Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about different ways to introduce new ideas into your business. These are ways to broaden your horizons as a business owner and learn how other people may be solving the same problem you are but doing so in different ways.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about nine ways to introduce new ideas into your business. This is “Startups for the Rest of Us,” episode 312.
[Theme music]
Mike [00:00:16]: 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 [00:00:25]: And I have a mouthful of food.
Mike [00:00:27]: – (laughs) And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob [00:00:32]: Well, I’m a little behind on launch, so I’m eating in here while I’m muted. Sorry about the ole mouthful-of-food thing. Things are going well. Went to Coverted yesterday, which is Leadpages’ conference, for the last two days, and so kind of getting over the extrovert hangover. I love going to conferences. I love meeting people, and I did a short talk about Drip and stuff along with Clay. It was good fun to meet folks, but then the next day just got to settle down into work-from-home day, which was really nice, so I can just be in my little cave listening to music and crank through some emails.
Mike [00:01:04]: Very cool. Yeah, I was wondering how Converted went. I saw a bunch of comments on Twitter, and there were some discussions in some forums that I’m part. People were talking about it a little bit. It was interesting. It seemed like it was a good conference to go to.
Rob [00:01:15]: What I enjoy these days is meeting new people. I was able to connect with Andrew Warner, who I already knew, because he spoke at MicroConf a few years back, and we’ve talked when I go on [?] and stuff; but I haven’t seen him in person in five years, maybe, so it was really cool. He threw a little – it was a whiskey tasting, in essence, but it was just a little party at his place. I was able to go up there. Derek and Anna were with me and Sheri, of course. It was good to connect with him. I’d never met Derek Halperin in person. I met Pat Flynn in person. These are all people that I’ve corresponded with in one way or another over the years, and it’s just kind of cool to meet them face to face. I also got to meet – I’d never met Ezra Firestone, who’s really big in the e-commerce space, but super cool guy, really interesting, and we had some good conversations. That’s what I really enjoy, is hearing the inside of people’s businesses, hearing what they’re up to and just connecting with them. It was fun. It was a good conference.
Mike [00:02:00]: Awesome. I’m just getting over being sick. I’ve been sick for a couple of weeks now. My wife got sick earlier this year, and she ended up with some – I don’t know if it was a bacterial infection, or virus, or whatever. Anyway, the doctors said that it was resistant to pretty much everything. It will go away on its own in eight to ten weeks, so I was deathly afraid that I was going to end up with the same thing. Fortunately, it seems to have mostly gone away at this point, so I’m very happy and thankful that that’s not going to be an ongoing issue for the next couple of months.
Rob [00:02:28]: Yeah, but even being sick for two weeks is a big bummer. Did it negatively impact your productivity?
Mike [00:02:33]: Oh, yeah. I couldn’t sleep at night. My sinuses were all congested, and it was just terrible. I was tossing and turning all night, not getting very much sleep, so my productivity nose-dived to pretty close to zero, but there’s not much you can really do about it either.
Rob [00:02:47]: You know, it seems like you get sick quite a bit. Do you feel like you get sick more than most people?
Mike [00:02:52]: I don’t think so. At least I hadn’t really thought about it. I didn’t feel like I got sick very often. It seems like when the kids go back to school, or if they have a break and then they go to school – I was talking about this with my Mastermind group earlier this week – it almost feels like the kids go to school, and they have all these viruses that they’re carrying with them, and they trade them around like Pokémon cards that nobody wants. Then they take them home and give them to their parents (laughs).
Rob [00:03:16]: Yeah, we had a pediatrician who used to tell us that the big spike in sickness is the week or two after school starts, and that’s exactly the reason. All the germs you’ve been carrying with you that your family’s gotten used to gets put back together, and then it just spreads like wildfire until everybody gets immune to it again.
Mike [00:03:30]: Yep. Other than that – on Blue Tick, I actually did make some progress on it. I onboarded a new customer into Blue Tick and restarted some discussions with some people that I’ve onboarded that had dropped off the radar a little bit to help understand why they’d stopped using it. Interestingly enough, there were a couple of cases where they said, “It’d be really nice if you could do this.” I was like, “Coincidentally, we can do that.” They’re like, “Oh, really? Let’s talk. Let’s schedule a meeting, and let’s set that up.” It was just interesting that there was a little bit of disconnect in some cases where the app can already do certain things, and they didn’t realize it, so just jumpstarting those conversations again and then working with them directly to help them set up that automation so that it’s integrated more into their systems. I added another paying customer this morning, actually, so –
Rob [00:04:16]: Wahoo!
Mike [00:04:17]: Yeah, things are, I think, moving in the right direction; but it’s still too early to tell for sure, I guess.
Rob [00:04:21]: But it’s forward progress, and this is like we talked about on our update episode a couple episodes ago. It’s really focusing hard on how do I get that next person to use it. If you are talking to five people and three of them have reasons they don’t want to use it, or objections, it’s figuring out, “Did I just talk to the wrong people, or do they need something that I need to build in order to get them to use it?” So, I think that’s good news. Onboarding a new customer and then adding another paying customer, I think, is pretty good progress for the week.
Mike [00:04:48]: Yeah.
Rob [00:04:49]: Yeah, on the Drip side, we actually launched a free plan last week. We had our $1 plan that had been running since Leadpages acquired us. We made the decision in tandem with Clay and those guys to just make it free at this point, so it’s free up to 100 subscribers. The hard part about free with email, and the reason that Mail Chimp has been one of the only providers able to make it work, is that you can really run into a spam issue, because people can send a lot of spam through you, and you don’t want that to happen because you have these sending IPs that need to stay solvent, so to speak. With the $1 plan, we definitely saw a lot of new spammers coming in. We were writing code constantly to get out ahead of it. Not to overemphasize it, but it’s kind of a machine learning algorithm, a little bit of AI, really focused, just looking at patterns. We can get out ahead of people sending now. We don’t have to wait for them to send to figure out, or to have some signals, that this person is likely going to send poor-quality email. It’s pretty fascinating looking at the data, and we’re digging more into that, but it allows us to launch that free plan. Of course, it takes resources, right? It takes that financial backing, and that’s what Leadpages has. They $37 million in venture capital they raised allows us to – we have six, full-time support people now. Can you imagine? We had one the entire time that we were bootstrapped. Then in the past 90 days, added, trained, onboarded; and we’re now fully staffed with five additional support people. It’s crazy. I couldn’t imagine having the bandwidth or the money to do that, so that’s the luxury of that side of the coin.
Mike [00:06:18]: Yeah, I can imagine the issues with the spammers. It becomes an arms race at some point. You have to deal with it and have to be out in front of it, but at the same time – it’s partially protecting yourself, but in essence you’re also protecting all of the other customers that you have. So, you can’t just let it go for a little while.
Rob [00:06:35]: That’s right. The good news is once we got big enough where we were sending tens of millions of emails, it matters a lot less. If someone gets in and sends 5,000 emails and 1,000 of them bounce, that’s a 20 percent bounce rate. It’s crazy. That is not good at all if you’re sending on your own IP. But when you’re sending 40, 50, 60 million emails, 1,000 bounces actually isn’t that big a deal. Since we’re able to catch people really quickly and stay out ahead of it – it felt good to figure out the signals, because before you experience it, it’s like, “How are we going to figure this out, and how are we going to find this?” But it became, like you said, a little bit of a game of cat-and-mouse, and it was a fun whiteboarding session with Derek and I to plot out all the things and then say, “How can we look at these quickly in real time without completely hammering the database?” You have to have all that in mind. You can’t just run queries every five minutes across everybody’s accounts. You have to figure out a way to do it pretty intelligently. So, that’s where we are. We’re definitely out ahead of it right now, but we notice that about every six months we have to upgrade our database. About every six months, we have a bunch of performance and scaling stuff to do, and about every six months we have to get out ahead of people trying to send spam, whether intentionally or unintentionally. Those six-month things are staggered, luckily. It doesn’t all happen at once, but it definitely is – we essentially have full-time people now working in all of those areas. Where before it was like all developers are building features to push the product forward, now we actually have one developer who all he’s doing is performance and scaling, and one guy who’s purely focused on just anti-spam stuff. These are the good problems to have. It’s the part of success that shows that you’re growing. You become a target as you get more prominent.
Mike [00:08:09]: Yeah, I had to add another server to my infrastructure a couple of weeks ago, so I know. Those issues are just a pain in the neck.
Rob [00:08:17]: Totally.
Mike [00:08:17]: Why don’t we dive into today’s episode? We’re going to be talking about different ways to introduce new ideas into your business. This applies to two different situations. The first one is if you are a full-time entrepreneur. You’ve been working on your own things. You’re self-employed. You’ve been doing that for a while. One of the challenges that you’ll run into is that you have a certain way of doing things, and it’s probably not obvious to you that there are other companies out there that are solving the same problems you are, and they’re going about them in different ways. So, the question is: Which of those ways should you be doing it? Are there other ways that you can bring in new processes, or new efficiencies, into the business, and do things better than you were before? And without having visibility into those companies, it’s really difficult to do that. The other side is if you are an employee of a company and you want to learn about how other people are doing things, you want to improve stuff in the current business that you’re working in, how do you go about doing that? How do you learn what other people are doing? Unless you change jobs, the answer is that it’s probably pretty difficult to do that. We’re going to talk about how to address that problem from both angles, whether you’re the business owner trying to bring in new ideas, or you are an existing employee in a company and you’re just simply trying to bring in new ideas, new ways of doing things either to solve existing problems that are just [cloogey?] and people have just dealt with it for a long time, or there’re things that are just completely blatantly done incorrectly because nobody’s really had the ability to stand up and say, “Hey, they’re doing this over here, and that’s a better way to do it.”
Rob [00:09:45]: Cool. So, let’s dive in.
Mike [00:09:46]: The first one is, I would say, probably the old standby that everyone goes to. The first one is books. I remember Lars Lofgren at MicroConf last year saying that he goes out, and he just – he’s a voracious reader, and he will download essentially a new business book every single week from Amazon and just tear through it. I think that that’s a fascinating way to go about learning and aggregating as much information as you can about how other businesses operate and how they’re doing things. I think it tends much more towards the business side of books, so it’s not really about the technical mechanics of how to do something. It’s how different companies are structured, what sorts of marketing efforts they do. The basic idea there is that you can pull a lot of good information from books, and you don’t necessarily have to read the entire thing. That’s one of the key pieces, I think, that factors into being able to get through 50 books in a year. It’s hard to sit down and read for a couple of hours every day. You can do it. It’s certainly possible, but I don’t think that most people have the time for that. If you can go through those books, read through the table of contents, start skimming specific chapters that are about things that you’ve never learned before, or that you’re aware of but not necessarily have a good knowledge of. That will broaden your base of understanding of a particular topic. From there, then you can go out and seek other information that’ll help you drill into specific areas that you find either helpful, or insightful, or just things that you want to learn more about.
Rob [00:11:09]: Yeah. What I find is when I’m stuck – and it may be stuck on a particular problem, or it may be just stuck wondering, “What’s next here? What’s next for the business? What’s next for me?” – I find that I go through these periods of just massive consumption of blogs, podcasts, books, other things we’ll talk about today. Then other times I’m listening to a lot fewer of them, but at different turning points I will listen to, through Audible, two books a week, like full-on business books. Like you said, I skip around a bit, because certain chapters are about things that either I know I don’t need, or are not going to be helpful. But I love the way that it gets me thinking along certain lines, and it kind of breaks me out of my typical patterns. I also take a lot of – I won’t say a lot of notes – but I take action notes like I’ve always talked about, where I think, “What action could this cause me to have in the future?” I don’t like taking just general summary notes of books, because I find that even if I refer back to them it doesn’t get me back in the headspace of what the book was saying. So, I try at the time to really take either direct quotes that I can use in my writing, or podcasting, or conferencesm or, I take direct actions like, “We need to think about doing this for Drip,” or, “Think about doing this for MicroConf.” or something like that. Gosh, I will read a lot, a lot of books. I actually think in the past – I talked about I’m getting more back into investing a little more lately. I think I’ve read maybe ten investing books in the past six weeks, and again, “read” meaning through Audible. It’s that kind of voracious consumption that I like.
The thing that I don’t like about books, as much as I do like listening to them, is a lot of stuff – especially if you’re looking at marketing approaches – if it’s kind of a tip/trick/tactic thing, once it’s in a book it tends to be pretty old. Even if it’s six to 12 months old, these things start to age, and they don’t necessarily work as well. If it’s in a book that gets popular, like the book about – you remember the one from I think it was the guy who ran sales for Sales Force. It was “Predictable Revenue”. He had this whole tactic of how to do the cold emails and all that stuff, and that just blew up. Everybody’s doing it now. It’s becoming less and less effective. There are still ways to make it effective, but it really has – it’s not as effective as when you first read it. Whereas if that had been a blogpost or a podcast, so many fewer people consume those. It actually makes it a better thing in the long term, if that makes sense. I take books for high-level stuff, but super-tactical stuff I tend, perhaps, to look more to podcasts.
Mike [00:13:18]: Yeah. Kind of a little side note that I wanted to just briefly mention here was that this is more about broadening your horizons and making sure that you’re, at the very least, peripherally aware of a lot of other things that are going on, or at least some of the things that are going on in other companies and, as you said, getting you out of those patterns that you’re probably used to operating in. This is very different than the just-in-time learning that you’ve talked about previously, where you have a particular problem and you consume as much information as you feel like you need to to get to the point where you’re about 60 to 80 percent of the way educated about it. Then you go start implementing things to learn that last pieces that really need to be taught on the job, so to speak. There’s a difference between broadening your horizons and that just-in-time learning.
[00:14:04] The second way to introduce new ideas into your business is to take a training course. There’s lots of training courses out there. There’s various sites, like udemy.com and coursera.org, udacity.com, skillshare.com. All these places are good resources to go out and learn about different topics that you’re interested. Sometimes it could just be you want to learn a new programming language because you’ve heard about it, and you’re interested in seeing what that has to offer, versus what you’re currently doing. It doesn’t mean you have to use it, but it is nice to be at least peripherally aware of what those things have to offer, and whether or not people with that type of background might be hirable in your environment. Is it going to be an easy transition for them? You can talk to different people about whether or not that would be an easy transition for somebody to make, from let’s say PHP to Ruby, for example. But going through it yourself also gives you a broader context, based on your own experience, how difficult should that be. Getting advice from somebody: “Oh, yeah, it shouldn’t be that difficult to make the switch.” that’s true for them, but it’s not necessarily true for everyone, and it doesn’t give you a complete picture of what it actually takes.
Rob [00:15:11]: Our third way to introduce new ideas into your business is, of course, through blogs and podcasts. I think this depends on the way you like to consume things. Some people prefer to read and skim, in which case blogs are for you. If you’re like me, you’re an audio generator and an audio consumer, so podcasts are going to be the way to go. What I like about podcasts is you can really niche down, and that’s hard to do with things like books and magazines because they need these bigger audiences. When I read business books, when I read – the last time I read “Inc.” magazine and whatever, the other entrepreneur magazine and stuff, the advice is just too general, because they’re looking at the entrepreneurs who’re trying to get started with stuff. That’s just not that interesting to me anymore. It isn’t helpful because the stuff is too general, it’s too beginner. With blogs and podcasts you can look around and you see the community of people that we’re hanging out with day to day. We go to MicroConf. We hang in on the same forums and that kind of stuff, and you can listen to their podcasts. Even folks who are not as far along as you are can often have really good ideas, and you can hear it just by them talking about their business. If you’re doing 50k MRR and there’s someone who’s at 5k or 10k, oftentimes they will have insights that can help you as well. I’m a big fan. We’ve had several episodes where we’ve gone through our top 20 or 30 podcasts, so if you’re interested in that you can look back through our archives to find out who we listen to on an ongoing basis.
Mike [00:16:32]: The fourth way to find new ideas or processes is to hire a contractor or a consultant. I feel like there’s a mild differentiation between these two that I can’t quite put into words. I feel like with contractors you’re generally hiring them for a particular skill set to achieve a specific job, but it almost feels like with consultants you’re asking them to solve a problem, and you don’t give them as many constraints. You don’t say, “It’s got to be done in this particular programming language,” for example, or, “It’s got to be done using these tools.” You essentially say, “Here’s the problem. Please help me find a solution to it.” Regardless of the differentiation between them, I think that there is a lot of value to be had by bringing somebody who works in various businesses into yours to help you achieve certain objectives. Part of the reason for that is that if they’re a contractor or a consultant, they have generally worked for a lot of different companies. It’s interesting. When you look across the spectrum at different consultants who have worked at a lot of different companies, they’ve seen a lot of things that you just simply wouldn’t have before, and it’s because they’ve been in so many different environments, they’ve solved so many different problems, and they’ve seen the same types of things over and over. Whether those are mistakes or how things are done well, they’re able to provide that information to you and give you some context about where you stand in relation to other businesses, and how they’re solving their problems versus how you’re solving them.
Rob [00:17:53]: Our fifth way to introduce new ideas into your business is to mentor someone, or be an adviser. I know that even way back in the day – let’s think 2008, 2009 – my blog was already up for three or four years, and people would write in for advice. That would, even not doing ongoing mentoring, would help me think through problems in a way that maybe I wouldn’t have thought through before. That was helpful. Then as things progressed and we had the podcast and MicroConf, all of that has helped me look at new ideas. People will bring stuff like, “Hey, I’m trying this new ad channel.” It’s like, “What? I didn’t even know that existed.” This was someone who supposedly I’m mentoring, where actually they’re giving me ideas. Then even more recently, I would say, as an advisor and beginning angel investor, I have really enjoyed the ability to look deep into these SaaS businesses that are coming up. These are essentially bootstrapped, that raised just a tiny bit of funding to help them get to the next level. I’m able to see all the numbers and what they’re doing and how they’re operating and how they’re executing and how the growth is. I can really get a lot of value out of that. Anyway, all that to say I think that this idea of mentoring someone in order to introduce yourself to new ideas is really one that I’m seeing take hold in my own experience.
Mike [00:18:58]: The sixth way is to do some consulting work on the side on your own. I think that you can do this regardless of whether you own your own business or not, because there’s always people out there who will place some value on the things that you know, and the background and experience that you have. Obviously, it’s going to be difficult to go out and do consulting in an area where you have no experience. That’s probably just not going to happen. But, at the same time, you can take the skills and experience that you have and try to take those into different environments, and try to solve similar challenges that other people are facing using their tools and their environment and the skills that you know and morph their environment. I think that as you start doing that type of thing more and more, you see different environments. You start seeing the different ways that people are doing things, and you get more of a sense of why they’re doing it that way. I think that that’s also very important. That sort of thing can also help you identify different business opportunities as well. When you’re doing consulting, because you see so many different things, you know that the same types of problems tend to come up over and over. If you’re working in one particular company, you don’t see them. You see your own problems, but you don’t necessarily see that there’s 30 other companies that are also having those same challenges. So, it can help you identify different business opportunities, but it can also open your eyes as to different ways of doing things as well.
Rob [00:20:015]: Our seventy way to introduce new ideas is to attend a conference with your peers. This would be something like I just talked about, like going to Converted, going to MicroConf, going to Business Of Software; figuring out where folks who are maybe a little bit behind you, a little bit ahead of you, are going. Go to the conference and meet people. What I’ve found is, even as my business has progressed, I’m still able to find people at different conferences. Even though there may be a lot of beginners at a certain conference, you can still find that if you can mingle with the speakers, or you can mingle with the folks who have businesses that are further along, you can get exposed to a lot of new ideas, new tactics, and jostle you out of your own thought process. An example – even at MicroConf Barcelona, I was talking to some folks, and they brought up the topic of investing, which is something that … It was right after the Drip acquisition, so I started noodling on this, like what to do with some new-found cash on hand. They brought it up, and I was like, “Whoa! I didn’t even know you guys cared about that, or thought about that at all.” Suddenly, they were throwing out ideas that they had, and ways that they were investing and ways of hedging things. It was just a cool experience to hear from these guys. In addition, they also talked about some marketing tactics, and some different competitors that were coming up in different spaces that were all relevant for stuff we were doing with Drip. It was something that would never happen in an online context. It wouldn’t happen on a forum. We probably wouldn’t’ve covered it via email, but sitting there having drinks for a couple of hours, just hanging around with interesting people doing interesting things and new ideas on a number of fronts, they’re just going to come out of that.
Mike [00:21:41]: The next way to introduce new ideas is to undergo a joint venture, or partnership, on a very specific project. I think that there’s a lot of different opportunities for this that people aren’t necessarily taking advantage of, because when people think “joint venture” or “partnership,” they tend to be thinking- – I guess with joint ventures, it’s probably not an extended thing. With partnerships, the mental image that comes to mind for people is, “This is going to be a very long-term thing that we’re going to be doing potentially for several years, so I want to be very careful about getting in and working on this with somebody else.” But there’s much shorter things that you can do that fall into that vein, such as writing an e-book, for example, or developing a training course, that do not necessarily require a lot of ongoing effort to maintain that particular product, but you can put those together and work with somebody else – whether it’s something that they came up with the idea, or you came up with the idea – or you find somebody that you just want to work with, and identify one, small thing that you want to do with them, and go through that. You can launch it, get it out there, and then you can move on and go back to your own business, or back to your full-time job, whichever you prefer. You will get the experience that goes along with that. One example that comes to mind that I’ve seen lately is the Big Snow Tiny Conf that I’ve gone to for the past couple of years up in Vermont has started expanding. Now it’s called Big Snow Tiny Conf East. Then they have one that’s in the west that’s run by Dave Rodenbaugh. Putting together a mini conference or mini meet-up for people is something that’s probably pretty new to Dave. I also know that Craig Hewitt is doing one over in Switzerland, or France, or something like that.
Rob [00:23:18]: France.
Mike [00:23:19]: Yeah, it’s in the Alps. Regardless, that’s kind of a new thing. You get to learn not just about working with these other people, but you also get to learn a new set of business skills that you otherwise wouldn’t be exposed to. I think that those are very neat ways to learn about new stuff that you could potentially bring into your business. Obviously, running a in-person group can be applicable to most businesses. Obviously, not all of them, but there are ways to leverage that in a lot of different businesses.
Rob [00:23:48]: Yeah. I think in terms of joint venturing, early on with Drip we did some joint venture webinars with different marketing teams, and we were blown away by the way some of them operated, just in how much of a machine they were in terms of processes and how well-executed. We just saw professionals doing it, basically. That experience alone showed us, “We need to up our game. We need to get better at just having refined processes and really going after what’s working and doubling down on that.” I think any type of JV, if you’re working with someone who’s sharp, you’re going to pick things up from them.
Mike [00:24:18]: The last one is to do some self-study and then blog about the experience. Obviously, self-study can take on a variety of different forms, but typically you want to have some sort of an endpoint or a goal in mind. Whether that’s to actually launch a product, or to build a training course, or even just to put together a case study – writing a book, for example, is something I talked to somebody about recently, and they just grilled me about all the different things to go into it, what comes with physical books versus digital books, how do you get the ISBN numbers, what goes into the layout and design for the book cover, and how the spine factors into it based on the number of pages, and all these little things that you wouldn’t necessarily think of, but they all go into that process. If you have to put that together and then present it to other people – whether it’s a blog, or a case study, or something along those lines – then you’re essentially teaching them. You have to understand the topic well enough in order to be able to teach it. If you can’t do that, then obviously there’s gaps in your knowledge, and those are going to show through. When you’re going through that process of putting together the teaching or training materials that go along with it after the fact, you’re going to be able to fill in those gaps, because if you look at that as a standalone work, the training side of it, you’re going to see that those gaps exist. You’re going to have to go back, and you’re going to have to learn those pieces so that you can educate other people. This really applies to anything. Teaching is one of those things that you have to understand a process or a product in order to be able to teach it to somebody else. One, it’s clear that you don’t understand it if you’re trying to teach it and you don’t. The second thing is that, by default, when you try to teach somebody something you understand it a little bit better because you have to present it in such a way that it’s easy for somebody else to pick up. So, teaching does help your own understanding of it as well.
Rob [00:26:04]: To recap, our nine ways to introduce new ideas into your business are through: books, training courses, blogs and podcasts, hiring a contractor or consultant, mentoring someone else, doing consulting work on the side, attending a conference with your peers, joint ventures and partnerships and self-study.
If you have a question for us, call into 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, 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 311 | What It’s Like Selling a $128k Side Project (With Guest Derrick Reimer)
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Derrick Reimer about the selling of his product Codetree. They discuss everything from the inception of the idea, to gaining traction, to launching, and finally the negotiation and sale.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ I talk with Derrick Reimer about what it’s like selling a $128,000 side project. This is ‘Startups for the Rest of Us’, episode 311.
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 [00:28]: And I’m Derrick.
Rob [00:31]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Derrick [00:35]: Well, I’m getting geared up for a real winter to come for the first time in my life.
Rob [00:40]: Indeed. It’s been getting chilly the last couple of weeks, huh?
Derrick [00:42]: Yeah. We had our first drop below freezing last night, I think. For those who don’t know, I recently relocated, along with you, from Fresno, California out to Minneapolis, Minnesota. I’m a born and raised California native, so this is all a new experience for me.
Rob [00:56]: Well, I guess the highs have been in the 50’s, which isn’t bad, but when I’ve been getting to work in the morning it’s like 44 with wind. And realizing that it’s going to be 50, 60 degrees cooler than that here in a few months is a little chilling. But it’s been like, “Boy, I’ve got to get the big coat out of the closet.”
Derrick [01:12]: Yeah. My wife and I went out and bought jackets that can actually keep you warm in this type of climate, because we’re used to just our California jackets. Right now we’ve basically reached California winter status and it’s only October.
Rob [01:23]: Yes. That’s right. It’s really October. Cool. We’re here to talk today about your recent sale of Codetree. To give folks a little bit of background, you’re Derrick Reimer, cofounder of Drip. You were CTO to my CEO, nd we were acquired three months ago by Leadpages, everyone knows. But during the time that we were building Drip I have always had my little side projects, podcasts, and conferences, and I had HitTail going, and you went and built Codetree.com which is lightweight project management that lays over GitHub Issues. This actually came out of a need that we had internally, right? Managing multiple developers and prioritizing?
Derrick [02:02]: Yeah. We were using FogBugz before we switched to using GitHub Issues, and we were just starting to see the product wasn’t totally actively maintained and it wasn’t meeting all of our needs. So I really wanted to start using GitHub Issues. We were already using GitHub in a lot of our processes, so looked at that idea of using GitHub Issues, and it was not quite there. It was about 80% there what we needed. It seemed like there was an opportunity to just build a little layer on top, something that would give us the ability to prioritize things, and maybe view things in a little bit more compact manner. And so I looked into what it would take to do that, and then the light bulb went off in my head and I thought, “You know, I wonder if other people are using GitHub Issues in this way, and need to do a little bit more project management type of stuff with it?” So it was right around 4th of July, just about a year and a half ago, when I threw up a landing page for it. I just threw it together in a weekend, and started tweeting about it, ran a little bit of Twitter ads to push it out to basically the people on Twitter who are following GitHub, so I could target them pretty easily, and immediately started getting a bunch of interest, which kind of set me off on the track of building it.
Rob [03:09]: And were there a lot of competitors doing similar things at the time, or were you the one of the early ones?
Derrick [03:13]: There were a few. There have been more that have popped up in the last year and a half for sure. I did take a look at them, and they all were kind of lacking exactly what we were looking for. I had a little bit different vision for how it would work. Most of them were kind of locking you into a Trello-style task board view. It wasn’t quite exactly what we were looking for.
Rob [03:35]: Right. That’s what I liked about Codetree. We – just to give folks full disclosure – this is still what we use – even though you don’t own it anymore – we use it as it runs all of Drip’s [basically?] engineering prioritization. So all of our issues, bugs, new features go into Codetree, and we assign them out to all the folks who are working on them. We have our DBA in there. I’m in there for some kind of project management level stuff, and decision making stuff, obviously not pushing code. But one of the coolest parts of it — well there were a couple of cool parts. One is that you can do prioritization, which I think at the time you couldn’t do in GitHub. And the other thing was the fact that I can look at a table-based view per developer. So the Home screen for me is just each developer with a table of the first 15 issues that are assigned to them in priority order. But the developers themselves can just switch to basically a task-based view, I think you call it – task list view – and it’s like Trello. And so you can just work in that view. That was like the ray of sunshine. It just made tons of sense to do that.
Derrick [04:30]: Right. So it was very specific use case around GitHub Issues, and so it was something that I felt like was pretty safe from GitHub building themselves. I felt like this was a good alternative use case that that would be, hopefully, pretty resilient against GitHub kind of clobbering what I was trying to do.
Rob [04:48]: Right. I mean we had conversations all during this, because you and I were in a Mastermind with Phil, and we would meet every couple weeks. We were talking through like you need to be agile enough to stay ahead of them. It could potentially be an acquisition target later on, which is good. They very well may clobber you, but you have to think about innovating and doing things that they aren’t doing.
Derrick [05:06]: Right.
Rob [05:07]: And, you know, when you initially launched it, if I recall – I mean this was before you had an ownership stake in Drip, and you were essentially an employee of the Numa Group, which is what owned Drip at the time. And you were looking to grow this into like a full time gig.
Derrick [05:24]: Yeah. I definitely had the itch at that point to have equity in something, and to be using my skill set that I had built up over the last few years building products and then working alongside you on HitTail and Drip. I was really looking to leverage that into something that I could have ownership in. So I saw Codetree as a good stepping stone. You know, you talk about your stair stepping approach, and I felt like it is SaaS – which is a little bit more complex than something like a Word Press plugin or a one-time sale product – but I also felt like it was small enough in scope that it was manageable for my first crack at a SaaS app.
Rob [05:57]: Yeah, for sure. And this kind of was part of the reason we started having conversations about that, because it occurred to me like, “Wow! Derrick’s really valuable to Drip.” And you, obviously, had ownership and kind of a love for both of these products, right? You kind of had the desire to do them both, I think. And you were doing them both for quite some time. And I think you had dropped down to three quarter time with Drip at one point. And that’s when you and I really started talking about, “What does the future look like? Where are we 6 to 12 months?” And that really led to the conversation of, “All right. Let’s talk about cofounder status. Let’s talk about ownership.” And you communicated well. You were like, “I need to feel ownership in something. Like I’m the founder, I’m an entrepreneur. Can’t keep doing this stuff forever and working for somebody else.”
Derrick [06:37]: Yeah. There were like two conversations that stand out in my mind. There was a conversation we had right around the time when I was starting to build Codetree. And you approached me and were like, “All right. So, where are we heading?” Basically, “Is my long-term with Drip, or is my long-term with Codetree?” And at that point you were looking for a commitment, like which way is it going to go. And it was a tough decision at the time, and I ultimately decided to continue development on Codetree and forego setting that aside in favor of an equity stake in Drip. And then I think it was maybe seven, eight months later when Codetree had launched, and it was just starting to gain traction when we had a second conversation that ultimately led to me kind of doubling down my time on Drip and letting Codetree remain a side project.
Rob [07:19]: Yeah. I mean speaking of that launch, let’s give folks a context of how long did you spend developing it? How big was the list by the time you launched? How did you do the launch? Did you just email everybody? What was the early traction? We can talk numbers if you want, loose MRR, or if you don’t feel comfortable, that’s cool too.
Derrick [07:35]: I broke ground on – at least launching a landing page – in July. And –
Rob [07:41]: Yes. You started marketing before you started coding.
Derrick [07:43]: I did, yeah.
Rob [07:44]: I love it.
Derrick [07:45]: It was the first time I had done that. I had tried building other projects before, and I, of course, spent months building the product before anyone had even heard about it. So, I was determined not to make that mistake again. So, I put up a landing page, got the early traction. I started running Twitter ads and I felt like I could target the GitHub audience specifically. I felt like that was a good medium, and a lot of developers are on Twitter. I managed to find some things that converted well. I was gathering maybe 20 to 50 email addresses a day of just people clicking a button saying, “Yes, I’m interested in this product when it launches.” I had basically a one-page landing page set up that kind of described the problem it was solving. It had a headline something like, “You love GitHub Issues, but you hate project management, and here’s how Codetree can help you do your project management in the GitHub flavor.” basically. So that seemed to resonate really well with a lot of developers. I would say I didn’t have as many conversations up front as I probably should have had, but I took the signal of people clicking this button at least signaled their interest enough for, hopefully, a few people to be willing to pay for it once it launched. So with that bit of traction I started development probably a few weeks after I launched the first landing page. It really was a nights and weekends project for me. I was fulltime on Drip. It took me a good six months before I was able to launch an early access. I had a list of maybe about 20 people who I had more direct conversations with later on in the process, and I think I just gathered those based off of sending out an email to the mailing list that I had gathered through the process of running Twitter ads. By the time I launched early access I probably had maybe 1,500 people on that list; so a good chunk of people to start trying to get for my early access program. The response was good, but it was a good learning phase, as is most early access programs for SaaS apps. I learned a lot about what things people wanted built, and I kind of had to come to the decision of: Was I going to spend a bunch more time building full laundry list of features that people wanted, or was I going to launch what I had? And you, me and Phil sat around Mastermind meetings talking about strategy about this, like ‘Should I just get it out there, or should I try to build more features?’ Ultimately there were a few 11th hour features that made it in. Like I built a rough version of the task board, I believe, right before launch, but a lot of the things I just saved for post-launch. So it launched in January. First landing page in July, launch in January.
