Episode 447 | Platform Risk, Pricing, and Customer Development

Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about pricing, talk about doing customer development in a crowded space, and about how much testing is too much testing. This is Startups For The Rest Of Us episode 447.

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

Mike: And I’m Mike.

Rob: And we’re here to share our experiences to help you avoid the same mistakes that we’ve made. To where this week, man?

Mike: Remember how there was a couple weeks ago where I mentioned there was this ongoing Google app authentication approval process I was going through.

Rob: Yes. Seems like that’s been going on for quite some time.

Mike: Yeah. Like I said, they had announced it back I think in October or November. But they didn’t really give any details on it other than what was published on their website and they’re slowly adding to it and then earlier this year, they started ramping up requests for information, and all these additional things. I got an email the other day saying that they’re basically going to start yanking access. I’ve actually been going back and forth with a couple of people inside of Google who reached out.

I just want to say thanks to those listeners who do work in Google and been listening, but they forwarded it over a couple of my emails, and started pushing through some things. Hopefully, things are moving a little bit faster, but I did just get an email this morning saying, “Now, you have to go through this security review.” I’m trying to figure out or find out more information about exactly what that looks like and whether it’s absolutely required. It’s just been a red date nightmare is what it really comes down to.

Rob: Yeah. I have questions for you about this. It sounds like this could be an existential threat to Bluetick, is that right? Could it basically put you out of business overnight?

Mike: Yeah. It absolutely could.

Rob: And does that scare you?

Mike: Yeah, it does. The whole reason I chose IMAP was because I didn’t want to be beholden to the Gmail API and I didn’t want to have to deal with anything that they could come in and say, “Either change” or maybe they say, “Oh, we’re not going to offer this anymore.” I didn’t want to deal with latencies and things like that associated with it because I knew people were running the problems with that kind of stuff.

Fast forward a bit, and they decide change policy and suddenly, policy says you have to go through all these red tape in order to verify your app. Now, because of what I’m doing, I have to go through security review and it’s a third party security review. The cost for that is pushed on to me and they don’t even give you an actual price for it. It’s like, I have to pay for it and it’s anywhere from $15,000-$75,000 on an annual basis.

Rob: And you totally have that in the couch cushions, right?

Mike: Yeah. Get the money from the tooth fairy or something. I don’t know.

Rob: It’s an existential threat and you genuinely don’t know what’s going to happen. They can literally yank access in two days and just say, “You didn’t comply,” or whatever. Is that accurate?

Mike: I wouldn’t think that it’s two days. I suppose it could, but I could take an email like a couple of weeks ago saying that they were going to extend the timeline to I think, June 15. I don’t know whether the security assessment needs to be done by the 15th or there is something else in there that said, “If you’ve had it done before January 19th then you have to have it done by the December 15th or 19th,” or something like that. I don’t know whether there’s this six months’ time frame. If it’s been done in the past six months, you’re fine, but before that you have to have a new one done. I don’t really know. They’re not forthcoming with direct information when you ask them questions and it’s just slow responses.

Rob: Is this anywhere? Have you gone online to forums? Other people have to be experiencing this, right? Have you gone into forums and looked? Does anyone have clarity in this? Or who do we know that has an app like Superhuman, as an example—now, we don’t know the founders of that—but who has an app like that that also relies on Google or Gmail specifically, that you can connect with, and ask if they have any clarity on it because this does feel like something where it needs more than one person because it sounds like you are not getting answers. If we cobble together, three or four founders who’ve had experience with this, then maybe you can get some clarity.

Mike: Yeah, I don’t know. I can certainly go looking for those. I’ve been following there’s a—it’s not a blog—I guess it’s a set of blog posts from a couple of different people. Contacts.io was one that I was looking at. They have this blog article that they talked about where they’re basically shutting down the whole thing because they can’t meet the requirements. They’re like, “Yeah. We’re just done.”

