Episode 390 | SaaS Pricing, Sponsoring Events, Subscription Boxes and More Listener Questions

Rob: In this episode of Startups for the Rest of Us, Mike and I talk about SaaS pricing, sponsoring events as a SaaS marketing strategy, subscription box approaches, and even revisit GDPR once again, and we answer more listener questions. This is Startups for the Rest of Us Episode 390.

Welcome to Startups for the Rest of Us–the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it, or even your second, or third. I’m Rob.

Mike: And I’m Mike.

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

Mike: I’ve spent a lot of time this past week cleaning up my email list, setting up some marketing automations, and working on my website. With the email list, there was a time frame of about six-seven months where I didn’t have I any sort of captcha in place and the form for adding your email address onto the list was embedded directly into the website. Because of that, because it wasn’t being loaded through JavaScript, there were a lot of bots that came through and just randomly entered in email addresses and I did not have double opt-ins enabled for this short-time period. I could very clearly see it in Drip like there were stuff that just should not have been in there.

Rob: Yup, totally. That’s a good way to do it. Like you said if it had been a Drip JavaScript widget, I think it’s just one checkbox in Drip where you can add captcha to it, you add re-captcha, but obviously if it’s embedded form, that’s not so easy. Cool, nice work there. I meant to ask you at the top of the episode through the magic of time travel, MicroConf is happening right now as this episode goes live. It’s Tuesday morning. What do you think you’re doing? Are you hungover or regretting that you stayed up so late?

Mike: No, I doubt it. I learned that back in 2011 not to do that.

Rob: You’re pacing yourself these days especially because it’s four days for us now which is definitely a bigger deal because we have obviously growth for two days and starter.

Mike: Definitely. I head out on Friday so I’m there from Friday to Friday. It’s not just four days, it’s seven days.

Rob: Dude, that is a long time to be in Vegas.

Mike: I know.

Rob: Drink a lot of water, go to bed early, use chapstick. All the things we said last week on the episode, you’re going to really want to double down on those.

Mike: Yeah, last week’s episode was sort of a reminder for me like, “Hey, these are all the things to make sure you remember to do it just so you can fix yourself.”

Rob: Yup. I’m in Vegas one day less than you are and I will be thanking my lucky stars. After about three or four days in Vegas, man, I’m done.

Mike: Yeah. I considered staying until Saturday but I decided against it.

Rob: That would be a tough call. My grandma used to live in Vegas and so we would visit her couple of times a year. I’ve been to Vegas 30, 40 times. I live in California so it’s a super quick hop from Oakland Airport. Yeah, they would always be 2-3 day trip and it was a perfect amount of time, it was like, “Oh yeah, that’s what this place is like—” Then by the time you’re three days in you’re like, “Oh yeah, that’s what this place is like.”

For me, I just came back from a two night, almost three day retreat, it’s the longest retreat I’ve taken in quite some time. I was trying to think, because I took like a one day last year and then in 2016 I took three days and got away but I got strepthrough so it wasn’t exactly a restful retreat, it’s more like recovery. But I really enjoyed it. I drove 2 ½ hours North up to Duluth, Minnesota which is right on the southern tip of Lake Superior. Lake Superior is so big you can’t see the other side. Aside from there being no waves, it kind of feels a little bit like the ocean because there’s no beaches as well, no planes flying over with the little banner saying rent the surfboards and stuff.

But I thought about a lot of different things, probably stuff that I’ll talk about in the coming weeks and months on the podcast. But a good reminder, if you haven’t taken your retreat for 2018, check out The Zen Founder Guide to Founders Retreat, go to zenfounder.com, and Sherry wrote like a 30-page guide that I use religiously, has all the questions, and all the things you should be thinking about if you go on a founder retreat.

Mike: Awesome. What’s the word for this week?