Rob [10:12]: Very cool. Do you remember what the conversion rate was to trial? And did you ask for credit card up front? I don’t recall.
Derrick [10:19]: Yeah, so no credit card upfront. I felt like developers especially would have a big aversion to that. And the conversion rate, that’s a good question. I’m pretty sure I got hundreds of trials after the launch, and I had a 14-day trial, so of course, there was the waiting game of waiting to see how many of those would actually convert. I believe at the end of my first month I had maybe between $400 and $500 a month in MRR, which felt like a big win at the time.
Rob [10:44]: Yeah. That was a nice little jump, kind of from a standing start, right, because you weren’t working from a network you had, you weren’t working from an audience. You just kind of proposed an idea, landing page, and built enough of a list to hit that. And that, if I recall, covered your expenses at the time. I think you were on Heroku and stuff, and maybe you made just a trivial amount of money.
Derrick [11:03]: Yeah.
Rob [11:03]: That’s cool. And then, it was a side project but you were investing time into a little bit of marketing and a lot of feature-building for the next, what was it, like four to six months before we really had the conversation about Drip, and you kind of shifted focus and really put it on? It wasn’t autopilot so much. You were still fixing bugs, and I remember you released some tiny little features stuff over the next six months after that maybe. But how long was that initial kind of investment after launch, and then we can take it from there.
Derrick [11:31]: Yeah, so I definitely spent a lot of time – nights and weekends – building out functionality in those months’ post-launch. I was trying to keep momentum going, and also trying to address all of the feedback that I had gotten from early access and from the initial wave of interest. So I think my wife could attest to that time was pretty crazy. We were still super aggressive on building out Drip, and so my days were filled with a lot of high intensity work, and then nights and weekends I was spending a lot of time building out features and probably not focusing much on marketing at that point. I was really just trying to keep the momentum going from the initial wave after the launch, and I remember, I think it was in March, I actually took a work retreat where I knew there were some features that I needed to bang out but I wasn’t going to necessarily have time to do them split up into small chunks. I really wanted to get some long stretches of time to get stuff done. So, I think I stole away to the central coast for a few days and just worked around the clock trying to hammer out some of those features. So I definitely tried to get creative during that time to get some big things done.
Rob [12:33]: Cool. And then at a certain point, obviously, you know, we had this conversation, and then you kind of made that transition. It was doing a few thousand dollars a month at that point. Is that right?
Derrick [12:41]: Yeah. I think it might have been around $2,000 a month at that point.
Rob [12:44]: Cool. And then at a certain point late last year — it was funny. I think I had gone on a retreat, or something, and I had written in my notebook – it was a bunch of stuff for me. And then I thought, “You know what, I wonder if Derrick should think about – he has enough revenue history, and I wonder if he’s still kind of committed to Codetree long-term, or if he should think about maybe selling it? And I wonder what he could get for it.” It was kind of just this thought process, and I think at the next Mastermind meeting you brought it up. And you said, “I’ve been thinking about selling Code -.” It was just funny that it had like both hit us at the same time. It was either late 2015, or maybe early 2016?
Derrick [13:17]: Yeah. I think you’re right. Something like that.
Rob [13:20]: Cool. What was the process for you? What made you – the thought process? You know, why did you decide to sell it?
Derrick [13:26]: You know, I was feeling like the product had a lot of potential still, and I felt like I just — especially with my decision to double down on Drip, I didn’t feel like I had the time to commit to it. The product was relatively bug free, and there was a happy base of users using it. I was growing by a handful of customers each month, so MRR was slowly ticking up. But there was still kind of an ever-mounting list of kind of larger, high level features and directions that I could take the product to really provide a lot more value to the customers. And I just didn’t have the bandwidth to tackle those larger things. I knew that in the hands of someone else it could definitely reach a much higher potential then where I was taking it. Also, I felt like ‘This can’t last forever.’ This market is competitive enough, and there’s enough innovation happening with project management in general, that Codetree can’t maintain its growth and its revenue in an auto-piloted state. So really, if I am going to sell it, probably the right time was then before the product started to decline.
Rob [14:29]: Yeah, and if I recall I said I would kind of check – I think I even checked anonymously. Didn’t I say, “Hey, I’ll talk to Tom Smale at FE and just check, “Hey, hypothetically I have this friend who has an app doing this much per month, and this much history, and what do you think he could get for it?” And he kind of asked some more questions and threw some multiples around, and I think you were like, “Yeah, I think this is worth investigating.” And so I made an intro between the two of you guys. What came next?
Derrick [14:55]: Yeah, you introduced me to Thomas, and we talked back and forth a little bit. I provided some more numbers, and he came back and said, “You know, I think this is a really strong app. There’s a lot of people looking for SaaS apps in this price range. There’s a lot of people wanting a first app to buy, and many of their best ones are in the $500,000 and up range which are just kind of out of the range for a lot of beginning folks. Then on the lower end there’s like the types of products you see on Flippa, that are maybe $30,000 to $50,000, and not great code base and all the other problems that come with that.” So, he made me believe that Codetree really kind of sits in that sweet spot, and he felt like we would be able to sell it quickly and be able to get an all-cash buyer. So all these things sounded really attractive to me. At that time, we were already knee deep in negotiation with Leadpages and, I believe, we were starting to near letter of intent and due diligence phase with that. So really, all these things were compounding at once, and that made it especially attractive to me the prospect of getting this sale done in a relatively short period of time.
Rob [15:59]: Yeah, if I recall you and I sold Drip; you sold Codetree; you sold your house; I sold my house. Did you sell a car or anything during that time?
Derrick [16:09]: I didn’t, but, yeah, it was really like a period of mass liquidation.
Rob [16:13]: Yeah, it was such an interesting and chaotic time. But there was a feeling of energy. I remember us kind of talking about it, of like, “Man, it’s good to kind of get some of the fruits of your labor.” You know, or like to be able to take some money off the table. And also to feel – I know that it had bothered you for a while that Codetree was there, and you knew it was solid, and you knew it could grow, and you felt like — It’s just a shame. I felt the same thing with HitTail. It was like, “Somebody should be growing this, and it’s just sitting there.” And so I knew it was going to be a relief for you when it finally closed.
Derrick [16:41]: Right.
Rob [16:41]: And so, it’s due diligence, but it’s essentially like all the requirements gathering and all the numbers, right? The FE has a really intense process there where they ask you a lot of questions about MRR, and where the traffic comes from, and growth opportunities and all that. How was that? How long did it take?
Derrick [16:56]: I had been warned ahead of time. I think at MicroConf earlier that year, Patrick McKenzie had talked about his experience selling Bingo Card Creator. You had the experience of selling HitTail. And so, I knew that it was going to be an intense process, but I feel like you’re never prepared for that; for just the amount of in-depth questions that need to be answered. So preparing income statements, and deep in-depth discussion about what marketing has been done, and how much has been invested in all the different areas to grow the business, and on and on and on. It probably took a solid two weeks of time just in my off-hours compiling together information and pulling data out of Stripe and all the different places.
Rob [17:34]: Cool. And then the sale happened pretty quickly, is that right? If I recall, you had several offers or at least several highly interested parties pretty early on.
Derrick [17:42]: FE likes to do like an early access circulation of a new prospectus. So they emailed their insiders group and tried to drum up interest that way. I think there were maybe three interested parties who came forth during that period before it even went to the broader audience. And, ultimately, the buyers who bought Codetree came through in that early phase.
Rob [18:05]: Right. And for folks interested in hearing more about this – especially from the other side – the buyers did a really good job of putting together a series of three blog posts. The third one culminated in this extremely long, very highly informative article about all the terms of the deal, and negotiation, and all that stuff. That’s really why you and I are able to come on here and talk about it, and why in the intro, or in the title of this there is going to be a price. Otherwise you wouldn’t have done that. But they wrote a blog post called ‘What It’s Like Buying a $128,000 Side Project.’ And we’ll, of course, link this up in the show notes. During the negotiation, once you had all the docs in there and then you started getting offers, was that stressful for you? Or was it — you know, compared to the Drip sale, I know that they are different orders of magnitude in terms of stress – but were you stressed or concerned or, I don’t know, did you feel out of control at all with the Codetree sale?
Derrick [18:53]: I think I would have felt that way if I were handling it on my own. I think having David from FE International, my broker who happened to also work with us on the Drip sale, was really pivotal for me in just keeping a level head. He bore the brunt of circulating this to perspective buyers, and vetting incoming buyers, and handling all of the follow up. We would have discussions and he would say, “Okay, this is what they’re offering. What do we want to say? Are you okay with this?” And I could just give him back an answer like, “No, I’m not okay with that.” Then he would handle the whole process of thinking through the best way to craft a response to the buyer that would not totally tick them off, or turn them away, or whatever. So just not having to deal with those finer points of the negotiation really eased my mind. It was in that first weekend – right after David had circulated the prospectus to the FE insiders – when I got initial interest from the ultimate buyers of Codetree. We had a call with them, and that was a little bit stressful to jump on a call with potential buyers. You want to make sure you don’t say something wrong, or something that’s going to hurt your negotiating position. So I definitely felt on guard with the first one, but David did a good job of kind of mediating the conversation and making sure that he jumped in any time there was a question that maybe was not something that we were willing to disclose at that time. So shortly after talking to them on a call an offer came through. That was a really exciting – just to get the first offer was a really exciting thing. We can talk about numbers, talk about what we’re going to ask for it, but actually getting a cash offer was pretty exhilarating. But the cash offer was for $103,000. So it was way lower than what I was asking at the time. And so, that stuck in my head where I was – there was a lot of emotions around it. One, I was exhilarated, but I was also mildly offended maybe that I would receive such a low ball offer. I remember thinking I had to decide at that point, was I willing to take less than what I was asking or was I willing to sit it out and wait for the right buyer to come along? And fortunately, David was there. I think I also talked to you about it. And everyone said, “Look, you don’t need to concede at all at this point. Just wait.” And that turned out being the right decision. But I think not being a savvy trained negotiator myself, it’s hard to think of like, “I’m going to just completely walk away from $103,000.”
Rob [21:14]: Right. Yeah. It’s definitely shocking the first time you see that and think, “Wow! That’s going to be wired to me in a few weeks if this all goes through.” But I totally remember you were in such a good negotiating position because the app looked gorgeous, it was solid, it was well built. You had your reputation of quality from Drip. I don’t want to say “overshadowing”, but kind of that Codetree benefited from, because Drip is just a really respected product, easy to use, and looks good. There was just so much going for it that Codetree was, in my mind, a premium product and a nice – it was a low priced product in the sense of we see a lot of SaaS apps that come through and they’re $800,000 or whatever. And it’s like, “Really?”, you either have to have a lot of cash or take out a big loan to do it. But to find an app of this quality in let’s say the low six-figure range, it’s pretty uncommon. And so, my gut was that, yeah, you were going to get a full price or close to that offer.
Derrick [22:07]: Yeah. It was fascinating to read the third part of the blog post series that the Codetree buyers put out, where they kind of go in detail about negotiation from their side. And they kind of outline, “At this point in the deal, here was our negotiating position, and here was the seller’s.” And kind of talk about how I think as a seller I was probably in the better position on this deal. So it’s really fascinating to see their thought process and how it aligned with what I was thinking at the time.
Rob [22:31]: Yeah. There is just a dearth of solid SaaS apps for sale, period. And especially at this price range. And I have several friends who have been trying to acquire things along this line for 12 to 18 months, and it’s just not happening. It’s definitely a seller’s market today, in terms of if you have a decent quality SaaS app you can get a good multiple for it. Cool. And so, you guys went through negotiations, you eventually settle on the price – as we said it was $128,000 – and after closing, did you get the bank wire right away? The same day that it closed?
Derrick [23:04]: No, so okay. If you’re ever selling a SaaS app don’t chose non-wire transfer methods.
Rob [23:13]: You went with the three day ACH -?
Derrick [23:15]: I went with the ACH. And so that was, yeah.
Rob [23:18]: But why did you go with the ACH, Derrick? Tell everyone.
Derrick [23:21]: Because there was a $20 fee for the wire transfer.
Rob [23:23]: There was a $20 fee! That killed me. I loved it.
Derrick [23:27]: When I made the decision, this was like weeks before it was ever going to close, I’m like, “You know, yeah I’ll save $20,” but totally not worth it.
Rob [23:35]: And then you got there and it closes. And there is some stress, or some anxiety, through it, and you get there and you’re like, “Finally, it closed today. Such great news.” And you’re like, “I cannot wait to see that wire in my bank account.” That is the true culmination, and the big dopamine rush, when you see it, and you had to wait three days for it. That’s terrible. I was like, “Oh, no!” And I think I was like, “Can you change that? I’ll throw the $20 in.” You’re like, “I totally want to do it.”
Derrick [24:00]: I tried. I tried.
Rob [24:01]: But it was too late, because it was Escrow.com or something, is that right?
Derrick [24:03]: Yeah.
Rob [24:04]: It was already locked in. So that was funny.
Derrick [24:05]: Yeah.
Rob [24:06]: And so, if I recall the next week you showed up in a Tesla, right? Is that what you did with all the money?
Derrick [24:14]: Oh man. I wish. No, I stuck it in a high yield savings account.
Rob [24:17]: Very good. Nice play, sir. Well, yeah, I think we’ve pretty much covered it. Is there anything else that you feel like you maybe left out of the story?
Derrick [24:24]: No, I think that covers it pretty well. I think probably my take-aways from this – if someone out there in the audience is looking to sell their product – one of the biggest things is don’t underestimate the amount of effort that due diligence is. And there’s things you can do to make your life easier, like keeping everything separated. I had a dedicated bank account for Codetree. I had a dedicated Stripe account for Codetree. All my other different SaaS things that helped power Codetree were all siloed in their own accounts, and that made the handoff a lot easier. It made it a lot easier to narrow down the exact costs that were involved, and where revenue was coming from. And I could produce a bank statement without having to filter out other non-relevant transactions. And so that made my life a lot easier. But there was still weirdness with like, when a Stripe charge comes in on one month do you count it in the month when it happened or do you count it in the month where the cash hit the bank? And you’ll see in the write-ups from the buyers that one of their big issues during due diligence was this supposed discrepancy in revenue reporting. So, some of these little things that don’t seem big in the grand scheme can potentially hold up the deal.
Rob [25:29]: Yeah, you were really well organized. And that’s kind of your nature and I think it helped make this a less stressful process. When I sold HitTail, which was November – it was almost a year ago now – it was so enmeshed with other things because the Numa Group had all these products at one point, that it was much more of a headache for me. Even to just suss out the numbers- the expenses mostly – because they were all comingled with things on the same credit card, and then the transfer over it was actually in the AWS account that Drip was in at the time. It wound up being a big mess during the actual transfer process. But yeah, I think that’s a really good piece of advice for folks who are listening.
Derrick [26:05]: Yeah.
Rob [26:06]: Sounds good. Well if folks want to keep up with you online where would they do that?
Derrick [26:10]: You can keep up with me on Twitter. I’m @DerrickReimer. And I also have my website at scalingsaas.com where I blog occasionally and publish other content.
Rob [26:19]: Sounds great. And you’ve been cohosting the Giant Robots podcast for a few weeks, right? I think you’re on maybe a hiatus right now?
Derrick [26:25]: Yeah. So, yeah, Giant Robots is in its third iteration, and Ben is bringing on cohosts to cycle in and out. And so, I’ve had an eight-episode stint there and it’s been a great time. We kind of delve into the behind the scenes of building out SaaS apps, so we talk a bit about behind the scenes of Drip, and also some technical things too.
Rob [26:44]: Sounds cool. So if you’re listening and you want to hear more from Derrick you could actually check out certainly Giant Robots, the last eight episodes. I’ve listened to them all. They’re very, very good. And there is more about Drip and other stuff in there, too. And then, actually episode 274 of ‘Startups for the Rest of Us,’ you came on and we talked about how to mentally and technically prepare for your launch, and we talked through the launch of workflows that happened earlier this year.
Derrick [27:03]: Yeah, it was a good one.
Rob [27:04]: Sounds great, man. Well, thanks for coming on the show.
Derrick [27:07]: Cool. Thanks for having me.
Rob [27:08]: 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 comments. 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 310 | Indie.vc and a More Realistic Approach to Funding
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Bryce Roberts of Indie.vc about their unique approach to funding startups and their terms. Rob shares his opinions on raising funding and angel investments.
Items mentioned in this episode:
- Indie.vc
- Current terms in Github
- Bryce’s Medium post on his learnings and adjustments to their approach
- Ycombinator thread about Indie.vc
Transcript
Rob [00:00:00]: In this week’s episode of “Startups for the Rest of Us,” I interview Bryce Roberts from Indie.vc. This is “Startups for the Rest of Us,” episode 310.
Rob [00:00:18]: 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, and I’ve given Mike the week off this week. I have a very special guest joining me on the show today. His name is Bryce Roberts, from Indie.vc. If you haven’t heard about Indie.vc, they’re taking a really interesting approach to funding companies, and it’s much more around this “fundstrapping” approach that I’ve talked about before. If you recall, fundstrapping, which – Colin from Customer.iO is the first person I ever heard use that term. The idea is to raise a single round of funding to get to profitability, or to help you grow faster, but not to have this implicit series A that you need to raise, as Bryce says during our interview. To be honest, I’ve never been anti-funding. I’ve always been anti people thinking the only way to grow a software business is through funding and then to raise that funding and have it require you to sacrifice your lifestyle, to relocate somewhere, to need to commit to growing a $100 million company with 200 people on the payroll, just all this stuff that never made sense. I always wondered why can’t you just raise a couple hundred thousand dollars to get to that seven-figure revenue mark faster, or get their more efficiently, and then just pay investors back like a normal business does; like when you start a carwash, or a restaurant, or a drycleaner, and you borrow money. You’re not looking for an IPO.
[00:01:33] That’s the approach that I’ve started to take with my angel investments. Last three, I think, have been into companies that I believe will all be seven- or eight-figure SaaS companies; and they’re not planning to raise a round from institutional investors, ever. That’s the premise. They needed some cash to get to growth and to go beyond that. Indie.vc is doing a similar thing. We talked in detail about their exact terms. Of course, they have their terms published on GitHub, which is super cool, because you can look through the docs that I think you’d sign if you were to take money from them. Just a fascinating conversation here with Bryce, who’s really going against the grain of traditional venture capital. I think it’s a good interview. I hope you enjoy it. Thanks so much for joining me today on the show, Bryce.
Bryce [00:02:15]: You bet. Super happy to be here.
Rob [00:02:17]: As I said in the interim, folks just heard you run Indie.vc. I first heard about Indie.vc probably close to two years ago, and it was on Hacker News. There was a big discussion of – at the time, you had a long-form letter at Indie.vc – that’s your URL – and it was basically explaining this new premise, or a new investing ideology. It was about not having to have this $100 million or billion-dollar exit to make money, but that you wanted to fund businesses that could achieve profitability and didn’t need to be a unicorn in order to be profitable for investors. This was really groundbreaking, and at the time, I think it was anonymous. Is that right, the way you published it?
Bryce [00:02:59]: It was anonymous unless you clicked the one – there were two links on that original letter. One of them was to sign up for a slack channel that we’d set up to answer questions. If you clicked on that, it would go to my inbox, so you would see that I was at OATV. Otherwise, there was no messaging, or branding, or anything else like that on it. So, yeah, that created a stir in that Hacker News thread as well.
Rob [00:03:21]: What was your thought process behind doing that anonymously?
Bryce [00:03:24]: Thought process was, just as we laid out in the original letter, that it was an experiment. So, if for any reason that just was a failure, we didn’t get anyone interested in it, no one wanted to apply, that we could have it set up completely separate from OATV. If it didn’t work out, we’d just take the site down, and we’d move on and go back to our day jobs. Wanted a little bit of that abstraction, but also I think it’s a little bit a part of our brand and marketing anyway, which is not intentional. It just is – it feels like you ought to have to do a little bit of work to get to know us and to get to know what we’re trying to do. I think it creates a little bit of scarcity, a little bit of intrigue and that, as a result, it drew people a little more closely in.
Rob [00:04:15]: I remember feeling when I read the letter, because if I recall, it was in Courier font and stuff. It gave me the hacker ethos. It made me feel like the DIY ethic of, “This is really cool. It’s grassroots.” It was just a neat feeling. You’ve mentioned OATV a couple times. For folks who aren’t familiar with that, could you let them know what that is?
Bryce [00:04:32]: To be clear, the DIY is really important to us, that kind of really raw, bare bones. Everything you saw in that first iteration and most of what you see now is still – that’s just me writing, posting. That’s something that’s important to us and always has been. In terms of OATV, OATV is a venture fund that I helped co-found back in 2005 with two partners. One is my partner Mark Jacobsen, and the other is someone who’s pretty well known in technology, my partner Tim O’Reilly. “OATV” stands for “O’Reilly AlphaTech Ventures.” It was a seed fund that Tim and I and Mark started in 2005, when seed investing really didn’t have a name. It wasn’t necessarily a category yet; but we were probably one of the first, I would say, handful – maybe five – institutionalized seed funds that got going back then.
Rob [00:05:27]: Very cool. Could you talk people through the premise? I guess you had the experiment that went out a couple years ago in terms of the letter and vetting people. I know you started with a cohort approach, and I think you’re no longer doing that. I think you had a fixed amount you invested up front, and now you’re more flexible, based on the business. Could you tell people about where you’re at today, just so they have an idea of what is Indie.vc? How is it different than just a traditional venture fund in terms of from the entrepreneur’s perspective?
Bryce [00:05:55]: The history is 2005, we set up a seed fund to introduce a new kind of optionality for entrepreneurs, not necessarily just bridge between seed and VC, but actually create some options for folks looking to run cash efficiently. As you can appreciate, part of the whole premise and the whole opportunity around seed was that the cost for getting these businesses online, up and going was dropping significantly. So, whether it was open-source software, hosted infrastructure – you name it – all of those things were starting to drive costs down and making it more accessible to entrepreneurs, which is kind of conventional wisdom right now, but back then it was just some wild, wild thinking.
[00:06:35] So, part of what Indie.vc was a response to was ten years into running OATV, it had become clear that some of those options that we had hoped seed investing would introduce to folks had kind of fallen by the wayside. Those options, as we saw them, were you could take a small amount of seed funding and then go raise from traditional VCs. That was one option. The other two we thought were just as important for founders were you could raise a little bit of money, make a tremendous amount of progress, and without having to raise more money, without having to take on more of that dilution and oversight from VCs. You could sell relatively early for a smaller acquisition, say, sub-$100 million type of acquisition; and it would still be a meaningful return – likely a life-changing outcome for the founder, but a meaningful return to a small fund, which is what we got started with.
[00:07:29] The third was, given how little capital these types of businesses take to get going, and given how strong and just wide the potential for profit margins are, given how efficient these things are, there ought to be a path where you just raise a little bit of money and then you just run that business as long as you want to, based on your profits and revenue. So, ten years into OATV and this whole seed investing experiment, we were looking back and just saying, “Okay. Part of that promise we’ve delivered on,” and that was filling the gap between angel investors and VCs, but those two other options seemed to have fallen by the wayside as fundraising has become the business model for so many of these companies that are getting started right now. When we started, a seed round was 250k, $500,000. A seed round now can be up to $5 million, whether you include their pre-seed or their post-seed, or their A2, or whatever these things are, right? Fundraising was intended to be a pain reliever, but the way we’ve looked at it is that it’s now become this gateway drug to this larger, unicorn culture that’s been built up around startups. So, Indie.vc in some ways is a response to that to try to capture some of that optionality again.
[00:08:46] I think part of your question was how we get our returns. As you can appreciate, we are still a venture fund. We raise a pool of capital. We put that to work. Our investors expect a return on that investment, and I think the one dimension that was pretty unique to Indie.vc-style investing is that not only can we make a return in the event that a company goes public, or gets bought in an acquisition; we can also make a return if founder decides they want to run that business indefinitely and profitably. We can take our return out in something that we call “distribution.” So, if a founder wants to keep running that business, wants to be paying themselves, really reaping the benefits of running a large, profitable, growing business, we just take our return out in cash as that business continues to grow. That’s kind of – plain vanilla as that sounds, that was at the time, and continues to be, a fairly radical concept, given that the venture-funded model suggests that any dollar you take in you’re reinvesting in growth. The idea that founders would be taking money out to put into their own pockets seems to run counter to so much of what’s already happening in that venture-funded world.
Rob [00:10:04]: Yeah, for sure, and that’s what I liked initially about the Indie.vc model and what you’re still doing today. In a second, I’ll run through your terms, which are published on GitHub. You have the exact terms that you give everyone. I was having a number of conversations right as I started doing a couple angel investments a few years back, and my interest has never been in the unicorns. I would much rather have a smaller business that has a much, much higher chance of success. Typically, right now it’s going to be B-to-B SaaS, because that’s what I know. I want to be able to put a small amount of money to work. You know, “small amount”: 5, 10, 20, 25 grand – whatever gets money in – and not have to swing for the fences and not have to swing for an acquisition. I kept looking for models to do this, and the only one that I stumbled upon was the way that carwashes and brick-and-mortars are funded. Then when I saw that you guys were doing this, my head exploded, like, “Yes! Someone is trying to apply this to startups and software companies.” We know that, if they’re smaller, they can just throw off a ton of cash, you know?
Bryce [00:11:05]: Yeah. It’s interesting, because despite the original letter that was posted – it was actually posted January 1, 2015. That’s when that Indie.vc site went live, but the buildup to that was really probably five or six years of conversations. I remember having a conversation with a friend of mine who’d invested in a couple of restaurants, and I was wrestling with a lot of these ideas and asked how they structured that. Given a local restaurant isn’t likely to IPO, and it’s not likely to be their ambition to IPO or even get bought, I was asking how they structured their return. In having that conversation and a bunch subsequently with other types of businesses, I thought, “Man! The margins in a restaurant business are just so paper-thin, in general. Why couldn’t we be trying this with tech businesses?” where your margins are oftentimes 60, 70, 80 – I’ve even seen 90, 95 percent in the investments that we’ve been looking at.
[00:12:02] It feels like a real opportunity to pursue that model for returns; and, yet, it just runs so counter to the business model of VC investing at this time, that very, very few people would really consider executing that, at least at a fund level, like you said. There are some people who are trying to find those for angel investments, but from a fund level, it hasn’t been necessarily as attractive or as accepted, just because the model hasn’t been proven out just yet.
Rob [00:12:35]: Right. As listeners know, my startup Drip was acquired a few months ago by Lead Pages; and we had hit a point a few months before that where we were really having internal conversations about the possibility of raising a small round, because our growth was being hampered or dampened by the lack of cash. It was the first business I’d ever run where that was the case. All the other ones, I always had ample cash to grow them, because they were smaller businesses. But we were really talking about that, and there was no chance I was going to go down the traditional VC route. It just was not – I never saw Drip – even though it had the market potential to be large, it wasn’t in my interest to be the CEO of some –
Bryce [00:13:12]: Why is that? Why didn’t you think the venture path was the path for you?
Rob [00:13:16]: Because I honestly value my lifestyle a little too much. I didn’t want to have to relocate. I didn’t want – I have my wife and kids, and we have a pretty good life. I didn’t want to feel the constant pressure of, “Get to $1 million.” “You should be hiring more.” “Hire, hire, hire.” My friends who’ve raised VC, that seems to be the thing: you need to get head count up. The idea of running even a 30 – well, 30 was reasonable, but when I started thinking about a 50-person team, it was just not appealing. I think that – I know you don’t necessarily lose control with your first round, but I looked down the line and thought, “Boy, you raise a series A and then a B. If that’s the path, then eventually are you still running your company?” Have you pushed into the center of the table and said, “I need to get to $100 million, or I go bust”?
Bryce [00:14:06]: Well, it’s interesting, because that’s actually a conversation I had recently with a good friend of mine who we spun up our seed funds at roughly the same time. We were talking about this model, and he was expressing frustration around what he termed the “implicit A,” right? Even at a seed round – like you said, you want to believe that that first round of funding really isn’t going to alter your course all that much, but the reality is there’s an implicit A as soon as you take that seed round these days. Most of the advice and most of the effort and most of the incentives around that seed round of funding end up pushing you towards another round of funding and another round of funding. So, as harmless as it may feel like it is, it’s really become, like I said, this implicit A at the tail end of any round of funding; and that’s something we wanted to be a counter to. We wanted to, hopefully, present a different set of options for a founder.
[00:15:02] And it’s something we’re seeing now. That same situation you found yourself in at Drip, we’re finding there’s a large number of companies who have grown. They could really unlock a lot of value in their business with an extra $250k, or $500k, or whatever it is. There’s a couple of hires they can’t make out of cash flow; or, there’s a new line of business they can’t fund out of cash flow; or, there’s a new product that’s additive to what they’re already doing that they want, but they can’t fund it out of cash flow. It’s within that group of founders we really found a lot of resonance and, for us, a lot of potential investment opportunities. I think what we can offer to them is – it’s funny. We just had one of our quarterly retreats in Chicago this last weekend, and one of the founders who’s a part of the Indie.vc group of companies said something along the lines of, “This is just enough VC b.s.” It’s like we haven’t bought all of it, but there’s still a level of accountability. You still have a partner in the business that isn’t with you day to day. There’s still a much broader network for folks who maybe aren’t in the Bay Area that we can provide to them, that they can access.
[00:16:10] That’s really what we’re trying to provide: just enough of that VC oversight without necessarily the levers that so many VCs have, which are voting rights. They become shareholders, but they become shareholders of a preferred class of stock. There’s a lot of layers of control that you give up and also optionality that you take off the table when you go that route. Hopefully, what we’ve tried to do in structuring the terms of Indie.vc is address those in a hard-coded way, where everybody’s playing all their cards face-up so that we can offer to an entrepreneur a certain level of service and a certain level of capital, and they can play their cards up in terms of what it is they’re trying to build. As your audience my appreciate, when you go out to pitch that round of funding to investors, even – you’d mentioned you really value your lifestyle. You mentioned that you may not be the right CEO to be running a 50+ person team. If you walk into an office of an investor and make that presentation, you can’t honestly tell them that, right? You have to tell them about how this is going to become a multi-hundreds-of-millions-of-dollars business.
[00:17:24] We think that’s a real opportunity for us, and we think that the more founders are empowered to build the business they’re best suited to build, and that we can support in doing that, we think that those returns for us will still be every bit as compelling as the returns we’d be seeing in the traditional seed investments that we’ve been making.
Rob [00:17:43]: Yeah, that makes sense. That’s the key, is something you just touched on, which is there’re a lot of businesses that are really great businesses that I think raise funding and get run into the ground because they would be great 5, 10, 15, $20 million ARR businesses, but highly profitable; and they just go for the $100 million thing, and then they implode because they just can’t get there for whatever reason.
Bryce [00:18:05]: There was a fascinating post written – I think it was last week – by a VC, saying, “Here’s how you end up in a bad position with your board.” The scenario he gave was a founder who’d raised two or three rounds of funding. Their business was doing about $5 million a month. The founder couldn’t raise any more money. The founder couldn’t sell the business. Now they’re locked horns with their VCs. I think most people who aren’t in that unicorn echo chamber would say, “Wow. If I had the opportunity to run a $5 million-a-month software business? Sign me up for that!” right? But it’s that type of misalignment with the kinds of companies some founders are best suited to build and the things that oftentimes – I think the other disconnect, too, is just timelines, right? There may be a timeline in which that entrepreneur, if given that opportunity, could grow from $5 million a month and become that massive outcome, but not on the timeline that a VC really needs it to happen in, which is typically five years. So, they would much rather see that founder crash and burn and sell that business for parts, because for every month or quarter that goes by that they have to sit on that board and that business is consuming its time, it’s time that’s taken away from the potential unicorns that are already in their portfolio – if that makes sense.
Rob [00:19:23]: It does, yeah. I want to switch it up just a little bit here and dig deeper into the specifics of how you guys work. I’m on GitHub right now, and I’m going to link your website. You have a [medium?] post, and you have the GitHub repo, where you have all your docs. My understanding is that you invest typically between $100,000 and $500,000 into each startup, and you don’t actually take equity in the business up front. It’s only upon an acquisition that that would happen. Then the repayment – and this is where you’re based more on cash flow than on exit or liquidity [event?]. The repayment is 80 percent of distributions until you’re paid back two times your investment. Then it flips to – what does it flip to after that? Does it flip 20-80?
Bryce [00:20:08]: Yeah, 20-80. That’s right.
Rob [00:20:10]: Okay, perfect. So, that’s 80-20 to your fund until you get 2X back. Then it goes 20-80 to your fund versus the founders, and that’s up until 5X your investment. Then it stops. Is that correct?
Bryce [00:20:22]: That’s correct.
