
Rob: Oh, no. No, no. This is how well we carried them out.
Mike: Well, I’ve been quite honestly we could put one on pretty much every single one of mine. We could kind of shorten it. I’ll go through them but this last year was just absolutely atrocious.
Rob: Let’s do it. Let’s roll through all yours right now then.
Mike: Sure. You want me to go through all five of them then?
Rob: Oh yeah, the agony. Let’s read them in slow motion so everyone can watch a trainwreck.
Mike: The first one was actually a carry-over goal from the previous year, which was login at least 100 days of exercise the coming year, and I fell way, way short of that. I probably got to 25 or 30 and that was just about it. The second one was making Blue Tech profitable including my time, which has also not happened.
And then the other three, I think at least one or two of these, about two or three months in, maybe March or so we decided, “Hey, these just don’t even look realistic. We should just can these to begin with.” One of them was speaking at six plus conferences or events because the idea was that, at first I thought, “Okay, well this can be a way to market Blue Tech,” but at the same time, you really have to have the right audience for that kind of thing anyway, and it felt like more of a distraction than anything else. So, I ended up canning that one.
Then the other one, reading at least one business book every two weeks. That seem to me like it was also a distraction. It was like a consumption thing. I also cut back on podcast listening just because of the same thing. It will just take up mental overhead that I just didn’t want to have. Then the last one of that list was hiring someone to take over Blue Tech development, which kind of requires that Blue Tech become profitable. If that doesn’t happen then it’s hard to fund that. So yeah, I would say pretty much one on all of those.
Rob: What does that tell us? Is it were you doing other things that you would say were accomplishments that were outside of this? Was it a focus thing or was there a better priority that came up? Or do you think our goals are stupid? That’s another. Should we not set goals?
Mike: I think a lot of it had to do with lack of focus. By lack of focus, I don’t mean I’m working on one thing and then working on another. I mean literally lack of focus. Inability to focus. Because I wasn’t sleeping. I mean, I’ve been kind of suffering through this for the past several years, like I got on a CPAP machine a couple of months ago and that thing has been working fantastically. I’m actually sleeping now. But I went back and before this episode, I looked at the sleep blog that I’ve kept for this sleep therapist that I saw. I was up anywhere from 3-8 times a night and I was only getting anywhere from 4-6 hours of sleep. There were times when I would get 1½-2 hours of sleep a night so I felt fuzzy.
It’s hard to describe the difference that it may swing. I felt that way. Yesterday, for example, I woke up and I had a fantastic night of sleep. It’s a world of difference between being able to think straight and just kind of going through the motions and getting things done but not really able to focus on any one thing and feeling like you’re shifting back and forth but not making any real progress.
Rob: Yeah. It’s easy to get distracted and your thoughts are fleeting. In addition, I don’t know if this happens to everyone but when I only get a few hours sleep, I am actually super pessimistic and I tend to look like someone with depression. I don’t technically have it because it’s not over a long period of time. I will wake up and just be like, “Oh this is all just shit. None of this is going to work. Oh my gosh. Why am I even starting startups? I can’t do any of it.” That will be my inner self-talk and I’ll catch myself now and be like, “Dude, you’re really tired. You should just go to sleep.”
I know that’s not easy for you but that’s what my inner monologue will be on those days of like, “You’re going to be better off not working today.” But for you, it was happening everyday, right?
Mike: Yeah, even on the weekends, too. That was the worst part is, I was exhausted and I couldn’t get to sleep. When I did go to sleep, I didn’t realize also the time because I was trying all these different things to just get to sleep. Or I’ll move my bedtime back earlier and I’ll go to sleep, or try to go to bed at 10:00 or 10:30, turn off all electronics, don’t answer emails after 7:00 or 8:00 o’clock at night, just turn all that stuff off. It works to a slight degree but not enough and I couldn’t figure out why and it kept happening.
Of course, come to find out through the sleep study, like, “Oh, my body is waking me up multiple times a night because I stopped breathing.” You can’t change habits and fix that. It just doesn’t happen. It didn’t matter what I did. Nothing was working.
Rob: Yeah, and that’s tough and it’s frustrating. Obviously, five goal set and zero goals achieved. Health issues were a major impact on that. It’s interesting. Sherry talks about this, that a lot of mental health issues in general, like people with depression or ADHD or other stuff, one cause of those, not for everyone, but one cause is a lack of sleep. Once people stop being able to sleep full nights, their minds start doing weird things.
She also talks about there’s some research studies that talk about the quite a bit the angst of being a teenager, how you turn 13 and you get all angsty from 13 to 18 or whatever kind of the thing is in high school. A lot of that could very well be too just a lack of sleep. The kids at that age need about 10 or 11 hours and most kids do not get that much and they’re tired all the time and it leads to the sadness or whatever. I’m no expert on this, so I don’t want to talk, but Sherry has talked to me multiple times about this and especially with our kids, because a couple of our kids at different times, they have behavioral issues, they have focus issues, and one of the first things that we will get is sleep and exercise every time instead of trying to medicate or whatever.
I’m not anti-medication but it’s like the first two resorts every time Sherry is like, “How has he been sleeping?” and, “Is he getting out and getting 20 minutes of hustle, hard exercise?” Not a 20 minutes walk but 20 minutes of running around playing dodgeball a day. I think that it’s interesting and it can have a huge impact on your mood and your ability to focus, which then has a huge impact on your productivity.
Mike: Yeah. For me, it was that vicious cycle of not being able to sleep and then it also affects my ability to go to the gym. If I don’t go to the gym first thing in the morning, it’s just not going to happen because I get busy in other things getting in the way. Not being able to sleep has a direct impact on my willingness and ability to go to the gym. It just puts me in this vicious cycle where I don’t get to sleep, so I don’t go to the gym, so I don’t feel good in any way, shape, or form, and then I go to bed and I’m stressed out, exhausted, and tired. And then my mind is wandering even before I get to sleep so I can’t get to sleep. When I do sleep, my body just – I guess I’m assuming because it’s physical problems. I just got the sleep apnea that wakes me up.
All of it combined. It just doesn’t end and there is no way for me to kind of break the cycle until I found out what it really was. I knew I wasn’t sleeping but that was a symptom. It wasn’t the underlying problem.
Rob: And you have that machine for the past couple of months. Dude, how’s your progress? Has it been night and day? Not just how you feel because I know that you feel is night and day but are you making substantially more measurable progress since then?
Mike: Yes. I can point to different things that I’ve done in the past, like two months or so. In the past two months, I have probably made more progress than I have in the past 10 or 15. It is night and day but I’m cautiously optimistic about how things are going to turn out but obviously at this point, I feel it’s more about execution that anything else. But I still have to make sure that I crack down on those health issues and make sure that they don’t get in the way.
Now that I know what the problem is or problem was, then I can try to do things to address it. But before, I was trying all these different things because I didn’t know what was going to work or what wasn’t and how to get around it. I remember pushing off on the sleep study a while back for my doctor, and she’s like, “Have you ever thought about having this done?” and I was like, “Well, I have but I don’t really want to go through it and have nothing come out of it,” because last time I ended up going in, she recommended that I go for a blood work. She’s like, “Oh your platelet count’s low and let’s check this out.” I go and she referred me to this doctor, go through that, and then $400 worth of test later, the doctor tells me, “Well, you don’t have leukemia,” and I’m like, “I never thought I did. I don’t know why I’m here for that test.” It kind of pissed me off but what do you do? The doctor’s are really just trying to figure out what’s going on here and they do it by process of elimination.
Part of it’s maybe my own fault for not doing it sooner because she had recommended it in the past but at the same time, I didn’t really want to have that done just because I didn’t know how much it was going to cost. My insurance barely covered any of it. It cost me several thousand dollars for between the machine and the tests and everything else anyway.
Rob: In looking back on obviously these goals, you said five of them are ones. This is a weird question but is there something that you’d accomplished in 2018 that you feel good about, that if it had been a goal, it would be a five? Something of note? I don’t know how you even rank that. I’m just trying to dig in to figure out is there anything there?
Mike: Like was 2018 a complete loss or were things you actually proud of?
Rob: Kind of, yeah. I mean, I just kind of digging into it because this sucks and there’s gonna be someone listening to this who thinks, “Oh, Mike should’ve sucked it up, accomplish stuff anyway, and push forward,” and then there are the majority of people I’m guessing are going to be like, “Wow, that totally sucks. I hope that never happens to me. I hope I never feel that way.” And then there are going to be people who like, “I’ve been through that.”
Whether it’s sleep issue, whether it’s your neck and back hurting so much that you can only work two hours a day, which has happened to me, whether some people get vertigo really bad so they get super dizzy, some people get depression, they get ADHD, there are all these debilitating things. They can be physical, they can be mental, they can be whatever, but it happens to a good chunk of us. Maybe not for a whole year in us since you’re saying on and off for a couple of years but I just think there’s a lot to think about with that. In terms of staying healthy, I think it’s probably the big takeaway, perhaps.
Mike: Yeah. The two things that I can point to is, the first one is the accomplishment, the scholarship program that I got, going last year at MicroConf. I think that, that was a good start and this year’s trying to take it to the next level. We’ll see how that goes but it was more about experimenting and trying to figure out what’s going to work, what’s not, and help work with the sponsors, figure out what works for them as well. I think that we did well with that.
Rob: I would agree with that and you basically spearheaded that and put in a bunch of time. That was something that was a little mini startup within MicroConf and I’m glad you called that out because that was something you did that was really cool. I think something else you may not call this up but you kind of crushed it on sponsorships this year with both the conferences so I would call that as a win for you. It’s weird to put a goal in there of like, “I want to increase sponsorships by X, Y, and Z,” because it’s more relevant to us, it’s an internal thing, and I don’t know that it’s that interesting to folks outside, but it is something you put time into and had success with.
Mike: Yeah but even the sponsorships themselves, they help us make Starter Edition possible because we, too, subsidize Starter Edition out from Growth Edition to some extent, and we have to because it costs the same to run both of the conferences. The stuff that we do there has a direct impact on Started Edition, which has a direct impact on people who are getting started with entrepreneurship and softwares. I think that all ties together is like a general kind of goal or direction that we both kind of always as long as this podcast has been going. But yeah, it’s a good thing to call those out. But I don’t know as I would probably have put those in exclusively as goals.
The only other thing I would say is, and I wouldn’t even call this a goal again, but I’ve started getting out with a group of friends here once a week and actually having some social contact outside of my office. It’s weird to say that because I don’t have an office that I go to. I don’t have employees or people that I meet with on a regular basis. I barely have any contractors at this point. It’s really just me, working on most stuff.
Like my social contacts, outside of my house is extremely limited. One of the things that I was trying to do is figure out in terms of the mood and you kind of talked about, if you don’t get sleep, you kind of feel depressed and why am I working on this and things aren’t working and you’re very pessimistic. I felt like that for a very long time because I wasn’t getting sleep. One of the things I tried to do was say, “Okay, well what can I do to fight this?” and one of them was getting out and be more social with people. So I kind of established that, Dungeons and Dragons group, then meeting with them on a weekly basis. Honestly, it was quite helpful but even now after getting sleep, it’s even more helpful because it’s not just me looking forward to it every week but everybody else is as well.
Rob: That makes sense. So some good things did come out of 2018 is what you’re saying.
Mike: Yeah, some, but I don’t know. I’m hoping 2019 will be substantially better.
Rob: Yeah. Sounds like a rough year. Looking at my 2018 goals, looks like I had three of them. One was to be in fewer meetings under 10 hours a week. You and I laughed, chuckled about this a few months back because the reason I was into so much meetings is because I was at fast-growing startup that was growing from, I don’t know, it was 20 or 30 people and it went up to 60-70 by the time I was leaving and that just requires a bunch of meetings to keep everybody apprised of what’s going on and all that. I was running a big team and non-senior leadership and there’s just a lot of stuff required with that.
When I left Drip in April, basically my meetings went to zero. We did this in November or December of last year so I didn’t have knowledge I was going to be leaving in April but I did achieve this in a way that I probably didn’t expect. I think the way I wanted to achieve it or would have thought about in November-December was to stay at the job but just change it so I was in fewer meetings but it turns out that leaving the job also did the trick. Frankly, my life’s been better for it, being in fewer meetings, that is.
Mike: Yeah. Add in six plus months of zero meetings a week, it tends to bring that average put down pretty far.
Rob: Yeah, I know. I am so much more chill and just content taking time off like this is something I’ve never done and it’s worth it.
My next goal was three days of exercise each week and so fewer meetings, but I give myself a five, a few days of exercise, I’m going to give myself a four. I basically crushed this goal from January until it got cold. I crushed it during last winter and then all through summer I was out doing stuff, I was riding my bike. Everything was built into my day and I was doing it.
Then it was probably around October, just a couple of months ago, that it got cold. We started homeschooling one of our kids and Tiny Seed started picking up. But what I let go was exercise and it’s what I always do and it’s always my lowest priority. So I did it for maybe 9 or 10 months of the year and there were weeks where I had five days of exercise. Way more than I even need in my opinion. Healthy by nature just by genetics or whatever. Even getting in three days of 20 or 30 minutes pop is enough. Mostly achieved, and I think it’s something that I want to certainly get back on the wagon here and the next few weeks as winter continues to bare down on us.
My last goal for 2018 and this one’s interesting. Let me read this whole thing. To ship something in 2018. Not sure what it’s going to be, yet. But I’ve been laying low for 18 months, 2017 was supposed to be a rest year and it was a hard year. First part of 2018 is going to continue to be rest but I need to start shipping, either consistent blog posts, a book, a new podcast, a course, software, something, and what is that something like?
Mike: I assume that that would be Tiny Seed.
Rob: It is and in 2017 November, I had no idea that that’s what I’d be doing. It’s interesting that it’s like knowing yourself. I figured I was going to need to do something and then I actually frankly started working on a book after I left Drip in April. I did write maybe 12,000-13,000 words, which is about a quarter of a book, 20%-25% of worth from a book. I did do that and then I eventually just slowed down on it and lost some interest and decided I just didn’t want to force it. There’s also that that’s in play and could feasibly come out sometime.
That’s what I had and I don’t know with me if goals are self-fulfilling prophecies or I make goals that I secretly, way in the back of my subconscious, know that I will achieve or something. This one strikes me as weird, honestly, because I remember the mindset I had at the time and I genuinely had no idea what I was going to do. I just know that I needed to put something out into the world and that something obviously has become Tiny Seed.
Mike: I think that generally, your goals tend to be, I wouldn’t necessarily call them self-fulfilling prophecies but more along the lines of you have this inkling in your head and in your subconscious that you know what direction you want to go or need to go but you’re not quite sure how you’re going to get there, and during our goals episode you put something down that has kind of surfaced but you’re not always certain of the specifics. But by the end of the year, something has solidified or something has come about.
For example, your fewer meetings. You probably weren’t thinking, “Oh, I’m going to leave Leadpages,” but at the end of the day, that was one of the ways that that came about. Maybe that partly influenced your decision because you wanted to have fewer meetings. And then the same thing with shipping something. That kind of goes back to leaving Leadpages as well but Tiny Seed kind of came out of that. You knew in the back of your mind, “I want to do something, not sure what that looks like.” I think your goals on a yearly basis tend to reflect that.
Rob: Yeah. That’s good insight. I also feel like I’m pretty methodical and I kind of know when it’s push year and maybe a rest year. I don’t know. I haven’t had many rest years per se but I don’t know. As we started Drip, I knew 2013 the goal had to be launch it and grow it to X, and then 2014, 2015, and 2016 at the beginning of them, I did make revenue goals for the end of the year.
This is an interesting conversation, actually, because some people don’t like goals, or they don’t believe in them, or they say they’re not worthwhile, or they say that they don’t fit them, they’re like, “Oh, how can you possibly plan 12 months out?” Maybe that’s a personality thing but I have had set goals for myself frankly since back in high school with Running Track.
I had goals to hit certain times at certain by certain meets or to make the state meet or whatever, and that to me was a motivator to strive to do that. I had goals to write certain amounts of things and then when I started blogging and started becoming a professional, I had a goal to make this much money by the time I was this old. I don’t know. I’ve been a goal to reverse it so maybe these goals fit my personality and am not something that everyone necessarily needs.
What I find is interesting is my wife, Sherry’s personality is quite a bit different than mine. But when she goes on a retreat, she also sets at least some, I don’t know if she calls them goals, but there’s things that she’s striving to do and she looks ahead a year and says, what are some things that I want to get done? Now I would call those goals but maybe you could call them a mind map. You could call them something different but it still is something and it may not have an exact time frame, it may not be, I want to make exactly this much money from this thing but it’s like I know that I need to kind of do this.
That’s how we do these episodes. I think we should probably call that out. Do you feel the same way? Are you a goal-driven person and does having goals, you think it helps you? Or do you think it’s a waste of time, I guess, to have these?