Rob: We’re answering some more listener questions, they keep trickling in at an even pace which is really nice, allows us to do these Q&A episodes pretty frequently. The subject line of this email is, “Loved episode 384, GDPR. I’m Chris Duke. I’ve been listening for a while in my walks through town. This is the first time I probably laughed and shouted out loud. I try not to use the word stupid very much but it is hard these days and GDPR is one of those things that brings it to mind. Not the basic idea, it’s good to make those of us in technology business think about protecting data but the people who think of things like GDPR completely clueless and I have no business coming up with the regulation on something they don’t understand.

I keep thinking about one example, MailChimp. If I tell them to forget me, does that mean they have to forever take my email off of every list? What if removing my data from an application breaks something in the app or someone else that I willingly given permission, has used my email, it’s called referential integrity. Thanks for talking about this, guys. We’ve already written a sequel script to delete data in my SaaS app, we used it as part of our development and testing. That and some clarity on our terms is about it for me. Keep up the great work.” I know the answer to this one, do you know?

Mike: Didn’t we talk about it last week or the week before where the forget me is on a per-provider basis? Let’s say you and somebody else are my customer and people have data for both of them. If they tell you to delete it, the other person does not have to. The person has to go to each of the individuals and it has to do with who’s the data provider and who’s the data processor.

Rob: In the case of MailChimp, If you emailed MailChimp and said, “My email is on a bunch of your customer’s email lists, forget me,” MailChimp would say, “You have to contact the MailChimp customers.” We can’t delete it out of their account or we’re not required to, I guess. Now if you went to meet MailChimp and said, “Remove me from your list and forget me,” obviously they could do that from their own list that they own, but that’s exactly right.

Mike: I still don’t think that it answers the question of how do you remember that you deleted somebody.

Rob: That’s right. Yeah, if they sign up again, I don’t think you’re supposed to block or I don’t think you’re required to block them. Because like you said, you have to keep their email if you are not going to allow them to sign up again.

Mike: The other thing I’ve wondered about is if you could just anonymize their data so it’s no longer personally identifiable and you just overwrite the IP addresses with all zeros or all ones or something like that.

Rob: I think that’s a realistic approach the people should evaluate because in complex systems, you don’t delete stuff. As a rule, you don’t delete rows from database tables especially as you get larger and more complicated. As a listener out there, if you’re thinking about this, just changing their email to something@example.com to gooit@example.com, like you said overwriting their IP with blank stuff and having some probably on a flag or whatever that this is anonymized but I do think that’s an interesting approach.

Mike: No, I don’t even think it says that it’s just an interesting approach, like in certain business situations you almost have to do that because it’s not even just about deleting the data, it’s about knowing historically how different things that you’ve done turned out. Like if you go in and you have to delete a bunch of data for all these people that came in and visit your website for example on a certain month, it skews all of your reporting for all those months so you can’t really see how things went or what happens during that time. All of your decision making moving forward is completely screwed up, you can’t delete it, you have to just anonymize it and be done with it.

Rob: Cool. Thanks for the question, Chris. I hope that was helpful. Our next question is from Kenneth. He says, “Hey guys, as always, love your podcast, been a fan for a few years since I read Rob’s book, Start Small, Stay Small in 2011. Rob’s book was a huge inspiration for me. However, I realized it’s been almost a decade or about eight years to be exact since he wrote it. Obviously many things have changed since then in the internet, it’s totally a different world today.

My question, if Rob were to update or rewrite the book in 2018, what would he change? Would he remove chapters, focus more on certain points include new topics, etc.? That’s about it. Thanks for all the resources, podcast stories, etc., that you guys have openly shared. Been a constant inspiration for me and hopefully one day I’ll be able to share my own story on how much you guys have impacted my life. Best regards, Ken.”

Mike: I think I know the answer to this, you’d rename it to Start Small and Get Big.

Rob: I don’t think I would.

Mike: No?

Rob: No. Because that’s the thing. Obviously that’s what I wound up doing when I was starting small and then going into something much bigger than I had originally intended. But I still think there is a really good case to be made for doing this kind of micro SaaS or micropreneur approach where you just have a lifestyle business and you never need to worry about all the headaches that I dealt with starting in 2013 of growing this company larger. It obviously came with rewards as well but I also think it’s a totally viable approach to start small and stay small. I wouldn’t presume just because I did something that everyone should. You know what I’m saying? I think it’s totally legit that startup business make low six figures and if you’re happy with that, man, that’s a great life.