Rob [00:20:23]: Okay. So, the idea is if someone – there’s a bunch of Hacker News threads if folks search it, but there’s a conversation where you actually address specifically – someone says, “What if a founder comes on, and then they just raise their salary up to a bazillion dollars or whatever instead of taking out dividends?” Because it’s when the dividends are distributed when the 80-20 stuff kicks in. You have clauses that help with that, right? They can only raise their salary up to a certain amount, or by a certain percentage, based on from when you guys invest.
Bryce [00:20:47]: That’s right. There’s a bunch of different models that people have tried out around how to trigger these types of distributions. Several of those have been – they’ll tie it to profitability. They’ll tie it to revenue. There’s a whole industry that’s forming now around revenue-based financing, where they immediately start to take a percentage of the revenue that comes in every month, and they get paid back up to a certain return as well. What we tried to do was tie it to incentives, right? So, as you mentioned, when we make an investment, we aren’t a shareholder in your business. It’s structured essentially as a loan with no maturity date, so there isn’t an interest accruing, and there isn’t a date at which that note will be called back. The unique element to the one we’ve structured, as you touch on, our repayment is really tied to the incentives of the founder. If the founder wants to start taking a significant amount of cash out of the business, we share in that. We tie it to total compensation. If a founder’s total comp – let’s say it’s $100,000 when we make the investment. We allow them to continue, we want them to continue to grow and to pay themselves and be able to reap the rewards of growing their business. So, we say up to 150 percent of that initial baseline that we set, that’s yours. Once you start to pay yourself above and beyond that, that’s what we consider a distribution. That’s when the splitting, the 80-20 and then flipping to 20-80 occurs, is once they’ve decided that maybe they do want more of a cash-flow lifestyle business. We are fully in line or aligned with them around them being able to grow and run that kind of business. We just want to be able to share as that cash flow starts coming out of the business.
[00:22:26] In the case where we do become a shareholder, there’s really only two scenarios where that happens. One, the founder decides to raise a more traditional round of VC funding. If someone is running the business profitably for years, but they decide to end up going and raising an additional – bringing on VCs to really scale up because they now see their outsized opportunity, we just convert in as part of that round at a pre agreed-upon percentage of whatever that is. Then if they sell anywhere in there, we convert into common shares and go through as part of that acquisition.
Rob [00:23:00]: Very cool. There’s a comment on Hacker News from someone who is obviously an Indie.vc portfolio company, and he says – there’s a whole discussion of it, but he says, “This is why I enjoyed being part of Indie.vc: zero emphasis on pitching or raising the next round, no demo day. All the focus was on growing a real business.”
Bryce [00:23:19]: It’s like I said. We just did a meet-up in Chicago this last week. What we’re doing now is – we did our first cohort last year, where we invested $100,000 into eight companies, and each quarter we would get together with those eight companies and not work on their pitches, but actually work on their business. We would bring in subject matter experts for things that they were wanting to build expertise around. At the end of that year, we said, “We can continue to do this or not.” It was unanimous within the group that they’d like to continue to have these meet-ups, so this was our first opportunity to start folding in new members, new investments that we’d been making since the beginning of the year. The response from a lot of the new folks was really positive. They were really taken back by what it meant to just focus on revenue and growth and profitability.
[00:24:09] One comment I remember from the weekend was someone lead off their answer to a question by saying, “Back when I used to think raising money was cool, I did X,” right? At its most basic, part of what we wanted to really see is this idea that you become who you hang around, right? So, you have a group of companies now who all are focused on fundraising, and you plug into that group, guess what you’re going to start focusing on? You’re going to start focusing on fundraising. You’re going to start solving your problems with going and raising another round. What we’re seeing now within the group – and, knock on wood, a year and-a-half in, all of those eight companies are all still in business. Some of those have gone from standing starts to profitable. We’re seeing that there’s real value in having a group of like-minded founders who want to build their company in the same way that you’re trying to build yours, so that’s support in that network. So, we think that’s a pretty – it seems subtle, but as the Hacker News commenter mentioned, it’s actually a pretty powerful undertone to create within a group. In fact, we’ve now done five of these, and I can count on one hand the number of times we’ve ever even talked about investor presentations, or talking to VCs.
Rob [00:25:21]: That’s super cool. It does become an amazing sight now when I go to – I grew up in the Bay Area. I grew up in the East Bay, so the Silicon Valley culture was very much part of me, growing up. But when I go back now – I haven’t lived there for 20 years, almost. When I go back now, when I go to a conference or whatever, I’m struck by just the one-track mind. Everyone is just talking about the pitching and talking about the raising and talking about raising money. I keep thinking, “People are focusing on building slide decks rather than building businesses.” That’s kind of been my quote.
Bryce [00:25:54]: No, exactly. Like I said, fundraising is the business model of this new, unicorn-obsessed, startup cohort. I think there’s a real opportunity for us. We have some investments in the Bay Area, but I tried living in the Bay Area, and I know live in Salt Lake City, Utah. We aren’t geographically focused. We don’t just invest in the Bay Area. We don’t make people move to the Bay Area to be a part of what it is we’re doing. I think a line that really resonated in that original piece that I wrote at Indy.vc was, “Bloom where you’re planted.” We try to embody that both in the support we provide for our companies, but like I mentioned, we did our last retreat in Chicago. We try to expose our companies – one, visit the companies in their local markets and support them there – we have a couple companies that are in Chicago – but also give exposure to people who aren’t from Chicago to the way local founders, [the] local start-up community there works so they can see that it’s different from their home states, but it’s also different from how the Valley works as well.
Rob [00:26:55]: Yeah, yeah. I like the idea from your perspective as someone running a fund that you then have diversification across geographies, right? All of your eggs are not in the Bay Area basket and all not pulling from the same talent pool and all not getting in the same group thing. I think there’s advantage to the diversity you have there.
Bryce [00:27:13]: It’s been great, and it was fun because one of the folks who came to a dinner we hosted while we were in Chicago tweeted out after they’d left – this is a person who’d done the VC-funded startup thing. They’re a pretty well-known name in the startup community, and they’re just totally burned out after their last venture-fueled startup experience. They tweeted out after the dinner how energized they were, that it was so refreshing to be around these kinds of founders who’re actually building real businesses and how that reinvigorated them to be thinking and working towards their next company. I think there really is something to that. I think there’s a group of people who really want to have an impact, who want to build something that doesn’t necessarily rely on getting permission from an investor to be able to have it exist and have it to impact people in the world in a meaningful way. So, I love that that person at the dinner picked up on the energy, and we hope that there’s a lot more of that energy we can help unlock through Indie.vc.
Rob [00:28:13]: Sounds great. Well, thanks again, Bryce, for coming on the show. I really want to be mindful of your time today. If folks want to learn more about Indie.vc, they can obviously go to www.indie.vc. If folks want to keep up with you, is it maybe Twitter? What’s the best place?
Bryce [00:28:28]: Yeah, indie.vc is the best place. It’s kind of a jumping-off point, and you’ll also see a unicorn that’s burning, and so you might enjoy seeing that. For me, I’m @Bryce on Twitter. You can add-reply me. We also have a Twitter account that’s pretty active for Indie.vc @Indievc – one word – on Twitter. I’m not great at email, but if you want to email me, I will definitely see it. If it’s interesting, there’s a high likelihood I will reply to it. I’m just Bryce, B-R-Y-C-E, @OATV.com.
Rob [00:29:01]: Sounds great. Thanks again for coming on the show.
Bryce [00:29:03]: Thank you, Rob.
Rob [00:29:04]: 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, and we’ll see you next time.
Episode 309 | Updates on Bluetick.io & Drip
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give some updates on Bluetick and Drip. Mike gives some details of overcoming technical challenges and how he plans to shift his focus to a marketing. Rob talks about some of the changes to Drip since the acquisition as well as ways his role has changed.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be giving updates on Bluetick and Drip. This is ‘Startups for the Rest of Us’ episode 309.
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 [00:26]: And I’m Rob.
Mike [00:26]: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [00:30]: Well, yes, more than this week. I think we’re talking about stuff that’s been going on for the past few months, right? Because we haven’t done and updates episode in a long time. We used to try to do these once a month or so and then there were certain extents of time where so much was going on that I couldn’t talk about. And I think stuff slowed down for you for a while. And I think it’s really time to get back here and get back at it and give folks an update.
And it would be nice to do these a little more often. I don’t know if we’ll do them monthly. But I always find it fun and interesting to talk about what we’re doing. And the feedback that I’ve heard in general is that folks really like to hear more about what we’re up to.
Mike [01:02]: Cool. So let’s dive right in.
Rob [01:04]: Yes. So for me, you know, I look back. It’s been just over three months since Drip was acquired. For those who haven’t been listening I had a startup called Drip. I co-founded it. It’s email software and it was acquired by Leadpages back in July. And so now I work for Leadpages. I’ve moved with my family to Minneapolis. And it has been quite an adventure.
I think the hardest part of the transition was definitely — well, aside from the acquisition itself — it was very stressful. Once that was done, the hardest part has been the move and the impact it’s had on the family. Moves are always stressful and I think that it’s a bummer when you move and your kids are all disjointed and don’t know what to do. And they’re homesick and then they go to school and they don’t have any friends and then — It’s a transition to a new place.
We’ve tried to fill it with adventure and make it exciting. And now that we have been in Minneapolis just over two months and everybody’s over it. And now it feels like home. And nobody talks about how they liked the Fresno house more or about how rough school is because they’re having fun. So that was a big transition and I feel like we’re past it. It feels really good to be past it and I don’t think I want to move any time soon again.
You’ve done some moves in your time, huh?
Mike [02:09]: I haven’t moved for at least 10 years. And there are good reasons why.
Rob [02:13]: Yes, because you remember how hard it was. We hired movers. Everything was paid for and so, we hired people to pack and move us and unload us. We didn’t do any of the hard work. The unpacking sucks, of course. But even then it was so much time to do all the logistics and then your stuff gets here and then the unpacking is just days and days of chaos. Yes, it’s stressful. It reminded me how stressful this actually is. But it’s good to be past it.
And on the flip side, the work transition to Leadpages has been way, way easier. I don’t want to say it’s been a breeze because that would probably be glossing over some things. But in general, it’s been a very good transition for me and, I think, for the team. I talk to everybody. I try to keep tabs on even our remote folks and it’s kind of business as usual. But we have a lot more money to do things. We just have more resources so it’s like business as usual but better, I think, is kind of how I’ve been talking about it.
There are obviously things I had to give up that weren’t – you know it wasn’t the easiest to give up all of the marketing, essentially. And I can be as involved as I want but, frankly, I don’t have time given the focus on the product and the hiring of engineers and stuff that I’m doing now.
But that was a tough choice because I’ve always marketed my own products and Leadpages is just so good at it in my opinion. And from the outside and now that I’m inside, they’re one of the best SaaS top of the funnel marketers in the world. It’s just an amazing machine that they’ve built. So it makes total sense that they would do this when they have a team of 20 or 30 people, why would I want to slow them down and be a bottleneck, essentially.
But giving up the marketing website was a tough choice. Not even a choice. I knew it had to happen. It was inevitability. It was just when it was going to happen. Then, of course, they cranked on it and rolled out nice new gorgeous marketing site. It’s at Drip.co. If you go there you’ll see it. And they have videos and they have all types of cool stuff that just would have taken me months and/or years and a bunch of contractors and way more money than I had to produce. And then they spit it out after it was three or four weeks that this whole website was up. So it’s pretty cool.
Mike [04:08]: What was the reason behind the domain name transition? It used to be GetDrip.com and now it’s Drip.co.
Rob [04:13]: Yes, it was to get away from people calling the app GetDrip. People on podcasts and all the time, “Hey, how’s your app GetDrip doing?” Well it’s not called GetDrip, it’s called Drip. And so for a long time I wanted, obviously Drip.com, which I think there was a squatter on it and he wanted six figures. And that wasn’t going to happen. But, yes, Leadpages was able to get Drip.co on the secondary market. And it probably – at the price, I don’t know I would have put the money towards it bootstrapped, but it made total sense to do it given the resources they have. So, that was the idea. It’s a four letter domain – six letters including the extension – so it’s nice and short, memorable. And it’s just nice to not be called GetDrip anymore.
Mike [04:51]: Back when you could actually get four letter domains.
Rob [04:54]: Yes, I know.
Mike [04:55]: It’s a thing of the past.
Rob [04:55]: I know. Well, Clay sought it out and bought it on the secondary market.
Mike [04:58]: Very cool. Couple of quick personal updates. My brother’s getting married this weekend so the whole family is leaving tomorrow morning so we’re recording on a Thursday.
Rob [05:05]: Wait. You have a brother?
Mike [05:07]: Yes. You didn’t know that?
Rob [05:08]: How long have you and I known each other?
Mike [05:10]: I don’t know. Like 10 years.
Rob [05:11]: 10 or 11 years. You have a brother? Do you have any – how many brothers do you have?
Mike [05:13]: He’s technically a half-brother. He’s 16 years younger than me so yes.
Rob [05:17]: Got it. Okay. You just don’t ever talk about him.
Mike [05:20]: I almost never see him, you know.
Rob [05:21]: Do you have a sister too?
Mike [05:22]: I do.
Rob [05:23]: You are kidding me. What?
Mike [05:24]: I have a sister.
Rob [05:26]: I just figured you were an only child. You never talk about your siblings. Do you know I have siblings? I talk about them, right, every now and then?
Mike [05:33]: I do know that you have them, I don’t know how many. I think you have a brother but I don’t think you have a sister.
Rob [05:37]: Yes, I do. I’m the youngest of four kids.
Mike [05:39]: Oh, I didn’t know that.
Rob [05:40]: With a sister and two brothers. Dude, how many siblings do you have?
Mike [05:43]: Well, it’s complicated.
Rob [05:46]: Two of mine are half as well, to be honest. I have two siblings and then one full.
Mike [05:51]: Yes, my parents, they got divorced when I was much younger and then they both remarried. And on one side I’ve got a stepsister and three stepbrothers and then there’s also a half-brother there. And then on the other side I’ve got, I think five or six … I think five stepsiblings in some way, shape or form. I think that there’s two boys and three girls. I don’t ever talk to them because I’m just never around.
Rob [06:15]: Right.
Mike [06:15]: But, yes, it’s kind of crazy. So there’s like 10.
Rob [06:18]: Got it. Alright. So you’re going to a wedding.
Mike [06:20]: Yes, so we’re going to a wedding this weekend. We’re leaving tomorrow morning. It’ll be Friday morning. The wedding is on Saturday. We come back on Sunday and then next weeks’ Columbus Day.
And then the other thing is I have to go off on a little bit of a rant here. It’s about Amazon and big data. I went on Amazon and I’m very particular when it comes to notebooks. And I’m sure people have their quirks about that sort of thing. But there’s a very specific type of engineering paper that I like for my notepads. So I went on Amazon and I bought one and next thing I know they’re trying to cram calculus and physics books down my throat. I’m like, dear God, please make it stop.
Rob [06:56]: Yes, that’s brutal.
Mike [06:57]: It’s just the entire line of recommendations from Amazon was nothing but college textbooks and I’m just like, no, I don’t want a $300 calculus book.
Rob [07:06]: It’s such a bummer. Yes. I wish there was a button you could click to be like dismiss these. Because that happens to me. My kids get on and shop. Or Sherry will get on and buy psychology books and it’s like, stop recommending that stuff to me.
Mike [07:16]: Yes. And it even happens if you borrow stuff from Amazon’s library. They’ll say, “Oh, well, you downloaded this thing about Barney the dinosaur. You might be interested in this too.” I’m like please stop.
Rob [07:26]: Yes, no doubt.
Mike [07:28]: But aside from that – and I’ve been talking about this for a while – but I finally finished migrating all the backend mailbox data inside of Bluetick. So everything’s over on a completely new storage mechanism. It’s not even a different storage system. It’s just everything is all indexed now and stored in a different way than it was before which makes it easier to get at the data and then make sure that everything’s synchronized. And I’ve got manual indexes that are built around a bunch of stuff so that I can – given any email address, for example, I can very quickly show you exactly who has emailed you from that email address or all the emails that you’ve sent to that email address. Which you can do inside of Gmail or most email clients. But it’s a lot more difficult when you’re trying to synchronize those things yourself. And the other thing that I’m able to do is I’m actually able to tie multiple email addresses to a single person. So that’s an interesting side effect of doing all this myself is that I can create those additional tie-ins that would probably be very difficult to do outside of something like Gmail or Outlook.
So then I can show you all the different communications that you’ve had with somebody. And the idea down the road is to be able to take that stuff and present it inside of the application so that you can see all of the activity related to somebody regardless of what email address was used to send to them or receive from them. So if you have a team, you’ll be able to see all the emails that have been received by your team from that person. And then you’ll be able to mark things as like, “Hey, this particular email was a private one. I don’t want that shared with the whole team.” And you can set preferences around that stuff.
The other thing it allows us to do is download the contents of those messages and display those as well. So, it’s kind of a first step down that path. It’s all looking good. Several million emails later and a huge WTF moment in the mill where I found that somebody had an email that was 65,000 characters long in the subject line.
Rob [09:14]: Wow. Okay. So, you’re truncating, right? You’re going to truncate it to 56 –
Mike [09:18]: Oh, yes, we’re going to truncate it back but I was not expecting it to go above – I was like maybe I could see somebody putting a few hundred characters in there. But the application just choked on it and it took me the longest time to figure it out. And it’s just like, “Oh. Whoops.” I mean that’s a no-brainer decision to truncate that but that’s what the spec says that there’s rules against it.
Rob [09:40]: Yes. It broke something. I was actually talking with a group of people a couple weeks ago and they started asking me about Bluetick and about the progress you’re making and about the technical issues that you’ve been mired in for the past 30 days, 60 days. And they were asking, “What’s going on with Bluetick? Is Mike going to launch? Is this another AuditShark?” They started peppering me with the questions and I was like, “I don’t know.” People don’t realize you and I don’t talk often. This is our conversation every week, right? We maybe talk about MicroConf but we don’t dig into each other’s apps and progress and that kind of stuff.
So, I think this is an interesting thing to dig into here because if I were to recount what I’ve seen over the past – so it’s October – so, if I thought back about the last six months since MicroConf, I feel like you’ve been working on a bunch of technical stuff, mired in technical detail. And I know you’ve worked with some early access folks and most of them came through, as far as I know, and they’re using the app. But it does feel like it’s been really slow going.
Mike [10:34]: Yes, it has. I don’t discount those thoughts. I’ve had kind of the same thoughts and reservations myself about the fact that certain things are just taking an extraordinary amount of time. And some of it’s the volume of data that I run into. So you do a migration and you’re targeting two million email messages and then it was like a million and a half through it where something went wrong. And I’m like, okay, now I have to figure out not only where exactly did this happen because it’s not always easy to pinpoint that stuff either. And doing a partial migration is a little bit challenging. So, the volume of some of those things is – just in terms of the prototyping. Because I’ve had to go through a lot of issues with trying to figure out how long is it going to take to query this particular thing. And you don’t think about those things when there’s only a 100 or 1000 items. But when you’ve got 150,000, 250,000 of them it makes a big difference about whether it takes a half second to query it or three minutes. Then sometimes it does take a long time. And one of the things I’ve found out is mail servers will time out on you if you don’t issue a command within a second, for example. And it’s like that’s not really going to work if all this stuff on the back end doesn’t respond a lot faster.
It sucks to be mired in those technical details but, at the same time, I feel like a lot of them are kind of past me at this point. So I’m really starting to shift my focus from the engineering side of things into marketing. Which I’m thankful for because it means that I don’t have to deal with a lot of those [?]. I think they’ll still come up but I don’t feel like the rest of the stuff that’s going on or that needs to be done is so critical that I have to not move forward with the app and I have to pay attention to it. I think that they’re little things. They’re little tweaks and little changes here and there as opposed to like, this needs to be fundamentally redesigned in order to make this work. Does that make sense?
Rob [12:22]: It does. It does. Given the conversations we’ve had over the past five years on this podcast about you building AuditShark and then now about Bluetick, you do have a tendency to get stuck in technical stuff. And to spend more time than probably is good for you before you get more people using it. And I’m wondering how can it be different this time?
Mike [12:47]: I think part of it is just making sure that people are using the app. I think early on I made the mistake of trying to go in the opposite direction, where I hired several developers to come on and help build the app and while they were building the app I basically was very hands off. I haven’t really talked about this before but I hired three developers back in January. They built the app, got it to launch or at least got it to the point where it was minimally usable. And then we ran into various UX issues with the front end of the app. Then there was a bunch of stuff that needed to be redesigned on the back end.
As I started digging into it – as I said I tried to do the opposite of what I did with AuditShark. I’m like I won’t touch any of the technical stuff. But then once we got to the point where I started putting it in front of people, we were like this needs to be changed mainly because it just doesn’t do what the customer needed it to do. And we went in to make some of those changes and the structure of many of the things was just fundamentally flawed. So, for example, permissions were all screwed up, the API was a total mess. A lot of the stuff that connected the back end to the front end, the interfacing was terrible. It made it very difficult to make changes. And there was a lot of heavy dependencies between those things.
So if you changed one thing it was very easy to break a bunch of other things. And because we tried to move quickly, we didn’t write very many unit tests. We still don’t have nearly as many tests as I would like which makes it painful and it makes me very hesitant to push that deploy button because I know that don’t exactly have a great strategy for rolling things back if something goes wrong. I’m working with a lot of production data and if something goes wrong I need to be able to have time to fix it and be reasonably confident that I’m not going to just destroy a whole bunch of data that I’m going to have to go back and somehow try to rebuild.
Rob [14:30]: The lack of unit tests, that’s brutal. I mean that’s like a classic mistake people still continue to make. But now you’re kind of hamstrung by it, right, because you -?
Mike [14:40]: Yes.
Rob [14:41]: It’s not good. We see this happen with certain software companies that aren’t built by software developers. They’re heavy marketers and they outsource the development and then they find out six to 12 months in, they’re like, “Oh, we have no unit tests and our code base is terrible. And, although we have customers, we can’t build new features.” Your velocity just completely comes to a halt.
Mike [15:01]: Right.
Rob [15:02]: And it sounds like you hit that already.
Mike [15:04]: I did. Yes. And, like I said, part of it was because the app was not designed with the levels of scale that need to be taken into account when you’re dealing with mailboxes. Like I said, it’s a fundamentally different story when you’re dealing with the expectation there’s going to be 100 items in here. Also, let me give you a very specific example. When you first connect your mailbox to the application, there’s a back end process that goes in and it looks at your emails and says let me find people that you may have emailed within the last X time period. I’m going to show you when the first contact that you ever made with them was; when the last contact was; who made it in each direction. That way you can very quickly and easily go in there and, once you’ve hooked up your mailbox, it will show you a list. You can just sort it and say who have I sent an email to in the last three months that never replied to me; or only replied once or twice; or I’m still waiting for a reply. Those are things that you can query in there. At very low volumes that works fine but when you scale it up and there’s people who have 1000’s and 1000’s of contacts, people that they’ve either sent emails to or received emails from and you go from 100 to 10,000 and suddenly lots of things break. And it’s not like it’s an isolated incident either. Several people have this problem.
So, going back and trying to re-engineer those things so that they actually work has been just very difficult. And, you’re right. I ran into these things much earlier than I anticipated. And the point I was getting at before – as I said, I haven’t really talked about this – I hired the three developers I would say shortly after I got it to the point where I was minimally usable. I ended up letting one of them go because I looked at the stuff he was doing and, as I said, I tried to stay hands-off, I tried to stay out of it. And then I go back and look at it. I left him in charge and I said, “You’re responsible for this.” And then I go back and look at it and it’s just way off base. It was very clear in retrospect this guy probably didn’t know really what he was doing. And I left him in charge of huge pieces of the infrastructure.
Then over the next couple of months, one of my other developers, he was very good at a lot of the front end stuff. But he ended up getting married and moving out of the country and, basically, wasn’t able to do any more work for me. And then then third one, there was a lot of micromanagement that was involved. So, I went from three developers to zero. And now I’m back up to one and it’s more of a senior developer. He’s very good, I’m very pleased with the work so far. He’s been able to get in there and be productive. But that’s only happened within the last month or so. And his time, at the moment, is very limited. I’m trying to transition things over but it’s been a long hard road for the past three or four months.
Rob [17:42]: So you had three hiring mistakes then?
Mike [17:44]: One of them was definitely not a mistake. The other one, she probably would have worked out had I been able to spend more time but I didn’t have the time to sit there and give direction. So, basically, I had to be very specific about everything almost to the point of micromanaging. It wasn’t a good fit ultimately. So, two out of three I would say. The third one, like I said, his life circumstances changed so there’s really not much you can foresee about that.
Rob [18:08]: Yes. It’s a lot of setbacks though. That’s a lot of things to happen in a short period of time.
Mike [18:15]: Yes. But I am very conscious of the fact that I don’t want this to turn into another AuditShark story because that’s certainly not the direction I want to go. At the moment what I’m trying to do is I’m trying to transition myself out of doing more of the coding work and more over into the marketing side of things. Next up for me is to, essentially, start looking at getting the sign up page in place and carving out some more of the onboarding emails. Potentially looking at an onboarding wizard because I think that there’s got to be something there to help onboard people into the app. But whether that’s a combination of videos or tutorials or individually onboarding people with onboarding sessions – I’m okay with that too. It’s a matter of getting people to the point that they’re able to be productive with the app as soon as possible.
Rob [18:55]: Yes. And that’s a big deal. I think you need to start building some momentum here because it feels like you’ve been stalled for a while. And just looking at that shortest line between you and getting more customers using it, that’s what I’d be looking to do right now. I don’t have necessarily advice just because I don’t know all of what needs to be done; what has been done; what your path is. But I think if there’s one piece of advice I could offer it’s figure out how to get more people using it and paying you for it as quickly as possible and then do that. And that may be building a website and that may not be. Maybe just continuing to manually onboard people for the foreseeable future.
Mike [19:33]: Yes, I agree with that. It’s an interesting thought experiment, I think, to consider do I even need to rebuild the website because right now it’s just a one-page site. It really does not do anything. There’s nothing that you can do aside from signup for the email list. And then from there I have an email course that I send people. It’s about 5000 words or so over the course of five emails. And that does pretty well at getting people to take that next step. But it’s also heavily slanted more towards this is a beta, contact to us if you’re interested. It’s not so much a push-the-product and let people know what it can do for them. It’s more of a showing them how to do things as opposed to here’s how the product can really help make things better for you. And part of that is just a result of the fact that when it was written, it was written before the product was launched or even available. So, I’ve got to go back and rework a lot of that – not a lot of the copy, but at least some of the calls to action in the emails.
Rob [20:28]: One thing you could think about – and again, I don’t know your road map, your plan or anything. But just hearing where you’re at and what you’re doing, one thing you could consider is either during that email course or instead of the email course, actually, on the one page just swap that out with a ‘Request a Demo’ button. And the ‘Request a Demo’ could lead directly to your Calendly page where people can just book themselves with a demo, it could lead to a Google form that asks for more information first and then you get back in touch. And the Google form – or type form or whatever – might be better because then you can get more info from them. And you can tell how much they might be paying you. Because I’m assuming your pricing tiers up based on seats or something like that. So, you can ask how many seats they expect; what they expect the product to do. That could be really interesting and it would be super fast.
Then if you just improved that single-page marketing site and didn’t really build everything out, that could save you some time and get you to the point of where you’re just driving people. Because I still think at this point, having automatic signup – no-touch signup – I don’t know that you’re there yet. I don’t know quite where the product is, but my guess is you still have more to build and you still need to figure out exactly what to build next in order to get it to the point where you could just send 100s of new trials, so to speak, through the frontal and actually have them stick. And, so, I feel like doing demos and driving more in-person conversations, that’s probably what I would lean towards at this point.
Mike [21:47]: That’s probably true. I kind of put it in my head these are the things that are on the list of things to do and I naturally surfaced like the website really needs some love and care. So I naturally surfaced that to the front of my brain. But I think you’re right. It’s probably not really, necessarily, the best place to be spending my time right now.
Rob [22:04]: Yes. You take your one-page landing page. It’s a Bluetick.io – by the way, for the listeners out there – and maybe improve the copy a bit just rewrite it based on what you know now. And not even rewrite the whole thing. Just add some bits here and there and then have a big ‘Request a Demo’ button and just gate it for now. And people who are interested in a demo, then at least you can have a conversation with them. You could see what kind of volume you’re getting. And you can have conversations with them both because it’s easier to sell things that way and you’ll be able to figure out how best to explain it. You can split test your message really quick. And then you can start taking notes on what your message is and then use that for when you revamp the page.
And then they’ll also just give you a ton of feedback about someone who comes in and is like, “Oh, there’s another tool I use and it does exactly this.” Or, “If you added this one feature I would use it.” Those conversations are just so valuable in this early stage.
Mike [22:47]: Yes, I agree. I had a demo that I did last Friday, I think, and I took notes before the demo and then I made it a point to take notes right afterwards about specifically what the objections that they had were. And wrote those down so that I could come up with answers that were significantly better than what I had so that I had something that was already written, already concrete as opposed to trying to think something up off the top of my head. I’ve done that before and it works really well when you consciously do it. But it’s very easy to just kind of overlook that.
The other thing I did was I had a VA go out and capture all of the marketing messages from, I think it was a list of about 30 different competitors that I put together. So, I’ve got all their primary calls to action and primary marketing headlines that they’re using. And then all the secondary headlines and then if they had any sort of bulleted lists about topics or pieces of information that they were trying to convey on some of the different pages, I had her capture those as well. And then I also had her build a feature comparison breakdown, which is more for me than for general consumption, but it will help give me an idea of when I get the question about, “I see competitor XYZ does this. How does Bluetick do that? Or how does Bluetick relate to competitor XYZ? What do you do better and what do you do worse?” I’ve been asked that question before and I haven’t been able to answer it for specific competitors. So, I got that information so that I could help answer those questions better.
Rob [24:10]: Whenever anyone says, “Can you compare Drip to XYZ competitor?” I always say, “Yes, we’re better.” People don’t find it very funny. For some reason those questions, they kind of infuriate me because it’s like we in particular have I think it’s like 400 or more email marketing apps. So people just name some app of the top of their head that no one’s ever heard of except for this person. There’s like 10 users. And it’s like I don’t know how we’re different. Major competitors we would say we’re easier to use, we’re easier to get onboarded with, we’re less expensive, we’re more powerful than most of our competitors. But to actually do a feature by feature comparison is really kind of a bit of work there.
Mike [24:41]: It wasn’t so much that I wanted to be able to provide a matrix to somebody but I really wanted to know what specific areas of the space that they operated in. So, are they more geared towards cold outbound emails; or are they more about sales funnel flow; or are they more about a CRM package? There’s very different ways to look at the sales process and different pieces of it that different competitors do better or worse.
For example, if somebody asks, “What’s the difference between this and Highrise?” I’m like well, “Highrise is a CRM. It’s not a mechanism for actually doing anything.” I hate to gloss over some of the difficulties or all the engineering behind something like Highrise but, at the end of the day, a CRM is basically a database. It’s a database of contacts and it doesn’t usually do anything for you, whereas with Bluetick, it’s more about automating a process of moving somebody from one step of your sales funnel to the next and making that visible to everybody. Now you can argue that, OK, that’s a CRM, that’s exactly what that does. But most CRMs don’t necessarily have built in functionality that does a lot more than that. They don’t do a lot of that automation right inside the app. They rely on a lot of external processes, external API’s, webhooks, that kind of stuff. And Bluetick has some of that stuff built right into it.
Rob [25:58]: I think this still points to you probably needing to find out exactly how to describe Bluetick. And before you were saying it was sales automation software and I actually like that. But now I’m realizing it may need to even be more specific and it’s like sales email automation software. Or email based sales automation software. Something like that because that’s really what it does, right? You could say sales automation and someone might think, “Is it going to do cold calls for me?” That could mean a lot of things but you’re really specifically focusing on using email to move people through a funnel. And so I think still seeking that description is something that you should probably do in the next few weeks and months.
Mike [26:31]: Yes and no. The email piece of it is like the v1. It’s just like the version one piece of it. So, I’ve had conversations with people about automating text messages, for example. They get a list of customers that they’ve done business with and they have high volume; and they want to be able to turn around and send text messages to their customers; and hook it up through Twilio, for example, so that they can have those replies go directly into Bluetick. Well, that’s kind of like a secondary – I don’t want to say secondary action – but it’s an additional mechanism for interacting with the customer. You could have email; you could have phone call in theory. That could initially just be like you plug something in and write down what you talked about but I think that Close.io actually goes an extra step beyond that and even records the calls and allows you to make calls through Close.io.
Rob [27:18]: Right.
Mike [27:19]: I’m not saying I want to do that but –
Rob: [27:21]: Yes, but I think you’re getting ahead of yourself.
Mike [27:22]: Oh, I agree.
Rob [27:22]: I think if you called yourself email sales automation at this point and then later on you drop it – You think about Drip we were like epic autoresponders early on. And it was all about the promise of raising conversion rates with the email capture widget. Then it was like now we’re automation software, email automation. And then it’s like now we’re marketing automation. We evolved over time. So don’t feel like because you call it email sales automation and I’m not saying that’s the term to use but if you picked on that had the word email in it you could change that later when you add SMS.