Mike: I’m definitely driven by goals but I feel like the further out those goals are, it’s harder for me to really conceptualize the entire path getting there, and unless I sit down and kind of do all the planning work of saying, “This is what it’s gonna take to get here. This is what’s it’s going to take to get here.” Unless I kind of do that whole process, I’m probably less likely to reach the end goal because I don’t necessarily have a map to follow. Part of having that map to follow it’s fun for me to build that but once I figure out the answer to a particular problem, I am not always the best at following through and actually implementing it.
That’s more of a personality thing than anything else but I can definitely buckle down and get things done, but it depends on kind of what is and what my interest level is. If there is a goal that I put down and I know exactly how to get there, if the hardest part is figuring out how to get there, then I probably weight less likely to actually do it.
Rob: Yeah. That makes sense and I think, to be honest, there were times when, I think back seven, eight, nine years ago for me, it was really hard to look ahead a year because I just didn’t know. These were years where I decided to write a book and wrote it in three months. There was no inclination that I was going to write a book that year. I just decided this is a new thing and I’m going to move on to it. We decided to launch MicroConf into that pretty quick and launched a podcast.
Those years, I think, if I had goals that I wrote down, probably completely went off the rails. But I was okay with that. There was a lot of stuff in flux in terms of my professional career and I was trying to figure stuff out and it’s not like I nailed these goals to my door and I could only do them when I etched them in cement and I could not veer from them. I veered from them because it was a better decision at the time.
What I find with goals I set now like we’re going to talk about in these episodes, these are a way for me to focus because I think most of us are presented with way more opportunities than we could possibly pursue and way more “good” ideas than we could ever implement, some of them good, some not. Having goals is at least some bumpers to keep me in a lane so that I don’t look around at every email I get offering for me to do this thing or this opportunity or whatever, and say, “Oh, of course that sounds like fun. I should do that.” But I come back to these goals and say, “Yeah, these are things that I really wanted to do and they made sense when I really thought about them,” and unless something amazing comes along that just blows my mind, I’m going to kind of stay on this track for this year and see things through.
I think that not having goals can lead to a shorter term perspective because again, shiny object syndrome. Opportunities come up so frequently that can be just derail you and you can get to the end of the year and be like, “What did I do the last 12 months?”
Mike: Yeah. It’s giving yourself permission to say no to things. There’s that idea that unless it’s a “Hell, yes,” it should be a no. But you’re right. There’s just so many things that we could do. It’s more about what do you want to do if you had all the time and resources in the world? But you only have so much time see in your lifetime to do anything.
It’s hard to figure out for each individual, I think. If you’ve got this unlimited list of options, what is it that you want to achieve? What are you going to be proud of? Eventually, you’re going to be gone and what do you have left behind?
Rob: Yeah. It’s an interesting thing to think about. It’s like a legacy. If you look at legacy and say, “All right. Mike, in 20 years, you and I will be in our 60s. We could still work, we’re still going to do stuff. But are our best days of accomplishment behind us?” This is a rhetorical question. We don’t have time to answer it here but do you have goals? Or a goal of when you look back, when you’re in your 60s or 70s, would you want to think, “Yeah, I did that.”
I think each of us should if we don’t. And how are we going to get there if we haven’t set some goals along the way? Do we just kind of wander our way and make it and in the end we’re like, “Hey, I’m glad all of that worked out.” Or does it have to be a deliberate decision every week, month, year to kind of make progress towards something bigger?
Mike: Yeah, but I don’t think you’ve always know what that’s going to be 20 years in advance. I mean, it’s hard to know what’s going to work and what’s not as you’re moving forward, and some things you’re going to do and be very proud of them. But in the grand scheme of things, they may be meaningless to, I will say, the greater world but to you, they meant something.
I think looking back, you’re going to want to have those things that meant something to you and yes, it would be really nice to have legacy where other people recognize the accomplishments that you’ve had. But at the end of the day, did you live the life that you’ve wanted to live?
Rob: That’s almost a great way to end this episode except for we haven’t covered our 2019 goals yet.
Mike: Damn you.
Rob: I know. I’m glad we talked to that through because I think the whole goals conversation is kind of been on my mind recently or every year or so, it just comes on my radar of why do we set these and what does all these mean? Maybe a separate episode we talk about legacy but for now, shall we dive into 2019 goals? Looks like you have two of them with multiple sub-parts. It’s like a tax. You’re like you’re an IRS document. One part D is, yeah. You let this roll into it.
Mike: All right. The two goals that I have for 2019, the first one is really just get my health back on track. With goals you really want to have some sort of definition around exactly what that goal means, so for me it means basically four different things. One of them is exercising, the second one is getting a regular sleep schedule going, and then the third one is losing some weight because I’ve put on probably about 25-30 pounds or so in the past couple of years, and it’s more because just lack of sleep and everything else is going into it.
Then the fourth one is regular in-person social contact, which I’ve got partially down at this point, I think, but think I probably need to expand that a little bit. Exercise a certain number of times a week. I wanted to get to it at least twice a week, and then the normal sleep schedule, I really need to be getting at least 6½-7 hours of sleep every night. Previously it was only maybe 4-5 on average, I think. Then obviously losing weight. I’d say 15 pounds to kind of start with for this coming year. Then regular in-person social contract. It’s kind of a nebulous thing, but I’ve got at least one scheduled night a week with people. Maybe I’ll go to two, but I’m not sure about that.
Rob: Yeah, that one’s tough because I don’t know that you want to commit yourself to two nights a week. It doesn’t necessarily always makes sense.
Mike: No, but I do notice that when I go to my gaming group and I come back, I tend to get a really good night of sleep that night every single time.
Rob: Interesting. Is it because you drink a lot?
Mike: I plead the fifth. It’s when I host, I don’t have to drive anywhere so that’s certainly helpful.
Rob: Less drinking disturbs your sleep, right?
Mike: Yeah, it does.
Rob: It helps you fall asleep but it doesn’t actually give you a good night sleep.
Mike: That’s true. Those are kind of the four subheadings under that first goal.
Rob: That makes sense. Let me do my first one. My first one, not surprisingly, is three days of exercise per week. It’s basically a continuation of something that I started a couple years ago, although I believe you started a whole exercise goal first, probably 3-4 years ago and eventually I was, “All right, I need to get on this.” It’s never something I’ve needed to do but I know it’s something I should do in all honesty, especially as I get older.
It’s kind of a boring goal, but it’s something that I need to have on my list or else I have no desire to do it and I will not make the time. Unless it’s written down and I know that I’m going to have to come back here and talk about it, it’s an interesting accountability thing. It’s not that I’d be terribly devastated if I came back and say, “Oh, I got a one.” I know it’s good for me, like eating my vegetables and I know that I will at least made some type of public commitment to it. For me, it’s helpful to say this as a goal.
My second goal is for Einar and I to build it into essentially the de facto brand when bootstrap has look for early-stage funding. This one is going to be tough to measure and this is where the 1-5 will help us out because I think by the end of 2019 frankly, that’s only 12 months away and it’s not a lot of time to do this.
I’m guessing this is this is a multi-year process. What I’m saying here is, I want to raise all the fund, kind of close the funding and have a batch that goes live. We get companies, they’re having success, and it’s just executing on the Tiny Seed vision. I don’t know exactly what to put to measure at the end of 12 months, but I have a feeling in my head of what I want it to be and I want it to feel successful. I want it to feel like it’s well-regarded and I want it to do right by both the founders and the investors who were involved with it. I want it to make a difference.
I feel like if we had said at the beginning of starting MicroConf, that the end of next year or the year after, we want it to be a prominent player in the conference space, which was not a foregone conclusion when we launched it by any stretch. That did happen. It didn’t probably happen in the first year. It took us a couple of years to get there but we knew it when we saw it. Once it happened, it was like, “Oh yeah. MicroConf is a thing now.”
That’s how I want. I want Tiny Seed to be a thing. That’s my long way of saying 2019 for me is definitely the year of Tiny Seed.
Mike: Yeah. I think for this one, I agree that for the way you kind of phrased it here is for it to be the de facto brand when bootstrappers are looking for early-stage funding. That is in and of itself as kind of a multi-year goal, but I think you could probably narrow that down a little bit to say you’ve got the first batch of people going through, however big that batch happen to be. Maybe you put goals around it, maybe you don’t, but at the end of the year, I think that you want to see that whoever has gone through that batch, has a reasonable looking chances for success based on where they started.
The exact definition of that is not going to be determinable right now, but you’re going to kind of know it when you see it six, eight, ten months afterwards. Maybe they’re at that point by the end of the year, maybe they’re not. It depends on kind of when you start that batch and get them started through the process, because if you start in January, then obviously you’ve got a lot more time than if you started in next October.
Rob: Yup. I made a note there, first batch of founders are in the batch and they have a good chance of success. I mean, in the back of my head, I really want this stuff to start moving in Q1, which is January, February, March, so we’ll see how close we can align to that, but it should give us a good chunk of the year to get people moving.
Mike: My second goal I have here on the list is specifically related to Blue Tech. First one is just getting my health back on track and then the second one is to establish some sort of traction for it or move on to something else. Maybe that sounds like a major shift, but at the same time I feel like with the focus starting to coming back to me and clarity and getting sleep, things need to move in a good direction or it’s just going to be meandering. If it’s still meandering at the end of next year, then chances are good that either I’m not committed to it or there’s something else going on.
Quite frankly, I just don’t want to be in a position where I’m making excuses at the end of next year. It’s got to move or not. If not, then fine. I don’t want that to happen but at the same time, as I said, I just don’t want to be in this position next year where I have to justify kind of what happened.
Rob: Yeah, I think that makes a lot of sense. I think it will be a tough decision. A lot of work easier to try to push it forward and then evaluate that.
Mike: Yeah. I don’t know exactly what the target is for that. I’m kind of fuzzy on what it means. Is it a revenue target? Is it customer base if I get to X-1 customers I plan to get to X? Do I kill things? I don’t think that’s really applicable. Did things shift substantially now that I feel like I’m able to focus or am I still in that position? Do I still feel like I’m not able to focus on it? If that’s the case then made it’s a motivation issue and maybe I’m just not really interested in it. But we’ll see.
Rob: Yeah. I feel like in my head it would be finding product-market fit. Having a product with that really is easy to grow because turn is so low and when people start using it, they stay and that you’re able to add enough customers that, like you said, it becomes profitable including your time, or it’s very close to that. It’s on a trajectory to hit that within a short amount of time, I guess. That’s all still amorphous but that’s what I think in my head it probably looks like.
Mike: Yeah, but that’s what I said, establish some sort of traction with it like the MU site trajectory and I think that’s exactly the same thing. Does it to appear to be on the right path, and you may not know exactly what that is right now but afterwards, you kind of know whether there’s a good difference between where it’s sat now versus where it is at that time.
Rob: Yeah. My last two goals. Again, my first one is three days of exercise a week, second one was about Tiny Seed, and my third one is do not panic when the stock market crashes. This is one of our predictions that we have every year. There’s going to be this correction or whatever.
Mike: Did you panic last week or the week before when the stock market dropped like 1000 points in a week?
Rob: Nah. I didn’t at all. No.
Mike: Okay.
Rob: Maybe this is an easy one. I mean, I kind of pay attention to it but I’m also so diversified and I don’t have so much in stocks that it matters. I don’t know. Maybe I’m just not going to panic. Maybe this is not a big one for me. But I’ve just been thinking about it. In 2008 when it all went down, I sold stock after it had gone down and it’s a complete rookie mistake that everyone makes. The reason that the mainstream investor, the reason that their returns don’t match a simple index fund is because people do that and they panic.
I’m in a way different mental position and a way different financial position this time. My hope is that no matter how bad it gets, I’m just kind of like, “Yeah, whatever. I don’t need to sell stock this point, to do anything and that that I’m able to just ride this out.” That’s how you’re going to do it. So I’m at the bottom is certainly not going to do it for you.
My last goal for 2019 is one that I want to do, I hope to do, but it will be the first to go if all of my focus is required to do what we need with Tiny Seed. This fourth goal is to either write or rewrite a book. By write I mean finish and publish, get something live. I continue to get feedback in a positive way.
There was a Hacker News thread when we announced Tiny Seed in October that went pretty bad. It was on the homepage for a day or something and it was crazy. Got a bunch of good conversation and comments around that. Part of that was like, “Hey, this is from the guy who wrote Start Small, Stay Small,” and someone like “Oh that would be great if we rewrote that,” something like that. That single heat, if he updated it for a second edition. That comment got upvoted 26 times or something and most comments get a couple upvotes. Then I chimed in like, “No, this is actually good feedback for me.” I know I hear this now and again but it is something that sold enough copies and that the mental or the high-level things in it are still applicable but kind of the tactics and a lot of the boots on the ground stuff has changed since 2010, in the last eight years.
It makes me really think about going back to that manuscript. I do have a different take, and I do have so much better examples, and I do have entire topics that I talk about now that are just not in a box. That would it be a lot less work to rewrite or not even rewrite. It’s like update, a second edition, basically, and expanded.
I think I would like to get that done and the nice part is it’s not a side thing or it’s like, “Oh, I need to steal time away from Tiny Seed.” It could be in service of that because a launch of another book and getting that into the hands of a bunch of new entrepreneurs or even founders who have read the old one, it continues to promote the idea of bootstrapping. It continues to push behind my brand and my brand is obviously attached to the Tiny Seed brand. I think it could be in service of my other goal, which is to grow Tiny Seed in prominence and respect.
Mike: There’s ways to cheat here a little bit was for me to take your old conference talks and have them transcribed and then put those in the book.
Rob: That’s a great idea. Obviously, it wouldn’t be just transcriptions. I would want to clean it up and stuff. There’s still some content in the Micropreneur Academy that I think never saw the light of day outside of the academy that I think could be modified and updated. Not like nuts and bolts, here’s how, and what to click in the Facebook interface but there’s still some kind of philosophical and high-level stuff that’s in there that I wrote. I can see that being a tractor that I didn’t put in the first one because either it wasn’t relevant or just cause I didn’t.
That’s the thing is to your point, there’s been so much content that we’ve kicked out on the podcast conference talks or through other means. Even that when I started writing the Drip book, the book I’m sort of writing this year, where I was kind of writing the story of Drip but then I started realizing there were these takeaways and there were mistakes and there were things I did right. Those are kind of essay right now and I could pull pieces of those into it. I think you and I get together every week and we talk for 30-40 minutes. We generate a lot of content that could be pulled from.
Mike: Yeah, for sure. I think we are about out of time for the goal episode. It went quite a bit longer than I had expected but good things, good takeaways for you?
Rob: Yeah, I think so. It was a good discussion and can kind of going to get these solidified. We’ll see. We should check-in in three or four months and see where we are.
Mike: Cool. Well, I think that wraps us up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening, we’ll see you next time.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. What of this week, sir?
Mike: Well, it’s the middle of December so I’m just kind of working on MicroConf sponsorships and scholarships at the moment. I was just having various conversations with people about different options with things that are a little bit different for a sponsorship option for MicroConf. There’s a few different options that are on there that also include the scholarships.
Last year we kind of quietly and under the radar offered 14 scholarships to people for Starter Edition. I’m looking to expand that this year and talking to various people about it. I’ve already got some people who’ve committed funds and already actually put the money in and started sponsoring those. That’s good to see and we’ll just kind of see where things shake out at the end of it. I kind of have a mental goal in mind but I don’t want to shoot myself in the foot by sharing it.
Rob: Sure and if someone was interested in either sponsoring either the conferences or offering a scholarship ticket to Starter, how do they get in touch with you?
Mike: They can reach me at mike@micropeneur.com or I think sponsors@microconf.com also works. Either one of those and if you’re interested in just sponsoring one individual scholarship option, there’s a link for that right on the sales page for the MicroConf Sales or you can go to microconf.com, click on the link to buy a ticket, and there’s an option there to just purchase an individual ticket. The terms of the sponsorships, there’s kind of a mechanism for purchasing more than just one or two tickets. I think it starts at four and goes up from there.
Rob: Yeah and I knew part of the scholarships. I mean, this is something you really spearheaded and you kind of came under the radar a couple of years ago, and then you really started pushing on this program last year. But it helps folks get to Starter who otherwise can’t afford to or they don’t have an expendable cash to get out there and it can really make a difference for someone. I know that we interviewed some folks with the kind of video interviews after the fact or during the conference to share with the person or company who would sponsor them. You and I looked through those and they were pretty meaningful and people were really impacted by the conference. I think it was a transformative experience for them. It’s nice to be able to offer something like that.
Mike: Yeah, definitely. What’s up with you this week?
Rob: Well, I’ve long had an LLC in California, obviously because that’s where I’ve been running my businesses and I just entered a process, I believe it’s going to get finalized this week, of transferring that LLC to Minnesota. There’s a bunch of reasons for doing this: (a) it’s cheaper to do business here, but (b) I had to have basically a kind of a PO Box or an accountant or whatever, you have to have an address in California that they could send stuff to. I don’t need to file tax returns in California anymore. Even just that, it’s like an extra tax return my accountant charges me several hundred bucks for.