Then there’s another one I’ve been following, I forgot the name of it, I’ve got it bookmarked, but they’ve been documenting the whole process of what they’ve asked, what they’ve gone through, what the responses where, what they said, and they got all the way to the point where they have to have a security assessment done, and they said out of respect for that company, they’re not posting how much it cost. But I was going to drop them an email today—and that’s a recent post that they put out there—I’m going to drop an email, and be like, “Hey, look. What does this actually involve? What does this look like because I’m not getting any answers I need either.” Since they’ve already gone through it, I’d love to hear more.

But things have been really rushed over the past two weeks because that’s when they started sending out those emails saying, “Hey, here are the days where we’re going to start notifying people who own these domains that you’re no longer going to be allowed to access the API.” Or, “Your app is no longer trusted or hasn’t been verified yet.” Over the course of the next four weeks or so, three to four weeks, they say that they’re going to yank everything if you don’t meet the requirements. But I just got an email this morning saying, “Hey, you’ve gone through this final verification.” I checked my database log, and it’s like, “Yeah, they actually logged in, they did add a mailbox.” Apparently, I’m past that point, but I still need to have this security assessment done.

I wrote a long email that I guess they’re forwarding around internally that basically, laid out all these things. It’s like, “I probably know more about security and compliance than most of the people you have working on this, and definitely more than the average developer, and not to sound arrogant about that but I actually do.” I pointed to different places where, “I’ve been the author of one of the centers for internet security benchmarks. These are independent publications where you can see my name is on them.” I offered them. “Isn’t there some sort of exemption that can be put in here? Isn’t there money set aside in Google for small companies? Isn’t there something there that says that if you’re below a certain threshold, it doesn’t apply to you? It’s not like I’m out here trying to scam the world or anything. I’m just trying to carve out an existence here for myself.” They’re like the government, I guess, that’s kind of how I see it. It’s like they’re large and inflexible, and I don’t know what to do. It’s like arguing with the IRS. You’re probably not going to get very far.

Rob: The hard part is that you know the scrutiny that they’re coming under now, with all the Facebook privacy security crap. So you understand why they might have a policy like this even though it doesn’t necessarily feel fair.

Mike: I do. I get it. I understand. But at the same time, when you look at the discrepancies between what the benefits to me are for having this security assessment done, like all that does is it benefits Google, it benefits their security baseline, benefits their security posture globally. What does it do for me? Zero. It does absolutely nothing. It doesn’t get me more customers. It doesn’t add to my marketing footprint. I don’t even get really listed anywhere where it’s going to get a large amount of traffic or anything like that. I get virtually nothing. I’m the one paying for it, and Google is reaping the rewards and benefits of it.

From that justification, “Why should I pay for this?” They’re making $15 million-$16 million per hour. They actually had to go back and forth with me to say, “Please create a free account for us so that we can log into your app.” It’s like, “Really? You can’t sign up for a free trial from Google. Nobody there’s got a credit card?” It just boggles my mind that they’re treating people this way.

Rob: The part about the credit card I get because, in a big company, very few people have credit cards, right? Because they don’t want people just willy-nilly—you can’t track all the expenses, and you wouldn’t know what’s going on. It’s not that they don’t have the money to have credit cards, it’s that tracking credit cards is a pain in the butt in an organization with thousands of people. That part makes a little more sense to me.

Mike: It makes a little more sense, but at the same time, it’s a free trial. There should have been a credit card someplace that they’ve got and said, “Look, there shouldn’t be anything paid going on this and if there is, contact whoever it is and if you need to do a chargeback, do a chargeback.” But that shouldn’t be a two-week back and forth between them and the developer. I literally waited for two weeks for them to get back to me. I was like, “What email address are you using to register?” Nothing. Two weeks, nothing. It’s not a hard question. I could have done it, and I did eventually hear back from them and got it all taken care off, but then even after I sent it to them, I said, “Hey, here it is.” It was still another week.

Rob: That’s the hard part, I think. To mean them not having a credit card, I would give them a pass on. I just know how it is at big companies, and on, and on. I don’t blame them at that point. The fact that it took them two weeks or three weeks or whatever you’re saying is, that’s the part that gets really hard when they have a deadline. You are trying to meet it, and they’re not getting back to you quick enough. It sounds like they’re not staffed up enough in this department, and some arbitrary person somewhere decided, “Oh, we have to be compliant with this by this day,” but didn’t actually make the decision to staff up or give the proper resources.