Mike [27:49]: Yes.
Rob [27:49]: You adding SMS, I’m guessing, is six months out so that gives you plenty of time. And maybe more, maybe six to 12 months. I think there’s still a lot of progress to be made with just the email front.
Mike [27:58]: Yes. There’s a boat load of stuff that could be done. It’s more a matter of prioritizing it. And I had a brief discussion with my developer this morning and we were talking about even just like a data import. And we kind of scaled it really far back in terms of what the initial plans were because it was just like we could do everything that we want to do but it’s probably going to take at least a month and it’s really just not worth the time investment at this point. So, we scaled it back. It will probably take a couple of days to do it instead of a month which obviously frees up time to do a lot of other things. But now that the, I’ll say that the bulk of the cleanup work is done, and I really do feel that way. A lot of the technical debt that we assumed early on to get something out the door as quick as possible, a lot of that stuff has gone away at this point and it’s a lot easier to make changes now. And there’s more documentation; everything’s more standardized; the code itself has not got three different standards that the code is adhering to. It’s just a lot more manageable. So hopefully at this point we can move considerably faster than we were before.
Rob [28:59]: Some other things from my side as I was reflecting on the past three months after the acquisition. I talked about a few of these things but a lot has gone on in terms of Drip. We launched a $1 plan, we doubled our affiliate commissions, which is nice to do, up to 30% recurring. We’ve hired three engineers which has been extremely time consuming. I forget how much time it is to start from nothing and to write a job description and to post it, take the incoming clients. The nice part is Leadpages has a recruiter and so she actually goes out and emails people prospects, essentially, which I was doing in the old days. It’s just some much stuff that I used to do that I’m able to hand off to other people. But even then all the interviews. You have the phone interviews and then the in-person interviews and then the decision and then the salary negotiation and just all that stuff. Even though I’m not handling all of it, it still does require a lot of time and energy.
Hired three engineers which has been mostly the bulk of my job, bulk of my time in a week doing that. And then I’m hiring one more new employee here in the next couple weeks. Interviewing people right now. I hope to slow down hiring. I don’t really expect to keep growing at this pace. I’m a big believer in small teams and being super efficient and scrappy and agile. And I think that growing the team too large too quickly is really a mistake that some startups make. And then you see them slow down because if it gets bigger you have to involve process and then the process slows down. I just don’t think that that’s the place we want to go to. Doesn’t sound like a fun way to go to grow the team that quickly. So hoping to slow that down and give myself some time to look at other stuff.
Mike [30:34]: Well, I think that as you grow the team people need to become comfortable – not just with each other but with the things that they’re working on and how they work together. And if you grow too quickly – I saw this at Pedestal Software to some extent because we grew from I think I was the fourth engineer that was hired and within probably a year we were up to 10 or 15 or something like that. And when you have that many people added to a team that quickly, it’s difficult to – get on the same schedule is not quite the right way to phrase it, but get in the same mental mode of working together. Get on the same page in terms of how you’re doing stuff. You know what I mean?
Rob [31:12]: Yes, totally. There’s just an adjustment period when you’re working with a new group of people on a new app.
Mike [31:17]: Yes, that’s it. It’s that adjustment period. It’s hard to do that and scale it up very quickly without having things go sideways very quickly as well.
Rob [31:26]: Yes. And so, other transitional stuff that’s happened that’s been really nice. I’ve been able to basically hand over support. Leadpages has, I don’t even know, 20 people or something. 25 people on their support team and we had one. And so to have trials go up as high as they did as quickly they did, which is where the bulk of support’s going to come, we just never would have been able to hire that quickly. And certainly didn’t have the budget to do it. I’ve handed over the reins of that to their very capable team at HR. Obviously all HR stuff. There was no reason for me to be managing payroll and employee onboarding and insurance plans and just all that stuff. So that was good to hand over to them. Legal, affiliate management.
Mike [32:03]: All the crappy parts of running a business.
Rob [32:04]: Isn’t it funny? Yes. Everything I’m naming is like we are product people. We want to build product and there’s all this other stuff that you have to do to have a company. And it’s really nice when there’s someone else there to do it. So my job has actually been filled with less as Anders called it in his question. You said the crap work. And for me this is crap work for me personally because of how I’m wired and because of my focus and what I’m good at. But it’s actually someone else’s sphere of genius. You know what I’m saying? The HR person, it’s her sphere of genius so she should be doing it. And the legal and the affiliate management, this is what they do fulltime. And so me having it as one of 50 things that I’m managing it’s just not going to be done anywhere near as well.
To be honest, I feel right now we’re getting to the point where we’re starting to ship pretty quickly again. The first 30 to 60 days after the acquisition was like, oh man, we need to add servers; we need to scale; some things are starting to get slow. We had people come in trying to send spam. There’s just all this stuff you’re fighting. And then we got enough code written that we’re out well ahead of that now. And that’s given us a chance to really get back in and dig into features.
And so, we’ve shipped some pretty cool things in the past couple weeks. And there’s some fun changes I won’t talk about yet but that are going to be coming here in the next month or two.
Mike [33:21]: Awesome. Well, I think we’re kind of running out of time here. But I guess to wrap things up a little bit, one of the things you’d asked me earlier was how to make sure that things are moving forward in the way that they need to; and how I’m going to move the app ahead; and put more people into; and actually scale up the customer side of things as opposed to digging in, as you said, and focusing too much on things that are not going to be as important. Or just simply aren’t as important. And I think for that, for me it’s really a matter of putting together some goals. And I think that early on, when I was first doing the customer development for it, I had some very concrete goals and I was highly focused on making sure that I was achieving a certain number of calls per week and having conversations and converting people into the preorders. And I think I need to get back to that. I think I need to pick maybe one or two different KPIs that I’m going to go after and use those as benchmarks moving forward for at least the next month or two. I don’t know off the top of my head what they are. I have some ideas but I think I may need to sit down and first thing is determine exactly what those are and then track those moving forward.
Rob [34:24]: Yes, totally. That sounds like a good thing. I feel like your number one focus right now should be getting more people on and getting them to pay you. And figuring out if there are sticking points between them paying you, what those are. Getting them hammered out moving as quickly as possible.
For me, to wrap up, over the next few weeks I’m going to be going to the Converted conference which is the one Leadpages puts on. I think I’ll have some stage time. I don’t think I’m doing my own talk there but talking about Drip and some other stuff. I’ve been spending a lot of time recruiting speakers for the two MicroConfs we’re putting on in six months. Which is a bit of an effort.
And then on more of a personal note. It’s a trip, I’ve been getting back more into investing. I kind of put that on the back burner a decade ago as I dove headlong into entrepreneurship, but it’s always been an interest of mine since I was a kid. I bought my first share of stock when I was like 14 or 15. I had to do it through my dad’s account because, obviously, you have to be 18 or something to do it. Read a lot of books when I was younger and I thought that was a way to make money. And as I learned it’s like investing is a way to grow money slowly and stay ahead of inflation but almost no one gets rich or makes their millions purely from investing starting with nothing. There’s like two exceptions in the history of mankind or something. But now that I have a little bit of a nest egg from the Drip acquisition, it just makes a lot more sense to be more deliberate about it because with a larger sum of money, it’s like just knowing more and doing 1% or 2% more per year, being a little more deliberate about it, it really is worth a substantial sum. And so that’s actually been a lot of fun. I’ve been listening to audiobooks. Actually, maybe at some point we could do a whole episode on it because that’s what I’m doing what my spare time is really thinking and looking about that and educating myself again and updating my skillset there. So, I have a lot of thoughts on the topic.
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 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 308 | Work-work Balance, Living A Process-Based Life, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss work-work balance, living a processed based life, angel investing, and answer more listener questions. Mike also gives an in depth update on his progress with BlueTick, and Rob helps define angel investing and shares some ways to make a possible return on your investment.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss work/work balance, living a process-based life, [angel?] investing, and more listener questions. This is Startups for the Rest of Us, episode #308. [THEME MUSIC] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:28]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes that we made. Wait a minute, was that the right thing? I wasn’t reading it.
Mike [00:36]: I don’t know. You tell me. I wasn’t listening [laughter].
Rob [00:38]: Yeah, I think – what is going on this week, sir?
Mike [00:42]: Well, I started rolling out the latest updates at Blue Tick, and this is kind of a massive release that I’ve been working on for a while now. But the core functionality of it is that it allows the application to download the actual contents of mail messages from somebody’s mailbox. The difficult thing behind it was actually that, depending on which type of mail server you use, there could be a lot of duplication in the mail messages that are behind it. So whenever you move a message from one folder to another on a mail server, it doesn’t move references around. It actually copies all of the data as well. So I basically had to run through this process of downloading the messages, and trying to find out if they’re unique or not, and storing them. It was kind of a mess. I don’t think I’ve ever written so much test code in my life for one specific function. Or for one feature, to be honest. Because there’s just so much involved in it.
Rob [01:35]: Yeah, it sounds like it. Why is this important for Blue Tick to have as a feature?
Mike [01:39]: People have been asking me to basically be able to surface just the content of the emails inside of the application, because they want to be able to log in, and when they’re sending emails through Blue Tick, they want to be able to see the replies, and what previous messages have been sent to the person. The only way to get that is to download them from their mailbox. So it makes it difficult to be able to surface that. I can show pretty easily the emails that I have sent, because I keep copies of those, but I don’t have any other way to show them emails that have been sent prior to them signing up for Blue Tick, unless I go into their mailbox and download them.
Rob [02:15]: Alright.
Mike [02:16]: So it basically provides them with a better history of all the different conversations. It gets more important in a team situation, because if you have multiple people who are on a team and User One sends an email to Sally, and then User Two sends a different email to Sally, you’ll be able to see those things in aggregate, so you can see what the team communication is with a particular person as opposed to just your own personal communication with that person.
Rob [02:39]: True. The bummer is that you had to build it yourself from scratch. I have to imagine that there’s not as much – well I guess with .net there isn’t as much open source stuff out there to do this. I know that when we tried to do stuff like this – we haven’t done this exact task, but when we have done stuff like this, like parsing RSS feeds, or just stuff that’s semi-standard but it’s a little [cloogy?]. There’s bits of [Ruby Jam?] written to do that and that we were able to use. Were there no components out there that did take care of this?
Mike [03:07]: Well, there’s components out there that allow you to interact with a mail server and download the stuff, but there’s nothing that says “Okay here’s this back-end storage system, and it’s a very generic thing, we’re just going to treat it like a database or something like that.” And you can wire up those pieces, but there’s nothing out there that directly translates a copy of the contents of a mail server into some generic back-end storage system. Because the back-end storage footwork can be pretty much anything. It can be a database, it can be a [nosequel?], it can be a file system. It can be a variety of different things. And all of the components that I used to get the messages are all of the shelf, but the back-end storage of it – depending on how you index things and how you want to surface the data, and what specific pieces you want to actually store, those are the pieces that I had to build. Anywhere where there’s questions about how do you search it, or index it, or anything like that? Those are the things that I had to also build. And then making sure that there’s tools in place that we can verify, “Okay, yes. We got this message, and we were able to get the contents. We built all the [indices?] and everything else.” And later on, my message might get deleted. So if a message gets deleted, then all that stuff needs to be updated. And then we had to build tools to make sure that everything got deleted. There’s no orphan data laying around, etcetera. It gets ugly very, very fast.
Rob [04:27]: This does not sound like fun at all.
Mike [04:29]: It is not. It was not.
Rob [04:32]: So, on my side, I wanted to call out a forthcoming e-book from MicroConf’s very own Kristoff Englehardt. And his e-book is SassEmailMarketing.Net and he’s obviously writing it for Sass Companies. He’s teaching about email marketing. And he did a video interview with me today. I’m assuming that he’ll include it as a bonus or something like that. So if you’re interested in that topic, SassEmailMarketing.Net, on another note, did you notice that our last two episodes went live almost two weeks late?
Mike [05:01]: That’s not technically true. [Crosstalk] They were out there.
Rob [05:06]: Right. That’s true. That is technically true. I got on Downcast, which is what I use on my iPhone a couple weeks ago on a Tuesday, and the episode didn’t come out. I thought, “that’s weird.” So I went to the website and, sure enough, it was live on the website. Well, I was thinking that maybe iTunes and Downcast got out of sync. Because Downcast – I think it must scrape iTunes or something like that. It wasn’t showing up. So it was several days later and you and I finally dug into Feed Burner, which is something we’ve used to for subscriber counts. Feed Burner got acquired by Google four or five years ago and they have just let it languish. So sure enough, something in there just snapped. Nobody cares, or was willing to fix it. I posted to their forums, I tried to email them, but there’s no help email address at all, support bounced, support@ bounced back to me. So I posted on their forums and it was like crickets. So we had to go nuclear on it and just switch everything over to a bare WordPress feed. The redirect is going, so hopefully everyone who is hearing this episode, it came up properly in your pod-catcher. But if someone is experiencing issues, feel free to get in contact and we’ll see if there’s any edge-cases that we’ve missed.
Mike [06:16]: Well, the problem is that if they’re hearing this episode then, obviously, they’re past the issue.
Rob [06:21]: Perhaps.
Mike [06:22]: [laughter] So it almost doesn’t matter.
Rob [06:22]: Although, a bunch of people were saying that they didn’t notice because they listened to the episodes on the website. Can you believe that?
Mike [06:28]: Oh, that’s interesting.
Rob [06:29]: I know. I would never have thought to do that. It just doesn’t – I mean, they’re on the website but it’s more for posterity, right? I guess the main consumption driver is really a pod-catcher. And I think 80% maybe of our downloads – because that was the cool thing. Feed Burner would tell you what percentage came from iTunes versus the Google downloads. It just had all these different divisions of your downloads. It was like 10-20% web and everything else was podcast apps. And of that, I think it was 80% or 90% iTunes. It was a huge consumption. Although, wait. That’s not true because Google had at least – they had the Android thing and it was like 20-some%. Anyways, I don’t remember the exact numbers, but it was nice to know. And we’re basically not going to have any of that data now. I mean, we do still use Blueberry I think it’s called. It gives us download data per episode, but the metrics in there are not very good. I guess we’ll just continue to fly blind.
Mike [07:20]: Yeah, that’s one of the downsides for podcasts in general. The statistics behind them that allow you to see kind of what’s going on, and what your listenership levels are. It’s atrocious. I’ve looked around a little bit, and talked to Craig Hewitt a little bit about it – he’s from Podcast Motor. And they’ve looked into potentially developing a product around providing statistics. I don’t know if they ever went anywhere with that, but the problem is that in order to get anywhere with those statistics you really need to kind of know – or at least be hooked into whatever the application or the platform is that the people are playing the podcast through. Because there’s a difference between a download and a play. You know, it could be thousands – it’s just like RSS feeds. There could be thousands of hits to the RSS feed, but is anyone actually reading it? And you really just don’t have any good way of knowing. That’s a very hard problem to solve, I think.
Rob [08:09]: Yeah, that’s kind of left out. I mean, since podcasting was bolted on RSS, and RSS by itself doesn’t have any type of analytics built into it, right? It just simply passes you a URL of a file. In this case, typically an MP3 file. And so what you’re saying is that when someone hits your RSS feed and then goes and downloads the MP3 file, your web server has no idea where that came from. It doesn’t know that it came from iTunes, it doesn’t know that it came from a pod-catcher or if it was played on the web and was just accessing it. So the cat’s out of the bag on that one and there’s not really much we can do to put it back in. But I guess that’s just the state of things. We can deal with it.
Mike [08:46]: The other funny part about this is that Feed Burner has kind of been on autopilot for Google since I think 2011 or 2012. So here it is like four years later and we finally decided to switch off of it.
Rob [08:57]: I know. Well, you know if things aren’t broken, you’re not going to spend the time and risk losing subscribers and risk potentially breaking anything. Any time I mess with this stuff I always feel like DNS propagation. You know that it’s probably going to work, but you’re not really 100% sure until it does. And there’s really nothing you can do to test it. You just have to do it. You just have to click the button and hope that everything redirects. And if it doesn’t and things start breaking it can kind of suck. So we have some listener questions that we’re going to run through today. I think that this cleans out – I don’t think we have any more listener questions in the queue, which kind of makes me feel good. We’ve had some of these listener questions in here since 2014. I’m sorry about that. It also makes me feel a little bad because people aren’t asking us questions. I feel like we should get these conferences filled again. So if you have a question for us that you’d like us to answer on the air, please send your questions to StartupsForTheRestOfUs.Com. So our first couple of questions are from Anders. Anders Peterson, who comes to many MicroConfs, you’ve heard us mention him on here before, said “One question I have is, do you have anyone in your life that continually asks you the hard business questions? Those questions you don’t want to hear but probably need to. If you do, how do you find those people?”
Mike [10:03]: I would say that I probably use my mastermind group for this kind of thing. When I have questions or problems I will bring them to them. But I also feel like in a mastermind group you have to be a little bit cognizant that over time you become good friends with people, so it can more difficult for them to essentially challenge you on the things that you’re doing, and really put your feet to the fire and say, “Look, you’re going in the wrong direction here. You haven’t made progress on this in a very long time, what’s going on?” They tend to be more intimately involved in the things that you’re doing, so they’re not as objective. That’s not to say there’s no value in having made a mastermind group, because I think there’s a ton of value. But I also think that because they are much closer to the situation – obviously you’re that kind of first tier where you’re very close to it and it can be very difficult for you to see the forest through the trees, so to speak. In addition to that, your mastermind group tends to be people who are also only one step removed. And then if you have a business coach or something like that, they’reprobably a little more removed from that, or even if you have just people that you meet at a meet-up or entrepreneurs that you meet a conference. Those people are even another step removed. I think as you get further removed, it’s probably easier to be more objective about things. And the conversation you’ll have, you’ll probably focus in on a few key issues versus the people who you are very familiar with who you’ve been talking about, they won’t necessarily question come of the assumptions because they’ve been there with you while you were making some of the decisions about those assumptions.
Rob [11:28]: I think for me it’s the same story. The mastermind people are going to be the people you feel comfortable enough with, or they feel comfortable enough with you to be willing to do this. Because if you don’t know someone very well and they ask you those hard questions, it kind of pisses you off. It’s like, “Who are you to ask me those questions?” But if you know that someone has your best interest at hand and they’re not trolling you on Twitter with a hard business question, but they’re actually asking it to help you maybe face up to some shortcomings or to face up to a decision you’re having or to call out bad decisions that you’re making or thoughts that aren’t valid. I think that’s helpful. So it has to be someone that you have a good relationship with. That you trust that they have your best interest at hand and that they’re not going to be a jerk and always ask the hard questions. Because if that’s all someone does, it’s going to get irritating to. You have to have a relationship beyond that. So I would say, yes, mastermind group. The other one is my wife. Sherri may not be inside the business and be able to ask the detailed business questions, but she does ask, as she’s hearing me talk about the same thing over and over over the course of a month or two months, she says “How are you going to fix that one? Why aren’t you fixing it? What can you do?” And starts prodding in there. And of course we have the relationship where we’re able to do that. The question of how you find those people, we’ve talked about finding folks for a mastermind. You’ve got to build those relationships slowly, build them over time, meet them at MicroConf, that kind of stuff. This is a good question. I think more people need to think about this topic. Who is it that is asking these hard questions, who has your best interest at mind and who knows enough about your business to know that it’s the right question to ask you? Thanks for sending that question along, Anders. Anders had a couple questions, actually. He said, “I’d like to hear more about how you handle work/work balance. I’ve talked a little bit with Rob last MicroConf Europe about how much time he spends on fun work and how much time he spends on crap work. What do you do to notice when the balance is off and how do you rectify it?”
Mike [13:19]: I like the phrase “work/work.”
Rob [13:22]: Work/work balance is cool.
Mike [13:23]: Yeah.
Rob [13:23]: I really like that idea of – it’s basically saying that not everything you do is going to be awesome every day, or fun every day. It’s like fun work versus crap work balance. Work/work balance is a clever way to say that.
Mike [13:34]: Yeah, but I can also see it coming from a large enterprise 500 company where they’re like, “Oh, there’s work that you do for us that you do here, at your desk, and then there’s work that you do at home while you’re not at your desk for us.” I guess for this type of thing I would say that if you look at the things that you’re doing and you’re finding yourself easily distracted from them and procrastinating them, then those are things that you probably need to figure out how to address. Is it something that you just need to power through? Is it a short term thing? Or is it something that you need to basically give to somebody else because it’s frustrating to you, you don’t understand it, or you don’t have the experience and expertise in order to do it? And I think that just being cognizant of what those things are and how you’re feeling about the work that you’re doing is important. It’s one thing to just say, “be more aware of it.” I don’t think that that’s the answer because it’s very difficult to become aware of it if you’re not already setting aside time to review those things. What I find is helpful is setting aside specific times at either the end of the day or the end of each week, depending on what you think the appropriate cycle is, to review what you’ve been doing and where you’ve been spending your time, and try and figure out if that’s the best use of your time. So it depends on what type of iteration cycle that you’re interested in achieving. If you’re trying to avoid those things where you’re stuck doing the same thing for several days on end, you might want to do a daily review. Even if it’s just five minutes set aside, a scheduled time, put a reminder in your calendar or do some journaling or something like that. If you’re okay with longer time periods where it might be a couple of days or a week or two, then you can space it out and say, “I’m going to do a review once a week, Friday at 3:00 P.M. or 4:00 or something like that.” When your week is especially winding down, put something in your calendar that says, “Let me come back and review what I’ve done over the past week.” So again, it depends on what that iteration cycle is, but the really important piece is making sure you set aside time to consciously review that as opposed to letting it be something that creeps in and then is a problem for days, weeks, or months on end and then suddenly you realize, “I need to do something about this.”
Rob [15:44]: I think that’s a really nice way to attack it – is to just review daily or weekly. Personally, I notice because I start losing motivation and I start not liking my job. I mean, that’s what it is. I’m the co-founder of the company and when I stop liking my job for weeks on end I realize I’m doing too much crap work and I need to figure out what it is. Then I start keeping notes at work. What did I do today that sucked? And I’ll do it as I’m going through. I don’t do it reflectively. I’ll realize as I’m sitting here in my inbox for five hours, okay, I need to figure that out. I mentioned this in several year-end reviews that I need to do less emails. That was something that was always there. Legal and administrative stuff and H.R. – there was a bunch of things that I was noticing would creep up as we were growing DRIP. So it’s work that had to get done, but it was work that I didn’t enjoy. Typically I’ll pick up on it because I’ll notice that I’m not enjoying stuff and then instantly the way I try to rectify it is I’ll identify, make a list, and then I’ll say, “Who can I hire to do this instead?” Like a specialist who is really good with administrative or really good with H.R. Because most of the things that you consider crap work is a job for someone else and it’s a thing that they enjoy. It’s just about finding the right person to do that for you.
Mike [16:56]: One thing that you mentioned in there that I think is probably not inherently obvious to everyone is that when you’re building your own business and you’re running it, you’d think that it would be like “this is going to be great, I have a job that I love because I built this job in order for me to enjoy it.” But the reality is that there are going to be aspects of running a business that you don’t enjoy. I think it’s just important to keep that in mind. Not everything about the business is going to be something that you enjoy. There are some thing you’ll just have to power through and there are other things where you’re going to want find someone else to do them.
Rob [17:26]: And then Anders’ last question was, “Have you ever noticed how most ‘normal’ people” – and actually, I like that phrase, “normals versus technologists” is a phrase that I’ve heard, but he says, “Have you ever noticed how most ‘normal’ people live an event based life? When I when the lotto, then I will become happy. When I get a new car, then I will be happy. Whereas it feels like most successful entrepreneurs live a process based life. I work on my business because it makes me happy, and because long term it will pay off. What is your take on this and where are you?”
Mike [17:53]: I would have to agree with that general assessment that a lot of people do live their lives that way, and they are always working towards these goals, but and they don’t always enjoy the process. They’re looking specifically for achieving that goal, but they don’t really look at anything beyond that. And they will make any number of sacrifices during that process thinking that the “I have arrived” fallacy that you kind of mentioned here on the podcast here before – the question is “what’s next?” What do you do from there? And if you don’t have an answer to that, it becomes very difficult to go on to the next thing, regardless of whether or not you were successful with the previous one or not. So you really have to think of a lot longer term than that. I don’t think that probably matters so much for people who are non-entrepreneurs because they have a 9-5 job, they go into work every day, and at the end of the day they go home and work on their hobbies and spend time with their families and it doesn’t matter. Because no matter what happens, they still have to go back to work the next day. That’s probably less of a problem for those types of people than it is for entrepreneurs in that situation where you could have a life-altering event – which is much more likely to happen, such as selling your business or selling your product, than win the lottery.
Rob [19:03]: Yeah. By its very nature, entrepreneurship is a constant state of forgoing present gains for potential future rewards, right? Your present day gains are things like you go out to Happy Hour, you could hang out and watch a movie, you could spend time with your family. There’s a ton of things you could do that are fun, but instead of that tonight you’re going to spend three or four hours writing code, building your business, doing some marketing. And over the weekend you’re not going to go out of town and go to the beach, you’re going to spend it writing sales copy and thinking through your pricing. That kind of stuff. That’s pretty much a perpetual state of affairs as far as I’m concerned as an entrepreneur. I think, Anders, you’ve made some generalizations here that I think are fairly accurate. I think that people who are drawn to entrepreneurship, they have to know they’re investing for something better in the future. So I do think there is that mix of – I think you can have the arrival fallacy as an entrepreneur because you can say, “Once I quit my job, then I’ll be happy. Once I sell my app, then I’ll be happy.” It’s easy to slip into that, but I do think the healthier and the long term entrepreneurs who make this more of a sustainable lifestyle realize that at a certain point you just have to be in it for the process. You have to find something in it that gives you the dopamine rush, right? And for some people that’s – Derek and I have talked about this – for some people it’s shipping a feature. It’s pushing a feature into production. And that’s the rush you need. And so you’ve got to find that and make that more of a part of your day. For other people it’s doing launches. Then figuring out what you’re going to do. An e-book launch, every other month for marketing? Could I do a video launch? Even if you have a Sass app, if what you really want to do is launch little products, because that’s where you get the rush from, then figure out how to do that. If you really love building a high-performing team, and working with them to solve problems, then figure out how to do that. That’s what it is, I think. Becoming happy and fulfilled by engineering a business rather than going for the end result. The end result – I mean, we talked about this with the Bill Walsh episode, right? Where he basically says to put your best effort in, be the best you can, and the score will take care of itself. That’s how I view this. It’s like the more you can make sure you’re happy and you’re keeping those around you happy, and making this a sustainable lifestyle, I think that good things will come of it eventually. Our next question comes from Kevin from Viper.io and he said, “I just wanted to jump in on a question. I love the show. I’ve been listening religiously and it’s overtaken all of my other podcasts. I have a question for you and hopefully you’ll have a chance to answer it. Rob, you say you do [angel?] investing in these fun startups. How do you make a return on those? I know some investors take a percentage of profits every month or something like that. Is that the structure you work with? Or are you banking on an exit? Have you made a return yet on any of those investments?” The fun strapping is where someone is basically trying to raise a small round. It’s typically between 50k and maybe 200,000/300,000 and it’s to get to profitability. So they’re not looking to raise a series A, B, and a C, they’re really just kind of raising a small round to grow quicker but to get to profitability. Last question is, “Have you made a return on any of these investments?” And the answer is no. I wouldn’t have. My first [angel?] investment was maybe three or four years ago. That was WP Engine and it’s now worth a bazillion dollars. I think their most recent round is public info. The most recent round was over a year ago and I think that they were valued at 120 million. So, certainly, my investments on paper are worth substantially more than when I first invested. That would be the business that’s the furthest along and there’s been no liquidity event or anything like that. Another part of his question is how am I going to make a return on these? Some of the investments are in big startups like WP Engine that are either going to get acquired or they’re going to IPO. I mean, there’s going to be a big liquidity event, as they call it. A chunk of mine – and it’s kind of what I’m focused on now because it just fits more with who I am and the business I believe have a reasonable evaluations are the ones that are going to be profitable businesses. These are not these moon-shot businesses. They’re businesses like Jordan [?]’s Hook and Justin McGill’s Lead Fuse and [?] from Matt and Joel – I’m an [angel?] investors in each of those. These are businesses that, I believe, they all absolutely have the potential to get to seven figures and maybe even eight figures in revenue. They’re going to be businesses that just spit out cash. They’re Sass businesses. And so gross profit on Sass apps can be something between 50% and 80%, and net profit can be between 20% and 70% depending on how you’re running it and how fast you’re growing all this stuff. So there’s a lot of money – a lot of cash – that can come out of these. So the deal typically is structured – and this is the same kind of deal that you’ll see at Indie.VC – is the money goes in and as long as the money is used to take care of the business, nobody takes money out. But as soon as dividends come out, a certain percentage goes to the investors. Some of the deals say that once the investors are paid back 3X, then things revert to a smaller amount that goes back to the investors. Sometimes investors get completely paid off, and are paid out at 5X. I think that’s how Indie.VC works. If they’re paid 5X then they’re own zero of the company anymore. And it’s only if the company were acquired before then that .VC would get it. I think that’s how it works. Don’t quote me on that. But that’s the idea. And each is a little different. I don’t want to speak specifically about the investments because the payment works private. The idea is, yes, while it used for the business nobody is making money. The founders are taking a salary, but there’s no dividends coming out to anyone. And then once they start taking that, a certain percentage which is negotiable – and it’s a different setup on each deal. Sometimes it’s based on how much you actually own. If you own 1% of the company, you get 1% of the dividends. In the others the investors are favored more upfront until they get paid back their initial investment, 1-2X. And then it flips. That’s the basic structure.
Mike [24:33]: I like the Indie.VC model, and I don’t know whether they pioneered that or if they’re responsible for pushing that, or if they were the first or whatever, but I like that idea better than the .VC model just because it’s more in favor of the entrepreneurs who are building it. I don’t think that you need this massive exit in order for it to be work it. I don’t know what your feeling or take on this is, but in many cases it’s not necessarily because you want to have this giant payout, but you want to see somebody be successful. You don’t want it to be a go-big-or-go-home, you want it to be something that somebody can grow into a viable and profitable business.
Rob [25:11]: That’s right. And those are the kind of businesses that I believe in anyway. Those are the businesses that I want to see succeed and that’s why I’ve started doing this model. And Indie.VC, I have seen their investor deck for people who become LP’s in their fund, the people that actually give money to .VC to invest. And they’re doing well with it. There’s definitely returns to be had in this fashion. This is also all modeled after brick-and-mortar businesses. If you want to start a restaurant or a car wash and you went to investors, a typical structure for that is investors do put up the money and you take a salary as you run it. Then as profits are generated and there are dividends, more goes to the investor. It’s often 80/20, 80% goes to the investors until they’re paid back either 1 or 2x, and then 20% goes out to the founders. It flips at a certain point. Sometimes there’s a maximum payout. Again, with Indie.VC 3x or 5x is I think where it maxes out. Where with brick-and-mortars, I’m not sure if it ever maxes out or how that goes. I think it’s more about a business that generates revenue, not this liquidity event. Right? In that sense, it’s funny – an app like Drip who’s long term play is become a profitable business has almost more in common than a dry cleaner or a car wash in terms of the business model, than it does with Facebook or Twitter where they really need to get massive or they’re just going to self-destruct. Our last question of the day comes from Jordie [Coski?] from TapFun.com. He says, “Hey guys, I’m a big fan of the show. I’m wondering how you would structure a salary for a lead developer on a Sass app. Would you build in any kind of performance structure related to revenue and revenue growth of the service?”
Mike [26:49]: I think that when you’re looking at this type of question, there’s two different ways that you can view it, or two different perspectives you can have. The first one is what role does that developer actually have in the development of the product? Are they a W2 employee? Or are they an external, third-party contractor? I think that depending on the answer to that, it’s going to heavily impact how you treat that person in terms of the compensation. So, for a W2 employee, obviously, you’re going to give them a salary. And this is really where the questions come in about giving them additional compensation or performance structure. If they’re an external contractor or third party that you just hired off of UpWork or LinkedIn or something like that, chances are really good that there’s not going to be any performance bonuses or anything like that. You’ve kind of negotiated whatever the contract rate is with them, and that’s what you pay them. It doesn’t really matter what their performance is, that’s what you’re going to pay them. If they’re a W2 employee, chances are this is where those questions will come in. And I think that in the case of developers, the vast majority of developers, there’s not going to be any performance bonuses, because it’s going to be very difficult to map the things that they bring to the table to the growth of the products. It’s very easy to write tens of thousands of lines of code that don’t really contribute to the bottom line in any measurable way. It’s very difficult to map those lines of code back to the performance of the product. You can write tens of thousands of lines of code that have zero to do with the product’s growth. That’s really what sales reps are for, that’s what the compensation record is for, compensation reps, people like that, that’s what they do. It’s to help them promote the product and incentivize them to grow the product. And they will do anything they can in order to do that. But with the developer, those mappings are much more nebulous. It’s very difficult to derive the impact on the product based on what it is that they do. So those are probably my general thoughts on it, in terms of offering equity or a stock plan or anything like that. Those things are all really negotiable. It kind of depends on what your relationship is with the developer and what the company culture is and how much money the app is making. You could do profit sharing or revenue sharing, those types of things. There’s lots of different way to go, but it’s also very situationally dependent. And I don’t think these are things you have to look at or really need to consider on day one when someone comes in. If you have a team or five or ten people, then maybe it’s something to think about. But for your first develop or two, I wouldn’t worry about it at all.