It feels kind of a nice piece of closure for me and it’s also an opportunity to rename the thing because I can name it whatever I wanted. The name that I picked in 2007 does not resonate with me. I picked a name that was so broad and esoteric that I could put whatever I wanted under it. At first, it was like a consulting firm so it had the name ‘Group’ in it. It’s called The Numa Group. It was a consulting firm but then I just put a bunch of software products under it and put my part of MicroConf under it. I don’t particularly love the name anymore and the domain name I have for it is clunky. So I just kind of consolidate the thing. I renamed it to Start Small LLC.
Mike: Oh nice.
Rob: Yeah. It took me a while. I’m not good at naming stuff and I was like, “What is something that for me is timeless? That in 10 years, I’m going to think back and say that was a good call?” and it’s not just because it’s the title of my book, or part of the title but I just feel like it fits into so much. It tells my story in two words and it fits in with the MicroConf ethos. It just said so many things.
Anyway, that’s been kind of a fun, cathartic process of just moving everything here, like The Numa Group redirects to my robwalling.com site which I had redone. I’m just kind of getting rid of a bunch of cruft. The Numa Group site was a landing page that was outdated and I just kept saying, “Oh, I’m going to get back to that,” but why it even have a landing page? Why even have that anymore? The company is not important. Frankly, at this point, it’s kind of about robwalling.com and then about Tiny Seed. It’s my personal site and the business site and everything else in MicroConf, of course. Anyway, that’s kind of been the process.
Mike: Yeah, I can imagine that’s a real pain in the neck and it’s something you probably want to get taken cared of before December 31st because if you don’t, you’ll have a file taxes again in California the following year.
Rob: That’s exactly what I’m doing. The only other thing is I’ve been coming out of the woodwork a little more and doing some interviews and even wrote a Q&A piece for a software execute magazine. That will be out in a couple of months and I’ll probably mentioned that again when it comes out. Have you heard of Hacker Noon?
Mike: Yeah.
Rob: Dave, the guy emailed me from there and did a little-written interview with me. It was kinda fun. It took a lot of work. I forget how easy voice interviews are compared to written interviews. I know that you know this because of the Indie Hacker one you did last year or earlier this year and you’re like, “Yeah, I spent two days on it.” So much effort.
Mike: Yeah. It was way more effort to do those. I think people’s expectations are different as well if you’re talking versus if it’s written, it seems like it should be carefully crafted, say exactly what you mean, and not anything else. When people are listening to you, you have a lot more leeway, I think, because people understand that you’re talking off-the-cuff and it’s not heavily scripted thing when you’ve memorized ever question and every answer.
Rob: Yeah, that’s right, and it feels less prepared whereas writing, it feels like you need to rewrite it, reread it, edit it, and do all that, which is exactly what I did. It took me 2-3 hours to answer the questions. What was cool was some of the questions at Hacker Noon interview, ones that I’ve really never been asked, which is always fun to think through but it’s also time-consuming, and it’s peaked.
It’s kind of peaked productivity stuff. I had to do it in the morning. I couldn’t in the afternoon there. I would just been too tired to really hammer something out. Then I came back to revised it, updated it, and stuff. I feel like it turned into a really good interview. I haven’t done a written interview in probably five years just because of the time that it takes. I just turn them down. But I kind of wanted to do this one. We’ll be sure to link that up in the show notes.
This week, we are diving into our goals for 2019. But first, Mike, the walk of shame. We get to look back at our 2018 goals. Episode 372, just a short 50 or so, 51 episodes ago, it looks like. We talked about our 2018 goals. Why don’t you roll into your first one? Are we going to do a 1-5 scale of one we completely flubbed the goal and five is we completely nailed it?
Mike: Oh I figure we talking about 1-5 is like my goals versus your goals.
Rob: Oh, no. No, no. This is how well we carried them out.
Mike: Well, I’ve been quite honestly we could put one on pretty much every single one of mine. We could kind of shorten it. I’ll go through them but this last year was just absolutely atrocious.
Rob: Let’s do it. Let’s roll through all yours right now then.
Mike: Sure. You want me to go through all five of them then?
Rob: Oh yeah, the agony. Let’s read them in slow motion so everyone can watch a trainwreck.
Mike: The first one was actually a carry-over goal from the previous year, which was login at least 100 days of exercise the coming year, and I fell way, way short of that. I probably got to 25 or 30 and that was just about it. The second one was making Blue Tech profitable including my time, which has also not happened.
And then the other three, I think at least one or two of these, about two or three months in, maybe March or so we decided, “Hey, these just don’t even look realistic. We should just can these to begin with.” One of them was speaking at six plus conferences or events because the idea was that, at first I thought, “Okay, well this can be a way to market Blue Tech,” but at the same time, you really have to have the right audience for that kind of thing anyway, and it felt like more of a distraction than anything else. So, I ended up canning that one.
Then the other one, reading at least one business book every two weeks. That seem to me like it was also a distraction. It was like a consumption thing. I also cut back on podcast listening just because of the same thing. It will just take up mental overhead that I just didn’t want to have. Then the last one of that list was hiring someone to take over Blue Tech development, which kind of requires that Blue Tech become profitable. If that doesn’t happen then it’s hard to fund that. So yeah, I would say pretty much one on all of those.
Rob: What does that tell us? Is it were you doing other things that you would say were accomplishments that were outside of this? Was it a focus thing or was there a better priority that came up? Or do you think our goals are stupid? That’s another. Should we not set goals?
Mike: I think a lot of it had to do with lack of focus. By lack of focus, I don’t mean I’m working on one thing and then working on another. I mean literally lack of focus. Inability to focus. Because I wasn’t sleeping. I mean, I’ve been kind of suffering through this for the past several years, like I got on a CPAP machine a couple of months ago and that thing has been working fantastically. I’m actually sleeping now. But I went back and before this episode, I looked at the sleep blog that I’ve kept for this sleep therapist that I saw. I was up anywhere from 3-8 times a night and I was only getting anywhere from 4-6 hours of sleep. There were times when I would get 1½-2 hours of sleep a night so I felt fuzzy.
It’s hard to describe the difference that it may swing. I felt that way. Yesterday, for example, I woke up and I had a fantastic night of sleep. It’s a world of difference between being able to think straight and just kind of going through the motions and getting things done but not really able to focus on any one thing and feeling like you’re shifting back and forth but not making any real progress.
Rob: Yeah. It’s easy to get distracted and your thoughts are fleeting. In addition, I don’t know if this happens to everyone but when I only get a few hours sleep, I am actually super pessimistic and I tend to look like someone with depression. I don’t technically have it because it’s not over a long period of time. I will wake up and just be like, “Oh this is all just shit. None of this is going to work. Oh my gosh. Why am I even starting startups? I can’t do any of it.” That will be my inner self-talk and I’ll catch myself now and be like, “Dude, you’re really tired. You should just go to sleep.”
I know that’s not easy for you but that’s what my inner monologue will be on those days of like, “You’re going to be better off not working today.” But for you, it was happening everyday, right?
Mike: Yeah, even on the weekends, too. That was the worst part is, I was exhausted and I couldn’t get to sleep. When I did go to sleep, I didn’t realize also the time because I was trying all these different things to just get to sleep. Or I’ll move my bedtime back earlier and I’ll go to sleep, or try to go to bed at 10:00 or 10:30, turn off all electronics, don’t answer emails after 7:00 or 8:00 o’clock at night, just turn all that stuff off. It works to a slight degree but not enough and I couldn’t figure out why and it kept happening.
Of course, come to find out through the sleep study, like, “Oh, my body is waking me up multiple times a night because I stopped breathing.” You can’t change habits and fix that. It just doesn’t happen. It didn’t matter what I did. Nothing was working.
Rob: Yeah, and that’s tough and it’s frustrating. Obviously, five goal set and zero goals achieved. Health issues were a major impact on that. It’s interesting. Sherry talks about this, that a lot of mental health issues in general, like people with depression or ADHD or other stuff, one cause of those, not for everyone, but one cause is a lack of sleep. Once people stop being able to sleep full nights, their minds start doing weird things.
She also talks about there’s some research studies that talk about the quite a bit the angst of being a teenager, how you turn 13 and you get all angsty from 13 to 18 or whatever kind of the thing is in high school. A lot of that could very well be too just a lack of sleep. The kids at that age need about 10 or 11 hours and most kids do not get that much and they’re tired all the time and it leads to the sadness or whatever. I’m no expert on this, so I don’t want to talk, but Sherry has talked to me multiple times about this and especially with our kids, because a couple of our kids at different times, they have behavioral issues, they have focus issues, and one of the first things that we will get is sleep and exercise every time instead of trying to medicate or whatever.
I’m not anti-medication but it’s like the first two resorts every time Sherry is like, “How has he been sleeping?” and, “Is he getting out and getting 20 minutes of hustle, hard exercise?” Not a 20 minutes walk but 20 minutes of running around playing dodgeball a day. I think that it’s interesting and it can have a huge impact on your mood and your ability to focus, which then has a huge impact on your productivity.
Mike: Yeah. For me, it was that vicious cycle of not being able to sleep and then it also affects my ability to go to the gym. If I don’t go to the gym first thing in the morning, it’s just not going to happen because I get busy in other things getting in the way. Not being able to sleep has a direct impact on my willingness and ability to go to the gym. It just puts me in this vicious cycle where I don’t get to sleep, so I don’t go to the gym, so I don’t feel good in any way, shape, or form, and then I go to bed and I’m stressed out, exhausted, and tired. And then my mind is wandering even before I get to sleep so I can’t get to sleep. When I do sleep, my body just – I guess I’m assuming because it’s physical problems. I just got the sleep apnea that wakes me up.
All of it combined. It just doesn’t end and there is no way for me to kind of break the cycle until I found out what it really was. I knew I wasn’t sleeping but that was a symptom. It wasn’t the underlying problem.
Rob: And you have that machine for the past couple of months. Dude, how’s your progress? Has it been night and day? Not just how you feel because I know that you feel is night and day but are you making substantially more measurable progress since then?
Mike: Yes. I can point to different things that I’ve done in the past, like two months or so. In the past two months, I have probably made more progress than I have in the past 10 or 15. It is night and day but I’m cautiously optimistic about how things are going to turn out but obviously at this point, I feel it’s more about execution that anything else. But I still have to make sure that I crack down on those health issues and make sure that they don’t get in the way.
Now that I know what the problem is or problem was, then I can try to do things to address it. But before, I was trying all these different things because I didn’t know what was going to work or what wasn’t and how to get around it. I remember pushing off on the sleep study a while back for my doctor, and she’s like, “Have you ever thought about having this done?” and I was like, “Well, I have but I don’t really want to go through it and have nothing come out of it,” because last time I ended up going in, she recommended that I go for a blood work. She’s like, “Oh your platelet count’s low and let’s check this out.” I go and she referred me to this doctor, go through that, and then $400 worth of test later, the doctor tells me, “Well, you don’t have leukemia,” and I’m like, “I never thought I did. I don’t know why I’m here for that test.” It kind of pissed me off but what do you do? The doctor’s are really just trying to figure out what’s going on here and they do it by process of elimination.
Part of it’s maybe my own fault for not doing it sooner because she had recommended it in the past but at the same time, I didn’t really want to have that done just because I didn’t know how much it was going to cost. My insurance barely covered any of it. It cost me several thousand dollars for between the machine and the tests and everything else anyway.
Rob: In looking back on obviously these goals, you said five of them are ones. This is a weird question but is there something that you’d accomplished in 2018 that you feel good about, that if it had been a goal, it would be a five? Something of note? I don’t know how you even rank that. I’m just trying to dig in to figure out is there anything there?
Mike: Like was 2018 a complete loss or were things you actually proud of?
Rob: Kind of, yeah. I mean, I just kind of digging into it because this sucks and there’s gonna be someone listening to this who thinks, “Oh, Mike should’ve sucked it up, accomplish stuff anyway, and push forward,” and then there are the majority of people I’m guessing are going to be like, “Wow, that totally sucks. I hope that never happens to me. I hope I never feel that way.” And then there are going to be people who like, “I’ve been through that.”
Whether it’s sleep issue, whether it’s your neck and back hurting so much that you can only work two hours a day, which has happened to me, whether some people get vertigo really bad so they get super dizzy, some people get depression, they get ADHD, there are all these debilitating things. They can be physical, they can be mental, they can be whatever, but it happens to a good chunk of us. Maybe not for a whole year in us since you’re saying on and off for a couple of years but I just think there’s a lot to think about with that. In terms of staying healthy, I think it’s probably the big takeaway, perhaps.
Mike: Yeah. The two things that I can point to is, the first one is the accomplishment, the scholarship program that I got, going last year at MicroConf. I think that, that was a good start and this year’s trying to take it to the next level. We’ll see how that goes but it was more about experimenting and trying to figure out what’s going to work, what’s not, and help work with the sponsors, figure out what works for them as well. I think that we did well with that.
Rob: I would agree with that and you basically spearheaded that and put in a bunch of time. That was something that was a little mini startup within MicroConf and I’m glad you called that out because that was something you did that was really cool. I think something else you may not call this up but you kind of crushed it on sponsorships this year with both the conferences so I would call that as a win for you. It’s weird to put a goal in there of like, “I want to increase sponsorships by X, Y, and Z,” because it’s more relevant to us, it’s an internal thing, and I don’t know that it’s that interesting to folks outside, but it is something you put time into and had success with.
Mike: Yeah but even the sponsorships themselves, they help us make Starter Edition possible because we, too, subsidize Starter Edition out from Growth Edition to some extent, and we have to because it costs the same to run both of the conferences. The stuff that we do there has a direct impact on Started Edition, which has a direct impact on people who are getting started with entrepreneurship and softwares. I think that all ties together is like a general kind of goal or direction that we both kind of always as long as this podcast has been going. But yeah, it’s a good thing to call those out. But I don’t know as I would probably have put those in exclusively as goals.
The only other thing I would say is, and I wouldn’t even call this a goal again, but I’ve started getting out with a group of friends here once a week and actually having some social contact outside of my office. It’s weird to say that because I don’t have an office that I go to. I don’t have employees or people that I meet with on a regular basis. I barely have any contractors at this point. It’s really just me, working on most stuff.
Like my social contacts, outside of my house is extremely limited. One of the things that I was trying to do is figure out in terms of the mood and you kind of talked about, if you don’t get sleep, you kind of feel depressed and why am I working on this and things aren’t working and you’re very pessimistic. I felt like that for a very long time because I wasn’t getting sleep. One of the things I tried to do was say, “Okay, well what can I do to fight this?” and one of them was getting out and be more social with people. So I kind of established that, Dungeons and Dragons group, then meeting with them on a weekly basis. Honestly, it was quite helpful but even now after getting sleep, it’s even more helpful because it’s not just me looking forward to it every week but everybody else is as well.
Rob: That makes sense. So some good things did come out of 2018 is what you’re saying.
Mike: Yeah, some, but I don’t know. I’m hoping 2019 will be substantially better.
Rob: Yeah. Sounds like a rough year. Looking at my 2018 goals, looks like I had three of them. One was to be in fewer meetings under 10 hours a week. You and I laughed, chuckled about this a few months back because the reason I was into so much meetings is because I was at fast-growing startup that was growing from, I don’t know, it was 20 or 30 people and it went up to 60-70 by the time I was leaving and that just requires a bunch of meetings to keep everybody apprised of what’s going on and all that. I was running a big team and non-senior leadership and there’s just a lot of stuff required with that.
When I left Drip in April, basically my meetings went to zero. We did this in November or December of last year so I didn’t have knowledge I was going to be leaving in April but I did achieve this in a way that I probably didn’t expect. I think the way I wanted to achieve it or would have thought about in November-December was to stay at the job but just change it so I was in fewer meetings but it turns out that leaving the job also did the trick. Frankly, my life’s been better for it, being in fewer meetings, that is.
Mike: Yeah. Add in six plus months of zero meetings a week, it tends to bring that average put down pretty far.
Rob: Yeah, I know. I am so much more chill and just content taking time off like this is something I’ve never done and it’s worth it.
My next goal was three days of exercise each week and so fewer meetings, but I give myself a five, a few days of exercise, I’m going to give myself a four. I basically crushed this goal from January until it got cold. I crushed it during last winter and then all through summer I was out doing stuff, I was riding my bike. Everything was built into my day and I was doing it.
Then it was probably around October, just a couple of months ago, that it got cold. We started homeschooling one of our kids and Tiny Seed started picking up. But what I let go was exercise and it’s what I always do and it’s always my lowest priority. So I did it for maybe 9 or 10 months of the year and there were weeks where I had five days of exercise. Way more than I even need in my opinion. Healthy by nature just by genetics or whatever. Even getting in three days of 20 or 30 minutes pop is enough. Mostly achieved, and I think it’s something that I want to certainly get back on the wagon here and the next few weeks as winter continues to bare down on us.
