Episodes

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us, I am your host, Rob Walling, and this is the podcast for bootstrapped and mostly bootstrapped founders to change their lives through entrepreneurship. This week I have fan favorite, Ruben Gamez, back on the show, and we talked through several listener questions, really good listener questions this week. And I’m not just saying that, people sent in video and audio asking questions like, so if I build a SaaS with no audience, how do I find people to talk to? If I build in no code, should I be concerned that I can’t export my code? Thoughts about going horizontal versus vertical, building a prosumer SaaS and more. 

Before we dive into that, you should check out MicroConf Connect at microconfconnect.com. This is our online community and forum. We host it in Slack and we’re approaching 7,000 members. They’re bootstrapped and mostly bootstrapped SaaS founders. Recent conversations in Connect, including a debate about magic sign-in links, how long you should spend diving into a niche before deciding on the product offer, how to safeguard your product from misuse during free trials, at what point in your journey should you invest in a conference booth, and more. It’s a vibrant and highly moderated community. Very high signal-to-noise if you’re looking to find and hang out with other misfits like you and I, head to microconfconnect.com. And with that, let’s dive into listener questions. 

Ruben Gamez, welcome back to Startups For the Rest of Us.  

Ruben Gamez:
Thanks. Great to be here.  

Rob Walling:
Yeah, it’s always good to have you, man. We have some really interesting listener questions today, all audio or video. As always, if you want to submit a question and you want it to go to the top of the stack, make sure to send audio or video, text questions do still get answered now and again, and let’s dive in to our first question from Jay Lee.  

Jay Lee:
Hey Rob, my name is Jay and I’m from LA. Loving the pod, so thanks so much. I had a quick question about how and where to talk to your first users, especially early on in your app’s life. So recently, I saw your post on X about how you don’t need an audience to start a SaaS, and that in fact less than 5% of the companies you invest in have any sort of audience at all, and it makes sense. So my question is then, assuming that you’re a programmer with zero audience, starting from scratch, what does your strategy look like? For example, let’s say you want to build software to help people run in-person conferences. Do you just go to some r slash conferences Subreddit and start posting questions? Do you just join some Facebook group and post, “What problems do you guys have?” Or do you cold DM people on LinkedIn with any conference manager title and ask them questions? So what would be your specific strategy and approach here? Thanks again and love the work you do.  

Rob Walling:
So I like this question because it’s fun. I’m Mr. Don’t Build An Audience If You’re Going To Build A SaaS, or it’s not don’t build an audience, but if you don’t already have an audience and that’s not an amazing gifting of yours and you really want to do it and all this and that, don’t do it. Don’t listen to the advice. And I come back to the less than 5% of all TinySeed funded companies, which is just 170 now, less than 5% had any kind of audience when they started or even have any kind of audience today. And it’s fun to me though when I say that and then Jay Lee writes in and says, okay, so then what? Because that’s kind of cool, right? It’s like, oh, someone’s listening and they buy into it, but it’s like, so then what do I do? Help me with the next step. So with that, I’ll kick it over to you Mr. Guy with an incredibly successful business and no audience. How do you think about the questions he’s thinking about?  

Ruben Gamez:
Yeah, it’s funny because you would think based off of what you see on Twitter and all that stuff that everyone has an audience and that’s how they start their business. But most of the people that I talk to and just like you’ve always said, they don’t start that way. So I’ve done it twice without an audience. I feel like that’s good because that means it’s the default. So the way that he phrased the question was interesting to me. It’s like, okay, he said in person, people who run in person conferences, you reach out to them and all that. How do you start to get those? How do you start to market those? I feel like that might be a little bit of a dangerous way to approach it. I’d start with the research side first, and I say dangerous because you could be in the right community. 

Let’s say you find a community, and I did this with Bidsketch back in the day, found a community of designers, a couple of community of designers for trying to validate the product, trying to see if there was interest there in buying, and then got nothing. And that was a negative signal. I think one of the things that a lot of people don’t talk about enough is that if you can have the right type of person, but the context could be wrong. They could be, the reason why they’re in this community might be a topic that doesn’t align with your product. So you might get, there are always segments of a type. So people that are running conferences, there might be people who are running conferences in a certain way or certain types of conferences that won’t make for good customers. That might be an issue. 

Or if you’re using ads and you have some bait, like a lead magnet or something like that, if that doesn’t align well with the type of product that you’re selling, like if you’re selling something on the money side, software for people who run conferences for monetizing conferences, but the bait that you use has nothing to do with that, that might also be a bad signal that you get there. So I’d start with the research side and I think about it in terms of talking to people who are potential customers. So yes, reaching out through LinkedIn, reaching out to Twitter through these communities, however you could find them, tell them that you’re researching a problem and not talk about the solution. Some of them will talk to you, some of them won’t. Also, I like to talk to founders who have sold into the space, who have the same type of product or had it in the past, failed or succeeded with it. 

I did this with SignWell. Talk to people who were in the electronic signature space as founders and get their perspective. The other side of it, like how hard it is, how they sold, what things are effective. And then sometimes talk to in slightly bigger companies when they have sales and marketing specialists, talk to somebody who’s done that role and try to learn from them. Not going too big because if I’m talking to somebody, in the early days, I did this, I talked to somebody, two people that one did growth and one did marketing for e-signature companies, but the companies, they were successful and they were larger than I’d be starting, but not so large. They weren’t DocuSign or something like that, which wouldn’t really be that relevant to me. And you get, I feel like a really good perspective on price points, on channels that work, on trade-offs, things that are good that are not so good, all that before you start marketing and then just are more informed about how to go approach your marketing.  

Rob Walling:
And it sounds like you would, if you have any kind of network in this space, you’d start with that because that’s easy, right?  

Ruben Gamez:
Definitely.  

Rob Walling:
If I know I happen to know five or six people who run conferences because I run conferences, but if I was going to build a product for in-person events, I would instantly go to them and I would ask them questions and “Hey, who else do you know who I can talk to?” Right?  

Ruben Gamez:
Yes.  

Rob Walling:
That’s the next, it’s the star.  

Ruben Gamez:
That’s a great way of doing it.  

Rob Walling:
Yes. But if you don’t know anyone, so you know zero, you have no network in the space. Well, you do exactly what you said, cold DMs, there’s LinkedIn, there’s Twitter, there’s Facebook, there’s Instagram, there is cold email, whatever way you can do it. And I do think, I mean Jay mentioned, do you go into a Facebook group or a Subreddit and start asking, “What problems do you have?” Or whatever. No, I wouldn’t. I would lurk.  

Ruben Gamez:
Right. See what naturally is brought up.  

Rob Walling:
Yep. I would want to see what’s brought up because look, people want to bitch about things and they bitch about… You know what I mean? So it’s like you don’t need to ask. You’re going to just notice. I have a few hobbies. I collect high-end vintage, Silver Age and Golden Age comic books. I play Dungeons and Dragons, and so I’m in those Subreddits and Facebook groups and this and that, and it’s the same shit every week. Someone complained about this grading company and someone complaining about Wizards of the Coast, the maker of Dungeons and Dragons doing the same thing. Again, you don’t have to ask anyone what the problems are or what their opinions are, they’re sharing them. And I feel like in-person event operators are going to have a similar thing. 

Now maybe they won’t complain as much as consumers whining about a tabletop game they should take way less seriously than they do. But if people who run events, we have similar problems and they’re just going to be talked about on a regular basis, maybe not every week, but you know that once a month, the same topic that’s bugging everybody and hopefully it’s like, “Ooh, does anyone use…” I’m going to bring up makeup example. “Anyone use Eventbrite? Oh my gosh, their fees are so awful and their software is terrible and it doesn’t do dynamic coupon codes.” And then I’m like, “Wait, what?” So now I’ve been part of this thing, checking in on it every day for a week or a month, and I get the tone. You start to understand just the gestalt and how people talk and how they interact. 

And then you chime in, “Oh hey, here’s a…” Either you can DM them on Reddit, I believe like private message or you can chime in thoughtfully. Not, “I’m selling something.” But you can say, “I’m a software entrepreneur. I’m researching something. I’m actually in the press of potentially building something that could blah, blah, blah.” You got to watch the tone of some Subreddits are so anti-marketing yourself that you may just need to PM, private message or DM people that you literally can’t. Like, you post a URL to your thing and you’re kicked out of the Subreddit. I’ve heard of that. So it depends, but you just have to be sensible about it and tactful.  

Ruben Gamez:
Yeah. The last thing that I forgot to mention related to all that was competitor research and looking at reviews and seeing the negative reviews and what people are complaining about there.  

Rob Walling:
Whether it’s like Capterra, whether it’s going to Google, ask ChatGPT, anywhere, any of the review and rating sites, just take them all with a grain of salt. But I agree, you start to get a picture of what people are upset about and what they don’t like. And here’s the thing with in-person events, I know that Eventbrite’s huge, it’s the 900 pound gorilla and therefore there’s a bunch of stuff they do poorly because that’s what big companies do over time, it just happens. So that’s actually an interesting space. 

Now there are, how many ticketing platforms do you think exists that ARG’s taking advantage of that? I mean, there’s got to be a hundred, literally a hundred. So then you start to think, okay, so am I looking for a unique position? Am I looking for an angle no one else is covering? Or am I looking for an angle? Think something that people are complaining about that they can’t find a solution to. So again, am I trying to be unique that no one else is doing? Or am I willing to compete with a couple of the others in this space if I think I can execute better and market better? How do you think about that?  

Ruben Gamez:
If you are trying to be unique and do something that nobody’s doing in this space, then just I think that’s a valid approach. But I also think it’s higher risk because no one’s proven that people will pay for that thing. So it’s just to understand where the risk is and then approach that first. I’d prove that out as true or false first before trying to approach distribution or marketing or anything like that. Because that’s the highest risk that no one will pay for this thing and it doesn’t… Like you reaching the right type of people won’t matter in that context. So I tend to prefer having competition. If it’s too competitive, then the risk becomes like, can you get distribution? And that’s the thing that I really focus on.  

Rob Walling:
Can you out market them?  

Ruben Gamez:
Yeah.  

Rob Walling:
Right. Then you look at what your skill set, what you think you can do. I want to say just two other things about how I might do this, find people. One is you have no audience, that’s fine, but still, if you have a Twitter account, you have a Facebook account, you have an Instagram account, whatever you have, post on there and say, if you’re following me, I’m an entrepreneur and I’m looking to talk to anyone who runs an in-person event, big or small, if you are or you know them, it’d be amazing if you… You know what I mean? It may do nothing, but it does, it takes three minutes. And so it’s like just promoting it. You say you have no audience, you probably have at least a hundred people that follow you somewhere. So that’s another way to do it. It’s not a silver bullet, but it might get you something. 

And then I’m curious for you, you started with SignWell, which is the best electronic signature app on the market. You started doing SEO way before you had a product, you were generating traffic. But my question for you is, had you already done all this research before that point when you started the SEO?  

Ruben Gamez:
The very first thing that I did was research on the distribution side, research different channels, SEO, and then, I’m trying to think of the timing. I felt like I started all that almost at the same sort of time. Once I felt good about distribution, then it was like, okay, let me better understand this. And it was not a case. So if I did something on the SEO side, it’s maybe I started with a couple of things that I felt were easier and I could start to get the right type of traffic, the right type of leads. But at the same time or very close soon after that, it was literally talking to all these people and understanding what I was getting myself into from as many perspectives as I could. So even though I felt like, okay, people are paying for this type of product and all this stuff, and the risk was on the distribution side, I still wanted to better understand why people buy and what distribution looked like. So I don’t know if that’s how I approached it.  

Rob Walling:
Yeah, that makes sense. Well, the reason I was asking is because 10 years ago, SEO was, I think it’s inarguable that it was easier. It was simpler than it is today. There were times when I was trying to validate some ideas that I never built. I was going to build some software for coaches, not more like sports coaches at universities, this whole thing. I never did because the validation didn’t come through. But I actually just, there were terms that had so little competition that I threw up a landing page and I built some links to it, which again, easier to do, but maybe it was like 12 years ago, you could do one of the private blog networks. Remember the PBNs? Is that what those were called?  

Ruben Gamez:
Oh. Yeah. That was fun.  

Rob Walling:
So I could literally get a page to rank in a week or two for terms, you know what I mean? And so would do that with a landing page that captured email, and then I would reach out and say, what are you looking for? Blah, blah, blah. So that was my way of doing it. Now, it’s not that easy today, but I still think if I were to launch a SaaS today, I would get a landing page up very early for me because of course, I’m always talking about it on podcasts. With Drip, I was spending a non-inconsequential amount of money, maybe a thousand a month, maybe more on Facebook ads when-  

Ruben Gamez:
Yeah, I remember you were doing Facebook ads.  

Rob Walling:
It was just a landing page. There was no SEO to it, and you could do AdWords. So here’s the thing, if people are searching for it, you do AdWords. If not, and you know the type of role then you run ads on, it’s either Facebook or LinkedIn is tougher to make it work. It’s just the way their tech isn’t as good, their AI isn’t as good, so you have to do a lot more manual stuff. But there you can target job titles and that’s the key. If you know the job title, you go there. If you know the demographics, psychographics, you go to Facebook. And if you want intent and there is actual volume, then you go to Google if you have any money to spend. 

So zero audience, but you can still drive people and look, could you drive them a landing page and say, opt in to learn more? Yes. Could you drive them to a landing page and say, I’m thinking about building this thing. It’s me in a little video. “Hey, my name’s Rob. Click the button below and just book a time with me. Here’s my Savicat link. And just book a time on my calendar because I want to talk to you.” You’re just trying to do stuff to get into conversations.  

Ruben Gamez:
Yeah, I did that with Twitter ads for SignWell, Twitter ads to a, I don’t remember the exact hook that I used. It was something related to costs for e-signature or something like that I think. And it was going to a survey and then I was pre-qualifying them on the survey just trying to find out if I wanted to talk to them. And if I did, then I’d offer them an incentive because this was cold, to talk to people it’s harder, super cold, especially off an ad like that. And if not, then I just added them to a list. So back then, especially when I did it, it was expensive, it was too expensive, I wouldn’t recommend it. But there are so many different ways of doing it.  

Rob Walling:
And to be clear, you’re not going for any type of ROI on these ads. This is a research cost.  

Ruben Gamez:
Exactly.  

Rob Walling:
Yeah. You’re not trying to make sales at all. You’re just paying for the privilege of speaking to folks.  

Ruben Gamez:
Yeah, you’re paying for the data.  

Rob Walling:
All right, so that may go down in history as the longest Startups For the Rest of Us question, but it’s good and thorough, dude, honestly. So probably the next book that I’m going to publish is called the SaaS Launchpad and it’s like a precursor to SaaS Playbook, what we just said needs to go in there. I literally made, the manuscript is quote, unquote done, but it’s not locked down. So I think I’m going to go back through what we just said and try to pull out a section. Because this is very, that’s the most in-depth, I think I’ve ever talked about this topic. So thanks for doing that with me.  

Ruben Gamez:
Yeah, it’s cool. And it was cool seeing you do it for Drip because I do remember that. I thought that was a really interesting approach that you had.  

Rob Walling:
Just scraping and clawing, trying to get people to pay attention. 

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Next question is about no code, code export.  

Ashish :
Hey, Rob, Ashish here. I’m calling you from Dubai. Relatively new listener to your podcast, maybe a little over a year, really enjoying the topics and the conversations. Thank you for what you do. I’m a non-technical person. I’m a marketing guy, but I want to build something and I don’t have a technical person. So I came across these no-code tools like Bubble, and I’m trying to see if I can build something out on Bubble, but I also, I came across this video on YouTube that talked about how Bubble does not allow you to export its code when you need to scale or when you need to move servers. 

My question to you is how much of that is an issue? Should I be paying attention to that right now? I don’t even have an MVP to show for. So is this an important discussion right now? Should I just try using Bubble, build a product, see how the market interacts with it, and then tomorrow if I need to scale, worry about that then? Or should I be worried about this right now from the starting process and look for tools that will allow me to export code? I kind of like Bubble because it’s comprehensive. The learning curve is there, but I think I’ve kind of got a hang of what is there. The other tools don’t seem difficult to learn, but yeah, I just wanted to know what your opinion on this is. Thanks.  

Rob Walling:
I like this one. No one’s ever asked it. We’ve talked about platform risk and no-code platform risk specifically about relying on a single platform and your entire business is built on it and how they can raise prices or they could go out of business or whatever. But the idea of, hey, if I can’t export the code from Bubble, should I consider building on it? What’s your take?  

Ruben Gamez:
The one thing I wasn’t clear about was exporting the code from Bubble, does that mean it gets to a certain scale, people are paying for it, then export it because now we’re going to have developers work on that or something like that?  

Rob Walling:
I was thinking two reasons. One, what if Bubble were to 10x their pricing tomorrow or go out of business and just disappear off the internet or which you said, which is a year down the line, six months down the line, I need to move to code. Is there a migration path or do I just have to build it from scratch? So I think either of those would be factors that you would consider.  

Ruben Gamez:
I feel like I would not worry about the scaling part of it, and this is even if you’re writing the code, I wouldn’t worry about it too much unless you have experience and you kind of know both the market and the product and all that. I think of it more as almost like an MVP or first version and I’d expect it to be rewritten or maybe rewritten from scratch from code. The harder part really is like, will people pay for this? Can I get distribution for it? And those are the things that I’d be focusing on. And it’s funny, about a year ago I talked to somebody that had a no-code app that was in the e-signature space. It didn’t do the whole thing, but it was pretty aligned. I was like, “Oh, this is interesting.” It was focused on some forms and they’d gotten some paying customers, but they were stuck and they wanted to sell it. 

So I looked at buying it and I did not buy it because it was no-code and the no-code stuff was super complex. It was like the app itself wasn’t that hard, so it wasn’t that complicated. The UI wasn’t doing all this sort of tricky stuff. It was just like there were so many, if then else, so many different conditions, so much stuff in the no-codes for away and it was super verbose, and it was hard to understand. It wasn’t like I could go in there and be like, oh yeah, I can get somebody that can quickly understand this. So I just didn’t, feel like it would be more like I would buy and have to rewrite from scratch, and that’s kind of like even if I’m starting it from no-code, I’d think about it almost in that sort of same way when scaling.  

Rob Walling:
Well, I agree with you on the answer that when I heard this question, I thought if I’m going to build no-code, there is no-code export. There’s no platform that lets you do that. So you either do it and accept that risk or you don’t and you hire someone to write code or write the code yourself if you know how. I feel like it’s pretty straightforward decision and you just had a cautionary tale around building a no-code, but I don’t think you’re saying don’t build something in no-code.  

Ruben Gamez:
No, no.  

Rob Walling:
Yeah, because I’m not either. I mean folks have heard my take. My take tends to be a balance, like no-code is a tool, know what you’re getting into, much like venture capital and funding, bootstrapper funding is a tool. Know what you’re getting into. There are pros and cons to it and I have entire episodes of both of this show dedicated to that as well as on the YouTube channel because an extreme view of never no-code or always no-code, I’ve talked to people with both and I’m always just like every example you’re bringing up for the never is actually not, or the always is this, the one that drives me nuts of anything SaaS, everything can be built with no-code and you should. 

And I’m just like, “No, that’s a factually inaccurate statement.” So like anything, there’s a nuance, but thanks for that question. So the end result is don’t consider this an endorsement, but in my shoes and in Ruben shoes, if we’re going to do no-code, that’s one of the factors you have to take into account when you’re going to do it. And so I would not be bothered by the fact that you couldn’t export the code. Our next question is about going horizontal or vertical as this OP spins out an existing app that he’s built for consulting clients.  

Dean:
Hi Rob. I’m Dean, I’m a freelance software developer. I’m Dutch, but I live in Madrid. I was recommended your podcast by two friends who both have successful SaaS businesses and also have been to MicroConfs. So before I raise my question, I would like to give you a bit of context. For the last four years, I’ve been building this SaaS product for a client. It’s a tool for historic and geographical research that allows researchers to create and navigate relational and geographical data in one map center tool. And I built and designed this SaaS product from scratch with my client and we started an MVP, then we got some important clients on board and after four years it became quite a feature rich application and a good few high-touch customers with five-digit subscription fees are on board now. So think of governments and utility companies. So it will probably give me a steady stream of income from consultancy work. 

But now I’ve seen this was a success, I would like to have a bootstrap size of my own. And I would like it to be a spin-off of this SaaS, I learned a lot of tricks of the trade. I cannot copy the product, but I can use concepts and technology. My clients are happy with that to build something similar. So knowing that the original is a high-touch vertical SaaS in a very niche market, a lot of its success depended on the context and knowledge that my client already had. My question is, should I try to find another vertical in another niche possibly with a partner that has context in that niche, repeat a trick or should I extract some of the features, simplify them, go for a horizontal low touch approach? I have to say, I prefer the latter. I think it’s more bootstrapable, but I’m curious to know what you think. Thank you.  

Rob Walling:
So this is a super interesting question. What do you think about it, Ruben?  

Ruben Gamez:
Yeah, it is. I’m curious what your answer will be.  