Mike: I was just pointing out that it should have been renamed to Start Small and Get Big just because on your website where’d you go to sign up for your newsletter, it says exactly that. And then there’s also that in the Drip widget where you can sign up for the newsletter.

Rob: Yeah. Which I did that once Drip started getting big. I realized I’m not just talking about staying small anymore, isn’t even that appropriate. I need to rename that headline anyway. I’ve kind of neglected that unfortunately. That’s on my personal website at robwalling.com.

This question is interesting. I’ve thought about it a bit over the years. To be honest, I had not opened my book, I mean it’s been five years since I went back and looked at it all, maybe more. This forced me to go back and take a copy and flip through it. What I’ve realized is that so many of the concepts are still 100% valid today, it’s some of the tactics that are not. I go really deep. I thought it was like half the book where I deep-dive and then like break out, I forget micro-niche finder, or market samurai, and I click this button, and I have screenshot, almost like it’s some web tutorial but it’s only 5 or 10 pages of the book is that and that’s the part that I would remove because that part changed so fast. It was like probably less than 18 months after it’s published, a bunch of those links and screenshots were just invalidated. Realizing that it’s a book and it’s not a living, breathing online course that I can edit easily, that is part of it that I would pull out.

I would still talk about niching down, I have a lot of concepts in there to still hold but I would remove some of the tactics that—and again it wouldn’t be a huge chunk of them, it would be a small part of the book—but there’s tons of stuff about outsourcing and hiring VAs, the mindset, and product last, market first. All that stuff I still hold true.

I was trying to think of anything else that I would add today, certainly there are marketing channels I didn’t even cover like Facebook ads that are probably mentioned. I would double down. I had a whole section of building your email list, I would probably expand that given how much more powerful I believe email is today and how much more I know about it.

I wrote the book in 2010 in essence, you can say I’ve learned quite a bit about it in eight years so there are parts that I would expand. I have butted this around obviously for years and I get talked about every since I started going even slightly how the data I was going to do an updated version or second edition, I toyed around, I talked to a couple of publishers, talked about doing a little more of a mainstream release. It’s still in the back of my mind somewhere to go back and revise it.

Flipping through the book made me realize I always thought that’s going to be too much effort, it’s going to take a tremendous amount of time, might as well write a new book, but that’s not the case. It wouldn’t be near the effort of writing a new book. As I flipped through it I was like, “Oh, this stuff’s still really good content that’s applicable.”

What do you think? You think I should go back and redo it?

Mike: I think that there’s definitely room for a second edition. It really depends on whether or not you want to go through and have a second edition versus writing a new book. Obviously if you write a new book, it’s going to be a different topic of some kind. But whereas if you’re simply revising the current book, it’s obviously a lot less work and you could probably bang that out in like a couple of weeks. It’s not like it’s that much effort, I don’t think, because really you’re just cutting out a bunch of pages where it’s hyper-specific, and the tools themselves or the URLs have changed, or maybe you replace the tools or you drop the pages entirely, and there is probably a few things that you left out that you want to add, maybe stories that you’ve shared over the years that resonated that with people that never just made it into the book or better examples you have of different things. I think that with the book itself you’re mostly concentrated on your own experiences. I doubt you’d go into sharing things that you’ve heard from other people but like specific examples from other people but I don’t know. It’s a toss up, I guess.

Rob: I think that’s a good point. As you were talking, I realized that was the one other thing that I felt was a bit dated with the examples I used. I used a lot of my own examples because there was really no one else that I knew. It was like Patrick McKenzie, Ruben from Bidsketch, Harry and Ted from Moraware. Then I used a bunch of the sites that I owned in Basecamp. It’s like there just wasn’t that much going on in 2010 when I was reading this in terms of the bootstrapping and the Micro-SaaS in the micropreneur space. Now I have dozens if not hundreds of examples. That’s where I could really beef it up.