I think, to circle back on the audit, how it benefits Google and not you, I don’t disagree with. It’s the same thing with Apple and the app store—it is a monopoly in essence. They can do what they want, they can screw the developers if they want, that’s the hard part, that’s the bummer of building on someone else’s platform. Until it’s antitrust, and the government gets involved, you kind of can’t do anything. You’re in an odd position because I know that you didn’t intend to build on someone else’s platform and that you did the IMAP stuff on purpose.

You’ve said that multiple times. I remember talking in the early days, and that was the point is you were going to do something that isn’t reliant on someone else. For them to just come in and say, “You need to drop $15,000-$75,000.” They can do it, and it sucks, but I cannot imagine them bearing the cost for all the developers who use their API because I think that’s what you’re saying is, you want them to bear that burden of it. I don’t know of a large company, with such a large public API, that would do that. Are you thinking they would have their own internal team that will do it, and they would just have people on salary to do it type of thing?

Mike: I would think that they have something along those lines. Honestly, my initial thought was, “There are going to be companies that can bear the burden, and it’s not really that big a deal for them.” Fine. Those aren’t the ones that I’m publicly advocating for here. It’s the ones that are in a position like me where, very limited resources, I’m not funded, I’m not making the type of money that would make a third party audit like that particularly easy, I’m doing everything myself. If I had 5 employees or 10 employees bringing in $1 million every year, okay, that’s a very different story.

There should be something set aside or some sort of exception process in place for companies that are not meeting a certain threshold, very similar to when the government comes in and say, “Oh, if you are 50 employees or more, you have to provide healthcare for your employees.” But there’s that threshold there because the burden on super small companies is so incredibly high whereas Pfizer or Facebook or Apple, they don’t care, it’s a drop in the bucket to them. They even have an entire compliance division, I’m sure. But a six-person company? No. That’s not the case. When you get into those super small companies, basically, what they’ve done is, they’ve taken this blanket statement that says, “These rules and regulations apply to everyone.”

Personally, I understand why they’ve done that, I understand what their intent is, but the application of it and applying it to every single business—big or small—it’s skewed in a direction that benefits the big businesses by pushing the smaller companies out of business.

Rob: Yeah. The thing I struggle with is, I can see it from their perspective and that the smaller companies are most likely going to be the ones that have the security holes, I would think, right? Maybe not in your case because you know security and you did it for so many years, but think about how many two-year developers, junior developer, hacking something together in PHP getting the API key, they’re not thinking about the security at the level that you are or that Google would require. I actually think that the risk to them is higher on the low-end. I don’t think there could be exemptions. It’s almost like you want more of a scholarship. That would be it, right?

Mike: If you look at exactly what you just said, the risk for a large company versus a small company is actually very similar. The reason is because a large company will have a much larger footprint, so they have much more data available to them and a larger customer base; a smaller company would have very few customers. The likelihood of any one of those getting hacked or them getting hacked or something happening—some sort of security breach—even if it does happen, the footprint of that breach is going to be much smaller.

Think of like T.J. Maxx, however many hundreds of millions of credit cards got hacked is because they are huge. If let’s say that Stripe was hacked, that’s a very similar thing. If you look at something like Bluetick or Level, for example, which Derrick Reimer just decided that he was going to shut that down, let’s just say that he was, for whatever reason, storing credit cards on his server and that got hacked, how many people have put their credit cards into that? The answer’s going to be, it’s much smaller than T.J. Maxx.

Rob: Right. It’s a higher likelihood of it getting breached, but (a) fewer people are going to want to breach it because they know it’s small, and (b) even if it gets breached, it’s just isn’t as nearly as big of a deal.

Mike: Correct. It’s about impact at that point.

Rob: Yeah. Their policy is obviously, very hard on what you are doing. I think the question I feel like, as a founder is like, you’re fighting this now, if you somehow win this battle, this conversation, do you have concerns moving forward that this is going to continue to be an issue?