Rob Walling:
I can go first if you want.  

Ruben Gamez:
Yeah, why don’t you go first. I’m very curious.  

Rob Walling:
So my answer, what he’s really asking, he’s saying should I go into another vertical where it is, he’s implying that will be higher touch sales, higher ticket price and be more of an enterprise mid-market sell or go horizontal and only pull a couple pieces out and make it this self-serve. I presume 10, 20, $40 a month, whatever self-serve is, make it this low cost, he said more bootstrapable thing. And I don’t necessarily agree with the premise of that framing even. That acts like there’s only two ways to go and I don’t think there are. You could go with horizontal and just make it expensive. You could go horizontal and still do sales calls and do demos and close. The horizontal and the vertical is separate from the other factors. I think they’re less reliant on each other. In my head, if I were to do it, it does depend on exactly what… I’m struggling a bit because I don’t know exactly what the software does, so I almost want to know more detail. 

To me, if it worked in one vertical and you can stay in a vertical, a different vertical, that’s where you can charge the most. And although it will be enterprise sales and onboarding and this and that, to me I would go for high ticket price if you want to grow this to a million or multi-million dollar SaaS company. Those are the patterns that I’m seeing in the companies that I’m invested in. Now with that said, I am a marketer. Me personally, everything I’ve ever built, the starting ticket prices, like Drip was $50 and that was the most expensive SaaS I ever sold. That’s the starting price and obviously the average revenue for account was much higher than that. But I’m not a salesperson and I wouldn’t love starting an enterprise company where you get five new clients a year or 20 new clients a year and it’s 2000 AC, no 2000 per month each. It’s like what a… That’s just not my gifting. 

And so in his shoes, I would either not do it or I would figure out how can I make this horizontal and how can I make it more of something that I can market? But that’s not self-serve either because self-serve implies that it’s low annual contract value or low average revenue per account. So I’d be wondering, is this generalizable? Is the big question. Is anyone looking for it? That’s probably the first thing I do. We just talked about doing research. Everything we said for the very first question I would do for either a vertical or a horizontal play. Horizontal is a lot harder to do it because now who are you contacting? You reaching out to the world? Are you going on Hacker News and Reddit? You know what I mean? That’s the hard part. It’s like does anyone need it? 

Because if I’m just going to go, if I have code and I have ideas and learnings and I’m going to say, cool, I’m going to launch this new novel thing that really no one else is doing right now. It’s this cool thing that can do geographic with historical stuff and I’m going to try to sell it. I think of ancestry.com because there’s history, right? Well, that’s basically a B2C play, isn’t it? Or B to prosumer at best. I’m not going to be in that game. There’s no way. So if that’s the model where this works, then no, I’m not doing that. I’m going to go for the high ticket vertical enterprise play. That’s my thinking. I realized I’m thinking out loud, but what do you think about all this?  

Ruben Gamez:
So my thinking is pretty similar to that except that on the vertical versus horizontal… So it’s tricky. The way that he’s framing or saying, going horizontal is I agree, is implying a lower touch, lower price type product because he said simplify, sort of strip out the stuff. And when you do that, that’s basically what you’re aiming for. So in my space with SignWell, we sell to the low end of the market. We sell also to mid-market going towards enterprise and for our core product we have an API and then we have the core product. So for the core product, for us to be able to be horizontal and sell more towards mid-market and going towards enterprise, we needed to build more. We didn’t need to have a, we couldn’t do it with a simple product because larger companies and enterprises, the ones that are going to pay more for the product, even across verticals just have all sorts of different needs and the sophistication levels just higher. 

So the product needs to be more sophisticated, needs to do more. We had to also do more on the compliance and security side and I feel like it’s a harder thing to do. I feel like it’s probably one of the hardest things to do to be horizontal and go for the enterprise. I think it’s easier. It’s all kind of hard, right? Different types of hard. I think it’s a little easier though to stick with enterprise and a higher price or mid-market or whatever and go after a specific vertical, especially if… So in his case, he’s already done it. He has that experience. This is another thing, it sounds super easy to just be like, oh yeah, we’re just going to go with, and I hear this from time to time, with this more simple product, go self-serve and all that stuff and that, there’s a lot that seems great about that, but the reality is it’s a different game. 

It’s like different company and team DNA, it’s different founder, DNA. It’s a different skill set. And you need much bigger numbers. The way you approach things is just different. And if he already has the experience and the skill set to do it for one vertical, I’d kind of leverage that and take a similar approach for another vertical.  

Rob Walling:
That’s how I think about it too. The higher price, typically the lower the churn, the faster the growth. We see this in the state of independent SaaS when we ask about churn and lifetime value and ticket price and then we compare it to growth, it’s obvious that the higher [inaudible 00:32:26] value, lower the churn and higher ticket price, the math just makes that make sense, but we see it in TinySeed too. We see that, like I have a list of all the companies that are doing seven figures in ARR that are in TinySeed, and it’s a good list. One commonality you’ll notice is almost all of them, some of them have lower priced plans like SignWell where you can sign up, is it like $12 per person? But they also have a thousand dollars a month plan, a $2,000 a month plan, a $5,000 a month. There’s one of them that literally has a couple of contracts, ACV, quarter million dollars, and those are harder to sell. 

They take longer. You know this. You’re doing sales calls right now selling this stuff, but those are the ones that grow you quickest. Even with Drip, I talked about it being $50 starting price point. Most of our growth, especially as we got later, were folks paying us between $500 and $2,000 a month. It was the big lists that made them moved the needle for us. And that’s the pattern we see over and over. So the indie hacker dream or the bootstrapper dream of course is to have a $20 a month product, self-serve, everybody just handles it. You got a KB, there’s no support ever. Everything just [inaudible 00:33:33] on a beach in Bali or whatever. And that does exist, but that also plateaus pretty quickly. If you want to build a three, four, 5 million dollar business like that, it’s few and far between.  

Ruben Gamez:
Yeah. The numbers that you need are just so big. I think people underestimate the scale that they need to get to that when you’re talking about a $10 a month type of business.  

Rob Walling:
So thanks for that question. Hope it was helpful. Our next question is from Francesco, how to approach a prosumer product.  

Francesco :
Hey Rob, it’s Francesco from Berlin. You are always advise against business to consumer product as they’re difficult to monetize and recommend in start building B2B SaaS. I totally agree with this, but I think there is also sort of a third category in between. There is the business to consumer or business to professional that we rarely discuss about. I want to get your thoughts about this space and I want to understand how would you approach such a business to clarify, I mean this kind of product like Notion or Linear or GitHub that they offer both a team or an enterprise plan but also the targeted for the individual use and they might be paid or free for the individual. 

I wanted to understand whether you see meaningful changes compared to a classical B2B SaaS and eventually which ones? And specifically if you were to build such business, if you first optimize for an individual to sign up and start using it and then potentially selling them to a team plan or the opposite, if you would go first after the company, the team’s plan and then eventually allowing the user to sign up and use it for a personal use. Thank you very much.  

Rob Walling:
So I feel like Francesco is talking about two different things. He talks about B to prosumer, B2P as we can say, and I do think we can talk about that, but he also gets a little bit into product-led growth and dual funnels. So I think we can talk a bit about both of those because those are not necessarily, those don’t have to be the same thing. You can make most of your money from enterprise and have a dual funnel so you’re serving prosumers or VSMBs or consumers for that matter. And then also have product-led growth and it can all be present or it doesn’t have to be. So I guess to start with, he asks about B to prosumer and he agrees he doesn’t want to do B2C, but I think he’s asking what is the difference? Is B to prosumer more similar to B2C, or is it more similar to B to SMB? 

And I’m actually going to, before I kick it to you, I want to go through a few things. I know I often say B2C and B2B, that implies there’s two, right? It’s a dichotomy. That’s not at all what it’s like. There’s B2C, there’s B2P, prosumer, which is, I will say it’s people who are making money from something but usually not doing it full-time. That’s how I define it. Like, photographers, lot of wedding photographers are like this, doing things on the weekend. A lot of fitness coaches are like this, B to prosumer. I think most indie hackers are this, where they make full-time living from other stuff and they’re building stuff on the side. I know a lot of interior decorators are interior designers who do it as a part-time thing. I think folks selling stuff on Etsy, most of those are prosumers where they’re making money, but it’s not their full-time income. 

There are a handful, but it’s like anything, it’s a power law. There’s a small number who are doing it. Then there’s, B to very small business. VSMB, B2SMB, B to mid-market, B to enterprise, B to government, B to schools. Each customer type is different. And in fact, at TinySeed I believe we’ve invested in companies who do every one of those, except I do not think we have anyone who sells to consumers. I mean we are B2B SaaS, so it makes sense we didn’t do that. I can’t offhand think of anyone selling to prosumers, but I do know folks in the MicroConf Community like Nate Grahek who’s been on the podcast and attended MicroConf, he has StickyAlbums which goes after photographers. And I’ve talked to him quite a bit about the challenges, the ups and downs of selling into that space. So with that preamble, Ruben, what are your thoughts on this question?  

Ruben Gamez:
Yeah, the whole categorization of what’s prosumer and business and all this stuff is interesting. To me, I think of it a little bit differently than you do. So B2B, like business to business, to me, anyone in a business context, if they’re making money off is a business. So that would include freelancers and photographers and all that stuff. A prosumer to me is somebody like, and Craig from Castos I feel like sells to multiple, right? Somebody with a hobby that spends on software. So podcasting software is a really good example or podcasting hosting because there are a lot of people with podcasts that do it as a hobby, like founders or I listen to video game podcasts, all sorts of different MMA podcasts sometimes to where it’s like they’re not really making money off of these things in a business context, but it’s something that they’re spending and photographers sometimes fall under that category. 

Some of them are like they have clients and some of them are like, no, I’m spending money on this equipment and the stuff for me and for my own hobby and uses. So I don’t know that it matters too much, but I think the part that matters is that these are all different segments and how you approach them really makes a difference. What type of product that you build and how you get distribution. So if you’re, and let’s use Castos is a good example. So if you’re bottom of the funnel type content, buyer intent content will bring in a mix across all of these groups. So something like ranking for best podcast hosting will bring in everyone from somebody who’s doing it as a hobby but needs podcast hosting, somebody who’s doing it part-time, somebody who’s doing it full-time, a company that needs a podcast, a publication. 

And then once you start to move away from that, you kind of often need to understand the different segments and where they live, where they hang out and how to approach each of the different ones and how to do the messaging for them. So I feel like it’s sort of relevant from a distribution standpoint and from a building a product standpoint, they’re two, a couple ways of, I prefer, my preference is to start with bottom of the funnel and get a mix of the different types of segments so that I could talk to them and see them as customers and understand what I like better, what’s my preference as far as, not just who’s paying more, but who’s excited about the thing that I’m building in the way that it’s positioned maybe or if I see an opportunity to serve a certain segment. And I just like that variety early on and that’s kind of how I would approach it. 

It’s hard to approach it from a general marketing sense of just getting a bunch of tension and people and going really broad across all these segments. If you’re not going bottom of the funnel or by your intent, by your aligned sort of way of getting leads and traffic and customers, then I’d be very deliberate about picking a segment and starting with that. I think a lot of it has to do with personal strengths. Going back to the original question of how does this work, how do people sell, how do these different segments buy the software? And then what’s the opportunity I see and what do I like?  

Rob Walling:
Yeah, I think that makes a lot of sense. The way I think about prosumers is they are very similar to consumers. They are price sensitive. They churn at higher rates because usually it’s either, as you’re pointing out, you were putting hobbyists into prosumers, right? And whereas I was saying you have to make money. So we have a slightly different definition of it, which is fine. They’re going to churn way higher than businesses. They’ll churn similar to consumers. I don’t know if it’s exactly, I mean I’m sure it depends on the space, but know you’re going to have a high churn, low price point, high price sensitivity, therefore you are going to need a very wide funnel. Lot of incoming traffic as you said, SEO content, whatever it is. You’re not going to be able to buy Google AdWords and market to prosumers. I say not. 

I never want to say you can’t. I just am very, very skeptical that you’ll be able to attract folks in the prosumer space at any type of volume that will make it make sense with Google AdWords. So prosumer businesses, I know multiple founders who have built, definitely mid-six figure ARR SaaS companies for prosumers. I actually know multiple who’ve done seven figures and everything I’ve just said checks out. They’re like, man, quite a bit of support. Man, the churn is really high. I tried to raise my prices and usually they’re unable to raise prices the same way we were with enterprises. But what they do is they wind up adding a bunch of, you have this thing and now you have a thousand or 2000 prosumers, and then you have your email list of another 20,000 or whatever. So then you just build a second product alongside it and a third product or a module that you can charge. That’s how you get more average revenue per account. You can’t just do the typical B2B playbook of raising prices, charging annually, all that stuff.  

Ruben Gamez:
This just reminded me of who was it, Buffer, I think it was Buffer that ran into this problem. So they were able to build a very successful business with big numbers. They got there and they were still got to a point of where they were struggling with, okay, how do we grow this more and trying to increase the average revenue per customer and never really did, never really got there, really smart people working on it. It is a hard thing to do.  

Rob Walling:
Yeah. And they came out, who’s the founder that’s still there? Is Joel?  

Ruben Gamez:
Joel. Yeah.  

Rob Walling:
Joel’s the one that’s still there. Yeah. He tweeted within the last month where he was like, we kept trying to, and they’ve been declining for three years in revenue, but I mean it’s still like 17 million ARR or something. It’s a boots start company. But he was saying they kept trying to fight the churn and they were trying to go up market and do this and that, and they eventually decided we are for makers and creators, which are solidly prosumers usually because most of them not doing it full-time want to do it. And so he said, we just embraced it. We know our churn is going to be this and we either will widen our funnel or we’ll just ride this out because they will plateau in a good way. They’re going down now. So you want to plateau in that point because you want to level out and he’s saying, we think we’ll level out this year in 2024, and I’m sure the number’s going to be 15, 16 million ARR. 

And look, that’s not a bad business. It’s not a business… I personally would get bored with that. I need something to be going up into the right, otherwise I lose motivation and I’m sure, and it’s hard to hire really good ambitious people because they don’t want to work on a declining product or a flat product, but I’m not going to throw shade at Buffer or anything they’ve built because it’s a hell of a business.  

Ruben Gamez:
Yeah, it’s still a nice business. That brings up another interesting point too is that sometimes, so it’s super easy to just be like, well go after businesses because the retention is better and they pay more and you just need less customers and all this stuff. But the reality is that sometimes the opportunity is just kind of maybe on the lower end or maybe in a business like Buffer where it’s like a lot of prosumer, a lot of freelancers, and that’s the easier path. But then just kind of know what you’re getting into, what kind of issues you might hit.  

Rob Walling:
I had Christopher Gimmer on the podcast. He’s spoken at MicroConf a couple of times. Snappa.com. Yep. It is exactly this. It’s a high churn, relatively priced sensitive audience, but he and a co-founder bootstrapped it to, he’s pretty public about their numbers. I think they’re doing a million and a half or something like that and in that range, totally bootstrapped. And they just eventually realized, “Hey, we can’t grow this business anymore.” But they’re basically split. I mean, they’re super profitable and now they’re launching a second product and they just accept that there was a great opportunity that they took advantage of and they can’t outrun that churn, but they don’t need to because now they have this cash flowing business that can help them do the next thing and the next thing and the next.  

Ruben Gamez:
Yeah, great example.  

Rob Walling:
And I think the part of the question he asked about Notion and GitHub having these free or super cheap plans, I think I pay $4 a month for GitHub and I have for years. I just don’t even know if I cancel it if I’m going to lose anything. So I just don’t ever, I’m just like, yep, every month I get billed four. I literally have no idea if there’s a repo that I need, but it’s like I can’t be bothered to go check the account for four bucks. And I’m a little bit like, I bristle a little bit when entrepreneurs ask about this because when people use Steve Jobs as an example, or Basecamp or these outlier folks, I feel like GitHub and Notion have how many hundreds of millions of dollars in the bank. And I don’t want to say we can’t learn things from them because we can. 

Like, HubSpot’s amazing. And I know we learned a lot about marketing, inbound marketing SEO from them, but I think it can be dangerous to look at a company like Notion and GitHub and say, well, if they’re doing it, then I also am going to have a free plan or a $4 a month plan because you don’t know how their economics are actually working. And if you don’t have the dual funnel, but at the same time, I’m not saying don’t do it, but I’m saying SignWell and Castos both have plans that are, well, yours I think starts at $12 a month and Castos lowest I think is $19 a month. So it’s somewhere around 20.  

Ruben Gamez:
We’re 10 and eight.  

Rob Walling:
10 and eight. All right. So low and that’s per seat. So feasibly if one person’s there. But yeah, this is very much low. You need a lot of customers to make it. But both of you have dual funnels and Castos has higher end hosting, but they also have the Castos Productions, the editing service that I think in production service it’s 500 to a thousand or 2000 a month. And SignWell, you have your API. We’ve talked about it on the show.  

Ruben Gamez:
Yeah, even on the core side, we have just companies with a lot of users that we sell into.  

Rob Walling:
And so, I don’t want to speak for you, but my guess is if we looked at the amount of MRR that comes from $10 plans for you and the amount of MRR that comes from people paying you a hundred and up or 500 and up, that it’s probably significantly more that are in that latter bucket. Is that right?  

Ruben Gamez:
Funny enough, it is actually weirdly, and I say weirdly because it’s usually not the case, equally distributed.  

Rob Walling:
Is it continuing to be that or is one catching up and out running the other, or do you think it’ll stay 50-50? Because you’re right, that is very-  

Ruben Gamez:
We are really strong on the lower end. So they’re growing kind of equally, the now, especially on the API side, that’s starting to increase. But yeah, it is a bit of a weird distribution because that’s typically not how it plays out.  

Rob Walling:
So listeners and Francesco, if I were thinking about this, just to be clear, most of, I have insight into a hundred ninety-something companies and most of the companies with this type of dual funnel, we have either free on the bottom end or super cheap, and then you have people paying you 500, a thousand, 2000 and up, they make the bulk of their revenue. Oftentimes it’s 70, 80% of their MRR comes from the higher end, sometimes more than that, to be honest. So if Francesco’s talking about that, about a GitHub, Notion type thing, and oh, my guess is too, I don’t know, is GitHub public? Because we could look at their S one and figure out where their revenue actually comes from.  

Ruben Gamez:
I feel like they are, but I’m not sure yet.  

Rob Walling:
And Dropbox is the same way where it’s like, oh, they’re like a B2C player, aren’t they? No. Have you ever looked at how much all their revenue is business? Not all, but you get the idea. So if I were to put that in context then, as Francesco’s thinking about prosumers, can you have these $4 plans, $10 plans, $20 plans? Yes. But if I were going to do it and I wanted to actually build a great business, I would make sure that this product that serves Prosumers also has an enterprise customer base, an enterprise use case and enterprise and by enterprise look, mid-market, whatever, 500 and up, 300 and up, like some number. 

I don’t literally mean enterprise because that’s actually massive contracts, but that’s where it can be dangerous to assume that since GitHub and Notion are doing something that I can do that too without knowing that the second part, which is, but you also need the high end. Because if there’s no use case for them, if you’re building something for individual fitness trainers for five bucks or 10 bucks, I don’t know. Are there places that are large enough that will pay you $2,000 a month for the same software if there’s team functionality? That’s the question. That’s the kind of thinking that I’d be looking at if I were thinking about this kind of business.  

Ruben Gamez:
Yeah, I agree. The Notion and GitHub, somebody, I think it was like, was a podcast from Brian Balfour, I forget its name. They were talking about like a lot of these businesses that seem like they’re B2C or seem like they’re lean consumer, they’re actually enterprise or enterprisey businesses. That’s where most of the money comes from.  

Rob Walling:
That’s what we see too. Well, sir, it’s been amazing having you on the show today. If folks want to keep up with what you’re up to, they can see your spicy hot trolley takes on Twitter at Earthlingworks, and of course, signwell.com for the best electronic signature app on the market. Thanks so much for joining me.  

Ruben Gamez:
Great being here. Thanks.  

Rob Walling:
Thank again to Ruben for joining me on the show again this week. Hope that was insightful and helpful. There were actually, I really did like the listener questions this week, especially that first one. There’s a reason I let it go 15, 16 minutes because there was a lot to talk about there. 

Thanks for listening this week and every week. This is Rob Walling signing off from episode 711.

Rob Walling:
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Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling, and today I go through listener questions and listener comments. I received several comments regarding episode 704 where someone had written in with the question, “I really like my day job. I don’t have a burning desire to be an entrepreneur, but I would like to be one. Do you have advice for me?” 

And I gave advice like, well, I had a burning desire and most of the entrepreneurs, actually all the entrepreneurs I know who’ve had success, had that burning need to do it. So if there’s a listener out there who is struggling with that motivation or who didn’t have a bunch of motivation and found success, please write in. I also said maybe just try some things and if you get lucky, great, and if not, it’s a win-win because you can keep the day job. So I have responses to that as well as a couple comments about the now infamous April Fools episode. And of course I’m going to answer listener questions. Stay tuned. 