Rob [29:16]: Yeah, I agree. I mean, you have to think about A, motivation, and B, what’s kind of the standard and why has that arisen? And the standard is not to give anybody but sales people a cut of profits. I mean, that’s typically the thing. Even people in marketing, as a rule at startups, they’re not getting a percentage. You know, they may get a bonus at some point or they may get stock options, but they don’t get a cut of the profits. Because you need those profits to grow. Especially at a small Sass app, you really want that money. I think something like stock options, which is really good for retention, because they invest in it over the years, I think that’s cool. Because then everyone feels like they have ownership. Also think about motivation. Are developers motivated by money? I mean, some, yeah, maybe. But developers are much more motivated by having really cool problems to solve, and working in an environment that’s fun, and being able to ship a lot of code quickly. There’s certain things that are just more valuable than a few thousand dollar bonuses that they’re going to receive each quarter or each year. So that’s not something I’ve seen done, and it’s not something I would particularly recommend. Giving people bonuses at some time during the year, or doing profit sharing, or setting up some plan later on down the line I think totally makes sense. You want to take care of your people. If your business is making money, you should share it with them. And giving people stock ownership is cool, there’s lot of different options. But up front, having that be part of the deal, I think is really tough. You could easily give away more than you need to or want to because you just don’t know what the business is going to look like. Get farther down the road, get this thing live, and when things start happening then make that call.
Mike [30:41]: As you mentioned kind of early on in that answer, it also depends on what their motivations are. So, just thinking about giving them equity, some people might not care about equity at all. So you have to understand what their motivations are for that kind of thing. It might not impact their productivity in any way, shape, or form, and you just gave away part of the company. You have to keep those things in mind as well. I think those things take time and it’s not something you will want to necessarily decide on day one. So I think that about wraps us up for the day. If you have a question for us, call it into our voicemail number at 1-888-801-9690, or email it to us at Questions@StartUpsForTheRestOfUs.com. Our theme music is an excerpt from “We’re Out of Control,” by MoOt used under creative commons. Subscribe to us in iTunes by searching startups and selecting StartupsForTheRestOfUs.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 307 | Is the Micropreneur Dream Still Alive?
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike inspired by a listener question, talk about whether or not the Micropreneur dream is still alive. Some of the topics discussed include reasons to start a business, stages of micropreneurship, and legacy.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to answer the question “Is the micropreneur dream still alive?” This is “Startups for the Rest of Us,” episode 307.
[Theme music]
Mike [00:00:16]: 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 [00:00:25]: And I’m Rob.
Mike [00:00:26]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:00:30]: Doing pretty good. I think we’re getting ready to send some emails to the MicroConf mailing list here in the next few weeks, because we’ve settled on the dates for MicroConf Vegas next April. If you’re interested in joining us and a few hundred of your closest founder friends in Las Vegas for, either MicroConf or MicroConf Starter Edition, head over to microconf.com and add your email address to our list, and we’ll let you know as soon as tickets are available.
Mike [00:00:55]: Are you saying we’ve actually planned something a little bit in advance?
Rob [00:00:57]: [Laughs] Once every two or three years we do this, and I think we might be ahead of the game on this one – although as I’m saying that, I’m realizing there’s still time for us to slack and get behind the eightball like we usually are.
Mike [00:01:08]: Yeah, cool. I talked a little about it a little bit this past week, about some of the changes that I was testing out for Blue Tick, and hit a couple of snags here and there mostly due to various RFC issues where they’re not real clear about stuff, or they imply things that are just absolutely not true. So, I’ve had to work through some of those, but the testing’s gone really, really well so far. I have a internal launch date that I’m shooting for at the moment, but I need to do a little bit more planning on that before I can commit to that actual date. I have a date in mind. I just want to go through all the lists of things that really need to be done before I can publicly call it out and say, “This is going to be the date.”
Rob [00:01:42]: Is this update just an internal rewrite, or does it add new functionality to Blue Tick?
Mike [00:01:46]: It adds new functionality. It allows you to see all the different emails that have been sent and received regardless of whether they were sent through Blue Tick or not, so when you add in a contact you basically just put in the email address of somebody that you want to add to the system. What it does is it matches that email address up to all the emails that you have sent or received from that person historically, even before you signed up for Blue Tick, and then it will be able to show those to you directly inside of the app. It’s a nice way of being able to mind your mailbox and identify people that you’ve started conversations with, and then they didn’t get back to you, and then – for whatever reason – you forgot about them. The app will have the ability to show those things to you.
Rob [00:02:24]: Cool. Given this, do you have a public launch date? At this point, you’re basically in early access right now, right? You’re getting your folks who’ve pre-purchased from you into the app and honing that and everything. Do you feel like your launch date is within reach?
Mike [00:02:37]: That’s what I’m still trying to sort out. I’ve got a list of all the things that need to be done, and I’m trying to figure out a time estimate for each of those. I know in my mind, “This is the date that I want to hit,” and I’ve got the list of things that need to be done, but I don’t have all the time estimates for all those things matched up and added up so that I can say, “Is this actually reasonable to be able to hit that date or not?” That’s what I’m working on right now, and that’s what the next step is.
Rob [00:03:00]: Mike and I really want to congratulate Glenn Germaine of My Practice. Glenn is a several-time MicroConf attendee. He’s come to MicroConf in Vegas with his wife. They fly up from Australia. He’s also written into the podcast several times, and has just been a supporter, and we’ve really appreciated our dealings and interactions with Glenn. His company was acquired by Best Practice Software, and he actually tweeted it out. He said, “Shout out to all our MicroConf buddies, particularly Rob Walling, [Single?] founder, for the years of advice.” He linked over to the press release, and so we have just a big “congratulations.” It’s such a big step to get to that point. He really grew My Practice on his own, boot-strapped it, and grew it to several employees, if I recall. Didn’t he have ten, 15 employees? That’s a big deal, to be able to exit that. We wish you the best, Glenn, moving forward.
Mike [00:03:45]: Yeah, and Glenn’s been coming to MicroConf since 2012, so it’s definitely been a long-time listener.
Rob [00:03:51]: Yeah, very cool.
Mike [00:03:52]: Yeah, congratulations, Glenn.
Rob [00:03:53]: What are we talking about today?
Mike [00:03:54]: Well, today what we’re going to be talking about is, “Is the micropreneur dream still alive?” This is inspired by a listener email from Scott Underwood. I’ll paraphrase some of the things that he said, but some of the different pieces he went into were the fact that, Rob, you just recently announced the sale of Drip a few months ago to Lead Pages, and it ties into Glenn Germaine’s announcement that he’d sold My Practice and is presumably going to be joining them for a while. Another announcement that came out recently was Patrick McKenzie announced that he was selling Appointment Reminder and, in addition to selling Appointment Reminder, should move on to other things. One of the things he’s doing is moving on to join Stripe as a full-time employee.
[00:04:31] Scott wrote to us and said, “I sent Patrick a quick congratulations email just before he broke the news, but it felt like the day the music died. My heroes are giving up on the dream I’m chasing and going back to being employees. Life’s a journey, a transition, growing families, etc., so priorities change. The Startups for the Rest of Us troops might need a little rally that the dream is still alive and attainable for those of chasing it. Thanks again for all the advice and entertainment over the years. Looking forward to more.”
[00:04:50] A couple of things I wanted to call out in this email snippet that I read out was that, I agree, priorities definitely change over time. But I think if you look at the three stories that I mentioned earlier, with Rob and Glenn and Patrick, the fact of the matter is that all three of these stories – if you look at them very objectively – they are success stories. All three of these were built from the ground up. They were built from nothing and were sold to the betterment of the founder. I think that if you look around at the general, broader community of people who are boot-strapping companies and building them, you can trice that back to MicroConf. You can see that MicroConf tends to sell out very quickly, and it’s aimed directly at this particular audience.
[00:05:30] So, you have to ask a couple of questions. The first one is: Are they pursuing something that’s ultimately going to put them back in the same position that they were in, which is working for somebody else? The second one is: Are they all delusional? The answer to that is, probably not, and I’m hoping it’s [laughs] really not. Certainly for some small segment of them, yeah, there’re some delusions of grandeur, but the reality is that people start businesses for a wide variety of reasons.
Rob [00:05:53]: Yeah. First off, thanks to Scott for sending that. I think it’s an interesting sentiment. I certainly thought it before I sold DRIP. It definitely crossed my mind, “What will people think?” That wasn’t a driving factor in the decision either way, but I did wonder how that would feel, and it’s interesting that there has been quite a bit of transition recently, and I bet just beyond Glenn and Patrick and myself, I bet there’re other folks here. I know there’s a lot of folks selling their aps and moving on to other things.
I think the thing to think about is – I don’t want to speak for Patrick or Glenn – but for me specifically, the micropreneur dream was to not work for someone else in a capacity that I didn’t enjoy, and to be stuck with that until I retired. These are the things. I didn’t work till I was 65 for someone, just trying to cram money into a 401(k) and just eke by and do the 9 to 5 and work my way up the corporate ladder. If you get fired or you leave that company, maybe you can do a lateral move. Maybe you won’t have as much trust. It’s kind of the rat race, right? I didn’t want to do that, and I didn’t want to work till I was 65.
[00:06:52]: So, while you can say at this point in time, this snapshot, “Yes, Rob now works for someone else again.” – something I haven’t done for about eight or nine years, I think, since I’ve been an employee at another company. But I ask myself: a, am I forced to do this until I’m 65? The answer is no, and that’s based on the financial means that happen from the exits and other things that I’ve had. The other thing is I’m working very much in a capacity that I really, really enjoy. I’m given this creative freedom. I could go into the specifics of it later, but I’m basically a product person. I’m doing what I was doing on DRIP anyways, but with a lot less headache and little to no – or, a lot less, I’ll say – financial risk. When you’re running your own company, you’re waiting to get just swatted by your competition, or to run out of funding, or to run out of money, or whatever, and that’s gone.
[00:07:38] So, I’ll just preface that by saying the fact that currently at this point in time I work for another company, given how different it is – so ten years ago, the last job I had, compared to now, it’s just night and day. I was basically a programmer just slogging away in a corporate environment. What I’m doing today is night and day, and I owe that to my entrepreneurship, and to the micropreneur journey. So when it’s like; Is the dream still alive? It’s like : Yes, it changed my life completely. Night and day. If I had not done that I would be in a completely different situation, with a completely different outlook and, again, I’d be slogging away, putting a couple hundred bucks a month into a 401(k), counting the days until I could retire and be in control of my own time. So, that’s kind of my initial thoughts, and we’re going to now dig into all matters of thinking through what this looks like.
Mike [00:08:23]: A couple of points that you made there which fed off the initial point, which was people start their business for a wide range of reasons. Some of these reasons are negative, and that’s because they want to move away from something. Then there’s other reasons why someone would start a business which have a more positive slant to them. They want to move toward something. Just to illustrate a couple of those examples, somebody might hate their job, or they hate their boss. There’re definitely reasons to start your own reason that have that negative slant. It’s because you’re trying to move away from a current situation. Rob just talked about the fact that he didn’t like his job. He was sitting there slogging away as a programmer, didn’t enjoy it. Those are the types of things that somebody would say, “I don’t like this. I either want to find a new job.” and that’s what the vast majority of people do. The other option is to start your own business to create a job that gets you away from that.
Then there’s the flip side of that, those things that you’re trying to move towards. It’s not to say that there’s only one reason to start the business. A lot of times these things factor into each other, and there are multiple things at play. You might want more money, or you might want some sort of financial independence. You might want to travel. You might want more time available to work on your hobbies, or spend with your family. Those are the ones that I talked about that have a much more positive slant to them. You’re moving towards something. Those are goals that you’re trying to achieve.
Rob [00:09:37]: Everything you have in this list are things that – these were goals that I wanted to achieve by getting out of just the salary employment of being just a 9 to 5 developer. So, I think this is really poignant, and I bet these things resonate, I would bet, with the majority, if not all, of our audience. The thing is I achieved all of these. Within a few years of even DotNet invoice, and in the early days, pre HitTail – these are all these little $2,000, $3,000, $4,000 apps. I hated my job, so I quit it. I hated my – I didn’t hate my boss – but I didn’t enjoy working for other people, so I left that. I did have a little more money. I definitely had time to travel, and I definitely had more time with my family.
[00:10:14] Then things change, right? Two years later, I personally got a little restless and got a little bored and wanted to have more impact on the world and do more interesting things, and working the four-hour work week wasn’t as interesting after a couple years. But it was amazing for the couple years that I did it. So I think that’s something to keep in mind. I don’t think you’re going to find your end state and be like, “Now I’m here, and I’m a micropreneur, and I’m independent, and I’m done for life.” None of us have done that. You look at Patrick McKenzie’s journey. You look at Jason Cohen’s journey. You look at my journey. Just everybody continues to evolve, because we’re entrepreneurs, and we’re ambitious, and we’re curious, and we need to constantly be learning. That means you have to do new things, and often those new things have to be bigger and scarier challenges, and oftentimes that may not look like you think it’s going to look. It may not look like raising a round and starting a big company. Maybe it means exiting your company and working for someone else to see if you can have an impact.
Mike [00:11:06]: That just kind of illustrates that the reasons that people exit their businesses is just as varied as the reasons that people start them, and some of those reasons overlap. For example, if you want more money and you want more financial independence, one of the ways to get that is to sell your company, to essentially get rid of all the responsibilities and the things that go along with it and essentially give yourself a financial reward for that that allows you to go do other things. The reasons you start the business can overlap very much with the reasons that you exit it.
[00:11:37] Now, I think that the biggest question to ask out of all of this is, “What is the end game for you?” I don’t think that there’s any right or wrong answer here that’s generally applicable to everyone, but it ties back to the classic “Rich versus King” argument. There’s two different variations of this. One of them comes from an article – we’ll link both of these in the show notes – but one of them comes from Noam Wasserman, who is a – I forget whether he’s at Harvard or MIT, but he’s a professor there who teaches about entrepreneurship. He talked about the idea of “Rich versus King” being a founder’s dilemma where you are trying to decide whether or not you’re going to take external funding. Are you going to try and build a business and make it huge and be rich because of it, or do you just want to grow it to the point where you are king of that particular industry, but you don’t necessarily don’t have a ton of money, because you didn’t take all the money, and you didn’t take any of it off the table.
[00:12:29] There’s another one a year after that, in 2009, by Jason Cohen, who talks about this particular dilemma as it relates from the standpoint of selling a company. Do you want to build a company and just run it as a lifestyle business – and “lifestyle” in air quotes, because Oprah’s got a lifestyle business, and she has quite a lot of money [laughs]. There’s different ways to look at that, but the idea is that you want to own that without giving up any ownership. That is your identity. You see it as an extension of yourself. The flipside of that is taking funding, going big – which may or may not work out – but it’s a risk. All these are about tradeoffs, about whether or not you’re going to take that external funding, give up some control. Again, it’s the classic rich versus king argument for that.
Rob [00:13:09]: Yeah, and the thing to keep in mind is as you go through this journey – I mean, I already touched on it for myself – but this journey of entrepreneurship is just that. It’s a journey. It’s a path, and your perspective is going to change. Whether you get married, whether you have kids, whether you start to travel, you’re just going to – that’s all going to shift you. It’s going to shift your priorities and your focus and the thing that you really, really value the most. To be honest, your current situation is going to heavily serve to shape your motivations. So, if you think about how things are going to change over time, let’s throw out some stages of entrepreneurship where step 1 is like, “Well, I hate my job. What can I do?” You go, and you find MicroConf, or you find this podcast, or one that – Justin Jackson, or Patrick McKenzie, or just somebody, and you follow them, and you figure out, “Oh, this is actually possible.” Right? Then maybe you validate an idea, and step two is building an idea, and three is launching, and four might be some growth.
[00:14:03] The, after that – let’s say you’ve quit your job at that point – what is the endgame? What is step five? Is it to just die with the most money? Is it to just sock money away? Is it to have freedom? Put yourself in the shoes of someone who has come from exactly where you are, and you’re working a salary job, and in your mind just getting out of that salary job is it, and you feel like you’d be happy for the rest of your life. That’s not what happens. Over and over, we see that it’s really good to have that motivation – for it to be strong – but once you get out of that salary job, you’re going to be super-happy for, I’ll say, a year or two, maybe three, depending on your disposition. Then you’re going to get restless, and you’re going to start thinking about, “What else could I be doing? This person over here’s doing something interesting. Maybe I should launch another product.”
[00:14:45] Or, you could perhaps even feel instability in your revenue. When I had HitTail at a certain point and Google tried to kill it two or three times accidentally, I suddenly realized, “Boy, I could lose my whole micropreneur dream that I have going right now overnight if Google decided to just nuke all the key words,” or whatever. So, certain things come up that then start making you think about, “What is next?” “What is next?” I think being in a steady state of just making eight grand a month, just enough to live, and trying to do that for 20 or 30 years – I don’t think any of us are going to be happy with that, and I don’t know how particularly stable that is. So, you have to start thinking about that. What is next? Is it to go bigger, or is it to diversify your revenue? Is it just to enjoy a few years of super-relaxed time and then think about what’s next? There’s a lot of thought that goes into this.
[00:15:30]: And you don’t need to think about that until you get there, to be honest. If you still are in a salary job and you don’t like it, your number one goal should be to get out of that. It should be to make enough money to get out of that. Once you get there, enjoy it. Live it up, and then when you do get bored, just think back to this episode and come re-listen to it. It really does come back to the arrival fallacy, right? You’re going to think that you will have arrived once you’re free from the 9 to 5, but it’s a fallacy. That doesn’t mean you shouldn’t do it, because it’s awesome to enjoy it for the time that it’s going to keep you happy – and that will be, like I said, one, two, three years, depending on your personality. Then you’re going to look at the next thing, and that’s how we grow as humans. We evolve over time.
Mike [00:16:06]: Yeah, I think the point of all that is even after you have, quote-unquote “arrived,” your life is still going to continue after that, so you still have to find things that are going to be interesting. Relating back to what you’ve said about the different stages of the micropreneurship, and the fact that your current situation is going to shape what your motivations are, in the early stages your focus is much more on yourself and your own needs : What are the needs of you and your immediate family, so that you can pay the bills and keep a roof over your head? Then it extends past that, and as you grow the business you extend that. It extends out to your family, or friends, or your co-workers, or employees. It extends out to your customers, and eventually to different parts of the region that you live, or the country, or the world that you want to have an impact. Over time, that impact is going to grow. The question becomes: How far is your reach? How much of an impact are you making?
[00:16:59] The goal of entrepreneurship is really to make an impact in whatever way is most appropriate for you. That question you need to answer for yourself is what do you want to have an impact on? I think I saw on Twitter Michael Pryor, who is the CEO of Fog Creek, had tweeted over to Patrick McKenzie – after he announced that he was going to be going to Stripe – and he said, “This is the perfect place for you to maximize your effective output on the world.” I think that’s a very poignant quote because of the fact that Patrick McKenzie is in a position where he probably doesn’t necessarily have to work for anyone else. But what is ultimately going to make him happy? He could go back to consulting. It didn’t seem to me like he particularly cared for that, although he could make a very successful career out of that if he wanted to.
[00:17:42] But the reality is that he comes from the bootstrapping world. He likes dealing with entrepreneurs. Looking at that from an outsider, I look at that and say: I agree with Michael. I think that going to Stripe and working with them to help entrepreneurs around the world, and small businesses, to succeed, that fits Patrick – from what I can tell – to a T. I mean that’s a perfect fit for him. With Stripe’s backing he essentially has resources that he can bring to bear on a problem that he sees as a worldwide problem of helping people to succeed with their businesses. The ability to bring Stripe’s resources to that particular problem – that is a huge impact for him. I think that, looking at that, if that’s his goal is to make an impact, I can’t think of a better way for him to do it. This relates back to the question of: What is it that you want to have an impact on. What are your goals? How do you achieve them? Even once you’ve achieved them, what’s next?
Rob [00:18:34]: Yeah, and there’s actually a pretty interesting chapter in Chris Guillebeau’s book. It was his first one. It was like “World Domination,” I think. He basically talks through entrepreneurship and some other stuff, and then late in the book he talks about legacy. He said at certain point, you got to start thinking, “What’s my legacy?” I remember reading this when it came out, which was probably – I don’t know – maybe 2010. At the time, I wasn’t ready to think about that. I remember dismissing that chapter out of hand, just being like, “I don’t even know what he’s talking about. I’m never going to think about that.”
[00:19:05] Then, lo and behold, a couple of years later I started realizing, “Wait. There’s something more here for me. Running businesses making $2,000 a month for the rest of my life is probably not the best use of my abilities. It’s not going to have the maximum impact. It’s not going to help people. It’s not going to help me and my family in terms of financially and freedom and all this stuff.” There’s so much that goes into this decision, and so I think at a certain point, as I said, you will probably start to shift and to think about your legacy.
[00:19:32] You know, there’s one other thing I wanted to bring up. I was thinking about Joel Spolsky and Jeff Atwood. I remember both of them just blogging in the early days. Joel Spolsky – what – around 2001, I think, started; and Jeff around the time I did, which I think was 2005. I watched Jeff move from a salaried employee to then working with Joel on Stack Overflow to then leaving Stack Overflow. Then they raised funding, and then he left and went to start his own – is it Discuss? Is that what it’s called?
Mike [00:19:56]: I forget what the company is called, but the product is Discourse.
Rob [00:19:58]: Discourse, yeah. Then the same thing with Joel. Joel was all about bootstrapping a real software company, and he built Fog Creek with Michael Pryor, which was awesome. Then when they started Stack Overflow, I was just totally shocked. I just thought he would run Fog Creek forever. Then when they raised funding, I was like, “What? But Joel always said don’t do the funding thing.” But then if you listened to his rational, it really made sense. They just had started a different business. He wanted to do something bigger. There was all this stuff that went into that decision to do it.
[00:20:24] So I think that’s even another story. I remember seeing that and hearing him talk it through, and being like, “That actually makes sense.” “That makes a lot of sense.” It didn’t tell me, “Oh, man, I don’t want to start a Fog Creek now,” which before I had wanted to start, like a software company. It didn’t make me think that I didn’t want to go down that path. It just made me think, “Wow, he’s just entering another chapter of that journey, and maybe I’ll get there someday.”
Mike [00:20:46]: If you look at examples of not just Joel and Jeff, but lots of other people in the bootstrapped world, as people grow their businesses, as they do things like that – they launch companies, and they exit them – it feels to me like they do bigger things over time. Nobody sets out to do something smaller than the last time. They want more challenges. They want to do things that are interesting to them, so the next thing always seems to be bigger than the last. It’s because people want to be challenged. Nobody wants to do the same thing over and over and over again. So, I think that what you’re seeing is as people move through this journey they start doing things that, to you, are unexpected, and it’s because you’re not necessarily in that situation. You don’t see all the things, and you don’t see the challenges that they’re having as boring. You look at them and say, “That’s exciting. I’d love to experience that.” But they’ve been through it probably numerous time, and they say, “I don’t want to do that anymore. Let me do something that’s completely new.” That’s why it makes sense to them, and from an external standpoint it really doesn’t sometimes.
Rob [00:21:41]: So, this is some stuff to think about, and this specifically relates to Patrick and myself and Glenn. The cool part is I think, a) this legitimizes this entire path of starting small. If you want to just stay small forever there are examples of people doing variations of that, where they just stay as the micropreneur, the micro [ISP?], and that’s totally cool. If you get there and you decide you want to do that, fine. But if you get there and you decide you get bored, this is the path. Look at what Patrick’s done. Look at what I’ve done. Look at how other folks have stair-stepped their way up.
[00:22:11] So, I think this: a) legitimizes it, but b) I think it’s cool that we’re still able to comment. We still have so much in common, right? Even when I was growing DRIP and we’ve been acquired now, I can still comment, I feel like, pretty intelligently on the early days, and how to – thinking about ideas and how to validate and how to find a market. I actually feel like I have more knowledge of that now than at any time previous. Just because I’m further away from it doesn’t mean I still don’t have a finger on the pulse of what’s going on there. Maybe over time, maybe in a decade, I won’t anymore. but right now I think the stuff we say on this podcast is still valid for a wide range of people, all the way from just trying to seek their idea, to building into a seven-figure SaaS business. I think there’s no question about it.
[00:22:57] The other good thing is there’re always people that’re kind of coming up behind us. You know, people who are currently earlier in the journey. So, you look at maybe Justin Jackson, [Kai?] Davis, maybe a Jordan [Dahl 00:23:09] from the Bootstrap Web podcast, Ryan Battles – I mean there’re people out there who really are focused on the early-stage stuff, and I think that that’s the cool part. This stuff’s all in flux, and people are at different stages. So there still is a lot of good information being created at all stages of this bootstrap journey.
[00:23:29]: So, the question I think we want to leave you with is: How far is your reach now? How much of an impact do you make, and how much do you want to make? The idea that entrepreneurship is – the goal of it – is to have an impact on yourself, on your family, and then maybe on the world? I don’t want to sound too grandiose, like starting DonNetInvoice had an impact on the world, but it certainly had an impact on my own life which allowed me to then change things, and change our lives. So, the question you want to think about as we leave this episode, I think, is: What do you want to have an impact on long-term? What do you want to start having an impact on? Maybe that starts with yourself. Then maybe the next one is your family – meaning you have more time, or you can travel with them. Then beyond that, that idea of legacy. How do you want to impact those outside of your immediate sphere?
So, thanks again, Scott, for the question.
[00:24:09] If you have a question for us, Mike and I very well may discuss it on the show. You can 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, 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 306 | Mixing Subscription and One-time Pricing, Angel Investing, Options for Recurring Payments, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer some listener questions including mixing subscription and one time pricing, options for reoccurring payments, affiliate programs and more. Mike also gives some recent updates on his progress with BlueTick.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, Mike and I discuss mixing subscription and one-time pricing, angel investing options for recurring payments, and more listener questions. This is Startups For the Rest Of Us, episode 306.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and scaling software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
Mike [00:33]: And I’m Mike.
Rob [00:34]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:38]: Well, I’ve had a couple of pre-order cancellations in the past week, which is a little bit disappointing. But one of them never got to the point of going through the on-boarding process. They never even connected their mailbox to the system – to Bluetick – and their concern was essentially privacy. They were really just trying to limit the number of applications that have access to their mailbox. So there is really no way for the software to work right now without that, and I can think of things down the road that might enable that, but it’s just not going to happen any time soon.
That was one of them. And then the other one, they had some other tools that they were looking to replace and then the vendors came back and implemented some of the things that they were lacking that I was building. So it’s unfortunate on both of those things, but the first one there’s really not much you can do about that, and then the second one, I mean, that kind of thing is just going to happen. Like I said, it’s a little disappointing, but I don’t think that it’s any reason to panic at this point.
Rob [01:29]: I think that other vendor building that extra feature is a bummer, but it’s not the end of the world because you just need to out-feature them, right? You need to stay ahead of them and innovate and stuff. Is that competitor a large competitor that you think could swallow up the market, where everyone’s going to be telling you – kind of like when MailChimp launched automation and everyone was saying, “Oh no, and MailChimp launched automation. Is that better than Drip?” and then we just had to keep addressing it. Is that what it’s going to be? Or is this competitor kind of an also ran or a lesser known player?
Mike [01:56]: No, they’re a big competitor, and they’re funded. And – how do I put it? The things that they implemented still don’t completely overlap with what I’m doing. The reason that the person was switching was they had a short list of things that they had that they needed that the vendor just simply didn’t have. And then when the vendor went in and added them, they’re like, “Oh, I’m sorry. The vendor just added a bunch of these things. And they were the reasons why I was going to switch away, because you had them and they don’t. But I have all my systems set up through them.” So it would have been painful for them to switch, and there’s a lot of other things that they probably use with that vendor that the customer would have had to wait for me to implement. So it would have been kind of painful, and because it was so integrated in those processes, it would have been difficult for them to switch. So it’s probably best that this happens now kind of and left the door open to possibly switch over at some point in the future.
Rob [02:44]: I think you’re going to hear this again. So I think you’ll either need to figure out a way to counter that objection, or build out enough functionality that someone would consider leaving whole-hog from that vendor over to you, or from that competitor over to you. Because otherwise, I have concerns that if they become the de facto for this type of sending, and everybody knows that, it’s really hard for you to get a foot-hold in the space.
Mike [03:07]: The thing is, they don’t even do like the email sending. So that’s the thing, is like it was just this customer wanted certain features that the vendor didn’t have, and the sending of the emails would be really nice and helpful, and that’s not what they have and it’s not what they implemented, but they implemented enough that it’s like, “Okay, well, yeah, I’ll stick around for a while longer.”
Rob [03:26]: Right. But then the other one I’m actually more concerned about the fact that he didn’t want to connect it due to security issues? I think other people are going to balk at that as well. What kind of education could you put in place – I’m brainstorming here. How can you educate people? How can you overcome that objection in the future, because if one out of – what do you have 10 or 15 pre-orders? And if one person out of that many cancelled, I have to imagine that that’s going to come up again.
Mike [03:51]: I had pretty in-depth conversation with them about it, and it feels to me like it’s much more of an edge case than, I’ll say, a mainstream thought about limiting the number of applications that have access. So one of the things right now that I don’t have implemented is any sort of OAuth mechanism to access the mailbox. It’s all directly done through one-time passwords if you’re using Gmail, or just the regular passwords if you’re using other mail servers. So that’s something that I could use to allow me access without having to provide the credentials into my system, and then they can revoke it at any time on the other side. You can do that with one-time passwords as well, but there’s only so much that you can speak to those types of points. I mean, if somebody is just not fundamentally not comfortable with your products interacting with their mail server, there’s really only so much you can do. And I think that there’s enough people that are okay with it that that’s not going to be a big deal.
Rob [04:44]: Yeah. I think you’ll know more as you have tens and/or hundreds of conversations. Then you’ll start to see a pattern. We had concerns in the early days from early customers about deliverability, because they just – it was an unknown. And that was a big thing we had to educate them on, because they kept saying, “I’m on MailChimp. How do I know your deliverability is as good?” And at that time, we were actually sending through, essentially MailChimp servers, right? Because we were using Mandrel, and so we always brought that to the table and basically said, “Look, our deliverability is as good as them. We actually ran parallel tests and we saw the same results. It was within a tenth of a percent deliverability either way.” And so we took the time to really focus on that one, because it was – we don’t get that almost at all anymore, because we’re just now, you’re accepted as a major player, but in the early days, that was for some reason this big concern of everybody’s, and it’s funny because that’s never been a concern of mine. I know you need to worry about it, but I figure if someone’s sent an email, they probably know what they’re doing.
But all that to say, I think that in the early days since you’re not a brand name, and since people don’t know who you are, that you are going to hear these types of things, and the more you can have prepared to really address it directly, and to be like, “You can revoke this at any time. These are the only things we look at…” and blah, blah, blah – whatever you can do to basically minimize it. You’re never going to talk everybody out of that concern, but if ten people raise it over the next six months and you can maybe talk five of them out of it – and it’s really education. It’s not even talking them out of it, it’s just educating them to the point where their fears are allayed, I think you’ll be in good shape.
Mike [06:09]: Yeah. I mean for the, I’d say the first batch or two that I’ve added in, I don’t know if that’s going to be too much of an issue. Most of the people I’m talking to know what my background is, and I can explain to them, “Okay, this is how everything’s encrypted. All your user names and passwords are encrypted. You can’t even get the user names and passwords of mail servers out of the system. There’s not a way to do it. You basically have to crack open the system, hack into the entire server, pull out the database, and then decrypt the information inside of the database for each of the records.” And at that point, there’s much easier ways of getting information.
But I also understand that access to your entire mailbox could be a huge issue for some people. So, as you said, there’s only so far you can take that conversation and try to convince somebody that, “Hey, this is going to safe – or at least reasonably safe – and you’re not going to have to worry about it.” But my bigger concern is down the road, when there’s people who are signing up that I’m not directly talking to, that I’m not having those conversations with. And I can’t answer those questions, because they’re not asking them. They’re on a website.
Rob [07:11]: And that’s where having that as a question right next to the credit card form, or right below it in the FAQ on the pricing page, or just something where it’s pretty prominent, I think is going to be a win. That’s where these early days of hustling and talking to people builds up not just your customer base, but it’s education of what the standard objections are. If you start noting these down somewhere in a Google doc and you’re able to say, “This was the objection, this is the reason why that’s not a big deal,” and I saved reams of those things. I probably had 20 or 30 by the time that we launched Drip. I had objections, I had FAQs, and answers I provided via email. So I just had it all as text, and then we basically pulled from that to build the marketing site, and not only the marketing but the FAQ piece of it. That’s such a big win. That’s something you’re pulling out of right now. The learning right now is worth way more than the revenue.