I bring that up because with apps that I’ve run in the past when Google or someone else broke when it was platform-built, they broke every year, 12-18 months, 6-18 months, whatever, they just kept breaking my stuff. It was an ongoing thing, and I think I want to post that question, (a) have you considered that, and (b) is that a reason to move on? I’m not saying you should, but have you given that thought, has that gone through your mind of like, “I shouldn’t be doing this? I should look for a different idea?”

Mike: It has crossed my mind, and I have given it thought. I think this situation is a little different in terms of the platform itself breaking because I’m relying on IMAP, not anything else. From that perspective, I don’t think that’s an ongoing issue. The policy changes could be because if they change policy once then, there’s no reason to think that they couldn’t decide that they’re going to change policy again.

Could that come up in the future? It absolutely could. Could come up next year or the year after? Yeah, it absolutely could. Am I worried about that side of it? Probably not because I think with Bluetick, it’s one of those things where I evaluate it and say, “Look, this needs to move forward at a certain amount of time, and if it doesn’t, then I should go on to something else.”

Rob: Yeah. That’s something I think we should probably dig into an episode or two. I know we don’t have it on the books today and no, we haven’t done a prep but I think it could be an interesting conversation, for you and I, to talk about where you are with Bluetick and just hear more how you’re thinking about it and where it stands in your mind especially given the light of what’s going on right now. I mean, this is a lot of hassle for—like you said—for an app that is not as successful as you want it to be.

Mike: Right. I even went in and took a screenshot of revenue and sent it to him like, “Look, this is how much this is making and you want me to do this? This is absurd.” I don’t know. We’ll see what they have to say. Hopefully, in a couple of weeks, I’ll have more information. But I mean, I may not, I don’t know. I’m spending so much of my time with Red Tape right now—and I have been for several months now. I’m not moving. It sucks. I don’t know what else I can do.

Rob: Is it taking up that much time? I can imagine replying to emails, you screenshot, you make the argument, then you sent the email, and then don’t you have the rest of your day to then build features, or market, I would say? Maybe you shouldn’t be building features right now, maybe it should be more marketing, but whatever, to do things that push the business forward.

Mike: It’s really distracting. Having that in my brain bouncing around, it’s really been distracting. It’s a little bit harder to focus.

Rob: You’re saying, you fire the email, and then you’re hung up on it for an hour or two, and you’re half struggling to work done. Is that the idea?

Mike: Some of it. In the past two days, there were two different emails that I sent. Each of them took me like an hour to put together. It just takes time to do that, which sucks, and I don’t know, maybe I could provide a lot less detail. I don’t know.

Rob: Yeah. It sounds like it’s tough because when I hear that I think, “Oh man, that is a waste of time.” But if you don’t put the thought into it and write a well-crafted email in this situation, it could be business-ending, so where’s the time best spent? But if you spent an hour to send an email, you still have the other six hours of your day, or seven hours of your day, depending on how much you work. Are you then distracted for that time or are you able to just let it go because that’s where you got to get, if you want to move this forward is to let it go and be like, “I’m going to move forward.” You do have a timeline. It’s like two weeks, three weeks until you know for sure, I’m assuming.

Mike: Sure. So, this morning, I spent some time doing support stuff this morning, and then I spent an hour on one of those emails, and then I’ve got this call for an hour, and then I’ve got another call after that for an hour, and that takes me to 1:00 in the afternoon. My kids get home at 2:45 PM, and I haven’t even eaten lunch yet, so I’ll hopefully start getting work done around 1:30 PM, and I’ll have an hour and a half to two hours before my kids get home.

It’s hard to get things done when that ends up in your schedule, so I don’t know, I don’t have a good answer at the moment, but it’s something I definitely need to think about offline, but we can discuss it next week or the week after or something.