Before we dive into that, you should check out MicroConf Connect at microconfconnect.com. This is our online community and forum. We host it in Slack and we’re approaching 7,000 members. They’re bootstrapped and mostly bootstrapped SaaS founders. Recent conversations in Connect including a debate about magic sign-in links, how long you should spend diving into a niche before deciding on the product offer, how to safeguard your product from misuse during free trials, at what point in your journey should you invest in a conference booth and more. It’s a vibrant and highly moderated community, very high signal to noise. If you’re looking to find and hang out with other misfits like you and I, head to microconfconnect.com. 

So to kick us off, I received a response to that episode, 704, around do you need a burning desire in order to be successful? And this first one, I’m going to keep anonymous. He wrote a really well-written and well-thought-out lengthy email, so I’m going to summarize it. 

He says, “That caller’s question really resonated with me, and I kept pushing the rewind button on my walk and listening to that snippet over and over. It’s just one data point, but I believe I support your general experience with startup founders. I’m a previously bootstrapped founder with a successful exit through a strategic acquisition.” 

And in summary, he and a co-founder built an app that they sold for 10 times ARR. And it’s a life-changing amount of money, but it’s not enough money that he never has to work again. And so he said, “It’s been hard for me personally post exit, trying to find my place again. I’m consulting 20 hours a week making great money, so I’m fortunate, but I’m also kind of miserable because,” and I like this quote, in quotes, “my volume is turned down to a two like you mentioned.” 

So I must have … maybe I said that in the episode. I know that as an entrepreneur, the volume’s always at, what, 11? And then you go get a day job. I remember 15 years ago or whatever, I would be consulting or I’d be launching products and it was super exciting, but it was super frustrating and scary and uncertain. And then I would say, “I want to go back and get a day job.” And I would get a day job and I would be so bored and so frustrated. And so I think that perfectly encapsulates that my volume was turned down to a two. 

And so back to the email, “I have another bootstrapped product that I’m spinning up and I have multiple other opportunities, but I haven’t committed to any of them. I desperately miss shipping valuable products to users, that dopamine hit. I want to fly again and have that feeling of same day turnaround fixes for users, new features to solve real problems, et cetera. I’ve considered going back to a day job, but instead I think I’m going to use this time to hit it harder on my startup projects while I’m consulting part-time.” 

And then he wraps up with very kind sentiment, “I hope you get some level of satisfaction from how life-changing your podcast is on so many levels. For every person who writes you, there’s probably 20 others you don’t even know about.” That is actually very meaningful to me. So thanks, Anonymous, I really appreciate the insight. 

And he’s basically talking about without the motivation, it’s been really hard to get back in the game. And I think that can be a second-time entrepreneur, or if you have a great day job that you love, it can be hard to find the motivation to do the grind. So thanks so much for writing in. 

The next email is on the same topic and it’s from Paul. 

Paul: 
Hey Rob,  I’m a co-founder at WonderProxy, and a scatter-shot listener to Startups For the Rest of Us. WonderProxy has been around for over a decade now, we do over a million dollars a year in sales, full time staff beyond the founders. We’re doing okay. Back in episode 704 you had a question from someone with a comfortable job who wasn’t sure about making the leap. You talked a bunch about the burning desire or need, and wondered if it was a requisite for starting this sort of thing. I don’t think my co-founder or I ever really had a “burning desire”, neither of us is particularly passionate about the space. We help people test their website from around the world, we’re not curing cancer. I think we had two things going for us that let this work for us. First, we both loved building things: I’ve loved programming since childhood, my co-founder has loved working on servers since college. Working on the company was something we liked doing in our spare time. I was excited to come home from work and keep programming. Second, 0ur day jobs could give us the space to let the company grow at its own pace. We didn’t have a full time employee for the first five years. New customers let us expand the service, or pay ourselves some amount of money. So there wasn’t any passion or burning desire, but there also wasn’t any pressure. Our day jobs paid us well. The company grew slowly over a period of years until we made our first hires. Then, things accelerated and I eventually went full time, but was able to do so without risking my salary (which was handy, by that point I had a kid and a mortgage). My suggestion for your listener would be to find a problem out there they think they can solve by doing something they enjoy. Stick that solution out there, and invest just bits of money and time into it. In my view the super power that comes with this approach is that giving some change (like a new landing page, or ad copy, or whatever) a month or two to work is easy (You’re busy at work!). Where fully invested founders act like hampsters on speed, changing things daily, never giving their product enough time to actually see results. Hope this helps them, thanks, can’t wait for the next episode.

Rob Walling:
Ooh, see? I actually want to dive in here. I didn’t say a burning desire about the space, I said a burning desire for freedom, or a burning desire to be an entrepreneur or to start your own company or to own your own thing. That’s the burning desire I had. Many of the early products that I owned, I didn’t necessarily care about the space, but there were opportunities for me to make enough money to quit the day job. And I felt as long as I did that ethically in a way that provided value for what people were paying for that that was fine.  

So thanks for writing in. I think it’s an interesting take and I do think that it’s an example of folks who put it on autopilot. Now do I think you’re less likely to find success that way? I do. I think that if you’re driving day-to-day and you have this burning desire to get to some end result, he’s right, you are a hamster on speed, but that can be beneficial when you’re an entrepreneur and when you’re trying to get to an end goal. 

And do I think you flail a bit and you probably waste some cycles? Probably. But do I think that focusing on a product and … I did at nights and weekends. So I worked a 40 hour a week day job and then depending on the week, and it was before we had a kid. And then after we had a kid, it might be between eight and 20 hours of nights and weekends that I could put in. 

And of course that was not getting enough sleep and it was not working out. It was doing all the things that you don’t want to do. But that allowed me to start building up side-income to the point where I actually did back off to four days a week at my day job. And I think in the end I was working three days a week, so like 24 hours a week and building products on the side. And so I love the fact that folks wrote in with their experience and I really appreciate their thoughts. 

My next email is on the same episode, but it’s on the ideal or the right trademark tech stack. And Daniel writes in, “When I started working on Codelantis, which is a code review app, I chose a tech stack that I knew and that is reasonably scalable, front and back end in different languages. Only later I realized this wasn’t an ideal choice.” 

“The best choice for an early stage product like mine is one that lets you iterate quickly and easily. I’ve switched to a single language repository,” so for him it’s TypeScript and Node.js, “a couple months back and the difference in development pace is like night and day, which also means that I’m not only shipping faster, but that my motivation stays up too. And this is arguably even more important for a nights and weekends project.” 

“So my TL;DR is don’t worry about scalability, worry that you can’t iterate fast enough, lose motivation, and no one will be using your product.” So thanks for writing in with that, Daniel. I think you need to worry about both. I don’t think I agree you don’t have to worry about scalability. 

There’s this weird balance of back in the day when I was a contractor writing code for third parties, some of our developers on my team would, we call it gold plating, and it’s over-engineering everything. And they would say, “Well, it’s for this big bank and maybe they’ve got a kajillion users.” And we had to have a balance. We couldn’t fall over when there were five users, but we couldn’t plan for five million, and we had to have a reasonable, pragmatic approach to making these things work. 

And I think picking your tech stack is similar, have a reasonable pragmatic approach. Will it scale well enough and will you be able to iterate quickly? I know that there are tech stacks that can do both, and I already weighed in on this whole topic. I appreciate Daniel’s insights on choosing the right tech stack. 

All right, so the April Fool’s episode, I have received more tweets, DMs, and emails about that episode than perhaps any other episode in the history of the podcast, so I really appreciated it. I did not think it would get that kind of response. 

I will give you some inside baseball that I had a real difficult time recording that episode because if you know me, I tend to be what? Pragmatic, logical, I tend to tell the truth. I try to tell you how I actually feel about things. If I don’t know the answer, I try to say, “I don’t know.” If I’m pretty certain about something, I try to say, “90, 95% certain.” And to say something that is just not what I believe and to actually steel man the arguments was challenging for me. 

I don’t think I’ve ever done this before, but I came into my office, I didn’t hit record, and I just recorded the whole episode without recording it. I just did a monologue in my office to figure out am I capable of doing this episode with a straight face? I did the whole thing and I thought, “You know what? That wasn’t that bad.” So then I hit record and recorded it. I still struggled when I listened back. I can hear myself acting a little bit, but it’s so cool that it didn’t come across like that for most people. So people were shocked. 

What I really appreciated were folks who wrote in and said, “You had me until you said this.” And for some people I think like Derrick Reimer said, “The moment you said that, I’ve rethought my stances based on thoughtful conversations on Twitter and Hacker News, I knew this was bull (beep). And Ruben Gamez, who has been a many-time guest on the show said, “The moment you talked about lowering prices, I was like, ‘Ah, he’s making it up. And this is a special episode, it’s got to be April Fool’s.'” He knew it right away. 

Most people, it seemed to take five to seven minutes. I think the entire diatribe was about 11 minutes before I gave it away. So a lot of people made it halfway through. And one such listener, Jakob Ericsson wrote in and said, “At first I was all for it, ‘Hell yeah, finally Rob is seeing it my way with consumers being great evangelists for products, B2C is fun.’ Then I started thinking, ‘Hey, he’s really having second thoughts on a lot of things. I wonder what people will think about being told things in such a convinced tone when it’s really the opposite of previous talking points. Churn is a good thing now?’ That broke the illusion for me.” 

Yeah, it was either churn or two-sided marketplaces. There were certain points that just became kind of ridiculous. So I appreciate you being a good sport if you listened to the episode and liked it and reached out. I haven’t done an April Fool’s episode in I believe six or seven years, so I felt like it was time to do it. 

All right, now let’s dive into a listener question from Mike. Mike says, “I started a company last year to address a sell shovels dev tools problem for this AI wave. I’m getting a consistent message about the features users need for me to be a viable option. My only pre-existing competitor has begun building for this use case and a new VC-funded competitor has entered the race. Realistically, there will be more coming.” 

“I take the competition as a sign I identified a real need, but I have strong doubts I’m going to be able to compete given how the ecosystem is shaping up. It’s a challenging problem in a complex and ever-evolving space. Lacking funding, revenue, and co-founders, my options seem limited. How should I handle this situation?” 

Yeah, so this is the double-edged sword of entering a, quote, unquote, “hot” space is, it’s inevitable if you’re in a space with a lot of opportunities growing quickly that a bunch of venture dollars are going to get poured into it. That doesn’t mean you’re going to lose, it’s just going to make it harder. I talk a lot about this in Start Small, Stay Small and probably should have talked a little more about it in The SaaS Playbook to be honest. 

But in The SaaS Playbook, I talk about why niches and verticals are usually so much better for solopreneurs who want to lifestyle it. A big mistake I see folks making is thinking I can build a venture-scale business or I can build a business that will probably need a lot of funding, but I can just bootstrap it. Or I can build in a market where there’s going to be a ton of funding and probably just bootstrap it. And while it’s possible, the odds are stacked against you. 

And so if it’s your first time, you can either do the step one business or you can restart small, stay small and look for out-of-the-way niches where no venture money is going to enter it. And am I saying go somewhere where there’s no competition? Of course not because there probably doesn’t exist a market of any size at this point that you can launch a software product into. But this is the double-edged sword of oh, there’s opportunity and there’s a bunch of people talking about it, therefore there’s going to be a kajillion dollars brought into it. 

Now can you still win? Can you still beat venture-funded competitors? Of course. If you know what you’re doing and you’re experienced, I would compete against venture-funded competitors. In fact, I did. Drip was, what, the 300th email marketing application? 

And our competitors who, I think VentureBeat did a top 10 marketing automation providers, maybe it was top 15, and we were number, I honestly forget the number, 10 or 11, and everyone ahead of us had raised a minimum of $20 million. Some had raised hundreds of millions and yet there we were in a little closet in Fresno, California at the time with five employees just scrapping. 

So yes you can, but I was an experienced entrepreneur. I had put 150 to $200,000 of my own money from my other projects into building it. I knew what I was doing, I had a network, I had an audience, I had blah, blah, blah. I had all these unfair advantages and if you don’t have that, it really becomes an uphill battle. 

So back to Mike’s question, how should I handle this situation? There’s a bunch of things you could do. You could look to get acquired. You could throw your flag out. Now here’s the thing, you’re going to get acquihired. They’re going to want to hire you as an engineer, probably pay you a bunch in stock, but if you can get … 

I saw someone who had 70K ARR, maybe it was 75, and they got acquired for 10X ARR. So they got three quarters of a million dollars for a fairly early stage product. If you don’t have that kind of money in the bank and that is life-changing for you and you have to work for a year or two in order to get it, I don’t know, that’s something I would have done in my younger years. So in thinking about acquihire, often that can cut both ways. It can be a good deal or it can be a crappy deal. 

You mentioned you have no revenue, which I think that’s probably the biggest problem here, is if you’re going to build, if you’re going to bootstrap, please go towards revenue. Don’t do the free plan. And if you’re entering a space where everyone has a free plan and therefore you need it to compete, think twice about whether or not you want to bootstrap in that space. I feel like a lot of folks, I’m not saying Mike’s doing this, but I do see folks entering these hot spaces and not realizing that the competition is stacked against them if they don’t have revenue co-founders and funding. 

So anyways, back to my answer. You could look to get acquired, which is harder than it sounds because if you go out looking to get acquired, then you look desperate and people are going to want to not pay you very much. But build and get on the radars, and if they approach you, you say, “I’m not really looking to get acquired really early, but sure I’m open to talking about it.” You play coy and then you go along with it as it evolves. 

Another thing you could do is just walk away, do something else. You could take what you have and focus on a vertical where there isn’t necessarily VC dollars. I don’t know. Without knowing a bit more about your space, I don’t know if there’s a vertical or a way that you can position down and take a corner of the market that they are not going to go after, but that your tech can translate to really easily. So to make up an example, instead of building the AI CRM for everyone, you build the AI CRM for realtors or for freelancers or for salespeople at SaaS companies. You get the idea. 

Another option is to go raise funding, fight fire with fire. And either go to something like a TinySeed, go out and try to raise angel money, go try to raise venture. If venture’s going into the space, it’s not as hard as you think to be able to raise funding. And yes, gasp, Startups For the Rest of Us, Rob the bootstrapping podcaster talking about raising venture funding. Well, I’ve been saying that for 15 years. It’s just a tool and if you need that tool to succeed in your space, then of course I would consider raising it. 

You have a big decision to make, Mike. Obviously this is a tough choice with a lot of things at play, and of course it depends on the specifics. I can’t even say, usually I say in your shoes, here is what I’d do. And really without knowing all the details and just sitting down and talking about the ins and outs for 30 minutes, 45 minutes, I don’t know that I could even weigh in on what I would do in your situation. But I hope all the options I’ve laid out for you are helpful. Thanks for writing in. 

Our next question is from Reid Alexander, subject line is, “Is Learning to Code Dead?” Reid writes, “Hey, Rob. Thanks for putting in all the work making Startups For the Rest of Us a great show. My favorites are the listener question episodes, which is why I’m writing. I’m currently in the process of selling my small online business with the hopes of further exploring the ins and outs of software development after its sells. I’m extremely novice when it comes to programming, so I’ve been looking for the best ways to quickly learn what I need to know to develop software myself thinking of becoming a full stack developer.” 

“So I guess my question is in three parts. Number one, is learning to code still relevant?” Yes, it is still relevant. I view AI as augmentation, like a little bit of a co-pilot is a great example. Having a co-pilot, having something that does autopilot, you still need humans involved to fly an airplane. So is it still relevant? Yes. Do I believe it will still be relevant in 5, 10, 15 years? Yes, people will still be making software. 

Now we may not be making software in the way that we do today, much like if we flash back to the ’50s. Now, I think in the ’40s, you would program a computer by moving vacuum tubes. And then eventually we got the integrated circuit, which was what, the ’50s or the ’60s. You’ll have to forgive even though I have a degree in computer engineering, I do not remember my history of how computers evolved. But I think it was in the ’60s we had the integrated circuit and therefore programming became typing ones and zeros, literally binary. 

Then there was assembly language, which were these short, usually three letter instructions that would generate the binary. And at that time people said, “Well, it’s going to be slow. Well, you’re not going to need programmers anymore because everyone’s going to be able to do assembly language.” And if you’ve ever seen assembler, it is an absolute nightmare to work with. 

And then it goes on and it’s like, well, C is a higher level language. Well, now everybody’s going to be able to program. And then they build C++ and then they build Ruby on top of that, and then they build whatever else. They build no-code on top of that. It’s all code. And at every movement, at every big shift, when those new languages came out, people would say, “Well, now you can just type human English instructions into a computer and it’ll just do the thing, and so we’re not going to need developers.” 

I see AI as the same thing. It’s another abstraction layer, it’s another augmentation layer, but there are still going to be brilliant developers, brilliant makers, brilliant product people who are better than others at it. Do I think it makes it easier to get on board and easier to learn? Probably. Do I think it makes it easier to be a crappy developer and build things that are not going to scale and that are going to break and that are going to have bugs? Yeah, probably. So is learning to code still relevant? In my opinion, 100%, yes. It’s going to change, but it’s still relevant. 

“Number two, if it is still relevant, which I believe to be the case,” the OP is saying, “what’s the best way to go about learning to code in a shorter period of time? With all the new tools, like ChatGPT, Replit,” which I haven’t heard of, “et cetera, is learning the traditional way, a waste of time?” 

I don’t know what the traditional way is because coming up, I read books. I was eight years old, there was a book called How to Speak BASIC to My Apple. I read that, I learned how to speak BASIC to my Apple. So is that traditional? Is going to four years of university traditional? I certainly don’t think that’s the way to code by the way, much cheaper, much faster ways. Is going to an online coding boot camp traditional? Is going to an in-person coding school traditional? Probably not, those things are newer. And then there’s also sites like Boot.dev and Frontend Mentor, which is, Frontend Mentor’s a TinySeed company, Boot.dev, Lane, the founder, was on this podcast just, I don’t know, in the last six months. 

I would say, which way do you learn the best? Any of those ways can work. If you learn from books, which most people don’t. For some reason I did, and I don’t know why, but I guess it was because it was the only way I had. Imagine me, eight years old in the 1980s trying to learn to code. It’s like, what were my options? There was no internet, there were no online coding schools. And it was intriguing to me that you could type something and a computer would do it. And I was like, “Well, I’m the youngest of four kids and everyone orders me around. I want to order something around.” So I learned how to speak BASIC to my Apple to do it. 

And then as time went on, there were in-person schools, in essence there were trade schools. But then there were even just these in-person boot camps where you can go for six weeks or six months and learn the basics. Figure out what modality works for you. If you’re the person who needs to go somewhere and be sitting there to not be distracted, then look locally. 

If you can do it online, that’s probably cheaper and you can probably find a better school because you have the whole world now as your option. Or again, Boot.dev, Frontend Mentor, there are a kajillion of those online. I think those are two good ones that I know about, but there are probably at least 50 more sites that can help gamify it and help you learn how to do it. That’s how I would think about it. 

Tools like ChatGPT are just augmentation. ChatGPT in my opinion, is not going to teach me how to code. It’s not designed to do that. But can it help me as I go along? It’s like I remember at a certain point in either high school or college, they allowed us to start using calculators. And they just said, “Look, doing basic math isn’t the thing anymore.” 

But when you’re in fourth grade through eighth grade, it’s like, “Well, you have to learn to do the math so that you know it.” At a certain point, they were just like, “Take the calculator and use it to do the basic math because the hard part is figuring out the geometry or the equations or which equation to use or how to do something that’s a higher level function.” 

And that’s how I see ChatGPT, it’s like the calculator. It’s just a little assistant that can help you if you get stuck. It can write a bit of code for you and it may or may not work, and you need to know how to debug that and integrate it into a core application that’s actually going to make sense. 

“And the third part of the question is are there certain languages or specifics I should focus on learning to become a full-stack developer who can create my own software and web applications, hopefully utilizing LLM within my projects? Thanks for all the advice you give and have a great week, Reid.” 

So are there certain languages? I mean, we talked a little bit about this, right? A lot of people use Node. We just heard someone write in and say, “I want it to be all JavaScript, therefore I only have to learn one language and I use some type of JavaScript framework on the front with Node on the back.” People build startups out of that. 

If I were to start today, I would probably go with Ruby on Rails or Python Django. I know another really popular one is PHP Laravel and there are these amazing SaaS starter kits that, again, I talked about these a couple episodes ago. I don’t want to rehash all that, but that’s what I would do. And maybe go to Stack Overflow or to Reddit or Quora and just Google this exact question and look to see what people are saying and just make a call. 

The thing is learning one language allows you to then learn other languages a lot easier. And I know switching ecosystems, it can be a pain. But I was teaching myself Python three or four years ago just for fun on weekends because I had never coded in it. And I knew PHP and I had seen Ruby on Rails because it was what drove Drip, but I was never able to code in it. But I was like, “Python seems pretty elegant and I really liked the ideas behind Django and it seems like you could get something going pretty quick.” 

And I was going to start building just some basic web apps to do whatever crazy things and I wanted to get into a little bit … This is before the LLMs come around. But I liked the idea of semantic analysis and such, and I was like, “Who has the best libraries for semantic analysis?” It was Python. 