I don’t know if I would go so far as to interview people or you and I just know the stories of so many people who have taken this approach, whether they’re Founder Cafe lifetime members, or they’ve come to MicroConf, or they listen to the podcast, or they’ve read one of our books, we just have that knowledge so much more. There’s so much more of a community than there is today. Now I’m kind of fired up about it as you’re talking about it.

It would be almost fun to go back and see, because you’re right if I write another book, it can’t be on that same topic and I wouldn’t even have the interest to really focus on that exact same topic today. But rewriting it and just making it better is actually something that I think would be interesting. Thanks for the question, Ken. I’ll definitely keep noodling on it and see if it leads anywhere.

Our next question is a question about SaaS pricing. It’s from François at cloudforecaste.io. He sent us a couple of questions I think. He says, “I’m reaching out to you again because we’re trying to figure out our pricing model for a new feature. Here’s my question, cloudforecaste.io is currently helping our clients monitor their AWS cost and we are now working on a new feature to help them save money.

The new feature will tell them how they can easily save money by fixing naive mistakes, unused resources, reserved instances, etc. on a weekly basis. We have a hard time figuring out the pricing since the first email is much more valuable because there’s a lot of potential optimization then the email in the third month, or the fourth month, or whenever. The first one’s going to have a lot of value.

The value also depend on the size of their AWS account. Here are a few ideas we have in mind, first one is a percentage based monthly price based on their overall spend. Second one is a flat-monthly price based on their overall spend. Third one is an expensive first email followed by a low flat-monthly price. The fourth one is remove the weekly cadence offered as a stand-alone product, and charge a percentage of what they can potentially save. Looking forward to hearing your thoughts on this. Thanks for the podcast.” What do you think, sir?

Mike: I think this is a really interesting question just because there are situations where people can really undervalue what a piece of software can provide for them. I can definitely see, there is an analogy for this situation which I saw, I think it was an online tool where you could go and somebody would basically build an example of how to use as your services or something like that and they were letting you put in your email address and find out if it had been hacked across hundreds of millions of records. It was coming back too quickly. People did not believe the results that they were getting because it came back so fast. They ended up inserting some artificial delays into it to make it appear like it was doing more work than it actually was.

I’ve heard similar examples in other places as well from different people doing different things and this seems to me like that’s one of those situations where people may look at that and say, “Oh, your software is doing this but I don’t value it as much even though I’m on paper saving a heck of a lot of money.” I wonder if the solution to this would not be to price it like as a stand-alone thing but to price it as, “Hey, here’s a service that we offer and it’s X thousand dollars or a percentage of whatever the monthly prices that’s saved,” and you offered it as such as a service, not as something you can just go in and automatically get this report that shows you all this information. That way gives the impression that you’re doing all this extra work and analysis.

The reality is most of it’s automatically generated but it’s based on all the work that you have done already. Then the ongoing monthly reports could be some flat-monthly price that is related to their overall spend to kind of help them save money. Because that first email, I totally agree that if you’re saving them a heck a lot of money up front, then trying to go down the path of having a SaaS pricing model that is variable in some way that reflects the value that you’re providing to them is really not going to work very well. I think that positioning it as a service as opposed to like, “Hey, here’s this off-the-shelf thing that you can buy that the software will do everything for you, that’s probably the approach I’d at least look at and test it out with a few people first.

Rob: You’re saying like present it as, “Hey, we do this manually type thing,” maybe not coming out and saying that but like, “This is a valuable service the we offer,” and don’t imply that software is doing all of it.

Mike: No. I wouldn’t say that, I would say that it is not something that you can go in, you can just click a few buttons, and automatically get the report. You have to talk to somebody in order to get it.

Rob: I see. Yeah.

Mike: Yeah. That way you can look at that and you could almost give them a ballpark estimate or price based on what you’re seeing from the stats and say, “Hey, this is the price that we have for this and we think that you’re going to save probably in this neighborhood.” You could give them a range like they’re going to save $10,000-$20,000 a month. You can tell them that and you say, “This is going to be $5,000 and just ballpark looking at what you’ve got, this is what we think you will save.” Then when you give them the actual report, it will show them exactly the steps they need to do that will both give them $17,000 a month in savings.