Rob: Yeah. Let’s do that because I do think this is worthwhile digging into. I don’t want to derail this whole episode, but I think this is such an interesting topic because this is the real side of entrepreneurship, right? These are the hard things that we all go through that are scary, and you often don’t know what to do, and it’s stressful. I have to imagine that when work ends, your kids get home, you’re probably stressed all evening—I would guess—unless you can let it go.

There’s a lot of ways we can talk about this. Thanks for sharing that, man. I know that it is not easy stuff to talk about, but I think this real conversation is important.

Mike: Moving on.

Rob: Yeah. I have some updates, but I’m going to leave them until the next episode because they’re just not that time sensitive. I wasn’t thinking […] I was doing. Let’s dive into a listener question, we got a voicemail question about pricing.

“Hi, Rob and Mike. First of all, thank you for your podcast. You’ve definitely made many […] journey and things like […] enjoyable. My question is yet another question about pricing. Something that’s been playing on my mind for a while. While I’m not trying to promote, I thought some background really helps these questions, otherwise, it turns into a whole load of, it depends. I run a successful SaaS called […], that runs digilization backups. However, the vendor lock in and the fear of digitalization releasing daily backups and making my life difficult is real. I’ve been working on my next product Ultimately. For SaaS products, they integrate payment gateway with your payment gateway, so you can do emails. Another work for that integration is without any code. It’s a bit like if Drip and Churn Buster have a love child. I’ve been struggling to work out pricing though. I want it to be in line with the value a customer receives, so I thought of a percentage of monthly recurring revenue, have it settle on a hidden percentage game saying, $9 per 1,000 MRR. However, talking to customers, the percentage model seems to strike fear into people with unexpected cost. Do you have a better suggestion before I roll with that because it’s just become a distraction. Thanks again, Simon. You can learn more about […] at […].com. Thank you.”

You have thoughts on this, Mike?

Mike: Yeah. Definitely. I’ve heard from other people who have apps that are kind of in the space and they have kind of reiterate the same thing that you’ve just covered, which is people really hate having a percentage model of any kind because they want it to be predictable. I think it’s interesting to see them make that argument because if you look at what you’re doing for them, you’re basically saving their money and preventing churn, and you don’t get paid unless they receive more money.

The reality of the situation is, they’re going to make more money by using your service, but they’re concerned about the fact that it’s going to cost them more money even though they’re making more money by using your service. For whatever reason, they have it in their heads that the cost fluctuates per month, and they’re not sure if they can afford it and this is a huge hang up for them. I’ve heard it time and time again.

What I would do is I would actually go and look at some competitors and don’t try to reinvent the wheel. Look at what they’ve done for pricing models and how they are putting things together and how they’re presenting them to customers. Don’t lean toward this model where people are going to hate your pricing. Find out what other people have done, copy what they’ve done, and then show how your solution differs from theirs. Don’t differentiate on your pricing model because that’s going to actually make your job of presenting it to customers a lot more challenging because they’re not going to understand it.

They’re going to look at your competitors and say, ‘”Well, they have this pricing model and that one, and this thing that you’ve come up with is completely, not insane or ridiculous, but it’s just very, very different.” They’re going to have a hard time processing it, and they’re going to mentally, cross you off their list because they don’t understand your pricing models.

Rob: Yep. I have tried to innovate with pricing models before. I have seen founders do it, and it is very hard to do. It’s like saying, “I want to invent a new category.” It’s like, “That sounds like a great idea. Call your app an integration email blah platform,” or something. People are like, “So, what is that? How are you different from MailChimp? How are you different from Zapier?” Those are the questions you get. People want to categorize that in their mind. Pricing is similar.

I think your advice is dead-on. The way I would approach it too is to at least look around at what other players who have similar models, how they’re approaching it. There are the ones that produce churn, but then there are also ones that help abandoned carts, there’s a whole gamut of things that make people money directly using email. Personally, I would pull out my Moleskine notebook, and I would just go around and do a big survey, boom, boom, boom, write it all down, and look at how that pricing is structured, and start from there. What you may find is that everyone does it based on a percentage as well, and you’ve just hit a few customers who don’t like it, and that’s fine. Your sample size is really small, and that makes it hard so far.