My last goal for 2018 and this one’s interesting. Let me read this whole thing. To ship something in 2018. Not sure what it’s going to be, yet. But I’ve been laying low for 18 months, 2017 was supposed to be a rest year and it was a hard year. First part of 2018 is going to continue to be rest but I need to start shipping, either consistent blog posts, a book, a new podcast, a course, software, something, and what is that something like?
Mike: I assume that that would be Tiny Seed.
Rob: It is and in 2017 November, I had no idea that that’s what I’d be doing. It’s interesting that it’s like knowing yourself. I figured I was going to need to do something and then I actually frankly started working on a book after I left Drip in April. I did write maybe 12,000-13,000 words, which is about a quarter of a book, 20%-25% of worth from a book. I did do that and then I eventually just slowed down on it and lost some interest and decided I just didn’t want to force it. There’s also that that’s in play and could feasibly come out sometime.
That’s what I had and I don’t know with me if goals are self-fulfilling prophecies or I make goals that I secretly, way in the back of my subconscious, know that I will achieve or something. This one strikes me as weird, honestly, because I remember the mindset I had at the time and I genuinely had no idea what I was going to do. I just know that I needed to put something out into the world and that something obviously has become Tiny Seed.
Mike: I think that generally, your goals tend to be, I wouldn’t necessarily call them self-fulfilling prophecies but more along the lines of you have this inkling in your head and in your subconscious that you know what direction you want to go or need to go but you’re not quite sure how you’re going to get there, and during our goals episode you put something down that has kind of surfaced but you’re not always certain of the specifics. But by the end of the year, something has solidified or something has come about.
For example, your fewer meetings. You probably weren’t thinking, “Oh, I’m going to leave Leadpages,” but at the end of the day, that was one of the ways that that came about. Maybe that partly influenced your decision because you wanted to have fewer meetings. And then the same thing with shipping something. That kind of goes back to leaving Leadpages as well but Tiny Seed kind of came out of that. You knew in the back of your mind, “I want to do something, not sure what that looks like.” I think your goals on a yearly basis tend to reflect that.
Rob: Yeah. That’s good insight. I also feel like I’m pretty methodical and I kind of know when it’s push year and maybe a rest year. I don’t know. I haven’t had many rest years per se but I don’t know. As we started Drip, I knew 2013 the goal had to be launch it and grow it to X, and then 2014, 2015, and 2016 at the beginning of them, I did make revenue goals for the end of the year.
This is an interesting conversation, actually, because some people don’t like goals, or they don’t believe in them, or they say they’re not worthwhile, or they say that they don’t fit them, they’re like, “Oh, how can you possibly plan 12 months out?” Maybe that’s a personality thing but I have had set goals for myself frankly since back in high school with Running Track.
I had goals to hit certain times at certain by certain meets or to make the state meet or whatever, and that to me was a motivator to strive to do that. I had goals to write certain amounts of things and then when I started blogging and started becoming a professional, I had a goal to make this much money by the time I was this old. I don’t know. I’ve been a goal to reverse it so maybe these goals fit my personality and am not something that everyone necessarily needs.
What I find is interesting is my wife, Sherry’s personality is quite a bit different than mine. But when she goes on a retreat, she also sets at least some, I don’t know if she calls them goals, but there’s things that she’s striving to do and she looks ahead a year and says, what are some things that I want to get done? Now I would call those goals but maybe you could call them a mind map. You could call them something different but it still is something and it may not have an exact time frame, it may not be, I want to make exactly this much money from this thing but it’s like I know that I need to kind of do this.
That’s how we do these episodes. I think we should probably call that out. Do you feel the same way? Are you a goal-driven person and does having goals, you think it helps you? Or do you think it’s a waste of time, I guess, to have these?
Mike: I’m definitely driven by goals but I feel like the further out those goals are, it’s harder for me to really conceptualize the entire path getting there, and unless I sit down and kind of do all the planning work of saying, “This is what it’s gonna take to get here. This is what’s it’s going to take to get here.” Unless I kind of do that whole process, I’m probably less likely to reach the end goal because I don’t necessarily have a map to follow. Part of having that map to follow it’s fun for me to build that but once I figure out the answer to a particular problem, I am not always the best at following through and actually implementing it.
That’s more of a personality thing than anything else but I can definitely buckle down and get things done, but it depends on kind of what is and what my interest level is. If there is a goal that I put down and I know exactly how to get there, if the hardest part is figuring out how to get there, then I probably weight less likely to actually do it.
Rob: Yeah. That makes sense and I think, to be honest, there were times when, I think back seven, eight, nine years ago for me, it was really hard to look ahead a year because I just didn’t know. These were years where I decided to write a book and wrote it in three months. There was no inclination that I was going to write a book that year. I just decided this is a new thing and I’m going to move on to it. We decided to launch MicroConf into that pretty quick and launched a podcast.
Those years, I think, if I had goals that I wrote down, probably completely went off the rails. But I was okay with that. There was a lot of stuff in flux in terms of my professional career and I was trying to figure stuff out and it’s not like I nailed these goals to my door and I could only do them when I etched them in cement and I could not veer from them. I veered from them because it was a better decision at the time.
What I find with goals I set now like we’re going to talk about in these episodes, these are a way for me to focus because I think most of us are presented with way more opportunities than we could possibly pursue and way more “good” ideas than we could ever implement, some of them good, some not. Having goals is at least some bumpers to keep me in a lane so that I don’t look around at every email I get offering for me to do this thing or this opportunity or whatever, and say, “Oh, of course that sounds like fun. I should do that.” But I come back to these goals and say, “Yeah, these are things that I really wanted to do and they made sense when I really thought about them,” and unless something amazing comes along that just blows my mind, I’m going to kind of stay on this track for this year and see things through.
I think that not having goals can lead to a shorter term perspective because again, shiny object syndrome. Opportunities come up so frequently that can be just derail you and you can get to the end of the year and be like, “What did I do the last 12 months?”
Mike: Yeah. It’s giving yourself permission to say no to things. There’s that idea that unless it’s a “Hell, yes,” it should be a no. But you’re right. There’s just so many things that we could do. It’s more about what do you want to do if you had all the time and resources in the world? But you only have so much time see in your lifetime to do anything.
It’s hard to figure out for each individual, I think. If you’ve got this unlimited list of options, what is it that you want to achieve? What are you going to be proud of? Eventually, you’re going to be gone and what do you have left behind?
Rob: Yeah. It’s an interesting thing to think about. It’s like a legacy. If you look at legacy and say, “All right. Mike, in 20 years, you and I will be in our 60s. We could still work, we’re still going to do stuff. But are our best days of accomplishment behind us?” This is a rhetorical question. We don’t have time to answer it here but do you have goals? Or a goal of when you look back, when you’re in your 60s or 70s, would you want to think, “Yeah, I did that.”
I think each of us should if we don’t. And how are we going to get there if we haven’t set some goals along the way? Do we just kind of wander our way and make it and in the end we’re like, “Hey, I’m glad all of that worked out.” Or does it have to be a deliberate decision every week, month, year to kind of make progress towards something bigger?
Mike: Yeah, but I don’t think you’ve always know what that’s going to be 20 years in advance. I mean, it’s hard to know what’s going to work and what’s not as you’re moving forward, and some things you’re going to do and be very proud of them. But in the grand scheme of things, they may be meaningless to, I will say, the greater world but to you, they meant something.
I think looking back, you’re going to want to have those things that meant something to you and yes, it would be really nice to have legacy where other people recognize the accomplishments that you’ve had. But at the end of the day, did you live the life that you’ve wanted to live?
Rob: That’s almost a great way to end this episode except for we haven’t covered our 2019 goals yet.
Mike: Damn you.
Rob: I know. I’m glad we talked to that through because I think the whole goals conversation is kind of been on my mind recently or every year or so, it just comes on my radar of why do we set these and what does all these mean? Maybe a separate episode we talk about legacy but for now, shall we dive into 2019 goals? Looks like you have two of them with multiple sub-parts. It’s like a tax. You’re like you’re an IRS document. One part D is, yeah. You let this roll into it.
Mike: All right. The two goals that I have for 2019, the first one is really just get my health back on track. With goals you really want to have some sort of definition around exactly what that goal means, so for me it means basically four different things. One of them is exercising, the second one is getting a regular sleep schedule going, and then the third one is losing some weight because I’ve put on probably about 25-30 pounds or so in the past couple of years, and it’s more because just lack of sleep and everything else is going into it.
Then the fourth one is regular in-person social contact, which I’ve got partially down at this point, I think, but think I probably need to expand that a little bit. Exercise a certain number of times a week. I wanted to get to it at least twice a week, and then the normal sleep schedule, I really need to be getting at least 6½-7 hours of sleep every night. Previously it was only maybe 4-5 on average, I think. Then obviously losing weight. I’d say 15 pounds to kind of start with for this coming year. Then regular in-person social contract. It’s kind of a nebulous thing, but I’ve got at least one scheduled night a week with people. Maybe I’ll go to two, but I’m not sure about that.
Rob: Yeah, that one’s tough because I don’t know that you want to commit yourself to two nights a week. It doesn’t necessarily always makes sense.
Mike: No, but I do notice that when I go to my gaming group and I come back, I tend to get a really good night of sleep that night every single time.
Rob: Interesting. Is it because you drink a lot?
Mike: I plead the fifth. It’s when I host, I don’t have to drive anywhere so that’s certainly helpful.
Rob: Less drinking disturbs your sleep, right?
Mike: Yeah, it does.
Rob: It helps you fall asleep but it doesn’t actually give you a good night sleep.
Mike: That’s true. Those are kind of the four subheadings under that first goal.
Rob: That makes sense. Let me do my first one. My first one, not surprisingly, is three days of exercise per week. It’s basically a continuation of something that I started a couple years ago, although I believe you started a whole exercise goal first, probably 3-4 years ago and eventually I was, “All right, I need to get on this.” It’s never something I’ve needed to do but I know it’s something I should do in all honesty, especially as I get older.
It’s kind of a boring goal, but it’s something that I need to have on my list or else I have no desire to do it and I will not make the time. Unless it’s written down and I know that I’m going to have to come back here and talk about it, it’s an interesting accountability thing. It’s not that I’d be terribly devastated if I came back and say, “Oh, I got a one.” I know it’s good for me, like eating my vegetables and I know that I will at least made some type of public commitment to it. For me, it’s helpful to say this as a goal.
My second goal is for Einar and I to build it into essentially the de facto brand when bootstrap has look for early-stage funding. This one is going to be tough to measure and this is where the 1-5 will help us out because I think by the end of 2019 frankly, that’s only 12 months away and it’s not a lot of time to do this.
I’m guessing this is this is a multi-year process. What I’m saying here is, I want to raise all the fund, kind of close the funding and have a batch that goes live. We get companies, they’re having success, and it’s just executing on the Tiny Seed vision. I don’t know exactly what to put to measure at the end of 12 months, but I have a feeling in my head of what I want it to be and I want it to feel successful. I want it to feel like it’s well-regarded and I want it to do right by both the founders and the investors who were involved with it. I want it to make a difference.
I feel like if we had said at the beginning of starting MicroConf, that the end of next year or the year after, we want it to be a prominent player in the conference space, which was not a foregone conclusion when we launched it by any stretch. That did happen. It didn’t probably happen in the first year. It took us a couple of years to get there but we knew it when we saw it. Once it happened, it was like, “Oh yeah. MicroConf is a thing now.”
That’s how I want. I want Tiny Seed to be a thing. That’s my long way of saying 2019 for me is definitely the year of Tiny Seed.
Mike: Yeah. I think for this one, I agree that for the way you kind of phrased it here is for it to be the de facto brand when bootstrappers are looking for early-stage funding. That is in and of itself as kind of a multi-year goal, but I think you could probably narrow that down a little bit to say you’ve got the first batch of people going through, however big that batch happen to be. Maybe you put goals around it, maybe you don’t, but at the end of the year, I think that you want to see that whoever has gone through that batch, has a reasonable looking chances for success based on where they started.
The exact definition of that is not going to be determinable right now, but you’re going to kind of know it when you see it six, eight, ten months afterwards. Maybe they’re at that point by the end of the year, maybe they’re not. It depends on kind of when you start that batch and get them started through the process, because if you start in January, then obviously you’ve got a lot more time than if you started in next October.
Rob: Yup. I made a note there, first batch of founders are in the batch and they have a good chance of success. I mean, in the back of my head, I really want this stuff to start moving in Q1, which is January, February, March, so we’ll see how close we can align to that, but it should give us a good chunk of the year to get people moving.
Mike: My second goal I have here on the list is specifically related to Blue Tech. First one is just getting my health back on track and then the second one is to establish some sort of traction for it or move on to something else. Maybe that sounds like a major shift, but at the same time I feel like with the focus starting to coming back to me and clarity and getting sleep, things need to move in a good direction or it’s just going to be meandering. If it’s still meandering at the end of next year, then chances are good that either I’m not committed to it or there’s something else going on.
Quite frankly, I just don’t want to be in a position where I’m making excuses at the end of next year. It’s got to move or not. If not, then fine. I don’t want that to happen but at the same time, as I said, I just don’t want to be in this position next year where I have to justify kind of what happened.
Rob: Yeah, I think that makes a lot of sense. I think it will be a tough decision. A lot of work easier to try to push it forward and then evaluate that.
Mike: Yeah. I don’t know exactly what the target is for that. I’m kind of fuzzy on what it means. Is it a revenue target? Is it customer base if I get to X-1 customers I plan to get to X? Do I kill things? I don’t think that’s really applicable. Did things shift substantially now that I feel like I’m able to focus or am I still in that position? Do I still feel like I’m not able to focus on it? If that’s the case then made it’s a motivation issue and maybe I’m just not really interested in it. But we’ll see.
Rob: Yeah. I feel like in my head it would be finding product-market fit. Having a product with that really is easy to grow because turn is so low and when people start using it, they stay and that you’re able to add enough customers that, like you said, it becomes profitable including your time, or it’s very close to that. It’s on a trajectory to hit that within a short amount of time, I guess. That’s all still amorphous but that’s what I think in my head it probably looks like.
Mike: Yeah, but that’s what I said, establish some sort of traction with it like the MU site trajectory and I think that’s exactly the same thing. Does it to appear to be on the right path, and you may not know exactly what that is right now but afterwards, you kind of know whether there’s a good difference between where it’s sat now versus where it is at that time.
Rob: Yeah. My last two goals. Again, my first one is three days of exercise a week, second one was about Tiny Seed, and my third one is do not panic when the stock market crashes. This is one of our predictions that we have every year. There’s going to be this correction or whatever.
Mike: Did you panic last week or the week before when the stock market dropped like 1000 points in a week?
Rob: Nah. I didn’t at all. No.
Mike: Okay.
Rob: Maybe this is an easy one. I mean, I kind of pay attention to it but I’m also so diversified and I don’t have so much in stocks that it matters. I don’t know. Maybe I’m just not going to panic. Maybe this is not a big one for me. But I’ve just been thinking about it. In 2008 when it all went down, I sold stock after it had gone down and it’s a complete rookie mistake that everyone makes. The reason that the mainstream investor, the reason that their returns don’t match a simple index fund is because people do that and they panic.
I’m in a way different mental position and a way different financial position this time. My hope is that no matter how bad it gets, I’m just kind of like, “Yeah, whatever. I don’t need to sell stock this point, to do anything and that that I’m able to just ride this out.” That’s how you’re going to do it. So I’m at the bottom is certainly not going to do it for you.
My last goal for 2019 is one that I want to do, I hope to do, but it will be the first to go if all of my focus is required to do what we need with Tiny Seed. This fourth goal is to either write or rewrite a book. By write I mean finish and publish, get something live. I continue to get feedback in a positive way.
There was a Hacker News thread when we announced Tiny Seed in October that went pretty bad. It was on the homepage for a day or something and it was crazy. Got a bunch of good conversation and comments around that. Part of that was like, “Hey, this is from the guy who wrote Start Small, Stay Small,” and someone like “Oh that would be great if we rewrote that,” something like that. That single heat, if he updated it for a second edition. That comment got upvoted 26 times or something and most comments get a couple upvotes. Then I chimed in like, “No, this is actually good feedback for me.” I know I hear this now and again but it is something that sold enough copies and that the mental or the high-level things in it are still applicable but kind of the tactics and a lot of the boots on the ground stuff has changed since 2010, in the last eight years.
It makes me really think about going back to that manuscript. I do have a different take, and I do have so much better examples, and I do have entire topics that I talk about now that are just not in a box. That would it be a lot less work to rewrite or not even rewrite. It’s like update, a second edition, basically, and expanded.