And so, literally in a weekend, now I have an advantage of course, because I used to be a developer so I could translate the paradigms. But that’s what I’m saying here is if you pick one that’s generally accepted and a bunch of web apps are built in and then later you realize, you know what? I really should have picked this other one, it’s like making that transition is a transition, but it’s not as painful as just getting started. So thanks so much for those questions, Reid. I hope that was helpful. 

I do not believe learning to code is dead. Let me just underline that. People say this for the sensational headline of it to get clicks and stuff. Will it change? Yes. Will driving change as self-driving cars come around? Yes. Did making garments change when the automated loom was invented? Yes. Did transportation change when cars were invented? Yes, but it’s like these are all advancements in technology that we can work with that make our lives better, make us more productive. 

And as long as we aren’t acting like an ostrich with our head in the sand imagining, “Oh, it isn’t coming, I’m not going to update my skills. No, I’m just going to be the same old developer I always have been.” Well, then I think you probably have a problem because there is a paradigm shift occurring right now. 

It’s like some of the developers in the early 2000s who I knew who were either desktop developers or they were still developing in COBOL and just older systems and didn’t want to learn even Perl or ASP or PHP stuff that was really evolving in the early 2000s. And I was like, “Look, that’s your choice, but realize there will be fewer and fewer jobs for you in the coming decades if you don’t update your skills.” 

My last question for today is from Patrick Bowman. Patrick asked about product protection, “When developing and researching a SaaS product, what is the risk of potential IP theft?” So the idea of someone stealing your intellectual property. “On a scale from 1 to 100, where would you rate this as a concern? Would you recommend an NDA or similar for the early adopters or testers who are testing a SaaS product? How would you recommend founders and developers protect their product if it is a substantial concern?” 

So here’s the thing, an idea for a product is not IP or it’s not something that you can protect against. Copyright protects the actual code. Trademark protects your mark that you’re using in trade, so your logo and the name. And patents can protect the specific way that you’re doing something. I’m looking at a patent law here. 

But realistically, if I come up with an idea for an app that does exactly some very specific AI thing for realtors and someone comes along and mostly replicates the exact same interface and tries to compete with me, unless I have deep pockets, you send them a cease and desist and they can ignore you. And what are you going to do, sue them? Again, unless you have deep pockets, IP protection is actually very, very hard. It’s a lot more complicated than people think. 

There’s difference between law and justice and when people have copied me, I’m always like, “(beep) this sucks.” It’s not just. But can I go after someone who recorded a YouTube video and basically used the same outline I did? Probably not. I mean, I could try, but is there any … Do I want to go to court and spend years and tens of thousands of dollars to try to get someone’s YouTube video taken down?” It’s just not worth it. 

And so what I thought this question was going to be about is people you hire to actually write the code for you, and of course you should have them sign an IP agreement they’re not going to steal your stuff. That’s just law. If they’re overseas, so you have a developer in the Philippines and they decide to steal it and try to compete with you, well, that sucks. Are you going to sue him in a Filipino court? It’s like there are risks you have to take I think with this kind of stuff. 

On a scale from 1 to 100, where would I rate this as a concern, especially with early adopters or testers who are testing a SaaS product? I don’t think I’ve ever thought about it. So it’s like if I say it’s a one, does that mean it never happens? Certainly it’s happened. It has to have happened, I just don’t hear about it. 

I talk to TinySeed companies, I talk to MicroConf companies, I talk to listeners of this podcast, see people at events. Every once in a while I’ll hear, “Oh, an employee took a piece of our code and went and did X, Y, Z and tried to compete with us.” It does happen now and again, but for me personally, it’s just not something I have ever been concerned about. 

I feel like if my customers are a bunch of indie makers or indie hackers who are really scraping looking for an idea, then yeah, maybe I’d have them sign an NDA. I am not sure how I would enforce that. But if my customers or early adopters or testers are realtors or lawyers, do I think that they’re going to go try to build a software product to compete with me? No. Could it happen? Yes. Is it likely to? I don’t think so. 

It’s just one of these things. It’s, as you’re saying, I like that you said 1 to 100 because it really is risk tolerance. It’s like at this point you have testers and early adopters. Do you also have general liability insurance or errors and omissions insurance at this point? Well, why not? Because isn’t there a risk that your software could do something, someone could sue you around the software? Of course, but the risk right now is astronomically low. So you’re not going to spend the time or the money worrying about it. 

I think similarly, do you have an LLC or a C corp set up so that you are not personally liable if anything happens to the software? You might, but a lot of people don’t. I didn’t have an LLC for the first five years of … I had all these products. This was from ’02 to ’07, 2007. I was a freelancer, I was a contractor and I was making money from software products, six figures from all this stuff. 

And I was still a sole proprietorship, meaning someone totally could have sued me personally for any of this. And for me it was just not worth the headache to get that corporate entity set up and to get all the stuff set up. And so am I saying everyone should follow my path? Well, of course not. But on a scale of 1 to 10 or 1 to 100, I guess as you said, it’s very low. It’s very low on my list to be honest. 

And the third part was how would you recommend founders and developers protect their product if it is a substantial concern? I guess not showing it to people that I was concerned about. I guess having them sign an NDA. That’s it. I mean, that’s what an NDA is for. You can’t take this and do anything with it. You can’t even tell people about it. That’s it. 

Yeah, I don’t know where else to go with it other than that’s what NDAs are designed for. And if people don’t sign NDAs, you’re going to let them check out your product? I guess that’ll be your choice if you think it’s a substantial concern. Typically, this is more of a concern that’s in people’s head than it is in reality. So thanks for that question, Patrick. I hope it was helpful. 

Thank you for joining me today. If you have a question for the show, you want to hear me or me and a guest answer it in a future episode, you can email questions@startupsfortherestofus.com and you can send a Dropbox link to an MP3 file or a video file, you can attach an audio file. Or you can go to startupsfortherestofus.com, click Ask a Question in the top nav, and then you can record right there on your phone or on your computer, send in video, audio. 

They always go to the top of the stack, except for … I say always. Most of the time they go to the top of the stack. Every once in a while I dig through the text questions because I still have a question from June of last year. So we are, what is that? 10 months. I’m starting to feel guilty a little bit, and I did go through several text questions today. But as a rule, the video and the audio are the ones that go to the top of the stack. 

One of the reasons for that, it’s just really cool to hear from people in the community and to know that there are other humans listening to this podcast. Because if you’re listening to it solo, do you know how many listeners there are? Are there five listeners? Are there 50,000 listeners? When you start hearing people writing in with their own concerns and you hear their voice and you hear the intonation of the question, there’s just so much more fidelity to that experience than it is sending a text question in and me reading it. 

Of course, still send text questions in if you want to. They still work out really well, as I think today’s show was hopefully helpful for you and certainly fun for me to record. And with that, I wish you an amazing week of productivity and progress on your entrepreneurial journey. This is Rob Walling signing off from episode 710.

Rob Walling:
It’s another episode of Startups For the Rest of Us. I am your host, Rob Walling, in this episode of Hot Take Tuesday. Einar Vollset and Tracy Osborn join me to talk about once.com, to talk about how a company sold for half a billion dollars and the founders got nothing, at least according to this article. A developer who went from open source to a full-time income. Then we give some book recommendations and have a lightning round of reactions to controversial startup opinions. Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling.
It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of Mailchimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. Microconf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon, so if you’re thinking about joining me and about 225 of your closest bootstrap founder friends, head to microconf.com/us. And with that, let’s dive into Hot Take Tuesday. Tracy Makes back for another Hot Take Tuesday.

Tracy Osborn:
I’m ready to fight with Einar.

Rob Walling:
Yes, it’s going to be great. Einar Vollset, thanks so much for joining us.

Einar Vollset:
Thanks for having me.

Rob Walling:
We have some nice, fun, not at all spicy topics to jump into today. Kick us off. Once.com from 37signals. They’re basically saying, “It’s not software as a service, it’s just a software.” No subscription. You download the code, you set up your VM, your virtual machine or whatever it is. I’m sure they have, what is it, Docker containers and such. But is one-time software the best thing since Clippy, best thing since [inaudible 00:02:14] shooting first? Tracy, I want your opinion on this.

Tracy Osborn:
I think it’s good to have options, but I think there’s a reason why the world moved towards SaaS. And you’re looking at once.com and their first product, Campfire. For anyone who has a technical team who wants to dive in and do everything themselves, then this is a interesting idea to replace Slack. And for folks who just don’t want to go in that direction, again, having the technical teams to do this because Campfire says, “Free updates to any 1.x version.” So that means that updates are going to end at some point. And it says, “Bare bones support included.” So there might be support, but most stuff you’re going to have to figure on your own.
This is why, for most folks, a SaaS product makes more sense for them even if it does have that subscription model and that idea they’re going to be paying for it forever and dealing with price increases and all that. I have other things to say about the product itself, Campfire, but I’m glad to see there’s other options. I can see that this being intriguing to a lot of folks, but not the majority of folks, and that’s why people are paying out the butt for things like Slack.

Rob Walling:
Einar Vollset, are we pivoting TinySeed to invest in one time sale software?

Tracy Osborn:
Why are you asking him?

Einar Vollset:
No. No, we’re definitely not.

Tracy Osborn:
I have opinions about that too.

Rob Walling:
We’ll come back to it.

Einar Vollset:
I think part of this grows out with how after the Slack acquisition, we’re now basically on the Salesforce pricing type in the Salesforce pricing world. So that means just going to get more expensive more quickly as we’re finding out with MicroConf and TinySeed. People get shocked when I tell them what our Slack bill is just for TinySeed and clearly there’s space there for… I actually think Slack itself has sort of failed at, or maybe by choice, but certainly they don’t cater well to this type of community. Not really like a business and not completely volunteer, but this halfway house where you want some of the features, but it really doesn’t make any ton of sense to be spending 50 or a hundred grand just for Slack software. And something like ONCE comes along. And if it’s good enough and you pay $299 once or whatever the price is, then certainly that’s very attractive from a consumer standpoint.
I sort of echo most of the stuff that Tracy says. I think maybe the Basecamp guys are in a unique position, whether they realize quite how unique their sort of position with the fame and their whole… It feels to me their whole marketing approach has been contrarian takes as marketing. That’s sort of been Basecamp stick, so it doesn’t surprise me that a pricing effort like this comes from Basecamp. As much as I love them, I know that they probably get a lot of attention every time they say something unusual or different, so that fits in with that pattern more than anything else, I think. I don’t think it’s a winning formula for your average startup indie hacker, bootstrapper, TinySeed founder to be like, “Oh, screw it. Let’s not charge $250 a month or whatever. Let’s just do $300 once.” We’re already struggling hard enough to get founders to charge enough money of the value, like charge enough so that they capture some of the value that they create. If this becomes a, this is our standard, then that becomes even harder, I think.

Rob Walling:
Yeah. For me as both a founder and as a customer or consumer of software, I don’t want ONCE. And I get it, my opinion, I’m doing mere research instead of market research, but I used to own downloadable software that ran on a server, it was called .NET Invoice. And I will never go back because the headache of support was brutal. People would install it. And people would install it on their own server or on a GoDaddy shared hosting account and it wouldn’t work and it was their problem. They didn’t care it was their problem. They would flame me, they would charge back, they would ask for a refund, they would do whatever. Even though I was like, “Look, it’s your thing.” So then I’d spend an hour or two troubleshooting finally be like, “Oh, your server’s misconfigured here,” and they’re like, “Oh, sorry,” and then they’d fix it. And so two hours of my time for a $300 one time, although it was-

Einar Vollset:
Rob the IT consultants. That’s great. I’m sorry. You missed those days, don’t you?

Rob Walling:
Not at all. And it wasn’t recurring, right? It was 300 one time and then I got 20% annual maintenance, right, so $60 a year per. And I don’t want to do that ever again. I know this long slow SaaS ramp of death is a thing, but also it’s recurring and it’s my servers. And if there’s a problem, I’m responsible for it, but it’s my servers and I know that they’re configured. I know that ONCE says, “Minimal support,” but it’s like, yeah, but come on, people are still going to flame you. They’re still going to charge you back. They don’t give a [inaudible 00:07:10] when you say minimal because they’ll be convinced that it’s your bug. It’s your bug, and then guess what? It’s not, but they don’t care, right?

Einar Vollset:
Right.

Rob Walling:
Because people are idiots on the internet. And so I don’t want it as a entrepreneur, I also don’t want it as a consumer. I would prefer to just please just handle this. I don’t want to spend above, like I have enough trouble. We have a couple apps written in Python and I’m always like, “Where are those hosted, dude? Does anyone have access to those? What if they go down?” It’s like, enough that we’re be… Tracy [inaudible 00:07:38]. So, I don’t know. For me it’s like, as you said, I think it’s a contrarian thing. I think it’s an interesting experiment. I do not at all see that it’s where the market’s going.

Einar Vollset:
Basically, the way that I think about it, you’re basically building in a 100% monthly churn. I spent so much time thinking about how to reduce churn. The fact that you would design your software business model in a way that, “Hey, let’s have a 100% churn every month.”

Rob Walling:
And with .NET Invoice, the first of every month I had zero in revenue and I was like, “I got to start from nothing.” The only thing that worked was if I had ads running or SEO or some recurring traffic source, that was the only way to maintain. For me it was single digit thousands in revenue. Tracy, back to you.

Tracy Osborn:
It doesn’t make sense as a business model in our opinions, I guess for 37signals. It doesn’t make sense for large teams that are using Slack or Teams to switch to something like this because of the lack of supports. And I have some issues with the user experience. I’ve tried it out, I didn’t like it. So this product really only works for maybe small, very savvy tech teams that want to have control of their software and how many of those are out there and what’s going to stop those people from doing something else like Slack free or Discord or anything else? It just doesn’t seem like this is a problem where we’re like, “Okay, Slack is super expensive. It’s awful. People don’t like it, they want a solution for this,” but I don’t see this one being the thing that fixes that problem.

Rob Walling:
I heard Ian Landsman on a podcast, I forget what it was, but he was talking about the launch of this Campfire launch with ONCE. And I can’t find the source of this, but he said that they had sold 800 copies in the first week. 800 times $300 is a quarter million dollars. With 37signals reach, 800 copies just isn’t that much, and it’s not… Look, I know how one time sales go. The first week is the big week and then it goes down from there. It usually doesn’t go up, especially if it’s audience based. So it feels to me, I mean, $250,000 in revenue for them is a rounding error and it doesn’t feel like a success. That doesn’t feel like a success. It’s like, I don’t know. I would think they would need to move a lot more copies for them to be over the moon.

Einar Vollset:
You should get the Basecamp guys on here to ask them how it went.

Rob Walling:
Yeah.

Einar Vollset:
That should be, come on. Yeah, just invite them on and talk about it. Why not?

Rob Walling:
Yep, they’re TinySeed mentors and investors, so.

Tracy Osborn:
Yes, and we love them. We love them for that. I want a product like this to work, but it’s like when you really dig into the focus that would use it, the product itself, the way it’s sold, there’s a lot of issues they’re going to run into and they probably have our already run into at this point. Because I actually haven’t heard many people talk about it since it launched either.

Rob Walling:
No. For a second topic of the day, I go to fundablestartups.com. The headline is, Sell for Half a Billion & Get Nothing, and the summary is that FanDuel was acquired for 465 million in cash, but due to liquidation preferences, the FanDuel founders and most employees received nothing in the massive deal. And I’m going to kick it to you first on this one. Can you let our listeners know what liquidation preferences are and what happened in this deal?

Einar Vollset:
Yeah, I don’t know specifically what happened in this deal, but as a general concept, liquidation preferences are basically this notion that if an investor invests in your company, say they put a $100,000 in and they have a 1x liquidation preference, what that means is basically that when you sell, they get at least a $100,000 back if there is at least a $100,000 back if it’s a 1x liquidation preference. If there’s a 2x liquidation preference, then they get at least double their money back. And if it’s 3x liquidation preference, then they get three times their money back. And there are some nuances beyond that too in terms of like, is the liquidation preference participating or non-participating? So a non-participating 1x liquidation preference means the investor basically has to choose, do they want 1x their money back or do they want to participate in relation to how much they owe of the company?
So obviously, if the transaction is at less than the valuation, they’ll exercise their liquidation preference and get their money back. If it’s larger than that, then they will choose to participate alongside the investors and not get a liquidation preference back. If it’s participating, then they get both. So that means if it’s a 3x participating, liquidation preference means you get three times your money back as the investor and then you participate based on your pro-rata share of the equity. If you don’t know what you’re talking about, if you don’t know what you’re doing, then it can be to the point where sort of unintentionally you didn’t even realize that actually the investors are getting their share plus 3x and you didn’t know that, and that might materially impact the actual money that you put in your pocket at the end of the day.
With this one, I saw this come around for some reason it was back on Twitter the last couple of weeks and I was always like… The headline was this, “Here’s how you sell your business for a billion dollars and make zero.” And I was like, “There’s just no way on God’s green earth that’s actually accurate.” So usually what happens in these kinds of situations is you’re selling for less than the liquidation preference or your latest investors. But a lot of the time, most of the time, and also in this case you want the existing management team and team to stay on because if truly all the money does go directly to the investors, then what’s the point of keeping working there? You might as well just quit and then the company gets run into the ground.
So usually, there’s this notion of a founder or management carve out as part of the transaction. So if they’re selling for 500 million, they might carve out 50 million of that and say, “Okay, 450 goes to the investors and they’ll do whatever they need to do in terms of their liquidation preference or whatever, and then 50 gets carved out as retention bonuses or whatever for the executive team.” Now what seems to have happened here is that the people who truly got zero are the original founders, but those original founders were no longer with the company. And that I can believe, if you are a founder and you basically signed a deal like this and you brought in whatever money, I think it was 275,000 in their latest Series E round and then you walk away, then yeah, I can definitely see how with the 2x liquidation preference, which is high but not [inaudible 00:14:10] or anything like that. I can definitely see how you end up with nothing.
But I think what’s also been lost in that situation is there’s also no way that those founders didn’t get a bunch of money at that Series E. So the founders who walked away, I just do not believe that you get in a situation where you’re raising a 275 million Series E from private equity and family office money and you give up control. And so basically, you agree to 2x liquidation preference and drag along rights and then you take no money off the table as part of that transaction, that I don’t believe. I’m sure that the founders who are now suing already got paid a reasonable amount of money in 2015. I’d be shocked if not, and if not, then they are stupid and their advisors are even worse.

Rob Walling:
And so people listening might say, “Well, there should be no liquidation preferences. Those are predatory,” but they’re not, right? So when TinySeed invests, if we write you a check for $120,000, we have a 1x liquidation preference. And what that means is if tomorrow you were to sell your company for $200,000, we get our 120 back and then you get the rest. And it’s to protect us, because let’s say we invest that 120 for 12%, if we didn’t have a liquidation preference, you could sell it tomorrow for $200,000 and we’d only get 12%, we get 24,000 back, so you could just screw us. So that’s the case at least I know why they exist.

Einar Vollset:
Yeah, there’s a balance there, right? You have to have some level of investor protection, and different investors just have different rights and different approaches to things. We have zero liquidation preference in part because we invest in so many founders. So we have the full spectrum of personalities among our founders, and it just doesn’t make any sense for a professional investor not to have at least a 1x nonparticipating liquidation preference, which is what we have. But there are other investors who basically have 3x liquidation preferences. Yeah.

Rob Walling:
Tracy Makes, what are your thoughts on this?

Tracy Osborn:
I wish I had Einar on my team when I was back the day at my startup and I was joining a accelerator and trying to decide whether I was going to take outside money. I talked about this in MicroConf 2016 is how I met Rob because I started this startup and I bounced back and forth on raising, thinking I was like, “Oh, I’m going to raise money.” And then I was like, “No, I’m going to go back to bootstrapping.” And what actually happened is I raised money from this accelerator. A friend told me that this accelerator had, I want to say at least a 2x liquidation preference might’ve been three, and they were like, “FYI, this could cause trouble in the future.”
I was dumb back then. I was like, “Okay, I’ll sign this anyways,” deciding not to raise money and going to bootstrapping. When I wanted to shut down the business and ideally I would like to sell the business so that I can move on and do other things like join TinySeed. Because of those terms and liquidation preference, and because I hadn’t raised money and because the company was, I couldn’t just as a bootstrap business be like, “All right, cool, I’m sticking myself a $20,000 sale and have some money from that,” but no I had this liquidation preference, I had this investor on board, all these old terms. I would have to pay back two or three times what they invested in me before I would see anything.
So I just had to shut down the business at that point. I got so many emails from people being like, “Why can’t you just sell the business for peanuts and get a little bit of money?” And I was like, “Because I won’t because of this prior investor and the liquidation preference and all that stuff.” So it’s anecdotally, but it’s now I know more about terms and what to look out for when raising money. And hindsight being 2020, I wish that I heard for the great [inaudible 00:17:46], I could have negotiated that in some way, shape, or form, I didn’t do that. I just didn’t know back then. And now I understand how I got into that situation.

Einar Vollset:
Like a lot of founders they just look at the top line number, how much money am I getting in?