As you said, Mike, I would start there. Then the more people you talk to, the more data points you’ll get, and at a certain point, you will know. If you’ve talked to 20 people, and 19 will have a problem with it, it’s a real problem. But if you talk to 20 people, and it was the first two or three who said it, then it’s a little more clear cut.

I hope that was helpful, Simon. Thanks for sending your voicemail in. As always, voicemails go to the top of the questions queue. Our next question is from Martin at quoshift.com.

He says, “Hey, Rob and Mike. My name is Martin. I’m from Australia. I’m looking to start a new SaaS business in a fairly mature space. There are about three competitors in the $10 million to $100 million range in annual revenue that I would eventually like to compete with. I’ve compiled a large list of current users of those solutions. I’m going to go ahead and reach out to schedule some interviews. My platform would be easier to use while providing an objectively better technical solution than other companies. Easier to use, objectively better. What are the top three questions you would be asking these users to see if they would be interested in switching to my product? By the same token, how can I get people to pretty sign up to my solution?”

What do you think?

Mike: I think I would start by asking them what is the single thing you hate the most about what they’re using now because that’s probably going to drive them to switch. It’s not going to be, “Oh, this could be a better solution. It’s going to be better, technically or the UI is going to be better.” You have to hone in on the things that they absolutely hate. Use that as a lever to try and move them from whatever else they’re using because they’re going to want to avoid that pain, more than to incrementally improve, what they have now. That’s where I would definitely focus. Beyond that, just the language, I’d say, in the email is a little bit concerning because you’re saying that it is objectively better, technically. Dude, your customers are not going to care. It’s more about their experience with it and what they are going to get out of it.

Rob: Yes. Switching costs, whether they’re high or not, in actuality, they are always high in someone’s mental–in their mind. You can’t make an app that is 30% better and expect people to switch. You need to make an app that is two times, three times better and have a real, compelling way to communicate that to the customers. Building a better mousetrap is a really hard way to get people to switch SaaS apps.

The switching cost on mousetrap is not high—I’ll put it that way. I like your idea, the number one question of like, “What do you hate the most? What are two or three things that you hate most about this app?” I think, to tie it in, you talked about Derrick Reimer earlier deciding not to do Level. He wrote the blog post on derrickreimer.com, about deciding to shut it down, and the process there. He felt like he didn’t do it as well as he should have. He referenced the book called, The Mom Test—the subtitle is—How to Talk to Customers & Learn If Your Business is a Good Idea When Everyone is Lying to You. One of the big questions in there is not just, “What’s your biggest pain?” But that then followed up with, “What have you done to try to get around this pain so far? What have you done to solve this pain so far?”

Because if they say, “My biggest pain is I can’t integrate with this other product. If you build that integration, it would be great.” What have you done to solve that pain? Well, if they haven’t tried to hire a developer, or write any code to do it, or tie into Zapier, or do anything to actually fix the pain, then the odds are good that that pain actually, isn’t that big of a deal. In their head, they’re thinking, “Yeah, this is a pain. This is something I dislike.” But if they haven’t taken the time, or the money, or made an effort to fix it, it starts to sound like, “Well, maybe this isn’t that big of a deal. I think that’d be the follow-up question that I would ask about each of those pain points and I would […] The Mom Test, of course, to even hope further because there’s a whole bunch of questions in that book.

You know one other thing I would consider asking is because from a customer development standpoint, you want to find out what to build, and the early things to build. I would be curious to ask, “How long have you been using this product? How hard would it be to switch? Have you considered switching in the past? If you have, why didn’t you switch to another?” You know what I mean? Go down that logic, that path, of trying to really get into it to figure out when it comes time have they actually thought through what switching to your product looked like because if they haven’t, they can get right up to the end. They actually build all these integrations, and then like, “Oh, I haven’t thought that I’d have to get a developer involved.” That’s a no go. Those are the types of questions. That’s the path I wouldn’t follow. Thanks for the question, Martin. I hope that’s helpful.

I think we have more time for one more question today. This one is also about customer development. It’s about setting up initial meetings when all you have is wireframes. It’s from Scott.