I think I would like to get that done and the nice part is it’s not a side thing or it’s like, “Oh, I need to steal time away from Tiny Seed.” It could be in service of that because a launch of another book and getting that into the hands of a bunch of new entrepreneurs or even founders who have read the old one, it continues to promote the idea of bootstrapping. It continues to push behind my brand and my brand is obviously attached to the Tiny Seed brand. I think it could be in service of my other goal, which is to grow Tiny Seed in prominence and respect.
Mike: There’s ways to cheat here a little bit was for me to take your old conference talks and have them transcribed and then put those in the book.
Rob: That’s a great idea. Obviously, it wouldn’t be just transcriptions. I would want to clean it up and stuff. There’s still some content in the Micropreneur Academy that I think never saw the light of day outside of the academy that I think could be modified and updated. Not like nuts and bolts, here’s how, and what to click in the Facebook interface but there’s still some kind of philosophical and high-level stuff that’s in there that I wrote. I can see that being a tractor that I didn’t put in the first one because either it wasn’t relevant or just cause I didn’t.
That’s the thing is to your point, there’s been so much content that we’ve kicked out on the podcast conference talks or through other means. Even that when I started writing the Drip book, the book I’m sort of writing this year, where I was kind of writing the story of Drip but then I started realizing there were these takeaways and there were mistakes and there were things I did right. Those are kind of essay right now and I could pull pieces of those into it. I think you and I get together every week and we talk for 30-40 minutes. We generate a lot of content that could be pulled from.
Mike: Yeah, for sure. I think we are about out of time for the goal episode. It went quite a bit longer than I had expected but good things, good takeaways for you?
Rob: Yeah, I think so. It was a good discussion and can kind of going to get these solidified. We’ll see. We should check-in in three or four months and see where we are.
Mike: Cool. Well, I think that wraps us up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening, we’ll see you next time.
Episode 422 | Impact of GDPR on Mailing Lists, Keyword Stuffing, Shady Competition, and More Listener Questions
/
RSS Feed
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including the impact of GDPR, pruning e-mail lists, TinySeed and more.
Items mentioned in this epiosode:
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about the impact of GDPR on mailing lists, keyword stuffing, shady competition, and more listener questions. This is Startups For The Rest Of Us Episode 422.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. How did you like my announcer voice today?
Mike: It was great. It was very…
Rob: I was working on it.
Mike: Are you taking voice acting classes so you can announce movies and stuff?
Rob: A voice-over guy? I could be more annoying with it. I was trying not to sound like a radio DJ. What’s the word this week, man? What are you doing?
Mike: It occurred to me that last week you were giving me crap for forgetting the intro. I will remind you of the time in MicroConf Europe, we were on stage, you completely spaced on the intro.
Rob: I did, actually, and I can’t remember anything. That’s right.
Mike: It’s not just me. We’re both getting old.
Rob: Indeed.
Mike: Or not just you.
Rob: A couple of weeks back in episode 420 when Einar and I recorded it, we got on the mic, we recorded it, and after I hit stop he said, “Do you guys do one of these every week?” It’s super funny. I said, “Yeah, but it’s easier blah-blah-blah,” and I couldn’t tell if he was just saying, “What a slog this was.” It was just a funny question and I was like, “Well yeah, we do it every week. For the last four hundred 420 weeks we have done one every week.” It was just a realization. I don’t know. I think it may have taken a lot of energy or a lot of thought for him to kind of be there, to be on a podcast, for not used to doing it all the time, it can feel exhausting. Remember the first 20 or 30 of these? How hard they were? I would go take a nap after we record it because I was so stressed and so anxious and nervous and not knowing what to say.
Mike: For the four listeners that we had at the time.
Rob: Yup and then eventually that all goes away. That leaning into hard things and then doing things that scare you and getting better at them.
Mike: Yeah. I don’t know. I don’t really have a problem with just getting on and talking at this point. I’m not self-conscious about it but I also don’t think that there’s 300 or 3000 people staring at me while I talk.
Rob: Right. It’s definitely different than being up on stage. How about you? What’s going on this week?
Mike: Well, I got into a couple of extremely angry emails from people who are unsubscribing from a couple of my newsletters. I’ve gotten two separate ‘F off’ emails this week, so I think I’m doing something right.
Rob: Why do you think that is?
Mike: Well, one person I think—
Rob: You probably…
Mike: I think I have explanations for both of them. One of them, he said he unsubscribed three times. I looked and there was only one unsubscribe there. Either it just wasn’t working or he wasn’t actually unsubscribing but he thought he was. The way it’s set up is it takes you over to the unsubscribe page so you can manage your subscriptions but just clicking the link isn’t like a one-click unsubscribe. My suspicion is he didn’t actually do it right.
Rob: And there’s a big red button on that page that says, “It says you have not been unsubscribed,” and there’s a big red button that says, “Unsubscribe from all,” and you have to click that. Just so you know, there is a setting in Drip, you don’t need to do it but you could flip it so that the moment they click that one link in their email, it unsubscribes them from everything. We’d had people who want to do both ways which is why there is a setting. And I say we, I don’t work there anymore. But when we built it, I really tough time with that, dude. I still say ‘we’ all the time about Drip and it’s like, “How is it technically ‘we’ anymore if I’m not there?”
Mike: Usually, the way that I talk about it is, if it’s something that I want to “claim” responsibility for but somebody else is going to do it, it’s ‘we’ as in ‘those people. I totally understand that but I don’t know what the whole deal was there. And then the other one I’m still tracking it down. It looks like I got bad data in terms of the name and apparently he was extremely upset that I said the wrong name in the email. But the way I got it was that, so call them a completely different name.
Rob: Yeah, that’s weird. I mean, that’s the thing. You can’t please everybody and you get one or two of these out of thousands. Some people are just jerks or idiots or had a bad day. There’s a lot of bunch of different explanations for it.
Mike: Yeah, I’m not worried about it.
Rob: You bring up more to laugh about it than anything.
Mike: Yup.
Rob: You must be doing something right. We have some new iTunes reviews. We’ve got one in October from Will and he said, “Both inspirational and actionable. Most entrepreneurial podcast fall either in the inspirational bucket or the actionable bucket, but rarely is a podcast both. Startups For The Rest Of Us is an exception to this.” We’ve got another review from Greech Jay. Man, his mom must’ve not liked him, Greech Jay? “Top notch,” it says, “Wow. Clearly brilliant and useful info. Huge value.” You think Greech Jay is just an online handle? Or do you think I’m mispronouncing it and it’s Greech or something like that?
Mike: No idea.
Rob: No idea, don’t care, huh? But thanks for the amazing reviews.
Mike: I didn’t say that I didn’t care. I just have no idea. I don’t have it in front of me. I can’t see how it’s spelt.
Rob: Are you eating something while we are recording?
Mike: No.
Rob: Yes, you totally are. This is great. Ladies and gentlemen, Startups For The Rest—
Mike: …noon, so what do you want me to do?
Rob: That’s true, you’re starving. So, thanks for the iTunes reviews. If you have not left us a five-star review, I promise I will not make fun of your name and I will not say that Mike doesn’t care about you because I know that he cares about each and every listener. It would be great if you could log into the clunky iTunes interface, click the five star and leave us a sentence about, “Hey, these guys say things every week. Say something factual.” Even if you don’t like us, put five stars and be like, “Yeah, these guys really show every week.” That’s a thing, right? Five-star worthy.
Mike: I think the best five-star worthy, like you’re just showing up every single week for eight years. We’re going up on nine at this point, so that’s a lot of time, that’s dedication.
Rob: Yeah, stupidity.
Mike: And sandwiches.
Rob: There you go. We’re going to answer listener questions today. Our mailbag is full once again, which is nice. As usual, the voicemails went to the top of the stack. We’re going to start with a voice mail at the impact of GDPR on the value of mailing lists.
Paul: Hello, Mike. Hello, Rob. My name is Paul from Melbourne, Australia. Thanks for taking my question. You both espouse the value of developing and curating mailing lists. But I recently read an article from LeadPages, stating that, and I quote, “A required checkbox does not allow for freely given consent under the GDPR law. Therefore, it should be optional for a subscriber to consent to receiving marketing emails from you in order to receive a lead magnet, freebie, pay product, et cetera.” What do you think this means for the building of mailing lists going forward? And does this affect your view of the value of mailing lists in relation to the likely increase and effort required to develop enough traffic to make up for the loss of email signups due to this optionality? Thanks again and have a great day.
Rob: Thanks for the question, Paul. I appreciate that. I think you might be misunderstanding something. I just want to clarify that, “A required checkbox does not allow for freely given consent under the GDPR law.” That’s the quote you have and what that means is, if you force them to have the checkbox checked in order to proceed, you have not given them optionality. What that means is it needs to be an option when they submit your email for them. They put in their email, maybe their first name. But there is a checkbox there, I believe it has to be unchecked by default. That’s my understanding, not a lawyer, not a GDPR expert, but I believe it has to be unchecked by default, and you can’t force them to check it to submit the form. Does that makes sense? They should be able to submit that form. It doesn’t make any sense to me, but that’s how my understanding of the law is. If they check it and they submit it, then they have consented and now you can email them. If they don’t check it and submit it, then you need to figure out what to do with that customer because they have not consented to hear from you.
What they built in Drip—hey I just said ‘they’ finally—they’re kind of building it as I was leaving but I think they did a really elegant implementation and if that check, you can just add a GDPR checkbox. It’s a strongly-typed item in Drip’s settings and when you add it, if someone submits without that checkbox being checked, then they have a property on the subscriber that says, “GDPR permission given or something,” and that is either set to true, false, or unknown, and unknown is if they were added through other means, through an API or an import or maybe they were added before you enabled it or whatever.
But again, if they do check it and submit it, then it’s true and if they don’t, then it’s false. You as a Drip customer could just have a workflow or rule that says, “Anyone who’s added with it false, unsubscribe them from all, delete them, do something to get them out of your system.” Or you could keep them in your system, in the Drip account—I’m not sure why you would do that—and just make sure that when you send out an email to everybody that you exclude those subscribers from the segment.
Those are nuts and bolts that I’ll cover before. This question is not about that. It’s more about how do we think this is going to impact it but I kind of wanted to clarify that. I’m using Drip as an example because I know intimately the implementation. I think it’s a good one. I’m pretty sure MailChimp and ActiveCampaign and Infusionsoft have all done similar kind of related implementations.
Now, over to you, he actually had a question. What do you think this means for building of mailing list going forward?
Mike: I don’t think that it changes a whole lot in terms of building a mailing list but I do think it probably has an impact on what you do with it once you have those email addresses because you’re going to have to make a decision about whether or not you’re going to send them email or not. If they’re submitting it and they haven’t provided consent or anything like that, do you still email them anyway?
Rob: Isn’t it illegal if they’re in the EU? I mean, you’re breaking EU law if you do that, right?
Mike: Yeah, you are, or at least I believe that you are. The question is, do you care? I’m not saying that you should or should not, I’m not a lawyer here, you’ve got to make your own decisions here but at the same time, if they’re submitting that, what’s the instance your company want to take on this? Do you want to be hardline? You […] comfortably comply with GDPR and were going to take that extremely seriously and we won’t email you unless you click the check box? If you do that, it’s like organ donor cards. Whatever the default is, that’s what most people are going to tend to.
Me, I probably wouldn’t check it because I’ll be like, “Okay, it doesn’t apply to me. I’m not in the EU so I don’t have to click this checkbox and it doesn’t matter. I’ll just click and submit.” But does that mean that you shouldn’t send an email to me? And the answer would be, “No, because I live in the US. It’s not applicable.” But you as a marketer have to decide where does this person come in from? Can you figure that out technologically? And even if you can, where do they receive their email? Where are they actually based? Are they using a VPN? You don’t know any of that stuff.
I feel there’s still going to be some things that come down the line where some of these things are going to change a little bit, maybe GDPR is going to be modified to say that, “If you don’t get consent upfront, you can turn around and send them an email to ask for it,” and if you don’t get it then, okay fine. But that’s not really any different than double opt-in at that point.
I feel that with any laws that are written, inevitably they are never written by people who are technical enough to understand what they’re trying to implement. That kind of stuff is going to happen. Because this was the first pass of GDPR, expect there’s going to be many changes. I would hope that that’s one of them but I don’t know. Ultimately, it blows down to what is your risk tolerance moving forward with your company and how likely do you think you are to be brought to court for over something like that?
Rob: Yup, that’s it. There is a setting in many of the ESPs, and Drip is one as well, where you can show this checkbox but then there’s a setting, this is where I feel again, Drip point the extra mile. There’s a checkbox that you can check in your Drip console to only show the GDPR checkbox on your forms if client’s browser registers to the EU, meaning, it’s doing IP lookups, I’m assuming that’s what it’s doing and geolocating them.
You and I know as technologists that, that’s not 100% foolproof. Just like you said, maybe they’re on a trip, maybe they’re on a VPN, maybe whatever. There’s a bunch of ways that that could be spoofed or incorrect or whatever. But here’s the question. If GDPR or if the EU actually came after you, your little, small business which I just don’t think that they’re going to do and you said, “Look, we implemented all this stuff. (a) Are the auditors going to even be smart enough to realize that there’s this setting, they’re not smart enough is not the right thing but technical enough to understand it, and (b) if you say, “Look, I did this. I did the best I could.”
This is the kind of stuff that is such a gray area that I think fretting about it is, I don’t know. I think it’s been given a lot of wasted thought to GDPR that I think could have been spent doing productive things, I think is my opinion. Like you’re saying, it’s risk tolerance. It’s much like filing your taxes. You can go super conservative and you can go super liberal with your taxes. If you go liberal and liberally interpret things, yes, if you get audited, you may run the risk.
It depends on the auditor because it’s not black-and-white. As much as we want all these things to be black-and-white, they’re not. They’re shades of gray and there’s levels of interpretation and there’s precedents that’s here but not there. It’s kind of a tough thing because you have to make a judgment call on it but I don’t think that GDPR is going to really impact the ability to build email lists.
Kind of like what you said. Everyone kind of shrugs their shoulders. If I see the checkbox, I check it. Maybe it’s going to be really hard for B2C. Let’s say you are Verizon or some selling to consumers. They’re the ones that are gonna accidentally forget to check some checkbox and that you’re then going to miss out of half of your people. I think the more tech-savvy people that we deal with, they’re going to know it, they’re going to eyeroll, and they’re going to check the box when they need to.
Mike: You brought up taxes. That was actually the direction I was going to go in as well and mention that because I think if you’re filing your taxes, chances are really good that you’ve prolly violated the law in some way, shape, or form and can be theoretically be nailed to the wall. At that point when you are audited, it comes down to intent. Were you actively trying to evade the law or did you make a mistake?
If you make mistakes, technically ignorance is not a viable defense in the courts but at the same time, these government agencies realize that you got a lot of things going on and some things are going to slip through the cracks, mistakes that could be made. It’s not that big a deal. It’s not a criminal offense, so it doesn’t matter. If you are actively doing things that are trying to circumvent or subvert but the intent of their legislations or regulations, yeah, they’ll nail you to the wall and that’s what it comes down to.
Rob: Yeah. It’s the difference between a mistake and fraud. Fraud, they prosecute you for it, put you in jail, and the fines are tremendous, if you did it on purpose. If they think it’s an accidental miscalculation, that happens. They will still sometimes have leniency and sometimes they’ll do a penalty or they’ll certainly go back and say, “Well, you didn’t pay us 10 grand and then we’re going to add $1000 penalty, but still, it is 10 grand that you owed them anyway. I don’t know.
Mike: But this discussion is really why entrepreneurs hate legislations where people are making rules about stuff they don’t understand. It’s just like, “Please go away and let us do our thing.” I get why they’re trying to do it, I get the intent, and maybe it really does work that way in reverse. I’ve never had my business brought to the courts for stuff like that, and hopefully it will never happen, but I feel they take intent into account when they look at that stuff.
Rob: I’ll say it again, it’s my soapbox. This is my charge more. Patrick Pence has charged more, I have. GDPR should have excluded small businesses. In the US, there’s this lobby that excludes small businesses from tough regulations that will be hard for them to live up to. Typically, if it’s 25 employees or less, or 50 employees or less, there’s some number where you’re exempt from a lot of things because they know they put undue pressure on. GDPR, I believe, should have done that.
Mike: That’s 50 employees, I think, for most things.
Rob: Cool. That was a good question, Paul, thanks. Our next question is another voicemail. It’s actually a question about Tiny Seed, based on episode 420 from a couple of weeks ago.
Mike: Can I answer this one?
Rob: You get to answer this one.
Chris: Hi. My name is Chris and I’m from San Antonio. I have a question for Rob and Einar about Tiny Seed. I wanted to ask you about managing risk for both you the investors and the founders being invested in since obviously, both sides are assuming risk in such an investment. It seems to me that with your business model, where you invest in companies that already have some traction, that the biggest risk is instead of outright failure like a VC-backed company might have where they just run out of money, instead the biggest risk might just be mediocre growth, where the question of whether you keep investing or if you need to bail out or not, isn’t really black-and-white.