Mike [08:02]: Oh, definitely. I have probably 50 or 60 pages of notes and in various Google docs with like – every time I have a conversation with somebody I take notes on it. So I keep all those notes in those Google docs, and I date them all so that I can just go back through and eyeball it and see who I talked to, and when I talked to them, and it’s all in one spot. Actually it’s in several different spots, but I think it’s in five different documents based on when I talked to them. So I keep each conversation in a single document that maps to where in the sales funnel they were at the time I had the conversation.
Rob [08:31]: Very cool. From my end, when to log in to my calendar app, it’s on my iPhone, which is called Sunrise. Have you ever used it?
Mike [08:39]: No, but I’ve heard of it. Didn’t Microsoft acquire it?
Rob [08:41]: They did, and in typical funded startup with no business model, Microsoft acquired them and shut the app down. And there’s been a bunch of notifications and so this is not a surprise, but it’s such a bummer because it is by far, in my opinion, the best calendaring app on the iPhone.
Mike [08:57]: Minor correction there, was.
Rob [08:58]: Was the best. Thank you very much. So I’ve switched. I’m using Tiny Calendar right now which is fine. And the Google calendar client for IOS, it’s decent, right? It’s not terrible but – and I’ve also tried to use the Outlook IOS app because they basically bought Sunrise and then tried to integrate some of that into Outlook, but it’s not the same. It’s nowhere near as polished and the UX just isn’t as good. So thanks to Derrick Reimer for initially introducing me to Sunrise, and now I think we’re all looking for a replacement of that.
And that’s a bummer. I don’t like it – it kind of irritates me when a startup starts with no business model and you’re just counting the days until they get acquired. I mean, right? In most cases that’s what’s going to happen. They’re either going to go out of business because they ran out of funding, or they’re going to get bought right before they ran out of funding, and the app’s going to shut down anyways. So it’s a little bit irritating.
Mike [09:45]: Definitely disappointing. So other Bluetick news here is we’re testing a pretty massive update to a lot of the backend infrastructure where we’re introducing an event messaging system, so that as different things happen in different parts of the application, that it will be able to send messages back and forth. And it allows us to react to different things that happen. So if somebody opens an email you can trigger a message that will perform a bunch of different actions. You can chain those things together. And there’s a huge amount of work that’s gone into this, but it’s kind of nearing the completion phase, but it allows the entire system to be a lot more scalable. And because those messages can be just pulled off a queue and processed, and if anything fails along the way then it’ll reprocess it. Obviously, there’s a lot of care that you have to have in certain cases where, if you don’t want obviously an email that could be sent more than one time, then you have to be very careful about concurrency aspects of that stuff, or whenever certain things are being shut down or started up. But like I said, it’s a huge update that we’ve been testing for probably close to two months now.
Rob [10:46]: Oh, man. Wow, that’s a long time, man.
Mike [10:50]: Yeah. Some of the stuff is just things that we’ve never worked on before, and then there’s error messages that we have to try and figure out exactly what they mean. I read one to you earlier. For the listeners, the error message I’m getting is, “The condition specified using HTTP conditional headers is not met.” which doesn’t mean a whole heck of a lot. So there’s a little bit of research involvement in some of this stuff.
Rob [11:09]: “Stack overflow. Help me!”
Mike [11:13]: Yeah, no kidding. No kidding.
Rob [11:14]: Cool. So well let’s dive into questions. I think we were talking about doing a more in-depth updates episode in the next few weeks, so we can dive further into this kind of stuff. But we have a bunch of questions today. I don’t think we’ll get through all of them. And actually, if you listen to this and you have either a topic suggestion for Mike and I to discuss, or a question that you have about anything startups, SaaS related, even tech related, tabletop gaming related – no I’m just kidding about the last one – but send it in to questions@startupsfortherestofus.com, because we are at this point running a little bit low on questions, so I bet we’ll be able to answer your questions sooner rather than later. And at this point we do have some guests lined up over the next few months. We don’t need topic suggestions with a guest included, because we don’t like to do a ton of interview stuff, because we’re not really an interview show, but definitely questions or topics are welcome.
So our first question is from Brian Matheson and he says, “Hey guys, many thanks for all your work on the podcast. I’m a big fan and I’ve learned a lot over the years. I’m a freelance videographer and I’m working on launching a new project that doesn’t require me to do stuff on a project by project basis. I want to collect recurring payments and communicate with businesses in this new project. At the moment, my plan is to use Stripe and link that up to my CRM. I’ve been researching payment systems, but Stripe looks like it offers the best long-term rates and compatibility with payment methods as well as CRM and other software. I’ve never dealt with recurring payments before and my question is, should I go with Stripe or are there alternatives you’d recommend? Also, are there any pitfalls I should be aware of, or advise you could give regarding setting up and managing recurring payments? Thanks for your help. Brian.”
Mike [12:53]: So one piece that you actually left out in that was he had said, “My intention is to begin with annual licenses, though I may offer monthly plans in the future, and potentially even three or five year deals for some material.” I think that based on that piece of information, I don’t know as I’d worry too much about the recurring payment side of things, because if you’re charging people on an annual basis my guess is that the price points for those are likely going to be high enough that you’re going to have to have conversations with people just to get them sold on it. And then you’re going to have to invoice them. So I would look for something that allows you to send invoices and then make sure that they get paid. There’s a lot of different pieces of software out there that do that kind of thing. FreshBooks is one, for example. There’s probably a bunch of others. I’m probably most familiar with FreshBooks. But there’s a variety of different ways to do that.
The other thing that you could do is you could wire up your website to take the payments through Stripe and then have just like a special page – or a set of pages – to one side that are private or hidden from the public world, and you just send links to those pages to get people to pay you online. I don’t know if I’d worry about the recurring aspects of it, just because I think that people are probably going to be a little bit leery of giving you a credit card for that they know is going to get paid on an annual basis. Now, that’s not to say that you can’t do that in the future, but I think that getting started when you’re spending all this time trying to focus on that piece is probably the wrong place to be focusing your time.
Rob [14:12]: I would agree. If you’re going to have a high price point, you’re either going to invoice. If they are willing to prepay with their credit card, that’s great, so you don’t have to do Net30 or whatever. In that case, I would really consider just setting up a WordPress install on WP Engine and then buying Phil Derksen’s plug-in called WP Simple Pay. In fact, I think they just rolled out subscription support, so it’s pretty simple to get that kind of thing set up and not have to worry about another layer. There are services like Recurly and Chargify that are SaaS apps, and they provide you with subscription billing infrastructure. But for what you’re doing, it just doesn’t sound like you need to scale that much. And they charge an extra chunk on top of your Stripe fee, whereas something like WP Simple Pay – and I’d imagine there may be a non-WordPress approach that’s similar to that that you could buy that would make it simple for you to just get that up and running if you do think people are actually going to want to sign up on your website. But as Mike said, if you’re going to be having conversations with them anyways, and it’s going to be either in person to start with or phone, then as far as I know, you don’t even need the website piece of it. I think you could set up a subscription right through just the Stripe web admin area. As long as you get their information from them, you can just start billing them right there, and things should work. That’s probably the simplest way. And I agree, Stripe compared to a traditional merchant account, or PayPal web Payments Pro, hands-down, I would go with Stripe, as long as it’s available in your country, and it sounds like it is.
Mike [15:36]: The other thing to keep in mind is that because you’re doing an annual payment for this stuff, you’re essentially just kicking that problem down the road by 12 months. You don’t have to fix that problem now which is, it sounds like you’re trying to fix the problem of scaling those payment systems, and you’re just not going to have the volume right now to have to really worry too much about it.
Rob [15:55]: So thanks for your question, Brian. Our next question is about pricing. It’s about mixing SaaS – or subscription – and one-time pricing. This is from Basel at Techsol Software and he says, “Hey, we just launched our product Clock. It’s a cloud time and attendance-based solution. So it’s at clockit.io. As part of generating some immediate cash flow we’ve been speaking with companies who are willing to buy for a one-time cost. Usually, it’s our expected lifetime value, plus an annual maintenance contract of 20%. Is it common for SaaS apps to do this? What, in your experience, are the pros and cons?”
So one piece about this I’m a little confused about is, he says, “Usually we’re trying to charge the lifetime value up front, and then have an add-in annual maintenance contract,” Typically, you figure out what the monthly subscription fee would be, you multiply that by 12, and you either charge that, or maybe charge 15% discount on that amount or something. But I’m not sure how he’s calculating “lifetime value”. Because let’s say your lifetime value for a time-based solution, it might be – for a time clock solution – it might be three years or four years of a lifetime. So if you charge ten bucks, is he then multiplying that by 48 and charging all of that up front with annual maintenance at 20%? I’m a little confused by that specific piece. I think exact numbers would be helpful here, but maybe we can answer it even with that kind of confusion in mind.
Mike [17:18]: Yeah. I think the issue here is that there’s a little bit of confusion, or crosstalk, between the idea of the delivery of the product versus how something is being built. And I understand how this is very confusing, because people tend to talk about them as being the same thing for a SaaS product, where you are delivering it over the web and you are billing for it on a recurring basis – whether it’s monthly or annually, it doesn’t really make a difference. But I think in this case what you’re really talking about is that SaaS is the delivery model, where you’re delivering it over the web, and it has whatever those ongoing costs are, but then your pricing model is actually much more geared towards a one-time fee. So it feels odd to me that somebody would do this, because there’s going to be those inherent costs moving forward for being able to deliver the service. And if you’re just charging them that one-time fee, as if it was a one-time downloadable piece of software, then it seems to me like you’re probably going to run into problems down the road at some point, in terms of the profitability of each of those customers. Now if they stop using it after 12 months or 15 months and you’ve charged them for what would have effectively been 24 months, then you come out ahead. But there’s going to be those customers that sign up and you expect them to stick around for 12 months, and then they end up sticking around for 5 years. I know somebody who runs a SaaS app that does time tracking, and a lot of their customers have been customers for five, six, seven, eight years, and they don’t leave because it’s just a pain in the neck to change. They’ve already got it integrated in all their systems.
Rob [18:46]: I’m not sure I have much to add to this. I think that trying to charge a lifetime value up front sounds a little weird to me. It’s more of an enterprise approach to things, and I think that one of the benefits of SaaS is that your revenue is fairly even. Even if you have some annual and some monthly plans, it is just a more stable revenue stream. So it’s easier. It’s more predictable, it’s easier to build a business on that. If you do this, it’s nice to get all the cash up front, but then realize you’re going to have to be perpetually selling and getting only that 20% renewal is going to be kind of painful. Imagine if you sold pretty hard for a year and you got revenue up to – whatever – half a million, or a million that year. The next year you only have 20% of that that’s recurring. And so that is an unusual approach. You’re not going to get SaaS multiples doing that, because you’re essentially taking so much cash up front that you don’t have a ton of long-term value. And so it all depends on your goals and all that, but I would personally consider having a more even keeled thing and just charging the same amount every year. That’s the model that I’m typically seeing working.
Mike [19:51]: Especially on a SaaS model where you’re continuing to deliver it. And I think that that’s the piece that is the difficult part here is because essentially you’re telling them, “Hey, you’re going to have to pay full price for this first year, but then every year after that, you get an 80% discount.” That’s difficult for you as a vendor to make work.
Rob [20:07]: So thanks for the question. Hope that helps.
Next question is from Bob and he says, “Should I seek investment advisors or both?” He says, “I have a product where the lifetime value is between $500 and $1000. I currently spend nothing on anything but my own expenses, minimal hosting costs, and as a result the product has been ramen profitable for years. Due to various reasons, this has now become my primary source of income. The product market fit is nearly perfect. In recent months, surveys have said they would not change a single thing about the app and more than 80% of users would be somewhat, or extremely disappointed, if they could no longer use the product. I have to do so much work to move it beyond ramen profitability, but I don’t really know what to do. I’ve read and read and read, but I’m paralyzed with the potential monetary black holes that I cannot afford because of the aforementioned ramen profitability. So my options as I see them are: number one, try and get another source of income going. Option two, take on an investor. Option three; take on an advisor who could guide me on next steps. Option number four, take on an advisor who is also an investor, and option five is find some low-hanging fruit.” What do you think?
Mike [21:08]: I think what I’m not clear about is what things have been tried at this point? So it sounds to me like the product is stable and it’s making enough money to support you, but probably not much more than that. And I think that that puts you in that difficult position, where your app is not growing enough – the app has stable income – but the growth curve is simply not there. And in order to push on that and make that growth curve higher, then you need to spend money in order to do it. And running all those different experiments to do different things to try and push the app forward, it’s resource intensive, in terms of cash and time and everything else, and that’s just a difficult position to be in. And I think it would depend a little bit on how many of these different things you’ve tried, and how many that you’re looking at that you think would be likely to succeed. And you have to do a risk analysis to figure out whether those are things that you want o try or if you’re just going to go in another direction and potentially offer a completely different product, or find an overlapping market where you can sell a product that solves a different problem to the same audience, which is probably the better direction to go. But I don’t know specifically what the product does, so it’s hard to judge whether or not that makes a lot of sense.
In terms of taking on investors, or advisors who are also investors, that seems to me to be pretty risky. It’s hard enough to get something to a profitable point where you’re making enough money that it supports you, and basically putting yourself in a position where you owe somebody else something seems like it’s probably the wrong approach. I might look around to see if there are mastermind groups that you can get in. Talk to other business owners. I would go that route first. Unless you stumble across something where you really are almost sure that by getting an investor you know what channels need to be pushed, and what gas pedals need to be pushed, in order to make the products much more profitable than it is, but you need the money in order to do that. I don’t think it’s a wise idea to get the money in order to run those experiments. You need to know what’s going to work first, and then spend the money on it, versus trying to use that money to basically guess at it and run the experiments. That’s the classic problem that most people who start out and they’re looking for funding are running into, is that they try to get funding to fund their business so that they can run experiments. And investors don’t want that. They want a business where they know that they can put money into it and they’re going to get more money out of it. They want all that experimentation done and out of the way up front, so that they can just push on the gas pedal.
Rob [23:38]: Yeah. I feel like we’re lacking some information to properly advice on this. Like, I’m wondering, you have product market fit, but do you have 10 customers? Do you have 100? Do you have 500? What’s the pricing model like? There’s things that I would need to think through before I could even consider giving advice, but to me it’s like finding the next lever, right? And I think the reading and reading and reading isn’t super helpful at this point. Obviously, it’s paralyzing. But it’s like, what is the problem that is keeping you from making more money? Is it a pricing issue? What do your competitors charge? Do you think you could increase pricing 50% tomorrow, and – not on existing people but on new people? And do you think that that would have an impact on your bottom line and not hurt sign ups? Or just run the test and just do it. Just increase it 50% and see what happens. That’s one test you can run.
Another one is, it’s a question to ask, is how many uniques do you get per month, because if you get 1,000, then you have a traffic problem then, right? But if you are only converting a tiny percent of people to a trial that hit your website, then you have a conversion problem. And if only few people are getting on-boarded and you’re bleeding them out after the trial, then you know you have essentially an on-boarding problem. And so that’s what it is. Identify the next thing that just looks all – that looks messy. And you know in that episode with Ruben Gomez, it’s what, 50 episodes ago, we laid out specific numbers and percentages that I like to see, and I know that if we don’t hit those that we have a problem in that area. I also outline these in at least one Microconf talk – and unfortunately, I forget which – but that’s where I would look if I was trying to improve this. The question of whether to take an investor or do it yourself is: Do you have the energy to attack it? The paralysis, you’re going to have to get over that, and you’re going to need to either talk to somebody, you’re going to need to get into a mastermind, like Mike said. Some exterior voice is going to help you push past that.
Mike [25:19]: I think the paralysis much more – other than the fact that certain experiments just take a lot more money – or he’s perceiving it to take a lot more money than he has available.
Rob [25:27]: But all this stuff you can do without money. I mean, with almost no money.
Mike [25:30]: I agree.
Rob [25:31]: That’s the issue. It’s like when I was bootstrapping back in the day, I had almost no money to spend on this. These days I do things differently and I can move faster. And if you raise funding you can certainly move faster. But if you want to do it yourself, you can do this yourself. And you can do it with not a ton of money. It’s just going to take longer. That’s my take on it. And so I think trying to find an advisor, if you have zero network and you’re trying to find an advisor, it’s like, “Good luck.” I think that’s going to be very, very hard. Just because everybody is busy. In fact, the people who know how to do this stuff are busy with their own projects. Finding an investor with zero network, it’s certainly possible, but there’s a lot more that has to be done. It’s not just something that – those are the harder roads to go unless you already have ins, you already know somebody who can vouch for you, you already have some type of online reputation, you have something to show for it. If you don’t, then I would personally turn your head towards your app, think about what are the quickest wins and what are the ways to do that without spending barely any money, because there are those wins out there. Right? There’s the SEO and there’s the content marketing which means you create it – whether that’s a video or text or audio. There’s social media stuff, there are a really cheap clicks. So it will take a little bit of money, but there are really cheap clicks on some sites these days. There are a lot of cheap/free – except for your time – marketing approaches, and those are the ones that, if you have a traffic problem – again it’s identifying if it’s a traffic problem then do one of those things. The conversion stuff. If you already have enough traffic and you’re just not converting, then it’s looking at what other people have done, like how does DRIP do their on-boarding and why do they convert so many people into their trials? It’s thinking through how to optimize this stuff. So I think with more specific information, we could probably make a better recommendation, but that is the thought process I would use to go through this.
So our next question is actually two questions, both about affiliate programs. So the first one is from Eton, and he says, “Hey guys, big fan of the show. I would love to hear about affiliate programs. In particular, how that plays into DRIP’s growth as a marketing channel, experience working with Ambassador, et cetera.” And then there’s another question from Robert Brandl from chattooltester.com and he says, “How do you set a program up? How do you find good affiliates? How much do you pay them? Your own experience, et cetera.”So it’s just kind of a little quick mini-episode maybe here on affiliate stuff.
Mike [27:38]: I have very little to offer on this, because I’ve just never really gotten into like the whole affiliate marketing thing. So why don’t you go forward?
Rob [27:45]: Yeah, cool. I have some thoughts on this. So in terms of affiliate marketing as a marketing channel, I think that I have used it on a couple of products, and certainly have had affiliate programs for most of them. I’ve seen really mediocre results in most cases. You have to be extremely deliberate about it, and I think if you have a really strong network, and you have a network of people who have audiences, or you’re willing to build that network, I think affiliate marketing can be exceptional. If you look at Leadpages, all their growth in their early days was from affiliates that Clay Collins knew, because he was an information marketer and everybody respected him, and he knew all these people from speaking at conferences and they had already done JVs for info. So then when he launched this software, there was a bunch of people lined up that he knew that had these massive audiences – 10,000, 100,000-person email lists. If you have that – very, very few people do – but if you have that, affiliate marketing is going to be awesome for you.
If you are literally going to sign up for Ambassador or sign up for referralsaasquatch.com or whatever else affiliate programs you have – and if you’re going to do it, I would definitely recommend finding a SaaS app to do it – that’s the best way to set it up. Just setting it up and then pinging your customers periodically, kind of promoting it, sending them emails, it’ll work. You can build a decent channel there, but it’s not the number one thing I’d be doing. If you really are time-constrained, and you’re bootstrapped, and you’re focused on getting new customers, without the network, you do have an uphill battle.
Now how to find good affiliates? I think that’s all about the network. I think cold approaching people can work, but you have to have something to bring to the table. And you have to have a better product and you have to have a really nice affiliate commission. So think about it. If you’re a SaaS app, the range I’ve seen is recurring subscription affiliate commissions, and I’ve seen it range between about 15 and about 30%. I think these days like an email marketing as an example, AWeber pays 30%, and I think MailChimp might pay 25%, and Drip pays 30% as well. And I think Leadpages pays 30%. So that kind of gives you an idea of where marketing SaaS apps fit, but other industries and such may have different norms, so you really just want to take a peek at some affiliate programs and see where you wind up.
Those are really my general thoughts on it. I think that affiliate marketing can, and has been, a really good channel for some SaaS apps; some people launching software. But it really does mean I think you need to have your own audience, and then have good network and a solid network of other people who are willing to promote it up front. Otherwise, I would prioritize affiliate marketing and blow a lot of the other marketing approaches that we talk about here on the show. So thanks for your questions guys. Hope that’s helpful.
Mike [30:10]: So as Rob said at the beginning of this show, we are looking for questions, so 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 on iTunes by searching for Startups and visit startupsfortherestofus.com for full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 305 | Strategies for Taking Pre-orders for a New Product
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to take pre-orders for a new product. These are strategies that can be used to help gain interest and validate a product. They also discuss some motivations and benefits to taking pre-orders.
Items mentioned in this episode:
Transcripts
Transcripts
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about strategies for taking pre-orders for new product. This is “Startups for the Rest of Us,” episode 305.
Mike [00:00:16]: 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 [00:00:25]: And I’m Rob.
Mike [00:00:26]: – And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:00:30]: Well, it’s nice to be in a big city where a lot of musical acts are coming through, and this week we are seeing not one, but two, bands, or acts, at this club called First Avenue, which is this icon of Minneapolis. It was featured prominently in that movie “Purple Rain,” and I think Prince owned it at one point, so it’s this club that’s been a club since the ‘70’s, and it’s just a very popular club. Anyway, we saw Lauren Hill, former lead singer of the Fugees, a couple nights ago. Then we’re seeing Explosions in the Sky tomorrow, so aside from the same stuff that I’ve been saying for the past four or five episodes, of we’re almost done unpacking, it feels like transition is coming to an end, we’re hiring several people at Drip, and things are moving forward and going pretty well in general, that’s the other thing that’s new.
Mike [00:01:13]: You know, when you first mentioned you were going out and seeing a couple of musical acts, my first thought was you’re going to get to hear the entire soundtrack for “Frozen,” or something like that.
Rob [00:01:21]: Yeah, right.
Mike [00:01:22]: Laughs.
Rob [00:01:22]: I mean that’s a lot of what we did – well, not a lot of what we did, but I think that tends to be the default. You get the musical stuff coming through that is kid-appropriate. It’s easy to bring them, and it’s been fun to do some grownup things, too, which the big city really allows that pretty easily.
Mike [00:01:37]: Cool.
Rob [00:01:38]: How about you? What’s going on?
Mike [00:01:38]: Well, I’m finally back to normal in terms of my back issues. I don’t think I really talked about it on the podcast, but I was kind of out of commission for about a week, week and a half with a pretty severe spinal problem. So, back on my feet now. I can actually stand and walk around without too much trouble, and kind of getting back to things and plowing through the work that has been stacking up a little bit. The other thing I do have is a listener sent us an email about an episode we did back in 303, which was our favorite tabletop games, and he runs a company called Playtable.xyz. So, if you go over to that website, they have – essentially, it’s a tabletop game device that you can put down, and you can play tabletop games on it. The focus is on being able to minimize the setup and tear-down time for some of the more complicated games and to be able to streamline the rules so that you don’t have to go look things up, and it gives a little bit of visual flair to the tabletop games. I checked it out. They’ve got a video up and got a mailing list that you can sign up for. It looks pretty cool.
Rob [00:02:33]: Yeah, I checked it out as well. I’m intrigued by it. I’d like to see how many games they get on it and how expensive they are and that kind of stuff, but certainly it’s an interesting work-around instead of having to read all the paper rules all the time. That’s something I like. You know, we talked about Pandemic a couple episodes ago, and there is a Pandemic for the iPad, and it’s really cool –
Mike [00:02:51]: There is.
Rob [00:02:51]: – Because you don’t have to remember all the stuff. You just move around, and it really helps guide you. I think it’s – once you know the rules of Pandemic, it’s easy enough to play, but those first couple of games are pretty painful just trying to remember everything –
Mike [00:03:01]: Yeah.
Rob [00:03:02]: – And that’s what the iPad kind of – it’s scaffolding that helps you get their faster, basically.
Mike [00:03:07]: Yeah. Some of those games, it’s not even just all the rules. It’s all the little markers and stuff that you have to put on the board for all these different things. Then there’re special-case situations that an app will just take care of that stuff for you. I think there’s a bunch of apps for some of the games that we had talked about. I’m pretty sure there’s one for Catan. There is one for Pandemic. There’s also one for Small World, which I think was only $6 or $7, but if you buy the board game itself, it’s 40 or 50 or something like that.
Rob [00:03:32]: Oh, jeez. Okay.
Mike [00:03:33]: Yeah, so there’s a huge price difference between them, but it’s on an iPad so it’s not nearly as expansive; but you do get the abilities to play against computer opponents. So, if you like to game, you can do that.
Rob [00:03:44]: Yeah, that’s nice. Cool. So, what are we talking about today?
Mike [00:03:47]: Today, what we’re going to be talking about is how to take pre-orders for a new product. These are essentially strategies that you can use to go out and, if you have an idea that you’re trying to validate, or you’re trying to get people interested in it and trying to figure out what it is that you actually need to build, then you probably want to get to a point where you’re going to be taking pre-orders for that product. That product can be a piece of software, it can be a book, it can be a service, it can be a course. Depending on how long it takes and what your time investment is going to be, you want to be reasonably sure that people are going to pay for it afterwards. You don’t want to spend six months or 12 months building something and then try to find people to buy it. I think we talked about it before. James Kennedy at MicroConf Europe had said that sales is really about finding out what people want, going out and getting it, and then delivering it to them; and you have to do it in that order. And if you try to build something and then go find someone to sell it to, you’re in a much more difficult situation, because now you’ve already put that time investment in, and it may not have been the right time investment. So, taking pre-orders is a step along that process to identify whether or not you’re on the right track. So, let’s talk about some of the motivations for taking pre-orders. I think the first motivation is risk mitigation. Are you going to be able to find people who are willing to pay for this? Can you convince those people that it’s going to solve their problem? There are a few caveats here, because if you’re talking to people individually and one-on-one, it’s much easier to sell somebody on the idea than it is if they were to come to your website; but that’s also the intent behind this. You want to have those conversations so you’re talking to them directly and you get the feedback about what sorts of hurdles you’re going to run into, or what questions they have, so that you can use those questions to put on the website that talks about those objection points that they might have.
Rob [00:05:36]: Yeah, and I think risk mitigation is a really nice benefit of asking for pre-orders. I think there’re obviously a lot of different ways to mitigate risk in terms of having a product idea that you don’t know if anyone is going to buy, but this is perhaps one of the best. Building an email list is another one. Talking to people and getting a verbal commitment is another one, but until someone actually makes purchase you don’t know for sure if they, in fact, will do it, right? We’ve heard people different doing it different ways, where you get a check that you’re not going to cash, or where you get the credit card and actually charge it and tell them you’ll refund it if stuff doesn’t work out. But I think this is an intriguing way to do this, and I think that it requires probably a lot of chutzpah to ask for money up front, especially if it’s someone you don’t know. I think if you tend to know people and they trust you’re going to deliver, makes it a little easier; but I do think that doing this is an interesting idea. We’ve talked about this in the past. I have always tended to build the email list rather than actually as for pre-orders up front – than actually take money. There’s a bunch of logic to that, that maybe we can cover in this episode, of why I’ve done that; but at the same time, I do think that, single-handedly, risk mitigation may be the single biggest reason that you may want to lean towards actually taking pre-orders.
Mike [00:06:48]: Let’s expand on that a little bit right now instead of trying to talk about it or come back to it later –
Rob [00:06:52]: Sure.
Mike [00:06:52]: – Because building the email list, I think in many ways, serves as a proxy for asking for money –
Rob [00:06:58]: Exactly.
Mike [00:06:58]: – And that you can use that as – there’s people that have signed up for my mailing list; and, sure, I’ve got 1,000 people there, but not all of them are going to buy, but some percentage is going to buy.
Rob [00:07:07]: There you go.
Mike [00:07:07]: The question is what percentage is that? You don’t really know, and taking the pre-orders and actually taking somebody’s money for it is not even just a proxy for that email list. It is actual money that you’ve got in your hands that all you have to do is you have to deliver what it is that they wanted.
Rob [00:07:22]: Right. And, yeah, all those points are valid. The reason I like building an email list is because I can get – let’s take Drip, for example. I built the list up to about 3400 people, and then I was able to nurture them along the process: give them screenshots; give them screen casts; ask for feedback via a survey; eventually do a slow launch, a email three to five hundred people at a time. It was a very well-orchestrated and well-crafted thing, and we had a really good conversion rate on that. If instead of building the list I just had a form that was like, “Here’s this amazing thing, and at the bottom of this page pre-order Drip for” – whatever – “three months for 99 bucks,” or whatever price it would’ve been, I would have gotten – I don’t know – a hundredth. Maybe I would’ve gotten 50 people or 100 people to pay me. Now, I would’ve had that money up front and would’ve had it for sure, but I wouldn’t have had the access to all 3,400 people, right? I actually think in the long run I converted a lot more people to paying, but I had to accept a little more risk up front by not taking the money up front. That make sense?
Mike [00:08:20]: Right. It does, but I don’t think that you would use that exact, same process for taking pre-orders. Taking a pre-order is not something where you just put up a website and just hope that people buy it sight unseen without any real walk through of it. I think that with a pre-order, your strategy is really finding people who really desperately have that problem and then crafting a solution that specifically solves that and, at the same time, having those individual conversations with other people who hopefully overlap, to help give you a better sense of what you should actually be building rather than building stuff, sending it out, doing surveys and not having as much of a hands-on approach with the people that you’re talking to. I think the strategy that I’ve seen work and I’ve used so far, with BlueTick, for example, is that if those initial people that you’re taking pre-orders from – if you know them or they know you, you can have those one-on-one conversations and establish that rapport with them such that you’re able to get the answers to the questions that you really need answered.
Rob [00:09:19]: Got it. Yeah, so you’re talking about doing medium-, high-touch sales to get a handful of pre-orders, in essence, to validate a product. I think there’s a difference – I think we’re talking about two, different things and I think those two different things are you’re talking, by hand, going through 10 or 15 people and getting those pre-orders to say, “All right, it’s valid. Let’s start building it.” I’m talking more about later on down the line, having that big list where you actually want to launch and you want to launch to thousands of MRR right off the bat. But I think our two approaches that we’re talking about are actually most powerful when they’re combined, and let me –
Mike [00:09:48]: Yeah.
Rob [00:09:49]: – Talk through that real quick. I do think that validating – the way I validated Drip was I emailed a bunch of people – by “a bunch,” it was 17 – and I got verbal commitments via email, “Yes, if you deliver that, I would try it out for three months.” That’s all it was. I didn’t actually take pre-orders. Now, why didn’t I take pre-orders? Well, two things. One, I knew that it could easily be six months from that time until we finished the product, because Derek was part-time on it. There was just a bunch of stuff, and I didn’t know how long it would take. It didn’t feel cool to me to take people’s money and to just sit on it for that long. Number two, all the people I was emailing with had some relationship with me, and so I trusted that if they actually said that they would try it out, that they would try it out. In the end, almost all – there were 11 people that said yes, and almost all of them – I think nine or ten – took me up on it and did deliver. Now, your mileage may vary there. If you’re at a conference and you’re meeting brand new people and you don’t know them, it’s like how much is their verbal commitment worth? You don’t know. I do think there’re some things to think about there. I don’t think there’s a right or wrong answer here. I really do think that you have to ask yourself what situation you’re in. Now, I have seen people multiple times when they go to take pre-orders, they do it on a landing page, where they send you to a site that looks like a landing page or a SaaS marketing site type thing, and they say, “The products aren’t ready. Enter your credit card here. We’ll charge you 49 bucks, and you’ll get the first X months free.” That’s the approach I mentioned, and that’s, I think, what we’re both saying is: “You probably don’t want to do that.” I actually think that’s a really bad approach, and the reason is because of what I said earlier. If you can build a list of a couple thousand people and then get pre-orders from there, you’re going to be way better off, right? It’s to combine the two approaches and nurture that list until you’re getting close to when the products will be ready. Then you’ve shown the screenshots. You’ve shown them screen casts. You’ve got them interested in the product. Then before the product is ready, but you’re like, “I think it’ll be done in the next month,” or the next few weeks, then you come in and say, “I’m going to give you this awesome deal. Buy your first year or your first six months for X, Y, Z.” They’ve already seen the screenshots. They know it’s pretty close anyways. Then that’s when you’re going to make that big, initial push, and I think you can get quite a bit of revenue. You’re no longer validating the idea. I guess you’re validating all the way to product-market fit, if we were to just take it literally; but you do at least know that there’s some desire for it. At this point, you really are trying to maximize some early revenue and get momentum going.
Mike [00:12:01]: Yeah, and I think the two approaches, as you said, are very complementary, and they overlap quite a bit. I don’t think that you either do one or the other, but you are probably not going to be in a position where you can gather 1,000 or 2,000 emails without having a pretty solid idea of what it is that you’re offering and what problem that you’re solving. That’s really where some of these strategies for taking the pre-orders really helps, because you can have those individual conversations. You can use that to craft what it is that you’re going to building, the marketing messages around it, the specific pain points that you’re trying to solve, and then use that information to go out and help build your mailing list at the same time. Then you’re building, and you’ve validated, “Hey, I’ve got enough people here that have placed a pre-order for it.” In parallel, you’re also trying to build that mailing list, using that information. I think you can build a mailing list without it. You can kind of – I don’t want to say “guess,” but it is, I’ll say taking educated guesses about what it is that people really want or need and having a few conversations here and there to help make sure that you’re on the right track.