“Hi, guys. I have a question for you. I’m trying to validate my idea by talking through wireframes with people, but before that can happen, I’m sending cold emails to people that I’m assuming are the target decision makers. In my case, it’s HR Managers of companies with around 250 or so employees, which may or may not be right. I wondered if you could talk about your experiences with getting those initial meetings set up. I don’t have a website at the moment, just initial product wireframes, do you think that’s a mistake at these early stage?”

He gave us a sample email, which I think is well-written. Any thoughts on this?

Mike: I like he led off the email by saying, “We’re in the early stages of building an app,” because I think it conveys to the person on the other end that you’re, I’ll say, as an aspiring entrepreneur. I found that that’s actually, a really good opening way to position yourself because you’re essentially soliciting them for their expertise and their advice.

A couple of things I would keep in mind though, the people that you talk to very early on like this—depending on how long it takes you to get your app out the door—it could be that these people are just not going to ultimately, end up being your customers. Just bear that in mind. Don’t bend over backward for every single one of these people, thinking that you’re going to get all of them as a paying customer once you start shipping the app or you have something to ship.

There’s a bunch of different reasons for that. But the fact of the matter is people switch jobs or their priorities change. All kinds of things can happen between the time that you first talked to them, and then you have something that you can show to them. I don’t think it’s a mistake to just show them wireframes. I mean, you need something to show them especially if you want to get any sort of prepayment or commitment from them.

The reason I would lean more towards that prepayment is because it essentially overcomes a hurdle which is that they’re saying they would pay for something, versus they will pay for it. If they give you a credit card as a prepayment, then they are willing to pay for it versus, “Oh, this sounds like a good idea. I would pay for it.” But the reality is, they want to see it, and they want to be able to play around with it. There’s going to be a bunch of people who fall into that category where they would pay for it except, and then they’ve got all these different reasons, that until you ask them for their credit card, they’re not really going to tell you because they want to be helpful. Nobody wants to be the person who says, “Oh, this is a bad idea.” If they’re trying to give you advice, they’re going to say those types of nice things which is going to what you want to hear, not necessarily what you need to hear.

Rob: Yeah. The hard part here is, if you’re an HR Manager of a company with 250 employees, you’re not going to prepay for something like this. Prepayment is such an SMB thing. When you’re talking to a single founder or a founder of a five-person company, yeah, they’ll totally give you a hundred bucks or whatever, put it in a credit card or whatever, but that type of thing, it works very differently as you get to the mid-market where they have these massive budgets, and everything is tracked.

You could feasibly do prepayment. But it’s going to be like, “Would you pay us $5000 or $10,000?” Then you’re going to need contracts. You’re going to have to go through procurement. That’s what this process would be like at that point. You’re trying to fund this based on customer pre-sales with larger companies, then it is definitely, much different—we would think—than if you’re dealing with just smaller companies.

Mike: Well, I don’t think you necessarily need to get to the point where you’re funding at with their money. In my mind, it’s more a matter of are they willing to commit to paying for when it’s ready. It’s a different goal than if you’re trying to get money from them to fund the development of it. That’s two different things, depending which direction he was trying to go.

Rob: Yeah. That’s fair. You don’t have to fund it, fund it yourself, but getting someone who runs HR at a 250-person company to give you their credit card number and say, “Yes, I’ll give you a few hundred dollars.” I wouldn’t do that. I worked at larger companies, and I just know the politics and everything that goes on in there, and you’re just so busy trying to push things forward that unless the solution is there in front of me, there are so many people marketing and trying to sell to these HR managers or to any manager at a company. That it’s like, them giving you the time to even give you feedback, and then them going out on a limb and then giving you money with the thought that you might build something. I mean, if they don’t know you, did they know that you’re going to build good software? Did they trust that you’re going to deliver […] ever? It’s a whole different ball game.

You’re not going to have a reputation like you might if, let’s say, I went to our audience and was like, “Hey, I’m going to build something that is going to solve whatever your problems.” There would be reputation factors, right? People know me, and hopefully, like me, and trust that I’m going to build something good, but he’s not going to have that with these HR Managers because it’s just cold outreach.