Rob: Yeah, that makes sense. I think that’s a pretty good approach, actually. I’m kind of torn on a couple things, I think the percentage based on how much they spend, it’s very logical, I’m curious to see what customers think of that. I guess it all depends on what the percentage is. I guess it makes a lot of sense, you can tell I’m torn on it. I like that you have better flat pricing but I actually do think the percentage could make a lot of sense because when we were tiny, and bootstrapped, and AWS bill was $5000 a month and if you said it was 1%—that’s $50 a month—that would probably have been a no brainer for me. Then of course once you’re doing $30 or $40 a month it is worth more, and at $300, $400 a month kind of feels equivalent. That’s probably what I would lean towards as this percentage.

I think trying to make the first email more expensive, I think it’s kind of a tough call. I don’t think I would go that way. But I would consider making this kind of an annual only thing that you give, they can get a sample email or they can get the first 20% of what the email looks like. You give them some information to prove that it does something.

Then like you said, they have to talk to someone in order to get this and it’s relatively high-priced and you do annual. The challenge with annual is their spending’s going to go up and down over the years, so how do you build a whole year when metered in a sense, with that you can either do it on a credit-based system or you can bill them where they are today and then bill them just the incremental each month, if they’re up or down you can keep it there.

I think this is an interesting thing with their two data the points in essence and I think talking to either existing customers or prospects is going to be your next step to basically say, “We’re going to do it based on a percentage and it’s going to be quarterly only or it’s going to be annual only. Do you want to sign up?” That, you are going to see if the rubber meets the road at that point.

Our next question is about sponsoring events as a SaaS marketing strategy. This is from Ed Freyfogle who is a speaker at this year’s MicroConf Europe. He says, “Given that you’ve run many events, I’m wondering what you think of sponsoring events as a marketing strategy? Particularly, I’d love to hear any tangible tips or best practices you’ve seen from sponsors as a way to make the most out of an event in terms of general brand building, but also specifically winning new customers.” What do you think, Mike?

Mike: Obviously, I run the sponsorship side of MicroConf so I have a lot of thoughts on this and I’ll try to keep them briefer than I would if we were doing an entire episode on it. When you’re looking to sponsor events, the thing I would keep in mind is that before you even try to figure out which events you’re going to be sponsoring, figure out what your goal is.

If your goal is to build brand awareness, then make sure that you know that in advance. You don’t try to do things that go outside of building brand awareness. That would include going to events or conferences where it’s not the right audience for building brands, like if you’re selling a marketing tool, going to a developer’s conference, obviously like there’s probably a little bit of crossover if you’re going for entrepreneurs but you don’t want to just build brand awareness with developers if they’re not the ones making the decisions. Because if you’re trying to get customers, you want to be able to get in touch with the decision makers, not the people who are at the other end of it, like the bottom layer of the organization.

The other thing I think to keep in mind is that when you are talking to people at a conference or an event, how close are you to the decision maker? How many hops are you going to have to make between the person that you talk to and the rest of the team or the people who actually make the decision? Because you may be able to run into the people who would use your products but they don’t necessarily care.

For example if you sell transactional email service of some kind and you go to a developer’s conference, those developers may not actually care about deliverability rates. The marketers would, but they’re not the ones that you are talking to. You’re going to have to convince the developer to give you an introduction to the marketer or whoever the VP of sales is that is going to say, “Hey, this deliverability is important to me and we should possibly switch providers in order to get better deliverability.” Those are the types of things that I would think of to start off with, and then beyond that, you want to stand out from the other sponsors.

If you have an opportunity to customize whatever it is that you are doing, whether it’s a specific giveaway to the audience or you are trying to drive traffic or drive conversations with people, figure out ways to do that so you might do like up Q&A session that is informal either during lunch, or after the conference, or during one evening event, something along those lines. If you do give away, you can provide people with that giveaway as a link and then you capture their email address.