Rob [00:13:00]: Yeah. I think another benefit to doing this kind of hybrid approach you’re talking about, where you do get validation up front from a small number of people and maybe take pre-orders, maybe you don’t based on what you want to do, and then building that mailing list, launching to it and potentially also taking a second round, essentially, of pre-orders right before you’re ready to launch. There’s another benefit to that in that you can then start trying out paid media when you’re building that list, right? You can try Facebook ads and AdWords and whatever else. You can also try content marketing. You try SEO. You can do a bunch of stuff that is that more broad, wider funnel marketing rather than just all the one-on-one stuff that would be required if you really have to talk to everyone who’s going to buy from you.
Mike [00:13:39]: I think one of the other motivations for accepting the pre-orders is that it allows you to fill in some of the knowledge gaps in terms of who exactly is your target customer, what do they do, what’s their role. This comes back to having those individual conversations with people, and it allows those one-on-one conversations, let you find out what you think is important that the customer actually doesn’t care about. It’s very easy to think that something needs to be done when the customers actually don’t care about it. It might be cool. It might be interesting to see, but it’s not something that is really a big deal. Then the reverse of that can also be true. You might think that, “This small feature over here is a nice-to-have,” and then customers see it, and they realize how powerful it is, and suddenly that’s the thing that they really are looking for; and you didn’t necessarily realize right away that that was so important to them. They may not have either, but in seeing it, it can change their mind, and it can make them see things in a different light.
Rob [00:14:34]: Other knowledge gaps it can fill in are what is important to buyers that you don’t know about, how much are people willing to pay versus what you think they’re willing to pay or what you think your app is worth. There are a lot of questions early on when you’re building an app, and I think that getting someone to put money down – this is essentially another form of risk mitigation, and it’s a form of learning early on, even before you have a product.
Mike [00:14:55]: Yeah, and we’ll talk specifically about what people are willing to pay versus what you think it is a little bit further in this episode. Yeah, those are all very important parts. Again, those two motivations for taking the pre-orders are just the risk mitigation and then helping to fill in the knowledge gaps. Let’s talk very, very briefly about how to actually take somebody’s money when you’re doing pre-orders. There’s three different ways that I know of. The first one, that I’ve done, is using WordPress and WP Simple Pay Pro and Stripe. It’s very easy, obviously, to set up a WordPress site. There’s a plugin made by Phil Dirkson. It’s called WP Simple Pay Pro, that you can buy. I think it’s $40 or $50, or something like that. It’s not very expensive. Then you wire it up to a Stripe account, and you can take pre-orders. You can even refund people’s money through Stripe months later, whether it’s six months, or seven months later. It appears to not be a big deal through Stripe. Now, of course, their credit card still has to be active; but you can do that and because Stripe hooks into your bank account when depositing the money, they’re able to turn around and take that money back out of your account, assuming that no more money is coming into the Stripe account. The other two mechanisms that I’ve seen are Gumroad and SendOwl. Both of these are mechanisms for typically delivering digital assets over the Internet. Both GumRoad and SendOwl allow you to set up a pre-order mechanism that allows you to distribute things once you’ve taken a pre-order. One thing I don’t know about either of these is whether or not you can go back and charge them in the future, like on a subscription basis, so it may not be the best option if you’re selling a SaaS application. But if you’re selling an info product, or a training product, or a book of any kind, those are pretty reasonable options, because then once you’ve finished it, you can upload it and then get it distributed to people very, very quickly.
Rob [00:16:36]: The other option here is there’s an iOS app – I’m assuming there’re android apps as well, but I’m just looking in iTunes right now. There’s an iOS app called Payment for Stripe, and you can hook this into your Stripe account. You could potentially, if you’re at a conference or anywhere, you could be talking to folks in person and pretty easily take pre-orders. I think that’s a nice way to do this if you don’t want to do it over the web and you want to do something more in-person.
Mike [00:16:57]: When you’re doing one-on-one demos with people, what is it that you really need to show them? For something like a course or a training product, you probably want to give them a course outline. If it’s a book, you probably want to give them a table of contents and outline all the different topics that you’re going to cover. If it’s software, you mostly want to have screen mock-ups of some kind. What I would do is I would walk through all the important parts of the application that are going to solve their problem. You don’t need to put in every screen, show things like profile screens and administration screens. You most likely don’t need those. You really want to focus on the screens that are going to solve their problem. I would wire up as much as you possibly can in a way that makes it obvious where they’re supposed to go and what they’re going to do and how they’re going to solve the problem that that software is designed to solve. There’s a lot of different tools and wire framing products out there that you can use. Balsamic is one that I’ve used pretty extensively. I’ve also seen people using Vision App, and there’s probably half a dozen others as well. You can put these together, and you can spend as much or as little time on these things as you want. It’s like any software product. You’re going to get out of it what you put into it, but at some point you have to draw the line and say, “Yes, this is good enough.” I think that’s a very important piece to remember – is that you don’t have to make everything look pretty. The final design does not have to be there. You’re really trying to focus on the problem that you’re solving and showing to the person that you’re going to give that demo to that this product is going to solve that problem.
Rob [00:18:23]: Yeah, that’s a key thing to remember. When I did pre-orders for Drip, I actually didn’t show any screenshots. I do think it’s helpful – if you are a designer, you can do decent mock-ups – to show some, but I think that if you get too far into the weeds, people frankly don’t necessarily have the time to dig into it. I think building a landing page and a marketing page for it with just a bunch of copy and maybe a fake screenshot – not even as something you’re going to distribute, but just as something that you can email to folks as you’re emailing or as you’re talking through – or, even just a short slide deck, like five slides of what you think things might look like. But I think you should focus, as you said, more on – you’ve got to figure out that value proposition, and that value proposition could almost be communicated in one sentence or a sentence plus a few bullets. If that’s what resonates, then what you’re actually going to build can come later. You’re just trying to figure out – is there a problem here that needs to be solved? and what is the general way that I’m going to solve that? I think the earlier in the process that you can figure out and that you can get confirmation that it really resonates with people, where they’re not puzzled, like, “Yeah, I guess that’s it,” but where they’re like, “Oh, my gosh, yes. This is such a big pain point,” that’s really what you’re trying to get to.
Mike [00:19:26]: The other thing to keep in mind when you’re going through that is that your value proposition that you communicate people is likely going to change probably dramatically between the first two or three or even five people. You’re going to iterate on that value proposition and your sales pitch after each person that you talk to, because you’re going to get feedback. There’re going to be certain things that resonate with them, and the future conversations that you have, you’re going to want to take those and extract things that you’ve learned from earlier conversations and present it to them and see if that works with them. You’re sort of split-testing the information that you’re learning with the other people that you’re giving the demo to. I don’t know as I would just say, “Give a demo to five or ten people.” You want to give it too as many as you can. I would probably shoot for at least 15 or 20, if you can do that; but realistically, you also want to run your idea past probably more than that. Probably, 30 or 40 people is probably a good, ballpark number of people to run the idea past. Then in terms of the demos, you probably want to give at least a dozen of them so that you can start honing in on the specific pieces that the majority of the people feel are important to them. Then you can concentrate on understanding what features need to be built first and what is the most important to people, and categorizing them according to what things need to be built first, and what things can be pushed, what things are not important and just can go into a future version.
Rob [00:20:45]: Is this similar to the process that you’ve been following for BlueTick?
Mike [00:20:48]: It is, actually. Most of it is. For example, I didn’t take orders through GumRoad or SendOwl. I took them using WordPress and the WP Simple Pay Pro. One thing that we haven’t talked about yet – I did say that we’d come back to it – was talking to people about actually taking the sale and taking their money for it. What I did for this piece was – what I wasn’t sure of was how much people were willing to pay for it. I had in my mind that I wanted to charge people $50 per mailbox for it, but I wasn’t sure whether or not that would be appropriate. What would people feel like the product was going to be worth to their business based on the problems that it solved? So, when I explained to them – I said, “Hey, here’s what my process is. I may or may not actually go through with this, but if I take your money and I decide not to go through with it, then I’ll refund it.” I laid out my refund policy. I laid out exactly what my timetable was, and I told them, “I’ll take your money now. I’m probably not going to be able to deliver for at least four to six months, and even after that point, it may still not work for you for another three or four months after that. So, it could be upwards of eight or nine months before I have something that I’m able to deliver to you. With that said, if eight months down the road you say, ‘This isn’t working for me,’ or, ‘I’ve gone on a different direction,’ I’m more than happy to give you a refund, and I’ll eat whatever transaction costs. If I have to send it to you through PayPal, I’m more than happy to do that. What I’m really interested in now is does this actually solve a problem for you that you’re willing to pay for.” Going back to the naming a price, this is a piece that I wasn’t real sure about, so I was very careful and cautious about presenting it to people in such a way that I wanted them to name what they felt it was going to be worth to their business. So, when I did that, I said, “You’re going to put your credit card number in,” and the website that I connected it to, I literally had a text box there, and they had to type in the amount. So, I would send them a URL through Skype, and they could plug in that number, and I would ask them to prepay for a certain number of months. It defaulted to 3, but they could select anywhere between 1 and 6. I’ve had a recent conversation with somebody, and they thought that, by and large, everyone would just choose one month. But the reality is what I found was out of the dozen people that I took pre-orders from initially, there was one person who prepaid for one month, there were two people who prepaid for two months, and then nine people who prepaid for three months. So, it was very interesting to see that most of them prepared for either the default, or at least a little bit. I think that that was because they had this understanding that, “I’m not going to get a ton of value out of this up front. It’s more of a longer-term investment,” which is really what I was looking for, because that validates and qualifies the people who are signing up for pre-orders, they’re looking at it as a longer-term investment. They’re looking at it as something that they’re going to be using for a while as opposed to somebody who’s a tire kicker who’s on your mailing list and does not have the level of investment or intended investment that you desire as the person who’s creating the product. I will say for sure that the first couple of conversations that you have with people – and this is especially true on the first conversation where you’re asking for that pre-sale – is when you ask them and say, “This is what it looks like. Would it solve your problem?” If they say yes, say, “Great. Well, here’s a webpage I’m going to give you. Here’s what the refund policy is, timeline, et cetera, when you will be charged for it the next time.” What I did for people was I took the payment that they had, and I said, “I will apply that as a credit to your account, but only after you have told me that it’s going to provide value to you.” I think that there’s a few different ways you can structure when they’re going to start paying for the application that you’re delivering, or the product that you’re delivering. But if it’s a SaaS application, you have three options. You can either have them start being charged when they’re first onboarded, a specified time after onboarding. Let’s say you onboard them on the first of January. You can say, “You get it for X number of months,” whatever you’ve prepaid for, “and then I will start charging you immediately,” or maybe you give them a 90-day grace period because you know that when you first get them onboarded there’s probably going to be issues. So, maybe you give them a little bit of an extended runway there. What I did, which I think may have been a mistake, was to say, “I’m not going to charge you until it provides value.” In retrospect, I think that that was a mistake because it gives people an unlimited time window which they can push it lower on their priority list. So, one of the challenges I’ve run into is people just aren’t really making time for using the app, and I think that if you were to say, “After I’ve onboarded you, I won’t charge you for 60 days, but once that point hits then the clock will start.” If you set that expectation up front, then you can always extend it. You can always say, “Look, we delivered this. We’re not quite ready yet. We know that there are some issues or things that we need to implement for it to really provide value, so we’re going to push this timetable out.” If you’re trying to dial things back in, if you’re trying to reel them in, you’re almost taking things away from it, and it’s not really fair to do that.
Rob [00:25:34]: Yeah, that makes sense. That’s a good way to think about it. I’ve talked about this, but with Drip I basically let people have unlimited trial because I was working so closely with them. This was for the first, let’s say, maybe 20 customers, when I was essentially doing early access, and we were just onboarding and trying to get features done. The hard part that I had is certain people would say, “Once I have X and Y, then I’m willing to pay,” and sometimes X and Y took us a month to build. I didn’t want anyone’s trial to be expiring during that time, so that’s why I was telling people, “Once it provides value, then let’s call it and start charging.” But I think you make a good point. There’s always not a real impetus for them to dig in and do a time investment there, so I think this is another place where kind of have to use your judgment.
Mike [00:26:17]: The other piece that factors into that is – let’s say that you signed up – call it ten people for easy math there, and three of them come back to you with stuff that’s going to take a month to build. Well, in order to deliver all three of those things, it’s going to take three months to probably deliver it, so it kind of pushes your entire timetable back for all kinds of things, and some of them you may not have realized up front that those things really needed to be built in order to provide value to everybody. So, if you dial back those expectations a little bit and say, “Look, you’ve prepaid for three months. I’m going to give you a month and a half, or two months up front just to get comfortable with it. Then I will start applying the credit.” Again, it just goes back to being able to extend things out if you need to, or if problems come up and you need to push things out and say, “Look, I know we were going to charge you now, but we’re not going to. We’re going to push this out because we’re not ready yet. We can’t deliver on this yet, and it’s not fair to you.”
Rob [00:27:10]: Yeah, I think that’s a good way to handle it.
Mike [00:27:12]: The other thing that I did, as I mentioned before, about naming the price and letting the customer pick their price is that it gives you a solid sense of what people are actually willing to pay versus what you think that they’re willing to pay. I think that this is super-important, because if you are too far off in what you think that the product is worth – let’s say that you think that people are going to pay $100 a month for it, and they come back to you and they say, “Yeah, I might pay 35 or 40 for it, but 100 is just way too much,” you might step back and say, “Do I really want to go forward and build this product when my lifetime value is going to be less than half of what I thought it was going to be?” And assuming that somebody paying $50 a month would stick around the same amount of time as somebody paying $100 a month, your lifetime value is going to be half for those people, so the issue is can you justify building the product at that price point and selling it at that price point. Are you going to be able to acquire customers at that price point? If you are talking to somebody and you name a price, their mind is instantly anchored to that price as opposed to what they think it’s going to provide to them in value, so there may be a disconnect between people who don’t know who you are or what the story is behind it and just hit your website versus those people that you’re talking to individually, and you can kind of convince them that, “Hey, this is a justifiable price for reasons X, Y and Z.” You can’t have that conversation with somebody who just hits your website.
Rob [00:28:30]: Yeah. Since pricing is such a hard thing to nail down, and there is so much guesswork and risk in it, I really liked the conversations that I had early on validating Drip. I think it is really important, and I also think something you need to think about is, if you’re just getting started, it can be okay to have a lower-priced product that you’re going to learn on. I think of how I stair-stepped up, and I went from one-time sales and then to subscriptions with HitTail, and it was – what – nine dollar starting point. It was like $9.95 and 20 bucks and 40 bucks and 80 bucks. Then at a certain point, I saw how bad the churn was, and there were limitations of how much I could grow it. Then beyond that, it was like, “Let’s get aspirational,” right? The original pricing of Drip was 99 bucks a month. That was going to be the minimum, and I kept saying, “What do we have to build to make this product worth 99 bucks a month?” That can be an interesting question if you’re far enough along that it makes sense to do, but I also don’t – I think you can toy with lowering price points. Just know you’re going to have more churn and stuff like that.
Mike [00:29:25]: I think the last step in this process is once you have decided whether or not you’re going to move forward or abandon the product that you’re looking at launching, I think you need to let everybody know. You need to let them know whether it’s a mass email or individual emails. If you’ve decided to move on and go do something else because it doesn’t look like you’re either going to be able to deliver, or that the product is going to be radically different than what you had envisioned and it’s not something that you want to pursue, then you’re going to want to go back and refund everybody’s money and maybe look at either a related product, or try something completely different. But regardless of what that is, you need to let people know early enough in the pre-order process, especially when you have them on the phone or you’re talking to them and you’re giving them that demo. Set their expectations, and you can tell them, “I’m doing this with X number of people,” or you can just ballpark it. Let them know, “I expect to know within 30 days,” for example, “whether or not I’m going to move forward with this. At that point, if I don’t have enough people, or haven’t gotten enough momentum with this, I’ll refund your money.” So, just make sure that you let them know what you’re going to be doing at that point. If you’ve made a commitment to them that you’re going to let them know by a certain date, follow through with that. Once you’ve done that, make sure to keep in touch every four to six weeks to let them know how things are going, what new developments are going on. If you can, include screenshots and keep them posted on how different pieces of the application are going, if you’re ahead or behind in any areas. The more information that you can tell them about how close you are to the original timeline that you expected, the better off you’re going to be and the more invested that they’re going to be in the application when they finally get onboarded. You’re going to help generate that excitement with them.
Rob [00:31:00]: I think this part can’t be underscored enough. When you have someone’s money, they tend to want to see some results from it. You can either make it kind of a crappy experience for them where you’re not communicating with them very well, and that would tend to be a lot of our defaults. As a developer, your head’s down, and you want to build stuff. Or an entrepreneur, if you have other developers, you’re going to tend to not communicate enough. But I think there’s a really nice approach here to be able to get people excited about this, and then they get thinking, and then they get talking about it. Then they tell other people. What we saw with Drip was there were people in early access who started talking in their Mastermind groups and in their little, private slack channels and their private forums, and I started getting direct emails from people saying, “Hey, So-and-so’s talking about this,” you know. We had early-access folks like Brennan Dunn and Jeff [?] and Ruben from BidSketch, and they’d say, “Ruben mentioned this. This sounds like something I need. Can I get in on it?” So, I then had people asking to get in early access before we launched. It was crazy – right? That’s a type of thing that you want to be able to build. It’s not as hard as it sounds. I don’t think this is lightning-in-a-bottle, Cinderella story stuff. This is just following this playbook and building something that people really are interested and need, and that it really does solve a pain point for them.
Mike [00:32:08]: Yeah, that’s actually a really good point, because if somebody comes to you and specifically asks to be on that early access program, there’s nothing saying that you can’t put them into it. Let’s say you’ve got the initial 12 people signed up, and you’re working through the pre-order process with them. Maybe you’ve delivered an alpha version to them. There’s nothing saying that you can’t take more pre-orders and put them through that process and start onboarding those people. I’ve actually done that to some extent, but it’s also got to be somebody who I feel is going to be a good fit for it and is going to start using it right away as opposed to somebody who is more of a tire kicker, I’ll say.
Rob [00:32:40]: Totally. I feel the same way. I also added people late. I did confirm with them. I was like, “If you’re really ready to dive in, let’s do this. There’s not a lot of time.” So, I added a little bit of time pressure, and I also started implying by that point – since I’d had enough experience with folks getting started up on Drip, I did tell them, “Hey, I’m going to give you as much time as you need for trial, but it’s going to tend to be between 20 and 30 days when you’re really going to hit the ground running.” So, I kind of set an expectation of, “You can’t just surf on this thing for 90 days and expect to see results.”
Mike [00:33:06]: Yeah, and as they’re going through that onboarding process, it helps you pave over some of the rough points of the app, whether there’s documentation issues, or pieces that are not entirely clear because the [UY?] or the [UX?] is not well designed. Or, you just haven’t quite figured out how to present information in a way that makes it easy for the user to understand. There’s lots of those types of issues that, as you’re going through the early-access pieces of it, you’re going to be aware of those. You can point people specifically to different things, or you can create videos that you send somebody so that you maybe don’t – get to a point where you don’t have to onboard each person individually. That’s really the position you want to be leading up to the point where you leverage your mailing list and start doing a much more public launch.
Rob [00:33:49]: That wraps us up for the day. If you have a question for us, can 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, 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 304 | From Bootstrapped to Funded and Back to Bootstrapped with Simon Payne
Show Notes
In this episode of Startups For The Rest Of Us, Rob talks to Simon Payne, a co-founder of Leadpages, about his journey from being a bootstrapped developer, to raising funding, and eventually moving on from Leadpages and developing his own product.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us’ I talk about moving from bootstrapped to funded and back to bootstrapped with special guest Simon Payne. This is ‘Startups for the Rest of Us’ episode 304.
[music]
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, and today with Simon Payne we’re going to share our experiences to help you avoid the same mistakes we’ve made. Every once and awhile, Mike and I like to mix things up and have a guest on the show. And today I welcome Simon Payne, who many of you will know as one of the co-founders of Leadpages. He was, in essence, the developer who helped to Clay and Tracy build Leadpages from day one. And Simon lives in Prague. I’ve met him in person and we’ve hung out several times over a few years. And so there was a good conversation that we had about basically starting off as a developer and transitioning from this bootstrapped company to Leadpages raising their $37 million in funding. And then just recently in the past few months, Simon has moved on and has decided to launch his own product called Convert Player. You’ll hear us talk about that in the interview. Hope you enjoy it. And we’ll be back next week with more of our normally scheduled programming. Thanks so much for joining me on the podcast today, Simon.
Simon [01:25]: I’m happy to be here.
Rob [01:26]: You and I first met in person – was it in Prague when we did MicroConf there the first year? I think you came to MicroConf in Europe it was like four years ago, is that right?
Simon [01:35]: Yes, I went to both of them in Prague.
Rob [01:38]: It was cool. And then we connected again, I think in DCBKK.
Simon [01:41]: Yes, it was in Bangkok.
Rob [01:42]: Cool. So you and I have known each other for several years, and you’ve been a big part of the dynamite circle, which I’ve had some affiliation with. But the reason that I wanted to have you on the show today is to talk about your experience basically working with Clay Collins and Tracy to get Leadpages off the ground in the early days, and finding out what it felt like to go through that journey as the first developer. And then to see the company raise funding and, obviously, get very large – there are 160, 170 people today. And you did that all while you were working remotely from Prague. And then recently, you have decided to move on, from what I understand – we’ll dig into it – it was a mutual decision and very amicable. And I know you’re still in touch with Clay. And then you’re working on your own new software product called Convert Player. And if folks want to check that out, go to convertplayer.com and you’ll find out more about what Simon is working on.
So, let’s start by talking about – this has been covered elsewhere, kind of the advent of Leadpages and how you and Clay met, so I don’t think we’re going to spend a ton of time on it. What year was it when you and Clay connected and started working on it? It wasn’t even Leadpages at that point, right? I think Clay was selling info products, and you were kind of like the web guy?
Simon [02:47]: Yes, I was helping him transition from information products into software. So we did the first few software projects together. First ones were just [Wordpress?] plugin.
Rob [02:56]: What were those?
Simon [02:58]: The first one we did was Welcome Gate. It was a simple WordPress plugin. It was for free. It helped you to make welcoming gate when you arrived on some website that will cover the whole page and give you an offer the first time you visit the site.
Rob [03:12]: Right. And this was like – no one was doing it at that time. You had to hand code it, and people didn’t really use that tactic, is that right?
Simon [03:19]: Yes, it was a completely new tactic. People liked it, but they didn’t know how to do it, so we made it easy for everybody to do it.
Rob [03:24]: And what year was that?
Simon [03:25]: It was 2012.
Rob [03:26]: And then after that you did – was it LeadPlayer was the next one?
Simon [03:29]: Yes, it was LeadPlayer. It was like a month later.
Rob [03:32]: Got it. Wow, a month later. You cranked it out fast. So it was like a WordPress plugin for video? Could you embed videos and then you could ask for emails during the video playing?
Simon [03:42]: Yes. Exactly.
Rob [03:43]: Got it. And then was Leadpages on the horizon shortly after that?
Simon [03:47]: It was very shortly after that. Yes.
Rob [03:48]: Leadpages launched was it January of 2013?
Simon [03:52]: Yes.
Rob [03:53]: And from what I recall, it got big really fast. Right? Revenue spiked way up. Was that mostly based on Clay’s audience and just his marketing chops?
Simon [04:01]: I was watching it from the [?] perspective and I was just completely stunned by the growth, because I just had to keep up with everything. So yes, it was all stuff that was Clay bringing through his content marketing, his audience, and his great marketing skills.
Rob [04:15]: How did you scale that so quickly? What were you hosted on?
Simon [04:18]: I already had good experience with Google App Engine so I was pretty confident with using that. Without App Engine, you would never be able to scale so fast. So it was super easy.
Rob [04:30]: Yeah, for sure. You’re a contractor, you’re living in Prague, you’re working with Clay and Tracy, you’re writing all the code. And things start going hockey stick. You guys were – I don’t remember what the numbers were, but I remember you guys hitting a 100,000 MRR in like no time. It was crazy. Did you hire more engineers right away, or were you solo working on the product for a while?
Simon [04:53]: It was growing so fast we couldn’t properly hire fast enough. So, I think the first year and a half it was just two, three, four, five developers coming pretty slow. But those first hires, they’re developers that are still in the company today. We were very careful about hiring somebody who’d be like a technical leader later, and could manage other people. [?] with Tracy about hiring somebody really smart and I think that was one of the secrets that helped us along.
Rob [05:22]: Right. Was Tracy a big part of the – because it sounds like you had some really good early hires – do you think she was a big part of that?
Simon [05:28]: Yes. Tracy was awesome. She had like 25 years or more experience in HR and hiring all the right people. She hired me. And it was really interesting how we head-hunted some of the developers. We kind of like stole them from other agencies and ODesk.
Rob [05:45]: An interesting part of the story, very similar to how Derek was a contractor for me, and then he became W-2, and then he eventually – kind of retroactively – became a co-founder of Drip. A similar thing happened with you and Clay and Tracy. You want to talk a little bit about that?
Simon [06:00]: Yeah. I originally joined Tracy and Clay to learn more about marketing. But then I realized I can just refocus on myself and my software skills. And I didn’t even think that I would be a co-founder. I just worked so hard and passionately on the business that they invited me to kind of join the center circle of the three of us.
Rob [06:20]: When did that happen?
Simon [06:23]: I think it was like one or two months at the beginning. They told me, “Simon, you are telling us every day what should we be doing. You’re already a co-founder because you behave like one, so we don’t even need to make more changes.” I was so excited about somebody being able to sell my software because, as a developer, I wasn’t very good at that propagation and promoting my stuff. So, for me it was a very interesting experience.
Rob [06:46]: Well, yeah. You know, I was in a conversation with someone the other day – it was actually another podcast, Bootstrapped Web – and we were talking about co-founders. And as we talked I realized there’s kind of this framework that just came out of it which was: if you’re going to have a co-founder you’re going to worry about kind of the interpersonal relationship. Like can you work together well? Are your working styles similar? And that was the first part. The second part was goals. Are the goals similar? Do you both want an IPO, or do you both want to build a nice profitable lifestyle business. And the third was are your skill sets complimentary? Because what we find is if two developers get together and they both know how to write code really well, they’re going to stomp all over each other, and then they don’t have anybody to market the stuff. So, it sounds like you guys had a really unique situation where you were basically the technical co-founder, Clay, obviously, ran marketing, and then Tracy, it sounds like she did most of the business and the hiring. And that sounds like a pretty potent combination.
Simon [07:34]: Yeah. And I think most people just saw me and Clay, but they overlooked Tracy, and that was the key thing because she gave us the undisturbed focus on each of our doings. It was very important for us.
Rob [07:47]: It’s really interesting because I knew of you and Clay, and I had no idea you had a third co-founder until, I think, you and I sat down to lunch a couple of years ago and you said that. And I was like, “Well what does she do?” Because you have marketing and engineering down, but now I understand it. And having met Tracy now – for those who don’t know I work at Leadpages now. Drip was acquired by Leadpages about two months ago. And so, I’ve obviously been working closely with Clay and then Tracy came into town – because she works remotely – and I was able to meet her. And I started seeing that’s her super-power. It’s like working with people, reading people, talking to people. And so I can see how that was really an advantage for you guys as you grew. So, Clay was marketing info products for a while before – I think since 2009, right? Then he was getting into software in 2012, and I’d imagine that was a bit of a transition, right? In terms of moving from marketing info products to software. Could you talk a bit about that?
Simon [08:38]: Yeah, definitely. I was kind of guiding his hand through software, but the learning curve was pretty fast for him. We did quickly make the duration to learn fast. So first we did WordPress plugin. I think it coded over a weekend. And over next week he just started marketing it. The next project was a little bit more. It was a bait plugin. We did that in a month. And then Leadpages was, I think five, six months later. So, we started from small, free stuff, we moved to bait plugins, and then we moved to selling SaaS and subscriptions. We just went through all these phases so that we learn how to do each stage and that will help us to see how people react to software. How to sell them to get them to communicate about it because it was all new for Clay. But it was interesting how quickly he picked up everything.
Rob [09:27]: Sure, it sounds like you guys – you’ve heard of my stair-step approach of basically going from WordPress plugins or one-time sales up to SaaS – it sounds like you guys did that really fast.
Simon [09:35]: Yes.
Rob [09:35]: Normally it takes years. And that’s cool. And you said Clay picked it up really quick, which that seems like that is his super power, right, is marketing? So that makes sense. And so, you said even over the first year or 18 months, you hired as fast as you could but since you were picky and wanting to hire the best, the team wasn’t huge. You recently left Leadpages, maybe a month or two ago. How big was the team by that time, the engineering team?
Simon [10:01]: Engineering, I don’t know. I think it was like 60 or 50 people, including QA and other technical people.
Rob [10:07]: Was there a difference from when you guys were self-funded to when you raised funding? Did that change anything for you and the engineering team? Or was it kind of the same path the whole time?
Simon [10:18]: It felt literally – and I talked about it with Tracy – that I was working for maybe four or five different companies. There were different stages of the company’s life when everything changed, like from one day to the next everything was different. And we didn’t see that coming. So, I remember some people were saying, “We are the early people.” They were like remembering when the company was like under 50. And I was laughing because I was there when it was like just three. So it changed dramatically every few months. The first period was the longest. I think like a year and a half, we were like three developers maybe. And I think it’s kind of interesting because people think that many of this fast growth you need a lot of people. But if you do it kind of smart, and we used App Engine and we trie to do it kind of like a lean way, we realized we don’t need to implement everything and have all this staff. And it actually was enough in the beginning.
Rob [11:15]: And what was the next phase?
Simon [11:16]: The next phase was kind of growing the US team, because in the beginning we were completely all remote. And basically, even when we were five or six people, we each took one big chunk of projects on their own. One guy just went and made analytics, one guy made split testing, a new [builder?]. And we each worked individually. The biggest challenge was to build a team that can work together in US and be integrated with some management. And that started completely, from scratch and it was really painful and slow.
Rob [11:47]: Yes. That transition can be. Did you have funding by that time?
Simon [11:50]: I think so, yes. I think it was about the time when we needed funding. So it was even more motivation for us to get more structured. I call the early days like a [“Hero”?] development, when you just have one guy and you basically have one phone call, tell him what to do, and he goes and figures out everything. But the next stage shifts to stuff like QA and processes and you have to write requirements, and starting documentation and tests. And that’s – if you haven’t done it for a year and a half – then it’s hard to start with all of that. So we have to bring new talent and people that can do all of that. And it took us some time to do that.
Rob [12:22]: That’s always tough. It’s a tough transition. It also slows you down because it adds more process.
Simon [12:27]: Yes, definitely.
Rob [12:28]: And so, you and I talked before the interview about there was kind of a transition point for you. You were a co-founder and working for Leadpages, and there was a point where you were going to move to Minneapolis, because I’m assuming that it just made a lot of sense given that most of the team was here that you would come here and be involved. But tell us the story of that and how that turned into, in essence, kind of a transitional point for you mentally.
Simon [12:51]: I wasn’t sure. I was kind of trying to test it so I was coming just for a few months. I was highly considering actually moving there. But then I had some problems with the visa because we were growing so fast we didn’t have time to properly prepare for all the legal situations. And I was kind of delayed more in Prague. And eventually realized I kind of value my life in Prague and my environment more. And I felt more stable and more productive here then I would be maybe there. So eventually I kind of transitioned into staying permanently remote in Prague.
Rob [13:25]: So that was maybe two, two and a half years ago and you kept working for Leadpages. And why was that? What was the driving force that kept you at Leadpages working away as the team got bigger? I know things change. Sometimes that can be tough on an early engineer. But there had to be something that kept you there toiling away on the product.
Simon [13:44]: I still very much enjoyed working with Tracy and Clay and I still like the company. I wanted it to succeed. And I felt like I can help the company a lot doing it from inside. So, that’s why I stayed so long during these four years.
Rob [13:59]: Yeah, four years you were there. Cool. And then, recently like I said, a couple of months ago you decided to transition out and you’ve built a new product called Convert Player. It’s at convertplayer.com. And your headline there is ‘Turn your video viewers into email subscribers.’ I have an inkling that you are building this one on your own, and probably want to bootstrap it and make it into a lifestyle business. Is that right?
Simon [14:20]: I don’t like this term ‘lifestyle business.’ I just like building business. But yes, I’m going to bootstrap it on my own and I’m going to be doing everything. I’m already coding it myself, writing all the copy. I’m going to be doing some video marketing and email marketing all by myself. I think it actually might work.
Rob [14:39]: I think so. And you’re in kind of an early access right now? You have some folks using it already? Things are going alright?