Tracy Osborn:
Yeah. Money.

Einar Vollset:
What’s the valuation and the story? And then they’re just like, “Whatever. Everything else will work out. We’ll just make a ton of money and then it doesn’t matter,” but it does matter. And really investor behavior and their terms particularly early on really matters. It can materially impact your ability to fundraise. It can materially impact your ability to sell the company. There’s lots of things with just making sure that the terms that you’re getting are reasonably balanced. It doesn’t have to be super founder-friendly because that 0x liquidation preference doesn’t make any sense either. But finding the right balance there I think is key.

Rob Walling:
And I could see an indie hacker posting this on Twitter and saying, “See? Funding, never raise funding. It’s the devil.” And it’s that’s not the lesson either, right? Funding is a tool. You don’t say that a hammer or a shovel is a tool, but understand when they work and when they don’t and understand what you’re getting into, understand which strings might be attached, educate yourself, hire a good lawyer and don’t just sign paper because funding can get you there faster. And we see this with TinySeed companies every day, so it’s not that it’s good or bad or indifferent, it is just a thing. And yes, there are predatory investors out there. There are really [inaudible 00:19:12] founders who try to screw their investors too. It cuts both ways. And so, that’s where liquidation preferences are a thing that’s part of the ecosystem.

Tracy Osborn:
I think it’s not just understanding the term, but also understanding different scenarios about what those mean. Because there are scenarios where a certain term could make sense and there’s scenarios where certain terms that don’t make sense and just being aware of where those are or will make the future less. Make it easier to plan for the future because you know what direction to go to based on the terms that you have. There is a book… Einar, don’t talk about books later, but I want to talk about, what was it, the book Venture Deals: Be Smarter than Your Lawyer and Venture Capitalist by Brad Feld, that was something I read post my investment in my prior startup that I wish I had read before I took that investment. Because people told me it was predatory. I thought I understood it, but that broke things down in a way where then I really understood what those scenarios meant for me.

Rob Walling:
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Our next story is titled, How I Turned My Open Source Project into a Business. It is the business of email engine. And for me, I mean, it’s an interesting story. Most people who started an open source project are not able to build a business around it. I believe it might even be supporting him full time, but the interesting part for me was he had the open source project and then it was under the AGPL license, which is extremely permissive. And then if you wanted an MIT license, then you had to pay him and it was €250 per year and basically he was making nothing. Like a year and a half, he made €750 in total revenue.
The big shift was basically saying, you need a valid license within 15 minutes after the app where it stops working. So he actually implemented what we would think of as a time-limited SaaS trial, and that instantly changed the whole game. He changed it from almost a donation model, right? It’s like, “Hey, can I have tips? To like, you need to pay to use the software?” Oh yeah, I guess he says at the end, the current MRR is €6,100 and growing steadily, which in Estonia where he lives allows him to pay himself a decent salary. So it is a full-time income. So Tracy, what’s your take on this story?

Tracy Osborn:
This is a fun topic because I have a lot of friends that are in the open source industry and I actually read this article and decided to ask a few friends, and I honestly don’t think that the licenses were the biggest factor here. It’s actually the founder or the creator of this service moving from a, “If I build it, they will come type,” of product to doing essentially sales. Because they talk about raising, they setting the price and they set a way for that they can get that money in and then they increase the pricing. And it’s all those kinds of things that we’ve talked about with founders just in general about, you can’t just build something and hope that people are going to send you money at some point. You have to be thoughtful about your pricing and how people are going to be using your product and do that sales stuff. That was the biggest difference. It wasn’t the changing of the licenses, it was the changing of how this person was selling and looking at the product through their own eyes.

Rob Walling:
Einar Vollset, what are your thoughts?

Einar Vollset:
My thought this is still probably vastly underpriced and he should probably 10X’s prices overnight. That’s what I think.

Rob Walling:
That’s what it feels like to me too.

Einar Vollset:
I mean, stuff [inaudible 00:23:35] around here. He already says it in the thing, 250 a year became 495, became 695, became 795, and finally 895. I’m like, “Brother, how about trying adding in a zero and see how that goes?”

Rob Walling:
There we go.

Einar Vollset:
Why not?

Tracy Osborn:
It’s [inaudible 00:23:47].

Einar Vollset:
What’s the worst that could happen?

Rob Walling:
Inspiring words from a man who knows SaaS pricing. Yep, that’s part of the TinySeed playbook, the not-so-secret part of raising prices. As we move towards wrapping up, I would like to get a book recommendation from each of you, and then we’re going to do a lightning round called Agree or Disagree, and it’s based on the Twitter thread that I started, which is what’s your most controversial opinion about building startups? I got 150 responses to that. I’m probably actually going to cover some of them in depth on a future podcast episode, but we’ll bounce through some of the spicy takes, controversial things, and I want to hear from each of you. Before we do that, Tracy Osborn, do you have a nonfiction book recommendation for folks?

Tracy Osborn:
All right, so in addition to Venture Deals, so if you ever want to raise money or you want to learn about these terms and things that go into taking a venture capital, definitely get Venture Deals by Brad Feld. But the other one I wanted to mention is a negotiation book by Chris Voss, Never Split the Difference. I have so much trouble with negotiation. I don’t like being in a position where I’m arguing against someone for my own benefit because my brain melts into a puddle and I get anxious and all that stuff. And I think this book really helps redefine how negotiation works in a way that really works for my brain, where a lot of it is taking that negotiation, having empathy for the person across the table, but then using that empathy to get what you want and that resonates with me.
So it’s not a fight back and forth when you’re negotiating. It’s seeing from their perspective, bringing up that perspective to that person as you’re going through the negotiation, finding that middle ground. It’s called Not Never Split the Difference, which I think is anti-middle ground, but it was a book that was really useful for me to understand a better way of negotiation.

Rob Walling:
And you also had a fiction book that you accidentally pasted in because you misread it. We might as well just throw that out as a bonus.

Tracy Osborn:
I read more fiction books than I do nonfiction because that was my way of turning off my brain from work, and I probably read about a book a week. Best book I’ve read fiction-wise recently is the Anomaly by French author Hervé Le Tellier. I hopefully I’m saying this correctly. If anyone wants a cool fiction book with beautiful writing, I would recommend just trusting my recommendation and don’t read the description of the book because it has a spoiler, and I think that the journey on that book is worth it to start completely scratch. Make sure you go through the first five chapters. It’s going to seem weird in the beginning, but I think it’s worth it. And I think it’s a good way to turn your brain off of business and read something fun and be transported to another world.

Rob Walling:
Einar Vollset, what’s your book recommendation?

Einar Vollset:
Oh, given that Tracy somehow managed to put three in there, I’m going to push with a combination of things. So, I really liked The Art of Learning by Josh Waitzkin, which is he was this chess wonder kid who also ended up becoming the world number two or world champion in some sort of an Asian fight sport thing that I don’t exactly recall now. He’s a very interesting guy. He’s this consultant to a high performers now and he talks about his approach to learning and how he coaches people on that. So I really like that one. And it is also just a good story. It’s pretty biographical about his growing up and him going through both the chess and the martial arts world.
That one’s good. And then I like a more philosophical book, which is David Deutsch’s, The Beginning of Infinity, which doesn’t really have any takeaways shape or form, particularly as it relates to B2B SaaS. It’s just an interesting way to think about the world that I think counters a lot of the… I think there’s an inherent negativity bias in the world in general. People are pretty convinced that finally, now here we are, it’s going to end very soon because we’re all [inaudible 00:27:30], versus this is the opposite and antidote to that, so I like that a fair bit.

Rob Walling:
Well, since you each gave a few recommendations, I won’t give one this week. People have heard enough from me. I had one, but I’ll table it for now. Now, I want a lightning round this, agree or disagree with these controversial opinions about building startups. We’ll start with Tracy. It’s from Dominic Mon, “Most developers get a better deal sitting it out in big tech.” Meaning instead of becoming a founder, sitting it out and working for FAANG or something, what do you think?

Tracy Osborn:
I mean, is money the only thing that matters or is working on something that’s interesting and challenging and having time freedom and all those other things? It’s like big tech works if you want to just make a whole bunch of money and then potentially be in a situation where you’re working on 09:00 to 05:00 and that’s it. But startups and they’re riskier, but it might be more challenging and more fun in different ways.

Rob Walling:
Einar, what do you think, “Most devs get a better deal sitting it out in big tech.”

Einar Vollset:
Yeah, financially speaking, most likely, yes. I think the expected financial outcome for the median one probably is probably higher, particularly if you get a job at the FAANG in Silicon Valley. Those US type salaries. Yeah, I think so. What you don’t get necessarily is the freedom to do your own thing and potential for a significantly higher outcome than you most likely to get in FAANG.

Rob Walling:
Next tweet is from our very own Interval Set, “Product led growth is where founders too scared to do sales, go to hide.” Tracy, what’s your lightning round take on this?

Tracy Osborn:
I mean, I’m drinking the TinySeed Kool-Aid at this point, so that comes straight from Ainar. I can’t disagree with him.

Rob Walling:
Yep. Ainar, you care to elaborate on this?

Einar Vollset:
I just agree with myself. I think it’s a very wise thing to say. I think in general, this Twitter account really truly is just quality after quality tweet nonstop.

Rob Walling:
Where’s the thumbs down? It is next to the heart, there should be a thumbs down. I want to dislike this tweet just because you said that.

Einar Vollset:
There’s a mute button, surely.

Tracy Osborn:
This relates to the open source stuff where there’s folks who want to build something and are like, “If I build it, people will come. Ooh, product-led growth. My product is going to be so amazing that people are going to be throwing themselves at me to pay me money.” As we’ve seen with many, many companies in TinySeed that marketing and sales is incredibly important.

Einar Vollset:
Yeah. I mean, to elaborate just a little bit more fundamentally what I’m trying to say here is I don’t think people realize that how consultancy sales really is, how you can’t just throw things up there and be like, “Hey, go use it whenever.” Probably the highest value SaaS businesses actually requires the sales, which almost looks like consulting. That’s what I think a lot of the time.

Rob Walling:
Our next take is from [inaudible 00:30:21] and Speaker James Kennedy. His take is, “It is not actually that hard.” Implying that building a startup is not actually that hard. Tracy, what’s your take?

Tracy Osborn:
It’s just the bold. I guess when you look at-

Rob Walling:
Bolds statement.

Tracy Osborn:
The bold statement, when you look at something again in hindsight, I’ll go back to looking at my startup and I look back at what I did with Wedding Lovely compressing those nine years altogether, I would agree that it wasn’t that hard, but the day-to-day stuff can feel like the worst thing in the world. You can go through those dips that it does feel like it’s harder than anything else that you’ve done because you’re having a bad day, things aren’t going well. So I think it’s long-term perspective, it can feel not as hard, but in the short term it’s really hard to tell people that.

Rob Walling:
Einar, what’s your take?

Einar Vollset:
I disagree with James here. I think it’s extremely hard. I think mentally more than anything else. I see that with founders and we support this question and TinySeed, it’s a mental rollercoaster in a way that just going to work and just the stress of it too, particularly once you start having employees that you feel like you’ve got to look after and all that stuff. Yeah, I think it’s hard.

Tracy Osborn:
It evolves. It’s hard to say that hard because you’re looking at everything, but getting from zero to one is a challenge and then scaling that is a challenge. Then working with employees is a challenge. Then jumping into enterprise sales can be the next challenge. Then having your mindset, right, so you can sell your company is also a challenge. All those things do add up.

Einar Vollset:
I think in general, people underestimate. I think a lot of the time people think like, “Oh, as soon as I get to a million in ARR,” or whatever number or there’s some hurdle, then it’ll just be coasting and just executing more versus that’s not the case. There’s always fresh things. Start again, add new things all the time in order to keep growth up.

Rob Walling:
So do two of you know the definition of a lightning round? You’re not supposed to go back and forth. You’re supposed to just-

Einar Vollset:
Yeah, yeah, yeah. Well, whatever.

Rob Walling:
… weigh in with a quick thought.

Tracy Osborn:
We like talk big.

Rob Walling:
I’m never doing-

Einar Vollset:
Whatever.

Rob Walling:
… a lightning round again with you two. I’m going to replace the-

Tracy Osborn:
I mean, to be fair, this is lightning round compared to our normal discussions.

Rob Walling:
Really, really? Yes.

Einar Vollset:
Yeah, I’m glad you just… Come on. This is superfast.

Tracy Osborn:
We like talking.

Rob Walling:
Our final lightning round is a tweet from Caesar Halmasian. “Startups are a trap. Businesses are way better.” Tracy, are startups a trap and lifestyle businesses way better?

Tracy Osborn:
I don’t like going first. If I’m going to be truly lightning round, I want to hear Einar go first.

Rob Walling:
Einar.

Einar Vollset:
No. You say, [inaudible 00:32:55]. No.

Rob Walling:
Care to elaborate or shall we just move on to…

Einar Vollset:
No. I mean, I think are startups are trapped? No. Lifestyle is way better. It depends what you’re optimizing for. If what you want to do is just futz around and start seven different an info product and some e-commerce drop shipping thing and a couple of SaaS’s and buy something and a newsletter that you monetize and just to start, if that’s what you’re happy doing, that’s great. But if what you’re wanting to do is something bigger, make most likely more money, then startups can definitely be the way. But there are different ways to do that too, right? There’s a difference between bootstrapping a SaaS business that you’re hoping to sell for 20 million bucks compared to starting Open AI where apparently you’re going to raise $7 trillion and build Silicon in the desert, right? They’re just different things. I don’t think anything is better. I think it’s a good thing that Elon Musk decides that he’s going to build Tesla and go to Mars or whatever. That’s fine. It just is what it is. For him, there’s no better or worse, I don’t think.

Rob Walling:
Yeah, I’ve done both, right? I’ve had great lifestyle businesses. I’ve had what I would consider startups. I mean, I would do consider TinySeeds a startup, MicroConf a startup, Drip certainly was, and I fall into the startup camp. Lifestyle business is great and it got a little boring and just working 10 hours a week for making my money was, I wanted something where I could be more ambitious about it and where I could really have a purpose around it. And that I think is what the startups that I’ve chosen to build have brought in addition to monetary rewards that were far beyond the lifestyle businesses. Lifestyle businesses in the short term, of course, you’re making income net profit on it. It’s taxed at income tax rates, and if you exit a startup, right, usually depending on where you live, you get that long-term cap gains and you accelerate, you get 10 years of net profit, 20 years of net profit if I’m talking SaaS. But it depends on multiples and such, but you can really accelerate that earning. Tracy closing thoughts on this tweet?

Tracy Osborn:
Ditto.

Rob Walling:
Nailed it.

Tracy Osborn:
Nice. I just wanted to go there. Boom.

Rob Walling:
Einar Vollset, folks want to keep up with you. Einar Vollset on Twitter, you work on TinySeed. You also are the principal of Discretion Capital. So someone’s listening to this and they have a SaaS company doing at least 2 million ARR and they’re thinking about selling. You’re a sell-side M&A advisory, and they should reach out to you. Einar@discretioncapital.com.

Einar Vollset:
[inaudible 00:35:23].

Rob Walling:
Tracey Makes, you are Tracey Makes on Twitter. So your name is Tracey Osborn. So everyone knows, but I call it your nickname as Tracey Makes, so that is-

Tracy Osborn:
Because I couldn’t get Tracey Osborn on Twitter, so I’m now Tracey Makes, yes.

Rob Walling:
Yes. Tracey Makes on Twitter, tinyseed.com. Anywhere else you want to send folks?

Tracy Osborn:
I’m probably more active on the TinySeed social media accounts than I am on my personal one. So if you’re ever talking with TinySeed [inaudible 00:35:46] on Twitter, that is me. I hesitate to mention this because then people are going to look at it, but I am also trying to get a TikTok account off the ground and I couldn’t get Tracy Makes for that one, so I’m [inaudible 00:35:58].

Rob Walling:
What?

Einar Vollset:
Just in time for it to be banned.

Tracy Osborn:
I know, right? I need to get better at doing videos.

Einar Vollset:
If you get banned right after you launched this, then I’m going to blame you. I’m going to say Tracy, you brought down TikTok with you.

Tracy Osborn:
Yeah. Yeah, my little startup talking about negotiation and other little videos I’m doing took it all down. But itstracymakes on TikTok because that is another place I did not get my preferred username.

Rob Walling:
Oh, so it’s I-T-S-

Tracy Osborn:
Tracy Makes.

Rob Walling:
So, itstracymakes-

Tracy Osborn:
Yep, on TikTok.

Rob Walling:
… on TikTok.

Tracy Osborn:
Yep.

Rob Walling:
Amazing. And if you’re not following me @robwalling on Twitter and saasplaybook.com these days is probably my most recent effort that you should check out. Tracy, thanks for joining me for this Hot Take Tuesday.

Tracy Osborn:
Always fun.

Rob Walling:
Einar, thanks for coming around, man.

Einar Vollset:
Thanks for having me.

Rob Walling:
Thanks again to Tracy and Einar for joining me on this week’s episode. And thank you for listening this week and every week. This is Rob Walling signing off from episode 707.

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us. As always, I’m your host, Rob Walling, and in today’s very special episode, I’m going to be walking through some advice that I’ve been giving over the past 10 plus years on the show, in conference talks, even in some of my books that I’ve really started to rethink as new evidence has presented itself recently. The more conversations I get into on Hacker News and Twitter around these topics of being a founder and launching a startup, rules of thumb and things that I’ve made recommendations on where, look, I’m not the person who says always never. But I will admit with many of these, I’ve said 90%, 95%, 98% of the time, I believe that this advice is sound. And in today’s episode, I’m going to talk about how I’m rethinking that on a few key points. 

The first point that I’m rethinking and want to maybe offer different advice than I have in the past is around pricing. And you’ve heard me say that pricing is the biggest lever in SaaS, and I still believe that. And I know that if your annual contract value is $500 a year, you have maybe 5 or 6 B2B marketing approaches that you can do, and there’s a bunch you cannot because you just can’t afford to do them. And if you’re charging, I don’t know, it’s in the 5 to $7,500 a year, then you probably have 10 or 12 that you can do. And if you’re charging 30,000, 40,000 and up, then all 20 of the B2B SaaS marketing approaches that I talk about on the show and in my book, The SaaS Playbook, are available to you. And all that’s true and I stand by that. 

But what I’ve realized is I think myself and the rest of the MicroConf community have gotten a little too hung up on increasing prices and feeling like raising your prices, A, that it’s the solution to everything. But B, that it’s always good. And I’ve started to take the other side of that argument pretty seriously. Like, what would happen if you lowered prices? A lot of good can come out of that. Imagine that instead of having a product that you’re selling for 200, $300 a month, even $100 a month, you go down market and you charge $10 a month, $20 a month. So many benefits can come from doing that. Things like you’ll attract a lot more customers because how many people or businesses can afford to pay hundreds a month? Well, there’s obviously a lot more that can afford to pay 10 or $20 a month. And so this increases your potential market, your total addressable market, as the VCs would say. I always like to call it the term, the total reachable market because who cares if it’s a total market if you can’t reach them in the ways that you’re marketing. 

But as I’ve thought about it, I’ve realized there are so many benefits. It widens your market. I know that I’ve talked about lower prices increasing churn, and that is true, but realize that there’s a plus side to churn as well. It means that the people who don’t need your product will leave, and you don’t need to support them anymore, and you don’t need to provide them with whatever hard disk space respond to their emails. There are a lot of benefits for people churning out. And so what I’m saying is that 2024 for me is going to be the year of going down market, and that’s going to be my default advice for founders coming to me with issues in their startup. “Are you plateaued? Have you thought about lowering prices? Are you not finding enough customers? Have you thought about lowering prices? None of your marketing is working. Nobody wants to use your product. Have you thought about lowering prices?” 2024, the year of going down market. 

Speaking of down market and lowering prices, there’s another paradigm or piece of advice that I’ve been giving, it’s got to be 14 years, probably more than this, 15 years. And it’s that if you’re going to build software, whether it’s SaaS, downloadable, whatever, that you target businesses, that B2B is superior to B2C. And I’ve really started rethinking that based on evidence again, that I’ve seen Twitter, Hacker News and folks who are charging these $5, $10 downloads for sometimes they’re one time and sometimes it’s monthly. But think about the benefits of targeting consumers. There are a lot, and there’s a lot that I ignore and don’t talk about on this show, and I feel kind of bad about it, which is why I’m recording this episode and putting it out like this because I wanted to get it to you as soon as possible. But think about if your entire addressable market of businesses in your space is 20,000, 50,000, 200,000 businesses, if you shifted your focus and went after consumers, billions. Billions of potential customers. 

So why would you focus on a small market with tens of thousands or at best hundreds of thousands of potential customers when you can have billions of customers? And not only that, but B2C apps, they are just a lot more interesting than B2B apps. B2B apps are kind of boring. Who wants to build CRM software for realtors or the business operating system for gyms and fitness studios when you can build software that’s used by people like you and I, and my brother, and my uncle, and my parents? It’s a way to not only sell to customers, but also to get recognition from people who will finally understand what you do. 