If you agree with that premise, I’m curious about what you think about the risk for the founder, rather than for the investors? Assuming you want the founder to work full-time in the product that’s being invested in, at what point are the founders allowed to explore other options if […] who wants out and do not really making enough to have a living salary like if they have a family? Are they allowed to freelance? Will they be expected for that freelance income to go into the company being invested in so you get a piece of that revenue? Or does the relationship simply end to that point? And even looking out past that runway, if the founder’s company is floundering two or three years later, what’s the responsibility that the founder has to you?
In other words, success is obviously a good problem to have for these companies that are investing in, but I’m really curious about the different ways that the companies or that the investment may fail, especially if it’s not a very black-and-white failure scenario. Thanks.
Rob: So, what do you think about this, Mike?
Mike: You could probably just confirm these for me.
Rob: Cool.
Mike: My inclination is to believe that obviously, there’s the ones that do well and those are successful. There’s the ones that burn out and they are shut down and close out. Neither are those are you really worried about. It’s the ones that are floundering for, I’ll say, extended periods of time. I think in those cases, not just Tiny Seed Fund but funds in general, are just going to say like, “Okay, well, we put money into it. It didn’t really go anywhere.” And until the business is legally shut down, it doesn’t make any difference because nothing changes. The investors do not have enough equity in the business to make any business decisions or force anything to happen. It’s kind of out of their hands, so why worry about it?
Until the business is shut down because when the business is legally shut down and the entity goes away, there’s probably close out conditions or things that are in the paperwork that say, “X, Y, and Z is going to happen,” but beyond that it kind of doesn’t matter. If it’s floundering that badly, their time is probably better spent working on the dozens or hundreds of other startups that were invested in, where some of them are being successful, and they’re going to take away the focus from those to put it on something that’s floundering, versus spending that time with a business that is doing well and could be doing substantially better by focusing on it, you’re basically going down the wrong path as an investor.
Rob: Yeah. I don’t think that’s a bad sentiment. To be honest, I have not thought about this, I’m glad he’s sending the voicemail so it’s totally off-the-cuff. I have not discuss this with Einar but what do most funds do? They do basically what you’ve said and there’s a reason for that. If the business is floundering and the founder wants to shut it down, then you let him shut it down. If they don’t want to shut it down and they want to keep it, I have an angel investment where the founder just took a full-time job to keep this startup alive. He’s taking some of his money and pumping it in there because he still believes it still has merit and he still thinks he can grow it, that it kind of hit product market fit now. What “responsibility” does he have to me or to the investors?
I mean, he has a responsibility to do his best but honestly, if he has said, “Look, I’m going to sell this for parts,” or if he said, “I just can’t do it anymore and it’s totally floundering and I’m going to shut it down,” then he should do that. I would honestly want to have heart-to-heart with him before that, like, “Is this really which wanted do you have built this to a certain point?” I mean, that’s the thing is, unless the relationship goes south, which most don’t, the investor-founder relationship.
I’m in touch with every founder I’ve ever invested in, our relationships are good. If they just told me honestly, like, “This sucks. I’m out,” and they don’t burn it to the ground and they don’t screw anybody, but they’re like, “Look, this isn’t growing. We’re going to have to shut it down,” it’s like, “Okay, it’s an angel investment.” That’s what I thought it might go to zero. The odds are decent that it’s going to go to zero.
I guess all I’m saying is, it’s kind of the same way that most investments are. Some founders will feel like they have more work to do on their product even if it hasn’t hit traction yet, and would I encourage a founder to go freelance and then try to keep a business alive that wasn’t working? If it’s not working, probably not, but it tends to be that weird gray area where it’s not working but the founder thinks it’s going to work in the next couple of months. They have this deal that’s going to close or they have this feature that’s going to go live or they have something game-changing, and In that case, I would just talk like each situation is going to be different, I guess is what I’m saying.
So it’s going to be hard to make a blank statement about what you’re going to do and allow or not allow. I don’t feel I’m going to not allow much. This is all seat-of-the-pants. “Building startups is building the parachute as you jump out of the plane on your way down,” as Reid Hoffman says, so each of these things is like, “Well, let’s have a conversation. What’s the actual situation here? And then, let’s troubleshoot this like smart people who gets things done.” Thanks for the question. I appreciate it.
Out next question is about iTunes keyword stuffing. Actually, it isn’t a question. It’s a statement. It’s from Chris Christiansen. He says, “In your last podcast, you made a comment, suggesting doing keyword stuffing in podcast descriptions for iTunes on the Libsyn podcast called The Feed. They’ve been talking a lot about all the different podcasts that have been banned from iTunes for doing keyword stuffing. Don’t try it.”
We should definitely clarify. We weren’t saying do keyword stuffing. We were saying it does work because the way that the algorithm is not very advanced. They fixed that longer term but you’ve been able to keyword stuff and rank for searches relatively easy on iTunes. Now whether you do that, because if you do it, you could get banned. If you are a successful podcast, and you’re driving users, and you’re do little bit of it, meaning, a little bit of SEO. I’m not saying your stuff in 20 keywords that have nothing to do with your podcast, try to rank for all these topics that you don’t relate to, but if you do intelligent SEO on your podcast.
We’re a show about startups. In the description, I want startups at least a couple of times in plain English, in essence it’s not startups-comma-business-comma, mix – all this stuff, but it’s an English flow that makes sense. I don’t feel like you’re even walking a line there. I feel like that’s a pretty reasonable approach to this. So, stuffing is not what I would recommend and it’s not what we do but it is thinking deliberately about how you write the description, the subtitle, and the title of your podcast.
Mike: I don’t remember whether it was you or me that said that but I probably would have referred to it as keyword stuffing and saying to do that but it’s not exactly right or at least it’s not an accurate description of it. What I mean by keyword stuffing when you’re doing a podcast is being very strategic about what you name it because the search algorithms and most of those podcast directories are really, really dumb. So, it’s not and I responded to this via email as well.
It’s not an accident that our podcast is named Startups For The Rest Of Us. We did some basic research and found it like those engines are just stupid. They’re not very good. They look at the title, they may look at the subtitle but those things count much higher than anything else. It made a lot of sense for us to call it Startups For The Rest Of Us and plus, we have the domain name, so it just worked out. But it is a good distinction to point out the difference between being strategic about that versus what is legitimately keyword stuffing where you’re just repeating the same words over and over again.
Rob: Yeah. There’s a reason we still rank high for that term even though there’s the Gimlet Media startup podcast and then there’s Mixergy, and there’s Jason Calacanis. There’s a lot of competition for that term and yet we’ve always ranked in the top whatever 7-10 of those, depending on what area of the world you’re in.
Our next question is about shady competition and how to handle it. It’s an anonymous email. It says, “Hi, Rob and Mike. First of all, thank you for all the work you guys do with the podcast and the community. Rob’s book, Start Small, Stay Small was the beginning of my life as an entrepreneur and your podcast made me quit my job and start to work full time on products.” Hey, we should add him to our list, Mike, right now our success list. “Right now, I’m one of the two co-founders of a profitable SaaS business.”
“Earlier this year, we did an AppSumo deal and during its promotion, a competitor spread false rumors about us in several private Facebook groups. He said that we had sold the business and that the app is going to close up shop right after the AppSumo deal was over. ‘Here’s some evidence,’ and he sent us a screenshot of the person saying this. This is crazy. We decided to completely ignore this and do nothing about it. In hindsight, this was a good move because in some Facebook discussions, it completely backfired on him and right now he has stopped this as far as we know. Im worried about facing this situation again now that we are growing bigger. What would you do in situations like these? Thanks for all your hard work.”
It’s a good question. It’s a tough question.
Mike: It is a tough question and I think it comes up as your business gets bigger and as you’ve been in business for longer, these situations come up more often just by virtue of being around. I think in most cases it comes back to like, what is likely the north star for your business and how do you conduct your business? Are you really shady about it or are you pretty honest with your customers, upfront, and transparent with them? Then, that has to be contrasted against who is making these types of claims, what people think of that person, and what they know about him versus what they think about you and what they know about you.
It boils down to the audience themselves and how much they like or trust the source of their information. I think in cases like this, most people are going to be pretty—at least—objective enough to say, “Yes, that’s true or false or that goes against my fundamental beliefs about what I’m hearing,” and that’s the way that they’re going to side.
If you know that you run your business on the up and up, I would totally not worry about that stuff. You might make one comment or response and say, “Hey, that’s totally not true,” or you could just ignore it. The people who know you well enough are going to ignore that and they’re probably not going to apply any credibility to it. There’s going to be people who don’t like that person already and is not going to take much for it to backfire in their faces, which will stain them basically in that person’s eyes forever.
I’ve seen this happen in a bunch of different cases. Some people get into fights on Twitter or Facebook or wherever. There were some of them are just personalities and they clash. The audience of one person’s side with that person. The other one’s side’s the other. It’s just going to happen because those audiences tend to be siloed. It’s based on their relationship to them and their trust. If you develop that trust over a long period of time, it’s not going to go away. I would not worry about it.
Rob: Yeah. I think you kind of have three options when this happens. You can do nothing. Intentionally decide, “Hey, I’m going to let this person burn themselves down and makes them look dumb.” Also, I would say most people who do this stuff don’t have very large audiences. You and I dealt with trolls over the years. I’ve had some pretty gnarly ones and all of them, except for maybe one or two, had 80 followers. I mean, there’s just nobody who cared what they were saying and they were trying to pull me into a fight because as soon as you engage with them when you have 13,000 or 14,000 followers, or 50,000 or 100,000, then you’re giving them attention.
That’s one thing, I would say is these folks tend to be to not have a big audience and then I totally lean towards completely ignoring because it just makes more sense to do that because no one’s hearing them anyway. But if they’re that rare exception and they are reaching people—in this case, probably Facebook groups—is tough because they are at least being heard. You can do nothing and if they’re being torn down in a group and people are saying, “I know that’s not true or whatever,” then I don’t need to say anything. You could just post one post and decide that you are not going to reply.
Someone like this is probably going to be a troll and is going to say things intentionally, that are going to try to make you respond because that’s a big thing that trolls do. That’s one of the good skills. If you have good troll game. You know what to say things to make people mad but you say things that make them want to respond, and you responding is actually losing. That’s how I think about it. That you’re giving in and you’re letting them have power over you, to make you respond to something that you probably know you shouldn’t.
Back to the three options, it’s do nothing, it’s post one thing that says, “No, this is not true, this is completely false or whatever,” and then don’t respond again. So you have come out, said it, been clear, and say nothing. Or the third one is to go on a full-on war with them right in. We’ve seen this on Twitter but you spend of time, you spend a bunch of energy, you just waste a bunch of things, and both of you look like idiots. People sit there, watching, and think, “What are these fools doing?”
You can obviously tell where I land. Its number one or number two, depending on the circumstance. But no, it sounds like in this case, you made the right call and then moving forward, I think you just got to use your judgment on that. But it’s a tough one, tough one when this happens because it feels crappy, especially when something is this false. It sounds just coming complete manufactured, something that wasn’t true. It’s bizarre.
Mike: Yeah. It’s very easy to take it personally, too, because it’s your business and then there’s making comments and you don’t want people to believe them. The reality is people are going to believe kind of what they want to and what they’re inclined to anyway. Interjecting yourself is not going to do yourself any favors in most cases.
I think Rob’s advice of either do nothing and ignore it, or one post and that’s it, do not re-engage. If any sort of protracted engagement, especially publicly, is never going to fall in your favor. I don’t know of anyone that has.
Rob: And our last question of the day is about pruning email lists. It’s from an anonymous emailer. He says, “Hi, Rob and Mike. We’ve got an email list focused on WordPress development. It’s currently around 6000 subscribers. It has a 20% open rate. I believe that we should regularly purge non-engagers. People who are not opening, has a Drip lead score of 0 or less, et cetera.”
“But my business partner disagrees. I think that pruning non-engagers helps our list health, which keeps us in the best hub of Gmail, et cetera. He thinks that non-engagers may reactivate and also pad our numbers for sounding impressive to prospective advertisers, et cetera. What are you think? Is there a right answer? What would you do?”
Mike: That’s tough because it sounds like there’s two different things going on. One is how are those subscribers impacting your business itself and the sales. Then there’s also the padding the numbers to sound impressive to advertisers. That’s a tough call there. I think that if you’re going down the route of purging them, I would put together a re-engagement campaign instead of outright purging them. That way, you reach out to them and say, “Hey, looks like you haven’t been engaged with our emails lately. Click here to stay on the list.” You can send a couple of those and if they re-engage, great, keep them on the list, and if not, then purge them.
I don’t think that I would go down the route of just blatantly getting rid of them. The other thing I would question is how got on your list and this is something for you to think about is, was it double opt-in or single opt-in? If it’s single opt-in, they submitted something or you got their email address from some place else, you just added them and they’re not opening the emails, then chances are good those are totally bogus and you’re not getting through them anyway, doesn’t matter. Those are the two things I would consider for that.
In terms of the trying to pad your numbers for advertisers, I don’t know if I could go down that path, either. You could give them the top line number and then caveat it. Your open rate is really what they’re going to be interested in anyway. You can just do the quick math on it and say, “Well, what’s the actual reach?” If you’ve got a 6000 subscribers and a 20% open rate, then you’re reach is actually 1200. It doesn’t matter how many of those subscribers you purge. You’re still going to have that 20% open rate and a 1200 reach. It doesn’t make a difference even if you purge half of them. You’re still going to end up with the same numbers.
I don’t know if I would worry about that too much. Just be honest enough and prompt with whoever your advertisers are and say, “Here’s what we’ve got for subscribers, here’s what our open rate is, and here’s what we believe our reach and impact is for you as an advertiser,” because if you aren’t doing justice to your advertisers, then they’re not going to come back. And that’s actually what you want? It’s hard enough to land an advertiser or a sponsor for your podcast or your email list or what have you. Don’t destroy your trust as well, because if you do, they won’t come back.
Reality is, the money that you get from any one email or podcast or whatever sponsorship, it’s not going to even compare to the trust that you lose and the potential revenue that you lose from them talking to other people and say, “Yeah, these guys screwed us.”
Rob: I think those are all good sentiments, Mike. I think that’s exactly what I’m going to say about re-engagement and if you search for Drip Workflow Re-engagement, there’s a one-click blueprint that is a fully-built out workflow. With one click, you can install it into your account. I believe it was designed by Anna way back in the day and it’s really good at re-engaging people. You can obviously add more emails to it or whatever.
We ran this on the Drip list, let’s say, it’s got to be 2015, because over time, open rates go down and down and we probably hit 25%. I was, “You know? I like to keep above 30%,” because it does. The lower your engagement rates, it will put you in the promotions tab. Sometimes it will get you in spam, but mostly it can impact your sending domain reputation as well, not the IP address that you send through.
This is a little bit of a tangent but we actually have customers come to us from MailChimp or Infusionsoft, and they would say, “Well, their deliverability wasn’t very good,” and I was always like, “That’s a little bit of a red flag. I know MailChimp’s deliverability is quite good.” It turns out the IP addresses stay with Infusionsoft and MailChimp but the domain you’re using, your ‘from address’ in essence, if you’ve kind of burned that domain by having really crappy open rates, then no matter where you go now with that domain, there is going to be a ding against you in the blacklist. That’s the real struggle. Once you lose that, it’s like bad credit. If your credit score drops, it takes a long, long time to get that back.
All that to say, I like to keep my open rates up. I mean we have customers come in with 3%, 5% open rates and they were trying to juice the numbers thing. My list is 100,000 people. But literally, there is 3000 or 4000 that would open emails and it was nuts. Eventually, you do have to intervene because if you’re on shared IPs, that can negatively impact other customers and such.
All that to say the re-engagement thing, I tried it and it had re-engagements for people who aren’t opening emails already, they’re very, very unlikely to open any additional emails. I remember the results were trivial and almost not worth doing. But you should totally try it and track it because you see in the workflow how many people get to certain steps, and you can just run the numbers.
I’m going to put in all 6000 or I guess not 6000 are unengaged. It’s only 4200 are unengaged. See how many get down to the bottom and re-engage. It tends to be, if I remember correctly, it’s between 5% and 10%. If that’s worth doing to you, then do it. Dump them on the workflow and when it gets to the bottom, poof, you just unsubscribe by default after a certain delay if they haven’t clicked anything. It’s really easy to do.
I agree with you, Mike. I don’t think you need to prune down only the 1200 who are opening—that’s ridiculous—but if someone hasn’t opened 10 of your last emails, very, very, very unlikely they’re going to open any email ever. I like more—thinking about it—if you’re going to do advertisers, instead of saying, “We have an email list of 6000,” you could say, “We have an email list of 4500,” if it does mean that’s what it is after your pruned. “We have an email list of 4500 and our engagement rates are 35% or 40%,” because that’s what will happen. It will send those numbers up.