Simon [14:45]: Yes. Things are going pretty well. I’m actually excited about how well it’s going. I like that.
Rob [14:51]: Good. Where do you want to take it from here? What does the next maybe six months look like for you with Convert Player?
Simon [14:58]: I have an idea that I want to implement and share and communicate and give away to people, because I feel like this is a piece of marketing tool that is kind of missing on the market. And I basically will be developing a new feature every week and then documenting it on video and showing it to other people to tell them how to do it because I’ve got some experience in that. So I think I’m going to be just doing this simple process like weekly videos and new features for the next half year.
Rob [15:28]: So content marketing basically demonstrating all the new stuff you’re doing and educating folks on how to use it.
Simon [15:33]: Yes.
Rob [15:33]: Yes. Do you want to tell folks – I gave the headline of what Convert Player does – but do you want to tell folks what it actually does?
Simon [15:39]: It helps you to get more email subscribers from the videos, which you can do on YouTube, but if you embed the videos on your site like WordPress or other site, you can actually achieve that by placing a special opt-in box anytime during the video.
Rob [15:55]: Got it. And is this WordPress plugin? Or is it SaaS?
Simon [15:58]: It’s actually SaaS. I was considering WordPress plugin and actually Clay gave me the idea that I should turn it into a SaaS. And I eventually did that.
Rob [16:08]: Yes, that’s cool. It looks like you support YouTube and Vimeo videos and, rumor has it that you’re integrated with Drip. Is that right?
Simon [16:13]: Yes. It is going to be one of my first integrations.
Rob [16:15]: Yes, that was cool. You emailed me and it was kind of fun to hear. Well, to hear A) you were working on a new project. Just because I’ve been watching what you’re up to with Leadpages for so long. Then it was nice that Drip was one of your first integrations.
Simon [16:27]: I’m actually using Drip for my own marketing and I’m using it, I have to tell you, I fell in love with that product. It’s really cool.
Rob [16:35]: Awesome. Yes, that’s good. Glad we could help. A few months ago, when you finally made the decision to leave Leadpages and go on your own and do Convert Player, that had to have been a pretty long thought process. And I’m wondering kind of what was the impetus for that? What eventually made you decide that it was time for something new?
Simon [16:54]: I was thinking a lot about how I could contribute to the company, and how can I help and contribute to the growth. And especially in the beginning, in the first years, I felt like really helpful and really valuable. And then the more the company grew it changed the different sizes and the environments, I slowly got the feeling like the skills I used to grow it from the ground are not as useful. But they are still useful for other things. So eventually I realized I’m going to use them to build a new product from scratch. Because I feel there are some people that generally good at taking a company that’s already launched and taking it to a higher level. And there are some people who are generally good at taking stuff from the ground, which I feel like that’s kind of like my domain. So, in that sense, I might have stayed even a little longer than necessary. But I felt I was still very productive.
Rob [17:44]: Yes. I totally get it. I feel the same way. I am a starter. I mean, obviously, right. I’ve started 20 things. But it just comes to a certain point where – and I don’t know if it’s – I guess it’s level of complexity, or it’s number of employees, or just at a certain point where your contributions aren’t as valuable as they were when they were only two or three people. So, that makes a lot of sense.
Simon [18:06]: Yes. And that start can be long. It could be a few years.
Rob [18:10]: Oh, yes. For sure. Well, and you know what I liked about it is I was basically coming into work for Leadpages as you were moving on, but the relationships are intact. It was a very amiable parting of ways and Clay still speaks very highly of you. And you talk about how Clay gave you the suggestion to go to SaaS. So, it’s obvious you guys are still talking and I know you’re still in touch with Tracy. That’s cool that it’s not some type of burning of bridges or bad blood or anything.
Simon [18:35]: Yes, that’s really important for me. And I want Leadpages to succeed, and I want to be really close to it as a partner business ideally. So, Leadpages incentive would be one of the integrations for Convert Player itself. And I just want to be around Clay and Tracy because they gave me so much and it was a very interesting and awesome ride.
Rob [18:58]: Yes, very cool. Alright, sir, thanks again for coming on the show today and talking about your journey over the past few years. I’ve already mentioned convertplayer.com if folks want to check that out. How else could someone get in touch with you if they wanted to follow what you’re up to?
Simon [19:12]: Well, I guess they can easily just follow me on Twitter and send me a message as well.
Rob [19:16]: Sounds good. What’s your Twitter handle?
Simon [19:19]: Mine is @SimonPrague.
Rob [19:20]: @SimonPrague. Sounds good. Thanks again for coming on the show, Simon.
Simon [19:25]: Cool. Thanks for having me.
Rob [19:26]: 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 used under creative comments. 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 303 | Our Favorite Tabletop Games
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about their favorite table top games. Deviating from the typical topics, they change things up and reveal some games they enjoy as a personal hobby. They put the games into 3 different categories by age range and difficulty and share some stories on how their families and kids enjoy them.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about our favorite tabletop games. This is “Startups for the Rest of Us,” episode 303.
[Theme music]
Mike [00:00:15]: 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 [00:00:24]: And I’m Rob.
Mike [00:00:25]: – 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 [00:00:29]: Well, we are mostly unpacked now in Minneapolis. There’s only just a few boxes left, and now we’ve gotten to the point where we’re hanging curtains, hanging photographs, really putting finishing touches on things. It’s amazing the amount of stuff that, even once we got here, we’re just like, “Oh, yeah. We didn’t really need that,” so we we’re giving stuff away to Goodwill, and then the amount of stuff that we actually need, right? We’re buying all thee curtains and all these paintings and art and stuff for this wall and that. Our living room stuff didn’t quite fit perfectly in the space, so we had to get another chair and stuff. It’s very time-consuming. At this point, I’m not super concerned about the money, like I used to be in our very first apartment, where everything had to be used and everything was Ikea and Craig’s List, but it’s just the time to do that and to find stuff that you like.
Mike [00:01:15]: You know, there’s a time shortcut you could take here. Just go to Target and buy a bunch of picture frames and just unpackage them and hang them on the wall. Just leave the stock photos in there. You’d be good.
Rob [00:01:23]: Boom! That’d be a great idea.
Mike [00:01:25]: [Laughs].
Rob [00:01:25]: Be like, “These are all our children that are away at college.”
Mike [00:01:28]: When you rent it out as an Airbnb, it won’t matter.
Rob [00:01:29]: Yeah, exactly, because everyone will feel like it’s theirs. The other thing I’ve been up to is a lot of hiring, like at work. I always forget how time-consuming it is to find really good people, and to find people that are the right fit for what you need, and we’ve tended to be extremely picky, in general. We’ve hired pretty slow, and we basically have four open positions right now. It’s almost my entire job right now. It’s like 30-plus hours a week of reviewing resumes and meeting with people and talking and then getting that going. That’s with – Lead Pages has a full-time recruiter, and several full-time HR people, so I’m not even negotiating anything in terms of actual salary, or researching salaries, or doing any of that. It’s purely just finding the right people. I’m hoping that we get over a hump here pretty soon and I can back off of that and get back to some more product-focused stuff.
Mike [00:02:1]: Cool.
Rob [00:02:17]: How about you? What’s going on?
Mike [00:02:18]: I think last week, I was – I don’t want to say “down in the dumps,” but I was just a little disappointed about the apparent lack of progress on the technical front and all the different challenges we’ve been running into. I feel like we’re starting to turn a corner. I just onboarded a more advanced senior developer onto the team, and basically replaced the rest of the team with him. So that is going pretty well so far. He did a full review of the API, and started overhauling a bunch of things, and I’m still working on other things in the meantime; but I think things are going in the right direction now. It’s been a slow process, but I think things are starting to turn a corner.
I’ve had a couple of conversations with some customers about some things that are in our feature pipeline that they’ve been looking for, that are, I’ll say, preventing them from fully transitioning over and using the product, because they want to use it to replaces some other things that they’re using. Until those things are in place, they really can’t make that transition, and it looks so far like – I’m mitigating as much of the risk as I can by having those conversations, but so far it seems like we’re really on the right track in terms of what it is that we want to deliver. So, I’ll have the conversation with them and say, “Here’s the broad-strokes idea of the feature. What is it that you’re looking for?” then let them talk, and see if it mentally maps back to what it is that we were planning on building, or we’re in the middle building. It’s nice that there’s 90, 95 percent overlap in what they envision versus what we’ve road-mapped out and are building.
Rob [00:03:40]: That’s really cool. It always is painful to run into roadblocks like this, and it’s nice to feel like you’re back on track. Do you feel like you’re just turning the corner now – like you’re just coming out of it and that’s going to be sustained – or do you still have in the back of your mind, “Are we still stuck in this?” and, “Are we really actually making progress?”
Mike [00:03:56]: No, I feel like we’re starting to come out of it, because a lot of the testing, I’ll say historically for certain things, has taken much longer. The reason it has taken longer is because we have to run a bunch of data through a process that will take hours or days to run, and as part of going through that process, it’ll run into a problem that we didn’t anticipate. Then we have to rewrite a bunch of stuff and then run the entire thing again to see if that worked instead. It’s almost like we’re translating data from one place to another. If fails along the way, we’ve got to redo a bunch of stuff. But in reworking it, we also are able to find places where we can cut down on the amount of time that it takes to process and do all of the work. I’ll give you an example. One thing took four days the first time – or it was on track to take four days. Then after it ran into a problem, I reworked a bunch of the code, got it down to take, I think, ten hours or something like that. Then it ran into a different problem, and then I reworked that and was able to get it down to about three hours. So, the initial iteration times to just see if a particular prototype of how to do something is extraordinarily painful, but over time as you go through some of the different challenges, it gets to be less painful because the iteration time is quicker. It still takes time to build all that stuff.
Rob [00:05:10]: Oh, for sure.
Mike [00:05:11]: I feel like we’re starting to turn that corner, and it’s getting easier and progressively faster to go through each of those iterations. That’s good to see.
Rob [00:05:18]: So, what are we talking about today?
Mike [00:05:20]: Well, today we’re going to be talking about some of our favorite tabletop games. This is a bit of a deviation from the shows that we typically do, where we focus in on a particular aspect of how to do something, or certain things that you might need to be careful of when approaching a particular problem. Every once in a while, we like to do, I’ll say, an “off-the-beaten-path” episode, where we talk about something different, whether it’s something that we specifically do either in our personal lives or just something that interests us. Today, I wanted to talk about one of the things that – in my house, we have a family game night. Once a month, roughly, we get together with other families, and we’ll bring all of our kids together. There’s – I don’t know – like ten, 12 kids or something like that, and we’ll be playing different games with them. Sometimes it’s just smaller groups. Sometimes it’s just the kids. Sometimes the kids will be playing one game, and sometimes the adults will be playing different games.
[00:06:07] I wanted to talk about some of the different games that we’ve played, and some of the different things we’ve tried, because some things we’ve tried introducing our kids to, and the kids are interested, but it’s just way too advanced for them, or it’s just not a good fit. Then there’s other ones where we don’t think it’s going to be – we’re really not sure, and it turns out that it’s a great game and everybody has a fantastic time.
Rob [00:06:26]: Super cool. Yeah, I’m such a board game fanatic. I should say “tabletop games” right, because I like RPGs, and I like more – I think “board game” connotes – to me, it’s like Monopoly and Chutes and Ladders and stuff, but “tabletop” is just more sophisticated, more strategic, something that just gets your brain firing. Just learning the rules is always such a task, and then learning the strategy of those rules and how to beat others at it is – I think it brings out – I think a lot of founders, this should ignite something, because it’s about complex systems and competition, and it’s really similar to launching a startup, so I think we could do almost an entire episode on Rob’s favorite tabletop games that he’s gotten on Kickstarter, because I have dozens and dozens of them. I’m that into this stuff.
Go ahead. Say it. “Ne-e-erd!”
Mike [00:07:11]: Nerd! [Laughs] Of course, on that note, I’ll mention that we’ll link up a website called boardgamegeek.com in the show notes that you can go take a look. You can probably find every single one of these games on that website, and there’s usually an in-depth review, and there’s reviews of each of the different games and the age-appropriateness and the number of recommended players and things like that.
Rob [00:07:33]: I want to throw one other – oh, you’re going to just hate me if you like tabletop games and you like Kickstarter. There’s a podcast called “Game Punting.” It comes out once a week, maybe once every other week. All they do is review their favorite six or seven crowd-funded tabletop games. It’ll be Indiegogo and Kickstarter, and it is just – it’s terrible for me, because I listen to that, and I’m just clicking through. I’m backing games, all crazy stuff. Sorry if you like tabletop games and crowdfunding, because you’re going to spend a lot of money.
Mike [00:08:02]: I guess we’ll break this down into four, broad categories. The first one is games that I will say are aimed at younger kids, and by “younger kids” I mean seven and up. These are the types of games that you can get a kid into and they will understand it, and it will actually be fun to play the game with them versus those things where you try to introduce them to it, and it’s just way too advanced for them.
Rob [00:08:23]: And these are not just games for kids. It’s just games that kids can start playing, because on this list we’re going to talk about Dungeons and Dragons, Magic: The Gathering. You can play that up until you’re our age, and it’s still super interesting. So we’re not going to be talking about necessarily kid games, but things that they can start playing at seven or eight years old.
Mike [00:08:40]: Yeah, that’s a really good distinction, because a lot of these games, I still find them highly entertaining, and it’s a lot of fun to play them, whether you’re playing with the kids or without them. These are just the types of games that you can introduce smaller kids to that you’re still going to enjoy playing regardless of whether it is aimed at that younger crowd or not. It doesn’t necessarily matter.
The first one is called “Sushi Go!”, and it’s a card game where you deal the cards out to everybody, and you are trying to score points from one round to the next. It’s very easy for kids to get into it. The idea is that you’re trying to collect and match up these different types of sushi, and for each match that you get, or each set that you get, you will score a certain number of points. The points are anywhere up to, I think, three points for each set that you get, so it’s either one, two or three points. You go through several rounds. Then at the end of the rounds, you add up the number of points that you get. Usually, the games in this are pretty close in terms of points. It’s really hard to get so far ahead of somebody else that you have no chance of winning, so that’s one of the benefits of Sushi Go!, especially when you’re trying to play with kids. The other thing is that there a lot of complexities to it. There are certain things that are worth a lot more points than others, and it can be difficult to get those matches, so if you’re trying to get something that’s worth four points, it can be very difficult to get that, but if you do get it, it can be very helpful if you are able to put those things together. You are trying to match what you get versus what other people may have in their hands, so you’re essentially playing head-to-head by taking things away from them when you play down sets.
Rob [00:10:11]: Oh, man. That would be so brutal. My six-year-old would scream bloody murder if someone took something from him.
Mike [00:10:17]: The thing is you don’t know. You just know that there is a card in there, and it may be face down, it may be in the deck, or it may be in somebody else’s hand. But let’s say that I’m trying to get a California roll, or something like that, and you’ve got one in your hand. I’ve got three in my hand, but I want a fourth one. Well, I don’t know where that fourth one is, but if you’re hanging on to it, I won’t get it, but I won’t necessarily know until the end.
Rob [00:10:39]: It looks like Sushi Go! Is right around $9 on Amazon.com here in the States.
The Second game we want to talk about is “Magic: The Gathering”, and this is a card game that’s been out since the early ‘90s. I actually played it in college. I don’t think it was out when I was in high school. Super fun game, and you can get starter decks for – I don’t know – 10 or 15 bucks, and each player needs a deck. So, my ten-year-old and I play – and, to be honest, we didn’t actually by starter decks. We went on eBay. For, like, 20 bucks – I think on Amazon as well – you can get a big, old box of hundreds and hundreds of “commons,” they’re called – commons and some uncommons and two rares or something. They’re not actually worth that much, but you can totally play the game if you don’t want to get into the collecting of it, because Magic is both a collectors’ game – where the cards go up in value and stuff – but if you really just want to play it as a game, which is probably would I’d recommend if you’re going to be playing it with younger kids, you can, again, spend 20 bucks and get plenty for tons of different decks. The concept is almost like a simplified version of Dungeons and Dragons, in a way. It’s just two wizards battling. It’s pretty sophisticated now. It’s actually gotten more complicated with more game mechanics over the years; but, in essence, you have some cards you play that are like your resources. Then you can tap those resources to summon creatures, and then you attack each other. You, as the spell caster, have 20 points when you start, and you’re just trying to get the other guy below 20. You can attack each other as creatures or each other. Yeah, it’s a pretty fun game, and we’ve played it a lot. We’ve gone to camps my ten-year-old went to where there were Magic tournaments, and it was so cool. He had brought his deck. What is it? A 20-year-old thing now, so a lot of folks play it, and it’s really age-appropriate from probably age seven or eight and up. Even when my oldest was seven, he picked it up pretty quickly.
Mike [00:12:17]: Yeah, I think the game came out in ’94 or ’93, maybe even ’92, something along those lines. So, it’s a pretty old game at this point, but every year they come out with new expansion packs, and they come up with new stuff. But I think you’re right. If you’re just trying to get into it, or you are trying to bring kids into it, it’s very well worth it to go on eBay and just buy, like, thousands of cards because they’re very, very cheap there. You won’t get the greatest cards in the world, but you can get a lot of them, and it’s significantly cheaper to do that than it is to buy all your cards new. There’s really no additional value to buying a new card these days. I think that the company behind it, Wizards of the Coast, realized very early on, or at least maybe five or ten years into it, that some of the previous cards that they came out with, they just weren’t going to make anymore; and some of them are worth thousands of dollars at this point. They’re not going to make them anymore, but nobody plays with those either, and they’ve banned certain cards from tournaments and things like that. I actually have a deck that was built ten, 15 years ago. It is completely not tournament-legal. There’s no way that it’s tournament-legal at this point.
Rob [00:13:15]: One, last thing about Magic: The Gathering, and we’ll move on. This is one of those games, one of the few games on this list, that you can play over and over for years. Since every time you choose what your deck is, you can just play with new cards. You can play different – there’s five, different colors you can be. Depending on which color you are, it’s just a totally different game, so much like Dungeons and Dragons or something with infinite possibilities – there’s no board. Certain games have boards. I find that you play them five, ten times, and then you’re kind of done with them. You’ve played it out, and it’s not fun anymore. Magic is one of those that you can play for a really long time.
Mike [00:13:46]: The next one on this list is called “Storming the Castle.” I got my kids into this when they were about seven years old, and they love it. It’s based on the movie “The Princess Bride.” So the idea is that you pick one of the characters from “The Princess Bride,” and you send them on a mission to try and storm the castle. Whoever gets there first is the person who wins, and there’s all the different places from the movie inside the game on these different cards, and you can put them in front of other players. You can overcome different challenges on your own path, but the idea is you’re just trying to storm the castle as fast as you can and get there before anyone else is able to get through all of their challenges.
Rob [00:14:22]: It looks like it’s available for about 17 bucks on Amazon. There’s a whole series of “Princess Bride” games. That’s hilarious. I’ve never even heard of these. I like that movie, but I’ve never heard of any of these games.
The next game is called “Boss Monster,” and this is also for about ages 7 and up. What I like about this game – I’ve only played it a few times, but the art is super cool. It’s eight-bit. It almost looks like Super Mario Brothers graphics on these cards. It’s just a card game, and it’s like a dungeon-building game. Not a dungeon-building, but – what do you call it? You put the dungeons down, and then you fight through them in rounds.
Mike [00:14:53]: I forget what the specific name is for it, but it’s kind of a resource-building game where you put the different cards down, and those are your resources, and you’re trying to attract or, in some cases, repel certain types of heroes from your dungeon; because there’re certain ones where you’re just not going to be able to compete to get them to your dungeon, so you just say, “I’m going to give up on that type of hero,” whether it’s a fighter or a wizard. There’s other ones you’re trying to attract based on what it is that you have in your dungeon. The goal is to get enough of the heroes to come into your dungeon that you can kill and get the points for them, before enough of the heroes come in and get through your dungeon and kill you. So, you can either get hurt, or you can kill the hero and get the points for it. You can either win the game or lose the game, or you can cause somebody else to win or lose the game based on whether or not you push a hero to their dungeon or you take the hero away from their dungeon.
Rob [00:15:41]: Yeah, it’s “Boss Monster: The Dungeon Building Card Game.” I think that about wraps it up. It was $20 on Amazon.
Mike [00:15:50]: The next one is a fun one. It’s called “Car Wars: The Card Game.” There is a Car Wars pen-and-paper game. It’s not really a role-playing game, but the idea in that game is that you build your vehicle of some kind, and then you can get put into an arena, and you can shoot other cars until one of you blows up, or one of you tries to get away. In the card game, Car Wars: The Card Game, you have a card that represents your car, and then you draw a bunch of cards, so does everybody else, and then you play one card per turn against the other players. You are essentially trying to be the last person in the arena with a functional vehicle, and there’s lots of different things that you can play. You can either play armor. There’s weapons that you can play. There’re special abilities that you can get and certain types of defensive measures, stuff like that.
I find that this is a lot of fun with my kids, and my wife plays with us as well. It’s interesting to see that, because you can attack anyone, it’s very easy to either be ganged up on or to have somebody else gang up on you. The kid will occasionally gang up on somebody, and there’s really not much you can do if that happens, but it’s not to say that you can’t get certain types of cars that will help you overcome two people coming against you.
Rob [00:16:55]: It looks like Car Wars: The Card Game is about 14 bucks on Amazon, and there’s also Card Wars: The Board Game. I haven’t played either of those, but I have heard about them. Car Wars: The Board Game is actually – what – 20, 30 years old. It’s kind of a classic.
Mike [00:17:07]: Car Wars was made by Steve Jackson Games, and it has been around for a very long time. Steve Jackson Games is also behind Gurps, which is the generic, universal roleplaying system, I believe.
Rob [00:17:17]: Our next game is called Dungeon. I actually recommend this. If you’re thinking about getting your child into Dungeons and Dragons, or you’ve never played Dungeons and Dragons and you want to get a more entry-level version of that, Dungeon is – when I bought it on Amazon brand new, it was $15, super cheap. Comes with a board, so it’s like D&D lite. Comes with a board, and it comes with some generic character classes, and then you just wander around the board. When you go into a room, you flip a monster, and then you try to fight it. It’s very simplified rules, but it just gets you some of the combat mechanics so that you understand the movement in combat stuff. This is one of those you play five or ten times, and then, yeah, you’ve kind of played it out. There’s just only so many things you can do, but it’s super cool, especially for younger kids because they just get it. It’s in the paradigm of the little pog moving around with the roll of the dice and being able to fight things, but you don’t need all the heavy weight of six, polyhedral dice like in D&D and all the heavy rules set.
Mike [00:18:14]: That’s a really good way to describe it. It’s “Dungeons and Dragons lite,” because there is that board game, and it’s very self-contained. But the downside, I think, of it is, as you said, you play it five or ten times, and then it gets boring. You start to realize there’s one character class in the entire game that has an advantage over all of the others, and there’s no point in choosing any other one. Since there’s only four character classes and only two people can chose any one, if you have more than three players, two of them are going to get that one character class, and the third player has to choose something else, and it can be really challenging to win, or even come close, if you have to use anything other than that one class. I think it’s the cleric, but I’m not sure of that.
The next one on this list is called “Small World,” and this one’s got great graphics. It’s a very colorful game. It’s a little bit like Risk, but without all of the annoyances of Risk, and I think they put that in some of their marketing materials as well. The idea is that you have a race that you choose, and then that race will get some special abilities that go with it. This has a lot of replay value, because those things get mixed up every time, so there’s 15 different races, I think and 12 or 15 different types of abilities, and depending on how those get mashed up in the game, you can have, for example, flying giants. Or, you can have underworld elves, or something along those lines. The idea is that you get a handful of these tokens, and you put them on the board, and it costs you a certain number of tokens to take over a space. That number is modified by the abilities and the race, so you might be able to take over seven or eight different spaces, or you might only be able to take over two or three. It depends on what other people have played on the board. The goal of the game is to try and score as many points as you can at the end of the turn that you take. What I like about it: 1) is the infinite replay value of it, and 2) that it’s so simplistic that it’s easy to understand and get the appeal of it without having to go through all of the intricacies of Risk and all the advanced strategy of Risk. In general, Risk is a very simplified game, but it makes it a challenge to play just because it takes so long to play Risk. With Small World, you just don’t have that option. You have very limited opportunities to do things during your turn.
Rob [00:20:20]: That’s the cool way to explain it. I’ve never played this game, and for as much as we are into tabletop games, it’s really surprising because there are, like, 20 different versions of it, and there’s all these expansions, so I knew it was a popular franchise. I’ve just never bought it, and that description actually makes me much more interested it.
Mike [00:20:37]: I would highly recommend this game. My kids love it. My wife will play with us as well, and it’s a lot of fun.
It kind of leads us into our next one, which the kids also really like. It’s called “Settlers of Catan.” It’s a very similar game in terms of the complexity, but obviously Settlers of Catan is much different in that you are trying to get your team or – you’re trying to get to ten points, and so you have to build cities. You can build roads. You can’t directly affect or attack somebody else, but you can indirectly block them or, prevent them from doing things. In Small World, you can directly attack somebody and completely take over a particular spot, but if you do that – you might only get eight tokens on a given turn, and it might take five or six to take over one spot. With Settlers of Catan, it’s very much a resource-driven game where you’re trying to gain resources and deploy them in a way that allows you to build things down the road. It’s a little bit more strategic in that sense. I like the replay value of Small World over Settlers of Catan. Settlers of Catan is the same from one game to the next, but I also think that that’s partially because we don’t move the board around in Settlers of Catan. I think with Settlers of Catan, the board will change, and where the resources are and the point values and stuff. With Small World, the board is different, depending on how many players you have, but the board is always the same. The two-player board is always the same. The three-player board is always the same. With Settlers of Catan, everything could be different. We don’t play it that way just because it could result in a four-hour game, but those are the main differences between them.
Rob [00:22:04]: Our next game is the classic, the originator, Dungeons and Dragons. I played in grade school and then a tiny, tiny bit in high school. Then I just didn’t play again for decades. When my son got to be about eight or nine and we were playing some Magic: The Gathering and I knew he was ready for it – I did research, and I was figuring I played first edition. I played basic D&D first –
Mike [00:22:27]: Oh, you’re old. You’re old. [Laughs].
Rob [00:22:28]: Yeah, no. I am that old. I was young. I was seven or eight when my brother got it. Anyways, there’s been five editions, and there’s all this religiosity around which edition you want to play and stuff, but I’ve researched, researched, and I finally figured out that if you’re going to start today, I would just highly you start with fifth edition. It’s got a streamlined rules set. Again, there’s a beginning D&D thing for 13 bucks on Amazon, and it comes with the dice, and it comes with one module, and it comes with a guide, the rules to it. D&D, if you’ve never played, it will blow your mind. It is a free-form game where you need a dungeon master, so it’s someone who’s running the game. They’re not playing against the players, but they’re basically crafting the story. It’s really nice to have multiple kids or multiple players playing their characters. You can really get into it and have people roll their own characters and create their own. We just use the ones out of the box at this point just purely due to time, because you can sink hours and hours into this. We got some miniatures, and we printed out some layouts. Man, we used to play without miniatures, where it was purely just describing what was around you, and that was fun, but combat’s a lot more fun if you have miniatures to figure stuff out.
There’s too much to be said about this game, to be honest. But if you’ve never played it and you’re into tabletop games, it is a classic. Fifth edition is a very solid game. I recommend that you check it out.
Mike [00:23:45]: Yeah, I would definitely recommend the fifth edition as well. I, like you, started back when it was still – it wasn’t even advanced Dungeons and Dragons. It was just the basic rules set back then. They had all the different boxes for it. I like the fifth edition rules much better than a lot of the advanced Dungeons and Dragons rules. I stopped around the second edition or so. There was 3, 3½ and then 4; and I didn’t really pay too much attention to those. Then as my kids got older, I got back into it. I really like that they’ve clarified a lot of things, and they allow you to create a character in such a way that it really builds a story around the character, and it’s character-focused, as opposed to previous editions, where it seemed more about the abilities that you got and the treasure and stuff like that. It was much more geared towards hack and slash, which I think younger kids are much more attracted to that side of the game, and that’s one of the downsides of this game as well, especially if they’re six or seven, or maybe even eight years old. They’re not so good at the roleplay, and they’re much more hands-on when it comes to the action sequences or there’s combat going on. They really like that aspect of it. The roleplaying, they’re just not as in tune with how to do that. So there are some challenges that you have to overcome; but, again, depending on the group that you’re in, you can still definitely make that happen and make it work.
[00:24:56] The next game is called “Code Master.” Code Master is a game that is aimed directly at smaller kids. If you’re a software developer of any kind, you’re probably not going to be interested in this one, but it is a nice intro to how computers work for kids. It’s very logic-driven. You get a series of commands on each of the boards, and there’s 40 or 50 different boards. Let’s say that one of them gives you three commands, and you can go from a red space to a green space, and then you can go down a slide, and then you can move from a purple space to a red one, and you have to move this little pog from one side of the board to the other using just those instructions. You can’t duplicate things. There’s usually almost only one way to make that happen given the board that you’re on and the instructions that they give you, so it’s very self-contained and very constrained; but it also teaches kids how to work out a problem that has a single solution. Some of them, as you go through further and further into the game, some things can be reused. You can enter a space more than once, and it can get more complicated, but it starts out, and it’s very, very easy. It’s a nice intro into teaching kids how to mentally map out what the path is to get to a given destination.
Rob [00:26:06]: Yeah, and if you’re looking for games along these lines, Robot Turtles is another one I’d recommend. It’s some very basic programming skills.
Our next category is collaborative games. Again, these are all ages. You can start probably around seven or eight years old. These games are so fun, because you’re all working together against an AI. It’s like an AI mechanism that sometime is flipping cards. Sometimes it’s rolling dice. It sometimes is picking randomly out of a pile. So, Castle Panic is one that’s really cool. It’s aimed at a little bit younger kids, but you’re basically just defending a castle, and all these monsters are running at it. Forbidden Island, as well as Forbidden Desert, are neat games. They’re a little more complicated. I’d say it’s – probably want to be a little older to play that, but they have neat, little – what are they? Little, plastic game pieces that make this field, and the are in metal boxes, so it makes it feel like a real premium game. These ones are a little more expensive.
Then I really like both Pandemic and Flashpoint. I think they were designed by the same guy, and they have similar game mechanics, but in Pandemic this virus, or multiple viruses, are taking over the world. The viruses are the AI, and you just have to – you’re trying to knock them off. Then in Flashpoint, it’s actually a home that’s on fire. The fire spreads with each round, and you’re a fireman going in and trying to take it out. Cool part about these, again, is you’re all working together. It works well with younger kids, because you can help them, and you’re not helping them play against you. Also, you either all win together or all lose together. These are probably – aside from maybe D&D and Magic: The Gathering, these are probably my favorite games.
Mike [00:27:33]: Yeah, we play Castle Panic, and Forbidden Island. That is the nice piece of those games, is that it is collaborative, and you win or lose as a team. If you don’t help each other out, then you’re all going to collectively lose. It’s nice to see the collaboration and the strategy behind helping each other out: “Well, if I do this, or I give you that, then you’ll be able to do this and that,” and being able to work through the problems in advance. Again, a lot of them are just driven by the cards, or the AI, as you put it; and sometimes there’s nothing you can do. You can play the best game in the world, especially with something like Pandemic, and you can still just lose, and there’s nothing that you did wrong.
[00:28:09] The next category of games – I will say that these are probably more for mid- to late teenaged kids, so if you have kids that are 12 or up, or 15 or up, then these two games are probably more appropriate for them. The first one is called “X-Wing Miniatures,” and the next one is called “Wrath of Ashardalon.” The X-Wing Miniatures game – my kids looked at that and said, “Hey, I really want that, and I want to play it.” We got it. In less than 24 hours, they broke one of the pieces; and within three or four days, half of them were broken. The reason I would say that this is aimed more at older kids 12 and up is because they’re just not careful enough to not break those things, and they are very, very brittle. It’s not just kids, to be perfectly honest. There’s plenty of adults complaining online, “Hey, these are easily broken. How do I get replacements?” and they didn’t really sell replacements for those pieces.
Rob [00:28:57]: Yeah, we had the same experience. It’s a fun game, but I think almost all of our pieces have been broken and glued back together at this point.
Mike [00:29:04]: Wrath of Ashardalon is almost like a Dungeons and Dragons lite game, similar to Dungeon in some respects, but it has a lot more replay value than Dungeon, but it’s also a lot more complicated. There’s a lot of nice figurines that comes with it, and it’s kind of expensive. There’s probably four or five different variations of the same type of game. There’s one that’s set in the Ravenloft realm, and there’s probably two or three others that I can think of; but they’re all, I would say, probably 14 to 16+ games. You really can’t have smaller kids playing those games, because they just don’t understand all the rules, and there’s just so many rules. It’s actually kind of painful to play, so unless you’re really into sitting down and playing a board game like that for three or four hours when you feel like you’re going to be flipping through the rules a lot, probably not a great game for the younger kids.
Rob [00:29:52]: That about wraps us up for today. 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, 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.