Your mom will no longer say, “My son or my daughter who’s a startup founder, they fix computers.” She might actually be a user of your app. And think about how much cooler that would feel than trying to explain email marketing to someone who has no idea what you’re talking about. And then they basically summarize it by saying, “Oh, so you provide software for people to spam you” which is a response that I got when building Drip a little too often, especially at family reunions. 

But not only that, there’s one other thing that B2C apps have that B2B apps very, very rarely have, and it’s virality. And I have not leaned in nearly enough to that incredibly powerful marketing approach of going viral that B2C apps allow you where consumers just talk and they spread the word for you and you just build the product and you don’t have to market it. And what’s a better dream than building an app with billions of potential customers who market it for you and maybe even your mom or dad will understand what you do? So on this show, I am going to start embracing B2C. And look, I’m not saying it’s better than B2B, but it’s at least on the same level, and I’m going to see how my opinion shake out over the coming year. 

The third thing that’s been bugging me, and I finally was able to put my finger on it last week, is I’ve talked a lot about two-sided marketplaces and how bootstrapping them is difficult and how you shouldn’t do it. And on this episode, I’m taking that back. What I’ve realized is that a SaaS app is a one-sided not marketplace, and a SaaS app has to do a lot. The software is the value. The job to be done is whatever the software is doing. With a two-sided marketplace, not only do you have two sides and much like going B2B to B2C, you now have so many more options for customers. Going from a one-sided not marketplace to a two-sided marketplace gives you so many more options. You now have two audiences that you can market to and sell to. You now have two audiences that you can provide different value propositions to, and you now have two audiences that you can build your product for. So I’ve realized the error of my ways in thinking that just because something is simpler, I.E. a B2B SaaS app doesn’t make it better. 

In addition, the job to be done of a two-sided marketplace, it’s done just by connecting people. All you have to do is take an Uber driver, pair them up with a rider, and it’s done. You don’t need to build a bunch of software that’s really hard to build. You could almost do this with no code or a Google sheet. Imagine eBay and Upwork and how simple those would be to launch today in terms of the software you’d have to build. The value is in connecting the two sides, and that makes these much easier and in fact, much simpler businesses. And I want to apologize for leading you astray on that point for the past many years. 

The fourth and final point I want to cover today is again, something that I want to backtrack on that I’ve talked about. I no longer believe in the value of focus, and I no longer believe that you need to launch a product, solve a problem, find product market fit, and invest time and energy into an idea and iterate on it and get it to the point where you’re providing value. Some people call it product market fit. I call it building something people want and are willing to pay for. Instead, I think that we should all be launching a bunch of things to see what sticks. We’re makers. We should make. We’re builders. We should build. Since it’s all just luck anyway, why wouldn’t I make a bunch of apps and throw them out there and see which ones get traction? If I’m in Las Vegas and I’m playing blackjack and I know that it’s all just luck, why wouldn’t I just play 10 hands figuring one of these will win eventually. 

The best part is I’m now giving you permission as the builder, the coder, the developer, the maker to just go build. All you have to do is build and launch. That’s it. I’m not going to talk to you about selling, about talking to humans, about listening to people’s pain points about marketing. I mean, who wants to learn SEO, who wants to deal with ads and creating content and cold outreach and trying to figure out what to do next amid the pain of launching a startup? No one does. So don’t do it. Look inside and ask yourself, “What do I want to do? What fits my personality?” And I bet if you’re really honest, what fits your personality is to make stuff and launch it and not do any of the hard things. 

So 2024, along with being the year of going down market, B2C, and bootstrapping two-sided marketplaces is going to be the year of launching a bunch of things to see what sticks. Obviously, the show is going to change quite a bit, and I bet you’re super curious to hear what tomorrow’s episode is like in light of my recent revelations. But I do want to point one thing out to you in case you haven’t checked your calendar. Today’s date is April 1st of 2024, and in many countries, today is a April Fool’s Day. So I apologize in arrears and I can be held responsible for nothing I’ve said in this episode. 

The views expressed in this episode of Startups For the Rest of Us are neither the views of MicroConf, TinySeed nor of Rob Walling. They’re the views of April Fool’s Day, 2024. I was really trying to steel man those arguments though, trying to look at the bright sides until it just got a little crazy. I was going to go on. I have three more things. Shouldn’t you build a second product if your first stops growing? What about multi-language support? How about take investment in the launch of the products? What about defining a new category when you’re bootstrapping? No, there’s a lot, I realize. I think I’m taking the joke too far. So I appreciate you listening today. This does not preempt the normal episode of Startups For the Rest of Us this week, so we will be back tomorrow with your normally scheduled episode that will be on topic, super serious as always, not an April Fool’s joke. 

Appreciate you hanging with me today. If you thought this was funny or if I actually got you for even a bit, please hit me up on Twitter. You can send an email to questions@startupsfortherestofus.com. I’m curious at what point most people realized that this was a joke episode because I started getting a little crazy with some of the B2C stuff. And if this is your first episode, if you’re listening to this months down the line, I’m probably putting an introduction, a warning, a disclaimer if you will, not to listen to it, just to skip to the next episode. But if this is your first episode, you may want to go back and listen to the 2, 3, 4 prior to this to see what this show is actually about. If you liked this one, thought it was funny, hit me up on Twitter, and if you didn’t, don’t bother. I’ll be back again in your earbuds tomorrow for another regularly scheduled episode. This is Rob Walling signing off from episode 706.5.

Rob Walling:
MicroConf US in Atlanta is here in just a couple weeks, and this is your last call to buy tickets. We’ve sold more than 90% of the tickets, and we will sell this event out as we have for many years. The event is April 21st through the 23rd in Atlanta, Georgia at the amazing Starling Atlanta. It’s a vibrant, upscale escape for creative souls. It’s going to be a great event.
There are going to be 200-ish of your closest Bootstrap and mostly Bootstrap founder friends who are showing up to hear talks from folks like Rand Fishkin of SparkToro, Asia Orangio of DemandMaven. I’m giving a talk that has never appeared on this YouTube channel, and a talk by Dr. Sherry Walling on staying motivated as an entrepreneur.

We have a special guest MC, Leanna Patch, and a very special guest who has never appeared on the MicroConf stage before, Ben Chestnut, the co-founder of MailChimp. He really doesn’t do many in-person events, but he has agreed to come on and do a fireside chat with me, I’m really looking forward to it.

If you haven’t attended a MicroConf in a few years, we’ve changed the format. We used to have 9 or 10 speakers over two days, so it was a lot of content, a lot of sitting in seats, and we’ve completely reorganized it. We have about five talks, and the afternoons are reserved for interaction for workshops and for our excursions. We’ve done excursions like ax throwing, brewery tours, improv classes. I know we aren’t hosting all of those here in Atlanta, but those are the types of things we do to get you out of the building, a little bit out of your comfort zone, but to be around other founders and make friends because MicroConf is about relationships. And that’s the thing we have doubled down on over the past three or four years as we’ve re-engineered the event from focusing on content to focusing on the community and the relationships that are built between founders.

So if you’re thinking about attending, you want to head to microconf.com/us and buy your ticket.
Unfortunately, I’m going to be unable to help you out when we sell out and you email me asking if you can get a ticket, because once we’re done, we’re done. It’s Microconf.com/us, and if you want to meet up again with about 200-ish of your closest founder friends that from past MicroConfs, from MicroConf Remote, from MicroConf Connect, and of course the Bootstrap community on Twitter started around MicroConf. So many of those folks that you know are going to be attending. So you don’t want to miss out. Microcomp.com/us. Hope to see you there!

Rob Walling:
Another week, another episode of Startups For the Rest of Us. I’m your host, Rob Walling. This week I talk with Braden Dennis, the co-founder of FinChat about their long journey of launching a product with an existing audience. And in fact, if you’ve ever heard me quote the stat that of all the companies I’ve invested in, 170 companies, that less than 5% of them had an audience before they launched their SaaS. FinChat is one of them. And you’ll hear Braden and I talk about the pros and cons of having that audience in this episode. In addition, they also launched a second product and pivoted the entire company to that second product. They’ve been bootstrapped, mostly bootstrapped, and now, they’ve raised venture funding. He and his co-founders have taken a lot of big risks and made big bets, and they’re doing pretty well with it. It’s a really interesting conversation today. I hope you stick around. 

Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling. It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of MailChimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. Microconf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon. So if you’re thinking about joining me and about 225 of your closest bootstrap founder, friends, head to microconf.com/us. 

MicroConf is hiring a director of marketing and operations. You can come work directly with me to help me refine, and expand, and execute on our growth strategy. We have a lot of exciting things going on over the next one to two to three years, frankly, at MicroConf, including a lot of new digital product launches. So if you have a strong background in online marketing, marketing digital courses, course creation, managing a small team and you’re interested in working directly with me to help shape the future of bootstrapped and mostly bootstrapped SaaS companies, head to microconf.com/jobs and you’ll see the listing for this as well as our community manager opening. If you’re interested, please apply and let’s have a conversation. And with that, let’s dive into my conversation with Braden. 

Braden, welcome to the show.  

Braden Dennis:
Rob, it’s so good to be here.  

Rob Walling:
So FinChat.io is your company. You started it with three co-founders. Your H One is the complete research platform for global equities. Do you want to give us an idea of where you stand today, what phase the business is at.  

Braden Dennis:
For sure. So we are a team of 11 people, soon to be 12 in a few days. Seven figures in ARR company, and the platform is for investment research. So we primarily serve professional, sophisticated institutional investors. And we’ve been going more and more kind of upmarket through that process.  

Rob Walling:
And you’ve raised a million and a half seed. Would you call it a seed or a pre-seed round?  

Braden Dennis:
Yeah. I guess, there’s no rules in raising money is one thing I’ve learned. I almost say that it was like a hybrid of a seed and a series A in terms of where we were in scale, but it was a tool for us to get to our next milestones. And we didn’t need more, we didn’t need less. It just felt like a really good number for us.  

Rob Walling:
We’re going to talk about a lot of things today. Building a second product, raising your round, venture versus bootstrapping. ‘Cause you’ve been through a lot in the past couple of years. I want to start by going back to when FinChat was initially launched, it was actually called Stratosphere, right? Stratosphere.io. And you have, is it one of the most popular personal finance podcasts in Canada? You started with an audience, and you built a SaaS, and one reason I want to touch on this is if folks follow me on Twitter or listen to me rant on this podcast, I often say, “Look, if you have an audience, great. That is a great advantage. But if you don’t, don’t go build one for SaaS.” If you’re going to do info products, or courses, or books, of course. But for SaaS, I think it’s more trouble than it’s worth and the time would be better spent doing SEO, or product development, or anything else. But roll us back there. Tell us about your podcast and then how Stratosphere came out of it.  

Braden Dennis:
Well, first I wholeheartedly agree with that sentiment. The podcast network owns two shows, and so I do run it as a separate business. It is an advertising business. If I was to dream up the best lifestyle business, it is truly that. It’s like a few hours of work each week. And I’ve been doing it now for a long time. I was looking at it the other day and I’ve been doing podcasts in various forms for 10 years now. And when we launched it for a while, there was basically no one listening. And then in 2019, since it was about investing, it was starting to take off. But it was taking off right before the big wave brought us even bigger in 2020 when people were doing self-directed investing. And so it’s been a fantastic project, it’s been every single week for 370 episodes now. So I think we’re about half of your catalog.  

Rob Walling:
It’s still a lot, man. Good for you.  

Braden Dennis:
But you can recognize that it is a grind, but I really do enjoy it. I get a lot of career satisfaction out of it. And then to roll that over to the product, to what you said, I say to people, “It gave me a great zero to one type of audience to show the product to, iterate on. Have like really forgiving users for your MVP was great, and I don’t take that for granted. I think it’s amazing to have that. But you do outgrow that audience, and as a business we outgrew it pretty quick because we are starting to focus on more upmarket B2B type clients. And so it gave us a great zero to one, but it is not going to be the thing that gets you 1 to 10 or anything like that. So I agree that it shouldn’t be a main priority for SaaS founders.  

Rob Walling:
And so you had this audience and it’s self-directed investors, kind of people interested in personal finance and investing and you built a SaaS. And what was it, was it like researching stocks?  

Braden Dennis:
It was the tool that I wish I had to save me time for the podcast research essentially, which was just how can I aggregate more historical financials from public companies across the whole world into one place that I can view them really quickly. And the whole concept was just like Yahoo Finance people were really familiar with, but it’s so ad invested and just really limited coverage. And just only has huge scale because they’ve been so good at SEO, and anytime someone searches up a company or a stock, they come up first. But I was trying to build just the MVP of how can I bring in financials from companies around the world in some sort of API feed, and then build Yahoo Finance on steroids to show my podcast audience. It was not some grand vision or product plan really.  

Rob Walling:
Right. And you mentioned you built it, you launch it, people are using it. You decide to go up market. Why was that?  

Braden Dennis:
Well, for all the reasons that you talk about in this podcast, anytime you have really low-price products, you face a lot of churn. It’s really, really hard to scale something when people are paying nine bucks a month, which was the original plan. Right? And so this should come to your listeners as no surprise that as a founder, it’s your job to learn and iterate. Your first plan is never going to be the concrete plan, and our plan right now moving forward is not going to be the plan in two, three years. It’s literally our job to iterate as we go. And so that’s kind of how we found ourselves here.  

Rob Walling:
Got it. And so the audience, as you said, was your zero to one, it got you started. And if I recall, we first talked when you were somewhere around 7 to 10K MRR. And I believe you had gotten bigger, and churn had done some damage ’cause again, $9 a month is, as you said, it’s hard to scale even when you have access to tens of thousands of people or whatever through a podcast. And it was maybe a year later, so I’m thinking, when did you think about start for the rest of his drinking game? When did you think about launching a second product? Because you and I talked about it and usually, as Ruben Gomez and I had spent an entire episode talking about… Usually my response is, “Don’t do that,” and you have to convince me otherwise, right? But you guys did and you executed on it really intelligently. 

I believe I actually used you as an example in that episode of people who had talked me into it. You were one, Jordan Gaul and I think there was a third. But walk us through that in how maybe ChatGPT going live had an impact on your thinking.  

Braden Dennis:
For sure. So the product was called Stratosphere, the company that we originally connected on and got into TinySeed with. Like you said, for context, around seven K in MRR at the time. Lots of churn… Growing, but not a venture scale idea or anything like that. And in the April-ish of 2023, last year, one of my co-founders was like, “We have been aggregating so much financial data. This product’s amazing. What happens if you just talk to it?” We had heard whispers of Bloomberg, the large incumbent trying to build BloombergGPT, but they just have a white paper. What if the small startup beats them to their game? And we did, and it went viral. And so we launched it, we bought the [inaudible 00:10:24]… I couldn’t have bought a domain name faster than FinChat because it was perfect, right? It was the domain for the space. And we launched it in April, and we had 65,000 signups on hour 46 or something of it being live. 

It had gone viral on LinkedIn, it had made its way around Twitter and stuff like this. And it had far surpassed just my reach. That’s when you really know. And we recognized, like, “Okay, this product’s cool. But everything behind it, investors want to know the source.” So when you search up, like, “What was Amazon’s revenue last year?” People want to know the source, and audit it, and go back to the filing that it came for. If people are doing this, especially at a professional scale, I was like, “Perfect. We already built that product. It’s called Stratosphere.” So we brought that in as the layer behind it, and it became one cohesive product. So it was more so just like we built two different styles of front ends and then realized, “Hey, if we just bring them together, this is actually the most compelling product that the market has right now.” 

And it was a scary decision. You and I talked about it. And we decided in an afternoon, we’re like, “This is too obvious.” Right? Like “This is too obvious, and there’s no sense of waiting another day to think about it because this is amazing.” There’s no risk in terms of we don’t have to dish the old product, we’re going to merge it over. And so I think I call it the low-risk experiment gone right, because we shipped that experiment in three weeks. I think it was like two to three weeks, we shipped it from zero to one to domain to live to 65,000 users in two and a half weeks. And so that’s really the key is if that took us four months, oh, gosh, that would’ve been a gigantic distraction at that time.  

Rob Walling:
Yep. And that’s the thing that I see with a lot of folks who do launch that second product is they’re launching it to escape. Usually, it’s to escape something that’s not working and they’re not putting in the hard work on the first thing. And then they take four months, five months, six months to build it, and launch it. And they think about it, and then it is not. You called it what a low-risk experiment gone right, it becomes a high risk experiment. And whether it goes wrong or right, now, you’re six months down the line and you have something that most people won’t have had the intersect. And you had hard work, luck, and skill that all took this. I don’t want anybody to think, “Oh, Braden got lucky. Stratosphere got lucky with FinChat.” It’s like, “No, it was all these things.” Because you launched it in two to three weeks, it wasn’t 30, 40 hours of dev. Somebody put in a lot of hours, your co-founder. 

And the skill, let’s talk about skill. That’s kind of how your preparation, it’s like, “Hey, you guys had the knowledge. You guys had the data.” Without all the data you pulled into Stratosphere, there is no FinChat. That makes sense. I couldn’t have built FinChat on my own in two to three weeks because I didn’t have all the background that you guys had. So I’m calling this out, so listeners who are listening don’t think to themselves, “Oh, well I can launch a second product too.” You are again a counter example, but with good reason because you could do it quickly. And it was a low-risk experiment that if it didn’t go right, you would’ve kept pushing on Stratosphere. Right? So FinChat took off in a way… It wasn’t just users, right? I mean, it was people clamoring for the data and you were like, “Wow, there’s revenue here whether we’re going to close it today or in a month.” 

And so you eventually just merged them. And so if you go to Stratosphere.io now, it redirects you to FinChat, right? And it tells you, “We’ve merged your account settings and dashboards onto FinChat.” Was that part a hard decision at all to merge it in? Was it like, “Well, do we shut it down? Do we run two products?” What was the thinking there?  

Braden Dennis:
Because we knew we were going to roll in that product with the exact same UI, UX experience other than the background, gray is a little bit different. It was an identical experience for those previous users and that’s why we felt really confident. And we even told people, like, “Hey, this is happening.” A lot of people replies on my Twitter being like, “Dude, no. I love the Stratosphere units interface.” And I said, “I promise you. When we launch this tomorrow, I’m going to reply to this thread and be like, ‘See'” And that’s exactly what I did. And they’re just like, “You know what? It’s actually better. You tweaked a few little things that actually improved it.” And as we should, right? As you get a chance to put a fresh coat of paint on stuff. But we didn’t change the experience and that’s really why our users were like, “Okay, the domain’s different. The URL is different. And now, I have all these new features with the AI chat as well.” It’s a no-brainer.  

Rob Walling:
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Why do you think FinChat worked so well so quickly? ‘Cause you had a product… Stratosphere is similar. As you said, the interface was similar, right? There’s a lot of similarities between the two. But it’s a great split test, and you think about in any 10 successes or 10 failures, like, “Was it the founder? Was it the market? Was it the product? What are those magic factors that all come together?” I summarize them as hard work, luck, and skill, but we know it’s very amorphous. You had two similar products in one just up into the right. I’ve seen the graphs. Do you have any sense of why that happened the way it did?  

Braden Dennis:
Before, we were not truly bringing anything differentiated to the market to professionals. We were bringing something differentiated to the market for retail investors who hadn’t had a chance to get a professional accessible research interface. But for those who have been in the business a long time, paying 25 grand a year for each Bloomberg terminal. These incumbents have been building this technology for 30, 40 years and they’ve kind of thought of every use case. And so the expectation for those users is just so much higher. And now, it was something different. Now, I don’t even have to go learn Bloomberg 2.0 as I can just talk to it the same way that I talk to my associate or the intern to pull up a graph comparing these two companies. It’s like, “Hey, can you quickly compare Google Cloud’s business to Amazon Cloud’s business? Build a chart and also, layer in operating margins ’cause I want to know why there’s such a big discrepancy in profitability.” Those are very casual conversations that happen in the office for these people. And then they’re just like type it into FinChat and it creates it. 

And they just had this magical experience for the first time. And so I think differentiation is a roundabout way of saying that it was different for the first time and the timing was right. So I think that that’s probably what it comes down to.  

Rob Walling:
Timing feels like a big piece that people… Everyone’s talking about GPTs, and AI, and LLMs and so it’s going to tend to get noticed at least. And look, if it got noticed and it wasn’t a great product, then it doesn’t go anywhere. Right? As people look at it and blah. But it really is taking advantage of a moment in time that you were at the right place and seized the opportunity. You saw the opportunity, you seized it. You did it quickly. And you rode that wave is what it feels like, right? And sometimes, this is where I always say there’s some luck involved because you weren’t lucky in going viral. You were lucky in the sense that GPT just came out the moment that you had this product. Let’s say you had built Stratosphere five years ago, seven years ago, what were the tech waves that it was AR/VR and it was crypto. Maybe you’d have done a blockchain strategy, whatever. 