The other thing is make sure that when you attend these events, if you try to sponsor an event from afar, it’s probably not going to get nearly the level of engagement or awareness that you’re looking for so make sure that you have business cards to hand out and make sure that you collect business cards or contact information from people while you’re there. Then once you’ve done that, absolutely make sure that you follow up with those people to take it to whatever the next logical step happens to be, whether it’s to having other conversation, or to get on a demo, or to just discuss what sorts of things you’re doing.

The last piece of advice I’d say is to make sure that if you can lead things in that direction to get to a promise of a future conversation and not suck up somebody’s time at the conference, that’s also not a bad thing.

Rob: Awesome, yeah. I’m actually going to leave it there because I feel like you have so much more experience dealing with this topic. I think that was a pretty good little primer there. We’ll probably do a whole episode on that, huh?

Mike: Probably.

Rob: Our next question is a subscription box company asking about technical issues and funding. It’s from Tyler Turk at cratedwithlove.com. He says, “I’m a Fresno-based startup and I have a question for you. I own a subscription box company. I found the company with my wife while attending Fresno State in 2015. In our first three years we’ve accumulated over $500,000 in revenue. I’ve been pretty much on my own from a business perspective doing all the ideation, curation, and even packing and shipping. My wife helps occasionally.”

They’re a monthly box subscription company obviously and it looks like they’re kind of date night boxes. You would buy it and then there’s activities and stuff for you to do with your significant other. Our biggest weakness right now is our technology and product market fit. We have a large amount of subscribers that have been with us for two years or more and the average active subscriber stays about eight months. But our churn is higher than we’d like. I know where the holes are in our website but I lack the technical skills to fix them.

In addition, I think the future of our company is more digital but I’m having a hard time figuring out how I pitch the future technology based on the data from the physical products we sell now, especially since the biggest needs are technical. I feel like I’m in a vicious circle where I won’t be able to raise money I need to scale until I fix our churn problem, but I can’t fix our churn problem until I get funds to fix the technical problems. I have two questions, is a startup from a smaller market with no relative experience in fundraising or network in larger markets, where should I start? Second, how do I transition from a product-based company to a tech company or a hybrid of both using the data I have now to support our pitch?” Do you have thoughts on either of those?

Mike: With these two questions, just before I answer them, I do want to kind of at least comment on one thing. Tyler said that he has a large number of subscribers that have been there for two or more years and the average subscribers stays about eight months but the churn is higher than they’d like.

I’m not sure exactly what the problem is on the website that would have any bearing on that. I’ll say an open question that I might have on that. If you’re sending those emails to them and they are making purchases and sticking around for a while, what is it about the website that would make them go away? Are things fundamentally broken which are causing people to drop through the cracks or is there something wrong with your email provider? I’m just kind of curious about what that is.

But neglecting that, going back to the two questions, the first one which was as someone who have no experience with fundraising or network some larger markets, how should I start? Coincidentally, one of our sponsors from MicroConf this year is called Bigfoot Capital. They provide funding for subscription-based businesses. I think that they’re focused mainly on SaaS businesses but this is a subscription business so it might fall under their wheelhouse, you can go check them out at bigfootcap.com.

Basically what they do is they look at your financials and they have a wide variety of people that they have provided funding to and they give you a loan. That loan is whatever percentage but it’s going to be based on the risk that they see, and you’re probably going to have a much better chance or opportunity of getting a loan to address some of the technical challenges that you have from somebody like that than you would from a traditional bank who has absolutely no understanding of online businesses. They just don’t get it.

He asks with $500,000 revenue over 3 years, they may be able to do something but my guess is that they just do not understand. I would look for some sort of private funding like that. I don’t know about fundraising—Rob, you could probably speak to them.