Mike: I think, what I would lean towards doing in that case is saying, “If the products says this, this, and this, so what are the roadblocks to you purchasing it and pain for it?” That gives you a little bit of insight in to the internal politics of how that company operates. If you’re asking that company that specific question, you’re going to get, I would think, a reasonably decent cross-section of how companies at that level operate in terms of purchasing and requisition.

Like, “Some are going to need to go through the IT department and they have to hand it off to them and the IT department has to purchase it. Some of them are going to have a credit card, they’re going to be able to just buy it themselves, and tell the IT department afterwards. Some of them purchases above a certain dollar amount, they need to go through somebody.” You can ask them about, “If the pricing was this, what would you think? If the pricing was this other thing, what would you think? What are the roadblocks that lead to those different points?” That’s what you need to know is how are you going to sell to these people assuming you built what they want.

So, one line of question is, “What is it that you want and need and what would make it so that she would pull the trigger and buy it and say yes.?” The second part is, “What does it take to actually get it into here?”

Rob: Yep. I think those are good points. He asked two other questions or he asked two questions in the email, and I don’t know if we’d addressed them very well. His first one was, “I wondered if you could talk about your experience with getting those initial meeting set up.” Yeah, the experience is, you have to send a lot of emails to get very few meetings. The funnel is wide, and people are busy, and they aren’t going to want to talk to you.

Other thing that I’ve done is use my network/audience to try to get that. Whether you’re going on LinkedIn, whether you are emailing everybody you know to basically say, “Look, I’m an aspiring entrepreneur or I’m a founder, and I’m in the early stages, I need advice on an HR product. Could you make an intro?” That’s how you’re going to get people who will at least talk to you on the phone. My experience is that it’s frustrating, and takes longer than you want and you get a lot of, “No, I’m not going to talk to you.” Eventually, your persevere, you figure it out, you talk to enough people.

Then his second question is, “I don’t have a website at the moment, just the initial product wireframes. Do you think that’s a mistake at this early stage?” I could go either way on this. I think wireframes is fine, but I think non-technical people have a tough time feeling wireframes as real things, but I’m less worried about how the screens worked, and I’m more worried about what is the headline. What is the headline of the website? There’s kind of this old marketing thought, and I think it’s good, it’s something that I’ve done from time to time, where you build the marketing page first, you build the landing first page. You go from there to then building the product. By the time you get that headline in there and some bullets of what the copy is and what it does. I mean, that’s how we did with Drip.

I’m trying to think, my book was that way too where it was five sentences on a page and then I took that and said, “Now, I’m going to go manifest this into reality.” That’s what I like about you building a marketing site is whether you do it in Squarespace or WordPress SaaS theme, it doesn’t have to look amazing, but it’s really about you getting it on paper, getting the marketing thoughts and the copy even in front of yourself, and maybe if they asked, you can send them there, it’s just an email opt-in, it kind of depends, but I think I lean towards in doing that. I think it’s a helpful exercise, especially for those of us who tend to want to go to the code.

Mike: I was going to mention exactly that. I don’t think that having a website in and of itself is going to help you, but I think the process of putting together the website makes you seriously think about what it needs to say, and how you’re going to position it, and it helps you craft a better story when you’re talking to people about the solution on a call, and you’re demonstrating those wireframes. It just helps you position it better so that if they look at your email, “Well, let me just take a look at the website before I reply back to this.” That should tell them very quickly whether or not they want to even waste their time at all or whether you’re serious. If you don’t have any website at all, who knows?

I mean, I feel like, this is definitely more me than anything else, but if somebody sends me some email and says, “Hey, I’m thinking about this,” and they’ve got literally nothing on their website at all or they don’t mean to have a website, it’s really hard to take him seriously that they were even going down this road.

Rob: Yeah. I think that’s a good point. Hope those thoughts are helpful, Scott.

Rob: Well, thanks for the questions everyone. If you have a question for us, you can call it into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.

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