It’s like you did happen to have that, but you also had the ability to execute so fast that led you to raise your funding ground that we talked earlier. So you took money from TinySeed, right? So you’ve been bootstrapped. You’ve been, what I call, mostly bootstrapped, which is like, I don’t know, 100 grand to 500 grand is kind of mostly bootstrapped, usually. There’s no fine line, but that’s kind of in my head what I think about. And then now, you’ve literally raised venture. You want to talk us through that decision because as a entrepreneur, self-made with your podcast, and you’ve bootstrapped that, we know that you could have bootstrap Stratosphere/FinChat. But you decided to go in between and then take the full step. So talk us through your thinking there.  

Braden Dennis:
And what feels like a short time, I know it’s been several years now. I’ve seen all three of that bootstrapped, mostly bootstrapped, and going venture scale. And even on the same company, which is kind of even more bizarre. But there’s a couple pieces there, right? I say to founders who are thinking about raising money and you mentioned that, what is it 1, 9 and 90 rule? What is that one again? That’s the 1% should go venture.  

Rob Walling:
Should at least consider venture, they’re probably venture ready. And then about 9%, I think, should consider some type of funding ’cause it just makes it a little easier to get off the ground. And that maybe is angel friends and family, maybe it’s TinySeed type money, but it’s non venture money. And then I think about 90% of tech companies, startups, and stuff should probably just bootstrap. And again, you and I talked, it’s directionally correct. It’s not the exact numbers, but yeah, probably 10 times more should do this and 10 times more should do that.  

Braden Dennis:
Yeah, those kind of rule of thumb directionally correct things. I think that this one’s spot on, and it’s just kind of important to be honest with yourself because along that way… What we’ve actually described, the whole genesis of this. When it was a product for my audience, it was a bootstrapped business. It was not even a mostly bootstrapped business, it was fully… This is a cool side project turned main time project that we could generate a decent living for ourselves, basically. It’s not going to support a big team or anything like that, but a good bootstrap project. Two things are actually really working, we had a successful pivot up market to, “Okay, this is not a venture idea. But this could hit 1 million in ARR, maybe two,” that kind of thing. And so we were being honest with ourself about what that outcome looked like. And I even had angels and VCs reach out and I just said, “Look, I’m not getting on the venture route because this isn’t a venture company.” 

I’m an investor myself, it’s my job to be a steward of your capital. I became investor first before company operator. And then when FinChat happened and that explosion happened, our ambitions grew with the opportunity of recognizing it. If you were to see me and my co-founders call about level setting around the ambitions that we wanted to go to, they changed in a massive way in six months. In terms of what we thought was possible, the company we wanted to build, and the company that we thought that there was an opportunity on. So it’s really just being honest with yourself because if you put yourself in the wrong path for your ambitions, or the company, or the market opportunity, you get a lot of conflicting incentives with investors, yourself, what you want to build. And that’s not really good for anyone, no one wins in that situation. And when you’re raising money, I now, am a steward of capital and it’s my fiduciary duty to go for a big outcome. And so that’s what we’re going to do.  

Rob Walling:
Often, when I talk to folks similar who ask me, “Should I raise funding?” I know that you get that question. I tell them, “Look, there’s no right or wrong answer. Know what you’re getting into at each layer. Know that it’s not undoable. Once you take venture, especially like you’re on the venture track, you’ve removed some optionality and that’s okay. Just know that.” So in my case, if I were thinking about it, I can stay bootstrapped for as long as I want. I have all the options. The moment I take any capital, whether it is from a TinySeed, or friends and family, or angels, or whatever, I’ve made a choice. I can no longer be bootstrapped, I have now made that choice and it’s a one-way door. And then once you do venture, it’s similar. So that’s where bootstrapping as long as you can, as long as it makes sense. I think it gives you, not only the optionality, but I can help you discover about the business. Some businesses you’re two, three years in and finally you’re like, “Oh, now, I see there’s a venture opportunity.” Sometimes it takes that long. 

But if you took venture or you took a big round of funding early on, three months in where you’re still trying to find product market fit, you just burn through that cash. You’ve removed your optionality and you’re now like, “Well, I got to grow fast, so I got to spend all this money.” And then finally, a product market fit, no money in the bank. Right? So that’s why I tend to be pretty pro bootstrapping, not just because I don’t see venture as an incredibly viable option, I’ve never been anti venture, but I just think too many people think it’s the default. When I say 1, 9, 90, I want people to have an order of magnitude of when I speak at events, and I say that, people are surprised. I thought everyone raised venture. No, and everyone shouldn’t, right?  

Braden Dennis:
It’s ’cause those are the big headlines you see and those are the kind of vanity metrics that a lot of founders, especially in certain areas are showing off. Raising money in itself is not a milestone, it’s a tool. I love the Craig from Castos, it’s a tool to live in the future. Like that’s exactly… I don’t think I’ve heard of a better saying on what funding is ’cause in itself, it’s not a milestone. It doesn’t create any intrinsic value. And in fact, it might be destructive for intrinsic value for any potential for you to have a successful exit or outcome. Because if you try to sell it for less than what the cap you raised at, then there’s a lot of issues with that, especially if you’re signing traditional venture capital documents, you sign over a lot of control. You create a board, you create… it’s not a milestone, it’s really not. It’s a tool and decision for the company you want to build.  

Rob Walling:
Yep. I often tell people “It’s not the finish line, it’s the starting line. It’s a new starting line.” I’m like, “Okay. Now, we’re going to scale up.”  

Braden Dennis:
And to add on that, it’s one of the only irreversible mistakes is messing up your cap table.  

Rob Walling:
That’s for sure. We’ve seen some come through TinySeed, man. Where it’s like, “Wait-”  

Braden Dennis:
We fail, we make mistakes daily. It’s like in our culture to fail, to ship fast, to move fast, to fail fast. That’s the only thing you can’t mess up is your cap table.  

Rob Walling:
Yeah, it’s so permanent. When we got on the call today, you and I were chatting beforehand. And I had this whole outline of like, “Oh, let’s cover these things. I think these are the most interesting parts of your story so far.” And something you said to me is, “I just made a really hard decision as the CEO of this company and it’s to shut down our API business.” So do you want to give folks context around, you have a web interface, you have an API, and you’ve had a lot of traction with the API. But I believe yesterday, you just decided we’re not accepting new customers. Right? Just talk us through that decision because it’s a hard one. Being a founder is making hard decisions with incomplete information, it’s a big strategic decision. But it sounds like you’re convinced it’s the right way to go.  

Braden Dennis:
Yes. And to give you even more context, I basically realized the writing was all on the wall yesterday and made the decision this morning. That’s how quick I’ve had to make the decision. And some people say, “Maybe sleep on it. Maybe that’s too impulsive.” But as founders, we’re seeing signals for months, and months, and months, and months. It’s not like crap at the fan yesterday, I’m shutting it down today. Right? That’s that founder gut decision and making the decision fast and concisely. Whether it’s wrong or right, you’re going to navigate and you’re going to move forward with it, I think, is really important. ‘Cause the writing’s been on the wall for this for a while. Say six months ago, we saw a lot of interest from fintechs on, “Hey, can we bring FinChat into our platform?” Say, you’re like a broker, a stock trading platform. You’re like the Robin Hood of country X, Y, and Z. 

And we learned the wrong lesson really quick, which was huge six figure deals, quarter million… We signed a deal for a quarter million dollars a year. And for us, we grew up selling $9 a month subscriptions. This is star struck. We hit gold. This is product market fit. The inbound is exceptional, and so we ran with it. What we learned over the next six months and up including until this morning is every deal was very custom. The sales cycle, it was not just slow, it was impossible with the legalities around it, them being so regulated. And our ability to actually execute something that we’re really proud of, we became consultants. And what that did for a team of, at the time, seven, eight now, 12 people, is you completely lose focus on the company that we wanted to build. We know we still want to go up market. We tasted up market, we like it. We like going up market and we learned some good lessons, but we know it’s just not going to be that product. So we decided we’re not taking any more inbound for this. 

Also, I’ve had probably the worst six months of my whole time building this company during that time, and my co-founders agree. Even though we’re making lots of money from it, we were really not enjoying that part of it and we were really stressed out that we were going to be able to deliver that at scale. And so we just said, “Screw it.” There’s a larger opportunity upmarket for an enterprise option here on the FinChat platform, not off platform, which is way more scalable and it’s something we actually know we’re good at. So that’s kind of like my thought process around here, but the learnings and decision making at speed, I think, are what has gotten us here and will continue to get us forward in the future.  

Rob Walling:
Yeah, that’s a good way to summarize it is learning and decision making at high velocity, high speed. Einar Vollset and I talk often about what do the TinySeed founders that we talk to have in common, the ones that are really doing well. And there’s a decisiveness, there is doing a lot of things quickly. And usually, for the most part, working on the right things. Maybe it’s not 100%, but maybe it’s 75 or 80. And if you’re doing enough things at high velocity, something’s going to catch. And that is something that you and your team are exceptional at. And I don’t actually know if it’s you or if it’s your team ’cause I don’t see the inner workings of… You have three co-founders, we’re actually going to talk about that in a second. So four of you total. And the thing I’m surprised by, I’ll say this, let’s dive into the four-co-founder thing. 

One of the things we talk about in TinySeed or even just in MicroConf that we see in state of independent SaaS is that I believe the number is 90% of our MicroConf TinySeed crew is one or two-person companies, which makes sense. One or two co-founder companies, I should say. And then it’s another handful… It might even be more than 90. Actually, it might be like 92, and then there’s like 5% that are three co-founders. And then just one or two that are four people. Because usually, if you get four people together, they don’t make decisions quickly. There’s too many cooks in the kitchen, right? And there are other things that are, not a mess, but there are other things that make it an antipattern or an exception to what we see. 

That hasn’t been the case with you, with FinChat, with Stratosphere. Is that there are four of you, but it seems like you function pretty well, at least from the outside. And it seems like you move very quickly, you make decisions fast. And also, you execute very quickly. Right? Talk us through that sentiment of why start it with four? How has it worked out? And would you do that again? Just all your thinking around it.  

Braden Dennis:
Great questions. Well, first of all, my co-founders, there’s four of us, and these guys are my best friends, including my CTO, who we’ve literally been best friends since we were 10 years old. And so we have kind of complete alignment, and when I get everyone on a call this morning for making this hard decision, it’s just like, “Yeah, of course.” Like “Of course.” We’ve been in it, we’ve been involved. There’s no one catching up on the crap that’s been hitting the fan. There’s no one that’s just tuning in for the first time on making a really hard decision. And I think that that’s really important, just constant communication, constant talking. And one thing that we do is we have a monthly set founders call, which is important because it’s four of us. But every few months, sometimes more if it’s called for… I just call the guys together and just get a realignment of what we want in terms of an outcome. For those three different stages of raising money, not raising money, kind of raising money, it’s like, “What do you guys really want?” 

Because if we’re not all aligned on that, then you’re going to run into a lot of problems. Even if it’s just two co-founders, even… Four co-founders, three co-founders, two co-founders, you got to be aligned on what you really want to build in terms of the company size. Do you want 100 employees. Or do you want zero employees? These are really important decisions to think about before you start building. I just think we get along so great. Everyone has their own really unique talents to offer. At the end of the day, as my role as CEO, they’re leaning on me to make the hard decisions. And have built that trust over a long time that they know I’m going to do, at least, what I believe is the right thing.  

Rob Walling:
And what’s the distribution of work? ‘Cause one of your co-founders is a CTO, as you said. So we know he’s writing code and building stuff. And you’re the CEO, so you’re doing, I’m guessing, operations and a lot of the decision making and driving it forward. Sales calls too, it sounds like?  

Braden Dennis:
Lots of that. Too many of that.  

Rob Walling:
Well, can you ever do too many sales calls?  

Braden Dennis:
Check out my calendar and maybe. Yeah.  

Rob Walling:
What do your other two co-founders do?  

Braden Dennis:
So Adrian’s our COO, he’s done a lot of operations. He helped build out that data team. Since he’s an accountant, he was the perfect fit. I’ve been actually moving over a lot of the operations to unlock more of my time to him to move into a more COO type role. And then Kevin is chief product officer. But him and Ryan are basically CTO one and CTO two. That’s how it works. So two developers that are technical and have a deep understanding, but also have a lot of chops for people skills and building teams. They like that stuff and they’re good at it, so it’s helpful.  

Rob Walling:
Braden Dennis, you are BradoCapital, B-R-A-D-O Capital on Twitter. And FinChat.io is what you’re building. Thanks so much for joining me, man. It was a great conversation.  

Braden Dennis:
No, thanks for having me. I’ve been listening to the podcast for… Oh, shoot. I don’t know. Years and years, and I’ve enjoyed it very much. So happy to be here.  

Rob Walling:
Yeah, it’s great to have you on this side of the mic. 

Thanks so much to Braden for showing up this week and giving his time to help educate the mostly bootstrapped founder community. If you haven’t checked out our YouTube channel, it’s youtube.com/microconf. I’m releasing a new video there every week. It is completely custom created, bespoke, as they might say across the pond. And it’s different content. It’s similar to the podcast, but it’s tighter focus, right? It’s 10 or 15 minutes focused on a single topic, and it’s like having a second podcast. That’s youtube.com/microconf if you want to check it out. Thank you for listening. This is Rob Walling, signing off from episode 705.

Rob Walling:
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When you choose to listen to podcasts, I know you have many options, so I appreciate you listening with Startups For The Rest Of Us. I’m Rob Walling, and in this week’s episode, I’m going to answer some listener questions. I’m going to mix it up this week. I’m going to break all the rules, going crazy, running with scissors up in here, and I am going to answer only text questions. 

I have text questions dating back to May of last year, so that is eight or nine months, if I’m doing math correctly on the fly. So, I’m going to dig in to a few of those just to get into the backlog. But I’d imagine that in the next listener question episode, I’ll get back to the old way of doing audio and video questions first. As always, head to startupsfortherestofus.com, click ask a question in the top nav if you want to send a question into the show. 

But before we get into the episode, I want to invite you to MicroConf Early Stage SaaS Sales Strategies. It’s an online event we’re hosting March 12th and 13th of 2024. It runs from 11:00 AM to 1:00 PM Eastern Time on those two days. And there will be sessions all focused on early stage SaaS sales led by Rachel Leow, Craig Hewitt, Daniel Ebert, Sam Howard. I’ll be MCing, and we’re going to cover strategies to boost your close rate, build a sustainable sales process, and figure out how to overcome the challenges of selling as a technical founder. We’ll also have daily Founder mixer sessions where you’ll get to meet other attendees to network and chat about what you’re working on. Tickets are inexpensive and they are available at microconfremote.com. And with that, let’s dive into the episode. 

Let’s dive into my first listener question. This one’s from just a few weeks ago from Lee. Lee says, “Hey, Rob, on a recent episode of Startups For The Rest Of Us, you mentioned that you don’t like when people use Apple or Basecamp as examples for comparing to their startup. Comparison to Apple seems obvious to me. But why Basecamp/37signals? They seem way more of a model for bootstrappers to emulate. Thanks for that question, Lee. So, the reason I don’t like when people use any type of outlier company is usually you are not in their position. The issue with Basecamp is not that they’re not a solid, mostly bootstrap company, they took a small bit of funding in the early days from Jeff Bezos. I’m not sure if you heard that whole story. 

But the problem is that Basecamp or the founders can come out and say anything. And they can say things like, “We don’t market,” or, “We don’t have any type of marketing analytics,” or, “We don’t check opens on our emails.” They could say, I don’t know that they’ve ever said this, “But we don’t do cold outreach. We don’t focus on SEO. We don’t care about marketing. We just built a great product.” And some of those things they’ve said, and some haven’t. I’m not trying to put words in their mouth, but they can say whatever. 

They have built one of the most successful bootstrapped businesses of all time. People estimate it’s doing what? A 100, 200, 300 some hundreds of millions a year in ARR is estimated. Jason Fried on the MicroConf stage said it throws off tens of millions a year in net profit and that was six, seven, eight years ago. And you know it’s probably grown since then. But the problem is they, as Jason Fried said, I said, “What were the keys to success?” He says, “We did some things right, but timing and we got a little lucky. Luck and timing were one and two.” And I think that’s a great and honest assessment of why Basecamp succeeded. 

If you started your SaaS in what ’04, ’05 and you get a little lucky, then you too cannot market and not check email, open and click rates, and not check analytics numbers. I don’t remember all. But it was things like this that I’ve heard them say. And so, then developers who don’t want to market, or who don’t want to focus on email opens and click rates, who don’t want to do blocking and tackling that 95% of the successful businesses I see doing, they use these quotes or that sentiment to justify it because they say, “Well, look, Basecamp’s successful and they didn’t do it.” The problem is you’re not Basecamp. 

It’s the same thing with Apple. Hey, Steve Jobs said X, Y, Z. And it’s like, but you’re not Steve Jobs. Keep in mind when he said that he was worth a $100 million. And he already had a massive company and he was co-founder with the guy who invented certainly the invention of that decade. But you could argue that the invention of one of the top few inventions of the past 50 years, the personal computer. So, that’s why I have an issue with it. But keep in mind I like and respect Jason Fried. And DHH sometimes says things that are pretty inflammatory that I don’t agree with, but they’ve built a hell of a business and I have respect for what they’ve built. 

The issue is they have really strong opinions about things. And I sometimes think that they would’ve been successful either way, whether they had or had not done those things, but most people are not. Most founders, especially those that “just want to build a great product,” need to get out of their own head, they need to get out of their basement, and they need to start talking to customers, asking them what they need, trying to solve a problem, building shipping iteratively. There’s all different ways you can do it. Basecamp never did that. And that’s cool. They truly scratched their own itch. And that was a thing early on where they were saying, “We scratched their own itch so everyone should.” And it’s like that is one good approach. But there are seven different approaches for finding ideas and problems to solve. 

I actually outlined all of these in a recent YouTube video. They’re doing really well on the MicroConf YouTube channel, Microconf.com/youtube if you want to check it out. And I think it’s something like seven ways to find SaaS ideas or proven ways or something. I have written that up as well. It’s going to be a chapter of my book that is the precursor of The SaaS Playbook. So, it’s the earlier stage stuff of finding ideas and validating. But anyways, that’s why I don’t like it when people use Basecamp as an example because usually it’s to justify an opinion or justify an approach to business that I just don’t see working for anyone else. And I want to state like DHH, Jason Fried, they are TinySeed mentors. They invested in one of the TinySeed funds. So, there’s nothing against them or the way they handle things. It’s just I think as someone just getting started, imagining that since they did it worked and it will work for you, I think is a mistake. 

I got a really nice note from a reader of The SaaS Playbook. He says, “Hi, Rob. This is not a question, but I wanted to send you a big thank you for The SaaS Playbook. I just read it in one go and I’m sure I’ll come back to many of the topics when relevant. I absolutely loved the book and how succinctly and to the point it’s written. I’m a B2C founder myself. Most of the insights are still very relevant. Although you’ve convinced me that my next company should probably be B2B. I’m trying to do that one founder at a time.” One B2C founder at a time trying to convert you. So, thank you for that note. 

If you haven’t read The SaaS Playbook, it’s available at Saasplaybook.com. It has actually just crossed 20,000 copies sold, which just feels incredible. And it’s picking up momentum. And probably every day, every other day I’m seeing folks talk about it on Twitter or Reddit and recommending it. And it’s that word of mouth that really drives book sales at this point. So, I appreciate it if you check it out. And if you have already purchased the book, would love it if you’d head to Audible or Amazon, and just give it a five star review or five star rating. You don’t have to type in a review because that also helps people find it. 

My next question is from Anonymous and he says, “Hello, Rob. I admire your work in the small SaaS space. I find myself stuck in a comfortable and happy job and I’m wondering how best to join the scene. I’m living my childhood dream at my day job. It’s a stable job, lucrative and enjoyable. It’s in a hobby I really enjoy. It’s basically the perfect fit. Between ambition, a desire for more money, and an earlier retirement, and seeing the success of some friends and family who were entrepreneurs, I would still love to own something. I could buy something and focus on automating the activities away, but MicroAcquire looks to have turned into a bit of a wasteland of cheap AI flip jobs.” 

Wow, I haven’t been on there in quite a while, so that’s interesting to hear that is as his sentiment. Back to the email, “I could be a consultant to bootstrap businesses, but my day job is more lucrative on an hourly basis and there are zero missed invoices. I have considered booking a ticket to MicroConf. I’m highly confident I can be of value to the community. I am sure I’m not the first person you’ve met who is interested but tempted by comfort aside from just take the leap of faith. Any thoughts from your experience?” A couple thoughts. I think you should come to MicroConf and you should be around founders. 

One of the reasons MicroConf is so different is that the vast majority of people have a real business. It’s not a bunch of wannapreneurs like so many of the SaaS or startup conferences you go to where it’s people walking around looking for permission, asking for funding. MicroConf is real entrepreneurs building real products to sell to real customers for real money. It’s our people. It’s the folks who would listen to Startups For The Rest Of Us, and take that leap and buy a $1,000, $1,200 ticket, and fly somewhere and make a hotel reservation. These are people who are willing to take action and do it. And so, I think if you’re looking for some motivation, being around those types of people for two and a half days, hearing the talks, having the conversations, I think is highly motivating. If that doesn’t get you unstuck, I don’t know what will. I don’t know you and how you work mentally or how you process all this, but I think that would be a big win. 