If you’re talking to prospective advertisers, tell them that, “If you’re looking at other places to advertise, ask what their open rates are like.” Specifically, start pointing this out. I think people should pay more attention to this personally just across the board. If I were going to advertise on any site and they give me an email this size, first thing I would do is I would say, “Show me your open rates. I want to see a screenshot of your MailChimp account. I need you to prove to me that your engagement is not crap,” because again, I just seen too many people with 10%-15% open rates who say, again they have a list of 100,000 but that list might as well be 15,000 or 20,000 person list. It’s just not worth it.
I agree with you, Mike, I think that the results are going to carry the day. I would absolutely prune it. I wouldn’t prune all 70%. That’s not how it works. You kind of go into Drip or whatever email tool is and say, “We’ll have to open the last, what feels comfortable, 10, 12 emails, 15,” you can beyond that, it’s ridiculous. I mean, it’s just too big of a number that they’re never coming back. That would be my opinion on that.
Mike: Well, looks like we’re out of time. I think we’re going to wrap today’s episode up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. How did you like my announcer voice today?
Mike: It was great. It was very…
Rob: I was working on it.
Mike: Are you taking voice acting classes so you can announce movies and stuff?
Rob: A voice-over guy? I could be more annoying with it. I was trying not to sound like a radio DJ. What’s the word this week, man? What are you doing?
Mike: It occurred to me that last week you were giving me crap for forgetting the intro. I will remind you of the time in MicroConf Europe, we were on stage, you completely spaced on the intro.
Rob: I did, actually, and I can’t remember anything. That’s right.
Mike: It’s not just me. We’re both getting old.
Rob: Indeed.
Mike: Or not just you.
Rob: A couple of weeks back in episode 420 when Einar and I recorded it, we got on the mic, we recorded it, and after I hit stop he said, “Do you guys do one of these every week?” It’s super funny. I said, “Yeah, but it’s easier blah-blah-blah,” and I couldn’t tell if he was just saying, “What a slog this was.” It was just a funny question and I was like, “Well yeah, we do it every week. For the last four hundred 420 weeks we have done one every week.” It was just a realization. I don’t know. I think it may have taken a lot of energy or a lot of thought for him to kind of be there, to be on a podcast, for not used to doing it all the time, it can feel exhausting. Remember the first 20 or 30 of these? How hard they were? I would go take a nap after we record it because I was so stressed and so anxious and nervous and not knowing what to say.
Mike: For the four listeners that we had at the time.
Rob: Yup and then eventually that all goes away. That leaning into hard things and then doing things that scare you and getting better at them.
Mike: Yeah. I don’t know. I don’t really have a problem with just getting on and talking at this point. I’m not self-conscious about it but I also don’t think that there’s 300 or 3000 people staring at me while I talk.
Rob: Right. It’s definitely different than being up on stage. How about you? What’s going on this week?
Mike: Well, I got into a couple of extremely angry emails from people who are unsubscribing from a couple of my newsletters. I’ve gotten two separate ‘F off’ emails this week, so I think I’m doing something right.
Rob: Why do you think that is?
Mike: Well, one person I think—
Rob: You probably…
Mike: I think I have explanations for both of them. One of them, he said he unsubscribed three times. I looked and there was only one unsubscribe there. Either it just wasn’t working or he wasn’t actually unsubscribing but he thought he was. The way it’s set up is it takes you over to the unsubscribe page so you can manage your subscriptions but just clicking the link isn’t like a one-click unsubscribe. My suspicion is he didn’t actually do it right.
Rob: And there’s a big red button on that page that says, “It says you have not been unsubscribed,” and there’s a big red button that says, “Unsubscribe from all,” and you have to click that. Just so you know, there is a setting in Drip, you don’t need to do it but you could flip it so that the moment they click that one link in their email, it unsubscribes them from everything. We’d had people who want to do both ways which is why there is a setting. And I say we, I don’t work there anymore. But when we built it, I really tough time with that, dude. I still say ‘we’ all the time about Drip and it’s like, “How is it technically ‘we’ anymore if I’m not there?”
Mike: Usually, the way that I talk about it is, if it’s something that I want to “claim” responsibility for but somebody else is going to do it, it’s ‘we’ as in ‘those people. I totally understand that but I don’t know what the whole deal was there. And then the other one I’m still tracking it down. It looks like I got bad data in terms of the name and apparently he was extremely upset that I said the wrong name in the email. But the way I got it was that, so call them a completely different name.
Rob: Yeah, that’s weird. I mean, that’s the thing. You can’t please everybody and you get one or two of these out of thousands. Some people are just jerks or idiots or had a bad day. There’s a lot of bunch of different explanations for it.
Mike: Yeah, I’m not worried about it.
Rob: You bring up more to laugh about it than anything.
Mike: Yup.
Rob: You must be doing something right. We have some new iTunes reviews. We’ve got one in October from Will and he said, “Both inspirational and actionable. Most entrepreneurial podcast fall either in the inspirational bucket or the actionable bucket, but rarely is a podcast both. Startups For The Rest Of Us is an exception to this.” We’ve got another review from Greech Jay. Man, his mom must’ve not liked him, Greech Jay? “Top notch,” it says, “Wow. Clearly brilliant and useful info. Huge value.” You think Greech Jay is just an online handle? Or do you think I’m mispronouncing it and it’s Greech or something like that?
Mike: No idea.
Rob: No idea, don’t care, huh? But thanks for the amazing reviews.
Mike: I didn’t say that I didn’t care. I just have no idea. I don’t have it in front of me. I can’t see how it’s spelt.
Rob: Are you eating something while we are recording?
Mike: No.
Rob: Yes, you totally are. This is great. Ladies and gentlemen, Startups For The Rest—
Mike: …noon, so what do you want me to do?
Rob: That’s true, you’re starving. So, thanks for the iTunes reviews. If you have not left us a five-star review, I promise I will not make fun of your name and I will not say that Mike doesn’t care about you because I know that he cares about each and every listener. It would be great if you could log into the clunky iTunes interface, click the five star and leave us a sentence about, “Hey, these guys say things every week. Say something factual.” Even if you don’t like us, put five stars and be like, “Yeah, these guys really show every week.” That’s a thing, right? Five-star worthy.
Mike: I think the best five-star worthy, like you’re just showing up every single week for eight years. We’re going up on nine at this point, so that’s a lot of time, that’s dedication.
Rob: Yeah, stupidity.
Mike: And sandwiches.
Rob: There you go. We’re going to answer listener questions today. Our mailbag is full once again, which is nice. As usual, the voicemails went to the top of the stack. We’re going to start with a voice mail at the impact of GDPR on the value of mailing lists.
Paul: Hello, Mike. Hello, Rob. My name is Paul from Melbourne, Australia. Thanks for taking my question. You both espouse the value of developing and curating mailing lists. But I recently read an article from LeadPages, stating that, and I quote, “A required checkbox does not allow for freely given consent under the GDPR law. Therefore, it should be optional for a subscriber to consent to receiving marketing emails from you in order to receive a lead magnet, freebie, pay product, et cetera.” What do you think this means for the building of mailing lists going forward? And does this affect your view of the value of mailing lists in relation to the likely increase and effort required to develop enough traffic to make up for the loss of email signups due to this optionality? Thanks again and have a great day.
Rob: Thanks for the question, Paul. I appreciate that. I think you might be misunderstanding something. I just want to clarify that, “A required checkbox does not allow for freely given consent under the GDPR law.” That’s the quote you have and what that means is, if you force them to have the checkbox checked in order to proceed, you have not given them optionality. What that means is it needs to be an option when they submit your email for them. They put in their email, maybe their first name. But there is a checkbox there, I believe it has to be unchecked by default. That’s my understanding, not a lawyer, not a GDPR expert, but I believe it has to be unchecked by default, and you can’t force them to check it to submit the form. Does that makes sense? They should be able to submit that form. It doesn’t make any sense to me, but that’s how my understanding of the law is. If they check it and they submit it, then they have consented and now you can email them. If they don’t check it and submit it, then you need to figure out what to do with that customer because they have not consented to hear from you.
What they built in Drip—hey I just said ‘they’ finally—they’re kind of building it as I was leaving but I think they did a really elegant implementation and if that check, you can just add a GDPR checkbox. It’s a strongly-typed item in Drip’s settings and when you add it, if someone submits without that checkbox being checked, then they have a property on the subscriber that says, “GDPR permission given or something,” and that is either set to true, false, or unknown, and unknown is if they were added through other means, through an API or an import or maybe they were added before you enabled it or whatever.
But again, if they do check it and submit it, then it’s true and if they don’t, then it’s false. You as a Drip customer could just have a workflow or rule that says, “Anyone who’s added with it false, unsubscribe them from all, delete them, do something to get them out of your system.” Or you could keep them in your system, in the Drip account—I’m not sure why you would do that—and just make sure that when you send out an email to everybody that you exclude those subscribers from the segment.
Those are nuts and bolts that I’ll cover before. This question is not about that. It’s more about how do we think this is going to impact it but I kind of wanted to clarify that. I’m using Drip as an example because I know intimately the implementation. I think it’s a good one. I’m pretty sure MailChimp and ActiveCampaign and Infusionsoft have all done similar kind of related implementations.
Now, over to you, he actually had a question. What do you think this means for building of mailing list going forward?
Mike: I don’t think that it changes a whole lot in terms of building a mailing list but I do think it probably has an impact on what you do with it once you have those email addresses because you’re going to have to make a decision about whether or not you’re going to send them email or not. If they’re submitting it and they haven’t provided consent or anything like that, do you still email them anyway?
Rob: Isn’t it illegal if they’re in the EU? I mean, you’re breaking EU law if you do that, right?
Mike: Yeah, you are, or at least I believe that you are. The question is, do you care? I’m not saying that you should or should not, I’m not a lawyer here, you’ve got to make your own decisions here but at the same time, if they’re submitting that, what’s the instance your company want to take on this? Do you want to be hardline? You […] comfortably comply with GDPR and were going to take that extremely seriously and we won’t email you unless you click the check box? If you do that, it’s like organ donor cards. Whatever the default is, that’s what most people are going to tend to.
Me, I probably wouldn’t check it because I’ll be like, “Okay, it doesn’t apply to me. I’m not in the EU so I don’t have to click this checkbox and it doesn’t matter. I’ll just click and submit.” But does that mean that you shouldn’t send an email to me? And the answer would be, “No, because I live in the US. It’s not applicable.” But you as a marketer have to decide where does this person come in from? Can you figure that out technologically? And even if you can, where do they receive their email? Where are they actually based? Are they using a VPN? You don’t know any of that stuff.
I feel there’s still going to be some things that come down the line where some of these things are going to change a little bit, maybe GDPR is going to be modified to say that, “If you don’t get consent upfront, you can turn around and send them an email to ask for it,” and if you don’t get it then, okay fine. But that’s not really any different than double opt-in at that point.
I feel that with any laws that are written, inevitably they are never written by people who are technical enough to understand what they’re trying to implement. That kind of stuff is going to happen. Because this was the first pass of GDPR, expect there’s going to be many changes. I would hope that that’s one of them but I don’t know. Ultimately, it blows down to what is your risk tolerance moving forward with your company and how likely do you think you are to be brought to court for over something like that?
Rob: Yup, that’s it. There is a setting in many of the ESPs, and Drip is one as well, where you can show this checkbox but then there’s a setting, this is where I feel again, Drip point the extra mile. There’s a checkbox that you can check in your Drip console to only show the GDPR checkbox on your forms if client’s browser registers to the EU, meaning, it’s doing IP lookups, I’m assuming that’s what it’s doing and geolocating them.
You and I know as technologists that, that’s not 100% foolproof. Just like you said, maybe they’re on a trip, maybe they’re on a VPN, maybe whatever. There’s a bunch of ways that that could be spoofed or incorrect or whatever. But here’s the question. If GDPR or if the EU actually came after you, your little, small business which I just don’t think that they’re going to do and you said, “Look, we implemented all this stuff. (a) Are the auditors going to even be smart enough to realize that there’s this setting, they’re not smart enough is not the right thing but technical enough to understand it, and (b) if you say, “Look, I did this. I did the best I could.”
This is the kind of stuff that is such a gray area that I think fretting about it is, I don’t know. I think it’s been given a lot of wasted thought to GDPR that I think could have been spent doing productive things, I think is my opinion. Like you’re saying, it’s risk tolerance. It’s much like filing your taxes. You can go super conservative and you can go super liberal with your taxes. If you go liberal and liberally interpret things, yes, if you get audited, you may run the risk.
It depends on the auditor because it’s not black-and-white. As much as we want all these things to be black-and-white, they’re not. They’re shades of gray and there’s levels of interpretation and there’s precedents that’s here but not there. It’s kind of a tough thing because you have to make a judgment call on it but I don’t think that GDPR is going to really impact the ability to build email lists.
Kind of like what you said. Everyone kind of shrugs their shoulders. If I see the checkbox, I check it. Maybe it’s going to be really hard for B2C. Let’s say you are Verizon or some selling to consumers. They’re the ones that are gonna accidentally forget to check some checkbox and that you’re then going to miss out of half of your people. I think the more tech-savvy people that we deal with, they’re going to know it, they’re going to eyeroll, and they’re going to check the box when they need to.
Mike: You brought up taxes. That was actually the direction I was going to go in as well and mention that because I think if you’re filing your taxes, chances are really good that you’ve prolly violated the law in some way, shape, or form and can be theoretically be nailed to the wall. At that point when you are audited, it comes down to intent. Were you actively trying to evade the law or did you make a mistake?
If you make mistakes, technically ignorance is not a viable defense in the courts but at the same time, these government agencies realize that you got a lot of things going on and some things are going to slip through the cracks, mistakes that could be made. It’s not that big a deal. It’s not a criminal offense, so it doesn’t matter. If you are actively doing things that are trying to circumvent or subvert but the intent of their legislations or regulations, yeah, they’ll nail you to the wall and that’s what it comes down to.
Rob: Yeah. It’s the difference between a mistake and fraud. Fraud, they prosecute you for it, put you in jail, and the fines are tremendous, if you did it on purpose. If they think it’s an accidental miscalculation, that happens. They will still sometimes have leniency and sometimes they’ll do a penalty or they’ll certainly go back and say, “Well, you didn’t pay us 10 grand and then we’re going to add $1000 penalty, but still, it is 10 grand that you owed them anyway. I don’t know.
Mike: But this discussion is really why entrepreneurs hate legislations where people are making rules about stuff they don’t understand. It’s just like, “Please go away and let us do our thing.” I get why they’re trying to do it, I get the intent, and maybe it really does work that way in reverse. I’ve never had my business brought to the courts for stuff like that, and hopefully it will never happen, but I feel they take intent into account when they look at that stuff.
Rob: I’ll say it again, it’s my soapbox. This is my charge more. Patrick Pence has charged more, I have. GDPR should have excluded small businesses. In the US, there’s this lobby that excludes small businesses from tough regulations that will be hard for them to live up to. Typically, if it’s 25 employees or less, or 50 employees or less, there’s some number where you’re exempt from a lot of things because they know they put undue pressure on. GDPR, I believe, should have done that.
Mike: That’s 50 employees, I think, for most things.
Rob: Cool. That was a good question, Paul, thanks. Our next question is another voicemail. It’s actually a question about Tiny Seed, based on episode 420 from a couple of weeks ago.
Mike: Can I answer this one?
Rob: You get to answer this one.
Chris: Hi. My name is Chris and I’m from San Antonio. I have a question for Rob and Einar about Tiny Seed. I wanted to ask you about managing risk for both you the investors and the founders being invested in since obviously, both sides are assuming risk in such an investment. It seems to me that with your business model, where you invest in companies that already have some traction, that the biggest risk is instead of outright failure like a VC-backed company might have where they just run out of money, instead the biggest risk might just be mediocre growth, where the question of whether you keep investing or if you need to bail out or not, isn’t really black-and-white.
If you agree with that premise, I’m curious about what you think about the risk for the founder, rather than for the investors? Assuming you want the founder to work full-time in the product that’s being invested in, at what point are the founders allowed to explore other options if […] who wants out and do not really making enough to have a living salary like if they have a family? Are they allowed to freelance? Will they be expected for that freelance income to go into the company being invested in so you get a piece of that revenue? Or does the relationship simply end to that point? And even looking out past that runway, if the founder’s company is floundering two or three years later, what’s the responsibility that the founder has to you?
In other words, success is obviously a good problem to have for these companies that are investing in, but I’m really curious about the different ways that the companies or that the investment may fail, especially if it’s not a very black-and-white failure scenario. Thanks.
Rob: So, what do you think about this, Mike?
Mike: You could probably just confirm these for me.
Rob: Cool.