The second question he has is, “How do I transition from a product-based company to a tech company or a hybrid of both using the data I have now to support our pitch?” I think we’re going to have to make some assumptions here because I don’t really understand what you are specifically intending by that. But my assumption is that what you’re trying to do is take your current offerings that you probably sent to people physically through the mail, whether it’s worksheets, or PDFs that you deliver digitally, basically make them into online worksheets that you can fill out on the website and share them, or through your app, or something along those lines.

With that in mind, I think that you need to test some of these things out and get information from the subscribers that you currently have now. Can you get hard data that really says, “Hey, this is why I left, and it has to do with like the convenience factor.” Because I think that if you try to look at this as a way to simply cut costs, like if you’re suffering from a problem were your cost of goods sold is too high and you’re trying to cut into that, I don’t know if going down the road of automated things and putting all this technical stuff in place is going to really change that because developers are going to be expensive to build all custom stuff for that. I think that you’re really just going to end up burning a hole in your pocket to try and build that stuff.

In the meantime you’re still paying those current costs for the goods that you’re selling. Later on, you’re still going to need to have ongoing updates, and maintenance, and things like that. There’s always going to be a subset of people who do not want to switch from the physical stuff that they are already getting, so then you have to make some decisions about do you cut those people off and abandon them, or do you try to move them over and say, “Look, if you don’t move, we really can’t do anything for you,” or you just force them. Those are the things that I would have to say about that. Rob, what are your thoughts on this?

Rob: Yeah. I would definitely agree on the second part about trying to move into software I think is a great long term play but I would not do that without funding if you’re not technical because it’s just going to be really expensive and you’re going to get more bang for your buck if you take whatever earnings you have and put them essentially back into the business.

I do agree that this is the kind of business where funding is actually kind of meted like physical goods are just really time consuming and really expensive. At a certain point you’re going to need a small warehouse, you’re going to need to pay rent, and the margin on physical goods obviously is nothing like software. This is one of those cases where I think, especially since you have some traction—because if you look at an 8 month lifetime is 12%, 12.5% churn and that’s not terrible. You want to improve upon that, obviously, and it sounds like you have some ideas on how to do it but there are companies raising funding that are pre-revenue in let’s say the $1-$3 million dollar range. If there’s like a proven founder, they can raise $4 million or $5 million pre-revenue. If they’re in Y Combinator, they can raise $10 million or whatever.

The fact that you have revenue, and you have some type of numbers, and you have a business model, and you’ve shown the hustle over three years, it’s a big plus. For angel investors, I’m not saying it’s going to be a slam dunk, it would be great if you had a network but if you raise $250,000, I would say you’re not raising enough. I think you probably need to raise half a million. I mean you really need to look at what you want to do with the money. If you want to do a series A later, then you have to think, “I want this money to last about 12 to 18 months.” If you never want to raise a series A and you want this to get you growth and then take you to the profitability, that I think somewhere between $250,000 and $500,000 is a decent number.

In a couple of ways, I would get on AngelList, angel.co, I would try to connect with either local investors because there is money to be had, I know it’s crazy but there’s money, to be had in the Central Valley of California. It’s lot of farmland but there are a lot of people who’ve made money and want to invest especially in local startups.

Since I happen to have the hometown advantage of having lived there, industries downtown, that’s the tech hub for really Fresno and the Central Valley, that’s why I would somehow get on their radar, they have pitch competitions every once in awhile, I attended one when I still lived there and there were three or four startups that pitched. With your story, I really do think that you could hustle and raise the money. You’ve already shown that you have the hustle to see this business through for three years on your own and sort of me raising funding is not actually going to be that difficult for someone with the focus and the kind of the grip that you’ve shown already.

That really would be my next move if I were on your shoes is to go out and again I would raise an angel round. I would probably stay away from institutional money where it’s someone investing in someone else’s money because they want quite a bit of control and there’s complications with that but it certainly is interesting and a vortuitous place to find yourself in.

Really nice work on this, man. You’ve done something that not many people can do, A, getting in business to last for three years and essentially I guess break even or be profitable, and B, to do it with physical products. Good for you. Thanks for the question, Tyler. I wish you the best of luck moving forward.

Mike: Are we all set for today?

Rob: We are, that will do it.

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