And there are still some tickets to Atlanta here, and it’s just about two months. That’s at MicroConf.com/us. That event will sell out. So, I wouldn’t wait if you’re going to do it. The other thing is something that I’ve said when I’ve had similar questions like this in the past. I guess from my perspective, it was a burning desire and need, and that got me through the hard times because it’s going to be a lot of work. And it’s going to be a lot of things you don’t want to do in order to get to the place that you want to be. And so, if you’re not highly motivated to do it, I just don’t know why you would stick with it through the ups and the downs, and whether it’s nights and weekends, or watching your savings drain if you quit without a product already in place. 

I’m trying not to view it just through my lens of how I did it, but I’ve talked to maybe a handful of entrepreneurs, half a dozen, 10, 12 about this topic. Asked them, “Do you think you could have made it without a burning desire?” And everyone’s been like, “No, it was too hard. I wanted to give up, but X, Y, Z thing got me to the next stage or kept me pushing on this product, or pivoting, or whatever it is.” For me, it was a desire to quit my day job, to have equity, to see what it was like to be an entrepreneur, and I didn’t like working for other people. And that’s usually the story that I hear about folks who start as bootstrappers. And then at a certain point, the dopamine comes from doing interesting things, creating, shipping things into the world and having an impact. 

And you start to be like, “Oh, well a couple hundred grand a year isn’t as interesting as a million a year. Oh, @2 million a year, $3 million a year.” And you start to get good at it, and then you start to love it and need it. And if you went back to work for someone as just a director of something or other, a manager of something or other where you’re, I’ll just say more of a cog in a wheel. I’m not saying you are now, but if you went back to a job, it would be tremendously unfulfilling like the volume was turned down to two after volume being turned up to eight, nine or 10 for so many years. But I don’t know, there may be entrepreneurs out there who didn’t have that burning desire and just kept going because they just did. I just have a hard time myself with that paradigm. 

So, if you’re listening to this and you’re a successful entrepreneur, and you have bootstrapped a startup or done something super interesting, and you’re in a similar situation where you weren’t super motivated to do it, but you did it because you wanted to and then it worked out, please write in questions at Startupsfortherestofus.com. I’d love to hear about your experience and how you made it through. I would almost think that if there are folks out there, and there probably are that are out there that have this experience, they almost launched a side project that maybe took off and they got a little lucky. And it’s okay to get lucky. I’m not taking anything away from that. I wish I got lucky with more things I did. But that’s okay. So, maybe that’s what you need original poster. I’m keeping this person anonymous. 

But maybe that is what you need, is to launch some things that are fun that if they work out, hey, great. And if they don’t, then you just let them go. Kind of the typical indie hacker project where someone launches it, puts it on product hunt, Hacker News, Reddit. And then if it doesn’t catch, which most don’t, they just abandon it or they autopilot it and add their new things such that they have this portfolio of products each doing $300 a month. So, yeah, I think that’s how I would think about it. And I definitely, if you love your job, I wouldn’t go and try to freelance, or be a consultant, or whatever. I don’t think that’s going to make any happier. I think it’s going to be product income or starting an actual, a startup where you’re selling a product, not just dollar for hours, that would make any kind of difference in your life. 

So, thanks for writing that email. I think it’s an interesting question and one that hopefully I’ve learned some insight onto. But obviously there are folks out there, if you’re out there and you have had success when you were in his situation, I would love to hear from you. My next question is from Pedro about an early access landing page. “Hey, Rob, thanks for the great content. It’s been incredibly helpful for me right now. So, my question is related to early access landing pages and the development timeline. What are the pros and cons for using early access landing pages before any development? So, the page wouldn’t have a ton of content and it’d just have an email capture form. Versus a more dense landing page with screenshots, feature lists, and sometimes even pricing details. In both cases, the customer conversations would be done. There is a problem to be solved, the product is not done yet, and the goal is to get prospects beyond the ones we are talking to during validation. Thanks a lot.” 

This is a good question and I’m not sure there’s a right or wrong way to do this. I’ll tell you the way I’ve always leaned, but it’s just because it’s been the easier way to do it. I have tended to attack something, a problem that is pretty well-defined and that I can just have a catchy headline that says, “I plan to fix this.” I believe the headline when we launched TinySeed, which was just a landing page and email capture was something like, “Startup funding is broken for bootstrappers,” or, “Startup funding is broken. Here’s how I intend to fix that.” And then it was pros, it was 800 words or a thousand words of talking through how venture capital doesn’t support bootstrappers, but some people want to raise a little bit of money, but they don’t want to go on the venture track. And here are thumbnails of Anner and I looking intensely at things. And I realized that’s a different example because it’s not an app, and so I wouldn’t have included screenshots or features, but I did the same thing certainly with my books. 

My books were usually just… Well, my first book was a headline and two sentences, that was the whole thing. And then an email capture. And it was something like finally a book written for people where venture capitalists aren’t putting a bunch of money in your bank account. And I think it didn’t say people, it said startup founders or developer founders, or something like that. Books are also different. But truthfully, The SaaS Playbook, go to Saasplaybook.com right now and look at that. That is essentially what you’re talking about, which is it’s the cover, it’s pictures of me, it’s pictures of the interior, its features and benefits of the book. That is what we did this time. I had more money, I had more budget, and I knew what was going to be in the book. The book was done by then. And so, I did pay a design firm to design that whole website. And then I’ll go back to Drip. And Drip was just a headline, three or four sentences of copy and an email capture widget. And I think that’s what we launched with. 

So, all I’m telling you is that’s what I’ve done and I don’t want to act like that’s right or wrong. I think it’s easier when you’re first getting started, if you are tackling a simple problem like all CRMs suck and here’s why, here’s how ours is different. Or some other simple obvious pain point that’s pretty easy to communicate in a handful of sentences. I don’t know. I like to keep it simple. I like to keep it simple as well because then people might be intrigued by it and then I can talk to them and say, “How do you think I’m going to fix CRMs? What’s broken about your CRM?” If you give them screenshots and show them how you’re doing it, you are putting your opinion on that. At this point, it’s not customer development. So, I think that’s part of the question, it’s like the more vague you are, the more customer development you can do. If you are actually trying to pre-sell a bit more information is probably warranted. 

So, in all honesty, I could go either way. I think the danger of having screenshots and a lot of info is that means you are taking an opinion and is it a hypothesis that you are certain of? Because if you’re not, then I would tend to hold that information back and let people confirm or deny my hypothesis, confirm or deny my opinions before I become that opinionated about them. You don’t want to be certain of stuff that customers aren’t telling you that you’re just making up in your own head. But the more certain I am of it, I probably would start building out a landing page. You’re going to eventually need that full featured SaaS website. I say need. A 100% need it, but it’s a good thing to have. And I think as you’re developing the product and you become more confident in it, fleshing out that landing page to see if it’s resonating with people and to see if you’re marketing it well, I don’t think that’s a bad idea. So, thanks for your question, Pedro. Hope that was helpful. 

My next question is from EJ. EJ writes, “Dear, Rob. Hope this message finds you well. I’ve been following your entrepreneurial journey with great interest and your story about purchasing a Microsoft business has particularly piqued my curiosity.” I think he’s referring to HitTail, although I purchased several small products, but HitTail is the one I tend to talk about the most. And when I acquired it, I believe it was doing about 1,500 MRR and it was completely flat and had been for a long time. And I eventually grew it up to about 30K MRR At its peak. It was a high churn business, so it was in the 25 to 30K for, I don’t know, quite a long time until I wound up selling it. 

Back to his email. “I understand that platforms like MicroAcquire exist to facilitate these acquisitions, yet I find myself grappling with several questions about the entire process. My primary concern lies in assessing the value and potential of a Microsoft business accurately. In a marketplace where information asymmetry is prevalent, how does one ensure that they’re making an informed and fair purchase rather than falling prey to an overpriced or underperforming business? In your experience, what are the key indicators to look out for or the red flags to avoid during the evaluation process?” So, there’s more questions, but I’ll answer that. The answer is you don’t and you just have to get good at trying to identify red flags. In addition, these days, personally, I would buy through a broker, Quiet Light, Effy International, Empire Flippers. They tend to do, I think, a bit more vetting than MicroAcquire. I’m not saying you shouldn’t buy on MicroAcquire, which is now called Acquire.com by the way. This email is that old. It was before the rebrand. But yeah, there’s definitely going to be some risk. 

If there wasn’t risk, then it would be priced accordingly. I was buying stuff and getting a little bit scammed or lied to back in the 2005 to 2012, 2011 maybe. Was that when I made my last acquisition? Something like that. And sometimes I got lied to and sometimes I didn’t, and I just made sure that I paid a low enough purchase price that it really didn’t come back to bite me. And I also did a ton of due diligence and as much investigation of it as possible. Of course, it’s asymmetric information and I think it’s trying to learn the ropes of what do I really need to look for? 

The key indicators to look out for are red flags to avoid, there’s almost too many to list. I mean, I would look for a book, or an ebook, or an entire YouTube channel, or someone who is the Rob Walling of acquiring businesses. Is there a podcast or some resource? Because I could imagine writing an entire book on this process of buying micro businesses through either the brokers I’ve named or Acquire.com, or I used to… What was the other one? Flippa, Flippa.com. I don’t hear about them as much anymore, but that’s the thing. It is getting more experienced at it so you can gut feel. You start to read a business and you do see that, oh, this is why that one’s a piece of crap and hasn’t sold. 

The other thing is you’re talking about assessing the value and the potential of a SaaS business. Usually for me, the potential was how am I going to market this? The potential is that there’s a marketing channel that I see or an avenue I see that the current person is not exploring that I think will work, and that I have some confidence that I can learn, or that I know how to do right. And without the ability to grow it, I never bought a business. I always bought ones that I wanted to either take from flat line to going up or I wanted to accelerate their growth. The next part of his email says, “Furthermore, once the business has been acquired, the transition phase presents a new set of challenges. How does it want to effectively manage and grow a live product, especially when they’re still in the learning curve phase? Are there specific strategies or resources you found particularly helpful? During this stage?” 

No resources, but the strategies are you get in and you spend a ton of time learning the code base, learning what the existing marketing is, learning where the traffic is coming from, who’s converting and why, looking at the funnels, looking at the bottlenecks. I remember having the instrument several products because there was no… There may be was Google Analytics, but nothing else. So, you just had no funnel measurement. And so, I would see people drop off at this one signup forum that was 10 questions long instead of just asking for a username and a password. And I would see that the pricing was way off. 

So, no resources. I don’t know anybody who talks about this. Maybe someone can write in with suggestions. But the strategies are I would get in and learn the business and literally take ownership of it. Imagine coming into a new company and there is either a product or something else that you have to get in and start driving. And you don’t own it. Let’s say you’re the software development manager and you have to learn the code base. How do you dig into that? You start by one bite at a time, eating that elephant. And so, for me, I would tend to identify what are the things that need to be fixed first and then move through that list. And so, with HitTail specifically, it was unstable. It was buggy and the server was crashing. So, I was like A, I need to learn the code base enough to fix the bugs. And that took a lot of time. It did. It took dozens and dozens of hours digging in just to figure out how this thing worked. 

I actually did the same thing in DotNetInvoice. There were math errors in this invoicing software. And it’s kind of like you have one job and you can’t have math errors in your invoices, and yet there were. And so, it was going page by page through it and being able to figure out, fix the bug, ship new versions. And then, let’s see, with HitTail it was getting it on stable servers, so we did a migration. And then I wanted a redesign of the marketing website and of the app, and that took a couple months with a designer, and then I had to retrofit it onto this old code base, and then it was marketing. And that’s when I said, okay, now I’m going to juice up. I didn’t want to juice up SEO and ads, and whatever, content marketing, and integration marketing, and anything else until I felt like the product was stable and the design was amazing. And that one worked out. It’s not to say that that’s the plan for everything. 

DotNetInvoice had some bugs that I had to fix. That was different. That wasn’t SaaS. It was downloadable software that you ran on a web server. The product looked good for the time and it needed some bug fixes and better support, and then it was just marketing. And I was looking at all the avenues that I could to lmarket.net invoice and grew that from, it was doing a few hundred dollars a month, like three, probably two to $400 a month when I acquired it. And it was usually between about three and $5,000 a month by the time I was able to plateau it. I never got a pass there. But that was a great little side income while I was doing consulting and sometimes had a full-time job as well. 

So, yeah, you just have to dig in and do the work, honestly. I don’t know any other way. Maybe someone out there is smarter than I’m, and they can do it without digging in and doing the work, but that’s just what I did every time. But one thing I did like about it is once I spent money on it, my back was to the wall and that was a helpful motivator to me of like, well, I spent the money. Now I need to figure out how to make this work. And that is also why I bought in spaces that I had a little bit of familiarity with. Like HitTail was an SEO keyword tool. I knew SEO. And DotNetInvoice was invoicing software for .net developers. 

You got the source code. And so, if you didn’t, you either cared about privacy or you cared about having the source code. And so, I was able to talk with the developers and people who were buying it. And learn from them, and converse with them, and figure out how to grow the marketing funnel. And then the last question in the email says, “Lastly, I can’t help but consider the intentions of the current business owners. While I understand that there could be numerous legitimate reasons for selling, I also wonder if there might be instances where the business might have undisclosed issues or skeletons in the closet that the seller is keen to avoid. In your experience, how prevalent is a scenario? And what precautions can one take to safeguard against situations? I understand these are complex questions. Any insights you can provide would be immensely valuable.” 

Yeah, I’m sure there are undisclosed issues or skeletons in the closet, especially if you buy on a marketplace. I’m not saying marketplace buying is bad, but it is, I think, more risky than going through a broker. I’m not saying that brokers validate and verify everything, but there is at least some recourse with a third party involved. So, if something was undisclosed, I would at least know that I could go back to someone and this brokerage has a reputation to uphold. And so, even if the seller disappears, I have some recourse. Yeah, the idea here is probably the same answer that I said to the first question, which is you have to know what you’re doing. You have to know what you’re looking for. And that takes time and experience, which is tough because how do you get that time and experience? The time is looking through a lot of deals and learning what makes them good and bad deals. And the experience for me came from buying smaller. 

Well, my advice would be to buy smaller ones today and then you’ll learn what didn’t work and apply that to the next one. I actually started with an $11,000 acquisition, and that was in, I think it was ’06, 05, or ’06 when I made that. That was a lot of money. That was all the money I had in the business bank account. So, I should have done something smaller. I was building things on the side, so I did have some experience. But that’s how you want to do it. You want to take these small steps and really learn from others. And that’s where I think the information put out by these brokers by Empire Flippers, maybe Acquire.com puts out info. I don’t read their stuff. I imagine they have eBooks on the topics. And Quiet Light, and FE International, and anybody else you can get your hands on, information in that space that’s going to help you learn, is something that I would be consuming if I was actively thinking about this. 

 But yeah, it’s risky. There’s always a chance someone’s not going to disclose things and they’re going to screw you. You’ll never get to a 100%. It’s always scary. What I don’t know is do you get to 80% where you’re 80% certain you’ll be fine? 85%? I don’t know what that number is. But the only way that I know to get better at any of these things you’ve asked about is to put in the time and gain some experience. And without that, I think you’ll just be sitting on the sidelines. So, thanks for that question, EJ. I hope it was helpful. 

My last question for today is from Misha and they ask, “What are your thoughts on choosing tech to build a startup in the MicroConf Slack community, which is Microconfconnect.com? I keep seeing the same two to three questions asked in various channels. For example, my database is slow. The usual, very specific responses pile up, but the core of the question ends up being someone who is new to software development and is seeing a symptom. Often the tech stack is Node.js or some Python weirdness, not Django or some .net thing, et cetera. At this point, why are people not just using Rails or Django? Tons of educational material, plethora of people to hire and more being trained in bootcamps. A library for 99.99% of problems, one would face easiest way to deploy and scale, and most importantly, super stable frameworks. Is this just a matter of helping folks understand the technical and business challenges with making the right choice for what they are building?” 

This is a interesting question. I guess it’s like A, you can have database slowdowns with any tech that you use. If you’re scaling, if you have bad code, I wouldn’t always blame that on the technology. I will agree with you though that if I were to build a SaaS app, which I’m never going to do again, very likely be something like Rails or Django, maybe Laravel. These are probably the top three that I see. Node.js is fine, and I know there’s developers out there screaming at the speaker right now. But I really like these super stable server side frameworks. I don’t like JavaScript, NBC frameworks that… Like React and such that have a bunch of spinners. 

I know there’s unit tests and all this, but it seems like a lot of the problems that I hear about with bootstrap founders who hire developers to build things wind up in this front end. Maybe that’s what Misha is saying is, it’s not the technology necessarily, but there are certain technologies that maybe lend themselves to, well, just different types of issues. Whether it’s performance issues, or whether it’s writing spaghetti code, or whether it’s… Since there’s so many bootcamps putting out people who are less experienced, then that means maybe the code quality overall is lower. 

I don’t know what it is, honestly. But I really like HTML rendered to a browser and then some JavaScript sprinkled in. And I know it to say, “Hey, here’s a old man doing the old man thing.” But it’s like, no, there’s just some stability. That’s a personal preference. I think, Misha, your question of why wouldn’t everyone just use one of these two frameworks? It’s like, well, all the frameworks… These two frameworks don’t cover everything. I know they’re stable, but what if I know PHP? What if I’m a .net developer and I want to build something nights and weekends? That’s all I know. I can spend the time to try to learn a new language. I’m not going to be that great at it. Or I can use what I know and I can build quickly. That’s usually I think what’s happening. But that’s also another thing, and it’s non-technical founders starting a SaaS. 

It’s just hard. I’ve talked about this on this show many times where if I was a non-technical founder trying to start a SaaS, I either wouldn’t or I would try to find a co-founder. A technical co-founder who can head up and own the code. When I say wouldn’t, I mean I would go back and try to stair step my way up, certainly not by building SaaS, probably not by building software. Because thinking that you can just hire a developer to write code and build a product, is like thinking, I can hire a carpenter to come build a house. You can, but you also need an architect, and you need a designer, and you need other skill sets. And how do you know the architect is any good? And once the foundation is poured, it gets really hard to come back and undo that work. 

And the analogy is not perfect. I get it. But thinking that any developer can build a SaaS app is incorrect. In fact, the vast majority cannot. And yet, people hire dev shops that just don’t… They don’t build quality code. They cut corners because you are not going to know any different. That’s the problem, is you can’t evaluate whether the developer is good or not, and you can’t evaluate if they’re rushing. Because even good developers can ship crappy code, low quality code if they’re in a big hurry and they’re being pushed to hit deadlines. There’s a reason that the majority of the MicroConf community are technical. It’s not that we don’t want technical people. In fact, we want more non-technical people because, hey, we need more marketers here. How often have I heard of a developer founder who needs more marketers? So, I’d love to have more marketers in the MicroConf community. 

Same thing with TinySeed though. Last time I looked, I think it’s like 10 or maybe 15% of companies we funded with TinySeed don’t have at least one technical co-founder. It’s a super minority. And there’s a reason for that because getting to the point to where a TinySeed would fund you, it’s obviously not easy. And doing that without a developer who is heading up that side of the business makes it even harder. And in fact, probably the number one issue that tends to face companies that we funded who don’t have a developer co-founder, is they are perpetually dealing on and off, but perpetually dealing with the headaches of that with, “I had a lead dev and then they left, and now I have to replace them.” And it’s like, that’s not the best. It’s a tough situation to be in. And those folks are bearing the burden of having to be the ultimate where the buck stops for a code base, but they’re not a developer. 

Your tech lead leaves and now you have two juniors in a mid-level. And you now have to go find that next tech lead, but you don’t know if they’re any good. It’s an uphill battle. And as appealing as SaaS is, and the fact that it is the best business model on the planet, I believe it is just really difficult. And this is why I talk about doing the stair step method of entrepreneurship, not to go straight to SaaS. And this is why if I was a non-technical founder… I mean these days, I wouldn’t be writing the code. If I were to start a SaaS app, I would try to find the best SaaS developer I knew, whether they lived in my town or not, or I just knew them through MicroConf. And I would work my network. And maybe I would hire them, maybe they’d be a, they wouldn’t. That’s irrelevant. 

Probably if I wanted to keep them around for a long time, then they would get equity, because I would want us to have that shared motivation, because it’s hard in the early days. But I wouldn’t go hire a freelancer, or a contractor, or an agency, or I’ll say just a… Random is not the right word, but you get the picture of AW2 employee who can leave any time and leave this code base. It’s like leaving an open heart surgery patient in the middle of surgery. And SaaS apps unfortunately, you’re always performing open heart surgery on a living patient. And that’s one of the reasons why this is so challenging. So, Misha, I’m not sure I have the best answer of why everyone doesn’t just use Rails or Django, but I sure appreciate your question. And I do agree with you that I think there are some tech stacks that are better designed or better suited for building SaaS applications. So, thanks for writing in. And that wraps another episode of Startups For The Rest Of Us. Thanks for joining me today and every week. This is Rob Walling signing off from episode 704.