Mike: My inclination is to believe that obviously, there’s the ones that do well and those are successful. There’s the ones that burn out and they are shut down and close out. Neither are those are you really worried about. It’s the ones that are floundering for, I’ll say, extended periods of time. I think in those cases, not just Tiny Seed Fund but funds in general, are just going to say like, “Okay, well, we put money into it. It didn’t really go anywhere.” And until the business is legally shut down, it doesn’t make any difference because nothing changes. The investors do not have enough equity in the business to make any business decisions or force anything to happen. It’s kind of out of their hands, so why worry about it?
Until the business is shut down because when the business is legally shut down and the entity goes away, there’s probably close out conditions or things that are in the paperwork that say, “X, Y, and Z is going to happen,” but beyond that it kind of doesn’t matter. If it’s floundering that badly, their time is probably better spent working on the dozens or hundreds of other startups that were invested in, where some of them are being successful, and they’re going to take away the focus from those to put it on something that’s floundering, versus spending that time with a business that is doing well and could be doing substantially better by focusing on it, you’re basically going down the wrong path as an investor.
Rob: Yeah. I don’t think that’s a bad sentiment. To be honest, I have not thought about this, I’m glad he’s sending the voicemail so it’s totally off-the-cuff. I have not discuss this with Einar but what do most funds do? They do basically what you’ve said and there’s a reason for that. If the business is floundering and the founder wants to shut it down, then you let him shut it down. If they don’t want to shut it down and they want to keep it, I have an angel investment where the founder just took a full-time job to keep this startup alive. He’s taking some of his money and pumping it in there because he still believes it still has merit and he still thinks he can grow it, that it kind of hit product market fit now. What “responsibility” does he have to me or to the investors?
I mean, he has a responsibility to do his best but honestly, if he has said, “Look, I’m going to sell this for parts,” or if he said, “I just can’t do it anymore and it’s totally floundering and I’m going to shut it down,” then he should do that. I would honestly want to have heart-to-heart with him before that, like, “Is this really which wanted do you have built this to a certain point?” I mean, that’s the thing is, unless the relationship goes south, which most don’t, the investor-founder relationship.
I’m in touch with every founder I’ve ever invested in, our relationships are good. If they just told me honestly, like, “This sucks. I’m out,” and they don’t burn it to the ground and they don’t screw anybody, but they’re like, “Look, this isn’t growing. We’re going to have to shut it down,” it’s like, “Okay, it’s an angel investment.” That’s what I thought it might go to zero. The odds are decent that it’s going to go to zero.
I guess all I’m saying is, it’s kind of the same way that most investments are. Some founders will feel like they have more work to do on their product even if it hasn’t hit traction yet, and would I encourage a founder to go freelance and then try to keep a business alive that wasn’t working? If it’s not working, probably not, but it tends to be that weird gray area where it’s not working but the founder thinks it’s going to work in the next couple of months. They have this deal that’s going to close or they have this feature that’s going to go live or they have something game-changing, and In that case, I would just talk like each situation is going to be different, I guess is what I’m saying.
So it’s going to be hard to make a blank statement about what you’re going to do and allow or not allow. I don’t feel I’m going to not allow much. This is all seat-of-the-pants. “Building startups is building the parachute as you jump out of the plane on your way down,” as Reid Hoffman says, so each of these things is like, “Well, let’s have a conversation. What’s the actual situation here? And then, let’s troubleshoot this like smart people who gets things done.” Thanks for the question. I appreciate it.
Out next question is about iTunes keyword stuffing. Actually, it isn’t a question. It’s a statement. It’s from Chris Christiansen. He says, “In your last podcast, you made a comment, suggesting doing keyword stuffing in podcast descriptions for iTunes on the Libsyn podcast called The Feed. They’ve been talking a lot about all the different podcasts that have been banned from iTunes for doing keyword stuffing. Don’t try it.”
We should definitely clarify. We weren’t saying do keyword stuffing. We were saying it does work because the way that the algorithm is not very advanced. They fixed that longer term but you’ve been able to keyword stuff and rank for searches relatively easy on iTunes. Now whether you do that, because if you do it, you could get banned. If you are a successful podcast, and you’re driving users, and you’re do little bit of it, meaning, a little bit of SEO. I’m not saying your stuff in 20 keywords that have nothing to do with your podcast, try to rank for all these topics that you don’t relate to, but if you do intelligent SEO on your podcast.
We’re a show about startups. In the description, I want startups at least a couple of times in plain English, in essence it’s not startups-comma-business-comma, mix – all this stuff, but it’s an English flow that makes sense. I don’t feel like you’re even walking a line there. I feel like that’s a pretty reasonable approach to this. So, stuffing is not what I would recommend and it’s not what we do but it is thinking deliberately about how you write the description, the subtitle, and the title of your podcast.
Mike: I don’t remember whether it was you or me that said that but I probably would have referred to it as keyword stuffing and saying to do that but it’s not exactly right or at least it’s not an accurate description of it. What I mean by keyword stuffing when you’re doing a podcast is being very strategic about what you name it because the search algorithms and most of those podcast directories are really, really dumb. So, it’s not and I responded to this via email as well.
It’s not an accident that our podcast is named Startups For The Rest Of Us. We did some basic research and found it like those engines are just stupid. They’re not very good. They look at the title, they may look at the subtitle but those things count much higher than anything else. It made a lot of sense for us to call it Startups For The Rest Of Us and plus, we have the domain name, so it just worked out. But it is a good distinction to point out the difference between being strategic about that versus what is legitimately keyword stuffing where you’re just repeating the same words over and over again.
Rob: Yeah. There’s a reason we still rank high for that term even though there’s the Gimlet Media startup podcast and then there’s Mixergy, and there’s Jason Calacanis. There’s a lot of competition for that term and yet we’ve always ranked in the top whatever 7-10 of those, depending on what area of the world you’re in.
Our next question is about shady competition and how to handle it. It’s an anonymous email. It says, “Hi, Rob and Mike. First of all, thank you for all the work you guys do with the podcast and the community. Rob’s book, Start Small, Stay Small was the beginning of my life as an entrepreneur and your podcast made me quit my job and start to work full time on products.” Hey, we should add him to our list, Mike, right now our success list. “Right now, I’m one of the two co-founders of a profitable SaaS business.”
“Earlier this year, we did an AppSumo deal and during its promotion, a competitor spread false rumors about us in several private Facebook groups. He said that we had sold the business and that the app is going to close up shop right after the AppSumo deal was over. ‘Here’s some evidence,’ and he sent us a screenshot of the person saying this. This is crazy. We decided to completely ignore this and do nothing about it. In hindsight, this was a good move because in some Facebook discussions, it completely backfired on him and right now he has stopped this as far as we know. Im worried about facing this situation again now that we are growing bigger. What would you do in situations like these? Thanks for all your hard work.”
It’s a good question. It’s a tough question.
Mike: It is a tough question and I think it comes up as your business gets bigger and as you’ve been in business for longer, these situations come up more often just by virtue of being around. I think in most cases it comes back to like, what is likely the north star for your business and how do you conduct your business? Are you really shady about it or are you pretty honest with your customers, upfront, and transparent with them? Then, that has to be contrasted against who is making these types of claims, what people think of that person, and what they know about him versus what they think about you and what they know about you.
It boils down to the audience themselves and how much they like or trust the source of their information. I think in cases like this, most people are going to be pretty—at least—objective enough to say, “Yes, that’s true or false or that goes against my fundamental beliefs about what I’m hearing,” and that’s the way that they’re going to side.
If you know that you run your business on the up and up, I would totally not worry about that stuff. You might make one comment or response and say, “Hey, that’s totally not true,” or you could just ignore it. The people who know you well enough are going to ignore that and they’re probably not going to apply any credibility to it. There’s going to be people who don’t like that person already and is not going to take much for it to backfire in their faces, which will stain them basically in that person’s eyes forever.
I’ve seen this happen in a bunch of different cases. Some people get into fights on Twitter or Facebook or wherever. There were some of them are just personalities and they clash. The audience of one person’s side with that person. The other one’s side’s the other. It’s just going to happen because those audiences tend to be siloed. It’s based on their relationship to them and their trust. If you develop that trust over a long period of time, it’s not going to go away. I would not worry about it.
Rob: Yeah. I think you kind of have three options when this happens. You can do nothing. Intentionally decide, “Hey, I’m going to let this person burn themselves down and makes them look dumb.” Also, I would say most people who do this stuff don’t have very large audiences. You and I dealt with trolls over the years. I’ve had some pretty gnarly ones and all of them, except for maybe one or two, had 80 followers. I mean, there’s just nobody who cared what they were saying and they were trying to pull me into a fight because as soon as you engage with them when you have 13,000 or 14,000 followers, or 50,000 or 100,000, then you’re giving them attention.
That’s one thing, I would say is these folks tend to be to not have a big audience and then I totally lean towards completely ignoring because it just makes more sense to do that because no one’s hearing them anyway. But if they’re that rare exception and they are reaching people—in this case, probably Facebook groups—is tough because they are at least being heard. You can do nothing and if they’re being torn down in a group and people are saying, “I know that’s not true or whatever,” then I don’t need to say anything. You could just post one post and decide that you are not going to reply.
Someone like this is probably going to be a troll and is going to say things intentionally, that are going to try to make you respond because that’s a big thing that trolls do. That’s one of the good skills. If you have good troll game. You know what to say things to make people mad but you say things that make them want to respond, and you responding is actually losing. That’s how I think about it. That you’re giving in and you’re letting them have power over you, to make you respond to something that you probably know you shouldn’t.
Back to the three options, it’s do nothing, it’s post one thing that says, “No, this is not true, this is completely false or whatever,” and then don’t respond again. So you have come out, said it, been clear, and say nothing. Or the third one is to go on a full-on war with them right in. We’ve seen this on Twitter but you spend of time, you spend a bunch of energy, you just waste a bunch of things, and both of you look like idiots. People sit there, watching, and think, “What are these fools doing?”
You can obviously tell where I land. Its number one or number two, depending on the circumstance. But no, it sounds like in this case, you made the right call and then moving forward, I think you just got to use your judgment on that. But it’s a tough one, tough one when this happens because it feels crappy, especially when something is this false. It sounds just coming complete manufactured, something that wasn’t true. It’s bizarre.
Mike: Yeah. It’s very easy to take it personally, too, because it’s your business and then there’s making comments and you don’t want people to believe them. The reality is people are going to believe kind of what they want to and what they’re inclined to anyway. Interjecting yourself is not going to do yourself any favors in most cases.
I think Rob’s advice of either do nothing and ignore it, or one post and that’s it, do not re-engage. If any sort of protracted engagement, especially publicly, is never going to fall in your favor. I don’t know of anyone that has.
Rob: And our last question of the day is about pruning email lists. It’s from an anonymous emailer. He says, “Hi, Rob and Mike. We’ve got an email list focused on WordPress development. It’s currently around 6000 subscribers. It has a 20% open rate. I believe that we should regularly purge non-engagers. People who are not opening, has a Drip lead score of 0 or less, et cetera.”
“But my business partner disagrees. I think that pruning non-engagers helps our list health, which keeps us in the best hub of Gmail, et cetera. He thinks that non-engagers may reactivate and also pad our numbers for sounding impressive to prospective advertisers, et cetera. What are you think? Is there a right answer? What would you do?”
Mike: That’s tough because it sounds like there’s two different things going on. One is how are those subscribers impacting your business itself and the sales. Then there’s also the padding the numbers to sound impressive to advertisers. That’s a tough call there. I think that if you’re going down the route of purging them, I would put together a re-engagement campaign instead of outright purging them. That way, you reach out to them and say, “Hey, looks like you haven’t been engaged with our emails lately. Click here to stay on the list.” You can send a couple of those and if they re-engage, great, keep them on the list, and if not, then purge them.
I don’t think that I would go down the route of just blatantly getting rid of them. The other thing I would question is how got on your list and this is something for you to think about is, was it double opt-in or single opt-in? If it’s single opt-in, they submitted something or you got their email address from some place else, you just added them and they’re not opening the emails, then chances are good those are totally bogus and you’re not getting through them anyway, doesn’t matter. Those are the two things I would consider for that.
In terms of the trying to pad your numbers for advertisers, I don’t know if I could go down that path, either. You could give them the top line number and then caveat it. Your open rate is really what they’re going to be interested in anyway. You can just do the quick math on it and say, “Well, what’s the actual reach?” If you’ve got a 6000 subscribers and a 20% open rate, then you’re reach is actually 1200. It doesn’t matter how many of those subscribers you purge. You’re still going to have that 20% open rate and a 1200 reach. It doesn’t make a difference even if you purge half of them. You’re still going to end up with the same numbers.
I don’t know if I would worry about that too much. Just be honest enough and prompt with whoever your advertisers are and say, “Here’s what we’ve got for subscribers, here’s what our open rate is, and here’s what we believe our reach and impact is for you as an advertiser,” because if you aren’t doing justice to your advertisers, then they’re not going to come back. And that’s actually what you want? It’s hard enough to land an advertiser or a sponsor for your podcast or your email list or what have you. Don’t destroy your trust as well, because if you do, they won’t come back.
Reality is, the money that you get from any one email or podcast or whatever sponsorship, it’s not going to even compare to the trust that you lose and the potential revenue that you lose from them talking to other people and say, “Yeah, these guys screwed us.”
Rob: I think those are all good sentiments, Mike. I think that’s exactly what I’m going to say about re-engagement and if you search for Drip Workflow Re-engagement, there’s a one-click blueprint that is a fully-built out workflow. With one click, you can install it into your account. I believe it was designed by Anna way back in the day and it’s really good at re-engaging people. You can obviously add more emails to it or whatever.
We ran this on the Drip list, let’s say, it’s got to be 2015, because over time, open rates go down and down and we probably hit 25%. I was, “You know? I like to keep above 30%,” because it does. The lower your engagement rates, it will put you in the promotions tab. Sometimes it will get you in spam, but mostly it can impact your sending domain reputation as well, not the IP address that you send through.
This is a little bit of a tangent but we actually have customers come to us from MailChimp or Infusionsoft, and they would say, “Well, their deliverability wasn’t very good,” and I was always like, “That’s a little bit of a red flag. I know MailChimp’s deliverability is quite good.” It turns out the IP addresses stay with Infusionsoft and MailChimp but the domain you’re using, your ‘from address’ in essence, if you’ve kind of burned that domain by having really crappy open rates, then no matter where you go now with that domain, there is going to be a ding against you in the blacklist. That’s the real struggle. Once you lose that, it’s like bad credit. If your credit score drops, it takes a long, long time to get that back.
All that to say, I like to keep my open rates up. I mean we have customers come in with 3%, 5% open rates and they were trying to juice the numbers thing. My list is 100,000 people. But literally, there is 3000 or 4000 that would open emails and it was nuts. Eventually, you do have to intervene because if you’re on shared IPs, that can negatively impact other customers and such.
All that to say the re-engagement thing, I tried it and it had re-engagements for people who aren’t opening emails already, they’re very, very unlikely to open any additional emails. I remember the results were trivial and almost not worth doing. But you should totally try it and track it because you see in the workflow how many people get to certain steps, and you can just run the numbers.
I’m going to put in all 6000 or I guess not 6000 are unengaged. It’s only 4200 are unengaged. See how many get down to the bottom and re-engage. It tends to be, if I remember correctly, it’s between 5% and 10%. If that’s worth doing to you, then do it. Dump them on the workflow and when it gets to the bottom, poof, you just unsubscribe by default after a certain delay if they haven’t clicked anything. It’s really easy to do.
I agree with you, Mike. I don’t think you need to prune down only the 1200 who are opening—that’s ridiculous—but if someone hasn’t opened 10 of your last emails, very, very, very unlikely they’re going to open any email ever. I like more—thinking about it—if you’re going to do advertisers, instead of saying, “We have an email list of 6000,” you could say, “We have an email list of 4500,” if it does mean that’s what it is after your pruned. “We have an email list of 4500 and our engagement rates are 35% or 40%,” because that’s what will happen. It will send those numbers up.
If you’re talking to prospective advertisers, tell them that, “If you’re looking at other places to advertise, ask what their open rates are like.” Specifically, start pointing this out. I think people should pay more attention to this personally just across the board. If I were going to advertise on any site and they give me an email this size, first thing I would do is I would say, “Show me your open rates. I want to see a screenshot of your MailChimp account. I need you to prove to me that your engagement is not crap,” because again, I just seen too many people with 10%-15% open rates who say, again they have a list of 100,000 but that list might as well be 15,000 or 20,000 person list. It’s just not worth it.
I agree with you, Mike, I think that the results are going to carry the day. I would absolutely prune it. I wouldn’t prune all 70%. That’s not how it works. You kind of go into Drip or whatever email tool is and say, “We’ll have to open the last, what feels comfortable, 10, 12 emails, 15,” you can beyond that, it’s ridiculous. I mean, it’s just too big of a number that they’re never coming back. That would be my opinion on that.
Mike: Well, looks like we’re out of time. I think we’re going to wrap today’s episode up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
